81120 Urban Governance Development Program - Emerging Towns Project Sixth Implementation Support Review May 30- June 11, 2013 Aide Memoire I. Introduction An Implementation Support Review of the Urban Governance and Development Program - Emerging Towns Project (UGDP-ETP) was held from May 30- June 11, 2013 to: (i) assess the overall status of project implementation, and the status of the key actions agreed during the January review; (ii) review the timeline for the municipal infrastructure sub-projects; and (iii) review the program of the GIZ-funded MST and agree on the FY14 MST work plan. The joint IDA-GIZ review team1 (referred to as the “Team” hereafter) worked closely with officials from the Ministry of Urban Development (MoUD), the Ministry of Federal Affairs and Local Development (MoFALD), the Department of Urban Development and Building Construction (DUDBC), the Town Development Fund (TDF), the Project Coordination Office (PCO) and the Municipal Support Team (MST) in undertaking this review. The team also visited Baglung and Lekhnath municipalities and held consultations with the municipality team, discussed action to expedite the municipal sub-projects, capacity development needs, and issues related to the institutional development support to the municipalities. The Team would like to thank the counterparts, including the Project Director, the PCO, the project agencies and the municipalities for the hospitality and all the courtesies extended to it during the review. This Aide-Memoire summarizing the main findings and recommendations was shared with the concerned agencies for discussions at a wrap up meeting on June 11, 2013 at the MoUD. As agreed at the wrap-up meeting, this Aide-Memoire will be classified as a public document. 1 The team comprised Elisa Muzzini (Sr. Economist/Task Team Leader), Silva Shrestha (Water and Sanitation Specialist), Shambhu Uprety (Procurement Specialist), Drona Ghimire (Environment Specialist), Bandita Sijapati (Social Development Consultant), Jingrong He (Procurement Specialist), Yogesh Malla (Financial Management Specialist), Pradeep Shrestha (Financial Management Consultant), Pawan Lohani (Municipal Finance Specialist/Consultant), Krishnaswamy Rajivan (Municipal Finance Expert/Consultant), Noor Tamrakar (Engineer/ Consultant), Laxman Rajbhandari (Municipal Management Consultant, SUNAG, MoFALD-GIZ) and Kalyan Nemkul (Team Assistant). 1 II. Key Project Data Project Data Project Performance Ratings Board Approval: May 10, 2011 Summary Ratings: Last Now Effectiveness Date: October 3, 2011 Achievement of PDO MU MU Closing Date: July 31, 2016 Implementation Progress MU MU Scheduled MTR Date: Feb 2014 Original Gn/Cr. Amt: US$ 25 million Project Management MU MU Proposed Cancellation: US$6.5 million Procurement MU MU Amount Disbursed: US$ 5.1 million Financial Management U U Safeguards MU MU M&E MU MU Counterpart Funding MU MS Ratings: HS=Highly Satisfactory; S=Satisfactory; MS = Moderately Satisfactory; MU= Moderately Unsatisfactory; U=Unsatisfactory; HU=Highly Unsatisfactory; NA=Not Applicable; NR=Not Rated III. Achievement of Development Objectives Status The current Project Development Objective (PDO) is to improve delivery and sustainable provision of basic services and priority infrastructure in the participating municipalities. The original PDO indicators are the following:  Percentage increase in the citizens who report that the infrastructure services offered by the municipality better meet their needs than the previous year (no target for year 2).  Percentage increase in citizens who report that they have participated in planning meetings at the ward level (no target for year 2).  Total number of people (of which females and people from disadvantaged groups) benefiting from the project activities (no target for year 2). The likelihood of achieving the first two PDO indicators by project closure is low given the significant delays in implementation and the limited borrowing and implementation capacity of the participating municipalities. The project performance rating with respect to the original PDO remains MU for both Development Objective (DO) and Implementation Progress (IP). A Level I restructuring is under processing to (a) re-align the PDO and PDO indicators to the institutional capacity of the participating municipalities, (b) reduce the scope of the municipal infrastructure sub-projects in line with the capacity of the municipalities and (c) enhance municipal support. The restructuring is expected to be completed by June 30, 2013. The proposed revised PDO is to improve the capacity of the participating municipalities to plan, implement and fund urban development activities. The improved capacity will contribute to the higher-level objective of improving infrastructure and service delivery in the participating municipalities. The proposed revised PDO indicators are:  PDO indicator one: Number of participating municipalities with funded investment and O&M plans. The PDO indicator would measure the enhanced capacity of the municipalities to plan for urban development in a sustainable and effective manner. (Year 2 target: 0; Year 3 target: 3). Progress expected from year 3. 2  PDO indicator two: Municipal infrastructure sub-projects under implementation with construction works on track as per the signed contract. The PDO indicator would measure the enhanced capacity of the municipalities to effectively implement municipal infrastructure investments. (Year 2 target: 0; Year 3 target: 80%). Progress expected from year 3.  PDO indicator three: Increase in municipal own source revenues in the participating municipalities. This PDO indicator would measure the increase in municipal resources for funding urban development activities. (Year 2 target: 15%; Year 3 target: 15%).  PDO indicator four: Total number of people (of which females and people from disadvantaged groups) benefiting from the project activities (Year 2 target: 36,000; Year 3 target: 50,000). The target for the first two PDO indicators is zero for the second year of implementation, and progress is expected starting from year 3. The project is broadly on track to achieve the third and fourth PDO indicators for the current year. Final data on municipal own-source revenues will be available by the end of the FY (July 15, 2013). The municipalities will confirm the final number of beneficiaries for the municipal block grants in the progress reports to the submitted to the PCO and MoUD by September 15, 2013 (see the updated results framework in Annex IV). Since the restructuring has not been formally approved, the project performance ratings are based on the original PDO. The Team noted that the M&E system is weak, and needs to be strengthened to ensure accurate and timely measurement of progress in achieving the PDO indicators, and ensure that the progress reports are available on time for the implementation support reviews (see Annex I). IV Current Implementation Status The Team acknowledges the progress in implementation since January 2013, and the proactive measures taken to address the shortcomings in implementation as part of the current restructuring for the project. The following key progress has been made since the January 2013 review:  Institutional arrangements have been clarified and coordination between the PCO, the project agencies and the municipalities has improved significantly. In addition to the weekly PCO meetings, the Secretary, MoUD holds every fortnight a meeting with the project agencies to review implementation progress.  Progress has been made with the preparation of the Track I municipal infrastructure sub- projects. Two sub-projects are ready to enter the construction phase. Bid evaluation reports for the Tansen Amar Naranyan temple conservation sub-project and the Dhankuta market sub-project have been finalized, and the World Bank has provided the no objection to award the contracts on June 11, 2013. The procurement notice for the Mechinagar gate sub-project has been published on June 7, 2013, and draft bidding documents are under preparation for the other three Track I sub-projects. Preparation of the Track II sub-projects is at an advanced stage with funding from GIZ, and all DPRs for Track II sub-projects are expected to be finalized by September 2013. 3  The recruitment process for the procurement and Financial Management (FM) specialists has been completed by the PCO (although with delays).  The first and second tranches of the municipal block grants for this FY have been released to the municipalities, although with delays, and the authorization to release the third tranche has been given to the municipalities. In spite of the achievements made, more progress is needed to expedite implementation, with a focus on the following areas. (a) Financial management performance of the project needs to be improved. The audit report for the project FY 2011/12 is overdue. The first and second Implementation Progress Reports (IPRs) for this Fiscal Year are also overdue. The legal covenant requiring the submission of annual work plan for the project for FY14 by April 30, 2013 has not been met. (b) Particular attention needs to be paid to further advance the preparation of the municipal infrastructure sub-projects to ensure the agreed timeline for completing preparation is met. (c) The activities under the Institutional Development component needs to be expedited, in particular the preparation of revenue enhancement plans and investment and O&M plans in the municipalities, since these activities are critical to meet the revised PDO indicators for the project. (d) The capacity of the municipalities for project management, procurement and safeguards is weak, and capacity building in these critical areas needs to be strengthened. (e) The M&E system for the project is weak, and needs to be improved to timely measure progress with the achievements of the PDO indicators. Overall progress in implementing the GAAP. The Team reviewed the different activities that were agreed as part of the Governance and Accountability Action Plan (GAAP) under the project. Coordination, which was identified among the project agencies as a major potential issue affecting project implementation, has now improved. There is clarity on the roles, responsibility and communication among the agencies including municipalities. During the preparation and design of the municipal infrastructure sub-projects, efforts are being made to ensure cost effectiveness by carrying out a detailed review at the design costs. At the municipality level, accountability is being ensured through the Municipal Coordination Committee, which discusses and takes decision at the municipality level on the critical issues and selection of the sub-projects in order to improve coordination in planning and implementation of development activities. Municipalities are also practicing social audit of the activities funded under the municipal block grants, as confirmed by the field visits carried out by the Team to Baglung and Lekhnath municipalities. Trainings have been provided to the municipalities on procurement, and the plan is to strengthen capacity building under the project based on the needs of the municipalities. Safeguards. The field verification for the safeguard compliance of the civil works funded in FY 2011/12 with the municipal block grants identified a few social and environmental issues in the municipalities in the Eastern region. For the civil works with environmental and social safeguards issues, it had been agreed during the January 2013 review that the municipalities would develop time-bound retroactive mitigation plans to address the concerns. The Team noted that the municipalities made some progress in undertaking the agreed mitigation measures, and actions have been agreed to ensure the mitigation measures are completed. The release of the third tranche of the municipal block grant for this FY in the municipalities in the Eastern region is conditional