64692 v1
 PUBLIC EXPENDITURE TRACKING AND SERVICE
DELIVERY SURVEY – EDUCATION AND HEALTH IN
                HONDURAS




                             VOLUME I




September 2010




Latin America and the Caribbean Regional Office
                                                                               Honduras PETS Volume I




Public Expenditure Tracking and Service Delivery Survey– Education and Health in
Honduras

Copyright © 2010 by The International bank for Reconstruction and Development / The World
Bank, 1818 H street, N.W.
Washington, D.C. 20433, U.S.A.
Internet: www.worldbank.org


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                                                                     Honduras PETS Volume I



              ABBREVIATIONS AND ACRONYMS

ADEL       Local Development Association
AIN-C      Atención Integral a la Niñez en la Comunidad (Comprehensive Community
           Child Health Services)
AMHON      Association of Municipalities of Honduras
Sida       Agencia Sueca para el Desarrollo Internacional (Swedish Agency for
           International Development)
CBOs       Community-based organizations
CCERP      Consejo Consultivo de la Estrategia para la Reducción de la Pobreza
CEB        Centro de Educación Básica (Centre of Basic Education)
CEPREB     Centro de Educacion Prebasica (Centre for Prebasic Education)
CESAMO     Centro de Salud Urbana (Urban Health Centre)
CESAR      Centro de Salud Rural (Rural Health Centre)
CLIPPER    Periferal clinics
CMH        Honduras Medical Association
CMI        Maternal and Child Centre
CONEANFO   National Commission for the Development of Non-Formal Education
CPME       Comision Presidencial de Modernizacion del Estado (Presidential
           Commission for State Modernization)
EFA        Programa Educación para Todos (Education for All)
ERP        Estrategia para la Reducción de la Pobreza (Poverty Reduction Strategy)
ETSDS      Expenditure Tracking and Service Delivery Survey
FHIS       Fondo Hondureño de Inversión Social (Social Investment Fund)
FONAC      Foro Nacional de Convergencia (National Convergence Forum)
GDP        Gross Domestic Product
GOH        Government of Honduras
HDI        Human Development Index
HR         Human Resources
IDB        Inter-American Development Bank
IHSS       Instituto Hondureño de la Seguridad Social (Social Security Institute)
INE        Instituto Nacional de Estadística (National Institute for Statistics)
INFOP      Instituto Nacional de Formación Profesional (National Institute of
           Vocational Training)
INPREMA    Instituto Nacional de Previsión del Magisterio
Lps        Lempiras
MDG        Millenium Development Goals
MG         Matrícula Gratis
MLps       Million Lempiras
MOE        Ministry of Education
MOF        Ministry of Finance
MOH        Ministry of Health
NAS        Nueva Agenda de Salud (New Health Agenda)
NGOs       Non-governmental organizations
PIU        Project Implementation Unit
PMA        Programa Mundial de Alimentos (World Food Organization)
PNS        Plan Nacional de Salud (National Health Plan)
PN         Plan Nacional (National Plan)
POA        Plan Operativo Anual (Annual Operational Plan)
PROHECO    Programa Hondureño de Educación Comunitaria (Honduras Community
           Education Program)
PTA        Parent/Teacher Association
RHD        Regional Health Department
SE         Secretaría de Educación (Ministry of Education)
SEFIN      Secretaría de Finanzas (Ministry of Finance)
SIAFI      Sistema Integrado de Administración Financiera (Integrated Financial
                                                                    Honduras PETS Volume I



         Management System)
SIARH    Sistema Integrado de Administración de los Recursos Humanos (Integrated
         System for the Administration of Human Resources)
SIARHD   Sistema Integrado de Administración de los Recursos Humanos Docentes
         (Integrated System for the Administration of Human Resources in
         Education)
SIERP    Sistema de Información para la Estrategia para la Reducción a la Pobreza
         (Poverty Reduction Strategy Information System)
SS       Secretaría de Salud (Ministry of Health)
STS      Staff Tracking Survey
TSC      Tribunal Superior de Cuentas (Supreme Audit Institution)
UMCE     External Unit for Measuring Education Quality
UNAH     Universidad Nacional Autónoma de Honduras (National Autonomous
         University of Honduras)
UNAT     Unidad de Apoyo Técnico
UPEG     Unidad de Planificación y Evaluación de la Gestión (Planning and
         Evaluation Unit)
WB       World Bank
                                                                                                                              Honduras PETS Volume I



                                                                      INDEX

VOLUME I
ACKNOWLEDGEMENTS ................................................................................................................. 11
EXECUTIVE SUMMARY ................................................................................................................. 12


VOLUME II
CHAPTER I – METHODOLOGICAL APPROACH .............................................................................. 9
   OBJECTIVE.................................................................................................................................................9
   OVERALL APPROACH ..............................................................................................................................11
CHAPTER II - EXPENDITURE TRACKING AND SERVICE DELIVERY SURVEY IN EDUCATION ..... 14
   BASIC EDUCATION SECTOR ISSUES ........................................................................................................14
   ORGANIZATION OF THE HONDURAN EDUCATIONAL SYSTEM ................................................................15
   ANALYTICAL FRAMEWORK AND SURVEY DESIGN .................................................................................20
   EDUCATION INFRASTRUCTURE AND WORKING ENVIRONMENT .............................................................26
   THE FLOW OF HUMAN RESOURCES IN PUBLIC PRIMARY EDUCATION ...................................................31
   THE “MATR�CULA GRATIS� TRANSFER PROGRAM ...................................................................................43
   THE FLOW OF TEXTBOOKS......................................................................................................................49
   SCHOOL LUNCH PROGRAM (“MERIENDA ESCOLAR�)..............................................................................53
   PARENTAL INVOLVEMENT ......................................................................................................................55
   ROLE OF MUNICIPALITIES IN THE EDUCATION SECTOR ....................................................................57
   MAIN FINDINGS AND POLICY RECOMMENDATIONS ...............................................................................59
CHAPTER III - EXPENDITURE TRACKING AND SERVICE DELIVERY SURVEY IN HEALTH ......... 66
   HEALTH SECTOR ISSUES .........................................................................................................................66
   ORGANIZATION OF THE HEALTH SECTOR ...............................................................................................67
   ANALYTICAL FRAMEWORK AND SURVEY DESIGN .................................................................................71
   SECTOR FINANCING FLOWS AND EXPENDITURE ALLOCATION ..............................................................76
   FACILITIES’ FINANCING PATTERNS AND RESOURCE FLOWS.............................................................81
   THE FLOW OF HUMAN RESOURCES ........................................................................................................90
   THE FLOW OF PHARMACEUTICALS AND SUPPLIES .................................................................................97
   MANAGEMENT AT THE FACILITY LEVEL ...............................................................................................100
   THE USER’S PERSPECTIVE .....................................................................................................................120
   ROLE OF THE MUNICIPALITIES IN THE HEALTH SECTOR ......................................................................124
   MAIN FINDINGS AND POLICY RECOMMENDATIONS .............................................................................126
REFERENCES ............................................................................................................................... 130
                                   Honduras PETS Volume I




