SUFORD SU Aide Memoire – May 2017 AIDE MEMOIRE International Development Agency (IDA) and the Forest Investment Program (FIP) Climate Investment Fund (CIF) SCALING –UP PARTICIPATORY SUSTAINABLE FOREST MANAGEMENT PROJECT (SUFORD SU), P130222/IDA H8520 and TF015286 JOINT IMPLEMENTATION SUPPORT MISSION May 15-26, 2017 KEY PROJECT INFORMATION Project Number P130222 Closing Date 31-Aug-2018 IDA Amount USD 19.00 million IDA Number IDA H8520 Approval 08-Aug-2013 Effectiveness Date 30-Aug-2013 Disbursements USD 11.11 million Grant Amount USD 12.83 million Grant Number TF015286 Implementation MS Board Approval 31-May-2013 Progress Rating PDO Rating MS Effectiveness Date 30-Aug-2013 Disbursements USD 7.87 million 1. Introduction. The Project Development Objective of SUFORD SU is to execute REDD+ activities through participatory sustainable forest management in priority areas and to pilot forest landscape management in four provinces. Participatory sustainable forest management will be implemented in Production Forest Areas (PFAs), while Forest Landscape Management (FLM) will be implemented in PFAs, and adjacent conservation, protection, and village forests. Through SUFORD SU, linkages will be developed with the REDD+ Readiness process especially with regard to aspects related to forest dependent communities, access restriction to natural resources, land tenure, customary rights, benefit sharing, and conflict resolution mechanisms. Collaboration includes analytical work, capacity building, and strengthening the policy and regulatory frame work for forest-dependent communities. 2. The total project allocation is US$50 million funded by the International Development Association IDA (US$19 million), Forest Investment Program FIP (US$12.83 million), the Finnish Government (US$10.5 million, Technical Assistance) and by the Government of Lao PDR (in kind contribution, US$7.5 million). The Project has been effective since August 30, 2013, and has a tenure of 5 years, or through August 31, 2018. The Project covers 1,090 villages and 424,000 people in 13 of 18 provinces in Lao PDR and 41 of 51 Production Forest Areas (PFAs). 3. The Mission was carried out by the World Bank, the Ministry of Foreign Affairs of Finland (MFA), the Ministry of Agriculture and Forestry (MAF), the Department of Forestry (DoF), The Department of Forest Inspection (DOFI) and the Finnish Technical Assistance (TA) Project from May 15 – 26, 2017. The mission was carried out in Vientiane and in Champasak and Attapeu Provinces and reviewed project progress for thematic, organizational, operational, safeguards and fiduciary concerns including progress toward carrying out village livelihood activities, including formulation and disbursements of associated grants; update on the forest landscape management plan and activities to meet objectives prior to project completion. 1 SUFORD SU Aide Memoire – May 2017 4. The World Bank and Government of Finland, Ministry of Foreign Affairs expresses its sincere appreciation to MOF, MOFA, MAF, DOF, DOFI, and the TA team as well as the provincial, district and village stakeholders for their invaluable contributions to a successful review of the Project’s progress. The next mission is planned for November 2017. The mission would like to also recognize our highest appreciation for the Chairmanship of the Mission wrap-up meeting by Mr. Sousath Sayakoummane, Director General, Department of Forestry, Ministry of Agriculture and Forestry. We thank him for his leadership, support and guidance to the Project. 5. Disclosure. According to the World Bank's Access to Information Policy, Aide Memoires are to be publicly disclosed unless otherwise indicated by the counterparts. The disclosure of the Aide Memoire was discussed and agreed to during the mission with DOF representatives. 6. Overall Implementation Status. In summary, the mission found that the project implementation progress and progress toward the Project Development Objective is Moderately Satisfactory. The formal approvals of the 40 forest management plans are completed and disbursement of village livelihood grants are approximately 37% completed (249 out of 666 villages). Landscape management work has gained momentum and the action plan for this activity aims for a successful closure by December 2017. Governance and law enforcement is strong and the mission congratulated the project on its contributions to PMO 15 notable decreases in illegal logging across the country. 7. Reduced emissions as a result of the project are estimated at 1.8 million tons of CO2e, which is substantially above the original projections. A proposed modification of the indicator framework agreed in the last mission is pending submission to the Bank and needs to be expedited. Disbursements for IDA and FIP TF were US$ 18.98 million (60%). Increased effort needs to be made to disburse the village livelihood and forest restoration grants. 8. The Prime Minister’s Office issued a tax exemption for the vehicles purchased by the project, which are being processed for release to the provinces in the customs department. However, it was noted that the vehicle dispatch is far behind schedule, and their purchase reflects a significant expenditure on the part of the operation. The mission stressed the need to resolve the issue of the vehicles processing and distribution without further delay. 9. Component 1: Strengthening and Expanding PSFM in Production Forest Areas. (IDA USD$12.22 million, FIP USD$8.15 million and Government USD$4.98 million) This component includes two subcomponents: (a) Developing partnerships to increase implementation capacity, and (b) Community engagement in PSFM and VLD. 10. Summary: The Mission assessed the component as Moderately Satisfactory. Forest inventories and management plans required for PSFM in 40 PFAs and 198 SFMAs, were carried 2 SUFORD SU Aide Memoire – May 2017 out in accordance with the PAD, Operations Manual1 and Annual Work Plan2. There are 3 SFMAs in one PFA which cannot be inventories because of security concerns in the area. All other Forest Management Plans were approved in December, 2016. Under Village Livelihood Development, the mission noted strong but incomplete progress. All the 666 VLD grant proposals are approved at the village and district levels, and by DOF. DOF has assigned several additional staff temporarily to quality control the proposals, which is required prior to authorization. Village Livelihood Development Grant and supplemental guide for FRG obtained the Bank’s no objection. The VLD grants are disbursed to 249 villages through May 2017 mission (37%). The VLD grants disbursement to the remaining villages is expected to be complete by the end of 2017. Late delivery of VLD grants may lead to delays in technical and organizational support to individual and groups farmers / cooperatives as well as participatory monitoring of VLD Grants activities and the grant disbursement needs to be further expedited. 