Document of The World Bank Report No: ICR00001838 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-39390 TF-54176 TF-56792 TF-91447) ON A CREDIT IN THE AMOUNT OF SDR 5.6 MILLION (US$8.0 MILLION EQUIVALENT) TO THE REPUBLIC OF HONDURAS FOR A POVERTY REDUCTION SUPPORT TECHNICAL ASSISTANCE PROJECT September 22, 2011 Poverty Reduction and Economic Management Central America Country Management Unit Latin America and the Caribbean Region CURRENCY EQUIVALENTS (Exchange Rate Effective September 22, 2011) Currency Unit = Lempira 1.00 = US$0.052 US$ 1.00 = 18.88 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS CFAA Country Financial Accountability Assessment CONASA National Planning Board for Water and Sanitation CPAR Country Procurement Assessment Report DGSC Civil Service Office EFMTAC Economic and Financial Management Technical Assistance Credit ENEE National Electricity Enterprise ERSAPS National Regulatory Agency for Water and Sanitation HONDUTEL Honduran Telecommunications Enterprise IADB Inter-American Development Bank IDA International Development Association IGR Institutional and Governance Review ISN Interim Strategy Note ISR Implementation Status Reports ONCAE National Procurement Agency PAD Project Appraisal Document PCU Project Coordination Unit PEU Project Execution Unit PDO Project Development Objective PRS(P) Poverty Reduction Strategy (Paper) PRSTAC Poverty Reduction Support Technical Assistance Project SIAFI Integrated Financial Management System SIARH Integrated Human Resources Management System SINACORP Integrated National Control System for Public Resources SWAp Sector-Wide Approach TF Trust Fund TSC Supreme Audit Institution UAP-SDP Project Implementation Unit in the Secretary of the Presidency UATP/UNAT Technical Assistance Unit (Secretary of the Presidency) Vice President: Pamela Cox Country Director: Carlos Felipe Jaramillo Sector Manager: Alberto Herrera Project Team Leader: Carolina Rendon ICR Team Leader: Carolina Rendon ICR Primary Author: Fanny Weiner ii HONDURAS Poverty Reduction Support Technical Assistance 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 Contents 1. Project Context, Development Objectives and Design ............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 8 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 ................................................................. 31 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 32 Annex 5. Beneficiary Survey Results ........................................................................... 33 Annex 6. Stakeholder Workshop Report and Results................................................... 33 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 34 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 40 Annex 9. List of Supporting Documents/People interviewed ...................................... 41 MAP .............................................................................................................................. 42 i A. Basic Information Poverty Reduction Country: Honduras Project Name: Support Technical Assistance IDA-39390,TF- Project ID: P083851 L/C/TF Number(s): 54176,TF-56792,TF- 91447,TF-93440 ICR Date: 09/26/2011 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: TAL Borrower: HONDURAS Original Total USD 8.00M Disbursed Amount: USD 7.93M* Commitment: Revised Amount: USD 7.37M* *Discrepancy due to exchange fluctuation of SDR during project time Environmental Category: C Implementing Agencies: Unidad Administradora de Proyectos - UAP Cofinanciers and Other External Partners: Department for International Development UK (DFID) Swedish International Development Agency (SIDA) B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 09/23/2003 Effectiveness: 04/07/2005 04/07/2005 01/31/2008 04/24/2009 Appraisal: 05/05/2004 Restructuring(s): 12/08/2009 02/19/2010 Approval: 06/24/2004 Mid-term Review: 03/19/2007 11/15/2007 Closing: 06/15/2008 12/31/2010 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Substantial Bank Performance: Moderately Unsatisfactory Borrower Performance: Moderately Unsatisfactory ii C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Quality at Entry: Moderately Satisfactory Government: Unsatisfactory Moderately Implementing Moderately Quality of Supervision: Unsatisfactory Agency/Agencies: Unsatisfactory Overall Bank Moderately Overall Borrower Moderately Performance: Unsatisfactory Performance: Unsatisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry Yes 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 Sector Code (as % of total Bank financing) Central government administration 100 100 Theme Code (as % of total Bank financing) Administrative and civil service reform 33 25 International financial standards and systems 17 40 Legal institutions