AFRICAN DEVELOPMENT FUND

Language : English Original : English

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REPUBLIC OF KENYA

APPRAISAL REPORT

COMMUNITY EMPOWERMENT AND INSTITUTIONAL SUPPORT PROJECT (CEISP)

NB: This document contains errata or corrigenda (see Annexes) HEALTH DEVELOPMENT DIVISION OSHD.3 HUMAN DEVELOPMENT DEPARTMENT OCTOBER 2007

TABLE OF CONTENTS Page

PROJECT INFORMATION SHEET, CURRENCY, AND ABBREVIATIONS; PROJECT MATRIX LOGFRAME .................................................................................................................... (i-iv) 1. ORIGIN AND HISTORY OF THE PROJECT .......................................................................... 1 2. INSTITUTIONAL FRAMEWORK ........................................................................................... 1

2.1 Socio-Ecomnomic Development............................................................................ 1 2.2 Policy and Institutional Framework ...................................................................... 2 2.3 Donor Intervention in Decentralized Development Planning and Finance............ 3 2.4 Challenges and constraints............................................................................................. 3

3. LOCAL COMMUNITY DEVELOPMENT............................................................................... 4 4. THE PROJECT........................................................................................................................... 5

4.1 Project Concept and Rationale ............................................................................... 5 4.2 Project Area and Beneficiaries ............................................................................... 6 4.3 Strategic Context .................................................................................................... 7 4.4 Project Objective .................................................................................................... 7 4.5 Project Description................................................................................................. 7 4.6 Environmental Impact .......................................................................................... 10 4.7 Project Cost .......................................................................................................... 10 4.8 Sources of Finance and Expenditure Schedule .................................................... 10

5. PROJECT IMPLEMENTATION ............................................................................................. 11

5.1 Executing Agency ................................................................................................ 11 5.2 Institutional Arrangements ................................................................................... 11 5.3 Supervision and Implementation Schedules ........................................................ 12 5.4 Governance .......................................................................................................... 12 5.5 Procurement Arrangements.................................................................................. 12 5.6 Disbursement Arrangements ................................................................................ 14 5.7 Monitoring and Evaluation................................................................................... 15 5.8 Financial Reporting and Auditing ........................................................................ 15 5.9 Aid Co-ordination ................................................................................................ 15

6. PROJECT SUSTAINABILITY AND RISKS .......................................................................... 16

6.1 Recurrent Costs .................................................................................................... 16 6.2 Project Sustainability............................................................................................ 16 6.3 Critical Risks and Mitigating Measures ............................................................... 16

7. PROJECT BENEFITS .............................................................................................................. 17

7.1 Socioeconomic Impact ........................................................................................ 17 8. CONCLUSIONS AND RECOMMENDATIONS ................................................................... 17

8.1 Conclusions and follow-up actions ...................................................................... 17

This report was prepared by MM. A. M. Yahie, Socio-economist, OSHD.3, D. Bronselaer, Procurement Specialist, OSHD.0, Mrs.G. Geisler, Gender Specialist, OSHD.0 and a Consultant Social Fund Expert, following their mission to Kenya on 13-26 August 2007. Inquiries should be addressed to Mr. Tom Hurley, Director, OSHD (Ext. 2046), Mr. T. B. Ilunga, Manager, OSHD.3 (Ext. 2117) or Mr. A. Yahie, (Ext. 2259).

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AFRICAN DEVELOPMENT FUND 01 BP 1387 Abidjan 01 Côte d’Ivoire Tel: +225 2020 4444 Fax: + 225 2021 7753

BP 323 1002 Tunis Belvédère Tunisia Tel: +216 71 335 511, Fax: 71 351 933

PROJECT INFORMATION SHEET

Date: August 2007 The information given hereunder is intended to provide some guidance to prospective suppliers, contractors, consultants and all persons interested in the procurement of goods and services for projects approved by the Board of Directors of the Bank Group. More detailed information and guidance should be obtained from the Executing Agency of the Borrower. 1. COUNTRY Republic of Kenya 2. NAME OF PROJECT: Community Empowerment and Institutional Support

Project (CEISP) 3. LOCATION: Throughout the Country 4. BORROWER: Government of Kenya 5. EXECUTING AGENCY: Ministry of Planning and National Development Treasury Building, Harambe Avenue P. O. Box 30005, Nairobi, Kenya 6. TOTAL COST: UA 20.78 million i) Foreign Exchange UA 0.80 million

ii) Local Cost UA 19.98 million 7. BANK GROUP FINANCE:

ADF LOAN UA 17.00 million 8. OTHER SOURCES OF FINANCE: GOVERNMENT UA 3.78 million 9. ESTIMATED DATE OF APPROVAL December 2007 10. ESTIMATED STARTING DATE AND DURATION: March 2008, 5 years

CURRENCY EQUIVALENT (August 2007)

National Currency : Kenyan Shilling (KES) 1 UA = 100.883 KES 1 UA = 1.53122 USD

LIST OF ANNEXES

I. MoPND Organizational Chart

II. Summarized Lists of Good and Services III. Project Implementation Schedule

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LIST OF ABBREVIATIONS APRM Africa Peer Review Mechanism CDCC Constituency Development Coordinating Committee CDC/CDF Constituency Development Committee/Fund CDD Community Driven Development CSC Community Score Card CSO Civil Society Organizations DDO District Development Officer DDP District Development Plan DIDC District Information Documentation Centers DPU District Planning Unit RDP Rural Planning Directorate DF Devolved Fund DFRD District Focus for Rural Development DPP Director of Public Prosecution ERS Economic Recovery Strategy FMR Financial Monitoring Report FPESP Free Primary Education Support Project GOK Government of Kenya IEC Information, Education and Communication JICA Japanese International Cooperation Agency KNBS Kenya National Bureau of Statistics KEPSA Kenya Private Sector Alliance KIPPRA Kenya Institute of Public Policy and Research Analysis KIHHBS Kenya Integrated Household Budget Survey LATF Local Authority Transfer Fund MIS Management Information System MoPND Ministry of Planning and National Development MTEF Medium-Term Expenditure Framework M&E Monitoring and Evaluation NARC National Rainbow Coalition NGO Non-Governmental Organization NSC National Steering Committee O&M Operations and Maintenance PRA Participatory Rural Appraisal

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COMMUNITY EMPOWERMENT AND INSTITUTIONAL SUPPORT PROJECT (CEISP)

PROJECT MATRIX LOGFRAME

Hierarchy Of Objectives Expected Results Reach (Target Population)

Performance Indicators

Indicative Targets and Time Frames Assumptions/Risks

Sector Goal: empower poor communities to access socio-economic services

Long Term Results: Reduced poverty and increased well being of the population

Population below poverty line:

Poverty headcount By 2030: 1. Absolute poverty is reduced from 45.9 % in 2006 to at least less than 10%. Source: KBS HH Survey

Continued growth of economy of at least 6% per annum and poverty reduction pace in the last decade sustained; GoK budget for DFs sustained or increased

Project Objective: Improved management of local socio-economic development.

Outcomes: Better management and utilization of development resources Enhanced social and public accountability in local governance and service delivery

Local communities District staff

% of constituencies able to utilize DFs % of constituencies with ‘prioritized basket of projects” % of districts with harmonized district development plans

By 2013: 1. 80% constituencies in target districts able to utilize and account for at least 90% allocated funds from DF from the current 50% in 2007 2. All constituencies in target districts prepared ‘priority Basket of Projects’ 3. All target districts developed harmonized district development plans to be utilized by all development partners. Source: MoNDP M&E Reports

Political resistance from those that will feel challenged by project consequences; slow project roll-out and internalization of its principles and operating procedures. Met. Measures: by legislations & educating the public to demand accountability from legislators. Launching workshop & KEFO Backstopping.

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Hierarchy Of Objectives Expected Results Reach (Target Population)

Performance Indicators

Indicative Targets and Time Frames Assumptions/Risks

Inputs/Activities: 1. Community Capacity Building 1.1 Undertake IEC campaign on DFs operations: 1.2 Conduced community/s & stakeholders workshops . 1.3 Establish women forums. 1.4 Developed social accountability tools promote community/& stakeholders demand for accountability 2. Strengthening Decentralized Development Planning & Finance. 2.1 Organized specialized training workshops & prepared tools 2.2 Constructed/rehabilitated & equipped DIDCs 2.3 Establish community participatory monitoring & accountability (PCM&A) system . 2.4 Enhanced capacity of MoPND, DPUs effective management of project resources. Project Budget Project Budget (UA millions) a. Goods 2.12 b. Civil Works 1.62 c. Services 14.12 d. Operating cost 2.93 Total Cost 20.78

Outputs: 1.1 Increased public awareness of Devolved Fund’s Operations 1.2 Enhanced Communities, & other stakeholders capacity & participation in local development 1.3. Enhanced gender equality & participation of women in local development. 1.4 Increased community & stakeholder capacity to demand accountability and use of governance tools. 2.1 Harmonized & strengthened decentralized development planning systems 2.2 Established fully functioning DIDCs 2.3 Strengthened M&E system 2.4 Strengthen internal capacity of MoPND and DPUs.

