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Document o f The World Bank
FOR OFFICIAL USE ONLY
Report No: 39220-UG
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF SDR 3 5.1 MILLION (US$55.0 MILLION EQUIVALENT)
TO THE
REPUBLIC OF UGANDA
FOR THE
LOCAL GOVERNMENT MANAGEMENT AND SERVICES DELIVERY ADAPTABLE PROGRAM LOAN (APL) PROJECT
IN SUPPORT OF THE
PUBLIC FINANCIAL MANAGEMENT REFORM PROGRAM AND THE DECENTRALIZATION POLICY STRATEGIC FRAMEWORK
November 20,2007
AFT: Water and Urban 1 Eastern Africa Country Cluster 1 AFRICA
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective October 3 1,2007
Currency Unit = Uganda Shillings (UShs) UShs 1 = US$O.OOOS
US$ 1.57 = SDR 1
APL BMAC BoU CAO CBG CDD CFAA CG cso DDPG DPSF DSWG EFMP I1 EIA ERR ESMF FDS FINMAP FMR GGACS GoU GTM HLG HPPG ICT IDA IDP IEC IFMIS IFR IRR JARD K P I LDG LG LGDP LGFAR LGFC
FISCAL YEAR July 1 - June30
ABBREVIATIONS AND ACRONYMS
Adaptable Program Loan Budget Management and Accounting Center Bank o f Uganda Chief Administrative Officer Capacity Building Grants Community Driven Development Country Financial Accountability Assessment Central Government Civi l Society Organization Decentralization Development Partner Group Decentralization Policy Strategic Framework Decentralization Sector Working Group Second Economic & Financial Management Project Environmental Impact Assessment Economic Internal Rate o f Return Environmental and Social Management Framework Fiscal Decentralization Strategy Financial Management and Accountability Program Financial Monitoring Report Good Governance and Anti-Corruption Strategy Government o f Uganda Generic Training Module Higher Local Government Harmonized Participatory Planning Guide Information, Communication and Technology International Development Association Internally Displaced Person Information, Education and Communication Integrated Financial Management Information System Interim Financial Report Internal Rate o f Return Joint Annual Review o f Decentralization Key Performance Indicator Local Development Grants Local Government Local Government Development Program Local Governments Financial and Accounting Regulations Local Government Finance Commission
FOR OFFICIAL USE ONLY
LGMSD LGSIP LLG M&E MDALG MDAs MoFPED MoLG MTEF NEMA NIMES NLGCBP NPA NPV O&M OAG OPM PAD PCU PDO PDU PEAP PEFA PFM PIP PPDA PRDP PRSC PSM PST RAP RFQ RPF SIL, S WAp SWG TC TPC UBOS UJAS
Local Government Management and Service Delivery Local Government Sector Investment Plan Lower Local Government Monitoring and Evaluation Ministries, Departments, Agencies and Local Government Ministries, Departments and Agencies Ministry o f Finance, Planning and Economic Development Ministry o f Local Government Medium-Term Expenditure Framework National Environment Management Authority National Integrated Monitoring and Evaluation System National Local Government Capacity Building Policy National Planning Authority Net Present Value Operations and Maintenance Office o f the Auditor General Office o f the Prime Minister Project Appraisal Document Program Coordination Unit Project Development Objective Procurement Disposal Unit Poverty Eradication Action Plan Public Expenditure and Financial Accountability Public Financial Management Project Implementation Plan Public Procurement and Disposal o f Public Assets Authority Peace, Recovery Development Program Poverty Reduction Support Credit Public Sector Management Project Support Team Resettlement Action Plan Request for Quotations Resettlement Policy Framework Specific Investment Loan Sector-Wide Approach Sector Working Group Town Clerk Technical Planning Committees Uganda Bureau o f Statistics Uganda Joint Assistance Strategy
Vice President: Obiageli K. Ezekwesili Country Director: John Murray McIntire
Sector Director: Michel Wormser Sector Manager: Jaime M. Biderman
Task Team Leader: Lance Morrell
This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.
UGANDA
Local Government Management and Services Delivery APL 1 Project
CONTENTS
Page
STRATEGIC CONTEXT AND RATIONALE ................................................................. 3 Country and sector issues .................................................................................................... 3 Rationale for Bank involvement ......................................................................................... 5 Higher level objectives to which the project contributes .................................................... 6
PROJECT DESCRIPTION ................................................................................................. 6
A . 1 . 2 . 3 .
B . 1 . 2 . 3.
4 . 5 . 6 .
Lending instrument ............................................................................................................. 6
Program objective and Phases ............................................................................................ 7
Project development objective and key indicators .............................................................. 7
Project Components ............................................................................................................ 8 Lessons learned and reflected in the project design .......................................................... 10
Alternatives considered and reasons for rejection ............................................................ 10
Partnership arrangements .................................................................................................. 11
Institutional and implementation arrangements ................................................................ 11
Monitoring and evaluation of outcomes/results ................................................................ 12 4 . Sustainability ..................................................................................................................... 13
Critical risks and possible controversial aspects., ............................................................. 14 Loadcredit conditions and covenants ............................................................................... 15
APPRAISAL SUMMARY ................................................................................................. 15
C . IMPLEMENTATION ........................................................................................................ 11 1 . 2 . 3.
. . .
5 . 6 .
D . 1 . 2 . 3 . 4 . 5 . 6 . 7 .
Economic Analysis ........................................................................................................... 15 Technical ........................................................................................................................... 17
Fiduciary ........................................................................................................................... 17
Social ................................................................................................................................. 19
Environment ...................................................................................................................... 20
Safeguard policies ............................................................................................................. 21
Policy Exceptions and Readiness ...................................................................................... 22
Annex 1: Country and Sector o r Program Background ......................................................... 23
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 29
Annex 3: Results Framework and Monitoring ........................................................................ 30
Annex 4: Detailed Project Description ...................................................................................... 33
Annex 5: Project Costs ............................................................................................................... 39
Annex 6: Implementation Arrangements ................................................................................. 40
Annex 7: Financial Management and Disbursement Arrangements ..................................... 42
Annex 8: Procurement Arrangements ...................................................................................... 60
Annex 9: Economic and Financial Analysis ............................................................................. 68
Annex 10: Safeguard Policy Issues ............................................................................................ 78
Annex 11: Project Preparation and Supervision ..................................................................... 83
Annex 12: Documents in the Project File ................................................................................. 84
Annex 13: Statement o f Loans and Credits .............................................................................. 85
Annex 14: Country at a Glance ................................................................................................. 88
MAP: IBRD 35755
UGANDA
APL
APL 1 Credit APL2 Credit Total
LOCAL GOVERNMENT MANAGEMENT AND SERVICE DELIVERY APL PROJECT
Indicative Financing Plan Estimated Implementation Period (Bank FY)
IDA YO GOU % Total Commitment Date Closing Date US$ m U S $ m US$ m 55.0 32 143.7 41 198.7 01/31/2008 12/3 1/2011 115.0 68 206.3 59 321.3 01/01/2012 12/3 1//2017 170.0 100 350.0 100 520.0
IN SUPPORT OF THE
PUBLIC FINANCIAL MANAGEMENT REFORM PROGRAM AND THE DECENTRALIZATION POLICY STRATEGIC FRAMEWORK
PROJECT APPRAISAL DOCUMENT
AFRICA
AFTU 1
Date: November 20, 2007 Country Director: John McIntire
Team Leader: Lance Morrell Sectors: Sub-national government administration
Themes: Decentralization (P);Municipal governance and institution building (S) Environmental screening category: Partial Assessment
Sector ManagerDirector: Jaime M. Biderman (1 00%)
Project ID: PO90867
Lending Instrument: Adaptable Program Loan
Program Financing Data 1
[ ] Loan [XI Credit [ ] Grant [ ] Guarantee [ 3 Other:
Responsible Agencies: Ministry o f Finance, Planning and Economic Development Kampala, Uganda
Ministry o f Local Government Kampala, Uganda
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Does the project depart from the CAS in content or other significant respects? Re$ PAD A. 3 Does the project require any exceptions from Bank policies? Re$ PAD D. 7 Have these been approved by Bank management? I s approval for any policy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? Re$ PAD C.5. Risk mitigation addressed under Annexes 7, 8 and 11 o f PAD. Does the project meet the Regional criteria for readiness for implementation? Re$ PAD D. 7
[ ]Yes [XINO
[ ]Yes [XINO [ ]Yes [XINO [ ]Yes [XINO
[XIYes [ ] N o
[XIYes [ ] N o
Project development objective Re$ PAD B.2, Technical Annex 3 Strengthen the ability o f the MDAs and LGs to plan and manage resources’ in collaboration with communities for service delivery Project description [one-sentence summary of each component] Re$ PAD B.4, Technical Annex 4 Component 1 : Support to the Public Financial Management Reform Program Component 2: Support to the Local Government Sector Investment Plans Component 3: Institutional and Policy Support Which safeguard policies are triggered, if any? Re$ PAD D. 6, Technical Annex 10 Environmental Assessment (OP4.01) Involuntary Resettlement (OP4.12) Significant, non-standard conditions, if any, for: Re$ PAD C.6
Loadcredit effectiveness:
1. MoFPEDMoLG to update the existing FM manuals for LGMSD
2. MoFPEDMoLG to update the chart o f accounts for the existing accounting software packages to prepare accounts for the LGMSD and interim financial reports
Covenants applicable to project implementation:
Mid-Term Review: MoLG will conduct a mid-term review o f LGMSD within 24 months after the effective date
Procurement: MoLG will appoint a Procurement Specialist to the PDU within three months after the effective date. MoLG will carry out procurement audits annually commencing fiscal year 2008/09.
Resources wil l include a l l Central Government transfers, which include LDG and CBG as we l l as human resources.
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A. STRATEGIC CONTEXT AND RATIONALE
1. Country and sector issues
1. Uganda remains a country o f opportunities and challenges. Since 1986, economic growth has been extraordinary and poverty has decreased substantially. Due to strong macroeconomic management (low inflation, stable exchange rate, and large foreign reserves), savings, exports, and foreign direct investment are increasing. Within the region, Uganda has been a leader in the fight against HIV/AIDS, with prevalence dropping significantly during the past decade.
2. The governance system in Uganda comprises two parts, namely, the Central and Local Governments (LGs)*. The central government i s primarily charged with formulating policies and regulatory issues while the local governments implement national and local policies and deliver services within their area o f jurisdiction. Uganda’s decentralization policy (which was announced in 1992, guided by the 1993 Local Governments Statute, enshrined in the 1995 Constitution, and consolidated and elaborated in the Local Governments Act, CAP 243) i s based on the principle o f devolution (political, administrative and fiscal autonomy) to LGs. Local Governments have the power to hire and f ire staff (except the Chief Administrative Officer (CAOs), Deputy CAO, and Town Clerks (TCs) o f the city and municipal council, who are appointed by central government), elect councilors through universal adult suffrage, collect revenue from own sources, and prepare development plans and budgets which are approved by i t s council without any recourse to central government. Within the region, Uganda has also been a leader in promoting decentralization as a means to improve the level o f services being provided and to reduce the level o f poverty. The challenge for Uganda i s now to deepen reforms already underway and prevent their reversal.
3. The decentralisation policy has been adopted as the primary vehicle for implementing government policy and programs in Uganda at the local level. The implementation o f decentralization has registered key successes such as devolution o f decision-making powers to popularly elected local governments, promotion o f popular participation, and improvement in the access to service delivery. The LGs currently absorb about 34% o f the national budget for service delivery. Although considerable progress has been made, there are a number o f operational challenges that must be addressed to consolidate and deepen the decentralisation process further. These challenges include: (i) weak fiscal decentralisation - imbalance in the allocation o f funds to local governments in view o f the services devolved to them; declining local own source revenues; (ii) inadequate human resources capacities3 in LGs for general management, planning, financial management, procurement, accountability, revenue enhancement, and mainstreaming crosscutting issues such as HIV/AIDS, gender and environment into local development planning, budgeting and expenditures; and (iii) uncoordinated central government ministries support to LGs. Therefore, additional institutional strengthening wil l be required at central and local government levels in order to deepen decentralisation and enhance service delivery.
4. During the last f ive years, significant progress has been made in enhancing the capacity and accountability o f local governments, and in implementing the decentralization policy supported by a number o f IDA-financed operations. The First and Second Local Government Development Projects (LGDP I & 11) have been instrumental in: supporting the development o f a draft Decentralization Policy Strategic Framework (DPSF), the Local Government Sector Investment Plan (LGSIP), passage o f the Local Government Rating Act, developing Harmonized Participatory Planning Guidelines (HPPG) for sub-national planning; supporting the restructuring o f local governments; supporting the Government’s
* LGs are based on the local council System with the Districts as the primary unit. Below the District are Lower Local Governments (LLGs), which include Sub-counties, Municipal Divisions, and Town Councils. LGs are corporate bodies that can sue and be sued in their name
as a result they can not attract and retain qualified staff. The situation i s worse in for Northern districts which are just emerging from 20 years o f conflict and civi l war, and
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Fiscal Decentralization Strategy (FDS); and building capacity o f local governments. In addition, the Second Economic and Financial Management Project (EFMP 11) successfully piloted, tested and rolled- out major elements o f the Integrated Financial Management Information System (IFMIS) application to 33 sites including ten higher level local governments.
5. These operations have contributed to measurable development outcomes in a number o f areas. Capacity Building and Local Development Grants financed under L G D P I1 have resulted in improved planning, financial management and human resource capacity, expanded local infrastructure, and increased levels of service provision throughout the country. They have also succeeded in harmonizing development partners’ support to decentralization by attracting bilateral donor funding o f US$25.2 mil l ion to cofinance L G D P 11. G o U has mainstreamed the LGDP modality and for the last two years fully funded the local development and capacity building grants (LDGICBG). The two grants have been fully provided for in the Medium Term Economic Framework (MTEF) for the next four years. This addresses the sustainability o f the LDG/CBG. In addition, LGDP I1 has introduced a number o f LG revenue policy reforms which included the enactment o f the LG (Rating) Ac t and proposed local service tax and hotel tax which are currently being discussed by Parliament. As a result, substantial increases have been achieved in local revenues from sources other than the Graduated Tax (G tax). EFMP I1 has realized efficiencies and cost savings in the form o f reduced budget execution time; more accurate accounting, reporting and auditing; reduced arrears; elimination o f opportunities for fraud and corruption; more efficient cash management; and the strengthening o f the Government’s financial management capabilities.
6. Although both L G D P I1 and EFMP I1 have contributed significantly t o increased service delivery, institution strengthening and improving service access to the majority o f Uganda population, the following remain as challenges to the sector: (i) the creation o f new districts (many o f which may not be viable); (ii) weak LGs capacity in Northern Uganda4 which i s just emerging f rom 20 years o f conflict; (iii) the need to strengthen the coordination between the other sector working groups (education, health, water and sanitation etc) with that o f decentralization since services f rom these sectors are delivered by LGs under a decentralized framework; (iv) the need to strengthen community - LGs interface to ensure that LG budgets and expenditures reflect community needs and communities are empowered to hold local leaders accountable for what they do; (v) continue the revenue enhancement effort to ensure sustainability o f existing capital stock in LGs; (vi) the need to professionalize LGs administrators and LGs Procurement Officers since about 65% o f LGs expenditures are through procurement; and (vii) the need to consolidate the functionality o f the IFMIS, r o l l it to remaining central government ministries, departments and agencies and viable LGs, in order to strengthen public financial management (PFM) in those LGs who are not beneficiaries o f the IFMIS, and strengthen the capacity o f the OAG to be able to audit LGs accounts as per statutory requirement.
7. In response to the Government request for a fo l low on operation to EFMP I1 and LGDP 11, the Bank took note o f such things as: (i) the achievements under the previous Bank supported projects; the challenges being faced by the sector; (ii) recent developments in the sector such as the formulation o f the DPSF and LGSIP; (iii) the current policy dialogue through the Decentralization Development Partner Group (DDPG); and (iv) the Public Financial Management Development Partner Group (PFM), Decentralization Sector Working Group (DSWG) and the Poverty Reduction Support Credit (PRSC) process. From this assessment, the Bank, reviewed the risks and adopted the APL lending instrument as appropriate to achieve the institutional reforms for deepening the decentralization process to ensure
Government has prepared a Peace, Recovery and Development Plan (PRDP) for the North, the sustainability o f the various investments to be made under this plan will, to a large extent, depend on the capacities o f LGs in the North. There is, therefore, urgent need to strengthen the capacities of LGs in the North so that they become visible and give the confidence to the people that government i s supporting their development cause.
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sustained service delivery and also as an exit strategy in case commitment to decentralization reforms dissipates.
2. Rationale for Bank involvement
8. Bank involvement in decentralization reforms in Uganda started in 2000 with the first Local Government Development Project (LGDP I). The LGDP I was designed as a pilot with the development objectives to test the feasibility o f implementing constitutional and legal mandates with respect to decentralized service provision and the evolution o f the development budget and to build the capacity o f LGs and a sub-set of LGs for improved service delivery, accountability and transparency. The LGDP I1 was designed to deliver discretionary funds to cover all higher and lower level local governments based on a philosophy o f bringing development funds as close as possible to beneficiaries. Parallel to the LGDP 11, the Bank also financed the second Economic and Financial Management Project (EFMP 11) whose objectives were to improve the effectiveness o f public expenditure management processes.
9. In 2006, the Government produced the Decentralization Policy Strategic Framework (DPSF) which provided a coherent, comprehensive and coordinated approach to the implementation o f decentralization. The framework sought to move the sector into a SWAP by creating inter-linkages among members o f the LG “family5”. The DPSF provided an overarching framework for the coordination, implementation and deepening o f the decentralization policy. Arising out o f the DPSF, the Government produced a ten year Local Government Sector Investment Plan (LGSIP). The LGSIP covers six strategic thematic areas o f focus for investment support, consistent with the devolution policy adopted by Government, namely: (i) local service delivery; (ii) political decentralization; (iii) administrative decentralization; (iv) fiscal decentralization; (v) good governance; and (vi) local economic development. All support to the sector i s now being coordinated through the LGSIP. The development partners have established a basket fund o f about US$40 million to finance some elements of the LGSIP. The Decentralization Development Partner Group (DDPG), o f which the Bank i s an active member, meets monthly to ensure coordination and synergy between their support to the LGSIP. The sector has a Decentralization Sector Working Group (DSWG) comprising al l of the LG “family”. The DSWG monitors and reviews progress o f the implementation o f decentralization policy through the Joint Annual Review o f Decentralization (JARD) which was supported under LGDP I1 for the last three years.
10. The Government has also prepared a Financial Management and Accountability Program (FINMAP) to support the Public Financial Management (PFM) Reform Program which intends to address public financial management issues in both the central and LGs. A similar arrangement exists for the Public Financial Management (PFM) sector working group where bilateral donors have also established a basket fund o f about US$70.0 million, o f which US$26.0 million has been confirmed, to implement part of the FINMAP. The PFM Development Partners Group, o f which the Bank i s an active member, also meets monthly to ensure coordination of their support to the FINMAP.
11. The proposed project will consolidate and build on the achievements of LGDP I and 11, and EFMP 11, while assisting the Government to address outstanding challenges. The proposed project aims to harmonize service delivery at the local level and aligns sectors and increases coordination in support o f sub-national service delivery. Central to this proposition i s support for the implementation o f the Government’s Public Financial Management (PFM) Reform Program, through the Financial Management and Accountability Project (FINMAP), in partnership with other Development Partners. This will complement the parallel support from the other development partners through the basket fund.
12. The Bank i s viewed by Government and by other development partners, as offering unique and essential value-added by providing policy advice and implementation support for decentralization in a
LG family comprises o f MoLG, Development Partners involved in the sector, central l ine ministries, LG Finance
5
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Commission (LGFC), LGs Associations, NGOsICBOs.
comprehensive manner, by sectors and throughout the country. The Bank’s comparative advantage would promote international knowledge sharing with other countries on the decentralization process in Uganda. Uganda’s experience with decentralization policy formulation and implementation has served as a “flagship” experience for the region. The Bank has supported extensive dialogue through workshops to examine the Uganda experience on decentralization and promoted twining arrangements between Uganda and other countries that could benefit f rom the Uganda experience. There is, therefore, strong rationale for the Bank to continue being engaged in the DecentralizationPFM reforms through policy dialogue and specific investment lending to support the implementation o f these reforms. Uganda has reached a critical level o f decentralization and over the past years it has provided numerous learning opportunities for other developing countries both within and outside the region. Support t o the sector by the Bank can not, therefore, be abandoned at this critical stage and moment o f the reform.
3. Higher level objectives to which the project contributes
13. The proposed operation i s consistent with priorities described in the Government’s Poverty Eradication Act ion Plan (PEAP), which emphasizes decentralization as a mechanism to increase local autonomy and strengthen both upward and downward accountability. The PEAP highlights the need for service delivery systems that are decentralized, efficient, effective and more responsive to the needs o f the poor. The PEAP also includes a priority action to expand the roll-out o f the IFMIS to al l central government votes and local governments to improve monitoring and financial controls. In terms o f the PEAP, the project supports Pillar 1 (Economic Management) and Pillar 4 (Governance). The Bank has designed the project (planned to be effective in FY 2008) to be one o f i t s instruments to support the Uganda Joint Assistance Strategy (UJAS).
14. The proposed project i s also aligned with the UJAS, which includes the objective o f “improved public service delivery” and the need to help the Government to strengthen public service management and accountability. The UJAS notes that “assistance aimed at enhancing the financial, institutional and human capacity o f local governments and measures and support to strengthen c i v i l society organizations will help the Government achieve its objectives o f effectively devolving responsibility for local service delivery”. The proposed project will complement activities supported by other Bank operations including the Poverty Reduction Support Credit (PRSC 6 and 7) and the Uganda Public Service Performance Enhancement Program.
B. PROJECT DESCRIPTION
1. Lending instrument
15. The lending instrument chosen for the IDA support i s an Adaptable Program Loan (APL) to provide phased support for the implementation o f the Government’s P F M Reform Program and the Decentralization Policy Strategic Framework (DPSF) that will require step-by-step policy reform and institutional development. The project i s designed to support the implementation o f the F INMAP and L G S P and it will comprise a logical sequence o f sector policy enhancement, institutional development and improvement in service delivery through investment activities.
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2. Program objective and Phases
Program Phases
Years
Program Objective
Enhance Local Governments (LG) abil ity to plan and manage human and financial resources for effective and sustainable delivery o f local government services (a) Triggers
(b) Benchmarks
Phase 1 (Consolidation)
JAN 2008 - DEC. 2011
Development Objective
Strengthen the abil ity o f the MDAs and LGs to plan and manage resources6 in collaboration with communities for service delivery
IFMZ solution operational in the 6 piloted second tier LGs 75% o f the Data Center Support and I F M I S Focal Point mainstreamed into the AGO, central ministries, departments and agencies Service delivery packages and standards developed by at least 3 key l ine ministries At least 2 sector M I S integrated in the national assessment process Government to continue funding the LDG and CBG from o w n sources 75% o f LG structures fully funded Pi lo t LGs producing and submitting f inal accounts for audit within 3 months Recruitment and training o f staff in AGO, central ministries, departments and agencies completed L G s uti l iz ing the service delivery packages and standards National assessment process ut i l iz ing sector M I S Actual releases to LGs o f the US$143.7 mi l l ion budgeted for LDGKBG under phase 1
Funding o f LGs structures included in the national budget
Phase I1 (Sustained Implementation)
JAN 2012 - DEC. 2017
Development Objective
Ensure LG capacity to delivery quality public service in a participatory and sustainable manner.
% LG Budget i s discretionary % of public satisfaction o f LG services % o f LGs meeting statutory reporting obligations
3. Project development objective and key indicators
16. Strengthen the ability of the MDAs and LGs to plan and manage resources in collaboration with communities for service delivery. Achievement of the PDO will be measured in terms of the following monitoring indicators: (i) % o f LGs in the Northern Uganda meeting the minimum conditions to access the LDG; (ii) % of LGs which have a computerized financial management system completing the final accounts within three months after the end o f the fiscal year; (iii) % o f Higher LGs registering 20%
Resources wil l include a l l Central Government transfers, which include LDG and CBG as we l l as human 6
resources. 7
increase in own source revenue from the baseline year o f 2005/06; and (iv) at least 75% o f the LDG i s invested in education, health, water, and roads sectors consistent with the PEAP.
4. Project Components
17. The Phase I project will consist o f three components that are designed to support the implementation o f the FINMAP and LGSIP. Component 1 will focus on institutional development activities that would strengthen Public Financial Management at central and local government levels to ensure the efficient, effective, transparent and accountable use o f public resources. Component 2 will support the implementation of the 10 year LG Sector Investment Plan (LGSIP) by providing discretionary funding to local governments to finance priority infrastructure and service delivery; strengthening the capacities o f LGs generally and in Northern Uganda specifically through capacity building/professionalization of staff, and integrating a CDD approach into decentralized service delivery systems by creating a mechanism within local governments for channeling harmonized support to community. Component 3 will focus on addressing institutional issues at the center (MoLG), project management and M 8z E activities.
Component 1 - Support to the Public Financial Management Systems Reform Program (US$20.1 million - IDA)
18. The objective of this component i s to strengthen Public Financial Management at central and local government levels and to ensure the efficient, effective, transparent and accountable use o f public resources as a basis for poverty eradication and improved service delivery. This component will have three subcomponents: (i) financial management systems in central departments and agencies, which will develop accountable and transparent institutional and management arrangements for effective performance, as well as expanding the current users in the central ministries; (ii) support to MoLG and Local Governments (LGs) which will develop a sustainable capacity in LG budget formulation, financial management and control, transparent and comprehensive financial reporting and training in use of systems; and (iii) management support, which will improve the capacity o f MoFPED to manage reform programs and facilitate the overall management and coordination of the FINMAP activities.
Component 2 - Support to the Local Government Sector Investment Plans (US$143.7 million - GoU and US$3 7.2 million - IDA)
19. The objective of this component i s to support LG infrastructure development which i s supported by the GoU's Local Development Grants (LDGs). The LDGs are discretionary development funds to deliver quality and sustainable basic services and empower communities to effectively participate in the planning, implementation, monitoring and evaluation of community-level initiatives for service delivery and livelihoods. Under LGMSD, IDA support will provide technical assistance, works, goods, training, community development grants and logistical support.
20. This component will have four subcomponents: (i) local development grants; (ii) community driven development (CDD) grants; (iii) strengthening local governments; and (iv) support to the LGs in Northern Uganda.
2 1. Sub-comuonents and activities
(i) Local Development Grants ("$129.4 million - GoU). The LDG which was piloted under LGDP I and rolled-out nationally under LGDP I1 i s now fully mainstreamed and funded by GoU. The total amount o f the LDG provided in the GoU MTEF for the next four years i s about US$129.4 million. The LDG will be used to strengthen the capacity of eligible local governments to implement subprojects consisting o f local infrastructure. The LDG will be disbursed against appraised and approved subprojects
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drawn from the LGs rolling developments plans consistent with Schedule 11, Parts 2 through 5 o f the Local Government Act, CAP 243, The access criteria, co-funding requirements, investment menu and performance assessment are detailed in the LDG Operational Manual. The Government will maintain the existing systems (operational manual, M&E reporting format, accountability format, horizontal and vertical fund sharing formula between LGskommunities, funds flow mechanism, etc.) which were developed under LGDPVII with minor adjustments in line with the LGMSD objective and focus of improving service delivery.
