Documentof TheWorld Bank FOROFFICIAL USEONLY ReportNo. 43788-LR EMERGENCYPROJECTPAPER ONA PROPOSEDEMERGENCYFOODCRISISRESPONSEPROGRAM TO THE REPUBLIC OF LIBERIA FROMTHE FOODPRICECRISISRESPONSETRUST FUND FOR AN ADDITIONAL FINANCING GRANTTO THE AGRICULTURE AND INFRASTRUCTUREDEVELOPMENTPROJECT(US$3.0 MILLION); AND AN ADDITIONAL FINANCINGGRANTTO THE COMMUNITY EMPOWERMENTPROJECTI1(US3.0 MILLION); AND A GRANT FORA FOODSUPPORTPROJECTFORVULNERABLE WOMEN AND CHILDREN(US$4.0 MILLION) MAY22,2008 HumanDevelopment 2 PovertyReductionandEconomicManagement4 Transport CountryDepartmentW1 Africa Region Ths document has a restricteddistribution andmaybeusedby recipients only inthe performance o f their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS (Exchange RateEffective May 21,2008) Currency Unit = LiberianDollars (LR$) IUS$ = LR$63.25 FISCALYEAR JULY 1 - JUNE30 ABBREVIATIONS AND ACRONYMS AIDP Agricultural InfrastructureDevelopment Project CAM Central Agricultural ResearchInstitute CBO Community Based Organization CEP Community Empowerment Project CFAA Country FinancialAccountability Assessment CFSNS ComprehensiveFood Security andNutrition Survey CGIAR Consultative Group for International Agriculture Research CPI Consumer Price Index CPS Corporate Partners CQS Consultant Qualification Selection C W Q Core Welfare Indicator Questionnaire DA DesignatedAccount DPs Development Partners EGIRP Economic GovernanceandInstitutionalReformProject EIP Emergency Infrastructure Project ESMF Environmental and Social ManagementFramework ESSAF Environmental and Social Assessment Framework ESW Economic Sector Work FA0 Foodand AgricultureOrganization FBOs Farmer-BasedOrganizations FFS Farmer FieldSchools FM Financial Management FMFA Financial ManagementFramework Agreement FPCRTF FoodPrice Crisis ResponseTrust Fund FSN Food Security Nutrition GDP Gross Domestic Product GFRP GlobalFoodCrisis ResponseProgram GoL Government of Liberia HIPC Heavily IndebtedPoor Country IFRs InterimFinancialReports IITA International Institute for Tropical Agriculture ILO International Labor Organization INGOs International Non-Governmental Organization IPD Import Permit Declarations IRP Infrastructure andRuralProject ISN InterimStrategyNote ISR Implementation Status Report IUFRs InterimUn-AuditedFinancial Reports LACE LiberiaAgency for Community Development LISGIS LiberiaInstitute of Statistics andGeo-Information Services LOU Letter of Understanding LFCRP LiberiaFoodCrisis ResponseProgram MAAFP Manual o f Administrative, Accounting andFinancialProcedures M C I MinistryofCommerce andIndustry MDG Millennium Development Goal MGD MinistryofGender andDevelopment MOA Ministryo fAgriculture M o E MinistryofEducation MoF Ministry o fFinance MoHSW MinistryofHealthandSocialWelfare M o I MinistryofInterior MRU Mano River Union NFSNS National Food Security andNutrition Strategy NGO Non-Governmental Organization O M Operation Manual PDO Project Development Objective PEMFAR Public Expenditure Management and Financial Accountability Review PFM Public Financial Management PFMU Project Financial ManagementUnit PLW Pregnant and Lactating Women PPC Public Private Collaboration PRS Poverty Reduction Strategy PTA Parent Teacher Association CWIQ Core Welfare Indictor Questionnaire SIU Special ImplementationUnit SOEs Statement o f Expenditures STCP Sustainable Tree Crops Program UNHCR UnitedNations HighCommission for Refugees UNICEF UnitedNations Children's Fund UNMIL UnitedNationsMission inLiberia USAID United States Agency for International Development WARDA Africa Rice Centre WFP World Food Programme WHO World Health Organization Vice President: Obiageli Katryn Ezekwesili Country Director: Ishac Diwan Sector Manager: Antonella Bassani C. Sanjivi Rajasingham Eva Jarawan Karen Brooks Task Team Leader Errol Graham Chris Jackson BarbryKeller Giuseppe Zampaglione Liberia FoodPriceCrisisResponseProject TABLE OF CONTENTS Page AgricultureandInfrastructure Development Project. Data Sheet....................................... Project 1 FoodSupport Project for Vulnerable Women and Children -Project Paper Data Sheet..................2 Community Empowerment Project I1. Paper Data Sheet.................................................... Project 3 A. Introduction........................................................................................................................... 4 B. Rationale for ProposedBank EmergencyProgram.............................................................. 5 C. Country Context.................................................................................................................... 5 D. Economic and Social Impact of Crisis.................................................................................. 7 E. Institutionalor Capacity Issues............................................................................................. 8 F. Government Responseto the Crisis...................................................................................... 9 G . Donor Strategiesand Programs .......................................................................................... 10 H. Bank Response.................................................................................................................... 11 I. Program Components ......................................................................................................... 11 J. Consistencywith Country Strategy .................................................................................... 12 K. ProgramObjectives, Outcomes, and Monitoring Arrangements........................................ 12 L. Appraisal of Program Activities ......................................................................................... 13 M. Compliance with Safeguards Policies................................................................................. 15 N. Implementation Arrangements ........................................................................................... 16 0. Program Rsks and MitigatingMeasures............................................................................ 17 Annex 1: DetailedDescriptionof Project Components............................................................. 21 Annex 2: FinancialManagementandDisbursementArrangements....................................... 35 Annex 3: DetailedProcurementArrangements......................................................................... 43 Annex 4: ProjectPreparationand Appraisal Team Members................................................. 48 Annex 5: LiberiaMap .................................................................................................................. 49 ProjectPaper Data Sheet AgricultureandInfrastructureDevelopmentProject(AIDP) Date: May 21, 2008 Team Leader: Gylfi Palsson Country: Republic of Liberia Sector Directormanager: C. Sanjivi Development Project (AIDP) FY 2008 2009 2010 2011 2012 Annual 4.5 17.0 12.0 6.0 0.5 Have these beenapprovedby Bank management? The Project Development Objectives remainthe same as the parent project: The project will support Government's efforts inre-establishingbasic infrastructure andrevivingthe agriculture activities. Total FPCR financing (US$m.): 3.0 million FinancingPlan (US$m.) Source Total Amount (US$m) Borrower 0.00 FPCR TF 3.0 m Total 3.0m 1 ProjectPaper Data Sheet CommunityEmpowermentProjectI1(CEPII) Date: May 21,2008 Team Leader: Giuseppe Zampaglione Country: Republic o f Liberia Sector DirectorNanager: Eva Jarawan Project Name: Community Empowerment Country Director: Ishac Diwan Project ID:P105683 Project I1 Environmental Category: B Borrower: Republic of Liberia Responsible agency: Liberia Agency for Community Empowerment Revisedestimated disbursements (Bank FY/US$m) FY 2008 2009 2010 2011 2012 Annual 1.00 4.50 4.50 5.OO 4.25 Cumulative 1.oo 5.50 10.00 15.OO 19.25 Current closing date: Closing date: June 30,201 1 from Bank policies? oYes XNo oYes oNo Revisedproject development objectives/outcomes The Project Development Objective has beenrevised as follow: As part o fthe Governmentresponse to the social and economic emergency o f Liberia, the Project will improve poor rural communities' access to basic infrastructure and provide economic opportunities for vulnerable households inurban and rural areas. Does the scaled-up or restructured project trigger any new safeguard policies? Ifso, click here to indicate which one(s). For Additional Financing [ ] Loan [ 3 Credit [XI Grant (from FPCR Trust Fund) For Loans/Credits/Grants: Total FPCR financing (US$m.): 3.0 million FinancingPlan(US$m.) Source Total Amount (US$m) Borrower 0.00 FPCR TF 3.0 m Total 3.Om 2 Project Paper Data Sheet Liberia FoodSupportProjectfor VulnerableWomen andChildren Date: May 21,2008 Team Leaders: Chris JacksodErrol Country Director: Ishac Diwan Graham Sector Managermirector: Antonella Bassad Sudhir Sectors: social protection, education, health Shetty; KarenBrooks/ Inger Andersen Environmental category: C Lending instrument: Emergency operation Project ID(s): Total Amount: US$4.0Million Proposedterms: Grant Expected implementation period: Expectedeffectiveness date: June 10,2008 Expectedrevisedclosing date: December 31,2010 Recipient: World FoodProgramme on behalfof Responsibleagency: World FoodProgramme the Republic of Liberia Maintain access to food among vulnerable households. Short Description: Source Local Foreign Total Borrower 0 0 0 Total IBRD/IDA 0 0 0 FPCRTF 0. 4.0 4.0 Others 0 0 0 Total 0 4.0 4.0 2008 2009 2010 2011 2012 2013 Total IBRD/IDA 0 2.0 2.0 0 0 0 Trust Funds Does the emergency operation require any exceptions from Bank policies? Yes [ ] No [XI Have these been approvedby Bank management? Yes [ 1 N o [ 1 Are there any criticalrisks rated"substantial" or "high"? Yes[X] N o [ ] What safeguard policies are triggered, ifany? None Significant, non-standard conditions, if any: Prior to effectiveness of the Grant, Governmentof Liberia andWFP would concludea Letter ofUnderstanding (LOU) settingforth the scope ofthe programandmodalities,targeting ofbeneficiariesand other matters. 3 A. Introduction 1. This project paper proposes support for a Liberia Emergency Food Crisis Response Program consisting o f (i) US$3.0 million o f additional financing to the Liberia Emergency AgricuZture and Infrastructure Development Project, (ii)US$3.O million o f additional financing for the Liberia Community Empowerment II Project, and (iii) a grant o f US$4.0 million for a new Liberia Emergency Food Support Project for VulnerabZe Women and Children. These are to be made available from the new Global Food Price Crisis Response Trust Fund(FPCR TF)'. This additional financing and financing o f the new project, totaling US$10 million, will constitute the Bank's overall support o f the Republic of Liberia's Food Crisis ResponseProgram (LFCW). 2. The proposed LFCRP would help finance activities to mitigate both the short-term and the medium- to long-term impact o f rising food prices inLiberia as a result o f the global food price trends. The proposed interventions will support the Government o f Liberia's (GoL's) national strategy to maintainand enhance food security. It includes support to (i) the implementation o f social safety net measures to maintain access to food among the most vulnerable households; and (ii) expedite a supply response o f agriculturalproductionthrough the implementation of measures to raise the yields and consequently the production of staples. Specific interventions under (i) include (a) a program for vulnerable women and children including a school feeding program and (b) a demand-driven public works program for dry-season employment. Under (ii) interventions focus on the provision o f essential inputs and post-harvest interventions to increase the productivity of rice and cassava production. 3. The LFCRP was formulated in the context of the Government's own strategic response to the food crisis and constitutes the Bank's contribution to a joint UN response. Donor partner co-financing o f the components o f the program i s not anticipated at this time. However, certain components are expected to be implemented by partners within the UN framework and this may result insignificant "in-kind'' contributions from these partners. 4. Theproposed overall allocationis as follows: Project Conrponent Anlount (ITS$) Modality Additional financing Agriculturc Conipoirent 1: Agricultural Productivity Interventions 3,000,000 and Infrastructure Oevelopnicnt Project (H3273) Component 2: Cashfor W'ork Employment Program Additional financing Community 3,000,000 1En, wermcnt Pro.ect ,[ ~ w 3 0 s o ~ Component 3: Food Support for Vulnerable Women and Children 4,000,000 New Project TOTAL 10,000'000 'The FPCR TF is to be established inconjunction with the Bank's Global FoodCrisis ResponseProgram (GFRP), andis subject to Executive Directors' approval and fundedout ofIBRDsurplus subjectto the approval of the Boardof Governors. - 4 - B. Rationalefor ProposedBankEmergencyProgram 5. Increasing world food prices threaten to undermine recent progress towards the millennium development goals (MDGs) by reducing household and national food security and threatening macroeconomic stability. Inpost-conflict and fragile states, social unrest and instability i s a real prospect. Global price increases have reached crisis proportions in2008: wheat prices rose from US$375 per metric ton (mt) inJanuary to US$440/mt inMarch while Thai rice export prices increased from US$365/mt to US$562/mt over the same period. The impact of high world food prices i s compounded by the pass-through effects o f increase in fuel prices, which adds to distribution costs and i s resulting in high food price inflation in many countries. 6. The Bank has recently put forward a new Global Food Crisis Response Program (GFW) which aims to allow a comprehensive response to the crisis across a range of different instruments. GFRP provides an overall framework for the Bank to coordinate its own contribution to addressing the crisis inpartnership with other multi-lateral organizations and donor agencies. The initial approach will be to facilitate a rapid Bank response with all available tools as soon as possible, while supporting the evolving coordination role o f the United Nations Task Force on the Global Food Crisis established recently in Berne. Eventually, it i s envisaged to have a more comprehensive partnership modeled along the lines o f other global programs, such as for Avian and Human Influenza (AIH) epidemic, for which the Bank has undertaken a role as administrator o f the AIH Facility. C. CountryContext 7. As a country emerging from 14 years of civil war, Liberia is extremely susceptible to the consequences of high food price inflation, including a very real risk o f reversal of recent progress inrestoringpeace and the nascent economic recovery. The impacts o f the increases inworld food prices are already evident inthe domestic economy since food is such a large share o f consumption. The consumer price index (CPI - in which food carries a weight of 45%) increased 14% in March 2008 - consequently a typical food basket now costs 25% more than in January 2007 (Figure 1). Higher food prices will pushmore people below the food poverty line. As reported inthe recent Core Welfare Indicator Questionnaire (CWIQ), poverty remains endemic with an estimated nationalpoverty rate o f 64%. Moreover, 48% of the population i s indigent, and unable to meet its basic food needs. The implications o f the food price increases on the poverty levels o f Liberia are severe. Based on the results o f the CWIQ survey, it i s estimated that a 20% increase inthe price o frice could leadto an increase o f 3 to 4 percentage points to the headcount poverty rate. Ths price increase has already takenplace inMonrovia. - 5 - Figure 1Trends inthe Consumer Price Index; January 2007 -March 2008 Source: Liberian authorities. 8. Rice i s the main staple food for Liberians, accounting for 37% o f the value o f food consumption and 50% of daily calorific intake o f the average household, and prices have increased substantially (Figure 2). Local rice dominates consumption o f rural households whereas imported rice dominates in urban areas and amongst upper quintiles. (One-quarter o f the Liberian population resides in Monrovia, in part a consequence of widespread displacement associated with the conflict.) Liberia imports about 70% of annual consumption requirements (US$82.1 million in 2007). Current stocks will meet national requirements through to August 2008 (with consumption o f about 17,50O/mt per month). Rice prices have particular political resonance especially among urban households. As such, they demand particular political attention as they can contribute to civil strife as observed in other post- conflict and/or fragile countries. The prevailing regime for rice imports essentially constitutes managed prices for imported rice while market prices for local rice are not mandated. A fixed wholesale/ retail margin o f US$1 per bag (of 50kg) o f imported rice i s insufficient to cover transport costs far from Monrovia. While current market prices are estimated to be US$31 per bag in Monrovia, prices in eastern Liberia are up to US$41 per bag. (By comparison, prices in Sierra Leone and Guinea are about US$50 per bag, with considerable informal trade taking place.) With the exception o f palm oil (used for cooking, but now facing higher demand for export for bio-fuels) other important foodstuffs are essentially non-tradable and therefore less impacted by global price rises (smoked fish, cassava, etc). Figure 2 Trends inRice Prices; June 2006 March 2008 - - -. ___ - - ___ - - - I 6000- -- nponed me-bcalme M 5000 - /` \ \ 10.00 ~ 0.00f ~ Source: Liberian authorities. - 6 - 9. Although Liberia remains heavily dependent on food imports (self sufficiency rates are around 70%), the latest FA0 Crop Assessment shows an impressivenascent recovery in the domestic production o f staples (Table 1). Production o f key staples - rice and cassava - has doubled since 2005 to 170,000mt o f (milled) rice and 930,000mt cassava (fresh weight) and the majority o f farmers expect production in2008 to be higher still. It i s estimated that 20% o f this increase can be attributed to increased area under production as returning Internally Displaced Persons (IDPs) re-engage their farms while 80% i s due to yield growth associated with the increased use o f new planting material. The Crop Assessment also estimates post-harvest losses at around 19% indicating that a substantial boost in food availability couldbe achieved with improved storage andbasic processing technology. Table 1Food Balance Sheet; 2005 -2007 Source: FA0 Crop Assessment 2008. Notes: * Cassavaimport requirements reported as cereal equiivalent. D. Economic and Social Impact of the Crisis 10. The increases infoodprices andthe pass-through effects of the increasesinoil prices have resulted inan acceleration o f inflation inthe first quarter of 2008. This trend i s likely to persist over the medium term and the projection for end-year inflation has been raised to 13.4% from single digit inflation (9.5%) in 2007. The higher food and fuel prices are also likely to have an adverse impact on the country's external balance. The current projections are that the trade deficit will increase in2008 to about 67.4% o f GDP but will gradually fall back to about 33% by 2010 as exports o f timber and iron are restarted. The larger trade and current account deficits are likely to be financed by increased foreign direct investment and higherofficial andprivate transfers. The fiscal impact ofthe food crisis is likely to be greater inthe short runas the Governmenthasrecently suspendedtariffs onriceimports (ofUS$2.10 per bag, at a cost o f US$1.9 million for the remainder of FY08 and an estimated US$8.4 million for FY09). Since the government i s committed to a balanced cash-based budget with no borrowing, it will likely have to take additional revenue measures or reduce its expenditures. Some off-set i s likely from increased revenues from rubber exports which have also increased in value, as well as other import tariffs levied ad valorem and over the mediumterm additionalrevenues from the logging and ironore concessions will be realized. Indeed, latest fiscal data (to December 2008) shows customs duties on all imports 22% higherthan budgeted figures. 