FOR OFFICIAL USE ONLY Report No: ICR00006535 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND/OR INTERNATIONAL DEVELOPMENT ASSOCIATION IMPLEMENTATION COMPLETION AND RESULTS REPORT Credit Number 6134-KE ON A CREDIT IN THE AMOUNT OF SDR 227 MILLION (US$ 300 MILLION EQUIVALENT) TO THE Republic of Kenya FOR THE Kenya Urban Support Program PROGRAM-FOR-RESULTS June 18, 2024 Urban, Resilience And Land Global Practice Eastern And Southern Africa Region CURRENCY EQUIVALENTS (Exchange Rate Effective December 29, 2023) Currency Unit = Kenya Shillings KSH 156.46 = US$1 US$1.32 = SDR 1 FISCAL YEAR July 1 - June 30 Regional Vice President: Victoria Kwakwa Country Director: Keith E. Hansen Regional Director: Iain G. Shuker Practice Manager: Peter D. Ellis Task Team Leader(s): Beatriz Eraso Puig, Davison Muchadenyika ICR Main Contributor: Carlos Ivan Mejia Rosario, Yasmeen Hopkins ABBREVIATIONS AND ACRONYMS APA Annual Performance Assessment MoPSYGA Ministry of Public Service, Youth and BEA Beneficiary and Economic Asset Gender Affairs CARA County Allocation of Revenue Act MTEF Medium-Term Expenditure Framework CIDP County Integrated Development Plan MTIHUD Ministry of Transport, Infrastructure, CoG Council of Governors Housing, and Urban Development CPCT County Program Coordination Team MTP2 Second Medium-Term Plan CPF Country Partnership Framework MTR Mid-Term Review CPS Country Partnership Strategy NEMA National Environmental Management CRA Commission on Revenue Allocation Authority CUIDS County Urban Institutional NLC National Land Commission Development Strategy NMT Non-Motorized Transport DLI Disbursement Linked Indicator NPCT National Program Coordination Team DLR Disbursement Linked Result NT National Treasury DORA Division of Revenue Act NUDP National Urban Development Policy DOSHS Directorate of Occupational Safety and OAG Office of the Auditor General Health services OHS Occupational Health & Safety EACC Ethics and Anti-Corruption Commission O&M Operations and Maintenance EHS Environmental, Health and Safety, and PAP Program Action Plan Social Safeguards PDO Program Development Objective EIRR Economic Internal Rate of Return PFM Public Financial Management EPE End of Program Evaluation PforR Program for Results E&S Environment and Social POM Program Operations Manual FM Financial Management PS Performance Standard GDP Gross Domestic Product PSC Program Steering Committee GRS Grievance Redress Service PTC Program Technical Committee GoK Government of Kenya QAR Quality Assurance Review IDeP Integrated Development Plan RF Results Framework IFMIS Integrated Financial Management SDHUD State Department of Housing and Urban Information System Development IGFR Intergovernmental Fiscal Relations SDG Sustainable Development Goal IPF Investment Project Finance SORT Systematic Operating Risk Rating Tool KDSP Kenya Devolution Support Program ToC Theory of Change KenUP Kenya Urban Program ToRs Terms of Reference KMP Kenya Municipal Program UAC Urban Areas and Cities KSG Kenya School of Government UACA Urban Areas and Cities Act Ksh Kenyan Shilling UDG Urban Development Grant KUSP Kenya Urban Support Program UIG Urban Institutional Grant MC Minimum Condition VfM Value for Money MoDP Ministry of Devolution and Planning WB World Bank TABLE OF CONTENTS DATA SHEET .......................................................................................................................... 1 I. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES.................................................... 5 A. CONTEXT AT APPRAISAL AND THEORY OF CHANGE .................................................................5 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) .......................................7 II. OUTCOME ...................................................................................................................... 8 A. RELEVANCE ............................................................................................................................8 B. ACHIEVEMENT OF PDOs (EFFICACY) ........................................................................................9 C. JUSTIFICATION OF OVERALL OUTCOME RATING ....................................................................11 D. OTHER OUTCOMES AND IMPACTS (IF ANY) ...........................................................................11 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 11 A. KEY FACTORS DURING PREPARATION ...................................................................................11 B. KEY FACTORS DURING IMPLEMENTATION .............................................................................12 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 13 A. QUALITY OF MONITORING AND EVALUATION .......................................................................13 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE .....................................................15 C. BANK PERFORMANCE ...........................................................................................................16 D. RISK TO DEVELOPMENT OUTCOME .......................................................................................17 V. LESSONS AND RECOMMENDATIONS ............................................................................. 18 ANNEX 1. RESULTS FRAMEWORK, DISBURSEMENT LINKED INDICATORS, AND PROGRAM ACTION PLAN ...................................................................................................................... 20 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 39 ANNEX 3. PROGRAM EXPENDITURE SUMMARY ................................................................... 42 ANNEX 4. BORROWER’S COMMENTS ................................................................................... 43 ANNEX 5. SUPPORTING DOCUMENTS (IF ANY) ..................................................................... 44 ANNEX 6. KUSP THEORY OF CHANGE ................................................................................... 45 ANNEX 7. OTHER OUTCOMES AND IMPACTS ........................................................................ 46 The World Bank Kenya Urban Support Program (P156777) DATA SHEET BASIC INFORMATION Product Information Program ID Program Name Financing Instrument P156777 Kenya Urban Support Program Program-for-Results Financing Country IPF Component Kenya Yes Original EA Category Revised EA Category Not Required (C) Not Required (C) Organizations Borrower Implementing Agency Ministry of Lands, Public Works, Housing, and Urban Republic of Kenya Development Program Development Objective (PDO) Original PDO The Program Development Objective (PDO) is to establish and strengthen urban institutions to deliver improved infrastructure and services in participating counties in Kenya. Page 1 of 48 The World Bank Kenya Urban Support Program (P156777) FINANCING FINANCE_TBL Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Administered Financing 300,000,000 291,424,305 289,870,401 IDA-61340 Total 300,000,000 291,424,305 289,870,401 Non-World Bank Administered Financing Borrower/Recipient 0 17,200,000 12,200,000 Total 0 17,200,000 12,200,000 Total Program Cost 300,000,000 308,624,305 302,070,401 KEY DATES Program Approval Effectiveness MTR Review Original Closing Actual Closing P156777 26-Jul-2017 11-Jan-2018 23-Oct-2020 31-Jul-2023 31-Dec-2023 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 21-Jun-2021 243.16 Change in Results Framework Reallocation between and/or Change in DLI 20-Jul-2023 287.62 Change in Loan Closing Date(s) Cancellation of Financing Reallocation between and/or Change in DLI KEY RATINGS Outcome Bank Performance M&E Quality Satisfactory Satisfactory Substantial Page 2 of 48 The World Bank Kenya Urban Support Program (P156777) RATINGS OF PROGRAM PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 02-Jan-2018 Satisfactory Satisfactory 1.43 02 28-Jun-2018 Satisfactory Satisfactory 23.55 03 07-Dec-2018 Satisfactory Satisfactory 135.45 04 18-Jun-2019 Moderately Satisfactory Moderately Unsatisfactory 135.45 05 20-Dec-2019 Moderately Satisfactory Moderately Unsatisfactory 135.45 06 29-May-2020 Moderately Satisfactory Moderately Satisfactory 139.06 07 02-Dec-2020 Satisfactory Moderately Satisfactory 242.39 08 03-Jun-2021 Satisfactory Moderately Satisfactory 243.16 09 01-Dec-2021 Satisfactory Moderately Satisfactory 281.82 10 31-May-2022 Satisfactory Moderately Satisfactory 283.05 11 28-Nov-2022 Satisfactory Moderately Satisfactory 285.58 12 27-Mar-2023 Satisfactory Moderately Satisfactory 287.62 13 20-Sep-2023 Satisfactory Moderately Satisfactory 291.03 14 11-Dec-2023 Satisfactory Moderately Satisfactory 291.03 SECTORS AND THEMES Sectors Major Sector/Sector (%) Public Administration 100 Sub-National Government 100 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Page 3 of 48 The World Bank Kenya Urban Support Program (P156777) Public Sector Management 100 Public Administration 100 Municipal Institution Building 100 Urban and Rural Development 80 Urban Development 80 Urban Infrastructure and Service Delivery 80 Urban Planning 40 Environment and Natural Resource Management 31 Climate change 31 Mitigation 8 Adaptation 23 ADM STAFF Role At Approval At ICR Regional Vice President: Makhtar Diop Victoria Kwakwa Country Director: Diarietou Gaye Keith E. Hansen Director: Ede Jorge Ijjasz-Vasquez Iain G. Shuker Practice Manager: Bernice K. Van Bronkhorst Peter D. Ellis Beatriz Eraso Puig, Davison Task Team Leader(s): Abdu Muwonge Muchadenyika ICR Contributing Author: Carlos Ivan Mejia Rosario Page 4 of 48 The World Bank Kenya Urban Support Program (P156777) I. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL AND THEORY OF CHANGE Context 1. Kenya had experienced strong economic growth in recent years before Appraisal, but the provision of infrastructure had not kept up with the pace of economic growth. Kenya's economic growth averaged 5.3% from 2004-14, spurred by infrastructure investments, private-sector growth, and consumer demand. Despite growth, infrastructure development lagged. 1 In 2014, Kenya was at an early stage of urbanization 2, offering the potential to drive economic growth that highly depends on the efficiency of public investments. Investment in cities, combined with moderate levels of rural-to-urban migration, was the most effective way to raise welfare and reduce poverty in the medium to long run 3. Rapid urbanization left cities with huge unmet demand for critical infrastructure and basic services, which constrained the productivity of businesses and negatively impacted the quality of life of residents. For example, the proportion of the urban population with access to improved water sources declined from 92% in 1990 to 82% 2012. A highly visible result of poorly managed urbanization was the expansion of overcrowded informal settlements, where about 60% of residents in major cities lived. 2. The Government of Kenya (GoK) recognized the need to manage urbanization as part of its overall development strategy. Kenya Vision 2030 highlighted rapid urbanization as one of four key challenges facing the country. Within the over-arching framework of Vision 2030, the urbanization component of the Second Medium Term Plan (MTP2) 2013–17 aimed to facilitate a sustainable urbanization process through an integrated urban and regional planning management framework of Kenyan urban centers and towns. Aligned to that goal, the MTP identified a series of investment programs to enhance infrastructure, connectivity and accessibility, safety and security. Developing the basic institutions required for effective urban management as a critical way to deliver these investments and for urbanization to contribute to sustainable growth in Kenya. The Urban Areas and Cities Act (UACA, 2011, amended 2016) presented an incentive to establish urban institutions; thus, strengthening the framework for devolution and improved management. Under the 2010 Constitution, local governments were abolished, and counties took over the revenues and the responsibilities previously assigned to urban local governments. However, the Constitution did not explicitly specify how urban areas would be governed and managed, leaving that to subsequent national legislation. UACA partially addressed this urban governance deficit, by providing procedures for chartering cities and municipalities and establishing urban boards. Such urban boards, appointed by county governments, would have delegated responsibilities for the management of cities and municipalities and would remain accountable to their respective county governments. However, at the time of appraisal, almost no counties had established urban boards to manage individual cities or municipalities on a delegated basis due to an adverse context from both national government to transfer resources and governments reticent to establish urban institutions. Therefore, to support the devolution process in Kenya, it appeared to be essential to make incentives for the creation of municipal boards as a last mile institution. Theory of Change (Results Chain) 3. The project aimed to establish and strengthen urban institutions to deliver infrastructure and services in participating counties in Kenya. A Theory of Change (ToC) was not a requirement during preparation, but one was developed for the purpose of this report (see Annex 6). 1 World Bank, 2016. “Kenya Urbanization Review.” Washington, DC. 2 World Bank, 2010. “Africa’s Infrastructure: A Time for Transformation.” Africa Development Forum Series. 3 World Bank, 2009. World Bank Development Report 2009: Reshaping Economic Geography. Washington, DC. Page 5 of 48 The World Bank Kenya Urban Support Program (P156777) Rationale for PforR Support, and Program Scope and Boundaries 4. KUSP supported the first Kenya Urban Program (KenUP), the vehicle for the implementation of the National Urban Development Policy (NUDP) with an objective of US$1 billion in financing for the period 2017 – 2022. KUSP financed key parts of KenUP across its six thematic areas, including urban institutions, governance, management, finance, planning and infrastructure and service delivery. It did so through three separate, but inter- related, windows at the national, county and urban levels financed through a Program for Results (PforR) (US$270 million) with an Investment Project Financing (IPF) component (US$30 million). The three windows of the operation were inter-related as the support to national level activities led to the development and implementation of the county level interventions through technical assistance, capacity building and program management. 