FOR OFFICIAL USE ONLY Report No: ICR00006136 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT IMPLEMENTATION COMPLETION AND RESULTS REPORT Loan Number: 8723-IN ON A LOAN IN THE AMOUNT OF US$210 MILLION TO INDIA FOR THE WEST BENGAL INSTITUTIONAL STRENGTHENING OF GRAM PANCHAYATS PROGRAM II PROGRAM-FOR-RESULTS June 26, 2023 Urban, Resilience and Land Global Practice South Asia Region CURRENCY EQUIVALENTS (Exchange Rate Effective May 31, 2023) Currency Unit = Indian Rupee (INR) INR 82.74 = US$1 FISCAL YEAR July 1 - June 30 Regional Vice President: Martin Raiser Country Director: Auguste Tano Kouame Regional Director: John A. Roome Practice Manager: Abhas Kumar Jha Task Team Leader(s): Vasudha Thawakar, Manvinder Mamak ICR Main Contributor: Riddhiman Saha ABBREVIATIONS AND ACRONYMS APA Annual Performance Assessment BMC Basic Mandatory Conditions CPF Country Partnership Framework DCU District Coordination Unit DLI Disbursement-Linked Indicator E&S Environmental and Social EIRR Economic Internal of Return ELA Examiner of Local Accounts EMC Expanded Mandatory Conditions ENPV Economic Net Present Value ESMF Environment and Social Management Framework FM Financial Management GOI Government of India GP Gram Panchayat GPIMS Gram Panchayat Integrated Monitoring System GPMS Gram Panchayat Management System GRMS Grievance Redressal Management System GTA Gorkha Territorial Administration IEC Information, Education, and Communication IFSA Integrated Fiduciary Systems Assessment IGFT Intergovernmental Fiscal Transfer IPF Investment Project Financing IR Intermediate Results ISGPP Institutional Strengthening of Gram Panchayats Program (Project, in case of Phase I) IVA Independent Verification Agency KRA Key Results Area M&E Monitoring and Evaluation MDS Mentor Deployment Strategy MIS Management Information System MOV Means of Verification MRS Mentor Reporting System MTR Midterm Review NPV Net Present Value NS Nirman Sahayaks O&M Operation and Maintenance OSR Own-Source Revenue PA&AO Panchayats Accounts and Audit Officer PAD Project Appraisal Document PAP Program Action Plan PBG Performance-Based Grant PDO Program Development Objective PforR Program-for-Results PMU Project Management Unit POM Program Operations Manual PRDD Panchayats and Rural Development Department PRI Panchayati Raj Institution QAR Quality Assurance Review RF Results Framework TOC Theory of Change WBMS Web-Based Monitoring System WBG World Bank Group TABLE OF CONTENTS DATA SHEET .......................................................................................................................... 2 I. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES.................................................... 5 A. CONTEXT AT APPRAISAL AND THEORY OF CHANGE .................................................................5 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) .......................................8 II. OUTCOME .................................................................................................................... 10 A. RELEVANCE ..........................................................................................................................10 B. ACHIEVEMENT OF PDOs (EFFICACY) ......................................................................................11 C. JUSTIFICATION OF OVERALL OUTCOME RATING ....................................................................18 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 20 A. KEY FACTORS DURING PREPARATION ...................................................................................20 B. KEY FACTORS DURING IMPLEMENTATION .............................................................................21 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 23 A. QUALITY OF MONITORING AND EVALUATION .......................................................................23 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE .....................................................25 C. BANK PERFORMANCE ...........................................................................................................26 D. RISK TO DEVELOPMENT OUTCOME .......................................................................................27 V. LESSONS AND RECOMMENDATIONS ............................................................................. 28 ANNEX 1. RESULTS FRAMEWORK, DISBURSEMENT LINKED INDICATORS, AND PROGRAM ACTION PLAN ...................................................................................................................... 30 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 49 ANNEX 3. PROGRAM EXPENDITURE SUMMARY ................................................................... 51 ANNEX 4. BORROWER’S COMMENTS ................................................................................... 52 ANNEX 5. SUMMARY OF ANALYSIS OF ECONOMIC IMPACTS ................................................ 54 ANNEX 6. SUMMARY OF PAP AND KEY CONTRIBUTION TOWARD PDO................................. 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) DATA SHEET BASIC INFORMATION Product Information Program ID Program Name Financing Instrument West Bengal Institutional Strengthening P159427 Program-for-Results Financing of Gram Panchayats Program II Country IPF Component India No Organizations Borrower Implementing Agency India Panchayats and Rural Development Department Program Development Objective (PDO) Original PDO The development objective of the proposed project is to further strengthen the institutional and financial capacities of Gram Panchayats across the State. PDO as stated in the legal agreement The objective of the Program is to strengthen the institutional and financial capacities of Gram Panchayats across West Bengal. FINANCING FINANCE_TBL Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Administered Financing 210,000,000 210,000,000 201,319,735 IBRD-87230 Total 210,000,000 210,000,000 201,319,735 Total Program Cost 210,000,000 210,000,000 201,319,735 Page 2 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) KEY DATES Program Approval Effectiveness MTR Review Original Closing Actual Closing P159427 15-Mar-2017 19-Apr-2017 19-Aug-2020 31-Dec-2022 31-Dec-2022 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 31-Mar-2021 169.77 Change in Results Framework Reallocation between and/or Change in DLI Change in Fiduciary KEY RATINGS Outcome Bank Performance M&E Quality Satisfactory Satisfactory Substantial RATINGS OF PROGRAM PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 20-Jun-2017 Satisfactory Satisfactory 41.99 02 04-Aug-2017 Satisfactory Satisfactory 41.99 03 12-Feb-2018 Satisfactory Satisfactory 51.79 04 21-Aug-2018 Satisfactory Satisfactory 94.06 05 27-Dec-2018 Satisfactory Moderately Satisfactory 103.26 06 29-May-2019 Moderately Satisfactory Moderately Satisfactory 103.26 07 27-Nov-2019 Moderately Satisfactory Moderately Satisfactory 126.98 08 25-Jun-2020 Moderately Satisfactory Moderately Satisfactory 135.37 09 06-Nov-2020 Moderately Satisfactory Moderately Satisfactory 135.37 10 28-Sep-2021 Moderately Satisfactory Moderately Satisfactory 169.77 11 31-Mar-2022 Moderately Satisfactory Moderately Satisfactory 177.97 Page 3 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) 12 08-Aug-2022 Moderately Satisfactory Moderately Satisfactory 177.97 13 11-Jan-2023 Satisfactory Satisfactory 191.65 SECTORS AND THEMES Sectors Major Sector/Sector (%) Public Administration 100 Sub-National Government 100 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Public Sector Management 47 Public Administration 47 Transparency, Accountability and Good 47 Governance Urban and Rural Development 53 Rural Development 53 ADM STAFF Role At Approval At ICR Regional Vice President: Annette Dixon Martin Raiser Country Director: Junaid Kamal Ahmad Auguste Tano Kouame Director: Ede Jorge Ijjasz-Vasquez John A. Roome Practice Manager: Catalina Marulanda Abhas Kumar Jha Vasudha Thawakar, Manvinder Task Team Leader(s): Uri Raich, Rajni Khanna Mamak ICR Contributing Author: Riddhiman Saha Page 4 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) I. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL AND THEORY OF CHANGE Context 1. At the time of appraisal, India was witnessing a substantial increase in fund flows to Panchayati Raj Institutions (PRIs 1) to implement the 73rd Constitutional Amendment and foster decentralization at the local level. To enable rural local bodies to deliver services more effectively, the 73rd Constitutional Amendment of 1993 established PRIs which consisted of three tiers: Zilla Parishads (ZPs) or districts, Panchayat Samitis or blocks, and Gram Panchayats (GPs) or villages. The Constitutional Amendment and ensuing laws enacted by the states formally recognized the PRIs and endowed them with powers and authority to function as self-government units. As these local governments played a key role in the delivery of public services, in 2015 the Fourteenth Central Finance Commission (CFC) recommended a substantial increase in tax devolution of the sharable central tax to the states from 32 percent to 42 percent for the next five years. However, strengthening public administration, financial management (FM), and planning and accountability systems of the PRIs was necessary to utilize the increased untied funding and to exercise the enhanced autonomy. 2. West Bengal was at the forefront of the decentralization process in India for the last few decades. The enactment of the West Bengal Panchayats Act, 1973, around two decades before the 73rd Constitutional Amendment, indicated the state’s vision and commitment toward decentralization and institutionalizing the PRI system. The state had ensured regular elections in PRIs, entrusted them with the responsibility of implementing various rural development programs, and had supported them with funds, functions, and functionaries to institutionalize rural development at the grassroot level. Annual financial audits of all GPs were made mandatory, and initiatives were undertaken by the state to strengthen the monitoring and evaluation (M&E) systems. Between 2010 and 2015, aggregate funding flows to the PRIs in the state increased by around 47 percent. The consolidation of the PRI system in the state was also supported by the World Bank-financed West Bengal Institutional Strengthening of Gram Panchayats Project (ISGPP) 2, which was implemented between 2010 and 2016. ISGPP provided performance-based block grants to 1,000 GPs on an annual basis for expenditures on public goods and services and undertook capacity-building activities in a range of areas including participatory planning, budgeting, monitoring, accounting and auditing, public procurement, human resources management, and environmental and social (E&S) screening. ISGPP contributed to the implementation of the 73rd Constitutional Amendment and was successful in establishing well-functioning fiduciary and planning systems in 1,000 GPs and developing a Performance-Based Grant (PBG) allocation system that could be rolled out to all GPs 3 in the state. The project helped develop (a) a transparent performance rating criteria by using Annual Performance Assessment (APA) scores, (b) an allocation formula based on population, (c) institutional arrangements for timely disbursement of funds, and (d) accountable M&E systems through APA and Quality Assurance Audits for tracking the utilization of funds by GPs. 1 PRI is a system of rural local self-government in India. 2 West Bengal PRI (P105990) – Investment Project Financing (IPF). 3 ICR - ISGP, December 2016 and IEG Report (ICRR). Page 5 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) 3. In 2016, the fourth State Finance Commission (SFC) recognized the contribution of ISGPP and recommended that the state government scale-up from the 1,000 GPs under ISGPP to all 3,229 GPs 4 in the state. The SFC report highlighted several constraints that were slowing down the decentralization process in West Bengal: (a) weak own-source revenue (OSR) generation and management; (b) weak intergovernmental fiscal transfer (IGFT) framework, owing to unpredictable fund transfers; (c) lack of proper expenditure management systems; (d) weak accounting and budgeting procedures; and (e) weak internal and external audit systems. The SFC report also noted that functional and expenditure assignments between the state and local governments, as well as within the three tiers of the PRIs, were unclear; GPs suffered from lack of adequate human resources; and the PRIs lacked the interest and motivation to enhance their OSRs because of their high dependence on IGFTs. 4. In accordance with the SFC’s recommendations, a comprehensive Government program (ISGPP II) was launched with an estimated budget of US$593.6 million covering all the GPs in West Bengal to take the decentralization agenda forward. The Government conceived ISGPP II under a programmatic approach and adopted the PBG system (developed under ISGPP) to transfer the entire state-level untied grants to all the GPs. The Government program aimed to accelerate the pace of rural decentralization to improve the quality of public services and local self-governance by augmenting the financial resources of PRIs and providing them support to plan, implement, and manage services in a decentralized and participatory manner. The key areas of focus were to establish a statewide PBG system, improve GP-level FM systems, develop HR capacity, improve local governance and decentralized planning and budgeting mechanisms at the local level. 5. The rationale for continued World Bank engagement, through a follow-on operation, was thus built on the success of ISGPP. The World Bank-funded Program-for-Results (PforR) operation formed part of this larger Government program with around 35 percent (US$210 million) of the overall planned funding. It aimed to support two-third 5 of the total number of GPs in the state; however, SFC funding was available to all GPs. With this approach, the Program focused on institutionalizing APAs and PBGs as the state government’s unified platform for providing discretionary funds to all GPs and ensuring targeted support to GPs that were not part of ISGPP. Overall, the Program aimed to improve GP level planning activities, service delivery and procurement, FM systems, transparency, and accountability. These efforts aimed to transform the existing PRIs into well-functioning, efficient institutions that would address the constraints outlined by the fourth SFC report. 6. The PforR instrument was considered appropriate as it enabled ISGPP II (the ‘Program’) to focus on systems development and capacity building on the basis of measurable results. The instrument enabled the Program to use and strengthen the existing state and GP systems that were already tested under ISGPP. It enabled the Program to measure specific results related to the development challenges highlighted by the fourth SFC, such as an increase in OSR, timely transfer of untied grants, timely external audit of GPs, and establishing of robust FM systems and management information systems (MIS) at the GP level. The PforR instrument facilitated a seamless transition from ISGPP which focused on a limited number of GPs, to ISGPP II, which aimed at implementing capacity-building and system development 4 At the time of appraisal, there were 3,342 GPs under the Program. However, around 112 GPs under Gorkha Territorial Administration were excluded from the Program (decision was taken at government level). 5 Rationale of providing IBRD funds to only 2,229 GPs being these were the new incoming GPs under the Program. IBRD had already supported the remaining 1,000 GPs under ISGPP. Page 6 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) activities in all 3,229 GPs in the state. This was fully aligned with the Government’s overall principle of establishing a harmonized grant allocation system based on performance and a capacity-building support system. The choice of instrument was also aligned to the recommendations of the 4th SFC to adopt and roll out the PBG allocation model of ISGPP throughout the state. 