ICRR 14453 Report Number : ICRR14453 IEG ICR Review Independent Evaluation Group 1. Project Data: Date Posted : 11/24/2014 Country : Uganda Project ID : P090867 Appraisal Actual Project Name : Local Government US$M ): Project Costs (US$M): 198.7 173.6 Management And Services Delivery Project L/C Number : C4372 Loan/ US$M ): Loan /Credit (US$M): 55.0 53.4 Sector Board : Urban Development US$M): Cofinancing (US$M ): Cofinanciers : Board Approval Date : 12/18/2007 Closing Date : 12/31/2011 12/31/2012 Sector (s): Sub-national government administration (72%); Central government administration (20%); Other social services (8%) Theme (s): Public expenditure; financial management and procurement (29% - P); Decentralization (29% - P); Municipal governance and institution building (14% - S); Municipal finance (14% - S); Gender (14% - S) Prepared by : Reviewed by : ICR Review Group : Coordinator : Ebru Karamete George T. K. Pitman Christopher David IEGPS1 Nelson 2. Project Objectives and Components: a. Objectives: The project is the four year first phase of a two -phase Adjustable Program Loan (2008-2017). The APL objective is: "to enhance Local Governments ability to plan and manage human and financial resources for effective and sustainable delivery of local government services ." According to the Project Appraisal Document (PAD, p. 7), the first phase project’s development objectives were : “to strengthen the ability of the Ministries, Departments and Agencies (MDAs) and Local Governments (LGs) to plan and manage resources in collaboration with communities for service delivery .� The Financing Agreement (FA, p.5) states that the development objective were to : “support the Recipient’s effort to strengthen the ability of its Ministries, Departments and Agencies (MDAs) and Local Governments (LGs) to plan and manage their resources, in collaboration with the local communities for effective delivery of services .� The Review assesses the achievement of objectives as stated in the Financing Agreement . b.Were the project objectives/key associated outcome targets revised during implementation? No c. Components: The project had three components : 1. Support to the Public Financial Management Systems Reform Program (Appraisal Estimate US$ 20. 20 .1 million, 17 .8 million ). Actual US$ 17. The component aimed to strengthen Public Financial Management at central and local government levels and to ensure efficient, effective, transparent and accountable use of public resources as a basis for poverty eradication and improved service delivery. This component had three subcomponents : (i) financial management systems in central departments and agencies, to develop accountable and transparent institutional and management arrangements; (ii) support to Ministry of Local Government (MoLG) and Local Governments (LGs)to develop a sustainable capacity in Local Government budget formulation, financial management and control, transparent and comprehensive financial reporting and training in use of systems; and (iii) management support, to improve the capacity of the Ministry of Finance, Planning and Economic Development to manage reform programs and facilitate the overall management and coordination of the Financial Management and Accountability Program activities . 2. Support to the Local Government Sector Investment Plans 37 .2 million, Actual US$ (Appraisal Estimate US$ 37. 32.5 million ). 32. The project financed technical assistance, works, goods, training, community development grants and logistical support. There were four subcomponents : (i) Local Development Grants (LDGs): The LDGs were used to strengthen the capacity of eligible local governments to implement sub-projects consisting of local infrastructure . The grants were disbursed against appraised and approved sub-projects drawn from the local governments' rolling developments plans . (ii) Community Driven Development (CDD) Grants). The objective of the CDD grants 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 service delivery process; and create a harmonized platform within the local government service delivery system. The CDD grants were funded by the Government of Uganda (GoU) through the 30% allocation of the Local Development Grants for lower local governments, and the IDA credit . In addition the beneficiary communities were expected to make contributions (cash, kind, and time). Each community had a one time allocation of US$ 2,500 for the duration of the project. (iii) Support to the Local Governments in Northern Uganda . The objective of this sub-component was to provide support to the local government component of the Government's Peace, Recovery and Development Program and re-establish state presence in the 38 districts in Northern Uganda. The project would provide resources for construction and renovations of lower level government offices and staff houses, equipment / vehicles, engineering supervision and monitoring. (iv) Strengthening Local Governments The objective of this sub-component was to support the local government capacity-building activities through the Government of Uganda's Capacity Building Grants (CBGs) to deliver effective and sustainable delivery of services for improved quality of life . The project would support the following areas : (i) Capacity Building Grants to local governments to enable them to cascade capacity of lower local governments, strengthen local governments in the North, facilitate career development of local government staff, and to develop skills through the use of generic training modules; (ii) certification and professionalization of select senior local government staff with a view to developing a nationally available group of professional local government managers; and (iii) strategic support for local government capacity -building; support of thematic research in local governance; and support to the Capacity Building Unit . IDA ). This 3. Institutional and Policy Support (Appraisal Estimate US$ 2.7 million, Actual US$ 3.1 million - IDA). component supported project implementation ; monitoring and evaluation; audit; (v) procurement audit; as well as implementation of the Good Governance and Anti-Corruption Strategy for local governments in Uganda . d. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Cost : The actual project cost was US $ 173.6 million compared to the appraisal estimate of US$ 198.7 million. The decline was mainly due decreased fund availability due to depreciation of Ugandan shilling as well as the exchange rate variations between SDR and US$ . Financing . The IDA Credit of US$ 55.00 million equivalent declined in value to US$ 54.06 million due to exchange rate variations between the SDR and the US$ . By project closing US$ 53.76 million was disbursed and US$ 0.28 million was cancelled. Borrower Contribution : The Government of Uganda contributed US$ 120.2 million out of a total planned of US$ 143.7 million at appraisal. The total amount was lower than anticipated at appraisal due to depreciation of the Ugandan shilling. Dates : Project closing date of Dec. 31, 2011 was extended for 12 months to December 31, 2012 The reason for this extension was the project was delayed by 12 months as a result of delays in obtaining Parliamentary approval . 3. Relevance of Objectives & Design: a. Relevance of Objectives: High. High . Project development objectives were highly relevant to country priorities and strategies . At the time of appraisal, the Government of Uganda was engaged in reforms to harmonize service delivery at the local level, align sectors, increase coordination in support of sub -national service delivery, and, improve the effectiveness of public expenditure management processes . Although some progress was already made in local government management and improved service delivery, implementation of a coherent decentralization policy encountered a number of challenges including (i) insufficient local government revenues limiting their autonomy, (ii) growing dependency on central government transfers (iii) inadequate downward accountability and (iv) poor quality of service delivery by the local governments attributable to some extent on the above factors and additionally insurgency faced by the local governments in Northern Uganda . The objectives of the project were highly relevant as they were aligned to the government's commitment to strengthening decentralization and public financial management reforms for improved service delivery through Decentralization Policy Strategic Framework and Financial Management and Accountability Program . The proposed objectives were highly relevant and consistent also with priorities described in the Government ’s Poverty Eradication Action Plan (which emphasized decentralization as a mechanism to increase local autonomy for decentralized, efficient, effective service delivery responsive to the needs of the poor . The objectives remained highly relevant to the Bank ’s Country Assistance Strategy (FY 2011-2015) and to one of its strategic objectives - "Improve good governance and value for money " and a related CAS outcome - "Strengthened accountability and efficiency of financial and human resource management .� b. Relevance of Design: Substantial The choice of Adaptable Program Loan as the preferred instrument was logical and justified in the context of the medium and long term reform agenda and also provided an option for an exit strategy in case Government commitment to decentralization reforms were to dissipate . The overall results chain was logical and relevant . The objective- to strengthen the ability of Ministries, Departments and Agencies (MDAs) and Local Governments (LGs) to plan and manage their resources, in collaboration with the local communities for effective delivery of services - was linked to project activities . Component 1 tried to strengthen Public Financial Management at central and local government levels and to ensure efficient, effective, transparent and accountable use of public resources through the use of Integrated Financial Management Information System . Component 2 included two types of grants for investments at local level as well as capacity building activities for local governments and communities. Project outcome indicators were not very well linked to the PDO, e .g.no outcome indicators were designed to measure achievements for the MDAs (See section 10 for details). 