Document o f The WORLD BANK

FOR OFFICIAL USE ONLY

Report No: 46669 -HA

PROJECT PAPER

ON A

PROPOSED ADDITIONAL FINANCING GRANT

IN THE AMOUNT OF SDR 5.4 MILLION (US$8.0 MILLION EQUIVALENT)

TO THE

REPUBLIC OF HAITI

FOR THE

COMMUNITY-DRIVEN DEVELOPMENT PROJECT

December 22,2008

Caribbean Country Management Unit Sustainable Development Department Latin America and the Caribbean Region

This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

2

CURRENCY EQUIVALENTS (Exchange Rate Effective November 30,2008)

Currency Unit = Haitian Gourdes (HTG) 39.70 HTG = US$1

1 SDR = US$1.49

AF BMPAD

CBO CDD CECI

COPRODEP DA EA

EMP GoH IDA IDB I SN

LICUS M&E

MARNDR MDE

MDOD MIS

MPCE O&M PADF

PCF PCUIUCP PRODEP

SDR TSS

UNCDF UNDP

USAID

FISCAL YEAR October 1 - September 30

ABBREVIATIONS AND ACRONYMS Additional Financing Bureau de Mone'tisation (des Programmes d 'Aide au De'veloppement)/ Bureau o f Monetization o f Development Aid Programs Community-Based Organization Community-Driven Development Canadian Center for International Cooperation Conseil du Projet de De'veloppement Participatij? Project Development Council Designated Account Environmental Assessment Environmental Management Plan Government o f Hait i International Development Association Inter- American Development Bank Interim Strategy Note Low-income Countries under Stress Monitoring and Evaluation Ministry o f Agriculture, Natural Resources and Rural Development Ministry o f Environment Maitres D 'Ouvrage De'le'gue's/Service Providers Management Information System Ministry o f Planning and External Cooperation Operation and Maintenance Pan American Development Foundation Post-Conflict Fund Project Coordination Unit1 Unite' de Coordination du Projet Projet de De'veloppement Communautaire Participatifl Community-Driven Development Project Special Drawing Rights Transitional Support Strategy United Nations Capital Development Fund United Nations Development Program United States Agency for International Development

Vice President: Pamela Cox Country Director: Yvonne Tsikata

Sector Director I Manager Laura Tuck I Ethel Sennhauser Task Team Leader: Garrv Charlier

FOR OFFICIAL USE ONLY

REPUBLIC OF HAITI

COMMUNITY-DRIVEN DEVELOPMENT PROJECT ADDITIONAL FINANCING

Table o f Contents I . Introduction ............................................................................................................. 1

I1 . Background and Rationale for Additional Financing .............................................. 2

I11 .

IV .

V .

Proposed Changes .................................................................................................... 5

Consistency with CAS or CPS ................................................................................ 6

Appraisal o f Restructured or Scaled-up Project ...................................................... 7

V I . Expected Outcomes ............................................................................................... 14

VI1 . Benefits and Risks ................................................................................................. 1'7

VI11 . Financial Terms and Conditions for the Additional Financing ......................... 18

Annex 1 : Disbursement Allocations o f Additional Financing and Reallocation ............. 19

Annex 2: Additional Financing Procurement Plan and Thresholds .................................. 20

Annex 3: Financial Management Risks ............................................................................. 21

Annex 4: List o f Areas o f Intervention o f PRODEP ......................................................... 22

Annex 5: Project Processing Schedule and Team Composition ........................................ 23

Annex 6: Detailed Description o f Original Project (PRODEP) ....................................... 24

Annex 7: Implementation Arrangements o f Original Project (PRODEP) ........................ 27

Annex 8: Map IBRD 36693 ..................................................................... 28

This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties . I t s contents may not be otherwise disclosed without Wor ld Bank authorization .

PROJECT PAPER DATA SHEET

Source

(CDD) Project (PRODEP)

Local I Foreign I Total

Bank policies?

Revised project development objectives/outcomes [If applicable] Not applicable. Does the scaled-up or restructured project trigger any new safeguard policies? If so, click here to indicate which one(s) No .

[ ] Loan [ ] Credit [XI Grant For Loans/Credits/Grants:

- For Additional Financing

Total Bank financing (US$m.): 8.0 million Proposed terms: 100% IDA grant

I. Introduction

1. This Project Paper seeks the approval o f the Executive Directors for an Additional Financing (AF) Grant in the amount o f SDR 5.4 million (US$ 8.0 million equivalent) to the Republic o f Haiti for the Community-Driven Development Project -PRODEP1- (P093640; IDA Grant No. H1810-HA).

2. The proposed AF to PRODEP would scale up investments under Component 1, Community Subproject Funds, Management, and Support. Specifically, the proposed AF would support: (i) a total o f approximately 300 additional community subproject investments through two additional subproject prioritization cycles in the 32 communes - or municipalities - (out o f a total o f 140 in Haiti), participating in Phase I2 o f the Project; and (ii) additional technical assistance to strengthen further the capacity o f the COPRODEPs and beneficiary community- based organizations (CBOs) participating in the project. The additional subprojects financed by the AF would benefit approximately 60,000 additional community residents in the 32 communes targeted.

3. The proposed AF would not entail any change to PRODEP's original development objective, participatory approach or implementation arrangements. The Project Operational Manual (POM) o f the original project would remain the same, except for the updates to reflect the increased funding related to the AF, key lessons learned from the successful implementation o f PRODEP to date, and improvements to the M&E system. Activities financed under the proposed AF would be completed by the original Project closing date o f June 30, 2010.

4. The expected outcomes from the investments o f the AF would be consistent with those o f the original Project and would include: (i) successful management o f direct transfers to CBOs for community subprojects in 32 communes; (ii) 50 percent o f residents in project area received access to basic social and economic infrastructure (e.g. potable water, irrigation, grain mills); (iii) 50 percent o f productivehncome-generating subprojects are s t i l l operational 3-6 months after completion; (iv) approximately 100 CBOs officially constituted or capacitated and participating in Project Development Councils (COPRODEPs); and (v) 80 percent o f CBO members expressing a positive change in terms o f their organizational capacity and ability to work together constructively.

PRODEP (short for Projet de De'veloppement Communautaire Participatifl, as the CDD project i s known in French, has three components: Component 1: Community Subproject Funds, Management, and Support, which finances: (i) small-scale basic socioeconomic infrastructure and productive/income-generating projects that cost on average US$20,000 (and no more than US$50,000), which are identified by community-based organizations (CBOs) and later prioritized by COPRODEPs (French acronym for Conseil de Projet de De'veloppement Communautaire Participatif; or Project Development Councils); (ii) contracting o f service providers; and (iii) capacity building and technical assistance for the CBOs and COPRODEPs; Component 2: Capacity Building and Technical Assistance to the central government/Project Coordination Unit, and to municipal government officials; and Component 3 : Project Administration, Supervision, and Monitoring and Evaluation.

For logistical and procurement planning purposes, project implementation was rolled out in two phases with no geographic overlapping. Phase I covered 32 communes in five departments. Phase I1 which i s ongoing, covers 25 communes in the remaining five departments. Haiti has a total o f 10 departments.

I

2

1

11. Background and Rationale for Additional Financing

Project Background

5 . Hait i i s the poorest country o f the Western hemisphere. Over the past decades, the country has demonstrated a very high vulnerability to a significant number o f political, economic and social crises, as well as to numerous exogenous shocks such as adverse natural events and commodity prices. PRODEP was prepared in the context o f the implementation o f the Government o f Haiti’s (GoH’s) 2004-06 Interim Cooperation Framework (ICF), and the Bank’s Transitional Support Strategy (TSS), which set the stage for the Bank’s reengagement in the country in the aftermath o f the political and institutional crises experienced by Hait i in the early 2000s. The project was prepared in response to the GoH’s request for assistance to improve - at the local level - economic governance, to promote economic recovery, and to enhance basic service delivery (three o f the four ICF pillars). PRODEP i s financed through an IDA grant in the amount o f SDR 25.6 mi l l ion (US$38.0 mi l l ion equivalent), which was approved on July 28, 2005. The corresponding Development Grant Agreement (H18 10-HA) was signed on September 9, 2005, became effective on December 8,2005, and the closing date i s June 30,2010.

6. The preparation o f the community-driven development (CDD) project was a response to the dire poverty situation in rural areas o f Haiti, where much o f the population was struggling for survival due to a lack o f critical basic services and economic opp~r tun i t ies.~ PRODEP was designed4 to help to break the cycle o f exclusion via a mechanism that would strengthen local constituency organizations and provide a means through which citizens could determine their most pressing investment needs and access funds to meet them. The C D D approach was also chosen to help promote greater transparency in the allocation o f investment resources within the municipalities and to increase the likelihood that these resources would be applied in a way that meets local investment demand. Lastly, the C D D mechanism in PRODEP was a way to promote community empowerment and social cohesion, and restore hope in a country that has gone through significant political and economic crises.

7. The development objectives o f PRODEP, as stated in the Development Grant Agreement, are to assist the G o H in implementing the direct transfer o f public resources to local community organizations in poor rural and peri-urban communities: (i) to improve their access to basic and economic infrastructure and support income-generating activities by financing small-scale investments proposed, implemented and managed by the community organizations themselves; and (ii) to improve governance and build social capital o f communities through an increase in citizen participation and transparency in open decision-making processes.

