Public sector modernisation of Estonia January 2018

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1 Public sector modernisation of Estonia January 2018 Introduction Background Labour deficit and broadening regional disparities due to declining population; Estonian overall labour force is expected to decrease 0,7% a year Increasing expectations demand for better public services everywhere; Government to cope with limited resources: more effective and efficient policies Need for more horisontal co-operation and co-ordination in central government level Public sector in numbers (2016) Public sector o Local goverments o Central govermen o Social insurance funds 848 The challenges for Estonian public administration (2011, OECD) Need for more horisontal co-operation and co-ordination in central government level Need for more efficient provision of public services in central and local government level The political targets More efficient central government and reduction of administrative burden (among top 5, Institute for Management Development Index); The ratio of the personnel of the public sector will not increase compared with overall workforce (less than 12%); The costs of the public sector from GDP will not increase (public sector expenditure from GDP will be less than 40,4%) State Reform State reform concept Continous policy agenda by successive governments; Binding action plan for implementation; Concrete tasks, deadlines, responsible entities; Public scrutiny of results. Objectives The main focus is to improve public services; Reduce governance costs and improve efficiency and transparency; Continuous development of IT services and e-solutions in public services and within public sector;

2 Continuous consolidation of support services. Action Plan Balance reduce regional disparities, balanced funding governance levels (local government reform, regional administration reform etc) Efficiency reduce administrative burden and improve cost efficiency (development of e-solutions, consolidation of support services, institutional reorganisation, scrapping legislation etc) Transparency involve citizens in decision making process (measures for citizen participation, referendums etc.) Main areas in the State Reform reform of local governments (2017) reform of state support functions (centralization ) - State Shared Service Centre administrative reform of state agencies abolishment of county governments (2018) Estonia has made several reforms and projects to modernise our public sector last years Reorganizations in Vocational colleges network reform Internal reforms in the universities Court registers reform Support services reform in prisons, closing Harku and Murru prisons Reorganizing the object security of Estonian Defence League Internal reorganizations in many agencies (environmental, rural, cultural and transportation agencies) Better process management in Tax and Customs Board (implementing ICT solutions) Consolidation of state support services (pay-roll, accounting, real estate management) Reorganizing the support services in social security agencies Reorganizing the workflow in Estonian Rescue Board Centralisation of support services In 2009 in the conditions of economic recession we decided to start a project of centralisation of state shared services. The aim of the project was the reduction of employees of support services by 40%, to improve the quality of state accounting, to develop a paper-free accounting process and make the comparable management data available both on central and institutional level. At starting point there were 253 state agencies with independent financial accounting, HR accounting and payroll calculation systems in Estonia. There were 14 different accounting software solutions and 11 different HR accounting software solutions in use and there was no common reporting system. Main function IT systems were not linked to financial or personnel accounting software. All agencies spent separately money on the development of those different softwares.

3 As a result of the project: 1) all state agencies are using common financial software, 2) all invoices are processed in e-invoice environment, 3) financial and HR information is available on web-based reporting system, 4) a self-service environment is developed for information concerning vacations, business trips, trainings and assets, 5) quality of accounting has approved, 6) number of employees of support services has reduced by 24%, 7) in 2017 not only is the financial, HR and payroll accounting centralised within administrative areas of ministries but it is consolidated into a single public authority State Shared Service Centre. State employees are especially satisfied with the self-service environment because it has reduced the bureaucracy within the agencies and made processes a lot faster. Special training program for mid-level managers In order to break silos in public sector and overcome the risks of decentralisation Ministry of Finance has designed a special training program for mid-level managers. Middle managers are a priority target group for our central development and training programs because they are the key players in spreading common values in Estonian decentralised civil service and implementing change. Mid-level managers are constantly between two fires because they simultaneously have to implement the top level s vision and motivate their subordinates. In practice, this often includes finding compromises between controversial aims and methods to implement the desired changes. Since 2014, we have offered a comprehensive development program for mid-level managers that offers a unique combination of development support, practical exercises and training to ensure the fulfilment of the objectives set in the personal development program of each participant. The intensive program aims to develop skills, knowledge and qualities that help middle level managers to perform better in their position and strives to unify the understanding of middle level manager s role by promoting transorganizational cooperation and creating communication networks. The program has also offered a number of concrete ideas for management improvement in different government institutions. 0-bureaucracy project In 2015 we started a project called 0-bureaucracy where the first stage was addressed to entrepreneurs to find out what bothers them most in communication with state and how we can reduce the bureaucracy to make their life easier. We received 252 proposals from entrepreneurs from where to reduce bureaucracy in state to business relationships. The second stage was to ask state authorities how to reduce bureaucracy within the state in our everyday communication between ourselves. From that initiative we received 963 proposals. It came out that some of the things that bother us every day are quite easily fixed. We just have to be aware and ask ourselves more often why we are doing things the way we are. Although 0 - bureaucracy project is far from finalisation we can still say that when you start with small things you may result in huge improvement. Today we have several law amending and software developing processes going on that derived from this project and as a result we can give our officials and entrepreneurs back time they can use on more productive activities in the future. New Public Service Act and decentralised (pay) system of public service

