State funding for local development projects

• Abstract
• Purpose of health policy or idea
• Characteristics of this policy
• Political and economic background
• Purpose and process analysis
• Expected outcome
• References

Abstract

During the years 2003–2007 the state has given municipalities special subsidies for local development projects in the field of social welfare and health care. The Ministry of Social Affairs and Health has used this system to steer the development of municipal social and health services according to nationally set objectives. The National Audit Office of Finland has conducted an audit on this system in 2007 and found that it has not been as efficient as it could be.

Purpose of health policy or idea

In Finland, the responsibility for health service provision is decentralised to more than 400 municipalities. The municipalities have a significant degree of freedom to plan and operate the services as they see fit and state level steering is rather weak. The main steering mechanisms on the state level are steering by legislation and by information.

During the years 2003-2007 the state has given municipalities special subsidies for local development projects in the field of social welfare and health care. The Ministry of Social Affairs and Health has used this system to steer resources and activities to matters that it believes can promote national objectives at the municipal level. In the system municipalities can receive government subsidies to develop services, improve efficiency and update operating methods. Altogether over 200 million euros have been appropriated for about 900 local development projects in the state budget in 2003-2007.

In this system the state provides partial financing while the rest is provided by the the actor being responsible for the project. Projects are usually implemented by one or more municipalities but can also be implemented by a federation of municipalities or a hospital district. As a rule projects last at least one year, and in most cases they last longer than this.

There is a range of different projects. A common form is the development of social and health services in a minicipality or a region. They include large organizational reforms (e.g. creating health districts, see "Merging primary and secondary care providers" (9/2007) as well as small development projects on some specific part of services (e.g. development of preventive mental health services for adolescents).

The National Audit Office of Finland (NAO) has conducted an audit on this funding mechanism. The audit examined how the system works as a steering instrument for the Ministry of Social Affairs and Health. The audit report was published in June 2007. NAO will conduct a follow-up audit in 2009. NAO is an independent expert body that operates in connection with Parliament. Its task is to audit the legality and propriety of the state's financial management and compliance with the state budget.

Main points

Main objectives

The objective of the system is to steer resources and activities on the municipal level to matters that the government believes can promote national objectives.

Type of incentives

State level project funding for the municipalities

Groups affected

Municipalities, Hospital districts

Degree of Innovation	traditional		innovative
Degree of Controversy	consensual		highly controversial
Structural or Systemic Impact	marginal		fundamental
Public Visibility	very low		very high
Transferability	strongly system-dependent		system-neutral

The State funding for local development projects has been a new method to steer the development of municipal social and health services in Finland.

Political and economic background

The state level steering of municipal social and health services has been rather weak from 1993 onwards. The main steering mechanisms on the state level have been steering by information and by legislation. However, it has been noticed that steering by information has not been very effective, so steering by project funding was introduced to strengthen the tools of the state to steer municipalities. The legislation reform was enacted in 2002. The system was financed by decreasing the state level funding for capital investments on municipal social and health services. Currently, the state does not give any earmarked subsidies for capital investment.

Purpose and process analysis

Current Process Stages

	Idea	Pilot	Policy Paper	Legislation	Implementation	Evaluation	Change
Implemented in this survey?

Origins of health policy idea

In November 1999 the Ministry of Social Affairs and Health set up a working group to reform the system of state subsidies for capital investments of municipalities. The report of the working groups was published in December 2001. It proposed the introduction of state funding for local development projects instead of giving subsidies for capital investments. This idea had been brought up before in parliament and in the Ministry for Social Affairs and Health.

Initiators of idea/main actors

• Government

• Providers

Approach of idea

The approach of the idea is described as:
new:

Stakeholder positions

The reform was rather widely supported by the actors in the state and the municipal level administration. The municipalities were concerned about the decreasing of state subsidies for capital investments. However, the reform did not have a significant influence on the total amount of state subsidies for municipalities and municipalities did not oppose the reform.

