Report No. 116895 – YFOfficial Use Only

Republic of Serbia

Horizontal Functional Review of Central Government

Preliminary Diagnostic Report

April, 2016

Document of the World Bank

CURRENCY EQUIVALENTS

(Exchange Rate as of April 26, 2016)

RSD 113.44=US$ 1

FISCAL YEAR

January 1- December 31

ACRONYMS AND ABBREVIATIONS

BSL

EU

GS

ICT

LPS

MPALSG

NPAA

PA

Budget System Law

European Union

Government Services

Information and Communication Technology

Law on Public Services

Ministry of Public Administration and Local Self Government

National Program of Adoption of Acquis

Public Agencies

PI

SB

Public Institutions

Subordinate Bodies

SO Special Organizations

ACKNOWLEDGEMENTS

This report was prepared by a team comprised of Raymond Muhula (Task Team Leader), Srdjan Svircev (Co-Task Team Leader), and consultants including Aleksandra Rabrenovic, Andrijana Zaric, Klaudijus Maniokas, Marko Mihić, Milos Markovic, Sasa Rikanovic, Svetlana Djukovic, Vladimir Obradovic, and Vladimir Vlajković. Administrative support was provided by Hermina Vukovic Tasic (Program Assistant) and Kornel Dražilov (Program Assistant). The report was prepared under the leadership of Adrian Fozzard (Practice Manager, Governance Global Practice) and Tony Verheijen (Country Manager for Serbia).

The report is the result of close collaboration with the Ministry of Public Administration and Local Self-Government (MPALSG). The team is especially grateful for the support and technical feedback provided by Nenad Rava (Advisor); Vidosava Dzagic (Advisor); and Nina Zelić (Advisor). The team benefited from meetings, consultations and feedback provided by Ministry Task Forces.

The preparation of the report was financed by the European Commission through the Instrument for Pre-Accession Grant II (2014-2020).

Standard Disclaimer:

This volume is a product of the staff of the International Bank for Reconstruction and Development/The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data presented in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.

Table of Contents

ACKNOWLEDGEMENTS..............................................................................................1

EXECUTIVE SUMMARY...............................................................................................5

1. INTRODUCTION AND CONTEXT........................................................................1A. INTRODUCTION................................................................................................................................... 1

B. OBJECTIVES, SCOPE AND METHODOLOGY...........................................................................................2

C. DATA................................................................................................................................................. 4

D. THIS REPORT.................................................................................................................................... 4

2. ORGANIZATIONAL FORMS IN THE CENTRAL GOVERNMENT...............6A. INTRODUCTION................................................................................................................................... 6

B. ORGANIZATIONAL FORMS................................................................................................................... 7

C. INTERNAL ORGANIZATION AND SYSTEMATIZATION..............................................................................10

D. OBSERVATIONS ON THE STRUCTURE OF THE CENTRAL GOVERNMENT................................................10

E. RECOMMENDATIONS......................................................................................................................... 13

3. STAFFING AND FUNCTIONS..............................................................................15A. INTRODUCTION................................................................................................................................. 15

B. STAFF ALLOCATION TO CORE AND SUPPORT FUNCTIONS..................................................................16

C. STAFF ALLOCATION TO FUNCTIONS CATEGORIES PER TYPE OF AUTHORITY........................................26

D. POTENTIAL FOR CENTRALIZATION OF COMMON FUNCTIONS...............................................................29

E. OVERLAPPING OF RESPONSIBILITIES.................................................................................................32

F. DECENTRALIZATION AND OUTSOURCING OPPORTUNITIES...................................................................32

G. RECOMMENDATIONS......................................................................................................................... 32

4. STAFFING, VACANCY RATES AND SPAN OF CONTROL..........................34A. INTRODUCTION................................................................................................................................. 34

B. THE SPAN OF CONTROL...................................................................................................................34

C. PLANNED V. ACTUAL EMPLOYMENT (VACANCY RATES)......................................................................38

D. PERMANENT VERSUS CONTRACTED STAFF........................................................................................41

E. PERMANENT V. CONTRACT EMPLOYEES BY TYPE OF INSTITUTION......................................................42

H. RECOMMENDATIONS......................................................................................................................... 45

5. CONCLUSION.........................................................................................................46

Annex 1: List Of Participating Institutions...................................................................48

Annex 2: Sample Functions And Staffing Table...........................................................52

Annex 3: Special Organizations: Statutory Basis And Legal Subjectivity.................542

Annex 4: Data Collection Guidelines.............................................................................55

List of Tables

Table 1: Staffing Profile in Central Government..........................................................................15

Table 2: Average Span of Control by Type of Staff.....................................................................35

Table 3: Range of Span of Control................................................................................................36

Table 4: Span of Control by Size of Institution.............................................................................37

Table 5: Potential Downsizing of Managers.................................................................................38

Table 6: Planned Staff by Type of Institution...............................................................................38

Table 7: Vacancy Rates Based on Permanent Staff.......................................................................39

Table 8: Vacancy Rates Based on Actual Staff (Permanent and Contract)...................................40

Table 9: Vacant Positions per Categories of Functions.................................................................40

Table 10: Contracted Staff Over Limit.........................................................................................41

Table 11: Subordinate Bodies Exceeding Limit............................................................................43

Table 12: Special Organizations Exceeding Limit........................................................................43

Table 13: Government Service Exceeding Limit..........................................................................44

Table 14: Public Institutions Exceeding Limit..............................................................................44

Table 15: Allocation of Planned and Actual Staff per Function...................................................56

Table 16: Total Number of Staff...................................................................................................56

List of Figures

Figure 1: Subordinate Bodies has the largest share of planned staff............................................16

Figure 2: About one third of staff is dedicated to support functions.............................................17

Figure 3: Distribution of total core and non-core staff by organizational form............................17

Figure 4: The majority of staff perform service related functions.................................................27

Figure 5: Staff in ministries mostly perform administrative functions..........................................27

Figure 6: Staff in Subordinate Bodies mostly perform inspection functions................................27

Figure 7: Services accounts for the largest share of staff in Government Services......................28

Figure 8: Service function is also dominant in Special Organizations..........................................28

Figure 9: Public Agencies perform mostly administrative functions............................................28

Figure 10: Public Institutions perform mostly service functions...................................................28

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Figure 11: Span of Control by Number of Employees..................................................................37

Figure 12: Ministries Exceeding Limit on Contracted Staff.........................................................42

List of Boxes

Box 1: Summary Preliminary Findings.........................................................................................vii

Box 2: Summary Key Preliminary Recommendations................................................................viii

Box 3: Steps in the Functional Review Process..............................................................................3

Box 4: Functions and their Categories.............................................................................................4

Box 5: Organizational Forms in State Administration....................................................................7

Box 6: Typical Functions of Ministries...........................................................................................7

Box 7: Typical Functions of Government Services.........................................................................8

Box 8: Typical Functions of Subordinate Bodies............................................................................8

Box 9 : Typical Functions of Special Organizations.......................................................................9

Box 10: Typical Functions of Public Agencies.............................................................................10

Box 11: Typical Functions Public Institutions..............................................................................10

Box 12: Rationalization of the Government in Lithuania: Concept of the Executive...................12

Box 13: Categories of Functions...................................................................................................17

Box 14: External Benchmarks for Support Function Ratios.........................................................26

Box 15: Centralization of Common Functions in Ireland.............................................................31

Box 16: Shared Services in Scotland.............................................................................................31

Box 17: Span of Control................................................................................................................34

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EXECUTIVE SUMMARY

1. The Government of Serbia has embarked on an effort to streamline its public administration. While the immediate purpose of the restructuring program is to control increases in wage bill and public sector spending, a longer term objective is to improve the performance of the public sector. This note presents the result of the first phase of functional review of Serbia’s central government institutions, part of a wider strategic effort to address structural and functional problems in the public administration. The analysis covers 94 institutions within the central government, including Ministries and the bodies under them: Government Services, Public Institutions, Public Agencies, and Special Organizations (collectively referred to as “State Administration Plus”).*

2. Functions across the central government were classified into five main categories as follows: Policy-making (P1); Policy Analysis (P2); Inspection (I); Regulatory (R); Services (S) and Administrative (A). Questionnaires and structured interviews were used to gather data from government officials. Additional data were obtained through analysis of legal documents and staffing plans. This report reflects the relevant analysis undertaken.

3. The analysis found misalignment between functions and organizational structures in the central government. The large variety of organizational forms and their conflicting mandates indirectly contributes to an increase in the number of staff and overlap in functions. There are several potential areas of overlaps identified, for example, in the following areas: development of entrepreneurship; human and minority rights; planning and coordination of transport services; and fire protection and control.

4. Streamlining and rationalizing the structure of the Serbian executive could result in a more coherent and efficient public service in the medium-term. Rationalization could be achieved through a variety of ways, including a moratorium on the creation of new organizational forms and development of a concept of the executive, defining major principles, organization types, purpose and legal status of public organizations. Phase two of the functional review will focus on these issues.

5. Staffing across the central government is not always aligned with organizational needs. This has led, in some cases, to a mismatch between the number of planned staff as detailed in the Acts on Internal Organization and Systematization of Posts (Systematization Acts) and the actual number.† According to the Systematization Acts of the 94 institutions covered, about 33,233 employees were foreseen. However, a total of 37,285 actual staff were employed in the central government as of June 1, 2015. Of the actual employees, 28,341 were permanent

* The term “central government” is not commonly used in Serbia. For purposes of this report, it refers to all bodies considered part of State Administration (Ministries, Subordinate Bodies and Special Organizations) and includes the other recognized forms such as Government Services, Public Agencies, and Public Institutions, hence the phrase: “State Administration Plus”.† Systematization Acts are prepared by all budget beneficiaries as part of personnel planning. They provide estimates of staff needed to perform various functions. The review did not look into the question of whether Systematization Acts are a good estimate of the number of staff needed.

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while 8,944 were contracted staff. In general, about 15 percent of employee positions in the Systematization Acts remained vacant.

6. The Budget System Law (BSL) limits the ratio of contract to a maximum of 10 percent of planned staff. This policy has not been fully observed. Altogether, there are 5,621‡ contract employees above the 10 percent threshold. Special organizations and Subordinate Bodies have the largest number of contract relative to permanent staff. Altogether, 6 out of 15 Special Organizations and 8 out 28 Subordinate bodies exceed the limit.

7. The span of control - the ratio of managers to staff - is inefficient. Managers in many institutions covered in the report have few staff working under them. Altogether, there are about 4,080 managers across institutions in the central government. On average the ratio of managers to staff is about 1:5. However, there are institutions where the number of managers is equal to the number of subordinate staff.§ Increasing the number of staff under one manager could reduce the number of managers and lead to efficiency gains. For instance, even requiring that that all central government institutions observe the average span of control of 1:5 could lead to a reduction in the number of managers by slightly over 1,000, assuming a two tier management structure. It should however, be noted that in some cases managers also perform subordinate functions.

8. Several organizations dedicate a large number of their staff to performing non- core functions, that is functions that are not part of the mandate of the organization, and are mainly of a support nature. Altogether, there are 10,169 employees across the central government performing non-core functions or about 30 percent of employees. There is a considerable potential for medium-term savings that could be achieved through mergers of small institutions, consolidation of public services, and centralization (via service and competence centers) and, possibly, outsourcing of certain common functions, such as IT, financial management and administrative services.