11. With one-third of the population2residinginurban areas (three-quarters inMonrovia) o f which 30% are reported to be unemployed or otherwise inactive, rising food prices will clearly reduce real incomes. In rural areas, over 50% o f household heads are engaged The following data is obtained from the recent CWIQ undertaken in2007. - 7 - primarily infarming. Since few households fully meet consumption needs, risingfood prices only benefit a small number o f net food producers; net food consuming households will see a reduction in their purchasing power. According to the Comprehensive Food Security and Nutrition Survey (CFSNS), for which field work was undertaken in2006, 11%o f households are food-insecure and an additional 40% are highly vulnerable to food insecurity3 with notably worse figures in the areas most affected by displacement during the war and more remote regions (respectively Lofa County, and River Gee and Grand Kru - see Figure 3). Although progress has been made since 2005 - GDP growth o f 7% and 11% in 2006 and 2007 and a doubling o f rice and cassava over this period - the CWIQ reports that 62% of rural households continue to "live with difficulty" and one-third report an inability to satisfy their food needs. Figure3: FoodInsecurity andVulnerability;2006. Source: CFSNS (2007) E. Institutionaland CapacityIssues 12. Liberia i s recovering from 14 years o f civil war which not only devastated the economy and destroyed infrastructure but also destroyed most state institutions. Since 2003, the Government o f Liberia (GoL) has formulated both interim and full poverty reduction strategies (PRS).4 But its capacity for implementationo f both policies and programs remains extremely weak. 13. The rebuilding of capacity has begun with assistance from development partners (DPs) including the Bank. The Bank has focused on rebuilding institutional capacity, particularly in economic governance and public financial management, as well as focusing on reconstruction o f basic infrastructure to spur economic growth. Basic service delivery i s primarily carried out through NGOs and UN agencies, including the rehabilitation o f social infrastructure, although many NGOs are withdrawing with the transition from relief to development. Nevertheless, activities o f these organizations have helpedto mitigate the lack o f government capacity inmany areas. Inparallel, the Bank has supported the creation o f the Liberia Agency for Community Empowerment (LACE), which has played an important role 3Food insecure i s defined as households with generally poor or borderline food consumption and very weak food access, or households with weak or very weak access and poor consumption. 4The PRS and Joint Staff Advisory Note are expected to bepresented to the Board late June 2008. - 8 - inthe rehabilitation of basic infrastructures at the local level. LACE has now operated for close to three years, under the guidance o f a Board o f directors, an Executive Director and a Deputy Executive Director, a Finance director and a staff o f 24 people. All staff in LACE has been trained in community participatory approaches, and selected staff has received intensive training inprocurement, financial management and compliance with environmental and social safeguards. 14. The UN agencies play a major role in augmenting implementing capacity of the Government by directly managing service delivery functions (in cooperation with the GoL and other stakeholders). Inparticular inthe case o f agricultural productionand food security, FA0 is heavily engaged in the recovery of the agricultural sector, particularly amongst the most vulnerable farm households. WFP implements a national school feeding program in conjunction with the Ministry o f Planning and Economic Affairs, Ministry o f Education, UNICEF and other partners as well as a program o f supplemental feeding for pregnant and lactatingmothers. UNMILi s involved inthe rehabilitation o f infrastructure. 15. Inall areas, donor assistance continues to evolve from a post-conflict relief mode to one in which sustainability, national ownership, and institutional development are increasingly prominent. While much progress has been made in terms o f Government leadership on the policy and strategy side, its capacity to manage financing and implement development programs remains extremely weak and overburdened. F. GovernmentResponseto the Crisis 16. GoL has set out its strategic response to the food crisis, which although in the early stages o f development, reflects consensus among key Ministries (primarily Finance, Commerce and Industry, and Agriculture), Government consulted with DPs, inparticular the World Bank and the UN agencies (including UNMIL and the Resident Coordinator/ Humanitarian Coordinator). As its current chairperson, GoL also hosted a regional meeting o f Ministers o f Agriculture (MOA)and Heads o f State o f the Mano River Union (MRU) to consider a regional approach. 17. Government's response focuses on three pillars: Mitigating the domestic pass-through of global price rises and ensuring consistent supply of importedfoods in thefuture. Measures include: (i) removing tariffs on rice imports; and (ii)reducing the risk o f supply interruptions by negotiating supply contracts with friendly governments; Maintaining access tofood among vulnerable households by a combination o f direct assistance to severely vulnerable households (including IDPs) and targeted feeding programs such as school feeding and supplementary feeding for pregnant and lactating mothers. Government will also develop/ expand a food- or cash-for-work scheme to provide additional income-generating opportunities during the lean season for under-employedhouseholds, primarily financed by donors. Expediting a supply response by promotingfood cropproduction through distribution of essential planting materials (mainly seeds and fertilizer), improved post-harvest systems (basic processing technology such as rice millers and improved storage - 9 - facilities) to reduce post-harvest losses. Government will also further encourage expansion o f agricultural production into new lands including through incremental expansion o f small-holders as well as large-scale commercial farming. 18. The Government's response outlined above is fully consistent with the recently approved Poverty Reduction Strategy (PRS) albeit with an increased focus on short-term results. It is also consistent with complementary sub-sector policies and strategies including the draft Food and Agriculture Policy and Strategy (December 2007) and the National Food Security and Nutrition Strategy (NFSNS - 2008). GoL has yet to fully cost their program, although some elements have been quantified. For instance, budget projections envisage over US$8 million in revenue from rice import taxes in FY09 that would be foregone with the removal o f tariffs; agricultural productivity initiatives to develop swamp rice production to benefit 25,000 farm families (at an estimated cost o f US$3.5 million); and a national program o f district-based technology transfer centers (US$4.5 million). Financingneeds are substantial and beyond the scope o f DPs. Some difficult choices will have to be made. 19. In addition, while GoL has articulated certain strategies, there remain a number of policy issues to be resolved. Developing a consistent approach to food policy including pricing and import regime will be important, as will reform o f the food marketing arrangements (giventhe role of Liberia Produce Marketing Corporation). Reforms shouldbe based on sound analytical work which would also feature inthe Government response along with complementary knowledge generation to help refine medium-term responses. The Government plans to request assistance from the Bank of priority analyticalwork to feed into these policy deliberations. G. Donor Strategies and Programs 20. Intensive discussions on support for the government's efforts in responding to the crises have taken place among key UNactors and inthe UNCountry Team's Food Security and Nutrition (FSN) technical working group, led by the .UN Resident Coordinator/ Humanitarian Coordinator. These have included primarily UNICEF, FAO, WFP and the World Bank although ILO, WHO and UNHCR are increasingly involved. Agencies have contributed their particular perspectives and areas o f comparative advantage to leverage synergies and avoid duplication. 21. The result is an emerging UN-family response that reflects a number of existing approaches combined with innovative rapid-response initiatives aligned with the strategic pillars o f the Government's response to the crisis, with the Government's Food Security and Nutrition Coordination Councilproviding a high-level coordinationmechanism. 22. Other donors with existing or proposed interventions o f relevance include USAID (institutional strengthening to the MOAand support to small-holder cocoa growers under the Sustainable Tree Crops Program (STCP). INGOs including Mercy Corp and World Vision also have significant programs. Infrastructure rehabilitation is financed by a number o f donors in addition to the Bank including, inter alia, the EC and USAID. There are also emerging private sector investments including the proposed concession for large-scale rice farming recently announced (although this i s unlikely to achieve full production for two seasons). - 10- H. BankResponse 23. The Bank's strategy for emergency support i s aligned with the Government's strategic approach and takes place inthe context o f the agreedjoint UNresponse. The Bank emergency program focuses on measures to address the short and medium to long term implications o f the global food crisis for Liberia. The proposed program reflects the Bank's comparative advantage and builds on current strengths -particularly its existing portfolio of programs inLiberia - and i s cognizant o f proposed responses of Government and other DPs. It is also fully consistent with the Bank's Global FoodCrisis ResponseProgram(GFRP). In this context it should be noted that Liberia is very fragile and unable to use existing IDA resources as its program supports multipleurgent interventions and leaves little flexibility for reallocation in light of the level o f commitment. The food crisis interventions are proposed to be financed out o f the newly created FoodPrice Crisis ResponseTrust Fund. 24. As detailed below, the programhas three components: (i) intervention to rapidly an increase productivity o f key food crops (rice and cassava) by doubling yields; (ii)an employment generation program to provide 800,000 person-days of employment during the dry-season; and (iii) program for vulnerable women and children including school feeding .a for two school years (2008/09 and 2009/10)n I. ProgramComponents 25. The description ofprogramcomponents is as follows: 0 Component 1: Agricultural Productivity Intervention (US$3.O million) to raise production primarily through increasing yields and reduced post-harvest losses. It will include marketing support to facilitate the supply o f marketable surplus to consumers in urban conurbations. This will build on the existing intervention under the Agricultural Infrastructure Development Project (AIDP - IDA H3270) which includes similar interventions in food crops and small-holder tree crops for export. Additional financing provided under this proposal will provide for an expansion o f the food-crops activities and for additional quick-impact interventions on post-harvest infrastructure for the current planting season. It i s expected to benefit around 150,000 small farmers over the three years. I t will also establish a local seed multiplication facilities to produce around 1,000mt o f certified seed given that international availability o f foundation or certified seed i s likely to diminish as neighboring countries seek to scale-up production with similar ~trategies.~ 0 Component 2: Cashfor Work Employment Program (US$3.0 million). The existing LACE which receives Bank support under the Community Empowerment Project (CEP) will implementthe activities under this component. LACE currently delivers demand-led community infrastructure and a new module would be developed to use local labor for basic community tasks such as sanitation and drainage clearance and the like. It is expected that over 75% o f component costs will be labor costs thereby maximizing the impact on beneficiaries. By operating through LACE, this component will provide additional financing through CEP I1- IDAH3050). 5For instance, existing seed multiplication programs import certified seed from breeders inSierra Leone, and foundation seed from a WARDA facility inCote d'Ivoire. - 11- 0 Component 3: Food Support for Vulnerable Women and Children (US$4.0 million). The activities to be financed under this component will include: (i) school feeding a program; and (ii) home rations for girls ingrade 4 to 6, as an additional incentive to take encourage greater attendance by girls, and (iii) a program for vulnerable women, mainly pregnant and lactating women. The program will cover approximately 69,600 beneficiaries and will be implemented through the World Food Programme (WFP). The programwill cover five of the ninemost vulnerable counties. 26. FinancingInstrument. The proposed interventions will be financed by grants from the Food Price Crisis Response Trust Fund (FPCRTF)6. The FPCRTF i s financed from IBRD surplus with the specific objective of supporting a food crisis response in the most fragile and vulnerable countries with little or no access to alternative sources of financing includingIDA. The primary objectives o f the trust fund include: (i) thenegativeimpactofhighandmorevolatilefoodpricesonthelivesofthe reduce poor in a timely manner, (ii)support countries inthe design of sustainable policies that mitigate the adverse impacts o f highandmore volatile food prices on poverty, and (iii) broad-basedgrowthinproductivityandmarketparticipationinagricultureto support ensure an accelerated supply response in support o f sustained improvement in food security. 27. The interventions proposed under the Liberia Food Crisis Response Program at this time are inthe nature of immediate investmentsto reduce the negative impact of high food prices and increase access by the vulnerable population, which responds principally to the first objective. There may be the possibility o f a policy-based intervention later. J. Consistencywith Country Strategy 28. The proposed activities are consistent with the current Interim Strategy Note (ISN), discussed by the Board inJune 2007. The ISN lays out a program o f emergency support for post-conflict institution building and reconstruction in Liberia with a focus on short-term stabilization, while buildingthe base for longer-term development. The I S N covers three o f the four pillars o f the Government's PRS, including: economic revitalization, governance and rule of law, and infrastructure and basic services. This response to the food crisis, while unforeseen, responds to Government's and the Bank's continued focus on short-term stabilization and rapid response to emergency needs, This operation's specific interventions on cash transfers (through employment programs), support to vulnerable women and children, and agricultural productivity link directly to the economic revitalization and basic services work that the Bank i s already undertaking. K. ProgramObjectives,Outcomes,andMonitoringArrangements 29. The program's overall development objectives are: (i) maintain access to food to among vulnerable households; and (ii)to promote domestic food production through activities to increase yields. The expected outcomes o f the program are improved access to 6The FPCRTF is to be established inconjunctionwiththe Bank's GlobalFoodCrisis Response Program (GFW), and is subject to Executive Directors' approval and fundedout ofIBRDsurplus subject to the approval of the Board of Governors. - 1 2 - food for poor households and vulnerable groups in Liberia and increased production of the two major staples -rice and cassava. It i s expected that increased domestic production o f the staples over the medium to long terms will provide a more sustainable means o f mitigating the impact o f higher world food prices. 