7. ISGPP II was central to the inclusion pillar of the World Bank Group (WBG) India Country Partnership Framework (CPF) (2013–17) (Report No. 76176-IN). Empowering and improving the capacity of GPs help the inclusive growth agenda. It also aims to improve access to services to the excluded population and enhance governance in the entire state through intermediate contributions to the longer- term goals of reducing poverty and boosting shared prosperity. Theory of Change (Results Chain) 8. The Theory of Change for the Program has been developed for this Implementation Completion and Results Report (ICR) based on the Program description in the Program Appraisal Document (PAD). Figure 1. Program Theory of Change Program Development Objectives (PDOs) 9. The PDO of ISGPP II is to strengthen the institutional and financial capacities of Gram Panchayats across West Bengal. Page 7 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) Key Expected Outcomes and Outcome Indicators 10. The key outcomes and PDO level indicators are shown in table 1. Table 1. Key Outcomes and Indicators Outcomes Outcome Indicators Total number of GPs that qualify Basic Mandatory Conditions (BMCs) and Expanded Improved institutional Mandatory Conditions (EMCs) annually in the Annual Performance Assessments (APAs). and financial capacity Average Percentage of performance based untied grants utilized by the GPs. Program Results Areas and Disbursement-Linked Indicators (DLIs) 11. The Program comprised four key results areas (KRAs) and seven DLIs, which are listed below. 12. The KRAs are KRA 1: Establishing a state-wide unified PBG allocation system for all discretionary funds available for GPs, KRA 2: Improving local government FM systems, KRA 3: Improving local governance and Human Resource (HR) capacities for increased transparency and accountability in local government functioning, and KRA 4: Improving the decentralized and participatory planning and budgeting mechanisms at the local level. 13. The following seven DLIs were used to trigger disbursements: DLI 1: Number of phase II Gram Panchayats (GPs) that have qualified Basic Mandatory Conditions (BMCs) in Annual Performance Assessment DLI 2: Number of phase II Gram Panchayats that have qualified Expanded Mandatory Conditions (EMCs) and got access to performance rewards in Annual Performance Assessment DLI 3: Percentage of activities implemented as per PRDD’s annual learning and training plan DLI 4: Average number of annual mentoring input days per Gram Panchayat with performance assessment DLI 5: Core institutional systems implemented by PRDD across all GPs for Gram Panchayat Management System (GPMS), Web-based Monitoring System (WBMS), and Geographic Information System (GIS); (b) Grievance Redressal Management System (GRMS) DLI 6: APA conducted by PRDD DLI 7: Targeted number of vacant core GP positions filled - Executive Assistants; GP Secretaries; and Nirman Sahayaks (NS) Note: PRDD = Panchayats and Rural Development Department B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) 14. The operation was restructured in March 2021. The changes are summarized below. Revised PDOs, Outcome Targets, Results Areas, and DLIs 15. The PDO and the KRAs remained unchanged. The following changes were made to the Results Framework (RF) and the DLI matrix: (a) PDO-level indicators. The target of PDO Indicator 1 (total number of GPs qualifying for BMC and EMC criteria) for Year 5 was reduced from 80 percent to 70 percent. Page 8 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) (b) DLI 2. (i) The Year 4 target was revised to 1,562 GPs and (ii) an additional disbursement cycle of APA for Year 5 was introduced for DLI 2 to use the US$13.69 million in savings (up to Year 4) under DLIs 1 and 2. (c) DLI 4. The Year 5 target for the assessment of mentors was increased from 60 percent to 75 percent. (d) DLI 5 (a). The DLI targets of Years 2, 3, 4, and 5 were revised and realigned to Government priorities. (e) DLI 5 (b). The target for Year 5 (percent of grievances redressed) was increased and the allocation was revised from US$0.6 million to US$0.3 million. This saving of US$0.3 million was reallocated to a new target, providing onsite mentoring support (physical/virtual) to 70 percent women- elected representatives across the universe of remote GPs, which was introduced for Year 5. (f) DLI 7. The DLI was dropped and the corresponding amount of US$1 million was reallocated to DLI 5 (a). The corresponding ‘Activity 5: GP level recruitment support’ was also dropped. Other Changes 16. The following other changes were made: (a) Intermediate results (IR) indicators. (i) A new IR Indicator 3.3 6: Percentage of women elected representatives mentored (physical/virtual mode) in remote GPs, was added; (ii) as DLI 7 was deleted, the related IR Indicator 3.2 was removed; and (iii) the targets for IR Indicators 4.4a and 4.4b were increased by 5 percent in Year 4 and Year 5. (b) Updating of the Program Action Plan (PAP). The Program Action ‘Amendment of the Panchayat Act 1973 and Rules 2007’ was revised to ‘Amendment of Rules 2007’. (c) Changes to Program procurement arrangements. The procurement arrangements were revised and aligned to the state government’s procurement rules and guidelines. (d) Reallocation of funds. Savings from DLIs were reallocated to DLI 2 (in the additional cycle in Year 5) and DLI 5 (a). Rationale for Changes and their Implication for the Original Theory of Change 17. Changes were made to the Program due to the following: (i) The impact of the COVID-19 pandemic - Given that achieving the target of PDO 1 was entirely dependent on the timely completion of external audits, timely approval of development plans, completion of subprojects by GPs, accelerated utilization of funds, etc., the end target (Year 5) was reduced by 10 percent, as the COVID-19 pandemic (including lockdowns) had significantly affected GP operations; (ii) The GPs under Gorkha Territorial Administration (GTA) were not covered by the larger Government program - The Year 4 target of DLI 2 was reduced from 1,634 GPs to 1,562 GPs, as 72 7 GPs (around 3 percent of Phase II GPs) under the GTA were not covered by the larger Government program, and therefore, was out of ISGPP II’s legal scope; (iii) Change in government priorities and decisions - As a result of the state level hiring freeze of GP core staff, 6 All intermediate indicators mentioned in the ICR are numbered (for example, 1.1, 1.2, and 2.1) as per the RF in the PAD. 7 72 GPs were under Phase II. In total, the Program did not cover 112 GPs under GTA Page 9 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) changes in state laws, and systems development already implemented by other central government systems, a few annual targets for DLI 5 and 7 became redundant; (iv) The good performance of the Program - The overall good performance by the Program resulted in upward revisions of the annual targets (DLIs 4, 5b); and (v) The need to maintain consistency in procurement processes and arrangements across the state - This resulted in aligning the procurement processes to the State Government’s procurement rules and guidelines. These changes did not affect either the Theory of Change or the originally expected Program scope or outcomes. II. OUTCOME A. RELEVANCE Relevance of PDO 18. Relevance of the PDO is rated High. The Program is consistent with Focus Area 3: Investing in Human Capital (which highlights issues related to public service quality) of the current WBG CPF for India for 2018–22 (Report No. 126667-IN). Objective 3.3: Improve access to rural water supply and sanitation services, states that the WBG will strengthen the capacity of state and local institutions for efficient and sustainable water and sanitation service delivery, scaling up performance-based service delivery models and increasing customer voice for accountability and providing quality assurance though robust M&E systems. ISGPP II follows a holistic approach in strengthening the service delivery capacity of all GPs (across all sectors) in West Bengal. The Program is also linked to Objective 2.4: Increase access to market relevant skills development and Objective 2.5: Enable more quality jobs for women, of Focus Area 2: Enhancing Competitiveness and Enabling Job Creation, as it involves capacity building and hiring of GP staff, development of local infrastructure, and so on. 19. The CPF emphasizes the need to focus on the catalytic approaches on ‘How’ the WBG group will deliver results at scale. How #3 includes ‘Strengthening public sector institutions’, which focuses on improving institutions in sectors and sub-sectors through increasing capability and better aligning incentives, as well as strengthening core government systems. This is in line with the institutional strengthening objective of the Program, which leverages PBG systems to showcase incremental improvements in GP functioning and overall strengthening of systems’ development at the local level. Under How #2: Engaging a Federal India, the CPF states that at the local level, the WBG will work with local governments to improve planning, coordination, and implementation capacity to address local challenges. Finally, the CPF states that the PforR instrument will incentivize better service delivery. In addition, the state government’s plan 8 to continue the Program for the GPs after the closing date also indicates the relevance of the PDO in the state political economy context. Relevance of DLIs 20. Relevance of DLIs is rated High. The DLIs were structured around the key issues faced by the state and provided sufficient flow of funds for Program implementation based on results achieved. The DLIs were clearly defined, with specific verification protocols and timelines. The verification mechanisms, annual allocations, and the minimum and maximum DLI values to be achieved to trigger disbursements 8 Details of how the state government wants to continue the Program activities are provided in later sections. Page 10 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) were well laid out in the Program Operations Manual (POM). Overall, the DLIs were feasible to be achieved; however, DLI 7: Targeted number of vacant core GP positions filled – executive assistant, GP secretary, and NS, involved external factors and decision-making at the state level due to which it had to be eventually dropped. For DLIs 3 and 4, the verification protocols were well designed, but the conditions for achievement were relatively simple compared to the other DLIs. 21. The DLIs were very well aligned with the PDO and the RF. DLIs 1, 2, and 6, which accounted for about 75 percent of the IBRD funds, were closely linked to the PDO indicators and all four KRAs. These DLIs played a key role in institutionalizing the PBG system in all GPs and underscored the importance of a performance-oriented disbursement mechanism. The remaining DLIs (3, 4, 5, and 7) complemented DLIs 1, 2, and 6, and played an overarching role to enable the Program to achieve its PDO and the Results Areas through capacity building, mentoring, staffing, and systems development. Some of the DLIs were revised post midterm review (MTR) to remain sufficiently relevant to the PDO, Program needs, and Government priorities. These involved introducing an additional DLI cycle in Year 5 for DLI 2; revisiting and revising redundant DLI targets; adding new indicators related to gender-based mentoring and capacity building in eco-fragile and remote regions; and dropping a DLI that depended on external factors (and had no direct impact on the PDO). Considering that even the SFC grants adopted the Program DLIs to disburse the state- level grants, the DLIs remained highly relevant throughout implementation. 22. Overall, the DLIs provided the necessary triggers to foster institutional development and achieve Program objectives. DLIs 1 and 2 incentivized GPs to improve their performance on planning, service delivery, procurement, and financial and transparency aspects. This helped establishing a PBG mechanism in the state and significantly improved GP capacity and performance. Regular mentoring and training mechanisms established in all 3,229 GPs through DLIs 3 and 4 contributed significantly toward strengthening the institutional and financial capacity of the GPs and achieving the desired results of the Program. DLI 5 facilitated the development of integrated systems, dashboards, and analytical tools that improved accountability and transparency of all GPs, and enabled government departments in decision- making and analysis of GP performance. Rating of Overall Relevance 23. Overall Relevance is rated High, as the PDO and the DLIs remained highly relevant to the CPF and Government priorities throughout the Program period. Moreover, the DLIs were revised when required, to keep objectives and DLIs fully relevant. B. ACHIEVEMENT OF PDOs (EFFICACY) 24. The PDO consisted of strengthening two closely related elements: institutional and financial capacities of GPs. To develop institutional capacity, the Program aimed to regularize and improve the development planning process, increase citizen participation, improve transparency through e- procurement, enhance quality control measures, integrate E&S aspects in the planning and implementation of local infrastructure, and improve overall transparency and accountability by establishing a GRMS. For strengthening financial capacity, the Program helped GPs improve their OSR, established a robust internal audit mechanism, improved documentation and reporting systems, and ensured usage of online accounting modules. The Program measured the achievement of these aspects through the APA exercise (discussed below), which included both institutional and financial conditions Page 11 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) across several BMCs, EMCs, and thematic areas. Given that in many cases the institutional and financial elements were blended in the APA conditions, the achievement of the PDO has been assessed in an integrated manner for both elements. 25. Split Rating. The assessment of Outcome uses the split rating methodology to account for the reduction in the PDO 1 target by 10 percent in Year 5 due to the impacts of the COVID-19 pandemic. The following paragraphs, however, discuss the achievement of the PDO in a consolidated manner for both pre- and post-restructuring stages of the Program, as the PDO and the related elements remained the same in both stages, except for the slight reduction in PDO 1 target. Assessment of Achievement of Each Objective or Outcome 26. The PDO of strengthening the institutional and financial capacity of GPs in West Bengal was to be achieved through the combined efforts of establishing a statewide PBG mechanism, improving FM systems, building HR capacity, and improving the overall quality of service delivery. The development objective was measured by two PDO indicators: (a) total number of GPs that qualify BMCs and EMCs annually in the APAs; and (b) average percentage of performance-based untied grants utilized by the GPs. These indicators were measured through the APA every year in all 3,229 GPs. The APA assessed (a) the four BMCs; (b) the two additional EMCs; and (c) the specific thematic areas that focused on assessing and incentivizing performance in planning and budgeting, project execution and service delivery, FM, and transparency and accountability. These conditions also covered the progress of the four KRAs under the Program. APA was therefore able to assess the Program’s performance toward the KRAs and PDO indicators as a whole. The assessment of achievement of the PDO is therefore based on the qualitative and quantitative evidence derived from unpacking the APA results. The assessment also reviewed other cross-cutting Program activities (for example, mentoring, formal training, systems development, internal audit, and hiring of core staff) that contributed toward achieving the PDO but were not part of the APA exercise. The assessment is also based on inputs gathered from workshops/consultations/field visits to sample GPs that were undertaken during implementation. 27. Achievement of PDO indicators. During the implementation period (2017–2022), the Program demonstrated good progress toward the year-on-year targets and achieved the end targets of both PDO indicators. Table 2 illustrates the indicators, their baselines and end targets, and achievement at closing date. Table 2. Achievement of PDO Indicators Achieved Revised PDO Indicators Baseline Original Target at Target Completion PDO 1: Total no. of GPs that qualify 40 80 70 75 BMCs and EMCs annually in APAs (percent) PDO 2: Average Percentage of 46a 66 No 75 performance based untied grants (as per the PAD, it is +5% revision utilized by the GPs (percent) increase every year over baseline b) Note: a. To be obtained through APAs in Year 1 of the Program, as the first disbursement of PBG was to happen in Year 1. Page 12 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) b. The end target is equivalent to an annual increase of 5 percent every year over baseline till Program closing (since baseline is 46 percent, the end target is therefore 66 percent). 