Document o f The World Bank FOR OFFICIAL USE ONLY ReportNo: 51591 -TZ PROJECT PAPER ON A PROPOSED ADDITIONAL FINANCING CREDIT IN THE AMOUNT OF SDR 25.2 MILLION (US$40 MILLION EQUIVALENT) TO THE UNITED REPUBLIC OF TANZANIA FOR THE HEALTH SECTOR DEVELOPMENT PROJECT I SUPPORT TO THE SECOND PHASE OF THE HEALTH SECTOR N DEVELOPMENT PROGRAM November 18,2009 Human Development Health, Nutrition and Population Eastern Africa Country Cluster 1 Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective October 3 1, 2009) Currency Unit = Tanzanian Shilling (TZS) TZS 1323 = U S $ 1 US$1.589900 = SDR 1 FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS AF Additional Financing IDA International Development AIDS Acquired Immune Deficiency Association Syndrome IEG Independent Evaluation Group APL Adaptable Program Loan IFMS Integrated Financial Management CAG Comptroller and Auditor General System CAS Country Assessment Strategy IFR Interim Financial Report CCHP Comprehensive Community IMR Infant Mortality Rate Health Plans ISR Implementation Status and CQ Consultant Qualification Results Report cso Civil Society Organization LGA Local Government Authorities DFA Development Financing LGDG Local Government Development Agreement Grant DHS Demographic and Health Survey MDG Millennium Development Goals DP Development Partner MKUKUTA Mkakati wa Kukuza Uchumi na DPP Director of Policy and Planning Kupunguza Umaskini Tanzania EA Environmental Assessment (Kiswahili for "National Strategy EmOC Emergency Obstetric Care for Growth and Reduction o f ESMF Environmental and Social Poverty") Mitigation Framework MOHSW Ministry o f Health and Social FA Financing Agreement Welfare FM Financial Management MSD Medical Stores Department GBS General Budget Support MTB Ministerial Tender Board GDP Gross Domestic Product MTEF Medium-Term Expenditure GF Global Fund Framework GOT Government o f Tanzania NCB National Competitive Bidding HBF Health Basket Fund NGO Non Governmental Organization HCWMP Health Care Waste Management NMSF National Multi-sectoral Strategic Plan Framework (for HIVIAIDS) HIV Human Immunodeficiency Virus OECD-DAC Organization for Economic HRH Human Resources for Health Cooperation and Development- HSDP Health Sector Development Development Assistance Program Committee HSRS Health Sector Reform Secretariat OPiBP Operations PolicyiBank HSSP Health Sector Strategic Plan Procedures HWI Health Workforce Initiative PAD Project Appraisal Document IBRD International Bank for PER Public Expenditure Review Reconstruction and Development PMI President's Malaria Initiative ICB International Competitive Bidding 2 FOR OFFICIAL USE ONLY PMORALG Prime Minister's Office, SWAP Sector Wide Approach Regional Administration and TACAIDS Tanzania Aids Commission Local Government TASAF Tanzania Social Action Fund PMU Procurement Management Unit TB Tuberculosis POA Plans o f Action TBD To be determined PPA Public Procurement Act TFR Total Fertility Rate PPP Public-PrivatePartnership TMAP Tanzania Multi-sectoralAids PRSC Poverty Reduction Support Project Credit TZS Tanzania Shillings PRSP Poverty Reduction Strategy USMR Under-five Mortality Rate QAG Quality Assurance Group UNFPA United Nation's Population Fund QCBS Quality and Cost Based Selection UNICEF UnitedNation's Children's Fund SBD Standard Bidding Document SOE Statement o f Expenditure sss Single Source Selection Vice President: Obiageli Katryn Ezekwesili Country Director: John Murray McIntire Sector Director Yaw Ansu Sector Manager: Eva Jarawan Task Team Leader: Dominic S. Haazen This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not be otherwise disclosed without W o r l d Bank authorization. 2 UNITED REPUBLIC OF TANZANIA HEALTH SECTOR DEVELOPMENT PROJECT I1 ADDITIONAL FINANCING TABLE OF CONTENTS Page A Introduction 1 B Background and Rationale for Additional Financing 1 C Proposed Changes 9 D Consistency with Country Assistance Strategy 11 E Economic Analysis o f Cost Overrun or Financing Gap 12 F Appraisal o f Scaled-up Project Activities 12 G Expected Outcomes 13 H Benefits and Risks 15 I Financial Terms and Conditions for the Additional Financing 17 Annex A: Procurement Arrangements 18 Annex B: Financial Management Assessment 22 2 PAPER PROJECT SHEET DATA Borrower: Government o f Tanzania Responsible agency: Ministry o f Health & Social Welfare (MOHSW) and Prime Minister's Office Regional & Local Government (PMORALG) Revised estimated disbursements (Bank FY/US$m) FY 09/10 10/11 Annual 17.0 23.0 Current closing date: December 3 1,2009 Revised closing date: December 3 1.20 10 Does the restructured or scaled-up project require any exceptions from Bank policies? oYes *No Have these been approved by Bank management? oYes oNo I s approval for any policy exception sought from the Board? oYes *No Revised project development objectives/outcomes The development objectives and outcomes are unchanged, although targets have been increased. Does the scaled-up or restructured project trigger any new safeguard policies? -uard policies are triggered. P - For Additional Financing [ ] Loan [XI Credit [ ] Grant For Loans/Credits/Grants: Total Bank financing (US$m.): 40.00 Proposed terms: Repayable in 40 years, including a grace period o f 10 years. 3 A. Introduction 1. This Project Paper seeks the approval o f the Executive Directors to provide an additional credit in the amount o f US$40 million (P119067, Credit 3841-2-TA) to the United Republic o f Tanzania for the Health Sector Development Project I1 (P082335, Credit 384 10; Grant H07 10). 2. Since 2000, IDA has been supporting the implementation o f the Government o f Tanzania, Mainland (GOT) long t e r m program o f health sector development through participation in the health Sector Wide Approach (SWAP) and the financing o f a share o f the total program expenditures. The Second Health Sector Strategic Plan (HSSP 1 ) was 1 launched in 2003 and was supported by over 20 development partners through a mix o f general budget support, the Health Basket Fund (HBF - a pooled fund) and targeted project financing (largely for malaria and AIDS). The proposed Additional Financing would fund scaled-up activities to enhance the impact o f this well-performing project, specifically covering costs associated with the initial two years o f HSSP I11 (2009-2015). 3. The project development objective (PDO) o f the Additional Financing i s identical to the original development objective': "to assist the Borrower in continuing to improve the quality o f health services and management o f resources allocated to the health sector through the expansion o f the health sector policy and institutional capacity building reforms initiated during the first phase o f the Program". 4. Outcome indicators remain substantially the same, but targets have been revised upwards to reflect the extension o f the project Closing Date, and the scaling up o f project activities. Some intermediate indicators have been added to reflect the focus on certain non-pooled activities. The scope o f the Project also remains the same, as all o f the planned activities are part o f the originally appraised program and are eligible for financing under the existing Project. The scale i s expanded as IDA will contribute to the financing for an additional two GOT fiscal years (2009/10 and 2010/11). It will disburse US$30.9 million under the existing category for pooled funds, and US$9.1 million under the existing category for non-pooled funds. The Development Partners currently contributing to the pooled funds include: Canada, Denmark, Germany (GTZ and KfW), Ireland, Netherlands, Norway, Switzerland, UNFPA, and UNICEF. B. Background and Rationale for Additional Financing 5. The Second Health Sector Development Project (HSDP 11) has contributed to the Government o f Tanzania's long term health sector program. This program has included efforts to increase financing for district-level essential health services; scale-up the 1 There were slight differences in PDO wording between the Project Appraisal Document and the original Development Financing Agreement (DFA) (Cr. 3841-TA, Gr. H070-TA) signed on January 13,2004. For the first Additional Financing, the latter was used in the Project Paper. To maintain consistency, the wording in the original DFA and the PP for the first Additional Financing i s used in this PP and the associated Financing Agreement. 