ANNEXES
ANNEX 1. METHODOLOGICAL/SAMPLING
ANNEX 2. INSTRUMENTS
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                                                                  List of Tables
Table 1. Education and health service providers included in the sample....................................................12
Table 2. School Sample...............................................................................................................................22
Table 3. Beneficiary-level databases...........................................................................................................25
Table 4. School sample, Physical Plant and Teachers.................................................................................27
Table 5. Quality of the physical plant (%), by school type .........................................................................28
Table 6. Teacher sample..............................................................................................................................29
Table 7. Teachers in the sample, by grade and school type ........................................................................29
Table 8. Characteristics of Teachers Selected for the Sample by School Type ..........................................30
Table 9 Survey schools not found in official ministry database, excluding PROHECO schools ...............32
Table 10. Survey Teachers not found in ministry database (Subset “C U D�) ...........................................33
Table 11. Teacher salary regressions ..........................................................................................................36
Table 12. School director opinions on teacher absenteeism........................................................................38
Table 13. Teacher absenteeism: 2008 school days missed, by survey .......................................................39
Table 14. Teacher absences (days), during 2008 School year ....................................................................41
Table 15. Determinants of the probability that the teacher was absent for at least one day during the week
prior to the survey. (MECOVI 2004) ..........................................................................................................42
Table 16. Uses of MG funds (% of MG recipients reporting use) ..............................................................46
Table 17. School management of funds ......................................................................................................47
Table 18. Ministry of Education 2008 mathematics textbook distribution strategy ...................................50
Table 19. Textbook flow and stock .............................................................................................................51
Table 20. Number of additional textbooks teachers needed, by school type (Teacher survey) ..................52
Table 21. Percentage of textbooks per student according to school director survey, by school type .........52
Table 22. Schools that receive PMA food by school type (2008)...............................................................54
Table 23. Parent rating of their child's public school (%) ...........................................................................55
Table 24. Parent characteristics, by relation to the PTA .............................................................................56
Table 25. Municipal spending on the education sector, per expenditure category, as percentage of source
of funding ....................................................................................................................................................57
Table 26. Municipal spending on education per category of expenditure...................................................58
Table 27. Municipal spending on education per source of income, as reported by the municipalities.......58
Table 28. Comparative international health indicators, 2006......................................................................66
Table 29. Health facilities in Honduras, 2007.............................................................................................68
Table 30. Main characteristics of the departments included in the survey..................................................73
Table 31. Final survey sample.....................................................................................................................73
Table 32. Analytical matrix and data sources .............................................................................................76
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Table 33. Health spending and sources by subsystem, Honduras, 2006.....................................................79
Table 34. Mean total expenditure reported by type of facility, 2006-2008 (in thousand Lempiras)...........86
Table 35. Budget and expenditure by type of facility, 2008 .......................................................................87
Table 36. Mean income from user charges by type of facility and service.................................................88
Table 37. Mean hospital expenditure by line item ......................................................................................89
Table 38. Average number of staff by type of facility. ...............................................................................92
Table 39. Discrepancies in personnel information across sources ..............................................................93
Table 40. Composition of staff sample .......................................................................................................94
Table 41. Personnel by level of education ..................................................................................................95
Table 42. Main obstacles to work achievement ..........................................................................................95
Table 43. Mean gross monthly wage by type of facility and profession (in Lempiras).............................96
Table 44. Procurement authority by type of supply, 2008 ..........................................................................99
Table 45. Mean losses and waste in stock management ...........................................................................100
Table 46. Classification of facilities according to type, management model, and hierarchy ....................103
Table 47. Lines of authority between central levels and facilities ............................................................104
Table 48. Existence and type of councils or committees in facility governance.......................................105
Table 49. Presence of users’ committees by facility type and management model ..................................107
Table 50. Level of managerial autonomy by type of facility ....................................................................108
Table 51. Mean physician productivity by type of facility (number of visits/hour contracted), 2006-2008
...................................................................................................................................................................117
Table 52. Problems affecting quality of care.............................................................................................119
Table 53. Distribution of users simple by type of facility.........................................................................120
Table 54. Most frequent diagnoses or symptoms driving patients to the facility......................................121
Table 55. Perceived quality of care and facilities......................................................................................122
Table 56. Payments made for care received..............................................................................................122
Table 57. Users payments by type of service and type of facility, 2008 (in Lp).......................................123
Table 58. Municipal spending on education per category of expenditure.................................................125
Table 59. Municipal spending on education per source of income, as reported by the municipalities.....125
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                                                                   List of Figures

Figure 1. Origin and destination of public expenditure flows.....................................................................19
Figure 2. Personnel databases .....................................................................................................................33
Figure 3. Structure and levels of the public health system in Honduras .....................................................68
Figure 4. Composition of national health expenditure, 2006 ......................................................................77
Figure 5. Institutions and Financial Flows in the Health System, Honduras ..............................................78
Figure 6. Distribution of health spending by category of expenditure, MOH, Honduras, 2006. ................80
Figure 7. Spending composition by type of input, MOH, Honduras 2006..................................................80
Figure 8. Financing sources by type and model of facilities, 2008 .............................................................82
Figure 9. Financing sources for public hospitals, 2008...............................................................................82
Figure 10. Financing sources of public health centers (reported), 2008 .....................................................82
Figure 11.a-e: Responsibility for procurement and payments by type of facility .......................................85
Figure 12. Difficulties in budget execution at facility level (proportion of those facilities having their own
budget).........................................................................................................................................................89
Figure 13. Mean expenditure composition by line item, 2008 (Hospitals and Clinics only) ......................90
Figure 15. Responsibilities for paying, hiring, firing and transferring personnel .......................................91
Figure 16. Facilities staff broken down by professional category, 2008.....................................................91
Figure 17. Coexistence of multiple staff contracting regimes.....................................................................94
Figure 18. Proportion of workers moonlighting, by profession ..................................................................97
Figure 19. Responsibility for drugs procurement by facility type and model.............................................98
Figure 20. Frequency of ratios between amount reported by management and recorded in stock cards for
10 most important drugs, 2008..................................................................................................................100
Figure 21. Ratios between quantities physically observed and recorded in stock cards, 117 facilities, 2008
...................................................................................................................................................................100
Figure 22. Management model by type of facility ....................................................................................101
Figure 23. Main functions of facility committees by type of committee ..................................................106
Figure 24. Main responsibilities of committees by type of facility...........................................................106
Figure 25. Presence of users’ committee by type of facility .....................................................................107
Figure 26. Proportion of facilities with their own separate budget ...........................................................108
Figure 27. Residual claimant status regarding budget savings..................................................................109
Figure 28. Residual claimant status regarding user charges......................................................................110
Figure 29. Main bases for planning in the sampled facilities, 2008..........................................................111
Figure 30. Priority programs and activities cited for Plan 2009 Priority #1                                                          Priority #2..........112
Figure 31. Accounts rendering by authority..............................................................................................113
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Figure 32. Monitoring and control of expenditures at the facility level....................................................114
Figure 33. Most commonly used management tools.................................................................................114
Figure 34. Maintenance systems by type of facility..................................................................................115
Figure 35. State of installations by type of facility ...................................................................................116
Figure 36. Main activities undertaken by the facilities .............................................................................117
Figure 37. Hospital efficiency and productivity........................................................................................118
Figure 38. Outpatient productivity (total outpatient services per staff) across facilities...........................119
Figure 39. Age composition of patients ....................................................................................................120
Figure 40. Proportion of municipal budgets spent on health, 2008...........................................................124
                                                                                Honduras PETS Volume I