In Haiti, nearly 90 percent o f poor households and 67 percent o f extremely poor households live in rural areas. Basic rural infrastructure i s virtually absent or severely depleted, reinforcing isolation and exclusion. According to the Household Living Conditions Survey draft report for 2003, only 1 1 percent of rural households had electricity, compared to 70 percent o f the wealthiest quintile.

The. actual design o f PRODEP was based upon the successfbl experiences o f two pilot CDD projects that were carried out previously in rural areas o f Haiti: (i) the Rural CDD Pilot Project, implemented in 2004 with the support o f a US$l million Post-Conflict Fund (PCF) grant; and (ii) a Labor-Intensive and Basic Infrastructure Rehabilitation Pilot Project, financed by a US$l million Low-Income Countries Under Stress (LICUS) grant in 2005. Both o f these pilot projects were modeled on the CDD approach implemented in Northeast Brazil with strong Bank support. This approach was adapted for the Haitian context.

4

2

Original Project Performance to Date

8. Overall project execution to date has been satisfactory, despite various disturbances related to the volatile political situation around the 2005-06 general election process, the political cr is is triggered by the violent protests against the high cost o f living in April 2008, and damage caused by the four hurricanes and tropical storms that hit the country in August and September 2008.

9. Phase I o f project implementation has proceeded quickly, and has largely been back on schedule in terms o f disbursements, establishment and strengthening o f Project Development Councils (COPRODEPs), and implementation o f community subprojects. As o f November 2008, about US$20.7 million had been disbursed, o f which US$11.3 million went towards community subprojects. More than 2,400 CBOs are already participating in the Project, significantly exceeding the target o f community groups to be strengthened and participating in COPRODEPs. The Project i s well on i t s way to completing - by early 2009 - the intermediate Phase I target o f 608 community subprojects, with 439 already fully completed and more than 100 90 percent completed or more.

10. To date, the types o f community subprojects that have been prioritized include: productive or income generating investments (grain mills, cassava mills, fruit processing, cyber cafes); basic infrastructure (potable water, hand pumps, small spring catchment, spot rehabilitation o f rural roads, soil conservation, electrification); and social centers (community centers, vocational training facilities.). A total o f approximately 45,000 people have directly benefitted from these subprojects, and approximately 2 10,000 have benefitted indirectly.

11. Field visits to subproject areas by the task team and independent technical auditors confirm that the project i s reaching i t s intended beneficiaries, generating satisfactory results on the ground, and wi l l likely fully achieve i ts expected impact. Subprojects are delivering expected economic and social benefits, and preliminary indications point to PRODEP meeting i t s expected rates o f return. These rates in the case o f the AF are expected to maintain similar levels as new subprojects under the AF would present comparable conditions. Pilots have been successfully conducted to engage Haitian Diaspora hometown associations in the U.S. and involve them in PRODEP through parallel financing o f identified. COPRODEPs in the South have already established a very proactive regional federation (COFESUD), and there i s potential for replication in other areas o f the country.

12. Notwithstanding the Project’s satisfactory performance to date, the Project Is M&E system has been identified as a weakness. During the Mid-term Review o f PRODEP in June 2008, i t was concluded that although the monitoring systems were performing fairly well (i.e. MIS, technical audits reports, etc.), the arrangements that were put in place for evaluating the Project’s results and outcomes were not functioning as intended. The main issues facing the evaluation aspects o f the project include: (i) A fairly high level o f complexity in the evaluation approach and methodology used, given the country context; (ii) Some o f the indicators proved

3

too difficult to measure; and (iii) Limitation o f qualified local consultants to carry out planned M&E activities in a timely fashion.

13. The Mid-term Review recommended a simplification and adjustment o f the methodology for evaluating the project, by moving from a household survey approach to a ‘case-study’ approach. This methodology i s employed by similar Bank-supported C D D projects in other parts o f the world, and involves carrying out beneficiary assessments o f a representative sample o f subprojects by subproject type. This approach will also allow detailed financial and economic analysis o f implemented community subprojects. Furthermore, minor adjustments to the project outcome indicators will also be required for the purposes o f better clarity and easier measurement (see Section V I on Expected Outcomes for an overview o f the proposed adjustments to the outcome indicators).

14. I t should be noted that steps have already been taken to address the weaknesses identified in the existing M&E arrangements such as: (i) The hiring in the past year by the PCU o f a new national M&E Specialist with stronger qualification and experience; (ii) The initiation o f the contracting process for hiring a consultant (individual or firm) to carry out the ‘case-study’ evaluation o f the Project; (iii) Increased focus o f supervision o f M&E activities, including adequate allocation o f resources to that effect. Finally, steps are being taken to take greater advantage o f the wealth o f information found in the delayed baseline study, especially in terms o f the final evaluation o f the Project.

15. Finally, PRODEP i s in compliance with the Grant Agreement covenants. The fiduciary management system i s satisfactory, and there are no pending financial audit reports. There are no unresolved environmental, social, or other safeguard problems.

Rationale for Additional Financing

16. Notwithstanding the Phase I achievements, significant delays in the procurement process to contract service providers for Phase I1 (25 municipalities) o f PRODEP, led to the delayed launch (by some 18 months) o f field implementation in these municipalities. Given the resulting time gap and the fact that project resources have already been largely committed (over 90 percent of grant proceeds), activities would cease in the 32 municipalities o f Phase I by January 2009, had i t not been for the proposed AF.

17. Given that the demand for project funding in these 32 municipalities has exceeded expectations, maintaining PRODEP activities in these municipalities i s deemed critical by the government and key stakeholders in order to consolidate the significant results already achieved and prevent any interruption or loss o f momentum while the groundwork for post-project institutionalization or mainstreaming o f the C D D approach into GoH’s local development strategy, and a possible follow-up operation i s being laid out between now and the closing date o f the project. The GoH has off icial ly requested financial support from IDA in this regards, and aggressive outreach activities by the G O H aimed to attract other potential partners and donors to support PRODEP are planned in 2009.

18. It i s also important to note that PRODEP has acquired increased visibility in the GoH at all levels (central and local) and that the G o H i s very supportive o f the C D D mechanism,

4

realizing i t s relevance and potential. The Government understands that working through extensive networks o f small farmer and producer organizations strengthens and builds up the resilience o f local communities to external shocks.

19. The proposed AF i s also part o f the Bank’s response to Haiti’s recovery needs, following the string o f four violent hurricanes and tropical storms (Fay, Gustav, Hanna, and Ike) that devastated the country in August and September 2008. Strong winds, flooding and landslides caused severe damage to the country’s housing, infrastructure (roads, bridges, water systems, etc.) and crops. Around 800 people were killed and 850,000 more affected. Damage and losses are put at $800 million, or around 15 percent o f GDP, making this the country’s worst natural disaster in more than a century. Many o f the areas hit hardest (communes in the South, Southeast, Nippes, Grand-Anse, and the Central Plateau) are areas in which PRODEP i s active and working with community organizations. Maintaining and reinforcing PRODEP’ s apparatus and operational capacity on the ground i s therefore even more important and timely, as it provides an effective channel to support communities’ own efforts to rebuild and recover.

20. In addition to this AF, the Bank’s post-disaster assistance to Haiti includes: (i) participation’ in the Post-Disaster Needs Assessment; (ii) an additional IDA grant o f $20 million, mainly for the reconstruction o f two major bridges, other bridge repairs and strengthening disaster mitigation management institutions (approved on November 18, 2008); (iii) a $5 million grant for rural water and sanitation, via the State and Peace-Building Fund (approved November 25,2008); and (iv) a proposed $5 million IDA project to rebuild schools.

21. Lastly, it i s important to note that PRODEP’s satisfactory results in rural areas o f Haiti served as the basis for the design o f the recently-launched Bank-financed PRODEPUR, an urban version o f the CDD project, which wi l l begin implementation in disadvantaged and violence- prone urban areas o f Haiti in late 2008. This project i s co-financed by the Caribbean Development Bank (CDB).

Alternatives Considered and Reasons for Rejection

22. Two alternatives to AF were considered. The first was to prepare a new rural CDD operation. Due to the limitations o f the current IDA allocation for Haiti, as well as the extended duration that project preparation and approval process would entail, this alternative was rejected. The second alternative considered was to modify the project arrangements under the existing project (PRODEP) to include a window o f larger public investment-type subprojects. This alternative was rejected in order to not increase the level o f complexity in the currently well- functioning project arrangements, and to allow a timely response to the pressing funding challenges facing the ongoing project.

111. Proposed Changes

23. The proposed AF would not change the Project’s original development objective or design. The proposed AF would support the scaling up o f activities under Component 1 o f the original Project (Community Subproject Funds, Management and Support) in the 32 communes that participated under Phase I o f PRODEP implementation. The primary change to the original Project would be to the project’s scope-specifically to the number o f additional community

5

subprojects to be financed (approximately 300, increasing the original target to around 1,450) and the number o f additional beneficiaries (approximately 60,000 more community members). In addition to community subprojects, the AF would also provide further technical assistance to strengthen the capacity o f the existing COPRODEPs and beneficiary CBOs.