11. Under Village Forestry, village land use maps in 33 villages are now validated, which is a prerequisite to improving tenure rights in Laos. Village forests situated inside and outside 3 forest categories (FCs) i.e. Production Forest Areas (PFAs), Conservation Forest Areas (CFAs) and Protection Forest Areas (PtFAs) in 33 villages are identified and mapped. 13 villages overlap with PFAs/outside FCs, 18 villages overlap with PFAs/CFAs/PFA/outside FCs and 2 villages adjacent to PFAs. Village forest management planning (VFMP) and tenure support to village forests are underway and expected to be completed by end of the fiscal year. The mission noted that the MOUs and Village Agreements would be the most likely means of increasing land-tenure security for target populations and their lands. The 5-year FSC certificate of the DOF Group of Forest Management Units (FMUs) expired at the end of 2015. DOF submitted an application for assessment for another 5-year FSC certificate to the Rainforest Alliance, the certifier. The Rainforest Alliance Team conducted the field assessment and granted DOF the FSC forest certification for another 5 years period 2017-2021 for an area of 10,949 ha. Village discussion on the FRG subprojects were conducted in November, 2016 in anticipation of the release FRG to the district, the sub-projects have been approved but the implementation is pending until districts are waiting for the release of FRG funds. 12. Issues and Recommendations: Some VLD grants need to be fully disbursed before October to take advantage of the planting season. Failure to disburse the grants fully by closure would have a highly negative impact on the project. An MOU-Village Forest Management Agreement (VFMA) is proposed for DOF’s consideration/approval for strengthening land tenure. This is crucial in providing necessary secured tenure for village forests managed by villagers and in attaining the project’s result indicator of 15,000 hectares of forest area under MOU-VFMA. The prospect of timber sales and benefit sharing focusing only on certified timber was proposed during the mission, and is compatible with the new Green Growth DPL targets. However, it requires that the project accelerate the certification process in PFAs. 13. Carbon sequestration estimates have been projected for the activities based on emissions reductions according to logging/trade data pre- and post-PMO 15. Estimates are for net reductions 1 SUFORD-SU Guidelines for the PFSM Planning Stage of the Operations Manual for PSFM in PFAs including: Establishing a PFA; Preparing for PSFM in a PFA; Organizing Forest Institutions to Implement PSFM; SFMA Resources Assessment; Forest Management Planning; Annual Operations Planning 2 3rd Annual Work Plan 2015-2016 3 SUFORD SU Aide Memoire – May 2017 of over 1.8 million tons of CO2e annually. This is much higher than the amount calculated at the project’s inception. Actual sequestration by the end of the project will depend on the implementation of the VLD grants given their importance for REDD+. Good monitoring and follow up to the grants is required to ensure both livelihoods and sequestration targets are met. Regarding forest monitoring in FMUs, a few of the 13 project provinces were not able to complete the establishment of the 30 target permanent sample plots (PSP) The provinces that have PSPs are doing PSP re-measurement. Other provinces are presently establishing PSPs. Post-harvest assessment was cancelled because the logging ban in PFAs has not been lifted. 14. Component 2: Piloting Forest Landscape Management (IDA USD 1.17 million. FIP USD 0.78 million and Government USD 0.48 million). The component includes developing methodologies and frameworks for forest landscape management for four northern provinces; Bokeo (BK), Louang Namtha (LM), Oudomxai (OU) and Xayaburi (XA) by facilitating consultative/participatory processes and strengthened interagency coordination. 15. Summary. The mission rated the component as Moderately Satisfactory. Work continues on the FLM which has gained orientation and increased traction over the last year in Bokeo and Louang Namtha in good cooperation with the ICBF operation. The development of FLM planning approach has been completed. The approach includes two phases where the area of 3 Forest Categories (3FC) is divided into landscape zones with different targets and restrictions. In the Mapping Phase, the 3FC area of the target district is divided into preliminary zones based on interpretation of satellite imagery and auxiliary data by GIS officers at FIPD. In the second phase, district officials, village and village cluster stakeholders are invited to district consultation process where the preliminary zones are reviewed and finalized. The approach was piloted in Long District of Luang Namtha Province and Meun District of Vientiane Province. The pilots showed that the approach worked well and could be scaled-up to other districts of Luang Namtha and Bokeo. However, to make the approach compatible with the preliminary LENS2 guidelines, in Oudomxay and Xayaburi it was significantly simplified. The project presented a credible action plan for completion of all aspects of the work by the end of the project which is included in the Annex. The progress on plans for the FLM indicators was being updated at the time of mission closure, due to technical reasons in calculating surface areas under the plans. 16. Recommendation. The mission agreed with the action plan presented by the project for completion of the work and asked DOF to monitor implementation closely in order to ensure all objectives are met. The indicator for no of ha under FLM plans needs to be updated as soon as possible. 17. Component 3: Enabling Legal and Regulatory Environment (IDA USD$1.97 million, FIP USD$1.31 million and Government USD$0.80 million). This component aims to strengthen the legal and regulatory frameworks for implementation of the PSFM and REDD+ at the national level and at the subnational level including land use planning at the community level that is critical to the management of forest resources. 18. Summary. The component is Satisfactory. The Department of Forest Inspection (DOFI) has developed and started implementing new systems for law enforcement, information, communication, and monitoring and the STEPP is advancing on schedule. The mission noted the 4 SUFORD SU Aide Memoire – May 2017 progress by the Project and diligence by Government personnel and consultants to strengthen cross agency and project links as part of a ‘3C’ approach to managing resources and deliveries: Co - operation, Co-ordination and Co-funding. The mission noted the substantial and continuing efforts to PMO15 dated 13 May 2016, and subsequent regulatory support instruments. A weighted estimate of the project’s contribution to PMO 15 implementation is 44%. The mission noted that Instruction No. 0054/MAF issued on 9 June 2016, and Notice No: 1990/PMO.ED issued on 19 December 2016 broaden PMO to include stronger action to address the trade in CITES and wildlife. The mission noted the substantial technical and equipment provided to support the operationalizing of the Smart Phone Information Reporting and Intelligence Tracking System (SPIRIT), including an additional $170,000 for training and equipment, Compliance Audit system, and enhanced Risk Assessment system has concluded. STEPP is demonstrating good results, with 1,345 cases investigated (638 still ongoing). Encouragingly, 16 cases were referred to the Office of the Public Prosecutor, and 32 prison sentences issued for illegal trade in timber. The mission noted that on 17 November 2017, the National Assembly passed the new Penal Law which, when proclaimed, will strengthen and broaden the scope of offenses, and increase penalties relating to forest and wildlife crime. An itemized list of contributions to other governance issues by the project is found in the Annex to this Aide Memoire. 