5. Sub-national level activities (Window 2 – Urban Institutional Grants, UIG and Window 3 – Urban Development Grants, UDG) were financed through the PforR instrument. Given the Program’s focus on institutional development and policy implementation at the sub-national level, the PforR provided a clear set of incentives to country governments by linking Program disbursements to the delivery of institutional benchmarks such as the establishment of urban management systems. The PforR also provided incentives for the delivery of county-led capacity building activities and a certain flexibility in meeting the specific developmental needs of different urban areas. The established urban institutions have been encouraged further through the PforR framework to improve their performance and deliver transformative infrastructure. 6. National level (Window 1) activities were implemented through an IPF component. The IPF funded a range of institutional and capacity development interventions and technical assistance implemented at the national government level by the State Department of Housing and Urban Development (SDHUD). The rationale for using IPF came from the lessons learned from the Kenya Devolution Support Project (KDSP) and other PforR operations in the country, which suggested the need to provide a high level of budget predictability for undertaking national government actions that are critical for the success of the project, such as the Annual Performance Assessments (APAs) and capacity building for sub-national government 4. IPF implementation modalities also were an effective way of providing technical assistance and institutional support activities in a timely and economic manner. Program Development Objectives (PDOs) 7. The Program Development Objective (PDO) was to establish and strengthen urban institutions to deliver improved infrastructure and services in participating counties in Kenya. Key Expected Outcomes and Outcome Indicators 8. The PDO was measured by three PDO indicators: (1) Number of urban areas with approved charters, established boards, appointed urban managers and a budget vote, (2) Number of urban areas that utilize at least 50% of the budget intended for their urban investments in their budget vote, and (3) Score in the APA for achievement of urban planning, infrastructure, and service delivery targets by counties/urban areas, averaged across all urban areas that qualify for the Urban Development Grant (UDG). Program Results Areas and DLIs 9. In line with PforR approach, windows 2 and 3 were implemented using existing country fiduciary systems with appropriate capacity strengthening measures. The activities undertaken were under the following results areas: (a) support to national government level for policy formulation and implementation, institutional development (capacity building) and country-level performance assessments (monitoring for coordination) – 4 World Bank, 2022. “Kenya Devolution Support Project Implementation Completion and Results” paragraph 74. Page 6 of 48 The World Bank Kenya Urban Support Program (P156777) window 1; (b) support to country governments for the development of county-level urban development policies, the establishment of Urban Boards, and the implementation and enforcement of county policies and legislation (capacity building and urban development) – window 2; and (c) support to urban institutions for the development of urban plans, systems and the implementation of urban infrastructure and services – window 3. 10. Program funds for sub-national activities were disbursed on the basis of three DLIs. The DLIs (Table 1) provided strong incentives for improved management of urban areas. Table 1: Program DLIs and Allocated Amounts Window Results area DLIs Amount % of total (US$ IDA (PforR) million) amount Window 2: county County governments commit to DLI 1: county governments have 22.2 8.2 governments address urban development met UIG Minimum Conditions and management issues Window 3: urban Institutional framework DLI 2: County governments have 171.4 63.6 boards and established and operational met UDG Minimum Conditions counties Urban planning, infrastructure, DLI 3: County governments and 76.1 28.2 and service delivery urban area institutions have met UDG Performance Standards Total IDA PforR finance 269.7 100.0 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) Revised PDOs Outcome Targets, Result Areas, and DLIs 11. KUSP was restructured twice, and both were Level 2 restructuring. The first restructuring, approved in June 2021, changed the results framework (RF) and the reallocation between DLIs, and added a fourth DLI. The PDO indicator “score in the APA achievement of urban planning, infrastructure and service delivery targets” was revised to “urban areas with an approved annual investment plan and urban area plans”. The rationale for this change was to simplify the calculation of indicator achievements and, therefore, make it easier for counties and municipal boards to collect the data. Similarly, there were minor changes to four intermediate indicators (cf. section III.b). 12. Changes to the financing plan: the program’s financing plan was changed to: (a) reflect under-spending on Window 1 (IPF); (b) reallocate the remaining balance of DLI1 (Window 2) funds; (c) allocate the remaining balance of DLI3 (Window 3) funds to the DLI4 (Window 3). The financing allocation for Window 1 was partially intended to be directed toward financing UIG to counties (US$ 4.5 million) as no clear modality of transferring funds between the two windows was established. However, this balance remained under the IPF. The undisbursed balance of Window 2 (US$ 481,690.7) was allocated to Window 3. 5 The undisbursed balances of DLI1 (Window 2, UIGs) and DLI3 (Window 3, UDGs) were allocated to a new DLI4 (Window 3, UDGs) (US$37,425,836). 13. The second restructuring approved in June 2023 extended the closing date from July 31, 2023, to December 31, 2023, to allow the completion of the Environmental, Health and Safety, and Social Safeguards Audit, Value for Money (VfM) Audit, and End of Program Evaluation. It also cancelled an undisbursed IPF amount of US$8,575,694 6. 5 KUSP Restructuring Paper June 2021 6 KUSP Restructuring Paper June 2023 Page 7 of 48 The World Bank Kenya Urban Support Program (P156777) Other Changes 14. The first restructuring led to modifications in the APA methodology and implementation. The onset of the Covid-19 pandemic, combined with delays in the procurement of the third APA, and the pressing timeline for the third disbursement, necessitated a shift in approach. 7 The restructuring allowed moving from an externally led APA to a self-evaluation mechanism subject to independent validation by the Office of the Auditor General (OAG). Rationale for Changes and their Implication for the Original Theory of Change 15. The first project restructuring that occurred after the Mid-Term Review (MTR) in October 2020, intended to address some of the main challenges identified. These issues were (i) difficulties in accounting for the progress made in achieving the PDO reflected in a change in the RF; (ii) under-spending on Window 1 (IPF); and (iii) reallocation between DLIs and change of DLI with the addition of a fourth to reduce capacity gap regarding the financial management by counties and urban boards Therefore, the proposed changes allowed the Program to: (i) better document and account for results; (ii) provide adequate funding for meeting DLI Targets over the entire life of the Program; and (iii) support structured capacity building on financial management. The second restructuring in 2023 gave the Program more time for implementation, considering the delays faced in the initial period. 16. The allocation to DLI4 strengthened incentives for countries and urban boards to improve the boards performance, upgrade environmental and social (E&S) management and improve overall management of investments projects. In addition, the allocation to DLI4 strengthened overall financial management. 8 II. OUTCOME A. RELEVANCE Relevance of PDO 17. Relevance of the PDO is rated high. The relevance of objectives has been evaluated to the extent the PDO is consistent with World Bank Group Country Partnership Framework (CPF) for Kenya FY23-28 discussed by the Board on August 22, 2022 (Report No. 172255-KE). The PDO is fully aligned with: (i) Objective 2 - Improve public expenditure transparency and effectiveness, as KUSP supported Kenya’s devolution process through capacity building for county governments and urban boards; (ii) Objective 5 - Extend infrastructure services to the last mile, as KUSP supported infrastructure investments in secondary cities while strengthening service delivery capacities of municipalities, lower-level structures essential in last mile provision of infrastructure services; and (iii) Objective 6 - Increase Household Resilience and national preparedness for shocks, as KUSP contributed to strengthen urban resilience in secondary cities by enhancing access to drainage and flood protection infrastructure. 18. The PDO was fully consistent with Kenya’s urban development goals as stated in the NUDP, Vision 2030 and MTP2. It was instrumental to incentivize the establishment of urban institutions after the abolishment of the local governments by the 2010 Constitution. It was the first PforR in the Bank that established new urban institutions as other programs incentivize strengthening of well-established municipalities. The next phase of the Program (KUSP2, P177048) became effective on March 2024 and will build on KUSP experience to strengthen the established urban institutions by incentivizing counties to provide them with greater autonomy, broader functions, and financing, while creating the capacity to enhance climate resilience and leverage private sector development. 7 The First and Second APA were done by an external consulting firm and the Third APA was conducted by the OAG. 8 Ibid. Page 8 of 48 The World Bank Kenya Urban Support Program (P156777) 19. KUSP was instrumental to operationalize the Urban Areas and Cities Act (UACA) 2011 (amended in 2019) and as such addressed the urban governance deficit by supporting county governments to develop procedures for chartering municipalities, establishing municipal boards and administrations. At the time of appraisal, except for Kakamega County Government, no county government had issued any charter and established these institutions since UACA was approved in 2011. KUSP supported all 45 participating counties governments to establish municipal boards, administrations with delegated responsibilities for the management of their urban areas in accordance with the UACA. By the time the program closed, a total of 77 municipal boards and municipalities were established to support urban areas management and planification and ensure delegated service delivery functions. Relevance of DLIs 20. The DLIs aligned well with the PDO and the RF. Four DLIs, linked the minimum conditions (MC) and performance standards (PS) to be achieved by counties and urban boards, accounted for 90% of the IDA funds and were closely linked to the PDO indicators 9. These DLIs played a key role in improving the management of urban areas and underscored the importance of a performance-oriented disbursement mechanism. They also played an overarching role to enable the Program to achieve its PDO and the Results Areas through capacity building and institutional strengthening. No shortcomings in quality elements of DLIs were identified, though a number of waivers were agreed for some MCs and PSs as explained in section III.B. The DLIs were clearly defined and measurable, well integrated and provided the right incentives for achieving the Program objectives. As mentioned in section I.B, DLI 4 was introduced following reallocation of remaining balances of DLIs 1 and 3 to remain sufficiently relevant to the PDO, Program needs, and Government priorities. 21. Overall, the DLIs provided the necessary triggers to the overall Program performance and results, leading to tangible outcomes. DLI 1 incentivized county governments to commit to address to urban development issues and improving urban management. From APA 3, all 45 counties were able to meet the minimum conditions. DLI 2, 3 and 4 incentivized participating counties to set up Urban Boards, with associated charters, managers, and budget votes in place. They also led to enhanced service delivery through the supported infrastructure. Rating of Overall Relevance 22. Overall Relevance is rated High, as the PDO and the DLIs remained highly relevant to the CPF and Government priorities throughout the Program period. Moreover, the DLIs were revised to keep objectives and DLIs fully relevant. B. ACHIEVEMENT OF PDOs (EFFICACY) Assessment of Achievement of Each Objective or Outcome 23. The assessment of achievement of PDO has been organized around each objective captured in the statement of objectives as follows: (i) Objective 1: Establishing and strengthening urban institutions, (ii) Objective 2: Improving infrastructure and services. Evidence presented on this section is drawn from PDO Indicators, DLIs, APAs, Beneficiary and Economic Assessment (BEA), Value for Money Audit (VfM), End of Program Evaluation (EPE) and Intermediate Results Indicators (IRIs). Objective 1: Establish and strengthen urban institutions 24. KUSP helped establish 77 urban institutions: Five years after the inauguration of County governments a huge institutional gap existed in terms of last mile service delivery and the planning, management and governance of urban areas. KUSP incentivized the establishment of 77 municipalities across Kenya, 59 of which were directly 9 Program activities at the national level were financed through the IPF instrument and therefore did not rely on DLIs. Page 9 of 48 The World Bank Kenya Urban Support Program (P156777) supported by the UDG. Counties used also the UIG money to support the establishment of further municipalities.10 These municipalities have charters which elaborate their powers and functions, appointed urban boards and administrations and have budget votes. At appraisal the program targeted to establish 35 municipalities. The municipalities creation followed the UACA definition of 50,000 people minimum and therefore allowed the creation of municipalities that fill the headcount but do not necessarily have the sufficient density to be considered as urban areas (KUSP 2 is supporting the government to challenge this definition). 