Case Study Albania

​DLDP Shkodra and Lezha Regions

Donor’s grant harmonization: practices and prospects in funding local government projects in Albania

Shkoder, January 2011

Contributors: Valbona Karakaci (dldp), Blendi Bushati (independent consultant)
Peer-review: BiH

Video Intro
Have a look at the video intro to get an overview of the case study and its contents.

Fact sheet

1. Context

General background

There is a general consensus that the process of decentralization has been progressing in Albania but with decreasing momentum over time. The institutional strengthening of the Local Government Units (LGUs), progress in public service delivery and improved fiscal situation at communal/municipal level are main indicators. However, a full implementation of what is foreseen in the decentralisation law and the related strategic documents is not achieved yet  [1] : the role of regions as a middle layer between the central government and the LGUs as well as the reform of the local finances and fund access is still to be defined. After the national elections of 2009 the progress in decentralisation reform has slowed because of a political crises (blocked parliamentary decision-making processes).

The LGU’s revenues have been growing constantly over the years, although their weight in the overall government budget has been slightly decreasing and their weight in the GDP remains more or less the same (at around 2.5% of GDP). It is encouraging that the percentage of investments in the discretionary expenditures has been increasing from 36% in 2005 to 45% in 2009 in the average of all LGUs. But overall, the local government’s expenditure in Albania remains the lowest, compared to other countries of Europe  [2]. The local revenues are composed of own revenues (taxes and tariffs) and unconditional as well as conditional transfers from the central government. The unconditional transfers are calculated based on a formula and have generally had an increasing trend during the past years. The unpredictable part of the local budget remains the access to the competitive Regional Development Fund (projects financed by the central government) and the various donor grants.

Donor projects with a focus on local level constitute 6% of the total projects or 14% of the financial volume of international aid.  [3] The main multilateral donors supporting projects with a focus on local level usually implement their projects through central government agencies or line ministries. These projects tend to treat the LGUs as passive beneficiaries. The bilateral donors use a more direct support to LGUs focusing their interventions on specific regions or on the decentralisation and regional development reforms. Given the poor infrastructure that Albania inherited from the communist past, the lack or poor quality maintenance work of local public infrastructure and the rapid development of new residential and business areas, the LGUs face a major challenge mobilising the resources for investments and improvements of public services under their responsibility (e.g. roads, waste, territorial planning, street lighting, etc.).  [4]

Case study area

The Region of Shkodra, is one of the 12 regions of Albania. The population is around 325,000 inhabitants  [5] in 5 municipalities (small cities and urban areas) and 28 communes in rural areas. Thus, the average population per LGU is around 10,000 people. Shkodra Region is chosen because it is one of the most experienced regions in terms of donor interventions and it is covered by Swiss cooperation support.

The Swiss cooperation in Albania has supported the decentralisation reform through the Decentralization and Local Development Programme (dldp) which supported eight LGUs in the Region of Shkodra (2006-2009) in its first phase. During the second phase (2010-2012), dldp works in Shkodra and Lezha Regions.

This case study focuses on the status of harmonization within the donor community and the degree of alignment with the central government grants (in the Region of Shkodra). It reflects on the experiences of the dldp phase 1 and the initial experiences of dldp phase 2 where project grant schemes were implemented  [6].

The hypothesis to be explored is: there is a need for a better harmonization of grant criteria and practices between donor and central government grants. Donor support should be focused on strengthening capacities of LGUs in order to access the main grant schemes: the national ones and the EU funds in the mid-term. At policy level the experiences should be used to discuss with national authorities the improvement of domestic grant fund distribution. As a result, the harmonisation increases the absorbing capacities of LGUs for competitive grants and the efficiency and effectiveness of project implementation will increase.

