Document of The World Bank Report No: ICR00002727 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-43720) ON A CREDIT IN THE AMOUNT OF SDR 35.1 MILLION (US$55.0 MILLION EQUIVALENT) TO THE REPUBLIC OF UGANDA FOR THE LOCAL GOVERNMENT MANAGEMENT AND SERVICES DELIVERY ADAPTABLE PROGRAM LOAN (APL) PROJECT IN SUPPORT OF THE PUBLIC FINANCIAL MANAGEMENT REFORM PROGRAM AND THE DECENTRALIZATION POLICY STRATEGIC FRAMEWORK June 25, 2013 Urban Development and Services (AFTU1) Country Department AFCE1 Africa CURRENCY EQUIVALENTS (Exchange Rate Effective June 1, 2013) Currency Unit = Uganda Shillings (UShs) U Shs 1.00 = 0.0004 US$ US$ 1.00 = 2,595 UShs FISCAL YEAR July 1 – June 30 ABBREVIATIONS AND ACRONYMS APL Adaptable Program Loan BoU Bank of Uganda CAO Chief Administrative Officer CBG Capacity Building Grants CDD Community Driven Development CG Central Government CSO Civil Society Organization DDPG Decentralization Development Partner Group DPSF Decentralization Policy Strategic Framework DSWG Decentralization Sector Working Group EFMP II Second Economic & Financial Management Project EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return ESMF Environmental and Social Management Framework FDS Fiscal Decentralization Strategy FINMAP Financial Management and Accountability Program FMR Financial Monitoring Report GGACS Good Governance and Anti-Corruption Strategy GoU Government of Uganda HLG Higher Local Government HPPG Harmonized Participatory Planning Guide ICT Information, Communication and Technology IDA International Development Association IDP Internally Displaced Person IFMIS Integrated Financial Management Information System IFR Interim Financial Report IRR Internal Rate of Return LDG Local Development Grants LG Local Government LGDP Local Government Development Program LGFC Local Government Finance Commission LGMSD Local Government Management and Service Delivery LGSIP Local Government Sector Investment Plan LLG Lower Local Government M&E Monitoring and Evaluation MDAs Ministries, Departments and Agencies MoFPED Ministry of Finance, Planning and Economic Development MoLG Ministry of Local Government MTEF Medium-Term Expenditure Framework NEMA National Environment Management Authority NIMES National Integrated Monitoring and Evaluation System NPA National Planning Authority NPV Net Present Value O&M Operations and Maintenance OAG Office of the Auditor General OPM Office of the Prime Minister PAD Project Appraisal Document PCU Program Coordination Unit PDO Project Development Objective PDU Procurement Disposal Unit PEAP Poverty Eradication Action Plan PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PIP Project Implementation Plan PPDA Public Procurement and Disposal of Public Assets Authority PRDP Peace, Recovery Development Program PRSC Poverty Reduction Support Credit PSM Public Sector Management PST Project Support Team RAP Resettlement Action Plan RPF Resettlement Policy Framework SIL Specific Investment Loan SWG Sector Working Group TPC Technical Planning Committees UJAS Uganda Joint Assistance Strategy USMID Uganda Support to Municipal Infrastructure Development Vice President: Makhtar Diop Country Director: Philippe Dongier Sector Director: Jamal Saghir Sector Manager: R. Mukami Kariuki Project Team Leader: Martin Onyach-Olaa ICR Team Leader: Jonas Ingemann Parby REPUBLIC OF UGANDA Local Government Management Service Delivery CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design ............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 5 3. Assessment of Outcomes .......................................................................................... 10 4. Assessment of Risk to Development Outcome......................................................... 16 5. Assessment of Bank and Borrower Performance ..................................................... 17 6. Lessons Learned ....................................................................................................... 19 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 20 Annex 1. Project Costs and Financing .......................................................................... 21 Annex 2. Outputs by Component ................................................................................. 22 Annex 3. Economic and Financial Analysis ................................................................. 29 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 35 Annex 5. Beneficiary Survey Results ........................................................................... 37 Annex 6. Stakeholder Workshop Report and Results................................................... 38 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 39 Annex 8. Comments of Co-financiers and Other Partners/Stakeholders ...................... 49 Annex 9. List of Central and Local Government IFMIS Sites .................................... 50 Annex 10. LGMSD – APL Triggers – and status at project closure ............................ 52 Annex 11. List of Supporting Documents .................................................................... 53 MAP IBRD 40134 iv A. Basic Information Local Government Management and Country: Uganda Project Name: Services Delivery Project Project ID: P090867 L/C/TF Number(s): IDA-43720 ICR Date: 06/25/2013 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: APL Borrower: UGANDA Original Total XDR 35.10M Disbursed Amount: XDR 34.98M Commitment: Revised Amount: XDR 35.10M Environmental Category: B Implementing Agencies: Ministry of Local Government Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 04/18/2006 Effectiveness: 11/19/2008 11/19/2008 Appraisal: 10/12/2007 Restructuring(s): 09/28/2011 Approval: 12/18/2007 Mid-term Review: 11/19/2010 11/15/2010 Closing: 12/31/2011 12/31/2012 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Moderately Satisfactory Performance: Performance: v C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 20 20 Other social services 8 8 Sub-national government administration 72 72 Theme Code (as % of total Bank financing) Decentralization 29 29 Gender 14 14 Municipal finance 14 14 Municipal governance and institution building 14 14 Public expenditure, financial management and 29 29 procurement E. Bank Staff Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Philippe Dongier John McIntire Sector Manager: Rosemary Mukami Kariuki Jaime M. Biderman Project Team Leader: Martin Onyach-Olaa Lance Morrell ICR Team Leader: Jonas Ingemann Parby ICR Primary Author: Jonas Ingemann Parby F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) Strengthen the ability of the MDAs and LGs to plan and manage resources in collaboration with communities for service delivery vi Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years % of LGs in the Northern Uganda meeting the minimum conditions to access the Indicator 1 : LDG Value quantitative or 30% (for FY04-5) 85% 88% (FY10-11) Qualitative) Date achieved 12/18/2008 12/31/2011 12/31/2012 Comments Achieved (target exceeded). Latest available figure. The actual value is 85% if (incl. % using the total number of LGs in Northern Uganda following the creation of new achievement) LGs in 2010 (55 instead of 38 LGs) % of LGs which have computerized financial management system complete the Indicator 2 : final accounts within three months after the end of the fiscal year Value quantitative or 0 90% 100% Qualitative) Date achieved 12/18/2008 12/31/2011 12/31/2012 Comments (incl. % Achieved (target exceeded). achievement) % of Higher LGs registering at least 20% increase in own source revenue from Indicator 3 : the baseline year of 2005/06 Value quantitative or 10% 45% 56% Qualitative) Date achieved 12/18/2008 12/31/2011 12/31/2012 Comments Achieved. Latest available figures (FY10-11). The actual target value represents (incl. % the improvements for a total of 81 LGs (data available), including new LGs. achievement) At least 75% of the LDG is invested in education, health, water, and roads Indicator 4 : sectors, consistent with the PEAP Value quantitative or 65% 80% 85% Qualitative) Date achieved 12/18/2008 12/31/2011 12/31/2012 Comments (incl. % Achieved (target exceeded). achievement) vii (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years % of LGs that have been computerized for at least one year completing bank Indicator 1 : reconciliation within two months Value (quantitative 70 100 100 or Qualitative) Date achieved 12/18/2008 12/31/2011 12/31/2012 Comments Achieved. Please note that the results framework in the PAD did not include (incl. % targets for the last two years of the project. The original target value above is achievement) therefore the value for 2009. Indicator 2 : % of LGs in Northern Uganda with at least x% of the approved staffing filled Value (quantitative 35 65 32 or Qualitative) Date achieved 12/18/2008 12/31/2011 12/31/2012 Not achieved. Figures are for FY11-12. The result is 18% using the total number Comments of LGs following the creation of new LGs (55 instead of 38 in Northern (incl. % Uganda). PAD results framework did not include targets for 2011/12 - target achievement) value applied is for 2009. % of LGs which are collecting property rates for at least 60% of the valuation Indicator 3 : rolls Value (quantitative 0 55 43 or Qualitative) Date achieved 12/18/2008 12/31/2011 12/31/2012 Comments Partially achieved. Please note that the results framework in the PAD did not (incl. % include targets for the last two years of the project. The original target value achievement) above is therefore the value for 2009. Indicator 4 : % of LLGs using the Harmonized Participatory Planning Guide (HPPG) Value (quantitative 60 85 100 or Qualitative) Date achieved 12/18/2008 12/31/2011 12/31/2012 Comments Achieved. Target exceeded. Please note that the results framework in the PAD (incl. % did not include targets for the last two years of the project. The original target achievement) value above is therefore the value for 2009. viii G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 03/19/2008 Satisfactory Satisfactory 0.00 Moderately 2 06/25/2008 Satisfactory 0.00 Unsatisfactory 3 11/20/2008 Satisfactory Moderately Satisfactory 0.00 4 05/28/2009 Satisfactory Satisfactory 5.27 5 12/01/2009 Satisfactory Moderately Satisfactory 7.37 6 06/10/2010 Satisfactory Moderately Satisfactory 17.63 7 03/04/2011 Satisfactory Moderately Satisfactory 28.17 8 07/05/2011 Satisfactory Moderately Satisfactory 30.51 9 01/30/2012 Satisfactory Satisfactory 39.50 10 07/30/2012 Satisfactory Satisfactory 45.48 11 03/20/2013 Satisfactory Satisfactory 53.22 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions A level 2 restructuring was completed in September 2011. The Financial Agreement was revised to extend the closing date from December 31, 2011 to December 31, 2012. The main reason for the extension was the 09/28/2011 N S MS 36.38 delay in acquiring Parliamentary approval for the project. The project was approved by Board on December 18, 2007 and became effective on November 19, 2008. ix I. Disbursement Profile x 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal Country Context Uganda’s population in 2008 was 29.6 million people. Since 1986, economic growth has average 7 percent and poverty level fell from 57 percent in FY93 to 24.5 percent in FY2010. Over the past two decades Uganda has established a strong record of prudent macro-economic management and structural reforms. Furthermore, after more than 20 years of insurgency, the conflict affecting Northern Uganda had significantly reduced in scope and intensity, and Government had initiated activities to re-establish full security in the greater Northern Region. Sector Background Uganda had implemented a policy of decentralization since 1992 as a means of democratization, improved service delivery and poverty reduction. The policy of decentralization is enshrined in the Constitution and elaborated in the Local Government Act (LGA) Cap 243. Since October 2000, the International Development Agency (IDA) through the first and second Local Government Development Program (LGDP I & II) supported Uganda in the implementation of the decentralization policy. The implementation of the decentralization policy encountered a number of challenges including (i) the large share of conditional grants and low local government own revenues limiting local government autonomy; (ii) growing dependency on central government transfers; (iii) inadequate downward accountability; and (iv) poor quality of services and constraints for service delivery in local governments in Northern Uganda experiencing insurgency. To provide a more comprehensive institutional framework for addressing the above challenges and contribute to deepening the realization of the decentralization policy intentions, Government of Uganda (GoU) formulated a Decentralization Policy Strategic Framework (DPSF) and Local Government Sector Investment Plan (LGSIP) in 2006. The DPSF provides a structure for coordination of efforts aimed at deepening decentralization. The LGSIP, on the other hand, details local government sector strategic investment plans, priorities and budgets in six thematic areas: local service delivery; political decentralization; administrative decentralization; fiscal decentralization; good governance; and Local Economic Development (LED). In addition the Government formed the Decentralization Sub-Sector Working Group (D-SWG) and subsequently, the Public Sector Management (PSM) Sector Working Group. Finally, Government had also prepared a Financial Management and Accountability Program (FINMAP) to support the Public Financial Management (PFM) Reform Program which intended to address public financial management issues in both the central and LGs. Rationale for Bank Assistance The Local Government Management and Service Delivery Project (LGMSDP) was designed as the third phase of Bank involvement in supporting decentralization reforms in Uganda – following the Local Government Development Project (LGDP I, starting in 2000), and LGDP 2 (2003-2007). Furthermore, LGSMD was building on key lessons and insights from the 1 implementation of the EFMP projects – particularly on with regards to support to public financial management reforms1. Through the introduction of the DPSF, the development of the Local Government Sector Investment Plan (LGSIP), and the passing of the FINMAP program, Government had established a coherent sectoral framework for support for the next stage in further enhancing decentralization reforms. LGMSD was formulated as Bank’s support to the LGSIP. The project aimed to harmonize service delivery at the local level and align sectors and increase coordination in support of sub-national service delivery. Support to Government’s implementation of the PFM reform program was a crosscutting measure to this effect. The project also was integrated in the deepened donor coordination structure in the decentralization sector – both through the SWG and through the PFM Development Partner group. The added value of Bank involvement in this context was particularly in the following areas: (i) providing policy advice and implementation support for decentralization in a comprehensive manner, including in overall decentralization reforms, and (ii) expertise and experience in design and implementation of IFMIS reforms. LGMSD was coherent and consistent with the Uganda CAS, specifically contributing to Pillar 4 Good Governance and to the Strategic Objective 4.2: Strengthened Public Sector Management and Accountability. 1.2 Original Project Development Objectives (PDO) and Key Indicators The development objective of the project was to strengthen the ability of the MDAs and LGs to plan and manage resources in collaboration with communities for service delivery. The project outcome indicators were: • % of LGs in the Northern Uganda meeting the minimum conditions to access the LDG • % of LGs which have computerized financial management system complete the final accounts within three months after the end of the fiscal year • % of Higher LGs registering at least 20% increase in own source revenue from the baseline year of 2005/06 • At least 75% of the LDG is invested in education, health, water, and roads sectors, consistent with the PEAP 1.3 Revised PDO (as approved) and Key Indicators The PDO and the indicators were not revised, but due to the increase in number of districts, Government opted to report both on the original indicators as well as on the indicators with revised values since the overall percentages could be affected by the calculation of old versus new districts. 1 The LGDP I was designed as a pilot with the development objectives to test the feasibility of implementing constitutional and legal mandates with respect to decentralized service provision and the evolution of the development budget and to build the capacity of a sub-set of LGs for improved service delivery, accountability and transparency. The LGDP II was designed to deliver discretionary funds to cover all higher and lower level local governments based on a philosophy of bringing development funds as close as possible to beneficiaries. Parallel to the LGDP II, the Bank also financed the second Economic and Financial Management Project (EFMP II) whose objectives were to improve the effectiveness of public expenditure management processes. 