25. KUSP strengthened the capacities of the newly established urban institutions: The Program improved basic capacities for municipal planning (51 Urban Spatial Plans and 57 Integrated Development Plans prepared), financial management (preparation of program-based budgets, use of Integrated Financial Management Information System, IFMIS), procurement, solid waste management (54 municipal solid waste policies prepared), and public participation (54 municipalities conducted citizen fora annually), and trained 392 County Program Coordination Team members on Environment and Social Safeguards, Financial Management, Monitoring and Evaluation.11 The BEA found that ‘KUSP has played a vital role in enhancing the institutional capacity of county governments to plan, implement, and manage urban development projects effectively. It improved governance structures and financial management practices have been observed in beneficiary municipalities. The program supported urban institutions in establishing strong basis for urban management through the cycle of investment planning and infrastructure delivery process. All three PDO level indicators that measure municipal capacity were surpassed. Objective 2: Improve infrastructure and services 26. The program invested in key urban infrastructure, which anchors the provision of services, thtough a total of 388 infrastructure investments across 59 municipalities. Among others, it financed the construction of 246km of drainage, 218 km of roads, 216 km of NMT facilities, 113 high mast security lights, 30 markets, 22 public parks, 5,000 parking facilities, 12 bus parks, 13 fire stations, 5,217 streetlights, 13 km of sewer line and 3 community facilities. To date 12, more than 85% are completed and operational. 13 Only 9% (33 number) works activities were ongoing, with 50% being over 90% complete and all of the ongoing works above 50% completion. The SDHUD is committed to monitoring the implementation of uncomplete projects post project closure and continue reporting to the Bank. 14 27. KUSP investments transformed access to services in urban Kenya: The investments are changing the social, living, mobility and economic fortunes in these urban areas, benefitting about 3.6 million people in urban Kenya. 15 The BEA noted that ‘The KUSP has resulted in substantial improvements in urban infrastructure, including roads, water supply systems, sanitation facilities, and waste management. These upgrades have significantly enhanced the quality of life for urban residents and improved the overall urban environment’. 16 Further, ‘the program's interventions have led to more efficient and reliable service delivery in beneficiary municipalities. Residents now have better access to essential services such as water, sanitation, healthcare, and education, contributing to improved socio-economic outcomes. 17 All infrastructure and service delivery intermediate indicators were surpassed, even when no PDO level indicator measured improved service delivery. Rating of Overall Efficacy 10 KUSP ISR, 11 December 2023. 11 KUSP ISR, 11 December 2023. 12 NPCT continues to follow up and the latest figures. 13 KUSP AM, November 14-17, 2023. 14 One major deficit to be resolved was in Eldoret for completion of the 64 Stadium, Kitui for completion of a market and Kitale for the completion of a business center. The Principal Secretary and the CoG are following up with the Governors. 15 KUSP ISR, 11 December 2023. 16 KUSP Beneficiary and Social Economic Assessment. 17 Ibid. Page 10 of 48 The World Bank Kenya Urban Support Program (P156777) 28. Overall Efficacy is rated as substantial. This is the result of KUSP almost fully achieving both its objectives on time, as there were some delays during implementation. Both objectives’ achievements are included in the efficacy assessment to (i) establish and strengthen institutions, and (ii) improve infrastructures and services. C. JUSTIFICATION OF OVERALL OUTCOME RATING 29. The overall outcome of the operation is rated as Satisfactory (S). Supported by timely restructurings and its continued High relevance, the Program achieved its overall development objective at completion with minor shortcomings in the efficacy, mainly in terms of delays and financing gap under multiyear projects as explained in Section III. Despite these minor shortcomings, KUSP has contributed significantly to the urban reforms towards strengthening the institutional capacity of the emerging urban areas, catalyzing the formation of urban institutions even outside the program. D. OTHER OUTCOMES AND IMPACTS (IF ANY) 30. The operation had other impacts, some of which were intended, others unintended. The main additional impacts were: (1) job creation and economic growth, (2) economic impact, (3) poverty reduction and share prosperity, (4) gender, equity, and inclusive development, (5) sustainability, and (6) contribution to the devolution process. For a full description of each of these impacts please see Annex 7. III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION 31. The KUSP aimed to support the objectives in two of the three priority areas of the World Bank’s Country Partnership Strategy (CPS) (2014–18, report 87024-KE). The CPS for Kenya had three strategic results areas. KUSP aimed to support strategic result area (a) competitiveness and sustainability—growth to eradicate poverty by helping to enhance the sustainability of Kenya’s urban areas through strengthening urban governance systems, supporting participatory strategic and spatial planning, and financing urban infrastructure and services. Improving the livability of Kenya’s urban areas also helped strengthen rural-urban linkages by increasing off-farm employment opportunities for rural populations, thus reducing poverty. KUSP also aimed to support the achievement of result area (c) consistency and equity—delivering a devolution dividend by strengthening county administrations and urban management systems to enable them to deliver on their mandates. During implementation, appropriate synergies were to be established with other Global Practices to maximize the operation’s contribution to the CPS. 32. KUSP is the first Bank PforR that established new local institutions. Given the proposed Program’s focus on institutional development and policy implementation at the sub-national level, a PforR modality provided a clear set of incentives to county governments by linking Program disbursements to the delivery of institutional benchmarks such as the establishment of city and municipal management systems. Further, since this was a novel experience, at appraisal the Program’s performance framework was designed with flexibility. 33. Indicators for the Program’s RF was easy to monitor. Despite some exceptions, the established targets were significantly surpassed during the project as the county’s appropriation of KUSP may have been underestimated at appraisal. Exceptions were the targets and requirements of four intermediate indicators (cf. section III. b). The revisions were meant to consider better than expected progress in achieving the PDO, an updated set of intermediate results relating to infrastructure activities. 34. KUSP was built on the lessons learned from the Kenya Devolution Support Program (KDSP – P149129) and added significant value by focusing on institutions and functions specific to urban development. The design of Page 11 of 48 The World Bank Kenya Urban Support Program (P156777) KUSP was informed by some of the early lessons learned during KDSP implementation, particularly regarding the need for robust inter-governmental cooperation, for full integration of conditional grants into budgetary frameworks at both national and sub-national levels, and for prudent ring-fencing of Operation-critical activities, from which the proposal of a hybrid option arose. Both KUSP and KDSP activities and implementation complemented each other with KUSP focusing on addressing the specific challenges of urban governance and development while KDSP grants financed much broader range of county wide investments. B. KEY FACTORS DURING IMPLEMENTATION 35. KUSP RF was restructured in June 2021 to simplify the calculation of indicators achievements. The indicator “non-motorized transport facilities constructed or rehabilitated under the program” was split into two indicators to capture non-motorized facilities and roads separately. The indicator “street or high-mast security lights constructed under the program” was decoupled to measure street and high-mast lights separately. The unit of measurement for the indicator “public works and green urban spaces under the program” was changed from hectares to number due to counting challenges. 36. Government commitment to urban institutional development. In every county, both the charter and the appointments to the urban board have been ratified by the county government assembly. Further, county governments have seconded some professional, technical, and administrative staff to the boards, and enabled the boards to assume more direct responsibilities in planning and management of services delivery, and implementation of projects, including those under KUSP. Some county governments have initiated steps to consolidate the institutionalization and organizational capacity of urban boards by (i) developing regulations to guide future operations; (ii) developing a strategic plan for the board; (iii) adopting organization structures that reflect the full range of functions and operations expected of an effective urban services authority; (iv) enabling recruitment of Board-employed by the statutory County Public Service Board (CPSB); and (v) budgeting for autonomous fiscal management and accountability by the Board. Good working relationships between the NPCT, the Council Governors and the Consulting team contributed to the success of the project closure report and APA process. 18 37. Program implementation was affected by delays. The high staff turnover at County and urban levels contributed to delays in investment implementation, which necessitated continuous training and capacity development. First, procurement faced several challenges, such as lengthy procurement periods or delays in issuance of extensions for ongoing consultancies impacting negatively on their delivery 19. Second, delays in the disbursement of funds, especially the UIG, were occasioned by delays in the approval of the Division of Revenue Act (DORA) and County Allocation of Revenue Act (CARA) by parliament. 20 Third, due to inadequacies in the capacity of the technical staff at the urban level, significant contract management issues were noted. 38. Disbursement delays for the APA were due to a lack of alignment in the design of the program between the APA process, more urban boards qualifying for the grants, and the budgetary cycles. The APA results were not obtained on time to inform the calculation of County Allocations to align with the preparation of CARA and DORA, resulting in disbursement delays to counties 21. This delay resulted in the funds and projects intended for a particular FY being spent in the following FY, respectively. Due to the pressing timelines, a shift was made towards a self-evaluation mechanism on the last APA, subjected to validation by the OAG. 18 KUSP Project Closure Report, February 2024 19 Kenya Urban Support Program, Project Closure Report, February 2024 20 The Parliament debates and approves the Division of Revenue Act to stipulate how national government and county governments share national revenues. Among county governments, revenue sharing is through the County Allocation Revenue Act. 21 Kenya Urban Support Program, Mid-Term Review, October 2020 Page 12 of 48 The World Bank Kenya Urban Support Program (P156777) 39. Waivers were granted for some MC and PSs for the UDG, resulting in more urban boards qualifying. The main reasons for granting these waivers were: (1) APA compliance timelines, for example, some municipalities provided the documentary evidence after the established compliance window due to delays in disbursements, and there was an agreement to extend the compliance window, (2) changes to the Urban Areas and Cities Act in 2019 which affected the composition of Urban Boards as stated in the Minimum Conditions, (3) at appraisal, there was some ambiguity as four of UDG MCs, three Program MCs, and one UDG PS had flexibility, i.e., by stating that ‘For the first APA (to be conducted in FY2017–18 and determining UDG allocations to counties for UDG disbursements in FY 2018–19) this UDG MC will be slightly modified to take into account program start-up’. Since waivers were granted, there were two main implications: (1) some counties were lax in complying with the conditions since they were anticipating waivers, and (2) counties accessed all their maximum allocation for the first two disbursements; hence, the balance had to be prorated for the third disbursement. 40. The Program encountered some fiduciary compliance issues. Throughout the project life, the Financial Management (FM) performance was mostly given a rating of moderately unsatisfactory due to the quality of documents and reports submitted. Through emphasis on compliance with the program conditions and operations procedures as well as FM training, it was later upgraded to moderately satisfactory. The SDHUD was working with the COG and the counties to make progress towards compliance with the fiduciary requirements. 