24. While the AF would be allocated to Component 1 o f the Project, minor adjustments would be made to the M&E methodology and to certain indicators for simplification purposes, and to take into account the fact that M&E has been one o f the Project’s main challenges to date. The proposed Results Framework - including the revised Expected Outcomes - i s included under Section V I (Expected Outcomes).

25. The proposed AF would be implemented using the institutional framework, procurement, and disbursement arrangements that are currently in place, are working well, and have the capacity to absorb additional funds. Social and environmental issues would be dealt with as in the original project, in accordance with the World Bank’s guidelines and in compliance with safeguards requirements. N o new safeguard policies would be triggered under the AF and the environmental category would remain at B. Lastly, the project closing date under the proposed AF would remain the same: June 30,2010.

26. scaled-up project with AF, including reallocation:

Below i s a breakdown o f the original IDA allocation, along with the new estimates o f the

Table 1: Detailed IDA Allocation (in US$ millions)

ministration, monitoring and

Notes: * / Beneficiary contribution estimated at 10 percent o f community sub-project investments amounts to about US$2.3 million and USS0.58 million respectively for the original Project and the AF. **/ This reallocation o f proceeds o f the ongoing Grant i s being processed separately in parallel with the proposed AF (see Annex 1 for details).

IV. Consistency with CAS or CPS

27. PRODEP was prepared under the Bank’s 2005 Transitional Support Strategy (TSS) for Haiti. The TSS highlights C D D as an approach to building social inclusion, participation, transparency, trust, and public-private partnerships at the local level, while also improving basic social, economic and infrastructure services, delivering hope and achieving quick wins, particularly in rural Haiti. PRODEP i s also fully consistent with the Bank’s Interim Strategy Note (ISN), which covers the period December 2006 through June 30, 2008, and which follows the Bank’s TSS focus o f delivering hope to the population and restoring credibility in

6

government institutions by helping the government deliver quick wins in the provision o f basic services and job creation. A full CAS (FY09-12) i s being developed on the basis o f the Poverty Reduction Strategy Paper (PRSP) that the GoH completed in November 2007, which i s expected to retain CDD as an important delivery mechanism for poverty reduction.

V. Appraisal o f Restructured o r Scaled-up Project

28. In November 2008, a Bank team visited Haiti to undertake the identification, preparation and pre-appraisal o f the proposed AF. The team met extensively with the project’s national counterpart team (BMPAD, Project Coordinating Unit, MEF, service providers, and others, inter al ia the Caribbean Development Bank).

Project Description: objectives, components and costs

29. PRODEP’s original development objective would remain unchanged, i.e. to assist the GoH in implementing the direct transfer o f public resources to local community organizations in poor rural and peri-urban communities: (i) to improve their access to basic and economic infrastructure and support income-generating activities by financing small-scale investments proposed, implemented and managed by the community organizations themselves; and (ii) to improve governance and build social capital o f communities through an increase in citizen participation and transparency in open decision-making processes.

30. Component 1 : Community Subproject Funds, Management and Support (Additional .US$S.O million equivalent from IDA, US$8.58 total with counterpart contribution). The additional funds allocated to this component would support (i) a total o f about 300 additional community subproject investments through two additional subproject prioritization cycles; and (ii) additional technical assistance to strengthen further the capacity o f the COPRODEPs and beneficiary CBOs) participating in the project.

3 1. Any other technical assistance or project administration and management costs would be absorbed by Component 2 (Capacity building and technical assistance) and Component 3 (Project Administration, supervision, monitoring, and evaluation) o f the existing project.

Institutional and implementation arrangements

32. The institutional and implementation arrangements’ in place under the original pro ect would remain the same, with overall project implementation responsibility with the BMPAD , or Bureau de Monktisation (previously the PL-480 Management Office) as the Implementing Agency on behalf o f the GoH. Other entities involved in project implementation include: CBOs, COPRODEPs and the Service Providers (MDODs) to support implementation at the local level.

6‘

See Annexes 6 and 7 for a detailed overview of the Project Description and Implementation Arrangements of the

Under the oversight of the Ministry of Economy and Finance (MEF), the Bureau de Monktisation (through its original Project (PRODEP).

existing Project Coordination Unit or PCU) i s also the Implementing Agency for the whole or only part of the following Bank-funded projects: Haiti Emergency Recovery and Disaster Risk Management Project (ERDMP/PUGRD), Transport and Territorial Development Project (PTDT), Urban Community-Driven Development-CDD Pilot Project (PRODEPAP), and the recently launched Urban CDD Project (PRODEPUR).

6

7

The roles and responsibilities o f each o f these entities remain the same as described in the POM. The subproject cycle, selection criteria, implementation processes and operational procedures remains the same as per the P O M o f the original project. The B M P A D and i t s PCU/BMPAD have been satisfactorily implementing PRODEP to date.

Economic appraisal

33. The economic analysis carried out during the original project’s appraisal was based on the implementation results o f the pilot project in Ouanaminthe, in the northeast o f the country. Three major types o f subprojects - infrastructure, productive, and social - are financed by PRODEP. The financial/economic analysis showed that the subprojects were financially viable and sustainable. The Project has been implemented for more than two years and project performance has been rated satisfactory. Phase I has financed 612 subprojects in 32 communes. Over 60 percent o f the subprojects have been completed, about 27 percent o f the subprojects have been completed 80-90 percent, and the rest has been completed over 50 percent. A comprehensive financial and economic analysis was not deemed to be necessary for the AF since the subprojects additionally financed will fo l low the original design; thus, the positive financial and economic results registered for the original project are valid also for the AF.

34. The completed subprojects have begun showing an impact on the communities and the beneficiaries‘ families. The infrastructure subprojects (involving rehabilitation o f access roads, construction o f small-scale irrigation systems, installation o f potable water) have been improving the communities’ access to market and social services. The installation o f potable water facilities i s not only saving community members’ time (water previously retrieved from rivers), but it i s also improving water quality, benefitting people’s health. The small-scale irrigation systems enable farmers to change their production patterns to shift f rom single crop (generally grains) to diversify crop cultivation o f high value crops (e.g. vegetables, or fruits). The productive subprojects (e.g., grain mills, cattle raising, community supply shops, etc) have shown benefits generated f rom the productive activities. Even if the net prof i t margin i s limited, CBOs have learned business practices, thereby increasing the sustainability o f these productive subprojects. Moreover, the income o f the CBO member families has increased. The social subprojects (training centers for women, youth and CBO members, cyber cafe etc.) are also starting to show an impact. Cyber cafes are the most impressive type o f subproject; the local high demand for information access makes the cyber cafds profitable.

35. To assess more in depth the economic and social impact o f PRODEP - as recommended by the PRODEP Mid Term Review mission (June 2008) - a representative sample o f case studies will be conducted by an independent consultant, using community s e l f evaluation process, to measure and document project impact at community level for each project type (infrastructure, productive and social).

’Among 6 12 subprojects, 242 are productive subprojects (about 40 percent), 280 are infrastructure (about 46 percent), and 90 are social (14 percent).

8

Technical appraisal

36. The technical viability o f the proposed project has been demonstrated by the results obtained during the first two and hal f years o f implementation o f PRODEP, as wel l as from the successful results o f the previous C D D pi lot projects carried out in Haiti. Additionally, lessons learned regarding certain needed technical improvements (e.g., allowing greater time for subproject execution and the finalizing o f O&M arrangements) have also been incorporated into the design o f this scaled-up operation. Technical standards o f specific subprojects, particularly those for which community demand is high, would be ensured through standardized designs (including engineering aspects, technical, financial and economic feasibility, O&M, simple environmental guidelines and cost parameters). All subprojects will continue to be screened by qualified MDOD technical staff. Communities wil l continue to be able to access technical assistance to aid them in subproject design and implementation. Semi-annual technical audits will also continue to validate subproject quality and, as needed, make recommendations for improvements. Training programs wil l also continue to be offered to develop community capacity to prepare, implement, operate and maintain subprojects, as well as acquaint them with existing environmental regulations, as i s detailed in the Environmental Management Plan o f the original Project.

Financial Management and disbursement arrangements

37. Financial management arrangements and risks. The proposed AF would use the financial management and disbursement frameworks that are currently in place under the original PRODEP Project. The last financial management supervision exercise found overall financial management capacity to be satisfactory. The B M P A D will have overall financial management responsibility o f the project. A desk review o f the financial management arrangements was carried out as part o f the preparation o f the project. The conclusion o f the Financial Management Assessment (FMA) i s that the overall project arrangements are adequate and satisfy the Bank’s requirements under OP/BP10.02 to provide, with reasonable assurance, accurate and timely information on the status o f the execution o f the project. Details o f the financial management arrangements are described below.

38. The BMPAD, which i s currently implementing the original PRODEP Project, has a well- established organizational structure, financial and administrative procedures, and a computerized financial management system. I t has experience working with both government and international partners, managing large amounts o f funds, and implementing development projects. The B M P A D has a computerized accounting software system (ACCPAC Plus), which i s multi-user and operates in network. ACCPAC can be used for multi-sites, is multi-currency and allows managing a practically unlimited number o f donors and projects separately. The B M P A D i s capable o f generating unaudited Interim Financial Reports (IFRs). The B M P A D will transfer subproject funds to the MDODs, which, in turn, wil l transfer these funds to the CBOs under terms detailed in the subproject agreements. In addition, the BMPAD will provide funds to the M D O D s for the carrying out o f their activities under the project. The CBOs wil l directly handle the funds for the implementation o f the subprojects.