Actors and positions

Government
The Ministry for Social Affairs and Health	very supportive		strongly opposed
Providers
Municipalitites	very supportive		strongly opposed
Hospital districts	very supportive		strongly opposed

Influences in policy making and legislation

The legislative reform was enacted by parliament in June 2002 (change of the Act on Planning and Government Grants for Social Welfare and Health Care). Parliament approved of the reform unanimously.

Legislative outcome

success

Actors and influence

Government
The Ministry for Social Affairs and Health	very strong		none
Providers
Municipalitites	very strong		none
Hospital districts	very strong		none

Positions and Influences at a glance

Adoption and implementation

In 2003-2007 the Ministry for Social Affairs and Health and provincial state offices granted over 200 million euros altogether to about 900 development projects of municipalities. In the future, state funding for local development projects in the social and health sector will probably be closely tied to the implementation of the National Development Programme for Social and Welfare, which is drawn up for the whole period of office of each government (normally for four years). The programme defines the government's general health policy aims and the measures that will be taken in order to fulfil these aims. It will be basedon the government programme agreed upon by the coalition parties. For the current government programme, see report HPM 10/2007.

The new government was appointed in April 2007 after parliamentary elections. The national development programme will be approved by the government in December 2007 for the period 2008-2011. This is the first time that a development programme will be done in this form. Legislation reform requiring the government to make this kind of programme came into force in early 2007.The Advisory Board of Social and Health Care has the responsibility of preparation, implementation and follow-up of the programme. The government plans to invest annually about 25 million euros in state subsidies for local development projects during the years 2008-2011.

Monitoring and evaluation

The Ministry of Social Affairs and health monitors all the projects it has funded by this system. However, the monitoring has not been very detailed. The National Audit Office of Finland (NAO) has conducted an audit on the system. The report of the audit was published in June 2007.

Review mechanisms

Mid-term review or evaluation, Final evaluation (external)

Dimensions of evaluation

Structure, Process, Outcome

Results of evaluation

The audit made by NAO showed that the funding system has not achieved all the objectives that it was intended to meet. The achievement of the desired results has been hampered by inadequate guidelines in the first years, projects' uncertainties about the roles of the ministry and the state provincial offices, and problems in planning projects, implementing results to practice and especially disseminating results. Requirements for project plans were usually not very demanding and in many cases project planning continued even after the project had started.

According to the audit there are no coherent national criteria for evaluating development projects, and evaluations are conducted in variable methods. Furthermore objectives and focuses in the development project system have been quite motley, which may have obscured the system's objectives and made the system harder to comprehend. The overall coordination of the development project system has not been adequate and consequently the objectives that have been set for individual projects as well as for the whole system have not been met as successfully as would have been possible.

Despite the problems, the system has had some positive effect. It has motivated the municipalities and given them a chance to develop their own activities. Projects have also increased co-operation among municipalities.

According to NAO projects should be required to have precise project plans in the future. In order to improve the comparability of results and their dissemination, the Ministry of Social Affairs and Health should make sure that coherent national criteria are developed for evaluating projects. NAO also proposes to require an external evaluation of the projects. The ministry should also make sure that projects' results and experiences are widely available for different actors.

Expected outcome

Currently there are many local development projects and experiments taking place in municipal services which will probably have a significant influence in shaping the future of the health care system. Only part of them has been funded by this mechanism. Probably the state funding has had some influence. It has certainly spurred municipalities to conduct development projects, but probably the steering function of state funding has been rather weak.

Impact of this policy

Quality of Health Care Services	marginal		fundamental
Level of Equity	system less equitable		system more equitable
Cost Efficiency	very low		very high

According to the evaluation conducted by the National Audit Office of Finland it seems that the impact of the system has been rather modest until now.

References

Sources of Information

Nurminen, Juho. Project funding as a steering instrument. The National Audit Office of Finland [In Finnish], 147/2007. http://www.vtv.fi/chapter_images/7567_1472007_Hankerahoitus_ohjausvalineena_NETTI.pdf

Author/s and/or contributors to this survey

Lauri Vuorenkoski

Suggested citation for this online article

Lauri Vuorenkoski. "State funding for local development projects". Health Policy Monitor, October 2007. Available at http://www.hpm.org/survey/fi/a10/2