CDD Grants to communities (IDA) CDD Grants to communities (GoU - Parish IPF)’ Total
(ii) Community Driven Development (COD) Grants (US$8. I mil l ion - IDA). The objective o f the CDD grant i s to facilitate the interface between the lowest level o f local governments and communities; empower communities to demand better services from their local governments; strengthen participatory planning processes; strengthen transparency in the local government service delivery process; and create a harmonized platform within the local government service delivery system through which support to communities will be provided. The CDD grants will be funded by: (i) GoU through the 30% of the LDG for lower local governments which was previously the Parish IPF, amounting to US$19.0 million; and (ii) the IDA credit amounting to US$5.0 million. In addition the beneficiary communities will be expected to make contributions in a manner appropriate to them (cash, kind, time etc.).
2007/08 2008109 2009110 Total 0 2,000,000 3,000,000 5,000,000
6,200,000 6,300,000 6,500,000 19,000,000 6,200,000 8,300,000 9,500,000 24,000,000
Each community will have a one time allocation of US$2,500 for the duration o f the project. The grants will be used to facilitate the interface between the lowest level o f local governments and the communities to support the delivery of services and not the construction o f new infrastructure which would have recurrent costs implications for the local governments, as well as other private sector investments. A negative list o f investments has been developed and included in the CDD Operational Manual. In addition, the project will provide resources amounting to US$3.1 million for community facilitation, technical assistance, and training o f the LGs, CSO facilitators and communities, as well as monitoring and supervision. The CDD grants will be disbursed against appraised and approved subprojects drawn from the LLGs rolling developments plans. The access criteria, investment menu and performance assessment are detailed in the CDD Operational Manual. The CDD grants will follow the same funds flow mechanism for the LDG and CBG.
(iii) Support to the Local Governments in Northern Uganda (US$21.9 million - IDA). The objective o f this sub-component i s to provide support to the local government component o f the Government’s Peace, Recovery and Development Program (PRDP) and re-establish state presence in the 38 districts in Northern Uganda. The project will provide resources for construction and renovations o f lower level government offices and staff houses, equipmentlvehicles, engineering supervision and monitoring.
(iv) Strengthening Local Governments (US$14.3 million - GoU and US$2.2 million - IDA). The objective o f this sub-component i s to support the local government capacity building activities which are supported through GoU’s Capacity Building Grants (CBGs). The CBGs are funds provided to LGs for effective and sustainable delivery o f local government services for improved quality of life. Under LGMSD, IDA support will provide technical assistance, works, goods, training, and logistical support. The project will support the following areas: (i) Capacity Building Grants (CBG) to local governments to
’ The 30% Indicative Planning Figure (IPF) fiom the LLGs LDG (65% o f Sub-county and 50% o f Divisions) wil l become part o f the CDD grant which wil l be accessed by communities after meeting the access criteria.
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enable them to - cascade capacity to LLGs, strengthen local governments in the North, facilitate career development o f LG staff throughout HLGs and LLGs, and to develop skills through the use o f generic training modules (GTM); (ii) certification and professionalization o f select senior LG staff with a view to developing a nationally available group of professional local government managers; and (iii) strategic support for local government capacity building which will include strategic supply-driven capacity building to LGs, capacity building for MoLG staff; re-orientation o f MDAs; support of thematic research in local governance and support to the Capacity Building Unit.
Component 3 - Institutional and Policy Support (US$2.7 million - IDA)
22. This component will encompass the management activities associated with the implementation o f the project, the establishment and implementation o f a comprehensive monitoring and evaluation (M&E) system and the preparation of the next phase o f the project. Activities will include: (i) project implementation support; (ii) monitoring and evaluation; (iii) environmental and social management monitoring; (iv) project audit; (v) procurement audit; and (vi) support to the implementation of the Good Governance and Anti Corruption Strategy (GGACS) for Local Governments in Uganda.
5. Lessons learned and reflected in the project design
23. Lessons learned from previous projects include: (i) institutional reform requires considerable political will and should be carried out in a sustainable manner; (ii) projects with an institutional change focus that also include infrastructure investments must be carefully designed to ensure appropriate sequencing and incentives to achieve institutional reforms; (iii) project ownership reflected in participatory design and implementation arrangements that integrate with core functions are key to success; (iv) the need to improve community access to information on local government budgets; (v) participation in investment decisions; and (vi) integration o f community planning into local government planning and budgeting cycles will result in better oversight o f standards and quality by the technical staff at the local level. The APL instrument was selected for the project to ensure that institutional reforms are given prominence with limited funding to local governments to finance priority infrastructure and service delivery and to address institutional issues in the post conflict areas. The triggers for proceeding to Phase I1 focus mainly on achievements o f the reforms during implementation o f Phase I. To enhance ownership, the project was prepared with full participation of the key staff o f the Ministry o f Finance, Planning and Economic Development (MoFPED) and the MoLG.
6. Alternatives considered and reasons for rejection
24. The team considered and rejected a development policy design for the project. Although such an approach would have been appropriate from IDA’S perspective to enhance the progress on certain policy reforms, it may not have been a robust choice capable of ensuring an acceptable level o f predictability o f financing for basic services in an environment already marked by a number o f sources of uncertainty. The development policy design was also rejected because it would not have provided the opportunity for detailed project implementation support as i s possible under investment lending. The support i s necessary, especially for the provision of technical assistance to the MoFPED, MoLG and Local Governments (LGs).
25. With respect to the lending instrument, the GoU requested support for a project which focuses on the implementation of the Government’s Public Financial Management (PFM) Reform Program and the Decentralization Policy Strategic Framework to ensure accountability, financial discipline, effective, and harmonized service delivery at the local level. The proposed project will consolidate and build on the achievements o f LGDP I & I1 and EFMP 11, while assisting the Government to address outstanding challenges. Given the multi-sectoral approach to align sectors and increase coordination in support o f sub-national service delivery, a two phase, 10 year Adaptable Program Loan (APL), with Phase 1 to be a
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four year project, i s proposed by the Bank and accepted by the Government. The Phase I project will support the implementation o f the PFM Reform Program and the Local Government Sector Investment Plan, in partnership with other development partners. The project would put in place essential enabling policies to implement the reforms, limited infrastructure investments, and a robust monitoring and evaluation (M&E) system. This approach allows for a built-in incentive for the implementation o f the reforms since moving from one phase to the next i s possible only upon fblfilling appropriate triggers, and also provides an exit strategy in case GoU falters in its commitment to reform and the triggers are not met.
C. IMPLEMENTATION
1. Partnership arrangements
26. Development partners have established a basket fund o f about US$40.0 million to finance some elements of the LGSIP (mainly administrative decentralization with some institutional support to the center - MoLG, LGFC and LGs Associations) over the next four years. A similar arrangement exists for the Public Financial Management (PFM) sector working group where bilateral donors have also established a basket fund of about US$70.0 million, o f which US$26.0 million has been confirmed, to implement part o f the FINMAP. IDA will finance some elements o f the LGSIP and FINMAP.
2. Institutional and implementation arrangements
27. The overall project implementation period for Phase 1 (APL 1) i s four years (FY2008-FY2012). The institutional arrangements for project implementation will be as per the Government structure. At the central level, the MoLG, MoFPED, and the Office o f the Auditor General shall be responsible for ensuring that project resources are budgeted for and disbursed within the national MTEF, and that project accounts are audited.
28. MoLG will have overall responsibility for implementation, accounting for project funds and for coordinating the activities in Components 2 and 3. MoFPED, in coordination with MoLG, will be responsible for implementing specified portions o f Component 1 of the project. In line with the efforts to mainstream project activities into the Government structures, the Task Manager and the component and sub-component managers will be civil service staff in the various departments in MoLG and MoFPED. These managers will be assisted in their project related duties by focused support teams. These teams will provide necessary technical support during Phase 1 of LGMSD, and will also act as an interface with the IDA to ensure that LGMSD i s implemented as per the IDA/GoU protocol agreement.
29. At the national level, policy issues which arise during the implementation o f the LGMSD will be coordinated within the wider context o f policy issues from the sectors which have impact on LGs and service delivery. This coordination will be done through sector working groups, the Joint Annual Review o f Decentralization (JARD) process, the Decentralization Sector Working Group (DSWG)/Public Sector Management (PSM) SWG, and the PRSC which al l feed into the Annual PEAP Implementation Review (APIR). This will ensure coordination and harmonization o f policy proposals and decisions which affect the implementation o f the LGMSD specifically and the LG sector generally.
30. At the project implementation level, it i s critical to ensure strong coordination between the MoLG, MoFPED and the sector ministries. The inter-ministerial committee appointed for the design of the LGMSD will be institutionalized and i t s scope o f work extended to include project implementation to ensure constant dialogue and coordination regarding sector issues and their impacts on LGs and service delivery. The work o f the committee will be taken over by a Project Technical Committee and i t s membership i s laid out in the Project Implementation Plan (PIP).
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Financial Management
31. Details of the financial and disbursement arrangements are provided in Annex 7. Financial management arrangements for the project have an overall risk rating of moderate which satisfies the Bank’s minimum requirements under OP/BP 10.02. The overall project implementation period for APL 1 i s four years. MoLG will be the executing agency for the project and have overall responsibility for accounting for projects funds and coordinating activities for Components 2 and 3 under the project. MoFPED will have overall responsibility for the PFM Reform components mainly related to the roll-out o f the IFMIS under Component 1 o f the project. The various departments in MoFPED and MoLG will be responsible for the implementation o f the project with focused technical support provided by the Project Support Teams (PST). The PSTs will also act as an interface with the Bank to ensure that LGMSD i s implemented as per the IDNGoU protocol agreement. Both PSTs will be assigned to carry out FM duties o f the LGMSD. They will monitor the disbursement o f funds as well as the withdrawals and direct payment applications, collect and control invoices, manage the project’s respective designated accounts, keep the books o f account, prepare and produce quarterly Interim Un-Audited Financial Reports (IFR), and make the necessary arrangements for the annual audit of al l accounts. They will be required to make operational their respective financial management and accounting systems, using the up-dated appropriate software as well as the up-dated FM manual and the chart of accounts including the format, content and periodicity o f the various financial statements to be produced.
Procurement
32. A Procurement Capacity Assessment was carried out for MoFPED, MoLG and LGs, including community procurement, and the report i s provided in Annex 8. The Procurement Risk Assessment carried out indicates that the overall risk for al l implementation institutions i s rated average for MoFPED and high for MoLG. The assessment reviewed the organizational structures, legal aspects and procurement practices. The key issues and risks concerning procurement for implementation o f the project have been identified and mitigation measures suggested for implementation. These will be monitored closely.
Project Implementation Plan
33. A draft Project Implementation Plan (PIP) has been prepared. The PIP includes a description o f implementation and monitoring arrangements, and spells out the sequence o f all project activities, and it contains a Financial Management Plan, CDD Operational Manual, and an overall Procurement Plan.
3. Monitoring and evaluation of outcomedresults
34. In line with the intention and design o f LGMSD as a mainstream program, most o f the routine M&E data will be made available through mainstream data collection to be performed by the MoFPED for Component 1 and MoLG for Components 2 & 3.
Environmental and Social Management
35. The Ministry o f Local Government, in conjunction with National Environment Management Authority (NEMA), shall spearhead, co-ordinate and supervise the implementation o f the ESMF at Central Government level. They will ensure that the ESMF i s implemented by al l the Ministry’s departments and that environment issues are mainstreamed into a l l i t s activities. For those activities being implemented under Component 1, the Environment Officers in the l ine ministries wi l l coordinate their activities with NEMA and MoFPED. For those activities being implemented under Component 2, the capacity of the Inspectorate Department in MoLG will be strengthened to carry out environment compliance inspection in the local governments as part o f their routine inspections. Under the project, an
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Environment Specialist will be contracted to monitor the implementation of the ESMF and RPF, as well as to provide support to the LGs on environmental and social management issues. I t i s expected that MoLG will recruit an Environment Specialist to be attached to the Inspectorate Department. The Ministry and NEMA’S role shall include support supervision o f environment mainstreaming in the Local Governments.
36. At the Local Government level, the Technical Planning Committee (TPC) will be responsible for implementation o f the ESMF. The Chief Administrative Officers (CAOs)/Town Clerks and Environment Officers shall be responsible for the day-to-day implementation o f the ESMF. The CAO/Town Clerks will ensure that the Environment Officers are facilitated to carry out their environmental activities in the local governments. They will ensure that all LG technical staff are trained in the use o f and comply with the environmental checklists. The role of the CAO/TC and Environment Officer will include supervision o f environmental mainstreaming in the lower local governments and communities.
37. The training and capacity building related to environment will be carried out by MoLG, NEMA, and LGs using the CBGs. Under the project, resources will be provided to support the following activities: (i) stakeholder consultation to streamline environment communication materials; and (ii) monitoring of the contract documents and environmental checklist to ensure that the environmental mitigation measures are implemented.
4. Sustainability
38. Sustainability issues under LGMSD arise at two levels: (i) sustainability o f the LDG/CBG; and (ii) sustainability o f the investments being made by the LGMSD. The first concern has been addressed by Government fully funding the LDG/CBG as part o f the normal national budget and reflected in the medium term expenditure framework (MTEF) o f Government for the next four years. This i s a clear manifestation by Government o f i t s commitment to the devolution o f the development budget to LGs, consistent with the decentralization policy of Government.
39. The second sustainability concern has been addressed in the project design by f irst ensuring that LG investments under the LGMSD are limited in order to consolidate existing investments, based on service delivery packages as advised by sector ministries, and to ensure that existing service delivery points are fully functional and providing the necessary services that they were intended to provide. This strategy will limit the danger of LGs creating “green field” investments which might lack the auxiliary services to make them fully functional. Secondly, the project will support a subset o f the public financial management reforms in local government which will improve financial management and reduce leakages. Finally, the investments made to strengthen the public financial management in the form o f the Integrated Financial Management Information System (IFMIS) are being integrated into the existing government structures, and the level of professionalization o f the staff has increased dramatically as a result o f the professional training that has been and will continue to be provided.
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5. Critical risks and possible controversial aspects
Sustainability of human resource capacity for
Technical human resource sustainability and management and maintenance o f the system.
retention.
Lack o f capacity in MoLG to support the
Integration o f essential software may cause rollout of IFMIS to local governments.
delays or issues during implementation.
Support institutionalizing relevant skill sets into central and M local government organizational structures.
human resources necessary for sustaining the system applications are in place.
with capacities similar to those existing in MoFPED.
integration.
Support the Government to develop a strategy to ensure that M
Assist MoLG to develop a strong IFMIS support function H
Further development of interfaces to provide for increased M
Government backtracking on i ts commitment to decentralization
- Funds will be made available for monitoring and evaluating the implementation of project activities. Under the FINMAP, the Office of the Auditor General i s building i ts capacity to audit sub-county projects which should address this risk. In addition, as a condition during implementation, an annual Financial Management review will be conducted to ensure that funds were received by the Communities and were used for purposes intended.
Reduction in local revenues and creation of new districts will compromise local governments’ ability to meet co-financing requirements and sustainability.
M
Other LG interventions with different philosophies and implementation modalities. Capacity of MoLG to supervise the project and to progressively take over its functions. Transfer system i s changed to the detriment o f LGs
Support to Project Management Two separate ministries involved in the implementation will make the implementation o f a complex project more complicated Financial Management Ensure that grant funds are received by Communities are, utilized for purposes intended and accountabilities done in a timely manner.
Audits of the sub counties where the Communities will be included are s t i l l a challenge for the Auditor General and may not be done in a timely manner.
Elevate decentralization policy dialogue to the highest political level through the PRSC process.
Support the Government to create a conducive policy framework for local revenue enhancement. Support LGs to build capacity for improved revenue collection and management. LDGs will only continue for those local governments that meet sustainability criteria. Harmonization of approaches and modalities will be pursued during project preparation and implementation. Provision of technical assistance to strengthen institutional capacity in the Ministry. Support LGs to increase own-source revenue.
M
H
M
M
M
Support to the ministries during preparation to establish and operationalize an internal management and coordination capacity.
M
Mitigation will be done through the following: - Accountability for grants will be done in accordance with LG statutory regulations and guidelines issued and widely circulated by the MOLG. - Communities will be involved in monitoring of expenditures and review o f periodic reports
M
The overall risk rating i s Moderate.
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6. Loadcredit conditions and covenants
40. Conditions of Effectiveness:
(i) MoFPED/MoLG to update the existing FM manuals for LGMSD.
(ii) MoFPEDMoLG to update the chart o f accounts for the existing accounting software packages to prepare accounts for the LGMSD and interim financial reports.
41. Others:
(i) Monitoring and Evaluation: MoLGMoFPED will submit semi-annual progress reports to IDA.
(ii) Mid-Term Review: MOLG will conduct a mid-term review o f LGMSD within 24 months after the effective date.
(iii) Fiscal Transfers (Component 2): IDA funds will be disbursed from the Designated Account to the GoU Consolidated Fund Account in Uganda Shillings on a quarterly basis based on the satisfaction of certain criteria, a financial performance assessment carried out by MoLG and submission of acceptable documentation accounting for previous releases.
Funds intended for CDD Grants will be disbursed by the Bank against fully appraised and approved subprojects drawn from the LGs rolling developments plans and consistent with Schedule 11, Parts 2 through 5 of the Local Government Act, CAP 243. IDA funds will be disbursed upon receipt of the first five signed Subproject Agreements between the Lower Level Governments and the qualifying Communities.
(iv) Procurement: MoLG will recruit a Procurement Specialist to support the Procurement Disposal Unit within three months after the effective date. MoLG will carry out procurement audits annually commencing fiscal year 2008/09.
D. APPRAISAL SUMMARY
1. Economic Analysis
42. The project consists o f three components: Component 1 - Support to the Public Financial Management Reform Program (US$20.1 million; 10%); Component 2 - Support to Local Government Sector Investment Plans (US$175.9 million; 89%); Component 3 - Institutional and Policy Support (US$2.7 million; 1%).
43. Cost-benefit analyses were undertaken for component 1. For component 2, the efficiency o f the investments was validated on a self-correcting mechanism incorporated in the design of the component and supported by a cost-effectiveness analysis. Components 1 & 2 represent 98% o f the total project cost o f US$199.70 million.
Component I - Support to the Public Financial Management Reform Program (US$20.1 million)
44. For component 1, the NPV and ERR estimates for the Local Government (LG) module and for Central Government agency (CG) module were undertaken using two samples for each module. Results indicate positive NPVs and high ERRS estimates for the four sample sites represented by the two LGs and two CGs (Table l ) , suggesting that the IFMIS component i s a net benefit investment. Given the similar investment sizes and operating costs and similar anticipated benefits for each modular type, the expected rates o f return on the investment for component 1 are assessed to be also positive for the planned 12 local governments and 29 central government agencies. The detailed evaluation o f both costs and benefits o f the modules i s provided in the project file.
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Table 1:Cost Benefit Analysis for Four Representative Sites Targeted for I F M I S Further Rollout
ID IRR NPV (Million Ushs) Site Nature of Site
1
2
12.80% Jinja Municipality Local Government 58.61
Lira Municipality Local Government 2,707.08 41.03%
45. In addition, component 1 will finance a second tier management information system for 16 local governments and a third tier information management system for al l non-IFMIS local governments. The investments in the second and third tier information systems will be evaluated based on the economic viability study planned to be undertaken during project implementation period.
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Component 2 - Support to Local Government Investment Program (US$l 75.9 million)
Ministry o f Water and Environment Central Government 2,982.53 44.3 3%
Central Govt Agency 1,277.78 27.35% National Agricultural Research Organization
46. The economic viabil ity o f the investments proposed for component 2 i s based on the design o f the Local Development Grant (LDG) which was piloted in LGDP I and rolled-out to the entire country in LGDP 11. The LDG system i s a transparent grant mechanism which provides feedback for self- correction. The allocation decisions are made by local governments through citizen participation according to the beneficiaries’ priorities. The primary requirements o f the LDG are that the decision process should be bottom-up, transparent and participatory. This approach i s different from the sector conditional grants to local governments in that the latter promote accountability mainly to the sector ministry. The LDG i s an unconditional grant designed to give accountability t o the beneficiaries. Since the actual investments to be financed by the LDG are not pre-determined, the evaluation o f the investments to be financed by the LDG under L G M S D was carried out using the post-construction outcomes o f LGDP I & 11. The outcomes from these two projects demonstrated that small local investments selected and implemented under the program and financed by the LDG are l ikely to be cost- effective and result in positive beneficiary outcome.
Cost-effectiveness - Comparative cost of LGDP I1 versus LGDP I
47. The cost-effectiveness o f component 2 was further tested by comparing the average cost o f the projects financed under L G D P I and I1 sector-by-sector. The result indicates that as capacity i s gained, the cost-effectiveness o f the project improved. Table 2 summarizes the results o f this analysis. The average cost o f the investments financed in LGDP I1 i s 88% o f the average cost o f the investments from LGDP I without accounting for inflation due to the time difference in implementation o f LGDP I and 11. A similar comparison o f the average cost for each sector indicated that the same i s true except for education and health sectors, where it i s higher.
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Table 2: Comparative Average cost of LGDP I1 and LGDP I
Roads & Drainage
Solid waste
Water & Sanitation
Total
3,338 11,130,932 2,081 1 1,705,568 95.1%
140 5,723,182 99 7,034,052 81.3%
2,770 4,331,300 1,74 1 88.0% 4,919,837
12,790 7,470,099 8,204 7,699,307 88.0%
2. Technical
48. The project i s technically sound in design, and the choice of technology will be governed by existing national technical standards based on the ability of the beneficiaries to meet the co-funding requirements and the operation and maintenance (O&M) costs. The successful implementation o f Integrated Financial Management Information Systems (IFMIS) under EFMP 11, which i s now fully operational, has enhanced the financial management capacity o f the central and local governments. The project will consolidate the gains achieved during the implementation of EFMP 11. Component 1 will finance development and implementation of IFMIS at the local level, as well as rolling out the IFMIS to the rest of the public sector that was not part of the initial rol l out under EFMP 11. LGMSD will continue along the same tracks and principles, and it i s expected that Government will continue to implement its sustainable human resource plan. The strategy o f focusing on expenditure accountability and capacity building before launching a broad assessment of the sustainability agenda will be reviewed on a regular basis to account for needed changes to ensure linkages between expenditure management changes and potential restructuring, decentralization or right-sizing o f the public service.
3. Fiduciary
Financial Management
49. The Public Expenditure and Financial Accountability (PEFA) Report of November 2005 (issued in July 2006) and the Country Financial Accountability Assessment (CFAA) carried out by IDA in 2004 shows that the Government o f Uganda has made substantial progress in improving its Public Financial Management Systems since the last CFAA undertaken in 2001. The fiduciary r isks associated with poor budget formulation and budget preparation processes have been reduced. In terms o f appropriate legislation and regulatory frameworks, significant progress has been made to ensure that the risk associated with the lack of clear rules and regulations has been reduced. Also, more useful information i s
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provided in the Report and Opinion o f the Auditor General to Parliament on the Public Accounts of the Republic of Uganda which are up to date. However, risks remain in terms of: (i) quality and timeliness of in-year budget reports since budget reports only include information on budget releases and not actual expenditures; (ii) stock and monitoring o f expenditure payment arrears; (iii) effectiveness o f internal audit; (iv) oversight o f aggregate fiscal risk from other public sector entities; (v) effectiveness o f measures for taxpayer registration and tax assessment; (vi) legislative scrutiny o f external audit reports; (vii) effectiveness of payroll controls; and (viii) effectiveness in collection o f tax payments. The GoU has prepared a Financial Management and Accountability Program (FINMAP) to address the weaknesses in its Public Financial Management system. The FINMAP i s supported by a number o f development partners including the World Bank that form the Public Financial Management Donor Group.
50. The project’s transactions will be managed within the existing set-up in MoLG and MoFPED, supported by the two Project Support Teams (PSTs) to be staffed with qualified FM staff members who are experienced in Bank project financial management. A computerized financial management system has already been developed and put in place at both ministries. These structures use satisfactory and sound accounting packages capable o f producing all the accounting and financial data required, including financial statements and bank reconciliation statements. However, the chart of accounts of the accounting packages needs to be updated to capture LGMSD accounts and prepare Interim Un-Audited Financial Reports (IFR). The project’s financial statements will be audited in accordance with statutory requirements, and suitable Terms o f Reference will be developed. Aspects of local government financial management are also addressed and weaknesses in capacity are highlighted under Annex 7 of this report.
51. Actions outlined in the Financial Management Action Plan will be undertaken by the project to strengthen the financial management system. The actions required to be done before effectiveness o f the Credit are: (i) MoFPEDMoLG to update the existing FM manuals for LGMSD; and (ii) MoFPEDMoLG to update the chart of accounts for the existing accounting software packages to prepare accounts for the LGMSD and interim financial reports. The action that was done before negotiations required that MoFPEDMoLG prepare and agree with IDA on Interim Financial Report (IFR) formats.
52. appropriate staffing arrangements are maintained throughout the l i f e of the project.
In order to ensure that the project i s effectively implemented, MoLGMoFPED will ensure that
53. The conclusion o f the assessment i s that the financial management arrangements for the project have an overall risk rating o f moderate which satisfies the Bank’s minimum requirements under OPBP 10.02 and are adequate to provide, with reasonable assurance, accurate and timely information on the status of the project required by IDA. With the implementation of the action plan, the financial management arrangements will be strengthened.
Procurement
54. In Uganda, a l l procurement utilizing public funds i s governed by the Public Procurement and Disposal of Public Assets Act 2003 (PPDA Act). The Act, which i s based on the UNCITRAL model law, established a regulatory body, the Public Procurement and Disposal of Public Assets Authority (PPDA).
55. The 2004 Country Procurement Assessment Report (CPAR) indicates that the PPDA Act represents effective and suitable legislation. However, compliance and enforcement o f the Act i s the main problem. In addition, there are a few provisions that need to be revised to enhance transparency. The details o f these provisions are described in Annex 8.
56. PPDA i s doing a lot of work on capacity building, procurement auditing, and preparing manuals and standard documents, but more work needs to be done to focus on activities that lead to ensuring that the law i s complied with and the public sector gets value for money. The law also enhances capacity and
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transparency, and promotes the private sector. These issues are being addressed through the ongoing PRSC support.
57. Procurement for the proposed project will be carried out in accordance with the World Bank “Guidelines: Procurement under IBRD Loans and IDA Credits,” dated May 2004 (revised October 2006); “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers” dated May 2004 (revised October 2006) and the provisions stipulated in the Financing and Project Agreements. Procurement under the Local Development Grant by local governments shall be carried out in accordance with the PPDA Act.
