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Document of The World Bank
Report No: 30284
IMPLEMENTATION COMPLETION REPORT(TF-29569 IDA-32950 PPFI-P9820 PPFI-P9821 PPFI-P9810)
ON A
CREDIT
IN THE AMOUNT OF SDR 58.7 MILLION (US$80.9 MILLION EQUIVALENT)
TO THE
REPUBLIC OF UGANDA
FOR THE
LOCAL GOVERNMENT DEVELOPMENT PROGRAM
November 23, 2004
Water and Urban 1Tanzania & Uganda Country DepartmentAfrica Regional Office
CURRENCY EQUIVALENTS
(Exchange Rate Effective June 30, 2004)
Currency Unit = Uganda Shillings Ush 1 = US$ 0.00056US$ 1 = Ush 1780
FISCAL YEARJuly 1 - June 30
ABBREVIATIONS AND ACRONYMS
ASD Alternative Service DeliveryCAS Country Assistance StrategyCBG Capacity Building GrantDDP District Development ProjectEOP End of ProjectERR Economic Rate of ReturnFUP First Urban ProjectGOU Government of Uganda HLG Higher Local GovernmentsIDA International Development AssociationKCC Kampala City CouncilLDG Local Development GrantLG Local GovernmentLGFC Local Government Finance CommissionLGDP Local Government Development ProgramLLG Lower Local GovernmentsM&E Monitoring and EvaluationMIS Management Information SystemsMOLG Ministry of Local GovernmentNCRP Nakivubo Channel Rehabilitation ProjectO&M Operations and MaintenanceOAG Office of the Auditor GeneralPAD Project Appraisal DocumentPDO Project Development ObjectivePEAP Poverty Eradication Action PlanPHRD Policy and Human Resources DevelopmentPMU Program Management UnitPPF Project Preparation FacilityPTC Program Technical CommitteeSDR Special Drawing RightsSFR Strategic Framework for ReformSIA Social Impact AssessmentUNCDF DDP United Nations Capital Development Fund
Vice President: Gobind T. NankaniCountry Director Judy M. O'ConnorSector Manager Jaime M. Biderman
Task Team Leader/Task Manager: Lance Morrell/Kate Kuper
UGANDALOCAL GOVERNMENT DEVELOPMENT PROGRAM
CONTENTS
Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 75. Major Factors Affecting Implementation and Outcome 146. Sustainability 157. Bank and Borrower Performance 168. Lessons Learned 179. Partner Comments 1910. Additional Information 20Annex 1. Key Performance Indicators/Log Frame Matrix 21Annex 2. Project Costs and Financing 23Annex 3. Economic Costs and Benefits 25Annex 4. Bank Inputs 34Annex 5. Ratings for Achievement of Objectives/Outputs of Components 36Annex 6. Ratings of Bank and Borrower Performance 37Annex 7. List of Supporting Documents 38Annex 8. Borrower's Contribution 39
MAPS
IBRD Nos. 30513 and 30514
Project ID: P002992 Project Name: Local Government Development Program
Team Leader: Lance Morrell TL Unit: AFTU1ICR Type: Core ICR Report Date: November 23, 2004
1. Project DataName: Local Government Development Program L/C/TF Number: TF-29569; IDA-32950;
PPFI-P9820; PPFI-P9821; PPFI-P9810
Country/Department: UGANDA Region: Africa Regional Office
Sector/subsector: Sub-national government administration (77%); Central government administration (16%); Solid waste management (6%); Sewerage (1%)
Theme: Decentralization (P); Municipal governance and institution building (P); Administrative and civil service reform (S)
KEY DATES Original Revised/ActualPCD: 05/19/1999 Effective: 03/21/2000 06/30/2000
Appraisal: 09/13/1999 MTR: 11/15/2001 02/18/2002Approval: 11/30/1999 Closing: 06/30/2003 06/30/2004
Borrower/Implementing Agency: GOVERNMENT OF UGANDA/MIN OF LOCAL GOVERNMENTOther Partners:
STAFF Current At AppraisalVice President: Gobind T. Nankani Callisto E. MadavoCountry Director: Judy M. O'Connor James W. AdamsSector Manager: Jaime M. Biderman Jeffrey S. RackiTeam Leader at ICR: Lance Morrell Gautam SenguptaICR Primary Author: Kate Kuper
2. Principal Performance Ratings
(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)
Outcome: S
Sustainability: L
Institutional Development Impact: SU
Bank Performance: S
Borrower Performance: S
QAG (if available) ICRQuality at Entry: S
Project at Risk at Any Time:
3. Assessment of Development Objective and Design, and of Quality at Entry
3.1 Original Objective:The project’s original objectives were fourfold:
(i) Test the feasibility of implementing constitutional and legal mandates with respect to decentralized service provision and devolution of the development budget through the provision of investment funds to the Local Governments (LGs).
(ii) Build the capacity of the Ministry of Local Government (MoLG), the Local Government Finance Commission Secretariat (LGFC) and a sub-set of the Local Governments for improved service delivery, accountability and transparency.
(iii) Test and institute alternative service delivery mechanisms through the private sector, beneficiary communities and other stakeholders in Kampala City Council (KCC).
(iv) Monitor and evaluate project implementation for actual experience and good practices for formulating an appropriate strategy, implementation modalities, and phasing for eventual scaling up nationally, over time.
LGDP was conceived as an initial phase of a long-term effort to assist the Central Government and Local Governments in their implementation of a national mandate to devolve the development budget and decentralize the provision of basic public services.
The project objectives were in line with the IDA’s long-term Country Assistance Strategy (CAS) for Uganda (Report no. 16540-UG April 30 1997), the National Development Strategy (1998/99) and Poverty Eradication Action Plan (PEAP, 1997) that stressed service delivery and poverty reduction. The project contributed to these goals in the strategic sense of creating systems to eventually deliver services locally and thus alleviate poverty more effectively. The country had shown sustained growth (7.2% over the past five years) and made numerous structural and institutional reforms, and was the first to qualify as a HIPC recipient in 1998. In the late 1990s, it was moving into a phase of deepening the reform agenda, a key dimension of which was the decentralized system of governance aimed at better service delivery standards and coverage through efficient and effective utilization of public resources. The project aimed at improving the capacity of the central and local governments to apply the provisions of the Constitution (1995), the recently enacted Local Government Act (1997) and associated Local Government Financial and Accounting Regulations (1998). The project objectives could have been reduced to two (namely (i) and (iii)) and could have been more outcome focused, but they were nevertheless realistic and important for the country and the sector at that time, as well as responsive to borrower demands and the development priorities articulated in the PEAP and CAS. The CAS included this project as part of its strategy to support local capacity building and providing key infrastructure investments in the districts as a contribution towards social and private sector development.
Inherently the establishment and strengthening of a decentralized governance system is demanding, complex and risky. As a result, the project was designed to scale up an earlier UNCDF pilot to 30 districts (out of 56) so that policies and principles could be tested (and costed) on a larger scale and lessons learned used to develop national policy formulation within a sound fiscal framework. The decentralization of the recurrent budget had already been completed and decentralizing the development budget as part of the Government’s Public Investment Plan was the logical next step in empowering local Councils and beneficiary communities. Delivery of services was to be provided to a greater extent by the private sector with government taking on an increasingly regulatory, facilitation, mentoring and monitoring role.
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3.2 Revised Objective:The objective was not revised.
3.3 Original Components:The project consisted of 4 components:
Component 1. Supporting and Operationalizing the Roles of the MoLG and the LGFC under the Government’s Decentralization Policy. ($9.5 million, 10%):
Subcomponent A. Operationalizing MoLG’s role under decentralization
Capacity building of MoLG Staff and retooling of its facilities, in order to perform its mandated lfunctions under decentralized governance.
Mentoring of Local Governments. MoLG to produce mentoring guides for Local Governments in lfields crucial for improved performance.
Compliance Supervision. Development of the LG Inspection Manual and development of consistent land systematic routine inspection and supervision.
Monitoring and Evaluation. Monitoring of performances of LG by MoLG, including manual and lassociated training for districts and municipal LG.
Advocacy of/for Local Governments. Inputs to support proactive role by Local Authorities lAssociation of Uganda (LAAU) and Urban Authorities Association of Uganda (UAAU) to include: amendment of Property Rates decree 1979 and Town and Country Planning Act; coordinating networking in areas of donor support to LGs, technical support and policy coordination.
Information Communication System to allow timely and effective decision adjustments. Establishment lof computerized database at MoLG Resource Center and computers and district and municipal LG levels, linked to MoLG database.
Subcomponent B. Operationalizing the LGFC Secretariat’s role under decentralization
Local Government Tax Study. Establishment and operationalizing M&E of LG revenue system. lMajor revenue enhancement study (of “best practices”) with three components (i) legal framework, (ii) institutionalization of LG revenue collection and (iii) establishment of M&E system of local revenue within LGFC.
Training of LGFC Staff. Build capacity of LGFC to perform its roles, through short term courses in lcountry and abroad.
Additional Office Space and Retooling. l
Component 2. Financing basic service delivery investments and capacity building activities through grants from the Central Government to the Local Governments. ($52.3 million, 54%):
Local Government Development Grant (LDG). Development block grants from Central Government l(through budgetary system) to Local Governments for provision of physical investments for mandated services as prescribed under the Second Schedule of the Local Governments Act 1997. (Excludes water supply). All tiers LG eligible but access to funds contingent on minimum set of institutional, financial and operational requirements mostly drawn from LG Act and LG Financial and Accounting Regulations 1998.
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Capacity Building Grant (CBG). Resources provided on demand-driven basis to meet statutory roles land responsibilities of LGs. LGs to identify gaps and capacity building strategies in annual planning and budgeting cycles. The CBG will enable LGs which did not qualify for the LDG to build up capacity to attain minimum standards to access LDG.
Component 3. Providing Support to the Kampala City Council for testing alternative basic service delivery mechanisms. ($19.5 million, 20%)
Test alternative basic service delivery mechanisms which include (i) contracting out of basic service ldelivery functions such as minor (routine) works in the Divisions; and (ii) financing and management of prioritized requirements such as improvements and extensions to the Mpererwe landfill site, refuse collection and transportation and rehabilitation and maintenance of tertiary, secondary and primary anti-malarial drains outside the Central Business District (CBD) area.
Institute measures to improve KCC’s (i) program and financial management performance, and (ii) lenhance its revenue mobilization efforts/performance.
Provide technical assistance in areas such as (i) engineering, financial management, management linformation systems and organizational reforms, and (ii) support institutional development and capacity building.
Component 4. Supporting program management, monitoring and evaluation and future program formulation. ($12.7 million, 13%) Note: PPF refund makes up final 2% of cost total; costs include contingencies and taxes, except for component 2 where LG responsible for taxes.
Program Management to provide financing toward office and administrative expenses for the Project lManagement Unit (PMU) and short-term consultancy inputs when necessary for specialized tasks.
Monitoring and Evaluation activities to be undertaken at various levels of LGs appropriate to a lparticular investment or sub-project and overall M&E to be consolidated by the MoLG team. Implementation of the M&E system to ensure lessons from the LGDP pilot are captures and utilized for the design of a scaled up version or for making alternative choices. Includes annual audit of the accounts of the LGs by the Office of the Auditor General.
Future Program Formulation Based on the LGDP and UNCDF DDP-Pilot, if the decision is made to lscale up these operations then resources under this component would be used for the preparation of the future national level program, to begin after the mid-term review.
Assessment of Components
Overall the design of the components was closely related to achieving the project objectives, although some of the indicators necessary to fully evaluate these objectives were lacking. The design was cognizant of the stage of development of the decentralization program and Ministry of Local Government in Uganda and therefore targeted considerable resources at strengthening the national as well as local government agencies. LGDP was designed with a recognition of the broader framework of support from donors for decentralization and despite occasional tensions that arose, addressed the areas where IDA would bring the most value-added. It took account of lessons learned in a range of related analytical and pilot experiences and was designed with a view to a much longer term program of support. Overall the design was effective but could, with hindsight, have included more emphasis on revenue enhancement, mainstreaming of activities into the MoLG and improved M&E for both project and decentralization program.
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Component 1. This component recognized the importance of developing the national support lframework for decentralization and provided the necessary resources to improve the key central institutions’ capacity to carry out their constitutional mandates, in particular that of MoLG. The activities were clearly articulated but to some extent too numerous and ambitious, particularly given the recent downsizing of MoLG and the very early days for the LGFC. In particular, the work on the LGFC did not anticipate the differences and tensions that would arise between it and the MoLG on their mandate. In respect of the Local Government Associations similarly, a clear roadmap for organizational development, in line with good practice, was not set out, which did not help mitigate the challenges that dogged these associations during the project’s lifetime. Finally, while it made sense to establish an M&E system early on, it was not clearly linked into the M&E that would be done for component 2 and 4, and needed more thinking on how the information would be used and collected by LGs and national government sector M&E systems.
Component 2. This component was well designed especially in terms of separating the grants for linfrastructure and capacity building. It also provided the necessary incentives for improved performance through the minimum criteria and reward system. It validated the initial pilot implemented by UNCDF.