to receiving commitment letters by the municipalities to complete the agreed safeguard mitigation plans next FY, and the municipalities sent their commitments letters to the PCO as planned by June 15, 2013. It was agree that starting from the next FY, the field 4 verification based on the screening checklist will be carried out before the civil works start to ensure that potential safeguard issues are identified at an earlier stage. The Team noted that strengthening municipal safeguard capacity is a priority; additional and targeted capacity building to the safeguard focal points in the municipalities need to be provided. See Annex II for a detailed report on safeguard status and agreed actions. Project Risk Assessment. Project risk is rated “substantial” given the delays in implementation, and the challenges faced by the project. Active steps have been taken during the second year of project implementation to restructure the project in order to expedite implementation. The steps are expected to mitigate project risk. Main mitigation actions include: (a) reduction in scope of the activities and loan financing component for the municipal infrastructure sub-projects in line with the borrowing and implementation capacity of the project agencies and the municipalities, with associated risk reduction for the municipalities and TDF; (b) shift in focus to capacity building, with preparation of Terms of Reference for IDA-funded MST to provide enhanced technical and institutional development support to PCO and participating municipalities; (c) intensive implementation support by the World Bank including mobilization of expert team for on-the-job training; (d) strengthening of coordinating role of the PCO, including increase in PCO staffing, and clarification of responsibilities of project agencies, with endorsement by the Steering Committee; (d) change in executing agency, following the establishment of the MoUD, and streamlining of Steering Committee’s decision-making (to ensure clear lines of accountability and strengthen project ownership at ministry level). Partnership and aid coordination arrangement. The GIZ-funded MST will phase out in June 2014 and IDA funds will be transferred from the Socio-economic Infrastructure Development component to the Institutional Development component as part of the ongoing restructuring to strengthen support to the municipalities. There will be overlap between the two MST to ensure proper handover of the responsibilities, taking into account the expanded scope of capacity building activities in line with the revised PDO of developing the capacity of the municipalities. The activities that were to be supported through GIZ parallel financing will be completed within June 2014. V. Procurement, Financial Management and Disbursement The Team discussed the implementation status of the procurement plan (PP) for the project. TDF, PCO and the municipalities are carrying out various procurement activities for goods and services. Procurement activities for works have now started at the municipal level. Dhankuta and Tansen municipalities have completed the bid evaluation for two municipal infrastructure sub- projects. However, the procurement process is slow, and needs to be expedited at both central and municipal level to bring the procurement progress to a satisfactory level. In particular, the procurement of consulting services has been significantly delayed (e.g. procurement of GIS consultants by PCO and IEE consultants by the municipalities). The recent selection of a part- time procurement specialist by the PCO is expected to improve the procurement capacity of the PCO and the municipalities. Municipalities’ capacity is weak, and more procurement capacity building is needed in particular in the areas of bid evaluation and procurement of consulting services. It was agreed that the PCO would request each municipality to nominate by June 30, 2013 a PMT member as the procurement focal person for the project who will be communicating 5 procurement related issues with PCO and be in charge of procurement management of the project. It was agreed that the PCO/MST would consult with the project agencies and municipalities on training needs and submit an annual plan for procurement capacity building to the Team by June 30, 2013, and organize a one-day training on procurement by July 30, 2013. Training would be organized by the PCO/MST with resource people made available by the World Bank. It is encouraged that not only procurement focal person, but also other project related staff, should participate in the procurement trainings provided by PCO/MST. PCO is now preparing the PP for next FY from July 15, 2013 until July 14, 2014. It was agreed that the updated and consolidated PP would be submitted to the World Bank by July 7, 2013. It was agreed that the consolidated PP for the project for next FY would be prepared by the PCO with inputs not only from the project agencies but also from the municipalities, which should be requested to update the plan for their own procurement activities and submit the update to the PCO by June 30, 2013. There have been significant delays in carrying out the activities related to financial management (FM), including submission of project audit for FY 2011/12, timely submission of IPRs and annual work program preparation and approval and budget releases. The project has overdue audit reports for FY 2011/12. The grace period provided for the submission of audit reports ended on May 15, 2013. The remedial measure about suspension of disbursement against the use of Statement of Expenditure (SOE) and Designated Account (DA) is now in effect. The expected submission date for the audit reports is end of June 2013. The two pending audit reports from the TDF and Dhankuta municipality have now being received by the PCO. The first and second IPR for FY 2012/13 are overdue. The PCO has submitted a draft annual work plan for next FY on June 12, 2013, and the draft needs revisions to ensure the work plans of all project agencies are incorporated. As per the project legal covenant, the annual work plan needs to be sent to the World Bank by April 30 of each year. Although with delays, the budget has been released to the PCO, and the PCO in the process of releasing the budget to the TDF and municipalities. The selection of the FM specialist at the PCO has now been completed, and FM capacity is therefore expected to improve at the PCO. PCO requested FM training for the project agencies (given that three new component managers have recently joined the PCO). It was agreed that FM training would be organized by the PCO/MST with a resource person made available by the World Bank. Actions for FM and procurement are summarized in Annex I as part of the project management actions. VI. Key issues in Implementation and Agreed Priority Actions The key implementation issues identified by the review are the following:  Need to expedite the preparation of municipal infrastructure sub-projects. Although progress has been made with the preparation of the municipal infrastructure sub-projects since the January 2013 implementation support review, the activities need to be expedited to ensure that preparation of all sub-projects is timely completed. A revised timeline for completing preparation of the municipal sub-projects has been prepared and discussed during the review. Of the remaining three Track I sub-projects under preparation, the appraisal for 6 the Mechinagar Gokul Marga is expected to be completed by June 2013. The target of completing the appraisal for the Baglung Access road and Dhankuta Hile Market sub- projects by the end of June 2013 will not be met, and the revised target date is July 15, 2013. The PCO needs to work with the municipalities to meet the target for completing the preparation of all Detailed Project Reports (DPRs) for Track II sub-projects by September 30, 2013.  Delays in the implementation of the institutional development activities for the municipalities. Delays in implementation of the Institutional Development component activities have occurred. Over the course of project implementation, one O&M plan (for Tansen municipality) has been completed, and three Revenue Enhancement Plans (REPs) have been prepared, but require significant revisions. With the recent restructuring and change in PDO, the institutional development support to the municipalities needs to be strengthened since the activities are critical for achieving the PDO indicators.  Need to further strengthen project management, procurement and safeguard capacity of the municipalities. Lines of communication with the municipalities have improved. However, the review found that municipal capacity is still very weak in spite of the training carried out during implementation. Municipalities require more structured and focused training and capacity building in the areas of project management, safeguards and procurement.  Delays with submission of project audit, IPRs and annual work program. The project has outstanding audit reports for FY 2011/12 and overdue IPRs for FY 2012/13. The PCO has submitted to the World Bank a draft annual work program for FY14 on June 12, 2013 but the draft needs revision. The annual work program needs to be submitted each year by April 30 as specified in the Financing Agreement. This legal covenant is therefore not in compliance. The following priority actions have been agreed to address the main implementation issues identified by the review:  PCO to proceed with the publication of the Expression of Interest (EoI) notice for the recruitment of the IDA-funded MST by June 25, 2013;  PCO to send the project audit for FY 2011/12, the first and second IPRs for FY 2012/13 and the annual work program for FY 2013/14 to the World Bank as soon as possible, and no later than June 30, 2013;  TDF to complete appraisal for (a) the Mechinagar Gokul Marga sub-project by June 30, 2013, and for (b) Baglung Access Road and Dhankuta Hile Market sub-projects by July 15, 2013;  Municipalities with support from PCO to finalize all DPRs for Track II sub-projects by September 30, 2013. 7 Detailed information on implementation progress is presented in Annex I. The list of all agreed actions is in Annex IV. VII. Proposed Timing and Focus of Next Implementation Review As agreed with the PCO, the next implementation support review will be in the second half of September 2013, and the exact dates of the review will be confirmed to the Ministry in August. The purpose of the next review will be to assess implementation progress, and assess the potential for upgrading the project performance rating based on progress made in carrying out the agreed actions. 