30. For the two restructured operations, monitoring arrangements will be embedded inthe existingproject's M&E arrangements with measurable indicators as described in Annex 2. For the new food support for vulnerable women and childrenproject, results frameworks and M&Earrangements are describedinAnnex 1. 31. Monitoring and oversight o f the Government's overall food crisis response program will be carried out by the Liberia Food Security and Nutrition Coordination Council (FSNCC) under the leadership o f the President o f Liberia. The food security and nutrition monitoring functions have been delegated to a Secretariat to be established under the FSNCC. The Secretariat will regularly produce information that describes the exposure to risks affecting the food security situation o f vulnerable groups and communities across Liberia. The Secretariat will establish a formal relationship with the Liberia Institute o f Statistics and Geo-Information Services (LISGIS) and with the Division o f Socio-economic Research, Marketing, and Agricultural Statistics of the Ministry o f Agriculture as well as the Monitoring Unit in the Ministry o f Agriculture (MOA). This close relationship will enable the Secretariat to draw upon data and analytical capacity to effectively perform its monitoring role. The FSNCC will provide oversight o f donor programs on food security and nutrition and interventions inresponseto the food price crisis. L. 81 Appraisal of ProgramActivities 32. Technical: The war undermined the agricultural sector by destroying physical infrastructure essential for production and marketing, retarding private input and output markets (which in any case were insufficiently developed) and preventing two decades of technological innovation from reaching farmers. Agriculture thus remains essentially subsistence with low technology and little marketable surplus. Yields o f food crops are about one-third o f the African average and considerably below agronomic potential. A concerted effort i s needed and Component 1will constitute the Bank's contribution. By using proven modalities o f farmer field schools (FFS) implemented through farmer-based organizations (FBOs), and using existing implementingpartners already well-versed in such techniques, a rapid roll-out o f interventions i s expected. 33. Absence o f a resurgent private sector and with 30% o f urban and 15% o f the rural population unemployed or inactive, wages are unlikely to rise considerably. Consequently, the surging food prices will result in declining real incomes which, given the dominance of food in household consumption, will have a material impact on well-being (as well as fomenting social unrest). Consequently, providing income supplement can partially mitigate these impacts. Unlike other countries, Liberia does not have a cash transfer scheme; when asked (via the CWIQ survey) what measures GoL could take to improve living standards almost half o f respondents identified employment generation as the priority. Component 2 will establish a new public employment scheme administered under Liberia's existing institutional mechanisms for community empowerment as implementedby LACE under the CEP and CEP I1Bank financed projects, which are both on-going. - 1 3 - 34. Finally, some households will remain unable to take advantage o f livelihood opportunities to mitigate the repercussions from the food price crisis. In such instances. To maintain well-being, especially nutritional status, direct food transfers are required. These also provide de facto subsidies to poor households thus maintaining somewhat real incomes. Component 3 will provide one meal per day to school children as well as additional take- home rations for girls. Timing o f the meal is important: while it i s better to provide a breakfast, many schools in Liberia operate a `shift' system with separate classes in the morning and afternoon, therefore lunchprovision i s optimal for impactingmost students. 35. The relevant agencies-WFP, LACE, and I I T NSTCP -have confirmed their ability to absorb this additional funding and that they already possess the requisite technical capacity or are confident on their ability to complement existing skill sets effectively and rapidly. 36. Economic and Financial: The benefits from the proposed program are both direct and indirect as well as short- term and longer-term. As highlightedinthe GFRP document, the urgency o f a response prohibits quantitative economic appraisal. Instead, a four-part decision criterion i s proposed based on: (1) policy context; (2) target beneficiaries; (3) expected benefit, cost-effectiveness o f benefiucost ratios; and (4) analysis of fiscal sustainability. 37. The proposed program is consistent with the framework set out in the GFRP. The overall policy context recognizes the post-conflict nature, the severe market failures and absence o f alternative measures to significant donor interventions. As noted elsewhere, policy aspects concerning rice i s likely to be reviewedto ensure a consistent public policy stance. Targeting i s explicit in all components and focuses on small-holder farmers (Component l), the dry-season under-employed (Component 2) and most vulnerable (through geographical targeting in Component 3). The combination o f social protection and productivity-enhancing interventions will ensure the program delivers both immediate program effects and benefits and longer-term development gains. Many aspects o f the program are sustainable - particularly those resulting from Component 1 as well as the improved education outcomes achieved through Component 3. Component 2 will develop a modality for labor intensive public works which could be continued beyond the end o f the current program, subject to additional funding. Like most school feeding programs, Component 3 i s fiscally unsustainable since it is unlikely that government resources will be able to continue the program although continued international support can be anticipated in the future. 38. Fiduciary Aspects: Dueto the extended conflict situation inthe country which led to earlier disengagement, the Bank has not carried out a Country Financial Accountability Assessment (CFAA) or similar Financial Management (FM) related Economic and Sector Work (ESW) in Liberia in recent years. A Public Expenditure Management and Financial Accountability Review (PEMFAR) i s ongoing, which includes an analysis o f the country's PFM strengths and weaknesses. Preliminary findings from the PEMFAR show that the Government has taken considerable actions to improve public financial management since 2006. Both physical and bureaucratic infrastructure was decimated by the war, including an exodus o f most o f the skilled personnel. Thus, the human capital in the area o f financial management i s decidedly low, affecting both the private and public sectors. The Public - 14- Procurement and Concessions (PPC) Act dated September 2005, which came into effect in January 2006 i s Liberia's first significant step towards subjecting public sector contracts to meaningful competition. Overall the PPC Act i s well written and comprehensive, and provides a good framework for the establishment o f a sound procurement system. However, it contains some weaknesses that have affected the efficient conduct o f procurement. It is further undermined by the absence of a comprehensive set of implementing regulations guidelines and manuals, which would provide procuringentities with detailed instructions on the correct application o f the law. The Act has mandated the establishment o f Procurement Units and Procurement Committees in all the Procurement Entities. However, the procurement structures recorded on paper are often only nominal and adequate support and control systems, such as basic computer systems, transport, manuals and instructions, and adequate allocation o f qualified human resources are not high enough in the hierarchy to resist interference. Fiduciary risks for this program are mitigated by the fact that the components o f the programwill be implemented through experienced project implementation units or by experienced international agencies. The risks associated with the need for much greater speed early in an emergency operation will be balanced by intensified supervision, including frequent procurement post-reviews (minimum one every six months) and annual procurement audits, and inclusion o f appropriate legal remedies inthe legal arrangements to be concluded with the Government and other implanting partners. Inaddition the fiduciary capacity o f the Bank has also been reinforcedwith the hiring o f a procurement specialist and financial management consultant basedinthe Liberia country office. 39. Disbursements for the eligible expenditure under Component 1 (Agricultural Productivity Intervention) and Component 2 (Cash for Work Employment Program) that are being financed through additional financing to the on-going operations (Agricultural Infrastructure Development Project H 327 and Second Community Empowerment Project H305, respectively) will be accommodated under existing disbursement arrangements under the original projects. For eligible activities under Component 3 (Food Support for Vulnerable Women and Children) arrangements will be made to have the funds advanced upon effectiveness o f the Grant agreement, to the designated account operated by the World Food Programme as executing agency on behalf of the Government o f Liberia. The advance amounts are to be based on an annual forecast submittedby the WFP. The WFP will account for the advances receivedand spent for eligible activities through interimunaudited financial reports in conformity with formats agreed with the Bank. Replenishments for the remainder o f the grant funds will be based on periodic interim unaudited financial reports o f the expenditure incurred and an expenditure forecast for the balance period. Disbursements will bemade into an account that may bepooledwith WFP's resources. M. Compliancewith Safeguards Policies 40. Components 1 and 2 o f the program are being implemented through the Agriculture and Infrastructure Development project and the Community Empowerment Project, both of which have been rated Category B. Recent ISR (10/30/2007) for the CEP project which monitored the environmental assessment and voluntary resettlement safeguards reported them as "satisfactory". The ISR for the AIDP (11/29/2007) rated the environmental assessmentas "satisfactory". Component 3 i s to be implementedthrough a new project which i s rated as Category C. However, there are social concerns that need to be taken into account - 15- in terms of balance targeting of the benefits of the program across social and geographic groups. In this regard, the three components are targeted to the poorest and are regionally balanced. Food support for vulnerable women and children focuses in the five counties o f Maryland, Sinoe, Grand Kru, Grand Gedeh, and River Gee in the poorer and more remote south-east areas o f Liberia. The agricultural productivity intervention will concentrate on small-holder farmers in the three counties of Bong, Nimba and Lofa - traditionally the breadbasket of Liberia and the area with the greatest agricultural potential. Given the multi- sector nature of AIDP, specific EMPs have been developed for the main components (roads, bridges, agriculture etc). 41. The existing AIDP is operating under an agreed Environmental and Social Screening Assessment Framework (ESSAF), whereby the initial environmental and social assessment was required to have been made by the Government within six months o f project effectiveness. Given the expansion of the agricultural component, the Government will be required to prepare an updated Environmental and Social Management Framework (ESMF), within six months o f effectiveness of the grant agreement, for the additional activities. The ESMF will formulate guidelines and procedures for environmental and social screening. I t will also provide guidelines for pest and pesticides use and management, as efforts, underthe project, to boost agricultural production and productivity will have pest and pesticide management implications. Inaddition, the ESMF will discuss institutional arrangements for implementation, along with any capacity strengthening and awareness raising measures deemed necessary for relevant stakeholder groups involved in implementation and monitoring o f project safeguard measures. The ESMF will be disclosed incountry and at the InfoShop following Board approval o f the proposed additional financing to the AIDP. Within Counties, the agricultural interventions will focus on existing farmer-based organizations (FBOs) already producing food-crops in order to maximize the impact on aggregate production. (Diversification, which requires more complex behavior change on the part o f farmers, i s not an objective o f this intervention). 42. The LACE public employment program under Component 2 will largely focus on rural counties not covered by the other two components as well as some sections of Monrovia and urban areas where social unrest i s a real risk. Public works will be self- targeting by providing a lower than market, but still meaningful wage rate. The Government's existing ESMF prepared for the CEP I1in 2007 i s considered adequate for purposes o f the additional activities. N. ImplementationArrangements 43. Implementationcapacity inLiberia i s extremely limited, with only two public entities confirmed with sufficient capacity to receive Bank funding directly - the Project Financial Management Unit inthe Ministryo f Finance and LACE. A few additional agencies manage implementation o f projects, but require significant levels o f external technical assistance. Implementation modalities for the three components have been designed within this constraint, while also recognizing the imperative o f rapid mobilization. Thus, the agricultural and cash-for-work employment programs will be implemented by government agencies with existing Bank projects and technical assistance already in place, and the emergency food support program will be implemented directly by a UN agency with an - 16- existing program in place. It should be noted that, while the emergency response to food prices crisis in Liberia embodies an urgent and immediate response, implementation arrangements, particularly for the agriculture and cash for work programs, will be structured to establish a foundation for longer-term development interventions to the maximum extent possible. 0. ProgramRisks and Mitigating Measures 44. Dueto the emergency nature ofthe crisis, t h s programwas preparedwithgreat speed under the Bank's policy on RapidResponseto Crises and Emergencies, OP 8.00. As a result the assessment o f the implementation readiness o f the various components was not as comprehensive as it would otherwise be. Consequently, in order to minimize the implementationrisks, further actions will be taken to ensure a speedy implementation. These actions include: fine-tuning o f the targeting mechanisms and assessing risks in the WFP program; working with the Government and other UN partners to identify and animate communities targeted for the implementation of the cash for work employment program under CEP 11; and contracting IITA and preparing an action plan for "quick wins" to reduce post-harvest losses under the AIDP 45. The specific country, sector and project operational risks that could jeopardize the success of the program and individual components are summarized in the table below along with the mitigating measures. Rating Riskjactom Uescrktiibnof risk Rating of Of risk Mitkation measures residual risk Macro- + Liberia is transitioning from post-conflict to M + The medium-tern economic outlook is LH economic economic reconstruction and development. The favorable, with growth rates expected to remain at framework macro-economic outlook is promisingwith growth 9-12 percent, supported by the recovery insectors improving steadily since 2004. The Government that the government estimates will fuel growth, has made progress inimproving fiscal management Le., agriculture, forestry, miningand service with a fiscal surplus o f 3.8 percent o f GDP in2007. sectors. However, the large debt overhang poses challenges + The country benefits from debt relief under and increases the country's vulnerability to external the HPCinitiative rescheduling of debt to Paris shocks. External public debt stood at US$4.8 billion Club creditors and has begun good faith or more than 600% o fthe estimated GDP in2007. + negotiations with commercial creditors. External shocks particularly from rising food + The Government has prepared a Poverty andoil prices couldpose significant challenges for Reduction strategy focused on rapidpro-poor Liberia going forward. + growth. Inaddition the Government hasprepared Poverty i s pervasive inLiberia. Fromthe a strategy to respond to the food crisis. recent (2007) survey, 64 percent of the population lives below the poverty line with most o fthe poor living inthe rural areas. - 17- RLvkfacrops Rating Of rikk Mitigationmeasura Country + The security situation inLiberiaremains H + The activities being supported by the project Risk fragile becauseo f the number o f (mostly) to maintain access to food by the vulnerable and to unemployed ex-combatants who have yet to be increase productiono f stapleswill contribute reintegratedinto society, the lack o f strong directly to addressing some o f the contributory domestic institutions which can mediate conflicts factors to the country's social tension. Inaddition, and enable them to be resolved without recourse to the Government i s working with UNMILto violence, and the fragile political situation in maintainan effective security presenceinLiberia Liberia's neighbors, CBte d'Ivoire and Guinea. + including at the Borders. UNMILi s scheduled to Political risks loom large as the population remaininLiberia at least until2010. looks for a substantialpeace dividend. Failure to + The Government is also using deliver jobs, social services and to tackle corruption communication outreachto better informthe couldresult ina lack o f support for the public of the global food situation and the likely Government's reform agenda. impact on Liberia. Sector + The public service has a dearth o fwell H + The program will aim to mitigate these risks policies and qualified middle and senior level staff, largely through its reliance on existing capacity as well as institutions becauseo f very