58. The procurement under the proposed project shall be carried out by the Ministry o f Finance, Planning and Economic Development and the Ministry of Local Government at the Central Government level. Procurement shall also be carried out at community level and the districts shall also conduct procurement under the Local Development Grants.
59. A procurement assessment o f MoFPED and MOLG was carried out and identified the risk i s average and high respectively. To mitigate the risk, MoLG will recruit a Procurement Specialist to support the PDU. The details o f the assessment are indicated in Annex 8. As mitigation measures for MoFPED, procurement and legal support will be obtained as part of the system integration consultant’s team to backstop the Ministry in complex procurements. For the Ministry o f Local Government, as part o f the preparation o f the CDD Operational Manual, a CDD Procurement Manual will be prepared to guide procurement at the community level. Additionally, communities will be trained and required to establish Community Management Committees prior to receipt o f funds. At the local government level, only districts with established Procuring and Disposal Entities will qualify for the Local Development Grant. The details o f the procurement arrangements and the mitigation measures are indicated in Annex 8.
4. Social
60. The development objective of the LGMSD project i s to strengthen the ability of LGs to plan and manage resources in collaboration with communities for service delivery. The key social issue, therefore, i s to ensure that this i s done in a socially sustainable and inclusive manner. The project’s planned social development outcomes o f greater empowerment and social inclusion are: (i) priority investments in infrastructure and service delivery are identified and funded by LGs; and (ii) communities have done so in a participatory, transparent and more accountable manner by the use o f the existing Harmonized Participatory Planning Guidelines (HPPG). This i s a framework formulated and promoted by both local authorities and civil society in Uganda and applied by local councils. In the same way, gender and other concerns for the most vulnerable groups such as the disabled, orphans, etc, that are target groups for the improved services, shall be addressed through the same participatory processes throughout the sub projects cycle, from identification through implementation and monitoring. The Ministry o f Local Government continues to take the lead in assisting LGs to promote community driven development through participatory planning, implementation, monitoring and evaluation.
6 1. The design o f this project, including the refining o f specific features, has benefited from a number o f assessments done including the Annual Assessment of Minimum Conditions and Performance Measures for Local Governments, 2006, and stakeholder workshops held on performance related challenges facing LGs. Key indicators in the annual assessment include quality plans with clear visions and focus on poverty eradication, through partnerships with NGOs/CBOs and private sector, and gender mainstreaming in development plans. This project will, therefore, support capacity enhancement for community driven development (CDD), which i s key in facilitating improved, participatory and more inclusive development plans at a l l levels o f LGs.
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62. Similarly, under LGMSD, the social issue o f maintaining and improving access to assets and livelihoods o f project-affected persons, due to possibilities o f land acquisition for purposes o f setting up infrastructure required for improved service delivery, has been addressed in a participatory and inclusive manner. A Resettlement Policy Framework (RPF) has been prepared and publicly disclosed. I t s implementation will help fulfill the obligations of the Directorates of Community Services in LGs, o f which, among others, i s to mobilize and empower communities for development. Consultations with selected communities, local leaders and government agencies, and lessons drawn from other CDD operations in Uganda were at the center o f the preparation of the RPF and will continue during implementation o f the project. The RPF sets the guidelines for the resettlement plans that would have to be prepared for any subproject that triggers the Involuntary Resettlement Policy. Potential resettlement impacts o f sub projects like water sources and systems, education and health facilities, and staff housing may include loss of land, other assets and livelihoods, weakened community systems and social networks. These will be identified, assessed and mitigated through the implementation of the RPF. Other social impacts are well covered in the provisions o f the Environmental and Social Management Framework (ESMF) that outlines a clear environmental and social screening process to be applied to al l subprojects by the implementers.
63. In addition, in order to mitigate the potential effect o f the political economy currently in Uganda and avoid undermining the project’s development objectives, risk management actions have been incorporated “up front” during the design o f the project. These include wider outreach and information dissemination regarding project objectives, activities and resources, which imply intense Information, Education and Communication (IEC) and community participation in decision making at al l phases o f infrastructure and services improvements.
5. Environment
64. Since the exact locations and potential localized adverse environmental and social impacts of future sub-projects (construction of office buildings and staff housing, water supply and sanitation, necessary small infrastructures to run the Integrated Financial Management Information System (IFMIS), feeder roads, education and health care facilities) could not be determined prior to appraisal of the proposed project, the Borrower has prepared and disclosed an Environmental and Social Management Framework (ESMF) which i s designed to address potential adverse environmental and social impacts (water, soil, noise and air pollution, loss of vegetation, increase in medical waste, and a potential increase in malaria due to the addition of new water supply systems) o f future sub-projects.
65. ESMF: The ESMF outlines an environmental and social screening process which focuses on the identification and assessment o f potential impacts and their mitigation and monitoring through the use o f (i) an Environmental and Social Screening Form; (ii) Environmental Checklists for Sub- County/Division/Town Council Local Governments which will be used in conjunction with the screening form and guidance from relevant sector ministries; (iii) institutional arrangements for the review and clearance of screening results and separate EIA reports; (iv) generic E M terms o f reference; and (v) a monitoring plan, including environmental monitoring indicators.
66. In addition, the ESMF includes: (i) Environmental Guidelines for Contractors to be attached to the bidding documents; (ii) Environmental Guidelines for Rural Water Supply and Sanitation Projects for use by local governments; (iii) a sample format for Environmental Management Plans for Sub-Projects; (iv) an Environmental Management Plan (EMP) to be included in the Project Implementation Manual; (v) a copy o f the National Medical Waste Management Plan to be implemented as appropriate in the health care centers to be funded under the proposed project; and (vi) a number of mitigation measures against malaria to be implemented in coordination with ongoing work at the Ministry of Health.
20
67. Monitoring & Evaluation: Environmental monitoring and evaluation will be carried out by the local government Environment Officers, as well as trained persons at the lower local government level - depending on the scale or scope of the sub-projects - following the monitoring exercises in sequences and frequencies as stipulated in the project implementation schedule, and where appropriate, the maintenance schedule. The District/Municipal Environment Officers, the Sub-County/Town Council Environment Focal Persons, in cooperation with the relevant sector heads at the higher and lower local government levels, will monitor the implementation o f the environmental mitigation measures based on the contractor’s work plan for district, lower local government, and parish level investments.
68. The Ministry of Local Government, in collaboration with NEMA, will monitor the implementation o f the environmental mitigation measures on a sample of local government investments on a quarterly basis. On an annual basis, the higher local governments and the Ministry of Local Government in collaboration with NEMA will carry out a national assessment o f local governments’ performance in environmental and natural resources management using the appropriate environmental and social monitoring indicators.
69. Capacity building: As discussed during the appraisal mission, the project - through the Ministry o f Local Government and the National Environment Management Authority - will support the following activities:
(a) Component I : The Environmental Specialist from MoLG will coordinate with the Environmental Officers at the relevant line ministries the implementation of the ESMF in the context o f the small investments (generators, cooling systems, minor rehabilitation o f buildings housing the equipment) required for the efficient running o f the Integrated Financial Management Information System (IFMIS).
(b) Component 2: At the district level, provision of environmental and social training to the District Environment Officers - training o f trainers - who will then train the staff at the lower level governments. The training program will be implemented by the Ministry of Local Government and NEMA. Training topics will include: (i) the environmental and social management process as outlined in the ESMF; (ii) national environmental and social policies, procedures, and guidelines; (iii) the Bank’s safeguard policies; (iv) selected topics on environmental protection; and (v) medical waste management. Subsequently, the District Environment Officers will train relevant staff at the lower local government levels. In addition, this component will fund activities designed to strengthen the local governments’ capacity to mainstream environment into their development plans.
(c) Component 3 : This component will support environmental monitoring activities as outlined in the ESMF which include (i) recruitment of an environmental specialist in MoLG; (ii) support for environmental monitoring and surveillance to 56 local governments; (iii) assessment and support for environmental compliance at the district and sub-county level for a l l districts; and (iv) stakeholder consultations.
6. Safeguard policies
70. The project has triggered OP 4.01 Environmental Assessment and OP 4.12 Involuntary Resettlement due to the construction and/or rehabilitation o f planned sub-projects (water and sanitation systems, feeder roads, education and health care facilities, office buildings and staff housing) and the generation o f medical waste. The safeguard screening category i s S2, and the environmental screening category i s B. The main safeguards policy issues concern potential water, air, and soil pollution, loss of vegetation, potential loss o f assets, land or income sources, and unsafe medical waste management. Since neither the exact locations nor the types o f the sub-projects to be funded could be identified prior to appraisal, the Borrower has prepared an Environmental and Social Management Framework (ESMF) and
21
a Resettlement Policy Framework (RPF); both documents were disclosed in Uganda in publicly accessible places on July 30,2007, and at the Bank’s Info shop on August 6,2007.
7 1. As discussed in section 5 above, the project supports the implementation of the ESMF through: (i) the provision of environmental training; (ii) support for environmental monitoring activities; and (iii) the recruitment of an Environmental Specialist. The training program will be implemented by the Ministry o f Local Government and NEMA.
72. Consultations: The ESMF has been prepared in consultation with members of the Physical Planning Division in the Ministry o f Land, Housing and Urban Development, NEMA, the land authority, fisheries, and agriculture. Discussions were also held with key institutions o f the Local Governments, Communities, NGOs, and al l other stakeholders, and field visits were made to five districts and two municipalities with a view to evaluate the requirements for sound environmental and social management, and to ascertain the stakeholders’ views of the project.
73. The outcome of these consultations indicated an interest in: (i) making mainstreaming o f environmental and natural resources management mandatory for local governments; (ii) carrying out regular environmental audits; (iii) encouraging local governments to use the local development grants for investments in solid waste management; and (iv) encouraging local governments to invest in national priority programs such as water and sanitation. The project will implement the afore-mentioned requests as appropriate.
74. As mentioned in the ESMF, consultations will also take place during the environmental and social screening o f sub-projects, and the results will be communicated to the public by the Environmental Focal Points and the Community workers at the village, parish and sub-county levels. The Districthlunicipal Environment Officers will communicate the results o f the environmental and social screening process at the district/municipal levels.
SaGiuard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [X 1 [I Natural Habitats (OP/BP 4.04) [I [ XI Pest Management (OP 4.09) 11 [ XI Cultural Property (OPN 1 1.03, being revised as OP 4.11) [I [ XI Involuntary Resettlement (OP/BP 4.12) [XI [I Indigenous Peoples (OP/BP 4.10) 11 [ XI Forests (OP/BP 4.36) [I [ XI Safety o f Dams (OP/BP 4.37) [I [ XI Projects in Disputed Areas (OP/BP 7.60) [I [ XI Projects on International Waterways (OP/BP 7.50) [I [ XI
7. Policy Exceptions and Readiness
75. procurement plan was prepared and reviewed during negotiations.
The project complies with a l l applicable Bank policies. The Project Implementation Plan and
22
Annex 1: Country and Sector or Program Background
UGANDA: Local Government Management and Services Delivery APL 1 Project
Introduction
1. Uganda remains a country of opportunities and challenges. Since 1986, economic growth has been extraordinary and poverty has decreased substantially. Due to strong macroeconomic management (low inflation, stable exchange rate, and large foreign reserves), savings, exports, and foreign direct investment are increasing. Within the region, Uganda has been a leader in the fight against HIV/AIDS, with prevalence dropping significantly during the past decade. Uganda has also been a leader in promoting decentralization as a means to improve the level of services being provided and to reduce the level of poverty. The challenge for Uganda i s now to deepen reforms already underway and prevent their reversal.
Local Government/Decentralization Sector
2. Uganda’s decentralization policy was announced in 1992, guided by the 1993 Local Governments Statute, enshrined in the 1995 Constitution, and later consolidated and elaborated in the Local Governments Act, CAP 243. The policy was based on the principle of devolution (political, administrative and fiscal autonomy) to LGs. Local Government in Uganda i s based on the Local Council System with the Districts as the primary unit. Under the District are Lower Local Governments, which include Sub-counties and Town Councils. In urban areas local governments comprise Kampala City Council, Municipal Councils, and Municipal Divisions. Local Governments are corporate bodies that can sue and be sued in their name. Considerable progress has been made in consolidating the local government system. Citizens have participated in regular elections o f their representatives at al l levels and have generally expressed their level o f satisfaction, or otherwise, with the degree to which their expectations are being met.
3. Bank involvement in decentralization reforms started in 1996 with the first Local Government Development Project (LGDP I). The LGDP I was designed as a pilot with the objectives to test the feasibility o f implementing constitutional and legal mandates, with respect to decentralized service provision and the evolution of the development budget, and to build the capacity o f LGs for improved service delivery, accountability and transparency. The overall assessment of LGDP I in 2003 was that it achieved its development objective and investments reached lower levels of governments and community projects were funded. LGs used the discretionary development grants to finance projects consistent with the national Poverty Eradication Area Program (PEAP). LGs demonstrated that they were responsible autonomous bodies by investing the discretionary LGDP funds in roads and drainage (39%), education (23%), water and sanitation (14%), health care (13%), production (5%), Administration (5%) and solid waste (1%). However, there were still challenges facing LGs which included: (i) lack of technical, financial and planning capacities in LGs; (ii) proliferation o f donor support in LGs with the associated multitude o f accounting and reporting requirements (lack of donor coordination); and (iii) declines in LGs own source revenues. In addition, it was determined that there were fundamental inconsistencies between the various sector conditional grants and donor funded projects given the devolution policy adopted by Uganda. The Government commissioned a study on fiscal decentralization, which led to the fiscal decentralization strategy (FDS) approved by Cabinet in June 2002. Through the FDS, Government decided to mainstream the LGDP modality o f discretionary development budget support to LGs, as a mechanism to deepen decentralization and ensure greater autonomy and downward accountability o f LGs.
4. The design o f LGDP I1 built on the successes o f LGDP I and tried to address the gaps identified during the implementation o f LGDP I. LGDP I1 was designed to strengthen the capacities in LGs for planning and financial management and to enhance LGs revenue from own sources for improved service delivery. The key feature o f the LGDP 11, which i s due to close in December 2007, i s to deliver
23
discretionary funds to both higher and lower level local governments, based on a philosophy o f bringing development funds as close as possible to beneficiaries. The program design builds on this principle, supplemented by strengthening organizational and institutional capacity, primarily at local government level. The most prominent feature o f this capacity building i s training in technical and administrative practices, including participatory planning. This improved capacity, in turn, i s re-enforced by the significant discretionary development funding channeled to districts that meet a set of defined criteria. The compliance with these criteria i s established through a yearly performance assessment.
5. Parallel to LGDP I & LGDP 11, the Bank also financed the Second Economic and Financial Management Project (EFMP 11) which closed in December 2006. It aimed to improve the effectiveness o f public expenditure management by: (i) improving and harmonizing the central and local government planning and budgetary processes and supporting the decentralization of the development budget; (ii) strengthening financial management especially through improving accounting processes; (iii) building capacity to monitor development performance, Government service delivery and the impact o f public expenditure on poverty trends; and (iv) testing the effectiveness and sustainability o f a distance learning center (as part o f a global knowledge-sharing program) in supporting capacity building programs for the public and private sectors.
6. Uganda are:
Achievements under the three Bank-financed operations supporting the decentralization process in
Harmonized development partners support to decentralization by attracting bilateral donor funding to co-finance LGDP 11.
0 Enabled the sector to move towards a SWAP by assisting Government to develop a Decentralization Policy Strategic Framework (DPSF) to bring al l policy issues in the sector into a single reference document, and a ten-year LG Sector Investment Plan (LGSIP). These outcomes have provided the foundation to move toward the alignment of development partners’ support to the sector in support o f the LGSIP.
0 LGs capacities have been improved through training, attachment, peer-to-peer learning, and hands-on support. Training of professional accounting cadres in LGs improved from a base level of zero to a total o f 294 (EFMP I1 - 267 and LGDP I1 - 27) by FY2005. LGs are now capable of producing financial accounts which are audited within the statutory nine month requirement after the financial year.
0 Continued investment for improved service delivery in education, health, roads and drainage, water and sanitation, through the discretionary local development grant, contributing to the PEAP sector outcome targets. This i s being achieved through the promotion o f harmonized participatory planning in LGs. The synergy between the two project elements o f capacity building on the one hand and budget support on the other has improved the ability o f local governments to plan, manage finances, and deliver services.
0 A number of LG revenue policy reforms have been conducted under LGDP 11. These reforms included the enactment o f the LG (Rating) Act, hands-on support to LGs for revenue mobilization, and training which resulted in an increase in LG revenue by 46% from Ushs 56.9 billion in FY2002/3 to Ushs 82.8 billion in FY2005/6.
0 Government has mainstreamed the LGDP modality and for the last two years fully funded the local development and capacity building grants (LDG/CBG). The two grants have been fully provided for in the MTEF for the next four years.
24
0 Under EFMP 11, the budgeting functions in central and local government have been strengthened through the use o f the IFMIS and thus integrated with the treasury. Budget preparations have also been streamlined and harmonized through improved communications and planning between central and local governments.
0 Deviation between central government revenue forecasts and revenue collections reduced from 11.1% to 0.13% surpassing the target value o f 5%. This was mainly due to the efficiency in revenue mobilization and implementation o f N o n Tax Revenue (NTR) reforms.
Under EFMP 11, the number o f accountants with professional accounting qualifications in central government and LGs increased from 12 accountants to 412 accountants by the end o f the project. The professional training and the use o f the automated IFMIS enabled central government ministries to prepare their financial statements within three months o f the closure o f the fiscal year, a reduction in completion time from five months to three months.
Under LGDP 11, the number o f accountants with profession accounting qualifications in LGs increased from 3 accountants to 42 accountants. The total number o f Local Government accounting staffs that have been trained under LGDP-I1 for various accounting qualifications are 1,641.
0 Under EFMP 11, the numbers o f auditors in the OAG with professional accounting qualifications increased from 8 auditors to 50 auditors. As a result, the OAG i s able to audit a l l central government ministries’ f inal accounts and submit the audited financial statements to Parliament for review by the Public Accounts Committee (PAC) within the statutory 9 months requirements.
0 A number o f L G s were included in the pi lot phase o f the IFMIS. There was a great deal o f enthusiasm from LGs to use the IFMIS and the economic analysis o f the sites showed that the Net Present Value o f the IFMIS investments at the LGs was positive at a social discount rate o f 12%.
7. In summary, both L G D P I1 and EFMP I1 have contributed significantly to increased service delivery, institution Strengthening and improving service access to the majority o f Uganda population. Both project strategies have been successful and relevant to continuing the decentralization process in Uganda. However, to ensure further deepening o f the devolution process, the G O U recognizes the need to consolidate the achievements o f the institutional reforms under LDGP I & I1 and EFMP I1 to date. A great deal o f institutional strengthening is, therefore, required at central and local government levels in order to deepen decentralization and enhance service delivery. The areas o f operational challenges that need to be addressed are:
Institutional Strengthening of MoLG. M o L G i s in charge o f a dynamic and changing policy environment for local government development. As task responsibilities and requirements have changed considerably over the past 5 years within the decentralisation sector, the Ministry will be required to undergo a restructuring exercise, so as to enable it to better meet the challenges o f the future. Among the areas which need attention in the restructured M o L G are: (i) the role o f technical assistance units such as Project Coordination Unit in any future set-up; (ii) the institutional support needed to bolster the proposed D S W G Secretariat; (iii) the need to strengthen the Department o f Inspection to enable continued support, mentoring and inspection o f LGs, as this i s the cornerstone o f the monitoring and evaluation system; and (iv) the need to strengthen policy analysis and advocacy work and dialogue with line ministries.
Human Resources Development/ Management. There are challenges pertaining to a l ow skills-base arising f rom increasing demands for enhanced service delivery. Local governments vary considerably in their capacity to perform tasks and hence do not require uniform institutional interventions for human resources developmentlmanagement. Capacity building efforts in the country
25
have often a sectoral and supply-driven approach which often led to heterogeneity o f approaches and messages. In a bid to harmonize capacity building in the country, a National Local Government Capacity Building Policy (NLGCBP) was developed in 2005 to regulate capacity building and interventions across the country. The NLGCBP provides the guiding frame for local government capacity enhancement within the LGSIF' and other sector investment plans. There i s need to professionalize LGs administrators and LGs Procurement officers, since about 65% o f LGs expenditures are through procurement. Professionalization o f these cadres o f LGs officers (like the ones done with accountants) will ensure efficient use o f public resources.
Development Planning and Resource Allocation. Development planning and resource allocation i s done through the planning and budgeting process at the local government level where LGs develop three-year rol l ing plans and budgets. The challenge, however, lies in making planning and budgeting sufficiently participatory and all-inclusive, as wel l as the integration o f higher local government plans into national plans and priorities.
Financial Management and Audits. All LGs are required to formulate, approve and execute their budgets and to balance them and produce final accounts at the end o f each financial year. Although improved, adherence to financial and accounting regulations continues to pose challenges for many local governments, particularly at the lower level. It implies that the districts concerned have weak capacities to provide technical backstopping for the lower local levels in financial management. There i s need to consolidate the functionality o f the IFMIS, ro l l it to remaining central government ministries, departments and agencies and viable LGs. Technical support wil l be required to strengthen the public financial management functions in LGs who are not beneficiaries o f the IFMIS and strengthen the capacity o f the OAG to enable it to carry out the audits o f LG accounts as per statutory requirements.
Fiscal Decentralization Strategy (FDS). Fiscal decentralization s t i l l faces many challenges, which include the imbalance in the allocation o f funds to local governments in view o f the services devolved to them; declining local revenues; poor accountability by some LGs; weak financial management, and weak procurement, and complex reporting and accountability systems. The growth in the number and diversity o f transfer mechanisms to local governments f rom the center has encountered disbursement problems downstream and high transaction costs. T o address this challenge, the Government formulated the Fiscal Decentralisation Strategy (FDS) that allows local governments some flexibility and/or discretion to reallocate resources between and within sectors during planning and budgeting process and aims to improve resource allocation, planning, budgeting and budget execution. There i s need to strengthen the coordination between the other sector working groups (education, health, water and sanitation etc) with that o f decentralization, since services f rom these sectors are delivered by LGs under a decentralized framework.
Local Government Revenues. Robust local revenues are an important indicator o f a sustainable local government, as this has historically been one o f the few sources o f discretionary funding for local priorities. However, local revenue generation remains a major challenge to al l LGs. The percentage o f locally raised revenue, as a percentage o f total funding, has continued to fa l l each financial year; in some local governments, the percentage remains less than 3% o f the total budget. As a result, local governments are too dependent on central government transfers and donor funds to finance their budgets. Some o f the key factors behind declining revenues include under-exploitation o f alternative sources o f revenue, contradictory polit ical pronouncements, abolition o f the graduated tax by central government, lack o f incentives and capacity to enhance local revenues, and insurgency in Northern Uganda. A number o f LGs revenue enhancement policy reforms were initiated and the LGs will need support to realize the full potential o f these new revenue sources (LGs (Rating) Act, 2005, Local Service Tax, and Hotel tax). The increase in LGs o w n source revenue wil l ensure sustainability o f existing capital stock in LGs through the financing o f the operations and maintenance cost
26
Management and Sustainability of Social Investments. Popular participation i s essential for sustaining social investments. While communities have participated in some degree in setting up social investments, they have not been very effective in maintaining them. Furthermore, most LGs find difficulties in co-financing social investments which sometimes constitute up to 20% o f the physical investment cost, in addition to meeting post construction operation and maintenance (O&M) costs. To a significant extent, the ability to co-fund construction o f physical infrastructure in LGs i s largely influenced by the seasonality o f revenue generation, and this varies f rom district to district. There i s need to strengthen community and LG’s interface to ensure that LG’s budgets and expenditures reflect community needs and to empower communities to hold local leaders accountable.
Local Government in Conflict Areas. LGs in Northern Uganda have weak capacity due to the c iv i l war in the past 20 years. Although Government has prepared a Peace, Recovery and Development Plan (PRDP) for the North, the sustainability o f the various investments to be made under this plan will, to a large extent, depend on the capacities o f LGs in the North. There is, therefore, urgent need to strengthen the capacities o f LGs in the North so that they become visible and give the confidence to the people that government i s supporting their development cause. There i s also a need to synchronise the Decentralisation Policy and the IDP Policy to enhance service delivery in communities facing or getting out o f insurgency and provide backstopping support to these areas.
Support to the National Anti-Corruption Strategy at Local Level. The Government’s National Anti-Corruption Strategy aims to eliminate corruption and abuse o f power in the management o f public and private affairs through a rebuilt and strengthened system o f integrity, ethical behaviour and conduct in local governance including c iv i l society, private sector organizations and local communities. At the local level, the focus will be on accountability to ensure that systems and guidelines are adhered to within budgeting, accounting and procurement. A Revised Charter o n Accountability and Ethical Code o f Conduct for Local Governments, 2006, has been prepared and would need to be operationalized at the local level. In addition, taking into consideration the increased mandates o f LGs in service delivery and complementary resource flows, the Government i s developing a good governance and anti corruption strategy (GGAC) for local governments to be implemented at sector level.
Monitoring and Evaluation (M&E). There are multiple M&E tools which are for specific individual programs/projects such as PMA, NAADS, NUSAF, LGDPII, etc. Equally challenging i s the fact that there are several levels o f M&E structure each performing key tasks that are loosely interlinked. The line ministries, IGG, OAG, MOLG, the Office o f the Prime Minister (OPM) and the NPA al l undertake parallel M&E missions in local governments. Currently, there i s no centralized system where information deduced from the various specialist M&E missions i s located for easy storage and retrievals by interested stakeholders. The O P M monitors and evaluates government performance through the National Integrated Monitor ing and Evaluation System (NIMES). This i s critical for obtaining a broad picture with respect t o how the whole country i s performing. However, the M o L G should coordinate and be the center for data storage and retrieval o f information generated from the local government system linked to the N I M E S framework. The major weaknesses manifested in LGs has been the lack o f capacity to f i l l out M&E forms as we l l as their interpretation especially at the LLGs and multiple interventions have drained LGs for l imited capacity.
8. In response to the Government’s request for a follow-on operation to EFMP I1 and LGDP 11, the Bank took note o f the achievements scored under the previous Bank supported projects, the challenges being faced by the sector, recent developments in the sector such as the formulation o f the DPSF and LGSIP, the current policy dialogue through the DDPG, D S W G and the PRSC process, and reviewed the risks. A two phase, 10 year Adaptable Program Loan (APL) was adopted to achieve the institutional reforms for deepening the decentralization process to ensure sustained service delivery and also as an exit strategy in case commitment to decentralization reforms dissipates. It will be comprised o f a logical
27
sequence o f sector policy enhancement, institutional development and improvement in service delivery through investment activities.