8 ANNEX I: Implementation Progress by Component The annex summarizes implementation progress by component. AI.I Service Delivery Improvement Component The MoUD has released the first and second tranches of the municipal block grant for FY 2012/13 to the municipalities, based on the calculations done by MoFALD. Block Grant Allocation 2012/13 (2069/70) in NRs. ‘000 S.N Municipality Total Grant on formula 1 Mechinagar 20,182 2 Dhankuta 11,098 3 Itahari 21,437 4 Tansen 8,104 5 Lekhnath 16,417 6 Baglung 7,761 Total 85,000 The block grant releases were put on hold up until the completion of the Level II restructuring that allowed the change in implementation arrangements for the Service Delivery Improvement component. The restructuring was finalized in February, which allowed for the disbursement of the municipal block grant, but there were severe delays in the release of funds due to issues including unavailability of adequate budget at the MoUD for this component and administrative oversights while issuing the authorization to the municipalities. The delay in the release of the block grants to the municipalities has led to delays in the implementation of the activities at the municipalities. The third tranche of the block grant for this FY was withheld pending confirmation of the fulfillment of the safeguards mitigation measures for the works done under the block grants in the first year of the project (FY 2011/ 12), as agreed during the January implementation support review. The PCO has given the MoUD authorization for the release of the third tranche of the municipal block grant to municipalities in the Western region after verification of compliance with safeguard measures in FY 2011/12. The PCO has given to the MoUD authorization for the release of the third tranche of the municipal block grant to municipalities in the Eastern region on June 15 after receiving written confirmation of commitment by the municipalities to fully fund the mitigation measures in FY 2013/14 before spending in new areas. For the activities funded under the municipal block grants for FY 2012/13, the municipalities have sent the screening checklist to the PCO. The PCO needs to review the checklists and carry out field verification by August 15, 2012 and inform the municipalities if there is any mitigation measure required (see Annex II on safeguards for details). All municipalities have received endorsement of their annual program for FY 2013/14 by the municipal councils and have shared the program with the PCO. The program includes the list the activities that will be funded with the block grants. The municipalities will need to send the 9 screening checklist for the works proposed under this component to the PCO by August 15, 2013. (see Annex II on safeguards for details). As part of the restructuring of the project and the changes in the PDO, the name of this component is proposed to change to “Strengthening Municipal Planning Capacity for Urban Development”. The component objective is to ensure that the municipal block grants be effectively utilized by the participating municipalities. This includes compliance with planning and implementation processes, adherence to the safeguards measures, and reporting. It has been agreed that the process of ex-ante safeguards screening of the activities and field verification of the works with potential safeguard issues will be enforced strictly from this year. The following intermediate indicators are proposed to monitor compliance with planning and reporting requirements:  The municipalities will send the annual plan of the activities to be funded under the municipal block grant (including the screening checklist for the works) to the MoUD and PCO by August 15 for the fiscal year  The municipalities will report on the activities completed in the previous FY by September 15 to MoUD and PCO of the subsequent FY. The Team noted that the planning and reporting formats used by the municipalities for the municipal block grants are not consistent, and need to be standardized to ensure that all municipalities use the same format, in line with the MoFALD block grant guidelines. The PCO/ MST will finalize the planning and reporting formats for the municipalities by July 30, 2013 and will continue to provide support to the municipalities on the reporting. The reporting format will also include a section on whether the activities implemented by the municipalities were part of the approved annual program or not. It is also agreed that from now on, the third tranche of the block grant release to the municipalities will be subject to the submission of the audit report by the municipalities for the previous fiscal year, to avoid delays with submission of project audit. Actions for Service Delivery Improvement Component  PCO to finalize the planning and reporting format for the municipal block grant and send it to the municipalities and the Team by July 30, 2013  Municipalities to send the screening checklist for the proposed works for FY 2013/14 as per the submitted annual plan to the MoUD and PCO by August 15, 2013 (see also Annex II on safeguards)  Municipalities to submit report on the activities completed in FY 2012/13 to MoUD and PCO by September 15, 2013 10 AI.II Socio-economic Infrastructure Development Component Progress has been made with the preparation of the Track I municipal infrastructure subprojects, although with delays relative to the original schedule. Two sub-projects are ready to enter the construction phase. Bid evaluation reports for the Tansen Amar Naranyan temple conservation sub-project and the Dhankuta market sub-project have been finalized, and the World Bank has provided the no objection to award the contracts. The procurement notice for the Mechinagar gate sub-project has been published (although with delays), and draft bidding documents have been prepared for the other Track I sub-projects. A revised timeline for completing preparation of the municipal sub-projects has been prepared and discussed during the review. The target of completing the appraisal for the Track I sub- projects by the end of June 2013 will not be met, and the revised target date is July 15, 2013. The TDF and PCO need to work with the municipalities to meet the target for completing the appraisal for the Track I sub-projects. It was noted that the selection of supervision consultants in Tansen has been significantly delayed, and need to be expedited to ensure the consultant is on board by July 30, 2013 before the works start. Preparation of the Track II sub-projects is at an advanced stage with funding from GIZ, and the DPRs are on track for completion by August 2013. PCO shall ensure that at least 10 subprojects have their DPR finalized by August 31 2013. The consultants are required to submit draft DPR for these track II subprojects by July 30, 2013 and final report within 10 days from receiving comments. Final DPRs for the remaining 6 sub-projects will be finalized by September 30, 2013. The Team visited sub-project sites in Lekhnath and Baglung. The Team was pleased to note that there is improved communication between the consultants and the municipality during the preparation of the sub-projects. The Team noted that municipality’s comments should be obtained before the final design of the subproject is carried out. PCO/MST and TDF will monitor that the municipalities receive the reports and have sufficient time to provide their comments. A status update of each sub-project is provided below. Status of Track I Subprojects 1. Tansen Amar Narayan Temple Conservation This subproject is ready to enter the construction phase. The bidding process for procurement of contractor for the conservation of Amar Narayan temple in Tansen is in the final stage of completion and the contract award is now expected by June 20, 2013. PCO shall assist the municipality to ensure that the contractor is mobilized within two weeks of the signing of the contract. The estimated cost of the subproject including contingency and VAT is NRs 37,720,807.74, and the contract has been awarded for NRs 34,428,173.87 including provisional sum and VAT. 11 2. Dhankuta Weekly Market Infrastructure Improvement This subproject is ready to enter the construction phase. The procurement notice for the construction of Dhankuta weekly market was published on 28 March 2013 and three bids were received by the bid closing date of 28 April 2013. The evaluation of bid was carried out with the support of TDF and the evaluation was completed by 13 May 2013. The evaluation report was approved by TDF on 24 May 2013. The bank has provided no-objection to the award on June 11, 2013. The Municipality is expected to award the contract by June 20, 2013. The municipal engineer will take responsibility for supervising the works. The estimated cost of the subproject including contingency and VAT is NRs 17,846,071.00, and the contract has been awarded for NRs 16,310,868.92 including provisional sum and VAT. 3. Dhankuta Hile Market Infrastructure Improvement The cost estimate of the sub-project has been increased from NRs 24.89 million to NRs 41.05 million with the changes made in the permanent sheds and the slaughterhouse. But the revised detailed project report for the sub-project has not yet been shared. It is not clear whether the earlier comments provided by the Team have been fully addressed and there is enough justification for the change in size of the sub-project. TDF should ensure that these reports are made available to the municipality and the Bank as soon as possible to ensure completion of appraisal by July 15, 2013. Furthermore, the consultants were requested to specify that the upgrading of the infrastructure is feasible with the current level of accessibility to the market. Improvement in accessibility will trigger safeguard requirements because of resettlements, and will be considered a linked activity if the municipality undertakes the road expansion within two years of completion of the works under the sub-project. TDF has informed that the municipality is willing to implement this sub-project only if the proposed water supply sub-project is not financed under the project. It has been agreed that the water supply sub-project would not be funded under the project because of the complex institutional arrangements and the costs (above the municipality’s borrowing capacity). PCO needs to communicate to the municipality the status of the water supply sub-project. 4. Mechinagar Gate Beautification The appraisal of Mechinagar Gate Beautification was completed by TDF and the Report approved by the Bank and the TDF board by 18 April. The loan agreement was signed on 22 April 2013. There has been long delay in publishing the bid invitation notice by the municipality, which was only published on 7 June 2013. The bids will now be opened on 8 July 2013. The estimated cost of the sub-project including contingency and VAT is NRs 13,197,655.35. 6. Mechinagar Gokul Marg TDF has completed appraisal of upgrading Gokul Marg (road) subproject and has submitted the appraisal report to World Bank for approval. The review of the report showed that the cost of water management has increased significantly since the previous presentation of the detailed 12 design report. The consultants have been advised to justify the provision of large side drains and the increase in cost. The consultants have agreed to review and revise the design of side drains and TDF will complete the appraisal process of the subproject by 30 June 2013. 