                                    ACKNOWLEDGEMENTS

This study has been conducted per the request of the Ministry of Finance and the Social Cabinet
of Honduras. It has been a long journey that started back in 2007 with the design of the project
and finished in 2010 with the presentation of this report. Despite numerous unexpected
incidences on the road – including floods and heavy rains, teachers’ strikes, institutional changes
and a political crisis that left the country isolated and put “on hold� externally-funded programs
– the team persisted in its effort to bring to light the conditions under which education and health
services are delivered in the country, especially to the poor. We hope that this study becomes a
useful instrument for the new administration to improve these services, and for the Honduran
citizens to demand quality of service in accordance with the level of resources invested in these
sectors.

The study has been carried out in collaboration with the following actors from the international
community, who contributed with financial support and/or technical specialists: DFID, SIDA,
and the Interamerican Development Bank.

On the part of the World Bank, this report has been prepared by a team led by Ana Bellver
(LCSPS), Cristian Aedo (LCSHE), Christine Lao Pena (LCSHH) and Maria Eugenia Bonilla
(LCSHH). This report would not have been possible without the support from Lidia Fromm and
the group of national and international consultants that worked in the different stages of the
project: John Edwards, education economist; Bernard Couttolenc, health specialist; and Helmis
Cárdenas, Marco Moncada and Fidel Ordoñez from ESA Consultants.

The team would like to thank: Laura Frigenti, LCC2C country director; Geoffrey Bergen,
Honduras country manager; Nick P. Manning, public sector manager; Keith Hansen, health
sector manager; Chingboon Lee, education sector manager; Humberto López, lead economist;
Sajitha Bashir; sector leader; and the three peer reviewers – Ritva Reinikka, sector director; Jerry
La Forgia, lead health specialist; and Jeni Klugman, lead economist – and Ian Walker, lead
economist for their support during the preparation of this study and their valuable comments.

It is not possible to name all of the Hondurans who have contributed in some way to this study,
but we would particularly like to thank government counterparts from the Office of the
Presidency, the Ministry of Education, the Ministry of Finance, the Ministry of Health, the
Technical Support Unit of Presidency, and the Honduran Social Security Institute, for their
involvement at the highest level, and the knowledge and valuable contributions of their technical
teams.
                                                                               Honduras PETS Volume I



                                           SUMMARY REPORT


1.     This report aims at providing the Government of Honduras (GOH) with a tool to
improve efficiency in the management of existing public resources in the education and
health sectors, in order to increase access and provide better education and health services to the
poor. Specifically, the objectives of the study are to:
    (i) Identify how resources are allocated and used in the education and health sectors;

       (ii)    Identify leakages and inefficiencies in the system;
       (iii)   Analyze how existing management models perform and how different public
               management instruments are applied in each sector; and
       (iv)     Issue recommendations for improving the management of resources in the education
               and health sectors.
2.      The education and health sectors account for 46.2 percent of Central Government
expenditures and have been highlighted as major drivers of growth1. Furthermore, in order
to achieve its Millenium Development Goals, Honduras needs to increase its social spending by
10.4 percent of GDP, which means nearly doubling it, or improving the efficiency of available
resources by 89 percent (World Bank, 2007b). Given the limitations in raising public expenditure
within the current macroeconomic context, the most feasible option is to try to increase
efficiency in social spending, especially in health and education.
3.      The analysis presented in this report focuses on specific areas of interest that are
described below. The main focus of the analysis in the education sector are the funds allocated
to human resources given that it accounts for more than 80 per cent of the budget. Per the
Government’s request, the tracking of funds allocated to three relatively new transfer programs
(Merienda Escolar, Matricula Gratis, Textbooks) was also conducted. Contrary to the education
sector, most financial transfers in the health sector are recorded in SIAFI and therefore, leakages
of funds was not a concern but rather how those resources were used and accounted for. Given
that the health sector is one of the most advanced in terms of planning and management tools the
analysis of management practices across the different management models was the main focus of
the analysis as well as the tracking of drugs and human resources.
4.      The report presents the methodology and main findings from the survey that was
carried out between November 2008 and October 2009. The following four departments were
selected -Copán, Francisco Morazán, Olancho and Yoro. In addition, twenty three municipalities
municipalities within the four sampled departments were surveyed with the objective of
assessing the role of local governments in the provision of education and health services.
5.    The report was commissioned by the Honduran Social Cabinet, the Presidency and
the Secretary of Finance. In addition to the World Bank, other development partners that

1
    Honduras Poverty Assessment, World Bank 2007
                                                                                              Honduras PETS Volume I



contributed to the study are the Inter-American Development Bank, DFID and Asdi. The
principal target audience of this study is the Government of Honduras (GOH), followed by the
external field-based partners involved in these sectors and civil society who are both users of
social services and actual or potential agents of change in holding service providers and the
Government accountable.
6.      The main recommendation of the report is that an effort should be made in order to
improve the scope, quality and transparency of the information collected on the provision
of education and health services. Basic information is needed about inputs – in particular,
human resources and pharmaceuticals–, financial contributions –specially those of municipal
governments, out-of-pocket and parent fees- and outputs – enrollment figures, medical visits,
prescriptions. Without such basic information it is difficult to see how the government can
improve the management of public resources in those two sectors. Moreover, users of public
services are entitled to know how many resources are spent in health and education in their
communities, monitor that they are used efficiently and hold service providers accountable.