2 1.4 Main Beneficiaries The primary target groups of the project were (i) the local governments2 and their institutions and constituencies, and (ii) MDAs and local governments for Component 1 on strengthening public financial management systems. In addition, private sector contractors benefitted from contracts managed and implemented under LDG and CDD. 1.5 Original Components (as approved) The project had three components with a total cost of US$198.7m of which US$55m was an IDA Credit and US$143.7m was financed by GoU. Component 1 - Support to the Public Financial Management Systems Reform Program (US$20.1 million - IDA) - This component supported Public Financial Management at central and local government levels to ensure the efficient, effective, transparent and accountable use of public resources as a basis for poverty eradication and improved service delivery. It had three subcomponents: (i) financial management systems in central departments and agencies, in order to develop accountable and transparent institutional and management arrangements for effective performance, as well as expanding the current users in the central ministries; (ii) support to MoLG and Local Governments (LGs) in order develop a sustainable capacity in LG budget formulation, financial management and control, transparent and comprehensive financial reporting and training in use of systems; and (iii) management support, in order to improve the capacity of MoFPED to manage reform programs and facilitate the overall management and coordination of the FINMAP activities. Component 2 - Support to the Local Government Sector Investment Plans (US$143.7 million - GoU and US$37.2 million - IDA) – The component had four subcomponents: (i) local development grants; (ii) community driven development (CDD) grants; (iii) strengthening local governments; and (iv)support to the LGs in Northern Uganda. (i) Local Development Grants (US$129.4 million - GoU). The LDG, which was piloted under LGDP I and rolled-out nationally under LGDP II was mainstreamed and funded by GoU under LGSMSD. The LDG was used to strengthen the capacity of eligible local governments to implement subprojects consisting of local infrastructure. The LDG was disbursed against appraised and approved subprojects drawn from the LGs rolling developments plans. The access criteria, co-funding requirements (for LGs), investment menu and performance assessment were detailed in the LDG Operational Manual. The Government maintained the existing systems (operational manual, M&E reporting format, accountability format, horizontal and vertical fund sharing formula between LGs/communities, funds flow mechanism, etc.) which were developed under LGDPI/II with minor adjustments in line with the LGMSD objective and focus of strengthening planning and managing resources for service delivery. (ii) Community Driven Development (CDD) Grants (US$8.1 million - IDA). The objective of the CDD grant was to facilitate the interface between the lowest level of local governments and communities; empower communities to demand better services from their local governments; strengthen participatory planning processes; strengthen transparency in the local government 2 With the creation of new districts in 2010, the total number of beneficiary LGs increased from 80 to 112. Similarly, the number of LLGs increased from 942 to 1147. 3 service delivery process; and create a harmonized platform within the local government service delivery system through which support to communities will be provided3. (iii) Support to the Local Governments in Northern Uganda (US$21.9 million - IDA). The subcomponent provided support to the local government component of the Government’s Peace, Recovery and Development Program (PRDP) and re-establish state presence in the 38 districts in Northern Uganda. The project provided resources for construction and renovations of lower level government offices and staff houses, equipment/vehicles, engineering supervision and monitoring. (iv) Strengthening Local Governments (US$14.3 million - GoU and US$2.2 million - IDA). The subcomponent supported the local government capacity building activities through GoU’s Capacity Building Grants (CBGs). The project supported the following areas: (i) Capacity Building Grants (CBG) to local governments to enable them to - cascade capacity to LLGs, strengthen local governments in the North, facilitate career development of LG staff throughout HLGs and LLGs4, and to develop skills through the use of generic training modules (GTM); (ii) certification and professionalization of select senior LG staff with a view to developing a nationally available group of professional local government managers; and (iii) strategic support for local government capacity building which included strategic supply-driven capacity building to LGs, capacity building for MoLG staff; re-orientation of MDAs; support of thematic research in local governance and support to the Capacity Building Unit. Component 3 - Institutional and Policy Support (US$2.7 million - IDA) The component supported the management activities associated with the implementation of the project, the establishment and implementation of a comprehensive monitoring and evaluation (M&E) system and the preparation of the next phase of the project. Activities included: (i) project implementation support; (ii) monitoring and evaluation; (iii) environmental and social management monitoring; (iv) project audit; (v) procurement audit; and (vi) support to the implementation of the Good Governance and Anti-Corruption Strategy (GGACS) for Local Governments in Uganda. 1.6 Revised Components The project components were not revised nor were the objectives changed. 1.7 Other significant changes A level 2 restructuring was completed in September 2011 and approved by Management. The Financial Agreement was revised to extend the closing date from December 31, 2011 to December 31, 2012. The main reason for the extension was the delay in acquiring Parliamentary approval for the project. The project was approved by Board on December 18, 2007 and only became effective on November 19, 2008. The project was therefore delayed by 12 months. 3 The CDD grants was funded through: (i) GoU through the 30% of the LDG for lower local governments which was previously the Parish IPF, amounting to US$19.0 million; and (ii) the IDA credit amounting to US$5 million. In addition the beneficiary communities were expected to make contributions in a manner appropriate to them (cash, kind, time etc.). 4 HLGs is another term for districts, i.e. the highest level of local government, whereas LLGs describes the secondary level of LGs within each district, i.e. sub counties and town councils. Both HLGs and LLGs benefitted from the LDG as per the allocation formula. 4 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Analytical As the Bank had been providing support for decentralization since late 1990s, and specifically through LDGP I and II since 2000, there was a clear rationale and analytical foundation for the Bank’s continuous intervention in decentralization. In particular, the background analysis in the PAD included key lessons from LGDP I and LGDP II as well EFMP II, and provided a clear outline for the key challenges for continuous decentralization reforms. The analysis also integrated lessons from other components and project, in particular the following lessons: (i) institutional reform requires considerable political will and should be carried out in a sustainable manner; (ii) projects with an institutional change focus that also include infrastructure investments must be carefully designed to ensure appropriate sequencing and incentives to achieve institutional reforms; (iii) project ownership reflected in participatory design and implementation arrangements that integrate with core functions are key to success; (iv) the need to improve community access to information on local government budgets; (v) participation in investment decisions; and (vi) integration of community planning into local government planning and budgeting cycles will result in better oversight of standards and quality by the technical staff at the local level. The project was prepared in consultation with development partners and with the relevant sector ministries, in particular Ministry of Local Government (MoLG) and Ministry of Finance and Economic Planning (MoFPED) – the two lead agencies. Assessment of Project Design The design of the operation and its components was sound and relevant, and reflected the context of the ongoing reforms in Uganda and the policy commitments made by Government through the passing of the LGSIP and the DPSF. The project in total aimed at addressing ten different reform areas5. In this context, the choice of APL as a lending instrument was rational and well justified. A two phase, 10 year Adaptable Program Loan (APL) was intended to allow sufficient time to achieve the envisaged institutional reforms for deepening the decentralization process, but it also could serve as an exit strategy in case commitment to decentralization reforms would dissipate. The Local Development Grant support was built on substantial experience under LGDG 1 and LGDG 2. A particularly useful approach in the context of the relative low level of per capita grants available per LG was to encourage LGs to enhance and sustain existing infrastructure to make it fully functional and sustainable rather than constructing new infrastructure. Under Component 2, the Government introduced a new mechanism, a CDD grant, within the overall Local Development Grant structure. The aim of introducing the CDD grant was to strengthen the interface between citizens at the lowest local Government level. However, in the design of the project, more attention could have been given with regards to the risks associated with this 5 (i) Human Resources Development/ Management, (ii) Development Planning and Resource Allocation, (iii) Financial Management and Audits, (iv) Fiscal Decentralization Strategy (FDS), (v) Local Government Revenues, (vi) Management and Sustainability of Social Investments, (vii) Local Government in Conflict Areas, (viii) Support to the National Anti- Corruption Strategy at Local Level, (ix) Monitoring and Evaluation (M&E), and (x) Institutional Strengthening of MoLG. 5 approach and the existing capacity at the level of the implementation agency to manage and implement this new modality. As mentioned above, the project was designed as the first part of a two-phased APL with substantial Government counterpart funding6. The GoU contribution to this program (total GoU financing amounting to 72% of LGMSD) demonstrated Government’s strong commitment to and ownership of the overall reform program and to the LDG specifically as an intergovernmental fiscal transfer mechanism. The overall PDO was consistent with the project components and the proposed activities and outputs. The PDO reflected the integration of one component focusing partially on MDAs (Component 1) and the share of activities focusing on LGs 7 . The project design was well balanced in terms of infrastructure investments and institutional strengthening activities aiming at sustaining outcomes. The implementation arrangements were clear and justified and were consistent with the project objectives. Assessment of Risks The project provided a comprehensive assessment of potential risks, and risk mitigation measures were appropriately applied. Only two areas were assessed as high risk: (i) lack of capacity in MoLG to support the roll out of IFMIS to local governments; and (ii) reduction in local revenues and creation of new districts will compromise local governments’ ability to meet co-financing requirements and sustainability. Beyond fiduciary risks, the project at design stage did not include specific risk management measures on the CDD Grant. The overall risks assessment of Government support to decentralization policy and commitment was justified at the time of appraisal, but risks with regards stagnation in financing made available for local government were not envisaged at design stage. Based on the observations above, the ICR rates the quality at entry as satisfactory. 2.2 Implementation Overall implementation of the project was sound. Missions were conducted on a regular basis and there was consistent coordination and follow up with Government and development partners in the SWG. As outlined in section 1.7, the project closing date was extended by one year. The midterm review was conducted as per the legal covenant - 24 months after project effectiveness. The midterm review recommended that the project should be extended by 12 months to allow for completion of activities. The MTR also provided valuable input for managing the implementation delays under component 1 (mainly result of discussions between the Bank and the Government with regards to the appropriate technological solution for the roll out of the IFMIS), and Component 2 (particularly with regards to the implementation for the Northern Uganda sub component and the CDD grant), a clear road map for implementation was agreed. 6 The first APL (LGMSD) totaled US$198.7m, of which US$143.7m was financed by GoU (all towards financing the LDG), and US$55m was financed by the Bank. The second APL was budgeted at US$321.3m, of which US$206.3m GoU and US$115m by the Bank. 7 The project integrated two different activities – PFM and support to overall decentralization reforms programs. While complementary (due to the fact that PFM reforms also involved the roll out of IFMIS to Local Governments), the activities were designed to be coordinated and managed by two different entities – MoLG and MoFPED due to the mandate and role of each of these institutions. This, however, did not affect project implementation. 6 The project was a problem project at one time during the early project implementation due to low disbursement rates resulting from delays under Component 1 and 2. The implementation of the project (component 2 and 3) was affected by overall external changes and policy shifts: Creation of new districts: In July 2010, GoU established 32 new districts (increasing the total number to 112 districts). The creation of new districts had negative impact on project implementation in the following areas: (i) the change in number of districts necessitated changes in the scope of work and caused delays in implementation of IFMS Tier 2, (ii) reduction in staffing levels and available capacity at HLG and LLG levels for both for new and old districts, with negative impacts on implementation of Component 1 and 2 and the overall project outputs and results, (iii) impact on interventions under Component 2 in Northern Uganda – the reform resulted in an increase in total number of districts from 38 to 55, thus impacting the volume of LDG transfers per district, negatively influencing the staffing levels, and increasing the volume of work to be completed, and (iv) failure to provide the necessary staffing for new districts resulted in a failure to meet the trigger to APL II on staffing threshold (75% of LG structures fully funded). Effects of the diminishing size of LDG and CBG: Over the course of the project, the per capita investments for the Local Development and Capacity Building Grants dropped to about US$0.75 for the rural districts and around US$1.57 for urban local governments due to the fact that the allocations provided remained stagnant. As the volume of money sent to Local Governments reduced (shrinking further after the creation of new districts) the net impact was a reduction in direct investments, the overall discretionary grants available for each LG, and a deterioration in the fiscal incentive provided as part of the LDG. Despite these challenges, the project implementation teams were able to undertake the necessary actions to ensure that by project closure almost all activities were satisfactorily completed at project closure and the credit provided was fully disbursed. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E Design: The project built on the existing M&E framework as developed under LDGP II. Routine M&E data was made available through mainstream data collection performed by the MoFPED for Component 1 and MoLG for Components 2 & 3. The project included a total of 8 indicators. The indicators were not modified during project implementation. The results framework in the approved PAD did not at the time reflect updated baselines for all indicators8, and the intermediate indicators did not include targets up to the end of the project (only up to 2009). The PDO indicators and the intermediate indicators did not reflect the focus on MDAs spelled out in the PDO. 8 The indicator for revenue collection still made reference to the original baseline of FY2005/06 and was not updated, also not during midterm review and restructuring. 7 M&E Implementation and Utilization: Monitoring and evaluation activities were carried out by the project teams for the various components as per the project design, including using data from the national performance assessments and establishment of a CDD project database. The project was able to consistently report on progress for each of the indicators under implementation and to track the implementation of projects under LDG and CDD. However, due to the delay and difficulties in obtaining some of the fiscal data, there was a lag between the year of reporting and the year under implementation. In addition, the results framework was not revised to cater for the increase in number of districts or to complete the missing annual targets for the intermediate indicators. The data collected was used to inform resource allocations (in the case of LDG) and to inform project progress reporting. Local Government National Assessment. The national assessment system designed under LGDPII was applied during LGMSD as a basis for allocation of LDG. The assessment was managed by Government teams and the intention to rely more on reports generated automatically from the LGs was achieved. However, despite these gains, the costs of the annual assessment remained high (almost US$1m per year) and this created challenges in terms of the timely delivery and completion of the assessments, thus affecting the timeliness of the budget and allocation process of the LGs9. 2.4 Safeguard and Fiduciary Compliance Safeguards. The project was appraised as a category B project, triggering OP4.01 Environmental Assessment and OP 4.12 Involuntary Resettlement. The project’s safeguards instruments included a Resettlement Planning Framework and Environmental Social Management Framework. Both were discussed at consultations and disclosed in-country on July 30, 2007 and in Infoshop on August 6, 2007. In addition to the safeguards instruments, the project envisaged an ambitious and comprehensive training program facilitated in partnership with the National Environment Management Agency (NEMA), targeting LG and MoLG staff. While comprehensive training, sensitization and mainstreaming efforts were undertaken to integrate safeguards aspects in project implementation and in local government management more general, safeguards were generally rated Moderately Satisfactory during implementation, largely due to the following issues: (i) delays in establishing and formalizing partnership with NEMA also causing delays in the roll out of the training program, (ii) insufficient application of the screening processes undertaken at LG level, and (iii) lack of environmental officer on site or lack of capacity for officer designated with the responsibility. Furthermore, the project design had indicated that an annual assessment of environmental and social safeguards would be completed. This was not done consistently – mainly towards the end of the project. MoLG undertook a review of sub projects in 15 districts in 2012. The review revealed up to 70% compliance with ESMF requirements in terms of screening, development and implementation of EMSPs and certification of projects. 