7. Baglung Municipality Access Road Baglung Municipal access road subproject consist of two segments, Link I connecting Baglung urban area with the Mid Hill highway and Link II connecting the municipality office with the Mid Hill Highway. The link 1 of the subproject has been discontinued due to the need to demolish three buildings in the route of the road. The length of Link II is 740 m and is reported to have an average gradient of 10.38. It has been designed as RCC pavement road for the full length with 4 m carriage way and with provision of drainage system for water management and retaining structures for protection works. The thickness of RCC pavement is 150 mm with gravel sub base of 150 mm thickness. The consultants have prepared revised cost estimate for the Link II municipal access road and shared the cost information with Baglung Municipality. The revised cost is Rs 39.5 million (about Rs 53 million per km). Baglung Municipality has reservation on this estimated cost as this cost is much higher than the cost per kilometer of the road for a normal hilly road. The present design involves massive excavation with damage to existing drains and provision of RCC pavement for the full length of the road. This has increased the cost of excavation, road pavement, water management and the retaining structures. The consultant was requested to explore alternative design options to minimize the earthwork excavation, and present the least cost option for the pavement to the municipality. However, the consultant’s position is that RCC pavement is the only viable option. At present, another consultant for Track II sub-project is conducting detailed design of the continuation of the road from the municipality’s office to the locations uphill. The preliminary design has been conducted and the estimated cost for this road is about NRs 25 million per Km. In the present situation, it was agreed that a second opinion by a expert team (based on joint visit to the municipality by PCO, TDF, and Track I and Track II consultants) is necessary to finalize the design of the municipal access road and explore the potential benefit of having one contract for the upgrading of the municipal access road under the Track I and Track II subprojects. Clarifications on the environmental safeguard requirements also need to be provided (see Annex II on safeguards for details). Status of Track II Subprojects The consultants mobilized with funding of GIZ are carrying out study of 16 subprojects in six municipalities for implementation under track II sub-projects. The numbers of sub-projects in each municipality are: Baglung 2, Tansen 4, Lekhnath 4, Mechinagar 2, Itahari 3 and Dhankuta 2. The detailed list is presented below. The Team is pleased that the consultants have made significant progress in conducting the study and have completed field study/survey works for 14 subprojects and are working in field to complete 2 remaining subprojects. MST has reported that the consultants have prepared preliminary design of 8 projects and have submitted draft report of 3 subprojects. The Team reviewed the draft reports submitted by the consultants and found that the reports are in the preliminary stage and included mainly preliminary drawings, quantity and cost estimate. It has been agreed that the detailed design reports will be prepared incorporating 13 all the aspects provided in the Table of Contents as agreed at the time of preparation of project brief. The report should clearly specify the objective of the subproject, present situation and planned development, design criteria adopted, detailed design calculations, list of proposed constructions, quantity and cost estimates, financial and economic analysis, social and environmental safeguard issues (including EMPs as necessary). The drawings require improvement by incorporating levels for drainage and other specifications. The safeguard requirements for urban road upgrading need to be clarified and a consistent approach needs to be applied to Track I and Track II sub-projects (see Annex II on safeguard for details). List of Track II Sub-projects Project Municipality Subproject Name No. Baglung 1 Sahid Smriti Park Development 2 Upgrading of Access Road to Deprived Community Tansen 3 Upgrading of Existing Road in Urban Areas 4 Multi Purpose Building (shops and guest rooms) 5 Shrinagar Park Improvement Lekhnath 6 Barah Chhetra Improvement 7 Upgrading foot-trail from Mandare Park to Sundare Danda 8 Picnic Spots & Amusement Zone at Mandare Park 9 Upgrading of Road in Urban and Peri urban Areas Mechinagar 10 Construction of Mini Market in Dhulabari 11 Construction of Agro Market in Dhulabari Itahari 12 Upgrading of Link Road 13 Construction of Agro Market 14 Construction of Bridges on the Link Road Dhankuta 15 Hile water supply project (Pre Feasibility Study) 16 Hile Bus Park (Terminal) Actions for Socio-economic Infrastructure Development Component  Second opinion on the technical specification and cost estimates for the Baglung access road provided by expert team (based on joint visit to the municipality by PCO, TDF, and Track I and Track II consultants) and agreement with the municipality on design and procurement packaging reached and communicated to the Team by June 20, 2013.  Contractor and supervision consultant for the Tansen temple conservation and contractor for Dhankuta market sub-projects in place by July 30, 2013;  Appraisal documents for Mechinagar Gokul Marga sub-project including EMP finalized by June 30, 2013; 14  Appraisal documents for the Baglung Access Road and Dhankuta Hile Market including EMPs finalized by July 15, 2013 ;  Bid evaluation for Mechingar gate sub-project completed by the municipality by August 31, 2013 and the other Track I sub-projects by September 30, 2013;  Submission of final DPRs for 10 Track II sub-projects by August 31, 2013, and the remaining 6 by September 30. 2013. AI.III Institutional Development Component The progress on the implementation of activities under this component across all agencies continues to be slow. Municipalities The activities under the Institutional Development component needs to be expedited, in particular the preparation of revenue enhancement plans, investment and O&M plans in the municipalities. The institutional development of the municipalities is critical to achieve the revised PDO to improve the capacity of the municipalities to plan, implement and fund urban development activities. The two main ongoing activities are the preparation of Revenue Enhancement Plans and the preparation and funding of O&M plans in the municipalities. In line with the revision of the PDO, a new activity – the preparation and funding of investment plans – need to be initiated in the municipalities. The PCO with GIZ-funded MST has supported the municipalities with the preparation of the plans. The work program of the GIZ-funded MST was reviewed. It was agreed that the GIZ- funded MST would complete the preparation of REPs and O&M plans by the end of its term (June 30, 2014), including preparation of investment plans in at least three municipalities. The activities will be handed over to the IDA-funded MST when the GIZ-funded MST phases out. Given the critical importance of the activities for achieving the PDO and the need to expand the scope of the activities, it was agreed that the World Bank would make available experts to support the PCO/MST with the institutional development of the municipalities. It was also agreed that the PCO would submit draft outputs (revenue enhancement plans, O&M plans and investment plans) to the Team for review as soon as they are available. The Team reviewed progress with the preparation of O&M plans and revenue enhancement plans. Draft revenue enhancement plans have been completed for Tansen and Lekhnath and preparation is underway in Baglung. One draft O&M plan has been prepared for Tansen. Orientation on the preparation of O&M plans has been provided to the six municipalities. The Team discussed with the PCO and municipalities during the field visit support for the preparation of the multi-year municipal investment plans. The agreed actions are summarized below. Revenue enhancement plans. The revenue enhancement plan for Tansen municipality was reviewed. It was noted that the revenue enhancement plan is the core document, and revenue projections should be used as the 15 basis for multi-year investment and O&M plans. The Team found that the revenue enhancement plan is to be updated to include the following comments:  The plan needs to be based on a comprehensive assessment of the municipal financial situation with breakdown of both revenue and expenditure sources.  Modeling of all revenue sources need to be included in the revenue projections, including revenue sources supported by other programs (e.g. SUNAG). An assessment of the existing tax base, tax compliance, and potential for each municipal revenue source needs to be incorporated. The modeling needs to present baseline data and projections based on expected growth in the rates and revenue base and collection efficiency trends.  For towns such as Baglung where IPT is to be implemented, the plan would need to incorporate steps needed for efficient implementation (billing, valuation and collections) and a consolidated revenue improvement program initiated (or report actions supported by other programs).  The plan for Tansen focused on a few taxes and fees such as business tax, rent tax and parking and tourist entry fees. The justification for the selection of the revenue sources that will be the focus of the project needs to be strengthened. Information on the consultative process followed to prepare the action plan needs to be included.  The costs of the actions need to be factored in to estimate the revenue increase associated with the implementation of the plan (actions should not include investment costs). The revenue increase needs to be measured with respect to the baseline revenue increase (which is on average 15%) It was agreed that the PCO/MST would revise the plan and submit the updated draft for review to the World Bank by August 31, 2013. The revenue enhancement plan for Tansen municipality will be the template for the preparation of the other plans. O&M plans The O&M plan prepared for Tansen municipality was reviewed. The O&M plan for Tansen has been based on surveys and an assessment of the assets needing attention. Setting apart finances from the municipalities own sources (land tax and local development fee) have been proposed. The Team found that the plan carried out a comprehensive inventory of the municipal assets, clearly identify the O&M costs and help the municipality prioritize O&M activities. The following was agreed:  The financial plan for funding O&M requirements need to be more closely linked with the projected sources of finance of the municipalities (as presented in the revenue enhancement plan) and baseline data for O&M spending needs to be estimated, to ensure that the proposed O&M allocation is realistic based on the current cash flows of the municipality.  A 5-year funding plan for O&M costs needs to be prepared in close collaboration with the municipality to fund the O&M gap, and gradually increase the share of revenues allocated to O&M from the baseline to the optimal amount. It would also be necessary to tie up the O&M plan with the revenue enhancement plan so that the allocation is budgeted. 16  The funding plan needs to be endorsed by the municipality at the next Council meeting in January 2014.  Investment and O&M for water supply assets (managed by the Users Committee) needs to be consistently treated in the plan. It was agreed that the PCO/MST would revise the plan and submit the updated draft for review to the World Bank by August 31, 2013. The O&M plan for Tansen municipality will be the template for the preparation of the other O&M plans. Multi-year investment plans Both the revenue enhancements and proposed O&M expenditures need to be within the framework of a multi-year investment plan tied to sources and application of funds. The project from next FY will provide support to the municipalities for the preparation of multi-year investment plans starting with 3 municipalities. The multi-year investment plans will be based on the Periodic Plans of the municipalities, and an outcome of the processes contained in the Periodic Plan, and will inform preparation of the annual plan and budget by the municipalities (due in January). The investment plan would prioritize the long list of municipal development activities included in the Periodic Plan based on sources of funding. Equipment There have been delays in the procurement of the laptops and printers by the PCO on behalf of the municipalities. During the field visit, the municipalities expressed the urgent need for these articles to enable them to carry out their functions. Actions for Institutional Development Component for Municipalities:  PCO to process the Expression of Interest (EoI) notice for the recruitment of the IDA-funded MST by June 25, 2013  Amend the ToR and cost estimates for the IDA-funded MST to include tasks for the preparation/update of annual investment plans and the posting of one municipal engineer in each municipality (instead of the current arrangement of one municipal engineer in each region) by June 30, 2013;  Submit timeline for completing Revenue Enhancement Plans (REP) and O&M plans in the six municipalities (including timeline for municipal approval of the plans) based on the targets in the results framework by June 20, 2013  PCO to prepare plan for supporting municipalities with the preparation of multi-year investment plans (including scope of work, budget and selection of municipalities) in consultation with the municipalities and submit to the Team for review by June 30, 2013  PCO to procure and send the laptops and printers to the municipalities by July 15, 2013.  