for a market economy 33 5 Participation and civic engagement 17 30 E. Bank Staff Positions At ICR At Approval Vice President: Pamela Cox David de Ferranti Country Director: Carlos Felipe Jaramillo Jane Armitage Sector Manager: Arturo Herrera Gutierrez Ronald E. Myers Project Team Leader: Carolina Rendon Alberto Leyton ICR Team Leader: Carolina Rendon ICR Primary Author: Fanny Weiner iii F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of PRSTAC is to assist the Government of Honduras in improving its institutional capacity in the areas of participatory planning and monitoring, public expenditure management, accountability, public administration and public service delivery thereby facilitating the implementation of the country's Poverty Reduction Strategy. Revised Project Development Objectives (as approved by original approving authority) N/A (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 Enhanced capacity to monitor and improve the Poverty Reduction Strategy in a Indicator 1 : participatory manner, in order to use it as an effective instrument to align public sector resources 9.4 % o f public Value expenditure quantitative or 7.8% allocated to 9.1% Qualitative) poverty reduction related programs Date achieved 06/03/2004 12/31/2004 09/30/2007 Comments Partially achieved. Indicator could not be continued to be measured after 2007, as (incl. % the country discontinued its PRS process. achievement) Creation of a more qualified and streamlined public sector and administrative Indicator 2 : career path under implementation in the Central Government Central Government Value expenditures on quantitative or 11.4% 11.1% wages and salaries Qualitative) reduced to 10.4% of GDP Date achieved 06/03/2004 12/31/2004 12/31/2009 Comments Not achieved. Instead of a new civil service law, a professionalization bylaw was (incl. % passed. However, not much advances were made to modernize the civil service. achievement) Competent fiscal and financial management institutions promoting efficient and Indicator 3 : transparent use of public resources with credible and independent accountability systems in place Value Promotion of a 100% coverage of quantitative or N/A financial Central Qualitative) management Government. iv system covering 100% of Central Government expenditures & Decentralized Agencies with effective fiduciary instruments Date achieved 06/03/2004 12/31/2004 12/31/2010 Comments Partially achieved. 100% coverage of Central Government, but only one (incl. % decentralized agency (ENEE). achievement) Indicator 4 : Timely and effective public services delivery in key sectors of the PRS Strategic reform Some advance has Value processes under been achieved in quantitative or N/A implementation in the education and Qualitative) at least four key water sector. sectors of the PRS Date achieved 06/03/2004 12/31/2004 12/31/2010 Comments Partially achieved. Teacher allocation post audit was conducted and results (incl. % disseminated. Broad support was given to the decentralization of the water achievement) sector. (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 Component 1: Percentage of foreign assistance channeled through sector-wide Indicator 1 : programs (SWAPs) according to PRS priorities. Value No target value (quantitative No baseline. Not measurable. established. or Qualitative) Date achieved 06/03/2004 12/31/2004 12/31/2010 Comments (incl. % achievement) Component 1: Number of progress reports and Poverty and Social Impact Indicator 2 : Analysis (PSIAs) produced using the PRS Evaluation & Monitoring system 4 progress reports 11 progress reports Value 1 progress report and 1 and 6 Poverty and and 5 Poverty and (quantitative Poverty and Social Social Impact Social Impact or Qualitative) Impact Analysis (PSIAs) Analysis (PSIAs) Analysis (PSIAs) Date achieved 06/03/2004 12/31/2004 10/30/2007 Comments (incl. % Achieved (at mid-term review). achievement) v Component 1: Number of social audit programs conducted at the community Indicator 3 : level Value 47 social audits at (quantitative Not established. 