Component 3. This component was critical not only to LGDP given Kampala’s importance as the llargest local government, but as a follow-up and necessary support project for KCC’s reforms developed under the First Urban Project and the investments and pilots being implemented in parallel under the Nakivubo Channel Rehabilitation Project (NCRP). In design, the component provided the critical support needed, namely in technical, financial and service delivery areas. It did not, however, sufficiently address the risks of diminished or changing political commitment to the reforms and establish milestones and early warning signals to ensure progress in the more difficult areas of financial management and revenue improvement. Nor did it measure expected improvements in service delivery.
Component 4. This component did provide substantial support to program management and learning lfrom the pilot, which enabled the Government to commission and develop a range of critical outputs and M&E mechanisms that would be used in both implementation and policy development. However, it relied heavily on a PMU and there could have been a clearer path to mainstreaming many of its functions during the project. A good feature of this component was that it provided funds for audits of local government and for a thorough review of the entire program at mid term.
3.4 Revised Components:Amendments were made although components were not revised:
(i) Provision of audit fees for MoLG and LLGs not initially included in the Development Credit Agreement (DCA).
(ii) Change from Project Management Reporting to Financial Management Reporting.
(iii) Extension of the project's closing date by one year to June 30, 2004.
(iv) Revised Road Map for Decentralization required not later than February 28, 2002.
(v) Reallocation of funds from Component 1 to Component 3 for rehabilitation of roads and installation of street lighting by KCC.
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3.5 Quality at Entry:The PAD effectively articulated the principles that guided the project, recognizing: (i) the need for fiscal prudence, so as not to undermine macro objectives; (ii) the complexity of decentralization and the need for a 10-20 year assistance horizon; (iii) that the recently legislated systems and structures were experimental; and (iv) that capacity at all levels must be adequate if decentralization is to work.
The project was part of a bigger picture of IDA support to the GOU which began in 1995 and including two PHRD grants, funds from the First Urban Project, the Peri Urban Infrastructure Project (which became LGDP) and the first Economic and Financial Management Project (EFMP). Importantly, it also had lessons of field experience from 1998 - 2001 from the UNCDF DDP pilot being implemented in five districts which served as the “template” for the design of LGDP. This allowed IDA to extend to 30 districts and 13 municipalities under LGDP. The objective was to ascertain implementability before launching a national program.
The design effectively used hard budget constraints and transparent access criteria to test the block grant mechanism and build LG capacity to prioritize scarce resources. It also importantly provided the capacity building grant to those districts that did not initially qualify for the grant, creating the incentives and mechanisms for learning. During preparation, a number of important reviews (Willingness to Pay survey, Community Participation Review) were conducted to ensure that community involvement would be intrinsic to the prioritization and implementation of the grants. Many key pieces of the system were therefore well thought through at entry.
A PMU was determined necessary given the limited capacity in the MoLG and LGFC and the complexity of the program, but it would have been advisable to think more about a plan to direct more responsibility to key directors by the EOP, and to become more a technical assistance unit rather than a PMU over time. This might have increased the institutional buy-in that developed mostly during LGDP II. On the other hand, more responsibility built within the Ministry may have reduced the pace of delivery and limited the potential for testing the grants mechanism effectively. The PMU approach was effective in generating the materials and lessons learned during LGDP I and ultimately led to department heads playing more effective roles as component managers under LGDP II. It took time to appoint and train LGFC staff so impact was too early to measure under LGDP I. However, research outputs were slow and not necessarily highest impact, a large part of which was related to unclear mandates and a lack of collaborative strategic management between the parts of the LG system.
Regarding component 3 support to KCC, the PAD discussed the progress made after restructuring of the FUP in 1997, most particularly the inception of the SFR. By the time of LGDP preparation, some reforms had been made in KCC including contracting out of various service delivery functions, reductions in the wage bill by half of what they were in FY1996/7 and the introduction of various good financial management practices. LGDP was intended to support further “Alternative Service Delivery” and to provide funds for consultants to support KCC in deepening its institutional reform efforts. However, it underestimated the risk of diminishing political will to restructure KCC and remedy its financial crisis.
Problems with counterpart funds by either national or local governments were not foreseen as a major risk in the PAD although some of the credit was cancelled due to a shortfall in the former, and implementation was hampered by delays in the latter. While LGDP was the predominant local government support program at the time of design, LGs were quickly overstretched by various sector programs requesting additional 10% contributions from LGs, something not foreseen at entry.
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A risk that was significantly underestimated and neglected in the PAD was a low level of political commitment to support revenue collection by LGs and reinforce the social contract of taxes for services. The revenue assignments of local governments were undermined in a series of statements, particularly towards election time, and replacement strategies were not adequately developed. The commitment of KCC to the SFR was also overrated, with significant implications for its capacity to turn around the financial crisis and delivery improved services. Other risks that were underestimated at entry were the weak capacity of the private sector especially in view of increasing procurement complexity and rigor, and the parliamentary delays in approvals. These risks reflect the only serious weakness in quality of entry, namely a low case or changing scenario for political commitment to serious financial and administrative reform within KCC and a diminishing trend in revenue autonomy of LGs, both of which should have had corresponding mitigation strategies. Furthermore the specific mechanisms to ensure participation of communities in district planning through strengthening the governance process from village through LLGs to Districts, could have been given more attention, as well as effective communication downwards on the outcomes of the district planning process.
With respect to the Bank’s safeguards, the project was category B and required an environmental analysis that varied for each investment. Modular sector-specific environmental checklists were prepared for the project and all investments were screened by LGs to ensure that they met the environmental requirements and followed the prescribed mitigation measures. No settlers were expected to be relocated as availability of land without any form of encumbrances was one of the prerequisites for project site selection and implementation. An SIA should nevertheless have been done before and not only at EOP to provide a baseline beneficiary assessment to measure impact.
Overall, quality at entry was satisfactory.
4. Achievement of Objective and Outputs
4.1 Outcome/achievement of objective:Overall Assessment: The overall outcome of the project was satisfactory, as the project achieved most of its objectives and these objectives were relevant to the GOU’s development priorities. With regard to the first PDO, the follow-on project LGDP II (multi-donor program of $165 million) and major policy changes demonstrate the satisfaction of stakeholders with LGDP I. Investments reached lower levels of government and community projects were funded, with few problems. Total funds of $42.6 million were disbursed in local development grants against $39.5 million projected. Most of the 8204 investments were made in PEAP priority areas, namely roads and drainage (39%), education (23%), water and sanitation (14%), health care (13%), production (5%), administration (5%) and Solid Waste (1%). Less than 20% was spent on administration of these funds. Average cost was approx. Ush 7.7 million. Labor accounted for 24% of total project costs, or approximately US$7.3 million that was paid directly to communities for approximately 1.5 million short term jobs (of which 30% went to women). The value for money audit of 2003 indicated that 68% of investment projects had good or best value for money, 25% fair value and only 8% no value for money.
The economic analysis shows that improvements in capacity of LGs in the processes of planning, approval, procurement, implementation and financial management are highly correlated with better outcomes in efficiency and value for money. There was transparency in accessing the grants, public participation and generally smooth procurement. Annual assessments and Audits (by Office of Auditor-General) were conducted of all HLGs and some LLGs which is itself a major achievement of the program. Furthermore,
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in June 2002 the government approved the Fiscal Decentralization Strategy which seeks to reduce the number of conditional grants to LGs from 32 transfers into one development and one recurrent transfer.
According to the Social Impact Assessment (SIA) conducted at EOP with a sample of local beneficiaries through interviews and 104 focus groups, significant benefits were perceived by local residents, including for example: (i) from roads: improved access to markets by farmers, increase land values, improved access to social services and reduction in transport fares; (ii) from water and sanitation: reduction in water borne and sanitation related disease, reduced distance and time to access clean drinking water; (iii) from education: improved enrollment and retention of pupils, improved timeliness of staff (housing) and more conducive learning environment (desks, chairs); (iv) from health investments: increased in- and out-patient attendance, increased immunization, improved working environment; (v) from productive investments: improved food security and improved earnings for farmers; and (vi) from power: new businesses, increased land value, improved security.
According to the SIA, downward accountability is gradually taking place, especially in terms of councils, committees and the executive improving performance. Councilors regard the District Development Plan as a key document of Council rather than a Planning Unit document, and the council meetings have seen a significant improvement in the quality of deliberations and resolutions. Community participation in planning is still relatively weak due to limited capacity in participatory planning skills, and community involvement happens mainly at Parish level. However, the public perceived a great improvement in transparency on the part of the GoU and LGs, through the publication of the releases in national newspapers, requiring all LGs to post indicative planning figures, lists of approved projects, names of management committee members, work plans and budgets in public places. This helped promote downward accountability as people were able to track down the use of the funds and question local leaders and staff. According to the SIA, LGDP I also revitalized the Technical Planning Committees at all levels of LGs which has enabled sharing of information, harmonization and coordination among departments, promoting horizontal accountability. Vertical accountability has significant improved from LGs to central government as discussed elsewhere. However, ensuring effective participation and communication at levels below District LG needed more focus.
For PDO (i), the MoLG made progress in developing guidelines and manuals that would enable it to support, mentor and monitor LGs. The extent of institutionalization of some of these instruments was limited, partly due to time constraints and partly to a lack of counterpart funds resulting in some consultancies having to be delivered under LGDP II ($6 million was cancelled under LGDP I). The LGFC was retooled and 70% of the training program for LGFC was completed but impact was not measured and was arguably limited given the ongoing difficulties of establishing a clear role allocation between it and MoLG. PDOs (i) and (ii) are difficult to distinguish from each other and should have been combined into one. These are evidenced nevertheless by the same impact indicators which show the improved capacity of LGs over time, measured through the annual assessment and SIA near EOP. During the first year there were a number of capacity gaps both at technical and political levels and as such only 12 Districts qualified for the first round of grants. However, the non-qualifying districts automatically received the capacity grant and by the second year 19 districts qualified and 6 were awarded bonuses. At EOP 42 Districts qualified and 16 were awarded bonuses. The program has therefore assisted tremendously in building the technical and political capacities of LGs. This also demonstrates the impact of the capacity building grant which disbursed $5.3 million versus a projected total of $4.17 million to LGs. Approximately 152,000 LG Councilors, staff, private sector and community representatives received capacity building under the project of which 28% were women. However, the capacity building grant's impact should have been better measured.
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For PDO (iii) ASD was mostly successful in KCC; minor routine works were contracted out (75% versus 85% target), 54 km of anti-malarial drains were cleaned (target 52), the Mpererwe Landfill was expanded by 19 acres (target 10) despite a weather-caused problem, and the landfill was managed reasonably well by the private contractor to within 5% of cost per/ton disposal and just under 20% in quantity targeted. The target of 60% of solid waste collected was only 80% achieved and the proportion of waste collected by private firms was 50% versus a 60% target. There were some cost overruns and cost recovery was less than expected which is a major challenge that needs to be addressed. The PDO did not go beyond ASD but the component activities included a broader scope, namely administrative and financial management and revenue mobilization improvements. In line with these, the Strategic Framework for Reform consultancy did not achieve many of its objectives. Some progress was made in the area of IT, engineering and improving the management information systems but significant improvements in program management and financial management were not evidenced by better budgeting, resource mobilization or service delivery. Strides were made to value the properties in Kampala, but revenue collection fell below targets with a number of problems in various contracts for collection. In KCC 47 staff received specialist training while 216 Councilors and Staff were trained in IT, with limited assessment of impact. However, all but 2 remain in KCC. Progress was therefore slow in the SFR, but in respect of the PDO, which refers only to ASD, KCC has certainly “tested and instituted” the ASD approach.
Finally, in respect of the fourth PDO, overall project management was effective although systemic M&E experienced some weaknesses and the extent of institutionalization of some activities performed by the PMU was more limited. A number of important outputs were developed under LGDP I that subsequently delivered outcomes and impact under LGDP II.
Unfortunately, however, some outcome indicators that could have been developed and tracked (such as revenue mobilization, the impact of training and the positive policy changes) were not. Some indicators are also more output than outcome oriented (see (vi) and (vii) below). In the case of revenue mobilization, the indicator was dropped, although the major weakness of the project’s performance was the failure to improve local revenue mobilization in LGs, as local revenues in fact declined due to both policy and operational failures.
On the other hand, this project created an opportunity for the first ever audit of lower local governments which required the preparation of final accounts and led to the identification of common issues. For higher LGs the Office of the Accountant General conducted audits using LGDP I funds but has now established in-house regional auditors and will pay for these using LGDP II funds for two years only. Both these revenue mobilization and financial management areas were not captured directly within the PDOs or associated indicators, but underlie the sustainability of most of them. The project has therefore significantly influenced the policy environment and OAG’s mainstreaming of audits of both HLGs and LLGs is an impressive outcome of the project.
Assessment of each outcome indicator: (i) Better planning, financing and delivery of services by the LGs in a sustainable manner. Satisfactory.
The project has made a significant impact with 89% of HLGs with functional Technical Planning Committees and 3-year Development Plans linked to the budget, versus 30% at start of project. The number of LGs with at least a 20% increase in local revenues increased from 19% in 2001/2 to 36.4% in 2002/3.
(ii) Strengthened and effective MoLG and LGFC delivery on their statutory mandates. Partial. Staff of the MoLG are now able to supervise, train and mentor LGs. Impact is evidenced by improved
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performance of LG in national assessment. 19 HLGs met the minimum conditions in 2003 while 42 met them in 2003. 16 HLGs were rewarded for good performance in 2003 versus 2 in 2001. The impact on LGFC remains uncertain partly due to problems in clarity of mandate.