PCO to submit ToR for the preparation of investment plans in three municipalities for next FY in consultation with the municipalities and submit to the Team for review by July 30, 2013 17  World Bank to make available resources as required to support the MST/PCO with the task of preparing the Revenue Enhancement Plan (REP), O&M plans and initiate preparation of investment plans  PCO to submit revised Revenue Enhancement Plan and revised O&M plan for Tansen incorporating Team’s comments to the Team for review by August 31, 2013 DUDBC/PCO The activities under the ID component of DUDBC/ PCO have been delayed, in particular the following activities: the hiring of consultants for GIS maps for the municipalities, the procurement of consultants for developing the FMIS, and the consultants for third party monitoring. The RFPs to the short-listed consultants for development of GIS urban maps was issued on January 8, 2013 with the submission deadline of February 8, 2013. The PCO completed the evaluation in May 2013, but during review, an error was identified in the evaluation criteria. As a result, the process of award of contract and the completion of the urban maps for six municipalities is going to be further delayed. The PCO/ DUDBC needs to communicate to the Team its decision on how to proceed to resolve the issue by June 20, 2013. The EOIs for both FMIS and third-party monitoring have been issued after delays. The Team stressed the need to complete the procurement process for these activities without delay so that the outputs can be produced in time to be relevant to the project. The full time Financial Management Specialist and the part time procurement specialist are now been selected, and will be joining the PCO in two weeks (June 25, 2013). PCO will make a decision on the selection of the M&E expert and inform the Bank if there is need to re-advertise by June 20, 2013, with the objective of completing the hiring by September 15, 2013. The PCO is in the process of publishing the procurement notice to hire the IDA-funded MST such that it overlaps with the existing MST and is also able to carry out the activities that are required as part of the restructuring. The Team reemphasized the need to continue the efforts to strengthen the PCO with appropriate staff and systems to carry out project management, financial management and M&E functions. There have been delays in the procurement of logistics and equipment (vehicle, IT equipment such as laptops, printers, etc.) that are important for the project management. Items include the laptops and printers to be procured by the PCO on behalf of the municipalities (as discussed earlier) as well as the vehicle for the PCO. During the field visit, the municipalities expressed the urgent need for these articles to enable them to carry out their functions. GIS training to the municipalities also need to be included among the capacity building activities as both municipalities visited during the review expressed the need to receive training on GIS to make full use of the GIS maps that will be prepared under the project. Actions for Institutional Development Component for DUDBC/PCO:  PCO/DUDBC to communicate to the Bank the decision by June 20, 2013 and re-issue the RFP for urban maps by June 30, 2013.  PCO to award the contract for FMIS by September 15, 2013 18  PCO to award the contract for third-party monitoring by September 15, 2013  PCO to complete the procurement of the vehicle by August 31, 2013 TDF and Business Restructuring Action Plan TDF has signed three loan agreements for municipal subprojects on the basis of its lending policies and procedures and incorporated disbursement conditions that mitigate construction and repayment risks. TDF has been implementing the Business Restructuring Action Plan (BRAP) from FY 2011-12. The purpose of the BRAP is to ensure that TDF has adequate capital and builds up an open access, criteria based lending window for municipalities that are based on prudential lending norms. The BRAP includes time bound actions to provide adequate capital to TDF, improve its asset quality, strengthen its management and enhance its earnings. As of June 2013, TDF has completed all actions to restructure the capital and adopt entity based appraisal systems. The main activities for FY 2012-13 include the completion of work out on the problem loans and the approval of guidelines for the Revolving Fund. The first phase of the workout has been completed and GON would (on the basis of the technical designs), undertake actions to rehabilitate the water supply systems. The guidelines for the Revolving Fund (RF) have been sent to KFW and a consultant is proposed to be hired to complete this task. The BRAP also includes provisions for training during FY 2013 that TDF proposes to complete. The need to defer some of the BRAP actions planned for FY 2012-13 such as the establishment of regional offices and the lending for pilot PPP’s was discussed during the review. It was agreed that these actions would be reviewed by TDF and dropped if no longer relevant. Further, actions for 2013-14, such as testing of new instruments (bonds), expansion of PPP lending, would also be reviewed by TDF and postponed until market and TDF’s internal situation improves. The TDF will send the revisions to the BRAP actions for FY 2012-13 and 2013-14 to the Team by August 31st 2013. It was also agreed that the TDF management would submit to the Board a status note on the BRAP performance after two years of implementation for review by August 31st 2013. The current financial situation of TDF is one of default to GON and low disbursements as compared with the Business Plan projections. The default noticed in January continues, and subsequent installments have also fallen due. The actions agreed then, namely, rescheduling or repayment have not been initiated. TDF continues to be in default to GON (of approximately NPR 65.97 million as on June 2013 as compared with NPR 54.21 million as on January 2013) under the Urban Environment Improvement Project (UEIP), despite collections of NPR 38 million during the FY 2012-13. It was agreed that TDF would resolve the issue of TDF default with GON and communicate the decision to the Team by August 31, 2013. The options include rescheduling, repayments or conversion of loans into equity. Furthermore, TDF operating costs are rising (up from approximately NPR 30 to NPR 43 million during the last year). Operating costs would need to be increasingly financed from interest 19 income from operations if disbursements do not improve. Actions to operationalize the Revolving Fund are required to improve disbursements and ensure the viability of TDF operations. It was agreed that TDF would take steps to finalize lending policies with KfW before October 31, 2013, so that lending under the Revolving Fund can commence. TDF has recruited specialists in Project Finance and Fund Management to strengthen its staffing. The following staff are in the process of being hired as part of the in-sourcing of specialists: Project Management, Project Finance and Fund Management specialists and these recruitments would be expected to be in place by July 31, 2013. The following activities are planned as part the TDF Institutional Development component: gap analysis for micro-banking, finalization of the RF lending norms, guidelines for credit risk analysis, a study of the borrowing capacity of 15 municipalities in TDF’s pipeline and guidelines for Business Promotion. The TORs for these activities will be finalized by June 30, 2013. The most critical pending activity that needs to be expedited is the need to rectify the micro banking system. The consultant selection is expected to be completed by August 30 and the assignment completed by end October. Actions for Institutional Development Component for TDF  Finalize TORs for consulting assignments by June 30, 2013, select the consultants by August 31, and complete the assignment by November 31, 2013  Finalize RF guidelines, BP and Borrowing Capacity TOR by June 30, 2013  Complete recruitment of in-sourced specialists by July 31, 2013  Review BRAP activities and submit the revisions to the Team by August 31, 2013  Resolve the default situation with GON and communicate resolution to the Team by August 31, 2013 MoFALD MoFALD had prepared the ToRs for the hiring of the consultants to (ii) update and develop the ministry’s guidelines in the governance and planning for the municipalities and (ii) the development of the MIS Strategy for the Municipal Management Division at MoFALD. During the review, the ministry expressed its interest in slightly revising the emphasis of the assignments to include support for developing template for implementing the policy guidelines and procedures for municipalities in the area of governance and budget planning, strengthening of Information and communication systems at both the central ministry and municipalities. It has been agreed that the ToRs will be updated according to the new priorities and the procurement process started for these activities. Actions for Institutional Development Component for MoFALD  Update the two ToRs for ID component as discussed during the review and send to World Bank for comments clearance by June 30, 2013  Issue the procurement notice for the hiring of consultants by July 15, 2013  Hire the consultants for the agreed tasks by September 15, 2013  Complete the tasks by January 15, 2014 20 MoUD Activities under MoUD, including the hiring of consultants, information and communication and logistics are underway, albeit with delays in the hiring of consultants. MoUD has prepared the ToRs for consultants to develop and/or update policy guidelines and procedures for municipalities in the area of physical planning and infrastructure development. The MoUD and the Bank have agreed on the scope of the work and MoUD plans to start the procurement process for this task by June 20, 2013. Actions for Institutional Development Component for MoUD:  Finalize the ToR for hiring the consultants for the development and updating of policy guidelines by June 30, 2013  Issue the procurement notice for the hiring of consultants by July 15, 2013  Hire the consultants for the agreed tasks by September 15, 2013  Complete the tasks by January 15, 2014 Project management and municipal capacity building The Team noted that additional and targeted capacity building is required to enhance project management, and the capacity of the municipalities in the areas of procurement and FM. The recent recruitment of procurement and FM specialist is expected to significantly increase PCO capacity. During the visit to Baglung and Lekhnath municipalities, the Team held consultations with the municipality teams on the training and capacity development needs of the municipal staff. This included discussion on the capacity support required on project management, procurement and FM, as well system and process development at the municipalities. The team also discussed on the roles and responsibilities of the engineers hired at the municipalities through the municipal block grants. It was agreed that municipal capacity building in the critical area of procurement, FM and safeguards would be intensified. Focal points would be nominated for procurement and safeguards by the municipalities in addition to the focal point for the project. Baglung municipality also noted that updated information on the roles and responsibilities of the PCO team members (given the new appointments and recruitment) should be timely provided to the municipalities, to ensure clear communication channels between the PCO and the municipalities. The Team noted that the M&E system is weak, and needs to be strengthened to ensure accurate and timely measurement of progress in achieving the PDO indicators. Progress reports on