19. Issues and Recommendations. The mission noted the positive moves by the government to clarify the regulatory framework concerning illegal trade in forest and wildlife products. The project support includes assisting DOFI to enforce forest and wildlife laws. The mission recommended that the project apply resources and support additional and stronger enforcement action, including enhanced investigations to support prosecutions. The mission also recommends that following the passing of the new Penal Law by the National Assembly on 17 May 2017, DoFI and PoFI should take stronger action to address the illegal trade in CITES Appendix 1 species in Lao PDR. The mission notes the strong commitment by DoFI to the development and implementation of SPRIT, but remain concerned that its use by PoFI’s remains relatively low. The mission encouraged DoFI to take stronger action to ensure SPIRIT is fully implemented at the provincial level. The mission notes the development of the IMS team’s capacity continues to improve, and encourage DoFI to enhance the skills of this team to include the analysis of information, and continued evaluation of Provincial reporting is maintained. The mission recommends the Compliance Audit system is implemented, and STEPP financial and reporting systems are assessed for compliance. Actions to implement these recommendations should be reported by 1 November 2017 to ensure proper evaluation at the next mission date. 20. Component 4: Project Management (IDA USD$3.19 million, FIP USD$2.13 million and Government USD$1.3 million). Summary. This component is considered Moderately Satisfactory. Since the announcement in January 2017 by the Government of Finland to terminate financial support to Laos, the project faced some delays in project support as some technical advisor positions were terminated (IT and communications) or changed to part-time (M&E). As a result, the inventory and mapping of resettlement and field impact assessment, and the study on feasibility of applying customary forest tenure in PFAs will be postponed to the second half of 2017. Some Technical Assistance positions will be hired under the SUFORD-SU project through Bank financing, including four international expert positions (forest management consultant, Village forestry Consultant, Village Livelihood 5 SUFORD SU Aide Memoire – May 2017 Development Consultant, and Forest Law Enforcement Consultant) and six National Consultants (three Forestry and Three Livelihood Development Consultants). In response to the project request, the project has proposed the employment of the remaining consultants namely, the Chief Technical Advisor, the Remote Sensing Consultant, and M&E Consultant, the Financial Management Consultant, and the Gender and Ethnic Consultant. Issues and Recommendations. The mission noted the issuance from the Prime Minister’s Office, Notice No.600/PMO, dated 20 April 2017 granted the exemption from the payment of taxes for the importation of vehicles and motorcycles for the project. The exemption is credited as counterpart financing by the government to the project of around US$ 2 million. The Bank urged the project to speed up the documentation process to release the vehicles and motorcycles before the end of the Bank’s Fiscal Year ending in June 2017. The mission stressed that the vehicles and all goods and services procured under Bank funded project should be used for the purpose intended. 21. Financial Management. Financial Management performance of the project remained Moderately Satisfactory. Audit reports and IFRs have been submitted timely. However, the audits revealed significant issues and weaknesses in internal controls that require urgent attention and action from project management. A review of transactions revealed similar weaknesses in internal controls. There were also questionable expenditures requiring discussions with the project management office. Disbursement of VLD and Forest Restoration (FRG) grants are slower than planned. Out of approximately $5 million aimed to be transferred between January and June 2017, $1.7 million had been transferred so far. The process of preparing and reviewing withdrawal applications is moving slowly. Moreover, there was also significant time lag in recording of provincial expenditures. All these factors could contribute to delays in documentation of expenditures and thus replenishment of needed funds. (Please refer to the Annex for findings of review of internal controls and transactions.) 22. The disbursement rate is 58% for H8520 and 62% for TF15286. The mission was informed that two withdrawal applications amounted to approximately $0.9 million have been prepared and under internal review of MAF before submitting to MOF. However, the total expenditure for which application has not yet been prepared amounted to approximately $0.6 million. The temporary increase of DA ceiling expired in May. If there is a need to extend the duration for temporary DA increase, the project management office should discuss with the task team leader and submit request for extension, together with justifications and funds flow forecast, as soon as possible. 23. Procurement: Overall, procurement performance of the project is considered “Moderately Satisfactory”. The implementation of procurement packages is progressing. In particular, the agency has awarded total five contracts of goods, and extended six individual consultant contracts and a selection of a firm is in progress. Please see Annex 1 for more information about procurement progress of the project. The two biggest packages procurement of 72 vehicles and 755 motorcycles were awarded on March 19, 2015 and July 27, 2015 respectively. There was a good news that the importation duty and taxes has been accepted, and the process of registration and plates numbers are in process. The mission advised the project to update the procurement plan in order to reflect 6 SUFORD SU Aide Memoire – May 2017 the current implementation status of all procurement packages and to add new packages as necessary; then send for the Bank’s review by June 15, 2017. 