1 integrated management o f childhood illness; increase vitamin A distribution; improve malaria treatment and HIV/AIDS testing, counseling and treatment; implement strategies for reducing maternal mortality; expand public-private partnerships for access to medicines; distribute bed nets; provide services by faith-based institutions; strengthen routine M&E; expand insurance coverage; and rehabilitate primary health facilities. 6. The Quality at Entry for HSDP I1 (2005) was rated "Satisfactory" overall by the Bank's Quality Assurance Group (QAG), while the Strategic Relevance and Approach was rated "Highly Satisfactory". The Project was also recognized with an Africa Regional Award for Excellence in 2006. 7. IDA i s an integral member o f the Development Partners Group-Health, which represents development partners in health sector dialogue, having chaired the Group in the past, and currently serving as the incoming chair. 8. IDA's support over the period 2000-201 1 was originally envisioned to be through an Adaptable Program Loan (APL) in 3 phases: The first phase o f the Health Sector Development Program was a US$22 million APL , (HSDP I Credit 33800) implemented from 2000 to 2003. It aimed to accelerate the reforms and emphasize institutional capacity development. The project outcome o f HSDP Iwas rated satisfactory in the Implementation Completion Report (ICR), as was the performance o f both IDA and the Borrower. The Bank's Independent Evaluation Group (IEG) concurred with the ICR ratings, including "substantial" institutional development and "likely" sustainability. HSDP I1 i s a US$65 million second phase APL (Credit 38410, Grant H0710) approved in 2003, with an original Closing Date o f December 2007, and supports the implementation o f HSSP 11. Additional Financing o f US$60 million was approved in July, 2007, along with a two-year extension o f the closing date, to allow HSSP I1 to be supported through to i t s completion. As the conditions for the proposed move to General Budget Support had not yet been met (see below), the Additional Financing was designed to continue financing the sector while these conditions were being addressed. IDA was also asked to use the opportunity o f the Additional Financing to filla gap in the HSSP budget for planned malaria activities due to delays in funding from some development partners. This accounted for just over 40 percent ($25 million) o f the Additional Financing, while Basket Funding accounted for 60 percent ($35 million). The pooled financing amount allowed the Bank to maintain its contribution to the Health Basket Fund at about US$15 million per year on average. Originally, the third HSSP was expected to be supported by a third phase o f the APL. At the negotiations o f HSDP 11, the GOT expressed i t s preference to have a larger share o f development assistance disbursed through general budget support (GBS - as described in the CAS presented to the Board on April 24, 2007). It was thus agreed that IDA's financial support to the sector would be folded into the Poverty Reduction Support Credit (PRSC) by 2008 rather than continue through the third phase o f the 2 APL, subject to the following three conditions: i) increased Government allocations to the health sector to accommodate the shift o f IDA financing for health from the APL instrument to the PRSC; ii) improved procurement performance by the Borrower in each fiscal year o f project implementation as assessed by procurement i) audits; and i i annual reviews o f the implementation o f the Health Care Waste Management Plan (HCWMP). 9. With respect to these PRSC entry conditions, while actual government funding for health i s increasing and i s expected to reach US$14 per capita in 20104 1 (see paragraph 43), the proportion o f the government budget being devoted to health has declined over recent years, as shown in Chart 1, raising concerns about the overall priority o f the health sector. Between 2005/06 (actual) and the 2009/10 estimates, the proportion (excluding Consolidated Fund Services) has decreased b y 4.1 1 percentage points, or 29.1%. If the 2005/06 percentage had been maintained, the health sector budget in 2008/09 would have been TZS. 329 billion or US$250 million higher than that actually included in the budget estimates. The 2009/10 health sector budget increased by 9.0%, which given 10.9% inflation and 3.1% population growth amounted to a real per capita reduction. Sustained policy dialogue between Development Partners and the Government will be essential if these trends are to be reversed. The Bank has an important role to play in this dialogue, and continued Bank engagement in the health sector i s therefore critical. 10. Districts s t i l l rely heavily upon the pooled fund to finance operating costs o f health facilities, and there i s not yet a public finance mechanism which can fully substitute for these funds. A reduction in the pooled fund upon the closing o f the HSDP I1 (including i t s additional financing) would thus create a shortfall in financing at the service delivery level. Chart 1 - Health Sector Spending as a Percent o f Total Government Expenditure With CFS No CFS Note: C F S = Consolidated Fund Services (debt service, etc.) 3 Year Works (%) Goods (%) Services (%) 2003/04 73 30 0 2004/05 66 57 0 2005/06 43 41 50 2006/07 30 14 0 2007/08 64 17 0 Note: High-risk cases had serious weaknesses, which "could cause material, financial, regulatory or reputational risks to the Entity warranting immediate attention by Senior Management" 11. Issues also remain with respect to procurement capacity although this i s now being addressed, inter alia, by securing technical assistance to build capacity in the Procurement Management Unit (PMU). Procurement audits through 2007/08 have been completed and they show that there are s t i l l a number o f procurement issues to be addressed and a great deal o f capacity building to be done. However, over the past five years that these audits were completed, there has been a generally improving trend, although there was some slippage in the last audit for works procurement. This i s being actively pursued by the joint Government/Development Partner Audit Sub-committee for the Basket Fund. Table 1 below indicates the percent o f "high risk" procurement procedures over the five audits. 12. Implementation o f the Health Care Waste Management Plan began in FY06/07, and the first planned implementation review was held during the M a y 13, 2009 Bi-annual SWAP Meeting (held in M a y and October o f each year to discuss progress in the achievement o f health sector objectives and activities). It was noted that progress had been made but that more needed to be done. An update o f the H C W M P was completed in 2007, and the Environment and Social Management Framework (ESMF) was prepared as part o f the preparation for the Regional Health Systems Strengthening and TB Support Project. Both have been disclosed in-country and in the InfoShop. Ongoing progress updates will be part o f future health sector review meetings, Recent Developments 13. Since the first Additional Financing (AF), four important developments have occurred, which may also have an impact on the feasibility and appropriateness o f any potential move towards General Budget Support (GBS), and the timing o f such a move: (a) The M O H S W has adopted a position that only those providing direct support to the health sector (project or pooled funding) should play a role in health sector policy discussions, meaning that a shift to GBS would effectively exclude the Bank from providing policy input to the sector; (b) An external evaluation o f the health sector in October 2007 (after the first AF was approved), highlighted the effectiveness o f the SWAP approach, and the Basket Fund in particular, in getting funds to the front line and improving outcomes; 4 (c) The volume o f joint GBS has plateaued over the past few years while the Bank and other development partners are reconsidering the prior projections for sharp increases in GBS and the proportion o f their total funding being devoted to GBS. The effectiveness o f this modality w i l l be reviewed through a joint evaluation planned for 20 10; and (d) The Bank in particular i s considering a shift in i t s approaches for supporting decentralized levels, i.e., local governments and communities. The Bank's letter to the GOT o f February 24, 2009 suggested consolidating some o f the existing funding mechanisms to the decentralized level under eight operations into a few multi-sector local government baskets, thereby reducing transaction costs and further promoting alignment to country systems. 