4. Achievement of Objectives (Efficacy): There are two sub-objectives: (i) to strengthen the ability of its Ministries, Departments and Agencies to plan and manage their resources, for effective delivery of services ; (ii) to strengthen the ability of Local Governments to plan and manage their resources, in collaboration with the local communities for effective delivery of services . It is important to note that creation of new districts as well as diminishing value of Local Development Capacity Building Grants over time had a negative impact on project implementation, however, as described below the overall objectives were substantially achieved, and the project met most of its targets . In July 2010, the government established 32 new districts, increasing the total number to 112 districts and this increase in number of districts necessitated changes in the scope of work and caused delays in implementation of Integrated Financial management Information System Tier 2. This also impacted the volume of Local development Grant transfers per district, increasing the volume of work to be completed . In addition failure to provide the necessary staffing for new districts resulted in not being able to meet the trigger to APL II on staffing threshold (75% of LG structures fully funded). In addition, as the per capita investments for the Local Development and Capacity Building Grants dropped, because the volume of money sent to Local Governments got reduced, the net impact was a reduction in direct investments, and a deterioration in the fiscal incentive provided as part of the LDG . i) Strengthen the ability of Ministries, Departments and Agencies to plan and manage their resources, for (i effective delivery of services : Substantial . Outputs (Most outputs do not have targets ): 12 consultants were funded in the Accountant General ’s Office (Technical support). The Tier 1 Solution of Integrated Financial Management Information System was rolled out in 28 Central Government Agencies (in addition to the 79 sites where the Oracle Integrated Financial Management Information System was running). An Integrated Financial Management Information SystemProject Support Team was funded to provide technical guidance on the system’s implementation at both existing and new sites . The data center to support extension of Integrated Financial Management Information Systemto new entities at the 28 Central Government agencies was partially upgraded and not fully completed by the time of project closure. But since the completion of the project, this has been fully upgraded . The Financial Systems/ ICT training provided to the staff of the Inspectorate Department helped create a cadre of Ministry of Local Government staff to sustain the process of implementation and roll out of the Integrated Financial Management Information System . Outcome : The PDO indicators focused only at Local Government level and did not include any indicators to measure the level of services provided at the Central Ministries Agencies and Departments (MDA) level. However, for the achievement of this sub-objective, the ICR stated that the MDA level implementation and and rolling out of of Integrated Financial Management Information System to higher than planned Local Governments (ICR p. 10) is evidence that the sub-objective is achieved. It is argued that through implementation of the system, the ability for MDAs to plan and manage their sources is improved . In addition, the transfer of resources from the center to the various levels of the local government in terms of development grants and the CDD projects, is another indication that the MDAs are enabling this process as planned . ii) Strengthen the ability of Local Governments to plan and manage their resources, in collaboration with the local (ii) communities for effective delivery of services : Substantial . Outputs (Most outputs do not have targets ): The Integrated Financial Management Information System was successfully rolled out to six (6) new districts of in May 2012. Technical support also continued to be provided to the pilot Local Governments on Tier 1. This brought the total Tier 1 roll out to 14 Local Governments. The tier 2 solution was rolled out to 6 pilot Local Governments, and, the sites went live in March 2012. Eventually the roll-out phase also covered an additional 20 Local Government sites, which became active between Oct-Dec 2012. Using Capacity Building Grants, Local Governments (LGs) trained a total of 67,884 people (41, 316 men and 26, 568 women) 1,653 staff were trained under the professionalization scheme . Rehabilitation of existing office blocks and construction of new ones, provision of residential housing for staff and provision of office equipment and vehicles (ICR, page 26 provides measurable output for each ) in 378 sub-counties spread across Northern Uganda New staff were inducted and trained in the Local Governments . 25 key government reference documents (laws, regulations and guidelines ) were printed and distributed to the Local Governments. 3 generic training modules were developed to equip the local governments with management tool for the post conflict situation under which they operate . The project financed 16,016 sub-projects under Local Development Grants (LDGs) by end of FY 2013 across all 111 local governments. The ICR reported that this resulted in improved access to services for a total of 4.7 million direct beneficiaries (of which 51% women) and an estimated 17 million indirect beneficiaries. 85% of all investment activities under Local Development Grant (LDG) were in core Poverty Eradication Action Plan sectors – education, health, water, and roads . Under Community Driven Development (CDD) grant, a total number of 13, 016 projects benefitting 2.6 million direct beneficiaries (of which 52% were women) were implemented in sectors such as livestock, agriculture, and, other services. At appraisal, the beneficiary communities were expected to make contributions to the projects under Community Driven Development (CDD) grants in a manner appropriate to them (cash, kind, time etc.). The ICR reports that out of the total cost of projects of approximately US$ 19.7 million, approximately US$5.2 million was provided in kind by community groups. Outcome : • 100% of Local Governments had computerized financial management systems and