1. Sarah Holloway, Governance Adviser, and Ajay Sharma, DFID Economist, from the Overseas Territories Department of DFID visited St Helena from 6-14 June 2003. The aims of the visit were to: (i) have preliminary discussions on the current budget processes and the establishment of a strategic economic framework; (ii) discuss financial management issues; and, (iii) review current economic issues.










2. The team appreciated the open and active participation throughout the discussions by Members of the Executive Council, Legislative Council, the Governor, the Chief Secretary, public officials, non-government organisations and the private sector. Both team members were very grateful for the valuable insights provided by everyone they talked to. The discussions undertaken during the visit were constructive, open and positive. A common understanding on key issues, with the St Helena Government (SHG), has developed during the course of the week. This Aide Memoire records the key issues discussed during the visit.

3. The Government of St Helena has gone through a consultative process within St Helena to arrive at 6 over-arching strategic objectives that they wish to focus on. Talks focused on how changes to resource allocation could help deliver these objectives in the medium term. It was agreed that a greater emphasis on productive developmental expenditure was needed to achieve these objectives.










4. To determine the balance between recurrent and developmental expenditure, a more transparent presentation of the annual government budget was agreed. All running costs will now be reflected in the recurrent budget so that a new baseline figure can be derived. This new presentation of the budget will form the basis for Aid Framework negotiations later this year.










5. In addition, the team talked about how savings could be made on the recurrent budget to release money for productive development expenditure. Agreement to budget deficit targets in the medium term will in part, be dependent on certain assumptions. Members of Executive Council have agreed to produce some agreed assumptions. These will be finalised later this year, when budget targets (excluding GlA) are agreed using the new baseline. Indicators to monitor sustainability and budget deficit targets were also discussed and will be finalised in time for agreement to the new Aid Framework.







SHG Activities









6. SHG stated that they were undertaking a review of their activities with a view to moving to greater outsourcing. Momentum for any greater involvement of the private sector in the provision of government activities has not yet developed.







Labour Market









7. Discussions with SHG and the private sector highlighted shortages in key posts and skills. For example, Doctors, teachers, and accountant posts were often filled by overseas staff on overseas pay and conditions. These problems are likely to get worse before they get better. There is evidence of greater labour mobility - a trend that has been exacerbated by improving educational standards over the long term and the restoration of full British Citizenship rights. Although no firm data is available, population estimates suggest that the decline in the population is not as bad as it is popularly perceived and it could be significantly over 4,000 (Statistics Unit, DEPD figures at end March 2003). It may be worth doing an island census to allay concerns and get firm data.










8. Given the level of present budget deficit, an increase in overseas staff is clearly not financially sustainable or consistent with greater self-reliance. SHG in discussion with DFID, propose to look at policy options and other changes needed to attract and retain Saints in key posts.







Air Access









9. A common thread running through many of the discussions the team held during the week was the question of air access. Potential contractors are currently on island formulating their proposals. SHG clearly faces resource constraints and has asked DFID for additional advisory and technical support to take the process forward. DFlD is already supporting this process and will consider further support. Given the island’s capacity constraints, it was felt there is a need to increase the focus on this particular project. Discussions with the private sector suggested this may be done by placing less emphasis on other projects. Delays to the airport would have large economic costs. Action needs to be taken so that resources can be provided to ensure that the project delays are kept to a minimum, but at the same time the process remains transparent to the population.







 




 




 




 




Public Sector Financial Management









10. The Mission reviewed estimates, statements of accounts and audit reports and discussed a number of on-going developments in the area of financial management.










11. It is clear that financial systems will need to be upgraded to support enhanced reporting requirements under the new Strategic Objectives and Strategic Planning exercise. At this time, the Mission feels that it would not be appropriate or justifiable to invest the time and resources required to introduce either resource accounting or accrual accounting. Improvements in financial management and reporting can be made with minor adjustments to existing systems to provide a stronger basis for financial reporting.










12. The intention is to use the 2004/5 budget process as a first attempt (within SHG) to introduce multi-year budgeting on the basis of the Strategic Objectives. This will require further development of the budgeting guidelines. There is also scope to improve a number of aspects of financial reporting (such as the use of unit costing and separation of revenue generating activities into full cost centres).










13. SHG faces an increasing pension liability and in view of the current "pay as you go" system an assessment of future liabilities should be undertaken.










14. Skills shortages remain a major challenge and it seems unlikely that reliance on external advisers can be reduced in the medium term.










15. The audit process currently places a heavy emphasis on transaction based audit. In the light of the duty to assess economy, efficiency and effectiveness, and the introduction of management by Strategic Objectives, the Mission recommends that greater emphasis be placed on performance (value for money), systems and computer audit.







Public Service Management









16. The Mission noted that SHG have made significant progress in the implementation of a comprehensive development and performance management framework. This is being achieved through initiatives such as Investors in People, introduction of Strategic Objectives, Constitutional reform and the plans for further work on Strategic Planning.










17. However, it was noted that the agenda to support continued modernisation and improvement of public service management in the light of current initiatives is a significant one, and careful consideration will need to be given to existing capacity constraints, such as the shortage of change management expertise.










18. There is a significant challenge in respect of localisation of senior posts, due not only to a shortage of local skills, but also due to a lack of candidates interested in taking on such positions. Remuneration issues in general continue to be a major constraint to both recruitment and retention.










19. There is an opportunity arising out of the Strategic Planning and Constitutional reform processes to undertake a fundamental review of the role of government in St Helena with a view to rationalizing, improving service delivery and revising government roles, structures and responsibilities. This will provide the basis for refining performance measures and targets to align them with the Strategic Objectives, and improve the focus on measurable outcomes.










20. The three changes in senior officials next year (Governor, Attorney General, Financial Secretary) could impact on the successful implementation of Strategic Planning, a medium term budgeting and economic framework and the new Constitution. Plans must be put in place immediately to manage the handover and transition periods for all three positions.







Constitutional Reform









21. The introduction of a new Constitution will have significant implications. Even though final details have not been agreed, there is sufficient clarity to enable SHG to plan ahead for implementation. It would be prudent to begin this process now.










22. The new Constitution will require changes to legislation, development of new working practices and processes, revised role descriptions and targets for some key posts, development of training materials, a broad communications process and an organisation restructuring exercise. The DFID Adviser agreed to develop an overall framework to be used for detailed action planning to support these changes. It seems likely that specialist support will be required in a number of specialist and technical areas and a formal request for support will be developed by SHG by September 2003.

June 2003