24. Social Safeguards. The social safeguards performance of the project to date is satisfactory. No land acquisition or involuntary resettlement has taken place, and any restriction of access to natural resources likely to occur will be achieved through the participatory preparation of land use management plans that conform to the requirements of the Community Engagement Framework. In terms of ethnic engagement, the project has targeted ethnic communities as beneficiaries, with an estimated 157,000 ethnic people benefitting to date. For the Village Livelihood Development activities, a process of Free, Prior and Informed Consultation has taken place in 678 communities. This process has been finalized in 675 communities resulting in broad community support for Community Action Plans on Village Livelihood Development. The vast majority of recipients grant recipients will be ethnic people. Other important achievements relevant to project performance on the ethnic components of the Community Engagement Framework include: - The completion of a baseline survey on the socio-economic situation of village grant recipients which includes the possibility of disaggregating results by ethnicity. - Proficiency in 16 ethnic languages among project staff (the project team regularly takes stock of the number of staff proficient in ethnic languages) - Participatory assessments of culturally sensitive sites prior to the commencement of forest related activities. 25. It will be important to sustain these achievements going forward, despite the reduction in the Finnish technical assistance. One challenge identified during the mission, and in the semi- annual progress report, was the potential for training on grievance redress for VLD and PSFM activities to be dropped as a result of reduction in Finnish TA. The task team recommended that a grievance redress mechanism would still need to be rolled out for these activities in order to be in compliance with the community engagement framework. This may involve a simplified process of sharing information at the village level about their rights to grievance redress (and who to complain to at the village, district and provincial level), and the maintenance of a grievance register. 26. In addition to safeguards, the project is doing an excellent job in targeting project benefits towards women and vulnerable groups, through the village livelihood development activities. This activity includes a requirement that the first round of beneficiaries in each village include women, economically vulnerable people, and middle income people. By taking this approach, the project has minimized the risk of elite capture of livelihood activities, which often characterizes this type of support. Another social consideration that goes beyond safeguards, that may need to be considered are labor and working conditions for people employed as part of forest restoration activities. The technical guidelines for these activities, which already include requirements for gender equity, should also include provisions on core labor standards (e.g. health and safety, grievance redress and child labor). 27. Environmental Safeguards. The environmental safeguards performance of the project is satisfactory. No compliance issues for environmental safeguards were identified during the mission. The mission advised the project not to revise the EMP as it has already been approved, 7 SUFORD SU Aide Memoire – May 2017 there are no major changes needed, it is used for training of trainer programs and embedded in the overall process of VLD and PSFM planning. The mission clarified that no road construction is financed under the project and is not to be included in the Operational Guidelines. The mission noted that environmental safeguards are considered in the landscape management activity. In addition, the project reported that awareness training was carried out for pesticide use. Even though pesticides are not a project activity, they are frequently used in villages for other purposes. More details of the safeguards issues are found in Annex 3. 8 SUFORD SU Aide Memoire – May 2017 List of Annexes: Annex 1 – Project Action Plan Annex 2 – Financial Management Annex 3 – Procurement Action Plan Compliance Annex 4 – Environmental Safeguards Annex 5 – FLM Action Plan Annex 6 – Results Framework Annex 7 – Progress Report Annex 8 - Mission Agenda Annex 9 - List of Participants Annex 10 – Project Monitoring Indicators 9 ANNEX 1 Action Plan Issue Due Date Responsibility Comment Ongoing DOF Over 400 grants still need to be Accelerate approval of disbursed to ensure they are being VLD Grants implemented by project closure Submission of proposal for June 30, 2017 WB To be routed through MOF to the modification of Indicators World Bank. Vehicle Registration and June 30, 2017 DOF Vehicles registered and dispatched to Dispatch to the Provinces provinces Attapeu, Logging and June 26, 2017 DOF The report on the logging and Plantations plantations establishment in Phoupasang PFA in Attapeu should be finalized and followup actions as necessary. Submit a request to the Immediately SUFORD-SU Submit request for temporary increase Bank for a temporary in DA from 2.5 to 3.5 million for the increase in DA period of an additional 6 months Audit and Other Financial June 26, 2017 Finance team, See Annex 2 for FM queries to be Management Issues SUFORD-SU addressed. Respond to second annual July 15, 2017 DOF DOF should review and send environmental and social comments and corrections to the Bank. safeguard assessment Procurement W01: construction of June 2017 NPMO, DOF. Contract award NPMO building Distribution of 72 units of August 2017. NPMO, DOF. registration and plates numbers pick up vehicles. Distribution of 755 units of October 2017. NPMO, DOF. registration and plates numbers motorbikes. G13: Office Equipment July 2017. NPMO, DOF. Contract award G16: field equipment for August 2017 NPMO, DOFI. Revise technical specifications and DOFI RFQ ANNEX 2 Financial Management 1. Staffing. We are pleased to note that recruitment for Senior FM consultant is underway at evaluation stage. However, it has taken sometime to recruit FM for Southern provinces. As project work increases, additional support will be required to ensure smooth implementation of financial management work. Therefore, it is advised that the project accelerates recruitment of this position and have the consultant on board by end of June. We are also pleased to note that the official reviewing role of the Senior FM specialist for PMO has been reflected in the FM Manual and this control should be enforced strictly to ensure internal controls put in place are observed. 2. Audit. The audit report and management letter were submitted timely. However, the auditors raised some significant issues that requires urgent attention and action, namely late clearance of advances, issues concerning inadequate/incomplete supporting documents, non-compliance with regulations with regards to payment of per diems, insufficient quotation for equipment purchase, large amount of payment in cash, check not issued in the name of suppliers/services providers and incorrect account code used to record transactions. Some of these issues are recurring. As issues are significant, the mission team will follow up with PMO separately on this matter. Due to the change in government fiscal year, the next audit report will cover the period from October 1, 2016 to December 31, 2017 and due for submission no later than June 30, 2018. 