completed financial accounts within 3 months of the end of fiscal year 2012, compared to the original target value of 90% at appraisal over a baseline of zero. • 56% of higher Local Governments registered at least 20% increase in its own-source revenue from the baseline year of 2005/06. The target was 45% over a baseline of 10%. • The share of Local Governments in Northern Uganda meeting the minimum conditions to access the Local Development Grant increased to 88% in 2012. The target was 85% over a baseline of 30%. (The ICR did not specify the minimum conditions that were met). Filling the approved staffing requirements in the Local Governments in Northern Uganda, which is an intermediate outcome indicator, was off target (32% was filled versus a target of 65%). The shortfall in filling the staffing requirements was attributed to increased staffing costs due to creation of new districts, and, scarcity of staff due to a limited pool of professional and qualified staff available to fill in the larger number of districts. • 85% of the Local Development Grants is invested in education, health, water and roads sectors (consistent with the Poverty Eradication Action Plan ), compared to the target of 75 % and baseline of 65 %. — The above listed PDO indicators were met . Furthermore, the ICR (p. 11) argued that employing the CDD grant had facilitated the interface between the lowest level of local governments and communities and created a harmonized platform within the local government service delivery system through which support to communities was provided . Although, there was no other evidence provided by the ICR to substantiate that the ability of the Local Governments to plan and manage resources in collaboration with communities was strengthened, the substantial utilization of CDD and LDG grants imply that these abilities are being developed /strengthened. The project team also subsequently noted that all lower local governments are now using the Harmonized Participatory Planning Guide which documents and ensures the systematic involvement of citizens in the planning and budgeting of resources at the LLG level . It is also important to note that the ICR provided no evidence on transparency in the local government service delivery process and the quality of the services provided . In terms of sustainability of the CDD projects and capacity building within the communities to successfully implement and sustain demand -driven CDD projects in the post- project period, the ICR reported that the continuation of local government investment cycle has been secured as a result of mainstreaming of Capacity Building Grants and Local Development Grants in the Government budget . APL Triggers and Status of the Second Phase APL Project At the closing of the project, due the failure of Government to meet one of the 6 triggers for APL2, the follow on project has been temporarily put on hold . The trigger that was not met was '75% of LG structures fully funded .' The ICR reported that (p. 52): "The trigger could only be 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 ." Furthermore, the Government through a recent Cabinet decision has announced that it will take the following steps to address bottlenecks 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 Program, funded from Government budget . In this context, The ICR reported that (p. 9) the Bank will maintain the dialogue and assess when preparation of the follow up project can begin . 5. Efficiency: Modest . Economic and Financial Efficiency : The PAD (p 15) presented a Cost Benefit Analysis of Component 1 and, economic viability analysis of the investments proposed under Component 2. These components represented 98% of the total project cost. The potential Net Economic Benefits of the Integrated Financial Management Information System under Component 1 was based on a small sample consisting of 2 local government sites and 2 central government sites. Some key project benefits due implementation of Integrated Financial Management Information System were : (i) Increased productivity resulting in time and cost reductions needed for processing payment transactions; (ii) Savings from reduction in wage bill for the accounts staff due to lesser number of man hours required for the same amount of operation. The PAD calculated the Net Present Value (NPV) to be positive for the sample and Internal Rate of Return ranging from 12.8% to 44.3%), suggesting that introduction of IFMIS would generate net positive benefit . For Component 2, the PAD analyzed economic viability of investment of only the Local Development Grant sub - component. The statistical evidence collected from Local Government Development Project I and II were used to predict economic viability of investment in different sectors . This was rationalized as the design of the Local development Grants was piloted in LGDP I and rolled out to the entire country in LGDP II . The PAD used the results from LGDP I and LGDP II to extrapolate that small local investments financed by the Local development Grants were likely to be cost effective . Following the same methodology, the ICR (page 29-34) completed an economic analysis of Integrated Financial Management Information System roll-out (Component 1) and an economic viability analysis of sectoral investments following implementation of the Local development Grant (Component 2). For Component 1, however, for the Net Present Value (NPV) analysis, the ICR used a sample of central and local government agencies different than that in the PAD . The sample evaluated in this analysis