unattractive levels o f remuneration. international organizations and establishedNGOs The dearth o f qualified staff is a major constraint to to implement the various components o f the implementing reforms within key agencies such as project. This will reduce the burden on already the Ministryof Finance. weak public institutions. Country + The government does not have a majority in H + Although this risk remains high, there is ownership the country's legislature and a severe food strong ownership for the Government's strategy to (incl. shortage weaken Government's ability to respond to the global food crisis and its impact on political Liberia. Throughcommunication outreachthe aspects) collaborate with the legislature and respond. Government will continue to inform o f the developments inthe global food market and measurestaken to mitigate its impact on the poor inLiberia. Country/ + The legislative framework to allow for the H + For Liberia as a whole, risks of poor sector effective policing o f corruption i s inneed o f governance inimplementation remain high and governance updating. anti-corruption instruments intheir infancy. + The Corruption Commission is not yet + However, this program contains well defined established to prosecutecase of corruption. + targeted activities and will utilize implementation The regime governing the importation of rice mechanisms that contain Financial Management i s fairly heavily regulated thereby reducing and Procurement frameworks that havebeen competition inthe market and increasing the risk tested and are under constant monitoring (for and vulnerability to external shocks. components 1 and 2). + Component 3 will be implemented byWFP. As a signatory to the UNframework agreement for FinancialManagementW P meets the standards o f the UNsystem including the Bank. See more under procurement risks at the end of the risks table. + Targeting mechanisms are set up explicitly ex-ante for the major part o fthe project, thereby also limiting discretion withregard to who will benefitfrom the Project andpotential mal- governance with regard to geographical or other distribution of benefits. + Ring-fencingunder this project, reduces governance risks, but these will remain substantial. - 18- Rating Riskfuctors Descr+iien of risk of residual risk Systemic 4 Ingeneral, the inadequacy o finternal controls 4 The existing projects AIDP and CEP have M corruption inGovernment systems, thehistory o fwidespread established fiduciary frameworks. AIDP has corruption during the interim government and lack performed well. Of 100sub-projects under CEP, oftrained civil servants make project one was found to be affected by corruption and implementation inLiberia risky. the system o f oversight was subsequently strengthened for all sub-projects. 4 The WFP component will be implemented byan international organization for which FM arrangements are inplace, in compliance with UN system requirements. 4 Legalremedies will beincluded inthe grant agreement, providing recourse incases of inadequate accounting or misfeasance. 11. Program-specificRisks Technical/ 4 The programis relatively simple inits design 4 The design incorporatesbroad oversight for Design and will rely o n the support o f establishedproject M the component to be carried out by the Ministry M management units and international institutions for o f Agriculture. Technical audits will be used to its implementation. monitor the implementation o f the sub-projects 4 There is a risk that sub-projects inthe cash for and recommend remedial actions. Poor work program may not be implemented ina timely performance by implementing partners would manner. disqualify them for future funding rounds. 4 The implementation agencies (SIU, LACE 4 The geographical targeting for the program o f and WFP will ensure that all proposed targeting the support for vulnerable women and children as is agreed inconjunction with Government on the well as the cash for work employment programmay basis o f clearly explained criteria. raise socialipolitical tension inuntargeted areas or particular groups being left out intargeted areas. 4 The team will encouragethe Government to use its communication outreach to explain the rationale for targeting certain areas. 4 WFP targeting is carried out withm a larger framework, already inplace, of agreements with the Government under letters o f understanding (LOUs). The principles o f such targeting are needs based by county and are commensurate with good targeting practices when it comes to school feeding and nutrition supplements. A new LOUis required as a condition o f effectiveness o f the new Food Support project. Imple- 4 Implementation capacity is generally weak 4 By using implementationmechanisms that mentation reflecting the l o w levels o f skills within the public H have already been tested, the program limits the M capacity and sector. This may increase the risk o f supervision risks that Government could fail to develop new sustain- overload. capacity or systems to implement the program. ability 4 BothA D P and CEP have established implementation mechanisms. TA to the S I U implementing AIDP was recently increased and capacity o f LACE under CEP is currently being increased. The school feeding program is implemented directly by WFP to reduce the capacity drain on country systems. - 19- cRiskfactors Descriptionofrisk Rating Qf Of risk Mifigatfun measures residirral risk Financial + The cash-for-works program has inherently + The existing projects AIDP and CEP) have well higher fiduciary risks. established fiduciary frameworks and FM arrangementsand haveperformed well. Financial management procedure for the cash-for-work S program will be developed and the external audit will also focus on this. The Bank team will also S provide intensive supervision and implementation support to the implementing agencies. + The WFP component will follow the WBiUN Framework Agreement on Financial Management IProcure- + The PPCC has not been able to enforce + The SIUand LACE'Sfiduciary framework i s compliance with the new ProcurementAct due to being strengthened through technical assistance institutional capacity limitations and procurement and close Bank oversight for procurement. knowledge gaps at all levels o f the public procurement system. Implementation o f component + The component's targets and outcomes will 3 by the WFP will entail the use o fWFP be closely monitored by the Bank technical team procurementpolicies and procedures. The Bank during the intensified supervision missions. I teamwill not have access to the usualprior review and H + Despite the fact that Bank procedures will not S other procurement mechanismsto ensure that the funds be used for procurement when UNAgency i s have beenused for the purposesintended. implementing (as envisaged by the GFFCR) the Bank would monitor planned outcomes during the supervision missions. Also the Grant Agreement betweenthe Bank and WFP will contain provisions to prevent and address fraud and corruption as well as establish legal remedies. + The two projects (AIDP and CEP) for + The safeguard measures inplace for existing environ- additional financing are rated as Category B on projects will be extended to the additional financing. mental environmental Safeguards and the new project, The recent ISRs for AIDP and CEP have rated the Liberia Emergency Food Support for Vulnerable performance on the environmental and social Women and Childrenis rated as Category C. M safeguards as satisfactory. + WFP activities (school feeding, rations for girls and nutrition supplements for pregnant and lactating mothers) are not expected to trigger any safeguard policies. Overall Risk (including Reputational Risks) Despite the limited scope o fthe activities proposed and the use o f existing or tested implementationmechanisms incountry, the governance, fiduciary and capacity environment o f Liberiajustifies the rating o f the overall risk as substantial for this operation. Memoitems: Poverty Reduction Strategy for LiberiaDraft 1, March2008 Abbreviations: L =Low; LH= Lwith WS Element; M=Moderate; S = Substantial; H=High WB: World Bank, CG: Central Government, GoL: Government o f Liberia; MoF: Ministry o f Finance; MoH: Ministryof Health. - 20 - Annex 1: DetailedDescriptionof ProjectComponents Background 46. Liberia has a relatively open market to food imports (notwithstanding specific notable exceptions) and has received substantial amounts o f international food aid in recent years. However, yields o f staples crops, particularly upland and lowland rice and cassava, are low relative to their potential and there is considerable room for improving yields in these crops. While rice yields have increased from 400kg per hectare (ha) over 2005 - 2007, they remain far below for the average for Sub-Saharan Africa o f about 1,50Okg/ha. 47. Importers o f rice are required to secure Import Permit Declarations (IPD) approved by the Ministry o f Commerce and Industry (MCI) for each proposed shipment. Applications must stipulate the purchase (fob) price, transport and related costs as well as the proposed wholesale and retail prices. The MCI also closely monitors the rate at which imports are released onto the market. This way, Government retains some influence on the price and timingat which rice importsare releasedinto the market. 48. Food insecurity i s a major issue for Liberia, The comprehensive Food Security and Nutrition Survey (CFSNS) conducted in 2006 revealed serious levels o f national food insecurity: 11% o f surveyed households are food insecure and 40% are highly vulnerable with the recently returned households being the most vulnerable. The survey also found that 39% o f children under the age o f 5 were stunted; 29% underweighted and 7% wasted. Households that are food insecure or highly vulnerable are concentrated inLofa, Grand Kru, River Gee, Bomi, Gbarpolu, Nimba and Sinoe counties. In addition, over-reliance on a few foods prevents nutritional balance, particularly in rural areas where only 15% o f households have a balanced diet. Inadequate food and the resulting poor nutrition not only affect attendance at school but also the ability to concentrate and consequently lead to poor educational outcomes. 49. In summary, the underlying causes of food insecurity and vulnerability include: (i) agriculturalproductioncapacitiesduetolackofhighquality seedsandsubstantial low post-harvest losses due to poor storage and processing techniques; (ii) low purchasing power due to limited income generation opportunities in the agricultural and non-agricultural sectors; and (iii)higher food prices due to the inefficiency in the marketing system and high transportation costs due to poor roads. 50. Ultimately, a sustained national response requires the robust recovery o f the agricultural economy. The immediate response to the food price crisis should be seen as complementary to existing donor and government efforts in this regard. The Bank i s investing heavily in rehabilitation o f the rural road network to better connect farmers to markets, which includes an intervention to support agricultural value chains in areas where roads are being rehabilitated. Other donors supporting the agricultural sector include USAID (roads and the recovery o f the small-holder cocoa sector), FA0 (rice seed multiplication, other small-scale interventions), and IFCI MIGA (technical assistance to the oil palm and rubber sectors). NGOs and INGOs are also active, mainly focusing on small-scale food security and/ or livelihood interventions. A strong agricultural sector cannot be achieved through exports alone, and strong local demand i s essential if increasing production i s to find a market. -21 - 51. The rapid rise in food prices focused attention on the importance o f strengthening food production as the foundation o f a buoyant rural economy (as emphasized in the recent World Development Report on Agriculture). Consequently new interventions are proposed in the food-crop sectors to expand domestic production both on-farm through yield improvements and by reducing what are significant current post-harvest losses. These interventions are fully consistent with the objective of Enhancing Domestic Food Production and Marketing Response as set out inthe Global FoodCrisis Response Program. 52. At the same time, interventions are necessary to maintain household's purchasing power in the face o f rising prices and to mitigate food insecurity through other mechanisms. These include programs such as school feeding and supplemental feeding programs for pregnant and lactating women. These typically have development objectives defined interms o f increased health status or educational achievement but their modality provides a de facto subsidy for the household food consumption. The absence o f employment opportunities necessitates public employment programs, either through deliveringpublic infrastructure with labor-intensive methods a n d or direct employment programs. Given the demographics o f a post-conflict economy such as Liberia, it i s essential to target youth. Component 1: Agricultural Productivity Intervention (US$3.O million) - Additional Financing 53. Objective and Rationale: The component seeks to scale-up an existing component o f the Bank's Agriculture and Infrastructure Development Project (AIDP) which aims to leverage the economic impacts of restored connectivity by strengthening agricultural value chains in areas benefiting from road rehabilitation. The target groups are small-holder tree crop farmers (mainly coffee and cocoa) in Lofa, Bong and Nimba counties and the project uses the proven farmer field school (FFS) modality for supporting farmer based organizations (FBOs). The International Institute for Tropical Agriculture (IITA) -part o f the Consultative Group for International Agriculture Research (CGIAR) system - through their Sustainable Tree Crops Program (STCP - funded by the USAID and others) have substantial experience inLiberia andare engagedto implementthe originalprogram. 54. Under the additional financing, IITN STCP would augment their existing interventions to include rice and cassava. The existing modality o f working through FBOs and establishing FFS remains appropriate. Their presence already in the three Counties will keep overheads down. Additional technical expertise for the new activities will be brought in by partnerships with local NGOs and FA0 as well as the Africa Rice Centre (WARDA) based in Benin. IITA i s the world's leading research agency for cassava. The component will seek opportunities for quick impacts for instance through the provision o f post-harvest infrastructure to reduce losses in the present growing season. (post-harvest losses are estimated at 19%). Support to farmers for production will concentrate on maximizing impact on the 2009 and 2010 planting seasons and this will be complemented by longer-term capacity building for institutions critical to sustained impacts such as the research system Central Agricultural Research Institute (CARI) and Country-level extension system. As such, this component will deliver immediate benefits while simultaneously preparing the groundwork for a longer-term support to crucial agriculture-related institutions. 55. Special ImplementationUnit Structure and ImplementationCapacity: AIDP - as well as other IDA funded infrastructure project in Liberia - i s implemented by a dual structure o f a Special ImplementationUnit (SIU) located inthe Ministry o f Public Works and a Project Financial Management Unit (PFMU) in the Ministry of Finance. The two-unit - 22 - structure thus ensures an arms length betweenprocurement process and handling o f financial matters and was designed to minimize possibilities o f corruption. The S l U prepares and procures substantial number of contracts with reasonable quality and speed. The implementation requirement resulting from the additional financing for Component 1 represents only marginal increase in expected delivery o f the unit. Implementation risk i s therefore deemed minimal. That aside, the IDA infrastructure team has and continues to work intensely with the unit to ensure that delivery o f its work program i s on track. The SIU i s currently implementing a program o f about $100 million in Bank grant funding. In its 18 months o f existence it has procured works, goods and services o f close to $70 million, whereof about $40 million has already been disbursed. The SIU i s supported by technical assistance in procurement, contract management and engineering. Still, restructuring of the S I U i s under way with the intention o f significantly scaling up its capacity and ensure it will be in a position to deliver on expected substantial increase in infrastructure funding from a number o f donors. The SIU recently recruited an Agriculture Expert to strengthen its capacity in managing AIDP implementation; this position also provides a strong link with MOA. 56. IITN STCP were identified as implementing partners under AIDP and approval for sole-source contracting confirmed. Arrangements are being finalized for their engagement by the GoL under AIDP and these would be revised to reflect this additional financing. 57. FinancialManagement,Procurement,and DisbursementArrangements: As it i s done inthe ongoingAIDP, the PFMU inthe Ministryo f Finance (MoF) would be responsible for financial management related to this component. Therefore the FM arrangements (including disbursement) for this component will remain as specified for AIDP. The procedures applied by the PFMU on ongoing projects are acceptable to the Bank. Financial management performance under the ongoing AIDP i s satisfactory. The Unit's capacity has been even further strengthened with the recruitment o f the Unit Head who possesses an internationally recognized accounting qualification, and two accounting assistants who are also expected to be at post at the beginning o f the thirdquarter o f 2008. 