3. Interim unaudited Financial Report (IFR). IFR for the quarter ended March 31, 2017 was due for submission on 15 May 2017. However, this has not been submitted. We urge that PMO urgently submit the IFR by May 31. The next IFR covering the period from April to June will be due on August 15, 2017. 4. Internal controls. Reviews of selected internal controls revealed that some basic controls were not followed. Summary of findings are as follows:  Bank reconciliation. DA reconciliation is only performed at time of preparation of withdrawal application. The mission team recommends DA statement be obtained monthly and reconciliation performed to ensure no unusual transaction or items left unreconciled, fraud or error. The reconciliation should also be reviewed and signed off by authorized officials being Senior FM consultant or head of finance division.  Petty cash. Petty cash replenishment and cash count was not done on monthly basis. Not performing the cash count at the end of each month could create the risk of misuse of cash, theft, error and fraud. Therefore, the project is advised to conduct the cash counts monthly and cash count sheet reviewed verified by authorized officials e.g. head of finance. In addition, the project needs to replenish the cash on monthly basis to ensure fund sufficiency and adherence to the FMM.  Contract monitoring. Although a record is maintained for all individual consulting contracts indicating information e.g. fees, out of pocket expenses and duration of contract, the payments previously made on the contracts were not recorded or monitored. As the project has large number of consultants both at PMO and provincial level, it is essential to monitor payments to ensure that payments are made within the terms and conditions and not exceeding the amount of the contract.  Advances. At PMO level, the total of outstanding advances paid from operating account as at March 31was $0.02 million consisting of 5 items. Although the amount is small, the aging of these advances is between 2 and 6.5 months. PMO is advised to follow up with respective advance holders and clear immediately. The longer it takes to clear advances, the higher the risk of those expenditure becoming ineligible for financing. Moreover, adherence to the liquidation requirements in the FMM must be followed.  Journal entry review. Review of journals from January to April indicated that the journals were not reviewed and verified before they were processed into the system. This increases risk of recording expenditure into incorrect account code. The auditors also raised this issue in the FY16 audit.  Asset management. The mission team was informed that project assets were last counted and verified in November 2016. However, the updated register has not yet been approved by the project director. Moreover, the register also lacked information e.g. date of purchase, condition of assets, and details of the locations of assets in the provinces. PMO is advised to update the list with complete information before the FY17 audit commence. In 2015, the project also procured 72 pick- up trucks and 755 motorcycles. Due to some unresolved issues on taxes, the vehicles have not been registered and distributed officially. Due to needs of the project, 17 trucks were released for used at PMO and some provinces without formal registration. The mission team was advised that vehicle insurances were purchased for all vehicles in used and register kept for these vehicles. The mission team also carried out sighting of remaining trucks and motorcycles at MAF’s wa rehouse. Majority of the motorcycles were parked in a locked warehouse; however, some are parked in the yard with no roof. Remaining trucks were also parked in the yard. We were informed that one vehicle front screen was damaged from falling trees. Now that the import tax exemption had been approved, it is highly recommended that the PMO accelerates the processing of documents for tax exemption so that vehicles can be released for good use in the project as soon as possible. Leaving vehicles unused for a long period of time also increases risks of deterioration or damage.  Accounting records. It was noted that transactions at the PMO as recorded in the accounting software (ACCPAC) is not up to date. Transactions at PMO were only recorded up to January 2017. Delay in recording expenditures leads to understatement of project expenditure. Replenishment cannot be made timely leading to shortages of project funding. Risk of those expenditure becoming ineligible is also high. PMO is recommended to ensure that transactions are up to date at all levels. PMO and Regional financial management consultants should ensure that data are entered into the accounting software timely, accurately and completely. 5. Transaction review. The mission team randomly selected and reviewed 14 transactions. Based on the review, the team noted that (i) journals were not reviewed and verified (sign off); (ii) payment to consultants were delayed, (iii) significant delays in clearing advances and (iv) questionable expenditure. Transactions relating to those questionable expenditures are as follows. No. Transaction Date Questionable Findings Description Amount 8. Clearing of advance 14.9.2016 20,385,000 Kip It took five months before advance for Car Shipping was cleared. The purpose of the paper work 163 paid advance taken was to process the to KOY Copy Shop importation of vehicles. The No. Transaction Date Questionable Findings Description Amount for copies of advance amount is rather large supporting ($21,621.42) and should have not document to submit been provided as advance to project the tax department staff. Payment should have been for purchase of 755 made as expenditure in incurred. units of motorbikes Total expenditure was $15,107 Based on out review, we noted questionable expenditure relating to payment of import fees charged by Ms. Koy Shop amounted to 20.4 million kip (20,385,000 kip) for importing 755 motorbikes. It is not clear to us as to the nature of this fee and why it is paid to a shop and not appropriate authority. It was not clear from the receipt, the business address and type of this business. From other receipts and invoices, we noted that the same shop also charged for form typing fees and photocopying fees. Therefore, PMO is requested to provide explanation. Total of 44,335,000KIP 9. Payment to oil 17.11.2015 2,654,400 Kip Motorbike #1495, 2745 & 7242 provincial project were given the fuel on 20L instead steering committee of 16L as mentioned in 2066. for Mr Chansee ((20L-16L) *3 motorbikes *3 months *9,000) =324,000 The Fuel rate used to calculate is incorrect, the project is using the fixed rate (9,000KIP/L for Regular and 8,000KIP/L for Diesel) rather than the rate from the Lao State Fuel Website as for their usual practice. As of 7 Nov 2015 the rate for regular was 7770KIP/L and 6400KIP/L. Thus the variance is: ((80L *5cars *3months* (8,000- 6,400)) =1,920,000 KIP ((20L *3 bikes *3months* (9,000- 7,770) =221,400KIP No. Transaction Date Questionable Findings Description Amount These over provision will either be returned to the project or deducted from future provision. 