9. The recommendations below address the key finding of this review: the structure of organizational forms in the central government and their conflicting mandates contributes to functional and organizational problems such as the number of staff, overlap in functions, and span of control. These must be addressed to create the foundation for other reforms.

10. The horizontal functional review is divided into two phases, the first of which is covered by this report. This phase is intended to provide the preliminary diagnosis of functions and their assignment across the central government, assignment of staff to individual institutions and to organizational forms. The second phase of the review will present an in-depth analysis of the recommendations emerging from this report. Issues to be covered include: centralization of non-core functions; missing and duplicated functions; organizational restructuring and the potential for efficiency gains. The review will also include a high level quantification of the potential budget impact of different restructuring scenarios as well as potentials for efficiency gains.

‡ Based on the number of employees on June 1, 2015.§ In the Serbian Export Credit and Insurance Agency there were 31 employees designated as managers and 30 employees (on June 1, 2015).

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Box 1: Summary Preliminary Findings

1 Some organizational forms have uncharacteristically high level of autonomy. For example, Special Organizations are largely independent of the ministries they are linked to, thus limiting the ability of ministries to exercises oversight functions.

2 Subordinate Bodies and Special Organizations often perform identical functions, the only exception is that Bodies within ministries may perform inspection oversight, while Special Organizations may not.

3 In some cases, there are overlapping functions. This creates opportunities for excess staff. Examples includes: Development of Entrepreneurship (Ministry of Economy, National Employment Service and National Agency for Regional Development); Human and Minority Rights (Ministry of Public Administration and Local Self Government and Human and Minotiry Rights Office); Resolving the property and legal status of real property (National Employment Services, Agency for property, and other organs); Planning, coordination and realization of transport services (Common Affairs Directorate; other organs); Fire pprotection and control (several different bodies).

4 Some institutions enjoy a relatively independent status of a Public Institution or Public Agency while their core functions are those of professional duties of state administration; there is an unequal legal position for the same type of organizational form. For example, some subordinate bodies have different types of liability; and several institutions do not have the appropriate organizational form given their core functions. Revising the Law on Public Services could resolve ambiguities in organizational forms.

5 Over 40 percent of employees in the non-core business perform administrative and logistic support functions. Specifically, Public Institutions, Special Organizations, Ministries and Public Agencies, have the highest share of employees in the non-core functions.

6 Various organizations across the central government level seem to undertake several functions, some of which could be centralized to improve efficiency. About 200 services have been identified at the central government level.

7 Various institutions employ more staff than planned. Therefore, Systematization Acts might not reflect business needs, as approximately 15 percent of planned positions are vacant. It would be useful to examine the drivers of this practice.

8 Lack of clear rules on ‘span of control’ across all institutions has led to an inefficient span of control. About 1,000 managers could be removed if an internal bench mark of 1:5 is observed across the central government. For instance, if each ministry were subjected to the internal benchmark, there would be a reduction of about 285 across all ministries, representing nearly a 28 percent reduction. Public Institutions could collectively reduce the number of managers by 406 managers (or about 29 percent). Such a reduction would have to be undertaken at individual institution level.

9 There is low adherence to the policy on capping the number of contract workers across the central government. For example, about 70 percent of ministries exceeds the limit on contract workers relative to permanent staff. Altogether, 6 out 15 Special Organizations exceed their limit, accounting for about 1,700 contract employees; 8 out of 28 Subordinate Bodies exceed the limit.

Box 2: Summary Key Preliminary Recommendations

1 Review the justification for each type of institution and the set of functions associated with each institution

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with the objective of defining a clear set of relevant functions and number of staff.

2 Define a clear set of criteria for establishment of Public Agencies and revise the legal framework regulating the operations of Public Institutions (PI). For a start, reassess the status of existing PIs, with a view to turning some into Subordinate Bodies.

3 Ensure 80:20 ratio between core and non-core functions in all institutions, this could potentially reduce the number of employees performing administrative functions.

4 Analyze options for outsourcing functions to local self-governments and private sector; centralization of some or abandonment of obsolete functions (e.g. marketing, publishing, printing, catering services, lawn maintenance). Where it is determined that a functions should be performed by the public administration it should be allocated to the appropriate organizational form.

5 Define the final list of services to be carried out at the central level and map all business processes.

6 Reassess the need for the existing number of managerial levels and reduce by, at least, one level, to flatten organizational structures and realize scale. Also, consider imposing a standard span of control for each institution.

7 Analyze reasons for engagement of contract workers beyond the approved 10 percent limit. Better enforcement of the limit could also improve opportunities for efficiency gains.

8 Review key non-core functions and explore the options for centralization of such functions in one or more “special” institutions.

9 Identify missing and duplicated functions relevant to each (or selected) institution across the state administration. Focus should be on matching functions to type of institution; purpose of each institution; and relevant functions and categories of functions relevant to the mandate of the particular institution.

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1. INTRODUCTION AND CONTEXT

A. Introduction

1. The Serbian public sector faces both structural and functional problems. The structural problems are related to the nature of the public administration system that has several layers, different types of organizations, overlapping, unclear mandates and overstaffing. The results of the multiple layers of the public administration are visible in the number of employees. Structural weaknesses in wage and establishment control systems have resulted in an unplanned increase in the number of employees in the public sector. There are about 480,000 employees across the public sector, with various levels of understaffing and overstaffing in individual entities, misalignment between managers and support staff and imbalance between staffing for core and support functions.

2. Affordability of the public sector wage bill is an immediate problem. The general government wage bill has grown significantly in recent years. As of 2015, the wage bill accounted for nearly a quarter of total public expenditure, equivalent to almost 11 percent of GDP. While not generally widespread, there is anecdotal evidence of overstaffing in some areas of the public administration. Similarly, the functional problems arising from structural and organizational deficiencies continue to undermine service delivery. There are still numerous administrative procedures, inefficient use of resources and delays in performing administrative tasks that necessitate a greater focus on improving efficiency and effectiveness in the public sector. For instance, inefficient government bureaucracy is identified by the private sector as among the most problematic factors for doing business in Serbia.**

3. Serbian governments have attempted to reform organizational performance and efficiency gains by focusing on financial allocations. In the process, organizational patterns within the public sector have tended to determine the level and nature of financing for the public sector, leaving the inefficiencies largely intact.†† The government recognizes this problem and is now focusing on a new approach aimed at changing the structure: undertaking a comprehensive functional review to provide the analytical basis for targeted reforms. The aim of the review is first and foremost, to improve the organizational and structural aspects of the public sector while also tackling efficiency through strategic staff cuts, in the short to medium term.

4. Ambitious targets have been set for the right-sizing and optimization program. In 2015 parliament approved a Law on the Ceilings on the Number of Employees which includes a mechanism to set annual public sector employment targets until 2018. The first of these targets was set in January 2016. All budget entities have been asked to plan for a reduction in the number of employees. A new salary law- the Law on Public Sector Employee Salary System- has also been passed with the aim of regulating public sector salaries. The law is expected to remove many of the pay inequities and bring greater transparency to the public pay structure.‡‡

** World Economic Forum (2015). Global Competitiveness Report, 2015-2016. Available on the Web: http://www3.weforum.org/docs/gcr/2015-2016/Global_Competitiveness_Report_2015-2016.pdf. Accessed April 20, 2016.†† See various annual reviews by SIGMA and EU.

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5. The second phase of the reforms is designed to focus on long term structural reforms in the public sector. This phase focuses on vertical functional reviews of the ministries of finance and agriculture, as well as a review of service delivery in social services including health, education and social protection.

B. Objectives, Scope and Methodology

Objectives of the Review

6. The objective of the functional review is to assess the organizational and functional structures of the central government. The review assesses the nature and structure of the central government, alignment between functions and organizational mandate, balance between core and non-core functions, and of managers and support staff to understand the extent to which government entities and their components are “fit for purpose”, and able to deliver their mandate with efficiency and effectiveness. This review provides preliminary analytical input for future reforms by: identifying functions in selected institutions; staff in identified functions; identification of redundancies; and outlining key areas for further optimization and reorganization of the public sector. It provides the basis for the second phase which will undertake an in-depth analysis of the recommendations emerging from this report. Issues to be covered include centralization of non-core functions, missing and duplicated functions, and organizational restructuring and the potential for efficiency gains. It will also include a high level quantification of the potential budget impact of different restructuring scenarios as well as potentials for efficiency gains.

Methodology and Scope of the Review§§

7. This review focused on key functions and staffing arrangements in various institutions within the central government and associated bodies (State Administration Plus). The following entities were covered: Government Services (GS); Ministries; Subordinate Bodies (SB); Special Organizations (SO); Public Agencies (PA); and Public Institutions (PI).

8. Data were collected based on a questionnaire developed for this purpose. The analysis was based on the Systematization Acts of 94 public sector authorities. The sample included 14 ministries, 29 subordinated bodies/ bodies within ministries (29 district offices as de-concentrated government structure are considered as one authority), 15 special organizations, 9 government services, 16 public agencies and 11 public institutions. The full list of institutions under review is in Appendix 1.***

‡‡ World Bank (2016). South East Europe Regular Economic Report: Rebalancing for Stronger Growth, Report No. 9. Washington, DC: World Bank, p. 22-23.§§ In the functional review conducted, the analysis was based only on the staffing figures of 1 June 2015 and no valid conclusions (except in some cases) could be drawn in regard to seasonality of jobs. For example, the Hydro-meteorological Institute has significant number of non-permanent staff that provide services of shooting the anti-hail rockets during the late summer season. In addition, out of the 404 non-permanent staff in the Statistics Office of Serbia (357 outside the limit), around 300 persons were engaged on a short-term basis for collecting agriculture related data at that part of the year.*** Information about the Directorate for Enforcement of Penal Sanctions is restricted and could not be shared. The Directorate employs about 6,000 staff. Deposit Insurance Agency was removed from the original list; Directorate for Waterways, Republican Legislative Secretariat did not share requested information, while the Office for Quick Response has no employees.

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9. The functional review was undertaken in five main steps. Functions and results for each institution were identified based on how they are presented in the Systematization Acts; initial lists of functions and results for each institution reviewed were sent to representatives of the institutions for verification. Staffing (permanent and contracted) allocation per function was determined based on self-reporting by institutions; and identified functions were standardized and categorized.†††

Box 3: Steps in the Functional Review Process

1. Identification of functions based on the Systematization Acts;2. Verification of identified functions by the institution;3. Allocation of staff against the identified functions;4. Standardization of identified functions;5. Allocating functions to categories; and6. Analysis and recommendations.

10. The review focused on the following organizational aspects:‡‡‡

purpose of each type of institution; core and non-core/support functions performed; staffing numbers – vacancies, permanent and contracted staff, managers; standard functions of the institution; overlapping and redundant functions, and areas for further optimization and reorganization.

††† A function is a set of activities performed by one or more staff and that leads to the achievement of one or more results. The functions have been classified on the basis of their products and/or results. Lack of a clearly defined product was treated as a sign that the function was obsolete. The classification proposed reflected the objectives and targets of the review.

‡‡‡ Since the Law on the Ceiling of the Number of Employees in the Public Sector introduced exceptions to the threshold of 10 percent contracted staff versus planned positions set by Budget System Law, more information on contracted staff would be needed for drawing valid recommendations. However, a simple head count reduction of 5,621 could be obtained if the ratio of contracted versus planned employees would be limited to the maximum.