9 pilots community level or Qualitative) Date achieved 06/03/2004 12/31/2004 10/30/2007 Comments (incl. % Achieved (at mid-term review). However, contribution from project is unclear. achievement) Component 2: Number of staff positions reduced in the Central Government as a Indicator 4 : result of reengineering processes. Value 6,191 positions Positions have (quantitative 1,513 positions reduced reduced increased. or Qualitative) Date achieved 06/03/2004 12/31/2004 12/31/2010 Comments (incl. % Not achieved. Reengineering process did not take place. achievement) Component 2: Number of civil servants recruited through competitive processes Indicator 5 : or confirmed under the new Civil Service legislation. Value (quantitative N/A 3,150 Not measurable. or Qualitative) Date achieved 06/03/2004 12/31/2004 12/31/2010 Comments (incl. % Not achieved. New civil service law was not approved. achievement) Component 2: Development of modules and coverage of upgraded web-based Indicator 6 : SIAFI Budget, Treasury, and Accounting modules operating in both Central and Budget, Treasury, Decentralized Accounting, HR, Value Agencies; and Asset (quantitative N/A Procurement, HR, Management or Qualitative) and Asset operating at the Management central government modules operating in the Central Government. Date achieved 06/03/2004 12/31/2004 12/31/2010 Comments Partially achieved. The modules are operating in the central government only; the (incl. % procurement module has been developed by ONCAE and not yet fully achievement) functional. Component 2: Percentage of public expenditure managed through a Single Indicator 7 : Treasury Account Value 90% of Public 100% of central N/A (quantitative Expenditure government vi or Qualitative) expenditure. Date achieved 06/03/2004 12/31/2004 12/31/2010 Comments (incl. % Partially achieved. achievement) Component 2: Percentage of operational Internal Audit Units in the Central Indicator 8 : Government under regulations established by the TSC Value (quantitative 10% 100% 100% or Qualitative) Date achieved 06/03/2004 12/31/2004 12/31/2010 Comments (incl. % Achieved. achievement) Component 3: Number of new public telephone lines available as a result of Indicator 9 : Telecommunications Sector Reform Value 387,314 land lines 669,541 land lines 100,000 additional (quantitative 70,201 mobile phone 8,807,272 mobile new lines or Qualitative) lines phone lines Date achieved 06/03/2004 12/31/2004 12/31/2010 Comments Achieved. More than 8 million additional phone lines, but without direct (incl. % contribution of the project. achievement) Indicator 10 : Increase percentage of average ship loading/unloading turn-around in ports Value 2,268 ships 2,162 ships (quantitative 40% increase 592,460 TEUs 484,148 TEUs or Qualitative) Date achieved 06/03/2004 12/31/2004 12/31/2010 Comments Not Achieved. Both the total number of ships, as well as the TEU decreased (incl. % slightly. (TEU = twenty-foot equivalent unit, measure used for capacity in achievement) container transportation) Indicator 11 : Component 3: Increase coverage of rural electrification. Rural coverage: not Value Rural coverage 39.35% available (quantitative 30% increase Total coverage: 64.64% Total coverage: or Qualitative) 81.27% Date achieved 06/03/2004 12/31/2004 12/31/2010 Comments Not completely measurable. Data on rural coverage was not available. (incl. % (www.enee.gob.hn) achievement) Indicator 12 : Total number of teacher posts audited. Value 22,000 posts (quantitative N/A 19,168 posts audited or Qualitative) Date achieved 06/03/2004 12/31/2004 10/30/2007 Comments Achieved. 19,168 posts were audited at time of mid-term review and results (incl. % published in the PETS report in November 2010. achievement) vii G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 12/10/2004 Satisfactory Satisfactory 0.00 2 04/23/2005 Satisfactory Satisfactory 0.00 3 11/11/2005 Satisfactory Satisfactory 0.75 4 07/14/2006 Satisfactory Moderately Satisfactory 1.61 5 12/27/2006 Moderately Satisfactory Moderately Satisfactory 2.20 6 06/25/2007 Moderately Satisfactory Moderately Satisfactory 3.06 7 12/21/2007 Moderately Satisfactory Moderately Satisfactory 3.92 8 04/22/2008 Moderately Satisfactory Moderately Satisfactory 4.59 9 10/17/2008 Satisfactory Satisfactory 5.01 10 04/03/2009 Satisfactory Satisfactory 5.86 11 04/23/2009 Satisfactory Satisfactory 5.86 12 07/24/2009 Satisfactory Satisfactory 6.61 13 04/23/2010 Satisfactory Satisfactory 7.55 14 05/05/2010 Satisfactory Satisfactory 7.55 15 01/13/2011 Moderately Satisfactory Moderately Satisfactory 8.28 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 Extension of closing date of one 01/31/2008 MS MS 4.17 year due to delays in project effectiveness. Extension of project closing 04/24/2009 N S S 5.86 date, due to slow implementation. Unilateral extension due to 12/08/2009 N S S 7.39 pause of Bank operations in Honduras Extension of project closing date, to complete project 02/19/2010 N S S 7.55 activities interrupted by political crisis. viii I. Disbursement Profile ix 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. Honduras has historically been one of the poorest countries in Latin America. At time of appraisal, the country had a population of about 7 million people, and an annual per capita income estimated at US$920; an estimated 63 percent of the population lived below the poverty line, most of them in rural areas. The country’s record of poor economic growth, recurrent macroeconomic imbalances, vulnerability to natural disasters, and a decade-long legacy of periodic fiscal mismanagement were key factors contributing to Honduras’ high poverty rate and weak social indicators. The country initiated a series of ambitious economic and structural reform programs throughout the 1990s to stabilize the economy, promote faster economic growth, and improve social conditions. 