14. Clear Per Diem 9.5.2016 4,340,000 kip Both per diem and lunch were paid advance for 52 staff or provided to participants to join training for the control of VD 31 participants received per diem funding for four 100,000KIP/day for attending district at ATP workshop from 25-29.04.2016. meeting hall from Lunch was also provided at 26-29/Apr/2016 35,000KIP/day. If lunch is provided, then per diems should not be received in full. Therefore, the amount in question is 35,000KIP/day *4 days*31=4,340,000 Annex 3 Procurement Action Plan Compliance Item Deadline Comments Status Submission of Revised November 28, 2016 Update the procurement plan in Done Procurement Plan to the WB order to reflect the current implementation status of all procurement packages and to add new packages as necessary. W01 Construction of NPMO March 2017 Completed bidding Completed NPMO Office Building. process/contract signing with Office building design contractor/ Start the construction. and biding opening G03-3 to G03-11 Furniture for May 2017. Four out of ten PFS. packages were completed. G11 (Lot2): Supply and delivery December 15, 2016 The importation duty and taxes Tax exemption was of 72 units of 4WD Double Cab issues have to be cleared with approved by PMO and Pick Up MOF. Otherwise it shall be MOF charged to the project budget. G12: Supply and delivery of 755 December 15, 2016 The importation duty and taxes Tax exemption was units of motorbikes. issues have to be cleared with approved by PMO and MOF. Otherwise it shall be MOF charged to the project budget. G13 Office Equipment: February 2017. Draft Bidding Document (NBC) is Completed the bid (Scanner, Copier, Fax, LCD completed and shall be submit the opening Projector, Wifi Router) Bank for review and No – Objection Early December 2016. G15: IT equipment for DOFI Completed C07.1-2 Financial Management December, 2016. The EOIs are received. The Done Consultant based in Southern project further proceed EOIs Provinces. Evaluation submit to the Bank for review and No – Objection by end of November 2016. Procurement information The information to be posted on the The project has started disclosure ministry’s website will include: advertise of request i. Annual procurement plan. expression of interest (REOI), request for ii. Invitation/REOI. quotation (RFQ) and iii. Bidding/proposal documents, Invitation for bid (IFB) which can be downloaded by on Home Page of DOF interested bidders and they can website. submit bids/proposals in hardcopy to project implementing agency as specified in the bidding/proposal documents. iv. Questions and Answers. v. Bid opening record, and vi. Contract award. Annex 4 Environmental Safeguards Detailed Findings from the Environmental Safeguards: 1. Pesticide Use – The Pesticide Risk Reduction (PRR) campaign focusing on the appropriate use of chemicals in agriculture and forestry plantation as an important land management tool and advocacy for organic cultivation was conducted in Oudomxay in close cooperation with FAO. It has enabled about 40 provincial and district staff to identify and address pesticide issues, train farmers in target villages on proper use of agrochemicals and how to mitigate possible negative effects. PRR Campaigns in the Northern provinces are planned to be conducted before the end of this year. The agrochemical data that was collected in the field at the same time as household baseline data collection was analyzed and will be used to target the agrochemical awareness campaign, prioritizing the Northern provinces. 2. Forest Management Plan – Of 25 district FMAs without FMP, 24 FMP formulated and completed in December 2016. The National Project Director will submit an FMP to the Bank for its review and comment by end May 2017. 3. Forest Landscape Management Framework (FLM) – Components of FLM framework consist of i) FLM institutional framework; ii) FLM decision framework; and iii) FLM monitoring framework. Framework for environmental safeguards and NRTF-PRTF safeguards information system will be included in the FLM decision framework and FLM monitoring framework, respectively. Process used during development of the forest landscape framework agreements should be documented and disseminated so that methodologies can be used to support replication in other landscape areas. 4. Monitoring and Evaluation – The second annual integrated safeguard assessment was conducted by a team of experts (3 national experts and 1 World Bank international consultant). A pilot mission to test the methodology was conducted in November 2016 in Vientiane province and a full assessment in Bokeo, Xayabouly and Attapue provinces in January 2017. The results suggest that environmental safeguards have been implemented well and environmental safeguards have been embedded in general operational procedures. 5. Environmental management and monitoring is embedded in the overall project implementation and monitoring framework. An estimated 5% of the PSFM and VLD budget is used for safeguards monitoring and management. In addition, special budget lines are reserved for special assessments (see Table A). Table A. Environmental Safeguard Budget (USD) Budget line FY 14/15 FY 15/16 FY 16/17 5% of PSFM budget 118,000 148,000 87,000 5% of VLD budget 157,000 156,000 120,000 Combined E & S Safeguard Assessment 7,000 2,000 1,000 Various inventories and remote sensing studies 33,000 41,000 51,000 Total 315,000 347,000 259,000 6. As the Finnish funding will be end in June 2017 an M&E consultant may be reassigned. The mission stressed the importance of maintaining an M&E consultant to sustain the capacity of the monitoring and evaluation on safeguard. Annex 5 Forest Landscape Management Action Plan Provide support to institutionalize the PRTF 2017 Q2- Q4 and 2018 Q2 Conduct FLM Workshops with Provincial 2017 Q4 REDD+ Staff and FLM Stakeholders Organize PRTF meeting(s) (coordinate with 2017 Q2 – 2017 Q4 DOF REDD+ Division and KFW Framework for identified FL decision-making 2017 Q4 situations Framework for environmental and social 2017 Q4 safeguards Conduct FLM Workshops 2017 Q4 Conduct FLM Monitoring 2017 Q4 Completion of Component 2018 Q1 Annex 6 Results Framework ORIGINAL RESULTS FRAMEWORK Unit of Target Y4 Current Indicator Name Core Baseline End Target Comment Measure (Dec 2017) (May 2017) Project Development Objective Indicators 1 FMA missing due to Hectare 1. Forest area brought under management plans X (ha) 1,283,000 2,301,000 2,265,000 2,301,000 security reasons. Will not be completed. 