14. The joint external evaluation concluded that: The SWAP has resulted in greater sector coherence and consistency, which has secured higher levels o f both domestic and external financial resources for health throughout the evaluation period. Compared to the set o f loosely or non-coordinated projects and programs previously in place, there i s l i t t l e doubt that the SWAP has delivered real improvement in sector coordination and dialogue. Under the SWAP framework, Development Partners have used a wide range o f funding mechanisms to support the health sector, ranging from direct project funding to general budget support. The Health Basket Fund has been a particularly effective mechanism for supporting Local Government Authorities (LGA) in their efforts to strengthen council and district health services, alongside the Government's system o f Block Grants to LGA's for health services. m The SWAP has contributed to improvements in health outcomes and to improvements in the quality o f health services at community level. These improvements can, in turn, be plausibly linked to progress toward MDG and PRSP/MKUKUTA goals, especially relating to infant and child mortality. The devolution o f responsibilities for health facilities and health planning to Local Government Authorities has improved health sector delivery in Tanzania - the associated financial support (through the Health Basket Fund and Block Grants) was essential to achieving this result. Councils and their health management teams are now mostly able to undertake meaningful budgeting through the CCHP (Comprehensive Community Health Plans) and to supervise and operate local health facilities. Strengthening council level health services, supported by the upgrading o f staff skills, and coupled with some improvements in centrally provided services (and the contribution o f strengthened national vertical programs) has contributed to improvements in service quality at health facility level. 15. However, the evaluation also identified a number o f remaining challenges: 5 Further streamlining o f the co-operation and dialogue mechanisms i s s t i l l required, as the current approach i s not yet delivering optimal value for money. There has not been significant progress towards achieving goals and targets relating to maternal and neonatal mortality. Further progress towards achieving some o f the most important MDG and MKUKUTA goals (infant, under 5 and maternal mortality) can be expected to be inadequate unless actions are taken to overcome the important constraints identified in repeated studies and noted by the evaluation, especially more effective management o f human resources for health (HRH). There has been relative lack o f progress in hospital reform and in the implementation o f an effective public private partnership (PPP). The sector has not responded effectively to address some sources o f unequal access to health services, especially geographic differences. Efforts to make the sector more sustainable and improve quality through the use o f cost sharing mechanisms, user fees, and risk pooling have not been accompanied by effective measures to provide any reasonable expectation that those who are not able to pay will be provided access to essential health services. Alternatives-for IDA and Rationale -for Additional Financing 16. As indicated above, changing circumstances have led the Bank to reconsider moving to GBS as the preferred modality for supporting the health sector, and it i s actively looking at long-term alternatives. An immediate shift to GBS i s not considered appropriate at this time. 17. Aside from moving directly to GBS, the alternatives for the Bank are to: i)not commit Additional Financing for Tanzania's health sector and let the project close on i t s revised Closing Date o f HSDP I1 (December 31, 2009); ii)pursue the third and final phase o f the APL; or, (iii) request a further extension o f the current Project together with Additional Financing in order to continue supporting HSSP I11 until the feasibility o f alternative financing mechanisms can be more fully assessed in light o f the recent positive reviews o f the HBF approach and emerging concerns about GBS. 18. The first option would leave a severe funding gap for the health sector, and undermine the ability o f the GOT to meet the original APL program objectives to which IDA i s committed. For example, without the IDA contribution to the HBF it may be difficult for the HBF to implement the planned increase in the allocation to districts from US$l.OO to US$1.25 per capita and s t i l l provide essential drugs and medical supplies through the central fund. Given the impressive reduction in infant and child mortality since the program was launched in 2000 (refer to Table 3), and the partnership which has been established, it would be inopportune for IDA to now withdraw i t s support for the sector. 19. The second option could not be put in place prior to the current closing date, due to both the limitations on available IDA and the need for a more in-depth analysis o f the nature o f the most appropriate funding modality over the longer term. Furthermore, since 6 it was agreed during the preparation o f Phase I1 that there would not be a third phase, the Phase I1 P A D did not include the triggers and other prerequisites for another A P L phase. 20. The third option was considered the most appropriate by both the GOT, Bank management and the Task Team. Additional Financing will enable IDA to continue to support the implementation and the objectives o f the HSSP approach as described within the HSDP I1 Project Appraisal Document (PAD), and will provide a suitable transition period to one or more o f (a) General Budget Support, (b) a new Health project, or (c) a new pooled funding arrangement under a "Local Government Basket". 2 1. With regard to (c), at the request o f the Country Director, a potential approach for such a new basket fund was developed and discussed with the MOHSW. The focus o f this approach would be to concentrate primarily o n the protection and promotion o f basic social services at the local level, providing a framework for multi-sector support to local service delivery. Initially, it i s expected that existing "basket fund,' mechanisms would be used, but that over time these would be channeled into a single pooled fund which would disburse directly to districts and/or local governments. For the health sector, this would initially mean financing districts through the district part o f the health basket fund, and financing for essential medical commodities and supplies through the central basket. Over time, the funding would be channeled directly to the districts, including funding for medical supplies and drugs which would be allocated to the district level. Continued policy dialogue would be needed to determine the overall level o f funding and the allocation mechanisms. Beyond the sector-specific financing, the approach should also encourage more multi-sector dialogue and address cross-cutting issues such as social accountability, governance and financial accountability at the local government level. Additional details on the concept are available from the project team. 22. The M O H S W has indicated it was generally supportive o f the concept, while pointing out that it would require significant attention to building governance and accountability structures at the local level, so that efforts to build capacity and improve local service delivery (such as the supply chain from the district to the health facility level) would be sustained over time. This process is already being started through the revision o f the Comprehensive Community Health Plan (CCHP) guidelines, to reflect the focus o f HSSP I11and enhance accountability at the community level. 23. In light o f these developments, the GOT requested IDA to: (i) extend HSDP I1 for one additional year; and (ii) provide Additional Financing in order to sustain support to for HSSP 111. This additional financing would be used to scale up interventions which would enhance the project's development impact and effectiveness, and extend IDA support for two more government fiscal years. Despite the significant amount o f external financing coming into the health sector, the HBF remains the only vehicle for providing significant amounts o f external support (either in cash or in kind through drugs and medical supplies) directly to front-line health services at the district level. Support for this area i s essential for strengthening the overall health system to ensure that external financing for vertical programs such as that coming from the Global Fund i s well utilized. 