This case study is written in a moment where dldp phase 1 has been finished and dldp phase 2 has just started. In order to share the experiences of both phases, especially with regard to their role in donor grants harmonization, the paper structure is the following:

• the planned activities explain the main features of dldp phase 1 respectively phase 2 regarding the grant criteria and procedures;
• the implementation chapter analyses the experiences of the grant component of dldp phase 1 and the differences in the activities foreseen for the grant component of dldp phase 2;
• the lessons learnt chapter focuses on the outcomes of the comparative analyses of different donor and government grants in the Region of Shkodra;
• the chapter on conclusions outlines dldp’s view on how donor and central government grants shall be further harmonized.

2. Activities and approaches

The dldp supported eight LGUs in Shkodra Region phase 1 (2006-2009) and it worked in five key areas, including public services provision and LGU management and administration.  [7] Part of the intervention was the provision of selected grants to improve public services. During the period 2006-2008, dldp financed 18 LGU projects with a total amount of around 800,000 Euro. The support included training and coaching of the LGU staff on project management and project proposal writing.

The selection process of the projects went through a negotiation process about priority project idea(s) and proposals with each LGU, submission of project proposals and related technical documents, screening of proposal by IC against a set of criteria as well as a quality check of the technical aspects, exclusion of non-responsive proposals (not fulfilling compulsory criteria), designing of possible adaptations, and eventually the approval by the steering committee.

The criteria and procedures for the evaluation of projects were designed keeping in mind the existing donors experiences in the region and drawing upon the lessons of a comparative study (prepared in the framework of the programme) on the criteria used countrywide for similar programmes operating at local level at the time. The grant accompanied the other soft types of assistance in planning, overall and financial management. The regional authorities were involved in the evaluation process for the selection of the projects.

The dldp phase 2 (2010-2013) has set up a competitive grant fund scheme (around 1 million Euro) through which to support partner LGUs in concrete improvements in public services and infrastructure, information/communication activities, elaboration of studies and promoting of inter-LGU projects.

The support of bilateral donors where LGUs might have direct or competitive access in the Region of Shkodra will not account for more than approximately 20% of the total grant funds accessable from the LGUs for the period 2010-13.  [8] Thus, dldp phase 2 decided to go one step further with its approach from aiming at harmonization with other bilateral donor (which was largely achieved already in dldp phase 1) to increased harmonization with the grant schemes applied by the competitive Regional Development Fund of the central government, ranked as the highest direct contributor for the LGUs in the next 3-4 years.

The competitive grant scheme of dldp phase 2, besides helping the LGUs in concrete improvements in their services, was conceived to serve two other purposes:

• to provide a “training and testing field” for the partner LGUs for participatory decision-making and transparent and accountable project management;
• to enable the targeted LGUs to access other funds at regional and national level. Through the participation in the grant scheme the LGUs in the two regions of the project will benefit from training and coaching to prepare good quality project proposals.

To put it in other words, the theory of change applied when designing the procedures for the dldp phase 2 grant fund was that the harmonization of these procedures would:

• increase the technical capacities of LGUs for accessing the main available funds (Regional Development Fund and EU IPA);
• create a positive practice of grant application (and management) in the supported LGU by also addressing direct needs on the other side;
• increase the efficiency and effectiveness by using more standardised application criteria and procedures;

allow to share with other donors and the central government as a basis for a discussion on further harmonization between donors grants, EU funds and Central Government funds on local development.

3. Experiences

The key success factors of the grant component of dldp 1 have been identified as being: transparent procedures, community involvement, combination of soft and hard projects in one complementary package (e.g. waste plans and collection trucks), involvement of regional level authorities in the decision making, harmonization of criteria/procedures with present donor’s grant fund, capacity building measures on Project Cycle Management and public procurement, on-budget support and linking the investments with strategic planning.

Related to the criteria and procedures of the grant component the main experience from dldp phase 1 is that donor harmonization in grant funds is possible: dldp 1 pilot case in Shkodra proved to be well harmonized with other donors such as SNV or GTZ. The result was that the absorbing capacity of the LGUs benefitting from dldp support was increased in the donor’s grant fund.1

Because of the limited number of LGUs participating in dldp 1, the scheme lacked the competitive dimension that most of the other existing grant schemes in the country had. On the other hand, despite of a successful experience of harmonization with other donors, a harmonization with IPA funds and Regional Development Fund was not yet in place.