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Box 4: Functions and their Categories

o Core functions of public sector institutions include: - P1 - policy making, strategic planning and legal drafting; - P2 – Policy analysis, monitoring and evaluation;

- R – Regulatory, i.e. individual decisions based on general norms (e.g. price setting, building permit, licensing, accreditation, certification, etc.);

- I – Inspection and Quality control (control of standards, inspection); - S – Services – administrative services to other authorities and public services§§§

o Support functions of public sector institutions include:- A - Internal administrative support (within organizations);

o One position is allocated to one function only, and 1 person can be allocated to one function only.

o In case two or more functions are undertaken in one job position, the post is allocated to the function that is predominantly performed (to the function whose implementation takes most of the time).

o The number of planned staff is based on the information presented in the Systematization Act of each institution.

o The actual number of staff include permanent staff (employment on indefinite period of time) and contracted staff (any type of engagement – long-term contracts for a definite period of time, short term contracts, authorship contracts, replacement of absent worker, engagement through youth cooperatives, etc.). Managers below the level of assistant minister/assistant director have been considered as specialists, and therefore allocated to one of the core functions.

C. Data

11. The analysis was based on the review of relevant laws and by-laws. The following laws were reviewed: Law on Public Administration; Law on Ministries; Law on Public Agencies; Decree on Principles for Internal Organization and Systematization of Posts in Ministries; Special Organizations and Government Services; and Rulebooks on internal organization and systematization of posts for all the 94 institutions included in the review. Additional information was obtained from consultations with a number of institutions, as well as information on functions and staffing data provided by authorities.

D. This Report

12. This report is intended to provide a diagnosis of the organizational forms in the central government, allocation of functions and staffing. Its primary purpose is to identify important areas for an in-depth analysis to be carried out in the phase 2 of the functional review. This report is accompanied by a database reporting all the data collected from various ministries and grouping them with more detail along the lines discussed in this report. Following this introduction in Chapter 1, the rest of the report proceeds as follows: Chapter 2 discusses the organizational forms in the central government and offers some recommendations; Chapter 3 describes the allocation of staff and functions to groups of institutions across the central government at an aggregate level, grouped into the six organizational forms of the central government. It also provides some initial recommendations; Chapter 4 describes the staffing

§§§ It is important to note that it is often hard to make a clear distinction between regulatory (R) and service (S) functions, as services often encompasses regulatory tasks. In order to enable more accurate comparison between authorities, it was agreed to categorize all functions that requires taking of individual decision on general norms as regulatory (R).

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profile in terms of actual and planned employment, with recommendations; and Chapter 5 concludes the discussion with some preliminary observations. Additional information, including the Methodology Note is provided in the annexes.

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2. ORGANIZATIONAL FORMS IN THE CENTRAL GOVERNMENT

A. Introduction

13. Serbia’s central government has six main categories of organizations (organizational forms). These government authorities are funded from the budget and are not entitled to own source revenue. Their ability to independently dispose of their own-source revenues was removed when the Budget System Law (BSL) was amended in 2012. **** The new legislation converted budget beneficiaries’ own-source revenue into general revenue of the budget, and revoked regulations that formally linked institutions and their own-source revenue. This has ensured greater efficiency in the use of these funds by more realistic planning and better oversight.

14. Although the legislation identifies types of authorities and describes their roles, it is difficult to understand differences between the types of authorities. For example, the difference between what is a considered a Public Agency (PA) on the one hand and a Special Organizations (SO) or a Public Institution (PI) on the other is not clear. This is because, all entities represent some kind of semi-autonomous agency. Similarly, the role of Subordinated Bodies (SB) and SO described by the legislation is almost identical. Moreover, legislation does not consider the purpose of different types of authorities as the basis for selecting an appropriate organizational form, organizational structure and identification of the tasks and jobs to be performed by an institution.

15. Authorities belonging to the same type could have different organizational forms and titles. The practice means that only one type of authority- Ministry- is organized in one form, while all other types of authorities can be classified in different organizational forms. Thus, an entity referred to as “Administration” might be classified as a Government Service (GS), SB and SO; one referred to as a Directorate, classified as a SB, SO and (PA; or one classified as a “Service” classified as a GS and PI; the Agency as SB and PA; the Bureau as SO and PI; and the Fund as PA and PI.

16. Considering their roles, several authorities do not have the appropriate organizational form. Some SOs are more suitable to be organized as a GS (e.g. Legislative Secretariat, Secretariat for Public Policies) and several PA could be better organized as SB. Besides that, official titles of some authorities do not correspond to the organizational form and in some cases, are counterintuitive. For instance, the Administration for Joint Services of the Republic Bodies is a GS, and not a SB; the Agency for Environmental Protections is a SO, and not the more intuitive PA.

**** Law Amending the Budget System Law, Official Gazette of the Republic of Serbia, No. 93/12.6

Box 5: Organizational Forms in State Administration

МIN - MinistryGS - Office, Service, Administration SB - Administration, Directorate, Inspectorate, Agency SО - Administration, Directorate, Bureau, Center, Secretariat, Commissariat, Agency PА - Agency, Directorate, Fund, CorporationPI - Bureau, Organization, Body, Institute, Register, Fund, Service

B. Organizational Forms

i. Ministries

17. Ministries are established to perform tasks of state administration in one or multiple related areas (SAL, Art. 22). The purpose of ministries is to shape and implement Government policy by drafting regulations, performing inspection oversight, managing public services, and monitoring the state of affairs and directing development in areas from their respective remits. Ministries are thus empowered to perform all state administration tasks, that is: preparing government policy; monitoring progress in their areas of competence; execute legislations passed by the National Assembly; inspection oversight; monitoring the provision of public services; development activities and other professional duties. Each ministry is headed by a Minister, who is accountable to the Government and the National Assembly for the lawful operation of the ministry (SAL, Art. 23, paragraph 3).

Box 6: Typical Functions of MinistriesP1 – Public Policymaking, Strategic Planning and Drafting LegislationP1 – Public Policymaking, Strategic Planning and Drafting Legislation P2 – Public Policy Analysis, Monitoring and EvaluationI – Inspection and Quality Control (compliance and inspection oversight)R – Regulation – Decision-making in individual cases based upon general standards (pricing; construction permitting; licensing; accreditation; certification)

ii. Government Services

18. Institutions covered in this category are established to perform routine professional and/or technical tasks. These are typical tasks performed to meet the needs of the government as a whole or of multiple public authorities. GS institutions provide professional or technical assistance to the government as a body, and may also be established to undertake tasks common to all or multiple state administration bodies. They may also be created to undertake a project of particular importance to the government as a whole. Such institutions provide professional (or solely technical, or, most often, both professional and technical) support to the government. This is the main distinction between GS institutions and Ministries or SOs. A GS institution can be established and dissolved by a government decree. They are a particularly flexible type of structure that the government can deploy to react to emerging social, economic, or other

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circumstances. The legal status of GS is regulated by the Law on the Government†††† and the Decree on Government Services.‡‡‡‡

Box 7: Typical Functions of Government Services

A – Administrative Support (inter-departmental)

S –Services

Names of types of Government services in practice: Office, Service, Administration

iii. Subordinate Bodies (bodies within ministries)

19. A ministry may have one or multiple authorities as its constituent parts. These ‘bodies within ministries’ are established to undertake executive or inspection duties and related professional activities in the event that the nature of such duties and activities requires greater autonomy than is enjoyed by a department of a ministry. The purpose of a body within a ministry is to implement government policy by performing executive, inspection and professional duties. Typical executive duties performed by bodies within ministries include deciding on administrative matters; keeping records; and issuing public documents. Unlike ministries, bodies within ministries may not enact regulations (rulebooks, orders or guidelines).

Box 8: Typical Functions of Subordinate Bodies

I – Inspection and Quality Control (compliance and inspection oversight)

S – Services

R – Regulation – Decision-making in individual cases based upon general standards (pricing; construction permitting; licensing; accreditation; certification)

Names of organizations in practice: Administration, Inspectorate, Directorate, Agency

iv. Special Organizations

20. Special Organization (SO) institutions are established to perform professional duties that require greater autonomy than that enjoyed by a body within a ministry. The purpose of SOs is to implement Government policy. Such duties include: collection and study of information in areas within the remit of the organization; drafting analyses, reports, informative notes, and other materials; and performing other professional duties. Executive duties performed by special organizations include: deciding on administrative matters; keeping records; issuing public instruments; and taking administrative actions. There are two types of SOs: (i) Secretariats (established to perform professional duties relevant to all state administration bodies, as well as related executive duties, and (ii) Institutes (established to perform professional duties that require the application of specific methods and knowledge, as well as related executive duties.

†††† Official Gazette of the Republic of Serbia, Nos. 55/2005, 72/2005, 101/2007, 65/2008, 16/2011, 68/2012 – Constitutional Court Ruling, 72/2012, 7/2014 – Constitutional Court Ruling, and 44/2014.‡‡‡‡ Official Gazette of the Republic of Serbia, Nos. 75//2005 and 48/2010.

8

v.v.v.v.v.v.v.v.

Public Agencies

21. A Public Agency (PA) is an organization established to perform development, professional or regulatory duties of general interest that do not require direct political oversight. An agency is established if it is able to discharge these duties better and in a more efficient way than a state administration body. This is especially in cases where the operation of an agency may be funded fully or primarily from revenues collected from the beneficiaries of its service (Articles 1 and 2 of the Law on Public Agencies).§§§§ A PA may perform regulatory and other state administration duties if such duties have been delegated to it under specific legislation. The government may not direct the operation of a PA, or align its operation with the operation of state administration bodies (LPA, Art. 4).

22. PA institutions enjoy autonomy in designing their internal organization, and may adopt any act required for their operation without the government’s consent. The only limitation in this regard is that these acts must be aligned with any special legislation and the founding act of an agency (LPA, Art. 41, paragraph 1). The government is thus not required to approve internal organization and staffing regulations of public agencies.

23. There are no specific regulations governing the legal status of employees of public agencies. The general Labor Law applies, thus public agencies are, in principle, free to set the salaries of their staff. Under the Law on Public Agencies, agency employees are not deemed civil servants; the rights, liabilities, responsibilities, and salaries of managing directors and employees of public agencies are all subject to general labor legislation. The sole restriction on the salaries of public agency staff is provided in the Law Establishing Maximum Public Sector Salary Thresholds*****, which caps salaries for, inter alia, public agencies and mandatory social insurance Organizations.

Box 10: Typical Functions of Public Agencies

S – Services

R – Regulation – Decision-making in individual cases based upon general standards (pricing; construction permitting; licensing; accreditation; certification)

Names of Organizations in practice: Agency, Directorate, Fund, Corporation

§§§§ Official Gazette of the Republic of Serbia, Nos. 18/2005 and 81/2005.***** Law Establishing Maximum Public Sector Salary Thresholds, Official Gazette of the Republic of Serbia, No. 93/12.

9

Box 9 : Typical Functions of Special Organizations

S – Services

R – Regulation – Decision-making in individual cases based upon general standards (pricing; construction permitting; licensing; accreditation; certification)

Names of Organizations in practice: Administration, Directorate, Institute, Centre, Secretariat, Commissariat, Agency

vi. Public Institutions

24. The purpose of PI is to provide services to members of the public in the areas of education, science, culture, healthcare and social security. The legal status of PIs is governed under the Law on Public Services (‘the LPS’).††††† Appropriate line ministries oversee the operation of institutions established by the Republic of Serbia, as well as of institutions which perform duties or activities from the general remit of the Republic of Serbia (LPS, Art. 24).