4 In 2013 entered into force a new Public Service Act. With that new law Estonia made a huge step to modernise our public service. We moved from career based HR management system to position based system. Meaning that our recruitment in public service is decentralised. We hire specialists for specific fields and there has to be a competition to find the best candidate for a position. A person s career depends on his/her individual advancement. As of 2013 our pay system of public service is decentralised and it takes into account the pay level on overall labour market, employee s personal responsibility rate and competitiveness on the labour market. We encourage mobility between public and private sector. It has given us an opportunity to hire good specialists from private sector to bring different way of thinking to public sector. The new law also pointed out a single state authority who is responsible for the development of state HR policy and state employees. That authority is Ministry of Finance. Share of general government sector should not exceed 12% of overall labour force In Estonia one of the challenges at the moment is how to manage in a situation where the overall labour force is decreasing and the economic growth is modest. Here in Estonia we have decided that the share of general government sector should not exceed 12% of overall labour force. That means government sector has to decrease at least 0.7% a year. How to do it when the expectations to public sector and public services we are offering remain the same? So we have decided to reform our state and make it more flexible and efficient. We have to minimise duplication between agencies, develop new e-solutions, reduce bureaucracy, decide what services we should not offer any more and what services we can outsource to private sector. A challenge for us is also maintaining competitiveness of public sector salaries, while avoiding too fast increase. Public sector should not be leading the salary market but at the same time we all expect that there are best people working in the public sector. So in addition to the salary we have to find other motivators to keep good people working for us and bring even better ones to join us. In Estonia we are currently working on a branding project to make state attractive as an employer. New working methods We can say that new working methods working from distance or tele-working are also challenges for public sector. We have to ask whether our labour or public service laws support that kind of working (the accounting of service hours, work safety etc.), how to develop our managers to help them cope with employees who work from the distance and are rarely in the office, how to make sure that we have all the necessary ICT equipment for that and ensure the security of data. One of the best examples of public sector modernisation is the system of tax declaration In Estonia around 95% of tax declarations are filed electronically. Using a secure ID, a taxpayer logs onto the system, reviews their data in pre-filled forms, makes any necessary changes, and approves the document with a digital signature. The process typically takes three to five minutes. From 2015 one-click tax returns are also available, all known data is displayed to the citizen together with the calculated result, then all they have to do is click on the confirmation button - all this takes less than a minute. From the state tax authorities point of view electronically filed declarations are much easier to process.

5 But to be able to offer customers pre-filled declaration forms and process all the information efficiently also means that all the other state registers and databases are up to date and able to communicate with each other automatically. For that Estonia has developed a data exchange layer for information systems X-Road. This system is a technological and organisational environment enabling a secure internet-based data exchange between information systems. In 2015 there were 219 databases connected to X-Road system (both public and private), 939 institutions were using it, 1723 different services were offered through the system and million inquires made. Public and private sector enterprises and institutions can connect their information system with X-Road. Joining the X-Road enables institutions to save resources, since a cooperative and secure data exchange layer already exists with all the other X-Road members. Data exchange between all the members of the X-Road ecosystem is significantly more efficient. X-Road also enables citizens and officials to operate via different portals and applications (document management systems, institutional information systems) in a more efficient and flexible manner. For example, it helps checking for relevant information in national databases or securely exchange documents with institutions. Central Government sector is decreasing (-2300 employees ) Governing area Employees (FTE) Ministry of Education and Research Ministry of Justice Ministry of Defence Ministry of the Environment Ministry of Culture Ministry of Rural Affairs Ministry of Economic Affairs and Communication Ministry of Finance Ministry of the Interior Ministry of Social Affairs Foreign Ministry Chancellor of Justice Office of the President Supreme Court The Parliament of Estonia National Audit Office of Estonia Government Office Together Reasons for larger-than-planned reduction in (01.06.)2015-(01.06.) Overall top-down orders effect, all the ministries wished to contribute to the state reform

6 2. Soft incentives allowing to raise wages from savings. Extra money for wage raise is available for only special target groups teachers, internal security workers, social security workers and cultural workers with higher-education 3. Ongoing structural reforms, for example school network reform, vocational colleges reform, prison system reform, court registers reform, consolidation of state support services (pay-roll, accounting, real estate management) etc 4. Using ICT solutions and developing e-services, for example environmental surveillance, tax and customs ICT systems etc PS! Central government institutions are constantly looking for ways to be more effective and productive, because they have to manage with their current budgets: budget increase is mostly possible only in priority areas (national security; promoting economic growth; sustainable livelihood of low income people; families with children; reforming public and local administration) Ongoing projects (institutional reorganisation) Possible merger of Estonian Technical Surveillance Agency and Estonian Consumer Protection Board Possible merger of Estonian transportation agencies (road, maritime, aviation, railroad) Planning to create Shared Storage Unit for state museums (also competence centre for restoration and digitalisation) Internal reorganisation of Statistics Estonia Initiation of moving public servants and structures of state authorities from Tallinn to counties (1000 workplaces) Other activities Ministry of Finance is centrally coordinating different trainings in different areas among public sector Middle managers are a priority target group for our central development and training programs, because they are the key players in spreading common values in Estonian decentralized civil service and implementing change We pay special attention to enhance the cooperation between the managers of different organizations, in order to manage the risks of Estonian decentralized public service system and cope with the challenges of increasingly complex external environment Government Office structural unit The Top Civil Service Excellence Centre is responsible for the recruitment, selection and development of top executives in civil service Implementation Overall steering by the cabinet of ministers; Execution by line ministries. Ministry of Finance, Ministry of Economic Affairs and Communications and Ministry of Justice are the key, Coordination by the Minister of public administration; Regular monitoring and reporting by the State Reform Coordination Board. The information about ministries

7 Ministries 11 ministries + State Chancellery 2734 employees ( ) Joint building of Ministries Ministry of Economic Affairs and Communications Ministry of Education and Science Ministry of Social Affairs Ministry of Finance Ministry of Justice 5 ministries, 8 ministers and 5 secretary generals Joint building in facts compared with previous situation People ca 1000 work places Working area reduction of ca 21% (16 m 2 per 1 work place) Costs reduction of costs 7 mln euros in 10 years Energy saving per 1 year ca 57 % Joint administrative department Personnel services Legal services Administrative services Records management services