Local communities Sector staff at district level CBOs, MPs, Councilors, civic leaders MoNDP staff at district and national levels, women & youth.

1.1 No. & type of IEC messages delivered & consultations with target population 1.2 No. of persons reached with various capacity development activities 1.3 No. of women and girl forums facilitated & % of women & youth participating in project management committees 1.4 No. of districts and constituencies using community score cards. 2.1 No. & type of products/tools and technical assistance rendered 2.2 No. of DIDCs constructed/rehabilitated and equipped 2.3 No. of performance assessment implemented 2.4 No. of project activities carried out on time and within budget

Between 2008 and 2013: 1.1.1 At least 10,000 (3/week/5yrs) IEC messages using various channels on DF operations targeting at communities, women, youth & civic leaders delivered. 1.1.2 Increased the level of awareness of the population (9 million) on DFs from the current >10% to at least 30% using audience tracking system.. 1.2 At least 60,000 persons (40% women) reached with various capacity development activities at community, district & national levels. 1.3 Establishment of at least 70 (1/constituency) women and girls forums. Women and youth representation in committees is increased from the current 15% to 30% by 2013. 1.4 At least 70% of target districts and constituencies use the Community Score Cards (CSCs) 2.1 All target districts produce district strategic development plans and Priority Basket of Projects 2.2 At least 35 DIDCs constructed/rehabilitated and equipped and are operational 2.3 At least three beneficiary assessments, quarterly and annual progress reports produced in each districts and results publicized through various media channels. 2.4 all proposed activities carried; national and district development plans harmonized measured by the # of districts & constituencies develop strategic plans and priority basket of project as shown in 2.1 above Source QPR, Supervision Mission Reports, MTR reports Borrower/ADF PCR, ADF/Borrower Disbursement Records, Project Annual Audit Reports

Communities, women and youth will cease the opportunities created by DFs due to weak capacity Corruption and Failure to utilize and retained manuals and skills acquired at district, constituency and community levels , delayed and timely release of funds and technical backstopping by ADF and MoNDP. Mitigating measures: build partnership with private sector , CSO and use of CSC, & raise awareness, training on procurement and financial management & strong linkage with ADF Governance project.

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1. ORIGIN AND HISTORY OF THE PROJECT

1.1 Background

1.1.1 In order to respond to the consistent challenge of poverty and inequality, the GoK introduced decentralized development planning and finance through “Devolved Funds (DF)” targeting communities at district and constituency levels. Through these DFs the government directly transfers resources to constituencies in order to finance community identified priority projects socio-economic development projects. These are resources over and above sector ministry budgetary allocations and are aimed at giving communities ownership of resources for effective local development. Their importance is recognized in the GoK’s long term development blue print, “Vision 2030”, which puts strong emphasis on enhancing equity, improving governance and social justice through the allocation of increased resources to DFs. 1.1.2 However, during a Bank identification mission in January 2006, various stakeholders raised concerns over institutional problems, community capacity weakness and poor governance as undermining the effectiveness and impact of the DFs. As a result, the Bank commissioned an Institutional and Capacity Building Needs Assessment Study which found that the lack of coherent policy framework to coordinate and harmonize operations, limited awareness and low community participation due to knowledge gaps and capacity limitations, inadequate mechanism for transparency and accountability and poor monitoring and evaluation for results are some of the challenges that ultimately compromise the impact of DFs. To address these challenges the Bank undertook a preparation mission between 23 April to 9 May 2007 and an appraisal mission in August 2007 in order to design the Community Empowerment and Institutional Support Project (CEISP) as outlined in this report. Therefore, the proposed project responds to the priorities and vision of GoK and is in line with the Bank Group’s strategy for Kenya as articulated in the Country Strategy Paper (2005-2007) and May 2007 update, which seeks to reduce poverty and improve equity by investing in human development.

2. INSTITUTIONAL FRAMEWORK

2.1 Socio-Economic Development

2.1.1 The results of the Kenya Integrated Household Budget Survey 2005/2006 (KIHBS) show that the government has been successful in reducing national absolute poverty from 52.3% in 1997 to 45.9% in 2005/2006. However rural inhabitants account disproportionately for more than 91% of 6.91 million hardcore poor suggesting that poverty is largely a rural phenomenon. KIHBS also showed serious regional differences. Rural areas of Central Province emerged as having the lowest prevalence of overall poverty with approximately a third of its population being poor, while the most alarming poverty trends are displayed in rural areas in the Coast and North Eastern Provinces where poverty rates are actually rising, reaching 67.9% and 73.9% in 2006 respectively. 2.1.2 Kenya is a highly unequal society with a Gini coefficient of 0.51% in 2005/6 (up from 0.45 in 1994). Regional, rural and urban disparities are mirrored in socio-economic indicators. Due to patriarchal attitudes among pastoral societies in North Eastern Province net enrollment of girls was in 2005 only 40.3% at primary and 4.4% at secondary level while girls in Nyanza province, for example led net enrolment at secondary level by 4 percentage points. Progress has been made with regard to closing gender gaps in education nationally, where due to gender-sensitive policies and strategies in the education sector including affirmative action measures near parity has been reached in enrollment and completion rates at primary level. However, while Kenya has put in place a comprehensive institutional framework for achieving gender

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equality, legal advances have been slow and women’s participation in decision making at national and local levels (8.5 and 13.3 %) has remained very low by comparison with neighboring countries, such as Tanzania (30.4%), Uganda (29.8%) and Rwanda (48.8%). 2.1.3 With the opening of the political and economic system, the economy registered a growth of 3.0 per cent, 4.9 per cent, and 5.8 per cent for the years 2003, 2004, and 2005 respectively. The recovery was spearheaded by consistent growth in tourism, transport and communication, construction; agriculture, and wholesale and retail trade. The generally good economic performance was due to improved economic management and the changed political platform. However, the recorded high growth has not adequately benefited the poor. This is because the majority of the poor are involved in the informal activities and subsistence production which have minimal returns. In addition, no noticeable trickle-down effects seem to have accompanied the enhanced growth of the economy.

2.2 Policy and Institutional Framework 2.2.1 Policy Context: The Economic Recovery Strategy (ERS) provided the overarching policy framework for economic growth and poverty reduction for the period 2003-2007. The strategy rested on three inter-linked pillars: (i) restoring economic growth; (ii) equity and poverty reduction; and (iii) governance. To sustain the economic growth momentum generated by the ERS, the GoK prepared a long term strategic policy framework, “Vision 2030.” It focuses on enhancing equity and improving governance and social justice and is based on 3 strategic pillars, namely the economic, social and political, which aim to maintain a sustained economic growth of 10% over the next 25 years. One of the policy measures introduced by the Government to reduce poverty and inequality is the use of DFs to avail resources for local development to communities. 2.2.2 Besides the line ministry system of service delivery, the government transfers part of its revenue to various DFs for local level development initiatives. The broad objective of all these social transfer mechanisms and grants is to empower communities to access services so that they can better manage risks and thereby reduce vulnerability and poverty. The funds have been seen as a more effective means of delivering basic social services at the local levels. Research findings reveal that DF are utilized for community development priority areas that are in harmony with the national development priorities.

2.2.3 Institutional Context: MoPND is mandated to facilitate and coordinate national development planning and provide leadership in national policy management. The Ministry is responsible for both the coordination and monitoring of ERS and Vision 2030 implementation. Its core functions include the preparation and coordination of economic policies and plans, fiscal strategy papers; budget documents as well as development plans. The Rural Planning Directorate (RPD) is charged with the responsibility of promoting rural development through implementation of appropriate strategies, programmes and projects under the District Focus for Rural Development (DFRD) strategy and overseeing all special programs including DFs. The Directorate has established offices in each district.

2.2.4 The country is divided into 8 administrative regions. Each region is subdivided into districts (120) and each district is divided into locations and constituencies (210) which are electoral zones. The lowest administrative structure is the sub-location. At the district level the DDC whose members include all relevant stakeholders is the entity responsible for coordination of the implementation of development plans. At the constituency level, the

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Constituency Development Coordination Committee (CDCS) is responsible for the identification, prioritization and allocation of funds to development projects within the constituency. 2.2.5 Most of the DFs come with their own institutional arrangements. The Constituency Development Fund (CDF), which is the most prominent that attracts most of the resources is managed by the National Management Committee (NMC). CDF project identification and prioritization originates at the constituency-level and is submitted to the Constituency Development Committees (CDC) for approval by the District Projects Committee, a sub-committee of the DDC. The funds for specific projects, which should benefit a broad cross-section of the inhabitants of a particular area, are then released to Project Committees, which might be community-based or be identical to the CDF if the project is constituency based.