Box 11: Typical Functions Public Institutions

S- Service

Names of Organizations in practice: Institute, Organization, Body, Institution, Registry, Funds, Service

C. Internal Organization and Systematization

25. Public authorities prepare staffing plans, indicating the number of employees required to perform their functions for the coming year. The plans are approved by government on the advice of the HRMS Internal organization and staffing arrangements for state administration bodies (ministries, bodies within ministries, and special Organizations) and Government Services are regulated by Rulebooks on Internal Organization and Systematization of Posts (Systematization Acts). Rulebooks are adopted by the heads of each public authority (except in the case of bodies within ministries, where a Minister is responsible for enacting the Rulebook) or GS, with the government’s approval.‡‡‡‡‡ Before approving each Rulebook the government must consult the MPALSG, Ministry of Finance, and the Human Resources Management Service (HRMS), which must all formally agree with the proposed arrangements.

D. Observations on the Structure of the Central Government

26. The legal framework governing the organizational structure of central government is based on the Law on the Government, State Administration Law, and Law on Public Agencies. It is undermined by the following problems:

a. The autonomy of Special Organizations: ‘Special Organizations’, as a type of state administration body, have relatively high independence from ministries, which is unusual in comparative legal practice. The State Administration Law stipulates that legislation may, but is not required to, designate a ministry to perform oversight over a SO. This allows SOs to be accountable directly to a government, without a ministry to control their operations. As each area of public importance falls within the remit of a ministry, the legal framework should be revised to ensure that each state administration body is under the jurisdiction of a particular ministry.

b. Duplication of organizational forms: Bodies within Ministries and SO often perform identical purposes, that is, to implement government policy by performing professional and executive duties. The sole difference between these two types of entities is that bodies within

††††† Official Gazette of the Republic of Serbia, Nos. 42/1991, 71/1994, 79/2005, and 83/2014.‡‡‡‡‡ Pursuant to the Government Decree on Principles of Internal Organization and Systematization of Posts

10

ministries may perform inspection oversight, whilst SOs may not. This slight difference may not be sufficient to justify the existence of two organizational forms.

c. Lack of uniform criteria for legal (corporate) identity: Some bodies within Ministries and SOs enjoy legal (corporate) identity while others do not. This undermines the principle of simplicity and transparency in public administration. Having legal (corporate) identity allows these entities to bypass the budget system by opening own accounts with commercial banks. This has the potential of jeopardizing the transparency of public finances.

d. Conflicting practices among various organizational forms: Some entities do not have the appropriate organizational form. For instance, some SO are, by their very nature, GS, as they perform professional duties to meet the needs of the government or multiple other public authorities (for example, the Legislation Secretariat and the Public Policy Secretariat). Some institutions enjoy a relatively independent status of a PI or PA while their core functions are those of professional duties of state administration.§§§§§

e. Lack of a clear naming system: Many entities of the same organizational form have different names. For instance, in practice GS may be called services, offices, or administrations; Bodies within ministries may be called administrations, inspectorates, directorates or agencies; SOs may be called directorates, institutes, secretariats, directorates, centers, commissariats or agencies; PAs may be formed as agencies, funds, directorates or corporations; whilst PIs may be established as institutes, organizations, bodies, institutions, registries, funds and services. The names of some entities do not correspond to the statutory names of their organizational forms, which also creates confusion and limits transparency. For instance, the Joint Services Administration is a GS, not a body within a ministry; the Environmental Protection Agency and the Agency for Amicable Settlement of Labor Disputes are SOs, not public agencies; and the Environmental Protection Agency is part of the Ministry of Agriculture and Environmental Protection and not a PA.

f. Inadequate legal framework: The lack of a clear legal framework to govern the status of employees of public agencies and public institutions is problematic. In addition to increased degree of autonomy in establishing their institutional structures and staffing arrangements, this may result in the proliferation of this type of entities. The legal status of employees is governed only by the Labor Law. Together with the limited central control over employee numbers, this allows PA and PI to independently determine the number of their staff and hire without competition. Until recently, there was not regulation of salaries in PA and PI, thus posing additional risks both for the proliferation of these entities and potential effects on the size of the wage bill.

Box 12: Rationalization of the Government in Lithuania: Concept of the Executive

After accession to the EU the public sector in Lithuania and many other new members of the EU in Central Europe expanded. Pressure for reform emerged from the challenges of adapting to the effects of the economic crisis: the need to consolidate the public sector became obvious. In Lithuania there were no clear

§§§§§ For instance, institutes such as the Education Improvement Institute, Education Performance Measurement Institute, Sports and Sports Medicine Institute, and Nature Protection Institute, which are primarily tasked with performing professional duties of state administration rather than providing services to the public, are public institutions and not state administration bodies. Similarly, , the National Housing Agency, Traffic Safety Agency, and National Agency for Regional Development are public agencies rather than state administration bodies, etc.

11

criteria regarding establishment and the status of public institutions; no criteria related to the performance of public administration: mandates and types of functions were not clearly established; and there was insufficient control over organizations under the government. In 2009 the Concept of the Executive was adopted as a response. It contained the hierarchy of executive bodies, criteria for establishing institutions, principles of separation of policy-making from the functions of implementation, transparency, accountability, rationality and purposefulness. The application of the principle of independence was articulated as related to the requirements of the EU law and specific types of functions, such as supervision. In practical terms the Concept prescribed allocation of many executive bodies under the Government to the ministries, also separating policy-making and implementation functions. There was a clear hierarchy between ministries and the bodies subordinated to them based on separation of functions. There were criteria determined for the establishment of the public institutions and their functions (public services) as well as for the state enterprises. Two years were allocated for the implementation of this Concept. Organizational streamlining was undertaken accordingly in line with the deadline, but provisions related to the public institutions and state property remain to be completed.

g.

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E. Recommendations

i. Re-examine the adequacy of existing organizational forms of central government authorities, particularly with reference to their purpose and duties (i.e. typical functions) they perform. The structure of organizations should correspond to their purpose and typical functions. In addition, roles and responsibilities with the oversight and control over the existing and new entities should be clearly specified in the Law on Public Administration;******

ii. Introduce clearer and more restrictive criteria for establishment of Public Agencies and re-examine the status of existing public agencies. These should be tasked only with functions that do not require political oversight (such as telecommunications, energy, or securities market etc.). A similar approach should be used with regard to Public Institutions. These should only be tasked with providing services to the public. All other entities that perform professional duties of state administration should have the status of state administration bodies. In that regard, the obsolete Law on Public Services should be revised as soon as possible;

iii. Introduce a comprehensive law on public sector employees to govern the legal status of staff of Public Agencies and Public Institutions. Particular attention should be devoted to pay levels at these entities (especially public agencies) in order to reverse the trend of proliferation of this type of institutions, which have overly high level of independence in the process of recruitment of their staff and determining the level of their salaries

iv. Review the mandates and functions of all bodies and undertake a thorough organizational restructuring to deal with the uncertainties in organizational forms. Such uncertainties continue to generate the need for staffing of potentially duplicative bodies. Focus should be on the variations in the organizations, lack of clarity of the types of functions that should be performed by different types of organizations and lack of clarity on the organizational form of different types of organizations;

v. Set a clear definition of purpose for each type of authority; linking its purpose with structure. For example: МIN - Design and implementation of Government policies through the preparation of regulations, supervision of the operation of the public service, monitoring and directing the development in the areas of its scope; GS – Provision of professional and technical support to the Government and other state administration bodies in matters of common interest to all or several state administration bodies; SB and SO - Implementation of the Government’s policies through the inspection services, professional/expert tasks and implementation of executive directives; PА and PI - The regulation, development and provision of services to citizens within the autonomous field that does not require political control, including provision of services to citizens in the areas of education, science, culture, health and social care; and

vi. Revise the Law on State Administration, the Decree on Principles for Internal Organization and Systematization and other relevant legislation. This should ensure linking of organizational structures to the objectives of authorities and cascading those to the

****** Current Law on Public Administration does not specify the purpose and clear criteria for organizational forms of different types of institutions.

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objectives of organizational units and individual jobs. Legal revisions should focus on the following issues: types of authorities and their purpose; the criteria for setting up different organizational forms and predominant functions for each type of authority; number of hierarchical levels for each type of authorities; ratio of core and non-core functions, and ratio of the number of staff and number of managers.

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3. STAFFING AND FUNCTIONS

A. Introduction

27. The Systematization Acts of all the 94 institutions covered in this report (as of June 1, 2015) envisaged 33,233 employees. However, a total of 37,285 actual staff were employed in the central government. This includes 28,341 permanent and 8,944 contracted staff. Thus, while institutions have not filled all vacant positions envisaged in the Acts, the hiring of contract employees raises the overall staff complement above the planned total.††††††

Table 1: Staffing Profile in Central Government

Type Planned staff

Permanent staff

As % of planned

staff

Contracted staff

As % of planned

staff

Actual staff (permanent

+ contracted)

As % of planned

staff

MIN 5,249 4,078 78% 734 14% 4,812 92%SB 12,214 1,0469 86% 1,211 10% 1,1680 96%GS 1,302 1,068 82% 2,85 22% 1,353 104%SO 4,579 3,898 85% 5,551 121% 9,449 206%PA 1,935 1,506 78% 277 14% 1,783 92%PI 7,954 7,322 92% 886 11% 8,208 103%Total 33,233 28,341 85% 8,944 27% 37,285 112%

Source: Staff estimates, June 2015.

28. In nearly all cases, the number of permanent staff is lower than that of planned staff.‡‡‡‡‡‡ About half of the planned staff is allocated to ministries and their subordinate bodies. However, with about 37 percent of the total planned staff complement, SBs have the largest share of planned staff. PIs (24 percent) and SOs (14 percent) are the other categories with a comparatively higher planned staff complement. GS and PA institutions have the least share of planned staff of 4 percent and 6 percent respectively.

†††††† This review does not cover all authorities in the State Administration. Therefore these figures do not represent the total number of staff working either at the central level of government or in the public administration. The report, however, discusses the total staffing figures since all staffing costs are covered by the state budget irrespective of type.‡‡‡‡‡‡ Subordinate Bodies is a notable outlier.

15

Figure 1: Subordinate Bodies has the largest share of planned staff

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

MIN SB GS SO PA PI

Number of Permanent/Contracted Staff vs Plan

Planned staff Permanent staff Contracted staff

SO is the only category of organization where actual employees markedly exceeds planned employees – entirely due to contracted staff

Source: Staff estimates, June 2015.

29. It is possible to conclude that, in general, the majority of entities adhere to staffing plans. Nevertheless, individual entities across various organizational types employ more than the planned staff. About 12 individual institutions (i.e. 4 SO; 3 GS; 3 SB; 1 PA and 1 PI) employ over 10 percent of the staff in their plans, while some six individual entities (i.e. 3 SO; 1 SB; 1 PA and 1 PI) employ over 30 percent more than planned.

B. Staff Allocation to Core and Support Functions

30. All functions of the public sector are divided into two major categories: core and non- core (support) functions (Box 13). Considering the distribution of total staff among core functions (P1, P2, R, I, S) and non-core/support functions (A), about 70 percent was planned for core and 30 percent for non-core (internal administrative support).