The Education sector: Trapped in an off beam policy discussion
7.      The Honduran Government’s commitment to education is evidenced by the very
rapid growth of resources devoted to this sector. Between 1990 and 2007 public sector
education expenditures rose from five percent to 8.6 percent of GDP. It went from 17.3 percent
of total government expenditure in 1999 to 32.5 percent in 2007, nearly doubling the proportion
of the total budget in just over eight years, which represents an important and growing effort to
channel resources to the sector. Nevertheless, as discussed below, education outcomes have not
been on par with this effort.
8.      The country has made important advances in the education sector over the last few
years. The key areas where progress has been made are: reducing illiteracy (which reduced from
19.4 percent in 2001, to 16.4 percent in 2008); increasing coverage at the preschool, and middle
and higher education levels2 (from 41 percent to 57 percent, 14 percent to 23 percent, and 11.6
percent to 15.6 percent between 2001 and 2008, respectively); increasing the completion rate for
sixth grade (from 38 percent in 2001 to 53 percent in 2008); and extending matrícula gratis3 – a
program which pays school costs previously covered by the fees paid by parents – to 83 percent
of preschool, elementary and middle school children.
9.      Despite this increase in spending Honduras has not been able to increase the
education outcomes of its students. Scores on standardized tests in Spanish and mathematics in
third and sixth grade have not improved since 1997. The average percentage of correct responses
among the students evaluated in sixth grade in the 2007 Standardized Survey of the External
Unit for Measuring Education Quality (UMCE), did not reach 50 percent in Spanish and
mathematics. This affects the country’s competitiveness, especially considering that in

2
   Preschool is for 0- to 5-year-old children. Basic education is from first grade to ninth grade. Middle education is
from tenth to twelfth grade. Higher education is all training after twelfth grade, including university.
3
   See report of sectoral goals in: www.gerencia.gob.hn.
                                                                                           Honduras PETS Volume I



international evaluations Honduran students perform worse than almost all of the other Latin
American countries4.
10.    Part of the reason why this increase in spending has not translated in better learnign
outcomes lies in the structural characteristics of public expenditure on education. Education
spending is highly concentrated on personnel expenditures, and especially teachers’ salaries,
which have increased sharply in the last eight years5. Therefore much of the expenditure
increase has been absorbed by higher teacher salaries. Teachers are regulated under a separate
employment regime (estatuto), allowing them to negotiate significant increases in pay, compared
with the other civil servants.
11.     The salary discussion with the teacher unions has centered the policy making
process in the education sector during the last decade and not performance-related issues
or learning outcomes. The public sector deficit experienced a significant deterioration between
2000 and 2003, attributable in part to an increase in the salary portion of the public sector. This
led the Government to issue a Framework Law of Public Sector Salaries in December 2003 that
helped, at least temporarily, to slow the growth of the public sector salary budget. The
information available on salaries and public sector employment, though limited, suggests that
growth in the real salaries of healthcare workers and other public sector workers (excluding
teachers) stabilized between 2002 and 2006. However, it is estimated that the real salary rate of
teachers increased by 18 percent during the same period, reflecting their comparative power in
terms of union organization and influence. Teachers were able to negotiate salary increases
without the condition of improving their performance and as a result, the gap between teacher
pay and performance is great and in general teachers6 are not accountable for the poor
achievement of their students.
12.     In August 2006, after various prolonged teachers’ strikes, the Government
negotiated a new agreement with the teachers’ unions. The agreement included: (i) Salary
increases tied to a system based on the performance of teachers (the Social Adjustment and
Education Quality Program – PASCE), combined with the rationalization of human resource
policies (including a census of teachers and auditing of posts, the improvement of the Integrated
System of Administration of Teachers Human Resources (SIARHD), and early retirement
schemes for teachers); (ii) The implementation of a national system for the evaluation of the
quality of education through standardized academic performance tests; and (iii) Independent
social audits carried out by parents regarding teacher attendance in schools. Preliminary
estimates of the fiscal impact of the pay structures included in this agreement indicate that


4
  Honduran third grade students were those with the worst performance in language and mathematics of the 18 Latin
American countries participating in the “Evaluation of Latin American Laboratory� of 1997. Honduran fourth grade
students obtained the lowest scores in language and the second lowest in mathematics. Honduras did not participate
in the “Second Regional Comparative and Explanatory Study of the Quality of Education� carried out in 2006.
5
    In other words, these spending increases have improved the salary conditions of teachers, but they have not
increased the number of teachers on the payroll, improved the provision of education services, enhanced school
infrastructure, or led to the construction of more schools.
6
    The PROHECO teachers are the exception.
                                                                                            Honduras PETS Volume I



salaries will double in nominal terms from 2007 to 2009, increasing government spending on
salaries between 1.0 and 1.5 percent of GDP.
13.     Some terms of the agreements have been met7; but the efforts to tie the higher
salaries associated with the PASCE to improvements in the quality of education, have not
been successful. After prolonged negotiations with the teachers’ unions, the PASCE regulations
were approved (in March 2007), but the verification variables considered for the payment of the
PASCE (fulfillment of the school calendar, punctuality and planning of classes) can hardly
qualify as indicators of the quality of learning taking place in schools. The future challenge of
the Honduran Government is to incorporate quality indicators within the system, which requires
changing the PASCE regulations, regardless of the likely opposition of the teachers’ unions. It is
important to mention that, as the Honduras Institutional Governance Review (2009) points out,
many of the initiatives and reforms that the country has attempted in the past several years have
failed, or have diverged from their initial objectives, fundamentally due to the powerful influence
of the teachers’ unions which does not have a counterweight in Honduras. For this reason, the
study recommends to empower the communities, parent associations and other social groups that
have an interest in education (such as the private sector), so that they can participate more as
natural allies of the Secretary of Education, in bringing about improvements to the learning
achievements of Honduran children.
14.     It is in this context of rising costs per student and lackluster academic performance
that this study examines the flow of public resources from the Central Government to the
final beneficiaries. The study stops short of asking whether the input mix is ideal; it does not ask
how well intermediate education inputs are turned into learning in the classroom. Instead, its
purpose is to look both at the flow and distribution of directly produced goods and follow the
resource flow from its source to the service delivery point: from the Ministry of Education to the
schools. In the education sector 161 schools were visited; 462 teachers interviewed; and 933
student family surveys completed.
15.      Given that the largest proportion of education funding goes to salaries, the study
focuses primarily on the analysis of human resource (teacher) management. Thus, the study
tries to quantify incongruities between budgetary and real assignments of staff and determine the
prevalence of behaviors that have adverse effects on service delivery, especially teacher
assignment and teacher absenteeism. In addition, per the Government’s request, three relatively
new transfer programs are also analyzed: a Ministry to school direct cash transfer program
known as the “Matrícula Gratis�, a school lunch program paid for by the Ministry of Education
but administered by the World Food Program, and the textbooks.
16.    In general, the study corroborates the existance of a weak accountability framework
in the education sector where expenditures are not only not linked to peformance but in
many cases not properly accounted for. Information is critical for resource management and
accountability, and yet, the databases on enrollment, learning outcones and personnel are