Development Objectives, Triggers and Benchmarks for the Two Phases of the Program
Program Phases
I Program Objective
Enhance Local Governments (LG) ability to plan and manage human and financial resources for effective and sustainable delivery o f local government services (a) Triggers
~
Phase 1 (Consolidation)
JAN 2008 - DEC. 2011
Development Objective
Strengthen the ability o f the MDAs and LGs to plan and manage resources8 in collaboration with communities for service delivery
IFMIS solution operational in the 6 piloted second tier LGs 75% o f the Data Center Support and IFMIS Focal Point mainstreamed into the AGO, central ministries, departments and agencies Service delivery packages and standards developed by at least 3 key line ministries At least 2 sector MIS integrated in the national assessment process Government to continue funding the LDG and CBG fiom own sources 75% o f L G structures fully funded Pilot LGs producing and submitting final accounts for audit within 3 months Recruitment and training o f staff in AGO, central ministries, departments and agencies completed
0 LGs utilizing the service delivery packages and standards National assessment process utilizing sector MIS Actual releases to LGs o f the US$143.7 million budgeted for LDG/CBG under phase 1
Funding o f LGs structures included in the national budget
0
0
0
Phase I1 (Sustained Implementation) JAN 2012 - DEC. 2017
Development Objective
Ensure L G capacity to delivery quality public service in a participatory and sustainable manner.
% L G Budget i s discretionary % o f public satisfaction o f L G services % o f LGs meeting statutory reporting obligations
~
Resources wi l l include all Central Government transfers, which include LDG and CBG as well as human resources.
28
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies
Project (Bank-Financed) Completed Projects Uganda First Urban Project (Cr. 2206-UG) Nakivubo Channel Rehabilitation Project (Cr. 32030-UG)) Local Government Development project (LGDP I) (Cr. 3295-UG) Second Water Supply Project (Cr. 2 124-ug) Small Towns Water Supply Project (Cr. 2583-UG) Second Economic and Financial Management Project (EFMP 11) (Cr. 3297-UG)
Project (Cr. 2736) Institutional Capacity Building
Ongoing Projects
Second Local Government Development project (LGDP 11) (Cr. 3773-UG)
UGANDA: Local Government Management and Services Delivery APL 1 Project
Ratings Outcome Sustainability ID Impact
S L M
S L M
S L su
U UN N
S L H
MS S S
S HL, su
Latest Supervision (ISR) Ratings Outcome Sustainability
Implementation Development Progress (IP) Objective (DO)
S S
29
Annex 3: Results Framework and Monitoring
UGANDA: Local Government Management and Services Delivery APL 1 Project
PDO
Strengthen the ability o f the MDAs and LGs to plan and manage resources9 in collaboration with communities for service delivery
Intermediate Outcomes
Component 1 Reduction in time for LGs to complete monthly accounts
Component 2 LGs in the North able to produce development plans and budgets
~~
Component 2 tncrease in revenue from Property Rates
Component 2 Lower LG (LLG) plans reflecting the priorities of the Zommunities in the development plans
Project Outcome Indicators
% o f LGs in the Northern Uganda meeting the minimum conditions to access the LDG
% o f LGs which have computerized financial management system complete the final accounts within three months after the end of the fiscal year
% o f Higher LGs registering at least 20% increase in own source revenue from the baseline year of 2005/06
At least 75% o f the LDG i s invested in education, health, water, and roads sectors, consistent with the PEAP
Intermediate Outcome Indicators
0
% of LGs that have been computerized for at least one year completing bank reconciliation within two months
% o f LGs in Northern Uganda with at least x% of the approved staffing filled
% of LGs which are collecting property rates for at least 60% of the valuation rolls
% o f LLGs using the Harmonized Participatory Planning Guide (HPPG)
Use of Project Outcome Information
YR1-YR3 Measure the achievement o f the K P I s
YR4 Lead into the implementation o f the second phase o f the program
Use of Intermediate Outcome Monitoring
Delays in the bank reconciliation will affect the completion o f the final accounts
Delays in filling vacant position in the LGs in the North will have an adverse impact on LGs meeting the minimum conditions
Low level o f collection will have an adverse impact on LG’s own source revenue
Failure to utilize HPPG will lead to low level o f public satisfaction for service delivery
Resources wi l l include all Central Government transfers, which include LDG and CBG as well as human resources.
30
Arrangements for results monitoring
90
Project Outcome
Indicators % o f LGs in the North meeting the minimum conditions % o f LGs which have computerized complete the final accounts within three months after the end o f the fiscal year % o f Higher LGs registering at least 20% increase in own source revenue from the baseline year o f 2005106 At least 75% o f the LDG i s invested in education, health, water, and sectors, consistent with the PEAP
Semi- Annual Progress Reports
Data Collection and Reporting - 2008 Baseline
2005106 2009 2010 2011 Frequency
and Reports
Data Collection
Instruments
Responsibility for Data
Collection 30 50 65 80 85 Semi-
Annual Progress Reports
National Annual Assessment
MoLG
0 65
- 30
75
35
80
- 40
LGs annual financial reports
MoLGMoFPED
LGs annual financial reports
MoLG 10 45 Quarterly Progress Reports
MoLG 65 70 70 75 National Annual Assessment
80 Semi- Annual Progress Reports
31
Frequency and Reports
Quarterly Progress Reports
Intermediate Outcomes
Component 1
% o f LGs that have been computerized for at least one year completing bank reconciliation in at least 2 months
Data Collection Instruments
Baseline 2005106
70
Responsibility for Data Collection
Component 2
% o f LGs in Northern Uganda with at least x% o f the approved staffing filled.
35
2008
Component 2
% o f LGs which are collecting property rates for at least 60% o f the valuation rolls
2009
100
0
80
Component 2
% o f LLGs using the Harmonized Participatory Planning Guide (HPPG)
Annual Financial Reports
60
AGO, MoFPED
Phase 1 (US$198.7 million)
Phase 2 (US$321.3 million)
50
Periodic Mon i to r ing (IDA)
Triggers’ Assessment
65
Twice a year
September 2009
Twice a year
Quarterly Progress Reports
Appraisal next phase
National Assessment Report
February 20 1 1
MoLG, Director Inspectorate Department.
30 50 Quarterly Progress Reports
Annual Financial Reports
MoLG, Director Finance Department
7s 80 Annual Surveys
National Assessment Report
MoLG, Director Inspectorate Department
Phasing of APL
32
Annex 4: Detailed Project Description
UGANDA: Local Government Management and Services Delivery APL 1 Project
Component 1: Support to the Public Financial Management Reform Program (US$20.1 million - IDA)
1. Objective: The objective o f this component i s to support the Government’s Public Financial Management Accountability Program (FINMAP), to strengthen the public financial management at central and local government levels and to ensure the efficient, effective, transparent and accountable use o f public resources as a basis for poverty eradication and improved service delivery. The FINMAP i s supported by other Development Partners, including IDA, with total budget of about US$70.0 million over a four and a half year period. The FINMAP has six components: (i) economic planning (MoFPED); (ii) budgeting systems (MoFPED); (iii) financial management systems (Accountant Generals Office); (iv) oversight (Office of the Auditor General and Parliament); (v) local government financial management systems (MoLG); and (vi) management support (MoFPED).
2. LGMSD will support components 3,5 and 6 of the FMMAP which are: (i) financial management systems (Accountant Generals Office); (ii) local government financial management systems (MoLG); and (iii) management support (MoFPED), respectively. This component will have three subcomponents: (i) financial management systems in central government departments and agencies, to develop accountable and transparent institutional and management arrangements for effective performance in the central ministries; (ii) support to MoLG and local governments (LGs), which will develop sustainable capacity in LG budget formulation, financial management and control and transparent and comprehensive financial reporting; and (iii) management support, which will improve management capacity o f MoFPED to manage reform programs and facilitate the overall management and coordination o f the FINMAP activities.
Sub-components and activities:
1.1 Financial Management Systems in MDALGs (US$11.6 million)
3. The objectives of this sub-component will be to develop accountable & transparent institutional and management arrangements for effective performance during budget execution. This will involve cross cutting systems/ICT deployment, restructuring, capacity building as well as policy issues relating to procurement. I t i s expected that the Ministries, Departments, Agencies and Local Governments (MDALGs) will continue to engage in sector development activities that will also involve elements o f PFM reform. Activities will include:
0 Technical support to Accountant General’s Office. This will include application support implementation and development o f PFM and IFMIS in Ministries, Departments and Agencies through the recruitment o f the ICT Data Center team to provide technical support.
Implementation of the further roll-out o f IFMIS in Central Government. The project will support the roll-out of IFMIS to a l l Central Government, and agencies, including the recurrent cost of the new sites.
Upgrading the data centre to support extension of IFMIS to new entities and accommodation o f related systems like the integrated personnel, payroll and pensions system.
Support to the IFMIS technical staff, including recurrent costs.
0
0
0
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4. It i s expected that at the end of the project, an effective financial, procurement and internal audit controlhystems (LFMIS framework) will be in place for CG/LG. It i s expected that the financial and procurement reports are reconciled quarterly and the year-end reports are available within three months o f year end and that comprehensive annual financial statements, including 100% MDA and HLGs & 75% LLGs are reported within the statutory timeframe.
1.2 Support to MoLG & Local Governments (US$6.9 million)
5 . The objective of this sub-component i s to support MoLG and LGs to develop a sustainable capacity in: (i) LG budget formulation; (ii) LG financial management and control; and (iii) transparent and comprehensive LG financial reporting. This sub-component i s linked to the ongoing development efforts under the Fiscal Decentralization Strategy (FDS) and LGDP programs. FDS/LGDP will continue to support the development o f the LG transfer system and deployment of improved Budget Formulation, Execution and Reporting Guidelines, as well as improvements to the legal framework for LG. Under this project, resources will be provided for the rollout and integration o f new ICT based PFM systems (IFMIS and other systems), strengthening of financial management systems in non-IFMIS LGs, and the change managementkraining required to ensure sustainability of the new systems. Activities under this subcomponent will include:
Roll-out and integration o f new ICT based PFM system (IFMIS and other systems such as budget reporting system) to 6 HLGs, including logistical support, training as well as facilitation for implementation and coordination o f the new sites.
Implementation of an IFMIS system for 2"d tier local governments. This activity will include recruitment o f technical staff, procurement o f equipment, roll-out o f the software, and provision o f training for appropriate LG and district financial management staff.
0 Technical support for the second tier LGs as well as the establishment o f a team o f consultants for application support.
Establishment o f Financial Systems/ICT Support functions at MoLG. This will involve training and capacity building for MoLG staff, particularly those in the Inspectorate Department, to effectively participate and coordinate the implementation o f IFMIS in local governments, as well as provide technical support to LGs.
6. Verification of the achievement o f this component will be the responsibility o f MoLG, with support from Accountant General's Office. At the end o f the project, it i s expected that the IFMIS infrastructure necessary for effective financial, procurement and internal audit control/systems (IFMIS framework) for HLGs and basic financial systems for other Non IFMIS LGs are in place.
1.3 Management Support (US$1.6 million)
7. This sub-component will provide support to the PEMCOM and MoFPED to facilitate the overall management and coordination o f the FINMAP activities as part of component 6 o f the FINMAP. It will include the strengthening o f the planning unit o f MoFPED through support to the project management team to bridge the skills gap and the implementation, monitoring and evaluation, program management, financial management, and procurement aspects under the project.
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Component 2: Support to the Local Government Sector Investment Plans (US$175.9 million - GoU and IDA)
8. The objective o f this component will be to support LG infrastructure development which i s supported by the GoU’s Local Development Grants (LDGs). The LDGs are discretionary development funds to deliver quality and sustainable basic services and empower communities to effectively participate in the planning, implementation, monitoring and evaluation of community-level initiatives for service delivery and livelihoods. Under LGMSD, IDA support will be to provide technical assistance, works, goods, training, community development grants and logistical support. This component will have four subcomponents: (i) Local Development Grant; (ii) Community Driven Development (CDD) Grant; (iii) Support to the LGs in Northern Uganda; and (iv) Strengthening Local Governments.
2.1 Local Development Grant (LDG) (US$129.4 million - GoU)
9. The LDG which was piloted under LGDP I and rolled out under LGDP I1 with IDA funding, has now been fully mainstreamed in the GoU budget and in the MTEF. The LDG will be used to strengthen the capacity o f Local Governments in the implementation of subprojects for local infrastructure, such as roads, schools, health clinics, etc. The LGDP I1 operational manual will be updated, to include service delivery packages, to reflect the current focus o f improved service delivery at service delivery points. The LDG will be accessed by all the LGs and communities that meet minimum access/eligibility conditions, as detailed in the operational manual, to achieve the following objectives:
To support LGs with discretionary development funds to deliver quality and sustainable basic services.
Empower communities to effectively participate in the planning, implementation, monitoring and evaluation o f community-level initiatives for service delivery and livelihoods.
Integrate a CDD approach into decentralized service delivery systems by creating a mechanism within local government for channeling harmonized support to community-level activities.
10. The total amount of the LDG provided in the GoU MTEF for the next four years i s about US$129.4 million. The LDG will be allocated to LGs based on the weights o f 45% for population; 40% for poverty count; and 15% for land area. The vertical sharing o f the LDG will be consistent with the current legal provision in the Act with respect to local revenue, The spilt between the District and the Sub-county LG i s 35%:65% respectively, and 50%:50% between the Municipality and the Divisions. Under the LGDP 11, most o f the subprojects funded by the LDG resulted in the creation o f new infrastructure. Under the LGMSD, the existing operational manual will be updated to require LGs to use the LDG to undertake complementary activities which will make existing investments more functional, rather than investing in new infrastructures. The choice o f the investments will be guided by the service delivery packages (menu) provided by sectors. Service delivery packages will be defined for each sector as an indicative ‘positive l is t ’ to guide LGs/communities on which investments are eligible. This i s to ensure consolidation and full functionality o f investments made under LGDP 11. For the LDG, the existing LGDP I1 operational manual will be updated. The Operational Manual will detail the grant access criteria, financing terms, funds flow mechanism, guidelines for addressing cross-cutting issues such as gender, environment and HIV/AIDS, planning and implementation arrangements o f activities, and criteria for assessment o f value for money.
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2.2 Community Driven Development (CDD) Grants (US$8.1 million - IDA)
CDD Grants to communities (IDA) CDD Grants to communities (GoU - Parish IPF)" Total
11. The objective o f the CDD grant i s to facilitate the interface, between the lowest level o f local governments and communities; empower communities to demand better services from their local governments; strengthen participatory planning processes; strengthen transparency in the local government service delivery process; and create a harmonized platform within the local government service delivery system through which support to communities will be provided. The CDD grants will be funded by: (i) GoU through the 30% o f the LDG for lower local governments which was previously the Parish IPF, amounting to US$19.0 million; and (ii) the IDA credit amounting to US$5.0 million. In addition, the beneficiary communities will be expected to make contributions in a manner appropriate to them (cash, kind, time etc).
2007108 2008109 2009110 Total 0 2,000,000 3,000,000 5,000,000
6,200,000 6,300,000 6,500,000 19,000,000 6,200,000 8,300,000 9,500,000 24,000,000
12. Each community will have a one-time allocation o f US$2,500 for the duration o f the project. The grants will be used to facilitate the interface between the lowest level o f local governments and the communities to support the delivery of services and not the construction of new infrastructure which have recurrent costs implications for the local governments. A negative list o f investments has been developed and included in the CDD Operational Manual. The CDD menu will focus on 'software' activities and small-scale investments that communities themselves can implement and maintain. Activities beyond the technical and financial capacities o f communities will be referred for implementation to LLG/HLG.
13. In addition, the project will provide resources amounting to US$3.1 million for community facilitation, technical assistance, and training o f the LGs, CSO facilitators and communities as well as monitoring and supervision. In the first year o f project implementation, the focus will be on training o f stakeholders involved in the implementation of the CDD and on communication and public outreach campaigns to disseminate information and sensitize the stakeholders. I t i s anticipated that much o f the community grants will be disbursed during the second and third year of the project, once capacity has been established and the stakeholders are familiarized with the CDD objectives and procedures. The CDD grants will be disbursed against appraised and approved subprojects drawn from the LLGs rolling developments plans. The access criteria, investment menu and performance assessment are detailed in the CDD Operational Manual. The CDD grants will follow the same funds flow mechanism for the LDG and CBG. Disbursements to the communities will be made from the sub-county level.
2.3 Support to the Local Governments in Northern Uganda (IDA - $21.9 million)
14. The objective o f this sub-component i s to strengthen local government institutions in Northern Uganda for improved service delivery. I t would also assist MoLG with the implementation of the local government portion o f the Peace, Recovery, and Development Program (PRDP), which was approved by Cabinet in August 2007 and launched on October 15, 2007. Since most of the activities to be implemented under the PRDP are decentralized functions, strengthening the capacities of LGs in the North becomes a pre-requisite if the PRDP i s to succeed, There are 38 districts with 348 sub-counties in the North, o f which 78 have no office space, and 257 need rehabilitation of their offices. The project would provide resources for: (i) rehabilitation of existing office blocks and construction o f new ones;
lo The 30% Indicative Planning Figure (IPF) from the LLGs LDG (65% o f Sub-county and 50% o f Divisions) will become part o f the CDD grant which wil l be accessed by communities after meeting the access criteria.
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(ii) provision o f new residential housing and rehabilitation o f existing ones for key staff o f LLGs; (iii) office equipment, vehicles and furniture; (iv) induction o f new LG officers; (v) support to physical planning o f IDP areas in 9 districts; and (vi) supervision and monitoring. This will enable the Government to re-establish presence in Northern Uganda which i s just emerging from 20 years of conflict. MoLG, in consultation with the ministry responsible for housing, will prepare: (i) a standard modular design and bill of quantities and specifications for the new sub-county office block; and (ii) assist in the quantification of the rehabilitation needs o f existing office blocks and preparation o f packages o f contracts. In order for the sub-counties in Northern Uganda to benefit like other regions in the country from the capacity building grant and other capacity enhancement efforts under the project, it i s critical that the construction and rehabilitation o f the office blocks be fast-tracked and completed during the first year of the project.
2.4 Strengthening Local Governments (USS16.5 million - GoU and IDA)
15. The objective of this sub-component i s to support the local government capacity building activities which are supported through GoU’s Capacity Building Grants (CBGs). The CBGs are funds provided to LGs for effective and sustainable delivery o f local government services for improved quality o f l i fe. Under LGMSD, IDA support will be to provide technical assistance, works, goods, training, and logistical support. Under this component the project will continue with best experiences from previous interventions to LG’s and also tackle new challenges such as working closely with communities and cascading capacity building to lower local governments (LLGs), with special consideration o f HLGs and LLGs in the North. The rationale for this subcomponent arises from the need: (i) for appropriately informed and empowered LG staff such that they are able to re-orient and respond to the latest policies of government; (ii) to enable LGs in Northern Uganda to become fully functional through support for enhanced staffing and training and technical assistance to reduce disparities in local government capacity and performance; and (iii) to facilitate the creation of a nationally available group of professional local government managers. With regards to the North the project will support the recruitment process, including advertising o f vacancies in national print media, facilitating the District Service Commissions during the recruitment process, and inducting new officials.
16. The project will support the following areas:
2.4.1 Capacity Building Grants (US$14.3 million - GoU). The capacity building grants to LGs aims to: (i) strengthen the newly-created districts; (ii) cascade capacity to LLGs which are the lowest service delivery points under decentralization with a view to promote a sense of ownership and accountability among beneficiaries and yield economies of scale; (iii) strengthen LG capacity to mainstream environment into the development plans; (iv) provide special attention to the needs o f weakened LG with multi-skilling and other interventions; (v) career development throughout HLGs and LLGs to further build numbers of staff in LG with key qualifications; (vi) targeted and focused skills development though use of GTM; and (vii) discretionary capacity building to cater to very specific and locally relevant needs.
2.4.2 Certijcation andprofessionalization of LG sta#(US$1.2 million - IDA). The project will support certification and professionalization of LG staff by: (i) developing a group o f nationally available professional local government managers from selected cadres (Deputy CAOs, TCs of municipalities and city councils and procurement) that are not covered by existing professional bodies; and (ii) using the GTMs to support skills development in HLGs and LLG, councilors and statutory committees, building capacity o f LGs to mainstream environment issues in development plans and creating incentives and motivation for knowledge and skills retention in the medium to long term.
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2.4.3 The project will provide institutional support to MoLG through: (i) capacity building for MoLG staff to respond effectively to policy and legal reforms, increasing demand for services and expanding work load due to expansion o f LGs; (ii) re-orientation o f ministries, departments and agencies to fully appreciate their roles in decentralization; (iii) supply driven capacity building to LGs; (iv) supporting thematic research in local governance; and (v) the capacity building unit operations and investments.
Institutional support to MoLG (US$l.O million - IDA).
Component 3: Institutional and Policy Support (TJS$2.7 million - IDA)
17. This component will support the MoLG in the implementation, monitoring, evaluation and audits o f the Project and the transfer program supported by Component 2, while building the capacity of MoLG to enhance its ability to oversee the implementation o f the newly-introduced sectoral reforms and the coordination within a multi-sectoral framework. In addition to providing support to the management and coordination o f activities being carried out under the project, this component will provide support to: (i) strengthen the environmental and social management capacity and monitoring through the provision o f training; (ii) project M&E for measuring KPIs; (iii) MTR, project audit, procurement audit, technical studies, and project evaluation (ICR); and (iv) the implementation o f the Good Governance and Anti Corruption Strategy (GGACS) for Local Governments in Uganda.
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Annex 5: Project Costs
APL Indicative Financing Plan
IDA 1 % I G O U I % I I Total
UGANDA: Local Government Management and Services Delivery APL 1 Project
Estimated Implementation Period (Bank FY) Commitment Date I Closing Date
Local Foreign Total U S $million U S $million U S $million Project Cost By Component
Strengthening Public Financial Management Systems 12.3 5.9 18.2 Support to the Local Government Sector Investment Plan 169.6 2.4 172.0 Institutional and Policy Support 1.6 0.9 2.5
APL1 Credit APL2
Total Baseline Cost Physical Contingencies Price Contingencies
US$ m US$ m US$ m 55 32 143.7 41 198.7 01/31/2008 1213 11201 1
115 68 206.3 59 321.3 01/01/2012 1213 1//20 1 7
183.5 9.2 192.7 2.4 1 .o 3.4
Credit Total
2.1 0.5 2.6 Total Project Costs' 188.0 10.7 198.7
170 100 350.0 100 520.0
Interest during cbnstruction Front-end Fee
Total Financing Required 188.0 10.7 198.7
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Annex 6: Implementation Arrangements
UGANDA: Local Government Management and Services Delivery APL 1 Project
1. Implementation Deriod. The Project will be executed over a period of about four years, from January 3 1,2008 to December 3 1, 201 1. The full APL has two phases - Phase 1 to be implemented over four years and Phase I1 over 6 years. This PAD focuses on Phase I project.
2. Proiect coordination and implementation arrangements. The institutional arrangements for project implementation for Phase 1 (APL) wil l be as per the government structure. At the central level, the MoLG, MoFPED, and the Office of the Auditor General shall be responsible for ensuring that project resources are budgeted for and disbursed within the national MTEF, and that project accounts are audited.
3. Proiect Management. MoLG will have overall responsibility for implementing and accounting for project funds and coordinating activities under Components 2 and 3. MoFPED and MoLG will be responsible for implementing and accounting for specified portions of Component 1 o f the project.
4. In l ine with the efforts to mainstream project activities into the government structures, the Task Manager and the component and sub-component managers will be civil service staff in the various departments in MoLG and MoFPED. These managers will be assisted in their project related duties by project support teams. These teams will provide necessary technical support during Phase 1 o f LGMSD, and will also act as an interface with the IDA to ensure that LGMSD is implemented as per the IDNGoU protocol agreement.
Implementation Support.
5 . Coordination Mechanism (Sector Working Groups). LGMSD has been designed as a multi- sector operation and a vehicle through which a dialogue regarding LGs and service delivery will take place. This calls for coordination of the program at two levels - national (service delivery issues) and project level (technical and day-to-day project implementation issues). The Project i s intended to complement the policy discussions supported by the Poverty Reduction Strategy Credits (PRSCs). At the national level, the policy issues which arise during the implementation of the LGMSD will be coordinated within the wider context of emerging policy issues emerging from the sectors which have impacts on LGs and service delivery (through sector working groups), the JARD process, the DSWGBSM SWG, the PRSC which al l feed into the annual PEAP implementation review. This will ensure coordination and harmonization o f policy proposals which affect the implementation of the LGMSD specifically and the LGs sector generally. At the LGMSD project implementation level, it i s critical to ensure strong coordination between the MoLG, MoFPED and the sector ministries. The inter-ministerial committee appointed for the design o f the LGMSD will need to be institutionalized and its scope o f work extended to include project implementation to ensure constant dialogue and coordination regarding sector issues and their impacts on LGs and service delivery.
6. costs, and GoU will finance 72%.
Financing. The total Project cost i s US$198.7 million of which IDA will finance 28% of the total
7. M&E procedures and reports are described in Section C.3, Monitoring and Evaluation o f OutcomesResults. Under component 3, support will be provided to MOLG to rationalize and harmonize sectoral management information communication technology (ICT) systems (LOGICS Plus, IFMIS, NIMES, EMIS, etc.).
Monitoring and Evaluation.
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8. Proiect Implementation Plan (PIP). A detailed draft PIP has been prepared by MOLG, and will be updated from time to time in agreement with IDA to guide execution o f each component and the implementation o f the Project as a whole. The PIP will set forth all operational and procedural steps regarding reviews and approvals of specific activities, flow o f information, detailed description o f the functions o f Project management and implementing bodies, procurement and financial management arrangements, reporting requirements, and manual amendment procedures.
9. Procurement Arrangements. Al l goods works and services financed under the Credit would be procured in accordance with appropriate IDA procurement Guidelines. IDA’S standard bidding document for goods and works and Standard Request for Proposals for Consultants as well as standard evaluation forms will be used throughout project implementation. Staff with relevant experience in Bank procurement procedures will be assigned to the project. Under MoFPED, procurement shall be conducted and coordinated by a Project Support Team, while for MoLG Procurement shall be mainstreamed into the Ministry and shall be conducted by the MoLG Procurement and Disposal Unit. Details o f the procedures will be provided in the Project Implementation Plan.
10. Financial Management Arrangements. Financial Management services for LGMSD will be provided by MoFPED and MoLG. Both ministries will deploy a full project financial management team to undertake the financial management responsibilities required during implementation of the project, in terms of an agreed Memorandum o f Financial Management Services (to be agreed before project effectiveness) and further supported by a Financial Management (FM) procedure manual, which needs to specify in sufficient detail the operational procedures, controls and sanctions to ensure effective and efficient FM for LGMSD. The FM staffing requirement will be revisited as the need arises.
11. CDD Grants. Each community will be entitled to a one time allocation o f US$2,500 for the duration o f the project. Project identifications will be done by communities and the sub-county will carry both the desk and field appraisals. Once the community has met the access criteria, and their project i s approved, the grants are then released by the sub-county to the community to procure the works, goods and services. Receipts will be submitted by the community to the sub-county accountant for record and future audit o f the sub-county account as an entity including the CCD grant. The implementation arrangements and access criteria for the CDD grants are detailed in the CDD Operational Manual which forms an annex of the PIP.