included 4 local government agencies from the pilot phase and 1 central government agency. As in the PAD, the ICR quantified the economic benefits of Component 1 with numerical representation of the magnitude of efficiencies achieved as a result of IFMIS implementation together with payment transactions volumes and administrative cost figures . The ICR (page 31) reported the overall aggregated internal rate of return of the 5 sites as 17 %, which was higher than the assumed opportunity cost of capital at 12%. The ICR also calculated a positive average net present value for the sites at about US$ 123,000. There were a few drawbacks in the methodology followed to measure cost efficiency . • The analysis of Economic Internal Rate of Return ( EIRR) and net Present Value (NPV) was based on a limited sample of 5 (4 Local Governments, 1 central Agency) did not provide sufficient evidence to to generalize for the efficiency of the entire project . The project team subsequently stated that there was not sufficient number of Local Governments (only 14) that implemented the Integrated Financial Management and Information System long enough to be able to get measurable data . • Based on the analysis only 2 local government sites and 1 central government site had a positive net present value of benefits and an internal rate of return that exceeded the assumed opportunity cost of capital . With a much larger number of project sites in place, the sign of the perceived net benefit and Internal Rate of Return (IRR) could be positive or negative . Hence, it is difficult to make overall conclusions for the entire component . For Component 2, the ICR (page 33) followed the same methodology as in the PAD and calculated the cost efficiency of projects under Local Governance Management Service Delivery (LGMSD) compared to those under Local Government Development Project (LGDP) 1 and 2. For sectors such as Administration, Health, and, Solid Waste had improved in cost effectiveness, but those in Education, Roads and Water were significantly less cost-effective, when compared to the preceding projects . The ICR stated, “It is important to note that this by no means implies economic inefficiency of these projects but simply a comparison of cost efficiency of individual investments across different projects .� However, the ICR did not provide alternative measures of efficiency and evidence to justify the above statement . In addition, the efficiency analysis of the CDD projects presented by the ICR was a rudimentary assessment not based on actual data regarding success level of the investments and their economic benefits. Therefore, the validity of this analysis is questionable . Institutional and Operational Efficiency : Some degree of project inefficiency could be attributed to implementation delays under Component 1 due to technical disagreement between the Bank and the Government of Uganda . Besides, there were procurement delays under Component 2 due to weak capacity of Local Governments . The complexity in acquiring land titles further delayed implementation process in Northern Uganda, adding to inefficiency of resource utilization . Based on the above analysis, which point out the shortcomings - small sample size used that make it impossible to make overall conclusions and lack of valid alternative measures of efficiency alternative measures for efficiency, the efficiency of the project is rated modest . ERR )/Financial Rate of Return (FRR) a. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal No ICR estimate No * Refers to percent of total project cost for which ERR/FRR was calculated. 6. Outcome: The relevance of objectives is rated high and the relevance of design is substantial . The efficacy of the first objective- strengthen the ability of Ministries, Departments and Agencies (MDAs) to plan and manage resources - is rated substantial. The second objective - strengthen the ability of Local Governments (LGs) to plan and manage resources - is rated substantial. Efficiency is rated modest due to small sample size that does not allow generalization of the results for the entire project, and lack of valid alternative analysis of efficiency . a. Outcome Rating : Moderately Satisfactory 7. Rationale for Risk to Development Outcome Rating: Institutional : There are potential risks associated with decentralization reforms unless there are concerted efforts to strengthen the capacity of local government officials . There are also risks associated with modalities of the CDD grant within the overall LDG structure . There are potential risks associated with the inherent capacity of the communities to continue to generate community project proposal, prioritize, implement community projects, procure goods and services, account for funds, and, report on community project progress . Although there has been substantial progress in terms of allocation and implementation of CDD projects, sustainability of the projects would depend on inherent capacity of the communities and also the strength of the interface between the local government and the communities. Technical : The Integrated Financial Management Information System management support at the national level is still being supported by consultants and a formal exit strategy has not been prepared yet . So there are risks to maintenance and sustainability if and when the technical support provided by the consultants is withdrawn in future . However, the government is committed to providing US $ 2 million from its recurrent budget to finance the running and maintenance of the system