9 In this scenario, Government has decided to undertake a thorough review of the relevance of assessment model, including (i) the current indicators, and minimum conditions, (ii) the management and implementation of the assessment process, (iii) the linkages of the assessment with M&E systems. The Ministry commissioned a consultancy team, which is reviewing the NAT with a view of making it more affordable, more sector-inclusive with more emphasis on value for money. 8 The Resettlement Policy Framework (RPF) was used as the overall framework for screening and reducing risks associated with land acquisition as part of implementation of LDG projects. While the project assisted MoLG in integrating safeguards as an indicator in the national annual performance assessments, and thereby contributed to further awareness and capacity on safeguards issues at LG level, the actual uptake and institutionalization of social safeguards management LG level was not fully successful, and there was some degree of variation of performance between LGs. A review conducted in 2012 indicated that one of the main challenges associated with the compliance with the RPF was delays in implementation of compensation measures. The main reason for this delay was due to low capacity and lack of knowledge and skills required to handle the process of land acquisition in the most appropriate and timely manner at LG levels. Fiduciary. In line with the project design, LDG (and CDD) was transferred using country systems for the fiscal transfers to LGs. LG FM and procurement systems were assessed as part of the national performance assessments, and the overall results demonstrated that the large majority of LGs performed acceptably. The project had an adequate financial management system (using national systems for LGs) that provided, with reasonable assurance, accurate and timely information that funds were being used for intended purposes. The accounting and financial procedures were in line with national and Bank procedures. Annual financial audits did not highlight any major issues10. FM was rated was rated MS and S interchangeably. Annual procurement plans were shared with the Bank team for review. The procurement plans were disclosed in time, according to Bank’s requirements. Procurement of works and goods were carried out satisfactorily during the project, but the project did face procurement delays (particularly under component 1) and was affected by capacity constraints (in particular with regards to implementation of sub projects in Northern Uganda). The annual procurement audits (a legal covenant under the project and a risk mitigation measures) were not carried out every year. The rating for procurement management in the project was overall Moderately Satisfactory and this was consistent over the life of the project. 2.5 Post-completion Operation/Next Phase In line with results of LGDP I and II sustainability of assets is expected to be satisfactory. All new and rehabilitated assets are managed and maintained by the local governments (districts and sub counties) in the case of component 2 and by LGs, and MDAs supported by technical teams from MoFEP and MoLG in the case of Component 1. At the closing of the project, due the failure of Government to meet one of the 6 triggers (75% of LG structures fully funded) for APL211, the follow on project has been temporarily put on hold. However, the continuation of the local government investment cycle has been secured due to the mainstreaming of the CBG and the LDG in the Government budget. Furthermore, Government through a recent Cabinet decision has announced that it will take the following steps to address bottle necks in decentralization: (a) restructure LGs and adjust them to the status and needs, (b) halt the creation of new LGs and establishment of stringent criteria for future creation of LGs, and (c) finance any remaining works under the Northern Uganda support from GoU budget. In this context, the Bank 10 Audit reports on utilization of LDG revealed minor inconsistencies in the use of LDG, although this was limited to a relative small number of LGs and relatively small amounts (unaccounted for). 11 Refer annex 10 for a full list of the triggers for APL II and the status at project closure. 9 will maintain the dialogue and assess when preparation of the follow up project can begin. The Bank is strategically placed to continue the engagement in the sector given the long experience as well as the current engagement in other urban projects that are closely tied to the decentralization agenda (Uganda Support to Municipal Infrastructure Development (USMID) and Kampala Institutional and Infrastructure Development Project in particular). 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation The relevance of the project objectives and the design remains high. The objectives and the design are consistent with both the UJAS (active Country Assistance Strategy at the time of approval) and the current CAS for Uganda. The objectives are fully aligned with Government’s Poverty Eradication Action Plan (PEAP) (which emphasizes decentralization as a mechanism to increase local autonomy and strengthen both upward and downward accountability) at the time of design as well as with the current National Development Plan (NDP). In particular, LGMSD addresses the sub-national thematic area of the NDP12. LGMSD was also aligned to the Peace Recovery and Development Plan for Northern Uganda (PRDP)13, and with key sectoral priorities. The mainstreaming of the LDG as a core component in the intergovernmental fiscal system also helped support the foundation for further World Bank engagement in the urban sector (USMID). USMID was designed as a performance grant for selected urban local governments with more stringent performance criteria in accordance with the higher capacity and more substantial capital investment of the urban local governments. 3.2 Achievement of Project Development Objectives Achievement of PDO is rated Satisfactory. The development objective of LGMSD was ‘to strengthen the ability of the MDAs and LGs to plan and manage resources in collaboration with communities for service delivery’. While the PDO included national and local level, the PDO indicators focused only at LG level and did not include any indicator to measure the level of services provided. Overall, the project objective was achieved. The project accomplished concrete and tangible results through the direct support to investments at LG level funded under Component 2, through the institutional and organization gains resulting from Component 1, and through the comprehensive capacity building support activities under Component 2. With respect to strengthening of MDAs, IFMIS was rolled out to a larger number of MDAs that originally targeted and a higher number of LGs than targeted completed their final accounts within the stipulated time (PDO indicator 2) – this provides evidence that element of the PDO 12 Including: (i) Increase access to service delivery, (ii) Promote the growth of Local Economic Development (LED) at sub- national level especially at parish level, (iii) Promote inclusive participation of all sections of population in planning and budgeting, (iv) Increase access to services in war affected areas in Northern and Eastern Uganda, (v) Improve household income to at least 20m shillings per household annually, (vi) Strengthen oversight institutions at local level, (vii) Facilitate extension of Rural Electrification services, (viii) Develop a system of responsive and accountable leadership at Local Government level, and (ix) Enable Local Governments develop adequate capacity to mobilize, allocate, and utilize financial resources at their disposal. 13 The PRDP is a special plan of action that also acts as a coordinating framework for stabilizing Northern Uganda in order to regain peace, recovery and development. Through the sub-component on support to Northern Uganda (SNU), LGMSD contributed to the implementation of the PRDP to re-introduce state presence thereby strengthening service delivery coordination, supervision and monitoring. The support to Northern Uganda contributed to four core PRDP strategic objectives namely; (i) consolidation of state authority; (ii) rebuilding and empowering communities; (iii) revitalization of the northern economy; and (iv) peace building and reconciliation. 10 associated with MDAs and LGs was achieved. The successful implementation of IFMIS to MDAs and LGs was remarkable, in particular in the context of the many challenges that such reforms often face delays and setbacks (as has been observed in several other countries in Africa). Although the implementation of the component was significantly delayed, the broad objectives in supporting and expanding the roll out of the Public Financial Management Reform Program were achieved. All three subcomponents achieved, and in some cases, exceeded their stated targets and outputs. The economic analysis (refer annex 3) indicates that the targeted benefits expected through the implementation of IFMIS were largely achieved, and that the project was both cost effective and efficient. With regards to the “strengthening of LGs ability to plan and manage resources for service delivery�, evidence provided from the national performance assessments indicates that the PDO was achieved. The share of districts meeting the minimum conditions has increased from 61% in 2009 to 89% in 2011 (including 88% in Northern Uganda, thus exceeding the target for PDO Indicator 1), and the share of districts (LGs) achieving rewards as a result of high scores in the assessments has increased to 64% in 2011. Similarly, the share of municipalities and LLGs meeting the minimum conditions has increased from 77% to 95% and from 57% to 73% respectively. This is another indication that the PDO focusing on strengthening ability of LGs to plan and manage resources with communities was achieved. Further, the project was highly successful in consolidating and expanding the capacity building activities targeting local government staff, including training of more than 67,000 LG staff in key LG management areas and more than 1,600 staff benefitted from the professionalization program. This contributed to improved LG performance and the expansion of a critical mass of LG staff. Finally, the PDO indicator on increases in LG own source revenues was achieved (PDO Indicator 3) – a total 56% of LGs increased their overall revenue with more than 20% between 2005/06 and 2010/11.14. With respect to service delivery, a total number of 16,016 sub-projects financed by LDG were implemented and completed by end of FY13 under the LGMSD across all 111 local governments in Uganda - with more than 4,500,000 direct beneficiaries (of which 51% women) and an estimated 17 million indirect beneficiaries. 85% of all the investment activities under Local Development Grant (LDG) were made in core PEAP sectors - education, health, water, and roads –exceeding the target for PDO indicator 4. A LDG review exercise (covering 8,423 projects) also revealed that most LGs were in full compliance with two of the key principles outlined the LGMSD design: (i) 84% of the reviewed projects were implemented in accordance with the principle under LGD to focus on making existing structures and facilities fully functional and fulfilling the required service standards, and (ii) 80% of the projects were compliant with the service delivery packages (setting service standards). A beneficiary survey indicated that almost 90% of beneficiaries were either satisfied or partially satisfied with the services and goods/works provided, and that overall satisfaction with LG services increased from 42 to 66% (refer section 3.6 for details). While substantially delayed, the successful implementation of the civil works has contributed to the achievement of the objective of the sub-component of the support to the LGs in Northern Uganda. Availability of buildings in sub-counties that had been practically abandoned by both 14 Data for FY10/11. This number includes a total of 81 LGs for which data was available at the time of this ICR, both new and old. 11 the LGs and its clients has to some extent re-established the presence of state authority and an improved level of service provision in the areas. A survey carried out by MoLG established that the improvements (in combination with training efforts and provision of operational equipment) had contributed to (i) reduced absence of sub country staff, (ii) improved productivity of LLG staff15. With regards to “strengthening of LGs ability to plan and manage resources in collaboration with communities for service delivery�, a set of implementation reviews provide indications that the CDD modality achieved the intended objectives set out at the beginning of the project, and that the CDD approach was successful in enhancing the strengthened interface between communities and the LGs and LLGs. Under CDD, a total number of 13,016 projects benefitting 2,640,098 direct beneficiaries (of which 52% were women)16 in agriculture, livestock and services sectors were completed. One intermediate indicator - on minimum staffing levels for LGs in Northern Uganda – was off target (32% vs. target of 65%). As explained, this indicator was strongly affected by external factors, including the creation of new districts – and this also is mirrored in the shortfall in meeting one of six triggers for the APL Phase 2. Based on the analysis above, the ICR rates the overall achievement of the PDO as satisfactory. 3.3 Efficiency An economic analysis was completed for IFMS roll-out (Component 1), a cost effectiveness analysis was done for the implementation of the LDG (Component 2), and an economic efficacy analysis was done for CDD grants (Component 2) – refer details in annex 3. Economic Analysis of Component 1: The sample evaluated in this analysis includes four local government agencies from the pilot phase of tier 2 implementation (Luwero, Nebbi, Iganga, and Kumi), and one central government agency (Uganda Heart Institute). The evaluation of component 1 is based on the comparison of the existing and future costs and benefits of IFMIS implementation, and calculation of the net present value and the internal rate of return of the investments. Overall, aggregated internal rate of return of all the reviewed sites is 17.27%, which is higher than the assumed opportunity cost of capital and thus a positive result. The overall net present value of the project for the sites in the sample is about UShs 320 million, or about US$123,000 (the results for the individual sites in the sample vary)17. Because of the small sample size it is difficult to make the overall conclusion based on the results of the cost-benefit analysis alone. It should be noted, however, that economic cost-benefit 15 However, monitoring visits also indicated that some of the staff houses (in particular in rural areas) were not consistently occupied by staff – this points to the issue that while housing can attract and retain staff, it must be complemented by additional incentives and actions (financial or other, and actual provisions for LGs to recruit staff). 16 Each CDD project has an average of 25 direct beneficiaries representing 25 households. The average size of a household is 6 members. CDD program reviews indicated that each household has a programming influence of at least 5 other households. Using this formula, it can be projected that the total number of individuals engaged in CDD projects, directly and indirectly, are 9,762,000. This represents at least 30% of the total population of the country. 17 Refer annex 3 for details. The PAD included a cost benefit analysis of IFMIS roll out to 2 LGs and 2 MDAs undertaken under EFMP II, but the author did not have access to the background data for this analysis. The analysis had an average NPV of 1.7b UGX A (approximately US$646,000) and an average ERR of 31%. 12 analysis is likely to underestimate the true value of the project or its components. While all of the costs of the component implementation are well defined and included in the analysis, not all of the benefits can be identified, measured and quantified in economic value terms and included in such analysis. Therefore, the estimated benefits of the component 1 described in this analysis could be considered somewhat conservative, and the actual benefits are likely to be larger. Economic Analysis of Component 2: The evaluation of this component includes the estimation of the cost efficiency of investments compared to the similar past investments (for LDG) and evaluation of the likelihood, based on the reported result, that the component achieved positive economic results. A cost-benefit analysis could not be completed because the component supports thousands of sub projects in different sectors that have varied costs, potential benefits, scale, and types of impact on beneficiaries. For this reason, it is difficult to accurately estimate benefits of the component as a whole and consequently to perform the economic cost benefit analysis for the entire component. While the cost efficiency analysis is not as useful in demonstrating the economic efficacy of the project, it nevertheless demonstrates whether any cost efficiencies were achieved during the implementation of this component (a similar approach was applied in the PAD). Cost Efficiency of LDG: The table below summarizes average cost figures for the LGMSD project, as well as average cost figures for the LGDP 1 and 2, which also used similar financing mechanism. The table summarizes average cost figures by economic sector. Cost Efficiency Comparison of LDG Projects (in US$, key sectors) LGMSD LGDP 2 LGDP 1 No of Projects Average Cost No of Projects Average Cost No of Projects Average Cost Completed per Project Completed per Project Completed per Project Administration 1.426 $ 1.947 256 $ 4.946 117 $ 10.639 Education 3.110 $ 4.482 3.445 $ 2.481 2.525 $ 2.241 Health 3.723 $ 3.793 1.248 $ 4.281 832 $ 3.903 Production and Marketing 1.611 $ 3.788 2.593 $ 1.493 809 $ 1.498 Roads and Drainage. 3.447 $ 6.345 3.338 $ 4.281 2.081 $ 4.502 Solid Waste 66 $ 1.373 140 $ 2.201 99 $ 27.054 Water 2.117 $ 2.829 2.770 $ 1.666 1.741 $ 1.892 15.500 $ 4.186,47 13.790 $ 2.773,06 8.204 $ 3.255,09 The table above presents a comparison of cost-efficiency of individual investments across different projects with similar approach. While some sectors (such as administration, health, and solid waste) appear to have improved in cost-effectiveness, others (such as education, roads, and water) show significantly less cost-effectiveness compared to LGDP projects. This may be due to the scale and of individual projects, especially in resource heavy infrastructure projects. Road, drainage and waterworks improvement projects normally are more costly per project compared to other sectors and, if relatively large scale improvements were undertaken in these sectors, the cost-effectiveness figure would be negatively affected18. Finally, the fact that procurement for all LG investments was undertaken using procedures in compliance with Bank guidelines and with Uganda’s legal framework is also an indication of the likelihood that project investments were cost-effective. 