28. BMCs. As highlighted above, PDO 1 consisted of four BMCs and two EMCs. The Program performed well in BMC 1, which involved increases in the OSRs of GPs. The Program interventions helped GPs demonstrate moderate to strong year-on-year incremental growth in their OSR performance. OSRs improved by a compound annual growth rate of 8–9 percent over the last four years of the Program. In absolute terms, total OSR collection, since the beginning of the Program in 2016–17, increased by around 35 percent in 2019–20. With continuous mentoring support and formal training sessions under the Program, average per GP OSR increased from around INR 0.39 million in 2009–10 (i.e., before the ISGPP era) to INR 1.15 million in 2017–18 (during ISGPP implementation). However, the aggregate number of GPs qualifying this condition was largely stagnant. In the case of BMCs 3 and 4, which focused on timely and systematic preparation of Gram Panchayat Development Plans, including the GP Budget and utilization of the computerized GPMS on a regular basis, respectively, the Program performed well. However, the Program faced challenges in implementing BMC 2, which involved the audit of GPs by the Examiner of Local Accounts (ELA) which was outside the departmental scope of the Program implementing agency. Significant delays in completing the audit of GPs by ELA due to lack of adequate resources and the impacts of the COVID-19 pandemic further delayed the APA process and the disbursement of funds to GPs. 29. EMCs. The EMCs were primarily related to the utilization of untied funds (EMC 1) and the completion of subprojects at the GP level (EMC 2). In case of EMC 1 (which is also linked to PDO indicator 2), which pertained to GPs utilizing their untied PBGs, progress was initially slow due to Panchayat elections, the lack of technical staff, and the impact of the COVID-19 pandemic. Until Year 3 of the Program, fund utilization averaged around 50 percent; however, the results improved gradually due to the training and mentoring activities initiated under the Program and the GPs could achieve 75 percent utilization by Program closure. For EMC 2, the overall performance improved over the years, as 93 percent GPs qualified in APA 2020 compared to 67 percent in APA 2018. The combined performance of the four BMCs and two EMCs was used to measure the achievement of PDO Indicator 1, while PDO Indicator 2 was directly linked to EMC 1. Given the above, it is important to underscore the key role of the Program interventions in helping GPs achieve the Program’s outcomes. These primarily include having a robust APA mechanism which required GPs to perform to qualify for receiving untied grants, on-demand/need- based deployment of mentors who coordinated with GPs and provided them hand-holding support in identifying and addressing the gaps (for example, ways to improve OSR and timeliness in the preparation of development plans), demand-driven formal training sessions, and systems development that made the GPs more efficient and transparent. Table 3 9 summarizes the status of GP performance on the BMCs and EMCs at Program closing. Table 3. Performance trend of GPs in the final year compared to the previous year Functional Area linked to the Percentage of GPs that Performance trend of the number Mandatory Conditions qualified in last APA Cycle of GPs meeting this condition a Own source revenue (BMC 1) 89 Stagnant External audit (BMC 2) 93 Downward GP Development Plan (BMC 3) 99 Upward 9 Source: APA 2020 Report. Page 13 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) Functional Area linked to the Percentage of GPs that Performance trend of the number Mandatory Conditions qualified in last APA Cycle of GPs meeting this condition a Use of FM system (BMC 4) 96 Upward Utilization of funds (EMC 1 and PDO 2) 94 Upward Completion of subprojects (EMC 2) 93 Upward All BMCs and EMCs qualified (PDO 1) 75 Upward Note: a. Performance trend indicates whether the final year results show an upward or downward trend in performance compared to the previous year. 30. The upward trend (as illustrated in table 3) in GP performance indicates that the Program was successful in building the institutional and financial capacity of GPs. However, as the definition of the PDO is broad, a detailed assessment of the KRAs as well as the activities undertaken by the Program provides a fuller picture of the progress toward achieving the PDO. 31. KRA 1: Establishing a state-wide unified PBG allocation system for all discretionary funds available to GPs. KRA 1 followed a two-pronged approach to establish a PBG system in the state: first, it implemented activities (i.e., conducting APA every year) that enabled GPs to access the PBGs, and second, it ensured timely allocation of PBGs so that GPs could plan and implement investments effectively and efficiently. The KRA aimed to mainstream the PBG systems by linking it with DLIs 1 and 2, which meant that the Program needed to achieve the DLIs to access the PBGs every year. During implementation, the Program consistently met the DLI 1 and demonstrated good results as GP-level OSRs started to increase, online accounting systems began to be used widely by GPs, and the development planning process became standardized and streamlined. In the case of DLI 2, GP performance (related to the utilization of funds and completion of subprojects), although affected initially due to elections, improved gradually toward the end of the Program period. The performance of Phase I GPs and Phase II GPs in accessing PBGs also varied. Based on APA results, 10 the number of Phase II GPs that could access PBGs increased gradually over the years from 50 percent to around 75 percent. However, the performance of Phase I GPs (which were not supported by IBRD funds under ISGPP II but were part of the Government program) indicated a sharp dip from 92 percent at the beginning of the Program to 59 percent in 2019–20. One of the key reasons for the Phase II GPs to perform better can be attributed to the additional capacity-building support that was provided to them under the Program. This was based on the general assumption that Phase I GPs were already well-capacitated through ISGPP, whereas Phase II GPs needed more support to ensure a level playing field to access the PBGs. The decline in the performance of Phase I GPs was highlighted during the MTR, and the Program took several measures (for example, intensive mentoring for GP staff) to improve their performance. Subsequently, their performance increased from 59 percent in 2019–20 to 77 percent at Program closing. Despite the implementation challenges and based on field- level consultations, the PBG system appears to have been well accepted by the GPs, as overall performance improved over the years. The Program has helped GPs understand the relevance of an efficient PBG system that facilitated improvements in institutional systems and capacity and enabled them to function more efficiently and effectively. 32. KRA 2: Improving local government financial management systems. The Program helped institutionalize a robust set of FM systems and improved the OSRs of GPs. The key activities included 10Important to note that Phase I GPs had to meet both BMC and EMC to access the PBGs given that they were already part of the earlier ISGPP. Phase II GPs, given they were new, had a fewer conditions (only BMC) to achieve to receive the grants. Page 14 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) providing hand-holding support to GPs (capacity building through formal learning and mentoring) to improve OSRs, in addition to incentivizing them through PBGs. On average, GP revenues increased by 8– 9 percent over the last four years of the Program (refer to annex 1 for IR Indicator 2.2 in the RF). The Program also incentivized the regular usage of GPMS by all GPs and established an integrated state-level digital dashboard to improve monitoring of GP performance in real time, and decision-making at the state and local government levels. The Program also institutionalized a risk-based internal audit ecosystem for GPs to strengthen the state’s oversight mechanism. Under this activity, the Program developed an Internal Audit Manual and trained more than 300 internal auditors. At Program closing, internal audits had been completed in 100 percent and 75 percent of GPs for FY2020–21 and 2021–22, respectively. At closing, the Program met the target of IR Indicator 2.1, which focused on improving GP-level PFM systems, scoring 84.44 percent, a significant improvement from 66 percent in Year 3. Overall, the Program has helped in establishing a robust internal audit ecosystem, increasing GP-level OSRs, and improving PFM systems at the local level. 33. KRA 3: Improving local governance and Human Resource (HR) capacities for increased transparency and accountability in local government functioning. The Program aimed to bridge capacity gaps by helping the state recruit the three core GP positions: Executive Assistant, Secretary, and NS (engineer). Although this activity made good progress initially (when more than 1,300 staff were hired), recruitment was stopped due to decisions taken at the state government level. The Program expected the status to remain unchanged for the foreseeable future and dropped this activity during the restructuring in 2021. The corresponding DLI 7 and IR Indicator 3.2 were also dropped. While this did not significantly affect achievement of the PDO, shortage of staff impeded GPs in executing their administrative duties as well as service delivery functions and subproject implementation. The Program, however, took complementary steps to improve the capacity 11 of the existing staff (especially women-elected representatives in remote GPs) by providing additional mentoring support. At Program closing, more than 82.52 percent women-elected representatives in remote GPs had received additional mentoring sessions under the Program (annex 1, IR Indicator 3.3). 34. Another dimension of this KRA was to ensure the quality of local governance through transparency in decision-making and public accountability. Some of the conditions under this indicator were related to the GRMS and mandated certain number of grievances to be registered with the GPs to demonstrate performance. While the indicator scored only 51.21 percent in relation to the target of 73 percent, the Program helped establish a GRMS for the GPs and made efforts to spread awareness of the system. 35. KRA 4: Improving the decentralized and participatory planning and budgeting mechanisms at the local level. KRA 4 focused on improving decentralized planning and budgeting systems, as well as project execution and service delivery capacity at the rural level. As described below, the Program played a critical role in institutionalizing and standardizing scheme execution in GPs and enhanced the service delivery capacity of core GP staff. (a) Planning and budgeting. The Program interventions helped create an enabling environment for conducting the annual development planning process in a streamlined, systematic, and timely 11Important to note that human resource capacity was improved through larger Program wide initiatives under Activity 2 and 3 (Formal learning and Mentoring, respectively). These activities are explained in the later paragraphs. Page 15 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) manner. Mentors specialized in participatory planning regularly interacted with GPs and informed them of the statutory planning processes and timelines. These initiatives helped establish a standardized planning and budgeting mechanism and improved documentation and transparency. Standardizing the planning process also ensured that the annual meetings were held at a specified time each year and the quorum was maintained. Under this activity, the GPs were able to foster a participatory planning process by undertaking para baithaks (community gatherings), wherein the local people could engage directly with GP staff in the planning process. Following this, fund fragmentation reduced significantly as GPs adopted a holistic approach in planning and prioritizing the works. As a result, the plans became more realistic, and the average size of activities increased significantly to US$2,500 in 2022 (at ISGPP II closure) compared to US$581 in 2010 (pre-ISGPP era). However, the Program scored 68 percent in Year 5, against the target of 75 percent (annex 1, IR Indicator 4.2), due to the online Gram Panchayat Integrated Monitoring System (GPIMS) not being updated in some cases with planning meeting details. Also, many GPs could not focus on activities other than the construction of roads (another assessment condition under IR Indicator 4.2) due to local level demands and needs. Nevertheless, the Program recognized the gaps in IT capacity and appreciated that the evolution of needs beyond roads is dependent on local needs and priorities. Overall, the Program has made a significant contribution toward establishing a standardized and improved planning and budgeting system in GPs. (b) Project execution and service delivery. The Program helped strengthen the service delivery capacity of GPs and enabled them to develop infrastructure that played a key role in improving the communities’ access to basic services. As highlighted above, GPs focused largely on developing all- weather roads for improved connectivity. In addition, small water supply schemes, streetlighting initiatives, and other activities such as the water ‘ATM’ for distributing filtered water to the general public, sanitary napkin vending machines, and solar power plants to reduce electricity costs in GP offices were also undertaken. A GP Works Manual was developed under the Program to help GPs standardize the subproject execution and service delivery process and enabled them to complete subprojects more efficiently. With the introduction of e-tendering systems and the Procurement Manual, the overall procurement systems have become more transparent and efficient and facilitated wider participation of bidders. Procurement of testing equipment and installation of quality control laboratories at the block level have strengthened the GPs’ overall contract management capacity, as GP staff are now able to assess the quality of materials provided by the contractors and are able to monitor the progress of works effectively. Training of contractors under the Program has helped GPs manage expectations and improve the overall quality of construction. As a result of the implementation of the Environmental and Social Management Framework (ESMF), GP staff are now aware of E&S issues at the field level. Several GPs have now scaled up their E&S practices in other schemes, as applicable (including adherence to the negative list provided under the Program). The findings of the Program’s Output Verification Study indicate improvements in the integration of ESMF guidelines by GPs. The Program has, however, not met the corresponding IR Indicator 4.1, as some shortcomings remain, including in ESMF reporting, geotagging of subprojects, preparing good quality comparison statements during procurement, creation of sustainable and remunerative assets, fund allocation for operation and maintenance (O&M) activities, and utilization of own funds for development activities. (c) Results disaggregated by gender and scheduled tribes/scheduled castes (SC/ST). The Program disaggregated APA performance by gender and SC/ST groups. At Program closing, there were close Page 16 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) to 52 million PBG beneficiaries, of which around 25 million were women. In terms of ST/SC GPs, at closing, an average of 65 percent GPs were able to access PBGs compared to 49 percent during inception (refer annex 1, IR Indicators 4.3 and 4.4). 36. Cross-cutting activities. Program-level capacity building and development of integrated web- based systems contributed significantly to achieving Program outcomes (outlined in the earlier paragraphs), as detailed below. 