7
  For example, the requirement to visit all of the schools requesting payment of the PASCE, and efforts to carry out
the census of teachers and the audit of positions.
                                                                                    Honduras PETS Volume I



inconsistent and unreliable. This in itself shows the lack of comitment to improve management
of public resources in the education sector and the enourmous influence of the groups which
benefit from the status quo. If the Secretary of Educacion does not have reliable information,
how can it ensure that resorces are allocated according to the policy priorities and monitor if the
desired results are being achieved? If there are no information on learning outcomes, how can
good teachers and good schools be rewarded? how can parents know if their children are
learning? This lack of information is evident in the area of human resources, where the survey
found numerous irregularities evidence the lack of control of the Secretary of Education over the
hiring process, the transfers of personnel and its performance; and the difficulties for managing
human resources in this sector.
17.    The main findings of the expenditure tracking and service delivery survey in the
education sector are as follows:
 i.     Human resource management:
- The Ministry of Education school and personnel databases play an essential role in existing
resource distribution mechanisms, yet they are so incomplete and full of errors that they are
unusable as administrative tools. For instance, 27 percent of the teachers in the survey sample
were not in the MOE database and 16 percent of sample traditional schools were entirely
missing.
- Nearly one quarter of the teachers officially listed as working at sample schools were not
actually working there (23 percent). These teachers should formally be classified as “ghosts�, i.e.
salaries paid for jobs not actually performed. It is estimated that the salaries for these teachers
amounts to USD $71 million per annum. However, given the inaccuracies in the database it is
possible that some of these teachers are actually working in other schools not included in the
sample and that the transfer was not recorded. Because of all these caveats, the above estimates
provide a ceiling for the total value of the “ghost� losses.
- More than one quarter of sample teachers (27 percent) were not listed in the MOE personnel
database. There is no clear guidance on the intended quantity distribution of teachers. If there is
any policy regarding the allocation of human resources at all, it seems not to be followed.
Informal practices appear to be the norm with more than half of the teachers either not in the
database or not in the school that was assigned to them.
- It is estimated that about 22 percent are formal teachers who are not included in the
department database or “interinos�. It is possible that some of the teachers that are not listed in
the MOE database for the department appear elsewhere in the database; others are just not
registered at all. If the latter, these are considered to be “interinos�, that is teachers that are hired
by the district or the department without the Ministry’s knowledge and that are eventually
included in the official payroll once the two databases are reconciled.
- About five percent of public school teaching personnel are truly informal teachers, paid by
someone other than the Ministry. Municipalities seem to be paying pay in full for these 1,550
informal teachers as they report to spend each year on teachers’ salaries an average of 116
million Lempiras. The expectations of these teachers are eventually to be absorbed into the
                                                                                           Honduras PETS Volume I



Ministry’s payroll. Therefore, they constitute a reservoir of political pressure to increase the
education salary budget by up to US$ 18.9 million per annum.
- Estimated annual losses to the primary school system from teacher absenteeism exceed USD $
19 million. The loss is of about 13.5 days per teacher, per year and the main reason is teacher’s
strikes. It represents a system-wide macro loss of about 7.4 percent of teacher services.
Absenteeism is unevenly distributed across the school system, with a significantly higher
proportion in rural traditional schools.
- Existing instruments are failing to address teacher absenteeism. Teacher absenteeism is seen as
a significant national problem by State and District directors as well as by school principals. Yet
school principals do not see it as a problem in their own schools. The laws regulating teacher
contracts provide for disciplinary action against teachers who are repeatedly absent from the
classroom. Yet the PETS survey found no evidence that school principals had ever taken such
disciplinary action, despite a 7.4 percent mean absence rate. State Directors of Education report
that, because of union pressure, repeated complaints against teachers generally result in
transferring the teacher to another school.
- Despite general belief, parents do not seem to be in a position to hold teachers and directors
accountable and monitor absenteeism. It is generally believed that parents can serve as school
watchdogs, enforcing teacher presence and reporting absenteeism. However, the PETS surveys
found the opposite to be true; Honduran parents report lower teacher absentee rates than the
teachers themselves. Parents were generally satisfied with the human side of schools and with
the education that their child is receiving and they tend to hold the teacher and principal in high
esteem. They were less satisfied with the school’s physical infrastructure.
    ii.   Matrícula Gratis:
- Estimated macro-leakage8 of Matrícula Gratis cash transfers amounts to about 19 million
Lempiras (USD$1million). If the Ministry of Education and individual school bookkeeping are
accurate, our best estimate is that approximately 7.4 percent of the transfers issued by the
Ministry did not reach the schools. Cash transfer macro-leakage estimates amounted to about 19
million Lempiras (USD $ 1 million) in 2008. It is not clear, however, if this represents a real
diversion of funds, or simply bad bookkeeping by the Ministry of Education, by individual
schools in the sample, or both.
- There are also significant micro-leakages9 in the Matrícula Gratis cash transfer program; that
is, the funds are not always transferred to the entitled beneficiary. The design calls for the
Central Government to transfer money directly to every public school bank account, based on a
simple, student enrollment-based formula. Hence, the problems that exist stem mainly from
inaccurate record-keeping. Not only do the amounts that the Government says it sent to schools

8
  We define “macro-leakage� as the difference between the total amount of resources the central authority emits and
the total amount received by all schools.
9
  We define “micro-leakage� as the difference between what policy dictates an individual school should receive and
the amount it actually receives.
                                                                               Honduras PETS Volume I



not match the amounts that the schools say they received, but there are many schools that do not
participate in this program at all.
  iii.   Textbook program:
- Similarly, micro-leakage appears to be rampant in the distribution of textbooks. For instance
Ministry records indicate that 1,557,300 math textbooks for grades 1 through 6 were printed and
distributed to state warehouses. Of these 1,514,660 were delivered to 330 department
warehouses in June 2008. Ministry enrollment data show 1,334,851 primary school students in
2007. There were enough books for every student to have one. Yet PETS data for September of
2008 show that about 20 percent of the schools did not receive math books. Coverage was worse
in other subjects. In Spanish language, 31 percent of the schools had no textbooks, while another
54 percent of the schools had surpluses of 10 percent or more.
  iv.    Merienda Escolar:
- There is no evidence of significant leakages in the food distribution program, yet the national
goal of providing a nutritious lunch to all Honduran public primary school students is not being
met. It is not entirely clear whether there are distributional issues in the school lunch program
but to the extent that it can be determined, PETS survey evidence suggests that the problem is
that not enough food is being delivered. Most of the schools surveyed had run out of food before
new shipments arrived. The shortage is unevenly distributed across schools, with some having
no shortages and others going without food for weeks at a time. It does not appear that the sum
of excess stocks in schools with a surplus is enough to offset the shortages in all other schools.
   v.    Management at the school level:
- Local governments are playing a substantial role in school finance that is largely off the books.
They pay for school repairs and construction, hire cleaning and security personnel, and they are
often active participants in the distribution of textbooks and food. An average municipality
spends more than 2 million annual lempiras in education, mainly in infrastructure (one and half
million Lps on average) and salaries for teachers and support staff, usually security guards and
cleaners (half a million Lps on average). Municipal governments are well informed about local
needs and constitute a natural agent for aggregating and expressing local demands for this public
service. However, they also constitute a source of political pressure for budget increases with the
appointment of new, extra-budgetary teachers that eventually put pressure on Ministry of
Finance education expenditure caps.
- The large share of fees charged to the parents in total school cash income is troublesome. The
purpose of the MG is precisely to obviate the need for parental fees. Of 143 schools reporting
some cash income, parent fees accounted for 12.1 percent of total school revenues. When funds
raised through other activities are added, the proportion rises to nearly one third of all school
funds (31.6 percent). The breakdown by school type is even more revealing. The proportion
coming from parent tuition and fees for special activities was 10.1 percent (20.7 percent) for
traditional urban schools, 12.6 percent (32.0 percent) for rural schools, and 17.6 percent (63.9
percent) for PROHECO.
                                                                               Honduras PETS Volume I