58. ProjectDevelopment Objectivesand OutcomeIndicators:The AIDP development objective i s to support Government's efforts in re-establishing basic infrastructure and in reviving agricultural activities. The addition o f the Agriculture Productivity Intervention under additional financing fits within this existing PDO, thus no changes are needed. Outcome indicators for this additional financing include: (i) increased rice production in project area; (ii) increased cassava production inproject area; and (iii) increase incassava an and rice yields. The Food Crop Assessment i s being finalized and will provide baseline data. PDO Outcome lndicaturs Useof Outcome Information The project will support Increased access to water for residents Restoration of critical infrastructure will indicate success Government's efforts in o f Monrovia insupporting GOL's top pnority to reinstateassets reestablishing basic destroyed dunng the war, ensure continued and reliable infrastructure and in Port productimty increased flow of goods to Libena, support safety and security inthe reviving the agriculture Increased access to an all seasonroad country and inrevlmng the agriculture economy activities for targeted rural population The development o fNational Transport Policy and Increased number o f markets where Strategc Paper will indicate transition from post-conflict seedrice is available to longer-term development-oriented envlronment Percentageincrease inmetric tons o f Assess capacity o f MPW and MOTto plan for long term cocoa transport network and transport management needs Increased marketed seedrice and cocoa exports i s Increased production of rice and evidence that farmers are respondingto new marketing cassava inproject areas opportunities - 23 - OutcomeIndicators [!$e of Outcome Information Results hiicators for Each Useof Results~ o i s j t o r i i 1 ~ One per Component Component ComponentA - Policy Reform and capacity building A management contract for ExternalPort Management Team in Productivityincrease i s a proxy for improved port the operation ofthe port of place management Monrovla Improvedpolicy Effectivepolicies support growth of the sector. formulation intransport Draft National Transport Policy and sector Strategy Paper formulated and prepared for Government's review and endorsement June 30,2008 Improvedpolicy [nclusionof result Eramework establishesbasis for policy formulation inagriculture Two new agriculture sector policies evaluation sector completed with results framework submitted to Minister o fAgriculture by December 31,2010 Component B. Agriculture and Infrastructure Investments Roadand nver crossing New Vai Town Bridge built by Goodprogress or otherwise may indicate Government access significantly December 31,2008 procurement and contractual management performance improved inrural and urban that will be addressed ifthe need arises Six main bridges rehabilitated by June 30,2009 At least40 minor river crossings improved by June 30,2010 Rural population within 2 kmof an all season road increases Oiljetty in the Port of Refurbishment of the Oil Jetty structure Monroviawhich i s near including construction ofnew off-load collapse station, mooring dolphins, and walkways by December 31,2008 Increased access to potable Refurbishmento fwater treatment plant water to Monrovia residents inMonroviabyDecember 31,2008 The value and supply chains Increased production and sale o frice Productionand sale o f locally produced seed evidence of of rice, cocoa and palm oil seeds on beneficiary sites emerging functioning seed market have become more efficient Increased production and Increased market throughput in sample Improved functioning o f market infrastructure evidence o f marketing of rice seeds o f markets inproject areas by Dec. 31, greater efficiency inthe value/ supply chain. Expansion of 2010 FBOs evidence o f ability o f farmers to organize to seek new knowledge and access market opportunities Data shows effectiveproduction and sale o frice seed. Validate assumption that producers use the markets to dispose o f marketable surplus Increased production o f Increase in yields o f rice and cassava Validate agronomic suitability o f inputs and extension food staplesprimarily amongst beneficiary farmers advice. Evidence o f sufficient market incentives to though yield improvements produce marketable surplus. 59. Monitoring and Evaluation Arrangements: Existing project monitoring and evaluation modalities would be applied to additional activities. This would be augmented by the proposed support to the National Food Security and Nutrition monitoring system under Component 3. Arrangements for results monitoring are below. - 24 - 3 n 0 2 n E W x 0 I v, .-& 0 N I 53m o a 0 2 2 .-E 1 9 c E 0 v1 2 H sa e! c .-0 E L. a 5 9 x 60. ImplementationPeriod: Scheduled closing o f AIDP is end o f December 2011 and activities under this additional financing will be completed well before that time. Component 2: Cash for Work Employment Program (US$3.0 million) - Additional Financing 61. Objective and Rationale: The component aims to provide income support to vulnerable households in rural and urban areas. The existing LACE which receives Bank support under the CEP will implement the activities under this component. LACE currently delivers demand-led community infrastructure and a new module would be developed to use local labor for basic community tasks such as sanitation and drainage clearance and the like. It is expected that 75% o f component costs will be labor costs thereby maximizing the impact on beneficiaries, and that this component will create some 800,000 person days temporary jobs. By operating through LACE, this component will provide additional financing through CEP 11. The implementation o f cash for work program through LACEhas the advantage o f combining the short term income support objective o f the food crisis response with the longer term objectives o f LACE's regular program. 62. CurrentProjectPerformance. LACE's performance inmanaging the CEP has been good. The project has consistently been rated satisfactory or moderately satisfactory. In recent times the project has experienced some delays inimplementationto be attributed to (a) delays in processing an extension o f the closing date under CEP I;and (b) shortage of construction materials with significant impact in costs and calendar for completion o f sub- projects. Moreover, a recent review o f procurement procedures by LACE highlighted some weaknesses. In order to strengthen LACE's procurement capacity, the Bank procurement specialist in Monrovia, with support from HQand from the Accra office o f the Bank, has been providing support in the following areas: strengthening the quality o f procurement plans; improving procurement filing and documentation and knowledge in procurement o f Goods and services; contract management; and closure o f contracts procedures. Under the auspices o f CEP 11, LACE i s also in the process o f recruiting a new procurement specialist. Furthermore, the Bank's recently approved EGIRP will work to build procurement capacity across the public sector. It i s o f note that the project has generated sufficient political support that a second CEP (CEP 11) has been approved, and will be co-financed by the European Union. 63. LACE's implementationand monitoring arrangements are detailed inthe MAAFP, an internal LACE document that has been approved by LACE's Board and the Bank. It describes procedures regarding personnel management, preparation o f work programs and budgets, appraisal and approval o f community sub-projects, disbursement o f funds, monitoring and evaluation, procurement, and accounting and audit. The Operation Manual (OM) deals in greater details with the identification, preparation, and implementation o f community sub-projects. As LACE's involvement in the cash for work program will not require deviation from its current procurement practices, permissible under its Financing Agreement with IDA, no revisions to the OM will be necessary. If these activities become a regular part o f LACE's portfolio, the OM will be revisited. For the purposes o f this program, however, a brief set o f guidelines (Cash for Work Employment Program Guidelines) will be developed (to be completed within two months o f grant effectiveness), and annexed to the OM. The guidelines will cover program implementation, as outlined above, and LACE will ensure that they will be widely disseminated to the public for enhancing transparency and buildingownership. - 27 - 64. LACE Structure and Implementation Capacity: LACE is a government agency that operates under its own procurement and disbursement procedures, and separate, transparent management and financial systems. LACE was established in 2004 by act of Parliament with the objectives o f improving poor rural communities' access to basic services and economic opportunities as well as building capacity at the community and local government level. LACE i s accountable to the President. The Board o f Directors i s responsible for governance and policy-making; specifically, it approves LACE'S annual budget and work program and its OM and Manual o f Administrative, Accounting and Financial Procedures (MAAFP), and it appoints the Executive Director, the Deputy Executive Director (in charge o f Administration), and the Finance Director. The Executive Director i s the chief executive officer responsible for the day-to-day management o f LACE. LACE has demonstrated implementation capacity which i s inthe process o f being scaled up under the IDA-funded Economic Governance and Institutional Reform Project (EGIRP).' LACE also has the advantage o fhavingwell-established relationships with many community leaders and local authorities, which will be critical to the successful implementation o f a pro- poor cash for work program. 65. Implementation Arrangements: Building on LACE's experience with direct procurement for civil works and goods, it i s envisioned that under the cash for work program, LACE will directly contract existing NGOs, small private firms, or larger community based organization (CBOs) to undertake labor-intensive small sub-projects inurban and rural areas. Targeting o f specific areas will take into account both needs (Le. rice surplus or rice deficit area, presence o f unemployed people) and the geographical coverage of existing interventions. To this end, LACE will work closely with the various city corporations, the Ministry of Public Works, and other national and international agencies. Works will most likely consist o f basic rural road maintenance (side-brushing, possibly ditch-digging) and urban sweeping and waste collection/ disposal. Liberia has a number o f organizations with experience working with international organizations and bilateral donors executing exactly these types o f works. The advantage o f tapping this experience i s two-fold: first, it will allow the program to roll-out rapidly; and second, it will further contribute to the capacity- building o f these small organizations, which will be increasingly useful partners in future endeavors. 66. LACE's implementationand monitoring arrangements are detailed inthe MAAFP, an internal LACE document that has been approved by LACE's Board and the Bank. It describes procedures regarding personnel management, preparation o f work programs and budgets, appraisal and approval o f community sub-projects, disbursement o f funds, monitoring and evaluation, procurement, and accounting and audit. The OM deals ingreater details with the identification, preparation, and implementation o f community sub-projects. As LACE's involvement in the cash for work program will not require deviation from its current procurement practices, permissible under its Financing Agreement with IDA, no revisions to the O M will be necessary. If these activities become a regular part o f LACE'S portfolio, the OM will be revisited. For the purposes o f this program, however, a brief set of guidelines (Cash for Work Employment Program Guidelines) will be developed, and annexed to the OM. The guidelines will cover program implementation, as outlined above. Financial management procedures for the cash-for-work program will also be developed and included in these guidelines (or included in the LACE's Manual o f Administrative, Accounting and Financial Procedures - MAAFP). 'IDA-H3850 - 28 - 67. FinancialManagement,Procurement, and Disbursement Arrangements: LACE currently operates financial management, procurement and disbursement procedures that are acceptable to the Bank. Financial management and disbursement arrangements for this component will remain as specified inCEP I.The Agency has over the years successfully set up adequate financial management and internal control systems acceptable to the Bank, and have succeeded inrecording, processing, preparing and have submitted quarterly interim un- audited financial reports (IFRs), and timely conduct o f audits. Financial management performance in the ongoing CEP I1i s satisfactory. The Bank's FM team would continue to intensify its supervision and provide FM implementation support to ensure that established financial procedures are strictly adhered to and where necessary strengthened. As o f April 2008, LACE has complied with fiduciary requirements, and continues to record transactions properly. Also it has successfully submitted withdrawal applications ina format required by the Bank. During the implementation of CEP I,LACE has submitted 34 withdrawal applications, more than one month. 68. Regarding procurement, LACE would continue to use established Bank procurement rules, but would specifically use two procurement mechanisms for this program, both in conformity with Bank procedures. First, LACE can publisha request for proposals for sub- projects, stipulating the percentage o f the sub-project budget to be devoted to labor, and the minimumnumber of persons to be employed. Inawarding contracts, LACEwould take into account not only satisfaction o f minimum criteria, but also past experience o f the organization, the women/ men proposed ratio, and the time-frame o f the proposed activity. Second, LACE will be able to use NCB to select implementing organizations, especially in urban and peri-urban areas. This method would be used for relatively important contracts (at least US$50,000) and where LACE can easily design a scope o f works (e.g., for the sweeping o f roads in a certain section o f Monrovia). The mix o f procurement methods to be used will depend on LACE'Sassessment of local demand, which will take into account other agencies' experiences. 69. The contracted organization will be responsible for recruiting workers - to be done primarily on a first-come, first-serve basis, though with special provisions for the inclusion o f women and the coverage o f multiple households in rural areas - and for paying them. The wage for the program will be set at US$2.50 a day, US$0.50 below the standard unskilled day wage paid by most organization engaged in similar programs. This will help to promote self targeting. Local authorities will be involved inmobilizing and sensitizing communities before the works begin, and will work closely with the implementingorganizations. 70. Project Development Objectives and Outcome Indicators: The PDO will be revised as follows: As part of the Government response to the social and economic emergency of Liberia, the Project will improve poor rural communities' access to basic infrastructure and provide economic opportunities for vulnerable households in urban and rural areas. Hence, this additional financing requires a limited restructuring inthe CEP PDO as compared to the original PDO, to include urban activities. The output indicators for the new component include the number o fpersons employed incash for work program - the goal i s to enroll about 10,000 persons in the program in year 1. The project will not monitor the use o f the additional income by beneficiaries, but at the end o f the project will assess the overall impact o f the project on vulnerable households and the performance of the implementation arrangements. The Table below i s the M&E framework o f the entire Project once the additional financing i s approved. Under the Project Outcome Indicators, the table includes an indictor to gauge the impact o f the Cash for Work Employment Program on - 29 - vulnerable households. Under component 4, a new indicator monitors the number o f person days created by the Program. Some refinement o f the existing M&E framework i s also proposed inorder to improve the monitoring o f progress towards the PDO. PDQ Project Outcome Indicators UseofProjectOutcome Information __I _I Aspart of the Government response to % o f completedsub-projects reflecting Gauge whether sub-projects the social and economic emergency of Beneficiary's priorities reflect community priorities Liberia, the Project will improvepoor # of children attending primary school in rural communities' access to basic "improved" facilities as defined by technical Case study for Bank work inother infrastructure andprovide economic assessment' post-conflict countries opportunities for vulnerable % of targeted vulnerable households (at least households in urban and rural areas. 