18 In addition to this, there are limitations with regards to crosscutting comparison over time for costs, due to prices changes in material costs, inflation and depreciation of the Ug Sh. 13 Economic Efficacy of CDD: Similarly to LDG, no detailed data is available to assess CDD projects’ actual economic benefits. However, because intended benefits of this subcomponent are already expressed in economic value terms (i.e. income generation for the beneficiary population), it is possible to estimate the likelihood of its economic efficacy. Based on the available data concerning the number of projects and beneficiaries, and assuming that these projects provided all their direct beneficiaries with an income equivalent to at least poverty line rate of annual income (403 U Shs per hour or US$1.25 per day ), the result would be a more than 400% return on investment. However, it is probably not likely that all CDD projects were successful and/or all of the projects provided income to all of their direct beneficiaries. Therefore, it is necessary to estimate at what level of adjustment (of project success rates, and of the number of direct project beneficiaries) the project would generate sufficient economic benefit to result in zero net present value of costs and benefits (i.e. breakeven point at a assumed opportunity cost of capital). If the actual results are higher than this adjustment level, then the actual net present value of the project is also positive and the project is economically beneficial. The analysis determined that if the actual success rate is only 46% of total funded projects, the subcomponent can be said to have achieved positive result. The adjustment point is conservative enough (in other words, it allows for large enough percentage of projects to be unsuccessful and still result in overall positive outcome) to allow for positive assessment for this subcomponent. Based on the findings above, it is concluded that the project achieved a positive economic result. 3.4 Justification of Overall Outcome Rating The overall project outcome is rated satisfactory. The project remains highly relevant to current Government and Bank priorities. The project succeeded in achieving its overall PDO: ability to plan and manage resources was effectively improved at MDA and LG level, involvement of communities was enhanced through use of the CDD approach, and, in addition, service delivery was improved. Three of four PDO indicators exceeded the target value and one indicator was partially achieved. Two of four intermediate indicators were exceeded target value, one was partially achieved and one was not achieved19. Furthermore, additional achievements outside of the PDO indicators justify that the overall outcome rating is satisfactory, among others due to (i) the effective delivery of sub projects in accordance with the LGMSD design principles improving access to services for the population nationwide as evidenced in beneficiary satisfaction surveys, (ii) the roll out of CDD as a new type of funding window achieving several of its intended institutional objectives while providing opportunities for gainful employment and income, (iii) the successful implementation of the sub component on strengthening local government capacity through CB grant and professionalization all contributes to the overall rating, (iv) the improvement in institutional capacity at LG level as evidenced in the results of the annual performance assessments, and (v) the achievement of 5 of 6 triggers for the next APL, including that Government continue to fund the LDG and CBG from own source (including beyond the lifetime of LGMSD). Lastly, the project was completed at a satisfactory level of 19 However, the intermediate indicator not achieved (staffing levels in Northern Uganda) was also affected by decision and policy changes outside the control of the project (increase in number of districts, and lack of financing of new staff). 14 efficiency and with a positive economic result as demonstrated in the gains from implementation of IFMIS and CDD. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development While no detailed data exists to demonstrate the poverty dimensions of the project, it can be stated that the fact that 85% of the investments under LDG were made within the core PEAP sectors is an indication that the project provided tangible benefits to all segments of society, including the most poor and vulnerable (provision of public goods). Similarly, there is evidence that poor communities benefited from CDD interventions, either directly (e.g. large number of women’s groups, groups of PWDs, youth, female headed households), or indirectly as members of a larger group. The project also integrated gender and poverty dimensions through the use of the Harmonized Participatory Planning Guidelines emphasizing participation and inclusion of all groups in LG planning and budgeting, and the integration of social and gender dimensions in the Annual Assessment indicators (clear focus on poverty eradication, through partnerships with NGOs/CBOs and private sector, and gender mainstreaming in development plans). Under CDD, communities contributed in-kind (amounting to US$ 5.2m in total), mostly labor, as part of the design and implementation of projects. This created temporary and also more permanent income opportunities for community members. In addition, while not quantifiable, it is estimated that a large proportion for both LDG and CDD were retained at local level since most of the construction materials was procured locally. It is also noteworthy that for both LDG and CDD, the number of female beneficiaries is high (52% for CDD, and 51% for LDG), and under CBG, a total of 39% of the LG staff trained were women. (b) Institutional Change/Strengthening Through the roll out and implementation of IFMIS and the expansive capacity building activities under Component 2 (financed by the CBG), the project contributed to strengthening of LG financial management and overall management, planning and delivery capacity of LGs, as outlined above. This is also evidenced in the improvement in performance scores across districts in the annual performance assessments. Furthermore, as evidenced in annex 3, there is clear evidence that the roll out of IFMIS to MDAs resulted in efficiency gains – potentially gains that could increase further over time. With regards to institutional change, the dialogue on decentralization reforms under the project, including the size and financing of LGs, indirectly contributed to a decision by Government to halt the creation of new districts, and to establish a commission to determine the appropriate structure for the different types of local governments (rural districts versus urban local governments), including their human and financial resources. (c) Other Unintended Outcomes and Impacts (positive or negative) The challenges associated with financing available for LGs faced during implementation of the LGMSD has led to deepening of the policy dialogue with Government regarding how to address the financing needs for urban and rural local governments. This dialogue led to the formulation of the Uganda Support to Municipal Infrastructure Development (USMID) which was approved by the Board in FY13 (the project includes targeted financing to meet capital needs of urban areas and expands the performance assessment for LGMSD). 15 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops In addition to the review, a Beneficiary Satisfaction exercise was completed for 180 LDG projects in 38 LGs (including LLGs in each LG) – representing a sample size of 1.1% of the total number of LDG projects, and 34% of total number of LGs. The survey focused on quality of the goods and/or works provided, timeliness of implementation, and sustainability of the service provided. The results of the exercise showed that more than almost 90% of the beneficiaries were satisfied or partially satisfied with the services provided: (i) 58% satisfactory, (ii) 28% partially satisfactory, and (iii) 14% not satisfactory. The main problems raised were (i) delays in project implementation, (ii) inadequate maintenance of roads and drainage, (iii) inadequate drainage around key community facilities, and (iv) the relative small size of facilities (i.e. of LDG financed projects) which often could not meet the demand. 4. Assessment of Risk to Development Outcome Rating: Moderate The risks to maintaining the development outcome as well as the risks to the overall institutional framework for decentralized service delivery are moderate given the commitment demonstrated by the Government and the capacity of the LGs to manage and maintain services and infrastructure provide under the project. While Government has demonstrated its commitment to supporting a decentralized framework for service delivery (including full financing of the LDG), the uncertain policy environment for decentralization, the decrease in overall funding per capita for LDG as a result of creation of new districts and population increase, and the inability to meet one of the triggers for phase 2 of the APL (on minimum staffing) are all potential risks to the sustainability of the gains made during the project. These risks are expected to be reduced due to the decision of Government to halt the creation of new districts and to review the structure of LGs in terms of staffing needs and requirements. On the institutional side, MoLG was provided with support to operate and manage the processes related to Component 2 and 3. Following the close of the project, Government has transferred responsibility and management for LDG and CDD, and is formulating a sustainability plan for management and oversight of IFMIS. At LG level, the sustainability of investments and outputs achieved has been secured through the strengthening of management and delivery capacity of LGs to perform on their mandate. Finally, as highlighted above, Government has decided to undertake a thorough review of the current assessment model and its indicators and institutional arrangements, and specific improvements have already been made as per the performance assessment model used for USMID. 16 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Quality at Entry - Satisfactory. The formulation of LGMSD commenced as a natural continuation of Bank engagement under LGDP I and II and key lessons from these operations were integrated in the design of LGMSD. Overall, the analytical foundations of the project were well prepared, strategically relevant, and consistent with Government policies and priorities. The risks and mitigation measures were assessed and relevant mitigation measures were identified, although some risks were more contextual than inherent to the project itself (e.g. creation of new districts). The choice of APL as the preferred instrument was logical and justified in the context of the medium and long term reform agenda and the specific focus of the project on a broad array of different reforms and initiatives. The APL approach was also chosen to have an exit strategy in case Government commitment to decentralization reforms were to dissipate. The PDO was somewhat convoluted due to the integration of MDAs and LGs in one objective and could have been simplified. The results framework did not fully reflect the MDA focus under Component 1, and did not include targets for the last two years of implementation (for intermediate indicators). (b) Quality of Supervision - Satisfactory The Bank conducted a total of 11 implementation support missions during the life of the project, and the mid-term review was completed 24 months after effectiveness as stipulated in the Financial Agreement. Most missions included joint field visits with the Government team, and the missions were effective in identifying and addressing any implementation issues. In addition, the Bank provided rapid day-to-day responses to GoU requests and queries on key issues. As part of the technical discussions on Component 1 (specifically on the data center), and in order to resolve technical issues with regards to the preferred technical solution, the team brought in technical expertise from other units to allow for the integration of experiences from other countries and to ensure quality and sustainability of the chosen IT solution. The midterm review completed in December 2010 provided valuable input an particularly allowed the Bank, in conjunction with the GoU team, to systematically target impeding factors for implementation, in particular the substantial delays under Component 1 and Component 2 encountered during the first eighteen months of the project. However, during midterm review and the subsequent restructuring, the Bank did not take advantage of the opportunity to update the results framework - although the number of districts had changed and no targets had been identified for intermediate indicators beyond 2009. The supervision and mid-term review documentation, including the Aide memoires, were adequate and detailed. The ISR ratings reflected the state of the project at the given time – from the delays in effectiveness, the delays in Component 1, and up until the last 18 months of the project were ratings were consistently satisfactory. The ratings on FM, procurement and safeguards deteriorated somewhat over time, and the M&E ratings may have been higher than warranted, in particular in connection with the delays in acquiring updated M&E data in the first two year of the project. 17 While the project did identify the risks of changes in Government approach to decentralization reforms, the mitigation measures designed to limit the risk (bringing the reform dialogue to the highest possible level through PRSC dialogue) did not prove fully effective. Furthermore, the design did not fully anticipate two major obstacles that caused delay in the first two years of the project: (i) the complexity of procurement under Component 1 and the preferences of Government to overhaul the existing data center, and (ii) the complexity in acquiring land titles in Northern Uganda which caused delays under Component 2. However, these two issues could not easily have been known up front and the Bank adequately collaborated with the Government to address implementation challenges and reduce delays. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory. As the rating of the project was Satisfactory through most of its implementation, and since the key implementation issues were proactively addressed, the overall satisfactory rating for Bank performance is justified. 5.2 Borrower Performance (a) Government Performance Rating: Moderately satisfactory. Although Government supported the its support to the project through the continuous timely and predictable transfer of resources to the LGs, and the prioritization of LDG (including CDD and CBG) in Government’s MTEF and annual budget and the co-financing provided by LGs as per project requirement, the combination of the following factors justifies a rating of Moderately Satisfactory: (i) the creation of new districts which had negative impact on project implementation, affecting staffing levels, scope of work and causing delays (refer section 2.2), (ii) the stagnation in overall funding to LDG resulting in a de facto reduction in the annual allocations to LGs due to population growth and creation of new districts, (iii) the insufficient provision of staffing for LGs resulting in the project not meeting one of six triggers for Phase 2 of the APL, and (iv) long delay in acquiring Parliamentary approval, thus delaying project effectiveness. (b) Implementing Agency or Agencies Performance Rating: Satisfactory MoFPED: The performance of MoFPED as implementing agency for Component 1 was satisfactory. Although implementation was substantially delayed, the substantial follow up of delayed activities ensured that almost all activities had been satisfactorily completed at project close. The ministry resolved implementation challenges and effectively coordinated work between the three agencies involved in implementation (MoFPED, OAG, and MoLG). MoLG: The performance of MoLG as implementing agency for Component 2 and 3 was moderately satisfactory. The ministry ensured that LDG/CBG/CDD funds were transferred on a timely basis. It also provided comprehensive and timely implementation support on the capacity building activities, and provided oversight and management of LDG and CDD – however, there 18 were delays in the roll out and implementation of CDD and the activities in Northern Uganda. The national assessments were not consistently completed on a timely basis (and the assessment for 2012 was not completed at time of project closure), and there were inconsistencies in M&E, safeguards and fiduciary oversight as evidenced in the sections above. LGs: Overall, the performance of the LGs was satisfactory and in accordance with LDG rules and regulations, and in case of Bank financed components, in accordance with Bank requirements. The main gaps in performance were with regards to (i) compliance with safeguards requirements, and (ii) adequate supervision of CDD. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory. The weighting of Government performance determining the enabling environment for the LGs, and indirectly affecting the implementation of the project justifies an overall rating of moderately satisfactory. 