7 Project Progress to Date 24. As shown in Tables 3 and 4, in Section G below, as o f October, 2009, HSDP I1 had already exceeded targets for 2 out o f 4 project development objective indicators. Reductions in the infant mortality rate (IMR) and the under-five mortality rates (USMR) were among the greatest observed in Sub-Saharan Africa over the last several years. Progress has also been made in the equity o f the IMR distribution, with the 2007/08 figures showing that 80% o f the gap between the baseline and the target had been covered. Less progress has been observed in total fertility rate (TFR) reductions, although the 2009 Demographic and Health Survey (DHS) should provide updated information on the latter indicator. Action on the TFR requires concentrated Government attention if progress i s going to be made, and development partners have shown a great deal o f interest in assisting the Government in this regard. In addition, targets for two o f the intermediate outcome indicators have been met (health expenditure per capita and TB completion rates), and o f those not yet attained, targets related to patient satisfaction, malaria treatment and reductions in malnutrition are on track to be achieved. The outlier i s the proportion o f births attended by a skilled health professional, which has been the focus o f the efforts to reduce maternal mortality, which has also not improved significantly over the last while. The emergency obstetrical care (EmOC) equipment included in the additional financing should contribute to improvements in this area. Donor and government commitment to the S W A p - which has just finished i t s 1Oth year - remains high. As a result, the pooled fund allocation to the district level was able to increase from US$0.5 per capita to US$l.OO per capita in FY08/09 and US$1.25 per capita in 2009/10. There i s a desire to increase this funding level even more in the future. These funds have been essential to service delivery, and have helped to build capacity for managing funds at local level. 25. ISR ratings for implementation progress and development objectives have been consistently satisfactory during the project life, with one exception when implementation and development objectives were rated marginally satisfactory due to the turn-over o f MOHSW management and associated interruption in pace o f implementation. The ISR at the time stated that it anticipated that the downgrading would be temporary and that the next ISR would be upgraded, which it was. Concerns about delays in implementation have since been addressed with the MOHSW management, and the pace has accelerated in response. As o f October 3, 2009, US$124.4 million, or 92%, o f the available IDA funds were disbursed and contracts were in place for a further US$6.5 million for a total of US$130.9 million, or 97.3% o f the total available funding. The available total o f US$134.5 million reflects US$9.5 million in foreign exchange gains, including US$4.0 million in the first credit, US$2.4 million in the grant and US$3.1 million in the first additional financing. 26. Unqualified audits o f the project special account have been submitted on schedule and Statement o f Expenditure (SOE) reviews have been satisfactory. Most audits o f the pooled fund - which encompasses one for the central basket and one for each district - have been submitted with some delay and some have been qualified, although on a year to year basis, they show improvement. Issues raised in both financial and procurement 8 are discussed in a joint GOT/DP Audit Sub-Committee, agreed concrete action plans are developed to deal with these issues, and progress on the action plans are monitored on an ongoing basis. IDA'Sprocurement post-reviews have been satisfactory. 27. Unaudited Interim Financial Reports (IFRs) w i l l be produced by the MOHSW quarterly, which helped in monitoring the progress o f the project. The project has complied with all legal covenants, including the requirement that procurement audits be submitted annually. The 2007/08 procurement audit has now been received and discussed by the Audit Sub-committee o f the Health Basket Fund. The Task Team i s satisfied that per OP 13.20, "implementation o f the project, including substantial compliance with loan covenants, i s satisfactory". This i s further discussed under "Benefits and Risks" below. With respect to safeguards requirements, the Health Care Waste Management Plan was produced and disclosed in 2003, revised in 2007, and progress was reported to the Technical Committee o f the SWAP meeting in May 2009. C. Proposed Changes 28. The development objectives and expected outcomes o f the Additional Financing are identical to the original development objectives, although targets for some outcome indicators have been revised upwards to reflect the one year extension o f the project, and others have been added to focus on the specific interventions covered (see section F). 29. The design and scope o f the Additional Financing are identical to HSDP 1 , as the 1 Financing w i l l support the continuation o f activities under the current project through the revised Closing Date o f December 31, 2010. The Additional Financing will continue to employ the institutional and implementation arrangements adopted in HSDP 1 . Seventy- 1 seven per cent o f the Additional Financing (US$30.9 million) w i l l disburse under Category 1 (Pooled Funds Expenditures financed under the Subprograms o f HSSP) o f the existing Development Financing Agreement (DFA). Twenty-three per cent o f the Additional Financing (US$9.1 million) w i l l disburse under Category 2 (Non-Pooled Expenditures financed under the Subprograms o f HSSP) o f the existing DFA. The HSDP I1 Project was designed to facilitate disbursements both through the pooled fund and outside o f the pooled fund. Table 2 summarizes a twelve-month extension o f the budget which was included in the HSDP I1 PAD, but now using the HSSP I11format. 30. IDA has been asked to use the opportunity o f the Additional Financing to support several specific interventions which are not currently funded through the Health Basket. This includes support for key priorities, including essential medical equipment to provide (i) emergency obstetric care (EmOC), (ii) support to help restructure the Health Sector Reform Secretariat (HSRS) into a consolidated implementation support unit which can take the leading role in guiding the implementation o f HSSP 111, with particular attention to human resources for health (HRH), PPP and health systems strengthening, and (iii) the introduction o f a comprehensive food fortification program for Tanzania to reduce the high prevalence o f micro-nutrient deficiencies in the population. 9 Table 2 - HSSP I11 Financing Plan (USD) - (Note: GOT = IDA FY) COMPONENTS FY09110 FY10111 Human Resources for Health 68,991,999 79,399,937 Referral Health Care 48,774,804 152,459,034 Maternal, newborn and child health 194,083,333 194,083,333 Disease Specific Programs MALARIA 70,708,3 3 3 70,708,333 HIV/AIDS 5 1.354.930 , , 5 1.5 15.789 I , TB/LEPROSY 6,74 1,667 6,74 1,667 N O N - C O M M U N I C A B L E DISEASES 173,333 208,369 NEGLECTED DISEASES 256,667 270,978 District health systerdHealth Infrastructure 801,488,625 801,488,625 Health care financing 594.45 1 7 12.676 Emergency preparedness and response 1,091,411 1,091,411 Social Welfare and protection 2,504,042 2,45 1,250 Monitoring, Evaluation and Research 1,133,690 1,138,297 T O T A L RESOURCES REQUIRED 1,247,897,284 1,362,269,699 AVAILABLE RESOURCES (including DP) 861,460,000 971,940,000 RESOURCE GAP' 386,437,284 390,329,699 I D A Financing (total) 17,000,000 23,000,000 Basket Funds 15,900,000 15,000,000 Non-pooled Funds 1,100,000 8,000,000 31. These areas are specific, high-value activities which are difficult to fund through the HBF, and have been identified by the M O H S W as the major gaps in existing Government and/or external financing. While the availability o f human resources i s a constraint to improving access to emergency obstetrical care, the absence o f EmOC equipment i s also a key factor limiting access even where staff are available. By making such equipment available, the effectiveness o f the existing staff, the likelihood that mothers will seek care, and most importantly, the outcomes o f the care that is delivered should all be improved. The provision o f the equipment will be supported by a sufficient scaling up o f referral services (see "Referral Health Care" in Table 2), to ensure that resources (human and operational) to support the entire chain o f emergency obstetrical care are available. 