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Annex 7: Financial Management and Disbursement Arrangements
UGANDA: Local Government Management and Services Delivery APL 1 Project
Summary of the Financial Management Assessment
1. The objective of these Financial Management Assessments i s to determine whether the entities to be responsible for the implementation of the Local Government Management and Service Delivery Project (LGMSD) have acceptable financial management arrangements as required by the Bank’s policies and procedures, including system of accounting, reporting, auditing and internal controls. Each Implementing Entity, that is, the Ministry of Local Government (MoLG) and the Ministry o f Finance, Planning and Economic Development (MoFPED), will host a Project Support Team which will be the main Budget Management and Accounting Center (BMAC) o f the LGMSD. Aspects o f local government financial management are also addressed and weaknesses in capacity are highlighted in the report.
2. To carry out the financial management assessments o f the MoLG and MoFPED, the World Bank’s financial management team visited the implementing entities in May 2007. The assessments were conducted based on the Financial Management Practices Manual issued by the Financial Management Board on November 3,2005 (see appendices for each assessment).
3. The assessments concluded that the financial management arrangements in place for the MoLG and for the MoFPED meet the Bank’s minimum requirements under OPE3P10.02 and are adequate to provide, with reasonable assurance, accurate and timely information on the status o f the project as required by IDA to manage and monitor the implementation o f the LGMSD. A key measure to be taken prior to the Financing effectiveness i s to update the financial management tools such as the financial management manual and the accounting software in the MoLG and the MoFPED.
4. The overall residual control risk i s considered low because (i) the PSTMoLG and the PSTMoFPED are emerging respectively from the Project Coordination Unit (PCU) of the LGDP I1 and that o f the EFMP 11, which both have handled FM responsibilities of Bank financed projects; (ii) accordingly, these PSTs have inherited FM arrangements in place; and (iii) measures are developed to address the moderate shortcomings identified by the present financial assessment.
5. On the basis that the FM and audit arrangements found in place at the MoLG and the MoFPED are adequate and meet the Bank’s minimum requirements under OPE3P10.02, the following measures are recommended to scale-up the two FM systems:
PSTMoLG: 0
0
0
0
0
0
Train the Finance Officer and the Accounts Assistant on Bank disbursement procedures; Train FM staff on FM CDD arrangements; Develop and implement Performance Evaluation Procedures; Revisit and up-date the existing FM Manual to the LGMSD by including FM CDD procedures and the GoU’ s chart o f accounts; Customize the GoU’ s chart of accounts in the existing accounting software; Open one Designated Account denominated in United States Dollars currency and one operational account denominated in Uganda Shillings currency in the Bank of Uganda (BoU); and Adopt the report-based disbursement method. 0
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PSTMoFPED 0
0
0
0
Train FM staff on the Bank’s report-based disbursement in order to be adopted; Develop and implement Performance Evaluation Procedures; Revisit and update the existing FM Manual for the LGMSD by including format o f Interim Un-Audited Financial Reports (IFRs); Customize the format o f IFRs in the accounting software in place; Ensure the ministry’s Internal Audit Unit conducts internal audit reviews for the project on a regular basis; and Open one Designated Account denominated in United States Dollars currency and one operational account denominated in Uganda Shillings currency in the Bank o f Uganda (BoU).
Country issues
6. The Public Expenditure and Financial Accountability (PEFA) Report of November 2005 (issued in July 2006) and Country Financial Accountability Assessment (CFAA) carried out by IDA in 2004 shows that Government o f Uganda has made substantial progress in improving its Public Financial Management Systems since the last CFAA undertaken in 2001. The fiduciary risks associated with poor budget formulation and budget preparation processes have been reduced. In terms o f appropriate legislation and regulatory frameworks, significant progress has been made to ensure that the risk associated with the lack o f clear rules and regulations has been reduced. Also more useful information i s provided in the Report and Opinion of the Auditor General to Parliament on the Public Accounts o f the Republic o f Uganda which are up to date. However, risks remain in terms of: (i) Quality and timeliness o f in-year budget reports since budget reports only include information on budget releases and not actual expenditures; (ii) Stock and monitoring o f expenditure payment arrears; (iii) Effectiveness o f internal audit; (iv) Oversight o f aggregate fiscal risk from other public sector entities; (v) Effectiveness o f measures for taxpayer registration and tax assessment; (vi) Legislative scrutiny of external audit reports; (vii) Effectiveness of payroll controls; and (viii) Effectiveness in collection of tax payments. Government o f Uganda (GoU) has prepared a Financial Management Accountability Program (FINMAP) to address the weaknesses in its Public Financial Management system. The FINMAP i s supported by a number o f development partners including the World Bank that form the Public Financial Management Donor Group.
Financial Management in Local Governments
7. The Local Governments (Financial and Accounting) Regulations, 2007 under Section 88 sets out the requirement for Local Governments to maintain proper books of accounts and to produce statements o f final accounts within three months o f the end o f the financial year in accordance with the Public Finance and Accountability Act, 2003. The regulations also mention that these accounts shall be audited by the Auditor General or someone appointed by him or her in accordance with the Local Government Act, CAP 243. The Auditor General reports to the Parliament, Line Ministers, the Minister of Finance, the Local Government to which the audit relates, the Local Government Public Accounts Committee, the Local Government Finance Commission, the Inspector General o f Government and the Resident District Commissioner.
8. The successful implementation o f the project will require financial management mechanisms that hold local governments accountable for project transactions. The basis for these accountability mechanisms i s laid down in the Local Governments (Financial and Accounting) Regulations, 2007. These shall be followed when Local Governments account for funds under components 2 o f the project.
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9.
(0
(ii)
(iii)
10.
Other aspects o f LG financial management are as follows:
Accounting and bookkeeping: The Local Governments (Financial and Accounting) Regulations, 2007 (LGFAR) under Section 59 states that each local government council shall maintain the following books of accounts: Cash book; Journal; General Ledger and subsidiary ledgers; Abstracts; Asset registers; and a Vote Book. Subsidiary ledgers will be maintained for LGMSD transactions.
Local Government Public Accounts Committees (LG PACs): Section 16 o f the LGFAR states that the LG PACs for each HLG shall examine reports o f the Auditor General, the head o f internal audit and any other reports o f commissions o f inquiry in accordance with Section 88 o f the Local Government Act, CAP 243. The LG PAC prepares a report and submits it to the Council and to the Minister o f Local Government who lays the report before Parliament. It i s the responsibility of the Chairperson o f the Council and the Chief Administrative Officer or Town Clerk to implement the recommendations of the PAC.
The Parliamentary Local Government Accounts Committee: The Local Government Accounts Committee was created by the Parliament in July 2001. The committee examines the reports o f the Local Government Public Accounts Committee. The Committee also considers the Auditor General’s report in relation to the Local Government Public Accounts Committee reports laid before Parliament by the Minister of Local Government. The Committee’s report i s presented to Parliament for debate twice a year. The creation o f the committee has strengthened the evaluation process o f the audit reports.
The sections in this report that describe the financial management arrangements for LGMSD will also detail the local government arrangements that will relate to component 2 o f the project.
Summary of Risk Analysis
1 1. The objectives o f the project’s financial management system are: (i) to ensure that funds are used only for their intended purposes in an efficient and economical way while implementing agreed activities; (ii) to enable the preparation of accurate and timely financial reports; (iii) to ensure that funds are properly managed and flow smoothly, adequately, regularly and predictably to implementing agencies; (iv) to enable project management to monitor the efficient implementation of the project; and (v) to safeguard the project assets and resources.
Furthermore, the following are necessary features o f a strong financial management system:
Project Support Teams (PSTs) should have an adequate number and mix of skilled and experienced staff;
Internal control systems should ensure the conduct of an orderly and efficient payment and procurement process, and proper recording and safeguarding of assets and resources;
Accounting systems should support the project’s requests for funding and meet i t s reporting obligations to fund providers including Government of Uganda, IDA, other donors, and local communities;
The system should be capable o f providing financial data to measure performance when linked to the output o f the project; and
An independent, qualified auditor should be gppointed to review the Project’s financial statements and internal controls.
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13. and provides a basis for determining how management should mitigate these risks.
The table below identifies the key risks that management may face in achieving these objectives
Risk Rating at PCN Stage M
M
M
Risk rating
Country level
Remarks Conditions Risk Mitigating Yrn Measures
Incorporated into Project Design
Risks remain in terms o f N The Government of enforcement o f Uganda has come up procurement and payroll with a strategy to rules and procedures; mitigate these country completeness o f data on level issues, by debt; effective designing a Financial independent oversight, Management and and timeliness and Accountability Project effectiveness of (FINMAP) whose legislative and public scrutiny. address the issues
objective will to
arising out of 2005 PEFA report and 2004 CFAA action plan.
Both MoFPED and N The capacity o f the MoLG have a satisfactory legal and institutional framework and their PFM systems are functioning reasonably well. However, MoLG Inspectorate Department needs to be strengthened in order to monitor the utilization of the CDD
Inspectorate Department of MoLG i s expected to be strengthened through the restructuring of the ministry which has already been approved by Ministry of Public Service. This will enhance the monitoring of the
involved in the LGMSD’s implementation and their Project Support Teams have previous FM experience in implementation of similar Bank financed projects. The challenge will be to ensure that grant funds are received by the Communities are utilized for purposes intended and accountabilities done in a timely manner.
I grants. I CDD grants.
Residual Risk
I
L
L
L
M
45
Risk
Control Risk Budgeting
Accounting
Internal Controls
Funds Flow
Risk rating
M
L
M
M
M
Risk Rating at PCN Stage
N/A
N/A
N/A
N/A
Remarks
At the levels o f both Ministries, budget preparation i s clearly defined, related variances are authorized, monitored and information i s used to make mid course corrections. MoFPED and MoLG PSTs have adequate staff to account for LGMSD accounts. Both o f the institutions have accounting software but their charts o f accounts w i l l need to be updated in order to prepare the accounts for LGMSD. Approval and authorization controls are documented and generally followed in both ministries, with some exceptions at the level o f PST/MoLG. (Absence o f assets Assistant and o f approvals o f bank and cash reconciliation statements by the Program accountant.). Internal audit function i s effective and performs ex-post audits, but needs some moderate improvements at the MoFPED. Fund flow arrangements are simple and functioning reasonably
Conditions Y/N
Y
N
Risk Mitigating Measures Incorporated into Project Design review o f periodic reports - Funds w i l l be made available for monitoring and evaluating the implementation o f project activities.
No measure i s needed.
As a condition o f effectiveness, the chart o f accounts for PST/MoLG and PST/MoFPED w i l l need to be updated in order to prepare the accounts for LGMSD.
Both FM manuals at M o L G and MoFPED need to be revisited and updated for the LGMSD. This w i l l be a condition o f effectiveness.
Ensure MoFPED Internal Audit Unit conducts i t s function in regard to the LGMSD operations.
Bank o f Uganda w i l l be computerizing i ts banking system and
Residual Risk
L
L
~~
L
L
L
46
Risk
Financial Reporting
Auditing
Risk rating
M
S
Risk Rating at PCN Stage
NIA
NIA
Remarks
well. In general, the BoU’s service standards are compliant with related needs of projects, but repetitive errors on some bank statements have been noted.
Staff in PSTMoFPED will require training in report based method o f disbursement in order to ensure funds are efficiently got from the Bank. - .
In both Units, FM reporting i s well established and compilation o f accounting information i s carried out through their respective software. However, formats o f the interim un-audited accounts will need to be prepared by the implementing units and agreed with the Bank.
Districts will be sending quarterly reports that wil l report on the expenditures for the CDD grants. Audits o f Bank’s finded projects are conducted by the Auditor General of Uganda according to acceptable auditing standards as per acceptable terms o f reference. There i s no risk in conducting the audits for the implementing units.
However, audits o f the sub-counties where the CDD grants will be included i s still a
Conditions Y/N
Y
Y
Risk Mitigating Measures Incorporated into Project Design this wil l address the issue o f errors in the bank statements.
PSTMoFPED staff wil l be trained in report based method of disbursement.
The appropriate format for Interim Un- Audited Financial Reports (IFRs) was prepared and agreed with the Bank during negotiations.
The IFRs will be included in FM Manual of the PSTMoFPED and PSTMoLG. I t wil l be also customized in the respective software. A l l the accountants wil l be trained in preparing IFRs
Under the FINMAP, the Office o f the Auditor General i s building its capacity to audit sub-county projects which should address this risk. A review on implementation of the CDD grants wil l be carried out during the mid-term review to ensure that the finds were received by the Communities and were used for
Residual Risk
L
M
47
Risk
Overall FM risk rating
Strengths
Risk Risk Remarks Conditions Risk Mitigating Residual rating Rating Y/N Measures Risk
at PCN Incorporated into Stage Project Design
challenge for the Auditor General and may not be done in a timely manner. mainstreamed in
purposes intended. In addition, a monitoring system will be
MoLG. M L
14. well. satisfactory.
Most o f the FM arrangements in PSTMoLG and PSTMoFPED are adequate and functioning The legal and institutional framework of their respective entity (MoLG and MoFPED) i s
Actions 1. Agreement on IFR format for MoFPED and MoLG (negotiation condition) 2. Update FM manuals
Weaknesses
Deadline Responsibility By Negotiation MoFPED, MoLG and IDA
Before effectiveness MoFPED and MoLG
15. The weak areas that need to be addressed are training staff in report based disbursement especially in PSTMoFPED, updating financial management manuals and updating the chart of accounts for the accounting software to account for LGMSD funds for both implementing units. These will be mitigated as documented in the risk and mitigation table above.
(effectiveness condition) 3, Update customization o f accounting
16. In regard to the CDD Grants, the challenge of the Auditor General’s Office auditing the LLGs (sub-counties) where most o f the CDD Grants accounts will be included needs to be addressed and will be mitigated as documented in the risk and mitigation table above.
Before effectiveness MoFPED and MoLG
Financial Management Actions plan
software (effectiveness condition)
PSTMoLG and PSTmoFPED as Budget Management and Accounting Centers (BMACs) o f the LGMSD
17. The financial management o f the LGMSD will be under the responsibility of PSTMoLG and PST/MoFPED, respectively, for Local Government related components and PFM Reform components mainly related to the rol l out o f the IFMIS. Both PSTs will be assigned to carry out FM duties of the LGMSD. They will monitor the disbursement of funds, as well as the withdrawals and direct payments applications; collect and control invoices; manage the project’s respective designated accounts; keep the books o f accounts; prepare and produce quarterly Interim Un-Audited Financial Reports (IFR); and make
48
the necessary arrangements for the annual audit o f all accounts. They will be required to make operational their respective financial management and accounting system, using the up-dated appropriate accounting software, as well as the updated FM manual and the GoU’s chart o f accounts including the format, content and periodicity o f the various financial statements to be produced.
Staffing Arrangements
18. Both PSTs are already well-staffed with regard to FM ski l ls and profile. Most o f the staff are qualified and experienced in Bank project financial management. The PSTMoLG i s composed o f the Program Coordinator, Administrative Officer, M& E Specialist, Infrastructure Development Specialist, Environment Specialist, the Program Finance Manager, and Accounts Assistant. The PSThloFPED i s staffed with the Program Coordinator, the Program Finance Manager, one Assistant Accountant, two Accounts Assistants and one Store Assistant. Nevertheless, segregation o f duties about assets management i s not followed by the PSTMoLG and, for both PST; there i s no link between the results o f current performance evaluation and the annual training schedule. In both ministries, there are Internal Auditors assigned to ensure respectively pre audit reviews and post audit reviews o f expenditures o f LGMSD. Staff in PSTMoFPED will be provided with practical training and guidance in how to prepare report based disbursements by the Country Financial Management Specialist.
19. Staff training in World Bank Financial Management and Disbursement Guidelines w i l l be done regularly. Training could be conducted mainly through the World Bank’s Africa regional training institutions or at the World Bank Country Office.
20. For Local Governments (LGs), Article 188 o f the Constitution stipulates that the Chief Administrative Officer (CAO) shall be the Chief Accounting Officer for the district. The Finance Department o f each LG i s headed by a Chief Finance Officer (CFO). The CFO reports to the CAO for all financial transactions and accounts in the LG, including those financed under the project. A sub- accountant in each sub-county i s responsible for managing the financial transactions o f a sub-county. In an effort to equip LG accounts and audit staff with up-to-date ski l ls in accounting and financial management, many have been enrolled for a course sponsored by the MOFPEDMoLG which wil l enable them to obtain professional or technical accounting qualifications.
Budgeting Arrangements
21. As a current practice in place at both ministries, budget preparation process and i t s monitoring will be clearly defined in the FM Manuals o f LGMSD. Physical and financial targets will be laid down. Local Governments will prepare their budgets in accordance with Part I11 on Budgeting o f the Local Governments (Financial and Accounting) Regulations, 2007.
Accounting Policies and Procedures
22. As a condition o f effectiveness, both the PSTMoLG and the PSTMoFPED will have to update existing Financial Management Manuals (FMMs) given that they have implemented the Bank’s projects before and prepare a LGMSD financial management that will have to be approved by the Bank.
23. The FMM will describe the accounting system (policies and procedures): the major transaction cycles o f the project; funds f low processes; the accounting records, supporting documents, computer f i les and specific accounts in the financial statements involved in the processing o f transactions; the l i s t o f accounting codes used to group transactions (chart o f accounts); the accounting processes from the initiation o f a transaction to i t s inclusion in the financial statements; authorization procedures for transactions; the financial reporting process used to prepare the financial statements and interim un-
49
audited financial reports, including significant accounting estimates and disclosures; financial and accounting policies for the Project; budgeting procedures; financial forecasting procedures; procurement and contract administration monitoring procedures; procedures undertaken for the replenishment o f the Designated Account; and auditing arrangements.
24. The Local Government accounting policies and procedures are documented in the Local Governments (Financial and Accounting) Regulations, 2007. The regulations describe budgeting, revenue, payments, accounting controls, treasury management, asset management, risk management, offence and penalties arrangements in local governments were the CDD Grants will be implemented.
Accounting Software
25. Both the PST/MoLG and PST/MoFPED have accounting software to account for the funds o f LGMSD and the staff are well versed in using the accounting software. However, the existing chart of accounts will need to be updated and agreed with the Bank in order to ensure funds for LGMSD can be appropriately accounted for and un-audited interim financial reports can be prepared. This will be a condition o f effectiveness.
26. At Local Government level, the Integrated Financial Management System (IFMIS) has been rolled out to 9 districts and municipalities. Plans are underway under this project to roll it out to higher local governments (districts, municipalities and town councils) while sub-counties will continue to use manual systems of accounting. However, despite these plans to roll out the IFMIS in local governments, most o f them especially the districts already have stand alone o f f the shelf accounting softwares in place.
Procurement Arrangements
27. Procurement arrangements for the project will be assessed by the Bank’s Procurement Specialist. However, there will be collaboration with the Bank’s team when conducting project supervision and developing terms o f reference for audits.
Internal auditing
28. Internal auditors appointed by each Ministry are handling tasks such as pre audit reviews and post-audit reviews o f expenditures for both MoLG and MoFPED and will intervene in the LGMSD. The internal auditors have internal audit manuals that emphasize risk based approach in conducting their audits. In addition, plans are underway to ensure each ministry reports to i t s sector audit committee which will enhance the independence o f the internal audit unit given that they will submit their reports to the audit committee as opposed to the accounting officer o f the ministry.
29. At Local Government level, each district has an internal audit unit whose duties are documented in the Local Governments (Financial and Accounting) Regulations, 2007. MoLG has also developed an Internal Audit Manual for the LGs that will emphasize a risk based approach to internal audit work. The head of internal audit submits hidher report to the Local Government Public Accounts Committees for action to be taken. However, due to the weak capacity o f internal audit in the local governments, plans are underway to train them in order to ensure they comply with the new internal audit manual requirements and also to link them up with the Institute of Internal Auditors - Uganda Chapter in order to enhance their skills. A number o f internal auditors are also undertaking professional accounting courses sponsored through projects such as LGDP I & I1 and Government resources as well. In regard to the Local Government Public Accounts Committees, their capacities are weak but under the LGSIP, MoLG plans to strengthen their capacity which will make them more effective in monitoring public expenditure.
50
Funds Flows Arrangements
1
2
Bank accounts for the project
Account Signatories (MoLG)
Designated Account Permanent Secretary MoLG; Project Coordinator; Program Finance Manager.
Operations Account Permanent Secretary MoLG; Project Coordinator; Program Finance Manager.
30. PSTMoLG and PSTMoFPED for the purposes o f implementing the project:
The following bank accounts will be maintained for LGMSD by each implementing unit, that is,
1
2
Designated Account: Denominated in United States Dollars (USD), disbursements from the IDA Credit will be deposited on this account.
Operations Account: This will be denominated in Uganda Shillings (Ushs). It wil l receive funds from the Designated Account to be utilized to pay eligible expenses in Uganda Shillings.
0
Designated Account
Operations Account
31. Agreement o f LGMSD.
These bank accounts shall be opened at Bank o f Uganda in accordance with the Financing
32. Local Governments receiving CDD grants shall establish a separate bank account for the project in which wi l l be deposited funds from the Government’s Consolidated Fund to be used exclusively for project activities in accordance with Local Governments (Financial and Accounting) Regulations, 2007.
33. The account signatories will have to be documented in the Financial Management Manuals for both PSTMoLG and PSTMoFPED. However, for both o f the accounts, the cheques wil l be signed by three persons that will include:
Component handled by MoFPED
I I Account 1 Signatories (M~FPED~ I Under Secretary MoFPED; Project Coordinator; Program Finance Manager. Under Secretary MoFPED; Project Coordinator; Program Finance Manager.
51
34. In the case o f MoFPED, the Under Secretary may assign the Project Coordinator to sign on hidher behalf. In case this assignment i s to be done, a written communication to this effect should be sent to the Country Director.
35. GoUMoFPED o f the withdrawal applications received from the PSTMoLG and PSTMoFPED.
All payments by IDA to the designated accounts will be done following the approval by
36. accordance with the Uganda Country Financing Parameters.
There will be no counterpart funding for the project. IDA funds will be utilized 100% in
Flow of Funds
37.
rn
rn
rn
38.
rn
rn
Funds flow arrangements for the project are as follows:
PSTMoLG and PSTMoFPED will prepare a six monthly cash flow forecast based on the work plan and submit a quarterly Withdrawal Application under the report based method o f disbursement upon effectiveness. Subsequent applications will be made on a quarterly basis following the calendar quarterly period ends to IDA within 45 days after the end o f the quarter.
IDA will make an advance disbursement from the proceeds of the Credit based on the cash flow forecast by depositing into a Borrower-operated Designated Accounts o f PSTMoLG and PSTMoFPED held at Bank o f Uganda denominated in U S Dollars. Eligible expenditures can be paid from the designated special account if denominated in foreign currency.
Funds from the Designated Accounts of PSTMoLG and PSTMoFPED can be transferred to the operations accounts for PSThloLG and PSTMoFPED respectively in order to pay eligible expenditure denominated in Uganda Shillings.
In regard to CDD Grants, the funds flow arrangements will be as follows:
CDD grants will be disbursed on a quarterly basis from the Designated Account of PSTMoLG to the GoU Consolidated Fund account. Approval o f releases will be based on the satisfaction o f agreed criteria, documented under the disbursement o f CDD grants section o f this annex, and submission o f acceptable documentation for previous releases.
Releases from the Consolidated Fund will follow requests from the MoLG to the MoFPED and will be made on a quarterly basis. Approval o f releases by the MOLG will be based on the satisfaction of certain criteria, documented under the disbursement of CDD grants section o f this annex, and submission o f acceptable documentation for previous releases. The funds from the Consolidated Fund will be deposited on the Government Grants Account through the MoFPED Treasury Department either through Electronic Funds Transfer, bank draft or check.
The Government Grants Account i s managed by the district/municipalities and i s a holding account for collection of all government grants to a district. Funds are transferred fiom this account to the District General Fund account and further to the District LGMSD Accounts for the CDD grants. Funds destined for sub-counties are transferred from the District General Fund account to the Sub-county General Fund account before their final destination, the Sub-county LGMSD accounts.
52
LGMSD FUNDS FLOW MECHANISM
MoFPED MoLG Designated Designated - -
account in USD account in USD
World Bank IDA Funding
GoU Consolidated Fund (includes LDG,
MoFPED Operations
General Fund LGMSD Accounts
MoLG Operations v
Disbursement Arrangements
39. Both PSTMoLG and PSTMoFPED have established effective financial management and accounting systems, which will facilitate the introduction o f report based method o f disbursements through submission of un-audited Interim Financial Reports (IFRs) to the Bank. The IFRs will be submitted for disbursement on a quarterly basis within 45 days after the end of the quarter. Another acceptable method of withdrawing funds from the Credit i s the direct payment method, involving direct payments from the Credit to a third party for works, goods and services upon the Borrower’s request.
53
Payments may also be made to Bank of Uganda for expenditures against IDA special commitments covering Bank of Uganda’s Letter of Credit. IDA’S Disbursement Letter stipulates a minimum application value for direct payment and special commitment procedures.
Category Amount of the Financing Allocated (expressed in US$)
(1) Works for: (a) Part A o f the Project;
(2) Goods, Consultants’ Service including
1,200,000 (b) Part B. 1 (a) and (c) of the Project
audits, training and operating costs for: (a) Part A of the Project; 16,600,000 (b) Parts B. 1 (a), (c), B.2 and C of the Project 15,200,000 (3) CDDGs for Subprojects under Part B.l(b) o f 5,000,000 the Project (4) Unallocated 4,000,000 TOTAL AMOUNT 55,000,000
13,000,000
40. Under the report based method o f disbursement, both PSTMoLG and PSTMoFPED will be expected to submit within six months after effectiveness a six months cash flow forecast based on their respective work plans for LGMSD. IDA will then deposit funds into the Designated Account and these funds will be used by the Borrower for eligible expenditure incurred on the project’s activities. If ineligible expenditures are found to have been made from the Designated or Operations Accounts, the Borrower will be obligated to refund the same. If the Designated Account remains inactive for more than six months, the Borrower may be requested to rehnd to IDA amounts advanced to the Designated Account.
Percentage of Expenditures to be
Financed 100%
100%
100% of the amounts disbursed
4 1. IDA will have the right, as reflected in the Financing Agreement, to suspend disbursement o f the Funds if reporting requirements are not complied with. In order to maintain the report based method o f disbursement we will expect both PSTMoLG and PSTMoFPED to: (a) sustain satisfactory financial management rating during project supervision; (b) submit IFRs consistent with the agreed form and content within 45 days o f the end of each reporting period; and (c) submit the project’s audit report to the Bank by the due date.
Disbursements of CDD Grants
42. IDA funds for the CDD Grants will be disbursed from the Designated Account to the GoU Consolidated Fund Account in Uganda Shillings on a quarterly basis based on the satisfaction o f certain criteria, a financial performance assessment carried out by MoLG and submission of acceptable documentation accounting for previous releases.