10,000) reportingincreased income byat least 20% IntermediateOutcomes IntermediateOutcome Indicators Useof totermediateOutcome Monitoring Component 1 # o f schools constructegabilitated Track progress inimplementing Community Driven Program # o f markets constructed/rehabilitated sub-projects. # o fbridges constructedrehabilitated Improved infrastructure intargeted # o f wells built communes # of healthfacilities Component 2 % o fPMCs that have 50% women Measure improved capacity to Capacity BuildingProgram % o f PMCs managing their ownbank accounts manage own resources. % o f communes that have minutes o f the Improved capacity to respond to meeting electing PMCs Gauge improved inclusion in community infrastructure development # o fPMC members successfully trained yearly decision making bodies at needs # o fcountyidistrict officials successfully community level. trained every year Gauge the efficiency of delivery of training. Component 3 % o fproject management expenses as partof Proiect Management total budgeted annual expenditures Component 4 Number ofperson days provided in labor Gauge progress in the Cash for Work Employment intensiveworks implementationo f Cash for Work Program(AdditionalFinancing) program Increased access to additional income from cash for work program 71. Monitoring and Evaluation Arrangements: The cash for work component will be folded into existing LACE monitoring arrangements. Contractors such as NGOs, CBOs, and firms will report to LACE on a weekly basis and on a monthly basis, in particular regarding the number o f person--days o f employment created through the program. Necessary support will be also given by technical experts hired by LACE to ensure that tasks are completed as agreed in the contract, and also that payments are done in accordance with what i s agreed in the Cash for Work Employment Program Guidelines, which will be prepared no later than two months after Project effectiveness. The Guidelines will also address the issue o f payments to workers, handling of cash by contractors and NGOs and reporting. At the end o f the project an independent beneficiary assessment will be conducted to assess the overall impact o f the project on vulnerable households, the perception o f beneficiaries, and project implementation. Furthermore, in order to increase transparency and inform communities, implementing agencies will be responsible for hrnishing all project sites with clear signs, indicating the type and scope o f works, the name and contact number o f the organization responsible, the contract amount, the number o f person days o f employment the project will create, and the source o f funding. Under the Community Empowerment project implemented by LACE, all project sites have already a sign o f this kind. * Improved school facilities is defined as schools that (i) duringthe rainy season; (ii) access to function with water and sanitation facilities' inthe school area; and (iii) with furnished classrooms. - 30 - 72. ImplementationPeriod: It is expected that the program will begin in June 2008, with activities launched inOctober to coincide with the beginning of the dry season. It will continue for two dry seasons, thereby endingno later than June 30,2012. To start the project as soon as possible, and on time for the end o f the rainy seasona set o f actions are proposed, as included inthe following table: Type of action By when By whom 1. Preparation of annex to existing Within two months from Project LACE with support from World Bank Manual on Work Emulovment Promam . < effectiveness I Guidelines 2. Hire a Head of the Work Employment Immediately after Project LACEwith no-objectionby the Bank Program effectiveness 3. Organize a workshop on labor ByJuly30,2008 LACE intensive public works with other Government (Ministry of Labor, Ministry of agencies and Government to exchange on Planning, Ministry o f Finance and Ministry o f current and future activities Public Works) Other agencies (such as ILO) and NGOs (such as Mercy Corps) 4. Discuss the proposed additional No later than June 30,2008 LACE and Members of the Board, in particular financing at the next board meeting Ministry o f Planning, Internal Affairs, Gender, civil society and NGO representatives, USAID and EUreuresentatives Component 3: Food Supportfor Vulnerable Womenand Children (US$4.0 million). 73. Objective and Rationale. This aims to reduce the food vulnerability of women and children from poor counties targeted by the program. The component would finance: (i) feedingonadailybasistopre-schoolandprimaryschoolchildren; (ii) home school take rations for girls in grade 4 to 6, as an additional incentive to encourage greater attendanceby girls, (iii) for pregnant and lactating women (PLW) attending clinics and hospitals; rations and (iv) the administrative cost of the WFP and its partners to administer the program including monitoring and evaluation o f the effectiveness of the program. This component will also support the piloting o f increased food purchases (possibly at pre-announced prices) from domestic sources for the WFP program. This i s intended to help stimulate domestic food production. 74. WFP has an existing national school feeding program covering all Counties and urban and rural communities. Over 2005 and 2006, over 600,000 children in over 2,300 schools were assisted with one school meal per day and 28,000 female children received take-home rations. The target for 2007 - 2009 i s 450,000 inyear one and 400,000 inyear two. A recent survey conducted by WHP identified nine counties where chronic malnutrition rates are `critical' - in excess o f 40%. Consequently, WFP have proposed a special program for identified five counties in the south-east Liberia which fall within these nine, and have proposed a special program specifically for those counties. Bank support will not displace other WFP resources but rather will fill a financing gap and thereby allow WFP to focus on the five most vulnerable counties with a three year program without scaling back its support inother vulnerable areas. 75. ImplementationArrangements. Implementationarrangements are prescribed inthe Handbook for School Feeding Program in Liberia (July 2007) producedjointly by WFP and the Ministry o f Education (MoE). This sets out clear procedures for implementing the program, including rules on school eligibility, the rights and obligations o f all stakeholders including WFP, MoE, teachers and principals, and the parent teacher association (PTA). The handbook also addressed meal preparation and food safety as well as the monitoring and - 3 1 - reporting on the program. WFP procures all inputs centrally and manages the distribution network (including to remote areas even inthe rainy season). WFP also designates qualified NGOs as cooperating partners (CPs) for specific school zones throughout the country. It monitors, along with the CPs and the MOE, to ensure that the school feeding criteria are respected and that delivered food i s fully accounted for. WFP i s also accountable to the donors from which the food aid i s resourced. In consultation with the MOE, WFP has the right to suspend any school from the program when a school fails to abide by the approved School Feeding Guidelines. The principal functions o f the CPs are defined by WFP. CPs are responsible for performing on-site inspection o f school facilities, monitoring, submitting reports on the status o f schools in various zones, delivering food commodities, updating school records and assessing school reports. 76. The Ministry of Planning and Economic Affairs (MPEA) will be the lead counterpartof WFP. This ministrywill serve as the linkto the other stakeholder ministries including the Ministry o f Education (MOE), Ministry o f Agriculture (MOA,Ministry o f Health and Social Welfare (MOHSW), Ministry o f Gender and Development (MGD), Ministry of Interior (MoI) and Ministryof Public Works. The Government's support will be through the exemption o f taxes on food and non-food items importedby WFP. 77. The Government of Liberiaand the World FoodProgrammehas signed a Letter of Understanding(LOU) which sets out the obligations of WFP and the Government. The LOU i s effective from July 1, 2007 to June 30, 2009. The LOU makes provision for the Government o f Liberia, at its discretion to undertake in close collaboration with WFP, periodic assessments o f the program to satisfy itself that everything i s on course as per the LOU. The signing o f one or more LOUs covering all activities under this component between the GoL and WFP will be a condition o f effectiveness for the grant to WFP. 78. ProcurementArrangements. In the implementation o f this component, the WFP procurement procedures will be applicable and the Bank will not exercise any prior review on the procurement decisions in that context. WFP will `be responsible for procurement activities under the project. However, the Bank will conduct intensified supervision o f the outcome and results o f the project to mitigate procurement risk in the context o f implementation. 79. Budget Arrangements: WFP will prepare annual work plans and budget for the project and send to the Bank for review within one month from effectiveness and thereafter byno later than December 15 each subsequent year. 80. FinancialManagementArrangements. The FM arrangements for this component would be based on the World BanMUnited Nations Financial Management Framework Agreement (FMFA). WFP will prepare its annual work program and budget for review by MOF and the Bank for approval. WFP would handle all the financial management aspects using its own procedures set out in the WFP Financial Regulations. WFP will maintain a separate ledger account for recording the transactions relating to this project. As per the FMFA, the Bank's audit requirements are met through the normal biennium audit o f the WFP, and separate audited financial statements and audit reports from WFP for this project are not required. 81. WFP would submit periodic interim financial reports (IFRs) to the Bank which include sources and uses o f funds; expenditures by project activities (sub-components) with comparative actual and budgeted amounts for the period under review and cumulatively for - 32 - the project life; opening and closing balance o f advances received from the Bank; projected expenditures and cash forecast for the next reporting period; and explanatory notes as needed. These reports will be submitted to the Bank within 45 days following the end o f each quarter. Formats o f the IFRs would be agreed between the Bank and WFP within one month o f effectiveness. 82. DisbursementArrangements. Upon effectiveness funds will be advanced to WFP as Recipient based on an annual forecast to be submitted by WFP. Disbursements shall be made into a WFP Bank account that may be pooled with WFP's resources. Replenishments o f the advance for the rest o f the period shall be basedon the IFRsdiscussed above. 83. The current LOU between WFP and the Government o f Liberia stipulates that the WFP will share its annual Standard Project Report with the Government o f Liberia, donors or implementation partners. The report will include both quantitative and narrative information. Quantitative information to be provided will include: the number o f beneficiaries receiving assistance (disaggregated by sex); the movement o f food commodities; the amount distributed indifferent areas and to different target group; and the receipt and use o f non-food inputs provided by WFP. Narrative information to be provided include; delivery and distribution arrangement, operational difficulties encountered and measures taken to overcome them; causes o f losses and steps taken to reduce them; the acceptability of the food provided and information on complementary inputsfrom other sources. 84. Project Objective and Results Framework: The project development objective of this component is to maintain access tofood among vulnerable households. 1, PDO Outcome Indicators Use of Outcome information -I-- - The project development objective is to 1. Number of (or %) pre-school and primary Verify implementation maintain access to food among school children from vulnerable household performance and impact of vulnerable households. receiving meals on a daily basis at school. the project. Increased access to food by school 2. Number (or %) of girls (grade 4 to 6) receiving children take-home rations. Increased access to food rations for 3. Number (or %) o fpregnant and lactating pregnant and lactatingwomen (PLW) women receiving food rations 85. Monitoringand EvaluationArrangements. The WFP will be responsible for the monitoring and evaluation o f the program with oversight from the School Feeding Unit inthe MinistryofEducation. The ParentTeachers Associations are also being encouragedto play a greater role inthe monitoring o f the program. Inaddition, there are plans for a national food security and nutrition monitoring and early warning system with possible funding under the joint UNprogram o f support to the NFSNS. 86. Arrangements for Results Monitoring are as follows: Target Values Intermediate O u t e ~ ~ a s e k eYKI -- I Frequency of Indicators 2008 tieports Instruments Data Collection Numberofchildrenreceiving To be 62,000 Semi-Annually Based on school meals determined register WFP Numberof girls receiving To be 4,300 Semi-Annually Based on school take home rations determined register WFP Number of Pregnant and To be 3,300 Semi-Annually Register at clinic WFP Lactating Women receiving determined and hospitals - 33 - 87. Implementation Period. It is expected that the program o f food support for vulnerable women and children will begin inJuly 2008 and runfor two years to June 2010. 88. Environmentaland Social Safeguards. This project triggers no environmental and social safeguards issues and i s rated as category C. However, the project has been designed to take account o f concerns regarding social equity and targeting o f food aid to the poorest and most vulnerable. In this regard, the project focuses in the five counties o f Maryland, Sinoe, Grand Kru, Grand Gedeh, and River Gee in the poorer and more remote south-east areas o f Liberia. - 34 - Annex 2: FinancialManagementandDisbursementArrangements Introduction 89. A financial management assessment was carried out inaccordance with the Financial Management Practices Manual issued by the Financial Management Board on November 3, 2005. The objective o f the assessment was to determine whether the implementing entities have acceptable financial management arrangements, which will ensure: (i) the funds are used only for the intended purposes in an efficient and economical way; (ii) the preparation o f accurate, reliable, and timely periodic financial reports; and (iii) safeguard the entity's assets. 90. The assessment was carried out by the Bank financial management team and included interviews with key staff (including the Unit Head at PFMU and Finance Director o f LACE) at the Project Financial Management Unit (PFMU) in the M o F and the LACE. This assessment draws upon experience with World Bank funded projects in Liberia, several of which are disbursingfunds through the PFMU inthe MoF and LACE. Overviewof Programand ImplementationArrangements 91. The objective o f the project is to mitigate both the short-term and the medium- to long-term impact o f rising food prices in Liberia as a result o f the global food price trends. The proposed interventions will support the Government o f Liberia's (GoL's) national strategy to maintain and enhance food security. It includes support to (i) the implementation o f social safetv net measures to maintain access to food among the most vulnerable households; and (ii)expedite a supplv response of agricultural production through the implementation o f measures to raise the yields and consequently the production o f staples. It seeks to scale-up an existing component o f the Bank's Agriculture and Infrastructure Development Project (AIDP P104716) which aims to leverage the economic impacts of restored connectivity by strengthening agricultural value chains inareas benefiting from road rehabilitation. 92. The Project Financial Management Unit in the Ministry o f Finance and the Liberia Agency for Community Empowerment would be responsible for the financial management o f the Agricultural Productivity Interventions and Cash for Work Employment Program components respectively. 93. The Food Supportfor Vulnerable Womenand Children component will be handled by the WFP. WFP will receive grant funds directly from the Bank under a separate Grant Agreement. WFP i s a signatory to the FMFramework Agreement between UNagencies and the Bank. Therefore the FM arrangements for this component will adopt the arrangements outlined inthe FMFramework Agreement. CountryAccountabilityIssues 94. Due to the extended conflict situation in the country which led to earlier disengagement, the Bank has not carried out a Country Financial Accountability Assessment (CFAA) or similar FinancialManagement (FM) related Economic and Sector Work (ESW) in Liberia in recent years. A Public Expenditure Management and Financial Accountability Review i s currently ongoing, which includes an analysis o f the country's PMF strengths and weaknesses. Preliminary findings from the PEMFAR suggest that the Government has made - 35 - considerable progress in the area o f financial management since 2006. However, a few aspects have been identified for further strengthening, including the need to improve the budget classification system; increase the computerization o f FM systems; improve accounting that will eventually move towards an accrual basis; and improve the quality o f expenditure reporting through IFRs. To that effect, with the World Bank support, there i s in place an established `centralized' project financial management unit, the PFMU inthe MoF, which has competent FM staff with professional accounting qualification acceptable top the Bank. In addition, there i s a pool o f few skilled personnel that are available to support the project at LACE to handle community type o f activities 95. The risk analysis and mitigationmeasures are limited to Components 1and 2. Table 1: Summary of RiskAnalysis COMPONENTS1AND 2 - Inherent Risk Risk RiskMitigation Measure Residual Rating Risk eating Country Level Poor F Mperformance due to a lack o f Establishmentof the `centralized' F M unitinthe MoF to handle adequately qualified F Mprofessionals. all project finances in the short to mediumterm, and LACE to handle CDD type projects while concurrent PFM TA under ;I EGIRP concentrate on targeted PFM training for both public and private sector staff. A PFM reform programi s being implemented. Entity Level PFMU (MoF): Entity management may politically M A strong project financial management unit (PFMU) will be L interferewithproject financial responsible for project financial management. management controls, even though there hasnot been any such incidence L LACE'S capacity has been examined and found to be sufficient. L so far. This will be closely monitored. L A C E b) LACEwill support capacity building L a) LACE'S F M systems may not be M of local authorities by providingsome adequatefor the implementation of the resources for training and supervision as set up under CEP 11. scaled-up project. Project Level: H See mitigation measures outlined under Internal Controls and S CashTor-workprogram is inherently Auditing riskyfrom ajduciary perspective given the nature of activities involved Overall Inherent Risks: s Control Risk: Internal Control Procedures: Projectwill use F M procedures established at PFMU for the M PFMU(MoF): financial management o f AIDP. Documentationof these a). FMpolicies may not be adequate procedures ina manual has been completed. The Financial and maynot evenbe inplace. ManagementUnit (PFMU) has a competent and qualified staff There is also likelihood o fproject with