32. The HSRS needs to be re-oriented from a "reform" focus to a unit which supports ongoing HSSP I11 implementation. Various initiatives need to be coordinated and appropriately guided, including the Health Workforce Initiative (HWI) which i s intended to address HRH issues, the PPP initiative, and a range o f health systems strengthening interventions. The proposed support will include the funding o f one resident advisor plus shorter-term technical assistance in specific areas to complement the assistance being provided by other development partners. Both the HWI and PPP initiatives are intending 10 to create secretariats to guide their activities. Overall coordination structures will be needed to ensure that they operate in a way that i s consistent with HSSP I11 and each other. This will be a major role o f the HSRS. 33. Micronutrient deficiencies are o f particular concern to both the government and the Bank (not just in Tanzania but globally), and recent analysis suggests that significant economic and human benefits (0.58 percent increase in GDP and almost 6,800 deaths averted annually) could be achieved quickly through a relatively modest investment in this area. Once established, the program would be self-sustaining, as i s the case in other countries. The action plan for food fortification has been finalized and w i l l be used in the development o f these activities. The MOHSW has been looking for a financier for these areas for some time, and already has clear plans in place. 34. Additional Financing i s therefore recommended for a total o f US$40 million, US$30.9 million for the Health Basket and US$9.1 million for the discrete interventions described above. This A F would bring total HSDP financing to US$165 million (original US$65 million and US$lOO million AF), with US$125 million or 76% going to the Health Basket. 35. Procurement will continue to be managed by the Procurement Management Unit o f the Ministry o f Health and Social Welfare and the Medical Stores Department. IDA will continue to conduct prior reviews for larger contracts (those using international competitive bidding or international consultant procedures) on behalf o f the development partners per the Memorandum o f Understanding which governs the pooled fund. Procurement management to date has been rated high by the Bank. Procurement will follow the same implementation procedures used under the ongoing project. The proposed Additional Financing operation w i l l be carried out in accordance with the World Bank's 2006 Anti-Corruption Guidelines. In addition, the "Guidelines: Procurement under IBRD Loans and I D A Credits" published by the Bank in May 2004, and revised in October 2006, and the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers," dated May 2004, and revised October 2006, will be the versions governing this project and the accompanying standard bidding documents for any new procurement. These operational requirements have been reflected in the Financing Agreement, and the 2009/10 MOHSW Procurement Plan incorporates these guidelines (See Annex A). A financial management assessment was also completed, and the conclusion was that the risk in this area remains modest (Annex B). D. Consistency with the Country Assistance Strategy (CAS) 36. The first Additional Financing was anticipated within the 2007-2010 CAS, that states: "An ongoing investment program in health will be extended through FY 10 with supplemental financing that address short term financing gaps. Thereafter it i s expected that IDA'S health financing w i l l be provided through PRSCs." This second Additional Financing continues to support IDA'S 2007-2010 CAS focus on harmonized aid modalities through participation in the health SWAp, although it reflects changing management thinking on the volume and share o f GBS. The 2007-2010 CAS specifically recognizes the greater efficiency and impact achieved through sector-wide approaches 11 and budget support. A new CAS i s expected to be completed within the next year or so, and it will reflect the new funding modality described above. E. Economic Analysis o Cost Overrun or Financing Gap - not applicable. f F. Appraisal o Scaled-Up Project Activities f 37. The Additional Financing will facilitate an extension o f the HSDP I1 Project's support to the current Health Sector Strategic Plan (HSSP). The HSSP was jointly appraised and endorsed by SWAP partners in April 2003. N o substantive changes to the previously appraised HSSP w i l l be supported under the Additional Financing. The economic, financial, technical, institutional, fiduciary, environmental, and social aspects o f the original appraisal remain valid. Within the SWAp, the HSSP i s continually appraised, annual work plans and budgets are jointly assessed, and continuous monitoring i s conducted through the SWAP Technical Committee, semi-annual joint reviews and various sub-sector working groups (e.g., around human resources for heath, health financing, reproductive health, etc.). Annual sector reviews ensure that experiences and lessons learned each year are reflected in subsequent year's implementation plans. Also, in 2007, a Joint External Evaluation o f the Health Sector was supported by the OECD- D A C Committee on Monitoring Development Effectiveness. 38. Under the SWAp, the costs o f the total HSSP are supported through a mix o f domestic government resources, general budget support (which could include the Bank's PRSC in the future), the pooledhasket funds and targeted project funds. All funds are used to finance activities under an annually agreed implementation plan for the HSSP. The implementation plan i s articulated within the 3-year rolling Medium-Term Expenditure Framework (MTEF) which defines objectives, strategies and associated expenditures for each year - and within the District Comprehensive Health Plans. 39. The Health Basket pools project funds from eleven development partners in order to reduce transaction costs and strengthen government systems. Some partners are unable to pool funds, some funds are earmarked from the point o f source and some costs are more readily financed outside o f the pool. In these cases, project funds are employed to finance specific designated activities under the MTEF or District Plans, with GOT and pooled funds filling in the balance o f the costs. Currently, malaria and AIDS receive substantial earmarked funds and these sub-programs are mainly project financed. 40. The HSDP I1 Project has disbursed against the agreed annual work plan for the HSSP through both targeted financing (via a Special Account) and the pooled fund (the Health Basket), and it would continue to do so under the Additional Financing. The proposed Basket funding would allow the Bank to maintain i t s contribution o f US$15 million per year on average, making IDA'Scontribution second in size only to that o f the Netherlands, unless there are significant increases in funding by other DPs. 41. The areas covered by the non-pooled funds cannot be addressed through increasing the health basket, because it i s geared more to financing ongoing operational expenses rather than one-time investments such as EmOC equipment and restructuring o f the HSRS. Further, food fortification i s a multi-sectoral issue that i s difficult to finance 12 through the Health Basket. The implementation o f a food fortification program will require the efforts o f several parts o f the M O H S W (Tanzania Food and Nutrition Center and Tanzania Food and Drug Agency), as well as the Tanzania Bureau o f Standards (Ministry o f Industries, Trade and Marketing), the food industry, NGO's and civil society. G. Expected Outcomes 42. The Results Framework and the monitoring arrangements are consistent with 1 those from HSDP 1 . The indicators used to assess the outcomes o f the Additional Financing are consistent with the indicators included in the PRSP, in the CAS and in the 1. HSSP 1 1 The Project Development Objective indicators have not been changed as they