the achievement of PDO indicators needs to be made available in advance of each implementation support reviews. The Team noted that the actions agreed during the January 2013 review to strengthen the M&E system for the project have been delayed. Municipalities need to receive guidance and training on the method of calculating the beneficiaries for the municipal block grant. The methodology note for estimating beneficiaries needs to be finalized and shared with the municipalities and the Team by June 30, 2013. Estimated year 2 data for PDO indicators 21 (municipal own-source revenue increase and number of beneficiaries) need to be provided to the Team by June 30, 2013. The recruitment of part-time M&E specialist needs to be expedited to ensure the consultant is on board before the next implementation support review. Actions for Project Management and Municipal Capacity Building:  Provide to all municipalities updated information on “who is who” at the PCO with contact information of new staff by June 20, 2013  Request the municipalities to (a) re-confirm to the PCO the composition of the PMT, including focal point for the project; and (b) appoint focal point for environment and social safeguards and procurement by June 30, 2013  Consult with the municipalities and project agencies, and prepare annual capacity building plan for the PCO and municipalities for FY14 for project management, procurement and safeguards to be delivered jointly by the PCO/MST and the World Bank and submit it to the Team by June 30, 2013  Work with municipalities to ensure all project information (ESMF, procurement guidelines, feasibility studies, etc) is printed and available in the municipalities office by July 30, 2013;  Update the PIM by August 31, 2013  Support the municipalities to ensure the effective use of municipal engineers hired by the municipalities with the municipal block grant for the project, request submission of timesheet of the engineers as required for monitoring, and report progress to the Team on a monthly basis.  Invite project focal persons from at least one municipality to participate to wrap-up meetings of implementation support reviews on a rotating basis starting from next review in September 2013 Actions for Procurement:  PCO to request municipalities and project agencies to submit draft PP for next FY by June 30, 2013  PCO to submit to the World Bank the PP for next FY by July 7, 2013  PCO/MST to organize a one-day capacity building on procurement with World Bank resource person by August 15, 2013 Actions for M&E system:  PCO to finalize the methodology note for estimating beneficiaries (including revisions as required on the number of estimated beneficiaries for Year 1) and share it with the municipalities and the Team by June 30, 2013  PCO to provide estimated values for the PDO indicators (municipal own-source revenue increase and number of beneficiaries) for Year 2 to the Team by June 30, 2013  PCO to complete the hiring of M&E specialist by September 15, 2013 22 ANNEX II: Social and Environmental Safeguards The Team held discussions with the PCO, MST, TDF and Lekhnath and Baglung municipalities on the following key areas: (a) safeguard compliance for the civil works funded with the municipal block grants under the Service Delivery Improvement component; (b) safeguard issues relating to the municipal infrastructure subprojects; (c) safeguard capability of the municipalities; (d) third-party monitoring of safeguards compliance; (e) preparation of brochure for the municipal infrastructure subprojects, and (f) environmental profile of each municipality, and (g) grievance redress mechanisms. The Team noted that some actions agreed during the last review (January 2013) have been complied although with delays. However, some actions have been partially complied with and a few have been delayed. Provided below is a summary of the discussions and agreed actions. AII.I Safeguard Compliance for Civil Works Funded by the Municipal Block Grant The following is a summary of the discussions on the status and agreed actions: Mitigation measures for civil works carried out in FY 2011/12. The field verification for safeguard compliance of the civil works funded in FY 2011/12 with the municipal block grant identified a few social and environmental issues. For the civil works with environmental and social safeguards issues, it had been agreed during the January review that the municipalities would develop time-bound retroactive mitigation plans to address the concerns, and that the third tranche of the municipal block grant would only be released only after receiving evidence of municipalities’ commitment to address the issues. The Team noted the some progress has been made in undertaking the agreed mitigation measures. The identified safeguard issues and agreed mitigation measures are the following:  Support for the construction of a partition wall (NRs 150,000) of Mandali Church (Dhankuta). This building is under a high-tension transmission line and the roofing material is asbestos. The building does not have permit. The issue was discussed in the January 2013 review; following the review Dhankuta municipality has written a letter to the church and requested that the funds be returned. During this review, it was agreed that PCO and municipality would ensure that either the amount is returned back or the municipality use a funding source other than the UGDP-ETP for this activity.  Drain construction (Naya Bazar, Itahari). The drain construction is incomplete and does not have outlet. This is causing stagnant water in the drain, mosquito breeding and bad smells. Following the previous review, the municipality has prepared a three year phased plan for completing the drain construction. Discussion during this review concluded that this should be a priority action and agreed that this drain with proper outlet will be completed using the first tranche of grant in the next fiscal year (FY 13/14).  Support to Shree Raktamala Primary School for construction of part of the school (Rs 200,000, Itahari). This is in encroached private property, and the court has ruled in favor of the owner. Board meeting of the Itahari Municipality has decided not to use the UGDP-ETP fund for this activity, rather the fund has been transferred for maintaining/ gravelling two roads (Laxminarayn, and Maden roads); 23  Drain construction (Captain Yagya Bahadur Marga, Mechinagar). The drain construction is incomplete and does not have outlet. This is causing stagnant water in the drain, mosquito breeding and bad smells. The municipality is proposing to complete the construction in consecutive years. Discussion during this review concluded that this should a priority action and agreed that this drain with proper outlet will be completed using the first tranche of grant in the next fiscal year (FY13/14). It was agreed that evidence of the municipality commitment would be provided before June 15, 2013 and the third tranche will be released thereafter only. Itahari and Dhankuta municipalities submitted a commitment letter to PCO that UGDP-ETP project funds previously used for the construction of the partition wall of Mandali Church (Dhankuta) are in the process of being returned, and funds have not been used for the construction of Shree Raktamala Primary School (Itahari). Itahari and Mechinagar municipalities submitted a commitment letter for completing the whole length of drains with outlets in Naya Bazar (Itahari) and in Captain Yagya Bahadur Marga (Mechinagar) using the first tranche of grant in the next fiscal year (FY13/14). The PCO has authorized the release of the third tranche of the municipal block grant on the basis of the commitment letters. It has been agreed that the PCO would verify the committed actions by the municipalities, as follows:  Mandali Church partitiona wall (Dhankuta) – PCO to monitor that municipality receives the amount from the church by the commitment date.  Drain construction (Itahari) - PCO to ensure that FY 13/ 14 first tranche of grant is used to complete the drainage work (and that resources are not allocated to other works, without ensuring enough resources for this one).  Shree Raktamala Primary School (itahari) - PCO to verify that the funds were not used for this activity, but for gravelling of roads as reported in the municipality letter.  Drain construction (Mechinagar) - PCO to ensure that FY 13/ 14 first tranche of grant is used to complete this work (resources not-be allocated to other works, without ensuring enough resources for this one). Screening for activities funded by the municipal block grant in FY12/13. PCO and MST informed that the screening checklist completed by the respective municipalities have been received for the activities implemented during FY 12/13. These have been desk reviewed by the PCO/MST, and activities with potential environmental and social issues are in the process of being identified. The review agreed that PCO/MST, by August 15, 2013, will field-verify the activities identified as potential environmental and social issues, including those relating to the indigenous people and other vulnerable groups. Following which mitigations measures, if necessary, will be agreed with the respective municipalities. Screening for activities funded by the municipal block grant in FY13/14. It has been agreed that starting from FY2013-14, the verification of the screening checklist for the civil works funded with the municipal block grant would be carried out before the works start to pre-identify potential environmental and social issues. The review also emphasized the need for due diligence on the issues of indigenous peoples and vulnerable groups as reflected on the ESMF. The 24 completed screening checklist for planned civil works for FY2013-14 will be received from the municipalities by August 15, 2013. PCO/MST will work closely with the municipalities to carry out the screening, and will field-verify the planned activities with potential safeguard issues by October 15, 2013. Grants to the municipalities will not be released without the reports from the field verification. AII.II Safeguard Issues relating to municipal infrastructure subprojects The Team noted that EMPs for the Improvement of the Market infrastructure (Dhankuta), Gate Beautification (Mechinagar), and Amar Narayan Temple Conservation (Tansen) have been finalized. Draft EMPs for Gokul Marga (Mechinagar) and Municipal Road (Baglung) have also been prepared. The progress in preparing the IEEs has been extremely slow. Until date, only one IEE consultant has been hired for the Access Road (Baglung). The other2 subprojects for which IEE is planned to be prepared include: Gokul Marga (Mechinagar) and Market Development (Hile, Dhankuta). The review noted a lack of consistency in the application of national safeguard regulations for the upgrading of urban roads under Track I and Track II. No IEE is under preparation for the upgrading of urban roads under Track II sub-projects, while IEEs are under preparation for the access road in Baglung and the Gokul Marga road in Mechinagar. The team requested the PCO to clarify safeguard requirements as per Nepal’s regulation for the upgrading of urban roads, and to communicate in writing the requirements to the Team and the municipalities by June 20, 2013. The review agreed that all IEEs for Track I subprojects needs to be completed by September 30, 2013. It was noted that, considering the capacity of the municipalities and slow progress, PCO/MST and TDF would have to provide increased guidance and support to the municipalities in expediting the IEEs. The team clarified, once again, that there must not be any civil works without approved safeguard documents (IEE, EMP etc.). It was also noted that TDF has been reviewing the engineering designs and bidding documents to ensure social and environmental concerns/suggestions noted in the screening, EMP and various field visit notes are incorporated. AII.III Safeguard capability of the municipalities The review in January 2013 noted that weak social and environmental safeguard capability of the municipalities (Municipal staff were not fully aware of the requirements under the ESMF as well as Nepal’s legal requirements). Furthermore, the review found that some municipalities did not have the latest version of the safeguard documents (such as ESMF, PIM etc.) at their premises. During this review, the PCO/MST informed that a set of documents have been sent to the municipalities again. However, during the field visit it was noted that there is no copy of the ESMF in Baglung municipality (while copies were provided by Lekhnath municipality). 