specific job descriptions that will help minimize any management may override existing possibility o f irregular control from outside controls. L A C E Projectwill use F Mprocedures establishedat LACE for the M a). F M policies may not be adequate financial management of CEP 11. The manual will be revised to and may not even be inplace. include FMprocedures to guide the new `Cash-for-Work' program. Internal audit unit inLACE will also watch on b).Management may override existing compliance with procedures set out inthe revised manual. controls. Fund Flows PFMU (MoF): Experience gained from the on-going operations will substantially L a) Project may not submitwithdrawal reduce this risk. The task team will monitor this activity and - 36 - applications on timely basis, thereby causing possible implementation delays. Past experience gained from the on-going operations (CEP Iand CEP 11) will reduce risk.The task team will monitor this activity LACE and provide the necessary assistanceand advice a) Project may not submit withdrawal M applications on timely basis, thereby causing implementation delays. *InternalAudit (/A) PFMU (MoF): The PFMUhas a qualified internal auditor to ensure there are L The MoF now has a small Internal adequate internal checks to address any weaknesses.Additional Audit unit which may soon become technician level audit staff will be added to complement the overwhelmedreducing its available resource effectiveness The existing internal audit unit at LACE will be strengthened to L LACE design and implement riskbased auditpractices especially on the The Internal Audit (IA) may lack sub-projects. The unitwill also verify transactions under the support to implementprocedures and `Cash-for-Work' program to ensure there i s compliance with set audit programs, intimely manner, for FMprocedures inthe revised manual. effective operation ExternalAudit PFMU (MoF); M Most recent audit report indicatedthat PFMUwas fully compliant The audited financial statements of the withregardto fiduciary requirements. Plans are inplace to usethe L project will be submitted late. existing PFMU audit arrangements for the new project. Auditor's TOR will be expanded to cover this operation infull. LACE: The audited financial statements of the M The selected independent auditor for CEP I1at LACE will have project will be submitted late. hisTOR revised to cover activities under Component 2 and also require the auditor to verify a sample o f the subprojects to ensure - Overall Control Risk S Overall FMRisk - S Strengths and Weaknesses 96. Strengths. The PFMU in the MoF has been functional for sometime now and it is responsible for project financial management under the Bank supported portfolio. The staff o f this unit has acquired useful experience in managing Bank financed projects, which will benefit this operation as well. The Unit has been further strengthened with the recruitment o f a Unit Head who is already at post, and two additional accounting assistants who are expected to be at post at the beginning of the third quarter 2008. The use of the existing unit will also ensure the speedy and timely implementation of the proposed project. It is envisaged that the PFMU will maintain at all times appropriate and robust financial management systems and practices that meet the acceptable standards. 97. LACE is already well established and experienced in the management o f similar activities from successful implementation of CEP I.The FM staff o f LACE is already managing a Bank assisted project. Because o f this prior experience, it is expected that LACE will take on the new project smoothly and quickly. The use of LACE will also ensure the speedy and timely implementation o f sub-projects that are approved in the course of time. LACE has established and maintained, at all times, appropriate and robust financial management systems and practices that are considered satisfactory to the Bank since April 30,2008 when it was declared fiduciary compliant. 98. Weaknesses and Time Bound Action PZanSimilar to other post-conflict countries, the general overall fiduciary environment inLiberia is very weak. With exception o f the Unit Head and the existing accounting staff, all the other new accounting staffjoining the PFMU - 37 - has limited experience in World Bank financial and disbursement procedures. The ultimate full benefit o f the PFMUis yet to be fully realized especially with the Unit Manager at post. Successful handling o f the additional responsibility requires that the project financial capacity o f the newly recruited accounting assistants will have to be buildquickly. 99. Likewise, the LACE also faces similar challenges as an agency operating in a generally weak fiduciary environment in a post-conflict country. Successful implementation o f this project will require strong ownership and active support from the government authorities and other implementingpartners. Table 2: Actions and Conditions AIDP and CEP I1are agreedupon. Effectiveness 2. Designand agree on IFRformats for useby WFP for periodic financial MoF and WFP Withinone month of reporting Effectiveness 3. Finalization o f updates inthe Financial Management Procedures Manual LACE and MoF ByJuly 31,2008 for LACE to incorporate procedures to guide `Cash for Work Employment' program at the community level e.g. targeting, equity and transparency, accountabilityetc. 4. Trainindmentoring of newly recruited accounting assistants at PFMUin UnitManager Within first month of FMinprojects. PFMU coming on board. 5. Review TOR for the Auditor to expand scope of work to incorporate new UnitManager Within3 months of project for (i) PFMU and (ii)engagement o f auditor for LACE with TOR PFMU/LACE Effectiveness that cover activities under Comuonent 2 ImplementingEntities'FMCapacity 100. The PFMU has a Unit Head who is assisted by a Project Accountant, both o f whom possess international accounting qualifications and experience acceptable to the Bank. Two accounting assistants are also expected to be at post at the beginning o f the third quarter 2008. They are supported by three accounting staff seconded from the MoF. There i s also an Internal Auditor and Procurement Specialist who posses qualifications and experience acceptable to the Bank. The newly recruited staff will be trained in World Bank disbursement procedures, ones they assume duty to enable them to manage the resources of Bank fundedprojects inLiberia. 101. The LACE finance unit i s also headed by a Finance Director (FD). The FD i s a qualified accountant with extensive project financial management experience. H e i s assisted by two accounts officers. The job descriptions o f the assistants ensure the presence of effective internal controls and avoid duplication o f functions. The FD i s responsible for the Project's day to day financial management and ensures that resources provided for project activities are managed for the benefit o f the Project, including keeping adequate books and records, recording transactions correctly and ensuring that the Interim Unaudited Financial Reports (IFRs) reflect the true financial affairs o f the Project. All the accounting staff participated in a capacity building training workshop which was organized by the Bank FM team inLiberia. 102. The FM capacity in both PFMU and L A C E have been assessed and found to be adequate to easily accommodate the additional responsibilities arising from the new project activities. The situation of capacity and skill mix will be monitored closely to ensure - 38 - proactive measures are taken as needed, especially in LACE with the new `Cash-for-Work' program which will need close monitoring. BudgetingArrangement 103. Both the PFMU and LACE would adopt the cash budgeting arrangement under the on-going AIDP and the CEP I1projects. The annual project budget will be based on agreed annual work program that will be closely monitored and reviewed during implementation. Similarly, financial planning and budgets will be useful in projecting in-year expenditures and guide PFMU and LACE indeveloping realistic cash forecasts resultingto improved cash management. Accounting 104. The PFMU will be responsible for the day to day financial management o f the proposed project in addition to that o f other ongoing projects (the Agricultural Infrastructure Project (AIDP - P104716), Emergency Infrastructure Project (EIP - P100160) and the Infrastructure and Rural Project (IRP - P101456). The PFMU will use the existing accounting system based on the FM procedures and accounting manual that provides for adequate segregation o f functions, capable o f recording all accounting transactions, and reporting correctly all assets and liabilities o f the project. The system i s also capable of producing accurate periodic financial reports, including interim un-audited financial reports (IFRs) and annual project financial statements. Accounting transactions processing and reporting are done using S U N Accounting software. The financial statements are guided by the International Public Sector Accounting Standards 105. LACE like the PFMU, will also use the existing accounting system under the CEP I and CEP I1 to recording, process and report all transactions under this new project. The financial management system would follow the financial accounting procedures established for the ongoing Bank financed projects. InternalControland InternalAudit 106. The existing internal control framework inboth PFMU i s considered adequate for the time being. The segregated roles o f various players in the line ministries/departments involved and in the PFMU provide an acceptable control environment. In addition, the internal audit function inPFMU will also be extended to cover activities under this project in the same depth as i s the case under AIDP for Component 1. The internal audit function in PFMUi s fairly young. It's presently a one person unitmanagedby a professionally qualified accountant. As the portfolio o f projects grows, there i s risk that the unit will increasingly be overwhelmed which could undermine its effectiveness. To mitigate this risk, the unit will be monitored closely with a view to strengthening it and modernizing it by introducing risk based approach in planning its work program. LACE will need to pay special attention to riskposedto project funds at the community subproject level. 107. The present internal control arrangement in LACE i s considered adequate. T h i s arrangement will also be applied to the activities o f the project under Component 2. The internal audit unit inLACE will also review activities under Component 2. Inparticular, the internal audit unit will focus on risk especially with regard to the new `Cash-for-Work Employment' program. The current FM procedures manual will be revised to include FM - 39 - procedures to guide the implementation o f the new `Cash-for-Work Employment' program. T h i s should be accomplished by end July, 2008 Flow of FundsArrangements 108. Disbursement Arrangements - Disbursement for the eligible expenditure under Component 1 (Agricultural Productivity Intervention) and Component 2 (Cash for Work Employment Program) that are being co-financed from the Global Food Price Crisis Response Trust Fund will be implemented through the existing disbursement arrangements under the on-going operations (Agricultural Infrastructure Development Project P104716 [H32701(and SecondCommunity Empowerment Project P105683 [H3050] respectively). A new segregated Designated Account shall be authorized for each o f these co-financing Grant Agreements for the funds flowing from this Trust Fundand these Accounts shall be managed and accounted for by the respective project implementationagency o f each original project. 109. The proceeds o f the grant would be disbursed over a two year period. On project closure, a period o f four (4) months (grace period) after the closing date, as agreed with the Bank, would be allowedto complete processing o f disbursement for expenditures incurredup to and untilthe closing date o f the grant. DesignatedAccount (DA) 110. The PFMU will continue to operate a centralized funds management system for the project. All withdrawal applications under Component 1 will be prepared here based on eligible expenditures incurred under the project. Separate Designated Account will be maintainedby PFMU. Similarly, LACE will also operate a separate Designated Account for the new (additional financing) project from which expenditures under Component 2 will be met. The two Designated Accounts will ideally be replenished at least once every month, to ensure the project does not experience any liquidity or cash flow difficulties. Financial Reporting 111. As being currently done under the on-going infrastructural projects (AIDP, EIP, EIPSC, and IRP) being implemented by the PFMU, and CEP Iand CEP I1by the LACE, both entities will prepare quarterly interim un-audited financial reports (IUFRs). The content an IFRis summarized as: The Quarterly Financial Reports; this consists o f a statement o f cash receipts by source and expenditures by main expenditure classifications for the period and cumulatively; cashbalances o f the project; and supporting schedules comparing actual and budgeted expenditures by component andor activity within component and explanations o f any variances. A bank reconciliation statement and bank statements showing the activities or movement o f cash inthe Designated Account are needed to help determine cash requirement for the next period. 112. As inthe case o f the ongoing projects, IUFRswill be submitted to the Bank within 45 days o f the end o f each quarter inthe case o f LACE, while it will be 30 days o f the end o f the quarter in the case o f the PFMU. The content and format o f these reports will follow closely the agreed formats in use for the ongoing Bank projects, and will be agreed upon within one montho f Effectiveness. - 4 0 - AuditingArrangements 113. Similar to the on-going projects being implemented by the PFMU and the LACE, independent and qualified auditors, acceptable to the Bank, will carry out an audit o f project financial statements. TOR for the auditors will be expanded to cover the new project. The TOR o f the auditor will specifically including verifying a sample o f the subprojects in the new `Cash-for-Work Employment' program. The auditor for the PFMU has been appointed. The auditor for LACE to audit the CEP I1 project will also audit the new project. Consideration is being given to re-appoint the same auditor who i s auditing the CEP Iproject. The audit arrangements (finalization o f TORSand appointment o f auditor by LACE) will be finalized within three months o f Effectiveness. 114. The project financial statements including movements in the Designated Accounts will be audited in accordance with International Standards in Auditing (ISA). Since the components are implemented by different entities, it i s envisaged that both the Components will be audited separately. Components 1 and 2 will each have a single opinion issued to cover the Component's financial statements, Statement o f Expenditures (SOEs) and transactions under the respective Designated Accounts, in accordance with the Bank's audit policy. 115. The auditors' reports and opinions in respect o f the project financial statements including the management letter for the respective Components 1 and 2 shall be furnished to the World Bank within six months following the end o f each fiscal year. SupervisionPlan 116. Duringproject implementation, intensive supervision will be providedto bothPFMU and LACE inorder to ensure that the project financial management arrangements are inplace and functioning at all times. The first supervision mission after effectiveness will include an FM Specialist to review the systems and operations introduced by the PFMU and LACE respectively. There will be a minimum o f two to three supervision missions per year, complemented by desk reviews o f quarterly IFRs. In addition, the World Bank's financial management specialist in the Liberia country office will provide day-to-day support and technical guidance to the PFMU, LACE and other implementingpartners o f the sub-projects especially under the LACE'Scomponent. With regard to WFP, desk review o f IFRs will suffice unless there i s good basis for visiting WFP Headquarters in Rome to resolve any exceptional FMtechnicalities that might arise. World FoodProgramme(WFP)-implementedComponent 117. The FM arrangements for this component would be based on the World Bank/United Nations Financial Management Framework Agreement (FMFA). WFP will prepare its annual work program and budget for review by MOF and the Bank for approval. WFP would handle all the financial management aspects using its own procedures set out in the WFP Financial Regulations. WFP will maintain a separate ledger account for recording the transactions relatingto this project. As per the FMFA, the Bank's audit requirements are met through the normal biennium audit o f the WFP, and separate audited financial statements and audit reports from WFP for this project will not required. -41 - 118. WFP will submit periodic interim financial reports (IFRs) to the Bank which will include sources and uses o f funds; expenditures by project activities (sub-components) with comparative actual and budgeted amounts for the period under review and cumulatively for the project life; opening and closing o f advances received from the Bank; projected expenditures and cash forecast for the next reporting period; and explanatory notes as needed. Formats o f the IFRs would be agreed between the Bank and WFP within one month o f effectiveness. 119. Upon effectiveness funds will be advanced to WFP as a Recipient based on an annual forecast to be submitted by WFP. Disbursements shall be made into a WFP Bank account that may be pooled with WFP's own resources. Replenishments o f the advance for the rest o f the period shall be basedon the IFRsdiscussed above. Conclusion of FMAssessment 120. The financial management assessment established that the financial management risk for the project i s substantial. The recruitment o f a Unit head for the PFMU and a project accountant (both posses international accounting qualifications and experience acceptable to the Bank), the recruitment o f two additional assistants to boost the staffing capacity at the PFMU, the requirement for the finalization of the FMProcedures Manual and the training of the newly recruited accounting assistants in project financial management as well as other mitigation measures will ensure that residual financial management risk i s reduced to moderate when all the measures are implemented. 