6. Lessons Learned Consolidation and focus on sustainability of services – The shift from purely new investments (as per LGDP I and II) to a principle of consolidation of existing services to bring them up to standard (using specific service delivery standards for the relevant sectors) was a relevant and appropriate approach in the context of limited resource envelope and reduced discretionary grants (including OSRs) available for LGs. The successful implementation and adherence to these principles added value to the project outputs, and provided a useful example of focusing resources towards sustaining existing assets and enabling improved delivery of services. Operational lessons from LGMSD were incorporated into the design of the (PforR) Uganda Support to Municipal Infrastructure Development (USMID) program. These include: (i) distinguishing between urban and rural local governments due to the different financial and capacity needs, (ii) using independent assessors (for minimum access conditions and other indicators/reviews) to increase transparency and accountability of assessments, and (iii) aligning the design with Government systems and procedures, and creating a fiscal transfer mechanism that can gradually become an integrated part of Uganda’s intergovernmental fiscal framework. Decentralization reform agenda is susceptible to external interventions, and such interventions can significantly stall reform process – even with risk mitigation measures in place. These issues require long term engagement. While LGMSD had anticipated the use of PRSCs as leverage for dialogue on decentralization reforms, the mitigation measures were not adequate to influence the decision to create new districts or to reduce the effects stagnation in financing. However, towards the end of the project, following sustained dialogue, specific announcements from Government indicated that it would take actions to address some of the overall reform agenda risks. Understanding and adjusting the LDG System – Performance and Allocations: The project successfully supported the expansion of the LDG system. However, beyond the immediate service outputs, there is still limited understanding of (i) the incentives and demands of the existing LDG system (indicators and allocations), and (ii) the institutional improvements at LG level observed over time. The essence of a performance assessment system is that it is timely, 19 independent, credible and objective. Currently, the LDG performance assessment system does not fully comply with such criteria. The lesson learned is that performance assessment systems must be regularly reviewed, adjusted and updated (including the specific indicators) in the context of the overall decentralization reform framework, and in particular with regards to fiscal framework and the particular service delivery responsibilities of the LGs. Undertaking IFMIS reforms in the context of decentralization projects can be a catalyst for implementation: the project demonstrated that, rather than causing substantial coordination problems, the linkage between IFMIS reforms and local service delivery was conducive in that the creation of capacity at LG level promulgated a demand for installation and implementation of IFMIS. It also demonstrated that although the transactions at LG level are relatively low compared to most MDAs, the existence of a functioning institutional environment (including availability of skilled staff) can facilitate roll out of IFMIS at LG level, with particular economic and organizational benefits. This case can be demonstrated across the region – several countries are currently undertaking IFMIS roll out (also to LGs). Balancing provision of public goods under LDG with implementation of Community Grants: The project was one of the first examples of integration of a regular local government grant with a specific community development grant, targeting community groups. As such, the project demonstrated both the risks and opportunities with such an approach. However, one lesson learned is that the implementation of CDD grants, while improving citizens demand for services and engagement with local government officials, also require substantial supervision and consistent oversight and support in order to create sustainability and ensure accountability. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies N/A 20 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent)20 Appraisal Actual/Latest Percentage of Components Estimate Estimate Appraisal (USD millions) (USD millions) Component 1 20.1 17.8 88% Component 2 32.2 32.5 101% Component 3 2.7 3.1 115% Total Baseline Cost N/A N/A Physical Contingencies N/A N/A Price Contingencies N/A N/A Total Project Costs 55.0 53.4 97% Front-end fee PPF N/A N/A Front-end fee IBRD N/A N/A Total Financing 55.0 53.4 97% Total undisbursed 0.177 Percentage disbursed 99.67% (b) Financing Actual/ Appraisal Latest Type Estimate of Percentage of Source of Funds Estimate Cofinancing (USD Appraisal (USD millions) millions) Parallel Borrower 143.70 120.221 84% cofinancing IDA 55.00 53.4 97% 20 The Uganda shilling depreciated against the US$ (1 US$ was equivalent to approximately 1,600 USh in 2009 and approximately 2,800 USh by the end of 2011. The US$ also depreciated against the SDR. The Government has made its commitment as co-financing in Ush, and the con-financing was not formally stated in the FA. 21 GoU provided a recurrent amount in USh each year, but the total amount is lower than anticipated at appraisal due to the depreciation of the shilling. 21 Annex 2. Outputs by Component Component 1 – Support to the Public Financial Management Systems Reform Program Subcomponent 1: Financial Management Systems in MDAs (US$11.6 million) Activity 1: Technical support to Accountant General’s Office. • Funding of 12 consultants in the Accountant General’s Office (5 FMSs, 5 IT Specialists, 1 Data Centre Manager and 1 Program Officer). Activity 2: Implementation of the further roll-out of IFMIS in Central Government. • The Oracle IFMIS is running at 79 sites (65 CG sites and 14 LG sites). • The Tier 1 solution has been rolled out to 28 CG agencies22. • An IFMS Project Support Team was funded to provide technical guidance on the system's implementation at both existing and new sites. The team comprised 1 IFMS Project Manager, 1 Data Centre Manager, 2 Senior IFMS Accountants and a Project Administration Support team. Activity 3: Upgrading the data center to support extension of IFMIS to new entities and accommodation of related systems like the integrated personnel, payroll and pensions system. • The IFMS Tier 1 solution was rolled out to 28 Central Government sites comprising ministries, commissions, agencies and referral hospitals (see detailed list in annex 9). • Data center was partially upgraded23 Activity 4: Support to the IFMS technical staff, including recurrent costs. The Management Support team continued to provide facilitate the consultants in the Program Coordination Office. Subcomponent 2: Support to MoLG & Local Governments (US$6.9 million) Activity 1: Roll-out and integration of new ICT based PFM system (IFMIS and other systems such as budget reporting system) to 6 LGs. The IFMS was successfully rolled out to six (6) new districts of Arua, Wakiso, Kabale, Gulu, Tororo and Rakai in May 2012. 22 See annex 9 for full list. 23 The activity was not fully completed by the time of project closure due to several reasons: (i) challenges in conversion of the center’s application from Oracle version 11 to 12, (ii) delay in procurement process. During the period January to March 2012, MoFPED completed the upgrading of the hardware for the Data Center in Kampala. MoFPED had expected to upgrade the Oracle software from version 11g to version 12g in July 2012 but this was not achieved by project closure. MoFPED is now in the process of directly hiring Oracle to support the upgrade, and it is expected that the upgrade will be finalized by July 2013. 22 Technical support also continued to be provided to the pilot LGs on tier 1. This brought the total Tier 1 roll out to 14 LGs24. Activity 2: Implementation of an IFMIS system for Tier 2 local governments. • The tier 2 solution was rolled out to six (6) pilot sites: Ntungamo, Mubende, Kumi, Iganga, Luwero and Nebbi districts – the sites went live in March 2012. • The roll-out phase covered an additional 20 local governments namely: Adjumani, Apac, Busia, Bugiri, Bundibugyo, Kalangala, Kapchorwa, Kitgum, Nakasongola, Pader, Kyenjojo, Paliisa, Kisoro, Masindi, Rukungiri, Sembabule, Hoima Municipality, Lugazi Town Council, Jinja Municipal Council and Mukono Municipal Council25. These sites became active between October and December 2012. Activity 3: Technical support for the second tier LGs as well as the establishment of a team of consultants for application support. A team of Application and IT consultants at MoLG continued to support the implementation of Public Financial Management reforms in Local Governments. Activity 4: Establishment of Financial Systems/ICT Support functions at MoLG. The training provided to the Inspectorate Department at MoLG was crucial in building a cadre of MoLG staff to sustain the process of implementation and roll out of IFMS. Subcomponent 3: Management Support (US$1.6 million). Throughout the project, the management support unit provided facilitation and backup for consultants working in the Program Coordination Office, including the Program Coordinator, the Finance Manager, Procurement, and M&E specialist, i.e. both the FINMAP program and the PFM components of the LGMSD project. A strategy for mainstreaming support in the national budget has also been identified, but a formal exit strategy remains to be completed. Component 2: Support to LDG The support provided to LGs including support to Northern Uganda, LDG, CBG and CDD) was used by LGs and community groups to achieve the following outputs: Subcomponent 1: Local Development Grant (LDG) • A total number of 16,066 projects at an average unit cost of UShs 10,884,932 were completed at project closure in the sectors of administration, education, health, production, roads and drainage, solid waste and water • The project contributed to improved access to services for a total of 4,687,582 direct beneficiaries (of which 51% women) and an estimated 17 million indirect beneficiaries. • 85% of all investment activities under LDG were in core sectors - education, health, water, and roads. 24 The total number of LGs under Tier 1 were reduced from 14 to 8 when Kampala City Council and 5 divisions became Kampala City Authority in FY10/11. 25 Kitgum and Kalangala did not go live before the end of the project due to delay with LAN Connectivity. By February 1, 2013, both these LGs were fully operative. 23 • The overall LDG envelop was invested as per the following as follows: Roads (32%), education (21%), health (21%) and water (9%). Below is a list of the key sub project outputs per sector: Sector # of projects Average costs per project Share of total LDG Administration 1,426 5,061,450UShs 4% Education 3,110 11,653,066 UShs 21% Health 3,723 9,862,167 UShs 21% Production 1,611 9,849,862 UShs 9% Roads and drainage 3,447 16,496,214 UShs 32% Water 2,117 11,653,066 UShs 9% Sector Output Education • A total of 13,933 classrooms were built in primary schools • A total of 83,332 three seats desks were procured for primary school pupils resulting into comfortable seating for 249,996 pupils. • A total of 515 staff houses (1030 Dwelling Units) for teachers were built hence providing accommodation to approximately 1030 teachers. Health • A total of 513 facilities were built (Health Centres II, III and IV). • Staff houses totalling 352 (880 Dwelling Units) were built for the medical staff. Sanitation • A total of 2,734 latrines (10,936 stances) were built mainly in schools, health centres and markets • 267 garbage skips especially in Town Councils and Trade Centres; • 22 sanitation lanes in Municipalities. Water • 1796 projects increasing access to water listed as follows: Boreholes, hand dug wells, piped water networks, shallow wells, water tanks, Gravity Flow Schemes and protected springs. Roads • 2598 km of roads were rehabilitated or constructed. • Many LGs invested in fixing culverts on swampy parts of the roads as well swamp raising. Others invested in building bridges; light grading, paving, graveling of roads • Provision of streetlights Production • Procurement of seedlings for clonal coffee, mangoes and oranges; and cassava cuttings for the farmers. • Livestock investments (under CDD) • Construction of 56 small markets and 1063 market stalls • Improvements made to four abattoirs to improve waste management •A total of 77 slaughter slabs were constructed and latrines and water tanks provided Trends in LG Performance in National Performance Assessments 2008-2011 Year 2008 2009 2010 2011 Indicator MC PMs MC PMs MC PMs MC PMs (Minimum condition /Performance Measure) MC Reward Static MC Reward Static MC Reward Static MC Reward Static Districts 34% 24% 7.5% 61% 48.8% 31% 85% 40% 23% 89% 64% 22% Municipal 37% 77% 61.5% 38.5% 89% 50% 21% 95% 46% 36% Councils LLGs 57% 23% 9.2% 74% 73% 46% 21% 24 Outcomes/Results: • Improvement in access to service delivery due to the large number of investments, then national coverage and the multi sector type of investments • Increase in income for households with opportunity to provide labor or support for implementation of sub projects, thus contributing to the local economy • Improvements in overall institutional capacity of local governments as evidenced in improved scores in the national performance assessments Subcomponent 2: CDD Grants • Under CDD, a total number of 13,016 projects benefitting 2,640,098 direct beneficiaries (of which 52% were women). • The total costs of projects (including community contributions) was approximately US$ 19,7m (including US$5,2m provided in kind by community groups) and the average cost per project was around US$ 1,516 • The priority sectors under CDD projects were: (i) livestock (43%), (ii) agriculture (33%), and (iii) services (events, management, catering, transport) – 9%. Other sectors included food processing, arts and crafts, small scale industries • For livestock, 5,891 projects implemented at an average unit costs per project of 2,623,946 UShs • For agriculture, 4,173 projects implemented at an average unit costs per project of 2,858,774 UShs • For services, 1,260 projects implemented at an average unit costs per project of 2,659,860 UShs Outcomes/results: • Each CDD project has an average of 25 direct beneficiaries representing 25 households. The average size of a household is 6 members. Progressive CDD program reviews indicated that each household has a programming influence of at least 5 other households. Using this formula, it can be projected that the total number of individuals engaged in CDD projects, directly and indirectly, are 9,762,000. This represents at least 30% of the total population of the country. • The implementation of the CDD modality has led to the creation of 13,016 group enterprises. • The CDD principle of direct community financing was adopted by other government programs such as Lake Victoria Environmental Management Program. • CDD revamped and emphasised the role of Parish Chiefs in the development process as the core interface between communities and Government. • The implementation of the CDD modality gave rise to some untended but positive benefits; including testing and applying the Community Procurement Guidelines facilitating the implementation of the NGO Registrations Act, creating programming and funding linkages with NGOs and other programs, and revamping the role of the Parish Chief. • CDD gave an opportunity to scale up activities for improved livelihood by enabling value addition of existing processes (e.g. acquisition of milling machines, coffee hullers, and other small scale production stations). The production stations not only created jobs and additional income in the communities, they also reduced the 25 burden and effort on part of the farmers/ households in respect to less time taken to walk/travel to trade centers or towns to get their produce and food processed. Subcomponent 3: Support to the Local Governments in Northern Uganda Activity 1, 2 and 3: Rehabilitation of existing office blocks and construction of new ones, provision of residential housing for staff and provision of office equipment and vehicles. The following outputs were delivered in 378 sub-counties spread across Northern Uganda: • construction of 88 new and renovated/completed the construction of 241 office blocks • construction of 122 new and renovated/completed the construction of 185 chiefs’ residences • construction of 156 new and renovated or completed the construction of 183 residential houses for extension workers. • each benefitting sub-county was furnished with sufficient office furniture including a lockable filing cabinet, desks, chairs, a lockable notice board, a desk top computer and a printer. • supply and installation of 205 solar power systems in the sub-counties that are not connected to the national electricity grid (completed after project closure) • 40 vehicles and 2,400 bicycles distributed to LGs, LLGs and parish chiefs to enable mobility in areas Activity 4: Induction of new LG staff. • Induction and training of staff in new areas, including in Participatory Planning, Financial Management, Procurement Council Procedures and records management. • Copies of 25 key government reference documents (laws, regulations and guidelines) were printed and distributed to the LGs • Three generic training modules (GTMs): Peace and Peace Building, Conflict Resolution and Management, Psychosocial Rehabilitation, were developed to equip the LGs with the management tool for the post conflict situation under which they operate. Activity 5: Support to Physical Planning in 9 LGs with IDPs. • 30 Physical Development Plans for thirty urban centers (25 Town Boards and 5 Town Councils) were completed to guide physical development in the fast growing trading centers26. • Pilot activities for implementation of Physical Development Plans were implemented, including: (i) Transferring the information on the approved detailed plans of the Central Business District (CBD), (ii) Opening a number of strategically located roads and the associated drainage systems and (iii) Naming of the roads and installation of road names and plot numbers to give permanent addresses to different locations within the towns. 26 Note that at the time of planning, even the five Town Councils were still town Boards. Most of the planned urban centers hosted the once populous Internally Displaced Persons camps. 