2.3 Donor Intervention in Decentralized Development Planning and Financing DFs are financed entirely by the treasury from the general revenue with the exception of the school bursary scheme and the HIV/AIDS fund, which receive additional financing from a number of donors. According to KIHS (2005/2006), it is estimated that constituency based DFs alone allocate approximately Ksks80 million (US$1.2 million) annually to each constituency. This translates to a total annual commitment from the treasury of US$252 million. The resources under these various funds are utilized to finance basic social and economic infrastructure. Nevertheless no resources are allocated for capacity building and institutional development in order to enable the communities to effectively manage these funds. Even though donors are fully aware of the capacity constraints at the district level, the allocation of donor resources for other similar development projects are also heavily skewed towards supply of physical infrastructure, while limited investments are made in human and institutional development. A number of donors including the World Bank and DFID have, however, increased their support to targeted poverty interventions and good governance. Most of these interventions focus on cash transfers to vulnerable groups such as orphans and vulnerable children.

2.4 Challenges and Constraints

2.4.1 The Bank-financed institutional study highlighted that the challenges facing decentralized service delivery in Kenya are essentially an overhang of poor policy management, weak institutional capacity and poor governance that have persisted over the years. They include: 2.4.2 Absence of a coherent planning and institutional framework for decentralized development planning and service delivery: Existing evidence shows that national development planning is managed in isolation. While sector ministries implement investments that are incorporated in national development plans it has been noted that donors, local government and NGO funded projects are not reflected in the planning framework. Since these institutions are governed by different regulatory and administrative frameworks and are financed by different sponsors, they adopt different planning, implementation, reporting and monitoring procedures and tend to finance priorities other than those consistent with DDPs.

2.4.3 Weak Institutional Capacity: Implementation experiences to date revealed gaps in effectiveness with which DFs have performed, including weak capacities at the national level

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to manage and coordinate development and at community level to identify, prioritise, successfully implement and sustain projects. Increasing resource flows to finance programs/projects at district/constituency levels have come without corresponding investment in capacity building. The additional project case work created by DFs puts heavy pressure on the limited technical staff at District level and below. The DPU is ill equipped and poorly staffed. Constituencies also lack technical personnel to help prepare project proposals to implement and monitor their effectiveness. As a result 20% of all constituencies use less than 50% of the resources allocated to them by CDF, while another 20% do not use the funds at all. 2.4.4 Lack of Community participation: Even though the governing principle of the DF is to encourage community participation, an institutional framework for community involvement is missing. The overall characteristic of the DFs therefore is that: (i) local councils as well as parliament retain control of resources; and (ii) local communities lack awareness about the objective, rules and procedures governing their access to DFs, and their roles and mandates. Appropriate community participation tools and approaches such as Participatory Rural Appraisal (PRA) have not been adequately utilized for entrenching community participation and the use of Information, Education Communication (IEC) to channel information to the general public is minimal. DIDCs at the district are either nonexistent or ill equipped. As a result, districts do not have established mechanisms to collect, process, store and disseminate information on local development. 2.4.5 Inadequate Transparency and Accountability: Within the highly contested political environment in Kenya, DFs have also been a locus for intense political competition due to the over involvement of political leadership which has caused prejudice to the planning, participation and implementation processes. Many projects are being used to leverage political support. Accountability mechanisms also appear weak as a result of inadequate mechanisms for communities to exact public accountability. 2.4.6 Poor Monitoring and Evaluation Mechanisms: In general, since capacities for districts and constituencies to monitor and evaluate projects are inadequate, M&E mechanisms are not well developed. At the community level, there is a lacuna in terms of who and how projects should be monitored. In addition, there is a glaring lack of computers and modern data storage and retrieval systems for enhancing financial management.

3. LOCAL COMMUNITY DEVELOPMENT

3.1 Government tracking of the Millennium Development Goals suggests a deterioration of socioeconomic indicators. The main factors which contributed to the decline of socio-economic indicators include persistent high levels of inequality, prevalence of HIV/AIDS, poor services delivery and weak capacity at district and community levels. In addition, the challenges and constraints highlighted in section 2.4 resulted in a situation where DFs have not been able to fulfill their mandate of increasing access to social services and alleviating poverty. Therefore, the following areas need specific attention:

3.2 Capacity building and enhanced participation of communities: Creating an enabling environment in which capacities of communities can be strengthened to promote transparency, accountability, legitimacy, pluralism and participation in development is critical. This would require: (i) the development of standardized training curriculum on relevant subjects; (ii) better utilization of local expertise, both in-service and retired; and (iii) the introduction of measures that will increase the ability of women to put their needs and views forward successfully.

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3.3 Harmonization of decentralized planning and finance: There is need to support the recently renewed drive by the Gok to revamp and legislate a more participatory and inclusive district rural planning framework formatted on the DFRD strategy. This will enable districts to: (i) develop harmonized strategic development plans that feed into national plans; (ii) establish standardized systems for planning, management, procurement, disbursement and M&E; (iii) strengthen the capacity of the MoPND and DPU; (iv) strengthen M&E systems to facilitate the systematic tracking of utilization of resources and the impact of the interventions on target communities; and (v) establish MIS under the DIDC by providing adequate facilities and equipment. 3.4 Improved Community Capacity to Demand Accountability and Transparency from Service Providers: There is strong evidence that demand for improved governance from civil society, the private sector and the public is increasing and government response has been positive. As a result, it is imperative that communities’ capacity to demand transparency and accountability from service providers is strengthened. This will require promoting the use of demand-side governance instruments such as the community scorecard (CSC), and creating a mechanism for ‘Voice Aggregation’ by the poor to exact accountability and contribute to improved public service delivery. The CSC process is a community-based monitoring tool that is a mixture of the techniques of social audit and community monitoring and evaluation. It is an instrument that has been successfully used to empower communities to demand accountability from service providers. On the supply side, there is need to develop an IEC strategy to inform and educate the public about DFs and rules and procedures that are governing their implementation.

4. THE PROJECT 4.1 Project Concept and Rationale 4.1.1 As noted in section 2.4, the Bank-commissioned Institutional and Capacity Building Needs Assessment Study identified a number of factors that compromise the effectiveness of DFs. In response to these challenges, CEISP has been proposed as an operation that seeks to improve the capacity of local level development planning and management.. The project will introduce a community driven development (CDD) approach that seeks to mobilize the capacities of communities and service providers to effectively plan, manage and monitor the results of implemented initiatives. The strategy will follow both supply and demand-driven approaches, where supply-driven will mean provision of predetermined requirements for effective delivery of services, and demand-driven will apply to client-based and process-oriented needs. The project will stimulate stakeholders by addressing capacities at the: (a) individual level through skills enhancement and participation in the various processes; (b) organizational or institutional level through creation of incentives; and (c) societal level through provision of information to contribute towards creation of a citizenry that is critically aware of its rights, and therefore able to demand greater accountability from government, donors, CSOs, etc. 4.1.2 The project was conceived and designed in a participatory manner. The ADF-financed institutional study gathered information from key informants and during focus group discussions with key stakeholders, including representatives from government, development partners, parliamentarians, academia and civil society organizations. Focus group discussions

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clarified the community members’/beneficiaries’ awareness and percept ions on the devolved funds, their uses, extent to which they address community priorities, capacity gaps and the role of the private sector. 4.1.3 Lesson Learned: This is the first time the Bank finances a standalone large scale capacity building project. Lessons learned from projects with capacity building components have been taken into account in order to scale-up institutional strengthening. Experiences from in Kenya and other regions show the following lessons which have been incorporated in the design of the project: (i) incorporating CEISP as part of a harmonized decentralized program to fill identified gaps in areas not being served by existing initiatives; (ii) national IEC campaign should follow the launching of the project to educate stakeholders on CEISP concept, principles and operational modalities; (iii) all actors in DFs should receive appropriate training for the roles they are expected to play; (iv) community empowerment is critical using a bottom up approach; (v) participatory processes should be used in generating community action plans; (vi) CSOs should be viewed as key partners and should be trained appropriately; and (vii) clear procedures and systems of operation (Operations Manual) should be developed and disseminated to all partners.