(iii) Improved applications of the provisions of the Local Governments Act 1997, and the LGs Financial and Accounting Regulations, 1998 by LGs in their operations. Satisfactory. At the end of 2003, 79% of HLGs were compliant with LG Act and LG Finance and Accounting Regulations, versus 38% in 2001.
(iv) Better coverage and lower unit costs of various public services delivered Satisfactory The value for money audit and the economic analysis done for the ICR prove the hypotheses of the project that building LG capacity to procure and manage investments leads to greater effectiveness (impact) and allocative efficiency. (See Economic Analysis Annex)
(v) Increased delivery of basic public services by the private sector. Satisfactory. By end 2003, 92% of LG expenditure went to payment of private sector providers versus 25% in 2001. In KCC, for example, solid waste collection went from 39% contracted out to 50% and 75% of routine works were contracted out, along with the landfill expansion and management. This indicator reflects increased privatization and mostly assumes rather than measures improved service delivery.
(vi) A sustainable Management Information System integrated with the Monitoring and Evaluation system developed and tested including the collection, analysis, storage and application of data for planning purposes for LGs. Partial. A LG information system (LOGICS) was developed to incorporate M&E for all subprojects, Compliance Inspection and an electronic Communication System. LOGICS was tested and rolled out to 17 districts and 2 municipalities and is being used by LGs for decision making in planning. There is a need to improve the use of LOGICS for decision making at national level and for it to be sustainable (updated, used) in LGs. A strategy is still lacking to link, integrate or at least better understand how these systems of the MoLG would interface or support the MIS of other sectors, including the IFMS being rolled out by MoFPED.
(vii) Procedures, arrangements and model documents and guidelines that are fully demonstrated to be ready for replication in all local governments in the country. Partial. Procurement and contracting procedures were developed, disseminated and are being used by all LGs. A National Assessment manual was developed and is being used by all LGs. Operations manuals on LGD grants and capacity building grants were developed and are being used by all LGs. Mentoring guides (9) were prepared. The M&E manual, compliance inspection manual and data base manual are in use in 19 HLGs. A Harmonised Participatory Planning Guide for LLGs was prepared. However, printing and publication of some manuals and guides had to be done under LGDP II due to lack of counterpart funds. LGFC prepared an implementation framework for a LG revenue enhancement study and revenue sharing study, developed a Best Practices Manual (used in LGDP II) and developed a framework for M&E of LG revenues, although it needed to be more cognizant of the context and should have emphasized broader policy options.
(viii) Scaled-up National LGDP approved by the Government. Satisfactory. Scaled up LGDP II was approved by government and started in 2003. This is a successful outcome in terms of both fiscal decentralization and development partner harmonization. With donor and GoU financing, the grant scheme is being rolled out nationally under LGDP II.
4.2 Outputs by components:Component 1. Supporting and Operationalizing the Roles of the MoLG and the LGFC under the Government’s Decentralization Policy. Moderately SatisfactoryThis component was well managed although some of the tasks (e.g. rates bill and establishment of the
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Physical Planning Authority) proved difficult to finalize given their reliance on political organs outside the control of the implementing agency, such as Parliament. Most of the critical inputs to developing a sound framework for decentralization, such as the assessment manuals, the mentoring and planning guides and inspection manuals, were prepared to a high level of quality. However, the lack of counterpart funds prevented the effective rollout of these to LGs under LGDP I and this component was revised and these activities transferred to LGDP II. The assessment process took time for LGs to understand and the increase from 40% to 51% of qualifying LGs was an achievement under LGDP I, although the significant increase under LGDP II provides the more convincing evidence of this. Some of the outputs expected from LGFC were slow as the organization was still finding its feet and this provided some frustration and overlap with MoLG activities. This kept them from working effectively together to develop and promote a unified and coherent vision of the policy framework for LG finance. This was particularly unfortunate given the impending political context which further undermined local revenue assignments. The M&E system was not fully thought through until LGDP II but the MoLG did make a start and incorporated some important elements such as the compliance inspections.
Component 2. Financing basic service delivery investments and capacity building activities through grants from the Central Government to the Local Governments. SatisfactoryThe grants proved to be successful in building the capacity of LGs to ‘learn by doing’ and to deliver cost-effective services to communities using private contractors. The increase from 38% to 79% from 2001-2003 of LGs complying with regulations, and the increase from 19 LGs to 42 LGs meeting minimum conditions (and 16 getting rewards), provides evidence not only of the pilot’s capacity to demonstrate proper use of funds but also reinforces the importance of the work done under component 1 to support this. In total, 152,129 participants benefited from the capacity building grant of which 28% were women. The challenges experienced under this component were difficulties in getting reports on time from LLGs to HLGs and problems of co-funding faced by LGs in light of declining local revenues. Overall significant learning opportunities were obtained through the grants program and these underpin the achievement of the major objective of the project, namely testing the feasibility of an intergovernmental transfer system for unconditional grants.
Component 3. Providing Support to the Kampala City Council for testing alternative basic service delivery mechanisms. Moderately SatisfactoryUnder LGDP I, the ASD program of contracting private sector providers for minor works and O&M proved achievable. The size of the ASD contracts increased significantly demonstrating the learning-by-doing of KCC technicians and cemented the important realization in KCC that ASD could deliver at least cost. On the other hand, the cost recovery expected for the Mperwere landfill contract did not occur under LGDP I. More generally, the Technical Assistance (TA) provided by Kirklees Metropolitan Council was highly regarded and effective, as evidenced by the capacity of the KCC and division staff to carry out increasingly complex tasks after the consultants left, as evidenced by their performance on ASD and in the Nakivubo Channel Rehabilitation Project. KCC took up some of the reallocated funds under component 1 for additional ASD. The institutional reform elements were less successful. LGDP I was designed to finance half of phase 2 and phase 3 of the Strategic Framework for Reform consultancy with FUP and NCRP financing the earlier part. Phase 2 focused more on valuations, property tax collection and management and phase 3 on other revenues of KCC. While progress was made in collecting market and license fees and in developing the valuation rolls for property taxes, and steps were taken to establish administrative, IT and financial management systems, the institutionalization of this remained weak, given the lack of political commitment from the Council itself and some of the Heads of Departments. The improvement in revenue performance expected from KCC fell far below the target (21bn Ushs versus 38 Bn Ushs if debt collection included) and budgets continued to be unrealistic.
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Component 4. Supporting program management, monitoring and evaluation and future program formulation SatisfactoryThe project management team effectively carried out this function, working closely with the Ministry. The limited capacity of the Ministry at the start of the project made it difficult to mainstream all tasks during LGDP I, although a plan for mainstreaming would have been advisable. Nevertheless, by the time LGDP II was in place, MoLG heads of department were committed and ready to be component coordinators. The PMU played a critical role in building the systems and frameworks for decentralization with key constituents in the GOU and donor community. It remained focused on the LG capacity questions and on drawing out and adapting to lessons being learned along the way. The establishment of the rotational Project Technical Committee meetings where district teams would evaluate each other was innovative and effective and has been adopted as part of a similar project in Tanzania. Under this component 318 LLGs and 761 LLGs were assisted in preparing their final accounts in years 2 and 3 respectively and these were audited by private firms via the OAG. The M&E system was still too project oriented and some more planning should have gone into its mainstreaming and links to the sectors earlier on. The mid-term review was very thorough as evidenced by the preparation that began on LGDP II at that time, reflecting the buy-in of donors and the GOU following the successful rollout of the pilot to the LGDP set of districts.
4.3 Net Present Value/Economic rate of return:A post-construction evaluation of the economic benefits of LGDP investments was carried out using three approaches - value for money, cost-effectiveness and cost-benefit analysis. The conclusion arrived at using these approaches demonstrates that overall the LGDP resulted in the identification, prioritization, selection and investment in economically viable subprojects. The poverty impact of LGDP is positive and the investments are shown to be positive both in terms of cost-effectiveness and through an ERR assessment. While there are significant variations between sectors, the economic analysis findings confirm the design hypothesis that by empowering the client and its constituents and providing appropriate incentives to enhance ownership and management skills, the decentralized approach of LGDP can achieve equal or better outcome than the old centralized approach.
Value for Money. Using the Value for Money Audit assessment of 839 subprojects out of a total of 8,204 subprojects implemented under LGDP, an economic analysis was conducted. An analysis of the data generated shows that the ranking of the outcome (“effectiveness”) of the sub-project is correlated to the ranking of the “economy” and “efficiency” of the local government. In particular, the “efficiency” is highly correlated to “effectiveness”. That is, the outcome is highly dependent on the mastery of execution of the processes of planning and approval, procurement, implementation, financial management and commissioning/handover. Districts which utilize their resources frugally (”economy”) tend also to have relatively high outcomes although not as high as those that have high “efficiency”, i.e. those that mastered the skills necessary for executing the processes within a project cycle. Thus, the hypothesis that local governments with adequate capacity (institutional and skilled manpower) will select and implement subprojects that are economically viable is validated. Moreover, the variation in outcome by sector reflects the capacity of the local governments and the quality of support they received from the Central Government. Cost–effectiveness. Cost-effectiveness analysis for the roads and education sectors on the basis of data collected under the M&E system show that unit costs are generally lower than non-LGDP projects (of approximately the same quality), further affirming the working hypothesis. In the education sector, the cost of a non-LGDP standard classroom is 25% larger than for a standard LGDP funded project. Also in the roads and drainage sector, the unit cost for footpaths and tertiary roads is Ushs.967/person and Ushs.752 per person respectively, indicating that footpaths and tertiary roads were built in densely populated areas where they are used by large number of people as suggested by the reduced unit cost per person-trip.
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Cost-benefit. Analysis in the water sector on prototype technology choices is positive. The weighted average rate of return for standard protected springs, shallow wells and boreholes is 18%. Sensitivity analysis indicated that this return was robust. The net present value is Ushs.1.5 billion.
4.4 Financial rate of return:Not applicable as no income-generating activities. See ERR section.
4.5 Institutional development impact:Decentralization is inherently complex and long term. It requires a sustained and multi-faceted approach to improving institutions across sectors, geographic delineations as well as levels of government. The LGDP is part of a longer term program of support to the GOU to make effective use of its human and financial resources. LGDP has demonstrated its impact. The development grant has been institutionalized and the returns on it are significant, with unit costs generally lower than non-LGDP projects. Some improvements have not yet been integrated into the central systems in a sustainable way, such as the M&E of LG performance (including beneficiary assessments) and the important area of local revenue mobilization remains underexploited and confusing. This is critical in terms of service delivery, sustainability of investments and local democracy and governance. Nevertheless, especially when seen together with LGDP II which reduced various donor projects into one national program, LGDP has made a significant impact on the governance landscape in Uganda.
Institutional Impact at National Level: The MoLG’s primary role is inspection, monitoring and coordination of LGs (LG Act) and also training and technical advice. The Ministry set up various departments and provided the staffing necessary to carry out functions such as compliance inspections and capacity building. LLGs were audited twice under LGDP and this is now being taken over by the OAG. All LLGs are now going through the process of preparing final accounts for auditing. The monitoring of the grants remained mostly within the PMU and could have been mainstreamed earlier on. Mainstreaming remains a challenge in LGDP II. LGFC is a new institution and it is yet to be seen whether they can fulfill their mandates following training under LGDP. There appear to be tensions, perhaps inevitable in terms of their respective roles, between MoLG and LGFC. At a national level, however, there was significant institutional impact in the broadest sense of support and buy-in towards greater decentralization and scaling up within the Ministry of Finance, the MoLG and donors based on LGDP I. In line with the objective of the project, the important elements of a national framework were developed, honed and tested effectively under LGDP I.
Institutional Impact at Local Level:LGDP improved the capacity of LGs to plan, manage and report on development funds and to engage more actively and openly with all internal partners, from national government to other LGs and civil society. LGDP was rated high in a Community-Driven Development (CDD) study comparing projects in the country, for institutionalizing participation by communities in district planning and investment cycles. Institutional impact within LG was significant in terms of “empowerment” of LGs to contract for small infrastructure investments prioritized locally and to ensure these had sound returns (See Economic Analysis). Being able to prepare and present final accounts is an extremely important discipline that LGDP supported at a LG level and should contribute significantly to upward and downward accountability. Furthermore, in June 2002 the government approved the Fiscal Decentralization Strategy which seeks to reduce conditional grants to LGs from 32 transfers into one development and one recurrent transfer.
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KCC had a separate Project Agreement for component 3. The Core Team of contracted staff drawn from KCC were responsible for overall project management but there is evidence that the Divisions did significantly increase capacity to contract for small works under ASD and to engage communities in the process. However, KCC as a whole saw slow progress in overall institutional reform leaving the Core Team to perform most of the responsibilities associated with the project and apparently limiting both “buy-in” and the potential for institutionalization of reforms.