121. Similarly, actions which were started during CEP I, which have been put inplace and prior to effectiveness o f CEP I1will ensure that the identified risks are adequately mitigated. The engagement o f a professionally qualified accountant as FD o f LACE, the adherence to the revised FM procedures manual that has taken into account the new `Cash for Work Employment' program and compliance with adequate internal controls, and the agreed auditing arrangements for the project will ensure that residual financial management risks i s maintained at moderate level. In summary, the conclusionofthe assessment is that the proposedFMarrangements for the Projectas describedmeet the Bank's minimumrequirementsfor FMunder OPBP 10.02. - 4 2 - Annex 3: DetailedProcurementArrangements Agricultureand Cashfor Work Components A. General 122. For the Agriculture and Cash for Work Components, procurement o f goods and works and selection o f consultants would be carried out in accordance with (i) the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, revised in October 2006; (ii)"Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004, revised in October 2006; (iii) Requirements o f OP8.00 for Rapid Response to Crises and Emergencies, and (iv) the provisions stipulated in the Grant FinancingAgreements, The various items under different expenditure categories to be financed are described below. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Government and the Bank inthe Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements ininstitutional capacity. 123. Procurement of Works: Works to be procured under two projects include: (i) minor/small rehabilitation works that would be required to enhance agricultural production, and (ii) minor works that may be associated with the delivery o f required services o f public value to be executed under cash-for-work mechanism. The procurement will be done using simplified bidding documents or standard Request for quotations agreed with or satisfactory to the Bank. In response to the new Framework for Rapid Response to Crises and Emergencies captured in OP8.00, and to facilitate project implementation and quick delivery o f results, no objections will be given, where appropriate, to the application o f the following: Using rapid procurement methods (direct contracting or simple shopping) for engaging the services o f qualified Agencies or civil works contractors already mobilized and working in emergency area; Using lists o f pre-qualified contractors with good track record to whom periodic invitations are issued, The pre-qualification document may use a simplified format; extending contracts issued under existing projects for similar activities by increasing their corresponding contract amounts, Where alternative arrangements are not available, using Force Account for delivery of Works services directly related to the project objective; and using NCB, accelerated bid times not below 21 days, and streamlined procedures and applying Bank provisions on the use o f bid-securing declarations and the elimination or waiving o f bidbond or, bid securities for small contracts. 124. Procurement of Goods: Goods procured under the two projects would include (i) hand tools, materials, protective clothing, etc under the employment generation strategies that would lead to provision o f services that have public value, (ii)seeds, fertilizers, tools, spraying equipment, protective clothing, harvesting equipment, simple storage facilities, etc which come under the agricultural production inputs component. Inresponse to the new Framework for Rapid Response to Crises and Emergencies captured in OP8.00, and to facilitate project implementation and quick delivery o f results, no objections will be given, where appropriate, to the application o f the following: Using rapid procurement methods (direct contracting or simple shopping) for engaging the services o f qualified Agencies / programs and/or suppliers o f goods; using lists of pre-qualified suppliers with good track record to whom periodic invitations are issued. The pre-qualification document may use a simplified format; Extending contracts issued under existing projects for similar activities by - 43 - increasing their corresponding contract amounts; and Using NCB, accelerated bid times not below 21 days and streamlined procedures and applying Bank provisions on the use o f bid- securing declarations and the elimination or waiving o f bid bond or bid securities for small contracts. 125. Selection of Consultants: Consultancy services include the agricultural inputs technical assistance services to be provided by the International Institute for Tropical Agriculture (IITA). It will also include the hiring o f individual consultants to provide TA and training, NGOs to manage the implementation processes on the ground, and firms to provide necessary inputs. The project has been classified as a rapid response program where, in conjunction OP8.00, Accelerated and Streamlined Procedures may apply to improve the flexibility, speed, and effectiveness o f the Bank's emergency response. The use o f a "pool o f experts" or a list o f "pre-selected' consulting firms and/or individuals may, therefore, be an appropriate method for supporting project implementation. Such a method will remain consistent with QCBS, CQS, andor the Selection o f Individual Consultants. No-Objection will also be given for sole-sourcing (single-sourcing) o f consulting firms, where it presents a clear advantage over competition. Firmsalready working inthe area and which have a proven track record in similar assignments may be the most suitable; Selection o f consulting firms through Consultants' Qualification Selection (CQS) method for contracting firms already working in the area and which have a proven track record for the provision o f technical assistance. 126. The selection process would be conducted by the Implementing agency (IA) for a series o f assignments -- with standard TORS-- before credit effectiveness, and would be subject to Bank prior reviews. Duringproject execution, the IA would just have to pick-up experts or firms from the list, based on their availability to carry out the assignment. Remuneration and fees would be resolved, at time o f pre-selections, and prescribed in a framework agreement - a sort o f retainer contract. While this approach will expedite ad hoc recruitment o f consultants for specific frequent assignments, it does not require any special waiver or clearance, because it will be fully consistent with the regular procedures. For all contracts to be awarded following QCBS, LCS and FBS, the Banks Standard Request for Proposals will be used. 127. Short lists o f consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o fparagraph 2.7 o f the Consultant Guidelines. 128. Consultancy services estimated to cost above US$lOO,OOO per contract for firms, and single source selection o f consultants (firms and individuals) will be subject to prior review by the Bank. Prior review o f the evaluation process o f the selection o f individual consultants (i.e. comparison o f three CVs) will only be carried out in exceptional circumstances, for example when hiring an Advisor for the entire project duration which could result in a substantial contract amount. Such contracts will be identified inthe procurement plan. 129. Training and Workshops: Training will be carried out on the basis of approved programs on a yearly basis. The programs will identify the general framework o f training and similar activities for the year, including the nature and objectives o f training and workshops as they relate to the project objectives. 130. Incremental Operation Costs: In addition, projects will finance incremental project implementation-related expenditures such as in-country travel, per diem, office supplies, - 44 - office rentals, utilities, maintenance, consumables, communication costs, etc. These will be financed by the project on a declining basis, and would be procured usingthe Liberia Public Procurement and Concessions Law, where appropriate. 131. The procurement procedures and SBDs to be used for each procurement method, as well as model contracts for works and goods procured would be available for IDA review by effectiveness. B. Assessment of the LACE and Special ImplementationUnit of the Ministry of PublicWorks's Capacityto ImplementProcurement 132. The implementing Agency for the Cash for Works component i s the LACE with the overall responsibility o f (a) assuring steady progress o f the procurement in accordance with an implementation schedule reviewed and approved by the World Bank; and (b) ensuring satisfactory implementationo f procurement activities includedinall contracts. 133. A review o f the capacity o f LACE and o f selected CBOs to handle and monitor procurement under the project was camed out as part o f the broader assessment o f the capacity in the country to implement Bank projects. The assessment was undertaken by the Bank Procurement unit inFY05. At the time o f this initial assessment, there was very little or no procurement capacity in LACE and the implementing CBOs. To mitigate procurement risks at the project implementation level, training in procurement was provided to staff o f both LACE and the CBOs. Further, inresponse to the assessment, and to manage and provide guidance for procurement, LACE recruited a Procurement Specialist, with qualifications acceptable to IDA, to: (i)plan and process all procurement done centrally for all components; (ii) assist PMCs to prepare procurement plans for their respective sub-projects; (iii) theimplementationoftheprocurementplans, and(iv)trainPMCsstaffinthe monitor use of procurement procedures agreed under the Project, including compliance with World Bank Procurement Guidelines. 134. However, procurement capacity within LACE remains weak due to weak procurement planning, filing, and management, particularly for goods and services, where compliance with Bank non objection procedures i s required. Further, during Mid-term review ofCEP I(January 2007), the World Bank team found that there is still scope for LACE to improve its capacity inprocurement and contract management. 135. One lesson learned from the implementation o f CEP Ii s that there is a need to train several staff on procurement inorder to ensure that the required expertise i s always available, even if there i s a high staff turnover or an increase in the volume o f business. That is why several LACE staff members participated recently in a procurement workshop in Monrovia. Another lesson learned i s that, inpost conflict counties, the implementing agency (LACE in the case o f Liberia) must have, at least initially, a leadership role in training and assisting the CBOs and Community Facilitators (CFs) incarryingout procurement for the sub-projects. As the CBOs and CFs become more experienced, L A C E should be able to become less involved and spend more time on the monitoring o f procurement done by CBOs with the assistance o f CFs. 136. Under CEP 11, in order to further strengthen LACE and mitigate the risks at CBOs level, LACE will recruit a new Procurement Specialist based in Monrovia. Focal officers in the CBOs with relevant qualifications and experience will be identified and trained in procurement under community participation strategies. Following this, to the extent that the - 45 - Engineers to be based inthe Monrovia HQ,Lofa, Bong and South East Region counties have divisional responsibilities for respective counties within Liberia, these Engineers shall also be trained in procurement and contract management, and their capacities built continually, in order to offer additional procurement supportto the CBOs within their areas of coverage. 137. The implementing Agency for the Agricultural Productivity Intervention component i s the SIU/MPW. The capacity of the S I U has been assessed recently. The S I U is currently implementing a program o f about US$lOO million in Bank grant funding. In its 18 months o f existence it has procured works, goods and services o f close to US$70 million, whereof about US$40 million has already been disbursed. The S I U i s supported by technical assistance in procurement, contract management and engineering. Still, restructuring o f the S I U i s under way with the intention of significantly scaling up its capacity and ensure it will be in a position to deliver on expected substantial increase in infrastructure funding from a number of donors. The implementation requirement resulting from the additional financing for component 1 represents only marginal increase in expected delivery o f the unit. Implementation risk is therefore deemed minimal. 138. Procurement risk assessment i s substantial. C. ProcurementPlan 139. Six-month procurement plans for project implementation under components 1 and 2 will be prepared to reflect project implementation plans. Thresholds, Procurement Methods and Prior Review Requirement will be the same for the new activities as under the original AIDP and CEP I1 projects. D. Frequency of Procurement Supervision 140. In addition, it is recommended to carry out supervision missions to conduct post review of contracts which are not subject to the above prior review requirements on a frequency o f three procurement supervision missions each year, to visit the field and to carryout a post review o f procurement actions. The procurement post-reviews should cover at least 20 percent o f contracts subject to post-review. 141. Procurement Audits: Not later than three months after the end of each financial year, the Grant recipient will submit to the Bank a procurement audit report prepared by consultants selected in accordance with the guidelines for selection o f consultants, based on TOR approved by the Bank and incorporated in the project implementation manual. The audits would (a) verify that the procurement and contracting procedures and processes followed for the projects were in accordance with the Financing Agreement; (b) verify technical compliance, physical completion and price competitiveness o f each contract in the selected representative sample; (c) review and comment on contract administration and management issues as dealt with by participating agencies; (d) review capacity of participating agencies inhandling procurement efficiently; and (e) identify improvements in the procurement process in the light of any identified deficiencies. The Borrower and IDA will review all thresholds stated in this section on an annual basis. Amendments may be agreed upon based o n performance and actual values of procurement implemented. Amendments to the FA may be proposed accordingly. - 4 6 - 142. Procurement Management Reports: The IAs will, every quarter, submit procurement management reports to IDA. The format and content o f Procurement Management Reports will be agreedbetween the Bank and each IA within one montho f effectiveness. 143. Publication of Awards and Debriefing: The results o f the bidding process for all ICB and NCB for goods and works, and also for consultant contracts estimated at US$200,000 and above, in response to paragraphs 2.60 and 2.65, and 3.4 of the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated M a y 2004 and revised in October 2006; and paragraphs 2.28 and 2.29 of the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated M a y 2004 and revised in October 2006 shall be published. . 144. Fraud and Corruption: All procuring entities as well as bidders and service providers, i.e. suppliers, contractors and consultants shall observe the highest standard o f ethics during the procurement and execution o f contracts financed under the project in accordance with paragraphs 1.14 of the Procurement Guidelines and paragraphs 1.22 of the Consultants Guidelines. Food Support for VulnerableWomen and ChildrenProject 145. Procurement procedures and intensified supervision. For the Food Support for Vulnerable Women and Children component, WFP procurement procedures would apply in keeping with the provisions of the FPCR TF Resolution. The Bank will not have access to the usual prior review and other procurement mechanisms to ensure that the funds have been used for the purposes intended. Despite the fact that Bank procedures will not be used for procurement, the Bank will closely monitor the component's targets and outcomes and report on them duringintensified supervision missions. 146. Fraud and corruption and legal recourse. For this project, the Bank and WFP shall agree to provisions to prevent and address fraud and corruption and establish legal remedies, along the lines of the WFP/World Bank agreement for program implementation in Sudan. These provisions will be set out inthe direct Grant Agreement between WFP and the Bank. - 47 - Annex 4: ProjectPreparationandAppraisalTeamMembers Key institutionsresponsible for preparationof the Program: MinistryofFinance, MinistryofAgriculture, LACE, MinistryofPublic Works. WorldFoodProgramme Table 3.1: ProjectProcessingSchedule Planned Revised Actual RRC review May 19,2008 May 19,2008 PID to PIC May 20,2008 May21,2008 ISDS to PIC May20,2007 May 21,2008 Appraisal May 21,2008 May 21,2008 Negotiations May21,2008 Board approval May29,2008 Plannedeffectiveness June 10,2008 Mid-term review June 10,2009 Closing date June 31,2010 Table 3.2: Bankstaff and consultantswho workedon the Programincluded Name Title Unit Christopher Jackson Economist (Co Task Team Leader) AFTAR Errol Graham Sr. Economist (Co Task TeamLeader) AFTP4 Charles Annor-Frempong Sr. Economist AFTAR BarbryKeller Country Officer AFCGH Kremena Ionkova Urban Specialist AFTU2 Amadou Tidiane Toure Lead Procurement Specialist AFTPC Jonathan Pavluk Sr. Counsel LEGAF Rajiv Sandhi Sr. Finance Officer LOAG2 GyfiPalsson Sr. Transport Specialist AFTTR Giuseppe Zampaglione Sr. Operations Officer AFTH2 Baba ImoruAbdulai Procurement Consultant AFTPC John Nyaga Sr. FinancialManagement Specialist AFTFM Anna Kristiina Karjanlahti Junior Professional Officer AFPT4 OwusuAgyei FinancialManagement Consultant AFTFM - 48 - Annex 5: Liberia Map LIBERIA - 49 -