- With the exception of salaries, school directors make most of the expenditure decisions and
parent associations play almost no role. Parents are generally uninformed about schools’ income
and expenses and most parents know very little about the Matrícula Gratis transfer program.
Teacher salaries are determined entirely by the “escalafón�; they are not linked to performance
and are not seen as administrative tools. School principals are generally completely unaware of
how much their teachers earn.
- Information management is very poor at the school level. The information flows in one
direction: bottom up. The system in place for administering financial information flows in only
one direction: up. Schools send information on enrollment that is consolidated at the central
level, but it is never sent back to the schools for verification or planning purposes, nor the
information on school performance or national statistics. Over four-fifths (82 percent) of the
school directors had never heard of the national integrated financial information system (SIAFI)
and 83 percent said that they had never received national statistical data and much less data
comparing their school’s performance to the national average.
18.  The main recommendations of the report to address those weaknesses are
summarized below:
a. Improve databases, develop better record-keeping practices and publish key information

   a.1. There needs to be a single school-level file that shows school names, location, and ID
        numbers along with total enrollment and the amounts and dates of all transfers.

   a.2. Improve the teachers’ database with the objective of removing informal and ghost
         teachers, and improve the allocation and management of human resources.

   a.3. In the interest of transparency, the distributional formulae for variable input transfers
         should be clear and widely publicized, and financial statements from schools published.
         Every effort should be made to let parents know how much their child’s school has
         received of each resource.

   a.4. Publish information on education outcomes at the school level to move gradually the
         policy discussion from input mix to performance.
b.     Transfers should be based on enrollment data for the previous year, or for that number
adjusted for population growth. Reliance on enrollment data for the current year creates
problems. Schools that fail to report enrollment information can have their enrollment number
frozen, or could even have it reduced by say five percent, as a penalty. Once there is a
trustworthy list of schools and their enrollment, transfers should be automated on the basis of
enrollment data even for non-reporting schools. Transfers of cash, food and books can be
planned ahead and proceed on a timely basis to coincide with the beginning of the school year.
c.      Central Government information and control of textbook distribution should be at the
school level, not at the department level. Honduras is a small country; there are many states in
Brazil, the U.S., and China that have a far larger population. State governments in those
countries administer textbook distribution, yet it is inconceivable in any of them that one third of
                                                                               Honduras PETS Volume I



the schools should be without any books, while half of the schools have too many. The Honduran
Central Government is capable of determining how many students it has in each of roughly
10,000 schools and then sending enough books to each school. In the short run given the severe
distribution problems detected at the district level, the capacity for resource
management/distribution at district offices should be strengthened.
d.      Bringing local governments into the fold. Local governments are playing a substantial
role in school finance that is largely off the books. They pay for school repairs and construction,
hire cleaning and security personnel, and they are often active participants in the distribution of
textbooks and food. Municipalities also play a pivotal role in the appointment of new, extra-
budgetary teachers that eventually put pressure on Ministry of Finance education expenditure
caps. The local governments’ role in school finance should be formally recognized. Given the
weak role that parent associations play, municipalities can become the third actor in the
education community.
e.     The Matrícula Gratis cash transfer program should be audited. There is a wide disparity
between the amounts of money that the schools say they are receiving and what the Ministry says
was allotted to them. A 10 percent random sample of schools listed in the Ministry’s records
should be visited, requesting copies of bank statements for 2008. These should be compared
against records of transfers to the schools in the Ministry’s files. In addition, it is necessary to
implement a system that allows for an accurate record-keeping of transfers from Matricula Gratis
to PROHECO schools.
f.      Train and empower school directors so they become key actors in mitigating leakages,
and hold them accountable. Given the concentration of power in the school director hand in
respect of determining the demand for and use of the various inputs, it would be essential that
s/he would have the right skills (training may be necessary) and right behavior (selection of the
right people for the job, incentives for improving performance). In this regard, training of school
principal on resource management should be assessed.
g.      Train parents for the monitoring of teachers’ absenteeism and the use of resources.
Parents can have an active role in the enforcement of teachers’ presentism, monitoring and
reporting cases of absenteeism. They can also be involved in the supervision of the use of funds
from Matrícula Gratis and other sources.
h.      A mechanism for bringing to light and addressing the physical infrastructure differences
between Honduran schools should be found. Policy debate to determine a minimum physical
infrastructure quality standard should be initiated, and a process for attaining this minimum in all
schools should be planned, possibly starting with school sanitation and student nutrition.
Honduran schools should be models for future Honduran families, they should be places where
teachers are happy to eat lunch and they should be “escuelas limpias y saludables�; models of
sanitation and nutrition.
i.      Rural schools, PROHECO or traditional, could become leaders in encouraging a healthy
diet. Obesity is a growing problem in this country, and yet there are no fruits or vegetables in the
current school diet. They could help develop “green� schools that grow their own produce, and
                                                                               Honduras PETS Volume I



maybe even learn to market it beyond the school. There is a problem inherent in devising an
educational system that relies entirely on transfers from the Central Government: dependence.
The farther a school is from the Central Government, the more removed it will feel from the
process that determines its environment. Growing their own healthy food, would give rural
schools a sense of pride and a comparative advantage in this regard.
j.      Continue analyzing the survey data to better understand other issues in Honduran primary
education. The three surveys were primarily designed to analyze the flows of resources from the
Central Government to schools. They also provide a wealth of data on a variety of issues central
to the efficiency and impact of the Honduran educational system. This study has concentrated on
identifying and describing problems with resource flows. However there should be an effort to
continue such analysis. Of particular importance is the ability to cross-refer the survey databases
that carefully describe the school environment, the teachers, and the student’s home with
Ministry of Education information on repetition, dropouts, and teacher salaries and training.