2 It has been informed that the Main Road Surface Drainage in Itahari and Access Road in Lekhnath have been dropped. 25 There has been no new orientation and trainings on social and environmental aspect, and the municipalities visited during the review requested additional safeguard support, in particular for the screening of the civil carried out with the municipal block grant. This review re-emphasizes the need for a focal person for environmental and social safeguards in each municipality with defined a ToR, and training/orientation to the focal person (s). See actions agreed in Annex I under project management and municipal capacity building. AII.IV Third-party monitoring of safeguards compliance Third-party monitoring for safeguards compliance has been delayed. PCO informed that the EOIs have been received and are under evaluation. The updated date for completing the hiring of the consulting firm for third-party monitoring has been agreed for September 30, 2013. The consulting firm will be hired for carrying out the annual monitoring of safeguard compliance for the remaining period of the project. AII.V Preparation of Subproject Brochures It was agreed during the January 2013 review that sub-project specific brochures would be prepared as and when the sub projects are finalized. Sub-project level brochures will be part of the IEC material to be distributed to the municipalities. Three subprojects (one each in Dhankuta, Mechinagar, and Tansen) have been finalized now. Brochure for these subprojects will be prepared by August 15, 2013—the brochure will be in Nepali and will, inter alia, include information regarding social and environmental mitigations, grievance addressing mechanisms, and measures for public consultations and information disclosures. AII.VI Environmental profile of the municipalities An environmental profile of each of the municipalities is to be prepared as a chapter of the respective municipality’s GIS Report. However, GIS Report preparation has been delayed. This has affected the environmental profile preparation as well. AII.VII Grievance Redress Mechanisms The Team noted the delays in the establishment of the Grievance Redress Mechanisms at the national level. The Grievance Redress Committees have been set up in the six municipalities under this project. But a central level GRM has not been set up yet. This review has emphasized, and the PCO has agreed, on the need to establish this mechanism at the PCO at the earliest. Actions Safeguard Compliance for Civil Works Funded by the Municipal Block Grant 26  PCO/MST to field-verify the civil works funded with municipal block grants in FY 2012/13 with potential environmental and social issues by August 15, 2013. Following which mitigations measures, if necessary, will be agreed with the respective municipalities.  Municipalities to prepare safeguard screening for planned civil works to be funded by the municipal block grants in FY 2013/14 with support from MST/PCO and submit to the PCO/MST by August 15, 2013.  PCO/MST to review the screening and field-verify planned civil works to be funded by the municipal block grants in FY 2013/14 by October 15, 2013 Safeguard Issues relating to municipal infrastructure subprojects  PCO to clarify national safeguard requirements for upgrading of urban roads as per Nepal regulations, and communication in writing to the Team and the municipalities by June 20, 2013. Consistent approach needs to be followed for all municipal sub-projects  Municipalities to submit final EMPs for Gokul Marga (Mechinagar) and Municipal Road (Baglung) incorporating comments received by the team by June 31, 2013.  Municipalities complete IEE for Track I sub-projects by September 30, 2013. Safeguard capability of the municipalities See actions under Project Management and Municipal Capacity Third-Party Monitoring of Safeguards Compliance  PCO to complete the recruitment of the consultant for third party monitoring of safeguards compliance by September 15, 2013 (delayed action from previous reviews) Preparation of Subproject Brochure  PCO to prepare brochure for three subprojects (one each in Dhankuta, Mechinagar, and Tansen) by August 15, 2013. Establishment of a Central-Level Grievance Redress Mechanism  PCO to establish a central grievance redress mechanism as soon as possible in accordance with the provisions of the ESMF and the PIM by August 31, 2013. 27 ANNEX III: Financial Management Budget for FY2012/13 and Expenditures Due to political situation affected by the dissolution of the Constituent Assembly, the government was not able to timely announce the annual work program and full budget for FY2012/13. Following the restructuring of the Project, the program to be implemented by the Ministry of Federal Affairs and Local Development (formerly Ministry of Local Development) in the form of conditional grants to be provided to the participating municipalities will now be implemented by the Ministry of Urban Development, and the work program and budget has been proposed by MOUD for FY2012/13. The approved recurrent and capital budgets of UGDP of the fiscal year 2012/13 are as follows: Budget Budget Budgeted amount in NRs. million Head GoN IDA Grant IDA Credit Total Recurrent 3473163 30.00 180.00 70.00 280.00 Capital 3373164 6.74 0 0 6.74 Total 36.74 180.00 70.00 286.7 The conditional grant and loan to be provided to the participating municipalities through Town Development Fund and conditional grant for institutional development to Town Development Fund (TDF) have been budgeted under Recurrent Budget. About NRs.128.28 million has been budgeted for the TDF for FY 2012/13. The review team noted that the budget has not yet been released to the TDF. TDF had already incurred expenses of about NRs.4.41 million in FY2011/12 which they have not been able to get reimbursement from the government. The review team reminded that according to the legal covenant Clause I of Section I of the Schedule 2 of the Financing Agreement, the PCO is required to share the proposed annual work plan and budget for comments by April 30 of each year before the work program and budget is submitted to the government for endorsement. The review team reminded that the draft work program and budget for FY2013/14 be shared with IDA for comments as early as possible. The PCO does not have any track of expenses till June 5, 2013 in FY 2012/13 since it has not yet received any statements from MOUD for block grants released to participating municipalities and for institutional development. In FY2012/13, the TDF has incurred expenses as follows as of May 14, 2013 for institutional development: Amount in NRs. Particulars of Expenses (in million) Study of fast track sub-projects for Dhankuta and Tansen municipalities 1.31 Study of fast track sub-projects for Lekhnath, Itahari, Mechinagar 2.27 and Baglung municipalities Remuneration of consultants 4.06 Total 7.64 28 The review team reviewed the supporting documents of expenses at TDF and they are found to be satisfactory. Disbursement Total disbursement as of May 31, 2013 is USD 5.06 million drawn from the Grant Account, which is about 21% of the total allocation, which include credit funds. Since the last review in January, there have been no disbursements. A withdrawal application was made in mid May but only claims with supporting documentations for a total value of USD 27,000 could be honored because of the disbursement suspension due to the overdue audit for the project. Currently, the Designated Accounts of the Project is in the inactive list, and the review team urged to submit the withdrawal application as early as possible, and no later than July 15, 2013. Financial Management The PCO needs to put substantial efforts in improving overall financial management of the Project. The PCO will require a strong team capable of coordinating financial management activities across different project agencies and components. The FM specialist at the PCO has been selected although with delays and he is expected to be on board within two weeks. Some of the key agreed actions that need to be undertaken by the PCO are still pending, in particular the development of a Financial Management Information System (FMIS). Following are some other observations of the review team: SOE Ledger: The SOE ledger has not been maintained by the PCO to account SOE and monitor reimbursement of SOE from the IDA. The review team guided on how the SOE ledger should be maintained with complete information of the withdrawal application number, amount requested, amount replenished, category number, withdrawal application date, authorization number and value date. Other Ledgers and Subsidiary Ledgers: The review team also noted that other ledgers such as main and subsidiary ledgers, program ledger and designated account ledger have not been maintained as required by the government accounting system. The review team guided on how these records should be maintained. Internal Control and Internal Audit: The review team observed that supporting documents of expenses have not been defaced with the PAID stamp. This is required as part of a good control system to avoid any double payments. The review team also observed that the internal audit has not been carried out. Project related Accounts Maintenance at TDF: The Team noted that the TDF has neither maintained separate account nor separate expenditure account head for expenses incurred for the project. The expenses incurred for the project have been accounted to TDF expenditures account heads but reported to PCO after analyzing the concerned expense heads. The team recommended to TDF to maintain separate books of accounts for program under the project to enable to monitor and track expenditures. 29 Implementation Progress Reports The Team reminded the PCO that the first and second trimester progress reports of FY2012/13 are overdue. The Project has agreed to submit draft of the overdue reports by June 20, 2013 and finalize them by June 30, 2013. The Team also reminded that the third trimester report of FY2012/13 is due on August 31, 2013. Audit Report The project audi report of FY2011/12 is overdue. The grace period provided for the submission of audit report has ended on May 15, 2013. Currently, the disbursement against SOE and Designated Accounts is under suspension. The Team is aiming to submit the audit report by June 30, 2013. Actions for Financial Management  PCO to send the project audit to the World Bank as soon as possible, and no later than June 30, 2013  PCO to send the overdue first and second IPR for this FY as soon as possible, and no later than June 30, 2013, and the third IPR for this FY by August 31, 2013  PCO to submit withdrawal application for the project by July 15, 2013  PCO/MST to organize FM training for PCO and component managers with World Bank resource person by August 15, 2013 30 ANNEX IV: Summary of Actions Area Action Agency Timeline Finalize the planning and reporting format for the municipal block grant and send it to the PCO July 30, 2013 municipalities and the Team Service Delivery Send the screening checklist for the proposed Improvement works for FY 2013/14 as per the submitted annual Municipalities August 15, 2013 (Component I) plan to the MoUD and PCO Send report on the activities completed in FY Municipalities September 15, 2013 2012/13 to MoUD and PCO Provide second opinion on the technical specification and cost estimates for the Baglung access road (based on joint visit to the municipality PCO/TDF and by PCO, TDF, and Track I and Track II June 20, 2013 consultants consultants), reach agreement with the municipality on design and procurement packaging and communicate it to the Team Finalize appraisal documents for Mechinagar Socio-economic TDF June 30, 2013 Gokul Marga sub-project including EMP infrastructure (Component II) Finalize appraisal documents for the Baglung Access Road and Dhankuta Hile Market sub- TDF July 15, 2013 projects including EMPs 31 Ensure contractor and supervision consultant for Tansen and Dhankuta the Tanseen Amar Nayaran temple conservation municipalities with July 30, 2013 sub-project and contractor for Dhankuta market PCO sub-project are in place Complete bid evaluation for Mechingar gate sub- Municipalities August 31, 2013 project Complete bid evaluation for other Track I sub- Municipalities September 30, 2013 projects Municipalities with Submit final DPRs for 10 Track II sub-projects August 31, 2013 PCO Municipalities with Submit final DPRs for 6 Track II sub-projects September 30. 