2. In October 1998, Hurricane Mitch caused major damage, and defeated much of the country’s development progress from the past decade. Following this natural disaster, the Government presented the Plan for National Reconstruction and Transformation, aimed at long-term sustainable poverty reduction and economic recovery. In this context, the Government prepared a Poverty Reduction Strategy, also a requirement to qualify for the Highly Indebted Poor Countries Debt Relief Initiative (HIPC), and presented a Poverty Reduction Strategy Paper (PRSP) (Report No. 22661-HO), to the IMF’s and World Bank’s Board of Executive Directors in June and July 2001, respectively, and an associated first Progress Report (Report No. 27648-HO) in February 2004. 3. The main objective of the Poverty Reduction Strategy (PRS) was to reduce poverty by 24 percent over the period 2001-15 by meeting the Millennium Development Goals. The strategy was founded on six pillars: (i) accelerating equitable and sustainable growth to levels consistent with income poverty reduction targets, (ii) reducing rural poverty, (iii) reducing urban poverty, (iv) enhancing investment in human capital, (v) strengthening social protection for vulnerable groups, and (vi) ensuring the strategy’s sustainability through governance and institutional reforms and enhanced environmental sustainability. 4. Despite the presence of a coherent and focused strategy and Government commitment to the reforms proposed in the PRSP, initial implementation made little advancements. The two main challenges to assure effective implementation of the PRS arose from shortcomings in the operationalization of the strategy and the public sector’s weak institutional capacity to implement the necessary reforms. 5. The Honduras Country Assistance Strategy 2003-2006 (Report No. 25873-HO), was based on the objectives and priorities expressed in the PRSP. The Bank’s strategy explicitly contemplated a technical assistance project to support PRS implementation, acknowledging the shortcomings in PRS operationalization and weak institutional capacity. These weaknesses were also identified in the 2004 Country Financial Accountability Assessment – CFAA (Report No. 28418-HO) and the 2004 Country Procurement Assessment Report - CPAR (Report No. 32791-HO). The Poverty Reduction Support Technical Assistance Project (PRSTAC) (P083851, approved on July 24, 2004), 1 evaluated in this ICR, followed the purpose to assist Honduras in moving forward with its PRS by strengthening the public sector’s institutional capacity with the final goal to alleviate poverty and meet the Millennium Development Goals. Giving support to a number of promising reform initiatives initiated by the Maduro Administration, Bank support was concentrated through a series of programmatic PRSCs, complemented by the PRSTAC, which was specifically designed to implement the measures under the PRSCs and with the final objective to meet the PRS targets. Although linking the project results directly to the PRS posed many risks, the Bank took advantage of this window of opportunity to support potentially far-reaching reforms. As support areas were expected to change during the implementation of the PRSCs, the PRSTAC design consequently reflected those expectations through a broad project development objective. 6. Previous to the PRSTAC and the PRSCs, the World Bank had supported the reform program through a series of Public Sector Modernization Projects, which aimed at restoring fiscal sustainability and increasing private sector participation in the provision of public goods. The PRSTAC followed and built on progress achieved under the Economic and Financial Management Project (EFMTAC) (P060785), which was approved on September 12, 2000 and closed on September 30, 2006. 