4.1.4 Finally, the last Bank Portfolio Review for Kenya (1995) showed a number of factors which affected the quality of the portfolio. These include: (i) poor quality at entry; and (ii) lack of mastery of Bank rules of procedures for procurement and disbursement by the project staff. The proposed capacity building activities financed by the project will address these weaknesses. It is anticipated that the Kenya Field Office (KEFO), integration of the project into the RPD, which has accumulated experience with other donor-funded projects, regular training of the project staff, etc., will significantly contribute to improved implementation.

4.2 Project Area and Beneficiaries 4.2.1 Project Area: In order to leverage the allocation and impact of the resources on reducing poverty, the project will target 35 districts out of the 120 districts in Kenya. The GoK will select the target districts in consultation with the Bank using the following criteria: (i) level of poverty and vulnerability; (ii) regional representation; (iii) demonstrated capacity weakness such as absence of DIDCs and low utilization of development resources; (iv) absence of other development partners with operations financing similar activities. In addition, limited number of districts with successful experience will be selected to be used a model for replication. 4.2.2 Project Target Beneficiaries: Besides the general public which will benefit from the IEC campaigns on DFs, the specific project beneficiaries are expected to be poor and vulnerable communities which constitute approximately 10 million or quarter of the population. More than 70,000 persons from 35 districts (approximately 70 constituencies) will directly benefit from the project. These will include: project management committees, constituency development coordinating committees, DDCs, DECs, CSOs, training facilitators, councilors and MPs, relevant sector officials at national and provincial level, and staff of the RPD in the MoPND.

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4.3 Strategic Context

4.3.1 The GoK is committed to decentralized fiscal management and service delivery as evidenced by the various public sector management reforms. Notably the decision to revamp and institutionalize DFRD as the framework for harmonizing, aligning and coordinating district and local development plans provides the MoPND with an instrument with which to change and improve development planning processes at these levels. The focus of the project on capacity building will also have strategic significance for the economy as a whole, since its impact will strengthen decentralized development planning and finance while enhancing efficiency of resource allocation and utilization across sectors. Moreover, the proposed investment will leverage the sizable investment in the sector estimated at $3 billion in the next ten years and scale-up its impact across sectors. 4.3.2 To this end CEISP activities will help to leverage development, harmonize the development planning process and consolidate measurement of impact of targeted poverty interventions from the strategic location of the MoPND. On the side of communities, CEISP services will seek to empower communities to effectively utilize the opportunities offered by the DFs, which will have both short to medium term effects on economic growth and human capital development. 4.3.3 The proposed project is also in line with the Bank Results Based CSP for 2005-2007. The RBCSP articulates the Bank Group’s strategy for Kenya which focuses on two pillars: (i) reducing vulnerability and improving equity by focusing on the social sectors, and (ii) promoting enabling environment for private sector led growth. The project’s focus on participatory governance and empowerment of the poor to participate in the country’s growth and development process is therefore consistent with these pillars.

4.4 Project Objective

The sector goal of the proposed project is to empower poor communities to access socio-economic services in order to reduce poverty. To this end, the main objective of the proposed project is to improve the management of local socio-economic development.

4.5 Project Description 4.5.1 CEISP will comprise of the following two components: (i) Capacity Building, and (ii) Strengthening Decentralized Development Planning and Finance. The project components will require the implementation of activities that will involve a mix of inputs from the following categories: (A) Goods, (B) Works, (C) Services and (C) Operating Costs. 4.5.2 Component 1: Capacity Building: This component aims to develop the capacity of communities and other local level stakeholders to make better, more focused and equitable use of resources made available through DFs in the short term. Long term outcomes of the activities aim to increase the ability of local stakeholders to demand accountability and to participate equitably in local level development planning and implementation in a coordinated and sustainable manner, taking into account the needs of all community members including women, youth, the elderly and other socially disadvantaged groups. The project will also

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support activities which assist aggregating the voice of women and girls, and to sensitize communities and local stakeholders towards their needs, abilities and potential. 4.5.3 Increased Public Awareness of Devolved Fund Operations: With the view to inform the public in particular vulnerable and marginalized communities, the project will finance IEC campaigns utilizing the local media (TV, Radio and newspapers), leaflets, quarterly news briefs, annual press releases, outreach activities and regional and district stakeholder workshops. These sets of activities will inform and educate the target population on the purpose of the DFs, the rules and procedures governing them, how to access the resources and account for them. At inception, the project will recruit a consultant to develop an IEC strategy, prepare the message content, identify the most suited delivery outlets and develop an audience tracking system to asses outreach, reaction, perception and attitudes towards specific communication messages.

4.5.4 Enhanced Community and other stakeholder/Capacity and Participation in Local Development: In order to enhance the capacity of communities and stakeholders at the district and below the project will allocate resources for training following both supply and demand driven approaches. The training moduls will include training on the project cycle, participatory planning including participatory rural appraisal (PRA) techniques, procurement, financial management, environmental management, promotion and fostering of social and public accountability in the delivery of socio-economic services through application of CSCs. It will also include facilitation of information and knowledge sharing through community to community (C2C) exchange visits and exposure to best practices. The project will provide resources to organize and deliver in each of the 35 districts 10 five- day workshops per year to be attended by 25 community participants. To facilitate and ensure the sustainability of the training program a Training of Trainers (TOTs) scheme will be supported by the project. Each district will have a core group which will be used as resources persons whenever needs arise. Refresher courses are planned for the duration of the project implementation.

4.5.5 Enhanced gender equality and the participation of women: To promote gender participation in public decision making and promote the recognition of women needs and potentials, the project will support leadership training of women to prepare them for assuming roles in committees and in project management; gender sensitization of communities, including traditional and religious leaders; as well as facilitation of women’s and girls forums which are expected to aid female voice aggregation and serve as entry points for information sharing and training. 4.5.6 Increased Community/Stakeholder capacity to demand accountability: The key outcome of the interventions outlined above will be better informed and capable citizens and other stakeholders who can identify needs, set priorities, and demand accountability and transparency from service providers. To strengthen the community empowerment process the project will support the development of social accountability tools such as the comprehensive community/citizens score card process. The project will allocate adequate resources to meet the cost of recruiting consultants to provide technical assistance in developing the training curricula, materials, manuals and guide books for community use, facilitating stakeholder workshops, and supporting the implementation of project activities at district level and below. 4.5.7 Component II: Strengthening Decentralized Development Planning and Finance: This component aims to facilitate effective people centered decentralized development planning and management. The expected outcomes include a: (i) harmonized development planning system; (ii) strengthened capacity of the MoPND and district planning units to facilitate decentralized

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planning, including the delivery and management of DFs; and (iii) strengthened M&E systems which facilitate the systematic tracking of DFs and other development resources and evaluation of their impact on communities and the establishment of a Management Information System at district level.

4.5.8 Harmonized development plans and procedure: The project will provide support to facilitate the development of harmonized development planning system with strong linkages between national and local level development plans. The main outcome of this process will be the development of: (i) district strategic plans and (ii) baskets of priority sub-projects to ensure that all development partners have a common planning framework in order to avoid duplication of effort and wastage of resources and accountability on their uses.

4.5.9 Strengthened capacity for decentralized development planning and finance system: The development of a harmonized development planning system also requires building and strengthening the knowledge base of various stakeholders e.g. DDO’s, DEC, sector departments, NGO’s. that are involved in the process of developing the strategic plans. This will be achieved through training of these staff at national and district levels. Training modules include strategic planning analysis, project cycle, participatory planning tools, gender mainstreaming, procurement and contract management, financial management, M&E, social accountability, etc.

4.5.10 Established District Information and Documentation Centers (DIDCs)Another important intervention is the establishment of DIDCs to collect, process, store and disseminate information on local development. The DIDCs will be the district information hub and are expected to enhance citizens’ and stakeholders’ access to information on local development. The project will construct/rehabilitate, equip and furnish 35 DIDC’s.

4.5.11 Strengthened M&E system. To track the progress towards a harmonized district planning framework, the project will provide support to development of the National M&E Master Plan. The project will also allocate adequate resources to conduct baseline studies for benchmarking and at least two beneficiary assessments studies during project implementation. Moreover, the project will support the development of community performance M&E system that will provide regular feedback with the aim of enhancing project performance.

4.5.12 Strengthened Internal capacity of MoPND: Due to the Ministry’s cardinal role in the country’s development planning process, a key outcome of this component will be enhanced capacity of its staff both at national and district levels in order to effectively manage and coordinate the development planning process in a holistic manner. To achieve this outcome the project will finance short term courses and study tours, master’s degree programs, recruitment of 35 District Field Operations Assistants (DFOA). This is adopted from UNDP and other development partners who employ UN Volunteers to supplement the capacity of the DPUs. It is expected that the DFOA will be gradually absorbed by the Ministry either by natural attrition of exiting staff or as part of the Ministry’s plans to recruit additional staff to address the existing shortfall in DPU. In addition the project will provide adequate equipment, furniture and technical assistance services prepare the project Mid Term Review (MTR) and Project Completion Report (PCR), etc.