37. Formal learning and training support (linked to DLI 3). The Program introduced formal learning and training initiatives for all GP staff (NS, Secretaries, and Executive Assistants), elected representatives (Pradhans and Upapradhans), and contractors. It adopted a bottom-up district-level planning process, wherein district staff assembled every year to assess the training needs of GPs and compile annual district- level training and learning plans. These plans were consolidated at the state level and an annual GP training plan and calendar was developed every year. In FY2021–22, the Program provided targeted trainings to around 14,100 participants on key subjects related to e-tendering, online GPMS, Goods and Services Tax (GST), and technical and engineering issues (including E&S and disaster risk management). During the past five years, the Program provided trainings to around 75,000 participants on various key issues. Post MTR, a feedback loop was established, wherein the gaps in weaker GPs were identified and training plans focusing on specific interventions were designed accordingly. During the pandemic, the Program faced difficulties in providing field-level trainings but adapted to the dynamic environment through online classes for GP staff. To sustain the training activities, the Program developed several online training modules/video clips on specific topics (for example, internal audit) for sustainability and ease of access for GP representatives. Feedback on the quality of training was also collected from the GP staff/trainees for each training event. Overall, the demand-driven approach provided GP staff and elected representatives a greater understanding of their roles and responsibilities and strengthened overall institutional capabilities, which enabled improving OSR, planning, service delivery, and transparency leading to the achievement of the Program’s development outcomes. 38. Mentoring of GP staff (linked to DLI 4). The Program complemented formal learning and training activities with mentoring support 12 for all GPs to strengthen their functional capacity in planning and governance, FM, public infrastructure, and rural engineering and IT systems, and as a result, helping them achieve the BMCs and EMCs outlined above. Every year, the Program deployed around 480 mentors to provide continuous and demand-driven hand-holding support to the GPs. This activity required an average of 19 days of onsite mentoring in each GP and performance assessment of the mentors deployed. The Program successfully met the DLI target every year, as mentor support gradually increased from an average of 21 days in FY2017–18 to 33 days in FY2021–22. A Mentor Deployment Strategy (MDS) was developed which focused on identifying weaker GPs and ensured focused and increased intensity of support to them. The Program’s Mentor Reporting System (MRS) geotagged the movement of mentors and automatically updated the mentor hours provided to GPs by each mentor. Mentor deployment was affected by the Panchayat elections in 2018, the State Assembly elections in 2021, and the COVID-19 pandemic in 2020 and 2021. The day-to-day mentoring support ensured that GPs understood their responsibilities and functions; identified and addressed the gaps in planning, service delivery, and fiduciary aspects, and enabled them to collectively achieve overall Program outcomes. 12 Originally, mentoring support was introduced in ISGPP. Page 17 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) 39. Systems development and rollout of the integrated GPIMS and GPMS (linked to DLI 5). Systems development activities under the Program focused on strengthening local governance and improving transparency through the rollout of user-friendly and integrated web-based IT systems. The Program administered five web-based applications: (a) GPIMS, which was designed to replace the manual system of collecting data, planning, and monitoring of GP-level activities (subprojects or schemes); (b) GRMS, which played a key role in registering and timely resolution of grievances by the GPs; (c) the training MIS application, which enabled departmental users to capture and monitor training/trainer/trainee data and take decisions accordingly; (d) GP Works Manual, which contained a simplified list of typical works undertaken by GPs with descriptions of standardized procedures to be followed before and during construction, including the ESMF guidelines; and (e) GIS application, including the MRS as highlighted above. The Program helped create a link between the GPIMS and GPMS and automated the data exchange between the two systems, thereby improving accuracy and efficiency in GP functioning. The Program established a state-level digital dashboard that displays GP-level performance data in the public domain for improved accountability and transparency and has enabled GPs’ staff and government officials to take decisions and analyze GP performance over time. It also developed an online vetting software to ensure efficient workflow management and timely vetting procedures for GP subproject documents (for example, estimates, drawings, and designs). Overall, the Program enabled the implementation of several systems aimed at enhancing transparency and efficiency in GPs and facilitating decision-making at the state/department level. 40. Implementation of the PAP. In addition to the above key activities, the PAP helped the Program address the weaknesses identified during the technical/E&S assessment and played a key role in the overall achievement of the PDO. A summary of the PAP’s contribution towards achieving the PDO is provided in annex 6. 41. Assessment of the Efficacy of the restructured Program. As highlighted above, assessment of the achievement of the PDO has been discussed in a consolidated manner for both pre- and post- restructuring stages of the Program, as the PDO and related elements remained same in both the stages, except for a slight reduction in the PDO 1 target. Rating of Overall Efficacy 42. Overall Efficacy is rated Substantial. Based on the discussion above on the achievements of the RF indicator targets, disbursement against DLIs, achievements under the KRAs, and other aspects, the overall rating of efficacy of both the original and the restructured Program is rated Substantial. C. JUSTIFICATION OF OVERALL OUTCOME RATING 43. Based on the sub-ratings for relevance and efficacy, overall outcome of the Program is rated Satisfactory. The PDO and DLIs remain fully relevant to the CPF and government priorities. The Program was able to develop institutional capacity by regularizing a participatory development planning process, improving transparency through e-procurement and establishing a GRMS, ensuring that quality control measures are in place through laboratories established across 100 blocks, among other results. It also strengthened the financial capacity of GPs by improving their OSRs by around 35 percent since 2016, improving fund utilization from 49 percent in 2010 to 75 percent at Program closing, establishing a robust internal audit mechanism, improving documentation and reporting systems, and ensuring the usage of Page 18 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) online accounting modules. The overall outcome rating is derived using the split rating methodology as illustrated in table 4. Table 4. Overall Outcome Rating (Split Rating Applied) Original PDO and Targets Revised Targets With Without Restructuring Restructuring Relevance of PDO High Efficacy (PDO) Substantial Substantial 1 Outcome Rating Satisfactory Satisfactory 2 Numerical Value of outcome ratings a 5 5 3 Disbursement 170,293,013 13 31,026,722 4 Share of disbursement 85 percent 15 percent Weighted value of the outcome rating 5 (Row 2 × Row 4) 4.23 0.77 6 Final outcome rating Satisfactory (5) Note: a. Highly Unsatisfactory (1); Unsatisfactory (2); Moderately Unsatisfactory (3); Moderately Satisfactory (4); Satisfactory (5); Highly Satisfactory (6). D. OTHER OUTCOMES AND IMPACTS (IF ANY) Economic Impact 44. During the Program period, a total of 76,681 works were carried out in 3,329 GPs, valued at INR 15,733.65 million (US$243.83 million). A review of the works undertaken by ISGPP II indicates that the key sectors were road construction (73 percent), water supply (8.6 percent), drainage facilities (5.2 percent), and electrical works (1 percent). The key benefits of these subprojects include reduced transport costs, flood damage impacts, water borne diseases related health issues, power charges and increased job creation activities. The works were implemented following the ESMF guidelines and the GP Works Manual developed under the Program. Two Output Verification Studies by a third-party firm hired by the government during Program implementation indicated overall improvements in both the quality of infrastructure as well as the technical capacity of GPs for project execution and service delivery. Site visits by the World Bank task team during supervision and closure also came to the same conclusion. 45. As the ISGPP II investments were determined based on the priorities of the respective communities, the analysis of their economic impacts has focused on assessing whether the EIRRs at Program completion of a sample of subprojects from the main sectors of investments were above the social discount rate (SDR) threshold of 8 percent. Five sample subprojects representing these sectors were selected for the economic analysis and the results are provided in Table 5. The EIRRs of the sample subprojects are between 15 to 24 percent, significantly higher than the SDR. Table 5: EIRR of sample subprojects at Program completion Sl. Details Subproject 1: Subproject 2: Subproject Subproject 4: Subproject 5: No. Construction of Construction of 3: Sinking a Construction Installation of Concrete Road Gravel Road Tube well of Drain solar panel 1 Project cost (US$ 0.0024 0.0034 0.0017 0.0020 0.0057 Million) 2 Population (nos.) NA NA 200 140 NA 3 EIRR (percent) 19.0 22.6 23.5 18.5 15.2 13 The disbursement amount of US$170.29 million as indicated above includes front end fee of US$525,000. Page 19 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) 46. The economic impact analysis at Program completion presented above is based on a similar approach that was adopted during appraisal. The analysis during appraisal consisted of selecting sample subprojects from four sub-sectors (roads, water, drainage, etc.,) which were part of ISGPP, and assessing their economic internal rate of return (EIRR) that ranged between 20 to 27 percent. However, although the analysis for this ICR adopts a similar approach to that adopted during appraisal, the results of the appraisal and completion stages cannot be compared directly, as the sample subprojects and their locations are different, and they were implemented under different programs (ISGPP and ISGPP II). A detailed economic analysis is presented in Annex 5. Gender 47. The Program recognized the existing gender gaps and challenges faced by women in West Bengal. The Constitution of India provides for 33 percent reservation for women, while in West Bengal the reservation for women is at 50 percent in all the three tiers of PRI. The Program provided space and opportunities for women PRI members to come forward and express their views. APA results indicate that at least 50 percent women participated in Gram Sansad and Gram Sabha meetings in most GPs. The Output Verification Exercise found that 88 percent of the sample GPs had more than 50 percent women members present during the committee meetings (Upasamitis). The Program also took steps to set aside a specific budgetary space for women-oriented activities in the annual action plans. In addition, training on gender issues was imparted to 500 Secretaries of Women and Child Development and Social Welfare Sub-committees. As part of information, education, and communication (IEC) activities, leaflets were designed for creating awareness on gender issues (such as dowry, child marriage, trafficking, dropping out of school, and so on). At MTR, a new DLI target was added to measure the capacity-building support provided to the women-elected representatives in remote GPs. At the same time, an intermediate indicator (IR 3.3) was also added to measure progress toward this activity. About 1,421 elected women representatives in eco-fragile/remote GPs received onsite mentoring support (physical/virtual) based on Training Needs Assessment on priority topics such as women and child-friendly GP drinking water and sanitation, organizational behavior and the role of elected members in community development. Poverty Reduction and Shared Prosperity 48. The Program implemented the Vulnerability Group Development Index which identified the backward areas in the state, ensured their active participation in the planning process, and assessed the areas of disparity in the local context to provide better services for the development of vulnerable groups and ensure holistic and sustainable development. As such, the Program had a direct impact on fostering inclusivity, providing better access to basic services and improving the overall quality of life at the rural level, and in turn contributed to the long-term goals of reducing poverty and boosting shared prosperity. III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION 49. The Program design and objectives were aligned to the SFC recommendations and carried forward the overall design of ISGPP (the predecessor project). The key factors that affected the Program design and objectives during the preparation stage were the results of ISGPP and the recommendations Page 20 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) of the fourth SFC. The success of ISGPP resulted in SFC recommending the state government to scale up the project to all GPs and adopt the PBG system to distribute all state-level untied grants. Key lessons learned from ISGPP, such as leveraging a PBG system to motivate GPs to improve performance, deploying mentors as a key element of capacity building, and using external independent firms for the APA, were carefully integrated in the overall design of ISGPP II and were scaled up to cover all GPs in the state. This ensured that the Program objectives had a significant development impact, and the overall design was pragmatic and implementable. The Program design also considered that West Bengal was at the forefront of the decentralization process in India and appropriately identified the strengthening of institutional and financial capacity of GPs as its key development objective. The Program was also well aligned to the inclusion pillar of the CPF (2013–17, Report no. 76176-IN). 50. A well-defined RF and DLI verification methodology facilitated a robust M&E framework and ensured the effective measurement of Program interventions. Based on the SFC recommendations, experiences from the earlier project and the Program’s technical and fiduciary systems and Environmental and Social System Assessments (ESSAs) that were carried out at appraisal, the RF was well designed and had achievable yet outcome-oriented targets. The DLI verification protocol was well defined in the Program documents with a clear distinction between annual and end targets. DLIs 1 and 2, which comprised around 65 percent of IBRD funding, were directly linked to the PDOs, and they enabled the Program to regularly collect evidence of progress through the APA exercise. 51. The impact of external factors was not anticipated. The DLI verification protocols and the APA tools were generally robust; however, the significant impact of externalities on disbursements and progress towards achieving the PDO could have been better reflected in the overall Program design, for example, (a) the GP audits were directly linked to the APA, but were undertaken by an agency for whom these audits were one of their many priorities and consequently resulted in delays, and (b) the hiring of GP-level staff was affected by state-level policy decisions. 