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Box 13: Categories of Functions

Core functions:o P1 - policy making, strategic planning and legal drafting,o P2 - policy analysis, monitoring and evaluation,o R - regulatory issues (i.e. taking individual decisions based on general norms),o I - inspection and quality control,o S - administrative services to other authorities and public servicesNon-core/support function:o A - Internal administrative support (within organization).

Figure 2: About one third of staff is dedicated to support functions

Figure 3: Distribution of total core and non-core staff by organizational form

Planned Actual0

102030405060708090

100

70 73

30 27

Share of total staff in core and support functions (%)

Core Support

MN SB SO GS PA PI Total 0%

10%20%30%40%50%60%70%80%90%

100%

70.980.3

65.483.2

46.662

70.6

2920

3517

5338

29

Core and no-core functions are evenly shared in Public Agencies

Core SupportSource: Staff estimates; June, 2015. Source: Staff estimates; June, 2015.

31. Core staff account for about 73 percent of total staff (Fig. 2). However, there are significant variations in the share of core staff among various types of authorities (Fig. 3). This ranges from about 47 percent in PAs to 83 percent in GS.

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Box 14: External Benchmarks for Support Function Ratios

Organizations vary widely in their use of support staff and benchmarks can be hard to obtain due to do different procurement approaches (e.g. is IT support outsourced) and due to different organizational needs in different sectors. For instance, some private sector organizations would target a ratio of 10% or better, but this target disguises a significant set of assumptions and variations in practice.

One central government benchmark can be derived from the UK’s Cabinet Office review of Back Office Benchmark Information 2009/2010, which reviewed all central government organizations with over 250 staff (129 or 87% of organizations responded, reflecting 540,000 staff). While serious issues with data quality were identified in some areas and a wide range of metric values was observed across organizations, the overall average ratios are still instructive:

HR functions: 3% of all staff (but up to 5% for the Rural Payments Agency) Finance staff: 2% of all staff (but up to 9% or 10% for Health and Transport Departments) Communications: 1% of all staff (but up to ~10% for some Education and Health agencies) Procurement: 1% of all staff (but up to 5% for DEFRA and NCLSCS)

A broader measure of back office activity (IT, HR, legal, estates, communications, procurement, knowledge management and finance), including outsourcing activity, suggests an approximate spend ratio of 16%, with the largest contributors being “run and maintain” IT costs (5%), estates costs (4%) and IT project costs (2%).

We should note that this does not include a major category of support staff included in the Serbia analysis, that of administrative and logistical support.

C. Staff Allocation to Functions Categories per Type of Authority

32. All categories of functions are performed in all types of authorities with different distributions (Fig. 4). However, by far, the largest share of staff (about 40 percent) in the central administration is dedicated to service functions. Inspections functions also take a slightly larger portion of staff, consuming about 18 percent of staff. Only about 2 percent of staff is allocated to policy making and strategic planning, and legal drafting functions (P1), while policy analysis, monitoring and evaluations account (P2) functions account for about 8 percent of the staff.§§§§§§ Regulatory function is performed by about five percent of the total staff.

§§§§§§ There are 2,968 employees performing P2 function in all 94 institutions.18

Figure 4: The majority of staff perform service related functions

2%

8% 5%

18%

40%

27%

Distribution of staff by type of function

P1 P2 R I S ASource: Staff Estimates; June, 2015.

33. Staff allocation to functions within organizational types also vary. This suggests that there is limited specialization of organizational forms. Thus, in ministries about 28 percent of staff performs policy-making related functions; 27 percent performs inspections, 6 percent regulatory, and about 7 percent perform service delivery functions. About 33 percent of staff provides internal administrative support.

Figure 5: Staff in ministries mostly perform administrative functions

Figure 6: Staff in Subordinate Bodies mostly perform inspection functions

1% 1% 4%

44%

29%

21%

Bodies within ministries

P1 (%) P2 (%) R (%)I (%) S (%) A (%)

Source: Staff Estimates; June, 2015 . Source: Staff Estimates; June 1, 2015.

34. Government Services have a stronger alignment of staff with functions. About 80 percent of staff provide services while about 3 percent participate in policy-making. The rest- approximately 17 percent of staff provide internal administrative support. Over a half of the staff in SOs perform service delivery functions, while about 20 percent of staff provide administrative support. About 18 percent of staff undertake policy making functions. Inspection and regulatory functions have the least amount of

19

8%20%

6%27%

7%

33%

Ministries

P1 (%) P2 (%) R (%)I (%) S (%) A (%)

staff. These functions are performed by 2 percent and about 1 percent of staff respectively. The distribution of staff to functions in SOs also demonstrates a lack of focus on the core functions.

Figure 7: Services accounts for the largest share of staff in Government Services

Figure 8: Service function is also dominant in Special Organizations

2%3%

1%

78%

17%

Government Services

P1 (%) P2 (%) R (%)I (%) S (%) A (%)

1%18%

1%

2%

58%

20%

Special Organisations

P1 (%) P2 (%) R (%)I (%) S (%) A (%)

Source: Staff estimates; June, 2015. Source: Staff estimates; June, 2015.

35. Within PA, a large portion of staff is dedicated to administrative support. And, while PIs also dedicate a large share of staff to administrative support, a far larger share of staff in public institutions undertake service functions.

Figure 9: Public Agencies perform mostly administrative functions

Figure 10: Public Institutions perform mostly service functions

1% 2%14%

7%

18%57%

Public agencies

P1 (%) P2 (%) R (%)I (%) S (%) A (%)

0%

1%

8%0%

53%

37%

Public institutions

P1 (%) P2 (%) R (%)I (%) S (%) A (%)

Source: Staff estimates; June 2015. Source: Staff estimates; June 2015.

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D. Potential for Centralization of Common Functions

36. Centralization of common functions is a growing trend in OECD countries. There are a number of common functions that could be centralized or outsourced in line with international best practice.******* There is a general belief that shifting to a contract based system provides increased freedom for managers to focus on delivering within an established framework, resulting in improved performance.††††††† In Serbia, opportunities for centralization of common functions exist in ICT services, public procurement, financial management services, administrative support, logistic support, and insurance. Some of these functions are described below.

37. ICT Services: The Administration for Common Affairs of the Republic Bodies and the Directorate for E-government perform ICT related functions. However the majority of authorities also have their own ICT staff or even ICT units. ICT related tasks performed by the above-mentioned authorities are not classified as support functions as these are their core functions. ‡‡‡‡‡‡‡ ICT as an internal support function engages 1,050 persons in total. About 68 percent of these staff (709 employees) are employed in 6 institutions: Tax Administration, Customs Administration, Republic Health Insurance Fund, National Employment Service, and Republic Fund for Pension and Disability Insurance, Republic Institute for Statistics. As such, this function could potentially be centralized into one of several competence centers, while taking into account differences between the IT development and IT support functions§§§§§§§.

38. Public Procurement: About 347 persons work on public procurement. About 56 percent of these (or 195 persons) are employed in 5 institutions: Tax Administration, Customs Administration, Republic Fund for Pension and Disability Insurance, Republic Geodetic Authority Republic and the Health Insurance Fund. In addition, the Central Procurement Unit has been established within the Administration for Common Affairs of the Republic Bodies and is responsible for conducting procurement for other authorities.

39. Financial management: Financial planning and monitoring, including budget execution is performed by 1,441 persons in total. About 61 percent of these (or 875 ******* Shared Services in the public sector context can be defined as the consolidation of corporate services into a Shared Services Centre administered by the Public Service, to enable increased standardization, efficiency, purchasing power, service quality, automation, and control. The move to Shared Services is beneficial, as well, for allowing organizations to focus retained resources on core activities.††††††† See: Cowper, Jeremy and Martin Samuels (n.d.). “Performance Benchmarking in the Public Service: The United Kingdom Experience”, p.2. Available on the Web: http://www.oecd.org/unitedkingdom/1902895.pdf . Accessed: April 20, 2016.‡‡‡‡‡‡‡ There are 30 employees in the Administration for Common Affairs and in the directorate for E-Government dealing with the ICT function.§§§§§§§ IT development function enables working environment for business processes (for example FMIS in the Treasury), while IT support function enables functioning of institutions (such as network maintenance, hardware and software maintenance, etc.).

21

persons) is employed in 5 institutions: Tax Administration, Customs Administration, Republic Health Insurance Fund, National Employment Service, and Republic Fund for Pension and Disability Insurance.

40. Evidence and Register: About 1,115 persons are engaged in the performance of this internal support function. The majority of the staff, approximately 72 percent or (807 persons) is employed in only two institutions: National Employment Service and Business Registers Agency. It is likely that there is a higher number of staff dealing with this function.********

41. Administrative Support: About 3,300 employees perform administrative support function. This includes technical secretaries, typists and registrars. The majority of these, about 80 percent (or 2,634) are employed in the following five institutions: Tax Administration, Republic Health Insurance Fund, Republic Fund for Pension and Disability Insurance, Republic Geodetic Authority and the Ministry of Foreign Affairs. Some of these services are also provided by the Administration for Common Affairs of the Republic Bodies.

42. Logistic Support: Logistic support function undertaken by drivers, couriers, housekeepers and hygienists accounts for about 663 employees. About 60 percent (or 388 persons) are employed in the following six institutions: Tax Administration, Customs Administration, Treasury Administration, Republic Health Insurance Fund, National Employment Service and the Ministry of Foreign Affairs. Logistic support is also provided by about 500 employees of the Administration for Common Affairs of the Republic Bodies. There are also 108 persons in 14 ministries performing the same function.

******** This requires further analysis –ongoing work under functional review of service delivery might provide additional insights.

22

Box 15: Centralization of Common Functions in Ireland

The National Shared Services Office (NSSO) was established in 2014 on an administrative basis within the Department of Public Expenditure and Reform. It is responsible for leading shared service strategy and implementation across the Civil Service, and providing guidance and support to other Public Service sectors in progressing their shared service commitments under the Reform Plan. Since the publication of the 2011 Public Service Reform Plan, two Shared Services Centers have been established in the Civil Service, with more planned. This includes People Point (the HR and Pensions Administration Shared Service Centre) and the PSSC (the Payroll Shared Service Centre). People Point provides HR and pension administration shared services on behalf of 35 Government Departments and Public Service Bodies for 30,000 civil servants. Ireland has tried shared payroll services in health, education, and local government institutions. The Civil Service Payroll Shared Service Centre (PSSC) currently (2015) provides payroll, pensions and travel and subsistence payments to nearly 31,000 Civil and Public Servants. Once fully established, the PSSC will provide services to almost 4 times that number, to Organizations such as the Courts Service, the Revenue Commissioners and the Central Statistics Office. The PSSC will also service retired Civil Servants and Public Servants.

Source: http://www.per.gov.ie/en/nsso-news/

Box 16: Shared Services in Scotland

Scotland has been expanding the range of shared services. In addition to finance and HR services, it provides shared audit, ICT and procurement services. ICT services are provided to the wider public sector under the ‘SCOTS Connect’ banner and these are detailed in a SCOTS Connect catalogue which is provided to all potential customers. The core offer is access to a secure network, through high capacity lines and offering desktop services and printing as follows: a desktop, laptop or tablet PC with a range of office automation tools (email, word processing etc.); security software; printing facilities; individual SCOTS user accounts, email addresses, email and file storage; access to applications and the Scottish Government intranet ; and secure Internet access

Information Services and Information Systems (ISIS) is the provider of Information and Communication Technology (ICT) Services for the Scottish Government (SG).  It is an internal Division and currently provides services to over 10,000 service users in central Government Departments, Agencies and Non Departmental Public Bodies throughout Scotland.