5. Major Factors Affecting Implementation and Outcome
5.1 Factors outside the control of government or implementing agency:Delay in Parliament in approving project (partially)lDelay in Parliament passing Property Rates law (substantially) lGood support from donor community for GOU’s decentralization policy (substantially)l
5.2 Factors generally subject to government control:Delays in credit effectiveness and first tranche (partially)lDelays in releases to local governments (partially)lStrong and consistent leadership and management from MoLG and PMU (substantially)lStrong GOU support for decentralization (substantially)lBudget of MoLG (along with most other ministries) reduced over time (partially)lElimination of LG sources of own revenue, in favor of central transfers which increases dependence land leaves LG at risk when budgets are squeezed (substantially)Lack of political will in the political arm of KCC to support reform of financial management and l
improvement in revenue mobilization (substantially)National political/policy leaders did not back LG revenue collection efforts and undermined some local ltaxes (e.g. G Tax, Boda Boda Tax)Local political/policy leaders did not develop revenue policies that have legitimacy/public support and l
have not “sold” the public on the social contract of services for taxes
5.3 Factors generally subject to implementing agency control:LGFC failed to address major policy questions related to revenue assignments to LGs (substantially)l
Problems with privatization of revenue collection due to a lack of active contract management and prol
curement processes that could have been better designed (partially)
5.4 Costs and financing:The project cost at appraisal was estimated at US$96 million equivalent, including taxes and duties of US$6.1 million. Of the total cost, US$80.9 million (84%) was to be financed by IDA and $15.1 million by the GOU. At closing, US$74.6 million (92%) of the IDA credit was disbursed and US$7.6 million (50%) from the GOU.
Counterpart Funds were budgeted in the Government’s Public Investment Plan and contributions from KCC were included in its budget at 10%. There were 2 Special accounts, 1 in KCC and 1 for MoLG. IDA funds for the LDG flowed directly through the GOU’s budgetary system released in three annual tranches to the Bank of Uganda in a foreign currency deposit account. The equivalent local currency was then made available to the Uganda Consolidated Fund from which quarterly releases were effected to finance locally prioritized investments for a set of qualified districts and capacity building activities.
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A counterpart shortfall meant the project could not complete implementation/roll out of the consultancies/studies financed under component 1, so $6.3 million remained uncommitted. SDR 2.08 ($2.94 million) of this was reallocated to KCC. The rest was cancelled. Disbursements from GOU were lower than expected due to this cancellation.
6. Sustainability
6.1 Rationale for sustainability rating:Likely
In the design phase, the teams took care to maximize sustainability of the system being tested, by building in the following: (i) efforts to enhance the local revenue base; (ii) affordability of investments; (iii) stakeholder participation; (iv) per capita investment level within government’s fiscal potential; (v) LG and community responsibility for development and O&M costs; and (vi) charge of user fees. These contributed to the likely sustainability of the main project results, namely the decentralized 'system' that included the grants and the capacity improvements in LGs. However, one element of the system, namely the ability to raise local revenues necessary for the O&M of local infrastructure investments proved a consistent challenge and remains an obstacle to sustainability of the local investment rather the system itself. The fiscal impact of LGDP was 3% of the national budget so did not pose much risk to macro sustainability. At its peak LGDP would only finance 7% of the development budget. On the other hand, the LGDP funds were spent in line with national sectoral priorities, reinforcing the intended expenditure pattern under the PEAP. There were sustainable improvements in capacity and understanding by LGs of their roles and responsibilities, particularly in planning, budgeting and financial management, as evidenced by the Annual Assessments and Audits. This also demonstrates improved capacity in the MoLG. The major instruments for monitoring LG performance were initiated under LGDP I and integrated more strongly into mainstream MoLG and Office of the Auditor General functions during LGDP II. There is general consensus that a capital development grant would continue, albeit perhaps slightly smaller per capita, even in the absence of LGDP II. These are significant sustainability achievements.
Subsidiary agreements between MoLG and LGs for LDGs required LGs to provide O&M budgets in each of the project accounts. Investment choices by LGs had to be in their 3 year development plans and the Willingness to Pay survey identified what the absorptive capacity of LG and beneficiary communities was, and used it to develop the budget envelope. So provided the intergovernmental fiscal framework remained stable, conditions for sustainability were promising at entry. Various destabilizing factors were to occur, however, and undermined the potential for sustainability. This was partly due to difficulties in raising LG revenues for both political and technical reasons and also a function of the mushrooming of sector programs at community level that demanded 10% from the same communities, spreading the resources more thinly for LGDP activities. All investments at a local level imply an ongoing O&M burden and given the weak policy framework for local revenues and weak local revenue performance and national budget stresses, it remains unclear where the O&M resources will come from to ensure sustainability.
6.2 Transition arrangement to regular operations:Many of the activities under component one have been mainstreamed into the MoLG and LGs under LGDP II. The grants have continued to rise and the audits and assessment mechanisms continue to ensure that LGs are complying with the law and improving their performance. The challenge of raising local revenues continues under LGDP II although a full component emphasizing this area was designed to address the weakness under LGDP I. Much of the problem lies within the political realm, however, as tax options for
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LGs are being limited. The role of the LGFC in presenting options is therefore critical during the transition phase under LGDP II.
For KCC, the problem of political buy-in and commitment to address the severe financial crisis of the city remained at EOP. “Regular operations” remain impossible until this situation is addressed. The ASD investments have delivered results and their O&M will depend on the capacity of KCC to address its financial problems. The O&M for the landfill was handed over to KCC as was financing for refuse collection and transportation. This will initially be supported from the escrow account that was set up as a covenant but the private contractors will need to increase cost recovery significantly to ensure sustainability.
There is a risk that without LGDP II, some of the key elements of the national support system would not have been sufficiently internalized by the MoLG, in both financial and capacity terms. LGDP I cannot, however, be seen as separate from LGDP II where the mainstreaming of instruments such as the audits and assessments was prioritized. The audits appear to be sustainable as they are being financed by the OAG. However, the national assessments and monitoring of the grants will depend on whether the Ministry prioritizes these activities in the context of the recent budget cuts. Given that many of these are required by law, however, there is a strong likelihood this will be done.
LGDP II allows for many of these critical institutional reforms and activities to be further integrated into the MoLG and LGs as part of the longer term program. The nature of decentralization programs is complex and long term and could not have been expected to take root firmly in LGDP I. It is clear, however, that LGDP I laid the groundwork for the LGDP II to be seen as a financing facility rather than a project, with some important technical support to help implement the constitution and associated LG regulations.
7. Bank and Borrower Performance
Bank7.1 Lending:SatisfactoryThe Bank team provided critical expert input and recommendations to the borrower and worked closely with them on all aspects of project preparation. The project was based on a considerable amount of detailed preparatory work including the community participation assessment, willingness to pay surveys, reviews of the DDP pilot and various other reports. One oversight was a baseline ‘beneficiary assessment’ on LG service delivery which makes the EOP assessment difficult to compare. The team was working in an area where there was relatively little experience and untested legislation and managed to work well, especially at a technical level with the borrower to develop an effective design.
7.2 Supervision:SatisfactoryDespite an abrupt change in TTLs and then in the entire IDA team, the borrower considers supervision to have been smooth and highly supportive to the project team. The quality and availability of the supervising team seems to have been high and supervision missions were frequent. All problems related to the project’s implementation and fiduciary procedures were resolved effectively on missions or between them. The resident mission also provided valued support to ensure speedy clearance of disbursement and procurement matters. The team supported the project in undertaking a thorough mid term review and also conducted various independent assessments in the field and attended PTC meetings in various districts over the project’s life.
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7.3 Overall Bank performance:Satisfactory
Borrower7.4 Preparation:SatisfactoryMOFPED, the Policy Steering Committee and MoLG were involved and committed from the beginning. The borrower was involved in all the stages of the project design, from concept to effectiveness and the experience and professionalism of the coordinator on the GOU side was notable. The GOU assumed the lead at all times while drawing on support from the Bank. The GOU team remained consistent throughout preparation and project supervision. The delays in parliament were an obstacle to timely effectiveness.
7.5 Government implementation performance:Moderately SatisfactoryThe government did not provide the full amount of counterpart funds committed at the start of the project, resulting in some activities being transferred to LGDP II. Apart from this, however, the various arms of the government were supportive of the project, particularly the MoFPED that focused on the LG Budget Framework Papers and in effecting the quarterly transfers; the Policy Steering Committee, consisting of the Permanent Secretaries of MoLG, MoFPED, and Gender, Labour and Social Development and the Program Technical Committee of these ministries.
7.6 Implementing Agency:SatisfactoryThe PMU in MoLG and the PCU in KCC carried out their responsibilities under the project very effectively and maintained a close working relationship with the MoLG and borrower. The staff were there from inception to conclusion, providing the institutional memory and technical assistance. A comprehensive Mid Term Review provided the necessary information to make adjustments and design LGDP II and was very effectively managed by the PMU with support from the MoLG and MoFPED. KCC was less supportive of the broader institutional reforms supported under the project, as evidenced by declining political commitment to effect real financial reform. The MoLG Heads of Department took some time to increase their capacity and begin to take on responsibilities for LGDP rather than relying on the PMUs but this eventually took place for LGDP II.
7.7 Overall Borrower performance:Satisfactory
8. Lessons Learned
LGs can use unconditional funds effectively and invest in national priorities. Discretionary budget lsupport to LGs can result in effective planning, investment and management by LGs without elite capture, provided there is a strong accountability framework both upward, downward and through peers. Linking funds to performance provide incentives to LGs to improve capacity through “learning by doing” and by stimulating competition and increasing compliance to standards and regulations. At the same time, LGs need considerable support to understand how to follow the laws and regulations applicable to them. Under these circumstances LGs become more innovative in solving local problems and together with communities become increasingly more empowered to do so. Economic analysis demonstrates that more local management capacity and greater ownership do lead to cost-effective investments in priority areas for poverty reduction.
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Participation and Downward Accountability. Effective participation and downward accountability lrequire specific support. Capacity Building for communities and LLGs to effectively engage in district planning are very important. In respect of communication, this should go beyond posting figures on LG notice boards to incorporate multiple context - appropriate mechanisms to inform communities of decisions, trade-offs and results. Access to information should be a performance indicator for LGs. Access to information by citizens lshould be a performance indicator that attracts rewards and sanctions. Information on the budget envelope and the way funds are spent throughout the year, as well as information on winning contractors provides additional accountability. LGDP type programs can help society understand what governance means and what the different roles are of different levels of government. Projects need to provide sufficient support for public relations and communications at a local level.
Investments with recurrent costs need decision-making at the appropriate level. Investment ldecisions that incur recurrent costs need to be made at the level of beneficiaries and adequate resources budgeted for, especially in a declining local revenue context. Community projects can be sustained through community contributions and peer pressure, but for LG level infrastructure, adequate budgetary provision is needed for O&M and declining revenues will threaten to undermine these investments. Planning and budgeting for O&M at local government level requires collaboration between national government (Ministry of Finance) and LGs and within National Government (with MoLG) to stimulate local revenue mobilization and track investments and their associated O&M.
Move local development grants into mainstream intergovernmental transfer system as soon as lpossible. It is critical to mainstream a development grant scheme into the government system as soon as possible and to use and improve the systems, documents and staff skills as necessary to do this, instead of using parallel project systems. This reinforces ownership and empowerment.
Capacity building for LGs should be inclusive and contain both supply and demand-side elements. lCapacity building needs to have both demand and supply-driven components, to provide both flexibility and the core topics for effective LG functioning. Capacity building for LGs should be inclusive of staff, councilors, statutory bodies and private (profit and non-profit) providers to ensure the system as a whole increases capacity. Training of trainers and provision of standardized materials is an efficient way to scale this up. Separating grants for capital projects and capacity building is recommended but both are necessary for capacity building.
Decentralization requires a central - local government partnership. Central Ministries of Local lGovernment need to clearly understand their role and see that if they perform well, there will be demand from local governments for ongoing support and capacity building. Decentralization should be seen as a partnership between Local and Central Government.
Demand-driven LG investments can significantly improve local contractor capacity over time. lLGDP type projects can significantly strengthen the informal sector and small contractors through competitive demand-driven provision of public services. CSOs can be used more proactively to provide and deliver services.
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Local Revenue Mobilization and financial management reform require considerable political and ltechnical commitment and focus. LGs often expect central government to provide all funds as transfers and do not spend enough effort on raising local revenues and mobilizing civic awareness to that end. The political risks inherent in increased revenue mobilization need to be assessed during preparation, ranging from understanding the impact on the poor to ensuring the highest level of political commitment, in order to manage this process effectively.
Better mechanisms are needed to maximize synergies between LG development programs and lsocial funds. Social Funds can build community capacity to develop ‘voice’ to engage with LGs and also target the most vulnerable citizens, while LG programs build the capacity of LGs to engage communities and increase accountability. There is a need to establish better criteria and mechanisms for the transition of districts from Social Funds to LG programs or to better clarify the boundaries of each program where both are necessary. While Social Funds are particularly effective during transition periods, the need to ensure sustainability of investments over time and institutionalize planning suggest that they be integrated with Local Government Programs over time.
9. Partner Comments
(a) Borrower/implementing agency:The Borrower has submitted a completion report which is presented as Annex 8. The overall assessment of the project is consistent with the ICR. It states that the project was satisfactory in meeting its development objectives and in fact influenced government fiscal decentralization in a number of ways, including the institutionalization of the development grant and the reduction of conditional grants for LG into one development grant (the Fiscal Decentralization Strategy approved June 2002). The project also demonstrated that LGs can finance basic service delivery in a cost-effective manner and in line with national priorities. It also institutionalized the audits of both HLGs and LLGs within the Office of the Auditor General.