52. Readiness for implementation of ISGPP II was ensured at appraisal. Based on the successful completion of ISGPP in 2016, the state and the World Bank were able to put together a well-capacitated implementation framework that was ready for implementing ISGPP II. The state-level Program Management Unit (PMU) had sufficient capacity with many staff continuing from ISGPP. B. KEY FACTORS DURING IMPLEMENTATION (a) Factors subject to the control of government and/or implementing agencies 53. Policy decisions by the state government resulted in a hiring freeze of core GP staff and overdependence on mentoring staff. The Program had embedded specific activities that focused on bridging the staffing gaps at the GP level (for example, core staff including engineers and secretaries). However, the hiring freeze enforced by the state during implementation resulted in the lack of well- capacitated staff in many GPs to take on the increased workload as a result of the greater devolution. This eventually led to an overdependence of many GPs on mentors. Subsequently, the Program took measures to ensure targeted mentor deployment through the MDS. Also, new indicators were introduced in the DLI matrix and RF that were related to capacity building of women-elected representatives. Page 21 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) 54. Delays in the external audit of GPs affected the disbursements of grants to GPs. The external audit of GPs was envisaged to be undertaken by the ELA under the Office of the Accountant General of West Bengal. However, lack of adequate resources and the impacts of the COVID-19 pandemic resulted in continuous delays in issuing external audit reports which further delayed the APA exercise. Since this activity had a direct link with DLIs 1 and 2, the PBG disbursements to GPs were delayed. 55. Focus of capacity-building activities on Phase II GPs led to a decline in performance of Phase I GPs. Mentoring support and training activities under the Program had initially focused on Phase II GPs. At MTR, the Program noted a decline in the APA performance of the 1,000 Phase I GPs, which were a part of ISGPP. This led to the development of the MDS, which focused on providing need-based mentor support for all GPs. 56. Coordination and engagement between the state/district implementation units and GPs could have been improved with regard to communicating their APA performance, including any gaps. The Program had developed a feedback loop, wherein the overall APA performance of GPs was reviewed at the department level and capacity-building initiatives were accordingly developed; however, the Program did not have a systematic (formalized) engagement mechanism to review and communicate the APA performance scores to the GPs. Knowledge of their performance scores and specific weak areas could have potentially helped GPs improve their APA performance. 57. Aggregate funds available under ISGPP II were less than the initial estimate of US$593.7 million, as CFC funds were disbursed separately outside the Program14. The initial estimate of Program expenditures comprised CFC, SFC and IBRD funds. However, during the early stages of Program implementation, the Government of India (GoI) decided to disburse the CFC’s share of funds separately (i.e., outside the APA process of ISGPP II) in line with its own set of standardized conditions 15 that were applicable to the entire country. Thus, CFC funds were excluded from the Program. However, this did not affect either the PDO or the overall operation of the GPs, as funds from the SFC and IBRD continued to be part of the Program. In parallel, CFC funds also continued to remain available to GPs, but were subject to meeting GoI conditions. 58. Other factors such as local elections also affected Program implementation. The Panchayat elections in 2018 and the State Assembly elections in 2021 had a direct impact on the GPs and their day- to-day functioning. Implementation of subprojects and the utilization of grants were affected during these periods. Activities linked to mentoring and formal training were also disrupted due to the elections. (b) Factors subject to the control of the World Bank 59. The World Bank task team provided strong support in the overall implementation of Program activities, particularly on issues related to the APA process, DLI verification methodologies, capacity- building activities, internal and external audit of GPs and the PMU, and systems development and integration. World Bank implementation support missions focused on reviewing (a) progress in achieving the targets of the indicators in the RF, (b) the APA process and its methodology, (c) the DLI matrix and the verification protocols, (d) status of mentoring support, (e) training calendars and plan, and (f) 14Refer World Bank letter dated August 30, 2018 to Department of Economic Affairs, Ministry of Finance, GOI 15The CFC conditions were standardized for all the states in India, and it would have been difficult for CFC to follow a different set of conditions under APA (ISGPP II) only for West Bengal. Page 22 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) implementation of systems development activities. The task team conducted several rounds of GP consultations from time to time to better understand the needs of GPs and discussed the challenges with the state-level PMU. During the pandemic, the World Bank task team proactively supported the PMU in developing a virtual methodology for undertaking the APA exercise. The APA tools and DLI verification methodologies were also regularly reviewed and discussed with the PMU. The task team also provided guidance and support in resolving major implementation issues (for example, the delay in external audits, the scope of training activities) by coordinating with the relevant agencies (for example, ELA) at the state level and proposing alternatives. The task team noted a decline in performance of Phase I GPs, during MTR and recalibrated the training and mentoring plan to ensure uniform deployment of resources for all GPs. The task team composition was fairly stable with only one change in the TTL from the start of preparation till the Program closing date. Overall, the task team reported back to World Bank management appropriately and followed up on the implementation issues highlighted in the Implementation Status and Results Reports. (c) Factors outside the control of government and/or implementing agencies 60. The COVID-19 pandemic affected most field-level activities, causing significant delays in the APA and the disbursement of grants to GPs. The Program was preparing for the MTR, when the lockdowns and travel restrictions started in March 2020. This resulted in several virtual discussions and a delay in completing the MTR. As a result, implementation of several course correction measures identified during the MTR were also delayed. When the pandemic started, the fourth year APA exercise was under way and field visits by the independent verification agency (IVA) and quality assurance review (QAR) team were pending. As the travel restrictions continued for several months and grant disbursements were being delayed, the Program piloted and implemented a virtual IVA and QAR methodology. Overall, the virtual exercises were successful and helped the Program to complete the pending APA activities. In addition to these delays to the APA, the pandemic also affected GP performance and the corresponding APA results (for example, OSR collections and grant utilization) for the final two cycles. It also compelled the mentoring and formal training activities to be undertaken virtually. Given the nature of certain trainings, the overall capacity-building plan had to be revised in some cases. Tracking of mentor inputs also became a challenge due to the shift to virtual mode. Nevertheless, the Operation gradually adapted to the changing environment and pending activities were completed as efficiently as possible. IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION M&E Design 61. The PDO had a clear link with the RF, which had specific, relevant, and measurable targets for each of the PDO and intermediate results indicators. Overall progress toward achieving the outcome was measured through two PDO indicators and eleven IR indicators which covered the four Program KRAs. Progress on these indicators was to be measured through the APA exercise, which constituted the overall M&E arrangement of the Program. The PDO indicators were directly linked to the DLIs 1 and 2 through the BMCs and EMCs of the APA exercise, while the IR indicators (except for a few) were aligned to the performance (thematic) evaluation measures of the APA exercise. The APA, the IVA, and the QAR (hired by the World Bank) were to be engaged for the overall assessment, verification, and quality assurance of Page 23 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) the APA process and to enable the PMU to identify and resolve any bottlenecks in implementing the Program. A training MIS was to be developed to track annual capacity-building activities and the implementation of the formal training plans. 62. The indicators were chosen effectively and enabled the Program to monitor progress toward the PDO. The PDO indicators were to measure whether the GPs were able to access the discretionary funds by undertaking various activities under the Program, as well as measure whether the GPs had the financial and institutional capacity to utilize the funds received by them. The corresponding results were to provide a comprehensive picture on progress toward strengthening the institutional and financial capacities of the GPs. The design of the IR indicators was both relevant and measurable, and each IR indicator was directly linked to one of the four KRAs. The results of each indicator were required to be analyzed together with on-ground feedback obtained through consultations to have a well-rounded understanding of progress. 63. DLIs 3, 4, and 5 played a cross-cutting role in enabling the Program to meet its objective. These three DLIs were measured by the IVA team through another cycle of annual independent verifications. They were to be monitored regularly and any ‘course corrections’, if needed, were to be undertaken based on discussions between the PMU and the task team. Overall, the DLI verification methodologies were comprehensive. All seven DLIs focused on indicators that provided evidence of continued progress toward the PDO. M&E Implementation 64. The APA exercise was undertaken every year by an external agency (APA firm) and included field visits to all 3,229 GPs. More than 300 field staff were hired by the APA firm to collect data directly from the GPs. The APA was followed by a verification exercise by the IVA to confirm the findings of the APA firm by visiting a sample of 100 GPs. In addition, the World Bank also deployed a QAR team to review the quality of the data in a sample of 10 GPs. The data collected and finalized were used to assess GP performance pertaining to DLIs 1 and 2 and also update the PDO and IR indicators in the RF. DLIs 1 and 2 were both scalable and well defined, and the verification protocols were effective. The APA tool was often fine-tuned (for example, targets were revised and means of verification [MOVs] were clarified) before the start of each cycle based on feedback from APA field staff and the IVA and QAR teams. DLIs 3 to 7 were verified by the IVA every year through field visits to the sample 100 GPs, and disbursements were made to the PMU for the implementation of training, mentoring, systems development, and overall Program management activities. M&E Utilization 65. The Program utilized the data derived from the APA to inform the capacity-building activities at the GP level. As mentioned in the earlier sections, the Program created a feedback loop, wherein the on- ground results of the GPs from the APA were analyzed, and specific weak areas of GPs were identified. The Program used these inputs to develop evidence-based learning plans by adjusting the mentoring efforts and training modules every year. Focused mentoring support was provided to weaker GPs and the APA results for the next cycle were reviewed to note any improvements. The Program could further improve its communication with GPs in terms of communicating their specific results on time and enable GPs to reflect on their own performance and make improvements, as needed. The M&E data and feedback Page 24 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) loop also played a key role on decision-making and allowed some course correction. The Program undertook a thorough review of slow-moving tasks (for example, DLI 5[a]) that were highlighted during the MTR and the DLI verification exercise. The underlying reasons were thereafter identified (for example, several activities had become redundant) and alternative targets were included during the restructuring exercise. Overall, M&E utilization contributed to enabling the PDO to be achieved. 66. The M&E systems established under the Program are likely to be sustained after Program closing. The World Bank assisted the Government to develop an online desk-based APA mechanism with similar indicators and results that would require significantly fewer resources to implement. This online tool will derive the performance results of GPs directly from the GPMS and the GPIMS. The results can be monitored at the state level and will help in policy decisions and in the disbursement of grants. Justification of Overall Rating of M&E Quality 67. The overall rating of M&E quality is Substantial. The Program was successful in establishing a robust and sustainable M&E framework which covered all the GPs. The indicators were realistic, measurable, and time bound. The MOVs, documents to be checked, and the formula to be used were fine- tuned over the Program period and remained focused on the KRAs and the PDO. The Program utilized the results to direct its efforts to capacity-building initiatives that were effective and efficient. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE Environmental and Social 68. The Program’s performance on E&S aspects was satisfactory. The ESMF adopted under ISGPP laid the foundation for integrating the E&S aspects with the ISGPP II activities. During early stages of implementation, minor issues were faced as technical approvals/vetting of schemes developed by GPs were delayed due to a limited understanding of the ESMF at the block level. The absence of technical/E&S capacity in the GPs, especially in remote eco-fragile villages, also resulted in gaps in developing infrastructure subprojects. These issues were addressed through regular technical trainings to the GP engineers and contractors. Additional mentoring support was provided to the eco-fragile GPs in remote areas. Overall, gaps identified during implementation were addressed through systematic efforts aimed at enhancing capacity at the local level and increasing awareness of E&S aspects. 69. The Program achieved the specific actions outlined in the PAP, which included effectively implementing the GRMS, enhancing the negative list, and undertaking orientation on ESMF to build capacity at all levels of the local government. The Program also generated a variety of IEC materials to generate awareness and developed GRMS, which was further strengthened through information and communication technology tools including a web-based system for effective monitoring. The Vulnerable Group Development Framework (VGDF) followed by the Program enabled GPs to identify backward areas, prioritize areas of disparity (for example, disadvantaged rural citizens), and improve the planning processes to provide better quality services. The Program also developed an online land portal that is now being used by all districts to document government land transfers, donation of land parcels, and so on. Page 25 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) Fiduciary 70. The Integrated Fiduciary Systems Assessment (IFSA), conducted during Program preparation, built on the knowledge and experience gained from ISGPP to identify weaknesses and embed suitable mitigation measures in the Program design. At Program closing, there was no change in the fiduciary arrangements assessed in the IFSA except for the flow of Program funds to GPs: funds went directly to the GPs from the ISGPP cell instead of being routed through the district offices. Some of the key fiduciary issues during Program implementation include the following: (a) Change in Program procurement approach. Till the MTR, the Program continued to use World Bank IPF procurement processes and legacy arrangements that were part of ISGPP. Post MTR, in line with the approach to use country systems, the procurement arrangements were comprehensively revised and aligned with the State Government’s procurement rules and guidelines. (b) Quality of procurement audit during the initial years of Program implementation. In FY2018– 19, a procurement audit was undertaken by the Program’s external auditors who were mainly transactional experts with limited procurement audit capacity. As a result, the audit reports could not ascertain if the procurement processes followed the agreed principles and procedures. Thereafter, it was agreed that the independent annual procurement audits would be conducted by qualified and specialized firms. A few procedural lapses related to authorization by competent authorities were observed by the auditors and these were resolved during implementation. (c) Weak accounting practices in the District Coordination Units (DCUs). Both the internal and external auditors made repeated observations on DCU’s weak accounting practices which included maintenance of records for fixed assets and inadequate supporting documentation for expenditure. These observations were recurrent but were usually related to petty expenditure. Despite interventions by the PMU to address these weaknesses, including training and frequent monitoring, these weaknesses persisted till the end of the Program period. (d) Weak internal audit at the Program level. Throughout the Program period, there were repeated delays in the appointment of the internal auditors for the Program which affected the internal expenditure control framework of the Program. Moreover, the internal auditors did not report on risks, process, and performance-related weaknesses of the Program and focused mostly on compliance and inconsistencies in individual transactions/payment vouchers. 