correspond with the indicators for the 2000-201 1 government's Health Sector Development Program (see Table 3). Targets which have been exceeded (for two o f the indicators, IMR and under-5 mortality) were revised upwards. The ratio o f IMR between the richest and poorest quintile i s on track for being achieved, but the total fertility rate target i s not likely to be met, and has been adjusted upward. A new Demographic and Health Survey (DHS) is being conducted later in 2009 and should provide updated estimates for each o f these indicators, as well as many o f the project outcome indicators. These data should be available in mid-20 10. Totalfertility rate 15-49 - 5.6 4.5 4.5 5.6 5.4 birthdwoman 43. The Intermediate Outcome Indicators, which reflect the performance o f HSDP 11, have been revised upwards to align with the extensions as a result o f the Additional Financing (see Table 4). These indicators have been jointly selected `as summary indicators for the HSSP SWAP and for the GOT'S PRSP results matrix. As shown, two o f the indicators have already met their targets (health spending per capita and TB completion rates) and a further three are close to meeting their targets (client satisfaction, malaria treatment and malnutrition), so new targets have been set for these indicators. 13 44. Both Tables 3 and 4 show the progress that has been made in the achievement o f the various indicators beyond what was expected in the original HSDP I1 document. For example, there were significant gains in both infant mortality i t s e l f and the equity o f mortality across income quintiles. The overall level o f financing has continued to grow, but as noted above, there are concerns about whether this pace can be maintained. Actual 2007/08 expenditure was U S $ l 1.23 per capita, significantly higher than the original HSDP I1 2007 target o f US$9.00. Moreover, the budget estimates for 2009/10 are US$14.46 per capita Even adjusting for lower budget execution, actual expenditures should be at least US$13.40 in 2009/10, suggesting that US$14.00 in 2010/11 i s definitely within the realm o f possibility, especially with the added impact o f this AF (equivalent to US$0.40 per capita in 2009/10 and US$0.52 per capita in 2010/11). While the nature o f the SWAP i s that attribution i s not straightforward, it i s probably fair to say that the continued support o f the Bank and other development partners has helped to some extent in achieving these results. As indicated above, there are s t i l l some concerns about the proportion o f total government funds going to the health sector, and this w i l l need to be the subject o f ongoing policy dialogue. 45. The monitoring framework for HSSP I11 resulted in several changes in indicators, including the ones for malaria. Accordingly, the indicator proposed for the additional financing has been replaced with the one below: the percent o f pregnant women and children who slept under an insecticide treated bed net. While the national "under 5" and universal campaigns were just started in the last year or so, there already appears to be some movement in this area. For example, between the Tanzania HIV/AIDS and Malaria Indicator Survey (October 2007-February 2008), the source o f the baseline information, and June 2008, there has already been some improvement. The completion o f the Under 5 program, jointly financed by the President's Malaria Initiative (PMI), the Global Fund and the Bank, as well as the Global Fund/PMI financed universal campaign, should result in continued progress in this area. 46. An additional indicator has been included to reflect the proposed purchase o f emergency obstetrical equipment, which should increase the number o f facilities which are providing such services. Updated information i s currently being collected, and an additional data collection will be done at the end o f the project to monitor the impact. 47. In addition to the indicators in Table 4, the following IDA Core Indicators will be added to the results framework for the next Implementation Status and Results Report (ISR), and will be reported on through to project completion (numbers refer to those in the IDA list): 2. Health personnel receiving training (number) 4. Children immunized (number) 6. Children receiving a dose o f vitamin A (number) 7. Long-lasting insecticide-treated malaria nets distributed (number) 14 Table 4: Intermediate Outcome Indicators HSDP I1 End of project HSDP I1 Second A F HSDP I1 Targets Progress Targets Indicator Baseline P A D - Dec. First A F - as o f Oct.2009 Dec. 2010 2007 Dec. 2009 Government's health US$11.23 US$6.6 US$9 us$ 14 budget per capita "$ l1 (FYO8 actual) f Proportion o births attended by a skilled health 47% 55% 75% 52% 57% professional f Percentage o clients seeking care at a health n/a 60% 65% 62% 68% facility report to be satisfied TB completion rate 80% 85% 285% 87.7% 90% f Percentage o children Substituted Substituted with cough or fever who by the by the 53% 80% 5 8% are taken to a health indicator indicator facilio below below f Proportion o vulnerable <5 yrs: groups (pregnant women <5 yrs: 29% 25% New New 15-49Yrs O f PW: 30% 40% PW: 26% indicator indicator under 5) sleeping under an (June 2008) (Feb 2008) ITN the previous night Malnutrition (weightfor 22% 29% 25% 18% age) among children e 5 20% DHS 2004/05 f Percentage o public Survey to be health facilities that can 5% (DHS New New completed in 20% provide Emergency 2005l05 indicator indicator 2009 Obstetric Care (EmOC) H. Benefits and Risks 48. The benefits o f the Additional Financing would be similar to the original PAD. In addition, it would allow for a better evaluation o f the rationale for shifting to the PRSC, ensuring that any transition to.budget support does not impede the pace o f progress in the health sector, and it would enable the Bank to respond to financing needs under the existing HSSP. In the event that a decision i s made not to shift to GBS, it would also allow time for a new health sector operation to be developed, based on the findings o f the evaluation mentioned above. It would also build upon the results to date in moving markedly towards reaching the health related Millennium Development Goals in Tanzania since the start o f the Health Sector Development Program in 2000. 49. The Additional Financing would benefit all Tanzanians, since the Health Basket Fund allocation i s distributed to all districts on a per capita basis. In addition, the emergency obstetrical equipment would be o f particular benefit to pregnant women, by providing higher quality and safer deliveries. The available funding would cover approximately 23 percent o f the districvother hospitals and 19 percent o f the health centers, making improved services available for up to 20 percent o f the population. 15 Finally, the food fortification initiative would cover up to 23 million people once it i s up and running. 50. The critical risks identified in the HSDP I1 PAD have been substantially addressed during the implementation o f the Project: (a) The impact o f HIV/AIDS in the sector has been partially mitigated under the National Multi-sectoral Strategic Framework for HIV/AIDS to which the Bank's Tanzania Multi-sectoral Aids Project (TMAP) contributes (closes March 2010), and which has received substantial support from other donors in recent years; (b) Government and donor commitment has been sustained, delays in disbursement to the health basket have largely been resolved, and additional donors have been added to the basket, with the result that in FY08/09 some 11 development partners (DP) provided over US$81 million in funding, up from 9 DPs and US$68 million in FY07/08. The health basket i s clearly becoming the funding modality o f choice among development partners, many o f which also provide GBS. 5 1. However, the higher and growing level o f financing also introduces new risks in terms o f the need for increased management attention and concerns over sustainability. These issues have received a great deal o f attention during Basket Financing Committee meetings, and w i l l continue to be a major focus o f ongoing discussions. 