The Borrower’s report cites a number of challenges faced by the project, including (a) delays in contracting due to the long procurement processes of the Bank; (b) slippages in implementation caused by contractors overshooting their expected completion dates; (c) inadequate availability of counterpart funds from central government; (d) delays in accountability from LGs as a result of HLGs finding it difficult to collect submissions from their LLGs (over 1000); (e) assessment period of LGs not built into national budgeting period; and (f) problems of co-funding by LGs in light of declining local revenues.
Overall, the Borrower as well as numerous donors interviewed for the ICR were very positive about the impact of the project. In particular, they were satisfied that LGDP I provided the political and technical platform needed to roll out the decentralization program across the country, as evidenced by the multi-donor “basket” provided for LGDP II. Some concerns were raised about the local revenue decline and the need for stronger political commitment to effective local government and the fiscal infrastructure that implies. Overall, the pilot has been seen to meet its objectives by the borrower and its development partners.
(b) Cofinanciers:
(c) Other partners (NGOs/private sector):
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10. Additional Information
A. The Bank’s ICR Team consisted of the following membersKate Kuper (Snr. Local Government Specialist, AFTU1, and TTL for ICR)Ephrem Asebe (Independent Consultant, for ERR of ICR)
B. List of Task Team Leaders of the ProjectGautam Sengupta, Lead Operations SpecialistLance Morrell, Lead Operations Officer
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Annex 1. Key Performance Indicators/Log Frame Matrix
Outcome/Impact Indicators
Indicator Projected in PAD (End of Project)
Actual/Latest Estimate
% LGs meeting assessment minimum conditions for accessing LGDP funds
90% 51%*
LGs qualifying for 20% reward 30% 19%*LGs with functional technical committees with sound 3 year dev. Plans linked to realistic budget
50% 89%
LGs effectively utilizing allocated LDG and CBG budget
70% 85%
Improved compliance with LG Act and LG financial and Accounting Regulations
75% 79%
Institutionalized action plan in place by LGs on accountability and transparency
75% 82%
Expenditure by eligible LGs for service provision is contracted out to private sector
50% 92%
KCC’s minor works contracted out to private sector 100% (revised to 85%)
75%
Action plan for sustainable service delivery (various elements)
100% 80%
Systems and procedures in place for M&E of LGDP Operational system Yes, LOGICs in 13 LGs and being rolled out to rest
* New districts were subsequently included that lacked capacity and also districts in northern conflict areas had various difficulties, so overall target not reached, but off broader set of districts.
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Output Indicators
Planned ActualComponent 1. Operationalizing Roles of MoLG and LGFC.
No. MoLG staff trained; fully functioning facilitiespersons trainedlEquipment purchased to plan l
445 persons Yes
LG compliance guidelines, regulations, standards and procedures developed and disseminated along with monitoring and regulatory activities
Yes
% of eligible LGs meeting minimum requirements and guidelines in accountability, planning and implementation of service delivery investments (target 90%)
51%*
LGFC advising GOU on revenue sharing, fiscal transfer instruments and taxation reform in support of LGs
professional staff trained (100% of staff)lEquipment purchased to planl
21 persons (100%) Yes
Component 2. Financing Basic Service Delivery and Capacity Building Activities through Grants from Central to LGs.
Eligible LGs routinely complying with statutory procedures (target 75%)
79%
Total expenditure by LGs for service provision contracted by private sector. (Target 50%)
92%
Component 3. Provide support to KCC for testing alternative basic service delivery mechanisms
Contracting out of minor /routine works by December 31, 2002. (Baseline 60%, revised target 85%)
75%
Contacted out refuse collection and disposal. Target 22000 tons collected, 60% by private firms.
18000 tons collected, 50% by private firms
Cleaning of 60km primary/secondary anti-malarial drains by June 2003. 54 kmExpansion of Mpererwe landfill by 10 acres 20 acresEfficient landfill management by private contractor
22,000 tons (from 14,000)l$5.7/ton (from $6.7/ton)lImproved effluent and groundwater quality. Target 50mg/l l(from >1500)
18,000 tons$6/ton75mg/l
Realistic budgets; improved quality of audits and increased revenue and debt collection (target 38 bn Ushs)
21.bn Ushs total revenue
Component 4. Support to program management , M&E and future program formulation.
Procedures, arrangements, model documents and guidelines fully tested and ready for replication in all LGs
Yes
LGDP implemented on schedule, within budget, milestones and objectives achieved.
Yes
Lessons learned fully integrated into national policy and design of national LGDP
Yes
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Annex 2. Project Costs and Financing
Project Cost by Component (in US$ million equivalent)AppraisalEstimate
Actual/Latest Estimate
Percentage of Appraisal
Component US$ million US$ millionComponent 1 8.08 3.64 58.04Component 2 52.34 49.22 98.87Component 3 16.67 20.50 100Component 4 10.84 6.59 64.59PPF Refund 2.00 2.21 100
Total Baseline Cost 89.93 82.16Total Project Costs 89.93 82.16
Total Financing Required 89.93 82.16
Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)
Expenditure Category ICBProcurement
NCB Method
1
Other2 N.B.F. Total Cost
1. Works 0.00 1.06 0.00 0.00 1.06(0.00) (0.64) (0.00) (0.00) (0.64)
2. Goods 0.78 0.58 0.29 0.00 1.65(0.63) (0.47) (0.23) (0.00) (1.33)
3. Services 0.00 4.99 27.90 0.00 32.89(a) Contracted out Services, Studies and institutional support(b) Office and administrative support(c) Training
(0.00) (4.73) (25.10) (0.00) (29.83)
4. Local Government Development Grant
0.00 0.00 52.33 0.00 52.33
(0.00) (0.00) (47.10) (0.00) (47.10)5. Project Preparation Facility Refund
0.00(0.00)
0.00(0.00)
2.00(2.00)
0.00(0.00)
2.00(2.00)
Total 0.78 6.63 82.52 0.00 89.93(0.63) (5.84) (74.43) (0.00) (80.90)
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Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)
Expenditure Category ICBProcurement
NCB Method
1
Other2 N.B.F. Total Cost
1. Works 0.00 0.63 0.00 0.00 0.63(0.00) (0.38) (0.00) (0.00) (0.38)
2. Goods 0.27 0.20 0.83 0.00 1.30(0.21) (0.16) (0.66) (0.00) (1.03)
3. Services 6.86 9.89 12.05 0.00 28.80(a) Contracted out Services, Studies and institutional support(b) Office and administrative support(c) Training
(6.27) (9.26) (11.15) (0.00) (26.68)
4. Local Government Development Grant
0.00 0.00 49.22 0.00 49.22
(0.00) (0.00) (44.30) (0.00) (44.30)5. Project Preparation Facility Refund
0.00(0.00)
0.00(0.00)
2.21(2.21)
0.00(0.00)
2.21(2.21)
Total 7.13 10.72 64.31 0.00 82.16(6.48) (9.80) (58.32) (0.00) (74.60)
1/ Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies.2/ Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff
of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.
Project Financing by Component (in US$ million equivalent)
Component Appraisal Estimate Actual/Latest EstimatePercentage of Appraisal
IDA Govt. CoF. IDA Govt. CoF. IDA Govt. CoF.Component 1 6.40 1.68 3.22 0.42 50.3 25.0Component 2 47.12 5.22 44.30 4.92 94.0 94.3Component 3 15.00 1.67 18.67 1.83 124.5 109.6Component 4 10.44 0.40 6.20 0.39 59.4 97.5PPF Refund 2.00 2.21 110.5TOTAL 80.96 8.97 74.60 7.56 92.1 84.3
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Annex 3. Economic Costs and Benefits
The LGDP Development Grant component was justified on (i) the validity and effectiveness of the decentralization set-up to prioritize, select and implement subprojects and put in place a Monitoring and Evaluation (M&E) system; and (ii) on the grounds of optimizing future benefits from the development grant.
A key assumption of this decentralized strategy was that local people and their governments can make rational choices in the decentralized environment by selecting locally appropriate service types and levels that help improve their quality of life; and allow the public sector to take account of differences across local governments in public service preferences thereby improving allocative efficacy of investments.
Table 1 summarizes the investment results by sector. A total of 8,204 subprojects were completed in all seven sectors at a cost of Ushs. 63.17 billion. Average cost of projects for the LGDP development Grant as a whole was Ushs.7.7 million. The table shows that roads and drainages and education were the two main sector financed, totaling over 60% of the Development Grant by the local governments.
Table 1: Summary Of LGDP I Completed Projects by Sector (output/impact reports)
Sector No. of projects
% of actual no of projects of
the total sample projects
Actual cost % share of actual cost of sector to total
costs of projects
Average cost (Ushs. per
project
Administration 117 1% 3,236,321,529 5% 27,660,868Education 2,525 31% 14,715,183,740 23% 5,827,796 Health 832 10% 8,441,966,949 13% 10,146,595Production 809 5% 3,150,550,664 5% 3,894,377Roads & drainage 2,081 25% 24,359,287,209 39% 11,705,568Solid waste 99 1% 696,371,107 1% 7,034,052 Water & sanitation 1,741 21% 8,565,436,093 14% 4,919,837 Total 8,204 100% 63,165,117,290 100% 7,699,307
The evaluation of the economic benefits of LGDP is presented using three approaches:
I. Decentralization system effectiveness based on an assessment of a sample of results from the Value for Money (VFM) Audit;
II. Cost–effectiveness analysis for roads and education sectors on the basis of the assessment of data collected under the project’s M&E system; and
III. Cost-effectiveness and cost-benefit analysis based on standard technology choices in the water sector.
I. Decentralized System Effectiveness for the Development Investments Using VFM Audit and General Assessment Data.
VFM Report to: Ministry of Local Government, LGDP Technical and Value for Money Audit of LGDP and DDP Supported Districts, Synthesis Report, March 2004, is defined as an independent assessment of the extent to which an organization operates efficiently and effectively and with due regard to economy and quality. This includes whether or not:
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• The investments have met the objectives for which they were conceived;• The financial human and physical resources consumed in realizing the investment are consistent with
normally accepted norms;• The process through which the investment is realized are consistent with accepted rules and
regulations;• The quality of finished investments are constructed to the standard agreed upon; and• The impact and utilization of the investment is to the degree expected.
The VFM audit rested on the interrelation of three variables, “economy”, “efficiency” and “effectiveness” defined as follows:
“Economy” – is concerned with minimizing the cost of resources used for an activity, with due regard for appropriate quality - and is audited in terms of deviations between budgeted cost, contract price and actual price. “Economy” is rated as Best (3), Good (2), Fair (1) or Poor (0).
“Efficiency” – in concerned with the investment process and has been defined in five stages: planning and approval process; procurement process; implementation process; financial management; and commissioning/handover process. Efficient execution of a sub-project (“efficiency”) is rated as Best (3), Good (2), Fair (1) or Poor (0).
“Effectiveness” – is concerned with the extent to which objectives have been achieved and the relationship between the intended impact and the actual impact of an activity – it includes: quality of finished activity/investment product (adherence to standards; quality of material; quality of workmanship); utilization of finished investment; operation and maintenance considerations (Budget allocation; O&M plan; O&M implemented). The extent to which the investment meets its objectives (effectiveness). Effective outcome is rated as Best (3), Good (2), Fair (1) or Poor (0).
A sample of 839 subprojects out of the total of 8,204 subprojects financed by LGDP was selected for Value For Money Analysis. It is fairly representative of the universe but the sample investments did have a higher average cost, indicating a bias towards relatively large subprojects implemented. Nevertheless, results of the VFM analysis can be taken to be a good test for the appraisal hypothesis i.e. provided the LG has capacity it will identify, select and implement economically viable subprojects.
The results of the VFM field observations for each project in terms of “economy”, “efficiency” and relative to “effectiveness” are summarized in Table 2. A subproject for example may be rated “best” for “economy”, “good” for “efficiency” and “fair” for “effectiveness” or any combinations of these.
Table 2: No. of Cases in the VFM Sample
Ranking Economy Efficiency Effectiveness (outcome, impact)
Best 180 64 63Good 383 346 415 Fair 178 350 283 Poor 98 79 78 Total 839 839 839
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An analysis of the data generated during VFM assessment shows that the ranking of outcome or “effectiveness” of the project is correlated to the ranking of “economy” and “efficiency” of the local government. In particular, “effectiveness” is highly dependent on the efficiency of the execution of the processes of planning and approval, procurement, implementation, financial management and commissioning/handover Districts which utilize their resources frugally i.e have “economy” tend also to have high outcomes although not as high as those that have mastered the skills necessary for executing the processes within a project cycle. Thus, the hypothesis that local governments with capacity will select and implement subprojects that are viable is validated.
The VFM audit results were summarized across sectors, in terms of number and value of projects ranked “best”, “good”, “fair” or “poor”. By total value, the sectors with the most “best” and “good” ratings for all three categories from highest to lowest are: Solid Waste (96%), Administration (87%), Production (84%), Water and Sanitation (81%), Education (66%), Health (52%), and Road & drainage (51%). On the other hand, the sector rankings in terms of “best” and “good” on “effectiveness” are: Solid Waste (91%), Water and Sanitation (69%), Production (64%), Education (63%), Administrative (52%), Health (48%), and Roads and Drainage (41%). On average, 57% of the 839 sample subprojects were rated “best” and “good” for effectiveness while the average in value terms was 64%. The health, roads and drainage sectors represent 44% of the investment and performed below the sample average, suggesting greater difficulties in improving local capacity in these sectors necessary to achieve better outcomes.