71. Review of complaints by the World Bank’s Integrity Vice Presidency (INT). Complaints received under the Program have been sent to INT, based on which INT is investigating them. The West Bengal State Vigilance Commission is conducting its own investigation. As the investigation has proceeded, the task team has taken actions, where possible, in accordance with the Legal Agreement. C. BANK PERFORMANCE Quality at Entry 72. The World Bank supported the state government in preparing a comprehensive, well-designed, and responsive operation that was aligned with the Government program. The scale of the Program (covering all 3,229 GPs of the state) was ambitious; however, the World Bank leveraged the implementation capacity built under ISGPP and was able to refine and scale up most of the Program Page 26 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) interventions. As discussed earlier, the Program was anchored to the recommendations of the fourth SFC, which ensured the strategic relevance of the Program. The choice of the PforR instrument was appropriate, given the maturity of the state agencies through their involvement in ISGPP. The World Bank carried out the required technical assessment, the Fiduciary Systems Assessment (FSA), and the ESSA to identify the potential risks and develop a comprehensive PAP which included measures to address the identified weaknesses during Program implementation. The coverage and depth of the APA tools (mandatory conditions and thematic measures), the DLI matrix, and the RF demonstrate the thorough preparation of the Program. The M&E framework was effective, as discussed in the M&E sections. Quality of Supervision 73. World Bank implementation support was prompt, decisive, and responsive. The World Bank carried out ten implementation support missions, including an MTR mission in September 2020. The key issues, potential risks, and actions plans to mitigate the risks were articulated in the Aide Memoires, Implementation Status and Results Reports, and Management Letters. The World Bank followed up regularly with the state-level counterparts on pending Program issues. In mid-2020, the COVID-19 pandemic had a significant impact on the APA exercise and subsequent grant disbursements to the GPs. The World Bank’s prompt support to help the Program revamp the APA tool into a virtual desk-based activity enabled the Program to complete the exercise and disburse funds to GPs. The World Bank monitored the ten cycles of the APA and revised the DLI matrix and the RF (during restructuring) in consultation with the state. During the MTR, the World Bank worked with the state to take ‘course- correction’ measures, including the development of the MDS. The World Bank created a feedback loop which ensured need-based development of the training and mentoring plans. In addition, the World Bank played a key role in developing an online APA tool to enable the Government to continue with the PBG systems institutionalized under the Program beyond the closing date and disburse discretionary grants based on results. In terms of implementation progress rating, the World Bank took a conservative approach (that is, retained the Moderately Satisfactory rating till August 2022) as some of the key institutional activities (such as integration of GPMS-GPIMS, internal audit of GPs) were delayed. Subsequently, these critical institutional reforms were largely completed before Program closure. Justification of Overall Rating of Bank Performance 74. World Bank Performance is rated Satisfactory based on its contribution to ensuring quality at entry and during supervision. D. RISK TO DEVELOPMENT OUTCOME 75. The key risks to the sustainability of Program outcomes are summarized below: (a) Sustainability of the PBG system as a statewide unified mode of grant disbursement. The key risks include changes in government policy, lack of capacity in the government department/s to implement a full-fledged PBG program, willingness of the GPs to participate, and lack of support from external agencies (for example, external audit and training). (b) Maintenance of other key institutional systems developed under the Program. If the PBG system is not maintained, other linked activities may also get affected, for example, GPs may lose the motivation to improve their OSRs or to continue using the computerized accounting systems. In Page 27 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) addition, to ensure the continuity of Program systems (such as the internal audit mechanism, GRMS, and the GP Works Manual), the Government will need to sustain its implementation mechanism and retain the capacity developed under the Program, including ensuring adequate staff to conduct the internal audit of GPs and update the GP Works Manual regularly. (c) Retention of institutional capacity in GPs. The challenges include maintaining the existing GP- level capacity built under the Program and building future capacity to keep up with the evolving needs of GPs. The Program got a glimpse of this phenomenon as the performance of Phase I GPs declined since the intensity of trainings and mentoring activities was decreased. (d) Integration of E&S aspects in GP-level subprojects. There is a risk of GPs not integrating the E&S aspects in their subproject life cycle (for example, regular screening and review of subprojects) unless there is commitment at the GP and state levels, and there is ongoing capacity building to implement/supervise the implementation of the ESMF. 76. To promote the sustainability and to facilitate the continuity of the development outcomes, the Program has developed online APA tools and has automated some of the systems established under the Program. The Program has developed an online APA tool to enable the Government to measure the performance of GPs centrally without visiting each of the GPs. In principle, the Program has agreed to use this online tool to complete the APA process and disburse PBGs for the next financial year after Program closure. The Program has also developed a state-level digital dashboard, which will update several GP performance parameters (for example, year-on-year OSR collection) to enable the Government to make policy decisions. The state remains committed to sustaining the systems developed under ISGPP II and plans to continue the mentoring and formal training activities. At the closing workshop of the Program, 16 the state government acknowledged the contribution of the Program in improving institutional capacity and promoting decentralization and emphasized the need for sustaining the capacity built under ISGPP II. V. LESSONS AND RECOMMENDATIONS 77. The statewide unified PBG systems implemented under the Program facilitated institutional and financial transformation in West Bengal GPs, but the systems need to be sustained post Program closure. To distribute the untied grants, the Program established the PBG systems which became very effective in building the institutional capacity of GPs, augmenting their OSRs, regularizing GP-level functions (for example, planning and budgeting and procurement), improving service delivery, and ensuring accountability and transparency at the local level. The APA exercise improved day-to-day GP functioning and ensured effective utilization of the funds. Therefore, integrating performance-based systems in Government programs can facilitate institutional development, foster performance, and enable the efficient implementation of activities. ISGPP II developed an online APA tool to enable the Government to measure the performance of GPs centrally (using similar parameters used under ISGPP II) without visiting each GP in the field. The Government has confirmed that this online APA tool will be used in the next financial year following Program closure. In addition to the PBG mechanism, the sustainability of institutional and financial systems (for example, usage of IT systems, GPMS, GPIMS, and improving OSRs) is also a key challenge after Program closure as GPs may not be adequately incentivized to continue using these systems. As a result, the Program developed a state-level digital dashboard that displays GP- 16 Closing workshop held on December 20, 2022. Page 28 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) level performance data in the public domain for improved accountability and transparency and can help Government officials in decision-making, data monitoring, and analysis of GP performance over time. 78. Adopting a programmatic approach by building on ISGPP played a key role in ensuring implementation readiness and achieving the envisaged development objectives. The programmatic engagement enabled efficient implementation of operational and technical aspects under the Program. As ISGPP II succeeded a ‘Highly Satisfactory 17’ ISGPP, the legacy systems helped ensure implementation readiness of the Program. The PMU was well capacitated with competent staff to move forward to implement ISGPP II. The GP staff were also familiar with the PBG system of transferring grants at the local level. Therefore, retaining a strong and mature PMU and carrying forward established systems from the predecessor project can ensure stability and continuity of Program activities. A Program of such scale, however, requires a continuous and uniform approach for capacity building of the implementing agencies. During the MTR, the Program noted a decline in the performance of Phase I GPs as the intensity of capacity building support under the Program to the Phase I GPs was less than that provided to the Phase II GPs. On technical aspects, given the programmatic approach, experiences from ISGPP could be leveraged and institutional interventions (already tested under ISGPP) were scaled up from 1,000 GPs to all 3,229 GPs in the state. The Program’s development impact goes much beyond ISGPP II as the institutional systems built under the Program are now helping GPs to implement other Government schemes and projects as well. 79. Continuous community engagement fostered local participation and contributed to the sustainability of Program interventions. During implementation, the Program continuously engaged with the local communities at the GP level. Para baithaks (community meetings) were organized where the local people could interact directly with GP officials and articulate their demands. The local people were also consulted during the construction of subprojects (for example, laying of roads) and grievances, if any, were resolved through the GRMS within a specified period. The Program also focused on improving the participation of women in Gram Sabha and Sansad meetings. Overall, the regular involvement of local people resulted in a bottom-up planning process and helped them embrace the Program. Fostering local participation can thus improve ownership and ensure the sustainability of capital assets developed under the Program. 80. A detailed assessment of external agencies should be undertaken at appraisal, and incentives can be built into the Program to minimize delays in implementation. Some key Program activities, such as the external audit of GPs that involved the engagement of external agencies (such as ELA), were severely delayed. Therefore, a thorough assessment of the external agencies, that could play a key role in the implementation of a project/Program, needs to be undertaken to identify the gaps and consider possible incentives to ensure timely implementation. In addition, Programs can establish a systematic coordination mechanism to engage with external agencies to help reduce implementation delays. 81. Mentoring support needs to be complemented by the deployment of staff in core GP positions, to avoid GP staff becoming overdependent on mentors. Mentoring support implemented over an extended period under ISGPP II, despite being effective in developing GP capacity, resulted in GPs becoming dependent on mentors even for day-to-day activities. This could be attributed to the lack of core GP staff such as engineers and executive assistants in many GPs. To avoid overdependence on mentors and to ensure sustainable capacity building, Programs need to identify resource gaps and deploy . sufficient staff in GPs to address such gaps. 17 Outcome rating as per Implementation and Completion Results Report (ICR) of ISGPP-I (P105990). Page 29 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) ANNEX 1. RESULTS FRAMEWORK, DISBURSEMENT LINKED INDICATORS, AND PROGRAM ACTION PLAN Annex 1A. RESULTS FRAMEWORK (i) PDO Indicators Objective/Outcome: PDO level indicators Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Total number of GPs that Percentage 40.00 80.00 70.00 75.00 qualify BMCs and EMCs annually in APAs 19-Apr-2017 30-Jun-2021 30-Jun-2021 30-Jun-2022 Comments (achievements against targets): The Program has met the End target of the PDO indicator. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Average Percentage of Percentage 46.00 66.00 75.00 performance based untied grants utilized by the GPs 19-Apr-2017 30-Jun-2021 30-Jun-2022 Comments (achievements against targets): Page 30 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) The Program has met the End target of the PDO indicator. The first disbursements under the Program were made in 2017-18. Expenditure incurred in 2017- 18 is therefore considered as baseline (Year 1). The Program has achieved 75 percent in Year 5 and has met the PDO indicator targets. Note: As per PAD, the end target should be equivalent to an annual increase of 5 percent every year over baseline till Program closing. Given that baseline was 46 percent, end target stands 66 percent. (ii) Intermediate Results Indicators Results Area: Establishing a state wide unified performance based grant allocation system for all discretionary funds available for GPs Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Annual performance Date 19-Apr-2017 30-Sep-2020 30-Nov-2022 assessment of at least 95% GPs conducted 19-Apr-2017 30-Sep-2020 30-Nov-2022 Comments (achievements against targets): IR Indicator 1.1: The Program achieved the Year End target with a delay. APA 2020 (Year 5) was completed in July 2022 with a delay due to (i) delay in the completion of the audit by external auditors, and (ii) the impact of the COVID-19 pandemic.. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Performance based grant Date 31-Jan-2017 31-Oct-2020 30-Nov-2022 Page 31 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) allocation (as per APA 19-Apr-2017 31-Oct-2020 30-Nov-2022 results) completed annually Comments (achievements against targets): IR Indicator 1.2: The Program has achieved the Year End target. However, the PBG allocation was delayed due to the delay in APA 2020 as highlighted in the above IR indicator. Results Area: Improved local government finances and financial management systems in GPs Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Improved PFM systems Percentage 53.00 73.00 84.44 (accounting, financial reporting and audit) in the 19-Apr-2017 30-Jun-2021 30-Nov-2022 GPs Comments (achievements against targets): IR Indicator 2.1: The Program has achieved the Year End target. Overall financial performance of the GPs have improved over the years. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Increase in GP’s own source Amount(USD) 18,000,000.00 26,307,692.00 24,769,231.00 Page 32 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) revenue 19-Apr-2017 30-Jun-2021 30-Nov-2022 Comments (achievements against targets): IR Indicator 2.2: (1) The exchange rates for ‘actual’ and ‘end target’ are considered same as the one used to calculate the baseline (US$1 = INR 65). (2) On a Y-o-Y basis, the GPs’ OSRs increased by more than 10 percent, except in Year 2. (3) At closure, the Program has met 94 percent (US$24.77 million) of the end target (US$26.3 million). (3) The OSR considered here does not include collection from other sources (e.g., non-tax collections from other sources and collection of arrears). If the entire OSR of GPs is included, it will exceed the end target of US$26.3 million significantly. Note: As per PAD, end target is equivalent to an increase of 10 percent every year over baseline till Program closing. Since baseline is US$18 million, end target stands at US$26.3 million Results Area: Improved local governance and HR capacities for increased transparency and accountability in local government functioning Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Improved participation, Percentage 53.00 73.00 51.21 transparency and accountability in the GPs 19-Apr-2017 30-Jun-2021 30-Nov-2022 Comments (achievements against targets): IR Indicator 3.1: Year 5 performance of GPs has improved marginally but did not meet the end target. This was mainly due to the low scores received in the GRMS OAC, where marks were allotted on the basis of number of grievances received and subsequently resolved. Utilization of GRMS (number of grievances lodged) has increased gradually over the past few years as GPs continued to spread awareness about the system Page 33 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of vacancies (in 3 Percentage 55.00 90.00 0.00 key GP staff positions) filled annually in the GPs 19-Apr-2017 30-Jun-2021 30-Nov-2022 Comments (achievements against targets): IR Indicator 3.2: As a result of state level hiring freeze of GP core staff based on state level decisions, this IR indicator was removed during the Restructuring in March 2021. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Percentage of women Percentage 0.00 70.00 82.52 elected representatives mentored (physical/virtual 01-Feb-2021 30-Jun-2021 30-Nov-2022 mode) in remote GPs Comments (achievements against targets): IR Indicator 3.3: The Program has achieved the End target. Page 34 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) Results Area: Improve the decentralized & participatory planning and budgeting mechanisms at the local level Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Improved project execution Percentage 65.00 85.00 40.20 and service delivery capacity at GP level 19-Apr-2017 30-Jun-2021 30-Nov-2022 Comments (achievements against targets): IR Indicator 4.1: The Program has failed to meet the end target of this indicator mainly due to lack of O&M budgeting, establishment of remunerative assets, etc. Output Verification Studies have been conducted during the Program period to assess the infrastructure built by the GPs. Overall, technical capacity for project execution and service delivery has improved in the GPs, as the procurement processes, contract management, quality testing, etc. have been standardized. GP Works Manual has also been developed as a guidance document for GPs to prepare estimates, execute works, etc. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Improved planning & Percentage 55.00 75.00 68.39 budgeting capacity at the GP level 19-Apr-2017 30-Jun-2021 30-Nov-2022 Comments (achievements against targets): IR Indicator 4.2: The overall planning and budgeting performance of GPs has improved gradually; however, the Program failed to meet the end target of this indicator. Page 35 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Total number of Percentage 0.00 10.00 11.00 beneficiaries, disaggregated by gender (male and female) 19-Apr-2017 30-Jun-2021 30-Nov-2022 Comments (achievements against targets): IR Indicator 4.3: The Program achieved the end target of 10 percent. In Year 5, the total number of beneficiaries increased by 10.57 percent compared to Year 4. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Total number of ST GPs Percentage 5.00 25.00 30.00 62.16 qualifying for EMC 19-Apr-2017 30-Jun-2021 30-Jun-2021 30-Nov-2022 Comments (achievements against targets): IR Indicator 4.4a: The Program exceeded the end target. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Total number of SC GPs Percentage 20.00 40.00 45.00 65.91 Page 36 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) qualifying for EMC 19-Apr-2017 30-Jun-2021 30-Jun-2021 30-Nov-2022 Comments (achievements against targets): IR Indicator 4.4b: The Program exceeded the end target. ANNEX 1B. DISBURSEMENT LINKED INDICATORS DLI 1: 1. Number of phase II Gram Panchayats (GPs) that have qualified Basic Mandatory Conditions (BMCs) in Annual Performance Assessment (Number) Baseline Year 1 Year 2 Year 3 Year 4 Year 5 Total Original values 0.00 1,119.00 1,400.00 1,634.00 1,867.00 0.00 Actual values 1,119.00 1,170.00 1,746.00 1,923.00 0.00 Allocated amount ($) 17,410,000.00 9,120,000.00 1,623,722.00 8,960,953.00 0.00 37,114,675.00 Disbursed amount ($) 17,410,000.00 9,120,000.00 1,623,722.00 8,960,953.00 0.00 37,114,675.00 Comments (achievements against targets): DLI 1 has been fully achieved for all years. There was no allocation or DLI target under DLI 1 for Year 5. DLI 2: 2. Number of phase II Gram Panchayats that have qualified Expanded Mandatory Conditions (EMCs) and got access to performance rewards in Annual Performance Assessment (Number) Page 37 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) Baseline Year 1 Year 2 Year 3 Year 4 Year 5 Total Original values 0.00 888.00 1,167.00 1,400.00 1,562.00 1,562.00 Actual values 888.00 1,077.00 1,013.00 1,330.00 1,664.00 Allocated amount ($) 17,410,000.00 29,950,000.00 18,899,686.00 22,240,461.00 13,685,178.00 102,185,325.00 Disbursed amount ($) 17,410,000.00 29,950,000.00 18,899,686.00 22,240,461.00 13,685,178.00 102,185,325.00 Comments (achievements against targets): Year 5 DLI target has been met. The Program improved its performance in Year 5 with an additional 334 GPs qualifying in DLI 2 compared to Year 4 results. DLI 3: 3. Percentage of activities implemented as per PRDD’s annual learning and training plan (Percentage) Baseline Year 1 Year 2 Year 3 Year 4 Year 5 Total Original values 0.00 0.00 70.00 75.00 80.00 85.00 Actual values 0.00 70.00 75.00 80.00 50.00 Allocated amount ($) 2,400,000.00 2,400,000.00 2,400,000.00 2,400,000.00 1,875,000.00 11,475,000.00 Disbursed amount ($) 2,400,000.00 2,400,000.00 2,582,400.00 2,400,000.00 1,141,544.00 10,923,944.00 Comments (achievements against targets): Except in Year 5, DLI 3 has been largely achieved in every year during implementation. Overall, training activities towards the end of the Program were impacted by the COVID-19 pandemic. Page 38 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) DLI 4: 4. Average number of annual mentoring input days per Gram Panchayat with performance assessment (Text) Baseline Year 1 Year 2 Year 3 Year 4 Year 5 Total 19 days of 19 days of 19 days of 19 days of Annual onsite onsite onsite onsite mentor mentoring mentoring mentoring mentoring deployment input and input and input and input and Original values 0.00 plan for FY17 performance performance performance performance developed as of 60% of 60% of 60% of 75% per POM. mentors mentors mentors mentors assessed. assessed. assessed. assessed. 19 days of 19 days of 19 days of 19 days of Annual onsite onsite onsite onsite mentor mentoring mentoring mentoring mentoring deployment input and input and input and input and Actual values plan for FY17 performance performance performance performance developed as of 60% of 60% of 60% of 75% per POM. mentors mentors mentors mentors achieved. achieved achieved achieved Allocated amount ($) 5,200,000.00 5,200,000.00 5,200,000.00 5,200,000.00 5,200,000.00 26,000,000.00 Disbursed amount ($) 5,200,000.00 5,200,000.00 5,200,000.00 5,200,000.00 5,200,000.00 26,000,000.00 Comments (achievements against targets): The Program has consistently achieved the DLI 4 targets. The mentor support gradually increased from an average of 21 days in FY 2017-18 to 33 days in FY 2021-22 Page 39 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) DLI 5: 5 a) Core institutional systems implemented by PRDD across all GPs for Gram Panchayat Management System (GPMS), Web-Based Monitoring System (WBMS) & GIS (Text) Baseline Year 1 Year 2 Year 3 Year 4 Year 5 Total PDA–based Web-based (a) Web-based (a) Module on Own Source integrated integrated preparation, Revenue system system submission system developed [hereinafter and approvals implemented and used by referred to as of scheme and used by 2,506 GPs. GPIMS] estimates and 1,671 GPs. developed design and used by developed all GPs(b) and rolled out Digital state as part of GPMS core level integrated module dashboard GPIMS to all GPMS core implemented providing GPs (b) A Original values module under and used by snapshot of comprehensiv implementation 2,506 GPs key e analytical (category A/B) performance tool indicators developed across all and available financial and in production physical mode, using progress data key of all GPs, information with an ability available in to drill down the existing to respective GP systems to GP’s and then generate state Page 40 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) to individual level standard transactions, (pre- available in programmed) production reports on the mode and in performance public of GPs (based domain. on certain parameters). Allocated amount for Allocated Year 4(a) amount for 3,200,000 Year 5(a) (b)1,200,000 1,000,000 (b) 1,200,000 RESTRUCTURE RESTRUCTURE (a) Web-based (a) Module on D: PDA–based D: Web-based integrated preparation, Own Source integrated system submission Revenue system [hereinafter and approvals GPMS core system developed referred to as of scheme module implemented and used by GPIMS] estimates and implemented and used by 2,506 GPs. developed design Actual values and used by 1,671 GPs. and used by developed 2,506 GPs all GPs(b) and rolled out (category A/B) Digital state as part of level integrated dashboard GPIMS to all providing GPs (b) A snapshot of comprehensiv key e analytical performance tool Page 41 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) indicators developed across all and available financial and in production physical mode, using progress data key of all GPs, information with an ability available in to drill down the existing to respective GP systems to GP’s and then generate state to individual level standard transactions, (pre- available in programmed) production reports on the mode and in performance public of GPs (based domain. on certain Allocated parameters). amount for Year 4(a) Allocated 3,200,000 amount for (b)1,200,000 Year 5(a) 1,000,000(b) 1 ,200,000 Allocated amount ($) 1,400,000.00 0.00 0.00 4,400,000.00 2,200,000.00 8,000,000.00 Disbursed amount ($) 1,400,000.00 0.00 0.00 1,200,000.00 1,000,000.00 3,600,000.00 Comments (achievements against targets): Page 42 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) DLI 5(a) has been partially achieved. In Year 4, state-level dashboard was developed that helped in improving transparency and state and local level decision. However, development and usage of web-based integrated by all GPs was not achieved at Program closing date. For Year 5, the module on preparation, submission and approvals of scheme estimates and design was created but the comprehensive analytical tool was not developed at Program closing. DLI 6: 5 b) Core institutional systems implemented by PRDD across all GPs for Grievance Redressal Management System (GRMS) (Text) Baseline Year 1 Year 2 Year 3 Year 4 Year 5 Total 60% 65% 70% (a) 80% grievances grievances grievances grievances redressed redressed redressed Redressed. (b) Provide onsite mentoring support (physical/virtu al) to 70% Roadmap for Online GRMS women Original values GRMS implemented elected developed representative s across the universe of remote GPs. Allocated amount: (a) 300,000 and (b) 300 ,000 Actual values 60% 65% 70% (a) 80% Online GRMS grievances grievances grievances grievances Page 43 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) implemented redressed redressed redressed. Redressed. (b) Provide onsite mentoring support (physical/virtu al) to 70% women elected representative s across the universe of remote GPs. Allocated amount: (a) 300,000 and (b) 300 ,000 Allocated amount ($) 300,000.00 600,000.00 600,000.00 600,000.00 600,000.00 2,700,000.00 Disbursed amount ($) 300,000.00 600,000.00 600,000.00 600,000.00 600,000.00 2,700,000.00 Comments (achievements against targets): The Program has consistently achieved this DLI during the Program implementation period. For Year 5, the Program also achieved the additional (new) DLI on providing mentoring support (physical/virtual) to 70% women elected representatives in remote GPs. DLI 7: 6. Annual Performance Assessments (APA) conducted by PRDD (Text) Baseline Year 1 Year 2 Year 3 Year 4 Year 5 Total Page 44 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) APA APA APA APA APA completed for completed for completed for completed for completed for 95% of GPs 95% of GPs 95% of GPs 95% of GPs 95% of GPs and results and results and results and results and results APA under included in included in included in included in included in Original values progress annual PBG annual PBG annual PBG annual PBG annual PBG announcemen announcemen announcemen announcemen announcemen t for West- t for West- t for West- t for West- t for West- Bengal Bengal Bengal Bengal Bengal FY17/18. FY18/19. FY19/20. FY20/21. FY21/22. APA APA APA APA APA completed for completed for completed for completed for completed for 95% of GPs 95% of GPs 95% of GPs 95% of GPs 95% of GPs and results and results and results and results and results included in included in included in included in included in Actual values annual PBG annual PBG annual PBG annual PBG annual PBG announcemen announcemen announcemen announcemen announcemen t for West- t for West- t for West- t for West- t for West- Bengal Bengal Bengal Bengal Bengal FY17/18. FY18/19. FY19/20. FY20/21. FY21/22. Allocated amount ($) 3,200,000.00 3,200,000.00 3,200,000.00 3,200,000.00 3,200,000.00 16,000,000.00 Disbursed amount ($) 3,200,000.00 3,200,000.00 3,200,000.00 3,200,000.00 0.00 12,800,000.00 Comments (achievements against targets): Completion of APA 2020 has been substantially delayed and therefore, DLI 6 for Y5 has not been achieved Page 45 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) DLI 8: 7: Targeted number of vacant core Gram Panchayat positions filled for a) Executive Assistant b) GP Secretary c) Nirman Sahayak (Text) Baseline Year 1 Year 2 Year 3 Year 4 Year 5 Total HR 1195 recruitment vacancies Original values 0.00 plan and filled. budget finalized. HR 1195 recruitment vacancies Actual values plan and filled. budget finalized. Allocated amount ($) 500,000.00 0.00 1,000,000.00 0.00 0.00 1,500,000.00 Disbursed amount ($) 500,000.00 0.00 1,000,000.00 0.00 0.00 1,500,000.00 Comments (achievements against targets): DLI 7 was dropped during the Restructuring Program in March 2021 ANNEX 1C. PROGRAM ACTION PLAN PAP TBL Achieved Action Timing Completion Measurement (Yes/No) Page 46 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) The Panchayat Act 1973 and West Bengal Due Date 31-Dec-2018 Yes The draft of amended West Bengal Panchayat Panchayat (Gram Panchayat Accounts, (Gram Panchayat Accounts, Audit and Budget) Audit and Budget) Rules 2007 to be Rules 2007 submitted to legislature for approval amended to revise the devolution framework, financial management systems and procurement systems in GPs Comments: The Government has informed the Bank that no further amendments to the Panchayat Act are envisaged in near future. Therefore, this action was revised during Program Restructuring in March 2021. Internal Audit in GPs -Establish internal Due Date 31-Aug-2017 Yes ISGPP Cell will engage a professional audit processes, train PAAOs/PDOs and firms/institutions to review internal audit jointly conduct internal audits under risk- processes, train PAAOs/ PDOs and jointly conduct based principles in GPs, as part of on-the- internal audits under risk-based principles, as part job training by ISGPP cell of on-the-job training Comments: This action has been completed. New three element Grievance Redressal Due Date 28-Apr-2017 Yes Grievance Redressal Management System fully and Complaints Handling Mechanism to operational be effectively implemented by PRDD Enhancing the negative list of activities by Recurrent Yearly Yes ESMF Updated incorporating the supplementary list ISGPP cell. of negative activities. This activity was complied with by the agreed date. Share with GP and other relevant Due Date 08-Feb-2017 Yes Revise the current ESMF including the agreed rules stakeholders the approach and governing securing lands for civil construction. methodology for securing lands for civil Create works by ISGPP cell/PRDD. awareness about the same across all the stakeholders and ensure its compliance by GPs. Page 47 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) This activity was complied with by the agreed date. ESMF capacity building for all the Due Date 31-Dec-2017 Yes Issuance of a directive to all the PRIs for the development entities - PRIs and Line adoption of revised ESMF. Departments - through appropriate orientation programs by ISGPP Cell/PRDD Page 48 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Preparation Vasudha Thawakar, Manvinder Mamak Task Team Leader(s) Sangeeta Patel Procurement Specialist(s) Neha Gupta Financial Management Specialist Jyoti Sriram Team Member Gopalaswamy Srihari Social Specialist Gaurav Dilipkumar Joshi Environmental Specialist Supervision/ICR Vasudha Thawakar, Manvinder Mamak Task Team Leader(s) Satyanarayan Panda Procurement Specialist(s) Neha Gupta Financial Management Specialist Jyoti Sriram Team Member Gopalaswamy Srihari Social Specialist Gaurav Dilipkumar Joshi Environmental Specialist Riddhiman Saha Team Member B. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY16 13.550 132,502.55 FY17 55.465 306,638.57 Page 49 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) Total 69.02 439,141.12 Supervision/ICR FY17 0 5,814.41 FY18 28.772 190,420.09 FY19 39.130 231,500.31 FY20 33.740 155,683.54 FY21 23.943 124,292.07 FY22 36.139 167,922.57 FY23 41.702 150,597.89 Total 203.43 1,026,230.88 Page 50 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) ANNEX 3. PROGRAM EXPENDITURE SUMMARY Actual Expenditures (Disbursement) Source of Program Type of Co- Estimates at Financing (US$) Financing Appraisal Percentage of Percentage of Actual Appraisal Actual World Bank — 209.47 18 202.18 19 35.29 57.71 Borrower — 384.20 148.19 20 64.71 42.29 Other Partners — — — — — Total 593.67 21 350.37 18 As per the borrower’s decision, 0.25 percent front-end fee (equivalent to US$525,000) would be paid out of loan proceeds and hence the total IBRD lending for program implementation is US$209.475 million. 19 The exchange rate specified in the PAD has been used: US$1 = 67.95 INR. 20 Includes audited expenditure up to March 31, 2022 and reported expenditure for FY22–23. 21 The initial estimate of US$593.67 million envisaged contributions from the central government (as part of 14th CFC grants); however, after the Program was approved, the Central Government took a decision to disburse the 14th CFC grants following their own set of conditions (and not through APA criteria) that was standardized for the entire country. Thus, CFC funds were excluded from the Program (but was provided to GPs separately by the Central Government) and the overall program outlay was eventually a lot lesser than US$593.67 million. Page 51 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) ANNEX 4. BORROWER’S COMMENTS Page 52 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) Page 53 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) ANNEX 5. SUMMARY OF ANALYSIS OF ECONOMIC IMPACTS 1. The analysis of economic impacts is based on a similar approach that was followed in the PAD. During the ISGPP period (2017–2022), a total of 76,681 works were carried in 3,342 GPs, valued at INR 15,733.65 million (US$243.83 million) as shown in table 5.1. The major sectors in which the works completed include (a) roads with 73 percent, (b) water supply with 8.6 percent, (c) drainage system with 5.2 percent, (d) buildings with 4.2 percent, and (e) electrical works with 0.8 percent. Accordingly, five sample subprojects representing the major sectors, were selected for the present quantitative economic analysis (table 5.2). Table 5.1. Details of Completed Works - ISGPP II Expenditure Expenditure US$, Expenditure Activity Head Total Activities INR, millions millions (percent) Building 3,124 661.72 9.88 4.2 Drainage system 4,119 820.24 12.24 5.2 Electrical work 930 124.17 1.85 0.8 Roads 50,827 11,479.92 171.34 73.0 Water supply 10,409 1,349.44 20.14 8.6 Others 7,274 1,298.16 19.38 8.3 Total 76,681 15,733.65 234.83 100.0 Source: PMU, ISGPP II, 2023. Note: Conversion rate of INR 67 = US$1 from the preparation stage (2016) was considered. Table 5.2. Details of Completed Sample Subprojects Cost at 2016 Price. Completed Subproject Cost (INR Million)1 Economic Name of the Year of Sample Subproject Name Discounted Cost: GP/District Implementation Actual1 to 2016 Discounted Pprice2 to 2016 Price 3 1: Construction of Concrete Road Khila, Howrah 2021 0.20 0.16 0.14 (0.117 km length) 2: Construction of Gravel Road Khila Howrah 2021 0.29 0.23 0.20 (0.123 km length) Dhanurhat, 3: Sinking a Tube well (benefiting South 24 2021 0.14 0.12 0.10 40 households) parganas Mallikpur, 4: Construction of Drain South 24 2020 0.15 0.13 0.11 (benefiting 35 households) parganas 5: Installation of solar panel at Khila, Howrah 2021 0.47 0.38 0.33 Khila GP Office Source: PMU, ISGPP II, 2023. Note: 1. Completed project cost disbursed to contractors. 2. Completed project costs were discounted to the processing year (2016) by using the Wholesale Price Index. Page 54 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) 3. Discounted project cost (2016) was converted to economic cost by multiplying the SCF of 0.85 to remove the impacts of taxes, subsidies, and other externalities. Economic Return 2. A specific ex-ante economic analysis for five completed sample subprojects, with cost-benefit flow approach, has been undertaken for (a) construction of a new gravel road, (b) conversion of a gravel road to a concrete road, (c) provision of a borewell-based hand pump water supply, (d) construction of a drainage system, and (e) installation of solar panel in the GP office. The key benefits of these sample subprojects and other ISGPP II investments include reduced transport costs, reduced flood damage impacts, increased water-borne diseases-based health benefits, reduced water collection-related time cost, reduced power charges, and increased job creation activities. 3. Although the analysis has adopted an approach similar to that followed during appraisal, results of the appraisal and completion stages cannot be compared as the sample subprojects considered were different and were implemented under different phases of the program (e.g., sample subprojects considered during appraisal were from ISGP). The analysis has adopted the assumptions following during the preparation stage. The ‘without-project’ (without the completed investment, the earlier service delivery issues continue) and ‘with-project’ (with the completed investment, the service delivery improves) scenarios were defined to identify the net benefits of the investment, with cash flow discounted at 8 percent (SDR used for evaluating World Bank-financed projects in India). The analysis considered the stream of costs (construction cost and O&M) and benefits (identified and quantified) over a 21-year analysis period (2016–2037) including one year for planning, procurement, and construction and 20 years operation. The stream of financial costs was adjusted for impacts of taxes, subsidies, and externalities to arrive at the economic value, using an estimated Standard Conversion Factor (SCF) of 0.85. Quantifiable subproject benefits considered for the sample subprojects in the analysis include the following in table 5.3. Table 5.3. Benefit Details for Sample Subprojects Sample Beneficiaries Benefits Subprojects Construction of 206 motorized vehicle trips (i) Reduction in vehicle operating cost due to the surface concrete road (200 two wheelers, 5 cars, improvement, estimated at INR 13,635/year (0.117 km length) and 1 truck) (ii) Reduction in travel time due to increase in travel speed estimated at INR 15,740/year. Construction of 170 motorized vehicle trips (i) Reduction in vehicle operating cost due to the surface Gravel Road (150 by two wheelers and 20 improvement, estimated at INR 28,845/year (0.123 km length) cars) (ii) Reduction in travel time due to increase in travel speed estimated at INR 50,177/year. Sinking a Tube 40 households with 0.21 (i) Reduction in daily water collection time due to the well hours daily reduction in water reduced travel distance and crowd, estimated at INR collection time 713/household/year. Construction of 35 households (i) Savings in annual household earning loss due to water- storm water drain borne diseases caused by stagnated water around estimated at INR 570/household/year Page 55 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) Sample Beneficiaries Benefits Subprojects (ii) Savings in annual household earning loss during rain by flooding and water stagnation estimated at INR 304/household/year. Installation of Khila GP office (i) Reduction in annual electricity bill, estimated at INR solar panel 72,000. 4. Results of the project economic viability as measured by the NPV and EIRR and its sensitivity analysis to changes in O&M cost and benefit streams are summarized below in table 5.4. Table 5.4. Summary of Economic Analysis Sample Sample Sample Project Sample Sample Project 2: Project 5: 1: Construction Project 3: Project 4: Construction Installation of Concrete Sinking a Construction of Gravel of solar Sl. Sensitivity Road Tube well of Drain Road panel No Scenario EIRR (%) EIRR (%) EIRR (%) EIRR (%) EIRR (%) ENPV ENPV ENPV ENPV ENPV 1 Base case 19.0 0.12 22.6 0.27 23.5 0.14 18.5 0.10 15.2 0.19 20 percent 2 increase in O&M 17.8 0.09 21.5 0.25 22.5 0.13 17.7 0.10 14.6 0.17 cost 20 percent 3 decrease in 12.8 0.04 16.7 0.15 17.5 0.08 13.5 0.05 10.8 0.07 project benefit Combined effect 4 10.8 0.02 15.4 0.13 16.5 0.08 12.7 0.047 10.1 0.05 (worst scenario) Note: ENPV- Economic Net Present Value in INR million, discounted @ percent SDR. 5. The positive NPV and EIRRs are in the range of 15.2 percent (solar panel) to 23.5 percent (Tube well) and are above the minimum required SDR of 8 percent. This indicates that sample subproject investments are economically viable, even without considering other nonquantifiable benefits. An analysis of the project sensitivity test results at (a) 20 percent increase in O&M cost, (b) 20 percent reduction in benefits, and (c) combined effect of these two shows that the rate of return and the NPV remain at acceptable levels. The internal rate of return remains higher than the SDR of capital in all cases and NPVs are found to be positive, thus confirming the viability of the subprojects under various scenarios. 6. Economic impact envisaged at the appraisal stage. The economic assessment undertaken above is the same methodology followed during the appraisal stage to assess the economic impact of the Program. Overall key benefits have remained similar, and in both cases (appraisal and completion stage), the economic feasibility results in terms of EIRR was found to be around 20 percent which is higher than the minimum required SDR of 8 percent. Page 56 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) 7. Several other potential qualitative benefits are not factored into the cost-benefit analysis because of lack of reliable data. Employment generation, 22 environment improvements, and capacity development 23 were the few qualitative benefits which can be assigned to the completed subprojects. Also, the economic benefit of the Program toward private sector development is particularly significant as the key infrastructure investments are executed by local small and micro enterprises at the GP level, with the involvement of the local community. Therefore, the estimated benefits from the identified investments can be considered conservative, and it can reasonably be assumed that the actual benefits will be much higher. 22 The independent studies in India have found that the rural infrastructure projects have highest multiplier effects for formal and informal employment in West Bengal (Source: ‘Impact on Infrastructure Investment on Quality of Job Creation: Closed Input-Output Analysis for Indian States’, Anushree Sinha, 22nd IIOA Conference in Lisbon). 23 A Study by the Planning Commission of Government of India had observed that the rural infrastructure investment in seven states in India had resulted in the increase of agriculture income by 17 percent and non-agriculture income by 12 percent (Source: Evaluation Study on Rural Roads Component of Bharat Nirman, Programme Evaluation Organization, Planning Commission, GoI, May 2010). Impact Evaluation of ISGP Project, Final Report, 2016. Page 57 of 58 The World Bank West Bengal Institutional Strengthening of Gram Panchayats Program II (P159427) ANNEX 6. SUMMARY OF PAP AND KEY CONTRIBUTION TOWARD PDO Sr. Achieved PAP Contribution to Achieving the PDO No. (Yes/No) 1 Amendment of Panchayat Act and Rules Yes Strengthened and streamlined the existing The West Bengal Panchayat (Gram institutional systems (for example, internal Panchayat Accounts, Audit and Budget) audit of GPs, procurement through e- Rules 2007 to be amended to revise the tendering systems) and facilitated devolution framework, financial implementation of the 73rd constitutional management systems, and procurement mandate by empowering local bodies and systems in GPs developing institutional capacity of existing (Note: Revised during restructuring in 2021) staff (for example, internal auditors) 2 Internal Audit in GPs Yes Developed a robust oversight mechanism Internal audit in GPs - Establish internal with continuous monitoring of the fiduciary audit processes, train Panchayats Accounts systems at the GP level. The risk-based and Audit Officer (PA&AOs)/Panchayat approach improved GPs’ financial Development Officer (PDOs), and jointly performance, mitigated key fiduciary risks, conduct internal audits under risk-based and helped developing overall institutional principles in GPs, as part of on-the-job capacity of GPs. training by ISGPP cell 3 Grievance Redressal Mechanism Yes Enabled GPs to resolve field-level issues and New three element Grievance Redressal grievances, improve quality of service and Complaints Handling Mechanism to be delivery, and enhance transparency and effectively implemented by PRDD accountability 4 Negative list Yes Contributed to the institutional capacities Enhancing the negative list of activities by through increased awareness and ISGPP cell sensitization about E&S issues and reduced the impacts on local environment and the communities by avoiding activities with negative impacts. Also, encouraged the GPs to explore and adopt eco-friendly innovative alternatives. 5 Land Yes Built GP-level capacity in respect of sourcing Share with GP and other relevant land on voluntary donation basis based on stakeholders the approach and predefined criteria, ensuring transparency by methodology for securing lands for civil maintaining records through the works by ISGPP cell/PRDD. development of an online land portal system 6 ESMF capacity building Yes Contributed to institutional strengthening by ESMF capacity building for all the enhancing local-level knowledge on development entities - PRIs and Line environmental sustainability and creating Departments – through appropriate sustainable infrastructure, thereby improving orientation programs by ISGPP cell/PRDD. the quality of services. Capacitated the GPs to adopt innovative initiatives toward environmental conservation. Page 58 of 58