In the dldp phase 2, the grant scheme cycle is at its beginning2 so there are not yet direct implementation experiences available. However, the competitive grant fund builds on the experiences of dldp phase 1. Additionally it attempted at:

• a harmonized scheme of criteria/procedures with national and EU IPA funds
• a competitive dimension (the fund is open to all the 54 LGUs of the two regions)
• a more participatory decision-making scheme (LGU associations, regions, civil society to be progressively involved
• promotion of Inter-LGU projects relevant for accessing national funds (given the relatively small size of many LGUs and their low financial capacities, Inter-LGU cooperation is seen as a key for improving public service provision a more gender sensitive approach.
• A manual for the management of the dldp grant fund was prepared (see Annex 4), including application procedures, criteria, application forms and implementation procedures. The criteria developed for the dldp phase 2 ensure the selection of the projects based on: the technical qualities of the proposal, the relevance of the actions to the objectives of the grant and the expected impact on the beneficiaries’ communities.

Two rounds of applications will be launched: at the end of 2010 (the current one) and at the end of 2011. Each round will have two phases: in the first one, the LGUs have to submit project concepts (ideas) with a simple application form. All the interested LGUs are trained in project proposal writing in order to offer them an equal chance to apply. The project concepts are evaluated from the experts of the Regions of Shkodra and Lezha based on criteria that are similar to the ones currently used by the Central Government in the Regional Development Fund Scheme3. The proposals are ranked based on a simple criteria and scoring system. Based on the outcomes of the evaluation, the LGUs whose proposals are ranked highest are invited to submit full project proposals (including the development of feasibility studies and technical projects). In general the LGUs should prepare all the technical documentation needed to start the implementation of the projects. The full project proposals also requires the LGUs to fill in a more detailed application form (which is similar to the EU IPA project fiches). At this stage, the qualified LGUs benefit from thematic workshops as well as project proposal writing and project cycle management workshops. External experts evaluate the proposals based on the harmonised criteria and scoring system, and a final decision of the key local stakeholders of the management board will endorse the technical evaluation of the experts on which projects to finance. Then a financing agreement is signed between dldp and the respective LGU which is responsible for the following implementation of the approved project.

A key feature of the grant is the fact that the process of the application is accompanied with training and coaching for the LGUs. Another important element of the scheme is the linkage provided between the interventions in improvements in public services and capacity building related directly to these improvements creating the basis for a sustainable impact on governance improvement at local level. The project is also promoting Inter-LGU cooperation as a way to come up with joint proposals and learn how to cooperate. This will be very important when applying for access to other funds. Gender mainstreaming in the projects proposed is an obligatory condition for a successful application.

The overall management of the grant fund will be carried out from a management body from the local stakeholders composed from the authorities of the respective regions, the representative of the associations of the Local Governments and the donor. This body will oversee the whole process in the first round and will be fully in charge for the second round of the applications.

4. Lessons learnt

As in the chapters before, here the criteria and procedures of application and evaluation of proposals for grant schemes is in the focus and not the implementation of such projects by LGUs.

The application process:

• The identification of the project proposals is done by the LGUs in all the grant schemes. All the schemes request a formal decision of the Local Councils that the project is a local priority and that it is part of the local or regional development strategy.
• The preparation of an application is also done by the LGUs. Most of the schemes will request two types of documentation: a) preparation of a project proposal and b) relevant technical documentation.
• Normally, all the schemes request the use of an official project proposal format that the LGUs have to submit. It contains sections such as background, project goal and objectives, activities, expected results and indicators, demonstration of the sustainability, project budget and arrangements for monitoring and evaluation. In the case of the Regional Development Fund (RDF), the LGUs are asked to submit a simple form with the main data of the project proposed. In the case of IPA funds, the preparation of the logical framework is also required.
• The technical documentation is usually the preparation of the technical design and bill of quantities by a licensed engineer, as well as the needed licenses form the respective authorities to start the works (especially in case of infrastructure projects).
• For most of the LGUs the preparation of an application is a time-consuming and costly process. Only the regional departments and the bigger municipalities have a dedicated department which prepares project proposals. Some of the practices are more challenging than others. This is especially true for EU IPA Cross border funds where the applicant LGUs also had to find partner organisation abroad and had to write a very detailed and professional project proposal. The LGUs needed help from outside experts to prepare such project proposals. In the case of the RDF, the LGUs must have all the technical documentation ready, which means hiring professional engineering consultants.
• In all the donor’s schemes, but not in the case of the RDF, launching of calls for proposals is accompanied with capacity building measures on how to prepare the application. In the case of the dldp, this is an on-going process of strengthening the LGU skills also during the implementation.

The criteria used:

• The donor’s grants for LGUs in the Region of Shkodra do not differ much from one another in the criteria they use and the process of evaluation used to allocate funds (see a list of criteria in Annex 5). In all the cases, the criteria used are evaluating the quality of the proposals per sector and assessing the anticipated impact of the proposal in the social and economic development of the local communities.
• More or less, all the schemes use obligatory (basic) criteria and evaluation criteria. If the proposal does not meet the basic criteria, it is not considered for financing. Some of the evaluation criteria that are found in all the grants are: a minimum ceiling of co-financing; promotion of Inter-LGU cooperation; community participation, number of beneficiaries, endorsement by the local councils, financial soundness and sustainability of the project.
• Depending on the source of financing in some cases more importance is given to the potential impact of the project (RDF) or to the quality of the project proposal per se (IPA funds). Some of the donors have some extra criteria specific to the programme (gender orientation, the impact on the private sector, cross-border effect etc.). Some criteria that are found in donor’s grants schemes but not in the RDF include linkage with capacity development of hard infrastructure works, capabilities of the applicant (proved through similar experiences) and gender impact.
• The IPA Cross border funds are specific in so far as they are not specifically targeted to local or regional development, although the areas covered, especially local economic development is a function of the LGUs. This means that the criteria used for the evaluation of the proposals are a bit different from the schemes that are directly targeting LGU functions. The evaluation is very much focused on the qualities of the project proposal, a fact that in our context means extra efforts form the LGUs view to prepare a coherent proposal and think in terms of project cycle management.

The process of the evaluation:

• The evaluation might have one or two phases depending on the schemes. IPA and dldp have chosen a two-round procedure. In the first round project concepts are prepared and evaluated and based on this intermediary assessment, the LGUs qualify for the next step and are asked to prepare a full project proposal.
• In the case of dldp, GTZ, SNV, IPA the evaluation is carried out by technical evaluators at regional level or independent expertise, or a mixture of both. The final endorsement is made at the regional level and needs to be confirmed by the donor.
• In the IPA Cross-border funds the evaluation of the quality of the projects is made by external evaluators and the final decision by the Joint Evaluation Committee (Ministry of Integration delegates of both countries). The decision needs to be confirmed by EU.
• In the case of the RDF the scheme is more complex. The LGUs apply in the line ministries depending on the sector their project is about. Each line ministry or agency acts as a technical secretariat, screening and evaluating the projects. Their evaluation is forwarded to the General Secretariat near the Council of Ministers. The final decisions based on the output of the secretariat are made in the Committee of the Development of Regions chaired by the Prime Minster and where relevant Ministers, as well as associations of the LGUs are members. The Bylaw on the RDF scheme recognizes a counselling role to the regions.

5. Conclusions

All the grants in the Region of Shkodra where the LGUs have access are not performance based grants, they are earmarked funding for financing of specific projects. The step of untying donor grants will need more reliable and experienced decentralised municipal finance management and is not likely to happen in the near future.

The analysis of the practices of the different schemes shows that there are not significant differences between the donors grant schemes. There are, however, important differences on how the allocation process takes place between donor’s grant and the central government Regional Development Fund, in terms of procedures and criteria used for application and evaluation of projects. The IPA Cross border funds are specific in so far that it is not specifically targeted to local or regional development, and the criteria and application forms used make it more challenging for the LGUs to prepare a competitive proposal.