1.2 Original Project Development Objectives (PDO) and Key Indicators 7. The objective of PRSTAC as stated in the Project Appraisal Document (PAD) was to assist the Government of Honduras in improving its institutional capacity in the areas of planning, participatory monitoring, public expenditure management, accountability, public administration, and public service delivery thereby facilitating implementation of the PRS. 8. The key outcome indicators of the PDO were aligned with the Government’s PRS and described in detail in the Results Framework (Annex 3 of the PAD) as followed: (i) Enhanced capacity to monitor and improve the Poverty Reduction Strategy in a participatory manner, in order to use it as an effective instrument to align public sector resources (ii) Creation of a more qualified and streamlined public sector and administrative career path under implementation in the Central Government (iii) Competent fiscal and financial management institutions promoting efficient and transparent use of public resources with credible and independent accountability systems in place (iv) Timely and effective public services delivery in key sectors of the PRS 2 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 9. The PDO and key indicators remained unchanged during the project. However, during the mid-term review, the Government and the Bank agreed to the adaption of activities under Component 2. As a consequence, one indicator under Component 2 was not achievable, as it directly referred to the passing of the new Civil Service Law. The change is a result of an agreement between the Bank and the Government to approve a Regulatory Decree instead of passing a new law. In addition, due to the lack of fiscal space, the Bank agreed in 2006 to drop the target for public expenditure allocated to poverty reduction programs. 1.4 Main Beneficiaries 10. The PAD does not identify specific project beneficiaries. However, based on characteristics of the project, the main direct beneficiaries are central government staff and citizens. Hereby, citizens would benefit from (i) improved poverty reduction programs, (ii) enhanced public service delivery, (iii) more transparency in the allocation of public funds, and (iv) better investment climate. Government staff would benefit from gaining additional skills through training, and improved working conditions. 1.5 Original Components 11. The total amount of the project was US$12.85 million, which were financed by an IDA credit (US$8 million), with co-financing from the Government of Sweden (US$3.8 million) through the Swedish International Development Cooperation Agency (SIDA), the Government of the United Kingdom (US$0.3 million) through the UK Department for International Development (DFID), and a counterpart financing from the Government of Honduras in the amount of US$0.8 million. The distribution of financing sources by component is shown in the table below. Cost Financing Component (US$ thousands) Source 1. Develop the Institutional Capacity to manage, 800.5 IDA credit monitor, evaluate and improve PRS implementation 300.0 Co-financing 2. Improve the implementation of public sector 1,864.7 IDA credit management 3,100.0 Co-financing 3. Support for sectoral activities within the framework 4,734.8 IDA credit of the PRS 500.0 Co-financing 600.0 IDA credit 4. Project Management 150.0 Co-financing Counterpart Contribution 800.0 Counterpart Total Project Cost 12,850.0 3 Project Component 1: Develop the Capacity to Manage, Monitor, Evaluate and Improve PRS Implementation. 12. The objective of this component was to strengthen the Government’s capacity to monitor, evaluate, and open the process of consultation for the PRSP and subsequent progress reports. The following sub-components were supported by this operation:  Sub-Component 1.1: Develop UNAT’s Analytical Capacity. This sub-component was to strengthen UNAT’s (Unidad de Apoyo Técnico) capacity to analyze and disseminate the results of public programs associated with the Government’s poverty reduction strategy. Activities included: (i) the recruitment of specialized staff for UNAT; (ii) the carrying-out of impact analyses and assessments of PRS-related programs; and (iii) the dissemination of such studies.  Sub-Component 1.2: Strengthen the Government’s Capacity to Coordinate Foreign Assistance. Government and stakeholders were committed to the creation and implementation of sector programs SWAps around PRS priorities. Activities included: (i) the design and implementation of SWAps in selected sectors; and (ii) the development and dissemination of adequate guidelines on SWAps.  Sub-Component 1.3: Enhance the PRS Consultative Process. This sub-component systematized the PRSP participatory process through regular consultations with communities to identify priorities, complemented by stakeholder involvement in designing and implementing the Strategy’s programs. Activities under this sub- component were geared to strengthen work undertaken by the PRS Consultative Council (CCERP) in PSR monitoring and evaluation. Project Component 2: Improve the Implementation of Public Sector Management. 