II. Cost –Effectiveness Analysis for Roads and Education Sectors based on Project M&E System Results. Roads and drainage. Construction and rehabilitation of tertiary roads, footpaths and drainages represented about 25% of the 8,204 subprojects and 39% of the total investment. For about half a dollar, a person in the districts can have access for improved footpath or tertiary road. Compared to the appraisal estimate the current costs of access per person for footpath and tertiary roads indicate effective resource allocation. However, the quality was below average, as only 41% of the sample projects (and 51% in terms of value) in roads and drainage were considered to have high outcomes.
Table 3: Summary of The Road Sector for the Period 2000/2001, 2001, 2002, 2002/2003
Footpath Tertiary road TotalTotal Investments 896,543,007 2,234,247,638 3,130,790,645Total no. of Beneficiaries 927,564 2,970,401 3,897,965Investment (%) 29% 715 100%Investment/beneficiaries Ushs.967 Ushs.752 Ushs.803
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Table 4: Roads & Bridges - Investment Effectiveness
Efficiency Best Good Fair Poor Total Efficiency
% (Best & Good)/Total)
No. of projects rated Best 4 7 1 0 12 92%Good 6 30 26 2 64 56%Fair 2 35 47 9 93 40%Poor 0 0 13 21 34 0%Total Outcome (effectiveness) 12 72 87 32 203 41%% 6% 35% 43% 16% 100% Subtotal 41% 59% 100%Investment size rating 7 44 40 10 100 Subtotal 51% 49% 100%
Education Sector. The education sector had the second highest share (31%) of the total investments and 23% of the number of projects financed by LGDP Development Grant. The main investments in the sector were made in constructing classrooms and procurement of desks. The comparison of the cost data from 13 districts shows that the investment made for classrooms and desks following the LGDP process did result in lower average unit costs for both the classrooms and desks, relative to non-LGDP options.
Table 5: Cost effectiveness comparison between LGDP I & Non-LGDP I Investments in Education
ClassroomSource of Financing
No. Districts
No. of Classrooms
Actual Total Cost Average Cost
Index
Standard LGDP 9 169 840,455,878 4,973,112 100%Standard Non-LGDP 13 2,627 16,304,533,940 6,206,522 125%DesksStandard LGDP 13 40,971 1,990.576,445 48,585 100%
Non-LGDP 13 47,382 2,767,590,000 58,410 120%
The VFM analysis of the investment in the education sector indicate a relatively high effective/outcome. About 66% of the investments and 63% of the educational projects respectively were rated to have an outcome of “best” or “good”. Also, in terms of efficiency, 86% and 79% respectively of the outcomes are rated “best” or “good”.
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Table 6: Education Sector Investments effectiveness
Efficiency Best Good Fair Poor Total Efficiency
% (Best & Good)/ Total)
No. of projects rating Best 7 5 2 14 86%Good 8 60 17 1 86 79%Fair 2 28 33 6 69 43%Poor 2 3 4 9 22% Total Outcome (effectiveness)
17 95 55 11 178 63%
% 10% 53% 31% 6% 100%Subtotal 63% 37% 100%Investment size rating 20% 46% 31% 3% 100%Subtotal 66% 34% 100%
Health Sector. The table below summarizes the distribution of people who received treatment in the period before and during project implementation for the major types of diseases. Intestinal worms (33.2%), yellow fever (29.6%) and malaria (15.7%) account for 78.6% of the patients receiving treatment. The increase in the number of people receiving treatment shows that more and more people are accessing the growing number of health facilities and does not necessarily indicate growth of the incidence of the diseases.
Table 7: Distribution of the No. of People Who Received Treatments
FY Intestinal Worms Malaria Yellow Fever1997/1998 103,309 12 41,3911998/1999 155,836 - 127,4861999/2000 282,879 170,928 161,5692000/2001 263,719 174,024 242,4822001/2002 246,218 151,875 363,364Total 1,051,961 496,839 936,292Percentage 33.2% 15.7% 29.6%
On the other hand, the health sector investment effectiveness, as assessed based on VFM data, is marginal. In terms of investment effectiveness, only 49% of the subprojects in the sector were rated as “best” and “good”, while in terms of investment value only 52% is rated as having outcome/effectiveness of “best” or “good”. This implies that impact of health investments at a local level are determined by more than improved investment management and probably indicate the relatively high O&M requirements that may not be met at a local level.
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Table 8: Health Sector Investments Effectiveness
Efficiency Best Good Fair Poor Total Efficiency
% (Best & Good)/Total)
No. of projects rating Best 5 5 10 100%Good 3 27 25 1 56 54%Fair 2 20 21 5 48 46%Poor 1 7 7 15 7% Total Outcome (effectiveness)
10 53 53 13 129 49%
% 8% 41% 41% 10% 100%Subtotal 49% 51% 100%
Investment size rating 7% 45% 40% 7% 100%Subtotal 52% 47% 100%
Administration Sector. The share of the investment which has “best and “good” ratings for effectiveness is 87% which is high. However, only 56% of the projects were rated “good”, indicating that bigger projects were executed more effectively than the smaller ones.
Production Sector. Investment outcome/effectiveness in the production sector both in terms of the number of projects and aggregate investment rated "best" and “good” is significantly higher than the average. 70% of the projects and 75% of the total investment amount made in the sector were rated as “best or “good”.
III. Cost effectiveness and Economic Rate of Return of the Water Sector.
The water sector represents 84% of the water and sanitation expenditure. The economic rates of return of each standard technology type is assessed based on the average costs and standardized costs for selected prototype technologies as outlined in the Water Sector Investment Program (SIP).
Cost-effectiveness. The table below shows average unit cost of investment in water supply infrastructure for 4 type of technologies being used in rural Uganda. For each technology type, the average cost is lower than the standardized cost for the respective technology under SIP. From field observation, the number of people served per unit water point for each type of technology is considerably higher than the respective design standard. Hence, the data suggests that the water is being delivered at a lower cost per capita than assumed in SIP 15. In fact the number of users at some water points is greater than the ideal design capacity for each technology. This fact was confirmed by the Uganda Socio-economic Survey of 2002/2003, which reported more users benefiting from the investment in water supply than is warranted by the design standard.
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Table 9: Investment and O & M costs in the 15-Year Sector Investment Program (SIP)
Spring Protection
Shallow Well
Borehole GFS (taps)
Unit investment cost (USD) 2,080 3,990 9,133 7,636Equivalent unit cost in ‘000 Ushs.2004 3,588 6883 15,754 13,172Average unit cost in ‘000Ushs of LGDP 3,018 6,041 6,041* 26,325**Additional people served due to unit of investment
200 300 300
Per capita investment in USD 10.4 13.3 30.4 50.3MaintenancePeriodic maintenance per unit water point Ushs.
1,745 2,661 5,214 2,661
Routine maintenance & mobilization (5%)of initial unit investment cost)
5% 5% 5% 5%
* Average cost for rehabilitation and construction while the cost ranges from Ushs.27,000,000 for 2,000,000,000. **the information for the no. of taps in GWS is not available.Source: Erich Baymann & Ephrem Asebe, Uganda: Impact Assessment of Rural water and sanitation Sector, July, 2004.
Benefits. The table above summarizes the investment cost and the O &M expenditure and the table below summarizes the main benefits of the investments in the rural water sector both qualitative and quantitative. Clearly, the relatively easily quantifiable benefits are time savings measured in terms of opportunity cost of labor; and medical expenses savings due to reduced waterborne diseases and saving in lost working time due to sicknesses caused by water born diseases.
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Table 10: Benefits of Investment in the Water Sector
Benefits Spring protection
Shallow wells Boreholes new GFS Taps
Incremental people covered due to the investment
200 300 300 150
Increment average no.of rural households
40 60 60 30(not safe water)
Saving time (reduction in time to walk 2 to 4.5 km) – more time for economically productive activity and waiting times, since all economics is about saving time
1 to 2 hours per day per household (UGS 120)
1 to 2 hours per day per household (UGS 120)
1 to 2 hours per day per household (UGS 120)
1 to 2 hours per day per household (UGS 120)
Savings in medical expenses
UGS 7300 per household/yr
UGS 7300 per household/yr
UGS 7300 per household/yr
Zero due to quality of water
Saving money from vendors (for the aged and poor without children)
Qualitative Qualitative Qualitative Qualitative
Improved school attendance
Long-term potential increase in productivity & creativity
Long-term potential increase in productivity & creativity
Long-term potential increase in productivity & creativity
Long-term potential increase in productivity & creativity
The table below summarizes the economic rates of return for selected technology-mix of water points assuming safe water supply. The result shows that boreholes have negative NPV and a rate of return below acceptable level of 12%. The weighted ERRs and NPVs are positive underscoring the fact that decentralized institutional arrangement is pro-poor, and is biased towards higher economic rate of return through favoring implementation of lower cost technologies.
Table 11: Economic Rate of Return of a Typical Water Point (NPV in UGS ‘000,000)
Protected Shallow wells
Boreholes GFS (taps) Weighted ERR & NPV
ERR 75% 46% 3% Undefined 18%NPV 6.32 7.66 -4.96 -17.71 1.95
A sensitivity analysis was carried out assuming that the water from the protected springs, shallow wells and boreholes is no more safe than the existing sources used by the households prior to the investments. The ERR and NPV estimates under such conditions indicate a less optimistic picture, suggesting that quality of water is a major reason for justifying improved water service.
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Table 12: Economic Rate of Return of a Typical Water Point (NPV in UGS ‘000,000)No Improvement of Water Quality
Protected Spring
Shallow wells
Boreholes GFS Weighted ERR & NPV
ERR 33% 20% -10% Undefined 4%NPV 2.5 1.93 -10.69 -11.71 -2.26
Assumptions: Costs. The SIP15 average unit investment costs of each technology mix and the associated O& M.
Value for Money Assessment: The water sector outcome based on VFM assessment shows that 69% of the project have outcome rated “best” and “good” while in terms of investment the value of the projects rated “best” and “good” is 81% of the investment, indicating that the quality of water is high.
Table 13: Water and Sanitation Investments Effectiveness
Efficiency Best Good Fair Poor Total Efficiency
% (Best & Good)/Total)
No. of projects rating Best 6 9 2 17 88%Good 7 56 13 2 78 81%Fair 5 44 29 5 83 59%Poor 1 4 3 8 13%Total Outcome (effectiveness)
18 110 48 10 186 69%
% 10% 59% 26% 5% 100%Subtotal 69% 31% 100%
Investment size rating 12% 69% 17% 2% 100%81% 19% 100%
Conclusions
The poverty impact of LGDP appears positive. The program is overall relatively cost-effective. The investments made under LGDP were also positive both in terms of cost effectiveness, ERR and NPV estimates. While there are significant variations between sectors, the potential for improvement of the effectiveness and sustainability of the investment under LGDP type projects rests on improving the skill of the local government staff and central government and appropriate incentive mixes in the sectors on a continuous basis. The findings noted above confirm the design hypothesis, that by empowering the client and its constituents and providing appropriate incentives to enhance ownership and skills, the decentralized approach of LGDP can achieve equal or better outcome than the old centralized approach.
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Annex 4. Bank Inputs
(a) Missions:Stage of Project Cycle Performance Rating No. of Persons and Specialty
(e.g. 2 Economists, 1 FMS, etc.)Month/Year Count Specialty
ImplementationProgress
DevelopmentObjective
Identification/Preparation/Preappraisal
05/1997 5 TTL, Eco, SSE, ME, OA08/1997 3 TTL, OA11/1997 4 TTL, Eco, ME, OA06/1998 6 TTL,POF, 2ME, ITS, OA08/1998 3 TTL, ME, OA10/1998 6 TTL, PFS, ME, OF, FMS, OA05/1999 7 TTL, POF, PFS, ME, Eco,
FMS,OA
Appraisal/Negotiation09/199 7 TTL, LFS, PFS, ME, Eco,
FMS, OA
Supervision03/2000 3 TTL, ME, OA S S05/09/2000 4 TTL, ME, FMS, OA S S10/06/2000 6 TTL, 2UFS, SSE, FMS, Eco S S02/25/2001 6 TTL, OpO, SSE, UFS, Eco,FMS S S06/27/2001 4 TTL, SSE, UFS, OpO S S11/05/2001 5 TTL, UFS, SSE, FMS, OpO S S07/05/2002 5 TTL, SUFS, SSE, Eco, OPO S S09/30/2002 6 TTL, SSE, SUFS, OpO, FMS,
PRSS S
03/11/2003 5 TTL, SSE, SUFS, OpO, CE S S10/02/2003 6 TTL, SSE, SUFS, OpO, SIO, CE S S02/13/2004 7 TTL, OpO, SSE, IO, SUDS,
SUS, CES S
ICR
TTL Task Team Leader OA Operations AnalystCE Civil Engineer PFS Public Finance Spec.Eco Economist POF Principal Operations Off.FMS Financial Management Spec. PRS Procurement Spec.IO Information Officer SSE Sr. Sanitary Engr.ITS Information Tech. Spec. SUDS Sr. Urban Dev. Spec.LFS Lead Finance Spec. SUFS Sr. Urban Finance Spec.ME Municipal Engineer SUS Sr. Urban SpecialistOpO Operations Officer UFS Urban Finance Spec.