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4.6 Environmental Impact

The proposed project is classified as category III. A dedicated training module will be designed to train the communities on environmental management. Where rehabilitation and construction of DPUs will be done, the design and the construction works will take into consideration the location, building sitting, site works with respect to the existing conditions

4.7 Project Cost

The total cost of the project net of taxes and custom duties is presented in Tables 4.1 and 4.2, as project cost summaries by component and category of expenditure, respectively. The total project cost is estimated at UA UA20.78 million, including UA0.80 million (3.8%) in foreign exchange (FE) and UA19.98 million (96.2%) in local currency (LC). The cost estimates are based on August 2007 prices. For the purpose of costing, all items have been priced in KES and converted into UA at the exchange rate applicable for the month of August 2007. Price escalation has been calculated based on 10% for LC and 2.5% FC annual rate of inflation throughout the 5 implementation period. The detailed project cost estimates are shown in the Project Implementation Document (PID) and the provisional list of goods and services is shown in Annex II.

Table 4.1 Summary of Project Cost by Component in UA Millions

KES (Million) UA (Million) % % Components FE LC Total FE LC Total Total FE

Component I 0.00 708.81 708.81 0.00 7.03 7.03 33.8% 0.0 Component II 71.40 735.47 806.86 0.71 7.29 8.00 38.5% 8.8 Total Base Cost 71.40 1,444.28 1,515.67 0.71 14.32 15.02 72.3% 4.7 Physical Contingency 3.57 78.59 82.16 0.04 0.78 0.81 3.9% 4.3 Price Contingency 5.54 492.68 498.22 0.05 4.88 4.94 23.8% 1.1 Total 80.50 2,015.55 2,096.05 0.80 19.98 20.78 100.0% 3.8

Table 4.2 Summary of Project Cost by Category of Expenditure in UA Millions

KES (Million) UA (Million) % % Categories of Expenditure FE LC TOTAL FE LC TOTAL BC FE A. Goods 51.02 111.97 162.99 0.51 1.11 1.62 7.8% 31.3 B. Works 0.00 116.25 116.25 0.00 1.15 1.15 5.5% 0.0 C. Services 20.38 1,004.94 1,025.32 0.20 9.96 10.16 48.9% 2.0 D. Operating Costs 0.00 211.11 211.11 0.00 2.09 2.09 10.1% 0.0 Total Base Cost 71.40 1,444.28 1,515.67 0.71 14.32 15.02 72.3% 4.7 Physical Contingency 3.57 78.59 82.16 0.04 0.78 0.81 3.9% 4.3 Price Contingency 5.54 492.68 498.22 0.05 4.88 4.94 23.8% 1.1 Total Cost (%) 80.50 2,015.55 2,096.05 0.80 (3.8) 19.98 (96.2) 20.78 100.0% 3.8

4.8 Sources of Finance and Expenditure Schedule

4.8.1 The project will be financed jointly by the ADF (82.9%) and the GoK (17.1%) as shown in Table 4.3. The ADF’s contribution will cover 100% of all FE costs and 82.3% of LC costs. The GoKt will finance 17.7% of the LC estimated at UA19.56 million. ADF will wholly finance the cost of work, 99% of services and 42% of goods. The Government’s contribution of UA3.47 million in LC will finance 95.2% of operating cost, 58% of goods and 1.1% of services. Tables 4.3 show the sources of finance by category of expenditure.

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Table 4.3 Source of Financing in UA Millions Source F.E. % L.C. % Total % ADF LOAN 0.80 100.0 16.20 81.1 17.00 81.8 GoK 0.0 3.78 18.9 3.78 18.2 Total (%) 0.80 (3.8) 100.0 19.98 (96.2) 100.0 20.78 (100) 100.0

4.8.2 Tables 4.4 & 4.5 below show expenditure schedule by component & source of finance.

Table 4.4 Expenditure Schedule by Component Component/year Y1 Y2 Y3 Y4 Y5 Total Component I 1.55 0.93 2.43 2.43 2.43 9.79 Component II 2.62 3.01 2.45 1.34 1.57 10.99 Total Cost (%) 4.17 (20.1) 3.95 (19.0) 4.88 (23.5) 3.78 (18.2) 4.00 (19.3) 20.78(100.0)

Table 4.5 Expenditure Schedule by source of finance Source/Year Y1 Y2 Y3 Y4 Y5 Total ADF LOAN 3.07 2.93 4.21 3.28 3.50 17.00 GOK 1.10 1.02 0.67 0.50 0.50 3.78 Total (%) 4.17 (20.1) 3.95 (19.0) 4.88 (23.5) 3.78 (18.2) 4.00 (19.3) 20.78 (100.0%)

V. PROJECT IMPLEMENTATION 5.1 Executing Agency

The MoPND will be the Executing Agency of the project and RPD will oversee its implementation. The structure and organization of the Ministry is shown in Annex I. The Ministry will second the project implementation team comprised of a Project Manager, a development economist, planner, an administrator/accountant, procurement officer and an executive secretary. RPD will be adequately equipped and will be allocated with sufficient financial resources in order to effectively fulfill all implementation functions as follows: (i) prepare project work plans and budgets; (ii) disseminate project information to stakeholders; (iii) oversee the preparation and implementation of project activities such as IEC, training, M&E programs, etc.; (iv) administer project accounts; (v) process the procurement of good and services; (vii) undertake field monitoring of project activities; and (viii) prepare project progress reports.

5.2 Institutional Arrangements

5.2.1 Since the project will be implemented within the DFRD framework, instead of creating a new separate structure, it will be integrated into the RPD of MoPND. Due to the multi-sector nature of the project a National Steering Committee (NSC) will be constituted and charged with the responsibility of overseeing overall project management and implementation. The NSC will be chaired by the Permanent Secretary of MoPND and the composition of its members will be gender balanced and will include permanent secretaries (or their appointed representatives) of the following institutions: Office of the President, Ministries of Finance; Regional Development; Gender, Sports and Social Services; Local Government, Information and Communication and representatives of Kenya Private Sector Alliance (KEPSA) and Kenya NGO’s Council. The Committee will be constituted to perform the following functions: (i)

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provide policy and operational oversight; (ii) review project progress on a quarterly basis; and (iii) review and approve annual work plans and operating budgets.

5.2.2 The entry point for CEISP at the district level will be the DDC being the centre of coordination and the constituency being the implementation focal point. The DPU headed by a DDO will be the operational hub responsible for overseeing the implementation and coordination of project activities at the district and constituency levels. To strengthen the DPU, the project will recruit 35 District Field Operations Assistant (similar to UN Volunteers) to provide technical backstopping to DPUs, facilitate development communication and social accountability mechanisms and institutionalization of participatory panning and development management processes. At the constituency levels, DPU will establish partnership with the private sector, donors and CSOs that operate at the local level in order to carry out specific project activities.

5.3 Supervision and Implementation Schedules

The project will be implemented over a period of 5 years (60 months) from effectiveness of the loan, assumed to be in the beginning of the first quarter of 2008. The implementation schedule is given in Annex III. .

5.4 Governance Kenya’s socio-economic development has in the past been undermined by poor governance and corruption. The country ranks well below many other African countries on indicators of governance and corruption. It is encouraging, however, that demand for good governance is increasing and government is responding positively. In order to support good governance the project will introduce governance instruments such as community scorecards and citizen report cards. During the implementation of the project the Bank will also introduce the following anti-corruption measures: (i) all procurements of Bank-financed activities are publicly disclosed; (ii) strengthen the capacity of the RPD on financial management and auditing; and (iii) ensure the project is supervised twice a year. The Kenya Field Office will also regularly monitor project performance.

5.5 Procurement Arrangements 5.5.1 Procurement arrangements are summarized in Table 5.1 below. All procurement of goods, works and acquisition of consulting services financed by ADF will be in accordance with the ADF Rules of Procedure for Procurement of Goods and Works, or as appropriate, Rules of Procedure for the Use of Consultants, using the relevant Bank Standard Bidding Documents. Procurement at community level will follow the Bank’s Guidelines for Procurement under Community-based Investment Projects, September 2000. 5.5.2 Works. Procurement of civil works will be carried out under National Competitive Bidding (NCB) procedures. Between 10 and 20 contracts will be awarded, for the construction of 20 new DPUs, rehabilitation of 15 existing DPUs valued in total at UA 1.61 million. NCB is chosen because the character, location and size of the construction works to be undertaken are such that they are unlikely to attract bids from outside Kenya.

