Evaluation of the project “Strengthening mechanisms for public finance at the local level in Montenegro” Lilit V. Melikyan 10/12/2013 Contents ACKNOWLEDGMENTS ......................................................................................................................................................... 4 ABBREVIATIONS ................................................................................................................................................................... 5 EXECUTIVE SUMMARY ....................................................................................................................................................... 8 1. INTRODUCTION ......................................................................................................................................................... 12 1.1. Background and objective of the project .............................................................................................................. 12 1.1.1. Country context: local governance and local government finance .............................................................. 12 1.1.2. Budget process ............................................................................................................................................ 14 1.1.3. The project concept ..................................................................................................................................... 14 1.2. Purpose of the evaluation ..................................................................................................................................... 15 1.3. Structure of the Evaluation report ......................................................................................................................... 15 2. METHODOLOGY OF THE EVALUATION ............................................................................................................... 16 3. PROJECT SUMMARY ................................................................................................................................................. 20 4. FINDINGS ..................................................................................................................................................................... 21 4.1. Relevance ............................................................................................................................................................. 21 4.1.1. Assessment of the project identification and formulation process .............................................................. 21 4.1.2. Assessment of the relevance of project concept and focus ......................................................................... 23 4.1.3. Relevance of project design ........................................................................................................................ 29 4.1.4. Selection of municipalities .......................................................................................................................... 30 4.1.5. Additionality/Synergies .............................................................................................................................. 30 4.1.6. Logical framework ...................................................................................................................................... 31 4.2. Effectiveness: Outputs and Short term Outcomes ................................................................................................ 35 4.2.1. Result 1: Mechanism for transparent and accountable public finance at the local level established and operational 36 4.2.2. Result 2: Municipal bonds market in Montenegro is strengthened through better understanding of benefits and opportunities among municipalities ......................................................................................................................... 43 4.2.3. Result 3: Fiscal equalization mechanisms in Montenegro further strengthened. ........................................ 45 4.2.4. Policy level Support .................................................................................................................................... 47 4.3. Potential for longer term outcomes (LTO) and impact ......................................................................................... 49 4.3.1. LTO 1: Efficiency and transparency of Government improved in order to effectively lead policy formulation, coordination and service delivery in accordance with European Union requirements. .............................. 49 4.3.2. LTO 2: Government capable to efficiently managing the requirements of independence and European Union accession ............................................................................................................................................................. 53 4.3.3. Potential for Impact: socio-economic development at the local level through strengthening accountable, transparent and results oriented public finance mechanisms .......................................................................................... 53 4.4. Efficiency ............................................................................................................................................................. 54 4.5. SUSTAINABILITY ............................................................................................................................................. 56 4.5.1. Policy Level ................................................................................................................................................ 56 4.5.2. Results level ......................................................................................................................................................... 57 5. CONCLUSIONS ............................................................................................................................................................ 57 6. LESSONS LEARNED ................................................................................................................................................... 59 7. RECOMMENDATIONS ............................................................................................................................................... 60 ANNEXES............................................................................................................................................................................... 62 2 ANNEX 1: Terms of Reference .......................................................................................................................................... 62 ANNEX 2: List of the meetings .......................................................................................................................................... 65 ANNEX 3: References ........................................................................................................................................................ 66 ANNEX 4: Project Budget .................................................................................................................................................. 67 ANNEX 4: Municipalities’ Revenues and Expenditures, 2008-2012 ................................................................................ 68 ANNEX 4: Questionnaire .................................................................................................................................................. 71 ANNEX 5: Interview guide ................................................................................................................................................ 77 ANNEX 6: Agenda for the field visit ................................................................................................................................. 83 ANNEX 7: The Communications Strategy of the Project .................................................................................................. 84 List of Boxes Box 1: Key Definitions .............................................................................................................................................................. 7 Box 2: Feedback from a KII .................................................................................................................................................... 29 Box 3: Indicators to Assess Openness of Municipality Decision Making, CDT, 2013 ............................................................ 52 List of Figures Figure 1: Administrative Map of Montenegro ........................................................................................................................... 6 Figure 2 Method of Triangulation ........................................................................................................................................... 16 Figure 3: Steps in Contribution Analysis ................................................................................................................................. 16 Figure 4: Total amounts of Loans and Borrowings, (Euro) .................................................................................................... 22 Figure 5 Loan Debt Balance as of 12.2012 ............................................................................................................................. 27 Figure 6 : Arrears and Debt repayment by local governments 2008-2012, million Euros ....................................................... 27 Figure 7: Training