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(b) Staff:
Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)
Identification/Preparation/Preappraisal
203 475.0
Appraisal/Negotiation 15 35.6Supervision 81 283.8ICR 9 34Total 227 828.40
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Annex 5. Ratings for Achievement of Objectives/Outputs of Components(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)
RatingMacro policies H SU M N NASector Policies H SU M N NAPhysical H SU M N NAFinancial H SU M N NAInstitutional Development H SU M N NAEnvironmental H SU M N NA
SocialPoverty Reduction H SU M N NAGender H SU M N NAOther (Please specify) H SU M N NA
Private sector development H SU M N NAPublic sector management H SU M N NAOther (Please specify) H SU M N NA
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Annex 6. Ratings of Bank and Borrower Performance
(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)
6.1 Bank performance Rating
Lending HS S U HUSupervision HS S U HUOverall HS S U HU
6.2 Borrower performance Rating
Preparation HS S U HUGovernment implementation performance HS S U HUImplementation agency performance HS S U HUOverall HS S U HU
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Annex 7. List of Supporting Documents
Project Appraisal Document - October 28, 1999Memorandum and Recommendation of the President - October 28, 1999Supervision Mission Aide MemoiresReport of the Mid Term ReviewAmendments to the Development Credit AgreementSocial Impact AssessmentWillingness to Pay Survey
Government of Uganda, Ministry of Local Government Reports:Local Government Act, 1997LGs Financial and Accounting Regulations, 1998LGDP Technical and Value for Money Audit of LGDP andDDP Supported Districts, Synthesis Report, March 2004Erich Baumann and Ephrem Asebe, Uganda Impact Assessment of Rural Water Sector, August 2004Uganda Bureau of Statistics, Uganda National Household Survey, 2002/3, Nov. 2003
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Additional Annex 8. Borrower's Contribution
A. Assessment of the Project Objective, design, Implementation and Operation Experience
A.1 Project Objective
The overall objective of the project was to improve delivery of basic services to engender economic growth and poverty reduction according to the Government’s decentralisation policy by a) testing the feasibility of implementing constitutional and legal mandates with respect to decentralised service provision and devolution of the development budget through the provision of investment funds to Local Governments (LGs); b) building the capacity of the Ministry of Local Government (MoLG), the Local Government Finance Commission (LGFC) and a sub-set of LGs for improved service delivery, accountability and transparency; c) testing and instituting alternative service delivery mechanisms through the private sector, beneficiary communities and other stakeholders in Kampala City Council (KCC); and d) Monitoring and Evaluating project implementation modalities, and pashing for eventual scaling up nationally, over time.
The project objective was consistent to the World Bank Country Assistance Strategy (CAS) and the national Poverty Eradication Action Plan (PEAP) Goal. It contributed to improving LGs’ performance of their statutory service obligations through the delivery of effective, efficient and participatory planning, budgeting and resource allocation procedures. It also enhanced the capacity of the MoLG, the LGFC and LGs to better deliver on their mandates. This contributed to the national development goal of economic growth and reduction of poverty.
A.2 Project design
The project objectives were consistent with the CAS, Government priorities and PEAP goals. The counterparts were involved at all the stages of the project design and this made ownership to be strong during implementation. The quality at entry for the project was therefore satisfactory.
LGDP I was designed through a consultative and highly participatory manner involving all the major stakeholders. The design built heavily on the experiences of the Peri-Urban Infrastructure Project (PUIP) funded by the World Bank from 1995-7 and the District Development Programme (DDP) funded by the United Nations Capital Development Fund (UNCDF) and the United Nations Capital Development Programme (UNDP) from 1998 - 2002. Whereas the PUIP piloted demand driven participatory service delivery programme in urban LGs, the DDP piloted the same approach in rural LGs. The design of LGDP I therefore focused on testing the viability of various approaches in the Government’s effort to decentralise functions and responsibilities for the provision of basic public services and had four components as follows:
a) Component 1: Supporting and operationalising the role of the MoLG and the LGFC under the Government’s decentralisation policy. This component provided a range of technical assistance to MoLG and LGFC to enhance their capacities in fulfilling their statutory mandates under decentralisation. The support to MoLG included capacity building of the staff and retooling; mentoring of LGs, compliance supervision; monitoring & evaluation; urban planning and management, advocacy of/for LGs; and an information Communication System to allow for a timely and effective decision-making. The support to LGFC covered LG tax study, training of LGFC staff, addition of office space and retooling.
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b) Component 2: Financing basic service delivery investments through Local development Grants (LDG) and Capacity Building Grants (CBG) from the center to LGs. This component was extending development block and capacity building grants, using government budgetary system of inter-governmental fiscal transfers, to LGs for provision of the decentralised service mandate as provided for under the Second Schedule of the LGs Act 1997. Access to the development grants was based on each level of LG meeting the minimum access requirements, which were largely drawn from the laws and regulations governing the operations of LGs in Uganda. Assessment of minimum requirements and performance measures was done annually. The capacity building grants were used by LGs on a demand driven basis to address capacity gaps, which were identified through the annual assessments.
c) Component 3: Providing support to KCC for testing alternative basic service delivery mechanisms. The component had three sub-components namely: (i) testing alternative basic service delivery requirement, (ii) measures to improve KCC performance in programming, financial management and revenue mobilization, and (iii) technical assistance for organizational reform, institution development and capacity building.
d) Component 4: Supporting programme management, monitoring and evaluation and future programme formulation. This component covered three activities namely: (i) Programme Management, (ii) Monitoring & Evaluation (M&E) of the Programme including support to the Office of the Auditor General (OAG) to audit lower LGs (LLGs) accounts, and (iii) design of LGDP II, the successor programme.
A.3 Project Implementation
A. A.3.1 Institutional Assessment
The Institutional Framework for the implementation of the project was the government institutions. MoLG was the executing agency; as such it was responsible for ensuring that the project was implemented as designed. Other institutions that were involved in the implementation of LGDP were Ministry of Finance Planning & Economic Development (MoFPED); Program Management Unit (PMU); Local Government Finance Commission (LGFC); Local Governments (LGs); Kampala City Council (KCC). In addition the following bodies were also involved in the program implementation: Program Steering Committee (PSC), Program Technical Committee (PTC), Local Government Tender Board (LGTB), and Office of the Auditor General (OAG). All these institutions performed their roles and responsibilities satisfactorily for the successful implementation of the project.
B. A.3.2 Implementation Assessment
Although the objective of the project did not change, implementation of activities under Component 1 was limited mainly to the development of the tools such as the Mentoring Guides for LGs, Compliance Inspection Manual, and Local Government Information Communication System (LoGICs). The actual roll out of these Guides, Manuals and systems could not take place in LGs due to lack of counter parts funds. This component was therefore revised and the activities transferred to LGDP II.
Component 2 had two windows of funding – the development grant and the capacity building grant. The development grant, which was a discretionary development budget support, could only be accessed by those LGs, which had met the minimum access criteria. At the beginning of the programme in 2000 only 12 Districts and 13 municipalities met the access criteria and did access the development grant while the rest of the 32 Districts (excluding KCC) by then could only qualify for the capacity building grants. By
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FY2003/4 42 higher LGs met the minimum conditions with 16 HLGs attaining a reward for good performance.
Component 3 supported KCC to privatize the provision of services to private contractors while the city retaining its roles of supervision and monitoring. Through such arrangement a number of services routine road maintenance, road rehabilitation, garbage collection etc. were contracted out. The overall assessment of the implementation of component 3 was satisfactory.
Component 4 provided the MoLG with a technical resource pool for the management of the programme, documenting the lessons learnt and designing a national scale-up of a successor programme. This component was also satisfactorily implemented and it resulted into the design of LGDP II with a number of buy in from other bilateral donors through their contribution to a basket funding.
C. A.3.3 Output/Outcomes Assessment
The Mid Term Review (MTR) of the project conducted in February 2002 found that the project was generally sound and had achieved its development objectives. The MoLG has been facilitated in form of capacity building. Guidelines and manuals have been developed. This should enable the ministry to deliver and be more pro-active than reactive. LGFC has been facilitated in executing its research and other related activities like data collection and analysis of LGs finances. Grants management has been adequately done at the various levels. Community projects were funded, implemented, commissioned and are being used.
The project influenced government policy on fiscal decentralisation and in June 2002 government approved the Fiscal Decentralisation Strategy (FDS), which seeks to reduce the proliferation of conditional grants to LGs (32 in numbers) into only two transfer systems: Development Transfer System (DTS) and Recurrent Transfer System (RTS). A number of donors have therefore moved away from project funding to basket funding to support the LGDP modality. This is being implemented under LGDP II. The specific outputs for each of the project components are described below.
Component 1: Supporting and operationalising the role of the MoLG and the LGFC under the Government’s decentralisation policy
The objective of this component was partly achieved. 10 vehicles, 20 computers (14 desk tops and 6 lap tops), two photocopiers and assort office furniture were procured for the MoLG. The retooling has greatly improved the ministry efficiency in delivery on its mandate. The component also produced, printed and distributed the following guides/manuals to LGs: (a) 20,600 copies of assorted Mentoring Guides and 3,000 copies of training manuals covering the thematic areas of planning, Local Government (legal & policy issues, Local Council structures, Statutory Bodies, and Creation, Demarcation and Grading Administrative Units), Human Resource Management, and Financial Management (budgeting, Accounting, Auditing, Procurement, and Report writing); (b) 3,000 copies of LGs Communication Guide; (c) 2,500 copies of Compliance Inspection Manual; and (d) 2,500 copies of LoGICs Data Base Manual.
The Mentoring Guides, for the first time, provided reference material for ensuring that LGs are given the same message in form of approach, interpretation, and procedures (based on the LGs Act and attendant regulations) when their capacity is being built in the various thematic areas. Hitherto this was not the case. LGs were trained using different approaches depending on who the trainer was. The Communication Guide is providing the framework for all the stakeholders involved in the management of LGs' affairs to share information on LGs activities, outputs, outcomes/impacts, and lessons learnt. This is to improve downward and upward accountability. The Compliance Inspection Manual has standardized inspection
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and reporting format. This has been computerized and linked to the LoGICs and the MoLG is now capable of playing the role of one-stop information center for LGs. Out of a total of 74 HLGs (56 Districts, 13 Municipalities and 5 KCC Divisions), the LoGICs has been rolled in 19 HLGs (17 Districts and 2 Municipalities). 62 computers have been procured and distributed to 62 HLGs (13 municipal councils and 49 districts) for LoGICs application. What is left is for the ministry to rollout nationally through training, continuous mentoring and technical back up support the manuals, guides and systems that have been produced under this component.
The capacity of the LGFC was built by training 13 out of its 15 staff locally and abroad (UK and USA). The Commission was also retooled by providing it with two vehicles (one mini bus and station wagon), three computers (two desk tops and one lap top), assorted office furniture, and additional office space.
Component 2: Financing basic service delivery investments through Local development Grants (LDG) and Capacity Building Grants (CBG) from the center to LGs
Under this component a total of about 8,208 projects were completed. The respective LGs and communities rated the overall qualities of 93% of those projects satisfactory or higher. The average cost of a project was US $ 3,700. The unit cost of the projects was generally cheaper than similar projects implemented by line ministries partly because of the low overhead cost by LGs/communities, the participatory nature of the LGDP modality and strong community contribution, which reduced project inputs costs.
An analysis of the investments financed under LGDP I by sectors indicate consistency with the Government Poverty Eradication Action Plan (PEAP) and the National Priority Programme Areas (NPPA), namely roads & drainage (40%), education (24%); water & sanitation (15%), health (14%), production/agriculture (5%), solid waste (1%), and other, such as LGs office blocks (1%). Within each sector the investment decision was targeting the community more. For example within health sector 61% of the health sector budget was invested in the construction of Sub-county Health Centers (HC3) and Parish Health Centers (HC2) including maternity wards. Similarly in education sector 94% of the budget was invested in the construction of classrooms, teachers’ houses and purchases of school desks, chairs and tables.
The constructions of the above projects created short-term jobs to 1,567,083 persons of which 468,244 were women (about 30%). Labour accounted for about 24% of the total project cost; hence about US$7.3 million was paid directly to communities towards the labour cost for the constructions of the various projects.
In 2003 (August to September) the MoLG commissioned an independent Technical and Value for Money (VFM) audit of the LGDP I. The broad objective of the audit was to assess whether LGs have expended LGDP grants funds Efficiently, Effectively and with due regard to Economy (3Es) and appropriate quality. The audit ascertained and prepared instruments for accountability in respect of whether or not (a) the investments made by LGs under LGDP I have met the objectives for which they were conceived, (b) the financial, human and physical resources consumed in realizing the investment are consistent with the norms, (c) the process through which the investment is realized are consistent with acceptable rules and regulations; (d) the quality of finished investments are consistent to the standard agreed upon, and (e) the impact and utilization of the investment is to the degree expected.
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The audit covered 847 investment projects and found that 67.76% had achieved good and best value for money; 24.56% had fair value for money and only 7.67% had achieved no value for money. In instances where no value for money was realized it was mainly because of some LGs’ inefficiency in planning, procurement, supervision, documentation, reports, handover and commissioning which were not measuring up to standards; and ineffectiveness due to uncompleted projects with no immediate plans to complete them, poor quality of completed projects, and/or lack of operations and maintenance provisions. Although the overall performance was good the weaknesses identified in some LGs are being addressed by MoLG in order to avoid future economic loss.