The Health sector- a relatively successful story but until how long?
19.     Honduras has made progress in most of its national-level health, nutrition and
population indicators. Since the ‘90s, the country has significantly reduced neonatal, infant and
child mortality, and to some degree, chronic malnutrition. While there are no recent estimates of
maternal mortality, the number of births attended by skilled health professionals (a proxy for
reduction in maternal mortality) has also increased to 67 percent (ENDESA, 2005-2006). These
improvements are mainly due to the following factors: the continued expansion of prevention,
promotion, and health care programs and services with an emphasis on Maternal and Child
Health Programs, as well as the use of alternative models of service provision with increased
participation of communities; improvements in access to potable water; and higher educational
levels of Honduran women (ENDESA, 2005-06).
20.     In spite of significant progress in health indicators, important challenges remain.
Coverage of several health services was expanded and infant and child mortality rates have
dropped. However, health indicators are still poorer than in other countries in Latin America and
important inequalities in access to health care and in health outcomes persist across regions, in
both urban and rural areas. In 2005, close to 1.2 million people (17 percent of the Honduran
population) did not have access to any type of health service (MOH, 2005). Significant gaps in
access and quality persist between rural and urban areas, as well as between low and high-
income households (ENDESA, 2005-2006). For instance, 43 percent of children suffering from
malnutrition come from households in the lowest income quintile, whereas only five percent
come from those in the highest income quintile. Quality of service in terms of availability of
adequate staff, equipment and medicines also remains a serious issue, with only 12 percent of
health centres and eight hospitals accredited in 2006. Most of the main problems during the
licensing process were related to lack of facility norms and equipment, insufficient personnel,
and inadequate infrastructure (MOH, 2007).
21.   The health sector is an interesting case in the Honduran context because it has
performed somewhat better, relatively speaking than other sectors. This is partly due to: (i)
                                                                                           Honduras PETS Volume I



some continuity in undertaking certain reforms, particularly those related to engaging the local
level in improving access to health services; (ii) the process followed in undertaking some
reforms in the sector (for example, a gradual, consensus-building among stakeholders in the
regional reorganization process, together with focusing on a bottom-up approach in the case of
the decentralized models of service delivery and also holding a discussion with unions to gain
sufficient support to continue and avoid large scale opposition); (iii) the nature and number of
unions in the sector. Major unions are centralized making negotiations a little simpler. There are
also 30 unions, syndicates, and groups representing various types of health personnel making it
more difficult for them to unite against reforms compared to teachers; and (iv) the sector has also
benefited from having some committed Ministers of Health who have championed certain reform
initiatives10 in spite of opposition from strong interest groups.
22.     Various reforms have been attempted in the Honduran health sector to address the
above issues with some degree of success. In general, reforms related to increasing physical
access have demonstrated more progress compared to those related to: (i) improving financial
access (about 80 percent of Hondurans do not have access to health insurance); (ii) service
quality (as of March 2008, only 12 percent of public health establishments and 11.5 percent of
private health facilities had been licensed according to MOH/PRSS reports); and (iii) efficiency
(for example, resources are still disproportionately allocated to curative care relative to
prevention and health promotion; there is a lack of coordination between IHSS and MOH in the
purchase of medicines resulting in higher prices and duplication of services in some areas;
hospitals separately purchase equipment instead of consolidating the purchase in lots to benefit
from lower prices, etc.). While it is true that lack of resources has been a main constraint to
improving financial access and quality in the health sector, inefficiencies in the use of existing
resources persist.
23.      To continue improving, the health sector still needs to address the following
significant institutional weaknesses that impede further progress of reforms and affect
sector performance. Key weaknesses are as follows: (i) the frequent changes in ministers and
resulting high staff turniover; (ii) the lack of clearly-defined and well coordinated policies and
strategies that are needed to achieve an integrated health system and well-articulated, budgeted
operational plans; (iii) a sector institutional framework that does not have adequate
accountability mechanisms to motivate policymakers and traditional service-providers to have a
strong sense of commitment and shared responsibility in identifying and solving health sector
issues in order to meet sector objectives. In general, there is a lack of incentives and sanctions to
promote good performance and coordination, making the sector depend to a considerable extent
on the level of commitment of political leaders and the ability of various interest groups to
influence the direction of reforms; (iv) the lack of definition, in some cases, and the overlap of
some functions makes it difficult to clearly define lines of accountability between sector
institutions and across administrative levels. Insufficient coordination between the Ministry of
Health (MOH), the Honduran Social Security Institute (IHSS) and the private sector also results

10
  For example, Ex-Minister E. Zelaya in the case of regional reorganization and Ex-Minister E. Palou in the case of
decentralized models and in the design of the new health reform proposal.
                                                                                Honduras PETS Volume I



in the duplication of interventions in some areas and their marked absence in other areas; (v)
there is a lack of a well functioning integrated health information system that provides reliable
and timely information to guide management decision-making and planning and budgeting
processes at the various levels of administration (Central Government to facility level), as well as
to regularly inform citizens about sector performance including progress made in attaining the
Millenium Development Goals and the targets of the Government’s Poverty Reduction Strategy.
Various data sources such as those from SESAL, SANAA, IHSS, etc .are available but remain
fragmented and would need to be consolidated. Information-sharing is also limited and would
need to use more and different dissemination channels; and (vi) various opportunities exist for
civil society associations to participate, but there is limited information available on their actual
effectiveness in influencing policy-making and implementation. There is also a lack of a
sufficient number of well-organized citizen associations and advocacy groups in the sector.
24.     In addition, the health system is fragmented, with multiple financing agents and
providers, and weak coordination. This leads to service duplication and inefficiency;
decentralization of certain services and management responsibilities has added to this
fragmentation and inefficiency. For example, procurement is fragmented and inefficient due to
its decentralization to the facility level (each hospital is responsible for its own procurement),
with no consideration for economies of scale. In addition, the health sector in Honduras includes
several types of providers operating under a variety of governance and management models.
Although the GOH is experimenting or considering adopting alternative models to promote more
efficiency and better quality of care, these models are recent and thus the evidence on the relative
merits of the different models is still limited.
25.     This study provides an overall picture of sector expenditure, sources of funds,
allocation and spending patterns, and then focuses on management at the facility level. The
processes of planning, budget preparation and execution are assessed in terms of degree of
systematization and control, regulation application and use of the central financial information
system (SIAFI). The study investigates which the factors at the facility level that influence
budget execution, such as allocation criteria, decision and managerial autonomy, control,
accountability mechanisms, and the role of the community. Two categories of expenditure are
analyzed with greater detail: personnel and pharmaceuticals. Personnel expenditure is analyzed
with respect to its distribution, hiring modalities and practices, and incentives for performance.
Expenditure on drugs is analyzed regarding its allocation, stocks management, distribution
mechanisms and control practices, in order to identify possible sources of inefficiencies. In the
health sector, 132 facilities were visited, and 358 health care staff and 558 patients interviewed.
26.      The overall conclusion of the report is that there is a real opportunity to improve
service delivery in the health sector and make a difference for many Hondurans. As
mentioned above, the health sector is an interesting case that can become a good practice model
in the Honduran contextgiven that most of the institutional challenges highlighted in this study
fall within the control of the Government. The Secretary of Health and INHSS are in a position
to continue the reforms initiated during the last decade if only the fragmentation of the
institutional framework is addressed, proper accounting systems are set up and a clear line of
                                                                                 Honduras PETS Volume I