including a group of core national consultants on its payroll . There are also risks associated with the quality of financial reporting as was found out during audit opinions of the Office of the Auditor General. Financial : There are financial risks associated with capacity building of the Local Governments . The ICR (p. 16) mentions risks related to the uncertain policy environment for decentralization, and the adverse effect on financial resources due to creation of new districts by the government . This was already reflected in the shortfall in staffing requirement and low performance assessment of Local Governments in Northern Uganda . There are risks associated with efficient allocation of LDGs and CDDs . The risks will be substantial if the performance assessments standards are not timely and consistent . The Government of Uganda has, however, come up with a decisive policy that no new districts would be created in future, thus, mitigating uncertainty regarding financial viability of local governments. However, concerns about efficient allocation of resources without timely performance assessment still remain. a. Risk to Development Outcome Rating : Moderate 8. Assessment of Bank Performance: a. Quality at entry: The project was formulated as a continuation of Bank engagement under Local Government Delivery Project (LGDP) I and II and key lessons from these operations were integrated into the design . The Project Development Objective was somewhat convoluted due to the integration of Ministries, Departments and Agencies and Local Governments in one objective and could have been simplified . While some of the risks and mitigation measures were assessed and relevant mitigation measures were identified, the design did not fully anticipate four major obstacles that affected implementation of the project (i) complexity of (ii) complexity in acquiring land titles in Northern Uganda which caused delays (iii) the change in Government policy towards decentralization as reflected in creation of new districts after the project started; and (iv) the lack of capacity in the Local Government entities to successfully formulate and implement Community Driven Development grants and Local Development Grants . There were weaknesses in the M&E design as it did not incorporate indicators for measuring capacity improvements of the MDAs and the LGs to plan and manage resources, and progress in service delivery . at -Entry Rating : Quality -at- Moderately Satisfactory b. Quality of supervision: There were 11 supervision missions conducted between 2008 and 2013 and a mid-term review was also completed 24 months into the project as stipulated in the Financial Agreement . Missions were effective in identifying and addressing implementation issues . Collaborative efforts between the Bank and the government helped address some of the design issues and implementation challenges . However, during subsequent restructuring of the project, the Bank did not take advantage of the opportunity to update the results framework - although the number of districts had changed and no targets for intermediate indicators were identified beyond 2009, two years before the end of the project . Quality of Supervision Rating : Moderately Satisfactory Overall Bank Performance Rating : Moderately Satisfactory 9. Assessment of Borrower Performance: a. Government Performance: The Government of Uganda supported the project through continuous, timely and predictable transfer of counterpart funding. However, the following aspects of government performance adversely affected project implementation: (i) uncertainty in government policy towards decentralization and creation of new districts which negatively impacted project implementation due to inadequate staff and finances in the LGs; (ii) An unexpected change in the government's stance to upgrade Integrated Financial management Information System to Oracle version 11 instead of Oracle Version 9 as agreed at appraisal delayed implementation of component 1; (iii) delay in acquiring Parliamentary approval diminished project effectiveness; (iv) significant delays in collecting data for the Local Government national performance assessments needed for timely and consistent M&E evaluation, thus making the utilization of M&E data unreliable for decision -making and resource allocation . Government Performance Rating Moderately Satisfactory b. Implementing Agency Performance: The Ministry of Finance, Planning and Economic Development had the overall responsibility for Public Financial Management reforms, in particular, related to the roll -out of the Integrated Financial Management Information System under Component 1 of the project. The Ministry of Local Government had the overall responsibility for implementation, accounting for project funds and coordinating activities in Components 2 and 3. The Local Governments were responsible for investing in projects under Local Development Grants and disbursement for funds under the Community Driven Development grants to the communities for investment in projects directly implemented by the communities . The Ministry of Finance, Planning and Economic Development performed satisfactorily overall . Although implementation was substantially delayed because of technical disagreement between the government and the the Bank, substantial follow up of delayed activities ensured that almost all activities had been satisfactorily completed at project closure. The ministry resolved implementation challenges and effectively coordinated work between the three agencies involved in implementation . The performance of Ministry of Local Government was mixed. On the positive side, the ministry ensured that different grant funds were transferred on a timely basis . It also provided comprehensive and timely implementation support on capacity -building activities, and provided oversight and management of Local development Grants and CDD grants . However, there were delays in the roll out and implementation of Local Development Grants especially in Northern Uganda - the latter due to delays and complexity of acquiring land titles and limited finances. The national assessments, which were to provide guidelines for allocation under LDGs, were not completed on a timely basis . The Ministries did not fully comply with safeguard measures during implementation of the project . There were delays in establishing and formalizing partnership between the Ministry of Local Government and the National Environmental Management Agency which, in turn, delayed roll out of the environmental training program . Also, the Ministries did not adequately apply the environmental screening process and sporadically assessed the environmental and social safeguards . A review undertaken by the Ministry of Local Government in 2012 revealed only 70% compliance with Environmental and Social Management Framework requirements . Overall, the performance of the Local Governments was satisfactory and in accordance with the rules and regulation for the awarding of Local Development Grants, and in case of Bank financed components, in accordance with Bank requirements . However, the Local Governments did not adequately institutionalize safeguard issues under the Resettlement Policy Framework so, compliance was low . Implementing Agency Performance Rating : Moderately Satisfactory Overall Borrower Performance Rating : Moderately Satisfactory 10. M&E Design, Implementation, & Utilization: a. M&E Design: Most of the routine M&E data were to be made available through mainstream data collection by the Ministry of Finance, Planning and Economic Development . The M&E design aimed to monitor 8 key performance indicators – 4 project outcome indicators and 4 intermediate outcome indicators. But there were drawbacks to the system . Firstly, the result chain was not robust enough and the mapping of the key performance indicators to the desired outcomes was incomplete, particularly there were no indicators to measure achievements for the MDAs . Secondly, for some indicators, the M&E design referred to outdated baselines (prior to the base year when the project was started ) and for some final and intermediate indicators, the project did not include targets up to the end of the project (only up to 2009). Additionally, the M&E design did not incorporate indicators to measure progress in “service delivery� for the communities. A beneficiary survey was done after the implementation and rolling out of the CDD projects to measure the level of beneficiary satisfaction, but, that did not allow for any rigorous impact assessment that would allow capturing the outcome and sustainabilty of the investments . b. M&E Implementation: M&E activities were carried out by the project teams for the key performance indicators, using data from the Local Government national performance assessments and a Community Driven Development (project database which tracked progress in investment in Local Development Grant and CDD projects respectively ). The data collected were used to measure performance of investment under local governments and to inform resource planning and allocation. However, as the ICR reports, there were delays and difficulties in obtaining fiscal data, thus making it difficult to fulfill the mandate of the M&E activities . One reason for this was that performance assessments were expensive (almost US$1 million per year) and this created challenges in terms of timely beginning, completion and delivery of the assessments . In addition, the results framework was not revised to incorporate an increase in the number of districts or to complete the missing annual targets for the intermediate indicators . c. M&E Utilization: M&E Quality Rating : Modest 11. Other Issues a. Safeguards: The project was categorized “B� under OP/BP4.01 and and OP/BP 4.12 Involuntary Resettlement was triggered . An Environmental and Social Management Framework and Resettlement Policy Framework were prepared and included (i) provision of environmental training by the Ministry of Local Government and the National Environmental Management Agency (ii) support for environmental monitoring activities; and (iii) recruitment of an Environmental Specialist. Consultations would take place during environmental and social screening of potential sub -projects, the results of which would be publicly disclosed . The project design included an annual assessment of environmental and social safeguards. The safeguard measures were not fully complied with during the project due to : (i) delays in establishing and formalizing partnership with NEMA, which consequently led to delays in roll -out of the environmental training program, (ii) inadequate application of the screening process and sporadic annual assessment of environmental and social safeguards (iii) absence or shortage of qualified environmental officers on site . A review done by the Ministry of Local Government undertaken in 2012 revealed only 70% compliance with safeguard requirements in terms of screening, development and implementation of ESMF and certification of projects . Compliance with the Resettlement Policy Framework was not up to the standards as