39. The financial management capacity o f the two MDODs currently working on PRODEP has been assessed’ and found to be adequate. CBOs incorporated into the Project via AF which

9

lack financial management capacity would be required to undergo financial management training prior to receiving the initial disbursement o f subproject funds. The Guidelines o f Fiduciary Management for Community-Driven Development Projects (CDD Guidelines) wil l continue to be taken into consideration, as in the original Project. The existing operational manual would be used for the project.

40. The financial management risk at the country level i s high as outlined in the last Country Financial Accountability Assessment (CFAA), which i s summarized in Annex 3. Although Hait i has made significant progress in recent years, the public financial management system remains weak with significant challenges particularly with regards to budget execution and controls. The overall public financial management weaknesses are not expected to impact the project because i t will be implemented through a government agency that has strong fiduciary capacity. However, given the volume o f subprojects the overall financial management risk would remain the same as for the original PRODEP project i.e. Substantial.

41. Accounting and reporting. The accounting system o f the B M P A D will be updated to reflect the increase o f the categories related to the AF. Financial reporting will remain the same. Consolidated IFRs will be prepared every quarter and submitted to the Bank no later than 45 days after the end o f the quarter.

42. Auditing. The auditing arrangement would remain the same. Semi-annual audit reports would be transmitted to the World Bank no later than four months after the end o f each audited semester. The existing contract o f the auditor will be amended to include the audit o f the AF.

43. Disbursement arrangements. The f low o f funds would remain the same as for the original project. Disbursements will be made in accordance with procedures outlined in the Disbursement Handbook for World Bank Clients and allow for use o f advances, reimbursement, direct payment, and issuance o f Special Commitment.

44. A single, segregated designated account (DA) o f US$1.5 m i l l i on will be opened in the Central Bank o f Hait i and managed by the BMPAD. Funds deposited in the DA will be used to finance: (a) the activities implemented directly by the PCU (BMPAD), and (b) other costs incurred by MDODs, including their administrative costs. Transfers to other accounts (secondary advances) from the DA are authorized.

45. Support to CBOs and the costs o f the subprojects implemented by CBOs wil l be paid by the direct payment method on a quarterly basis. No t later than 45 days after the end o f each quarter, MDODs will prepare and transmit to the B M P A D their consolidated financial and physical progress reports. After approval o f these reports, the B M P A D will transmit them to the World Bank together with a request for direct payment. Upon receipt o f the resources, the M D O D will then transfer CBOs’ funds to the CBO bank account under terms detailed in the subproject agreements, which wil l require the CBO to have an account in a commercial bank or a credit union. Upon signature o f the subproject agreements, the World Bank wil l transfer, via the mechanism described above, 50 percent o f the amount o f the subproject for the quarter. After transmission o f a satisfactory financial and physical progress report, the remaining balance o f the subproject agreement (50 percent) wil l be released. The average lifetime o f the subproject i s estimated at six months.

10

46. Reporting for project-related expenditures wil l be based on summary reports in the form of Statements o f Expenditure for Categories 2, 3, and 4 for all expenditures related to goods, works, and consulting services ( f i rms) contracts o f less than US$50,000), individual consulting services contracts less than US$25,000, and al l operating costs and training. For Category 1, reporting for project-related expenditures on subprojects will be based on unaudited financial management reports to be submitted quarterly. The format and content o f the IFRs wil l be updated to include the increased allocations o f the categories.

47. Disbursement condition. N o withdrawal wi l l be made under Category 1 unless a Community Grant Agreement for the implementation o f the relevant Community Subproject, including whenever applicable, environmental mitigations measures in respect thereof, shall have been entered into between the relevant Beneficiary Community and an MDOD, all in accordance with the procedures, terms and conditions set forth in the Operational Manual and as shall be evidenced by the first three such signed Agreements furnished to the Association for i t s review.

48. Disbursements by category: The table below sets out the expenditure categories to be financed out o f the IDA Grant proceeds. The allocations for each expenditure category are the following:

Notes: /I this reflects the proposed reallocation of the original Grant which i s being processed in parallel (see annex 1 for details); /2 includes training and capacity building o f participating community-based organizations and project municipal development councils

49. Retroactive financing’. Payments made for expenditures prior to the date o f signature o f the amendment o f the Legal Agreement may be made on account o f payments made for eligible expenditures before that date but after December 1, 2008, in an aggregate amount not exceeding US$800,000.

Procurement

50. General: Procurement for the proposed project would be carried out in accordance with the World Bank’s “Guidelines: Procurement Under IBRD Loand and I D A Credits” dated May

This provision refers only to Government-financed eligible expenditures. For any expenditures financed from IDA 8

funds through the Designated Account on the ongoing project which, for whatever reason, would need to be reimbursed fiom the additional financing, there i s no notion o f retroactive financing as this type o f carryover o f expenditures i s considered normal financing.

11

2004, revised October 2006; and “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers” dated M a y 2004, revised October 2006, and the provisions o f the Legal Agreements. The various items under different expenditures categories are broadly described below.

51. Assessment of the Agency’s capacity to implement Procurement: Procurement activities wil l be carried out by the BMPAD, which i s already managing procurement under PRODEP, as well as procurement for the community-based components o f several other Bank projects and small grants in Haiti. The Bank’s assessment o f the capacity o f B M P A D to implement procurement actions for these projects i s based on BMPAD’s satisfactory performance to date in implementing these ongoing projects. While the procurement team in the B M P A D i s well-equipped to execute procurement according to Bank Guidelines, the overall public procurement system in Hait i remains relatively weak. Despite recent reforms in the legal and institutional framework for procurement, there is st i l l a lack o f skilled personnel with knowledge o f international norms, limited planning and follow-up capacity and insufficient use o f standard documents and procedures. Consequently, the overall project risk for procurement remains high.

52. The service agreements currently in place with two service providers (MDODs) for the targeted 32 communes o f Phase I will be amended and extended by 18 months to include the expanded community investments and technical assistance activities to be financed under the AF. This extension o f the existing agreements is justified on the basis that the two non-governmental organizations (NGOs) which provide these services were competitively selected under Phase I1 o f PRODEP, have been performing well in their respective areas, and have demonstrated the capacity to scale up their activities quickly.

Selection of Consultants / Service Providers:

53. Procurement Plan, Thresholds for Procurement Methods and Bank Review: The procurement plan for implementation o f the AF was agreed between the Recipient and the Project Team on December 17, 2008 and is included in Annex 2. The plan wil l be integrated into the PRODEP procurement plan and updated annually following the same procedures that are already in place for the PRODEP. The recommended thresholds for the use o f the procurement methods specified in the Legal Agreement are identified in the table in Annex 2. These thresholds, as well as the requirement for Bank prior review o f al l but the smallest contracts, are common to al l World Bank projects in Haiti and have served as the basis for the agreed procurement plan. As is the case wi th PRODEP, supervision o f procurement will be carried out primarily through the prior review o f virtually al l procurement actions by B M P A D and supplemented by supervision mission at least twice a year.

Environmental and social safeguards

54. General: The same environmental and social safeguards will apply to the AF as to the original project, and the same management framework will be used. As with PRODEP, the AF community investment wil l be small in scale (US$20,000 on average, up to a maximum o f US$50,000), and subprojects that would .entail resettlements o f any kind (physical or non- physical) wil l also not be eligible under the AF.

12

55 . Scope and coverage: The AF would only support activities in the 32 municipalities in which the PRODEP i s already present. In addition to operating in the same zones, the scope and type o f activities remains unchanged. As a result, no new safeguards will be triggered.

56. Institutional capacity: The implementing agency (the BMPAD, previously the PL-480 Management Office) and i ts PCU have hired an environmental specialist who has been responsible, since 2005, for assuring that the policies defined in the project’s Environmental Management Framework (EMF) and Operations Manual are respected. The project has also financed a number o f environmental safeguards and environmental training sessions for other PCU staff, MDODs, COPRODEPs, and local and central government staff participating in project implementation at the regional and local levels. A communication expert has also been hired, based on the need observed during project implementation to improve the quality o f communication and public consultation prior to undertaking small community subproject works. Safeguards arrangements under the ongoing project have been deemed satisfactory by Bank missions and are expected to be maintained under the AF.

57. Finally, although there have been no cases o f conflict around issues o f resettlement thus far in implementation, steps have been taken under the preparation for the AF to ensure a more robust process o f screening against resettlement impacts, based on experiences in other regions. Discussions have been held with the client, and procedures are being included in the Operational Manual to verify more rigorously in each relevant subproject: (1) that none o f the three categories o f impact covered under the policy are applicable; and (2) that “voluntary” contributions o f land by communities are indeed voluntary, and involve no form o f coercion. The process will include verification that community members do indeed have the option to refuse or reject donations o f land.

58. Experience o f safeguards implementation to date: The EA, Pest Management and Physical Cultural Property policies (OPs 4.01, 4.09 and 4.11, respectively) were the only safeguard policies originally triggered, and experience under implementation indicates no need to revise this assessment. Both the environmental and social screening mechanisms used in the identification and selection o f community subprojects (all 612 subprojects to date have been assessed using these instruments) and local risk management activities have been largely satisfactory.