41. Despite procurement challenges on the IPF component, Window 1 delivered valuable tools, demand- driven training, and technical assistance to support the strengthening of County and Urban Governments in areas of urban governance, planning, and resilience, as well as fiduciary and E&S management. The NPCT also established a Capacity Enhancement Program to provide municipalities with additional supporting staff to implement the Program, some of which have now been absorbed by the Counties. The covid-19 pandemic disrupted support for the supervision and monitoring of county-level processes and activities, as well as slowing down policy- related activities and technical guidance. This resulted in low absorption of funds. Additionally, a few consultancies proposed had to be canceled due to procurement challenges or lack of time to deliver. IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION M&E Design 42. Since a ToC was not required at preparation, the RF provided a description of the link between most of the PDO and intermediate indicators and their corresponding activities, baselines, end target, data sources and responsible agencies. For example, the objectives were clearly specified in the PDO (to establish and strengthen urban institutions to deliver improved infrastructure and services in participating counties) and remained the same throughout the project. Similarly, the intermediate results indicators captured the contribution of the project’s activities and outputs towards achieving the two PDO-level outcomes, and were specific, measurable and achievable. The baselines, target values, and frequency were available for all indicators. However, some targets set at appraisal were too modest (for example, the end target for the three PDO indicators and most of the intermediate results indicators were significantly surpassed, in some cases by more than three times the set target). 43. DLI verification protocols were clearly defined at Appraisal and included in the POM to ensure a rigorous verification process, capturing both quantitative and qualitative aspects of the DLI achievements. The protocol included a description of the data source, the independent APA team, the PTC and PSC as the verification entities and the annual procedures to evaluate the achievement. The M&E design and arrangements were well embedded Page 13 of 48 The World Bank Kenya Urban Support Program (P156777) institutionally, with the monitoring and reporting taking place at both national and county levels of government. Monitoring and evaluation took place at both national and county levels of government. At the national level, SDHUD was responsible for leading the results monitoring and evaluation and verification of DLIs. APAs were carried out by an independent verification agency (IVAs) contracted competitively by SDHUD to verify all DLIs. A detailed verification protocol and procedures were developed in the POM to guide the results monitoring and evaluation and verification of DLIs during the implementation. M&E Implementation 44. During implementation, M&E took place at national and county government levels. At the county level, data was collected from the relevant county/urban board departments to report on program implementation and capture data on urban governance, urban infrastructure, and services delivered using program funds. This data was also part of the key data required for the APA, the findings of which were the key source of information to track the indicators presented in the RF. The participating counties also prepared progress reports twice a year (a midyear report and an annual report) containing agreed data and transmitted them to the SDHUD. M&E specialists at the SDHUD consolidated such input into a single progress report for presentation to the PSC, PTC, and the Bank for review and comments. The M&E specialists in SDHUD also provided training and backstopping support to staff at the county/urban levels to ensure that the reports were timely, comprehensive, and accurate. The Program rolled out the Geo-Enabling Monitoring and Supervision (GEMS) tool for adoption by counties and municipalities. Despite the ease of data collection and analysis, especially for granular data, and using dashboards to display information, there were some persistent challenges. One main challenge was the late report and incomplete submissions from counties and municipalities. Given the staff turnover in some counties and urban areas, more training was needed during the implementation of the use of the GEMS tool. 45. Results were monitored through the APA and several evaluations. Three APAs were conducted and provided data for the achievement of DLIs. Two APAs were conducted by an independent firm, while the OAG conducted the final APA. Three other evaluations were conducted, and data for the RF were provided: BEA, EPE, and VfM. A complimentary technical infrastructure visit was also used to monitor results and offered valuable insights on the progress of activities implementation at the local levels. M&E Utilization 46. The project indicators were monitored against their targets to measure the accomplishment of objectives. The RF and monitoring reports were used routinely during Implementation Support Reviews. As a PforR operation, reliable, up-to-date monitoring, verified by an external IVA was critical for triggering the disbursements. For this, the implementation support missions also reviewed progress according to the DLI matrix and assessed the likelihood of achieving remaining DLIs. Several indicators relied on periodic surveys to measure progress, and given delays in initial implementation, the periodicity of those surveys was reduced with results only becoming available upon completion of end-line surveys. Overall, M&E was used to inform project management and decision-making. At MTR, M&E led to restructuring to allocate resources between DLI1 and DLI3 and other changes to the RF as mentioned in previous sections. These changes aimed at enhancing implementation of the Program. The restructuring, therefore, allowed for a better assessment of the project’s outcomes. The M&E data and findings were also used to inform KUSP2, as an immediate subsequent intervention to build on KUSP experience. Justification of Overall Rating of M&E Quality 47. The overall rating of M&E Quality is Substantial. The program’s M&E, including RF, DLIs and monitoring and evaluation plans and procedures was: (i) well-designed, with coherence and complementarity among results areas, key indicators and DLIs; (ii) implemented well, albeit some moderate shortcomings in the RF that were Page 14 of 48 The World Bank Kenya Urban Support Program (P156777) rectified with the restructuring following the MTR, including some modest end targets for several indicators were not adjusted although these appear to have been fully met by MTR; and (iii) utilized reliably and increasingly as implementation progresses to inform issues and areas of concern, as well as credit disbursements. Overall, the M&E system as designed and implemented was generally sufficient to assess the achievement of the objectives and test the links in the results chain, except there was no PDO indicator for Objective 2 – improved service delivery. More generally, both the M&E and the DLIs were rated Satisfactory for all the implementation period of the project. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE 48. Compliance with overall E&S safeguards is rated as Moderately Satisfactory. Several challenges affected the E&S ratings throughout the life of the Program due to non-compliance with specific policy requirements for functional environment and social safeguards systems according to the Bank’s PforR Financing Policy. At the county level, some of the challenges included: (i) commencement of subprojects without the National Environment Management Authority (NEMA) approvals; (ii) non-compliance with occupational health and safety (OHS) requirements at most construction sites, (iii) weak grievance systems and citizen feedback that allow for a transparent, timely and efficient redress process, and (iv) inadequate skills by county officers on program requirements with respect to environment, health and safety and social compliance. 49. The program made progress in addressing most E&S risks. Overall, the municipalities overtime increased the presence of E&S specialists, mostly seconded from the counties, although continuous capacity building and support on E&S issues was required to complete works. There was also progress in E&S risks management including undertaking training on programs E&S requirements and procedures, establishing of GRM structures, sensitization on OHS regulations by Directorate of Occupational Safety and Health services (DOSHS) for the participating municipalities. To enhance the monitoring system, NPCT supported the municipalities in establishing a monitoring system with relevant tools to enhance municipal compliance with Kenyan Laws. Towards the end of the project, there was also a notable progress in resolving and closing grievances filed with the Grievance Redress Service (GRS). Streamlined coordination between NPCT, County Program Coordination Teams (CPCT) and Bank teams demonstrated benefits towards amicable resolution of project complaints. GRM systems at County and National levels were also continuously being strengthened and supported through the program. The NPCT has documented experiences concerning E&S mitigation measures, milestones achieved, challenges, key lessons learned, and recommendations. Key learnings and recommendations are being integrated into E&S arrangements for KUSP2. 50. A total of 567 grievances of varied nature were registered, mainly related to poor workmanship, displacements, health and safety, environment non-compliance, labour disputes, procurement and governance, poverty destruction and disputed access. Of these, 529 (93%) were resolved and closed at that level, and the rest are still in resolution phase or pending court resolutions. A total of 45 (8%) of the registered cases were escalated to the Bank, State Department of Housing and Urban Development (SDHUD), or courts for resolution. Under the grievances logged by the Bank, 80% of the complaints (63 out of a total 71 received) have been amicably closed, with 6 outstanding (2 at advanced stages of resolution and 4 under EACC or court investigation). A total of 8 cases registered in the Bank GRS have been successfully closed in the course of the program. The resolution of complaints has relied on continued collaboration between the WB task team, the NPCT, and the CPCTs. The NPCT and CPCTs will continue monitoring and reporting on the outstanding cases post -program closure until all are resolved. 51. Financial Management. Overall, FM performance was rated moderately satisfactory, with periods of moderately unsatisfactory due to delays in the internal audit reviews, delays in the transfer of funds from CRF to SPA, and FM weaknesses at counties related to unsupported expenditure and high staff turnover among others. Despite achieving 100% disbursements of conditional grants, there were reported challenges related to Page 15 of 48 The World Bank Kenya Urban Support Program (P156777) infrastructure investments, especially the financing gap from multi-year investments, but the counties have committed to finance and finalize them. The program was compliant in submitting timely and acceptable IFRs for the IPF component. Delays in the submission of audit reports were experienced in the first three years, with timely submission in the last three years. Three audit reports were unqualified (2018, 2021 & 2022), while three were qualified (2019, 2020, and 2023). The final program audit will be submitted by December 31, 2024. The program expenditure reconciliation has been concluded with total program expenditure totaling Kshs. 29, 312,375,612, exceeding the DLI payments amounting to Kshs. 28,271,366,851, thus fulfilling the PforR requirements. Expenditure amounting to Kshs. 360,317,969 was excluded from the expenditure framework due to noncompliance with program processes. The undocumented Designated Account status has an outstanding balance of USD 1,171,328.52 as of May 2024, which would need to be refunded or have expenditure documented before the June 30, 2024. 52. Procurement. At the national level, procurement fell under the IPF modality (Window 1), adhering to the WB Procurement Guidelines on IPF. Despite procurement challenges experienced through the course of the program, mainly delays with lengthy procurement periods at the SDHUD, the IPF component was able to deliver valuable tools, demand-driven training and technical assistance (TA) to support the strengthening of County and Urban Governments in areas of urban governance, planning and resilience, as well as fiduciary and E&S management. As the IPF could only fund activities completed by the closure date of December 31, 2023, and payments made by April 30, 2024, the program closed with undisbursed balances, as mentioned in previous sections. However, minor shortcomings in the procurement process were reported in the Project Closure Report by NPCT, notably in the forms of delays in the issuance of extensions for ongoing consultancies, delays in payments to consultancies and service providers, and lengthy procurement periods due to normal WB procurement officers’ rotations. To avoid these challenges in future programs, it would be essential to have a procurement officer with all the necessary authorizations to approve procurement processes. C. BANK PERFORMANCE Quality at Entry 53. Quality at entry is rated Highly Satisfactory. The WB supported the GoK in preparing a well-designed project that responded to their priorities. The Operation’s design emerged in the context of devolution and was informed by the WB’s existing urban operations in Kenya, complementing the achievements of those projects by addressing the urban institutional and financial challenges. The design adopted a combination of a PforR instrument and an IPF instrument to support its PDO. The rationale for using IPF as a financing instrument for this intervention arose from the lessons learned from other PforR operations in the country, which suggested the need to provide a high level of budget predictability for undertaking national government actions that are critical for the success of the Operation as a whole, in particular, county-level APAs. The RF was concise and complementary with DLIs, the M&E framework was effective for routine monitoring and evaluation, and substantiating disbursements, although the targets set at appraisal could have been more ambitious. The preparation team helped design a project that was appropriate in scope, and