performance accountability defined. Procurement and distribution of pharmaceuticals seem to be
the most sensitive area where the survey found evidence of leakages.
27.    The main findings of the expenditure tracking and service delivery survey in the
health sector are as follows:
i. Significant evidence was found of waste and leakages in the management of drugs and
 supplies. However, inconsistencies between databases and recordkeeping make it difficult to
 track these resources and quantify leakages. The proportion of total expenditure allocated to
 drugs and other supplies is higher than expected, and a comparison of quantities and amounts in
 stock for the ten most important drugs and supplies suggest weak controls and supply
 management. On average, the amount recorded in stock cards was much lower than the one
 reported by accounting reports, with 56 percent of facilities showing a difference in stock of 50
 percent or more. Although a word of caution is required as the information submitted and
 accounts rendered to central offices are often considered unreliable.
ii. Not all the sources of income at the facility level are accounted for, particularly vulnerable
are the out of pocket expenses. A significant proportion of funds from the international
cooperation and municipal governments bypasses MOH and is channeled directly to facilities.
Those funds are not recorded in the budget and therefore no consolidated information on budget
financing or spending at the facility level was available. Similarly, facilities are allowed to retain
most of the user fees they collect. However, where revenues are reported, there is no effective
checking mechanism to verify that all revenues are reported and accounted for. User fees are
determined locally, usually by the managers of the facility themselves, and there is no national
fee schedule. User fees are not published and there is little information available to the users of
health services in this regard which makes them prone to abuses and leakages.
iii. Limited managerial autonomy and weak governance structure. Most public facilities have
little managerial autonomy and decision-making power. Even though all facilities report
preparing an annual plan, decisions regarding resource allocation and human resources in
particular are centralized. Only hospitals have a separate budget and thus monitor budget
execution. Most outpatient facilities have no information on key elements such as expenditure,
purchases or human resources. The surveyed alternative management models also lack
managerial autonomy, since all decision-making power rests on the organization in charge of
managing it; facility managers themselves do not manage resources and have little information
for decision-making. Twenty-six per cent of the facilities surveyed had a management,
consultative or technical committee as part of its governance structure. However, the role those
committees play is so diverse that it is difficult to reach meaningful conclusions.
iv. Promising planning and budgeting process but still insufficient. There is a formal and
structured planning and budgeting system in place, which represents a significant step forward
compared to other sectors in Honduras. Each facility prepares an annual plan which supposedly
should be the basis for budget preparation. However, the planning exercise is more of a formality
and has little use for actual management of resources and activities. The bottom line is an
inherent contradiction between a relatively sophisticated tool versus low capacity at the local
                                                                                Honduras PETS Volume I



level to actually use them effectively, and a decision-making process that is still centralized and
has not followed the decentralized planning process. In addition, since the budget system
allocates funds mostly based on historical values, it does not provide any incentive for improving
performance at the facility level.
v. Need to improve managerial capacity and practices to reap benefits from decentralization.
Many facilities report using management tools and techniques such as planning, monitoring,
performance evaluation and contracts management. However, facility managers – especially
from smaller facilities – complain about their lack of knowledge, tools and trained staff for
management. In spite of their availability, use and effectiveness of these tools for decision
making and evaluation is low. In particular, outpatient facilities have little or no information
about their use of resources, because resources allocated to them, and purchase of supplies and
services, are managed at the regional MOH offices. Having no financial or resource information
prevents meaningful management at the facility level.
vi. Inadequate allocation, qualification and management of human resources (HR). Severe
 problems are apparent in HR management, and important distortions are evident in the incentives
 structure. Firstly, recruitment and management of personnel are centralized, and facility
 managers in the public sector have little say or autonomy in defining staff numbers, profile and
 qualifications. This leads to understaffing or, in some cases, of overstaffing. Secondly, payment
 levels are severely distorted, with salaries in the public sector being much above market levels,
 especially in the case of physicians. A huge difference exists between the wages of physicians
 and other professional categories. Finally, even though some systems to reward performance
 appear to be in place, it is uncertain whether they convey appropriate incentives to facility staff
 or if they are more an administrative routine process. Staff recruitment, contracting and
 management are also hampered by inadequate regulations that include multiple contracting
 regimes and reflect the power of interest groups or professional categories rather than a rational
 allocation and use of human resources.
28.     The main recommendations to address the weaknesses identified above are:.
a.       Improve the planning and budgeting process as management tools. Even though already
established as a formal management instrument, the planning and budgeting process in the sector
could be significantly improved by: (i) increasing the capacity at the local and facility level to
prepare plans in a more integrated way, linking the different phases and elements of the process;
(ii) increasing the capacityof regional offices (MOH departmental offices) through training, to
review and consolidate facility plans into consistent regional plans; training those responsible for
preparing and monitoring plans and budgets would also be very helpful; (iii) streamlining the
whole process and making it less of a bureaucratic requirement and more of a practical tool for
local managers; and (iv) streamlining and strengthening the national budget process so that it
becomes a reliable tool for tracking and consolidating all sources of health sector financing.
b.      Consolidate and fully implement the decentralization and regionalization policy. In order
to remedy the patchwork of levels and lines of authority and responsibilities, the MOH should
clarify the decentralization policy and make each level of facility report to the same
                                                                             Honduras PETS Volume I



administrative unit. This would likely be the central MOH for national hospitals and
departmental offices and/or municipalities for regional and local hospitals and outpatient units.
Along these lines, decentralization should be fully implemented with the transfer of executing
responsibilities to regional and local levels.
c.     Improve managerial capacity at the regional and facility levels. To reduce resource waste
and inefficiency in resource allocation, facility staff should be trained in management of the
supply chain (including but not restricted to drugs), and management controls over stocks and
supply distribution and use should be improved. Streamlining the procurement and budget
execution processes, and reducing the number of administrative steps needed for procurement,
would also contribute to better resource management.
d.      Strengthen information systems to increase their reliability and usefulness. Facility
management and central and community oversight requires reliable and timely information on
service production and use of resources. Even though basic information systems are in place,
they are deemed unreliable and are little used for management, monitoring and evaluation.
e.      Consolidate and unify user fees policies and systems. In order to ensure greater equity,
user fees charged for different types of health services should be standardized and unified under
one national policy, which should include adjustments for regional differences in earnings and
cost of living.
f.     Consolidate or reduce the different staff contracting regimes. Harmonizing the different
contracting regimes for staff in public facilities, and reducing their number across the board,
would contribute a great deal toward unifying the different personnel databases and rationalizing
the management of human resources.