26 Outcomes/Results • A survey carried out by MoLG in conjunction with the LGs established that the improvements had contributed to (i) reduced absence of sub country staff, (ii) improved productivity of SC staff. However, the results of the national assessments indicated that a large number of district sin Northern Uganda still failed to meet minimum conditions or scored low in the performance assessment. Subcomponent 4: Capacity Building Support Outputs: • Using CBG, LGs trained a total of 67,884 (41,316 men and 26,568 women). The following key topics where LGs utilized CBG to strengthen the capacity of various stakeholders (Councilors, LGs Technical Staff, staff of CBOs and NGOs, contractors, etc.): Topic of CB Females Males Total Mentoring 3298 3318 7020 Mentoring of LLGs 951 759 1709 Performance appraisal 1453 2602 4055 Procurement and contract management 642 801 1443 Revenue mobilization and enhancement 588 811 1399 Roles and responsibilities 468 591 1059 Development Planning 607 1199 1806 Environment management 472 841 1313 Ethics and integrity 468 425 893 Financial management 1304 2382 3686 Gender and gender mainstreaming 1035 1286 2321 Induction of councilors 137 201 338 Induction of technical staff 3349 3578 6927 Leadership skills 1264 782 2046 Administrative Law 511 890 1401 Computer training 354 194 548 Data and records management 747 731 1478 • 1,653 staff trained under the professionalization scheme, of which 1429 were trained under the CBG and 224 under the professionalization program. Out of those trained, 288 staff (representing 17%) were promoted, 166 staff (representing 10%) moved on for better jobs, while 55 staff (representing only 3%) either retired, resigned, dismissed or passed away. Outcomes: • 100% funding of the Capacity Building Grant (CBG) by the Government of Uganda which was incorporated in the Midterm Expenditure Framework (MTEF) and regularly transferred to LGs (as 10% of LDG); • The CBG is fully managed by Human Resources Development and Management (HRM/D) units in the LGs and it funds a wide range of CB activities, 27 • Utilization of nine institutions of higher learning (IHL) to provide training under the professionalization arrangement resulting 180 staff (HLG and LLG) being trained under the professionalization scheme. • Improved performance across all LGs in the areas of Human Resource Management, procurement, LG planning, records management, financial management, public administration, contracting, community development and management, M&E and resource mobilization to satisfactory levels • The Local Governments have acquired a critical mass of professionals spread across all Local Governments in areas of human resource management, public Administration and management, procurement, environment management, gender mainstreaming, records management responsible for the streamlined systems in their areas of profession (but still huge staffing gaps) • There is increased gender awareness in the Local Governments as evidenced from a reduction in gender disaggregated beneficiary differential Component 3: Institutional support Outputs: • Prepared review reports for CDD, safeguards management, implementation of LDG and CBG • Prepared and delivered Mid Term review report on collaboration with consultants 28 Annex 3. Economic and Financial Analysis An economic analysis was completed for IFMS roll-out (Component 1) and a cost effectiveness analysis has been done for the implementation of the LDG (Component 2). In addition, an economic analysis was completed for the CDD grant under Component 2. Economic analysis of IFMS roll-out; The focus of the analysis for this component is the continued rollout of Integrated Financial Management Information Systems (IFMIS) to Central and Local Government Agencies. The analysis attempts to quantify and compare existing and future costs and benefits of IFMIS implementation, and calculates the net present value and the internal rate of return of the investments. As the costs of the project are given, the primary challenge of this analysis is to, as accurately and comprehensively as possible, estimate economic benefits of the investments. Project Benefits The expected benefits of the project are assumed to result from the efficiencies gained as a result of IFMIS implementation, and economic costs that will or can be reduced or eliminated. Calculation of these benefits involves the estimation of the time spend on various activities and transactions before and after IFMIS implementation and estimation of economic value of improved efficiency and accuracy in processing transactions and performing related activities. Specific projected benefit categories estimated in the analysis are: (i) Time and cost reductions needed for processing payment transactions, and resultant savings in opportunity cost of economic resources. As the time and effort needed to process transactions is reduced, the amount of economic resources freed up and is available for more productive economic activities. (ii) Time and cost efficiencies achieved by central and local government agencies for processing of payments and related transactions. As a result of IFMIS implementation, the staff spends significantly less time processing each payment transaction and on related activities. This can lead to either direct reduction of staff costs for the government agencies, or can simply create opportunities for other productive use of staff time. (iii) Time and cost efficiencies achieved by central and local government agencies for other processes and activities encompassed by the IFMIS, such as account reconciliation, preparation of financial and management reports, and so on. The direct economic benefits of this category are similar to the ones described above, as they reduce the cost of these activities and create opportunities for either direct administrative cost reductions through the reduction of staffing levels or through the utilization of feed up staffing resources for other activities. This analysis, based on the data collected and supplied by the implementing agency, considers economic effectiveness of this component by examining only a sample of central and local government agencies that implemented IFMIS. The sample evaluated in this analysis includes four local government agencies from the pilot phase of tier 2 29 implementation (Luwero, Nebbi, Iganga, and Kumi), and one central government agency (Uganda Heart Institute). It is noted that, besides the few economic benefits estimated in this analysis, there are many other potential benefits that are not factored in the cost benefit analysis described here27. It should also be recognized that the real economic benefits accruing to the recipients may not be financial or economic in nature. Therefore, the estimated benefits of the project described in this analysis could be considered somewhat conservative, and the actual benefits are likely to be larger 28 . Given the limitation of the assumption relating to productive use of available resources29, which has been freed due to the introduction of the IFMS, the benefits estimated in this analysis should be considered to be potential rather than definite. The numerical representation of the magnitude of efficiencies achieved as a result of IFMIS implementation is provided in the tables below. These values, together with payment transaction volumes and administrative cost figures, were used in quantifying the economic benefits of Component 1. Table 1 summarizes the average no of days needed, before and after IFMIS implementation, for a payees’ accounts to be credited after invoicing. Table 2 summarizes total estimated staff time, in hours per month, needed to process payment transactions before and after system implementation. Table 1: Number of Days Needed to Complete Payment Process Contractors Suppliers Staff Advances Transfers Pre-IFMIS Post-IFMIS Pre-IFMIS Post-IFMIS Pre-IFMIS Post-IFMIS Pre-IFMIS Post-IFMIS Luwero 11 2 11 2 3 1 5 1 Nebbi 9 2 9 6 2 1 4 1 Iganga 12 3 12 3 3 2 4 2 Kumi 15 2 14 2 7 1 4 1 UHI 10 4 10 4 14 3 - - Average 11.4 2.6 11.2 3.4 5.8 1.6 4.3 1.3 27 This is either because estimating such benefits is impossible because of the unavailability of the data or because it is impossible to quantify the value of these benefits 28 Some examples of additional benefits of the project include: (i) Improved Access to Data: archiving and retrieving records is easy and accurate, (ii) Faster identification of bottlenecks in the payment process, (iii) Greater flexibility in correcting an error made during the process (Most manual processes required fresh paperwork, IFMS allowed correction of the same transaction (iv) Easy access to an audit trail of a transaction (an auditor or accounting officer can now log on to IFMS and instantly access transaction data, rather than constantly looking for hard copy documents), (v) Easy tracking of Budgets and Expenditure for Heads of Department and all other relevant authorities, (vi) System budget controls have helped in controlling expenditure within the approved budget, (vii) Improved transparency: each department has access to their approved budgets and budget and financial information can be obtained on real time basis, and (viii) Accurate complete and timely reports are available at any time. 29 The freed resources may or may not be put into productive use. 30 Table 2: Number of Hours per Month Needed to Process Payment Transactions Contractors Suppliers Staff Advances Transfers Pre-IFMIS Post-IFMIS Pre-IFMIS Post-IFMIS Pre-IFMIS Post-IFMIS Pre-IFMIS Post-IFMIS Luwero 38.17 2.43 69.83 4.72 32.42 6.63 23.75 1.97 Nebbi 19.33 1.78 24.67 6.44 21.58 5.10 17.67 1.68 Iganga 64.50 3.65 45.00 2.71 159.33 16.00 73.33 3.33 Kumi 146.00 3.40 217.08 5.58 122.83 5.71 21.50 2.60 UHI 3.25 0.35 38.25 2.53 85.83 3.50 - - Average 54.25 2.32 78.97 4.40 84.40 7.39 34.06 2.39 Project Costs and time horizon Project investment costs included in the analysis are fixed and recurrent costs for each site in the sample. Fixed costs include site preparation, equipment and software, training and other miscellaneous one-time costs incurred during the implementation of the project. Recurrent costs include support and maintenance, software, overhead, and other ongoing expenses. This analysis assumes that the time horizon of this project is 6 years. Results of Economic Assessment Overall, aggregated internal rate of return of all the reviewed sites is 17.27%, which is higher than the assumed opportunity cost of capital and thus a positive result. The overall net present value of the project for the sites in the sample is about Ushs 320 million, or about US$123,000. The results of the cost-benefit assessment vary among the sites selected for the analysis. Two of the local government sites in the sample (Luwero and Kumi) and the central government site have positive net present value of cost and benefit streams and an internal rate of return that exceeds the assumed opportunity cost of capital. However, two other local government sites (Iganga and Nebbi) generated internal rates of return that, while still positive, are lower than the opportunity cost of capital used for the analysis and therefore result in the negative net present value of cost-benefit streams. Despite this mixed results, the overall result is a positive net present value, with an internal rate of return that exceeds the assumed opportunity cost of capital. Table 3: Net Present Value and Internal Rate of Return Results for the Reviewed Sites NPV (USh NPV (USD) IRR Millions) Luwero 78.34 $ 30,132 17.44% Nebbi (47.81) $ (18,387) 8.45% Iganga (88.97) $ (34,218) 5.50% Kumi 373.57 $ 143,682 36.29% UHI 5.50 $ 2,117 13.63% Overall 320.65 $ 123,326 17.27% 31 Because of the mixed nature of individual site results and a small sample size, it is difficult to make overall conclusions with complete certainty. The overall result is a positive net present value, with an internal rate of return that exceeds the assumed opportunity cost of capital. However, site-specific results are varied, with two out of five selected sites showing negative net present values. However, considering that the benefits of the project are not limited to the ones estimated and quantified in this analysis (while its costs are given), it is likely that the overall net effect of the project is positive. Sensitivity Analysis The sensitivity analysis estimates what the results of the analysis would be if the time and cost efficiencies achieved under the project were lower than the base figures assume. For example, assuming that the days needed to complete payment transactions and the staff time needed to process these transactions were 10% lower than the current estimates suggest, two of the sites still would show positive net present values. However, the overall internal rate of return of the project would drop slightly below the opportunity cost of capital and would thus result in a slightly negative NPV. If the above figures were 20% lower than assumed, then all but one of the sites, as well as the overall sample, would show negative net present values. The internal rate of return of the project would in this case drop to about 6%, which is about half of the assumed opportunity cost of capital. Table 4 summarizes these findings. Table 4: Sensitivity Analysis – Cost-benefit Analysis Results with 10% and 20% reduction of the efficiencies achieved under the project -10% -20% NPV (USh NPV (USh NPV (USD) IRR NPV (USD) IRR Millions) Millions) Luwero 4.65 $ 1,789 12.33% (69.04) $ (26,554) 6.85% Nebbi (108.50) $ (41,732) 3.65% (169.20) $ (65,078) -1.58% Iganga (147.32) $ (56,662) 0.84% (205.67) $ (79,106) -4.26% Kumi 271.71 $ 104,502 30.16% 169.84 $ 65,322 23.73% UHI (25.61) $ (9,851) 3.87% (56.73) $ (21,819) -7.89% Overall -5.08 $ (1,954) 11.91% -330.81 $ (127,234) 6.14% Cost effective analysis of the Local Development Grants (LDG) utilization: The evaluation of this component included only the estimation of the efficiency of investments compared to the similar past investments. Cost efficiency analysis demonstrates whether any cost efficiencies were achieved during the implementation of this component. The table below summarizes average cost figures for the LGMSD project, as well as average cost figures for the LGDP 1 and 2, which also used similar financing mechanism. The table summarizes average cost figures by economic sector. 32 Table 5: Cost Efficiency Comparison of LDG Projects LGMSD LGDP 2 LGDP 1 No of Projects Average Cost per No of Projects Average Cost per No of Projects Average Cost per Completed Project Completed Project Completed Project Administration 1,426 5,061,450 256 12,859,060 117 27,660,868 Education 3,110 11,653,066 3,445 6,449,738 2,525 5,827,796 Health 3,723 9,862,167 1,248 11,131,430 832 10,146,595 Production and Marketing 1,611 9,849,862 2,593 3,882,787 809 3,894,377 Roads and Drainage. 3,447 16,496,214 3,338 11,130,932 2,081 11,705,568 Solid Waste 66 3,570,878 140 5,723,182 99 70,340,525 Water 2,117 7,356,224 2,770 4,331,300 1,741 4,919,837 15,500 63,849,862 13,790 55,508,429 8,204 134,495,566 While sectors, such as Administration, Health, and Solid Waste, appear to have improved in cost-effectiveness, others, such as Education, Roads, and Water, show significantly less cost-effectiveness compared to LGDP projects. This may be due to the scale and of individual projects, especially in resource heavy infrastructure projects. Road, drainage and waterworks improvement projects normally consume large amount of financial resources per project compared to other sectors and, if relatively large scale improvements were undertaken in these sectors, the cost-effectiveness figure would be negatively affected. It is important to note that this by no means implies economic inefficacy of these projects but simply a comparison of cost-efficiency of individual investments across different projects. Community Driven Development (CDD) Grants Similarly to LDG, no detailed data is available to assess CDD projects’ actual economic benefits. However, because intended benefits of this subcomponent are already expressed in economic value terms (i.e. income generation for the beneficiary population), a rudimentary assessment can be performed to evaluate economic efficacy of this subcomponent. Based on the available data concerning the number of projects and beneficiaries, and assuming that these projects provided all their direct beneficiaries with an income equivalent to at least poverty line rate of annual income (403 UShs per hour or $1.25 per day30), the result would be a more than 400% return on investment. Such a result would be extraordinary, but it would probably not be prudent to assume that all of these projects were successful and/or all of the projects provided income to all of their direct beneficiaries. A useful and illustrative exercise in this case would be to estimate at what level of adjustment (of project success rates, and of the number of direct project beneficiaries) would the project generate sufficient economic benefit to result in zero net present value of costs and benefits (i.e. breakeven point at a assumed opportunity cost of capital). If the actual results are anywhere higher than this adjustment level, then the actual net present value of the project is also positive and the project is economically beneficial. Therefore, if this adjustment level is sufficiently low to allow for a conservative assessment, it would be safe to declare that this subcomponent likely achieved net positive economic effect. 30 Wage data is based on “Wages in Uganda� survey by wageindicator.org, October 2012: http://www.wageindicator.org/main/publications/2012/wages-in-uganda-wage-indicator-survey-2012 33 Table 6: Minimum Project Success Rate Needed to Achieve Breakeven Point P rojec t S uc c es s R ate Needed to A c hieve B reakeven P oint 46,15% O verall Adjus ted Number of P rojec ts 13.016 6.007 D irec t benefic iaries per projec t 25 11,5 T ota l D irect benefic iaries 325.400 69.308,3 T otal A nnual Inc om e G enerated - at poverty line rate (US h) 259.649.676.000 55.303.851.866 T otal P rojec t C os ts (U S h) 49.378.439.166 49.378.439.166 Net P res ent V alue of C os ts and B enefits (U S h) 162.903.239.903 - T otal A nnual Inc om e G enerated - at poverty line rate (US D ) $ 99.865.260 $ 21.270.712 T otal P rojec t C os ts (U S D ) $ 18.991.707 $ 18.991.707 Net P res ent V alue of C os ts and B enefits (U S D ) $ 62.655.092 $ - R eturn on inves tm ent 426% 12% As the table above demonstrates, this adjustment point appears to be about 46%. In other words, only 46% projects would have to be successful, and each project would have to provide poverty rate level of income for only 46% of direct beneficiaries, for the subcomponent to generate internal rate of return that is equivalent to the assumed opportunity cost of capital. While no such cursory evaluation would be sufficient to clearly demonstrate that the subcomponent was economically beneficial, the adjustment point is conservative enough (in other words, it allows for large enough percentage of projects to be unsuccessful and still result in overall positive outcome) to allow for positive assessment. It should also be noted that this evaluation includes only one year’s worth of economic benefit provided by these projects. It is reasonable to assume that at least some of these projects would continue to generate economic benefit for direct beneficiaries beyond the one year horizon, and consequently further increase the economic value of the project. Besides direct economic benefits of these projects, the subcomponent also has some additional side benefits the economic value of which is not included in the above evaluation. Some of these benefits are: - Household hygiene, universal primary education enrollment rates, and some other indicators have improved, since they are prerequisites to access CDD funds - Communities are positively responding to government programs (like immunization, etc.) because they are a requirement to access CDD funds - Communities have opened accounts in financial institutions - Community management and procurement within groups has enhanced decentralization and improved accountability in local government agencies. 