43. Funds intended for the CDD Grants will be disbursed by the Bank against fully appraised and approved subprojects drawn from the LGs rolling developments plans and consistent with Schedule 11, Parts 2 through 5 o f the Local Government Act, CAP 243. IDA funds will be disbursed upon receipt o f the first five signed Subproject Agreements between the Lower Local Governments (LLGs) and the qualifying Communities
Disbursement Table
54
Financial Reporting Arrangements
44. Formats of the various periodic financial monitoring reports to be generated from the financial management system will be developed and documented in the Financial Management Manual o f LGMSD. There will be clear linkages between the information in these reports and the Chart o f Accounts. The financial reports will be designed to provide quality and timely information to the project management, financiers and various stakeholders monitoring the project’s performance.
45. and PSTMoFPED:
The following quarterly Interim Financial Reports (IFRs) will be produced by both PSTMoLG
0
0
Sources and Uses o f Funds Uses o f Funds by Project Activity/Component
46. capability to produce the IFRs to the Country Financial Management Specialist.
The formats were defined and agreed during negotiations and the project must demonstrate i ts
47. Both PSTMoLG and PSTMoFPED will also be using the report-based method o f disbursement and therefore will be required to submit the following information in order to support report-based disbursement:
Interim Financial Report (IFR).
. SA Bank Statements. . Special Account (SA) Activity Statement.
Summary Statement of SA Expenditures for Contracts subject to Prior Review. Summary Statement of SA Expenditures not subject to Prior Review.
48, The financial statements should be prepared in accordance with International Public Sector Accounting Standards (which inter alia includes the application o f the cash basis o f recognition o f transactions). The IDA Credit Agreement will require the submission of audited financial statements for LGMSD by both PSTMoLG and PSTMoFPED to the Bank within six months after the year-end.
49.
1.
2.
3.
50.
The LGMSD Financial Statements will comprise of:
A Statement o f Sources and Uses of Funds / Cash Receipts and Payments which recognizes al l cash receipts, cash payments and cash balances controlled by the entity; and separately identifies payments by third parties on behalf o f the entity.
The Accounting Policies Adopted and Explanatory Notes. The explanatory notes should be presented in a systematic manner with items on the Statement o f Cash Receipts and Payments being cross referenced to any related information in the notes. Examples o f th is information include a summary o f fixed assets by category o f assets, and a summary o f SOE Withdrawal Schedule, listing individual withdrawal applications; and
A Management Assertion that Bank funds have been expended in accordance with the intended purposes as specified in the relevant World Bank legal agreement.
Indicative formats o f these statements will be developed in accordance with IDA requirements and agreed with the Country Financial Management Specialist.
5 1. For LGs, the Local Governments (Financial and Accounting) Regulations, 2007 require every local government to produce statements of final accounts within three months from the end o f each
55
financial year in accordance with the Public Finance and Accountability Act, 2003. LG expenditures financed using grants provided under components 2 will be reflected in these financial statements. The Chief Administrative Officer i s required to submit the accounts to the Auditor General. The Local Governments Act further requires that in addition to normal Government Accounting requirements, separate reports shall be made and submitted to donors to account for donor funds in accordance with the relevant agreements. For each quarter, consolidated quarterly financial reports will be prepared by each HLG. These will consolidate the accounts for the LLGs within their area of jurisdiction and their submission to the MoLG will be a prerequisite for the release o f quarterly disbursements to the LGs.
I Audit Report
The Auditor General’s opinion on annual financial statements prepared by each implementing agency (MoLG and MoFPED). Letter to Management prepared by the Auditor General on each implementing agency’s (MoLG and MoFPED) internal control system.
External audit
Due Date
Two (2) reports to be submitted within six months after the end o f each financial year.
Two (2) letters to be submitted within six months after the end o f each financial year.
52. The Auditor General of GoU, in accordance with international auditing standards acceptable to IDA, will conduct an audit of the annual financial statements prepared by PSTMoLG and PSTMoFPED. The Auditor General may sub-contract the external audit to a private audit firm that will submit to him a report for review before issuing the audit report to the Bank. Any firm of auditors subcontracted to carry out the audit should meet IDA’S requirements in terms o f independence, qualifications and experience. The external audit report must be submitted to the Bank within six months after the end of the financial year.
53. The arrangements for the external audit o f the financial statements o f LGMSD should be communicated to IDA through agreed terms o f reference. Appropriate terms of reference for the external auditor must also be developed and agreed before disbursements are made to the project designated accounts. Both the PSTMoLG and PSTMoFPED have managed a number o f IDA projects and none o f the projects has an outstanding audit report. No significant issues have been raised in any o f their audit reports.
54. GoU does not have a policy that allows public disclosure o f audit findings, but Article 41 (1) of the Constitution o f Uganda allows the public to access this information. The Access to Information Bill, No. 7 o f 2004, has been drafted to complement the clause in the constitution and i s currently with Parliament. The media, under the Press and Journalist Act, also has access to information such as audit findings. In addition, the public i s allowed to attend the Public Accounts Committee o f Parliament when it i s addressing audit issues.
55. submission are:
The audit reports that will be required to be submitted by LGMSD and the due dates for
56. Local Governments are also bound by law to prepare financial statements and have them audited by the Auditor General. Grants disbursed to LGs under component 2 will be reflected in the financial statements o f the relevant LG and these will be subjected to audit in accordance with the Local Governments (Financial and Accounting) Regulations, 2007.
56
57. The scope o f the project audit will entail a review o f the project funds, expenditures under components 1 and 3, and a review of the procedures through which grants provided under component 2 are disbursed to the local governments. The expenditure by the LGs financed through the grants i s audited as part of the normal statutory audit o f the financial statements o f the local governments and appropriate assurance will be obtained from these for the purposes o f the project.
58. Although the requirement for the Auditor General to audit the financial statements o f Local Governments including LLGs i s stipulated in the Constitution, the Office o f Auditor General has in the past suffered significant capacity weaknesses that have prevented this constitutional requirement and mandate to be fulfilled, particularly in the case of LLGs (about 900) were most of the CDD activities will be implemented. Under the FINMAP, the Office of the Auditor General i s building i t s capacity to audit LLGs (sub counties) projects which should address this risk. In addition, as a condition during implementation, an annual Financial Management review will be conducted to ensure that funds were received by the Communities and were used for purposes intended.
Credit Conditions
59. For Credit Effectiveness:
a) MoFPEDMoLG to update the existing FM manuals for LGMSD in form and substance satisfactory to the Association.
b) MoFPEDMoLG to update the chart of accounts for the existing accounting softwares to prepare accounts for the LGMSD and interim financial reports in a manner satisfactory to the Association.
Supervision Plan
60. Given the modest level o f the overall control risk, the LGMSD will require in accordance with the Bank’s Financial Management Practices Manual, one financial management supervision per year conducted by the Bank and MoLG. A review o f the CDD grants will be carried out during the mid-term review to confirm that funds were received by the Communities and utilized for purposes intended. The intensity o f supervision could be reassessed based on the evolution of the rating for the overall control risk.
Conclusion of the Financial Management Assessment
61. A description o f the project’s financial management arrangements above indicates that although they satisfy the Bank’s minimum requirements under OP/BP 10.02, there remain improvements to be effected for the system to be adequate to provide, with reasonable assurance, accurate and timely information on the status o f the Project as required by the IDA. The recommended improvements are detailed in the Financial Management Action Plan as well as the risk mitigation measures under the Summary o f Risk Analysis.
57
Appendix 1: Financial Management Capacity Assessment of the Project Support Team at the Ministry of Finance, Planning and Economic Development (MoFPED)
The Project Support Team, which i s the former PCU of the EFMP I1 under the MoFPED, will carry out the financial management tasks and activities regarding resources allocated to the MoFPED o f Uganda to support the implementation o f the LGMSD’ s component 1. This component deals with IDA support to the PFM Reform Program called the FINMAP and Local Government PFM Reform Program.
PST of MoFPED Accounting and Financial Staff
Internal control system
Internal audit arrangements
Reporting, Monitoring and information system
External audit arrangements
Banking arrangements and cash management
Existing FM arrangements 1 Program Finance Manager 1 Assistant Accountant 2 Accounts Assistants 1 Store Assistant Qualified and experienced staff in the Bank-funded project FM Segregation o f duties in place. A FM Manual documenting accounting policies and procedures to be used by LGMSD needs to be prepared and agreed with IDA. Two internal auditors of the MoFPED to ensure pre-audit reviews of expenditures and internal control system reviews, but absence o f related reports on internal control system. Software in place: latest version of Micro-Soft Business Solutions Navision with customization o f the Program Chart o f Accounts in line with that o f the GoU. It includes also the module o f safeguard over assets. But the IFR format i s not customized. FMR are produced on a regular basis. No outstanding audits for previous projects. Require LGMSD audit TOR to be prepared and agreed with IDA. Bank reconciliations are regularly done. PSTMoLG will need to open a Designated and Operations account in Bank o f Uganda.
Recommendations for LGMSD > No more staff i s required; > To carry out training on the
9 To develop and implement report-based disbursement; and
Performance Evaluation Procedures.
Prepare LGMSD FM Manual and submit to IDA for approval.
To set-up an agreement between the Support Management Unit and the Internal Audit Unit to carry out internal audits and to provide internal audit reports on a regular basis. Existing chart o f accounts should be tailored in order to prepare LGMSD accounts and IFRs that will be submitted to IDA.
IFR format prepared and agreed with IDA during negotiations.
Prepare audit TOR and agree with IDA. Will need to communicate request for audit of LGMSD to Auditor General. To open a Designated and Operations Account in Bank o f Uganda and communicate the details including signatories to IDA.
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Appendix 2: Financial Management Capacity Assessment o f the Project Support Team at the Ministry o f Local Government (MoLG)
The Project Support Team which i s the existing PCU of the LGDP I1 o f the MoLG will carry out the financial management tasks and activities regarding resources allocated to the MoLG o f Uganda to support the implementation o f the LGMSD’s component 2 and 3. These components deal with IDA support respectively to the Decentralization Policy strategic Framework (Development Grants and Capacity Building) and to the process o f change management within MoLG and LGs.
Internal control system
Internal audit arrangements
m External audit arrangements
management
Existing FM arrangements 1 Program Finance Manager 1 Finance Officer 1 Accounts Assistant Qualified and experienced staff in the Bank-funded project FM, but to pay attention to the segregation o f duties. Absence of a link between the results o f performance evaluation and training schedule. A FM Manual documenting accounting policies and procedures to be used by LGMSD needs to be prepared and agreed with IDA. One internal auditor of MoLG to ensure post reviews of expenditures and investigations in LGs; has produced various related reports to the permanent Secretary Software in place: Sun System with customization o f the Program Chart o f Accounts; includes the module on safeguard over assets. FMR produced regularly.
No outstanding audits for previous projects. Require LGMSD audit TOR to be prepared and agreed with IDA. Bank reconciliations are regularly done. PSTMoLG will need to open a Designated and Operations 3ccount in Bank o f Uganda.
Recommendations for LGMSD 9 FM Staff to be trained on FM
CDD arrangements. 9 To develop and implement
Performance Evaluation Procedures.
Prepare LGMSD FM Manual and submit to IDA for approval.
No more requirements.
Existing chart of accounts should be tailored in order to prepare LGMSD accounts and IFRs that wil l be submitted to IDA.
IFR format prepared and agreed with IDA during negotiations. Prepare audit TOR and agree with IDA. Will need to - communicate request for audit o f LGMSD to Auditor General. To open a Designated and Operations Account in Bank of Uganda and communicate the details including signatories to [DA.
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Annex 8: Procurement Arrangements
UGANDA: Local Government Management and Services Delivery APL 1 Project
A) General
Applicable Procedures and Guidelines
1. Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004, revised October 2006, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. Each contract to be financed by the Credit wi l l be in the procurement plan to be prepared by the Borrower and agreed with the Bank. The Procurement Plan will indicate for each contract the method for procurement o f goods and works, and method for selection of consultants. The Plan wi l l also indicate the planned and actual for each contract, the need for pre- qualification, estimated costs, prior review requirements, and time frame for key processing activities. The Procurement Plan wil l be updated at least semi-annually or, as required, to reflect the actual implementation progress of each contract against planned benchmarks.
Use of National System
2. A l l contracts following National Competitive Bidding, and other lower procurement procedures (shopping, and selective tender for smaller works contracts) wi l l follow the national public procurement law (the PPDA Act and attendant Regulations and the Local Government Act, CAP 243 and i t s Regulations). These procedures have been reviewed by the Bank and found to be acceptable except for the following provisions which wil l not be applicable under this project.
Allowing bidders only 21 days to submit bids; Invitations to bid for NCB shall be advertised in at least one national newspaper with a wide circulation, at least 30 days prior to the deadline for the submission of bids shall be allowed for al l NCB;
Negotiations with the best evaluated bidder. This practice i s not appropriate, except for consulting services contracts, and for contracts procured through direct contracting;
The merit point system for bid evaluation; This shall not be applied for goods and works contracts procured on basis of competition (ICB, NCB or restricted tender).
Pre-qualifying bidders and then inviting only a few on a rotational basis; For shopping procedures, the Procuring and Disposal Entity (PDE) wil l not be allowed to pre-qualifl suppliers on an annual basis and invite all pre-qualified providers to submit proposals. Shopping wil l be to a few f i r m s (at least three) as per the procedures indicated below;
Direct Contracting for contracts estimated to cost the equivalent o f $1,100 or less. There wil l be no use of the micro-procurement method for each contract estimated to cost the equivalent of $1,100 or less. Micro-procurement i s by definition, Direct Contracting, or Single Source Selection, which should be used on exceptional basis with adequate justification and with the bank's prior approval.
Section 42 of the Local Government Procurement Regulations on Community Procurement which requires procurement to be done by the lowest administrative L G unit shall not apply. Procurement under the CDD Grant shall be conducted fully by the Community and clearances
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shall be by the Community Procurement Management Committees as detailed in the Community Procurement Manual
3. Under the proposed project, procurement under ICB and selection o f consultants using QCBS shall also (in addition to the World Bank guidelines) comply with the national system except where the two conflict. Specifically, the Contracts Committees shall continue to perform their oversight functions at each o f the key procurement stages and contracts shall, as required, be subjected to the Solicitor General’s clearance.
Procedure for Shopping
4. For clarity and removal o f doubt, the following procedures will be followed for shopping. Request for quotations (RFQ) shall be from as many suppliers or contractors as practicable, but from at least three. The RFQ and quotations shall be in writing and the quotations shall be submitted and opened at the same time. The RFQ shall contain all required specifications (and drawings, if needed, in case o f works); standards etc. to enable the supplier or contractor to provide a complete quotation. Invited bidders shall be required to acknowledge receipt o f the RFQ, and copies o f this acknowledgement shall be kept on the respective procurement fi les. Each supplier or contractor from whom a quotation i s requested shall be informed o f the place, time and method o f submission o f quotations, and whether any elements, apart from the charges for the goods or services themselves, such as transportation and insurance charges, customs duties and taxes, are to be included in the quotations or not. Each supplier or contractor may only give one price quotation and may not change this quotation, once the quotations are submitted and opened. No negotiations shall take place with respect to a quotation submitted by the supplier or contractor.
Solicitation Documents to be used
5 . The Bank’s standard bidding documents w i l l be used for procurement under International Competitive Bidding (ICB), and for procurement under National Competitive Bidding (NCB) with appropriate modifications. Alternatively, the standard tender documents for procurements o f Supplies, Works and Non-Consultancy Services prepared and issued by the Public Procurement and Disposal o f Assets Authority (PPDA) may be used for NCB. Where the PPDA documents are used, ONLY the Technical Compliance Selection methodology shall be adopted. The rest o f the methodologies shall not be used, even for NCB, for the procurement o f goods, works and non-consulting services.
6. The Bank’s Standard Request for Proposal document will be used in the selection o f consulting f irms. Short l is ts o f consultants for consulting services contracts estimated to cost less than $200,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines. The PPDA Standard Bidding Document for the Procurement o f Consultancy Services shall not be used.
7. Framework Contracts for common small value supplies will be procured annually so as to enable implementing agencies to place orders for urgently needed supplies at short notice, at a competitive price.
Scope of procurement under the Project
0 Procurement o f Works: Works procured under this project, would include: Site preparation works for IFMIS installation sites, local government offices, staff houses fo r LG staff in Northern Uganda.
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Procurement of Goods: Goods procured under this project would include; software, software licenses, computer hardware and related accessories, vehicles, motorcycles, bicycles, office equipment, office furniture and internet connectivity,
Procurement of non-consulting services: Procurement of non-consulting services will be done using sample SBD for non-consulting services for al l ICB and NCB agreed with or satisfactory to the Bank and for shopping, the solicitation template to be agreed with the bank.
Selection of Consultants: Consulting firms and individual consultants will be selected to provide system integration services, training, definition o f requirements as well as management, technical and implementation support. Consultants will also be used to provide Specialist in Financial, Procurement and Project Management Services, to perform audit of project accounts, to monitor and evaluate outputs and impacts, to assess the progress in meeting PDO, and to provide engineering services in for the site preparation works. Short l is ts of consultants for services estimated to cost less than $200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.
Operational Costs: The Project will finance operating costs of MoFPED and MOLG that relate directly to Project Implementation. The Project’s operating costs will include: fuel and vehicle maintenance for project vehicles, stationery, goods and equipment such as computers, office furniture, communication costs, subsistence allowance for authorized travel, and equipment maintenance.
Community Participation in Procurement
8. Community Procurement shall be carried out for small works and goods. The details o f the procurement arrangements which shall be in line with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004, Revised October 2006, and shall be specified in the CDD Operational Manual and the Community Procurement Manual.
B. Assessment o f the apencies’ capacity to implement procurement and Actions to Mitigate Risk
9. An assessment o f the agencies’ capacity to implement procurement actions for the project was carried out by Howard Centenary in May to June 2007. The assessment reviewed the organizational structures for implementing the project and the interaction between the project’s staff responsible for procurement and the Ministries’ user departments. The details are indicated below for each o f the agencies.
Ministry o f Finance, Planning and Economic Development
10. Procurement activities under MoFPED will be carried out by a Project Support Team (PST) in the Ministry which shall work closely with the Component Managers who are the end users in the Ministry and are civil servants.
11. Assistant. The Ministry i s in the process of hiring 2 additional Procurement Assistants for the unit.
The Procurement Unit i s headed by a Procurement Officer who i s supported by a Procurement
12. The FINMAP has a Program Implementation Manual. The Procurement Arrangements in the manual were reviewed and found to be comprehensive and satisfactory, with the exception of the paragraphs that allow negotiations for goods and works procurement under NCB and ICB. The PST has a
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Contracts Committee that oversees the FINMAP procurement. This committee i s a sub committee o f the Ministry’s Contracts Committee.
13. The Ministry has experience in managing procurement under World Bank funded projects gained from the previous EFMP I1 Project where similar equipment and systems were purchased. Whereas some o f the key staff who previously managed procurement and overall coordination has since left, significant experience s t i l l exists within the user departments and the PST. The Procurement Officer has also attended procurement training on procurement management under bank financing. The PST additionally has a good procurement records and data management system. Considering (i) the experience that still exists within the Ministry and the PST despite the loss o f key staff and (ii) the highly complex procurement to be conducted under the component, the overall risk for the FINMAP component for the proposed project i s rated A V E R A G E .
Risk Management Plan:
1. The Ministry proposes to hire an Integrator as a consultant to support integration and deployment o f the oracle solution as well as quality assurance on the program. The selection of the consultant shall commence in a timely manner to ensure that the firm i s available to provide procurement support for al l major procurements under the project. The team shall be required to include experienced legal and procurement expertise to backstop the PST’s procurement unit in the preparation o f technical specifications, bidding documents, bid evaluation reports, contract negotiations and contract preparation.
2. The FINMAP Implementation manual should be revised to cater to the following by credit effectiveness:
(i) Restriction o f contract negotiations to the selection of consultants. Negotiations under procurement o f goods/works should only be conducted when non-competitive methods are used; and
(ii) Allowing the use o f World Bank Procurement Guidelines for procurements funded by IDA and detailing the procedures to be followed under the specific methods.
3. The Procurement Officers shall attend relevant courses in Project Procurement in GIMPA or ESAMI within twelve (12) months o f Credit Effectiveness.
Ministry of Local Government
14. having responsibility for procurement.
Procurement under the Project i s to be mainstreamed into the Ministry with the Ministry’s PDU
15. MoLG’s Procurement and Disposal Unit (PDU) i s headed by a Principal Procurement Officer (PPO) who i s supported by a Senior Procurement Officer and a Supplies Officer. The Procurement Officers have limited experience with IDA Procurement from the LGDP 11, where their participation i s limited to review o f documents prepared by the LGDP I1 Procurement Specialists. The Procurement Officers have attended procurement training on procurement management under bank financing. The PDU’s current workload i s high, mainly due to the required review o f the LGDP I1 procurements. This should, however, be significantly reduced after closure o f LGDP I1 in December 2007.
16. The Ministry has a poor procurement records and data management system which i s compounded by the lack o f sufficient space and equipment for the storage of procurement records. The records are
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filed by document type rather than by Procurement contracts and there are, therefore, no complete stand alone procurement fi les. There i s no evidence o f sound procurement planning and contract management. The general conclusion i s that staff performance may not be monitored properly, so required procurement tasks may, therefore, not be carried out with due diligence, as a result of which procurement would hold hostage project implementation.
17. Considering (i) the limited experience o f the Procurement Officers in Project Procurement, and (ii) the volume of Procurement to be conducted under the Project by the Ministry, the overall risk for procurement to the Project i s HIGH.
Risk Management Plan
1. The Project Coordinator, in liaison with the Permanent Secretary, shall monitor the Procurement Unit to ensure adherence to the Procurement Plan and the applicable guidelines. This shall include quarterly procurement review meetings to be attended by the project implementing staff. The main purpose o f the quarterly meetings will be to review progress on procurement implementation and direct, in a timely manner actions required to make good any shortcomings on the implementation. The PDU will prepare, for the quarterly meetings, an update o f the procurement plan indicating how each contract on the plan has progressed/will progress and highlighting emerging issues (if any) that require the meetings consideration.
2. A Procurement Specialist with qualifications satisfactory to the World Bank shall be hired to support the PDU in conducting procurement for the project.
3. MoLG shall provide adequate space and equipment for the PDU to enable them to efficiently perform their duties.
4. The PDU staff shall attend relevant refresher courses in Project Procurement in GIMPA or ESAMI within twelve (12) months of Credit Effectiveness.
Local Governments
18. Under the new Local Government Amendment Act, Local Governments are required to have a Contracts Committee (CC) and a Procuring and Disposal Unit. For most o f the districts, the CCs have now been operationalized. In the interim, The Secretary CC i s responsible for conducting procurement until the PDUs are staffed with at least 1 trained Procurement Officer. This process i s expected to be completed by December 2007. The project i s also supporting the professionalization of administrative staff in local governments.
19. Based on reviews carried out by MoLG, the record keeping in LGs has been poor. Improvements were noted in the calendar year 2007 following the Inspection Reports carried out, but generally, the records kept have been inadequate.
20. Procurement and Disposal Units.
The main risk for procurement under LGs i s the misuse of LDG and CBG grants by LGs without
21. In light o f the (i) limited procurement to be done by LGs with each contract not expected to exceed US$60,000 and (ii) the newly applicable Procurement Act and Regulations, the overall risk for procurement for Local Governments i s rated as AVERAGE.
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Risk Management Plan
1. As an eligibility condition, only LGs that have established Procuring and Disposal Units shall be eligible for the LDG. The Procurement Staff shall receive training in Public Procurement from MoLG / PPDA.
2. The Ministry o f Local Government, in conjunction with the PPDA, shall conduct annually, audits o f procurement in LGs. This may be done through the use o f external consultants.
3. The Officers in the PDU are to receive training in procurement as part o f professionalizing procurement staff using the Capacity Building Grant.
Community Participation in Procurement
22. The main risk to community procurement i s elite capture by some members of the community or the private sector and politicians. This risk shall be mitigated by ensuring collective decision making by the Community Management Committees.
23. MoLG shall develop a Community Procurement Manual by Credit Effectiveness. The manual, which shall be subject to review and approval by IDA, shall specify the following as pre-conditions for the release o f funds to a community:
a) Community Management Committees shall be established to make collective decisions on procurement. The collective decision making shall ensure that decisions are not hijacked by individuals.
b) The Community Management Committees shall be trained in procurement and provided with the Community Procurement Manual.
24. The Local Governments shall be responsible for monitoring of community procurement. This shall include verification that the communities are following the agreed Procurement Manual and shall establish the presence o f Community Management Committees. LGs shall however not be responsible for prior review or approval of procurement.
C. Procurement Plans
25. MoLG and MoFPED, at appraisal, developed Procurement Plans for project implementation which provides the basis for the procurement methods, This plan has been agreed between the Borrower and the Project Team on October 26, 2007 and i s available at the Procurement Office in the FINMAP MSU and the MoLG Procurement Unit and PIU. It will also be available in the Project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually or, as required, to reflect the actual project implementation needs and improvements in institutional capacity.
D. Freauencv o f Procurement Suuervision
26. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment o f the Implementing Agency has recommended at least two (2) supervision missions per year to visit the field to carry out post review o f procurement actions.
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ATTACHMENT 1
Details o f the Procurement Arrangement involving international competition
1. Goods and Works and non consulting services.
(a) List o f contract Packages which wil l be procured following ICB and Direct contracting:
1 Ref No.
IFMSIO 7-08/03
IFMSIO 7-08/02
F M S L
0910 1 G/08-
FMSL
09/02 G/08-
MLGI 004/08
MLG/O 06/08
MLG/O 06/08
2 Contract (description)
MoFPED
Procurement o f licenses for: implementation o f 2 new modules on IFMS (Fixed Assets, Inventory) in existing sites & further rollout (Oracle Corp. to be contracted) Procurement o f Computer Hardware, Software & Accessories for; further rollout, upgrade o f the Data centre and deepening o f IFMS in 35 existing sites Implementation of Financial management system in 26 local governments Procurement o f Motor vehicles to support FMS in local governments and FINMAP coordination unit (PST) M O L G Motor Vehicles
Solar Power Systems
Office Furniture for LGs
3 Lot Number
Lot 1 - Licenses for 35 existing sites, Lot 2 - Licenses for further rollout in 34 sites
Lot 1 - Servers, Lot 2 - Computer hardware, Lot 3 - Data links, Lot 4 - Cabling works
Lot 1 - pilot phase in 10 sites, Lot 2 - rollout phase in 16 sites
Lot 1: 2 Station Wagon vehicles, lot 2: 32 Double Cabin Pickups
4 Estimated cost US$ '000s
2,266.50
3.63 8.50
2,802.00
270.00
1,330
1,200
330
5 Procuremen t Method
Direct Contracting
ICB
ICB
ICB
ICB
ICB
ICB
6 Pre-or Post Qualification
Post qualification
Post qualification
Prequalification
Post qualification
Post qualification
Post qualification
Post qualification
7 Review by the Bank
Prior
Post
Prior
Prior
Prior
Prior
Prior
8 Expected Bid Opening Date
06-Aug-08
2 1 -Apr-08
1 3-NOV-08
1 3-NOV-08
15-Jun-08
20-Jun-08
10-Sept-08
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(b) ICB Contracts estimated to cost above US$350,000 for works and US$200,000 for goods per contract, and all direct contracting will be subject to prior review by the Bank. The first three contracts under the extension shall be subject to prior review irrespective o f value
1 Ref:
2. Consulting Services.
2 3 4 5 6 Description o f Assignment Selection Estimated Review Expected
Method Amount in by Bank Proposals US$ '000 (Prior I Submission
(a) List o f Consulting Assignments with short-list o f international f i rms.