within the GoK’s institutional framework with the support of the SDHUD to help ensure its efficient implementation and build capacity simultaneously. Quality of Supervision 54. Quality of Supervision is rated Satisfactory. Overall, WB’s supervision was timely, responsive, and results- focused, as required by a results-based structure, and carried out mostly by a Country-office-based team. There were two Task Team Leaders during the entire preparation and implementation cycle. Three short-term consultants were hired to closely monitor implementation and provide near real-time support and guidance to the client on any Page 16 of 48 The World Bank Kenya Urban Support Program (P156777) evolving implementation challenges. The WB’s implementation support was hands-on and pragmatic in terms of disseminating required knowledge and best practices, co-facilitating review and evaluation measures, identifying sustainability measures, and adjusting the design to reflect its reduced scope necessitated by the GoK’s new policies and decisions, and to reflect its implementation experience. However, minor shortcomings in the procurement process were reported in the NPCT Project Closure Report, notably lengthy procurement periods due to WB procurement processes and officers’ rotations. As described in the PAD, the Bank was to conduct regular quality assurance reviews (QAR) of the APAs to revise the results and accompanying evidence, assess DLR achievement, and sample a few counties and municipalities to validate APA results. Despite the team not documenting the outcomes in the QAR document, the team conducted the QAR functions by reviewing the evidence from the APA reports from the national and municipal levels and documenting the outcomes in the Aide Memoires and ISR reports. The final APA documented all the comments and reviews from the Bank. Additionally, waivers in MCs and PSs should have been properly reported and documented, although the PAD allowed flexibility in terms of granting these waivers in the first and second APAs due to the novelty approach of incentivizing the establishment of new institutions. Despite these minor shortcomings, the challenges of implementing a novel approach in the country, and the restrictions imposed by the COVID-19 pandemic, the Bank team’s efforts during supervision assured that the delivery of the PDO and results was not affected. The MTR was comprehensive and instrumental in agreeing to improvements in implementation. Reporting was provided jointly for the PforR and the IPF. The timely restructurings adjusted the RF, DLI matrix and financing amounts through cancellations that adjusted the PforR and IPF funding in line with revised needs. Nevertheless, the restructuring did not provide clear modalities for the undertaking, as a total of Ksh. 450 million intended to be reallocated from Window 1 (IPF) to the PforR component remained undisbursed due to lack of clear modalities. Reporting was succinct, timely and thorough, and ratings were well documented in ISRs. The team was especially effective in working with the client to identify actions required to ensure the sustainability of the Program’s achievements beyond the implementation period. Justification of Overall Rating of Bank Performance 55. Based on the assessment of Quality at Entry and Quality of Supervision, the overall Bank performance is rated as Satisfactory. D. RISK TO DEVELOPMENT OUTCOME 56. The development outcomes achieved are likely to be sustained. KUSP has supported building capacity in counties and municipalities in different areas. Counties now have the minimum fiduciary staff to support the programs and municipalities. However, limited public investment in and financing urban development has been partly to blame for the low quality of urban infrastructure and services. The current fiscal transfer system does not directly fund urban boards. The current structure of county and urban governance, coupled with the predominantly rural nature of most counties, places urban areas at a funding disadvantage. Most urban boards have no budgets for operations and maintenance (O&M), leading to the degradation of public assets. Insufficient, over-used and under-maintained infrastructure discourages private investments and undermines productivity and competitiveness. Reaping the full benefits of urbanization will require investments in new and existing infrastructure and services. The follow-on program KUSP2 will further strengthen the capacities of urban institutions to improve the delivery and resilience of urban infrastructure and services. In this sense, the new Program will strengthen the PFM systems at the urban entities by requiring preparation model laws to assist counties in operationalizing the provisions of Section 173 of the PFM Act, 2012 to fund urban areas and cities and improve municipal PFM systems as a minimum condition to access the UDGs. KUSP2 will also require that investments need to be accompanied by O&M plans for infrastructure sustainability and avoidance of potential ESHS impacts. Page 17 of 48 The World Bank Kenya Urban Support Program (P156777) V. LESSONS AND RECOMMENDATIONS 57. Sustainability of the Program’s results requires county governments and urban institutions to champion urban reforms while managing the incentive effect of these programs. Although the Program incentivized counties to establish urban institutions and make them operational, more needs to be done to strengthen the effectiveness and capacities of urban boards to deliver services. In many cases, the newly created boards and administrations were weakly empowered, lacked access to human and financial resources, and had a weak mandate to manage urban areas and coordinate/deliver infrastructure and services. This also speaks to the incentive effect of these programs. On the one hand, the Program was much more successful than anticipated, as no county government wanted to be left out of KUSP, even if the money was relatively low to the county's development budget in some cases. On the other hand, given that UACA’s definition of an urban areas lacks a density component, there was also a perverse incentive to define boundaries to meet the 50,000-population threshold and establish some relatively rural municipalities. Some recommendations in this area are: (i) County Governments must develop guidelines and operational frameworks for smooth transfer of functions and resourcing to the urban institutions; (ii) there must be commitment by County Public Service Boards towards staffing of urban institutions; (iii) financing must follow functions, enhancing own source revenues and asset management; (iv) support the development of comprehensive performance management systems for municipalities; (v) provide adequate resources for O&M; (vi) national governments should have clear policies and regulations for the establishment of urban areas in an effective way. 58. Partnering with the right stakeholders and providing hands-on support will significantly contribute to the Program’s success. During implementation, the NPCT engaged closely with relevant MDAs 22 and had a pool of technical experts to provide hands-on training and capacity building. NPCT worked closely with CoG to strengthen inter-governmental relations, coordinated capacity-building activities and policy and legislative review and development, and provided support for program coordination, including social risk management and FM. The strong engagement with CoG became an integral element of KUSP success by troubleshooting problems and enhancing coordination and communication with Counties and Municipalities. Without this key partner, the Program would not have achieved the results it managed to accomplish. This type of programs can help strengthen the devolution program, although it is important to clarify the roles of different stakeholders. For example, the national government is responsible for policy making, technical assistance, and capacity building, while subnational governments are responsible for service delivery. Additionally, although PforRs are supposed to require a low transaction and are not seen as high-risk, the experience with KUSP and other PforR projects in the country, such as KDSP, is that these types of programs still require intense technical engagement from the Bank. For example, although E&S specialists receive less allocation for staff time given a generic approach to risk and use of the country system, the KUSP experience highlighted the need for capacity building and handholding. 59. Comprehensive and continuous capacity building in a hybrid PforR and timely monitoring can help reduce delays and improve the Program’s results. KUSP’s hybrid approach of PforR and IPF was selected based on lessons learned from KDSP. For PforRs, it is key that the government has the resources to provide the needed capacity- building and program management support. In the context of Kenya, adding a national-level DLI would not have guaranteed that a sufficient budget was allocated, so the IPF offered a solution. It also allowed the Bank to provide more hands-on support in implementing capacity building and TA. However, the size of the IPF needs to be adequate, and a clear and budgeted work plan must be implemented to avoid underspending. In the case of KUSP, additional challenges related to COVID-19 made it difficult to conduct some of the planned capacity building. Moreover, high staff turnover at urban levels contributed to delays in investment implementation and shortcomings 22Examples include National Treasury on PFM, State Department of Public Service on HRM, State Department of Public Works, Kenya Urban Roads Agency, the NEMA on technical guidelines, standard and norms. Page 18 of 48 The World Bank Kenya Urban Support Program (P156777) in reporting, FM, and ESS compliance, which necessitated continuous training and capacity development. There is a need for a comprehensive Annual Capacity Building Plan based on an institutional needs assessment, including aspects of infrastructure design and contract management, which were the cause of many grievances in KUSP. Further, the plan needs to provide adequate modalities to provide capacity building in a timely way for a program of a national scale. Additionally, systems that allow continued and reliable monitoring of the progress of works can help the national government provide timely hands-on support to address implementation bottlenecks and reduce delays. These systems must be accompanied by the designation of clear processes and responsibilities at the national and subnational levels, and capacity building. 60. A robust APA process is critical for the Program's success. To ensure the quality of the results and incentivize performance improvements through the different APA cycles, a number of issues need to be considered, including (1) the WB should document in a QAR its validation of the results of the APA; (2) the finance agreement should link the definition of the MCs and PSs to the POM to ensure compliance and any changes agreed should be revised in the POM; (3) given that the APA process seems to be inherently a political process in Kenya, the role of the Program Steering Committee should not interfere with the results of the APA; (4) allocations to counties should strictly follow the results of the APA and no ‘waiver’ should be granted. 61. Including national-level agencies responsible for E&S standards in program design can mitigate ESS issues by supporting oversight. KUSP supported extensive infrastructure investments at the urban areas level, which required considerable safeguards capacity building at the county and urban areas level. However, the Program suffered from numerous E&S issues as described in previous sections. There is a need for close collaborative working arrangements with key regulatory agencies such as NEMA and DOSHS to ensure that Municipalities comply with environmental permit conditions and provide capacity building to municipalities and counties to manage environmental, health and safety risks based on national laws and regulations. 62. Strengthening financial management systems can reduce delays. Despite the progress noted in the fiduciary system towards the end of KUSP, some key challenges related to delays in inter-government transfers of funds, delayed payments of contractors and services, which contributed to the slow absorption rate and partial cancelation of funds, weak audit committees, among others, persisted. Lessons learned in these areas include: (1) Linking APA processes with budget cycles is critical for disbursements to be synchronized with FY budget cycles, and avoid delays in identification, designs, procurement and implementation of investments without waiting for supplementary budgets approval; (2) to avoid delays in APAs, multi-year APA contracts can be negotiated and renewed every year subject to satisfactory performance; (3) to assist in coordinating the budget and funds flow of conditional grants and minimize FM risks, the support of the CoG is instrumental and needs to be provided with adequate capacity; (4) need to engage the internal audit at the national and county level from the onset of the Program design and implementation; (5) need to provide continuous capacity building and backstopping to accountants and finance officers at the local level; (6) need to enhance records management capacity in municipalities, (7) need to ensure government financing is systematically increased through the life of programs to ensure sustainability of initiated and new interventions. Finally, during the program implementation period tracking and reporting of expenditure was mainly on IDA resources instead of including government resources that were incorporated in the last program report. The budget codes for the expenditure framework for the program should be defined and tracked both at the national and the county level to ensure both IDA and government resources are captured and reported on, including in the audited financial statements. . Page 19 of 48 The World Bank Kenya Urban Support Program (P156777) ANNEX 1. RESULTS FRAMEWORK, DISBURSEMENT LINKED INDICATORS, AND PROGRAM ACTION PLAN Annex 1A. RESULTS FRAMEWORK (i) PDO Indicators Objective/Outcome: Urban areas with approved charters, established boards, appointed urban managers, and