34 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Solomon Alemu Consultant AFTU1 Agnes Kaye Program Assistant AFMUG Daryoush Kianpour Consultant MNSPS Marie Claire M. Li Tin Yue Senior Program Assistant AFTU1 Rowena J. Martinez Consultant AFTU1 Catherine S. McSweeney Consultant SDV Barjor E. Mehta Lead Urban Specialist SASDU Lance Morrell Consultant IEGPS Naa Dei Nikoi Operations Adviser LCSDE Richard Olowo Lead Procurement Specialist AFTPE Martin Onyach-Olaa Sr Urban Specialist AFTU1 Zara Inga Sarzin Sr Urban Development Specialist AFTU1 Patrick Piker Umah Tete Sr Financial Management Specialist AFTME Supervision/ICR Solomon Alemu Consultant AFTU1 Mary C.K. Bitekerezo Sr Social Development Specialist EASDE Parminder P. S. Brar Lead FM Specialist AFTME Howard Bariira Centenary Senior Procurement Specialist AFTPE Martin Fodor Senior Environmental Specialist AFTN3 Paul Kato Kamuchwezi Financial Management Specialist AFTME Agnes Kaye Program Assistant AFMUG Rosemary B. Kyabukooli Program Assistant AFMUG Daryoush Kianpour Consultant MNSPS Marie Claire M. Li Tin Yue Senior Program Assistant AFTU1 Catherine S. McSweeney Consultant SDV Barjor E. Mehta Lead Urban Specialist SASDU Martin Onyach-Olaa Senior Urban Specialist AFTU1 Jonas Ingemann Parby Urban Specialist AFTU2 ICR Author Zara Inga Sarzin Sr Urban Development Specialist AFTU1 35 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY05 0 6.5 FY06 28.55 124.74 FY07 67.14 323.48 FY08 52.35 245.26 Total: 148.04 699.98 Supervision/ICR FY09 48.26 213.77 FY10 46.79 261.69 FY11 26.24 165.96 FY12 11.94 64.69 FY13 13.15 62.92 Total: 146.38 769.03 36 Annex 5. Beneficiary Survey Results A Beneficiary Satisfaction exercise was completed in November 2012 for a total of 180 LDG financed projects in 38 LGs (including LLGs in each LG) – representing a sample size of 1.1% of the total number of LDG projects, and 34% of the total number of LGs. The review team consisted of members of the MoLG PIU. The team conducted feedback sessions with beneficiaries in each of the districts – at district level as well as at the town council, sub country and municipal council level. A minimum of 5 projects were visited per District/Municipality. The projects visited were in the areas of health, education, sanitation, roads and drainage. The survey focused on quality of the goods and/or works provided, timeliness of implementation, and sustainability of the service provided. The results of the exercise showed that more than almost 90% of the beneficiaries were satisfied or partially satisfied with the services provided: (i) 57% satisfactory, (ii) 28% partially satisfactory, and (iii) 14% - not satisfactory. The main problems raised were (i) delays in project implementation, (ii) inadequate maintenance of roads and drainage, (iii) inadequate drainage around key community facilities, and (iv) the relative small size of facilities which often could not meet the demand. 37 Annex 6. Stakeholder Workshop Report and Results N/A 38 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Summary of Project Description The Local Government Management and Service Delivery Project (LGMSD) designed as the initial phase of a ten (10) year Adaptable Program Loan (APL). It aimed at providing phased support for the implementation of the Government’s Public Financial Management (PFM) Reform Program and the Decentralization Policy Strategic Framework (DPSF). The project required step-by-step policy reform and institutional development. The first phase of four (4) years commenced in FY 2008/09 and was supposed to end in FY 2011/12. Arising out of initial delays, the project was granted a one year no cost extension to end on December 31st, 2012. The program objective was to enhance Local Governments (LGs) ability to plan and manage human and financial resources for effective and sustainable delivery of local government services. The development objective for the first phase of 2008/09 to 2011/12 was to strengthen the ability of MDAs and LGs to plan and manage resources in collaboration with communities for service delivery. Context The Local Government Management and Service Delivery (LGMSD) Project was designed to give effect to the implementation of these reforms and instruments. LGMSD was also designed to conform to the National Development Plan which is Uganda’s equivalent of a Poverty Reduction Strategy. LGMSD was also fully aligned with and supportive of The National Local Government Capacity Building Policy and The Peace and Recovery Development Plan (PRDP). The Peace Recovery and Development Plan for Northern Uganda (PRDP) became operational in the Financial Year (FY) 2008/2009. Project Outcomes and outputs Component 1: Strengthening Public Finance Management Systems The objectives and expected outputs for this component were achieved. Despite the overall improvement in the timeliness of submission of the bank reconciliations and financial statements as a result of the roll out of IFMIS, the trend in the quality of the financial reporting by the targeted LGs remained mixed, as measured by the audit opinions of the OAG. These results indeed lend support to the notion that computerization of financial management systems is a necessary but not sufficient condition for ensuring fiduciary assurance in PFM. Component 2: Support to LGSIP Under the LGMSDP, the LDG was incorporated in the GoU Medium Term Expenditure Framework (MTEF) and allocated across LGs based on the weights of - 45% for population; 40% for poverty count; and 15% for land area. As a deliberate consolidation effort, the LDG was used to undertake complementary activities to make existing investments more functional rather than investing in new infrastructure (service delivery units), guided by the service delivery packages provided by sectors. A maximum of 5% of the LDG was earmarked for re-tooling, maximum 5% for monitoring and maximum 5% for technical support and supervision. 39 Local Government Development Grant A total of 16,066 were implemented across the various sector of education, water, health, roads and environment, among others. LDG investments created employment and benefit for a total of 4,687,582 direct beneficiaries (2,399,175 women and 2,288,407 men) and an estimated 17 million indirect beneficiaries, and detailed in some of the outputs below: Education • A total of 13,933 classrooms were built in primary schools • A total of 83,332 three seats desks were procured for primary school pupils resulting into comfortable seating for 249,996 pupils. • With the provision of desks, the teachers were able to easily maintain eye contact with the pupils thus making it easy to teach and supervise them. • A total of 515 staff houses (1030 Dwelling Units) for teachers were built hence providing accommodation to approximately 1030 teachers. This has enabled the teachers to have ample time to evaluate the pupils work and to prepare well for the lessons. Health • A total of 513 facilities were built in Health Centres II, III and IV. • Staff houses totaling 352 (880 Dwelling Units) were built for the medical staff. Sanitation • A total of 2,734 latrines (10,936 stances) were built mainly in schools, health centres and markets • 267 garbage skips especially in Town Councils and Trade Centres; • 22 sanitation lanes in Municipalities. Water • 1796 projects increasing access to water listed as follows: Boreholes, hand dug wells, piped water networks, shallow wells, water tanks, Gravity Flow Schemes and protected springs. Roads • 2598 km of roads were rehabilitated or constructed. • Many LGs invested in fixing culverts on swampy parts of the roads as well swamp raising. Others invested in building bridges; light grading, paving, graveling of roads • Provision of streetlights Production • Procurement of seedlings for clonal coffee, mangoes and oranges; and cassava cuttings for the farmers. • Livestock investments (under CDD) • Construction of 56 small markets and 1063 market stalls • Improvements made to four abattoirs to improve waste management •A total of 77 slaughter slabs were constructed and latrines and water tanks provided 40 CDD - Progress and Results The CDD cycle was formulated and implemented for the first time in Uganda. It involved group formation or remobilisation, registration, expression of interest, household assessment, generating community project proposal, group management assessment, implementation of the community projects, procurement of goods and services, accountability of funds and reporting on community project progress on a quarterly basis. CDD provided direct community financing which went to innovative community investments. Based on the community group and the Parish as the entry point, CDD re- enforced the implementation of key Government policies such as the Universal Primary Education (UPE), the National Water and Sanitation Policy and the Public Health care policy. The flexibility of the CDD modality ensured targeting of hitherto untargeted categories of the population such as the youth, disabled persons, and formerly internally displaced persons. Northern Uganda While the implementation of this component suffered significant delays, the planned activities were implemented and completed at the end of the project. • Civil works: The successful implementation of the civil works has contributed immensely to the achievement of the objective of the sub-component of the support to the LGs in Northern Uganda, namely, to strengthen the LG institutions for improved service delivery, good governance and Reinstating State presence in Northern Uganda. Availability of buildings in sub-counties that had been practically abandoned by both the LGs and its clients has rekindled life in the originally ‘dead’ sub-counties. A survey carried out by MoLG in conjunction with the LGs established that the following impacts were closely linked to the successful implementation of the works. • Physical Development Plans: Physical Development Plans of thirty urban centers (25 Town Boards and 5 Town Councils) were prepared to guide physical development in the fast growing trading centers. • Challenges encountered: (i) insufficient capacity of local contractors causing delay in works, (ii) time lag between the planning (2006) for the buildings and the actual implementation of the planned activities (2010) causing escalation of costs due to price changes in building materials, and (iii) personnel turnover causing risks to implementation and oversight of works. Strengthening Local Governments - Capacity Building support This sub component broadly achieved its objectives and expected outputs. The impact of the capacity building program is evidenced by the following: • There is improved performance across all LGs in the areas of Human Resource Management, procurement, LG planning, records management, financial management, public administration, contracting, community development and management, M&E and resource mobilization to satisfactory levels. 41 • The Local Governments have acquired a critical mass of professionals spread across all Local Governments in areas of human Resource management, public Administration and management, Procurement, environment management, gender mainstreaming, records management responsible for the streamlined systems in their areas of profession. • There is an improved awareness of standards of service delivery in the local Governments with a significant improvement in service access. • There is increased gender awareness in the Local Governments as evidenced from a huge reduction in gender disaggregated beneficiary differential. • There is a marked improvement in public procurement awareness which has diminished related procurement queries in Local Governments. However, in the context of the prevailing environment for decentralized service delivery, a number of challenges remain: (i) reduced size of Capacity Building Grant provided to the districts, (ii) low staffing levels - and (iii) Particular staff challenges in new districts: In the newly created districts, relatively fewer staff benefited from the capacity building initiatives as they received little CBG and for a relatively shorter period. Component 3 – Institutional and Policy Support This component was implemented to satisfaction with regular monitoring activities and a careful watch on the Key Performance indicators. The Midterm review was conducted in time and its recommendation were implemented. It should be noted that project implementation picked real momentum after the MTR. Major Implementation Issues and Challenges Encountered i) Creation of new districts. The creation of new districts which distorted the original planned scope of works and led to delays in implementation of the IFMS tier 2 solution. Additionally, as a result of the proliferation of the new districts, a significant proportion of key local government positions remain unfilled and there is also a significant non-wage recurrent cost shortfall. All these factors collectively conspired to affect the efficacy and sustainability of the system’s implementation in the affected districts. New districts also led to challenges in project supervision, and required extra resources. Also affected were the staffing levels whose averages dropped at times to a dismal 9% and this invariably impacted on project implementation. On a tougher note, the drop in staffing averages undermined the trigger to APL II which required a staffing threshold of 75% especially for Northern Uganda. ii) Upgrade of the IFMS data centre. The delay in the upgrade of the data centre, in large part due to challenges in the conversion of the centre’s application software from Oracle version 11 to 12. This in turn undermined the realization of optimal performance of the IFMS system; iii) Lack of Ownership. Lack of ownership of the IFMS by some of the political leadership at the districts and in so doing affecting the system’s sustainability. This 42 necessitated an intensification of change management efforts in the concerned districts so as to influence the attitudes of the political leadership towards the system; iv) Lack of reliable power supply. This escalated to unsustainable levels, the recurrent costs of running the system, particularly in terms of fuel for the generator and other incidental costs; v) Manpower gaps. Manpower gaps for the provision of timely and adequate on-going application support (for at least six months) at the tier 2 roll-out sites. This subsequently undercut the efficacy of the system at the affected sites. vi) Draw Down Effects of the Diminishing size of LDG and CBG. Increasingly per capita investments for the Local Development and Capacity Building Grants dropped to about US$ 0.75 per capita for the rural districts and around US$ 1.57 per capita for urban local governments. As the volume of money sent to Local Governments reduced, shrinking further after the creation of new districts the net impact was a reduction in direct investments. Correspondingly, the overall coverage for CDD grants was quite insignificant in comparison to the number of administrative units and community groups. vii) Slow uptake of mainstreamed project functions. While greater effort was put in support MoLG to execute the mainstreamed project functions, there was equally a slow pace in the adoption and execution of project activities. This can be attributed to workloads of the staff, especially in the Inspectorate Department and the difference in work requirements between precise project requirements and the more routine work of Government. Project Sustainability LGMSD was consciously designed to take into consideration the sustainability of processes and direct investments. The matrix below presents key achievements with regards to sustainability. Component Observation Public Financial (i) Recurrent costs for Tier 1 IFMS have been mainstreamed, and external support is retained Management for purposes of major ongoing interventions. Reforms (ii) Some of the recurrent costs for the Tier 2 IFMS have been mainstreamed, but significant investment is still required to extend the system to over 100 eligible local governments Local LDGs are now part of the routine Government of Uganda (GoU) Financing Framework, under the Development consolidated Fund. Grants Capacity CBGs are now part of the routine Government of Uganda (GoU) Financing Framework and part of Building Grants the Consolidated Fund. The revised Local Government Sector investment Plan provides for and places emphasis on new Local Government capacity delivery and the requisite resourcing framework. Support to Institutional Structures strengthened through provision of permanent accommodation for critical Northern Uganda Lower Local Government staff. O&M costs will continuously be met from Local Government own revenue. Sub-county administration headquarters, capacity Building and post trauma conflict 43 Component Observation resolution and management will strongly contribute to the re-establishment of state presence. CDD CDD used a group approach that was anchored on existing government systems of registration and support by the Community Services Department in each Local Governments. CDD has set an agenda for and reinvigorated the hitherto weak function. Emerging community safety nets are largely income-based and will be self-sustaining. Institutional Landmark project activities such as Career Development and Professionalization have led to the Support creation of a critical mass of Local Government managers in the country. The National Local Government capacity Building Policy is being reviewed for uptake of emerging capacity building concerns. The Local Government Sector Investment Plan (LGSIP) now reviewed gives promise the the Local Government capacity question and calls for resourcing. Program The Program Support Team worked in conjunction with the mainstream MoLG staff (who were the Management and Component Managers) to execute all key program functions. Increasingly this has ensured Coordination sustainability of project management skills. Key Lessons Learnt Continuity, Consolidation and Innovation – The LGMSD demonstrated a very valuable lesson