52. To support improved governance, HSSP continues to support annual audits; annual public health expenditure reviews (PERs), the engagement o f civil society in Annual Joint Health Sector Reviews, the formation o f Council Health Service Boards in each district and Health Facility Boards at facility level. Human resource constraints persist, but under the HSSP, strategies are being piloted to improve retention and deployment under the Human Resources for Health Task Force, and a new Health Human Resources Secretariat i s being established. The proposed restructuring o f the Health Sector Reform Secretariat i s designed to coordinate these various initiatives into a coherent operational approach. 53. To address fiduciary risks in the Project, IDA would continue to conduct prior review o f procurement under the health basket on behalf o f the pooling partners. Annual Post Procurement Reviews have also been conducted on IDA financing. There have been no instances o f mis-procurement with IDA funds disbursed through non-pooled funds, nor in procurement under the pooled fund subject to IDA'Sprior review. Progress has been made in developing a comprehensive procurement plan for the HSSP (encompassing all sources o f financing). Persistent procurement delays due to limited capacity, which showed some signs o f improvement, have more recently been negated by increased demands, particularly from the Global Fund. The procurement strengthening measures discussed in Annex A are intended to respond to this situation. 54. Audits o f the Special Account (Category 2 non-pooled expenditures) and SOE reviews have been satisfactory. Unqualified audits from the Comptroller and Auditor General (CAG) were received on time last year, and are expected on time this year. Audits o f the pooled fund (Category 1) are the responsibility o f the CAGYbut were conducted by a contracted external auditing firm up to and including the 2006/07 audit. The 2006/07 audit was submitted late and the 2007/08 audit has just been released by 16 CAG. These audits are reviewed in regular meetings o f the joint GOT-DP Audit Sub- committee which has noted improvements over the past two years. These Basket Fund ' audits, however, have continued to be qualified. The main reasons for the FY07/08 qualified audit were: (i) amount o f the expenditure reported by MoHSW in the the income and expenditure statement was overstated by TZS. 2,692,14 1,262 (approximately 0.3% o f the expenditures for which payment vouchers could not be U S $ 2 million); (ii) located; and (iii) salary payment to one employee who was on unpaid leave (about US$ a 4,400 or 0.03 percent o f the Basket Fund expenditures) was not refunded by the responsible staff. The first issue relates to the year-end transfer o f funds from one government account to another (i.e., Basket Fund account) for annual reconciliation, which was processed but not yet effected. The second issue relates to filing problems which are currently being addressed and the employee in the third issue has now returned to work at MOHSW and there i s every expectation that a full refund w i l l occur. 55. The Audit Sub-committee met in early November and the first agenda item was the presentation o f audit reports by Controller Auditor General for the MOHSW, LGAs and PMORALG. An action plan to address the qualified audit issues raised i s being developed in consultation with the Bank and other DPs. As in the past for t h i s project, the DPs have been very proactive in engaging with the government so that plans o f action (POA) acceptable to the DPs are developed and implemented to deal with both the various audit recommendations and general financial management issues, and these are monitored on an ongoing basis. The financial management assessment took into consideration the overall fiduciary risk associated with use o f country systems and Basket Funded operations. I t confirmed that appropriate mechanisms have been put in place over the years o f implementation and meet the requirements under OP/BP 10.02. The government i s fully committed to further improve policies and procedures in the future. 56. To address safeguards risks, the Health Care Waste Management Plan was revised in 2007, and a new Environmental and Social Mitigation Framework (ESMF) was developed in 2009. Both documents have been disclosed in-country, and were sent to the InfoShop for disclosure prior to the beginning o f appraisal. The Additional Financing does not involve any civil works, and the annual Subprograms will be based on suitable Environmental Assessments (EAs) as prepared on the basis o f the ESMF and approved by the Association, as well as any Environmental Management Plan required by such EA. I. Financial Terms and Conditionsfor the Additional Financing 57. The financial terms o f the Additional Financing w i l l not change. The only expected changes to the Development Financing Agreement are: (i) type o f financing the (the financing will be fully IDA credit, whereas HSSP I1 was partially financed with an IDA grant); (ii) Closing Date (extended to December 3 1, 2010); (iii) amounts to the the be disbursed (although the Categories in Schedule 1 w i l l not change); (iv) specific activities or procurement under the existing components; and (v) the performance indicators (per section VI). 58. The conditions and legal covenants for the Additional Financing remain identical 1 to those for HSDP 1 . 17 Annex A: Procurement Arrangements A) General Procurement for the Additional Financing for the Second Health Sector Development Project (HSDP 11) would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated M a y 2004; revised October 1, 2006; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated M a y 2004; revised October 1,2006, and the provisions stipulated in the Legal Agreement. The general description o f various items under different expenditure categories are described below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank project team in the Procurement Plan. The Procurement Plan will be updated at least annually, or as required to reflect the actual project implementation needs and improvements in institutional capacity. Procurement for the Additional Financing will continue under the current arrangement. Under the ongoing project, the overall responsibility for procurement o f works and goods (with the exception o f pharmaceuticals and medical supplies) and selection o f consultants is under the Ministry o f Health and Social Welfare (MOHSW) through i t s Procurement Management Unit (PMU). Procurement o f pharmaceuticals and medical supplies i s performed by Medical Stores Department (MSD), which i s a semi-autonomous body under the MOHSW. IDA would continue to conduct prior review o f procurement under the health basket on behalf o f the pooling partners. Procurement o f Works: None. Procurement o f Goods: Goods procured under the Additional Financing would include emergency obstetrical equipment, laboratory equipment, fortificants, and medical equipment. Procurement o f non-consultingservices: Non-consulting services to be procured under the Additional Financing include: printing o f guidelines, regulations and manuals. . Selection o f Consultants: M a i n consulting services to be financed by the Additional Financing include: developing and implementing regulations, food standards, guidelines, quality assurance manuals, internal and external Q N Q C , and legislation, sensitizing decision makers, producers, consumers and general public, monitoring and Technical Assistance. B. Assessment o f the agency's capacity to implement procurement Procurement o f goods and selection o f consultants i s carried out by the Procurement Management Unit (PMU) established in accordance with Public Procurement Act (PPA) no. 21 o f 2004. The Ministerial Tender Board (MTB) also established in accordance with the PPA is responsible for processing bids (ie., approval o f the bidding documents, advertising, receipt and opening o f bids) as well as adjudicating contract award. 