59. K e y lessons learned from the implementation to date o f the original project and other linked projects (e.g., the Urban CDD Pilot/PRODEPAP and the recently launched Urban CDD Project/PRODEPUR) include: (a) the need for minor improvements in the format o f the screening checklist, to provide more space for the recording o f identified environmental concerns; and (b) the involvement and increased responsibility o f local and regional officials as a critical factor in the implementation o f the EMF, as well as the provision o f support through TA and training. These measures are already being carried out in the existing Project and would continue to be carried out in the AF.

13

Safeguard policies

Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP/GP 4.0 1) [XI [ I Natural Habitats (OP/BP 4.04) [ I [XI Pest Management (OP 4.09) [XI [ I Cultural Property (OPN 1 1.03, being revised as OP 4.1 1) [ I Involuntary Resettlement (OP/BP 4.12) [ I [XI Indigenous Peoples (OD 4.20, being revised as OP 4.10) [XI Forests (OP/BP 4.36) [ I [XI Safety o f Dams (OP/BP 4.37) [ I [XI Projects in Disputed Areas (OPIBPIGP 7.60)* [ I [XI Projects on International Waterways (OP/BP/GP 7.50) [ I [XI

[XI

[ I

* By supporting the proposed project, the Bank does not intend to prejudice the final determination o f the parties' claims on the disputed areas

VI. Expected Outcomes

60. The AF proposes minor modifications to some o f the outcome indicators for the purposes o f easier measurement. The revised expected outcome indicators include: (i) 32 communes (within the original 60) successfully managing direct transfers to CBOs for community subprojects; (ii) 50 percent o f residents in project area received access to basic and social infrastructure; (iii) 50 percent o f productivehncome-generating subprojects that are s t i l l operational 3-6 months after completion; (iv) approximately 100 CBOs officially constituted and participating in COPRODEPs; (v) 60 percent o f the population in project area expressing awareness of PRODEP and i ts objectives/activities; and (vi) 80 percent o f CBO members expressing a positive change in terms o f their organizational capacity and ability to work together constructively. Table 3 presents the revised Results Framework.

14

Table 3: Revised Results Framework

Project Development Objective

To scale-up the direct transfer o f public resources to local community organizations in poor rural and peri-urban communities, by:

(9

(ii)

To improve their access to basic social and economic infrastructure and support income- generating activities by financing small- scale investments proposed, implemented and managed by community organizations; and

To improve community governance and build social capital o f communities through an increase in citizen participation and transparency in open decision-making processes.

Original Project Outcome Indicators

60 communes successfully managing direct transfers to CBOs for community subprojects

Cost-effectiveness/ efficiency o f direct transfers to CBOs vis-& vis traditional service provision.

Percent ruraliperi-urban poor with access to basic social and economic infrastructure (e.g., water supply, feeder roads, school, health posts)

20 percent change in household assets, per- capita incomes among project beneficiaries.

2,000 CBOs officially constituted and participating in COPRODEPs

300,000 households expressing awareness of PRODEP and its obj ectives/ activitiedmeans o f access.

Additional Financing Outcome Indicators

32 communes (within the original 60) continue to successfully manage direct transfers to CBOs for community subprojects

Propose to drop: considering data collection and capacity constraint, this indicator i s not realistic. In most cases, there i s no prior 'traditional' service provision, which makes a comparison challenging.

50 percent o f residents in project area with access to basic social and economic infrastructure (e.g. access to potable water, irrigation, grain mills)

50 percent o f productive/ income-generating subprojects are operational 3-6 months after completion

100 CBOs officially constituted and participating in COPRODEPs (includes pre- existing and strengthened, as well as newly-created CBOs)

60 percent of population in project area expressing awareness of PRODEP and its objectiveslactivitiedmeans of access.

New Project Outcome Indicators

57' communes successfully managing direct transfers to CBOs for community subprojects

50 percent o f residents in project area with access to basic social and economic infrastructure (e.g. access to potable water, irrigation, grain mills)

50 percent o f productive/ income- generating subprojects are operational 3-6 months after completion

3,500" CBOs officially constituted and participating in COPRODEPs (includes pre-existing and strengthened, as well as newly-created CBOs)

60 percent o f population in project area expressing awareness o f PRODEP and its objectiveslactivitiesi means o f access.

'The original target ofthe project was to reach 55-65 communes, therefore the indicator was set at the average of60. As per the result o f the competitive contracting process of service providers, PRODEP wi l l cover 57 communes (32 in Phase 1 and 25 in Phase 11). The AF wil l only target the 32 communes under Phase I.

This target i s based on the number o f CBOs already participating (2,400 under Phase 1 as o f November 2008), plus the estimated number o f CBOs to join the Project under Phase 11, as well as under the AF. 10

15

Intermediate Results One per Component

Component One:

Rural/peri-urban community organizations (CBOs) in poor communes select, manage funds, implement and maintain subprojects in basic small-scale infrastructure, education, health and other productive investments.

Component Two:

Build and strengthen capacity o f CBOs and COPRODEPs in subproject execution, roles and responsibilities as described in the project operational manual, environmental and social dimensions o f the project.

20 percent change in Social Capital Indices reflecting greater citizen participation in resource allocation decisions

Results Indicators for Each Component

Component One:

60 COPRODEPs following democratic and open meeting procedures as detailed in the Project Op. Man.

# o f subprojects: (a) 2,600 proposed, (b) 1,950 approved, (c)1,300 under implementation, and (d) 1,300 completed, by subproject type e.g., infrastructure (potable water, roads), productive (irrigation, food processing) and social (health, education);

Creation o f new community organizations (CBOs)

30 percent o f CBO/COPRODEP members which are women

75 percent o f subprojects with adequate O&M arrangements.

Component Two :

360 training events for ZBOs, COPRODEPs

80 percent o f CBO members express a positive change in terms of their organizational capacity and ability to work together constructively

Additional Financing

Component One:

32 COPRODEPs following democratic and open meeting procedures as detailed in the Project Op. Man.

# o f subprojects: (a) 600 proposed, (b) 300 approved, (c) 300 under implementation, and (d) 300 completed, by subproject type e.g., infrastructure (potable water, roads), productive (irrigation, food processing) and social (health, education);

20 new CBOs created as a result o f the project.

30 percent o f CBO/COPRODEP members which are women

75 percent o f subprojects with adequate O&M arrangements.

Component Two:

360 training events for CBOs, COPRODEPs

75 percent of CBO members have attended at least one training event

80 percent o f CBO members express a positive change in terms o f their organizational capacity and ability to work together constructively

New Project Outcome Indicators

Component One:

57 COPRODEPs following democratic and open meeting procedures as detailed in the Project Op. Man.

## o f subprojects: (a) 3,200 proposed, (b) 2,250 approved, (c) 1,450 under implementation, and (d) 1,450 completed, by subproject type e.g., infrastructure (potable water, roads), productive (irrigation, food processing) and social (health, education);

100 new CBOs created as a result o f the project.

30 percent o f CBOiCOPRODEP members which are women

75 percent o f subprojects with adequate O&M arrangements. Component Two:

360 training events for CBOs. COPRODEPs

75 percent o f CBO members have attended at least one training event

16

MIS tracks and monitors subproject implementation, and overall physical and financial performance o f PRODEP.

Pace o f subproject execution by CBOs (e.g., 3 months)

Percent prioritized and approved subprojects which are financed. Component Three: Subproject unit costs (per beneficiary family, type o f subproject)

Geographic distribution of subprojects (1 0 departments)

Flow o f project funds

VII. Benefits and Risks

Benefits

90 percent o f COPRODEP members who have attended at least one training event.

80 percent o f subprojects are implemented within 4 months

Propose to drop; this indicator will always be 100 percent.

Component Three: Average subproject cost

Geographic distribution o f subprojects within a l l 10 departments.

Amount o f project finds disbursed by the Bank

90 percent o f COPRODEP members who have attended at least one training event.

80 percent o f subprojects are implemented within 4 months

---

Component Three: Average subproject cost

Geographic distribution o f subprojects within a l l 10 departments.

Amount o f project funds disbursed by the Bank

61. The proposed AF would add to the following benefits to the 32 communes participating in Phase I: (i) increased social inclusion; (ii) increased access to basic services and economic opportunities; (iii) strengthening o f local constituency organizations; (iv) increased transparency in the allocation o f local investment resources; and (v) the continued promotion o f community empowerment. Specific additional benefits f rom the AF would include: (i) a further 300 community subprojects in the 32 communes o f Phase I; and (ii) additional technical assistance to the existing CBOs and COPRODEPs. It would also provide the G o H with an extended window o f opportunity to attract additional donor financing to sustain a scaled up CDD approach.

Risks

62. The economic and political volatility o f Haiti, as well i t s vulnerability to natural disasters, continue to pose significant risks to project implementation (as in the original Project). Other risks specific to the AF include a possible loss o f momentum and disillusionment on the part o f the Phase I communities and central and local governments if the time i s too long between the completion o f Phase I o f the original project and the effectiveness o f the AF. Based on the above considerations, and considering the accumulation o f experience with CDD project implementation by the BMPAD, the satisfactory performance o f the mitigation measures in place (effectively ring-fencing the project), i t i s f e l t that the project i t s e l f merits a risk rating o f M.

. .

17

However, given the overall country and sector context, the overall residual risk rating o f S or “Substantial” is deemed more appropriate for the AF”.