on the need for continuity that also allows innovation and new areas. The LDG under the program was implemented under LGDP I & II. It had been adopted by the Government as the preferred mode of financial transfers to the Local Government. Innovations and new areas under CDD and Support to Northern Uganda offered relevance to the entire program given their criticality in addressing some of the top outstanding development dilemmas for the country. Critical to note is the consolidation principle upon which the LGMSD design was based. It has ensured completion and use of hitherto stalled or even abandoned investments. Program Synergies with Policy and Institutional Framework – Adherence to country systems and particularly the anchoring of the LGMSD in the Financial Management Plan and corresponding national financial management reforms, the Local Government Sector Investment Plan, the Decentralisation Policy Strategic Framework and the Peace, Recovery and Development Plan increased program relevance and programming scope for the LGMSD. The need for a strong locus for service delivery and management - Local Government administrations as the vanguards for service delivery need to be strong and visible. The renovation and building of sub-county headquarters in Northern Uganda has fundamentally improved relation between the citizens and Government. This has immensely augmented the peace building and resettlement effort. Conflict vs opportunities for economic regeneration – the LGMSD revealed huge economic opportunities arising out of the conflict situation in Northern Uganda which must be increasingly tapped. For example former Internally Displaced Peoples Camps (IDPCs) have merged into satellite towns. Returnees especially the youth needs gainful employment 44 that may only be offered by a highly innovative and nontraditional service delivery program. Community Involvement for cost reduction and accountability - Involving communities in the management of public resources leads to a reduction in the cost of transaction while stimulating demand for rights, obligations and accountability for public resources. Recommendations Constant attention to environment and natural resource management – LGMSD has raised GoU understanding and attention to the natural resource management. The implementation of the program revealed that all kinds of investments including “software� activities have a direct or indirect impact on the environment. All program designs must therefore take cognizance of this and have in-built mechanisms for addressing the emerging concerns. Sustainability – this must be anticipated at the design and onset of the program in order to constantly check if sufficient attention is being paid to ensure sustainability of the process and the investments. Equally important, program designs need to have inbuilt flexible mechanisms for reviews and tracking. Continuous systems security monitoring - which is especially critical during “stage one� of Public Financial Management reform efforts. To this end, the government will engage a consultancy firm to address the various security issues that came to the fore following the forensic audit of the Office of the Prime Minister. According greater priority to the revenue component of a future Public Financial Management reform strategy. This will help ensure that the revenue base of the Local Governments is widened and in so doing transform them into financially viable and sustainable entities. Adopting a more participatory approach in stakeholder consultation during the design of subsequent PFM reform undertakings. This should entail broader consultation with politicians as this will help ensure full support of the leadership for the system during subsequent system roll-outs. Review and assess CDD to ensure effective implementation and managing risks. To secure sustainability of the CDD investments, it should be a key priority of Government to conduct more in-depth reviews to establish the evidence on the investments, e.g. by conducting the following: (i) An economic analysis to determine the economic benefit of the CDD across groups and individual households, (ii) A tracer study to determine how each of the community groups has progressed since CDD inception and beyond, and (iii) A random impact assessment to establish whether CDD met its objectives. 45 Bank Performance Design and design Support. The Bank was instrumental in originating the initial Concept Note on the Local Government Management and Service Delivery program. Specific input was made on the Community Driven Development (CDD) modality, which was a new area for Uganda. The Bank provided protracted design support through sub-component design team leaders who worked with local counterparts at MoLG. Three preparatory missions were fielded to augment the project preparation momentum. Procurement. The Bank provided regular support and advice on procurement compliance and the issuance of No Objections as appropriate. Each supervision mission ensured the participation of a Procurement Specialist who worked with national staff. Annual procurement audits were conducted to routinely check progress. Financial management. Financial Management support included regular financial performance reviews and actual replenishments. Each implementation support mission ensured a dedicated check of the financial status and whether there was continuous conformity to the Bank financial management procedures as agreed in the Financial Management Manual. Project Cost and Financing. This was done jointly with the Ministries of Local Government and that of Finance Planning and Economic Development. Project costing entailed appropriation of the budgets to be provided by GoU, namely the Local Development and capacity Building Grants and determining IDA financial support. The Bank also considered and approved all subsequent cross component cost adjustments. Implementation. The Bank provided regular implementation support through e- communication, supervision missions and reviews. Six dedicated financial management and procurement reviews helped to refocus implementation during the course of the program. In terms of Financial Management, the Bank reviewed and approved the Financial Management Manual which formed the basis of operations in the context of the Public Finance and Accountability Act and the Local Government Financial Regulations. Borrower’s Performance Design. The Government of Uganda through Ministry of Local Government and Ministry of Local Government provided dedicated teams for the design of the LGMSD. Given the teams’ experience in designing the first and second Local Government Development Pprogram (LGDPI & II) and the First and Second Economic and Financial Management Program (EFMP I & II), Uganda made very valuable input into the design process. General Execution and Implementation. Implementation was spearheaded by two specialized units – the Program Support Team at MoLG and the Program Coordination Unit at MoFPED. Internal management reviews, quarterly Program Technical Committee (PTC) meetings, backstopping teams, component implementation reviews provided regular avenues for progress tracking. Particularly for the PTC, program implementation benefitted 46 from external views of key Local Government stakeholders while its quarterly physical rotation provided opportunity for on spot checks and cross learning. Other than some residual activities under Component 1 and the Support to Northern Uganda, all LGMSD activities were implemented to full completion as at December, 2012. Overall the Government provided very robust and commendable execution and implementation effort to the LGMSD especially in the second half of the program, after the Midterm review. Procurement. The Program Support Team and the Program Coordination Unit had a strong Procurement function that oversaw all procurements in liaison with the Procurement and Disposal Units (PDUs) in the respective Ministries. This ensured timely preparation of the procurement plans and regular follow up of specific procurements with the PDUs. MoLG and MoFPED comprehensively participated in the procurement reviews which helped to iron out inconsistencies in procedure and hastened subsequent processes. Other than external delays in a major procurement for solar panels under Support to Northern Uganda, procurement was expeditious. Financial Management. Progressive missions noted that there was strict financial management that followed Bank and GoU procedures. A Financial Management Manual Agreed at program inception was followed. Financial Management Reports (FMRs) were prepared and filed in time while a financial status report was always prepared for each of the implementation supervision missions. Application for replenishments was quite regular as were the Local Government financial transfers made on a quarterly basis. Mandatory accountability was required for any financial resources released either to MoLG staff of the Local Governments themselves. Conclusion Overall LGMSD contributed significantly to the implementation of the Decentralization Policy in Uganda and within the aspirations of the National Development Plan and the objectives were met. The implementation of the program was kept within the context of the main theme, i.e. Local Government Management and Service delivery. While continuing the performance based grant model, the LGMSD also sought greater community participation and benefit through the Community Driven Development model. The Program created a bridge between mainstream public investments and community projects. The Support to Northern Uganda made tremendous stride to re-establish state presence after over twenty years of war and conflict which had paralyzed state and particularly, Local Government apparatus. While there was and continue to be overwhelming response from NGOs and development partners to the Northern conflict, a continued absence of Local Government institutional and physical negated this process. Through LGMSD, the restoration of sub-county headquarters to act as a locus for development and post conflict settlement is a major achievement of the program. Other key successes of the program include contribution to the policy debate on the clarification of context issues, such as the direction of the decentralization reform, functional assignments for each LG level and dealing with emerging capacity concerns. There were improvements on LDG and CBG by considering them as separate grants. The 47 subdivision of the LDG to create a community empowerment grant was applauded as a very strong policy response action to decentralized governance. The nationwide roll-out of IFMS is anticipated to reduce transaction cost across government. To a significant level, LGMSD dealt with some of the critical public sector and governance issues in Uganda. These include among others; increasing service access through public sector and community level investments, skills enhancement of Local Government managers, increasing voice for the poor to demand for services and accountability, handling post conflict trauma and resettlement and re-establishing state presence in Northern Uganda. 48 Annex 8. Comments of Co-financiers and Other Partners/Stakeholders N/A 49 Annex 9. List of Central and Local Government IFMIS Sites IFMS Central Government Sites (FY 2009/10) 1 Ministry of ICT 2 Ministry of East African Community Affairs 3 Public Proc. and Disposal of Assets Authority 4 Directorate of Ethics and Integrity 5 NEMA 6 Public Service Commission 7 Judicial Service Commission 8 Education Service Commission 9 Health Service Commission 10 Uganda Bureau of Statistics 11 Law Reform Commission 12 Inspector General of Government 13 Electoral Commission 14 National Planning Authority 15 Local Government Finance Commission 16 Uganda Police 17 Directorate of Public Prosecution IFMS Central Government Sites (FY 2011/12) 1 Mulago Hospital 2 Blood Transfusion Services 3 National Agricultural Research Organization (NARO) 4 National Agricultural Advisory Services (NAADS) 5 Uganda Prisons 6 Butabika Hospital 7 Lira Hospital 8 Uganda Aids Commission 9 Uganda Human Rights Commission 10 Mbale Hospital 11 Uganda Land Commission 50 Hybrid Sites (FY 2011/12 – 2012/13) 1 Uganda National Bureau of Standards 2 Uganda Cancer Institute 3 Uganda Heart Institute 4 National Citizens and Immigration Control 5 Uganda Tourism Board 6 Uganda Cotton Development Organisation 7 External Security Organisation 8 Diary Development Authority 9 Ministry of Trade and Industry 10 Ministry of Tourism and Wildlife List of Local Government Sites – Tier 2 IFMIS Roll Out TIER 2 IFMS – LOCAL GOVERNMENTS Iganga District Local Government Kumi District Local Government Luwero District Local Government Mubende District Local Government Nebbi District Local Government Ntungamo District Local Government Rukungiri District Local Government Kotido District Local Government Kalangala District Local Government Kyenjojo District Local Government Masindi District Local Government Kitgum District Local Government Apac District Local Government Busia District Local Government Kapchorwa District Local Government Lugazi Town Council Adjumani District Local Government Bundibugyo District Local Government Kisoro District Local Government Pader District Local Government Nakasongola District Local Government Pallisa District Local Government Sembabule District Local Government Bugiri District Local Government Hoima Municipal Council Mukono Municipal Council 51 Annex 10. LGMSD – APL Triggers – and status at project closure Triggers Benchmark Status as December 2012 1. Integrated Financial Pilot LGs producing and Met. The entire six pilot second tier Management Information submitting final accounts for LGs are already online since March System (IFMS) solution audit within 3 months 2012 and the Interim Operational operational in 6 piloted second Acceptance certificate has been tier LGs issued by GoU. The benchmark for submission of final account within three months (by September 2012) has been met. 2. 75% of Data Centre Support Recruitment and training of Met. The organizational structure of and IFMS Focal Point staff in AGO and MDAs the data center has a total of 12 mainstreamed into AGO, central completed. positions of which 10 are appointed Ministries, Departments and civil servants. While the help desks Agencies (MDA). in MoFPED and MoLG are manned by consultants, the onsite systems in most MDAs and LGs are operated by civil servants. 3. Service delivery packages and LGs utilizing the service Met. Seven service delivery standards developed by at least 3 delivery packages and packages have been integrated into key line ministries. standards. the Operational Manual, and disseminated to the LGs. A survey carried out in 20 sampled LGs revealed that 91% of projects implemented by LGs abided by the packages. 4. At least 3 sector Management National assessment process Met. Currently, LoGICS can Information Systems (MISs) utilizing the MIS effectively process data from Health, integrated in the National Education and Water MISs. Funds Assessment process. have been secured to procure a consultant who will transform the current NA tool into one that will rely on sector MISs, to generate the continuous assessment reports. 5. Government continue funding Actual release to LGs of Met. Government is fully funding the LDG and CBG from own US$143.7M budgeted under the LDG and CBG under the MTEF. source. phase 1 However, due to increase in population the per capita size of the grant is decreasing annually. 6. 75% of LG structures fully Funding of the LG structures Not met. The trigger could only be funded included in the national budget. achieved if (a) government provided more money for financing the LGs structure, (b) entry levels for LGs staff for the various positions reviewed to allow for more entry and competition, and (c) the current structure is reviewed and made leaner to fit within the existing budget envelop. There are a number of studies which will inform government on the policy decision. 52 Annex 11. List of Supporting Documents LGMSD Financing Agreement LGMSD Project Appraisal Document Environmental and Social Management Framework, LGMSD Resettlement Policy Framework, LGMSD Implementation Status and Results Reports Aide Memoires LGMSD Mid Term Review Report, December 2010 (Technical Review) LGMSD Mid Term Review, Summary of Review Workshop, December 2010 Review of the LGMSD in respect to existing facilities, Use of Service Delivery Packages, and Beneficiary Satisfaction, FY08/09-FY11/12, October 2012 National Local Government Assessment Reports, 2010 and 2011 (Annual Assessment of Minimum Conditions and Performance Measures for Local Governments) CDD Review Reports, 2010-2012 LGMSD Implementation Completion Report (Government of Uganda) 53 IBRD 40134 UGANDA LOCAL GOVERNMENT MANAGEMENT AND SERVICE DELIVERY PROJECT PROJECT DISTRICTS: DISTRICT CAPITALS* DISTRICT BOUNDARIES PRIOR TO JULY 1, 2009 NATIONAL CAPITAL INTERNATIONAL BOUNDARIES EFFECTIVE JULY 1, 2009 RIVERS This map was produced by the Map Design Unit of The World Bank. EFFECTIVE JULY 1, 2010 *District names are identical to District Capitals, The boundaries, colors, denominations and any other information and are, therefore, not named on the map, except shown on this map do not imply, on the part of The World Bank in six exceptions, e.g. “KABAROLE�. Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 30°E 32°E 34°E 0 25 50 75 100 Kilometers SOUTH 0 25 50 75 Miles SUDAN 4°N 4°N Moyo Lamwo Kaabong K E N YA Yumbe Adjumani Koboko Kitgum UGANDA Maracha le Ni Arua Amuru Kotido t Ac r Albe hw Pader Agago Ok o k a Gulu Abim Ora Nwoya Zombo Moroto an DE M . RE P. Nebbi Nile Kole Otuke Lo ch om Victoria O F C O N GO Oyam Lira Alebtong Napak Bulisa Amuria 2°N Kiryandongo Apac Katakwi Amudat 2°N Dokolo Nakapiripirit Lake Lake Kwania Kaberamaido Lake Salisbury Opeta r t Masindi be Soroti Siti Amolatar Ngora Kumi KWEEN Al Hoima Lake Kyoga Serere Bulambuli Binyiny Kafu Nakasongola Kapchorwa ke Bukedea Bukwo La Buyende Pallisa Sironko i Kyankwanzi Nkus Budaka Mbale Ntoroko Kibuku Kamuli Bududa Kiboga Kaliro Butaleja Luwero Busiki Manafwa Kibale Luuka Bundibugyo Kayunga Fort Portal Nakaseke Tororo Kyenjojo Iganga Mubende Bugiri KABAROLE Kyegegwa Wakiso Busia Mityana Mukono Jinja Mayuge KAMPALA Buikwe Namayingo Kamwenge Kasese Kanoni Mpigi Katonga A Kitamilo GOMBA BAL Gombe Lake AM 0° Sembabule BUT 0° George Kalungu Ibanda Bukomansimbi BUVUMA Rubirizi Lake Kiruhura Masaka Edward Buhweju Lyantonde Kalangala Lwengo Mtooma Bushenyi Kibingo K E N YA Mbarara SHEEMA Rakai Rukungiri Isingiro Kanungu Ntungamo Kisoro Kabale Lak e Vic toria TANZ AN I A TA NZA NIA RWA N DA 32°E 34°E JULY 2013