Under the Capacity Building Grant a total of 152,129 participants benefited of which 28% were women. The capacity building activities were demand driven and identified by the respective LGs. A wide range of topics was covered based on the demand and local circumstances in a given LG.
Component 3: Providing support to KCC for testing alternative basic service delivery mechanisms
Under SFR, KCC took a decision that in order to improve service delivery the private contractors would be used to provide services so that KCC remains with supervisory and monitoring roles. Funds were provided under this component to start off these efforts and by the end of the Project all works ranging from road sweeping, grass cutting, pot hole repairs and roads rehabilitation, drains rehabilitation and maintenance, just to mention a few, are being delivered by private contractors. This has resulted into increasing the serviced area and private sector development specifically in the field of road construction and drainage works.
The management of the landfill at Kitezi was also contracted out and high level and quality management was achieved. The landfill was expanded giving it another 10 years of further dumping. The leachate treatment plant was also constructed at Kitezi to treat the leachate and subsequently reduce the pollution of the environment. Attempts were made to contract out refuse collection and transportation in all the five Divisions but due to capacity problem within the private sector, in this field only two firms were identified for the collection service in Kawempe and Kampala Central divisions. Performance of these two contractors was found satisfactory when they were reviewed during the month of August, 2004.
Under the same component KCC has put in place a voice and data communication through which all the five divisions have been networked plus the headquarters. This has subsequently reduced communication problems and enabled communication through e-mails. Revenue mobilisation activities which were financed under Nakivubo Channel were supported by consultancy services which were provided by Archadis BMB Management Consultant firm. Technical assistances were provided in the fields of financial management, revenue mobilisation, ICT and the reform management. These experts provided assisted KCC to register realistic progress in the respective field. KCC managed to carry out a review of the organisation and a restructuring proposal is to be implemented.
KCC was also supported through a practitioner to practitioner arrangement from Kirklees Municipal Council specifically in the field of landfill design and development, designing of solid waste management strategy and the traffic management plan. Kirklees Municipal Council also provided exposure training for a number of KCC staff and councillors. In addition a number of staff received training from both local and international training institutions and also attended conferences, seminars and workshops focusing on the implementation of the SFR.
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Component 4: Supporting programme management, monitoring and evaluation and future programme formulation
The objective of this component was achieved. The Programme Management Unit (PMU) carried annual assessment of LGs to (a) monitor and evaluate their compliance to the provisions of the laws and national guidelines governing the operations of LGs; (b) determine those LGs that have the capacity to manage discretionary development funds and therefore eligible to access the Local Development Grant (LDG) under LGDP I, (c) provide incentives/disincentives for LGs performance through rewarding good and sanctioning poor performing LGs; and (d) assist the Local Governments to identify functional capacity gaps and needs. The assessment has been one of the major in-put in the development of an appropriate capacity building plan for LGs in Uganda. The annual assessment M & E reports have documented LGs experiences over the programme implementation period and a number of lessons have been learnt which have influenced national and donor policies. Technical back-up support to weak LGs were provided by the PMU in the areas of planning, financial management, procurement and contract management to assist such LGs to meet the minimum access requirement next time round under the project.
Under component four 318 lower LGs (LLGs) were assisted in writing their final accounts under the first batch of disbursement and 761 LLGs including the five Divisions of Kampala City Council (KCC) were assisted under the second batch. The component also provided financial support to the OAG to audit these accounts through contracting out to competent private audit firms. This has been the first time ever in the life history of these LLGs in Uganda to have audit final accounts.
The implementation of LGDP I informed the design of LGDP II, which became effective in October 2003. LGDP II, which cost US$165 is funded by the International Development Association (IDA) of the World Bank, Netherlands, Irish Aid, DANIDA, Austria government, Government of Uganda (GoU), and LGs.
D. A.3.4 Operation experiences
Although the programme achieved its objective, there were a number of challenges faced during implementation. These included (a) delays in contracting due to the long and tedious procurement processes of the bank, (b) some contractors overshooting their assignment time period resulting into extension of contract period although within the lump sum contract value, thus causing slippages in implementation of follow-up roll-out activities, (c) inadequate availability of counter parts funds from central government, thus constraining smooth implementation of project activities, (d) delays in accountability from LGs as a result of the challenges faced by HLGs (56 Districts and 13 Municipalities) trying to collate accountability submissions from their respective LLGs (over 1000), (e) assessment period not in sync with the national budgeting period resulting into technical supplementary to be prepared by MoFPED, (f) problems of co-funding being faced by LGs in light of declining local revenue.
Most of the above challenges have given government the necessary insight as to how best a programme of the magnitude of LGDP with a national coverage can best be managed. The lessons have been very valuable in the design of the LGDP II, which have addressed most of the above challenges.
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B. Borrower’s performance
E. B.1.1 Project preparation
The borrower was involved in all the stages of the project design (preparation of concept document, design, appraisal, negotiation, and effectiveness). The borrower therefore assumed leadership in formulation and execution, with the Bank quarterly supervision providing valuable technical and experiential support to government in terms of bring in new ideas and experiences internationally. The Bank also helped in critical comments to improve the terms of references for the various assignments contracted out under the programme. This contributed substantially for improving the capacity of the executing agency.
F. B.1.2 Government implementation performance
The MoLG was the executing agency for the project. As such it was responsible for the overall project coordination and ensuring that all the components were implemented by the respective implementing agencies according to the project design. The implementing agencies included LGFC and Directorate of LGs Administration and Inspectorate (DLGAI) for component 1, LGs for component 2, KCC for component 3, and PMU/MoLG for component 4.
The MoLG co-ordinated the activities across the various components and evaluated LGs’ performance with respect to project implementation. The MoLG as the executing ministry of the project was also responsible for effecting and publishing the transfers to ensure transparency and accountability. It also offered training and technical advice to LGs, carried out compliance verification, and mentored those LGs, which did not qualify for access to funds under Components 2 to enhance and improve their performances. It also monitored and evaluated the performances of LGs to ensure compliance with national policies, regulations, standards, procedures, and adherence to LGDP guidelines.
The MoFPED, which is responsible for co-ordinating all development plans at the national level, under LGDP focused its attention more on ensuring that the Local Government Budget Framework Papers (LGBFP) are realistic and prepared in time as they fed into the National Budget by MoFPED. It was also responsible for effecting the quarterly transfers to LGs.
The Policy Steering Committee (PSC) provided policy and strategic guidance for the implementation of the project. The PSC consisted of the Permanent Secretaries of the Ministries of Local Government, Finance, Planning and Economic Development, and Gender, Labour and Social Development.
The Program Technical Committee (PTC) co-ordinated technical implementation issues of the project and forwarded policy issues to the PSC for advice. The PTC also liaised with the Decentralisation Donor Sub-Group (DDSG) and provided regular updates on project implementation. The PTC met once every quarter on rotation regional basis to give opportunities for LGs and PTC members to conduct field visits and share experiences for better project implementation and management.
G. B.1.3 Implementing agencies performance
The implementing agencies mentioned above were responsible for the day-to-day activities of their respective components. They had a very close working relationship with the executing agency (MoLG) and the borrower (MoFPED). The retention of the PMU staff, who were involved from the inception of the project up to implementation, provided the necessary institutional memory for the project to assist the implementing agencies in their day to day tasks.
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C. Bank’s performance
The Bank’s performance in all aspect of the project cycle was satisfactory. There were no significant deviations from Bank’s policies or procedures during project preparation and implementation.
Although there was a change in Task Team Leaders (TTLs) for the project, both TTLs were very supportive and contributed significantly to the quality of project supervision since they were readily available to the executing agency through their quarterly supervision missions and open access line through email, fax, telephone, and video conferencing. Through such support the executing agency was able to get Bank advice on both the substantive and procedural aspects related to the project implementation. The TTLs, with their team members, were able to solve all procedural problems associated with Bank procurements and financial management issues whether during mission or at station. The team was also ably supported by financial and procurement departments at the resident mission which ensured speedy clearance of disbursements and procurements matters.
The project was therefore executed within the rules and procedures of the Bank without any inconveniences or trouble. The consulting, supporting and supervisory role of the Bank was adequate and advantageous for the project.
D. Lessons learned
Strong commitment from government: For a programme like LGDP to be implemented successfully, it requires a strong commitment from government in terms of coordination to ensure that the various new systems being developed and piloted are acceptable to government under the LGDP I. This was possible because of the pro-active participation and guidance from the highest political leadership and officials from the MoLG and MoFPED.
Capacity Building (CB): Demand driven capacity building approach gives LGs the necessary flexibility to address their unique capacity gaps. However to compliment a demand driven capacity building, there is also need to have a supply driven capacity building covering mandatory core topics. Capacity building in LGs should be looked at from a holistic manner by covering all the key relevant stakeholders such as staff, councillors, statutory bodies and private service providers (private contractors, NGOs, CSOs etc) to ensure that a LG as system is functioning well. Cascade capacity building through Training of Trainers (ToT) and standardised training materials need to be used since they can be cost effective and make national coverage easier within a short period of time.
Ring fencing of project funds: A number of the project activities under component 1 could not be completed as a result of budget cuts and failure of the Treasury to provide the necessary counter part funding. Component 2 which was “ring fenced” under the Poverty Action Fund (PAF) modality did not experience similar problems. It is therefore important that prior arrangements are made with MoFPED to ensure that projects such as LGDP are “ring fenced” in totality to avoid suffering from budget cuts.
Discretionary budget support to LGs: The results from the LGDP indicate that LGs are responsible even if they are given the discretion to plan, allocate, invest and manage discretionary development budgets. This result disproves the usual argument of elite capture, especially if there is a strong communication framework, popular and democratic participation. Discretionary development budgets do not only stimulate LGs and communities to be more creative and ‘own’ the investments but it also enhances participation and accountability. The increase in the number of Infrastructure Service Delivery (ISD)
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under the LGDP did not only improve the accessibility of these infrastructures to the population of the LGs but also helped build the human capital and contributed substantially to poverty reduction.
The provision of discretionary development budgets to LGs/communities also encouraged LGs to be more innovative to solve local problems. With little money LGs and communities were able to broaden their development debates. They felt more empowered and realised that they could improve service delivery even by using their own resources. Budget support allowed them to rationalise their investment activities based on local circumstances. LGs began to appreciate the need for the linkage and making realistic plans and budgets. Communities were facilitated and engaged in dialogue in order to make informed decision. Decision-making process by communities became iterative as more information was made available to them.
Accountability: This was greatly improved under the programme by making access to information by the citizens a performance measure, which could attract an incentive or a sanction for the concerned LG. The participatory planning process, within a known budget constraint, also helped to promote accountability and transparency. During the planning process communities would know the available resource envelop and would be monitoring how this resource was being spent throughout the financial year. List of approved contractors would be displayed in public notice boards including those who had been awarded contracts. Access to information is therefore key for improving accountability.
Performance driven resource allocation: The linking of funds access to performance greatly improved the capacity of the LGs in planning, financial management and accountability. Funding through a performance driven approach encouraged competition and improved LGs compliance to standards and regulations.
Continuity of project staff: This is important to ensure the retention of the institutional memory for effective programme implementation and rapid response to situations, which would otherwise adversely affect project activities.
Sustainability challenges: For every new investment there is an associated recurrent cost. The graduated tax, which is the major source of revenue for LGs in Uganda, had been declining over the years. As a result the revenues of LGs had been declining. This has created a serious threat to the sustainability of local infrastructure created by LGs. It is therefore very important for the sustainability that investment decisions are made at that level where the recurrent cost lies, and that level of institution (community, LGs or central government), which has the technical and financial capability to manage such an infrastructure, although identification can be by any level. This is to ensure that adequate resources are budgeted for meeting the operations and maintenance cost of the infrastructure.
Community projects with well-defined beneficiaries are easily sustained through community contribution and use of peer pressure to enforce compliance from community members. However for public Infrastructure Service Delivery (ISD) such as District roads where the users are more defused, it is very important that the District LGs make adequate budgetary provision for the operation and maintenance of such services. In circumstances where LGs are facing declining local revenue, sustainability of public ISD becomes problematic and a major concern.
Mainstreaming of project activities: The success of the project was mainly because the LGs component was mainstreamed into the government system. There was therefore minimum overhead cost on parts of the LGs since the systems, documents and staff belonged to the LGs. There were no LGDP staff members at the LGs.
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Monitoring and evaluation: Although this is being used mainly as a management tool, under the LGDP M&E played very important role in documenting the lessons learnt, identifying areas for policy research and influencing national and donor policies in development financing. Through the implementation of LGDP a number of lessons emerged with respect to financing, planning & budgeting, production, sustainability and the need for promoting democratic popular participation for transparency and accountability in the provision of services to the rural communities.
Team spirit between Bank and Government staff: The success of the LGDP I is partly because of the team spirit and the commitment to work together between the Bank and government staff. Decisions were arrived at amicably with the common objective to see the project succeed. Issues were presented and discussed in a transparent manner. This helped actions to be taken expeditiously for the benefit of the project. Both sides were willing to listen to the arguments from each other for enriching decision-making processes. The partnership spirit was present throughout the project cycle.
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