18 An assessment o f the capacity o f the Implementing Agency to implement procurement actions for the project has been continually carried out by IDA over the course o f the existing project. The assessment reviews the organizational structure for implementing the project and the interaction between the project's staff responsible for procurement and the Ministry's relevant central unit for administration and finance. Currently, the P M U has a total o f twenty (20) procurement staff: three (3) Principal Supplies Officers including the Head o f PMU, three (3) Senior Supplies Officers, fourteen (14) Supplies Officers o f different grades and support staff including Assistant Supplies Officers, Supplies Assistants and Secretaries. The P M U i s responsible for undertaking procurement activities for the ongoing HSDP I1 financed by both the Government and DPs. Six (6) procurement staff are mainly involved in procurement o f the ongoing Phase I1 program and have acquired adequate experience in procurement o f goods and selection o f consultancy services. However, it was noted that all the P M U staff need further training in procurement o f works, goods, and consultancy services. The key issues and risks regarding implementation o f procurement include: (i)inadequate procurement filing and record keeping, (ii)inadequate working space, and storage facilities and space for documents, (iii)revised thresholds for ICB/NCB for prior review. The overall project risk for procurement remains high and corrective measures identified and actions to mitigate the risk include: training staff in data management and procurement filing; providing the procurement staff at with adequate working space, and facilities for safe keeping o f documents; and select contracts below the new threshold to undergo prior review. The following action plan i s designed to mitigate the procurement risk: Action Deadline Responsibility Conduct procurement During program Borrower/IDA workshops/courses to implementation MOHSW procurement staff involved in procurement (procurement strengthening) Improve record keeping and During program Borrower filling systems (Procurement implementation data management) Select contracts below the During program BorrowedIDA new threshold to undergo implementation prior review Provide adequate working During program Borrower space for procurement staff implementation and space for keeping procurement records and documents. 19 Details o f the Procurement Arrangement involving international competition bidding and other methods. 1. Goods and non consulting services. (a) List o f contract Packages which will be procured following ICB and other methods: (US$ millions) Ref Contract Estimated Review Expected Comments No. (Description) Cost Preference by Bank Bid-Opening Method (Prior/ Date Post) 1 Essential Obstetrical - Equipment I 6.5 Prior 25/01/2010 Non- Pooled Category 2 Laboratory 0.2 1 Selected 09/01/2010 Non- 1 equipment for Prior Pooled and dossifiers Review Category for food & - fortification 3 foiifiian;, o.15 Post 3 010 1/2010 Non- Pooled distribution Category and stora e 4 Supply o f Post 3 010 1/2010 Non- dossifiers and Pooled - installation Category (b) ICB contracts for goods estimated to cost above US$500,000 equivalent per contract and all direct contracting will be subject to prior review by the Bank. However, a specified number o f NCB contracts identified in the Procurement Plan shall be prior reviewed. 20 2. Consulting Services. (a) List o f Consulting Assignments with short-list o f international firms. (us$'ooo) Contract Estimated Procure- Review Expected Comments ~ mescription) cost ment by Bank Bid- Method (Prior I Opening Post) Date Develop and 195 CQ Post 11/03/2010 Non-pooled implement Fund regulations, food standards, 200.0 QCBS Prior 18/02/20 10 Non-pooled I evaluation Fund consultants 3 Sensitize 160.0 CQ Post 25/02/20 10 Non-pooled decision Fund makers, producers, consumers and eneral ublic r-l%dkK 220.0 sss* Prior 0 110 1/20 10 Non-pooled /HSRSg * An reconfi uration Note: ongoing TA Fund (b) Consultancy services estimated to cost above US$200,000 equivalent per contract and single source selection o f consultants (firms) w i l l be subject to prior review by the Bank. Consultancy services estimated to cost above US$ 100,000 equivalent per contract for individual consultants will be subject to prior review by the Bank in exceptional cases only, e.g., when hiring consultants for long-term technical assistance or advisory services for the duration o f the project. (c) Short lists composed entirely o f national consultants: Short lists o f consultants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines. 21 Annex B: Financial Management Assessment As part o f the Health Sector Development Project APL-I1 Additional Financing preparation, a financial management assessment was carried out in accordance with the Financial Management Practices Manual issued by the Financial Management Sector Board on November 3, 2005. The objective o f the assessment i s to ensure that the MOH&SW has adequate financial management arrangements to ensure that (a) HSDP-I1 funds will be used for the purposes intended in an efficient and economic way; (b) HSDP-I1 financial reports will continue to be prepared in an accurate, reliable and timely manner; and external audit report will be prepared in line with international accepted audit standards and issued on time. The assessment concluded that positive actions have been taken which helped to address most o f FM matters arising from the previous supervision missions and audit reports. External audit unqualified audits o f the project special account have been submitted on schedule and Statement o f Expenditure (SOE) reviews have been satisfactory. Audits o f the pooled fund - which encompasses both the central basket and each o f 121 districts - have been submitted with some delay and have mostly been qualified, although on a year to year basis, they show improvement. The mains reasons for the qualification were (i) 0.3% o f the expenditures for which payment vouchers could not be located because o f poor filling; the situation i s currently being addressed by the new PS who i s also an accountant. (ii) delays in obtaining a refund from an M O H S W employee who was supposed to be on unpaid leave as a consultant, amounting to 0.03% o f the basket funds; since this employee i s back on the government books there i s no question that this will be collected. (iii)error in the amount reported as being refunded to the holding account. This last issue relates to year-end procedures and where various funds should be reported; this last issue will be addressed by revising the financial statements to reflect the actual transfer. Reporting, Unaudited Interim Financial Reports (IFRs) will be produced by the M O H S W quarterly following the calendar year quarterly periods which helped in monitoring the progress o f the project. The IFRs will be sent to IDA within 45 days after the end o f the quarter. Comprehensive IFRs template has been provided to the project accountant for easy reference. Accounting, the MOH&SW mainly uses the government I F M S accounting system for consolidated fund transactions. For stand-alone projects, separate packages are installed such as Pastel for Malaria program. The Ministry is in the process o f installing the customized ACPACK software that can interface with the I F M S system so as to reduce on transaction costs and easy reporting for projects. It i s anticipated that this software will be ready for use in the ministry when this project becomes effective. Accounting policies and procedures in place follow the Government Accounting Manual developed by the Accountant General o f Tanzania when implementing I F M S procedures. 22 Staffing, the Permanent Secretary o f the ministry takes full fiduciary responsibility as the accounting officer while the day-to-day financial operations are overseen by the Chief Accountant and the Director o f Policy Planning. The Project Manager and a project Accountant are responsible for daily transactions and reporting requirements. The existing Accountant has previously worked on Bank funded projects for seven years and i s considered appropriate. H e will require some training in Bank FM and Disbursement procedures given the changes in recent years. Internal Controls the financial accounting policies and procedures in place are sufficient to ensure that the project complies with the relevant Bank policies (OP/BP 10.02). These include the establishment o f internal controls and proper accounting procedures which are documented in the Government Accounting Manual developed by the Accountant General o f Tanzania when implementing IFMS procedures. In line with government accounting, the project accounts and transactions will be prepared on a cash basis. The conclusion o f the assessment i s that project's financial management arrangement satisfies the Bank's minimum requirement under OP/BP 10.02 and the existing system i s adequate to provides, with reasonable assurance, accurate and timely information on the status o f the project as required by the IDA. The Financial Management risk rating remains modest. 23