SCOTS provides excellent value for money with the recharge cost for standard SCOTS provision being around two thirds of the cost of an equivalent peer provider.

Source:http://www.gov.scot/Topics/Government/PublicServiceReform/efficientgovernment/SharedServices

23

E. Overlapping of Responsibilities

43. There are several areas of overlapping functions among institutions. Functions related to development of entrepreneurship is claimed by three institutions. These include the Ministry of Economy; National Employment Service; and National Agency for Regional Development. Similarly, functions related to human and minority rights can be found both in the Office of Human and Minority Rights and the Ministry of Public Administration and Local Self-Government. Functions related to resolving property ownership and legal rights over property are claimed by a number of institutions. Apart from Republic Property Directorate and the National Employment Service, the Ministry of Justice, Commissariat for Refugees also deals with this function.

F. Decentralization and Outsourcing Opportunities

44. There are several opportunities for outsourcing of some functions currently performed by central government entities. For instance, 341 persons provide catering, printing and fire safety services as employees of the Administration for Common Affairs of the Republic. An in-depth analysis of catering and printing services should be undertaken to investigate potential opportunities for outsourcing these services. The following authorities are recommended for further analysis: Institute for Sports and Sports Medicine where half of staff provides accommodation and medical services; and the Geological Institute of Serbia whose legal status has changed, but continues to perform functions that are clearly not within its remit.

G. Recommendations

i. Further analysis of core- to no-core staff is necessary to determine the appropriate balance in the distribution of staff across functions. For a start, it is possible to assign a maximum of 80 percent of staff to core functions, and the other 20 percent to non- core functions in each institution.

ii. Analyze options for centralization or outsourcing of certain functions to improve efficiency in performance. An important aspect of this exercise would be a determination of the key functions that must be undertaken at the central level. Services such as ICT, financial management, administrative, and logistic support which are currently dispersed among several institutions are potential candidates;

iii. Undertake a thorough analysis to identify duplicated functions. Such a review would also determine the precise location of such functions and assign them to the institutions where they are most suitably and efficiently performed. The preliminary assessment has identified a number of areas of possible duplication that require further analysis.

24

iv. Review assignment of staff to key central government functions such as policy analysis, strategic planning, monitoring and evaluations. These functions now seem to have among the lowest shares of staff assignment across the central government;

v. Abolish service positions in ministries. This is because ministries are not supposed to deal with service delivery. Services currently performed by ministries could be delegated to the correct authorities.

vi.

25

4. STAFFING, VACANCY RATES AND SPAN OF CONTROL

A. Introduction

45. Governments are constantly under pressure to improve the performance of the public sector against the competition for inadequate resources. As there is no one solution for enhancing public sector efficiency, countries have adopted diverse approaches to institutional reform. These approaches include: increasing devolution and decentralization; strengthening competitive pressures; transforming workforce structure, size, and HRM arrangements; changing budget practices and procedures; and introducing results-oriented budgeting and management. In this section the analysis presents findings on the span of control, vacancy rates, and the ratio of permanent to contracted staff.

B. The Span of Control

46. There are different benchmarks for the span of control- the number of employees that a manager can control at any given time. Most governments use internal benchmarks to estimate their span of control. Thus, authorities with the ratio above the average can be considered efficient, while those below average are considered less efficient.††††††††

Box 17: Span of Control

Span of control is the number of staff reporting directly to a manager. Benchmarks for span of control in the public sector emerged in the early 1990s. For example the US federal government decided to undertake a national performance review in 1993. As a result of this review, it was decided that the federal government's span of control would be increase from 7 in 1993 to 15 by 1999‡‡‡‡‡‡‡‡.

In Europe, an interesting case is Lithuania, which adopted criteria for the management of common functions in public organizations in 2010§§§§§§§§. It includes criteria for the span of control, human resource management, IT, property management and some other common functions. On the basis of these criteria there is an annual assessment of ministries and bodies subordinated to them. The benchmark for the span of control has been established at 4. The majority of the public service organizations have coped with it, but some ministries lag behind. For instance, the average in 2013 was 5.36. Larger organizations with more than 250 staff scored much better than average.

47. The average span of control for all the 94 authorities participating in this review is 1:5. On average, for every one manager, there are five regular permanent

†††††††† It should be noted, that identification of causes of different ratio levels would require further analysis.‡‡‡‡‡‡‡‡ Bugarin, Alicia (1997). “Flattening Organizations: Practices and Standards”. Sacramento: California Research Bureau, p. 7. Available on the web: .http://www.library.ca.gov/crb/97/04/97004.pdf . Accessed April 26, 2016.§§§§§§§§ The standards were approved by the relevant order of the Minister of Finance. https://www.e-tar.lt/portal/lt/legalAct/ca4dc9e0717711e484b9c12b550436a3

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employees. Only 20 of the authorities have ratios above this overall internal benchmark. Considering the type of authority only, Ministries, (3.5), Special Organization (4.8) Public Institutions (4.4) and General Service (4.7) have a span of control below the average. Public Agencies (6.1) and Subordinate Bodies (6.4) have above average.

Table 2: Average Span of Control by Type of Staff

Type of Authority

Permanent

Planned

Variation

(%)MIN 3.5 3.9 11SB 6.4 6.8 6SO 4.8 4.6 -4GS 4.7 5.2 11PA 6.1 7.3 20PI 4.4 4.7 7Internal Benchmark 5.0 5.3 6Source: Staff estimates; June 2015.

48. The span of control varies among authorities of the same type. Thus, in ministries, the ratio between the number of managers and executive staff varies from 1.7 in the Ministry of Economy to 4.6 in the Ministry of Foreign Affairs. In SBs, this goes from 1.6 in the Administration for Agrarian Payments to 8.6 in the Tax Administration and Labor Inspectorate. GS and PIs have similar spans of control. This ranges from1.8 in the Serbian European Integration Office to 6.4 in the Administration for Common Affairs of the Republic Bodies (a SO). The span of control in the Republic Fund of Health Insurance and Central Register of Obligatory Social Insurance is 2.1, while that of the Republic Fund for Pension and Disability Insurance (a PI) is 7.

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Table 3: Range of Span of Control

Type 0-1 1-2 2-3 3-4 4-5 Over 5MIN 0 4 4 2 4 0SB 3********* 7 6 8 1 5SO 2††††††††† 2 4 1 1 5GS 1 2 3 2 0 1PA 2 4 1 2 1 6PI 0 0 2 2 3 3Total 8 19 20 17 10 20

Source: Staff estimates; June, 2015.

49. The most significant difference between the span of control in institutions of one type is between the SO and PA. The span of control in SO ranges from 1.5 in the Social Insurance Bureau to 14 in the Republic Seismologic Bureau. The span of control is even more disproportionate in PA with ratios varying from 1 in the Serbian Export Credit and Insurance Agency to 51 in the Agency for Restitution and 22.1 in the Business Registry Agency. The statistics for SBs presented above would significantly differ, if the Technical Services of Administrative Districts were analyzed as 29 separate authorities as they actually operate. Thus, there would be 5 institutions with the span of control 0-1 and 1-2; 20 institutions with 2-3; 18 institutions with 3-4; 2 institutions with 4-5 and 8 institutions with a range of 5 and more.

50. The span of control also differs significantly depending on the size of institutions. Institutions with up to 50 employees and 50-100 employees, have a below average manager’s span of control. Table 4 below presents this difference based on the size of institution.

********* Two authorities without staff and one authority with manager and not staff engaged††††††††† Centre for Investigation of Accidents and Serious Incidents has two managers and no staff, while the Republic Agency for Peaceful Settlement of Labor Disputes has 6 staff and no managers

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Table 4: Span of Control by Size of Institution

Size of Authority Span of controlUp to 50 employees 2.551-100 employees 2.9101-200 employees 3.6more than 201 employees 5.4Weighted average span of control 5.3Source: Staff estimates: June, 2015.

51. The majority of smaller institutions- those with only up to 50 employees- on average have a span of control of 2-3. However, District offices with the same number of employees tends to have larger spans of control. The majority of District Offices have a span of control of 3 to 4.

Figure 11: Span of Control by Number of Employees

0%10%20%30%40%50%60%70%80%90%

100%

Up to 50 Employees(n=45)

51-100 Employees(n=16)

101-200 Employees(n=11)

200+ Employees(n=22)

Distribution of spans of control by organizations of different size

0 - 1 1 - 2 2 - 3 3 - 4 4 - 5 Over 5

Average:2.5 2.9 3.6 5.4

Improving average span of control as organisations increase in sizeBut even in large organisations, there are some poor performers

Span of control

Source: Staff estimates, June 2015.

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52. The large number of managers is not only inefficient, but also unequal across the board. The lack of an official span of control means that some managers are overburdened by a large span of control while others are not. Applying the internal benchmark span of control the number of managers could be reduced by up to about 24 percent. However, such as reduction would have to be done at individual institution level, rather than by type of institution given the variations in the span of control among the 94 institutions reviewed.

Table 5: Potential Downsizing of Managers

Type Total number of managers

Managerial positions for

potential downsizing

Downsizing (%)

MIN 916 285 28.6SB 1,406 173 13.5SO 671 135 19.0GS 189 44 21.1PA 213 75 38.0PI ,1343 406 28.8Total 4,738 1,118 23.6

Source: Staff estimates; June, 2015.

C. Planned v. Actual Employment (Vacancy Rates)

53. About 33,233 positions are envisaged by the Systematization Acts in all the 94 authorities analyzed. SB has the highest number of planned staff (12,214), and accounts for about 37 percent of all planned staff. PI (7,954) has the nearest number of planned staff and accounts for about 24 percent of all planned staff. Ministries (5,249) and SO (4,579) are next, and respectively account for 16 percent and 14 percent.

Table 6: Planned Staff by Type of Institution

Type Number of planned staff

% of total planned staff

MIN 5,249 15.8SB 12,214 36.8SO 4,579 13.8GS 1,302 3.9PA 1,935 5.8PI 7,954 23.9Total 33,233 100

Source: Staff estimates; June, 2015.

54. However, there are several institutions with high numbers of vacant positions relative to planned permanent staff. The institutions have planned positions that are not

30

filled by permanent staff as envisaged in the Systematization Acts. Altogether, about 15 percent (about 5,000 jobs) of planned positions are not filled. This suggests that these institutions have overestimated their staffing needs or that some functions are not being performed fully. Vacant positions are highest in SB (1,745 positions); Ministries (1,171 positions), SO (681) and PI (632 positions) have some of the highest number of vacancies. However, as a share of planned employment, Ministries (22 percent); PA (22 percent) and GS (18 percent) represent the categories with the highest discrepancies.

Table 7: Vacancy Rates Based on Permanent Staff

Type Planned Permanent Vacant Vacancy rate (%)MIN 5,249 4,078 1,171 22.3SB 12,214 10,469 1,745 14.3SO 4,579 3,898 681 14.9GS 1,302 1,068 234 18.0PA 1,935 1,506 429 22.2PI 7,954 7,322 632 7.9Total 33,233 28,341 4,892 14.7

Source: Staff estimates; June, 2015.

55. Vacancy rates persists in some institutions even contract employees are included (e.g. Ministries, SB and PA). However, the majority of the institutions exceed their planned number of positions, when contracted staff are included in the total number of employees. The discrepancy between planned and actual employment, including contracted staff is thus 4,052, representing an increase of 12 percent more than planned.

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Table 8: Vacancy Rates Based on Actual Staff (Permanent and Contract)

Type Planned Total Vacant Vacancy rateMIN 5,249 4,812 437 8.3SB 12,214 11,680 534 4.4SO 4,579 9,449‡‡‡‡‡‡‡‡‡ -4,870 -106.4GS 1,302 1,353 -51 -3.9PA 1,935 1,783 152 7.9PI 7,954 8,208 -254 -3.2Total 33,233 37,285 -4,052 -12.2

Source: Staff estimates: June, 2015.

56. The use of contract workers creates staffing distortions in the allocation of functions. The top three categories of functions with the highest number of vacant positions are policy making, inspection and regulatory functions (table 9). There are 129 vacant positions attached to policy making (P1) functions, accounting for 17 percent, or the majority of vacant positions. Inspection Supervision (I) function has a total of 428 vacant positions, while Regulatory (R) functions has 84 vacant positions.§§§§§§§§§

Table 9: Vacant Positions per Categories of Functions

Number of vacant positionsType P1 P2 R I S A Total

MIN 92 95 38 154 30 28 437SB 17 14 23 313 80 87 534SO 5 -1120 -6 -65 -3333 -351 -4870GS 2 0 3 0 -65 9 -51PA 12 10 44 18 116 -48 152PI 1 24 -18 8 -217 -52 -254Total 129 -977 84 428 -3389 -327 -4052

Source: Staff estimates: June, 2015.

57. However, there is also the problem of overstaffing in some areas. Overstaffing is prevalent in the policy monitoring and evaluation (P2), service delivery (S), and administration (A) functions. Policy monitoring and evaluation (P2) is overstaffed by about 49 percent (or 977 persons); Service delivery by about 29 percent (3,389 persons) and Administration functions by about 3 percent (327 people). Within these categories of functions, there are also variations across types of institutions. Overstaffing is most prevalent in SO than in any other organizational form. There is evidence of overstaffing

‡‡‡‡‡‡‡‡‡ Special Organizations is an outlier largely due to employment of contract workers in Hydrometeorological Service.§§§§§§§§§ The information is form June 1, 2015, and is based on the Systematization Acts.

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in nearly every category of function in this organizational form, suggesting that it might be performing certain tasks outside its mandate.

D. Permanent versus Contracted staff

58. The Budget System Law (BSL) limits the size of contract employees to 10 percent of the actual number of permanent employees. At the same time, the Law on the Ceiling on Number of Employees in the Public Sector adopted in 2015, defines exceptions to this rule. For instance, institutions with less than 100 employees can have up to 10 contract employees. Diplomats, teachers and project staff are not considered contract employees.**********

59. Out of 37,285 staff in the 94 institutions at the central level, there are 28,341 permanently employed and 8,944 contracted staff. Thus, across all organizational forms, there are about 5,621 (or about 17 percent) contracted above the 10 percent limit.

60. Some organizational types operate within the 10 percent limit for contract staff. However, individual institutions within these categories tend to engage several staff above the limit. For instance, while SO cumulatively operate a staff complement below the 10 percent threshold, some individual entities classified as SO bodies have as high as 200 contracted workers over the limit.

Table 10: Contracted Staff Over Limit

Type Planned staff Actual staffing figures Contracted as (%) of planned

staff

Surplus of contracted staff as per the BSL

Permanent staff

Contracted staff

% No. of staff

MIN 5,249 4,078 734 14.0 4.0 209SB 12,214 10,469 1,211 9.9 -0.1 -10SO 4,579 3,898 5,551 121.2 111.2 5093GS 1,302 1,068 285 21.9 11.9 155PA 1,935 1,506 277 14.3 4.3 84PI 7,954 7,322 886 11.1 1.1 91Total 33,233 28,341 8,944 26.9 16.9 5,621

37,285Source: Staff estimates: June, 2015.

E. Permanent v. Contract Employees by Type of Institution

a. Ministries

**********Data collected encompass all the contract employees (i.e. there is no breakdown by specific type of non-permanent employees). Therefore the findings reflect the extent to which employment practices across institutions observe the 10 percent limit imposed by the Budget System Law

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61. Ministries together have 5,249 planned positions. Out these, about 4,078 (or 86 percent) are occupied by permanent staff, while 734 positions (14 percent) are occupied by non- permanent staff. Collectively, ministries break the limit of contract employees by about 209 employees. Individually, 9 out of 14 ministries have contracted staff compliments above the threshold of 10 percent. Ministry of Foreign Affairs with 95 employees above the limit, has the highest number of staff above the limit.†††††††††† Others are: Ministry of Construction, Traffic and Infrastructure with 52 employees above the limit and Ministry of Agriculture and Environmental Protection with 37 above the limit.

Figure 12: Ministries Exceeding Limit on Contracted Staff

Education, Science and Technological Development

Economy

Youth and Sports

Finance

Labour, Employment, Social and Veteran Affairs

Culture and Information

Agriculture and Environment Protection

Construction, Traffic and Infrastructure

Foreign Affairs

0 10 20 30 40 50 60 70 80 90 100

Contract employment exceeding limit

Source: Staff estimates; June, 2015

†††††††††† Employees working at embassies and consulates are exempt from the limit according to the Law on Maximum Number of Employees in the Public Sector, and 41 person is contracted there.

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b. Subordinate Bodies

62. The 29 SB collectively have 12,214 planned job positions. Of these, 10,469 are occupied by permanent employees and 1,211 by contracted staff. With about 10 percent of non-permanent staff, the SB is the only group of institutions below the 10 percent threshold. Nevertheless, about one third (8 out of 29) of SBs are above the limit for contracted staff prescribed by the Law.

Table 11: Subordinate Bodies Exceeding Limit

Authority Contracted employees Treasury Administration 204Customs Administration 72Directorate for Agrarian Payments 33Agency for Environmental Protection 18Directorate for Agricultural Land 13Public Debt Administration 8Free Zones Administration and 1Administration for Transport of Dangerous Goods 1Total 350

Source: Staff estimates; June, 2015.

c. Special Organizations

63. The Systematization Acts for SO envisages 4,579 positions. About 3,898 of these positions are filled with permanent staff, while non-permanent occupy 5,551of these positions. Altogether, SO therefore employ 5,093 employees (or 121 percent) above the limit. It should be noted that the top three violators of the 10 percent ceiling among all central government institutions are classified as SO. The majority of contracted workers are employed by Republic Hydro-meteorological Service.

Table 12: Special Organizations Exceeding Limit

Source: Staff estimates; June, 2015.

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Authority Contracted employees Republic Hydro meteorological Service 4,229Republic Geodetic Authority 510Statistical Office of Serbia 357Commissariat for Refugees 26Public Procurement Office 2Agency for Peaceful Settlement of Labor Disputes

1

Total 5,125

d. Government Service

64. There are 1,302 planned positions allocated to GS. About 1, 068 of these positions are filled with permanent staff. Control employees occupy 285 positions. Collectively, GS has 163 employees above the threshold of 10 percent.

Table 13: Government Service Exceeding Limit

Source: Staff estimates; June, 2015.

e. Public Agencies

65. Collectively, PA have 1,935 planned positions. Of these, 1,506 are occupied by permanent staff and 277 by contracted staff. Together, PA employ 84 non-permanent staff (i.e. 4.3%) above the 10 percent threshold. Like the other categories, there are variations among individual authorities. Two out of the 16 authorities are above the 10 percent threshold. These are Business Registries Agency and Medical Devices Agency with 125 and 4 contract employees respectively above the limit.

f. Public Institutions

66. PI collectively have 7,954 planned jobs. Of these, 7,322 are occupied by permanent staff and 886 by non-permanent employees. Among the PI, four authorities breach the limit as shown in the table below.

Table 14: Public Institutions Exceeding Limit

Source: Staff estimates; June, 2015.

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Authority Contracted employees Administration for Common Affairs of the Republic bodies 111European Integration Office 29Government Airline Service 10General Secretariat of the Government 8Office for Cooperation with Civil Society 3Office of Media Relations 2Total 163

Authority Contracted employees National Health Insurance Fund 40National Employment Service 38Institute of Education Quality Evaluation 36Institute for Sports and Sports Medicine 29Total 143

H. Recommendations

i. Review the Systematization Acts and analyze the reasons for engagement of contract works beyond the approved 10 percent limit. Better enforcement of the limit could also improve opportunities for efficiency gains.

ii. Introduce periodic reporting on permanent and contracted staff (annually or biannually) to ensure monitoring of staffing data across all budget beneficiaries. Such reports could also be used to identify functions where there is a need for more permanent instead of contracted staff.

iii. Introduce a system wide standard span of control. Every budget beneficiary should be required to adhere to a defined span of control. Care should be taken to ensure than the span of control is applied to individual organizations, rather than at the aggregate level given the variations in the number of staff across institutions of the same type.

iv. Enforce the policy on the limits to the number of contract workers to discourage the excessive reliance on non-permanent employees. The existing 10 percent threshold provides a useful starting point, but further action could be taken to eliminate all vacant positions in the planned employment to reduce opportunities for unnecessary employment of contract staff.

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5. CONCLUSION

67. This report has reviewed possible duplications, irrational distribution of functions and provided appropriate conclusions and general recommendations. The analysis was based on the review of the Systematization Acts of 94 organizations forming the core of the central government, and identification of specific functions and resources per function. It identified misalignments in the relationship between functions and organizational structures; staffing and functional imbalances, and redundancy and overlaps in organizational forms. The result presented reflect only the diagnostic phase of the horizontal functional review of the Serbian executive.

68. The exercise focused on the identification of functions, linking them with resources and classifying them. A full list of the institutions at the central level was prepared, linked with the outputs, number of employees, and classified, into core and support functions. Core functions, in turn, were classified in the policy-making, analysis, inspection, regulatory, public and administrative services. Legal analysis of the government structures and their status was also undertaken.

69. The analysis uncovered possible duplication of functions, but it requires thorough examination in the second stage of the functional review. So far, it is difficult to say whether it offers any room for short-term savings as a result of potential duplicated functions. The review did not identify missing functions at this stage. However, it can be assumed that the majority of missing functions will be related to the process of the Serbian accession to the EU and functions anticipated in new legislation.

70. Three major conclusions emerged from this exercise. First, there is an obvious need to streamline and rationalize the structure of the Serbian executive. This can lead to a more coherent, able and efficient public service in the medium-term. This can be achieved through a moratorium on the creation of new organizations and development of a concept of the executive defining major principles and organization types, purpose and legal status of public organizations. Second, there is potential for short-to-medium-term savings from cutting the number of auxiliary and contract staff. If downsizing would follow the proposal of this functional review, the total number of staff in 94 authorities could be reduced by about 8,000 jobs. Finally, there is a considerable potential for medium-term savings in increasing the size of public service organizations by pursuing mergers of small institutions and consolidation of public services, centralizing (via service and competence centers) and, possibly, outsourcing certain common functions, such as IT, financial management and a number of others.