Post) MoFPED
Date
ConsIO8- 09/03
ConsI07- 08/02
Implementation o f training QCBS Prior 3 1-Oct-08 program for new modules 1,780.00 (Fixed Assets, Inventory) and further rollout o f IFMS
further rollout in 34 sites IFMS system Integrator - QCBS Prior 07-Jan-08
1,700.00
(b) Consultancy services estimated to cost above US$lOO,OOO per contract and US$50,000 for Individual Consultants, Single Source selection o f consultants (f irms) for assignments estimated to cost above US$5,000 and all staff contracts will be subject to prior review by the Bank.
(c) Short lists composed entirely o f national consultants: Short l is ts o f consultants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.
Thresholds for procurement methods
The Thresholds for procurement methods shown below will be used for procurement methods on the procurement plan.
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Annex 9: Economic and Financial Analysis
UGANDA: Local Government Management and Services Delivery APL 1 Project
A. Local Government Management and Service Delivery Project
1. The proposed project provides phased support for the implementation o f the Government’s PFM Reform Program and the Decentralization Policy Strategic Framework (DPSF) that will require step-by- step policy reform and institutional development. The project i s designed to consolidate and build on the achievements of EFMP 11, LGDP I and I1 while assisting the Government to address outstanding challenges. The project includes a subset o f activities outlined in the Government’s Financial Management and Accountability Project (FINMAP) and the Government’s 1 0-year Local Government Sector Investment Plan (LGSIP). I t also promotes more effective CDD activities by directing more support to the sub-counties and their role in mentoring the parishes.
B. The Economic Evaluation
Component 1 - Support to the Public Financial Management Reform Program (US$ZO.l million)
2. The net present value (NPV) and economic internal rate o f return (ERR) of component I are based on a sample o f local governments and central government agencies which use the recently installed Integrated Financial Management System (IFMIS) financed by the EFMP 11. The economic evaluation o f component I also make use o f the parameters developed for a comprehensive evaluation o f post- construction of EFMP I1 and a sample review o f the investments planned for the proposed project taking the variations in costs and benefits in the nature o f the local government and ministerial agencies.
3. The assessment was undertaken for two local government sites (Lira and Jinja Districts) and two Central Government Sites (Ministry o f Lands and Housing, and Ministry of Agriculture, Animal Industry and Fisheries). The intent i s to implement the IFMIS in 29 central government agencies and 22 local governments (See Table 1, Appendix). In addition, this component will finance a second tier management information system for 30 districts and 40 towns and a third tier information management system for 31 districts and 52 towns. The investments in the second and third t ier information systems will be evaluated, based on the economic study planned to be undertaken during project implementation period.
Actual costs included in NPV and IRR Computations are in 2007prices:
4. Investment costs including a l l one-off costs including site preparation costs, supplier contract (supply, delivery, installation of IFMIS solution), hardware, software, and training costs. Recurrent costs include support and maintenance costs, hardware and/or software upgrades, continuous training, staff/employment costs, and insurance. Other recurrent costs include costs such as replacements o f investments in legacy systems; retraining and transfer of displaced staff were considered sunk costs and therefore left out of the computations.
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Benefits
Overall
Four particular categories of benefits were considered for auantification:
35 5 45 2 53 6 59 6
Opportunity cost of inefficiency on GDP from the payment process i s estimated as the amount o f money a client loses due to elongated delays in the payment system, which money should have been available to create wealth if availed in the right time. Savings from reduction in the wage bill for the accounts units i s estimated as the difference between pre-IFMIS wage bill for accounts staff and the post-IFMIS wage bill for the downsized accounts units-downsized because o f introduction of IFMIS. Productivity gain (number of hours saved each day on part o f IFMIS users at the sites, as a result o f the system’s efficiency vis-a-vis the old system), and Opportunity cost due to reduction in pilferage due to improved receipting system.
Economic Benefits o f the IFMIS
i) Increased aroductivitv on Dart of svstem users due to increased eficiencv of the svstem.
5. Table 1 shows that the payment processes that used to take an average of 35/45 days to clear now take an average of two to five days, hence the system users now have more time, more freedom to handle/deal with other issues that they could not otherwise engage in before IFMIS was introduced. The data in Table 3 i s based on actual data collected for the Post-IFMIS economic evaluation and assumed to be valid for the follow-on project.
Table 1: submission of tax invoice and issuance of check) - district level
Average No. o f days taken to complete the payment process (time between
ii) process time for their wayments
Increased productiviq of sumliers, contractors, service uroviders, etc., due to the shortened
6. Table 2 shows that Clients now get their money in less time, which releases them to create more wealth as opposed to spending a lot o f time (and money) chasing payments at MDAs. They no longer suffer from the previous woes e.g. time lost in chasing payments, antagonism from angry workers due to delayed payments, increased loan costs, family breakdowns, etc.
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iii) Productivity has significantly increased as the skills levels and orientation of System Users have greatlv improved. They (IFMIS users) are now qualified professional accountants as wel l as computer literate and capable o f applying their new skills to other areas that require similar skills. The staffs have also started thinking as information officers, which i s a major leap.
iv) Pilferage v ia the receipt and payment processes has been minimized if not totally eliminated.
v) discounts on large purchases o f IFMIS equipment, stationery, etc.
Given the larger size o f the system, Government will enjoy particular economies o f scale e.g.
vi) Given the success o f the IFMIS implementation in Uganda, several delegations from other countries are coming to study the IFMIS, particularly to benefit f rom Uganda’s experience in the success registered in the implementation o f the IFMIS. They come to Uganda and spend money in the local economy, which also enhances the country’s GDP”. So far, f ive such delegations have been received- f rom Lesotho, Nigeria, Gambia, Ghana, Serbia and Zambia. It i s estimated that the hotel and per diem expenses in Uganda alone may have generated revenues o f US$42,000. This represents about 2% o f the L i ra and Jinja share o f the I F M I S investments.
Other System Benefits (related to cost savings and productivity gains):
Benefits from contributions of calculatinn and printing tasks e.g. improved accuracy in calculating tasks, abil ity to quickly change variables and values in calculation programs, etc. Benefits from contributions to record keeping tasks e.g. abil ity to automatically collect and store data for records, improved security in records storage, improved portability o f records, etc. Benefits from contributions to record searching tasks e.g. faster retrieval o f records, improved ability to create records of records accessed and by whom, etc. Benefits f rom contributions to system restructuring capabiliQ e.g. ability to simultaneously change entire classes o f records, ability to change large files o f data, abil ity to create new files by merging aspects o f other files, etc. Benefits from contributions of analvsis and simulation cauabilitv e.g. ability to aggregate large amounts o f data in various ways useful for planning and decision making, etc. Benefits from contributions to process and resource control e.g. reduction o f need for manpower in process and process control, improved ability to maintain continuous monitoring o f processes and available resources, etc.
Results of Economic Assessment
7. The results o f the NPVs and EIRRs for the four sites studied indicated a positive NPV and high IRR for al l the sites studied (see Table 2), suggesting that the IFMIS project at the four sites i s a net benefit investment. A similar conclusion may be expected to be reached for the rest o f the IFMIS sites. The likelihood o f such outcome i s confirmed for the planned IFMIS for both the local government and the central government subprojects. The detailed evaluation o f both costs and benefits i s available in the project f i le.
l1 Using the UN’s DSA rate o f $200 for Uganda, the total estimated benefit from such visits comes to ($200 times an average o f 5 days times average o f 6 delegates times 7 delegations) = $42,000.
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I Table 2:Cost Benefit Analysis for Four Representative Sites Targeted for I F M I S Further Rollout
ID IRR NPV (Million UShs) Site Nature of Site
I 1 I JinjaMunicipality I Local Government I 58.61 I 12.80% I I 2 I LiraMunicipality I LocalGovermnent 1 2,707.08 1 41.03% I I 3 I MinistryofWaterandEnvironment I CentralGovement I 2,982.53 I 44.33% I
27.35% 1,277.78 National Agricultural Research Organization Central Govt. Agency
Sensitivity Analysis
8. Table 2, Appendix, identifies two particular risk factors that could deliver a negative N P V if the assumptions used turned out t o be inadequate i.e. the assumed level o f pilferage and the opportunity cost o f capital before installation o f the system. Sensitivity analysis on the remainder o f the variables generally suggest that even at the worst case scenarios, for instance, with no growth rates in the economy, NPV remains positive and IRR fairly high, suggesting that the investments are quite profitable.
Conclusions and Recommendations
9. The results o f the evaluation portray a clear picture o f the system’s potential in meeting i t s objectives. The quantitative assessment established that the IFMIS i s a net benefit project. It has a positive N P V and a high IRR. In addition, payment processes that used to take an average o f 35/59 (min/max) days to complete, now takes an average o f two to six days because o f the IFMIS.
C. The Economic Evaluation
Component 2 - Support to the Local Government Support Investment Program (US$118.7 million)
10. The Local Government Development Projects (LGDPI & 11) are discretionary decentralized development budget support to the local governments. Such discretionary development budget support funding has no conditionality with respect to sector allocation at the local level. I t leaves these allocation decisions to be made by local governments through citizen participation according to their priorities. The main requirements are that the decision process should be bottom-up, transparent and participatory. This approach i s different f rom the sector specific conditional grant to local governments. The main difference i s that the later promotes accountability mainly to the sector ministry or special purpose fund providing the conditional grant while the former gives accountability t o the beneficiaries.
11. A key assumption o f this decentralized strategy i s that local people and their governments can make rational choices in the decentralized environment by selecting locally appropriate service types and levels that help improve their quality o f l i fe thus allowing the public sector to take account o f differences across local governments in public service preferences, thereby improving efficacy o f investments. The stakeholders include members o f the community, Local Governments, the Ministry o f Local Government, IDA and the development partners. The stakeholders, as a group, actually contribute to capacity and development grants to help improve the quality o f the decision making process and to provide the resources for the execution o f the project. The project i s also o f interest t o the development community at large who are considering the appropriateness o f the LGDP funding mechanism for achieving results on the ground on a sustainable basis.
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12. The L G D P component o f the Project may be justified on: (i) the validity and effectiveness o f the decentralization set-up to prioritize, select and implement subprojects; (ii) the Monitoring and Evaluation (M&E) system put in place to provide timely feedback; and (iii) on the grounds that the system put in place would lead to optimizing future benefits from the development grant on a sustainable basis and the cost-effectiveness performance o f the program.
Results
13. Table 4: Comparative Average cost o f L G D P I1 and LGDP I summarizes the investment outputs by sector for LGDP I1 and L G D P I respectively. Under L G D P 11, a total o f 12,790 subprojects were completed in the 8 sectors at a cost o f UShs.95.54 billion. Average cost o f projects for the LGDP development Grant as a whole was Ushs.7.47 mill ion. Under LGDP I, a total o f 8,204 subprojects were completed at an average cost UShs.7, 699,307. The Tables show that local governments utilized over 62% o f the Development Grant for two main sectors: roads & drainages, and education. The disbursed amount registered under LGDP I1 was higher both in absolute and relative terms than was the case under LGDP I.
Cost-effectiveness - Comparative cost of LGDP I1 versus LGDP I
14. The average cost o f the projects financed under LGDP I1 i s 88% o f the average cost for LGDP I, without even accounting for inflation due to the time difference in implementation. A similar comparison o f the average cost for each o f the sector indicated the same except for education and health, where it i s higher.
Table 4: Comparative Average cost o f LGDP I1 and LGDP I
LGDP I1 LGDP I Yo of AvICost of LGDP I I / 1 LGDPI 1
Source: S I A surveys
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Correlation of Cost -Effectiveness and Functionality
15. As shown in Table 3, Appendix, the relationship between cost effectiveness and functionality i s positive. This demonstrates that the better the performance o f the functioning o f the department the better the cost-effectiveness o f the project. This confirms the view that building institutional capacity i s important for cost-effectiveness o f the sub-projects implemented.
Sustainability relative to Functionality
16. Table 4, Appendix, summarizes the co-relation between sustainable outcome and functionality. The sustainability o f the project outcome appears to depend on maintenance expenditure, the functioning o f the related department and mentoring. The result shows that institutional capacity building i s critical to achieving sustainability.
Conclusion
17. The statistical evidence collected in the course o f implementation o f the LGDP I1 indicate that the hypothesis on which design o f the project was based, that decentralized bottom-up planning process that promised to prioritize, select and implement sub-projects will result in a cost-effective manner i s true. The process has proved to be responsive to local needs as reflected in the degree of satisfaction recorded at village level. Further that the bottom up approach to planning will lead to community satisfaction and that the outcome o f such a process would be sustainable appears to be confirmed. Furthermore, the data generated in the design and implementation o f the project could provide a good source for carrying out further research into effective community type project design and implementation.
73
APPENDIX
6 7 8 9
Table 1: FINMAP: Scheduling of I F M I S Implementation
Courts o f Judicature Buganda Road 6 Soroti Municipality Min is t ryo f ICT Communications House
Ministry o f Water and Environment Butabika Hospital Butabika
Luzira
I I I 1 FY2007108 I LOCATION FY 2007i08
8 9
Nakasero 8 Moroto Municipality Blood Transfusion Services Aids Commission Ntinda
9 I Mbale Hospital
74
Table 2: Sensitivity Analysis Results
Discount rate
IFMIS sites
No risk N o risk N o risk N o risk Cost o f licenses per year
GDP growth rate I No risk I No risk I N o risk I No risk 1 Ncgatiw KIW i f n o
pilferage hcl'orc 1FMIS
Ngati\?c NIW
OCK at less than 1 5?lo
No risk No risk No risk Level o f pilferagc (before IFMIS)
Opportunit\. cost assuming prz-IFMIS assuming pre-IIWlS assuming pre-IFMIS o f capital
Negative NPV Ycgiiivi. NPV Xcgatiw NPV
assuming pri.-IFMIS OCK at less than OC'K ai less than 104'0 15% om at 004
75
Table 3: Correlation of Cost-effectiveness and Functionality (summary)
Sector
Administration
Education
Relatively high Cost- correlation co- effectiveness efficient Functionality indicator (most correlated)
1 .oo 0.19 Local Revenue Performance
1.00 0.15 system Performance on LOGICS monitoring
Council, Executive and Finance and 1 .oo 0.20 Planning Committee Performance 1 .oo 0.17 O&M expenditure 1.00 0.06 Budget Allocation Performance
Production 1.00 I 0.13 I Gender Mainstreaming Performance
1 Quality o f the Development Plan and
1 .oo 0.18 Procurement Capacity and Performance Quality of the Development Plan and linkages with
0.17 BFP and budget 1 .oo 0.19 Local Revenue Performance
Roads
Drainage
Solid waste
1 .oo 0.1 1 linkagks with BFP and budget
1 .o 0.68 Functionality o f L G Works Department
1 .oo 0.62 Functionality o f L G Production Department 1 .oo 0.50 Performance on LOGICS monitoring system
1 .oo 0.45 Resources Department 1 .oo 0.22 Functionality of LG Water and Sanitation Department
Functionality of LG Environment and Natural
Water
76
1.00 I 0.19 I Performance on LOGICS monitoring system
Sanitation
All sectors
1 .oo 0.22 system
1 .oo 0.17 1 .oo 1 .oo 0.06 Local Revenue Performance
Functionality o f LG Works Department
0.06 Performance on LOGICS monitoring system
Table 4: Correlation of Sustainability and Functionality (summary)
Health 1.00 I 1 .OO I O&M expenditure
Solid waste
Sanitation 1.00 I 1.00 I
1 .OO I O&M expenditure 0.32 bender Mainstreaming Performance
1.00 I 0.35 performance o f council Sector Committees lstaff functional capacity; monitoring &
1.00 I 0.45 hentoring (LGTPC performance) kunctionality of LG environment and natural
All sectors 0.45 esource Department P 1.00 I
77
Annex 10: Safeguard Policy Issues
UGANDA: Local Government Management and Services Delivery APL 1 Project
1. The project has triggered OP 4.01 Environmental Assessment and OP 4.12 Involuntary Resettlement due to construction and/or rehabilitation activities related to the planned sub-projects and the generation o f medical waste. The environmental category i s B, and the safeguard category i s S2. The main safeguards policy issues concern potential water and soil pollution, loss o f vegetation, potential loss o f assets, land or income sources, and unsafe medical waste management. Since neither the exact locations nor the types o f the sub-projects to be funded could be identified prior to appraisal, the Borrower has prepared an Environmental and Social Management Framework (ESMF) and a Resettlement Policy Framework (RPF).
OP 4.01 Environmental Assessment
2. Consistent with the requirements o f OP 4.01, the project has prepared an Environmental and Social Management Framework (ESMF) which outlines an environmental and social screening process designed to identify, assess and mitigate potential adverse environmental and social impacts of future sub- projects (water and sanitation systems, feeder roads, education and health care facilities, office buildings and s ta f f housing, and small investments (generators, cooling systems, minor rehabilitation of buildings housing the equipment) required for the efficient running of the project’s Integrated Financial Management Systems (IFMIS).
3. Based on experience with similar types o f sub-projects, potential adverse environmental and social impacts are likely to include water, noise and air pollution, loss o f vegetation, and a potential increase in malaria due to new water supply systems.
4. discussed during the appraisal mission:
Capacity Building: The project will support the following capacity building measures as
Component 1: At the national level, an Environmental Specialist will be hired at the Ministry o f Local Government to coordinate the implementation o f the ESMF in the context o f the small investments (generators, cooling systems, minor rehabilitation o f buildings housing the equipment) required for the efficient running o f the project’s Integrated Financial Management Information System (IFMIS).
Component 2: At the district level, District Environment Officers will receive environmental training - Training o f Trainers. The training program will be implemented by the Ministry o f Local Government and NEMA. Training topics will include: (i) the environmental and social management process as outlined in the ESMF; (ii) national environmental and social policies, procedures, and guidelines; (iii) the Bank’s safeguard policies; (iv) selected topics on environmental protection; and (v) medical waste management. Subsequently, the District Environment Officers will train relevant staff at the lower local government levels. In addition, this component will fund activities designed to strengthen the local governments’ capacity to mainstream environment into their development plans.
Component 3: This component will support environmental monitoring activities as outlined in the ESMF which includes: (i) support for environmental monitoring and surveillance to 56 local governments; (ii) assessment and support for environmental compliance at the district and sub-county level for al l districts; and (iii) stakeholder consultations.
78
5. The Screening Process: The screening process consists o f (i) an Environmental and Social Screening Form; (ii) Environmental Checklists for Sub-CountyDivisiodTown Council Local Governments which will be used in conjunction with the screening form; (iii) institutional arrangements for the review and clearance of screening results and separate E M reports; (iv) generic E M terms o f reference; and (v) a monitoring plan, including monitoring indicators.
6. In addition, the ESMF includes (i) Environmental Guidelines for Contractors; (ii) Environmental Guidelines for Rural Water Supply and Sanitation Projects; (iii) a sample format for Environmental Management Plans for Sub-Projects; (iv) an Environmental Management Plan (EMP); and (v) a National Medical Waste Management Plan. The National Medical Waste Management Plan will be implemented in accordance with the needs at the health care facilities to ensure that they are provided with the necessary equipment and training for safe medical waste management and thus preventing a further spread o f HIV/AIDS through uninformed health care workers, scavengers or waste dump site operators.
7. M & E: Environmental monitoring and evaluation will be carried out by local government Environment Officers as well as trained persons at the lower local government level - depending on the scale or scope o f the sub-projects - following the monitoring exercises in sequences and frequencies as stipulated in the Project Implementation Schedule, and where appropriate, the Maintenance Schedule. The Districth4unicipal Environment Officers, the Sub-County/Town Council Environment Focal Persons in cooperation with the relevant sector heads at the higher and lower local government levels will monitor the implementation of the environmental mitigation measures based on the contractor’s work plan for district, lower local government, and parish level investments.
8. The Ministry of Local Government, in collaboration with NEMA, will monitor the implementation of the environmental mitigation measures on a sample of local government investments on a quarterly basis. On an annual basis, the higher local governments and the Ministry o f Local Government in collaboration with NEMA will carry out a national assessment o f local governments’ performance in environmental and natural resources management using the appropriate environmental and social monitoring indicators.
9. Consultations: The ESMF was prepared in consultation with members o f the Physical Planning Commission, NEMA, the land authority, fisheries, agriculture. Discussions were also held with key institutions o f the Local Governments, Communities, NGOs, and al l other stakeholder to better articulate the requirements of environmental and social management o f the support and services to be provided by the project. Field visits were made to five districts and two municipalities with a view to evaluate the constraints encountered in the implementation of sound environmental and social management plans, and to ascertain the stakeholders’ views o f the project.
10. The outcome of these consultations such as: (i) making mainstreaming of environmental and natural resources management mandatory for local governments; (ii) carrying out regular environmental audits; and (iii) encouraging local governments to use the local development grants for investments in solid waste management; and (iv) encouraging local governments to invest in national priority programs such as water and sanitation.
11. The ESMF mentions that consultations will also take place during the environmental and social screening process and the results will be communicated to the public by the Environmental Focal Points and the Community workers at the village, parish and sub-county levels. The DistridMunicipal Environment Officers will communicate the results o f the environmental and social screening process at the district/municipal levels. According to the EL4 procedures, public information and participation must be ensured during the scoping period and the preparation of terms of reference for the Environmental Impact Assessment (EM). This will be done by the DistrictiMunicipal Environment Officers in
79
collaboration with the DistrictMunicipal Community Development Officer and the Community workers at the lower local government levels. Public information programs are carried out and the results o f public hearings - if any - will be taken into account when a decision i s taken whether or not to issue a permit.
12. Safe Medical Waste Management: The National Medical Waste Management Plan will be implemented in accordance with the needs o f the health care facilities to be supported by the project. This will ensure that these facilities are provided with the necessary equipment and training for safe medical waste management, thereby preventing a further spread of HIV/AIDS through health care workers, scavengers or waste dump site operators.
13. Potential adverse impacts will be identified during the environmental and social screening process and the implementation of potential mitigation measures will be informed by the National Medical Waste Management Plan, for example, the provision of equipment (Le. for the collection, transport, temporary storage, and disposal) and appropriate training of health center staff and dump site operators. The program will be guided by the Medical Waste Management Plan in consultation with the Distr ict Health Officers and the Ministry o f Health as necessary.
14. The ESMF recommends that the medical waste management system should aim at (i) avoidance or minimization o f secondary impacts from the disposal system; (ii) prevention of human access and scavenging activities; (iii) control of contamination o f land, air, or water; and (iv) avoidance o f disease vectors (insects, rodents etc.). Towards this end, the ESMF identifies and describes the most critical activities to be addressed under the project: (a) separation and intermediate storage o f health care waste; (b) transport and treatment; and (c) final disposal. Both, environmental and social mitigation measures would be verifiable and monitored during the various stages o f the program cycle by the Local Governments, Ministry of Local Government, and NEMA.
OP 4.12 Involuntary Resettlement
15. As this project triggers the policy on Involuntary Resettlement, the project prepared a Resettlement Policy Framework (RPF). Sub-projects, other than for component 1 , will be community demand driven. At the time o f project preparation the location o f civil works, which would trigger OP 4.12, were unknown and therefore a Resettlement Action Plan (RAP) could not be prepared. The RPF will be circulated to communities through the offices of the Local Governments.
16. Involuntary Resettlement i s triggered not only when land acquisition i s required but also where there i s no physical relocation but project activities impact assets, restricts access to natural resources, or negatively impacts livelihoods. Once sub-project activities have been identified and location o f impacts i s known they can be screened to determine if OP 4.12 i s triggered. If OP 4.12 i s triggered, the Local Government would ensure a RAP i s prepared following the guidance and standards set forth in the Resettlement Policy Framework.
17. Civil works activities that may be implemented under this project includes: construction o f facilities such as water supply, sanitation, storm water drainage, primary education, primary health care, community access roads and feeder roads, solid waste management, or extension of rural electricity networks. Efforts will be made in the design and screening of sub-projects to avoid impact on people, land, assets, access to natural resources and livelihoods. Where impacts are unavoidable, a Resettlement Action Plan will be prepared and efforts made to minimize the magnitude of impacts.
80
18. Resettlement Action Plans (RAP) would be prepared in consultation with affected individuals and communities. Resettlement assistance and compensation for impacts will be determined with the assistance of impacted persons through the consultation process to ensure that no one i s left worse off as a result of the project. RAPs would be submitted to Local Government Technical Planning Committee, and the World Bank, for approval prior to commencing civil works activities.
19. Mitigation: Mitigation measures would be consistent with the magnitude of impact. In cases where physical relocation, and associated losses, are required mitigation measures could include: relocation to housing equivalent or better to previous accommodation, and relocate to land equivalent or better to land lost. For those whose livelihoods are impacted mitigation measures could include: creation o f cottage industries and revenue generating activities, promotion of husbandry, promotion o f fish farming, weaving, dyeing and other intensive income generation opportunities. For those who may have assets impacted, but are not physically relocated, mitigation measures may include: income restoration resulting from immediate project benefits, provide job opportunities, and compensation for assets lost in the form o f cash funds or asset replacement.
20. Institutional Framework The institutional framework for implementing resettlement activities will be based on the existing Local Government system which i s guided by the Constitution, the decentralization policy, and other relevant Ugandan laws, as well as World Bank policy. Ugandan law acknowledges a citizen’s right to compensation for loss o f land and assets which i s consistent with World Bank policy. This includes non-title deed holders, encroachers, and illegal occupants such as squatters. In order to reduce land speculation and opportunistic invasion, a cut-off date will be established after which time encroachers will not be eligible for compensation or assistance.
21. Local Government Institutions will be provided with capacity building activities necessary to equip them with the skills to screen project activities for project impacts, prepare a RAP, and implement activities set out in the RPF and subsequent RAPs.
22. Valuation: Valuations for losses will be at market rates as it i s the higher value when compared to replacement cost. Compensation values will coincide with the timing o f the actual loss. If payment i s delayed by more than six months an inflation premium, equal to 1% o f value plus official inflation rate, will be added to the compensation amount. All compensation and resettlement assistance will be completed prior to commencement o f any project activity which triggers OP 4.12.
23. Compensation and resettlement activities will be funded like any other project activity eligible under the project. Funding would be processed by the Local Government Institution. All payments of compensation, resettlement assistance, and rehabilitation assistance will be made by the Local Governments in the presence of the affected person(s) and witnessed by community leaders.
24. Grievance: The grievance procedure i s multi-tiered, beginning with the local level using community structures and affinities. If the grievance i s unresolved, the affected person(s) can contact Local Government authorities. Under al l circumstances, affected person(s) can resort to the Ugandan legal process in higher courts.