2. Forest areas brought under forest landscape Fieldwork scheduled for Ha 0 2,682,000 0 2,682,000 management plans May 2017 Target revision suggested. 3. People in forest and adjacent community with monetary/non-monetary benefit from forest X Number 309,000 424,000 544,000 424,000 Will be calculated only once a year for an annual report. 3a. People in forest and adjacent community with Target revision suggested. monetary/non-monetary benefit from forest - female X Number 145,000 198,000 260,000 198,000 Will be calculated only once a year for an annual report. 3b. People in forest and adjacent community with Target revision suggested. monetary/non-monetary benefit from forest – X Number 157,000 237,000 304,000 237,000 Will be calculated only once ethnic minority / indigenous peoples a year for an annual report. New indicator proposed. 4. Rate of forest cover loss/gain in target areas Ha 8,694 6,836 No change 4,814 Will be assessed during next compared to untreated areas fiscal year (in 2018). 5. Enhanced carbon storage from improved Not yet able to be assessed. forest protection and restoration in selected tCO2e 0.00 8,555 No change 14,227 Will be assessed during next PSFM areas fiscal year (in 2018). Indicative national level estimate on impact of law 6. Reduced emissions from deforestation and tCO2e 0.00 97,125 1,800,000 121,407 enforcement available. forest degradation in selected PSFM areas SUFORD-SU contribution being estimated. Intermediate Results Indicators Assessment methodology to 1.1 Percentage of beneficiaries who receive be reviewed. Only end Percentage 0 70 Not measured 80 technical services of adequate quality status proposed to be assessed. Unit of Target Y4 Current Indicator Name Core Baseline End Target Comment Measure (Dec 2017) (May 2017) Assessment methodology to 1.1a Percentage of VFLC who receive be reviewed. Only end services of adequate quality in Forest Percentage 0 70 Not measured 80 status proposed to be Management assessed. Assessment methodology to 1.1b Percentage of production groups who be reviewed. Only end receive services of adequate quality in Percentage 0 70 Not measured 80 status proposed to be Livelihood Support assessed. Assessment methodology to 1.2 Percentage of participants who perceive the be reviewed. Only end Percentage 0 60 Not measured 80 CEF process is adequate status proposed to be assessed. 1.3 Aggregate forest area brought under Indicator and targets under ha 1,2830,00 2,371,000 1,283,000 2,386,600 strengthened tenure revision 1.3a Forest area brought under strengthened Indicator and targets under ha 1,283,000 2,301,000 1,283,000 2,301,000 tenure (MoU) revision. 1.3b Forest area brought under strengthened Indicator irrelevant. No legal ha 0 40,000 0 40,000 tenure (Forest Lease) basis for forest leases. Indicator and targets under 1.3c Forest area brought under strengthened ha 0 30,000 0 45,600 revision. On hold until tenure (Community Land Title) approval of Land Policy. 1.4 Percentage of CAPs and Village Will be calculated only once Percentage 68 100 70 100 Development Plans under implementation a year for an annual report. 1.5 Aggregate forest area under certification ha 80,600 650,000 10,949 650,000 Targets under revision. Targets under revision. 1.5a Forest area under certification (FSC ha 80,600 150,000 10,949 150,000 Certificate restored in Forest Management Standard) limited area. 1.5b Forest area under certification (FSC Targets under revision. FSC ha 0 0 0 500,000 Controlled Wood Standard) suspended. 2.1 Number of FLM Frameworks developed Will be reported only once a Text 0 4 0 4 under the project that are assessed as complete year for an annual report. 2.2 Areas with FLM Annual Plans under Relevance of annual plans ha 0 1,080,000 0 1,080,000 implementation under review Unit of Target Y4 Current Indicator Name Core Baseline End Target Comment Measure (Dec 2017) (May 2017) Village forestry, salvage 3.1 Reforms in forest policy, legislation or other logging, forestry legal regulations supported X Yes/No No Yes Yes Yes compendium, wildlife and aquatic legal compendium 3.2 Regulations required to support national Regulation Regulation Suggested to be combined sustainable sector financing and sub-national No targets complete with partial; not No change with the previous indicator in implementation of PSFM and REDD+ are Text until end of implementatio regularly from baseline the Revised Results identified, drafted, and submitted for government project n monitored monitored Framework. review regularly Indicator revision 3.3 Number of breaches of forest law detected Number 900 750 1345 650 suggested. 638 cases ongoing 3.4 Percentage of investigations of breaches of Indicator revision Percentage 60% 80% 80% forest law initiated and successfully concluded suggested. REVISED RESULTS FRAMEWORK Unit of Target Y4 Current Indicator Name Core Baseline End Target Comment Measure (Dec 2017) (May 2017) Project Development Objective Indicators Hectare 1 FMA missing due to security reasons. Will not 1. Forest area brought under management plans X (ha) 0 1,018,000 982,000 1,018,000 be completed. 2. Forest area under forest landscape Ha 0 750,000 0 750,000 Fieldwork scheduled for May 2017 management pilots 3. People in forest & adjacent community with Will be calculated only once a year for an increased monetary/non-monetary benefit from X Number 0 717,000 235,000 717,000 annual report. forest 3a. People in targeted forest & adjacent Will be calculated only once a year for an community with increased benefits from forest- X Number 0 354,000 115,000 354,000 annual report. female 3b. People in targeted forest & adjacent Will be calculated only once a year for an community with increased benefit from forest- Ethnic minority/ indigenous X Number 0 346,000 147,000 346,000 annual report. Will be assessed during next fiscal year (in 4. Rate of annual forest cover loss in target areas Percentage 0,27 0,25 TBA 0,23 2018). 5. Enhanced carbon storage from improved Will be assessed during next fiscal year (in forest protection and restoration in selected tCO2e 0 0 TBA 14,227 2018). PSFM areas Indicative national level estimate on impact of 6. Reduced emissions from deforestation and tCO2e 0 0 1,800,000 121,407 law enforcement available. SUFORD-SU forest degradation in selected PSFM areas contribution being estimated. Intermediate Results Indicators 1.1 Beneficiaries who perceive that they receive Assessment methodology to be reviewed. Only Percentage 0 0 Not measured 80 technical services of adequate quality end status proposed to be assessed. 1.1a VFLC who perceive that they receive services of adequate quality in Forest Assessment methodology to be reviewed. Only Percentage 0 0 Not measured 80 Management and Village Livelihood end status proposed to be assessed. Development 1.1b Production groups who perceive that they Assessment methodology to be reviewed. Only receive services of adequate quality in Livelihood Percentage 0 0 Not measured 80 end status proposed to be assessed. Support 1.2 Participants who perceive the CEF process Assessment methodology to be reviewed. Only Percentage 0 0 Not measured 80 is adequate end status proposed to be assessed. 