The analysis of the structure and volumes of the LGU grants in the Region of Shkodra shows that in a time-span of six years (2008-2013), the main source of financing will be the Regional Development Fund grant scheme of the central government (around 75%). Other donor’s grants will have a modest weight in the overall funds available to the LGUs in the region. The IPA Cross border funds financed by the EU, despite of the modest weight for the moment (4%), are important because they represent the gateway for access to future substantial EU funds targeted at the sub-national level for the LGUs of the region.

It is then, of a crucial importance for the donors to harmonize their procedures with IPA and Regional Development Fund. The donors working on decentralisation and regional development in the country should also ensure through sharing of their experiences to consolidate the Regional Development Fund scheme. This would enable better resource allocation, because the projects proposed would be screened based on objective and measurable criteria on one side and a better response to the local needs on the other side.

Concrete recommendations deriving from the dldp experience and the analysis of this paper include:

• Links to adequate capacity building measures at decentralised level (in all dimensions) shall be maintained both to improve the LGU capabilities in project cycle management but also to increase their capacities in accessing funds from the central government and the EU. The process must be accompanied with intensive training and coaching on project cycle management and LGU functions.
• Improve the application process and criteria for the selection of the projects. Given the human resources and budget constraints it is advisable to have a two round evaluation process in each scheme: project concepts and full project proposals. In this way, the LGUs that will not have a chance to succeed will not misallocate their scarce resources. A set of technical sub-criteria could be developed for the RDF based on the broad criteria defined in the law, making it easier for the technical secretariats to evaluate the projects.
• Strengthening the transparency of the process. In all the schemes the rules, the deadlines and the criteria for the evaluation of the projects must be known to all the applicants in advance. It should be made clear what is a good project, what are the minimum requirements to qualify and what are the technical standards also for the technical designs. The organizers must put special attention towards officially notifying the applicants on time, possibly giving the reason for the rejection of their applications.
• Involvement of the regional administrations in the evaluation process. Given their knowledge of the territory and of the local priorities the expertise and role of the regions would be of great significance in deciding on the priorities to be financed in at least a preliminary round of applications.

The consolidation of the RDF scheme must be seen as a process of constant approximation with the structures and processes needed to manage EU funds on regional development in a decentralised manner. Donors should work towards that common goal.

Footnotes                                                                                                                                                                              

[1] “The strategy of the Decentralization and Local Government“; Open Society Foundation for Albania „Civic report: Monitoring of the implementation of the stabilization and association agreement, October 2009-September 2010“. ( back to text)

[2] The local government finances in Albania are discussed in detail in several studies. The data and some of the conclusions here are taken from the mid-term budget of Albania, Ministry of Finance, “Local Finance Policy note” World Bank, September 2008), USAID (LGPA) “Local government revenue trends in Albania. An analysis of the local revenues 2000-2009“, September 2009. ( back to text)

[3] Database of donor financed projects in Albania (2000-2010), Department of Strategies and Donor Coordination website. ( back to text)

[4] Indeed, the results of a baseline survey conducted by dldp before the start of the second phase, found out that the LGUs in both regions think that more should be done on policy making level regarding criteria to access funds. ( back to text)

[5] Data from the National Civil Registry Office (January 2010). ( back to text)

[6] For the purposes of the paper the analysis is focused on the procedures of application, criteria used for the selection of projects to be financed and the evaluation arrangements. Given the understandable constraints, the paper does not analyse the procedures of implementation of projects financed by different donors and government. ( back to text)

[7] Intercooperation “Albania Decentralization and Local Development in the Shkodra Region Programme Document for Phase 1 (July 06 – December 09)”. Bern, May 2009. ( back to text)

[8] The analysis of the volumes of grant funds shows that in the upcoming three years, the Regional Development Fund will still account for around 74 % of all grant funds from the central government and donors. The expected contribution of other projects is as follows: the new ADA/SDC Regional Development Programme (16%), dldp phase 2 (around 5%), EU IPA crossborder (around 4%) and a UNDP project (less than 2%). ( back to text)