71. The proposed measures can hardly lead to substantial short-term savings, but could ensure long-term quality and effectiveness of the public sector. Lessons of

38

public sector restructuring during the fiscal crisis in Europe and elsewhere demonstrate that short-term budget savings may lead to longer-term costs due to decreased capacity, expertise or other factors. Effective cutbacks require leadership, rational decision-making, extensive consultation and expertise. Further work needs to focus on validation of the preliminary results. This should be undertaken through relevant discussion with stakeholders focusing, for instance, on areas of duplication of functions and redundant functions.

72. While this activity did not include analysis missing functions, the accession process currently underway will no doubt necessitate the introduction of certain functions. Assessment of the missing functions regarding the EU acquis should have been performed in the process of the preparation of the National Program of the Adoption of the Acquis (NPAA). It is possible to review possible clusters of missing functions detailed in the Serbian NPAA and conducting relevant expert interviews (missing functions sub-component).

73. Assessment of the optimal place for current functions performed has been partially addressed in this report dealing with the classification of functions. This was based on the relevant best practice, such as separation of policy-making and implementation functions, separation of the inspection and public service functions. The issue of the optimal level of functions requires further analysis based on best practice regarding centralization and de-centralization of functions.

39

ANNEX 1: LIST OF PARTICIPATING INSTITUTIONS

1 Ministry of Construction, Transport and Infrastructure 2 Republic Geodetic Bureau3 Republic Housing Agency4 Road Traffic Safety Agency5 Port Governance Agency6 Administration for Determination of the Seaworthiness7 Administration for Transport of Dangerous Goods8 Directorate for Railways9 Civil Aviation Directorate of the Republic of Serbia10 Centre for Investigation of Accidents and Serious Incidents11 Ministry of Mining and Energy12 Administration of the Energy Reserves13 Ministry of Youth and Sports14 Bureau of Sport and Sport Medicine15 Ministry of Foreign Affairs16 Administration for Cooperation with the Diaspora and Serbs in the Region17 Ministry of Culture and Media18 Ministry of Trade, Tourism and Telecommunication19 Tourism Organization of Serbia20 Geologic Bureau of Serbia21 Republic Secretariat for Public Policies22 Administration for Public Procurements23 Commissariat for Refugees and Migration24 Republic Directorate for Commodity Reserves25 European Integration Office26 Office of Media Relations27 Office for Reconstruction and Flood Relief28 Administration for Common Affairs of the Republic bodies29 General Secretariat of the Government30 Office for Human and Minority Rights31 Office for Cooperation with Civil Society32 Government Airline Service33 Personnel Management Service

40

34 Ministry of Economy35 Business Registry Agency36 Serbian Export Credit and Insurance Agency, S.C. Uzice37 Institute for Standardization of Serbia38 National Agency for Regional Development39 Bankruptcy Supervision Agency40 Privatization Agency 41 Fund for the Development of the Republic of Serbia42 Directorate of Measure and Precious Metals43 Administration for Quick Response44 Ministry of Justice45 Directorate for Management of Seized Property46 Administration for Cooperation with Churches and Religious Communities47 Ministry of Public Administration and Local Self-Government48 Directorate for E-Government49 Administrative Inspectorate50 Technical Services of Administrative Districts

50.1 53.1 Technical Service of Borski Administrative District50.2 53.2 Technical Service of Branicevski Administrative District50.3 53.3 Technical Service of Jablanicki Administrative District50.4 53.4 Technical Service of Juznobacki Administrative District50.5 53.5 Technical Service of Juznobanatski Administrative District50.6 53.6 Technical Service of Kolubarski Administrative District50.7 53.7 Technical Service of Kosovski Administrative District50.8 53.8 Technical Service of Kosovskopomoravski Administrative District50.9 53.9 Technical Service of Kosovskomitrovacki Administrative District

50.10 53.10 Technical Service of Macvanski Administrative District50.11 53.11 Technical Service of Moravicki Administrative District50.12 53.12 Technical Service of Nisavski Administrative District50.13 53.13 Technical Service of Pcinjski Administrative District50.14 53.14 Technical Service of Pecki Administrative District50.15 53.15 Technical Service of Pirotski Administrative District50.16 53.16 Technical Service of Podunavski Administrative District50.17 53.17 Technical Service of Pomoravski Administrative District50.18 53.18 Technical Service of Prizrenski Administrative District50.19 53.19 Technical Service of Rasinski Administrative District

41

50.20 53.20 Technical Service of Raski Administrative District50.21 53.21 Technical Service of Severnobacki Administrative District50.22 53.22 Technical Service of Severnobanatski Administrative District50.23 53.23 Technical Service of Srednjebanatski Administrative District50.24 53.24 Technical Service of Sremski Administrative District50.25 53.25 Technical Service of Sumadijski Administrative District50.26 53.26 Technical Service of Zajecarski Administrative District50.27 53.27 Technical Service of Zapadnobacki Administrative District50.28 53.28 Technical Service of Zlatiborski Administrative District50.29 53.29 Technical Service of Toplicki Administrative District

51 Ministry of Finance52 Tax Administration53 Treasury Administration54 Custom Administration55 Administration for Prevention of Money Laundering56 Tobacco Administration57 Public Debt Administration58 Free Zones Administration59 Central Register of Obligatory Social Insurance60 Republic Directorate for Property of the RS61 Republic Statistics Bureau62 National Mortgage Insurance Corporation63 Agency for Restitution64 Ministry of Agriculture and Environmental Protection65 Veterinary Administration66 Administration for Plant Protection67 Republic Water Directorate68 Forests Administration69 Directorate for National Reference Laboratories70 Administration for Agrarian Payments71 Agricultural Land Administration72 Agency for Environmental Protection73 Republic Seismologic Bureau74 Republic Hydrometeorology Bureau75 Serbian Radiation Protection and Nuclear Safety Agency76 Serbian Nature Conservation Bureau

42

77 The Indemnity Fund78 Ministry of Health79 Administration of Biomedicine80 Serbian Agency for Medications and Medicine Devices81 Serbian Agency for Accreditation of Health Care Institutions82 Republic Fund of Health Insurance83 Ministry of Education, Science and Technological Development84 Bureau for Improvement of Education85 Bureau for Evaluation of the Education Quality86 Bureau for Intellectual Property87 Ministry of Labor, Employment, Veteran and Social Affairs88 Labor Inspectorate89 Administration for Safety and Health at Work90 Social Insurance Bureau91 Republic Agency for Peaceful Settlement of Labor Disputes92 Solidarity Fund93 Republic Fund for Pension and Disability Insurance94 National Employment Service

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ANNEX 2: SAMPLE FUNCTIONS AND STAFFING TABLE

Office for Human and Minority Rights

Function Category of Function

Number of staff planned by

Systematization Act

Actual number of staff

Permanent staff

Contracted staff

1 Management of the institution А1 5 2

2 Human Resources Management А1 2 2

3 Planning and conducting public procurement procedures А1 1 1

4Preparing documents and implementing obligations deriving from the international cooperation

А1 5 4

5 Financial support А1 3 3

6 Preparation and implementation of projects from the scope of work А1 6 3 1

7 Monitoring, analysis of the status and drafting acts from the scope of work P2 7 5 1

8 Drafting strategic and planning documents from the scope of work P1 2 2

9Coordination of work of Councils and delegations of the RS in the bodies dealing with issues of national minorities

S2 7 6 1

10 Logistics and technical support А1 1 1

44

DescriptionEnvisaged by

Systematization Act

Actual number of staff as of 1

June, 2015

Total number of executive staff 26 21

Total number of managers down to the level of assistant minister/assistant director (it includes minister/director , state secretary/deputy director, assistant minister/assistant director, secretary general of the Ministry, chief of cabinet) 5 2

Total number of managers up to the level of assistant minister/assistant director (it includes head of groups, head of units/divisions, head of departments) 8 6

Total 39 29

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ANNEX 3: SPECIAL ORGANIZATIONS: STATUTORY BASIS AND LEGAL SUBJECTIVITY

Name Statutory basis for establishment Legal subjectivity

National Land Survey Institute Law on Ministries NoNational Public Policy Secretariat

Law on Ministries No

National Legislation Secretariat

Law on Ministries No

National Commodity Reserves Directorate

Law on Ministries No

National Property Directorate Law on Ministries NoNational Institute of Statistics Law on Ministries NoNational Meteorological Institute

Law on Ministries No

Intellectual Property Institute Law on Ministries NoSocial Insurance Institute Law on Ministries NoDirectorate of Railways Railways Law YesAccident Investigation Centre Air Transport Law NoSerbian Geological Institute Law on Mining and Prospecting YesPublic Procurement Administration

Public Procurement Law No

Commissariat for Refugees and Migrations

Migration Management Law No

National Seismological Institute

Law on the National Seismological Institute

No

National Agency for Amicable Settlement of Labor Disputes

Law on Amicable Settlement of Labor Disputes

No

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ANNEX 4: DATA COLLECTION GUIDELINES

Considering the already verified Functions Table and the Act on Internal Organization and Systematization of Posts, please add the following staffing information into relevant columns of the Functions Table:

A. Identify the post/s and number of executives that implement each function/deliver function’s results (please insert number of post/s and number of executives as envisaged by the Systematization Act);

B. Identify the number of staff that actually implements each function/deliver function’s results.

In addition to the data described above, the following staffing data are also required:

(i) Total number of executives envisaged by the Systematization Act(ii) Actual total number of executives as of 1 June 2015(iii) Total number of managers down to the level of assistant minister/deputy

director as envisaged by the Systematization Act (it includes minister/director + assistant minister/assistant director + secretary general of the Ministry + chief of cabinet)

(iv) Actual total number of managers down to the level of assistant minister/ deputy director (it includes minister/director + assistant minister/assistant director + secretary general of the Ministry + chief of cabinet) as of 1 June 2015

(v) Total number of managers up to the level of assistant minister/deputy director as envisaged by the Systematization Act (it includes head of groups + head of divisions/units + head of departments)

(vi) Actual total number of managers up to the level of assistant minister/ deputy director (it includes head of groups + head of divisions/units + head of departments) as of 1 June 2015

(vii) Total number of actual staff as of 1 June 2015

Notes:

In case two or more functions are implemented at one work post, the post should be allocated to the function that is predominantly performed (to the function

47

which implementation takes most of the working time). One working post can be allocated to one function only (In exceptional cases only

and when one post participates equally in implementing two functions, the information on work post should be inserted under two functions with the special notes at both places “50% of work time”).

For the function described as day-to-day management of the institution, please consider only the managers down to the level of assistant minister/ deputy director. Managers below the level of assistant minister should be considered as specialists.

Total number of work posts and executives allocated to the functions must be equal to the number of posts and executives envisaged by the Systematization Act.

Total number of staff that currently implements the functions must be equal to the total number of actual staff (please consider the staffing data as of 1 June 2015).

Tables of Required Data

Table 15: Allocation of Planned and Actual Staff per Function

Function Products/resultsNumber of post as per

the Systematization Act

Number of executives as per

the Systematization Act

Actual number of staff

… … ? ? ?… … ? ? ?… … ? ? ?… … ? ? ?… … ? ? ?… … ? ? ?

Table 16: Total Number of Staff

Description of the information As envisaged by the Systematization Act

Actual number as of 1 June 2015

Total number of executives ? ?

Total number of managers down to the level of assistant minister/ deputy director (it includes minister/director + assistant minister/assistant director + secretary general of the Ministry + chief of cabinet)

? ?

Total number of managers up to the level of assistant minister/ deputy director

? ?

48

(it includes head of groups + head of divisions/units + head of departments)

Total number of all staff ? ?

49

50