2013 PCO Municipalities Process the Expression of Interest (EoI) notice for PCO June 25, 2013 the recruitment of the MST Amend the ToR and cost estimates for the IDA- funded MST to include tasks for the preparation/update of annual investment plans and PCO June 30, 2013 Institutional Development the posting of one municipal engineer in each (Component III) municipality Submit updated timeline for completing REP and O&M plans in the six municipalities (including PCO June 20, 2013 timeline for municipal approval of the REP and plan) based on the targets in the results framework Prepare plan for supporting municipalities with the preparation of multi-year investment plans PCO June 30, 2013 (including scope of work, budget and selection of 32 three municipalities for next FY) in consultation with the municipalities and submit to the Team for review Submit ToR for the preparation of investment plans PCO July 30, 2013 in three municipalities for next FY in consultation with the municipalities and submit to the Team for review Make available resources as required to support the World Bank As required MST/PCO with the task of preparing the Revenue Enhancement Plan (REP), O&M plans and initiate preparation of investment plans Submit revised REP Plan and revised O&M plan PCO August 31, 2013 for Tansen incorporating Team’s comments to the Team for review DUDBC/PCO Communicate to the Bank the decision to re-issue PCO/DUDBC June 20, 2013 the RFP for no objection Re-issue the RFP the contract for urban maps PCO/DUDBC June 30, 2013 Procure and send the laptops and printers to the PCO July 15, 2013 municipalities Award the contract for FMIS PCO September 15, 2013 Award the contract for third-party monitoring PCO September 15, 2013 Complete the procurement of the vehicle PCO August 31, 2013 33 TDF Finalize TOR for consulting assignments TDF June 30, 2013 Select the consultants TDF August 30, 2013 Complete the consulting assignments TDF November 30, 2013 Complete recruitment of in-sourced specialists TDF July 31, 2013 Review BRAP activities and submit the revisions TDF August 31, 2013 to the Team Resolve the default situation with GON and TDF August 31, 2013 communicate resolution to the Team MoFALD Update and finalize the two ToRs for ID component as discussed during the review and send MoFALD June 30, 2013 to World Bank for comments clearance Issue the procurement notice for the hiring of MoFALD July 15, 2013 consultants Hire the consultants for the agreed tasks MoFALD September 15, 2013 Complete the tasks MoFALD January 15, 2014 MoUD 34 Finalize the ToR and submit to the Team for MoUD June 30, 2013 review Issue the procurement notice for the hiring of the MoUD July 15, 2013 consultant Hire the consultant as per the agreed tasks MoUD September 15, 2013 Complete the tasks MoUD January 15, 2014 Project Management Provide to all municipalities updated information on “who is who” at the PCO with contact PCO June 20, 2013 information of new staff Request the municipalities to (a) re-confirm to the PCO the composition of the PMT, including focal point for the project; and (b) appoint focal point for PCO June 30, 2013 environment and social safeguards and procurement Consult with the municipalities and project agencies, and prepare annual capacity building plan for the PCO and municipalities for FY14 for PCO June 30, 2013 project management, procurement and safeguards to be delivered jointly by the PCO/MST and the World Bank and submit it to the Team Work with municipalities to ensure all project information (ESMF, procurement guidelines, PCO July 30, 2013 feasibility studies, etc) is printed and available in the municipalities office 35 Update the PIM PCO August 31, 2013 M&E Finalize the methodology note for estimating beneficiaries and share it with the municipalities PCO June 30, 2013 and the Team Provide estimated values for the PDO indicators (municipal own-source revenue increase and PCO June 30, 2013 number of beneficiaries) for Year 2 to the Team Complete the hiring of M&E specialist PCO September 15, 2013 36 Send the project audit to the World Bank PCO June 30, 2013 Send the overdue first and second IPR for this FY PCO June 30, 2013 Financial Management Submit withdrawal application for the project PCO July 15, 2013 Organize FM training with World Bank resource PCO/MST August 15, 2013 person Send the third IPR for this FY PCO August 31, 2013 Request municipalities and project agencies to PCO June 30, 2013 submit draft PP for next FY Procurement Submit to the World Bank the PP for next FY PCO July 7, 2013 Organize a one-day capacity building on PCO/MST August 15, 2013 procurement with World Bank resource person Clarify national safeguard requirements for upgrading of urban roads as per Nepal regulations, PCO June 20, 2013 and communication in writing to the Team and the municipalities Submit final EMPs for Gokul Marga (Mechinagar) Safeguards and Municipal Road (Baglung) incorporating Municipalities June 31, 2013 comments received by the team Prepare brochure for three subprojects (one each in PCO August 15, 2013 Dhankuta, Mechinagar, and Tansen) 37 Field-verify the civil works funded with municipal block grants in FY 12/13 with potential PCO August 15, 2013 environmental and social issues Prepare safeguard screening for planned civil works to be funded by the municipal block grants Municipalities August 15, 2013 in FY 13/14 with support from MST/PCO and submit to the PCO/MST Establish a central grievance redress mechanism as soon as possible in accordance with the provisions PCO August 31, 2013 of the ESMF and the PIM Review the screening and field-verify planned civil works to be funded by the municipal block grants PCO/MST October 15, 2013 in FY 13/14 Complete IEE for Track I sub-projects Municipalities September 30, 2013 Complete the recruitment of the consultant for third PCO September 30, 2013 party monitoring of safeguards compliance 38 ANNEX V: Results Framework Year 1: FY 2011/12 Project Development Objective (PDO): To improve the capacity of the participating municipalities to plan, implement and fund urban development activities. Baseline Cumulative Target and Achievement Remarks PDO Level Results Indicators Reference Y1 Others, if any Year 2 Year 3 Year 4 Year 5 Indicator One: Number of Number. Tansen participating municipalities Municipality with funded investment and Target 0 3 6 6 prepared O&M O&M plans plan but it is yet to be linked with Municipal 0 Annual Plan and Budget. Plans in Actual 0 other municipalities are under preparation. Indicator Two: Municipal Percent of There are no sub- sub-projects under approved sub- Target 0% 80% 80% 90% projects are implementation with projects. 0% under construction works on track Actual 0% implementation. as per the signed contract On track based on projected data Target 15% 15% 20% 25% for this FY. Final Indicator Three: Increase numbers will be in municipal own source available at the Percentage 15% revenues in the end of the FY annual increase. participating (July 15, 2013). municipalities. 15% Growth rate is Actual estimated based (est.) on 2nd trimester municipal 39 revenue collection. Number of 36,000 50,000 70,000 92,000 On track based beneficiaries, (F 35% (F 35% (F 35% (F 35% on number of percentage of Target Indicator Four: Total DG DG DG DG beneficiaries beneficiaries number of people (of which 25,000 (F 10%) 10%) 10%) 10%) estimated based who are females and people from 35% DG on planned females (F) and disadvantaged groups) 10%) activities. Final percentage of benefiting from the project numbers beneficiaries activities. available by from 40,000 Actual September 15, disadvantaged (est.) 2013 groups (DG). INTERMEDIATE RESULTS Intermediate Result (Component One – Strengthening Municipal Planning Capacity for Urban Development): Municipal block grants effectively utilized by the participating municipalities On track based Intermediate Result Target 35% 35% 35% 35% on planned indicator One: Municipal Percent of activities. Final Grant allocated to municipal grant 35% reports will be programs targeting women, allocated to available by children and disadvantaged capital projects. 40% Actual September 30, groups. (est) 2013. Intermediate Result indicator Two: Number of municipalities submitting Target N/a 6 6 6 satisfactory annual plans Indicator will for the municipal block Number N/a apply from year grants to the MoUD by 3. November 15 (end of first Actual N/a trimester of the Fiscal Year) Intermediate Result indicator Three: Number Number N/a Target 6 6 6 6 municipalities submitting 40 satisfactory annual progress reports to MoUD for the municipal block grants by Actual 6 August 15 (one month after the end of the Fiscal Year) Intermediate Result (Component Two – Capacity Building for Municipal Infrastructure Development): Infrastructure in participating municipalities constructed and/or rehabilitated. Target Achieved: Target 3 13 18 18 Bidding process Intermediate Result of Amar narayan indicator One: Number of Temple, Tansen municipal infrastructure Number of Progress and Dhankuta sub-projects successfully appraised 0 reported by the Market appraised and ready for project TDF Completed, bidding (i.e. bidding notice Gokul marg and published) Actual 4 Mechinagar Gate is ready for bidding notice Intermediate Result Target 0% 20% 60% 100% Percent of IDA Progress indicator Two: Percentage 0% fund reported by the of funds for municipal sub- disbursement Actual 0% TDF projects disbursed. Intermediate Result (Component Three – Institutional Development): Strengthened institutional capacity of the participating municipalities and project agencies. Intermediate Result Target - 80% - 90% indicator One: TDF’s TDF record as of collection ratio meet 75% On track 31st March 2013 prescribed thresholds Actual 75.04% Intermediate Result Target N Y Y Y indicator Two: Standard N = No lending policies and Y = Yes N procedures applied to all ETP municipal sub-projects Actual N 41 Intermediate Result indicator Three: Number Target 0 3 6 6 MoUD has of municipalities that have Number of prepared ToR to developed and approved Municipality 0 prepare planning norms and guidelines building byelaws based on Actual 0 the guidelines by MoUD Intermediate Result indicator Four: Policy N = No Target N Y1 Y2 Y2 MoFALD has guidelines and procedures Y1 = Yes prepared ToR to for municipalities on (updated) N prepare governance and budget Y2 = Yes guidelines planning updated and (implemented) Actual N implemented by MoFALD Intermediate Result indicator Five: Policy N = No guidelines and procedures Y1 = Yes Target N Y1 Y2 Y2 MoUD has for municipalities on (developed prepared ToR to N physical planning and /updated) prepare infrastructure development Y2 = Yes guidelines developed/ updated and (implemented) Actual N implemented by MoUD 42