81
25. An administrative reporting system will be instituted which:
Monitoring: The Local Government Institution will carry out monitoring or project activities.
0
0
0 Reports any grievances; 0
0
Alerts project authorities to triggering of OP 4.12; Provides timely information about assets valuations;
Documents compensation and assistance process and timing; and Updates the database with respect to changes that occur on the ground.
26. Annual evaluations wil l be made in order to: a) determine whether or not affected persons have been appropriately compensated for their losses before sub-project activities had been implemented, and b) ensure affected persons continue with the same, or higher, standard o f living as experienced prior to project.
82
Annex 11: Project Preparation and Supervision
UGANDA: Local Government Management and Services Delivery APL 1 Project
Planned Actual PCN review 0411 812006 Initial PID to PIC 10/26/2007 Initial ISDS to PIC 0711 712006 Appraisal 1 O/ 1212007 Negotiations 11/07/2007 BoardBVP approval 1211 812007 Planned date o f effectiveness 01/31/2008 Planned date o f mid-term review 09/30/2009 Planned closing date 1213 1/201 1
Key institutions responsible for preparation o f the project: Ministry o f Finance, Planning and Economic Development and Ministry o f Local Government
Bank staff and consultants who worked on the project included: Name Title Unit Lance Morrell Team Leader AFTU 1 Solomon Alemu Senior Engineer AFTU 1 Rowena Martinez Operations Specialist AFTU 1 Naa Dei Niko i Sr. Operations Officer AFTU 1 Daryoush Kianpour Sr. Information Officer AFTRL
Martin Onyach Olaa Urban Specialist AFTUl Patrick Umah Tete Financial Management Specialist AFTFM Richard Olowo Senior Procurement Specialist AFTPC Barbara Magezi Public Sector Specialist AFTPR Edeltraut Gilgan-Hunt Environmental Specialist AFTEN Kristine Schwebach Sr. Social Development Specialist AFTCS Mary Bitekerezo Sr. Social Development Specialist AFTCS Suleiman Namara Social Protection Specialist AFTH 1 Catherine McSweeney Consultant SDV Zara Sarzin Consultant AFTU 1 Edith Mwenda Sr. Counsel LEGAF Luis Schwarz/Marie Khoury Senior Finance Officer LOAG2 Howard Centenary Procurement Specialist AFTPC Marie Claire Li Tin Yue Program Assistant AFTU 1 Agnes Kaye Program Assistant AFMUG
Barjor Mehta Sr. Urban Specialist WBIFP
Bank funds expended to date on project preparation: 1. Bank resources: US$586,525.27 2. Trust funds: 3. Total: US$586,525.27
Estimated Approval and Supervision costs: 1. Remaining costs to approval: US$24,433.3 1 2. Estimated annual supervision cost: US$120,000.00
83
Annex 12: Documents in the Project Fi le
UGANDA: Local Government Management and Services Delivery APL 1 Project
1. Procurement Capacity Assessment Report 2. Financial Management Assessment Report 3. Project Implementation Plan 4. 5. Resettlement Policy Framework 6. 7. Letter o f Development Policy
Environmental and Social Management Framework
Local Government Sector Investment Plan
84
Annex 13: Statement of Loans and Credits
UGANDA: Local Government Management and Services Delivery AF'L 1 Project
Original Amount in US$ Millions Difference between expected
and actual disbursements
Project F Y Purpose IBRD I D A SF GEF Cancel. Undisb. Orig. Frm. ID Rev'd
PO78382 2008
P105649 2008 PO69208 2007
PO90210 2007 PO50440 2006
PO86513 2006
PO83809 2005
PO74079 2005
PO79925 2004
PO65437 2003
PO75932 2003
PO77477 2003
PO02952 2003
PO74078 2002
PO70222 2002
PO69996 2002
PO65436 2002
UG-Kampala Institutional and Infiastructure Dev UG- Agr Rsr UG-Power Sector Dev. UG-PRSC 6 DPL UG-Pub Sew Perform Enhance (FY06) UG-Millennium Science Init (FY06) Priv Sec Competitiveness 2 UG-Road Dev APL 3 (FY05) UG-Natl Re Dev TAL (FY04)
(FY03)
S IL (FY03) UG-Loc Gov Dev 2 (FY03) UG-N Uganda SOC Action Fund (FY03) UG-Makerere Pi1 Decentr Srvc Del (FY02) UG-GEF Energy for Rural Transf (FY02) UG-Energy for Rural Transform (FY02) UG-Road Dev Phase 2 APL (FY02)
UG-PAMSU S I L
UG-GEF PAMSU
0.00
0.00 0.00
0.00 0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
33.60
12.00 300.00
125.00 70.00
30.00
70.00
67.60
25.00
27.00
0.00
50.00
100.00
5.00
0.00
49.15
64.52
0.00
0.00 0.00
0.00 0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00 0.00
0.00 0.00
0.00
0.00
0.00
0.00
0.00
8.00
0.00
0.00
0.00
12.12
0.00
0.00
0.00
0.00 0.00
0.00 0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.12
0.00
0.00
33.60
12.00 300.00
125.00 71.59
30.72
66.6 1
107.56
23.67
18.95
3.09
24.62
57.74
1.45
8.57
37.30
3 1.45
0.00
0.00 0.00
0.00 0.00
0.00
22.73
24.93
10.08
12.21
2.34
9.99
30.47
-0.33
8.36
30.10
20.46
0.00
0.00 0.00
0.00 0.00
0.00
0.00
17.19
-0.58
0.00
0.00
0.00
10.07
0.18
0.00
5.58
15.87
85
Original Amount in US$ Millions Difference between expected
and actual disbursements
Project F Y Purpose IBRD I D A SF GEF Cancel. Undisb. Orig. Frm. ID Rev’d
PO02984
PO73089
PO72482
PO70627
PO44695
PO50439
PO44679
PO59127
PO02970
PO49543
2002
200 1
200 1
2001
200 1
200 1
2000
1999
1999
1998
UG-Power S I L 4 (FY02)
(FYO1)
Control S I L (FYO1) Regional Trade Fac. - Uganda UG-Nat Agr Advisory Srvcs S I L (FYO1) UG-Priv & Utility Sec Reform (FYO 1) UG-Econ & Fin Mgmt (FYOO) UG-Agr Rsrch & Training S I L 2 (FY99) UG-Roads Dev APL (FY99) UG-Road Sec & Inst Supt (FY98)
Total:
UG-EMCBP S I L 2
UG-HIV/AIDS
0.00 62.00 0.00 0.00 0.00 18.98 11.06 -4.94
0.00 22.00 0.00 0.00 0.00 6.91 4.22 -1.75
0.00 47.50 0.00 0.00 0.00 2.91 -3.06 0.00
0.00 20.00 0.00 0.00 0.00 16.73 14.85 0.00
0.00 45.00 0.00 0.00 0.00 41.34 12.97 0.00
0.00 48.50 0.00 0.00 0.00 20.38 17.22 0.87
0.00 34.04 0.00 0.00 0.00 8.51 -7.74 3 .OO
0.00 26.00 0.00 0.00 0.00 4.41 3.72 0.82
0.00 90.98 0.00 0.00 0.00 40.29 35.76 35.76
0.00 30.00 0.00 0.00 0.00 6.19 5.77 -0.43
0.00 0.00 20.12 0.12 649.97 8 1.64 984.29 266.11
86
UGANDA STATEMENT OF IFC’s
Held and Disbursed Portfolio In Millions o f US Dollars
Committed Disbursed
IFC IFC
FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.
1996 AEF Agro Mgmt 0.35 0.00 0.00 0.00 0.35 0.00 0.00 0.00 1992 AEF Clovergem 0.84 0.00 0.00 0.00 0.84 0.00 0.00 0.00 1999 AEF Gomba 0.45 0.00 0.00 0.00 0.45 0.00 0.00 0.00 1998 AEF White N i l e 0.10 0.00 0.00 0.00 0.10 0.00 0.00 0.00 2005 DFCU 10.00 0.00 0.00 0.00 10.00 0.00 0.00 0.00 1998 Tilda Rice 0.59 0.00 0.00 0.00 0.59 0.00 0.00 0.00 2005 UMU 1 .oo 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total portfolio: 0.00 0.00 0.00 0.00 0.00 0.00 13.33 12.33
Approvals Pending Commitment
FY Approval Company Loan Equity Quasi Partic. 2002 Buiagali 0.07 0.00 0.00 0.04
Total pending commitment 0.07 0.00 0.00 0.04
87
Annex 14: Country at a Glance
UGANDA: Local Government Management and Services Delivery APL 1 Project
Uganda a t a glance 9/28/07
Key Deve lopment Ind ica tors
(2006)
Population, mid-year (millions) Surface area (thousand sq km) Population growth (Oh) Urban population (% of total population)
GNi (Atlas method, US$ billions) GNI per capita (Atlas method, US$) GNI per capita (PPP, international $)
GDP growth (%) GDP per capita growth (%)
(most recent estimate, 2000-2006)
Poverty headcount ratio at $1 a day (PPP, Oh) Poverty headcount ratio at $2 a day ( P P P , %) Life expectancy at birth (years) Infant mortality (per 1,000 live births) Child malnutrition (% of children under 5)
Adult literacy, male (Oh of ages 15 and older) Adult literacy, female (Oh of ages 15 and older) Gross primary enroiiment, male (% of age group] Gross primary enrollment, female ( O h of age group)
Access to an improved water source (Oh of population) Access to improved sanitation facilities (YO of population)
Uganda
29.9 241 3.6 13
8.9 300
1,490
5.3 1.5
50 79 23
77 58
119 119
60 43
Sub- Saharan
Africa
770 24,265
2 3 36
648 842
2,032
5.6 3.2
41 72 47 96 29
69 50 98 86
56 37
LOW income
2,403 29,215
1.8 30
1,562 650
2,698
8.0 6.1
59 75
72 50
108 96
75 38
N e t Aid Flows
(US$ millions) Net ODA and official aid Top 3 donors (in 2005):
United States Netherlands Denmark
Aid (% of GNI) Aid per capita (US$)
Long-Term Economic Trends
Consumer prices (annual % change) GDP implicit deflator (annual ?h change)
Exchange rate (annual average, local per US$) Terms of trade index (2000 = 100)
Population, mid-year (millions) GDP (US$ millions)
Agriculture Industry
Services
Household final consumption expenditure General gov't final consumption expenditure Gross capital formation
Exports of goods and services Imports of goods and services Gross savings
Manufacturing
1980
113
13 4 2
9 2 9
45 9
1 0
12 6 1,245
72 0 4 5 4 3
23 5
88 9 I1 2
6 2
19 4 26 0 -1 0
1990
663
30 4
25
15.7 37
45.5 44 4
319.6 132
I 7 8 4,304
2000
817
58 43 60
14 0 34
5.8 3.8
1,512 0 1 00
24.3 5,926
(% Of GDP) 56 6 37 3 11 1 20 3 5 7 9 8
32 4 42 4
91 9 78 2 7 5 I 3 7
12 7 20 0
7 2 11 2 19 4 23 0
1 2 9 3
2006 *
1,198
242 80 64
I 4 0 42
3 5 6 7
1,825 1 91
29 9 9,322
31 7 24 6
8 6 43 7
77 6 14 4 24 9
13 8 30 7 11 2
Age distribution, 2006
Male Female
70 74
sa 64
50-54
40 44
30-34
20-24
10-14 0 4 , . . .
30 20 10 0 10 20
percent
Llnder-5 mortality rate (per 1,000)
200 1
1990 q995 2000 2005
nUganda USub-Saharan Africa
Growth of GDP and GDP per capita ( W )
GDP per capita O5 I I -GDP - 95 00
1980-90 1390-2000 2000-06 (average annual growth %)
3.4 3.1 3.4 2.9 7.1 5.6
2.1 3.7 4.3 5.0 12.2 7.0 3.9 14.1 5.2 2.8 8.2 7.7
2 7 6 8 5 6 2 0 7 1 5 9 8 0 8 9 10 3
2 7 6 8 5 6 2 0 7 1 5 9 8 0 8 9 10 3
1.8 14.7 7.8 4.4 10.0 10.8
Note Figures in italics are for years other than those specifled 2006 data are preliminary a Aid data are for 2005
Development Economics Development Data Group (DECDG)
indicates data are not available
88
Uganda
Balance of Payments and Trade
(US$ mj/Jons) Total merchandise exports (fob) Total merchandise imports (ci0 Net trade in goods and services
Workers' remittances and Compensation of employees (receipts)
Current account balance as a % of GDP
Reserves, including gold
Central Government Finance
(% of GDP) Current revenue (including grants)
Current expenditure
Overall surplus/deficit
Highest marginal tax rate (Oh)
Tax revenue
individual Corporate
External Debt and Resource Flows
(US$ millions) Total debt outstanding and disbursed Total debt service Debt relief (HIPC. MDRI)
Total debt (Oh of GDP) Total debt service (% of exports)
Foreign direct investment (net inflows) Portfolio equity (net inflows)
2000
460 954
-703
238
-644 -10.9
719
11.3 10.4 10.9
-13.8
30 30
3,498 74
1,282
59.0 10.5
161 0
2006
603 1,336 -I ,378
4 76
-1,074 -11.5
1,025
12.6 11.7 12.0
-10.6
30 30
4,463 172
1,705
51.1 10.7
257 2
:omposition of total external debt, 2005
Private 27, Short-term *'
IDA 3 141
S$ millions
Private Sector Development
Time required to start a business (days) Cost to start a business (% of GNI per capita) Time required to register property (days)
Ranked as a major constraint to business (% of managers surveyed who agreed)
Electricity Tax rates
Stock market capitalization (Oh of GDP) Bank capital to asset ratio (%)
2000 2006
- 28 - 96.0 - 227
.. 63.3
.. 11.0
0.6 1.2 9.8 10.3
IGovernance indicators, 2000 and 2006
I Voice and accountability
Political stability I
Regulalory qualify
Rule of law I
Control of conuption
0 25 50 75 100 1 02006 02000
Country's percentile rank (0-100) higher values im@y bsHer refings
Source: KaUfmann-KPaay-MaStNUui, World Bank
Technology and Infrastructure 2000 2005
Paved roads (% of total) Fixed line and mobile phone
High technology exports subscribers (per 1,000 people)
(% of manufactured exports)
.. 23.0
8 56
22.5 14.0
Environment
Agricultural land (% of land area) Forest area (% of land area) 20.6 18.4 Nationally protected areas (% of land area) .. 32.6
Freshwater resources per capita (cu. meters) .. 1,353 Freshwater withdrawal (Oh of internal resources)
C02 emissions per capita (mt) 0.06 0.06
GDP per unit of energy use
0.8
(2000 PPP $ per kg of oil equivalent)
Energy use per capita (kg of oil equivalent)
(US$ millions)
IBRD Total debt outstanding and disbursed Disbursements Principal repayments Interest payments
0 0 0 0 0 0 0 0
IDA Total debt outstanding and disbursed 2,115 436 Disbursements 190 93 Total debt service 9 40
IFC (flscalyear) Total disbursed and outstanding portfolio 36 12
of which IFC own account 36 12 Disbursements for IFC own account 0 10 Portfolio sales. prepayments and
repayments for IFC own account 6 0
Gross exposure 43 43 New guarantees 0 43
MlGA
Note: Figures In italics are for years other than those specified. 2006 data are preliminary. 9/28/07 .. indicates data are not available. -indicates observation is not applicable.
Development Economics, Development Data Group (DECDG).
89
Millennium Development Goals Uganda
50 -
2 5 .
0,
With selected targets to achieve between f990 and 2075 (estimate closest to date shown, +/- 2 yean)
- r-- - I I
- I
Goal 1: halve the rates for $1 a day poverty and malnutrition 1990 1996 2000 2005
33.8 37.7 Poverty headcount ratio at $1 a day (PPP, % of population) Poverty headcount ratio at national poverty line (% of population) Share of income or consumption to the poorest qunltile (%) 5.7 Prevalence of malnutriiion (% of children under 5) 23.0 25.5 23.0
Goal 2: ensure that children are able to complete primary schoollng Primary school enrollment (net, %) Primary completion rate (% of relevant age group) 58 56 Secondary school enrollment (gross, %) 11 16 19 Youth literacy rate (YO of people ages 15-24) 70 77
Ratio of girls to boys in primary and secondary education (Oh) 82 93 98 Goal 3: eliminate gender disparity In education and empower women
Women employed in the nonagricultural sector (% of nonagricultural employment) Proportion of seats held by women in national parliament (%) 12 18 18 30
36
Goal 4: reduce under4 mortallty by two-thirds Under4 mortality rate (per 1,000) 160 156 145 136
Measles immunization (proportlon of one-year olds immunized, %) 52 57 61 86 Infant mortality rate (per 1,000 live births) 93 92 85 79
Goal 5: reduce maternal mortality by three-fourths Maternal mortality ratio (modeled estimate, per 100,000 live births) Births attended by skilled health staff (% of total) 38 38 39
880
Goal 6: halt and begln to reverse the spread of HIWAIDS and other maJor dlseases Prevalence of HIV (% of population ages 15-49) 6.4 Contraceptive prevalence (% of women ages 15-49) 5 15 23 Incidence of tuberculosis (per 100,000 people) 161 319 339 369 Tuberculosis cases detected under DOTS (%) 58 49 45
Goal 7: halve the proportlon of people without sustalnable access to bask needs Access to an improved water source (Oh of population) 44 49 55 60
Forest area (% of total land area) 25.0 20.6 18.4 Nationally protected areas (% of total land area) 32.6
GDP per unit of energy use (constant 2000 PPP $ per kg of oil equivalent)
Access to improved sanitation facilities (% of population) 42 43 43 43
C02 emissions (metric tons per capita) 0.0 0.0 0.1 0.1
Goal 8: develop a global partnership for development Fixed line and mobile phone subscribers (per 1,000 people) 2 2 8 56 internet users (per 1,000 people) 0 0 2 17
Youth unemployment (% of total labor force ages 15-24) Personal computers (per 1,000 people) 0 2 9
ilspa 25 2WO 2002 2005
-0- Primary net enrollmenl ratio (..)
leasles lmmunlzatlon (%of I-year olds) . I I I '1990 1995 2WO 2005
0 Uganda 0 Sub-Saharan Africa
l lCT Indicators (per 1,000 people)
XIW 2002 2W5
OFixed +mobile subscribers l# Internet users
Note: Figures in Italics are for years other than those specified. .. indicates data are not available.
Development Economics, Development Data Group (DECDG).
9/28/07
90
MAP SECTION
BundibugyoBundibugyo
BushenyiBushenyi
IbandaIbanda
KiruhuraKiruhura
NtungamoNtungamo
HoimaHoima
IgangaIgangaBusiaBusia
SironkoSironko
BugiriBugiri
KabaleKabale
KamuliKamuliKaliroKaliro
ButalejaButaleja
BudakaBudaka
KayungaKayungaKyenjojoKyenjojo
KapchorwaKapchorwa
BukwoBukwo
KaseseKasese
KisoroKisoro
KitgumKitgum
KumiKumi
KaberamaidoKaberamaido
LiraLira
LuweroLuwero
NakasekeNakaseke
NakasongolaNakasongola
MasakaMasaka
KamwengeKamwenge
KalangalaKalangala
MasindiMasindi
MbararaMbarara
KanunguKanungu
MorotoMoroto
NakapiripiritNakapiripiritKatakwiKatakwiAmuriaAmuria
MoyoMoyo
KibaleKibale
PallisaPallisa
SorotiSoroti
FortFortPortalPortal
AruaArua
JinjaJinja
BubuloBubulo
MbaleMbale
TororoTororo
GuluGulu
NebbiNebbi
ApacApac
AmolatarAmolatar
MubendeMubende
RukungiriRukungiri
IsingiroIsingiro RakaiRakai
SembabuleSembabule
MpigiMpigi
MukonoMukonoMityanaMityanaWakisoWakiso
KibogaKiboga
KotidoKotido
KaabongKaabongAdjumaniAdjumani
YumbeYumbeKobokoKoboko
KilakKilak
MarachaMaracha
OyamOyam
DokoloDokolo
BusikiBusiki
BulisaBulisa
AbimAbim
KAMPALAKAMPALA
MO
YO
ADJU
MANI
SIRONKOSIRONKO
KA
YUN
GAA
KABA
ROLE
SEMBABULE
KISOROKISORO
KANUNGUKANUNGU
RUUKUUNG
IRRI
KAPCHORWAKAPCHORWA
BUKWOBUKWO
MASINDIMASINDI
HOIMAHOIMA
KASESEKASESE
KABALEKABALE
KIBOGAKIBOGA
MITYANAMITYANA
KIBAALEKIBAALE
MUBENDEMUBENDE
MPIGIMPIGI
MBARARAMBARARA
IBANDAIBANDAKIRUHURAKIRUHURA
ISINGIROISINGIRORAKAIRAKAI
MASAKAMASAKA
NTUNGAMONTUNGAMO
BUSHENYIBUSHENYI
APACAPAC
AMOLATARAMOLATAR KABERA-KABERA-MAIDOMAIDO
KAMULIKAMULI
GULUGULU
NEBBINEBBI
LUWEROLUWERO
NAKASEKENAKASEKE
IGANGAIGANGA
KALIROKALIRO
KALANGALAKALANGALA
MUKONOMUKONO
JINJAJINJA
KUMIKUMI
KATAKWIKATAKWIAMURIAAMURIA
MOROTOMOROTO
SOROTISOROTI
PALLISAPALLISA
MBALEMBALEBUDAKABUDAKA
MANAPWAMANAPWA
LIRALIRA
K I T G U MK I T G U M
ARUAARUA
KOTIDOKOTIDO
KAABONGKAABONG
TOROROTORORO
KAMPALAKAMPALA
YUMBEYUMBEKOBOKOKOBOKO
PADERPADER
MAYU
GE
MAYU
GE
BUG
IRIBU
GIRI
WAKISOWAKISO
KAMWENGEKAMWENGE
KYENJOJOKYENJOJO
NAKAPIRIPIRITNAKAPIRIPIRIT
NAKASONGOLA
BUNDIBUGYOBUNDIBUGYO
BUSIABUSIA
MARACHAMARACHA
AMURUAMURU
OYAMOYAM
DOKOLODOKOLO
ABIMABIM
BULISABULISA
NAMU-NAMU-TUMBATUMBA
BUTALEJABUTALEJA
Ora
Alb
ert
Nile
Achwa
Victoria Nile
Oko
k
Locho
man
Siti
Nkusi
Kafu
Katonga
To To FaradjeFaradje
To To JubaJuba
To To LodwarLodwar
To To BeniBeni
To To BuniaBunia
To To BeniBeni
To To NyakanaziNyakanazi
To To KisumuKisumu
To To NakuruNakuru
To To KigaliKigali
To G
oma
To G
oma
G r e aa tt RR ii ff tt VVaa ll ll ee yy
Margherita PeakMargherita Peak(5110 m)(5110 m)
Mt. Elgon (4321 m)Mt. Elgon (4321 m)
DEM. REP. DEM. REP. OF CONGO OF CONGO
S U D A N S U D A N
K E N Y A K E N Y A
K E N Y A K E N Y A
TANZANIA TANZANIA TANZANIA TANZANIA
RWANDA RWANDA
To To Faradje Faradje
To To Juba Juba
To To Lodwar Lodwar
To To Beni Beni
To To Bunia Bunia
To To Beni Beni
To To Nyakanazi Nyakanazi
To To Kisumu Kisumu
To To Nakuru Nakuru
To To Kigali Kigali
To G
oma
To G
oma
Margherita Peak Margherita Peak (5110 m) (5110 m)
Bundibugyo
Bushenyi
Ibanda
Kiruhura
Ntungamo
Hoima
IgangaBusia
Sironko
Bugiri
Kabale
KamuliKaliro
Butaleja
Budaka
KayungaKyenjojo
Kapchorwa
Bukwo
Kasese
Kisoro
Kitgum
Kumi
Kaberamaido
Lira
Luwero
Nakaseke
Nakasongola
Masaka
Kamwenge
Kalangala
Masindi
Mbarara
Kanungu
Moroto
NakapiripiritKatakwiAmuria
Moyo
Kibale
Pallisa
Soroti
FortPortal
Arua
Jinja
Bubulo
Mbale
Tororo
Gulu
Nebbi
Apac
Amolatar
Mubende
Rukungiri
Isingiro Rakai
Sembabule
Mpigi
MukonoMityanaWakiso
Kiboga
Kotido
KaabongAdjumani
YumbeKoboko
Kilak
Maracha
Oyam
Dokolo
Busiki
Bulisa
Abim
KAMPALA
MO
YO
ADJU
MANI
SIRONKO
KA
YUN
GA
KABA
ROLE
SEMBABULE
KISORO
KANUNGU
RUKUNG
IRI
KAPCHORWA
BUKWO
MASINDI
HOIMA
KASESE
KABALE
KIBOGA
MITYANA
KIBAALE
MUBENDE
MPIGI
MBARARA
IBANDAKIRUHURA
ISINGIRORAKAI
MASAKA
NTUNGAMO
BUSHENYI
APAC
AMOLATAR KABERA-MAIDO
KAMULI
GULU
NEBBI
LUWERO
NAKASEKE
IGANGA
KALIRO
KALANGALA
MUKONO
JINJA
KUMI
KATAKWIAMURIA
MOROTO
SOROTI
PALLISA
MBALEBUDAKA
MANAPWA
LIRA
K I T G U M
ARUA
KOTIDO
KAABONG
TORORO
KAMPALA
YUMBEKOBOKO
PADER
MAYU
GE
BUG
IRI
WAKISO
KAMWENGE
KYENJOJO
NAKAPIRIPIRIT
NAKASONGOLA
BUNDIBUGYO
BUSIA
MARACHA
AMURU
OYAM
DOKOLO
ABIM
BULISA
NAMU-TUMBA
BUTALEJA
DEM. REP.OF CONGO
S U D A N
K E N Y A
K E N Y A
TANZANIATANZANIA
RWANDA
Ora
Alb
ert
Nile
Achwa
Victoria Nile
Oko
k
Locho
man
Siti
Nkusi
Kafu
Katonga
Lake Vic tor ia
LakeEdward
LakeGeorge
LakeKwania
Lake Kyoga
LakeSalisbury Lake
Opeta
Lake
Albe
rt
To Faradje
To Juba
To Lodwar
To Beni
To Bunia
To Beni
To Nyakanazi
To Kisumu
To Nakuru
To Kigali
To G
oma
G r e a t R i f t Va l l e y
Margherita Peak (5110 m)
Mt. Elgon (4321 m)
30°E
4°N
2°N
0°
4°N
2°N
0°
32°E 34°E
32°E 34°E
UGANDA
0 25 50 75
0 25 50 75 Miles
100 Kilometers
IBRD 35755
OCTOBER 2007
UGANDALOCAL GOVERNMENT MANAGEMENT AND
SERVICE DELIVERY PROJECT
DISTRICT CAPITALS
NATIONAL CAPITAL
RIVERS
MAIN ROADS
RAILROADS
DISTRICT BOUNDARIES
INTERNATIONAL BOUNDARIES
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries.