Document of The World Bank Report No: ICR00004118 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-79160) ON A LOAN IN THE AMOUNT OF US$80 MILLION TO THE REPUBLIC OF EL SALVADOR FOR A LOCAL GOVERNMENT STRENGTHENING PROJECT June 27, 2017 FISCAL YEAR 2017 ABBREVIATIONS AND ACRONYMS CCC Citizen Control Committees COMURES Corporation of Municipalities of the Republic of El Salvador (Corporación de Municipalidades de la República de El Salvador) CPS Country Partnership Strategy FAO Food and Agriculture Organization of the United Nations FODES Fund for the Economic and Social Development of Municipalities (Fondo para el Desarrollo Económico y Social de las Municipalidades de El Salvador) FISDL Fondo de Inversión Social para el Desarrollo Local GoES Government of El Salvador IPP Instances of Participative Planning (Instancias de Participación Permanente) ISDEM Salvadoran Institute for Municial Development (Instituto Salvadoreño de Desarrollo Municipal) MARN Ministry of the Environment and Natural Resources (Ministerio de Medio Ambiente y Recursos Naturales) MH Ministry of Finance (Ministerio de Hacienda) MIGOBDT Ministry of the Interior and Territorial Development (Ministerio de Gobernación y Desarrollo Territorial) M&E Monitoring and Evaluation OPLAGEST National Office for Territorial Planning, Management and Control (Oficina de Planificación, Gestión y Control del Territorio) PDO Project Development Objective PEP Strategic Participatory Plans (Planes Estratégicos Participativos) PFGL Local Government Strengthening Project (Proyecto de Fortalecimiento de Gobiernos Locales) SAE Secretariat of the Presidency for Strategic Affairs (Secretaría de Asuntos Estratégicos) SAFIM Integrated Municipal Financial Administration System (Sistema de Administración Financiero Integrado Municipal) SIGMUNI Municipal Management Information System (Sistema de Información de la Gestión Municipal) SSDT Under-Secretariat of Territorial Development and Decentralization (Subsecretaría de Desarrollo Territorial y Descentralización) STP Technical and Planning Secretariat of the Presidency (Secretaría Técnica y de Planificación de la Presidencia) UEP Project Implementing Unit (Unidad de Ejecución del Proyecto) UEP-MH UEP at the Ministry of Finance Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Sector Manager: Ming Zhang Project Team Leader: Victoria Stanley ICR Team Leader: Victoria Stanley ICR Main Author: Ana I. Aguilera EL SALVADOR Local Government Strengthening Project CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design ............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 5 3. Assessment of Outcomes .......................................................................................... 13 4. Assessment of Risk to Development Outcome......................................................... 19 5. Assessment of Bank and Borrower Performance ..................................................... 20 6. Lessons Learned ....................................................................................................... 23 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 24 Annex 1. Project Costs and Financing .......................................................................... 25 Annex 2. Outputs by Component ................................................................................. 26 Annex 3. Economic and Financial Analysis ................................................................. 36 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 43 Annex 5. Beneficiary Survey Results ........................................................................... 46 Annex 6. Stakeholder Workshop Report and Results................................................... 49 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 50 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 51 Annex 9. List of Supporting Documents ...................................................................... 52 Annex 10. PDO and Intermediate Outcome Indicators ................................................ 54 Annex 11. Agreed Institutional Arrangements for Sustainability ................................ 57 MAP A. Basic Information Local Government Country: El Salvador Project Name: Strengthening Project Project ID: P118026 L/C/TF Number(s): IBRD-79160 ICR Date: 05/18/2017 ICR Type: Core ICR REPUBLIC OF EL Lending Instrument: SIL Borrower: SALVADOR Original Total USD 80.00M Disbursed Amount: USD 79.87M Commitment: Revised Amount: USD 80.00M Environmental Category: B Implementing Agencies: Fondo de Inversion Social para el Desarrollo Local Ministerio de Hacienda Cofinanciers and Other External Partners: el Instituto Salvadoreño de Desarrollo Municipal (ISDEM) B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 01/25/2010 Effectiveness: 11/18/2010 01/08/2013 Appraisal: 04/19/2010 Restructuring(s): 07/29/2014 08/13/2015 Approval: 06/01/2010 Mid-term Review: 05/31/2013 05/20/2013 Closing: 11/30/2015 12/31/2016 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Major Sector/Sector Public Administration Sub-National Government 29 29 Central Government (Central Agencies) 4 4 Energy and Extractives Other Energy and Extractives 11 11 Transportation Rural and Inter-Urban Roads 34 34 Water, Sanitation and Waste Management Other Water Supply, Sanitation and Waste 22 22 Management Major Theme/Theme/Sub Theme Public Sector Management Public Administration 48 48 Administrative and Civil Service Reform 8 8 Municipal Institution Building 48 48 Urban and Rural Development Urban Development 25 25 Municipal Finance 25 25 Services and Housing for the Poor 15 15 Urban Infrastructure and Service Delivery 5 5 E. Bank Staff Positions At ICR At Approval Vice President: Jorge Familiar Calderon Pamela Cox Country Director: J. Humberto Lopez Laura Frigenti Practice Ming Zhang Ethel Sennhauser Manager/Manager: Project Team Leader: Victoria Stanley Mark A. Austin ICR Team Leader: Victoria Stanley ICR Primary Author: Ana Isabel Aguilera De Llano F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project development objective is to improve the administrative, financial and technical processes, systems and capacity of local governments to deliver basic services, as prioritized by local communities, in the medium and long-term. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years All locally defined and prioritized municipal subproject investments of 262 municipalities, which are financed by the Project, are implemented in Indicator 1: accordance with fiduciary and safeguards policies as well as national standards. Value 0% 100% 98% quantitative or Qualitative) Date achieved 06/02/2010 06/02/2010 12/31/2016 Comments Substantially achieved. Percentage achieved for this indicator is 98% (incl. % (87% for fiduciary and 97.7% for safeguards). achievement) Percentage of local governments that progress by at least one capacity category on areas for which they received technical assistance. See Annex Indicator 2: 10 for explanation of capacity categories. Value 0% 100% 85% 87% quantitative or Qualitative) Date achieved 06/02/2010 06/02/2010 07/29/2014 12/31/2016 Comments Achieved. The actual value surpassed the target by 2 percentage points as (incl. % reported in the Final Evaluation achievement) Percentage of requests from local governments for technical assistance Indicator 3 : received by ISDEM, dealt with on a timely and satisfactory manner. Value 0% 90% 90% quantitative or Qualitative) Date achieved 06/02/2010 06/02/2010 12/31/2016 Achieved, as measured by the Final Evaluation Report, 2,893 requests Comments were received, of which 2,560 were dealt with in a satisfactory and timely (incl. % achievement) manner. (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Percentage of investments satisfactorily completed according to Indicator 1 : contractual documents (including technical specifications). Value 0% 80% 91% (quantitative or Qualitative) Date achieved 06/02/2010 06/02/2010 12/31/2016 Achieved. The actual value achieved surpassed the target value by 11 Comments percentage points as measured by a series of operational and financial (incl. % achievement) audits carried out throughout the project period in 221 municipalities. Percentage of investments built/rehabilitated that are effectively used at Indicator 2 : the end of project. Value 0% 80% 92% (quantitative or Qualitative) Date achieved 05/30/2013 05/30/2013 12/31/2016 Achieved. The actual value achieved surpassed the original target by 12 Comments percentage points. The indicator was measured through a representative (incl. % sample of investments or sub-projects as described in the Final Evaluation achievement) Report. Percentage of Citizen Control Committees (CCC) that supervise Indicator 3: construction and agree to monitor the functioning of project financed investments. Value 0% 80% 89% (quantitative or Qualitative) Date achieved 01/08/2013 01/08/2013 12/31/2016 Achieved. 97% of the CCCs supervise construction and 81% agree to Comments monitor the functioning of project financed investments. The indicator (incl. % was measured through a representative sample of investments or sub- achievement) projects described in the Final Evaluation Report. Percentage of local governments that have plan for maintenance of sub- Indicator 4: projects. Value 0% 80% 98% (quantitative or Qualitative) Date achieved 01/08/2013 01/08/2013 12/31/2016 Comments 123% of target value achieved. (incl. % achievement) Number of local governments that have completed and implemented a Indicator 5: public finances (fiscal consolidation) Value 0 128 112 149 (quantitative or Qualitative) Date achieved 01/08/2013 01/08/2013 07/29/2014 12/31/2016 Comments 133% of target value achieved. (incl. % achievement) Number of local governments that have completed a disaster risk Indicator 6: management plan. Value 0 209 131 174 (quantitative or Qualitative) Date achieved 01/08/2013 01/08/2013 07/29/2014 12/31/2016 Comments 133% of target value achieved. (incl. % achievement) Number of local governments that have completed and implemented Indicator 7: strategic participatory plans (PEP). Value 0 114 54 70 (quantitative or Qualitative) Date achieved 01/08/2013 01/08/2013 07/29/2014 12/31/2016 Comments 130% of target value achieved. This indicator was revised as part of the (incl. % Mid-Term Review evaluation. achievement) Number of local governments that have implemented and are using the financial management system (SAFIM) developed by the Ministry of Indicator 8: Finance. Value 0 47 93 (quantitative or Qualitative) Date achieved 01/08/2013 01/08/2013 12/31/2016 Comments Target exceeded by almost 100%. (incl. % achievement) Decentralization proposal prepared. Indicator 9: Value n/a Yes. Yes. (quantitative or Qualitative) Date achieved 06/02/2010 06/02/2010 12/31/2016 Comments Achieved. (incl. % achievement) A strategy and new curriculum for ISDEM's Training Center has been Indicator 10: produced and implemented. Value No. Yes. Yes. (quantitative or Qualitative) Date achieved 06/02/2010 06/02/2010 12/31/2013 Comments Achieved. Training Center and curriculum in place. (incl. % achievement) Number of local government employees and officials trained through Indicator 11: ISDEM's vocational training and the municipal strengthening program. Value 0 150 722 (quantitative or Qualitative) Date achieved 01/08/2013 01/08/2013 12/31/2016 Comments 481% of target achieved. (incl. % achievement) ISDEM has set up and maintains a database to monitor its technical Indicator 12: assistance to local governments. Value No. Yes. Yes. (quantitative or Qualitative) Date achieved 05/30/2013 05/30/2013 12/31/2016 Comments Achieved. (incl. % achievement) G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 06/30/2010 Satisfactory Satisfactory 0.00 2 02/26/2011 Satisfactory Satisfactory 41.00 3 08/12/2011 Satisfactory Satisfactory 41.00 4 05/02/2012 Satisfactory Satisfactory 42.51 5 09/22/2012 Satisfactory Satisfactory 44.54 6 02/09/2013 Satisfactory Satisfactory 48.54 7 08/17/2013 Satisfactory Moderately Satisfactory 52.38 8 01/07/2014 Satisfactory Satisfactory 60.52 9 06/12/2014 Satisfactory Satisfactory 62.38 10 11/30/2014 Moderately Satisfactory Moderately Satisfactory 67.31 11 06/23/2015 Moderately Satisfactory Moderately Satisfactory 72.00 12 07/14/2015 Moderately Satisfactory Moderately Satisfactory 72.50 13 10/13/2015 Moderately Satisfactory Satisfactory 73.48 14 05/16/2016 Moderately Satisfactory Moderately Satisfactory 77.26 15 11/02/2016 Moderately Satisfactory Moderately Satisfactory 79.73 16 12/13/2016 Satisfactory Moderately Satisfactory 79.73 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions Given implementation arrangements were not working as originally expected and ISDEM was not 01/08/2013 S S 48.54 able to implement Component 2 due to limited managerial capacity, a Level 2 restructuring was requested to make changes to ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions the implementation arrangements, results framework and reallocation of resources among disbursement categories. A Level 2 restructuring was requested to make further modifications to the results framework. More specifically, changes were made to: (i) clarify what will be measured and how; (ii) ensure consistency 07/29/2014 N S S 62.69 between the English and Spanish versions; and (iii) revise Component 2 targets based on a more realistic understanding of how many plans could be implemented before the Project's end date. Extension of closing date to December 31, 2016 (13 months) and reallocation of 08/13/2015 MS MS 72.50 available resources among disbursement categories. I. Disbursement Profile 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. The economic slowdown caused by the 2008 global financial crisis reversed El Salvador’s achievements in terms of poverty reduction, as well as economic and fiscal sustainability. The GDP growth rate declined from 4.7 percent in 2007 to 2.5 percent in 2009. In 2009, tax revenues declined by 11 percent and the fiscal deficit increased 5 percent of GDP, compared to 3.1 percent in 2008. In 2008, overall poverty had increased to 42.3 percent compared to 35.5% in 2007.1 2. The impact of the financial crisis particularly affected municipalities. As a consequence of decreased government income in the midst of the global financial crisis, municipal governments lost 15 percent of income in 2009. The municipalities primarily responded to this revenue shortfall by reducing investments in public service delivery infrastructure by 20 percent. Municipalities have limited revenue powers and most of their income comes from central government transfers and borrowing. Many of the municipalities were already in debt and a large portion of central transfers were being used for debt servicing. 3. Decentralized service delivery needs remained significant. Historically in El Salvador, most public services, investments and resources have been highly centralized . Starting from 1998, local governments began to have a more important role in service delivery; yet it was insufficient to cover the needs of local populations in terms of investments and local service provision. In 2010, half of the country’s households did not have water connections and a million families (two thirds of the population) were not connected to sewerage systems. Distance to paved roads for the poorest people living in rural areas exceeded five kilometers, which is double the distance travelled by non-poor families. 2 In a municipal diagnostic carried out for the preparation of the Project, a representative sample of Municipalities and communities identified their top investment priorities as improving access to potable water, rural roads, electricity and the installation of local sewer systems. 4. Municipalities were highly dependent on fiscal transfers from the central government and had weak revenue autonomy. Municipalities remained highly dependent on fiscal transfers from the national government to cover operational expenses and debt service costs. Own-source revenue collection represented only a small fraction of municipal revenue (2.3 percent).3 Fiscal transfers were highly centralized and allocated in monthly quotas to municipalities based on the formula established in the Economic 1 World Bank Project Appraisal Document, Local Government Strengthening Project, April 2010. 2 Recent Economic Developments in Infrastructure – Strategy Report (REDI-SR) Infrastructure Service Provision in El Salvador. Fighting Poverty, Resuming Growth. October 10, 2006. Report No. 37689-SV. Jordan Schwartz. 3 Maria, Acero, Aguilera, & Garcia Lozano (2017). 1 and Social Municipal Development Fund (FODES) Act. Under this revenue sharing mechanism, seven percent of the central government’s revenue was distributed according to a formula-based approach in which resources are allocated proportionally according to four key variables: population (50 percent), equal share 4 (25 percent), poverty (20 percent), and land area (5 percent). This formula is heavily biased in favor of smaller municipalities. 5. Rationale for Bank’s engagement. The rationale for Bank involvement was based on the following Project related aspects: (a) The Project built on the Bank’s knowledge and experience with regional and international good practices. The Bank brought its knowledge and experience on local government strengthening from analytical and project work in Latin America (Dominican Republic, Nicaragua, Mexico, Bolivia, Peru, Brazil, Chile), Asia (India, Philippines), and Africa (Ethiopia, Senegal, Rwanda and Guinea) to the project design. This included participatory planning, disaster response and mitigation, and decentralization. (b) The Project complemented and expanded efforts made by the donor community to assist the Government in the decentralization process. Initiatives supported by other donors, including Spain, Germany and the United States, encouraged reform in local government management processes. The Project built on these lessons and processes, and provided an opportunity for the GoES to broaden the scope and scale of those initiatives. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 6. Project Development Objective (PDO). The PDO was to improve the administrative, financial and technical processes, systems and capacity of local governments to deliver basic services, as prioritized by local communities, in the medium and long-term. 7. Key Indicators: Progress toward achievement of the PDO was to be measured by the following outcome indicators:  Project Outcome Indicator 1: All locally defined and prioritized Municipal Sub- project investments of 262 municipalities financed by the Project are implemented in accordance with fiduciary and safeguards policies as well as national standards.  Project Outcome Indicator 2: Municipalities receiving additional TA progress by at least one capacity category on areas for which they received TA5.  Project Outcome Indicator 3: Local governments are regularly requesting municipal administration and planning support from ISDEM, and ISDEM has 4 Equal share means that 25 percent of the available resources are distributed among the 262 municipalities on an equitable basis (i.e. an equal amount to all). 5 See Annex 10 for explanation of capacity categories and methodology. 2 been budgeted sufficient resources to respond and has a system to prioritize and meet requests in a timely manner. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 8. There were no changes made to the PDO. However, on January 8, 2013, the PDO indicators were revised to better define what would be measured, without changing the basic nature of the indicators. The original target of Indicator 2 was reduced, as it was deemed unlikely that 100 percent of municipalities would improve their capacity through technical assistance. Revised PDO Indicators based on January 2013 restructuring 2 The indicator was revised to “Percentage of local governments that progress by at least one capacity category on areas for which they received technical assistance� (see Annex 10 for detailed description). Baseline: 0% Original target: 100% Revised target: 85% 3 The indicator was revised to “Percentage of requests from local governments for technical assistance received by ISDEM, dealt with in a timely and satisfactory manner�. Baseline: 0% End target: 90% 1.4 Main Beneficiaries 9. Direct beneficiaries. The direct beneficiaries were the 262 municipalities and their respective staff who received training and other capacity building. Activities under Component 1 also directly benefited communities receiving improved or increased service delivery (new roads, sanitation, electricity, etc.) Component 2 activities benefited the municipalities, their staff and citizens through improved planning processes and strategies. The implementing agencies also benefitted directly from capacity building under Component 2. The Project created over 13,000 direct temporary jobs and over 4.5 million people benefited from the implementation of infrastructure works. 10. Indirect beneficiaries. All citizens benefited indirectly from enhanced planning processes and plans and from the improved service delivery in their communities and better trained municipal staff. National firms benefited from the award of contracts for the Component 1 sub-projects and many local workers benefited from the jobs generated. 1.5 Original Components (as approved) 11. The project was designed with four components to support the achievement of the PDO: (i) decentralized service delivery; (ii) strengthening local governments; (iii) decentralization strategy; and (iv) project management. Components 2 and 3 contribute to achieving Part 1 of the PDO “to improve the administrative, financial, and technical processes and systems�. Component 3 aimed at supporting the preparation of a decentralization strategy, in line with the government’s goal of deepening the decentralization and deconcentration of the public sector in the medium and long term. Component 1 and institutional strengthening activities under Component 2 support Part 2 of the PDO “to improve capacity of local governments to deliver basic services, as 3 prioritized by local communities, in the medium and long term�. Component 4 is an overall support and project management component. 12. Component 1: Promotion of Decentralized Service Delivery. Provision of subproject grants to municipalities. 13. Component 2: Strengthening of Municipal Governments. (a) Strengthening of municipalities’ institutional and technical capacity to design and implement municipal subprojects, through, inter alia, the provision of technical assistance and training to municipalities’ personnel to prepare, implement, and supervise municipal subprojects. (b) Support for the implementation of the Municipal Administrative Career Law, through, inter alia: (i) the development or update (as the case may be), and implementation of Municipal rules, processes and procedures; (ii) the support of the Municipal Training Center in ISDEM, and the establishment of regional offices of the center in selected sites; and (iii) the creation of a national registry for the municipal administrative career, including the carrying out of periodic update information contained in said registry. (c) Strengthening of the participatory planning capacity of municipalities, through, inter alia, the provision of technical assistance and training to improve the processes and systems for the preparation of strategic participatory plans and participatory municipal development plans. (d) Strengthening of the procurement and financial management capacity of municipalities, through, inter alia, (i) the provision of technical assistance and training to improve procurement practices, policies and procedures; and (ii) the acquisition and utilization of equipment, including hardware and software6. (e) Strengthening of the disaster risk management capacity of municipalities, through, inter alia: (i) the evaluation of current risk management practices; (ii) support the development of a national risk management policy, in coordination with the competent national authorities; and (iii) the provision of technical assistance to municipalities in disaster risk reduction activities. (f) Strengthening of the institutional capacity of the Salvadoran Institute for Municial Development (ISDEM) and Under-Secretariat of Territorial Development and Decentralization (SSDT), through, inter alia, the design and implementation of strategies, plans, programs, institutional structures, rules, and procedures to respond to local needs and development. 14. Component 3: Decentralization Strategy Support. Support for a national decentralization strategy for service provision, through, inter alia: (a) the evaluation of 6 As part of the November, 2010 restructuring, Activity (d) under Component 2 was divided into two sub- activities: (i) strengthening of the procurement and financial management capacity of 100 selected municipalities; and (ii) administrative and technical support and oversight for the preparation and execution of technical assistance sub-project grants. 4 current rules, processes and procedures for said service provision; and (b) support for the development of a national decentralization strategy and plan to implement said strategy. 15. Component 4: Project Management. (a) Support to the Fondo de Inversión Social para el Desarrollo Local (FISDL) and ISDEM in the coordination and implementation of the Project, through, inter alia, the provision of technical assistance and training, and the acquisition and utilization of goods. (b) Design and implementation of a Project communications strategy to support Project implementation. (c) Provision of technical assistance for the establishment of a Project monitoring and evaluation system. (d) Carrying out of technical studies to develop training models to support local public sector management, all as approved by the Bank; and (ii) provision of technical assistance to carry out the audits referred to in Sections II.B.3 and V of Schedule 2 to the Legal Agreement, all under terms of references acceptable to the Bank. 1.6 Revised Components 16. No revisions were made to the project components after the government’s pre- effectiveness changes in July and November 2010. However, the allocation of funds across components experienced minor variations throughout the project’s life span. 1.7 Other significant changes 17. Restructurings. The Project experienced five restructurings: two before project effectiveness and three during project implementation. Due to system limitations7, the latter are summarized in Section H of the Data Sheet; while the first two are described below:  July 2010 restructuring: Following Board Approval, on June 1, 2010 a level 2 restructuring was approved to reallocate funds between components in response to the government’s request to allocate more resources to municipalities; US$3.9 million was reallocated from Components 3 and 4 to Component 2.  November 2010 restructuring: Following ratification of the Loan by the National Legislative Assembly on August 26, 2010, a level 2 restructuring was requested to allocate more resources to be directly executed by municipalities. Specific changes related to: (i) changing the implementation arrangements of activities B.4 and B.5; (ii) adding a new disbursement category called “Technical Assistance Subprojects Grants� under Part B; and (iii) increasing the Designated Account ceiling amount for Part A of the Project, given that additional resources were to be transferred from Ministry of Finance directly to the municipalities. 7 The WBG Operations Portal does not allow to include information on restructurings that took place before project effectiveness. 5 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Soundness of background analysis 18. The Project was closely aligned with the country’s development goals and Bank strategy at the time of approval. The Five Year Development Plan 2010-2014 established three strategic goals to which the project aimed to contribute, namely: (i) reducing poverty and inequality by improving living conditions; (ii) deepening the decentralization and deconcentration of the public sector (including reforms to improve sustainability of public finances); and (iii) promoting efficient management of disaster and environmental risks. The Project was also consistent with the World Bank Group’s El Salvador Country Partnership Strategy (CPS) FY 2010-2012 (Report #50642-SV) and specifically contributed to two of the strategic objectives of the CPS: (i) strengthening fundamentals for economic recovery by addressing macro and institutional vulnerabilities; and (ii) increasing economic opportunities, particularly for the poor. The Project supported these objectives by (i) promoting investments in key basic services prioritized by local communities; and (ii) strengthening local governments’ systems and institutional capacity to improve service delivery, public financial management and transparency, and disaster risk management. 19. A municipal diagnostic helped inform and prioritize key areas to support local government’s institutional strengthening. During project preparation, specific activities to improve local governments’ capacity were identified through a municipal diagnostic of 10 representative municipalities in the country. This assessment focused on three key pillars: (i) an evaluation of the country’s legal framework to support local governments; (ii) a review of financial mechanisms available to municipalities to assess whether these were sufficient and flowed efficiently to implement local mandates; and (iii) an assessment of the existing capacity of local governments. The analysis identified six areas of greatest deficiency in terms of municipal public management: (i) participatory planning; (ii) procurement and contract management; (iii) financial management; (iv) organizational structure, stability and continuity of municipal staff; (v) transparency and internal procedures; and (vi) capacity in designing, preparing and executing municipal development investments. Adequacy of government’s commitment 20. The Project reflected the GoES’ preferences for resource allocation and national priorities. Following ratification of the Loan by the National Assembly, the project was restructured to direct more technical assistance resources to be executed directly by municipalities in order to implement local investments. This was in line with the government’s priority for channeling more resources directly to municipalities. In addition, the Project was the first in the country to actively engage with all 262 municipalities, contributing to the national decentralization agenda. 6 21. Local investments under Component 1 were prioritized through participatory planning processes. The Project incorporated and mainstreamed participatory planning schemes that were successful in previous engagements in the country, while also building on good international practices 8. The Project built on the creation of Citizen Control Committees (CCCs) 9, which was a successful model from other projects and contributed to the achievement of the PDO by ensuring strong citizen engagement in the execution of local investments. The role of the CCCs was to closely supervise community-prioritized local investments throughout all stages of the sub- project cycle (design, preparation and execution). These committees participated in the prioritization of sub-projects and helped ensure that community priorities were accurately reflected during the execution of works by municipal governments and contractors. The Project also developed a participatory planning methodology that considered ways to tackle potential barriers for citizen engagement (e.g. high participation costs, flexible meeting schedules, etc.). Some CCCs were also trained on environmental and social safeguard policies. Assessment of project design 22. The Project design gained from strong engagement with multiple stakeholders. The Ministry of Finance, ISDEM, FISDL, SAE, SSDT and COMURES were part of the implementation arrangements. An Inter-institutional Committee comprised of implementing agencies at the national level and COMURES met regularly to ensure coordination in the execution of project components and local investments. Central execution of funds by national entities was combined with decentralized implementation of certain activities and funds. This design guaranteed greater inclusiveness in project investments and strengthened institutional capacity at the municipal level, benefiting all regions. 23. The Project over estimated ISDEM’s managerial capacity during the design and preparation stages. ISDEM was tasked with project management and fiduciary activities for the implementation of Component 2 and contracting under Component 3 (implemented by SSDT). Given that ISDEM did not have prior experience of managing Bank-financed projects, the Bank team recommended setting up a project executing unit (UEP- Unidad Ejecutora del Proyecto) to be responsible for these functions. However, ISDEM was unable to successfully carry out these tasks, negatively affecting project implementation during the first half of the project. Risks related to the institution’s political structure, limited managerial capacity, delays in contract management, and insufficient financial and human resources led to a Level 2 restructuring on January 8, 8 Project design benefited from lessons learned from various projects financed by the German International Development Agency (GTZ), the Spanish International Development and Cooperation Agency (AECID) and the United States Agency for International Development (USAID) in El Salvador over the previous ten years. 9 Instituto Salvadoreño de Desarrollo Municipal (ISDEM). (2012). Guía de Funcionamiento de los Comités de Contraloría Ciudadana. San Salvador. 7 2013. Most of these responsibilities were later transferred to the Ministry of Finance (which assumed the fiduciary functions) and SAE (for overall project coordination and management)10, and ISDEM became solely responsible for providing technical assistance to municipal governments under Component 2. These modifications, along with changes in ISDEM’s senior leadership team, led to improved implementation. 24. Project assessment over estimated ISDEM’s capacity to work on DRM issues. The original project design tasked ISDEM with providing technical assistance to municipalities on several topics 11 , including disaster risk management. However, ISDEM’s Organic Law (Decree No. 616/1987) mandates that the institution is solely responsible for delivering technical assistance on technical, 12 planning, financial, and administrative management. The lack of an institutional mandate and experience to deliver technical assistance on DRM issues became another implementation barrier 13 . However, this challenge was eventually resolved with strong support from the UEP. Qualified staff at the UEP provided technical assistance to ISDEM staff on two key activities: (i) developing methodological guidelines for preparing municipal DRM plans that were used as training materials for municipalities; and (ii) training on DRM topics. During project implementation, the Project also provided scholarships to eight ISDEM staff to pursue a professional certificate on DRM. These actions not only contributed to resolving project implementation challenges, but also helped to build technical capacity at ISDEM and strengthen DRM capacity at the municipal level. Assessment of risks 25. The overall risk at appraisal was correctly assessed as Substantial. Three ‘Substantial’ risks were identified at project appraisal, with associated mitigation measures: (i) the risk of not having an electoral majority to approve Bank loans in Congress, which was mitigated by engaging in a strong dialogue with all political parties 10 The January 8, 2013 restructuring was approved to transfer the leading responsibility for the implementation of Component 2 from ISDEM to the project coordinating entity at the SAE. The restructuring also entailed that the UEP and its reporting, monitoring, financial management, and auditing responsibilities, originally assigned to ISDEM, were transferred to the Ministry of Finance (Report No. 70534-SV. Restructuring Paper. El Salvador Local Government Strengthening Project Loan (P118026). 11 The Project’s implementation arrangements for Component 2 established that ISDEM was responsible for providing technical assistance to all municipalities on basic procurement and financial management, environmental and social policies and procedures, participatory planning, and DRM. ISDEM was also responsible for delivering training and capacity building activities for the professionalization of the municipal civil service (Report No. 53980-SV. Project Appraisal Document on a Proposed Loan in the amount of US$80 million to the Republic of El Salvador for a Local Government Strengthening Project (P118026). 12 According to the Law, technical capacity refers to the areas of institutional governance, own-source revenue collection systems, budget and project preparation, construction and supervision of works, as well as operation and maintenance of municipal public services. It does not include capacities for disaster risk management (DRM). (Ley Orgánica del Instituto Salvadoreño de Desarrollo Municipal. Decreto No. 616). 13 It is important to note that during preparation, this issue was vastly discussed. The Bank team initially proposed building on international expertise to support ISDEM in this capacity, but this was later discarded. 8 and building consensus; (ii) limited municipal capacity to design and implement investment activities, which were aimed to be mitigated by project activities and Bank implementation support; and (iii) limited capacity at FISDL and ISDEM to comply with safeguards and fiduciary requirements, which was mitigated by planning support activities to these institutions. Many of the identified risks materialized during implementation and mitigation measures generally ensured that project implementation was not significantly affected. 2.2 Implementation Factors that positively affected project implementation: 26. Standard methodological guidelines ensured the systematic transfer of skills to municipalities for the preparation of planning documents. The development of methodological guidelines for the preparation of Strategic Participatory Plans (PEPs), municipal fiscal consolidation plans and DRM plans helped achieve a relatively homogeneous quality of these plans across local governments. The content of the guides was developed by the UEP-MH and ISDEM and was delivered by ISDEM as part of the training curricula on municipal strengthening. These guides and the technical training courses and capacity building activities helped municipalities to develop plans that met the required standards. These guides continue to be used by ISDEM for training and support purposes. 27. The creation of technical groups within ISDEM led to institutional strengthening as well as improved Project implementation. Starting in 2012, ISDEM grouped its technical staff into technical groups in three main areas of expertise: (i) participatory planning; (ii) municipal fiscal consolidation and management; and (iii) disaster risk management. These groups were chaired by a technical expert hired by the UEP who transferred knowledge and tools to ISDEM. This reorganization supported the technical specialization of ISDEM’s staff and trainers 14 and ISDEM is now better equipped to provide support and technical assistance to municipalities more strategically by grouping requests by technical area rather than by region. Factors that negatively affected project implementation: 28. The Project’s design overestimated FISDL’s capacity to manage all procurement procedures via the decentralized execution modality, causing implementation delays. FISDL (in charge of managing procurement processes under Component 1) received over 3,300 procurement processes from the 262 municipalities, which was much greater than the anticipated volume of municipal requests. While FISDL increased the number and qualifications of staff during implementation, additional 14 Technical assistance requests from municipalities were handled on an on-demand basis, with trainers responsible for covering specific regions of the country. 9 training on procurement and technical design of works could have benefited implementation. 29. The lack of sufficiently qualified local consultants and limited local capacity affected the implementation of Component 1, especially during the initial stages. Limited technical capacity at the municipal level and the inability of many local governments to find enough qualified consultants15 to prepare the technical designs of works (carpetas técnicas) also resulted in much back-and-forth with FISDL. Other constraining factors included inadequate or insufficient training delivered by FISDL to municipalities and insufficient supervision by FISDL and ISDEM staff at the start of the Project. Mid-Term Review and further actions: 30. The Mid-term Review (MTR) was held in two parts, in May and October 2013, in order to thoroughly cover all aspects of the Project. The first part focused on technical supervision of Component 1 sub-projects, while the second part reviewed the other components and activities. Overall implementation and progress toward PDO achievement were assessed as satisfactory; however, a number of weaknesses were outlined on monitoring and evaluation, and safeguards. Shortly after the MTR, a Bank mission focused on M&E which led to the revision of the M&E through restructuring. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 31. M&E design. The Results Framework adequately reflected initial project design.. PDO indicators 1 and 2 directly measured progress toward the objective of achieving increased local capacity to deliver community-prioritized investments. PDO indicator 3 measured the sustainability of institutional arrangements to support capacity building activities to municipalities in the medium and long term. However, intermediate indicators and targets of PDO indicators needed to be adjusted during the January 2013 restructuring to better measure achievement of the development objective. Indicator measurement tools were only developed during project implementation; these contributed to the development of M&E capacity. 32. M&E implementation. M&E implementation had a slow start, but was successfully executed during the second half of the project. The UEP struggled to hire an M&E specialist during the initial stages, and then experienced several staff rotations16. However, starting in 2012, the UEP submitted quarterly and annual progress reports to the Bank, monitoring progress towards the achievement of the PDO and overall project implementation. In addition, as discussed above, project monitoring greatly benefited from the findings of the Mid Term Review. Additional indicators were added to identify 15 Due mostly to limitations of the domestic labor market (i.e. lack of enough qualified consultants for such a large amount of work for 262 municipalities). 16 A total of three M&E specialists were hired over the life of the Project . 10 and implement corrective measures during the remainder of the Project. These proved particularly useful for the formulation and monitoring of PEPs and supported the work of the CCCs. 33. M&E utilization. As part of the M&E tools developed by the Project, the Municipal Management Index received recognition in the country and by independent evaluators. This allowed a more accurate measurement of PDO indicator 2, and could also be adopted to periodically measure progress in El Salvador for future efforts. It is important to note that, as in other projects aimed at strengthening capacities, indicators toward these objectives can only be partially attributed to Project, given that experimental studies were not possible at the time of evaluation. 2.4 Safeguard and Fiduciary Compliance 34. Social safeguards compliance is rated Satisfactory. The Bank’s social safeguards policies on Indigenous Peoples (OP/BP 4.10) and Involuntary Resettlement (OP/BP 4.12) were triggered during preparation. Safeguards documents (resettlement plans and indigenous peoples plan) were prepared and disclosed in compliance with Bank requirements. Two sub-projects required involuntary resettlement and two Abbreviated Resettlements Plans were prepared (for Zacatecoluca in 2012 and El Carmen in 2013). Both plans were documented and according to project documentation, the sub-projects were of low-impact. The final ISR reported no pending OP 4.12 issues and an estimated 126 people affected. In addition, an Indigenous Peoples Plan was prepared in Izalco during the formulation of its Strategic Participatory Plan (PEP). During Project implementation, the Borrower lacked a social specialist to monitor social issues. One lesson learned is to expand, wherever feasible, the role and institutional strengthening of social safeguards through experienced and trained social and environmental teams in order to facilitate the eventual establishment of a Department of Social and Environmental Management. 35. Environmental safeguards compliance is rated Moderately Satisfactory. The following Bank environmental safeguards policies were triggered: Environmental Assessment (OP/BP 4.01), Natural Habitats (OP/BP 4.04), Pest Management (OP 4.09) and Physical Cultural Resources (OP 4.11). Safeguards documents, complying with Bank requirements, were prepared and disclosed prior to project appraisal. Despite issues during project implementation, the last ISR rated overall Environmental safeguards as Moderately Satisfactory as nearly all issues had been resolved. FISDL carried out over 500 environmental supervision missions and identified over 100 sub-projects that required remediation measures; 99% of these have been resolved. The environmental and social remediation analysis and plan is required for the Canton Olomega Bridge in the municipality of El Carmen to address the impacts from occasional flooding due to the poor design of the bridge. As part of the next lending operation on municipal development in El Salvador (currently in preparation), the Bank will follow up on this case. 11 36. Financial management compliance is rated Moderately Satisfactory. From project approval in June 2010 to October 2013 (MTR mission), project performance in the area of financial management was rated as Satisfactory (S). The first disbursement to the project was processed in December 2010 as an advance to the municipalities for almost a 50% of the total funds; however, utilization of these funds and documentation started only in early 2012. During the MTR mission, FM Performance rating was downgraded to Moderately Satisfactory as project control processes needed to be strengthened by enhancing the monitoring of project funds at the municipal level; this was also highlighted in the operational audit report. Additional control measures were discussed agreed during the MTR and were included in the updated Operational Manual. In late 2014 FM performance was further downgraded to Moderately Unsatisfactory (MU) because of: (i) significant delays in the documentation of the municipal transfers which had a high balance; (ii) some municipalities not submitting project profiles for approval; and (iii) continuing weaknesses in the monitoring of project funds at the municipal level. A subsequent mission in late June 2015 found that as a result of implementation of the agreed Action Plan, there was substantial improvement and the rating for FM was upgraded to Moderately Satisfactory; this rating was thereafter maintained until the final ISR. 37. IFRs were generally furnished without delays and were acceptable. Annual financial audit reports were furnished to the Bank with minor delays during the first period of execution, but this situation was normalized starting with the audit report for the year 2013. Audit opinions were unmodified (clean) throughout the project, although some internal control issues were signaled by the auditors in the Operational Audit reports. As established in the PAD, the Project carried out annual external operational audits to evaluate technical, safeguards, and administrative compliance at the municipal sub-account level. These audits were carried out by the same audit firm as the financial audits and were conducted on a selected sample of municipalities annually so that by the end of the Project all municipalities had been audited. All issues raised during these operational audits were monitored by the government and the Bank until they were resolved. 38. Procurement compliance is rated Satisfactory. Procurement performance by both the UEP and FISDL can be assessed as satisfactory. Centralized procurement actions were performed directly by the UEP, while procurement by participating municipalities was supervised by FISDL through the issuance of no objections. The final Procurement Policy Review (PPR), covering a sampling of procurement from the second semester of 2015 to December 2016, confirmed that procurement was satisfactory. The Procurement Plan was updated regularly and was satisfactory implemented, although there were substantial delays due to the large number of requests (2,615 for goods and works and 703 for individual consultancies) and limited capacity. Training, direct and timely advice and assistance provided by the Bank Team on procurement matters contributed to minimizing the impact of procurement issues. 39. One case was submitted to INT in April 2016, after the Bank was informed by the project authorities that a local firm that was awarded a contract in Cojutepeque had 12 falsified the required advance payment and performance guarantee. The firm subsequently was debarred. With the No Objection from the Bank, FISDL rescinded the contract and the work was completed by the municipal government with own resources. 2.5 Post-completion Operation/Next Phase 40. Continued support to local governments is required to sustain the participatory planning processes introduced by the project. The Final Evaluation Report indicates that over 85% of municipalities have shown strong ownership of municipal plans and Mayors intend to continue strengthening the planning processes. However, another group of local governments considered the plans only as a participation criteria for accessing Project funds. Future efforts should continue supporting the preparation and implementation of local plans (including PEPs and DRM plans); this could be led by ISDEM. Municipalities that did not prepare a PEP or DRM plan under the Project could be prioritized by future operations to ensure the availability of consistent planning instruments across all local governments in the country. Periodic follow up and monitoring of municipalities with existing plans will likely increase local ownership and improve coordination of national and local priorities. The guidelines and methodologies prepared under the Project will support this future work at the municipal level. 41. Continued support to ISDEM is necessary to strengthen institutional capacity at the local level. Training and capacity building activities for monitoring and assessment of services provided, as well as improvements to the scope or technical quality of the existing curricula, would benefit from additional support to ISDEM. 42. Sustainability of Project’s achievements. Inter-institutional arrangements to ensure sustainability include the creation of a Governance Committee 17 chaired by MIGOBDT and STP, with participation from ISDEM, FISDL, and the Ministry of Finance. The Ministry of Finance is providing resources to ensure the continued rollout of SAFIM. Financial resources will be needed to continue institutional strengthening activities. A summary of the proposed institutional arrangements to ensure the sustainability of the project’s achievements is provided in Annex 11. 43. Current pipeline operations in El Salvador (e.g., the Local Governance and Economic Development Project, GODEL) could benefit from integrating the considerations mentioned above in the project design to achieve greater development impact. Future operations should build on the successes achieved to date and use the installed capacity to support improved municipal governance and service delivery. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 17 In Spanish, Mesa de Gobernanza. 13 44. Relevance of the Objectives is rated as Substantial. The PDO continues to be in line with the higher-order objectives of the current 2015-2019 CPF. As mentioned in section 2.1, the Project’s design was closely aligned with the Five Year Development Plan 2010-2014 and World Bank Group’s 2010-2012 CPS for El Salvador. The Project continues to be relevant and aligned with the current CPF’s objectives 1 and 5 related to building safer communities and promoting the efficiency of public spending.18 In addition, the Project also contributes to three policy priorities identified in the 2015 Systematic Country Diagnostic: (i) improving the resilience of the country to natural disasters; (ii) building a more transparent and efficient state; and (iii) strengthening fiscal sustainability.19 45. Strengthening local governments was highly relevant to the country’s development goals at the time of preparation and continues to be an area of priority today. The Five Year Development Plan for 2014-2019 includes a strategic focus on stimulating economic development and bringing the government closer to citizens. The Government’s strategy towards local governance and economic development is centered on the objective of building a citizen and results oriented state. The proposed policy orientations under this area of focus include strengthening the articulation between the national and local governments, as well as between municipalities through the promotion of inter-municipal cooperation, and between cities, with the objective of developing a system of cities that acts as an engine of territorial and economic development20. 46. Relevance of the Design and Implementation is rated as Substantial. The project components were designed to directly link with the PDO. As mentioned in Section 1.5, Component 2 contributes to achieving Part 1 of the PDO, while Component 1 and institutional strengthening activities under Component 2 support Part 2 of the PDO. The Results Framework captured indicators that helped track achievement towards the PDO. PDO indicators 1 (as well as Intermediate Indicators 1 and 2) contribute to measuring the achievement of Part 1 of the PDO, while PDO Indicators 2 and 3 (and Intermediate Indicators 3 and 4) contribute to achieving Part 2 of the PDO. In addition, despite initial delays and restructuring, overall implementation arrangements remained relevant throughout the project and contributed to achieving the PDO. 3.2 Achievement of Project Development Objectives 47. Based on the findings of the Final Evaluation Report, 21 the Project has achieved its main development objective. In terms of local government capacity in 18 Report No. 95185-SV. IBRD Country Partnership Framework for the Republic of El Salvador FY16-19. 19 El Salvador Systematic Country Diagnostic. Building Strengths for a New Generation (World Bank, 2015). 20 Plan Quinquenal de Desarrollo 2014-2019. El Salvador Productivo, Educado y Seguro. Gobierno de El Salvador. 21 See Annex 5 for additional information on methodology and findings. 14 administrative and technical processes, 98% of municipalities have seen an improvement - 87% in fiduciary processes and 97.7% in environmental safeguards processes. All municipalities carried out participatory planning processes to prioritize local investments. Details of the project outputs are listed in Annex 2. 48. Achievement of PDO indicators. Achievement of PDO indicators 2 and 3 exceeded target values. PDO indicator 1 achieved 98% of the ambitious target of 100% of municipalities. PDO Indicators Target Achieved 1 All locally defined and prioritized Municipal Subproject investments of 262 100% 98% municipalities, which are financed by the Project, are implemented in accordance with fiduciary and safeguards policies as well as national standards. Baseline: 0% 2 Percentage of local governments that progress by at least one capacity category 85% 87% on areas for which they received technical assistance. Baseline: 0% 3 Percentage of requests from local governments for technical assistance 90% 90% received by ISDEM, dealt with in a timely and satisfactory manner Baseline: 0% 49. Part 1 of the PDO – To improve the administrative, financial and technical processes and systems (rated Substantial). According to the Final Evaluation Report, 54% of municipalities reported improved capacity for municipal finance, 79% on procurement capacity, 88% on organizational management, and 74% on technical processes and municipal services. More than 82% of municipalities reported that the social and environmental monitoring guidelines were used during the execution of works, and over 92% were satisfied with the supervision tasks performed by the CCCs. 50. In addition, the Project supported the country’s goal to mainstream the implementation of two important systems for improved municipal governance, i.e., the Ministry of Finance’s Integrated Municipal Financial Administration System (SAFIM) and the Municipal Management Information System (SIGMUNI)22. With support from the Project, 120 municipalities have installed SIGMUNI and trained their staff23, and 88 (of the 104 municipalities trained) currently use SAFIM, exceeding the initial target due to the strong demand from municipalities. Nearly 90% of local governments considered that municipal staff was adequately trained on SAFIM and will continue to use this system. Based on the positive results achieved to date on the use of SAFIM, the Ministry of Finance has developed two additional modules on municipal cadasters, taxes and own- source revenue collection, to train municipal staff starting in early 2017. Additional modules on local debt management and business intelligence, as well as the creation of a 22 The first was supported as one of the key objectives of the project, while the second one was not originally planned as part of the project activities but rather came as a government’s initiative that the project helped to operationalize. 23 The UEP estimated that by the Project’s closing date, 100 out of these 120 municipalities regularly used SIGMUNI. 15 service help desk and call center available for local governments is planned for 2017- 2018 to sustain the efforts aimed at improving local governments’ administrative, financial, and technical processes. 51. As part of the Project’s activities under Component 2, a total of 160 municipalities invested US$6.1 million in the preparation of fiscal consolidation plans. Supported by the Project, 149 of these plans were implemented, surpassing the 112 target. Of these, 84% of the municipalities were satisfied with the lessons and results obtained from these plans. Informed by these plans, participating local governments have updated their municipal cadasters, improved tax registries, conducted training activities for municipal staff, and acquired specialized software and equipment. These activities were aimed at improving municipal finances by strengthening institutional capacity for fiscal and administrative management, easing the financial burden of highly indebted municipalities, and improving fiscal sustainability at the local level. In addition, the Project supported the preparation of 174 DRM plans and 92 PEPs exceeding the initial targets of 131 and 54, respectively. Finally, over 89% of CCCs satisfactorily supervised works prioritized under these plans and financed under Component 1. 52. While technical assistance activities were aimed at strengthening local governance on these issues, sustainability remains a concern and it is not clear how these plans will be monitored, implemented and updated in the long term. For instance, local governments have expressed concerns regarding the required financial and qualified human resources to update and adjust these plans 24 . Moreover, short electoral cycles translate into limited incentives for Mayors and local authorities to continue to advance on this agenda. 53. Activities under Component 3 provided support for: (i) the evaluation of current rules, processes and procedures for paid service provision; and (ii) the development of a national decentralization strategy proposal and a plan to implement this strategy. Sectoral diagnostics were successfully finalized for the decentralization proposal for Health, Education, and Water, with two transversal analyses on Financial and Legal issues. Workshops were also carried out to disseminate the results of these diagnostics to national and local government officials, civil society, cooperatives, and other key stakeholders involved. However, while these studies were informative, after national elections in 2014, the new administration did not show strong interest in this agenda, thereby limiting the intended outcome of these outputs. 54. Part 2 of the PDO – To improve capacity of local governments to deliver basic services, as prioritized by local communities, in the medium and long term (rated Substantial). Institutional strengthening activities carried out under Component 2 helped improve local governments’ capacity for service delivery. Planning capacity has been strengthened in all the municipalities with DRM plans prepared by all, while a 16 further 92 municipalities benefitted from the preparation of strategic participatory plans (PEPs). 55. Under Component 1, a total 525 sub-projects were completed across all 262 municipalities, resulting in improved services to citizens in terms of road infrastructure, as well as water and electricity access. These sub-projects were prioritized through 294 community consultations with more than 29,000 participants. There have been over 3.6 million beneficiaries (direct and indirect) and over 13,000 temporary jobs were created. The community-prioritized investments identified and implemented through these plans were effectively used by 95% of municipalities at the end of the Project, with 98% now budgeting for maintenance (versus 80% prior to the Project). The Final Evaluation Report showed that despite initial negative perceptions, the application of environmental and procurement norms proved to be effective in ensuring greater efficiency in the use of public resources and mitigating risks. Over 85% of municipalities considered that their capacities to identify and prevent social and environmental risks has improved, and 87% expressed interest in continuing to apply safeguards instruments in the future. In addition, nearly 96% of municipalities considered that the Project helped them improve the technical quality of sub-projects, and over 85% expressed willingness to continue promoting citizen engagement processes. 56. Overall, 481 municipal staff from 167 municipalities have completed a technical and/or diploma training course; of these 201 were women. All planning processes have been institutionalized by ISDEM through special guidelines and manuals to support further planning. ISDEM has two training centers and an annual training curriculum with 33 courses. The Final Evaluation Report highlighted that over 84% of municipalities considered that ISDEM’s trainings and technical assistance were timely, sufficient and of good quality. As part of the Project’s achievements, FISDL now has an environmental safeguards unit which looks at all investments, not merely those financed by the Bank. 3.3 Efficiency Rating: Substantial. 57. In line with the ex-ante methodology outlined in the PAD, an ex-post economic and financial analysis focused on Component 1 was carried out separately for different categories of sub-projects. Special attention was given to sub-projects for rural and urban roads, household electrification, and solid waste management, which accounted for over 90 per cent of investments under Component 1. The financial analysis described in the PAD evaluates the capacity of local governments to allocate incremental resources for maintenance and operation of Project-funded municipal investments. The economic analysis assesses the minimum benefit required from Project-funded investments to cover both the investment and recurrent costs. 58. The Economic Analysis. While the economic analysis did not provide estimates of the benefits derived from each municipal investment, the methodology used assumes that Project-financed investments delivered economic benefits higher than the estimated minimum benefit per beneficiary, based on comparable available data. The analysis at completion provided the following results: (i) the minimum benefit per beneficiary that 17 justifies the investments in roads is between US$12 and 13 per year, which in the case of a densely populated country like El Salvador is expected to bring much higher returns per capita derived from the roads financed under the Project, resulting in overall positive economic benefits; (ii) total costs of household electricity connections are estimated to be between US$25 and 27 per month for a 99 kWh consumption, which matches household energy bills at 2016 energy prices in El Salvador, therefore demonstrating that costs at least equal the willingness to pay for these services and investments financed under the Project; (iii) the minimum benefit per garbage collection truck that justifies Project investments is between US$160 and 237 per day, while the average market price for hiring a truck in El Salvador ranges between US$185 and 414 per day, hence resulting in overall economic benefits (since Project costs were below comparable market prices); and (iv) sports and recreational facilities financed under Component 1 would have to be used by at least 23 players per day (for one hour each) to be justified in economic terms25, which is equivalent to a soccer match per day per sport facility. Since this is in line with average usage rates in the country, the recreational activities funded under the Project are assumed to have delivered overall positive economic benefits. A more detailed description of the data and assumptions used for computing these estimates is provided in Annex 3. 59. The financial analysis assessed the capacity of local governments to allocate incremental resources for maintenance and operation of project-funded investments. It is still too early to assess the medium-term impact of Project interventions aimed at increasing local government capacities to raise their own revenues. Financial capacity for operation and maintenance (O&M) has therefore been assessed by comparing increases in direct transfers from central government to the municipalities during Project implementation (an increase of US$100 million in aggregate in real terms), with annual maintenance costs generated by the infrastructure financed by the Project (which are estimated at an aggregate of US$8 million per annum). Thus, even though municipalities will have many uses for the incremental direct transfers, it should be possible for them to allocate the required incremental funding for O&M. However, municipal budgets currently do not assign the required amount to adequately maintain all local infrastructure. In the case of household electrification sub-projects, maintenance is expected to be ensured by private energy suppliers. Project funded new garbage collection will reduce current operating and maintenance costs associated with solid waste management as they will replace the inefficient old trucks currently in use. See Annex 3 for more details on financial analysis. 60. Administrative Efficiency. The project was implemented with full utilization of the loan and only a 13 month extension of the loan closing date. Given the wide geographical spread of the project, with a combination of infrastructure investments in multiple sectors and capacity building, administrative efficiency is rated high. 25 a simple model (ignoring the positive externalities from playing sports and having recreational spaces available at the community level) suggests that project-financed sports and recreational facilities need to be used on average by a minimum additional 23 players for an hour each day to be justified in economic terms. 18 3.4 Justification of Overall Outcome Rating Rating: Satisfactory. 61. The project’s overall outcome rating is Satisfactory based on the ratings of Relevance of Objectives (Substantial), Relevance of Design and Implementation (Substantial), Achievement of both elements of the PDO (Substantial), and Efficiency (Substantial). 3.5 Overarching Themes, Other Outcomes and Impacts 62. Poverty Impacts, Gender Aspects, and Social Development. Although the Project had a national scope, it indirectly benefitted the population living in poverty through the allocation of loan proceeds following the FODES formula, which is positively biased in favor of the poorest municipalities. 26 The Project also indirectly targeted the population in poverty by supporting fiscal consolidation plans in the 160 most indebted municipalities (which tend to be highly correlated with higher poverty rates). Additionally, over more than 40 percent of the municipal staff trained (201 out of 481 people trained) and members of the CCCs (2,425 out of 5,400) were women. 63. Institutional Change/Strengthening. The final workshop presentation by the implementing agencies was very positive about the capacity gained at the local level for managing municipal investments. 64. The Project created institutional capacity on environmental and social safeguards in FISDL. FISDL has created a unit dedicated to managing social and environmental safeguards. These improved skills and processes on safeguards will now be integrated with the engineering aspects of all FISDL activities, which could make a substantial difference in the way civil works are prepared and implemented in El Salvador. 65. Behavioral and institutional changes of ISDEM’s managerial and technical teams. Changes in the protocols and procedures to identify demand and monitor the quality of the technical assistance services represented an important gain for the institution. The Project fostered better communication between ISDEM and municipal governments, which has contributed to improving the institution’s credibility. Today, ISDEM has a well-functioning training center and is working to establish strategic partnerships with local universities to set up regional training centers. 26 According to the FODES formula, annual municipal allocations are distributed in proportion to the following criteria: 50% according to population, 25% corresponding to an equal allocation, 20% based on poverty, and 5% proportional to territorial extension or area. 19 66. Other Unintended Outcomes and Impacts (positive or negative). The Project also equipped and improved the operational capacity of the Ministry of Finance’s Directorate General of Government Accounting. The Project provided state-of-the-art computer equipment and servers to support the Ministry of Finance in developing training modules on municipal financial management. With support from the Project, staff programmers developed open-source systems for the deployment of SAFIM and built long-lasting capacity at the institution. As a follow-up from this work, the Ministry of Finance is currently developing a technical assistance help desk with video calls and self-paced online training courses to support municipalities. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 67. A final evaluation of the Project was carried out between August 12 and December 9, 2016, which assessed the Project’s impact on beneficiary municipalities and other participating institutions, including the UEP, Inter-Institutional Committee, ISDEM, FISDL, and the Ministry of Finance. The role of the CCCs in the construction and supervision of works was rated positive, and the level of satisfaction on the execution of activities and sub-projects included in the PEPs was high. A more detailed summary of the survey results can be found in Annex 5. 4. Assessment of Risk to Development Outcome Rating: Moderate 68. Considering both the nature of the investments and the next steps envisioned, the risk to Development Outcome is deemed Moderate, as discussed below: 69. Sustainability of technical and institutional capacity support to municipalities: The Project has come a long way in enhancing administrative, technical and fiduciary capacity at the municipal level. On-going discussions and institutional arrangements between ISDEM, STTP, and MIGOBDT aim to tackle issues relating to the provision of continued support to municipalities (see Annex 11 for additional details). 70. Sustainability of the support on DRM. ISDEM does not have an explicit institutional mandate to provide support on DRM issues. However, ISDEM has shown strong willingness and ownership on this topic by investing in the professional development of municipal advisors. But sustaining these institutional gains will require additional support. On-going mitigation measures include future efforts led by the Directorate General for Civil Protection, MIGOBDT, and MARN (see Annex 11). 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory. 20 71. Project design was technically sound. Project components were directly linked with the PDO. Informed by lessons learned from prior efforts in the country and the municipal diagnostic, the Project design integrated technical, financial and economic aspects appropriately. While there could have been greater clarity on how to measure specific indicators, the design of the Results Framework under a “framework approach� during project preparation (in the absence of information on the specific investments) was reasonably sound. 72. Institutional and fiduciary arrangements were adequately designed with due regard to compliance with Bank safeguards and fiduciary requirements. These included the development of a resettlement policy framework, an environmental management framework, and an indigenous people’s planning framework, as well as informing government counterparts about relevant policies in a timely manner. 73. Project identification, preparation and appraisal experienced moderate shortcomings, as summarized below:  Implementation arrangements. The Bank overestimated ISDEM’s managerial capacity to carry out fiduciary and overall project coordination and management functions and overestimated FISDL’s capacity to respond to a large and growing number of municipal requests for procuring goods and services.  Monitoring and Evaluation arrangements. The Mid-Term Review identified the need to modify some project results indicators and targets, which were addressed during the 2013 and 2014 restructurings. (b) Quality of Supervision Rating: Satisfactory 74. Close project supervision helped to ensure successful implementation. Bank implementation support focused on taking proactive measures to ensure successful project implementation. The Bank team worked closely with the Government to adjust implementation arrangements, support inter-institutional coordination, address fiduciary and safeguards challenges, extend the Credit closing date, and adjust the M&E framework. The Bank was able to respond immediately to urgent issues and ensure effective project implementation due to the presence of a local Operations Officer and Country Office staff. The ICR rates the quality of supervision satisfactorily, based on the following:  Focus on development impact. Following the MTR, the Bank team worked with the Government agencies to strengthen the Project’s M&E framework. In 2015, the Bank team in partnership with FAO, developed a protocol that set clear criteria and guidelines for evaluating the Project’s development outcomes.27 In addition, the Bank worked with the Government to restructure the Project through reallocation of funds 27 Protocolo de Evaluación para el Proyecto de Fortalecimiento de Gobiernos Locales, PFGL (FAO. L. Dias Pereira y M. Quesada, 2015). 21 between expenditure categories. The Bank team worked closely with the various implementing agencies to ensure that systems and processes were in place and to monitor progress on the execution of works and capacity building activities, and took proactive measures to address implementation bottle-necks and delays.  Resolution of safeguards issues. The Bank team worked closely with the implementing agencies to ensure compliance with Bank safeguards requirements and provided guidance to develop solutions to minimize adverse impacts on local communities.  Fiduciary aspects: Specific training on financial and procurement management was delivered to implementing agencies’ staff on a regular basis. Periodic financial and operational audits ensured good quality of supervision on fiduciary aspects throughout implementation. High turnover rates of government staff imposed additional pressures on the supervision teams, as new staff had to be re-trained following these changes.  Candor and quality of performance reporting. ISRs were archived biannually and documented project status and issues in a candid and clear manner. The ISRs modified overall project ratings, component ratings and other ratings based on the issues identified during regular supervision missions. In particular, the ratings for both IP and PDO were downgraded in 2014 and 2015 due to continued issues with financial management and safeguards. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory. 75. Based on the Banks’s performance in ensuring quality at entry (Moderately Satisfactory) and quality of supervision (Satisfactory), overall Bank performance is rated as Moderately Satisfactory. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory 76. The Government of El Salvador demonstrated strong ownership and commitment towards achieving the development objective. In spite of significant challenges affecting project implementation, SAE/SSDT strongly championed the Project. The Government supported and participated in community consultations as well as the development of work at the municipal level, which relied on CCCs for local supervision. During the final dissemination workshop, representatives from the local governments expressed their gratitude for the support provided by the national government during implementation. 77. To ensure effective coordination across the various implementing agencies, the Government established an inter-institutional committee, which held regular meetings to discuss implementation progress at the component level and agree on next steps. This arrangement also ensured better coordination of local investments carried out by municipalities. 22 78. The Government was actively engaged in identifying and carrying out proactive measures to ease project implementation. The Government and Bank teams worked closely to tackle implementation delays and bottlenecks in the preparation and approval of sub-projects, as well as in ensuring good coordination across implementing agencies at the national and local levels. The government countersigned all Bank Aide Memoires to stay on top of project progress. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 79. Project implementation was carried out by various implementing agencies, whose performance is discussed below.  UEP (rated Satisfactory). The UEP did a good job of coordinating efforts at the national and municipal levels during project implementation. Progress reporting to the Bank was timely and facilitated the resolution of implementation issues. There were delays in the hiring of some key specialists (M&E and Communications, in particular) and some attrition, however the UEP team did its best to compensate and overall held the Project together.  FISDL (rated Moderately Satisfactory). FISDL’s performance was technically satisfactory, but response capacity was exceeded by growing demands from local governments. FISDL strengthened the qualifications of its staff, increased the number of local advisors in the field, and created an environmental and social safeguards unit that remains fully operational today.  ISDEM (rated Moderately Satisfactory). ISDEM was unable to carry out fiduciary and project management tasks, which negatively affected project implementation during the first half of the project and triggered a project restructuring. Once freed from these responsibilities, ISDEM was able to concentrate on the technical work, and prepared more agile guidelines and processes to support capacity building of local governments. It also created an online system for identifying demand for technical assistance from municipalities and assessing the quality of services provided.  Local governments (rated Moderately Satisfactory). Municipalities experienced a steep learning curve during the initial 18 months of project implementation, especially with regard to Bank fiduciary and safeguards requirements. However, regional workshops and training ensured ownership from local governments to implement the Project and comply with Bank requirements successfully. In addition, project implementation spanned over two municipal, and one national, election cycle, translating into municipal staff rotation, and affecting local governments’ performance after each transition. Additional training provided to new incoming staff by the UEP and the Bank team, as well as additional supervision, helped overcome these challenges. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 23 80. Based on the assessments of the performance of the Government (Satisfactory) and implementing agencies’ (Moderately Satisfactory), overall Borrower performance is rated as Moderately Satisfactory. 6. Lessons Learned The project provides six key lessons, both project-specific and of wide general application: (i) A community-driven approach can significantly enhance the prioritization of key local investments. Engaging with local communities for the preparation of municipal plans, as well as the identification and prioritization of strategic work and services ensured greater ownership of these planning instruments and local investments. At the same time, integrating communities in the supervision of works was critical to validate the technical, social, and environmental aspects of local investments, including budgeting needed resources for operations and maintenance of these works. (ii) The combination of hard investments with capacity building activities at the local level can significantly improve municipal management and enhance service delivery. The implementation of integrated financial and planning systems at the local level proved to be a powerful tool to improve fiscal sustainability and enhance service delivery at the municipal level, especially when combined with corresponding resources to prioritize investments and works derived from these plans. However, while the Project enabled substantial institutional gains on integrated financial and municipal management, issues of sustainability need to be properly addressed. The implementation and monitoring of these plans in the medium and long term depend on sustained support (both technical and financial) to municipalities and civil-society participatory agencies. (iii)Capacity building proved to be more important than the availability of financial resources for supporting municipalities. Despite having a 50% advance of the loan proceeds available for disbursement in their local accounts, municipalities experienced difficulties in utilizing these funds during the initial two years of implementation. Once procurement, technical and financial capacity was strengthened, municipalities were able to effectively implement prioritized investments in close collaboration with local communities, providing valuable infrastructure and services at the local level. (iv) Being strategic about which tasks should be centrally or regionally managed can better support decentralization and municipal development. The Project fully decentralized Components 1, 2.4b (fiscal consolidation plans), and 2.5 (DRM plans), which created difficulties for both the contracting and supervision of the work. In the case of DRM plans, all 262 municipalities were trying to find qualified consultants to support this process within a short period. However, the domestic market for these skills in El Salvador is small and municipalities were unable to find eligible consultants. In this regard, a centrally or regionally managed procurement process for these plans could have provided efficiency gains. Further, grouping municipalities 24 around flood zones or other relevant factors would have perhaps made the planning more useful. (v) Building lasting capacity for improved municipal development requires focus at all levels. The original project design included more support to central agencies for building systems and processes aimed at supporting municipalities. One of the project’s strengths was the important effort made to build technical and operational expertise at national institutions such as ISDEM and FISDL. In terms of sequencing, future efforts would benefit from first building capacity and systems at the central level and then working at the municipal level. (vi) A stronger participation of COMURES as a key political actor will benefit local ownership of future efforts towards the strengthening local governments’. Given its degree of political influence at the municipal level, COMURES can become a key partner in promoting strategic planning and improved municipal management in the country, including advancing the implementation of systems and tools such as SAFIM, SIGMUNI, and municipal development plans that increase transparency and effectiveness of local administrations. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners 81. A copy of the final ICR (in Spanish) was shared with the Borrower and specific comments were provided. Most of the comments raised by the Borrower were editorial and are incorporated into the final ICR. (a) Borrower/implementing agencies 82. The team received independent set of comments from all implementing agencies and Ministry of Finance. These comments, which were editorial, were harmonized and integrated into the final version of the ICR. (b) Cofinanciers 83. Not applicable (c) Other partners and stakeholders 84. Not applicable 25 Annex 1. Project Costs and Financing a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Component 1 55.25 56.94 103.1 Component 2 20.75 24.95 120.2 Component 3 1.63 0.68 41.7 Component 4 8.26 5.02 60.8 Total Baseline Cost 85.89 87.59 102.0 Unallocated 0.67 0.00 0. Total Project Costs 86.56 87.59 102.0 Front-end fee IBRD 0.20 0.20 100.0 Total Financing Required 86.76 87.79 101.2 (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Borrower Cash 3.00 3.76 125.0 International Bank for Reconstruction Cash 80.00 79.06 98.8 and Development Local Goventments (Prov., District, Cash and in- 2.00 5.04 252.0 City) of Borrowing Country kind 26 Annex 2. Outputs by Component 1. Component 1: Promotion of Decentralized Service Delivery. This component provided Subproject Grants to Municipalities. Under a framework design, pre-identified strategic areas of investment at the time of appraisal included the following: (i) expansion and/or improvement of drinking water systems; (ii) repair and improvement of local roads and streets; (iii) drainage works, extension of sanitation lines, improvements to solid waste management, and cleaning of public spaces; and (iv) expansion of electricity services and coverage. As described in the PAD, expected outputs under this component included: (i) increased resources for all 262 municipalities for basic service investments; (ii) improved financial management and procurement processes for municipalities; and (iii) established environmental and social frameworks for regulating municipal investments. Summary of Outputs  El Salvador’s 262 municipalities finalized arrangements to execute their Component 1 loan allocations either for infrastructure Sub-projects or for the purchase of goods. 257 municipalities have presented at least one Technical Folder (CT) or a Sub-project profile for the development of infrastructure works. Five municipalities decided to use 100% of their allocations for the purchase of transport equipment for waste management.  FISDL reviewed/approved 543 CTs/Sub-project profiles for infrastructure works in the municipalities.  Of the 543 profiles and CTs presented to, and endorsed by, the FISDL, 525 Sub- projects were financed by the Project. The following pie chart provides a breakdown of Sub-projects by theme. Prevention of Drinking Water Violence Total and Sanitation [PERCENTAGE] [PERCENTAGE] Electric Utilities Other Themes [PERCENTAGE] [PERCENTAGE] Waste Management Road Improvement [PERCENTAGE] [PERCENTAGE] 27  81 Sub-projects were for the purchase of goods for US$5.48 million. 28.4% of the goods were for the prevention of violence, while 71.6% were for waste management.  In 14 municipalities, twenty pre-investment studies were financed by Project for US$152,000. 248 municipalities financed the design of the CT/profile with their own funds and used the allocated pre-investment funds for the execution of Sub- projects. The following chart presents a review of the execution of Subprojects along with processes of implementation as defined in Component 1: Overall Status of Component 1 Amount (US$ Phase Sub-projects Municipality million) Sub-projects Finalized, in Execution or Pending (A) 525 255 46.29 Purchase of Goods (B) 81 53 5.48 Pre-investment Studies (C) 20 14 0.152 Total for Component 1 (A+B+C) 626 262 51.92 2. Component 2: Strengthening of Municipal Governments At the time of appraisal, this component was expected to deliver the following outputs: (a) Assistance to municipalities for the preparation and implementation of municipal sub-project investments under Component 1 through training, workshops and the preparation of methodological guidelines. (b) Support for the professionalization of the Municipal Civil Service through the preparation of staff manuals, training for municipal staff, in-situ complementary technical assistance to municipal staff and authorities, and the creation of a learning center at ISDEM. (c) Delivery of consultation workshops, participatory planning processes, systematization of planning methodologies and instruments, and development of municipal plans (strategic, fiscal and DRM plans). (d) Support to municipalities for procurement of equipment and software, as well as training and capacity building for strengthening fiduciary management. (e) Support to national entities such as ISDEM through performance assessment, design and implementation of training programs. Sub-component 2.1 – Support to Investments Summary of Outputs 28  This sub-component contributed to the strengthening of the municipalities’ institutional and technical capacity to design and implement municipal Sub- projects through, inter alia, the provision of technical assistance and training to municipalities’ personnel to prepare, implement and supervise municipal Subprojects.  The Project conducted 294 Citizen Consultations (CCs); the table below summarizes the number of CCs by region, municipality, participants, and prioritized sub-projects. Citizen Consultations and Prioritized Sub-Projects by Region Communitie Citizen Participants Prioritized Regions Municipalities s Consultations Total Women Men Projects Occidental 80 27 63 63 5,476 3,098 2,378 122 Central 47 133 72 8,582 4,461 4,121 127 Paracentral 38 128 65 6,599 3,654 2,945 130 Oriental 58 127 94 9,225 4,436 4,789 Total 170 451 294 29,882 15,649 14,233 459  In addition, 575 Citizen Control Committees (CCCs) were formed with the participation of about 5,400 persons, of which about 2,400 were women. The CCCs were to ensure the quality of works and transparency in the management of PFGL funds through the participation of beneficiary communities of the Sub- projects. The table below provides details on CCCs by region and number of : Formation of Citizen Control Committees Number of Members Region CCCsnstituted Total Women Men in Force Occidental 110 1,042 477 565 Central 141 1,401 594 807 Paracentral 153 1,413 658 755 Oriental 171 1,541 696 845 Total 575 5,397 2,425 2,972 Sub-component 2.2 – Support for the Implementation of the Municipal Administrative Career: Professionalization of the Municipal Employees This subcomponent provided support for the implementation of the Municipal Administrative Career Law through, inter alia: (i) development or update (as the case 29 may be) and implementation of municipal rules, processes and procedures; (ii) support of the Municipal Training Center in ISDEM and the establishment of regional offices of the center in selected sites; and (iii) creation of a national registry for the Municipal Administrative Career, including the carrying out of a periodic update of the information contained in the registry. Summary of Outputs  The Project contributed to ISDEM’s fulfillment of the Law on Municipal Administrative Career that signaled its creation in Article 48, as a special permanent program designed for the formation and professionalization of the public municipal servers in order to update their knowledge and develop potentialities, skills, and abilities. Every municipality of the Departments of Morazán, San Miguel, Usulután, and La Unión (all within the Oriente Region) is a beneficiary of the newly installed Municipal Training Center (CFM); prior to the project, the only CFM was located in the capital, San Salvador.  At Project closing, US$169,000 had been invested in the CFMs of San Salvador and San Miguel. The ISDEM reported that 481 municipal employees and 167 municipalities had participated in different courses at the CFMs, as shown in the table below. Completed Diplomas and Technical Careers that obtained PFGL support Name of Diploma/Technical Career Women Men Total Local Economic Development 27 26 53 Economic Development and Sustainable Territorial 22 27 49 Management Project Formulation and Evaluation 15 21 36 Municipal Management 31 30 61 Disaster Risk Management and Municipal 34 106 140 Development Leadership in Municipal Management 15 12 27 Prevention of Violence with a Territorial Focus 38 45 83 Local Development and Municipal Management 19 13 32 (Technical Career) Total general 201 280 481 Sub-component 2.3 – Strengthening of the Capacity for the Participative Planning of the Municipalities: Participative and Concerted Planning This sub-component helped to strengthen the participatory planning capacity of municipalities through, inter alia, the provision of technical assistance and training to improve the processes and systems for the preparation of strategic participatory plans and participatory municipal development plans. 30 Summary of Outputs  92 municipalities elaborated their PEPs in Phases I, II, and III, with close follow- up was by the UEP with the support of the ISDEM. 69 municipalities invested 100% of their loan allocations.  The Project developed methodological guidelines for the participatory strategic planning of the municipalities, which defined the principal phases of elaboration, principles to follow and participants to consider during municipal planning.  A “Guide for the Operationalization of the Methodological Guidelines for the Participative Strategic Planning of the Municipalities� was prepared, which provided tools for the elaboration of the PEP and the normalization of the plan.  Follow-up on the implementation of the PEPs (Phases I, II, and III) and the functionality of the Instances of Participative Planning (IPPs).  Capacity generation in IPPs of Phases I, II, and III through the development of regional exchanges and training activities. The table below provides a breakdown of PFGL support to the PEPs of the 92 municipalities during each phase. Implementation Phase No. of Municipalities with PEPs Phase I 30 Phase II 40 Phase III 22 Total 92 Sub-component 2.4 – Strengthening of Procurement and Financial Management Capacity This sub-component strengthened the procurement and financial management capacity of municipalities through, inter alia: (i) procedures; and (ii) acquisition and utilization of equipment, including hardware and software. Summary of Outputs 2.4A SAFIM – The Municipal Financial Management System  Design and development of the Municipal Financial Management System (SAFIM) to modernize municipal financial management, strengthen transparency, and rendition of accounts in the municipalities. The Project supported the Ministry of Finance in the development of the system from its design up to its implementation through the contracting of specialized human resources, the purchase of equipment, and logistic support for system training events. The 31 SAFIM was created with modules for accountability, treasury, and budget, and is being used in 89 municipalities. 2.4B Municipalities in a Critical Situation  The Project supported 160 municipalities in the preparation of Fiscal Consolidation Plans (PRFM), as well as their implementation in places where the financial situation is in the most critical state.  All 160 municipalities have finalized their plans and have begun to implement the plans by purchasing equipment and contracting consultants.  11 municipalities have invested 60%-90% of their allocated loan funds into PRFM implementation, while 149 have executed 90% or more of their allocations. These 149 municipalities have also achieved the indicator that establishes that 112 municipalities have implemented PRFMs. In addition, 112 municipalities have invested 100% of their allocations. As observed in the table below, 1,134 processes for the procurement of goods and services for the implementation of PRFMs were provided No Objections by ACI-FISDL. Processes of Implementation of PRFMs Type of Ajudicated In Process Total Process Purchase of 743 0 743 Equipment Consultancies and 391 0 391 Trainings Total Processes 1134 0 1134 Sub-component 2.5 – Strengthening the Capacity of the Municipalities for Disaster Risk Management This sub-component strengthened the disaster risk management capacity of municipalities through, inter alia: (i) evaluation of current risk management policies; (ii) support to the development of a national risk management policy, in coordination with national authorities; and (iii) provision of technical assistance to municipalities for disaster risk reduction activities. Summary of Outputs  The Project developed “Methodological Guidelines for the Municipal Planning of Disaster Risk Management�, which defined the objectives of the plan , modalities of interventions, actors and instances to consider, and the content and product of each stage of formulation, implementation, monitoring, and adjustment. These guidelines help to steer the process and to homogenize the planning documents that contribute to the standardization of concepts. 32 All 262 municipalities developed Plans for Municipal Disaster Risk Management (PMGRDs). 245 of the 262 municipalities have a plan as per the format and method suggested in the Methodological Guidelines developed by the Project. The remaining 17 municipalities used own funds to implement actions or sub- projects that contributed to the reduction of risk, identified as “other plan�, such as PEPs, civil protection plans, or existing risk management plans. 188 municipalities have invested 100% of their loan allocations (72%). This sub- component utilized US$7.76 million of its allocation of US$8.18 million (94.9%).  As of December 20, 2016, 174 municipalities had achieved the goal of the indicator associated with Sub-component 2.5, i.e., a target of 131 municipalities to implement the PMGR. The table below provides details of PMGRD implementation. PMGRD Implementation Processes Type of Process Adjudicated In Process Total Trucks/Machinery for Risk Management 13 0 13 Tools, equipment and materials for emergency attention 852 0 852 Transportation equipment for emergency attention 229 0 229 Risk Management Plans 180 0 180 Total 1274 0 1274 Sub-component 2.6 – Strengthening of the Institutional Capacity of ISDEM, COMURES, the Ministry of Finance, and SSDT This sub-component contributed to strengthening the institutional capacity of ISDEM and SSDT through, inter alia, the design and implementation of strategies, plans, programs, institutional structures, rules, and procedures to respond to local needs and development. Summary of Outputs  Salvadoran Institute for Municipal Development (ISDEM). The ISDEM has contracted two consultancies: “Detection of Training Necessities and Elaboration of Plan and Formation for the ISDEM� and “Organizational Restructuring of the ISDEM.� The Project supported the development of the System of Monitoring and Technical Assistance (SIMAT) as well as the CFMs that are managed by the ISDEM in San Salvador and San Miguel, as mentioned above. Mobile devices, informational and multimedia equipment were purchased to enable the functioning of the CFMs. The CFMs have a program of 33 municipal training courses per year.  Sub-secretariat for Territorial Development and Decentralization (SSDT) and Articulation with Local Governments. The Project supported technical assistance 33 to the SIGMuni municipalities. It trained 214 people to use the system in 120 municipalities throughout the country’s 14 Departments. Of the first 100 municipalities registered within the Information System of Municipal Management (SIGMuni), 80 upload information on municipal management, 37 regularly while the rest have begun to do so. The rest are preparing information for uploading. The advancement in the implementation of SIGMuni is significant, as all municipalities have begun training in order to have the tools to use the platform and to prepare information for uploading. The table below provides data on the municipalities (by department) and people trained to use SIGMuni. % of % of Men Total Total Women Total Men Trained in Total People Department Municipalities Women trained in Trained the Trained Trained Trained the Municipality Municipality 01 Ahuachapán 7 3 30% 7 70% 10 02 Santa Ana 8 4 31% 9 69% 13 03 Sonsonate 6 4 29% 10 71% 14 04 Chalatenango 11 15 60% 10 40% 25 05 La Libertad 9 10 59% 7 41% 17 06 San Salvador 13 14 56% 11 44% 25 07 Cuscatlán 7 7 47% 8 53% 15 08 La Paz 7 4 33% 8 67% 12 09 Cabañas 4 3 50% 3 50% 6 10 San Vicente 4 4 57% 3 43% 7 11 Usulután 15 7 29% 17 71% 24 12 San Miguel 12 5 29% 12 71% 17 13 Morazán 9 7 44% 9 56% 16 14 La Unión 8 1 8% 12 92% 13 Total 120 88 41% 126 59% 214 3. Component 3: Decentralization Strategy Support. This component was expected to deliver the following outputs: (i) conduct institutional and sectoral diagnostics to inform recommendations on alternative distribution of responsibilities and models for improved service provision; (ii) build consensus around responsibility assignments; (iii) define fiscal implications and potential fiscal decentralization policies; and (iv) prepare a decentralization policy and implementation plan. This component provided support for: (i) evaluation of current rules, processes and procedures for paid service provision; and (ii) the development of a national decentralization strategy and a plan to implement the strategy. Summary of Outputs  Sectoral diagnostics were completed for the decentralization proposal for the following themes: Health Sector, Education Sector, Drinking Water, Financial 34 Analysis and Legal Analysis. Workshops were conducted to disseminate the results of these diagnostics to officials from the national government, local government, autonomous institutions, civil society, cooperatives, and other actors who were involved.  Studies have been prepared on the juridical and legal frameworks, and of finances for the scope of decentralization-deconcentration.  The Project supported the MIGDT and STPP in the preparation of studies for an Environmental Management Framework for Indigenous Communities.  A strategy proposal was prepared for the prevention of violence in the implementation framework of the Safe El Salvador Plan “Learning by Doing with the Community and Municipality�.  A model for “Schools of Community Coexistence in the Municipality of San Martin� was developed with the objective of increasing local governments’ engagement in the national effort to promote the prevention of violence within their territories. This includes strengthening the capacity of local management in the social prevention of violence through the implementation of the Community Coexistence Schools (ECC) model, with the strategy of learning by doing.  Models for sport, transformation of conflicts, prevention of general violence, art and culture with children, youth, mothers and fathers of families were developed in San Martin, offering an attractive space for socialization and training at the community level that incorporates values and develops abilities and habits of coexistence amongst its members. The development and implementation of the venues for this process were coordinated by the municipality, community, and the (EX SSDT)/Government of El Salvador.  At the behest of the Ministry of Finance, an expert in the development of entrepreneurial applications under JEE technologies was contracted for the design and development of modules for the System of Financial Management of the Public Sector SAFI – GRP. The consultancy had the objective to contribute (partially) to the finalization of activities in the development of the new SAFI I and complement the effort financed by Project funds. 4. Component 4: Project Management. At time of appraisal, expected outputs under this component included project implementation and management tasks, communications strategy, monitoring and evaluation activities, as well as support for the preparation of studies. This component provided support to: (i) FISDL and ISDEM in the coordination and implementation of the Project through, inter alia, the provision of technical assistance and training, and the acquisition and utilization of goods; (ii) design and implementation of a Project communications strategy to support Project implementation; (iii) provision of technical assistance for the establishment of a Project Monitoring & Evaluation System; and (iv) carrying out of technical studies to develop training modules to support local public management and the provision of technical assistance to carry out the audits referred to in Sections 11.B.3 and V of Schedule 2 to the Legal Agreement. Project Management is considered Satisfactory. The UEP has functioned in a Highly Satisfactory manner. The Project’s M&E system was developed in a timely manner and 35 has been used extensively to inform decisions on adjustments to the implementation. The UEP followed up closely with the processes of the PEP (the key element for the change in the process of municipal planning), with a team of specialists complementary to that of the ISDEM, fulfilling external evaluations on the quality of the PEPs and contracting consultancies for support and reinforcement of participation. The Interinstitutional Committee and subsequent technical tables have functioned during the Project period and have effectively supported decision-making and coordination of activities. Internal and External Audits. In December 2016 an external operational and financial auditor was contracted for the fiscal exercise of 2016 and the grace period agreed from January to June 2017. The firm LATINCO LTDA de CV was responsible for carrying out the audit. The firm built on the findings of the previous audits (from 2012 to 2015) to carry out the final audit. In this final wave, 22 municipalities were audited. The selection criteria of these municipalities included, among other criteria, those that had not been audited before or those for which the operational and financial audits had not been finalized. In the last semester of 2016, all requirements of the completed audit were attended by the National Court of Accounts (national comptroller entity) for Components 2 (except 2.4b and 2.5), 3, and 4. This final audit comprised two periods: (i) between January and September 2016, and (ii) from October to December 2016. The result of the final audit is yet to be received and evaluated by the Bank’s fiduciary and technical teams. The table below provides an overview of the external audit of the Project. Municipalities Findings Total Year With Total Without With Partially Not Findings Audited Pending Resolved Unresolvable Audited Findings Findings Resolved Resolved by Year Findings 2012 61 7 54 5 180 2 1 5 188 2013 80 11 69 13 199 6 6 6 217 2014 67 17 50 4 43 1 6 0 50 2015 36 33 3 1 3 0 1 0 4 244 68 176 23 425 9 14 11 459 Percentage of Resolution 9.4% 92.6% 2.0% 3.1% 2.4% 100.0% Support to the Project’s Communication Strategy. Upon the Project’s Closing, a communications campaign was carried out to inform the public of the Project’s achievements. This included an event that invited officials from the 262 municipalities, public and private institutions, as well as civil society and international organizations. One of the major magazines known throughout El Salvador ran an article about the Poject’s successes. Other forms of media, including informational booklets, brochures, 36 and a website with up-to-date information on the Project were produced28. A workshop on the Project’s lessons learned was also organized by the UEP and was attended by participants from FISDL, ISDEM, DGCG of the Ministry of Finance, COMURES, and EX SSDT, as well as members of the UEP itself. 28 http://www.pfgl.gob.sv/ 37 Annex 3. Economic and Financial Analysis The Project aimed to strengthen local governments both in terms of infrastructure for public service delivery (Component 1: US$52.8 million, IBRD) and local planning and management capacity (Component 2: US$19.7 million, IBRD). All 262 local governments of the country were eligible for investment support and training as described in previous sections. Due to the different nature, scope and scale of the investments, and the difficulty in quantifying benefits for most of them, an ex-post cost benefit analysis of the Project as a whole is not warranted. As for the ex-ante analysis in the PAD, the present analysis focuses on Component 1 and is made separately for different subproject categories. Table 1 summarizes investments under Component 1. Road construction and rehabilitation, access to electricity by rural populations, improvement of solid waste management (garbage collection and compression trucks), and sports infrastructure and equipment represent 90 percent of investments under Component 1 and were subject to a more detailed financial and economic analysis. Other typical projects include: facilities for community events; material and facilities for musical/cultural activities and vocational training; improvement of city/town parks and squares; and pedestrian and vehicular bridges. Table 1: Summary of Project Investment in Infrastructure Subproject Categories Number of Total investment Number of subprojects (USD million) beneficiaries (‘000) Rural and urban roads 367 37.16 1,037 Household electrification 76 2.75 14 Solid waste management 60 5.29 2,159 Sports infrastructure and equipment 25 2.06 298 Education and social equipment 18 0.44 600 Urban works 17 1.21 265 Rural bridges 10 1.20 12 Sewage 8 1.10 4 Street lighting 8 0.37 115 Video-surveillance 7 0.04 126 Urban bridges 4 0.72 15 Water supply 4 0.3 1 Source: PFGL database (2017) Note: Categories in bold represent 90 percent of the project investment through Component 1. The project also financed the design of 19 subprojects with a total cost of USD 116,515. As in the PAD, the financial analysis assesses the capacity of local governments to allocate incremental resources for maintenance and operation of project-funded investments. The economic analysis assesses whether benefits generated by Component 1 investments are greater than incurred costs. For the purpose of this analysis, the minimum 38 benefit to justify the project intervention was defined as the annual benefit which will cover investment costs, recurrent costs and opportunity costs of capital, thereby generating a Net Present Value equal to zero. The average minimum annual benefit for a representative sample of sub-projects was assessed against benchmarks as to discuss whether the investment in each category of sub-projects could be justified in economic terms. Financial sustainability Table 2 presents the expected increase in the municipalities’ recurrent costs due to the investments made under Component 1 (sub-project maintenance costs) and compares them against the direct transfers they receive from the central government (FODES). Table 2: Project Investments and Iincrease in Annual Maintenance Costs (Figures in USD ‘000) 2011 2012 2013 2014 2015 2016 Total Project Investment 9,944 13,771 10,848 11,328 3,574 3,424 Maintenance costs generated by the 1,550 3,667 5,304 6,987 7,494 7,933 project at constant prices (2016) Direct Transfers at constant prices (2016) 247,605 308,435 311,672 339,350 351,159 348,999 Real increase in direct transfers 25% 1% 9% 3% -1% Share of incremental maintenance 0.7% 1.2% 1.7% 2.1% 2.2% 2.3% costs in total direct transfers Source: Author's calculations from information in PFGL's database, technical projects and ISDEM (2017). Notes: Maintenance costs correspond to 15% of investment costs, the average estimated maintenance cost for the sample of 105 projects for which there is complete information available. It is still too early to assess the medium term impact of Project interventions aimed at increasing local government capacities to raise their own revenues (Sub-component 2.4B) and therefore improve their capacity to maintain and invest in infrastructure. However, direct transfers from the central government to the municipalities increased by nearly USD100 million in real terms during the project implementation period, while annual maintenance costs generated by the infrastructure financed by the Project are estimated at USD8 million. These figures must be analyzed with caution, though. Larger municipalities may have seen large increases in received direct transfers in absolute terms and Project investments represent only a small share of their total infrastructure. In these cases, the financing of maintenance for Project financed infrastructure and equipment may not be an issue. However, small municipalities which saw small increases in direct transfers in absolute terms, or those municipalities that used increased revenues to pay off accumulated debt, may have more difficulty in allocating budget for maintenance. The Project final evaluation reports show that, in general, municipalities budget for infrastructure maintenance. However, these budget lines are not assigned the required amount to adequately maintain all of the municipality infrastructure. In the sample of 25 road sub-projects that were visited, maintenance was “corrective� and not “preventive�, i.e., the municipalities were able to repair eventual damages, but would generally not intervene to minimize the gradual deterioration of the infrastructure. The citizens control 39 committees (CCCs) that were formed to supervise the works provide occasional voluntary maintenance work (in some cases, local residents clean the gutters and vegetation on the roadside). In interventions that benefited public spaces, such as squares, city parks, main avenues and tourist sites (i.e., particular sub-projects under the categories of urban works, street lighting, and sports infrastructure), maintenance may be more regular, given their social and economic importance. In the case of sub-projects that aim to increase access to electricity, it is expected that maintenance would be ensured by private energy suppliers who have an interest in retaining their customers. Families with low energy consumption have their electricity subsidized by the government, so as to enable access to electricity for the poor. Garbage collection trucks were bought to replace older vehicles which operated less efficiently (higher fuel and maintenance costs). The replacement of garbage collection trucks should reduce operation and maintenance costs associated with solid waste management (see economic analysis below). Economic efficiency Public infrastructure and services are economically efficient if the benefits to the population at least equal the total incremental costs. This minimum benefit is estimated by considering sub-project investment cost, the economic life of the investment, a discount rate equal to the opportunity cost of capital (assumed to be 12% per annum), and a period of analysis of 10 years29. The analysis was undertaken using constant prices, with 2016 as base year. The main assumptions are summarized in Table 3. Table 4 and Table 5 present the data that substantiates the analysis. Table 3: Main Assumptions Roads Household Solid Sports electrification waste equipment 30 manageme nt Main assumptions – high scenario Average maintenance costs (% of 16% 11% 10% 10% 29 The considered period of analysis is rather short given the uncertainty on the financial capacity of the municipalities to maintain the infrastructure over a long period. 30 In the case of electrification, the cost of producing and distributing 99 kWh is USD18 (considering 7.8 percent transmission and distribution losses). For solid waste management, diesel consumption is assumed to average 30,000 liters/year at a market price of USD0.64/liter of diesel in the absence of information on economic prices. 40 investment) Average economic life (years) 9 20 10 10 Main assumptions – low scenario Average maintenance costs (% of 7% 11% 10% 10% investment) Average economic life (years) 4 20 10 5 Two scenarios were examined for each of the four main sub-project categories:  A high scenario, in which: (i) municipalities adequately maintain Project financed infrastructure and its economic life is as projected; (ii) 85 31 percent of the new electricity connections are active; and (iii) new trucks introduce savings in truck rental, with low increases in fixed costs of labor (drivers and garbage collectors)32.  A low scenario in which: (i) municipalities on average do not adequately maintain Project financed infrastructure and the economic life is lower than projected; (ii) 73 percent of the new electricity connections are active; and (iii) new trucks introduce savings in truck rental but also increase fixed labor costs (drivers and garbage collectors) significantly. The two scenarios provide a range of minimum annual benefits that would justify the Project investments in each sub-project category in economic terms. Table 4: Summary of Investments in each Main Sub-project Category Roads Household Solid waste Sports Other electrif. manag. equipment projects Total Investment (USD ‘000) 37,155 2,751 5,289 2,062 5,515 Percentage of total investment 70 5 10 4 10 Investment per Beneficiary (USD) Average 36 190 2 7 5 Maximum 2,263 1,130 1 200 192 17,578 Minimum ~ ~0 ~0 0 45 - Standard deviation 235 - 31 The share of connections to the grid that are active was estimated based on a study (Quesada, 2016. Evaluación de Resultados de los Proyectos de Electrificación Rural Ejecutados en ll Año 2014 Financiados con Fondos FINET) on a rural household electrification project implemented in 2014. 32 The simple model that was built for the cost-benefit analysis of garbage collection trucks assumes that without the project, municipalities would have to hire garbage trucks at a high cost every time the old ones falter or not collect garbage (generating social costs at least equivalent to garbage collection through hired trucks). However, at the time of evaluation, estimations on how many municipalities would have hire staff to operate new trucks remains uncertain (i.e. missing counterfactual). Therefore, the model considers two possible scenarios (high and low) to account for the estimated increase in fixed (staff) costs. 41 190 33 45 Investment per unit (USD) Investment Investment Investment Investment Investment per km per per truck per per connection subproject subproject Average 228,302 70,701 920 66,109 82,465 2 Maximum 1,290,983 2,900 185,000 454,587 325,708 Minimum 9,525 9,181 50,404 - - Standard deviation 126,930 - - 610 86,665 Implemented targets Paved Projected Number of kilometers connection trucks s 163 2997 78 - - Note: Other projects include: educational equipment and material (1% of investment); urban infrastructure works - parks, squares, etc. (2%); rural and urban bridges (2%); sewage systems (2%); street lighting (1%); videosurveillance (<1%); and drinking water supply (1%). Source: PFGL’s database (2017) *Note: 11This is an exception (otherwise, the highest cost per beneficiary is for roads followed by household electrification), which consists of a bridge ((USD246,087) which was estimated to benefit only 14 people.2 The high value per km of this sub-project is related to the small size of the intervention (USD103,278 for 80 meters). The highest investment for a sub-project was USD$773,192. Table 5: Project Economic Indicators Minimum Annual Benefit Unit: (km) (household) (truck) (sub- project) Per unit (high scenario) 76,480 300 57,780 21,300 Per unit (low scenario) 84,770 325 86,580 29,700 Per beneficiary (high scenario) 12 63 2 2 Per beneficiary (low scenario) 13 68 3 3 Source: Author’s calculations from PFGL’s database (2017), Global Climate Scope ( http://global- climatescope.org/en/country/el-salvador/#/details), The Worlds Bank (http://data.worldbank.org/indicator/EG.ELC.LOSS.ZS?locations=SV), The ministry of Economy of El Salvador (https://www.edrhym.gob.sv/drhm/documentos/comunicados/Precios_vigentes_combustibles.pdf), and the US National Institutes of Health (https://www.ncbi.nlm.nih.gov/pubmed/19723822) Roads. Average costs per kilometer of project roads compare well with similar interventions elsewhere. For example, the Third Road Rehabilitation and Maintenance Project in Nicaragua had costs between USD190,000 and 616, 000 per km for main roads and between USD94,000 and 243,000 per km for the rehabilitation of rural roads with brick pavement (nominal prices from ICR 2007). The maximum value of investment costs per kilometer (USD1.3 million/km) is an outlier, corresponding to an 80 meter sub- project that cost USD103,278 to benefit 450 people. Apart from this outlier and the rehabilitation of a 30 meter road for USD27,000, the unit costs of sub-projects were below USD500 thousand per km. 42 El Salvador is densely populated, where even rural roads usually serve a large number of families, providing them better access to their houses, improved environment (drainage, reduced dust, easier garbage collection, etc.), easier school transport, easier transport of production, etc. Urban roads and streets usually serve an even larger number of beneficiaries, both local residents and from other areas, in some cases tourists. Hence, road construction costs in El Salvador per beneficiary33 are very low. There are only five cases where investment costs per beneficiary were above USD1,000. In general, these works were in major streets and avenues with infrastructure beyond the road pavement (lighting, sidewalks, etc.). In some of these cases, the number of beneficiaries may have been underestimated, considering only the families and businesses along these roads. For example, the rehabilitation of road sections of six streets and avenues in Santa Ana for which the number of beneficiaries was estimated to be 111; or the pavement of a 1 km long avenue in San Vicente, for which the number of beneficiaries was considered to be 120. O average, the minimum benefit per beneficiary that justifies investments in roads is between USD12 and 13 per year. Given the variety of benefits that roads bring to the populations they serve, these can be considered as efficient investments. Household electrification. These interventions connected groups of households to the grid (in the case of four sub-projects, household electrification was through off-grid solar panels). Investment costs in household electrification averaged USD190 per beneficiary and USD920 per connection. Most unit costs are around this average, with four cases above USD500 per beneficiary and five above USD2,000 per connection. An investment of USD2,000 per connection for equipment with an economic life of 20 years translates into a monthly investment cost of USD 8.3/household. On average, the minimum annual benefit per connection that justifies the investment is estimated to be between USD300 and 325, i.e., a minimum benefit between USD25 and 27 per month for a consumption of 99 kWh. Based on 2016 national energy prices, the estimated monthly bill for 99 kWh would be USD26.1, which is in the range for the required minimum benefit to justify the investment. Solid waste management. Investments in solid waste management comprise the purchase of 78 garbage collection and compression trucks in 58 municipalities. One municipality invested in street garbage bins (USD600) and another in the rehabilitation of a plant for solid waste composting (USD33,379). The price of trucks varied between USD66,000 and 185,000, which compares favorably with the price of similar types of 33 Given the diversity of environments in which the Project invested in roads and the complexity in determining the number of beneficiaries in each case, it is possible that sub-project formulators have in some cases overestimated the number of beneficiaries. Nevertheless, roads in El Salvador have certainly low investment costs per beneficiary. 43 equipment in the US market, suggesting that procurement was efficient. The investment cost per beneficiary is quite low as in many municipalities the trucks serve the whole municipality, i.e., all its inhabitants. The low scenario for the estimation of the average minimum annual benefit per truck that justifies the investment is quite conservative as it implies that all trucks would require a newly hired team of five people to operate them. The high scenario is probably more representative as it considers that new teams would be hired only for half the purchased trucks (staff operating old faulty trucks would be used in the other cases). On average, the minimum annual benefit per truck that justifies the investment is estimated to be between USD57,780 and 86,580, i.e., between USD160 and 237 per day. The range of minimum annual benefit per truck per day compares favorably with the alternative cost of hiring trucks, which in a small sample of municipalities varied between USD185 and 414 per truck per day. Sports equipment. This category mostly includes the improvement of existing soccer fields. Investment per beneficiary is rather low, given the average of 12,000 beneficiaries per sub-project34. It is difficult to assess whether all these beneficiaries will use the new facilities and equipment on a regular basis, but given that this equipment is part of the long term strategy to reduce violence in the country, they are likely to benefit the population at large. On average, the minimum annual benefit per football field that justifies the investment is estimated to be between USD21,300 and 29,700, i.e., a minimum benefit between USD58 and 81 per day. Considering that the willingness to pay of the users is USD2.5 per player hour (the current market price for hiring a soccer field in El Salvador), the football fields have on average to be used a minimum of 23 to 32 player hours/day to be justified in economic terms (23x2.5=58 and 33x2.5=82). 34 This average is largely skewed by (i) the investment in a sports pavilion in La Libertad (USD 454,586) which is estimated to benefit over 95,000 people and the (ii) investment in the gymnasium and soccer field in Tecoluca (USD 129,852) which is expected to benefit over 20,000 people. Without these two outliers, the average number of beneficiaries per subproject would be 5,290 and the average investment per beneficiary of USD 14. 44 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility / Specialty Lending Mark A. Austin Task Team Leader LCSAR Stephen Brushett Consultant GSU10 Caroline Charpentier Consultant LCSAR Gonzalo Espitia Avilez Consultant LCSAR Francis V. Fragano Consultant LCSDE Jonas Frank Sr. Public Sector Specialist GGOPS Jimena Garrote Counsel LEGLE Armando Guzman Sr. Disaster Risk Management GSU18 Escobar Specialist Jania Ibarra Operations Officer LCCSV Yoonhee Kim Sr. Urban Economist GSU12 Alvaro Larrea Lead Procurement Specialist GGO04 Jorge Martinez-Vazquez Consultant GMF04 Keith W. McLean Lead Governance Specialist GGO13 Fabienne Mroczka Sr. Financial Management GGO22 Specialist Jason Paiement Social Development Specialist GSURR Geeta Sethi Adviser GFADR Liliana Vendeuvre Consultant GENDR Eli Weiss Sr. Rural Development Specialist LCSAR Gregor V. Wolf Program Leader LCC5C Luz A. Zeron Sr. Financial Management GGO22 Specialist Ming Zhang Lead Urban Economist Dino Francescuti Agricultural Economist FAO Keisgner De Jesus Alfaro Sr. Procurement Specialist LCSPT Antonio Blasco Sr. Financial Management LCSFM Specialist Max Velasquez Matute Consultant TWILC Fabrice Edouard M&E Specialist FAO Supervision/ICR Mark A. Austin Task Team Leader LCSAR Stephen Brushett Consultant GSU10 Jason Paiement Social Development Specialist GSURR Eli Weiss Sr. Rural Development Specialist LCSAR Gregor V. Wolf Program Leader LCC5C Caroline Charpentier Consultant LCSAR Jania Ibarra Operations Officer LCCSV Ana Lucia Jimenez 45 Alvaro Larrea Lead Procurement Specialist GGO04 Gunars Platais Sr. Environmental Economist LCSEN Fernando Lecaros Financial Management Specialist GGO22 Monica Lehnhoff Procurement Analyst LCSPT Alberto Leyton Special Asst. To RVP LCRVP Fabienne Mroczka Sr. Financial Management GGO22 Specialist Tomas Socias Sr. Procurement Specialist GGODR Victoria Stanley Task Team Leader GSULN Ruth Tiffer-Sotomayor Sr. Environmental Specialist GENDR Alvaro Campy Orozco Consultant GWA04 Stamatis Kotouzas Junior Professional Associate GSURR Stephen Muzira Sr. Transport Engineer GTIDR Aaron Ordower Consultant LCSDU Patricia Rodriguez Consultant GSU10 Haris Sanahuja Consultant GSU10 David Tuchschneider Sr. Rural Development Specialist GFA04 Daniel Chalupowicz Financial Management Specialist GGO22 Maria Victoria Ojea Online Communications LCREC Specialist Robin Rajack Land Administration Specialist LCSAR Jose Simon Rezk Sr. Financial Management GGODR Specialist Juan Jose Valencia Consultant GSULN Edgardo Mosqueira Lead Public Sector Development GGODR Medina Specialist Margarita Puerto Gomez Social Development Specialist GSU07 Karina Rodriguez Saenz Safeguards Specialist GENDR Augustin Maria Senior Urban Development GSU10 Specialist Mariela Mena Safeguards Specialist GWADR Ana I. Aguilera Urban Development Specialist GSU10 Caleb Travis Johnson Consultant GSULN Fabrice Edouard M&E Specialist FAO Esteban Travaglianti Roads Specialist FAO Luis Deas Pereira Economist FAO Patricia De la Fuente Team Member GGODR Hoyes Jimena Garrote Counsel LEGLE Jose M. Martinez Procurement Specialist GGO04 46 (b) Staff Time and Cost Stage of Project Cycle Staff Time and Cost (Bank Budget Only) No. of staff weeks USD Thousands (including travel and consultant fees) Lending FY10 50 266.74 Total: 266.74 Supervision/ICR FY10 3 12.07 FY11 14 83.48 FY12 18 119.95 FY13 20 115.87 FY14 21 113.8 FY15 16 93.22 FY16 18 99.48 FY17 14 80.41 Total: 718.28 47 Annex 5. Beneficiary Survey Results A final evaluation35 of the Project was carried out by an international consulting firm between August 12 and December 9, 2016 (120 days). Among other variables, the evaluation addressed the Project’s impact on beneficiary municipalities and other participating institutions. Information was collected through various avenues including visits, focus groups and in-depth and semi-structured interviews with key agencies and institutions (e.g. UEP, Inter-Institutional Committee, ISDEM, FISDL, Ministry of Finance, among others), field visits to municipalities and sub-projects. A sample of municipalities (a total of 48 from various regions and departments) and a subsample of subprojects (a total of 25, located in 9 of the sample municipalities) were identified to be evaluated. Field visits were conducted for the 25 subprojects36 to verify the quality, state and use of the infrastructure works, to obtain lessons learned and to document successful cases. During the field visits, two key instruments for conducting the Project’s evaluation and measuring its impact, were applied: (i) the Evaluation Protocol (Protocolo de Evaluación), and (ii) a tool to measure the Municipal Management Index (�ndice de Gestión Municipal - IGM). The former consisted of an M&E tool that incorporated additional indicators to those included in the Project’s Results Framework, which served to assess institutional changes in the municipalities and national-level institutions, as well as to measure the perception of progress of municipal actors (e.g. Mayors, General Managers, among others). On the other hand, the IGM consisted of an M&E tool that built on the information collected through a 2010 survey that served to establish a municipal baseline on the management capacity of the 262 municipalities. It allowed measuring the impact generated from improvements in the administrative, financial and technical processes and systems of local governments, and in their management capacity to provide basic services and develop medium and long-term sustainable processes. In total, 582 surveys were conducted to develop the Evaluation Protocol, which comprised nine questionnaires/forms, consisting of closed-questions. The table below summarizes the focus of each survey. 35 EPYPSA. “Evaluación Final del Proyecto de Fortalecimiento de Gobiernos Locales (PFGL)�. Diciembre 2016. 36 These subprojects were selected based on special technical, environmental and social safeguards characteristics, and rate of success. 48 Description of Survey Forms Form Party Surveyed Project Objective/Description Code Component AD01 Head of UACI37 Component 1 To know the opinion and perception of the Head of the UACI on the at FISDL changes promoted by the Project regarding processes related to the execution of infrastructure and technical assistance projects. CCC Citizen Control Sub-component To know the opinion and perception of the CCC members in regard to Committees 2.1 the functioning and role that these groups had in the execution of projects implemented by the municipal government. PS01 Technical person Component 1 & To know the opinion and perception of the Municipal Technical Team, within Project Sub-component preferable the person in charge of social promotion, on the changes in Unit 2.1 citizen participation resulting from the Project. EA01 Trained Sub-component This evaluation was conducted during the process of personnel 2.2 professionalization and sought to identify the areas in which the course contributed to strengthening capacities. EA02 Trained Sub-component To learn the rating given to the training and professionalization personnel 2.2 process. ED01 Trained official Sub-component To assess the efficacy of the training processes that municipal and supervisor 2.2 employees completed, in terms of knowledge and capacity building. ED02 Trained official Sub-component To assess the changes in job performance resulting from academic and supervisor 2.2 training activities. ES10 IPP (Instancia de Sub-component To know the progress on the execution of activities and projects Participación 2.3 established in the Annual Operational Plan (POA) as part of the Permanente) implementation of the municipal Strategic Participatory Plans (PEP). RF01 Head of UACI or Sub-component To know the opinion and perception of the Financial Commission on other member of 2.4 the scope extent of the training during the formulation of the Fiscal the Financial Consolidation Plan (Plan de Rescate Financiero Municipal - PRFM), Commission the quality and relevance of the support provided by the consultant, and the relevance and sustainability of the proposed activities in the PRFM. GR01 Person in charge Sub-component To know the opinion and perception of the person responsible for the of the PMGRD 2.5 formulation and monitoring of the Municipal Plan for Disaster Risk Management (Plan Municipal de Gestión del Riesgo De Desastres – PMGRD). Additionally, 3 two-person teams, comprised of 1 Coordinator and 1 Interviewer conducted field visits and interviews with 48 Mayors and/or General Managers of the selected municipalities (those included in the sample). The following paragraphs summarize the main findings of the results of the surveys and interviews. PEP, POA and IPP. Generally, the IPP members show a high level of satisfaction in regards to the execution of activities and projects included in the PEP’s POA. Approximately 84 percent of respondents are satisfied (59.5 percent “very satisfied�; 24.3 percent “completely satisfied�). Regarding the coordination between the IPP and the municipality, approximately 75 percent are satisfied (56.8 percent “very satisfied�; 21.6 percent “completely satisfied�). Generally, 75.7 percent of respondents indicated to be satisfied with the performance of the IPP in monitoring the POA’s activities and projects, as part of the PEP implementation by the municipality. 37 Unidad de Adquisiciones y Contrataciones Institucional. 49 Training and technical assistance. The perception on the impact of the training and technical assistance provided by the Project to improve municipalities’ administrative processes (i.e. execution of works and purchase of goods and services) is positive, with 83 percent of respondents agreeing. The quality and timeliness of the technical assistance provided by ISDEM was also rated highly, with over 90 percent of respondents agreeing on its quality (46.75 percent “highly agreeing�; 41.16 percent “agreeing�). According to the survey results, the areas where municipalities most improved included “more agile processes for bidding awarding contracts� (79.2 percent), “improved public procurement� (79.2 percent) and “hiring of more competent staff� (77.1 percent). The lowest scored areas were “more agile elaboration of TORs�, “greater admissibility� and “citizenship participation and protagonism� – all three with 2.1 percent. In terms of procurement and safeguards (social and environmental) training provided by the World Bank, approximately 73 percent agreed that the content for each of the two types of training was adequate. Overall, 83.9 percent of municipal employees agree that they have gained more knowledge and improved their capacities as a result of training and capacity building activities carried out over the last three years. The role of the CCC. The CCC was rated positively with regard to the construction and supervision of works. Ninety-seven percent of respondents agreed that the CCC was present during the construction phase, and 81 percent agreed that CCC members showed their commitment to ensuring a good functioning of the completed works. Accordingly, 84.6 percent of municipalities showed interest in advancing the promotion of processes of citizen accountability and control (37.4 percent “highly agreeing�; 47.3 percent “agreeing�). Other items that were surveyed included: Training on SAFIM by the Ministry of Finance’s General Directorate of Government Accounting (Dirección General de Contabilidad Gubernamental – DGCG) (approximately 90 percent “agreed� that it was adequate); Fiscal Consolidation Plan (84 percent “agreed� that the results of the Plan turned out as expected); and Formulation of the Municipal Disaster Risk Management Plan (95.6 percent “agree� that communities have actively participation in the formulation of the Plan); among others. 50 Annex 6. Stakeholder Workshop Report and Results 51 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR A copy of the final ICR (in Spanish) was shared with the Borrower and specific comments were provided and included in this version ICR. No summary comments were provided. 52 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Not applicable. 53 Annex 9. List of Supporting Documents Project Appraisal Document, Local Government Strengthening Project, April 2010. Loan Agreement. Local Government Strengthening Project, Loan Number 7916 –SV, July 19, 2010. Manual Operativo Modificado, Proyecto de Fortalecimiento de Gobiernos Locales (PFGL), Tomo I. Febrero 2016. (Operations Manual) Marco Conceptual para el Manejo Ambiental de Sub-Proyectos. Abril 2010. (Environmental and Social Management Framework) Evaluación Social Proyecto de Fortalecimiento de Gobiernos Locales. Abril 2010. (Environmental and Social Management Plan) Marco para los Pueblos Indígenas, Proyecto de Fortalecimiento de Gobiernos Locales. Abril 2010. (Indigenous Peoples Planning Framework) Marco de Políticas Reasentamiento, Proyecto de Fortalecimiento de Gobiernos Locales. Abril 2010. (Resettlement Policy Framework) Restructuring Paper No. 1, Local Government Strengthening Project, Loan Number 7916 –SV. July 2010. Restructuring Paper No. 2, Local Government Strengthening Project, Loan Number 7916 –SV. November 2010. Restructuring Paper No. 3, Local Government Strengthening Project, Loan Number 7916 –SV. January 2013. Restructuring Paper No. 4, Local Government Strengthening Project, Loan Number 7916 –SV. July 2014. Country Partnership Strategy for El Salvador, Report No. 50642-SV. October 2009. Country Partnership Framework for El Salvador, for the period FY2016-FY2019, Report No. 95185-SV. May 2015. Evaluación Final del Proyecto de Fortalecimiento de Gobiernos Locales (PFGL). Diciembre 2016. Press release and results’ dissemination materials of Project’s Closing Ceremony. 54 World Bank (2010-2016). Archived documents in Project’s electronic file, including Aide Memoires, Implementation Status Reports (ISR), Project Financial Assessment, Procurement Assessment; WBDocs Washington, D.C. 55 Annex 10. PDO and Intermediate Outcome Indicators (i) PDO Indicator 2 - “Percentage of local governments that progress by at least one capacity category on areas for which they received technical assistance�: The “capacity� of municipalities is measured by the Municipal Governance Index built by the Project. The index is composed of 33 variables and 62 indicators and scores municipalities in a range of 0-100 points in terms of governance. The variables are organized in four main “areas� each contributing with 25 points to the index: (i) Organizational level and management capacity of the municipality (e.g. use of operations manuals, planning tools, etc.), (ii) quality of technical procedures (e.g. project formulation procedures,…) and of municipal services, (iii) financial management, and (iv) participation, environment and gender. The 87% of achievement reported on the PDO indicator 2 in the ICR corresponds to the share of municipalities that improved their overall index result. 4. This result is based on a baseline from 2010 for the whole country and a sample of 39 municipalities for which information was collected in 2016. The sample was representative and stratifies by population, size, poverty level and region/department. (ii) Intermediate Outcome Indicators Intermediate Outcome Indicator (as January 2013 restructuring Post Mid-Term Review (May 30, 2013) approved) Result 1: Local governments plan and execute investments according to technical standards and in a participatory way. 1.1 80% of investments, as defined in local The indicator was changed to: “80% of investments The indicator was changed to: “Percentage of investments governments’ contracts, satisfactorily satisfactorily completed according to technical specifications�. satisfactorily completed according to contractual documents completed according to technical Baseline: 0% (including technical specifications)�. specifications. End target: 80% Baseline: 0% Baseline: 0% End target: 80% End target: 80% 1.2 80% of Citizen Control Committees The indicator was changed to: “80% of citizen control The indicator was changed to: “Percentage of Citizen Control provide supervision to construction and committees provide supervision for sub-projects�. Committees that supervise construction and agree to monitor the functioning of Project financed Baseline: 0% functioning of project financed investments�. investments. End target: 80% Baseline: 0% Baseline: 0% Revised target: 80% End target: 80% 1.3 5% of budget allocated for, and The indicator was changed to: “80% of local governments The indicator was changed to: “Percentage of local governments satisfactory utilization of, operations have plan for maintenance of sub-projects�. have plan for maintenance of sub-projects�. 56 Intermediate Outcome Indicator (as January 2013 restructuring Post Mid-Term Review (May 30, 2013) approved) and maintenance for Project financed Baseline: 0% Baseline: 0% investments. Revised target: 80% End target: 80% Baseline: 0% End target: 5% 1.4 80% of facilities built/rehabilitated No change. The indicator was changed to: “Percentage of investments effectively used at the end of project. built/rehabilitated that are effectively used at end of project�. Baseline: 0% Baseline: 0% End target: 80% End target: 80% Result 2: Local development and municipal strengthening plans have been implemented. 2.1 80% of at least 66 pilot local This indicator was dropped and replaced by more specific No further changes. governments have implemented the indicators listed below. action plan. Baseline: 0% End target: 80% 2.2 A new indicator was added: “80% of 160 municipalities have The indicator was changed to: “Number of local governments implemented public finances consolidation plan�. that have completed and implemented a public finances Baseline: 0% consolidation plans�. End target: 80% Baseline: 0% End target: 112. 2.2 A new indicator was added: “80% of 262 local governments The indicator and target were changed to: “Number of local have implemented risk management plans�. governments that have completed a DRM plan�. Baseline: 0 Baseline: 0 End target: 209 Revised target: 131 2.3 A new indicator was added: “5-year municipal development The indicator and target were changed to: “Number of local plans produced with citizen participation�. governments that have completed and implemented strategic Baseline: 0 participatory plans�. End target: 114 Baseline: 0 Revised target: 54 2.4 A new indicator was added: “47 local governments have The indicator was changed to: “Number of local governments implemented SAFI finance system of Ministry of Finance�. that have implemented and are using the financial management Baseline: 0 system (SAFIM) developed by the Ministry of Finance�. End target: 47 Baseline: 0 End target: 47 2.5 National risk management policy. This indicator was dropped and replaced by a more specific No further changes. Baseline: n/a indicator (see 2.2 above). End target: policy established. Result 3: An interinstitutional structure has been established under the coordination of SSDT/SAE to analyze and design decentralization policies. 3.1 Decentralization strategy established. No change. The indicator and end target were changed to: “Decentralization 57 Intermediate Outcome Indicator (as January 2013 restructuring Post Mid-Term Review (May 30, 2013) approved) Baseline: n/a proposal prepared�. End target: strategy established. Baseline: n/a Revised target: proposal prepared. 3.2 MH has established and staffed a fiscal This indicator was dropped and included as part of 3.1 above.No further changes. decentralization unit. 3.3 SAE/SSDT and COMURES have staff This indicator was dropped and included as part of 3.1 above. No further changes. dedicated to researching, analyzing and preparing decentralization policy papers. Result 4: The required institutional structure within ISDEM aimed at strengthening local governments’ institutional capacity ha s been established and is operating successfully. 4.1 ISDEM has developed contractual The indicator was changed to: “ISDEM has developed The indicator and target were changed to: “A strategy and new mechanisms and institutional capacity capacity to support local governments’ development�. curriculum for ISDEM’s Training Center has been produced and for supporting local governments’ Baseline: limited capacity. implemented�. development. Revised target: capacity in place. Baseline: no. Baseline: no. Revised target: yes. End target: yes. 4.2 A new indicator was added: “150 local governments’ The indicator was changed to: “Number of local government employees trained by ISDEM courses/programs�. employees and officials trained through ISDEM´s vocational Baseline: 0 training and the municipal strengthening program�. End target: 150 Baseline: 0 End target: 150 4.3 ISDEM has set up and maintains No changes. The indicator was changed to: “ISDEM has set up and maintains database to monitor local governments’ a database to monitor its technical assistance to local development (current level of governments�. management capacity). Baseline: no. Baseline: no. End target: yes. End target: yes. 58 Annex 11. Agreed Institutional Arrangements for Sustainability (of project’s achievement in the medium and long term) Component or Sub- Description of main function to carry out Institution that is recommended to Component in PFGL take on function 1 Infrastructure Works Monitoring the maintenance of works and application of environmental and FISDL. (262 municipalities) social safeguards for over 500 works with varying levels of complexity. 2 Risk Management Plans (262 Monitoring implementation of plans. National Council of Civil Protection municipalities) (Consejo Nacional de Protección Civil) (led by MIGOBDT and MARN, DPC). 3 Financial Consolidation Plans Monitoring implementation of the municipal financial management plans. ISDEM, in coordination with (160 municipalities) MIGOBDT. 4 Strategic Partipatory Plans Monitoring and technical guidance for the continued implementation of the Interinstitutional Committee (Mesa de (PEP) PEPs and the functioning of the regional coordination of the permanent Gobernanza), in coordination with (92 municipalities) participation mechanisms. ISDEM and STTP. 5 Integrated Municipal Monitoring and technical assistance to 106 municipalities for SAFIM’s Ministry of Finance. Financial Administration implementation. System (SAFIM) (106 municipalities) 6 Municipal Management Monitoring and technical assistance to 120 participating municipalities MIGOBDT Information System responsible for uploading information of the municipal management (SIGMUNI) (120 modules. Technical support for system and servers. municipalities) 7 Studies-proposal, Monitoring and promotion their analysis and discussion with local STPP/DGTE decentralization and municipal governments and sectors. finances 59 60 61