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Table 5.1 Summary of Procurement Arrangements UA '000,000 Project Categories

ICB NCB Other NSL NBF Total 1 Works 1.1 New construction DPU 1.45(1.45) 1.45(1.45) 1.2 Rehabilitation of DPU 0.16(0.16) 0.16(0.16) 2 Goods 2.1 DPU Furniture 0.19(0.19) 0.19(0.19) 2.2 RPD Furniture 0.03(0.03) 0.03(0.03) 2.3 DPU Equipment 0.48(0.48) 0.48(0.48) 2.4 RPD Equipment 0.02(0.02) 0.02(0.02) 2.5 District Vehicles 1.29 1.29(0.00) 2.6 RPD Vehicles 0.07(0.07) 0.07(0.07) 2.7 Books 0.03(0.03) 0.03(0.03) 3 Services 3.1 IEC Campaign 0.69(0.69) 0.69(0.69) 3.2 Technical assistance 2.52(2.52) 2.52(2.52) 3.3 Community training 7.50(7.50) 7.50(7.50) 3.4 Stakeholder workshops 1.85(1.85) 1.85(1.85) 3.5 Training workshops 0.77(0.77) 0.77(0.77) 3.6 Regional study tours 0.11(0.11) 0.11(0.11) 3.7 Overseas courses 0.17(0.17) 0.17(0.17) 3.8 Bursaries 0.28(0.28) 0.28(0.28) 3.9 Province backstopping 0.22(0.22) 0.22(0.22) 4.1 Operating cost 2.93(0.443) 2.93(0.443) 4.2 launching workshop 0.008(0.008) 0.008(0.008) Total Cost 0.48 (0.48) 1.62(1.62) 11.69 (11.69) 3.21 (3.21) 1.29 20.78(17.00) ICB: International Competitive Bidding, NCB: National Competitive Bidding, NSL: National Short Listing, NBF: Non Bank Funded. Amounts ( ) are financed by the ADF Loan

Table 5.2 Summary of Other Procurement Arrangements in UA Procedure Goods/Services Maximum per contract Maximum in aggregate National shopping DPU Furniture 5,524 193,330 RPD Furniture 27,619 27,619 RPD Equipment 23,974 23,974 RPD Vehicles 23,354 67,061 Books 33,833 33,833 Guidelines of Procurement under Community- based investment projects

Community training

7,500

10,000,000

Government procedures Stakeholder workshops 25,000 1,852,248 Training workshops 15,000 766,141 Regional study tours 20,000 108,290 Overseas courses 3,260 168,365 Bursaries 5,000 279,587 Province Backstopping 5,000 223,669

5.5.3. Goods. One contract for the procurement of office equipment in the District Planning Units (DPU), valued in total at UA 0.48 million, will be awarded under ICB procedures. Other goods, such as office furniture for the DPRD and for each DPU, equipment for the RPD and books for the DIDCs (estimated to cost less than UA 35,000 per contract and not more than UA 0.35 million in aggregate) will be procured through National Shopping, as detailed in Table 5.2 above. National Shopping is chosen because the goods to be procured are so diversified that it would be of no commercial interest for any single supplier to bid for them and there is an adequate number of national suppliers and agents of qualified foreign suppliers to ensure competitive prices. 5.5.4. Consultant Services. Consulting services for the IEC campaign will be acquired through competition on the basis of Shortlists using the selection procedure combining technical quality with price consideration. The Borrower shall limit the publication of the announcement to national newspapers in view of the small values involved (contract values ranging from UA

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10,000 to 50,000), and the detailed socio-cultural knowledge demanded by the assignments. This is also justified because there is an adequate number of national service providers and agents of qualified international service providers (including international NGO’s) to ensure competition. However, any eligible consultant, being regional or not, may express his desire to be short-listed. Individual Consultants for Technical Assistance will be selected on the basis of national shortlists for the same reasons evoked earlier. 5.5.5. Procurement of services for Community Capacity Building and Training to be performed by local trainers (UA 0.21 million per district and UA 7.50 million in aggregate) will be in accordance with the Bank Guidelines for Procurement under Community-based Investment Projects, September 2000 (CBIP). For speedy implementation of these activities, a Project Operations Manual (POM) is under preparation. The POM will be based on the CBIP. 5.5.6. The following activities will be procured through existing GOK procedures: (i) Over 200 workshops (Venues, Logistics, Travel, Subsistence, Documentation & Refreshments) with a maximum value per workshop of UA 25,000, (ii) 10 Study Tours (UA 15,000 each), (iii) 25 overseas courses (UA 5,000 each), (iv) 50 bursaries (UA 3,206 each) and (v) regular backstopping from provincial level down to the communities with a total value of UA 173,881. This is because GOK has the appropriate materials and modules, as well as the experience and a proven track record for these activities. 5.5.7. National Procedures and Regulations: National procurement laws and regulations have been reviewed together with the Public Expenditure and Financial Accountability (PEFA) assessment by the donors in July 2006 and determined to be acceptable. Executing Agency: The MoPND will be responsible for the procurement of goods, works, consulting services & training services. The resources, capacity, expertise and experience are inadequate to carry out the procurement. To this effect the Ministry will second a qualified and full-time procurement specialist to the RPD. General Procurement Notice: The text of a General Procurement Notice (GPN) will be agreed with the GoK during negotiations and will be issued for publication in Development Business, upon approval by ADF Board of Directors of the loan proposal. 5.5.8. Procurement Review. The procurement of all activities with the exception of the Community Capacity Building & Training will be subject to review and approval by the Bank before promulgation as follows: Specific Procurement Notices; Tender Documents or Requests for Proposals from Consultants; Tender Evaluation Reports or Reports on Evaluation of Consultants' Proposals, including recommendations for Contract Award; and Draft contracts, if these have been amended from the drafts included in the tender invitation documents. The procurement of the Community Capacity Building & Training activities will be subject to post-review under the conditions as stipulated under § 5.2 of the Guidelines for Procurement under Community-based Investment Projects, September 2000 and shall further be specified in the Project Operations Manual under preparation.

5.6 Disbursement Arrangements

The loan resources would be disbursed using the Special Account (SA) and direct payment methods. MoPND will open a special account in foreign currency at a bank acceptable to the Fund. The account will be used to deposit the loan proceeds. Upon request by the borrower, Direct Payment method will be used to make payments directly to third parties in respect of goods, works or services already delivered to the Borrower or goods expected to be delivered. The Borrower will also open a local currency account in a Bank acceptable to the

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Fund. Funds will be withdrawn from the SA to be deposited in the local currency account to meet project-operating expenditures. Expenditures should be committed to the items eligible under the loan and should cover a previously approved program of work and activities for a period of 6 months. The funds advanced under the special account shall be fully justified within a maximum of 12 months. The special account will be replenished from time to time on the condition that the immediately preceding advance has been utilized and justified up to at least 50 percent and the other older advances have been fully justified.

5.7 Monitoring and Evaluation M&E will be an integral part of project activities. At inception a baseline survey will be undertaken to measure against benchmarks or target during implementation. This is aimed to regularly track output, outcomes and input indicators against the benchmarks set at appraisal. In addition the project will, on an annual basis, facilitate performance assessments using CSCs to get citizen feedback on the performance of service providers. Results from these assessments will be publicized widely. The project will submit to the Bank Quarterly Progress Reports (QPR) at the end of each quarter. A mid-term review will be conducted after two years to evaluate progress. At the end of implementation a Project Completion Report (PCR) will be prepared by the Borrower and Bank..

5.8 Financial Reporting and Auditing

To meet fiduciary requirements, CEISP shall submit to the Bank audited financial statements at least 6 months after the end of the financial year. MoPND internal audit will ensure that agreed operational, accounting, payment and procurement procedures are respected. Follow-up procedures for audit recommendations will be in line with Bank practice. Failure to submit the report of the audited accounts six months after the end of the financial year would result in the suspension of disbursement to the project.

5.9 Aid Co-ordination

The Kenya Coordination Group meetings provide opportunities to discuss matters of mutual concern. The Development Coordination Group meets each month. The Harmonization, Alignment, and Coordination Group actively promote the aid effectiveness agenda. Sixteen sector donor groups coordinate dialogue and program support at the sector level. There is concerted effort by the donor community in Kenya led by DfID and the World Bank to establish a coordination framework for social protection. CEISP could become the critical cornerstone on which GoK and the development partners refocus their capacity building initiatives. Strengthening DFRD, and the national and district level planning and development process, will provide a holistic and harmonized framework to be used by all development partners. While the project will support the proposed donor coordination framework for social protection, the field office in Kenya will enhance the Bank’s participation in the proposed forum.