1.3 Aggregate forest area brought under ha 0 1,018,000 982,000 1,018,000 Indicator and targets under revision strengthened tenure 1.3a Forest area under (MoU-PSFM) ha 0 1,018,000 0 1,018,000 Template for MoUs under review Unit of Target Y4 Current Indicator Name Core Baseline End Target Comment Measure (Dec 2017) (May 2017) 1.3b Forest area under MoU-VFMA ha 0 5,000 0 10,000 Template for MoUs under review 5 Will be calculated only once a year for an 1.4 VLD grants under implementation Percentage 0 100 100 (estimate) annual report. 1.5 Forest area under certification as a result of ha 0 150,000 0 400,000 the project. 1.5a Forest area under certification (FSC Forest ha 0 150,000 10,949 150,000 Certificate restored in limited area. Management Standard) as a result of the project. 1.5b Forest area under certification (FSC Controlled Wood Standard) as a result of the ha 0 0 0 250,000 FSC suspended. project. Will be reported only once a year for an annual 2.1 FLM Frameworks developed Yes/No No Yes No Yes report. 2.2 Areas with FLM implementation plans ha 0 750,000 0 750,000 Village forestry, salvage logging, forestry legal 3.1 Reforms in forest policy, legislation or other regulations supported X Yes/No No Yes Yes Yes compendium, wildlife and aquatic legal compendium Significant expansion of inspection activities outside high risk areas brings the percentage 3.3 STEPP field activities resulting in Percentage 0 65 55 75 down. Before PMO 15, inspections targeted enforcement action mostly high-risk cases resulting in higher percentage. 3.4 POFIs in compliance with DOFI best Number 0 17 17 18 management practice operating procedures Annex 7 Progress Report [Appended by reference] Annex 8 Mission Agenda JOINT IMPLEMENTATION SUPPORT MISSION OF SUFORD-SU 15-26 MAY 2017 KEY CONTACTS NAME TITLE MOBILE EMAIL GOVERNMENT STAFF Mr Bounpone Sengthong Nat. Project Coordinator +856-20-2222 7330 bounpone.sth@gmail.com SUFORD SU Mr Esa Puustjärvi CTA +856-20-5552 6882 esa.puustjarvi@indufor.fi Ms Noi (Simpaseuth Rasavong) Office Manager +856-20-5562 1961 rasavong@gmail.com THE WORLD BANK Mr. Robert Davis Mission Leader +856-20-2222 1357 rdavis1@worldbank.org Mr. Soudalath Silaphet (Mimi) Climate Investment Sp. +856-20-2222 1303 ssilaphet@worldbank.org MFA Ms. Annika Kaipola Councellor +84-4-3826 6788 annika.kaipola@formin.fi Full list of participants in Annex 1. PROGRAM Venue/Presenter Date Activities /Comments Mon, 15 May In the morning Team members arrive Kick off Meeting DOF Meeting Room 14.00-14.10 - Opening Remarks Chair 14.10-14.20 - Introduction of the mission purpose and team members Mr. Robert Davis, Mission Leader, Senior Forestry Specialist of WB 14.20-14.30 - Remarks from the Government of Finland Ms. Annika Kaipola, Councellor, Embassy of Finland in Hanoi 14.30-15.15 - Delivery of Outputs and Achievement of Project Results Mr. Bounpone, National Coordinator 15.15-15.30 - Coffee break 15.30-16.30 - Discussion and Concluding Remarks Tue, 16 May Technical meetings DOF Meeting Room Venue/Presenter Date Activities /Comments 8.30-10.10 PSFM Team: Presentation on current status of activities Mr. Manuel Bonita, Forest Management Advisor 10.10-10.30 Coffee 10.30-12.00 VLD Team: Presentation on current status of activities Mr. Peter Greindl, Village Livelihoods Advisor 12.00-13.30 Lunch 13.30-15.00 Forest Law Enforcement Team: Presentation on current Mr. Khampeth, DOFI status of activities 15.20-16.30 Village Forestry Team: Presentation on current status of Mr. Edwin Payuan, Village activities Forestry Advisor Wed, 17 May Technical Meetings DOF Meeting Room 8.30-10.00 Private Sector Plantations - Findings from social and environmental Mr. Steeve Daviau, Gender assessments and Ethnic Advisor - Review of concession contracts Mr. Jukka-Pekka Tolvanen, Legal Advisor 10.00-10.20 Coffee Break 10.20-11.10 Forest Landscape Management Team Mr. Manuel Bonita, Forest - Development FLM framework Management Advisor 11.10-12.00 Assessment of Forest Degradation Mr. Markus Kukkonen, Remote Sensing Advisor Lunch Meeting of the Supervisory Board SUFORD Meeting Room 13.30-13.35 Opening Remarks 13.35-13.40 Remarks from the Government of Finland Ms. Annika Kaipola, Councellor, Embassy of Finland in Hanoi 13.40-14.50 Evaluation of Performance by Technical Assistance Team Mr. Esa, CTA of SUFORD- Members SU Discussion 14.50-15.20 Evaluation of Performance by Counterpart Staff Mr. Esa, CTA of SUFORD- Discussion SU 15.20-15.55 Other issues 15.55-16.00 Concluding Remarks Thu, 18 May 09.00-11.00 Review of Financial Management 13.30-15.00 Review of policy and regulatory work done and to be Mr. Esa and Mr. Aidan done by SUFORD Fri, 19 May Meetings as required/drafting of Aide Memoire WEEKEND Mon, 22 Nov Venue/Presenter Date Activities /Comments Flight VTE-Pakse dep. 7.30 arr. 8.45 Morning Travel to Attapeu Lunch 1.30-2.30 Meeting with PAFO, discussion on past and future activities 1.30-2.30 Meeting with POFI, discussion on past and future activities Travel to district (to be selected) 3.30-4.30 Meeting at DAFO, discussion on past and future activities Travel back to Attapeu (depends on the district) Overnight in district or Attapeu Town Tue, 23 Nov 8.00-14.00 Visit to 2 villages that have received VLD grants Drive to Pakse Overnight in Pakse Wed, 24 Nov Morning Free Mission Wrap-Up in Pakse Venue to be decided 13.30-13.45 Opening Remarks Chair 13.45-15.00 Presentation of main findings by the mission Mr. Robert Davis, Task Team leader 15.00-15.20 Coffee 15.20-16.30 Discussion 16.30-16.40 Concluding Remarks Chair Thurs, 25 and Friday, 26 November All day. Separate Stakeholder and M&E Workshop DOF and World Bank with Agenda Stakeholders Annex 9 LIST OF PARTICIPANTS Name of Mission Member World Bank Mr. Robert R. Davis, Task Team Leader, Sr. Forestry Specialist Ms. Soudalath Silaphet, Climate-Smart Investment Specialist Mr. Dzung Viet, Village Forestry Spec. (FAO) Mr. Jim Carle, Forest Mgt. Spec. (by remote) Ms. Waraporn Hirunwatsiri, Environment Specialist Mr. Khamphet Chanvongnaraz, Procurement Specialist Ms. Anita Soukhaseum , Program Assistant Ms. Siriphone Vanitsaveth, Sr. SM Spec. Ms. Kingfa Ooudomphan, FM Consultant Mr. Martin Lenihan, Sr. Social Specialist Government of Finland Ms. Annika Kaipola, Councelor Department of Forestry Mr. Bounpone Sengthong, DDG, National Coordinator of SUFORD Mr. Lattana, Deputy Head of Forest Management Division Mr. Sengdeuan, Forestry Officer Mr. Khamnoi, Forestry Officer Ms. Phetsamai, Administrative Officer Ms. Khonesavan, Financial Officer Department of Forest Inspection Mr. Bounthan, Director of Planning and Cooperation Mr. Khamphet, SUFORD Coordinator TA Team Mr. Esa Puustjarvi, CTA Mr. Edwin Payuan, Village Forestry Advisor Mr. Peter Greindl, Village Livelihood Advisor Mr. Steeve Daviau, Gender and Ethnic Advisor Mr. Aidan Flanagan, Forest Law Enforcement Advisor Mr. Manuel Bonita, Forest Management Advisor, Ms. Simpaseuth Ratsavong, Office Manager