a budget vote Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Urban areas with approved Number 0.00 35.00 77.00 charters, established boards, appointed urban managers, 26-Jul-2017 31-Dec-2023 31-Dec-2023 and a budget vote (measures establishment of urban institutions). Comments (achievements against targets): Target Surpassed. The Program has catalyzed the establishment of 59 municipalities across the 45 beneficiary counties and 18 additional municipalities (Elwak, Mwingi, Diani, Kitengela, Bondo, Malaba, Kehancha, Oyugis, Emali, Juja, Ahero, Nanyuki, Maua, Kenol, Gilgil, Kilgoris, Engineer, and Chuka), demonstrating that the Program had institutional development impacts beyond the original target. Objective/Outcome: Urban areas that utilize at least 50 percent of the budget intended for their urban investments Page 20 of 48 The World Bank Kenya Urban Support Program (P156777) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Urban areas that utilize at Number 0.00 17.00 57.00 least 50 percent of the budget intended for their 31-Jul-2017 31-Dec-2023 31-Dec-2023 urban investments Comments (achievements against targets): Target surpassed: 96% of beneficiary municipalities absorbed 100% of UDG allocation under FY 2018/2019 UDG allocation and over 50% of the 2019/2020 UDG allocation per the program’s eligible menu. According to APA 3 (last and final APA), 57 municipalities had used 100% of the 2018/2019 UDG allocation and over 50% of the 2019/2020 allocation, per the eligible expenditure menu. Only two municipalities, Kitui and Hola, did not meet this minimum condition. Although no new APA was undertaken, NPCT has provided demand-driven support to Kitui and Hola municipalities to attain this target. Objective/Outcome: Urban areas that have an approved Annual investment plan and Urban area plans Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Urban areas that have an Number 0.00 15.00 57.00 approved Annual Investment Plan and Urban Area plans 31-Jul-2017 31-Dec-2023 31-Dec-2023 Comments (achievements against targets): Target Surpassed: The capacity of urban institutions to prepare annual investment plans and urban area land use plans has significantly improved. According to APA 3 (last and final APA), 57 municipalities met UDG minimum performance standard 7, which measures the number of municipalities with annual urban investment plans in place, with commensurate budget allocation for funding UDG investments. 57 Municipalities prepared Integrated Development Plans, and 51 municipalities prepared Urban Spatial Plans. Page 21 of 48 The World Bank Kenya Urban Support Program (P156777) (ii) Intermediate Results Indicators Results Area: National Level Results Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Guidelines on planning, Number 0.00 6.00 4.00 infrastructure, and basic service delivery prepared 06-Jul-2017 31-Dec-2023 31-Dec-2023 and made public on MTIHUD website Comments (achievements against targets): Target partially achieved: Four guidance notes have been finalized. Two notes support establishing urban institutions and citizens’ participation in urban governance, including (i) The Urban Boards Induction and Training Guidebook and (ii) the Citizen Forum Handbook. In addition, (iii) the Solid Waste Management guidelines and Urban Resilience guidelines (guidance notes) have also been finalized. Preparation challenges of other guidance notes (on Municipal Finance, Urban Planning, and Management, Participatory Slum Upgrading, and Urban Mobility) with UN-Habitat were encountered. Further, the Participatory slum upgrading and Urban mobility guidance notes are in draft form and are expected to be finalized in the second phase of the Program, KUSP2. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion APA results (UIG and UDG Yes/No No Yes Yes Page 22 of 48 The World Bank Kenya Urban Support Program (P156777) allocations) made on time 06-Jul-2017 31-Dec-2023 31-Dec-2023 (before end of FY and prior to start of next FY) Comments (achievements against targets): Target Achieved: The Third and Final Annual Performance Assessment (APA 3) was successfully concluded. The process was led by the Office of Auditor General (OAG) and proved very efficient in executing the task. The APA 3 results were used to inform the final disbursement of the PforR component (US$ 37.4million) in June 2021. No new APA was undertaken as the program was fully disbursed. Results Area: County and Urban Area Results: Urban Management Systems in place Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Counties that qualify for the Number 0.00 45.00 45.00 UIGs 06-Jul-2017 31-Dec-2023 31-Dec-2023 Comments (achievements against targets): Target achieved: Urban Institutional Grants (UIG) have strengthened urban institutions. Based on APA 3, all 45 Counties met the three minimum conditions for access to UIG, which include (1) a signed participation agreement in place, (ii) a County Urban Institutional Development Strategy (CUIDS) and commensurate budget annexed in the CIDP, and (iii) UIG of previous year spent in accordance to the eligible menu. The UIG supported various activities, including the establishment and delineation of urban institutions (preparation of Municipal Charters and urban strategic plans); development of policies and plans related to urban planning and development control; solid waste management; induction, training, sensitization forums, peer learning, and benchmarking activities; equipping, furnishing, and operationalizing new municipal offices (e.g., Tharaka Nithi operationalized a GIS laboratory); facilitated setting up of systems towards streamlining operations at the urban level (e.g. installation of Electronic Development Application Management System in Makueni); public participation and stakeholder forums related to prioritization of investment, budgeting, and preparation of Urban Integrated Page 23 of 48 The World Bank Kenya Urban Support Program (P156777) Development Plans. The Beneficiary Assessment notes that improved governance structures and FM practices have been observed in beneficiary municipalities due to the UIG. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Urban areas for which citizen Number 0.00 35.00 54.00 fora (public consultations between urban board and 06-Jul-2017 31-Dec-2023 31-Dec-2023 residents, including plan and budget consultations) have been held at least once a year. Comments (achievements against targets): Target surpassed: Citizen engagement fully integrated into investment prioritization, budgeting, and development planning at the urban level. UDG Performance Standard (PS) #3 assessed the frequency of citizen engagement between urban boards and residents on planning, budgeting, budget execution, etc. From APA 3, there has been a tremendous improvement in citizen engagement, with APA 3 recording 54 municipalities (91%) having held at least two citizen forums (public consultations between urban boards and residents) on planning, budgeting, and budget execution, up from 28 municipalities in APA 2. In addition, the number of municipalities that availed their key public documents online increased from 39 (66%) to 54 (91%) under APA 2 and APA 3, respectively. More so, 39 municipalities (66%) publish their annual calendar of citizens’ fora with urban area residents, including plan and budget consultations announced in local media and county government websites. The municipalities have continued to engage citizens in budget processes, safeguards, and planning. Results Area: County and urban area results: Urban planning, infrastructure and services Page 24 of 48 The World Bank Kenya Urban Support Program (P156777) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion People provided with Number 0.00 3.50 3.60 improved urban living conditions (million) 06-Jul-2017 31-Dec-2023 31-Dec-2023 Comments (achievements against targets): Target achieved: Over 3.6 million urban residents have benefitted from improved access to critical urban infrastructure in the 59 beneficiary municipalities. A total of 388 infrastructure investments have been initiated across the 59 beneficiary municipalities. Among others, KUSP has financed the construction of 246km of drainage system, 218 km of roads, 225 km of NMT facilities, 128 high mast security lights, 25 markets, 22 public green parks, 5,000 parking facilities, 12 bus parks, 14 Fire stations, 5,241 streetlights, 13 km of sewer line and 3 community facilities. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 1.a. People provided with Percentage 0.00 50.00 50.00 improved urban living conditions (of which female, 06-Jul-2017 31-Dec-2023 31-Dec-2023 [percentage]) Comments (achievements against targets): Target achieved. As the project supports 59 municipalities, the beneficiary assessment took a sampling approach and, therefore, did not measure this indicator in totality. However, from the 2019 Population census, the male-to-female ratio was determined at 49.9 to 50.1 percent, respectively. The assumption, therefore, was that over 50 percent of the direct beneficiaries are women. Page 25 of 48 The World Bank Kenya Urban Support Program (P156777) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion UDGs for the previous FY Percentage 0.00 90.00 96.00 spent in accordance with the eligible investment menu 06-Jul-2017 31-Dec-2023 31-Dec-2023 Comments (achievements against targets): Target surpassed: UDG investments aligned to the program investment menu and urban investment plans: UDG Minimum Condition 8 assessed that the UDG was utilized according to the program’s eligible investment menu. Under APA 3, 96% of the beneficiary municipalities (57 out of 59) met UDG minimum condition 8. Continuous monitoring mechanisms and targeted capacity building and training by the NPCT team contributed significantly to the investment selection processes and proposal development by beneficiary municipalities per the investment menus. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Drainage systems built or Kilometers 0.00 10.00 246.00 rehabilitated under the progarm 06-Jul-2017 31-Dec-2023 31-Dec-2023 Comments (achievements against targets): Target surpassed: Eleven percent of investments under the program were towards the construction or rehabilitation of stormwater drainage facilities in the beneficiary urban areas. Over 246 km (146.5 km being part of the road works and 100 being standalone storm water drainage channels) of drainage network have been completed and operationalized, directly benefitting over 150,000 people. In fast-growing municipalities, including but not limited to Kiambu, Malindi, Narok, Naivasha, and Kisumu, the invaluable impacts on flood management, improved land values, improved rates collection, reduction in water-borne diseases, and improved safety and quality of life of residents has been recorded. O&M requires urgent attention and financing, as well as robust SWM management systems to ensure sustainability. Page 26 of 48 The World Bank Kenya Urban Support Program (P156777) Eleven percent of investments under the program are towards construction or rehabilitation of storm water drainage facilities in the beneficiary urban areas. Over 233 km (122 km being part of the road works and 112 being standalone storm water drainage channels) of drainage network have been completed and operationalized, directly benefitting over 100,000 beneficiaries. In fast growing municipalities, including but not limited to Mandera, Kiambu, Malindi, Narok, Naivasha and Kisumu, the invaluable impacts on flood resilience, improved land and rental prices, improved rates collection for Counties, reduction in water borne diseases and improved safety and quality of life of residents has been recorded. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Nonmotorized transport Kilometers 0.00 100.00 225.00 facilities constructed or rehabilitated under the 06-Jul-2017 31-Dec-2023 31-Dec-2023 program Comments (achievements against targets): Target Surpassed: Connectivity has been prioritized by counties for investment using UDG funding. Over 225 km of NMT facilities, including walkways and cycle paths, have been completed and operationalized as standalone infrastructure or as part of road upgrading works. The stand-alone NMT infrastructure, amounting to 113 km, directly benefits over 100,000 urban residents, with the completed NMT facilities and road rehabilitation works benefitting over 350,000 urban residents with improved safety and security for pedestrians and cyclists and improved accessibility and connectivity noted. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion High-mast security lights Number 0.00 30.00 128.00 installed under the program 06-Jul-2017 31-Dec-2023 31-Dec-2023 Page 27 of 48 The World Bank Kenya Urban Support Program (P156777) Comments (achievements against targets): Target Surpassed: A total of 128 high masts have been completed and operationalized, directly benefitting over 100,000 urban residents. The use of renewable energy sources, including solar and wind, has been demonstrated and is supported. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Markets constructed under Number 0.00 4.00 25.00 the program 06-Jul-2017 31-Dec-2023 31-Dec-2023 Comments (achievements against targets): Target Surpassed: To date, 25 markets and upgrading of market stalls have been completed and operationalized within the various municipalities (including Kapenguria, Maralal, Ol Kalou, Naivasha, Migori, Awendo, Meru, Wote, Lamu, Kisumu, Homa Bay, Kilifi, Kimilili, Kerugoya Kutus, Mwatate, Maralal, Bomet, Kathwana, Kajiado, and Wajir. and Kerugoya Kutus), directly benefitting over 10,000 local traders with improved facilities for trade and directly benefitting over 400,000 urban residents living within 3 km walking distance from the market. The Value for Money Audit determined that markets deliver up to 13% return on investment for municipalities with significant socio-economic impacts demonstrated, such as increased employment, higher value-added, improved economic stability, increased access to goods and services, lower-cost options for the community, additional revenue generation for municipalities, and enhanced reliability and transparency in service provision. Access to operation and maintenance budgets remains a challenge for municipalities. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Public green urban spaces Number 0.00 10.00 22.00 Page 28 of 48 The World Bank Kenya Urban Support Program (P156777) constructed or rehabilitated 06-Jul-2017 31-Dec-2023 31-Dec-2023 under the program Comments (achievements against targets): Target Surpassed: A total of 22 urban recreational parks have been completed and are operationalized (in Wote, Malindi, Thika, Ruiru, Awendo, Kikuyu, Kakamega, Kisumu (4), Kericho, Siaya (2), Iten, Kwale, Naivasha, Kajiado, Kisumu, Eldoret and Kapenguria) benefitting over 190,000 urban residents living within 2 km radius from these facilities. Numerous landscaping activities have also been implemented in various municipalities. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Municipal solid waste Number 0.00 10.00 54.00 policies and plans prepared under the program adopted 06-Jul-2017 31-Dec-2023 31-Dec-2023 Comments (achievements against targets): Target surpassed: SWM Capacity enhanced with coverage and collection improved at the urban level due to UDG support: UDG Performance Standard (PS) 9 assessed that the municipal board has adopted a solid waste collection and disposal policy and plan and is being resourced and implemented. From the three APAs, continuous improvement is demonstrated from 25 municipalities in APA 2 to 54 municipalities in APA 3. Additionally, Counties such as Garissa, Isiolo, Kakamega, Lamu, Samburu, and Trans Nzoia have leveraged the UIG in preparing Solid Waste Management Policies and Plans in community sensitization and awareness to enhance compliance. Further, over 5 percent of the total UDG investments have been aligned towards improving the collection and handling of solid waste, with over 30 municipalities leveraging on the UDG to finance the purchase of SWM equipment and boost collection and coverage. Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Formally Revised Completion Page 29 of 48 The World Bank Kenya Urban Support Program (P156777) Target Urban spatial plans Number 0.00 8.00 51.00 completed under the program 06-Jul-2017 31-Dec-2023 31-Dec-2023 Comments (achievements against targets): Target surpassed: Capacity to prepare and approve urban spatial plans has greatly improved: UDG Performance Standard (PS) 8 assessed the availability of an updated and approved Urban Spatial Plan in the beneficiary municipalities. From the three APAs, continuous improvement in the capacity of municipalities to prepare sustainable urban land use plans has been demonstrated, from 21 municipalities under APA 1 to 41 municipalities under APA 2 and 51 municipalities under APA 3. Various Counties (including Bomet, Bungoma, Homabay, Kirinyaga, Laikipia, Lamu, Makueni, Migori, Nakuru, Nandi, Nyamira, Elgeyo Marakwet and Taita Taveta) have leveraged on the UIG to finance the preparation of spatial plans and development control tools. Other Counties (as Bomet, Kakamega, Nakuru and Migori) have utilized the UIG to prepare land use plans for other emerging urban areas, with Nakuru financing preparation for over 29 urban centers. Challenges in financing the implementation of land use plans still need to be addressed. A spatial planning assessment was undertaken under the IPF component that proscribed recommendations for boosting spatial planning capacity in municipalities under KUSP 2 implementation. (Discrepancies between the measure of this indicator (urban spatial plans completed) and what is actually measured in the APA process (i.e., urban spatial plan is completed and available, and not necessarily completed under t he Program) contributed to the deviation between the target and the actual.) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Urban IDEPs completed Number 0.00 35.00 57.00 under the program 06-Jul-2017 31-Dec-2023 31-Dec-2023 Comments (achievements against targets): Target surpassed: Capacity to prepare and implement Urban Integrated Development Plans (IDePS) has continuously improved. UDG Performance Standard (PS) 7 assessed the availability of an approved Urban Integrated Development Plan. The achievement of this indicator has gradually improved Page 30 of 48 The World Bank Kenya Urban Support Program (P156777) from 20 in APA 1 to 46 in APA 2 and 57 in APA 3. This demonstrates the improved capacity of the beneficiary municipalities to prepare robust Urban IDePS. Learning from APA 1 and 2, APA 3 additionally assessed the status of approval of the IDEPS by municipal boards. It is demonstrated that 57 municipalities have approved Urban Integrated Development Plans that are integral in guiding development priorities and resource allocation in the municipalities. Counties (including Bungoma, Embu, Lamu, Makueni, Mandera, Nandi and Tana River) have leveraged on the UIG in financing the preparation of urban IDePS and strategic plans. Additionally, continuous targeted capacity building has been provided to municipalities to enhance their preparation of ba nkable Urban IDePs. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Roads constructed or Kilometers 0.00 100.00 218.00 rehabilitated under the program 17-Jun-2021 31-Dec-2023 31-Dec-2023 Comments (achievements against targets): Target Surpassed: Connectivity infrastructure has been prioritized by the beneficiary municipalities for investment using UDG funding, with 67% of the total UDG investments financing connectivity infrastructure, including roads, pedestrian walkways and cycle paths, bus parks, parking facilities, road signage, and street lighting. Over 218km of road upgrading works, including the provision of associated infrastructure such as storm water drains, footpaths, bicycle lanes, landscaping, road furniture, and signage, have been completed and are operational, benefitting directly over 200,000 urban residents with improved safety and security for pedestrians and cyclists and improved accessibility and connectivity. Additionally, over 5,000 parking facilities and 12 bus parks benefitting over 100,000 urban residents within 3 km radius have been constructed and operationalised. These have considerably contributed to boosting revenues for the municipalities and enhancing mobility for urban residents. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Page 31 of 48 The World Bank Kenya Urban Support Program (P156777) Street lights installed under Number 0.00 1,000.00 5,241.00 the program 17-Jun-2021 31-Dec-2023 31-Dec-2023 Comments (achievements against targets): Target Surpassed: Over 14 municipalities have invested mostly in solar-powered street lighting systems, with impacts on enhanced business opportunities, enhanced business operation timings, improved security, and improved standards of living have been recorded. Over 1 million urban residents have directly benefitted from this intervention. O&M challenges continue to be addressed to ensure the sustainability of the infrastructure. ANNEX 1B. DISBURSEMENT LINKED INDICATORS DLI 1: Window 2: County governments - County governments commit to address urban development and management issues (County Governments have met UIG MCs) (Number) Baseline 2017-18 2018-19 2019-20 2020-21 2021-22 2022-2023 Total Original values 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Actual values 45.00 0.00 0.00 0.00 0.00 45.00 Allocated amount ($) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Disbursed amount ($) 22.00 0.00 0.00 0.00 0.00 0.00 22.00 Comments (achievements against targets): Page 32 of 48 The World Bank Kenya Urban Support Program (P156777) From APA 3, all the 45 Counties met the minimum conditions for UIG. To date 100 percent has been disbursed under the DLI to counties, amounting to US$ 21.7 million DLI 2: Window 3: Urban boards and counties - Institutional framework established and operational (County governments have met UDG MCs) (Number) Baseline 2017-18 2018-19 2019-20 2020-21 2021-22 2022-2023 Total Original values 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Actual values 40.00 0.00 0.00 0.00 0.00 40.00 Allocated amount ($) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Disbursed amount ($) 171.40 0.00 0.00 0.00 0.00 0.00 171.40 Comments (achievements against targets): From APA 3 all the 45 Counties (59 municipalities) met all the nine UDG minimum conditions. All the 59 municipalities have set-up Municipal Boards, with associated municipal charters, municipal managers and municipal budget votes in place. To date, 100 percent has been disbursed under this DLI to Counties, amounting to US$ 171.4 million. DLI 3: Window 3: Urban boards and counties - Urban planning, infrastructure and service delivery (County governments and urban area institutions have met UDG PSs) (Number) Baseline 2017-18 2018-19 2019-20 2020-21 2021-22 2022-2023 Total Original values 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Page 33 of 48 The World Bank Kenya Urban Support Program (P156777) Actual values 45.00 0.00 0.00 0.00 0.00 45.00 Allocated amount ($) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Disbursed amount ($) 36.00 0.00 0.00 0.00 0.00 0.00 36.00 Comments (achievements against targets): From APA 3, 36 out of 59 muncipalities met all the performance standards, an increase from 15 municipalities in APA 2 . The best performing performance standards are PS1, PS 2 and PS 7. Fifty-eight municipalities have met UDG PS 1 (there is a publicly available job description for the position of municipal manager). Fifty-seven out of 59 municipalities met UD G PS 2, that the municipal board held quarterly meetings. Fifty-seven out of 59 municipalities also met UDG PS 7, that an approved urban Investment Development Plan (IDeP) is in place. The worst performing UDG PS is PS 8, with only 51 out of 59 municipalities having an urban spatial plan in place. DLI 4: Window 3: Participating County Governments and Urban Area Institutions have met UDG Minimum Conditions and performance standards (Number) Baseline 2017-18 2018-19 2019-20 2020-21 2021-22 2022-2023 Total Original values 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Actual values 0.00 0.00 0.00 0.00 0.00 45.00 Allocated amount ($) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 37,425,835. 0.00 0.00 Disbursed amount ($) 0.00 37,425,835.00 00 ANNEX 1C. PROGRAM ACTION PLAN Page 34 of 48 The World Bank Kenya Urban Support Program (P156777) PAP TBL Achieved Action Timing Completion Measurement (Yes/No) Align program implementation structure Recurrent Continuous Yes Inclusion of appropriate program implementation and staffing structure and staffing arrangements in POM Comments: Counties have responded to program incentives by establishing urban institutions (municipalities, boards) that were "missing institutions" following Kenya's devolution that created two tiers of government--the National level and 47 County Governments Strengthen environmental and social Recurrent Continuous Yes Inclusion of environmental and social management management system systems and procedures in POM. Comments: While the POM includes environmental and social risk management systems and procedures, and KUSP benefitted from ESS actions under KDSP, capacity at the local/municipal level remains low Improve implementation of Recurrent Continuous Yes Inclusion of incentives for implementation of E&S environmental and social management management systems in MCs and PSs system Comments: While the incentives for implementation of E&S management systems where included in MCs and PSs and improvement was made, low capacity at the local/municipal level remains a challenge Page 35 of 48 The World Bank Kenya Urban Support Program (P156777) Build capacity for environmental and Recurrent Continuous Yes (1) Inclusion of appropriate staffing arrangements social management in POM; (2) Training of staff in environmental and social management system Comments: The Program included staffing arrangements in POM and supported trainings on ESS and OHS for county and municipal staff. Still there is high rotation of staff and capacity building needs to continue under KUSP2. Strengthen national and sub-national Recurrent Continuous Yes Program budget codes are defined in IFMIS. budgeting and fund flow systems Program grants captured in CARA, DORA and Ministry/county budgets. Program funds are disbursed on a timely basis and as per budget Comments: KUSP supported dedicated budget votes for municipalities. Annual grants were captured in the national level budget county budgets. 100% of funds were released, albeit with delays. Build capacity for program financial Recurrent Continuous Yes The FM manual is completed as part of POM. management Program accountants and finance officers designated. Training provided on the use of IFMIS Comments: FM Manual was included in POM, and program account and finance officer in NPCT in place. Training programs on FM are delivered to county governments, though IFMIS not yet used at municipal level. Page 36 of 48 The World Bank Kenya Urban Support Program (P156777) Strengthen procurement capacities Recurrent Continuous Yes Procurement officers appointed and trained Clarification of procurement roles, responsibilities and procedures (POM) Compliance with procurement procedures and regulations (as part of APA) Timely procurement and contract management (as part of APA) Comments: County appointed procurements officers for the program, though there has been a high rotation. The APA and internal audit reviewed the compliance with procurement procedures. NPCT undertook review of procurement execution as part of backstopping. Strengthen complaints management Recurrent Continuous Yes Fully operational complaints management system at SDHUD level Comments: Counties put in place functioning complaints handling mechanisms. NPCT provides support for handling complaint, with two officers supporting and following internal GRM procedure. Still, the M&E could be improved with an eGRM. Through KDSP, establish county level Recurrent Continuous Yes Fully operational complaints management system complaints management systems at county level Comments: Counties have embraced processes to establish complaints handling systems under KDSP Page 37 of 48 The World Bank Kenya Urban Support Program (P156777) Improve risk management Recurrent Continuous No Establishment and upkeep of program risk register (POM) Comments: Dropped. While the program build on KDSP risk management activities, it did not establish a program risk register. Page 38 of 48 The World Bank Kenya Urban Support Program (P156777) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Preparation Abdu Muwonge Task Team Leader(s) Joel Buku Munyori, Pascal Tegwa Procurement Specialist(s) Henry Amena Amuguni Financial Management Specialist James N. Karuiru Procurement Team Mohammad Ilyas Butt Procurement Team Michelle Lisa Chen Team Member Sangeeta Kumari Social Specialist Keziah Muthoni Muthembwa Team Member Jean Okolla Owino Team Member Eric Dickson Team Member Michael Macnamara Winter Team Member Claudia Lorena Trejos Gomez Team Member Angelina Darini Musera Team Member Purity Muthoni Mwagha Team Member Ben Okindo Ayako Miranga Environmental Specialist Monicah Nyawira Karangi Team Member Judy Maureen Waturi Team Member Diana Jemutai Sirma Team Member Vitalis Adongo Mwambasa Team Member Page 39 of 48 The World Bank Kenya Urban Support Program (P156777) Gaylord Benard Mitto Team Member Catherine Kathuni Team Member Winnie Achieng Adhoch Procurement Team Supervision/ICR Beatriz Eraso Puig, Davison Muchadenyika Task Team Leader(s) Joel Buku Munyori, Pascal Tegwa, Mulugeta Dinka Procurement Specialist(s) Leonard Mutuku Matheka Financial Management Specialist Annastacia Waithera Wacheke Financial Management Specialist Henry Amena Amuguni Financial Management Specialist Purity Muthoni Mwagha Team Member Ben Okindo Ayako Miranga Environmental Specialist Alidu Babatu Adam Social Specialist Monicah Nyawira Karangi Team Member Judy Maureen Waturi Team Member Diana Jemutai Sirma Team Member Vitalis Adongo Mwambasa Team Member Gaylord Benard Mitto Team Member Catherine Kathuni Team Member Yasmeen Hopkins ICR Author Carlos Ivan Mejia Rosario ICR Author Angelina Darini Musera Team Member Hope Nanshemeza Team Member Claudia Lorena Trejos Gomez Team Member Edwin Nyamasege Moguche Team Member Michael Macnamara Winter Team Member Eric Dickson Team Member Gladys Akurut Alupo Procurement Team Jean Okolla Owino Team Member Page 40 of 48 The World Bank Kenya Urban Support Program (P156777) Keziah Muthoni Muthembwa Team Member Michelle Lisa Chen Team Member Mohammad Ilyas Butt Procurement Team James N. Karuiru Procurement Team B. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY16 11.984 118,643.83 FY17 43.421 492,266.25 FY18 2.050 34,044.70 Total 57.46 644,954.78 Supervision/ICR FY18 15.075 157,980.59 FY19 21.313 262,332.02 FY20 35.472 457,573.02 FY21 13.870 178,499.52 FY22 27.837 191,506.31 FY23 42.641 318,096.38 FY24 13.518 258,633.63 Total 169.73 1,824,621.47 Page 41 of 48 The World Bank Kenya Urban Support Program (P156777) ANNEX 3. PROGRAM EXPENDITURE SUMMARY Actual Expenditures (Disbursement) Source of Program Type of Co- Estimates at Financing (US$) Financing Appraisal Percentage of Percentage of Actual Appraisal Actual World Bank PforR 269.7M 269.7M 100 100 IPF 30M 21.3M 71 71 Borrower Counterpart 20M 12.2M 70.9 70.9 Other Partners 0 0 Total 320M 303.2M Page 42 of 48 The World Bank Kenya Urban Support Program (P156777) ANNEX 4. BORROWER’S COMMENTS 1. The report provides a detailed and true reflection of KUSP. 2. Para 5: It is stated that, at the time of appraisal, no counties had established urban boards to manage individual cities or municipalities. This should be changed as Kakamega County Government had established Kakamega and Mumias municipalities. 3. Para 15: It would be good to add the reason as to why the US$ 4.5 million intended to be directed towards financing UIG to counties. This was mainly due to having no clear modality of transferring funds between the two windows. This also compounded the challenge of slow absorption at IPF since the discussions of the transfer took quite long before it was decided that the funds cannot be directed to fund UIG activities in Window 2. 4. Para 22: There is need to be consistent in the number of municipalities that were created as at the time of closure of the Program. In this para, it is stated that 63 municipal boards and municipalities were established, while in para 28, it is stated that 77 municipalities were established. The correct number is 77 municipalities. 5. Para 30: The total number of infrastructure projects should be revised to 388 and consider adding the stadia and the goods and equipment procured under UDG to support service delivery. These include fire engines, skip bins, compactors among others. 6. Para 35: Change the total number of infrastructure projects to be consistent with the previous edits. 7. Para 49: It is true that waivers were granted and the reasons for that are captured, but the implications of the waivers should also be highlighted mainly that counties were laxed in complying with the conditions since they were anticipating waivers. It should be advised that this should be avoided in future similar programs. 8. Para 50: It should also be noted that since waivers were granted, counties accessed all their maximum allocation for the first two disbursements and the balance was prorated for the third disbursement. This affected the designed DLI disbursements. 9. Para 56: There is need to include the technical infrastructure visits as one of the means that was used to monitor results. The visits offered valuable insights on the continuous progress of activities implementation at counties and municipalities level. 10. Para 63: Procurement can be rated as moderately unsatisfactory due to the challenges and observations highlighted. A recommendation needs to be mentioned in order to avoid these challenges in future programs, for instance, having a program procurement officer with all the necessary authorizations for approving procurement processes. 11. Para 71: It should also be emphasized that the allocations to the counties will strictly follow the results of the APA and no ‘waivers’ will be granted. Page 43 of 48 The World Bank Kenya Urban Support Program (P156777) ANNEX 5. SUPPORTING DOCUMENTS (IF ANY) 1. Project Appraisal Document. World Bank. 2017 2. Financing Agreement. World Bank. 2017 3. Aide Memoires (various). World Bank. 2017–2023. 4. Implementation Status Reports: 1 through 13. World Bank. 2017–2023. 5. Restructuring Papers. World Bank. April and December 2020. 6. Country Partnership Strategy for Kenya (2014–18). World Bank. 2014. 7. Country Partnership Framework for Kenya (2023-28). World Bank. 2023. 8. Annual Performance Assessments. 2018, 2020 and 2021. 9. Beneficiary and Social-Economic Assessment. Alpex Consulting Africa Limited (ACAL). 2023 10. End of Program Evaluation Report. 2023 11. Value for Money. EOW Associates. 2023 12. Borrower’s Project Completion Report, December 2023. Page 44 of 48 The World Bank Kenya Urban Support Program (P156777) ANNEX 6. KUSP Theory of Change Page 45 of 48 The World Bank Kenya Urban Support Program (P156777) ANNEX 7. OTHER OUTCOMES AND IMPACTS Job creation and economic growth Infrastructure financed by the Program stimulated economic growth and job creation in secondary cities. The BEA concluded that ‘Investments in infrastructure projects have created employment opportunities and supported local businesses, leading to increased economic activity and income generation. In the sampled high-magnitude infrastructure projects, a total of approximately 3,000 new jobs have so far been created as a result of the projects. Additionally, the KUSP investments led to an increase in business revenue for the community in and around the projects. For instance, in Eldoret, traders along Pioneer Health Centre – Rexona Road reported to have increased their daily revenues from an average of Ksh. 7,392 to Ksh. 10,983 (a 49 percent increase) after upgrading of the road’. Likewise, markets have created opportunities for vendors, artisans, and small businesses to sell their products and offer services. After analyzing all the investments, the EPE noted that these ‘have had a wide range of positive impacts, including increased working hours resulting in higher income for businesses, enhanced security, and greater satisfaction and wellbeing among residents. They have also contributed to job creation, cultural visibility, and improved access to education and healthcare facilities. Overall, these initiatives have transformed the municipalities, making them more livable, economically vibrant, and sustainable’. Economic Impact During the Program period, 388 infrastructure investments were carried out across 59 municipalities, valued at more than KES 27.8B (US$ 200M). The economic assessment conducted for KUSP2 23 revealed substantial benefits from investing in the type of infrastructure and services eligible under KUSP. For example, the construction of urban road networks has a positive net present value (NPV) ranging from US$11- 470 million and a positive internal rate of return (IRR) ranging from 16-65 percent. Similarly, streetlight investments have a benefit/cost ratio of 1.8 – 2.5 and NPV of 93-126 million. Overall, the program's economic impacts were important regarding revenue increases experienced by traders benefitting from improved urban infrastructures (i.e. roads, water supply, sanitation facilities, waste management), job creation, and estimates of returns to program investments. Additionally, there were several non-quantifiable benefits associated with the provision of various services, including: (a) reduced health infections during rainy seasons with the improvement or development of solid waste management systems and facilities, (b) reduction in destruction of property with proper drainage and stormwater harvesting and storage systems, and (c) enhanced citizen engagement processes resulting in a better- informed citizenry and more inclusive decision making. Refugees and host communities also benefited from better infrastructure and services. Poverty Reduction and Shared Prosperity The Program contributed to the World Bank’s over-arching goals of ending extreme poverty and promoting shared prosperity by delivering improved urban infrastructure on an inclusive basis and in ways that enhanced economic growth and development in participating counties. For example, the BEA highlights how KUSP contributed to developing sustainable and inclusive municipalities by enhancing infrastructure, 23 Economic Assessment was done for KUSP2 preparation based on KUSP1 investments. Page 46 of 48 The World Bank Kenya Urban Support Program (P156777) addressing municipalities’ poverty, and improving service delivery in urban areas. Similarly, KUSP supported the creation of markets, roads and walkways, further creating opportunities for economic prosperity. These achievements also made a significant contribution to attaining Sustainable Development Goal (SDG) 11 (sustainable cities and communities). Gender, Equity, and Inclusive Development The primary beneficiaries of the operation were 3.6 million residents of the 59 urban centers participating, half of whom were female. The equity assessment at the municipal level conducted during the VfM Audit revealed that ‘equity was addressed through the inclusion of minorities and marginalized groups during project identification, planning, implementation, operation, and maintenance.’ 24 Through citizen participation in the prioritization of investments, the Program addressed the needs of vulnerable and marginalized populations. 25 KUSP also helped some urban areas that were new county capitals and which historically had received little investments to have, for example, their first kilometer of road and pavement. In the North and North Eastern (NEDI) regions, the investments contributed to the economic empowerment of marginalized groups through employment during and after implementation. For example, in Garissa and Wajir, about 415 local residents were employed during the construction of KUSP investments. Similarly, the VfM Audit concluded that ‘All the KUSP investments were awarded to local contractors increasing local investments which will sustainably promote economic inclusion and empowerment in the NEDI region’. 26 Sustainability The provision of urban infrastructure and services requires strong collaboration and significant capacity at national, county and municipal levels. Hence, the Program strengthened the institutional capacity at SDHUD, counties, and municipalities. To sustain the reforms and investments supported by KUSP, the closing mission of the Program agreed on a Sustainability Plan. The plan is anchored on (i) continuous reporting from counties to the National Program Coordination Team (NPCT) at the SDHUD on financial management and safeguards compliance, and NPCT supervision of pending UDG investments up to operationalization, which will be monitored as part of KUSP2, (ii) implementation of PFM Act Section 172- 3 so counties allocate finances to municipalities (minimum condition for KUSP2), (iii) technical backstopping from NPCT to municipalities, and (iv) finalization of the UACA Regulations to reinforce the transfer of powers, functions and resources to municipalities. 27 Nonetheless, there are concerns regarding the operation and maintenance (O&M) of infrastructure and municipal financial sustainability if the transfer of finances is not done in line with PFM Act. Contribution to the devolution process In 2015, the stakes of devolution in Kenya were particularly centered on creating municipalities, which was a cornerstone of the process. KUSP was not only a pioneer in the wider devolution context but also a significant reform of the Kenyan governance institutions that first met resistance from national 24 KUSP VfM Audit. 25 KUSP ISR, 11 December 2023. 26 KUSP VfM Audit. 27 KUSP ISR, 11 December 2023. Page 47 of 48 The World Bank Kenya Urban Support Program (P156777) governments and governors as they questioned the county's and urban boards' capabilities to receive most of the PforR funds. By building on KDSP, KUSP played a crucial role in supporting the devolution process in Kenya by further enhancing the dialogue with the Kenyan government regarding devolution, providing financial and technical support to county governments, incentivizing performance through conditional grants, and addressing specific challenges related to urban governance and development. It contributed to a better understanding of devolution challenges while strengthening institutions, enhancing service delivery, and fostering sound inter-governmental relations at the county and national levels. Page 48 of 48