63. I t i s important to point out that the mitigation measures developed to address risks identified during the original PRODEP’ s preparation have proven effective; this i s particularly true considering issues such as political interference, misappropriation, or misuse o f community resources. The establishment o f clear rules and transparent, inclusive, and participatory processes for community sub-project financing has reduced significantly the potential for discretional allocations, and allowed eligible beneficiaries to participate effectively, including women and youth groups. The project’s emphasis on capacity building, systematic training and technical assistance to community organizations and groups has enabled them to implement and manage quality sub-projects. These mitigation measures will continue to be implemented through the proposed AF.

VIII. Financial Terms and Conditions for the Additional Financing.

64. mil l ion equivalent).

The AF to PRODEP would be provided as an SDR 5.4 mi l l ion IDA Grant (US$ 8.0

” This S rating i s also in line with the rating adopted for the recently approved and similar Urban CDD projectiPRODEPUR.

18

Annex 1: Disbursement Allocations of Additional Financing and Reallocation

(2) Goods

In order to cover the additional costs associated with increased capacity building and training activities o f a much higher-than-expected number o f participating CBOs and o f COPRODEPs under the original project, and to also cover service provider (MDOD) costs that proved to be higher than anticipated during project preparation, i t i s being considered to reallocate proceeds o f the original Grant as follows:

95,000 -- -- 95,000

(3) Consultants' services and Training and audits

(a) Service Agreements

(b) other, including audits

(4) Operating Costs

(5) Unallocated

TOTAL

4,5 1 1,000 1,791,000 2,150,000 8,452,000

2,357,000 1,187,000 -- 3,544,OCO

1,993,000 1,993,000 --

1,46 1,000 -1,461,000 20,000 20,000

25,600,000 0.0 5,400,000 31,000,000

19

Annex 2: Additional Financing Procurement Plan and Thresholds

Expenditure Category

1. Works

Thresholds for Procurement Methods and Prior Review

Contract Value (Threshold) Procurement Contracts Subject to US $thousands Method Prior Review

>I ,000 ICB All

2. Goods

I I 100-1.000 I NCB I All I 4 0 0 Shopping All

Regardless o f value Direct Contracting All > loo ICB All

5-25 <5

Regardless o f value

I I 25-100 I NCB I All I Shopping Al l Shopping None

Direct Contracting All 3. Consulting Services - 3.A Firms Regardless o f value QCBS, QBS, FBS, LCS All

4 0 0 CQS All

- 3.B Individuals

4. Works, Goods and Services under Subprojects

ICB = International Competitive Bidding QCBS = Quality- and Cost-Based Selection FBS = Fixed Budget Selection CQS = Selection Based on Consultants’ Qualifications

NCB = National Competitive Bidding QBS = Quality-Based Selection LCS = Least-Cost Selection

Regardless o f value Single Source All Regardless o f value Comparison o f 3 CVs in All

accordance with Chapter V o f the Guidelines

procedures detailed in Operational Manual

<50 Community Participation None

20

Annex 3: Financial Management Risks

Risk Assessment H l S l M l L

Risk Mitigations measures

Inherent Risk Country Level. Quality o f PFM I X I I institutions (see PEFA- PMF,CFAA, CPAR, CPIA & other diagnostics), standard o f financial accounting, reporting and auditing, quality o f FM profession

Entity level. Independence of entity’s management, appropriateness o f the organizational structure, impact o f civil service rules I I I I

X

- X

The detailed cost table o f the AF and the procurement plan will be adopted prior to negotiations. T h e BMPAD has a sound accounting system and procedure. The software will be updated to reflect the increase in the allocations. T h e BMPAD has a sound internal control system. An internal auditor has just been recruited recently and has developed an audit plan. Follow up on the implementation o f this audit plan will be undertaken. The flow o f funds will remain the same. However, given the nature o f the project (CDD) and the volume o f sub-grants, close monitoring o f the component will be undertaken. The format and.content o f al l the IFRs will be updated to integrate the AF. Timely submission o f the IFRs by the MDOD and the Consolidated IFR will be monitored. TOR o f the existing auditor will be updated to include the AF.

Program level. Relative size o f the Bank loan, type o f lending instrument, complexity o f the APG (e.g. sectors involved, number of implementing and sub-implementing entities, multi-donor etc.)

I I I

X

S

I I I I

Overall Rating Inherent Risk I 1 x 1 Control Risk

Internal Controls

Funds Flow

Financial Reporting X

- X

X

X -

The integrated fiduciary assessment (PEMFAR) was conducted by the Bank in 2007. Based on the findings, an action plan was elaborated by the Government. T h e Bank and the IDB are assisting the institutions in the implementation o f this action plan through technical assistance grants (EGTAG I&II) and a DPL (EGRO I & 11).

The AF will be implemented by the BMPAD, which i s an autonomous agency with strong fiduciary capacity.

The fiduciary arrangements and the different actions to be implemented as identified in the Audit will help mitigate the risks. Close financial management supervision will also be undertaken.

Residu a1 Risk

M

~

S I

L

L

M

S

S

M

M

21

Annex 4: List o f Areas o f Intervention of PRODEP

# om

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

16 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 16 32

1 1 1 1 1 1 1 1 1 1 1

11 1 1 1 1 4 15

1 1 1 1 1 1

7 1 1 1 3 10 25 57 )OD

'HASE/ MDOD

PADF -

CECl -

- CECI/C

Lot

L o t i

pADFll Lot :

Lot 1

mmunas 8 5 Rank-

ing

96 132 106 63 117 133 116 97 70 103 72 78 79 80 121 99

113 125 112 124 123 111 126 88 122 110 17 56 73 42 114 128

131 127 89 90 91 94 104 93 66 76 120

129 95 74 115

85 86 100 i o 9 108 63

1 8 4

107 118 130

(Oct 200:

Departments

IAF Southeast

South

Nippas

Centre Toti

Northeast

33 34 35 36 37 38 39 40 41 42 43

ub-Total Lot 1 North 44

45 46

HaAi Community-Driven Development ProjactfPRODEP (IDA Grant No. H18lO-HA)

List of Intervention k e a s - Phase I, II 8 Additional Financing)

La Chapelle Granda Salina Desdunes Marchand-Dassalin AnsaRouga Ennery Marmelade Gros Mornas Baie de Henne Jean Rabel Eassin Bieu

Eahon Ranquitte Plaisanae

YO. I Communes

MDOD CECl Tot 3TAL PHASE I

I 1

E Artibonite

Northwest

I 47 ]Pilate DUS Total Lot 21 1

Total MDOD CECUCARE

Nippa

Total MDOD PADFlASSODLO TOTAL PHASE II

TOTP urce Signed financing agreements Bureau de MonBtlZatiO

diVisiol Village - -

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

16 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

16 32

-

-

1 1 1 1 1 1 1 1 1 1 1

11 1 1 1 1 4 15

1 1 1 1 1 1 1 7 1 1 1 3 10 25 57

NOV 200:

- ~

- - -

- -

- - -

6

Nb. Of Sub-Projects 'hasal Phase11 Snotal AF Total

I 8 I1 i i I I

22

Annex 5: Project Processing Schedule and Team Composition

Time taken to prepare project

Project Processing Schedule

4 weeks

Appraisal 1211 6/08

Negotiations

Approva l

12/17/08

01/29/09

Team Composition

Planned Date o f Effectiveness 02/15/09

Name .

Garry Charlier

Specialty

Task Team Leader

Fily Sissoko

Yao Wot to r

Sr. Financial Management Specialist

Procurement Specialist

Solange A l l i a l i Sr. Counsel

23

Dav id Freese

Zhong Tong

Sr. Finance Off icer

Agr icul tural Economist

Lorena Cohan Extended Term Consultant

N i n a Chee ,

Peter Cohen

Sr. Environmental Specialist

Extended Term Consultant

Carolina C. Hammond Program Assistant

Annex 6: Detailed Description o f Original Project” (PRODEP)

Building o n the successful experience o f the PCF-funded C D D pilot, the proposed project would scale-up the direct transfer o f public resources to local community organizations in poor rural and peri-urban communities, by: (i) improving their access to basic social and economic infrastructure and support income-generating activities by financing small-scale investments proposed, implemented and managed by community organizations; and (ii) improving governance and building social capital o f communities by increasing citizen participation and transparency in open decision- making processes. Despite the continued polit ical unrest in Haiti-most intense in urban areas such as Port-au-Prince-the project’s focus o n rural community organizations and demand-driven processes with local implementation have the potential t o mitigate the overall high project risk by easing social tension in rural areas and delivering quick wins, as stated in the TSS, at a time during which they are sorely needed in Haiti.

Project components

Component 1: Communitv subproiect funds, management and support (US$34.0 million) would finance, in some 55-65 targeted communes o f rural and peri-urban Haiti, (i) approximately 1,300 small-scale investments, costing, on average, US$20,000 (but in a l l cases n o more than US$50,000), which are identified by community-based organizations (OCBs) and later prioritized in representative project development councils (COPRODEPs) as a function o f available resources under the project and (ii) the contracting o f service providers in the project area to mobil ize OCBs to participate in the project, as wel l as provide the necessary training and technical assistance to these OCBs, and their respective COPRODEPs, to fulfill their roles in executing and maintaining these subproject investments. The component would mainstream the financing mechanism tested under the PCF-funded C D D pi lot project. Community subprojects would be for basic socio-economic small-scale infrastructure, education, health, productive, natural resource management and other investments as identified by OCBs. Funds for subproject execution would be transferred directly to OCBs v ia subproject agreements; OCBs are then responsible for subproject financial management and expense reporting fo l lowing subproject completion. Subproject selection would be demand- driven and would fo l low procedures detailed in the project operational manual, which wil l be updated f rom that used under the PCF-funded CDD pilot, drawing o n lessons learned f rom the pi lot and expanded in response to the proposed scaled-up operation.

The component would also earmark resources for the hiring o f technical assistance service providers to mobilize OCBs in the targeted communes and train them in the preparation and subsequent execution o f subproject investments. The component would also finance training and technical assistance to prepare the COPRODEPs to fulfill their responsibilities related to subproject monitoring and supervision, and training to OCBs. Given the information-intensive nature o f CDD, a comprehensive communications strategy would be financed under th i s component to raise awareness among the intended project beneficiaries on the project objectives and avenues for participation.

Targeting

The national territory o f Ha i t i i s divided into 10 Departments, 140 communes, and 568 “communal sections”. Due to the grant financing under the component for community subprojects, it i s important

l2 Excerpt from World Bank Project Appraisal Document Report No. 32634-HT dated July 6,2005.

24

to maximize the targeting o f the rural poor. Under the project, targeting occurs on various levels, namely:

a) Communes are targeted, based o n poverty levels and operational criteria; and

b) Communi@-based selection o f poor beneficiaries and particularly vulnerable groups by the project development councils (COPRODEPs).

Criteria for commune targeting

Consistent with the project’s overarching objective o f poverty reduction, the principle criteria for determining commune eligibil i ty will be i ts poverty level, as determined by Haiti’s 2004 poverty map. Operational criteria would then be taken into account in order to determine the time-ordering (i.e., phasing-in) o f these eligible communes.

Poverty: The only recent source for poverty indicators at the commune level i s a 2004 poverty map produced by the G O H and with financial assistance f rom the IDB, which provides a ranking o f communes according to a poverty index, calculated as a composite measure o f access to basic social services including water, education, health and sanitation. Commune ranking under the poverty map would determine their eligibility. The advantage o f this selection method i s i t s consistency with project objectives and i ts transparency as an objective rule. The latter i s particularly important in order to minimize the scope for or appearance o f polit ical influence over the distribution o f project funds, and helps foster a sense o f fairness in government operations. Under th is criteria, a l l departments would contain eligible communes.

Operational Criteria: A second stage o f the selection process would determine how the project i s phased-in across geographic areas. Priority would be given to communes that meet the one or more o f fo l lowing operational criteria:

(a) proximity to other eligible communes, providing ease o f access and economies o f scale; (b) proximity to communes where the Bank (via the PRODEP pi lot and L I C U S grant) already has a presence o n the ground, such that operations can be quickly scaled-up to provide the ‘quick wins’ desired in the ICF; and (c) the existence o f other development projects which G O H i s implementing with the financial assistance o f other donors with which the project could establish operational l i n k s and underpin existing ‘poles’ o f development (see Annex 2).

Consideration would also be given to security issues, which may restrict entry to certain areas o f the country, at least through the 2005-06 electoral cycle. In these cases, even though a commune i s ‘selected’ according to poverty criteria, the project may not operate there initially, due to operational constraints. Whi le in most cases extending operations into communes in the top ha l f o f the poverty ranking will not occur until later phases o f the project, project management may extend operations into such a commune where, due to geographic proximity to a conglomeration o f communes benefiting f rom the project, i t becomes necessary to do so to avoid conflict over project resources that would impede access to eligible communes. Finally, the severity o f poverty would become a final reference point for determining priority points o f entry. Those conglomerations o f communes that are ranked ‘extremely poor’ (exhibiting the l o w endowments in access to basic services) and meet the above operation criteria would be given first pr ior i ty in the phasing-in o f PRODEP operations.

25

Level of funding per commune

Indicative budget envelopes would be allocated to each eligible commune for the purposes o f priorit izing subproject proposals f rom their respective OCBs. Over the five-year horizon o f project implementation, budget envelopes to the communes would be assigned bi-annually. In order to provide a simple and transparent rule for determining funding allocations, which will be perceived o f as fair by the resident population, the amount o f project funds allocated to each commune will be based on the number o f geographic sub-divisions in the commune (sections communal). Whi le population size also matters in terms o f equity, the population o f the sections communal appears to be fairly concentrated between a range o f 5,000 to 10,000 inhabitants, according to 1999 data f rom the National Institute o f Statistics o f Hai t i (IHSI). However, a new national census has just been completed which provides population at the commune level. The rural and peri-urban population o f this census would be used to adjust upward the base allocation for the larger communes, where necessary. Working from an average cost per subproject in the range o f US$15,000 to US$20,000, and an average o f 4 projects per section communal (based o n the experience o f pilot), the project would allocate US$ 60,000 per section communal. .Once allocated, however, the COPRODEP would then have full control over determining h o w many projects are actually funded and h o w they are allocated across the sections communales.

Component 2: Capacity-Building and Technical Assistance (US$3.6 million), implemented by the PCUPL-480 [since 2007, the BMPAD], would finance, among others (i) training-of trainers events in basic administration, management, financial management and accounting for COPRODEPs, as well municipal government and regional representatives o f central government ministries; (ii) periodic regional and national exchanges among COPRODEPs to share knowledge and experiences gained under the project; (iii) workshops for M D O D s and their associated f ie ld offices - both existing and those which enter the project over i t s period o f execution - to equip them to adequately accompany OCBs and COPRODEPs in carrying out the activities under Component 1; (iv) training for PL-480 staff in order to effectively supervise overall project implementation; (v) various consultant services including possible preparation o f future operation and assessment o f ways in which the Haitian Diaspora might be mobil ized to both co-finance and provide technical expertise to the community subprojects; and (vi) po l icy dialogue to engage GOH and other stakeholders o n a medium to long-term national strategy to facilitate the mainstreaming o f CDD.

Component 3: Proiect Administration, Supervision, Monitoring and Evaluation (US$2.7 million) would finance incremental costs associated with project implementation by the project coordination unit (PCU), which will be housed in the existing PL-480 Management Off ice and operate under the oversight o f the Ministry o f Planning and External C~opera t i on . '~ This would also include the establishment o f a Monitor ing and Evaluation subcomponent, which would accompany project execution. Impact evaluation would also be financed under this component.

l3 Also the implementing agency fo r the LICUS labor-intensive infrastructure rehabil itation project.

26

A n n e x 7: I m p l e m e n t a t i o n A r rangements o f Original Project14 (PRODEP)

General

The proposed institutional and organizational arrangements for project implementation would be patterned o n the organization o f the PCF-funded C D D pi lo t project. The Ministry o f Planning and External Cooperation (MPCE) would have overall oversight o n the project. The M P C E would delegate overall project execution to the PL-480 Management Office, a national agency under the MPCE with administrative and financial autonomy. The PL-480 management office was created in 1986 to manage food aid; i t i s now entrusted as wel l with project coordination activities. A Project Steering Committee would be established to define the project’s strategic orientations, as wel l as to vet i t s annual work plans and budgets. This committee would be composed o f representatives of ministries involved in project implementation. PCU/PL-480 delegates day-to-day operations to the MDODs, which would be non-governmental organizations (NGOs) with sufficient national coverage and capacity to accompany the implementation o f project activities in the rural space.

Execut ing ent i t ies

Community-based Organizations (OCBs) are groups o f rural citizens (of 20-40 families representing some 100-200 individuals) with a common interest that organize into officially-constituted c i v i l associations. They identify, prepare, implement, supervise, operate and maintain their subprojects, assisted by technical assistance and training made available by project development councils (COPRODEPs) and the M D O D s (see below).

Project Development Councils (COPRODEPs) include representatives o f OCBs (a minimum o f 80 percent o f total membership), c i v i l society, as well as local government (20 percent o f membership). As the principal entity for targeting benefits and allocating project resources at the communal level, COPRODEPs also provide a critical link to local government and have the potential t o engage in other non-project activities. They play a fundamental role in mobilizing communities and promoting their participation in local .decision-making, They receive, prioritize and approve subproject proposals f rom the OCBs during regularly scheduled and widely publicized meetings that the public i s encouraged to attend, and then submit investment plans to the MDODs. COPRODEPs also accompany OCBs during subproject implementation and subsequent O&M.

Maitres D’Ouvrage Deleges (MDODs), under the overall guidance o f the PCU/PL-480 (see below) are services providers (e.g., NGOs, non-profit organizations) that (i) assist OCBs and COPRODEPs to strengthen their organizational and operational capacities, (ii) accompany both COPRODEPs and OCBs in the “on-the-ground” execution o f project activities, (iii) provide technical assistance to OCBs throughout the subproject cycle, (iv) technically appraise subproject proposals which have been approved by the COPRODEP, (v) enter into subproject agreements (accords) with OCBs for the financing o f subprojects, and (vi) transfer funds for subproject execution directly to the bank account o f the OCBs. Subsidiary implementation agreements to be signed between the PL-480 Management Office and the MDODs) will define the specific roles and responsibilities o f the MDODs in facilitating the implementation o f the project. T o enhance implementation readiness as soon as the resources are made available, the project would support in i t ia l ly the recruitment o f two MDODs (PADF and CECI, two well-established NGOs with proven track records in the implementation o f similar activities under the PCF- and LICUS-funded pi lot projects) operating in the targeted

Excerpt from World Bank Project Appraisal Document Report No. 32634-HT dated July 6,2005. 14

27

municipalities and increase to a total o f 4-6 MDODs over the implementation period. MDODs would also be required to operate f ie ld offices in the project area throughout project implementation to carry out activities as described above with OCBs and COPRODEPs.” The f i rst two subsidiary agreements with the pre-selected NGOs (i,e., C E C I and PADF) -- totaling US$7.6 m i l l i on -- were finalized during negotiations.

Project Coordination Unit (PCUPL-480), housed in the PL-480 Management Office, will be responsible for overall project coordination, management, administration and oversight, and delegate will day-to-day execution o f subproject-related activities under component 1 to the MDODs through the subsidiary implementation agreements mentioned above. The duties o f the PCUPL-480 would include (i) continuous oversight o f the execution o f information campaigns, in coordination with the MDODs; (ii) project reporting, as needed, to the Bank, (iii) overall project financial management, (iv) maintenance and updating o f the project Management Information System (MIS), and (v) impact evaluation.

PL-480 Management Office i s an autonomous public institution, created in 1985 to (i) receive and monetarize food aid f rom the international donors, and (ii) identify and fund government development projects with relevant institutions andor agencies in areas such as road construction, agriculture, education, health and commerce. I t i s governed by a Board presided over by the Minister o f Planning and External Cooperation, with the Minister o f Finance as Vice-president and with several other key l i ne ministries as active members. The PL-480 Management Office has strong track record o f working together with other sector ministries, combined with detailed knowledge o f procedures applied by the different donors. I t s latest program was funded f rom multiple aid sources which include the governments o f the USA, Canada, Spain, Japan and France. The PL-480 Management Off ice i s managed by a General Director who ensures the Board’s secretariat and i s composed o f technical, finance and administrative units. I t has ample experience in procurement o f works executed by medium and small-scale local enterprises.

l5 These field offices o f the MDODs would be known as Technical Coordination Bureaus (in French, Bureaux Techniques de Coordination or BTC).

28

Figure 1: Subproject Cycle

INFORMATION AND COMMUNICATION CAMPAIGN

(Specific information on PRODEP given by MDOD)

BTC: Identif ies and supports creation o f CBOs/ Ensures in i t ia l formalization o f CBOs

Format ion o f COPRODEPs

- Ident i fy subproject ideas - Prepare subproject proposals - Submit subproject identif ication sheets to

COPRODEP

Priorit ize subproject proposals (in General Assembly o f COPRODEP) Approve subprojects

MDODBTC: - Evaluates subprojects - Verifies consistency with available budgetary

envelope - + I

I I I

I Validationofdossier I - t w

CBOs select consultant to carry out technical dossier

CBO finances the development o f the technical dossier Contract between BTC and CBO

MDODBTC evaluate technical dossier Opening o f CBO bank account

o CBO account COPRODEPPAP and BTC

Supervise the technical and f inancial

esponsible for operation and maintenance

29

Figure 2: Implementation Arrangements for Community Subprojects

BMPAD (PCU) Other Actors “on the ground”

Operate Project Suecial Account

Mayor/CASBC Representatives o f GOH line ministries

Other Donors/ Projects

USAID UNDP MINUSTAH IDB CHF IOM

I

Supervise overall project implementation

30

; Supervise subprojects i Mobilization/Training/

MDODBTC Transfer $ to MDOD for subproject

Figure 3: Institutional and Implementation Arrangements

PCUBMPAD

31

G R A N D E -A N S E

N I P P E S

S U D S U D - E S T

O U E S T

C E N T R EA R T I B O N I T E

N O R D -E S T

N O R D

N O R D - O U E S T

MarcelineSudre

CarrefourBaraderes

Gebeau

La Cahouane

MarcheLéon

Vieux Bourg d'Aquin

CarrefourCharles

SourceChaude

Crrf. Joute

Plaisance

Morne Occo Crrf. Des Ruisseaux

BlockaussSt. Antoine

Trouin

Montrouis

PontSondé

Delegram

Shada

Delmas

Trianon

Carrefour Dufort

Sta. Terrienne

Sentard

LesPoteaux

HascoCroix des Missions

Bon Repos

Ville Bonheur

PORT-AU-PRINCE

Pont Miragoâne

Fonds Jean Noel

Bodane

Croix Fer

RoysecCasse

Baptiste

Crrf. Mace

FondParisien

St.Etienne

Barrage

73º30' 73º00' 72º30' 72º00'

20º00'

19º30'

19º00'

18º30'

20º00'

19º30'

19º00'

18º30'

74º30' 74º00'

72º00'72º30'73º00'73º30'74º00'74º30'

To Santiago

To Barahana

DO

MI

NI

CA

N

R

EP

UB

LI

C

Port-Margot

Limbé

Bas Limbé

Plaine duNord

Milot

Dondon

Pignon

St. Raphael

La Victoire

PlaisanceGrd. Riv. du Nord

Acul duNord

CAP-HAÏTIEN

Quartier MorinLimonade CoracolPilate

Le Borgne

Bombardopolis

Jean-Rabel

PORT-DE-PAIX

Bassin-Bleu

St. Louis

Ile de la Tortue

Chansolme

Gras Morne

MÔLE ST. NICOLAS

Anse-á-Foleur

Baie de Henne

Verrettes

Pte. Riv.de l'Artibonite

St. Marc

Grande Saline

St. Michelde L'Attalaye

GONAÏVES

La Chapelle

Dessalines

L'Estere

Desdunes

EnneryMarmelade

Terre-Neuve

Anse-RougeTrou Du-Nord

Ouanaminthe

VallieresRanquitte

Bahan

Perches

MonbinCrochu

Ste. Suzanne

TerrierRouge

FORT LIBERTÉ

Maïssade

Thomonde

Boucan Carre

HINCHE

Cerca-la-Source

Thomassique

Cerca Carvajel

MirebalaisSaut d'Eau Lascahobas

Belladére

Savanette

Tiburon Camp-Perrin

Port-Salut

Roche-á Bateau

LesAnglais Maniche

ChardonnieresPort-á-Piment

Côteaux

St. Jean du Sud

Cayes

Ile a Vache

TorbeckArniquet

Cavaillon AquinSt. Louis du Sud

Dame-Marie

Anse d'Hainault

Les Irois

Petite Troude NippesMoron

Abricots

Bonbon

JEREMIE

Roseaux

Beaumont

Chambellan

Corail

Pestel

L'Asile

Baraderes

Anse-a-Veau

MiragoânePetite Rivierede Nippes

BainetCôtes-de Fer

JACMEL

Cayes-JacmelMarigot

Belle-Anse

Grand Gosier

Anse a Pitres

Thiotte

Léogâne

Arcahaie

Cabare

Gressier

Cornillon

Crois des Bouquets

Petion-Ville

Carrefour

Kenscoff

Ganthier

Thomazeau

FondsVerrettes

PetiteGoâve

GrandGoâve

Canice

MontOrganisé

Capotille

Pointe a Raquette

Anse a Galet

La ValleChantal

A T L A N T I C O C E A N

C A R I B B E A N S E A

G o n â v e C h a n n e l

S a i n t M a r c C h a n n e l

GONÂVEISLAND

Tortue Island

Vache Island

CayemitesIslands

Cape Rose

Grande Anse

BassD

roit

Voldro

gue

Rose

aux

Point Gravois

Cavaillon

Grande

Nippes

MiragoâneLake

Cotes de Fer

Bainet

Gra

nde

Ja

cmel

Gos

sellin

e

Cape Jacmel

Momance

Grise

Blanche

Saumatre Lake

CaimenLake

Port-Au-PrinceBay

Donye

n

Torc

elle

Couline

Point Lapiere

Qui

nte

Bayonnais

Colo

mbi

er HennesBay

Pric

e

Point Jean-Rabel

Gatinette M

ousti

que

Les Trois Rivieres

Tortue Channel

Limbe

Acul Bay

Mancenille Bay

Mar

ion

Great Northern

Bouyaha

Belle

Canot

Font Grass

Sar

nana

Estére

ARTIBONITE

Thomonde

Boucan Carre

Fer-a-Cheval

PeligreLakePeligre

Dam

Artibonit

e

JAMAICA

HAITI

U.S.A.

CUBA

DOMINICANREPUBLIC

Puerto Rico (US)

THE BAHAMAS

ATLANTIC OCEAN

Caribbean Sea

Lesser Antilles

0 10 20 30 40 50

KILOMETERS

HAITICOMMUNITY-DRIVEN

DEVELOPMENT (CDD) PROJECTAreas of PRODEP Intervention

PHASE I AND AF COMMUNES

PHASE II COMMUNES

COMMUNE BOUNDARIES

DISTRICT BOUNDARIES

ASPHALT ROADS

GRAVEL ROADS

DIRT ROADS

RIVERS

COMMUNE HEADQUARTERS

SELECTED TOWNS

NATIONAL CAPITAL

INTERNATIONAL BOUNDARY

OCTOBER 2008

IBRD 36693

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.