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6. PROJECT SUSTAINABILITY AND RISKS 6.1 Recurrent Costs The project recurrent cost is estimated at KES29.5 million (UA292,617) or 0.0075% of 2008/9 GoK recurrent expenditure. This covers operations and maintenance of DPU facilities and equipment, daily operating expenses and technical backstopping. These costs are considered reasonable and will not have any implication on the recurrent budget.

6.2 Project Sustainability 6.2.1 Implementing the project through the existing planning and administrative framework is viewed as efficient and sustainable in relation to establishing a separate project management structure. To achieve desired impact and sustainability, the project will strengthen: (i) linkages and harmonization between national and district level development planning; and (ii) synergies and coordination among the key sectors and stakeholders respectively. CEISP is also designed as an integral part of the mainstream government planning systems which will ensure long term sustainability of its activities. The establishment of DIDCs and introduction of the basket of priority projects will also enhance the impact and sustainability of the project. The project will also build capacity to effectively manage local development. As such, through direct involvement including institutionalization of CSC, communities will be left with residual capital that can be utilized to sustain development. 6.2.2 The sustainability of project activities will be enhanced by additional measures such as: (i) statutory enactments to increase the allocation of resources to local development; (ii) improved absorptive capacity of communities will attract additional resources; (iii) Public Private Partnership in the implementation of project activities; and (iv) collaboration with NGOs; (v) use of community identified resource persons trained as facilitators. This will build technical and community based consultancy services capacity that could be continuously accessed by communities.

6.3 Critical Risks and Mitigation Measures 6.3.1 One of the critical risks that CEISP faces is the risk of facing ‘political’ resistance from those that will feel challenged by its consequences. This will be mitigated by institutionalization of decentralized planning and finance and publicly disclosing through the web information on the allocation and performance of projects in each constituency. 6.3.2 Growing concerns over poor governance and corruption in Kenya present a critical risk. As pointed out in section 5.4, however, there is growing demand for good governance among key stakeholders in the private sector, CSOs and local communities. To mitigate this risk the project will introduce anti-corruption measures as stated in paragraph 5.4.1 and will establish partnership with these stakeholders in order to build and sustain a bottom-up approach using instruments such as community scorecards and citizen report cards, to exact transparency and accountability from services providers. Another risk has to do with possibilities of slow project roll-out and internalization of its principles and operating procedures. To mitigate this risk, a roll-out strategy will be prepared soon after Appraisal and will include development of strategies and operational frameworks for IEC and training. To ensure smooth internalization

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and quality of project operationalization, the project will provide for periodic backstopping at the RPD with external technical assistance at critical stages of project implementation.

7. PROJECT BENEFITS 7.1 Socioeconomic Impact 7.1.1 CEISP is expected to have a positive impact on social capital formation whereby more than 70,000 stakeholders will gain knowledge, skills and hands-on experience in participatory development planning. As a result, it is expected that: (i) 80% of target constituencies will be able to utilize 90% of allocated resources (up from the current level of 50%), better manage social and economic risks and exert social justice in the allocation of public resources; (ii) All 35 districts will establish priority basket of projects which are reflected in harmonized district development plans. Due to the enhanced knowledge, information and capacity for effective project management, project inputs will spur social and economic activities and impact on the productivity of beneficiaries. The project will further benefit target groups through improved access to social services such as primary education, health care, etc.

7.1.2 The project is also expected to contribute to Kenya’s efforts at closing gender gaps, particularly in public decision-making. It is anticipated that the gender focused activities of the project, such as sensitization, gender quota and facilitation of girls and women forums will in the medium to long term contribute towards raising the participation of women in decision-making in the civil service and in local and national politics to 30%, as directed by the President in 2006.

8. CONCLUSIONS AND RECOMMENDATIONS

8.1 Conclusions and Recommendations Recommendations and Conditions for Loan Approval 8.2 It is recommended that an ADF loan not exceeding UA17 million be granted to the Government of Kenya for the purpose of implementing the project described in this report. The loan will be subject to the following specific conditions:

(a) Conditions Precedent to Entry into Force of the Loan Agreement

8.3 The Loan Agreement shall enter into force upon fulfillment by the Borrower of the provisions of Section 5.01 of the General Conditions applicable to loan agreements and guarantee agreements of the Fund.

(b) Conditions Precedent to First Disbursement

8.4 The Fund’s obligation to make the first disbursement of the loan to the Borrower shall be conditional upon the entry into force of the Loan Agreement and the fulfillment by the Borrower of the following conditions:

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(i) The Borrower shall have provided evidence satisfactory to the Fund of the opening of a foreign currency Special Account and a local currency account at bank(s) acceptable to the Fund (Paragraphs 5.6.1).

ii) The Borrower shall have provided evidence satisfactory to the Fund of having appointed the members of the National Steering Committee, comprising representatives of the following: Office of the President, Ministry of Finance, Ministry of Regional Development, Ministry of Gender, Sports and Social services, Ministry of Local Government, Ministry of Information and communication and representatives of Kenya Private sector Alliance and Kenya NGO’s Council. (Paragraph 5.2.1).

(iii) The Borrower shall have provided evidence satisfactory to the Fund of having nominated the following members of the Project Implementation Team, whose qualifications and experience shall be acceptable to the Fund: project manager, development economist, development planner, administrator/accountant, procurement officer, and executive secretary (paragraph 5.1.1).

(c) Other Condition of the Loan

(i) The Borrower shall within 6 months of 1st disbursement of the loan, submit to the Fund evidence of having recruited the 35 District Field Operations Assistants (paragraph 5.2.3).

Annex I

Organizational Chart

Ministry of Planning and National Development

MINISTER

Assistant Ministers

Permanent Secretary

Economic Planning Secretary

M&E Directorate

Rural Planning Directorate

Sectoral Planning

Directorate

Macro-Planning Directorate

KNBS

KIPPRA

PEC

NCAPD

NEPAD

Community Development Programs (CDP)

Other Ministries/

Departments

Administration Department

External

Domestic

Productive

Infrastructure

Social Sectors

Central

Sub-national

Projects/Program

District Planning

Provincial Planning Offices

District Planning Units

Annex II

Summarized List of Goods and Services

Source of Funds ADF

LOAN Total Category of Expenditure FE LC Total LC Total FE LC Total A GOODS DPU Furniture 0.000 0.159 0.159 0.000 0.000 0.000 0.159 0.159 RPD Furniture 0.000 0.020 0.020 0.000 0.000 0.000 0.020 0.020 DPU Equipment 0.425 0.000 0.425 0.000 0.000 0.425 0.000 0.425 RPD Equipment 0.021 0.000 0.021 0.000 0.000 0.021 0.000 0.021 Dstrict Vehicles 0.000 0.000 0.000 0.927 0.927 0.000 0.927 0.927 RPD Vehicles 0.059 0.000 0.059 0.000 0.000 0.059 0.000 0.059 Books 0.000 0.024 0.024 0.000 0.000 0.000 0.024 0.024 TOTAL GOODS 0.506 0.203 0.708 0.927 0.927 0.506 1.130 1.635 B WORKS New construction DPU 0.000 1.041 1.041 0.000 0.000 0.000 1.041 1.041 Rehabilitation of DPU 0.000 0.112 0.112 0.000 0.000 0.000 0.112 0.112 TOTAL GOODS 0.000 1.152 1.152 0.000 0.000 0.000 1.152 1.152 C SERVICES IEC Campaign 0.000 0.496 0.496 0.000 0.000 0.000 0.496 0.496 Technical assistance 0.000 1.811 1.811 0.000 0.000 0.000 1.811 1.811 Community training 0.000 5.383 5.383 0.000 0.000 0.000 5.383 5.383 Stakeholder workshops 0.000 1.330 1.330 0.000 0.000 0.000 1.330 1.330 Training workshops 0.000 0.498 0.498 0.000 0.000 0.000 0.498 0.498 Regional study tours 0.074 0.017 0.092 0.000 0.000 0.074 0.017 0.092 Overseas courses 0.128 0.017 0.145 0.000 0.000 0.128 0.017 0.145 Bursaries 0.000 0.198 0.198 0.000 0.000 0.000 0.198 0.198 Provincial backstopping 0.000 0.000 0.000 0.159 0.159 0.000 0.159 0.159 TOTAL SERVICES 0.202 9.751 9.953 0.159 0.159 0.202 9.909 10.111 D OPERATING COST Operating cost 0.000 0.000 0.000 1.089 1.089 0.000 1.089 1.089 Project launching 0.000 0.006 0.006 0.000 0.000 0.000 0.006 0.006 TOTAL OPERATING COST 0.000 0.006 0.006 1.089 1.089 0.000 1.095 1.095 Base cost 0.708 11.111 11.819 2.175 2.175 0.708 13.287 13.994 Physical & price contingency 0.090 5.086 5.176 1.607 1.607 0.090 6.693 6.783 TOTAL COST 0.798 16.197 16.995 3.782 3.782 0.798 19.979 20.777