institutionalization of safeguard issues under Local Government management was inadequate . The 2012 review by the Minsitry of Local Government indicated that one of the main challenges associated with compliance was low level of capacity and knowledge among LG officials, who were responsible for carrying out land acquisition in a timely and efficient manner. This had implications for capacity building among Local Governments in Northern Uganda where the outcome could not be met due largely due to delays in land acquisition . The ICR did not report on whether the Bank made any efforts to monitor and resolve the safeguards issues . The ICR did not record how any environmental or social impacts were addressed or if any sub -projects did not meet the environmental or social standards . b. Fiduciary Compliance: Financial management arrangements were considered moderately risky at appraisal with the indication that financial management arrangements would be strengthened during the course of the project . Procurement risk was considered average for the Ministry of Finance, Planning and Economic Development and high for the Ministry of Local Government. The ICR (page 9), however, reported that the project had developed an adequate financial management system that made possible accurate and timely financial management by the ministries . National performance assessments showed that the Local Governments ’ performance in financial management and procurement was acceptable. However, it should be noted that these assessments were not done in a timely and consistent manner. The LGs were the main implementing agencies through which the Local Development Grants and the CDD grants were disbursed. The ICR (page 9) mentioned that audit reports on utilization of LDGs revealed minor inconsistencies in the use of the grants by a small number of LGs, but, did not state whether the issues identified in the audits were addressed. Procurement plans were disclosed in time, but, there were significant delays in procurement at the national level due to technical disagreement on Component 1 between IDA and the government. At the Local Government level, there was some procurement delay due to capacity constraints with regards to implementation of LDG sub projects in Northern Uganda. The ICR reported that annual procurement audits were not carried out every year . It was planned at appraisal that procurement would be carried out at community level for the sub -projects under the CDD grants. However, the ICR did not report on the quality of the procurement system by the communities . An Annotated Exit Report by the Ministry of Local Government noted weaknesses in community procurement process . c. Unintended Impacts (positive or negative): None reported d. Other: None reported 12. 12. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Efficiency is rated modest due to lack Satisfactory of robust economic analysis to measure project's efficiency. Risk to Development Moderate Moderate Outcome : Bank Performance : Satisfactory Moderately Quality at Entry and Quality of Satisfactory Supervision are both rated as moderately satisfactory. Due to weaknesses in the project design at entry, which were not corrected during Bank supervision, M&E was poorly handled both in the design and implementation phase. Borrower Performance : Moderately Moderately Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate. 13. Lessons: The ICR offers six lessons, three of which are of particular importance and have general implications . They are reported here with some adaptation . Successful decentralization reforms should incorporate a comprehensive understanding of the modality and functionality of the fiscal decentralization framework and service delivery, there should be timely, independent, credible, and, objective performance assessments . CDD grants improves the citizens' demand for services and engagement with local government officials, but its successful implementation requires substantial supervision and consistent oversight and support in order to create sustainability and ensure accountability . A well functioning Integrated Financial Management and Information System facilitates successful decentralization efforts and better local service delivery . I IEG Lesson : Policies affecting project outcomes should be agreed and finalized during appraisal . 14. Assessment Recommended? Yes No Why? Yes, to verify the ratings and to assess the impact and sustainability of the projects under Local Development Grants and Community Driven Development Grants . Also, to provide more evidence on (i) the progress of the decentralization process and (ii) the strength of the interface between the Local Governments and the communities, (iii) capacity building of the Ministries, Departments and Agencies and Local Governments and sustainability thereof. 15. Comments on Quality of ICR: The ICR is candid in the assessment of project implementation and outcomes achieved and, while the quality of ICR is rated satisfactory, there are some weaknesses . Relevant facts and data about the performance of the project are provided and the report reads well . However, there are some shortcomings : (i) the ICR does not provide sufficient evidence on sustainability of the overall decentralization reforms; in particular, there is no discussion on sustainability of the Community Driven Development initiatives; (ii) the efficiency analysis is unsatisfactory . The ICR could have used a robust methodology to measure actual cost efficiency of the project . a.Quality of ICR Rating : Satisfactory