Annex III

Implementation Schedule

YEARS 2008 2009 2010 2011 2012 2013

MONTHS M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F ACTION BYACTIVITY

ADMINISTRATIONAppraisal: August 2007 ADF/GOKBoard Approval: November 2007 ADFLoan Signature: March 2008 ADF/GOKEntry into Force ADFInstallation of PCU: Jan/Feb 2008 GOKProject launching: ADF/GOKIMPLEMENTATIONImplementation period GOKSupervision Missions ADF/GOKMid-term Review ADF/GOKBorrower's PCR: March 2013 GOKPCR Mission: September 2013 AVU/ADFCAPACITY BUILDINGIEC campaign procurement GOKIEC campaign implementation GOKTA recruitment GOKTA GOK/TAStakeholders workshops GOK/TATraining national & district level GOK/TATraining community level GOK/TA/COM

INSTITUTIONAL SUPPORTProcurement of goods DPU GOKProcurement of works GOKExecution of works GOKTA recruitment GOKTA GOK/TAPROJECT MANAGEMENTProcurement of goods PIU GOKTA recruitment GOKTA GOK/TA

M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F2008 2009 2010 2011 2012 2013

Annex

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REPUBLIC OF KENYA

COMMUNITY EMPOWERMENT AND INSTITUTIONAL SUPPORT PROJECT (CEISP)

CORRIGENDUM

Page (iii) Project Matrix Logical Framework

• Under the assumptions column remove the word “political” and “Met. Measures” should read as “Mitigating Measures”

Chapter I (Page 1): Second sentence in paragraph 1.1.1 to read as follows: “Through these DFs the government directly transfers resources to constituencies in order to finance community identified priority socio-economic development projects. The last line of the same paragraph should also read as follows “…..improving governance and social justice through increased allocation of resources to DFs.” Chapter II (Page 2) In paragraph 2.1.3, remove the last sentence. In paragraph 2.2.4, the first sentence should read as follows: “The country is divided into 8 administrative regions. Each region is subdivided into districts (133) and each district is divided into divisions, locations and constituencies (210) which are electoral zones.”. Also CDCS should be changed to CDCCs. In Page 3, Paragraph 2.2.5, the second sentence should read as follows: “CDF project identification and prioritization originates at the locational level and is submitted for approval to the Constituency Development Committees (CDC) and District Projects Committee, a sub-committee of the DDC.” Also in the last sentence, delete the last part which reads “…..or be identical to the CDF if the project is constituency based.” In the first sentence of paragraph 2.4.3, delete “national” and replace it with “district.” In the third line from the top of the paragraph remove the word “case” Page 4: in the last sentence of paragraph 2.4.3, insert “at the time of the appraisal” before the figure 20%. Chapter 3: Page 5 In paragraph 3.4, the last sentence but one should read as follows: “. It is an instrument that has been successfully used to empower communities to demand accountability from stakeholders.” Chapter 4: Page 6: In paragraph 4.2.1, the last sentence should read as follows: “In addition, limited number of districts with successful experience will be selected to be used as a model for replication.” Page 9: In paragraph 4.5.12 delete “gradually” in line 5 from the bottom of the paragraph.

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Chapter 5: Page 12: In paragraph 5.4.1, the fifth sentence should read as follows “During the implementation of the project the Borrower and the Bank will ensure the following anti-corruption measures are enhanced:” The last sentence should read: “The ADB Kenya Field Office will also regularly monitor project performance.” Page 14: Under paragraph 5.6.1, replace “MOPND” with the word “Borrower”

Page 15, paragraph 5.8.1 should read as follows: “To meet fiduciary requirements, the Borrower shall submit to the Bank audited financial statements within 6 months after the end of the financial year. MoPND internal audit will ensure that agreed operational, accounting, payment and procurement procedures are respected. The Kenya National Audit Office or its appointed auditor will be the external auditor of the project. Follow-up procedures for audit recommendations will be in line with Bank practice. Failure to submit the report of the audited accounts six months after the end of the financial year would result in the suspension of disbursement to the project.” Chapter 6 Page 16: Paragraph 6.2.2 shall read as follows: “The sustainability of project activities will be enhanced by the following measures: (i) CDF act which guarantees at least 2.5% of ordinary revenue; (ii) improved absorptive capacity of communities will attract additional resources; (iii) Private sector involvement in the implementation of project activities; and (iv) collaboration with NGOs; (v) use of community identified resource persons trained as facilitators. This will build technical and community based consultancy services capacity that could be continuously accessed by communities.

Paragraph 6.3.1: remove the word “political”

Paragraph 6.3.2: The first three sentences of the paragraph should read as follows: “Concerns over corruption in Kenya present a risk. As pointed out in section 5.4, however, the GoK continues to respond positively. To mitigate this risk the Borrower and the Bank will introduce anti-corruption measures as stated in paragraph 5.4.1 and will establish partnership with other stakeholders in order to build and sustain a bottom-up approach using instruments such as community scorecards to exact transparency and accountability from stakeholders. Chapter 8 Page 17: Condition (b) ii) should read as follows: “having appointed members of the National Steering Committee comprising the Permanent Secretary of the Ministry of Planning and National Development as chairman and a representative of each of the following: Office of the President; Ministry of Finance; Ministry of Regional Development; Ministry of Gender, Sports and Social Services; Ministry of Local Government; Ministry of Information and Communication; Kenya Private Sector Alliance; and Kenya NGOs’ council.”

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7. ANNEXES

Annex II: The heading of the columns should be as specified in the table below: Summarized List of Goods and Services

Source of Funds ADF LOAN GoK Total Category of Expenditure FE LC Total LC Total FE LC Total A GOODS DPU Furniture 0.000 0.159 0.159 0.000 0.000 0.000 0.159 0.159 RPD Furniture 0.000 0.020 0.020 0.000 0.000 0.000 0.020 0.020 DPU Equipment 0.425 0.000 0.425 0.000 0.000 0.425 0.000 0.425 RPD Equipment 0.021 0.000 0.021 0.000 0.000 0.021 0.000 0.021 District Vehicles 0.000 0.000 0.000 0.927 0.927 0.000 0.927 0.927 RPD Vehicles 0.059 0.000 0.059 0.000 0.000 0.059 0.000 0.059 Books 0.000 0.024 0.024 0.000 0.000 0.000 0.024 0.024 TOTAL GOODS 0.506 0.203 0.708 0.927 0.927 0.506 1.130 1.635 B WORKS New construction DPU 0.000 1.041 1.041 0.000 0.000 0.000 1.041 1.041 Rehabilitation of DPU 0.000 0.112 0.112 0.000 0.000 0.000 0.112 0.112 TOTAL GOODS 0.000 1.152 1.152 0.000 0.000 0.000 1.152 1.152 C SERVICES IEC Campaign 0.000 0.496 0.496 0.000 0.000 0.000 0.496 0.496 Technical assistance 0.000 1.811 1.811 0.000 0.000 0.000 1.811 1.811 Community training 0.000 5.383 5.383 0.000 0.000 0.000 5.383 5.383 Stakeholder workshops 0.000 1.330 1.330 0.000 0.000 0.000 1.330 1.330 Training workshops 0.000 0.498 0.498 0.000 0.000 0.000 0.498 0.498 Regional study tours 0.074 0.017 0.092 0.000 0.000 0.074 0.017 0.092 Overseas courses 0.128 0.017 0.145 0.000 0.000 0.128 0.017 0.145 Bursaries 0.000 0.198 0.198 0.000 0.000 0.000 0.198 0.198 Provincial backstopping 0.000 0.000 0.000 0.159 0.159 0.000 0.159 0.159 TOTAL SERVICES 0.202 9.751 9.953 0.159 0.159 0.202 9.909 10.111 D OPERATING COST Operating cost 0.000 0.000 0.000 1.089 1.089 0.000 1.089 1.089 Project launching 0.000 0.006 0.006 0.000 0.000 0.000 0.006 0.006 TOTAL OPERATING COST 0.000 0.006 0.006 1.089 1.089 0.000 1.095 1.095 Base cost 0.708 11.111 11.819 2.175 2.175 0.708 13.287 13.994 Physical & price contingency 0.090 5.086 5.176 1.607 1.607 0.090 6.693 6.783 TOTAL COST 0.798 16.197 16.995 3.782 3.782 0.798 19.979 20.777