13. The objective of this component was to support the implementation of the new Civil Service legislation, thereby ensuring a more equitable working environment with better performance incentives and improved quality of civil servants. It also strengthened the Government’s budgetary, financial, and fiduciary management to produce a more accurate, timely, relevant, and transparent public sector. The following sub-components were supported by this operation:  Sub-Component 2.1: Implement the New Civil Service Law and Continue with Efforts to Reengineer the Public Sector. This sub-component would help the Government implement a new Civil Service Law being discussed. This legislation included renewed provisions for the establishment of transparent and less politically influenced procedures for hiring, evaluation, and dismissal of public servants. Activities under this sub-component included: (i) the expansion of the Human Resource Management System (SIARH) and its integration with SIAFI; (ii) the conceptualization of the structure and functions of the new Civil Service Regulatory Office and equipping the latter for its day-to-day operations; (iii) training of civil servants in topics related to HR management; (iv) carrying out of studies on the fiscal impact of the redefined wage policy and a strategy to ensure its fiscal sustainability; (v) support to Government efforts to reengineer the public administration in a number of additional public entities; and (vi) the contracting of a specialized firm to conduct 4 independent personnel evaluation activities in pilot agencies and to develop the capacity of those entities to apply the new HR policies regarding posts classifications, recruitment and selection, performance evaluations, and professional development.  Sub-Component 2.2: Upgrading and expanding the Capacity of SIAFI. This sub- component helped to develop a set of norms, methodologies, and computer-based systems to allow the Government to prepare an effective and transparent budget compatible with the PRS. Activities under this sub-component included: (i) acquisition of software, communications and computer equipment, and data links and licenses to use servers for the upgrading and expansion of web based e-SIAFI, as well as preparation of an “e-SIAFI users manual�; and (ii) a review of the Central Government’s financial accounts.  Sub-Component 2.3: Strengthening the Institutional Capacity to Ensure Accountability through Internal and External Control. This sub-component was geared to assist the Supreme Audit Institution (Tribunal Superior de Cuentas - TSC) to establish stronger financial controls, thereby instituting greater transparency in public financial management. Activities under this sub-component included: (i) training of personnel of internal control units from all public sector entities in various skills related to new regulations and control abilities; and (ii) the acquisition of equipment (such as computers and communications) for each area of the TSC. Project Component 3: Support for Sectoral Activities within the Framework of the PRS 14. The objective of this component was to support sectoral activities that require technical assistance to fulfill the actions and conditions specified in the PRSC (three year program). In this context, technical assistance was to be provided to specific sectors identified by a Project Steering Committee during Project implementation. To begin, the following activities in the areas of public infrastructure and service provision were identified in principle as activities to be supported, but were pending ratification by the Steering Committee:  For the telecommunications sector, financial and legal advisors were to be hired to assist the Government in restructuring and modernizing HONDUTEL. These advisors, together with other consultants, were to help the Government of Honduras to prepare new telecommunications legislation and to strengthen the newly established telecommunications coordinating unit.  For the power sector, consultants were to be hired to assist the Government in improving the efficiency of the national electricity enterprise (Empresa Nacional de Energía Eléctrica - ENEE) including its restructuring. Other activities in this sector that could be supported by the fund included: the design of institutional and regulatory reforms necessary to improve the performance of the sector; a comprehensive study of power tariffs, as well as of various regulatory aspects of the power sector, and of mechanisms to stimulate private sector participation. Activities could also be undertaken to strengthen the National Commission of Energy (the entity in charge of regulating this sector). Finally, technical assistance was to be provided to identify and implement viable approaches for providing modern energy services to consumers in rural and semi-urban areas. 5  For the ports sector, activities included technical assistance geared to help the Government restructure the National Ports Company. In addition, consultants were to be hired to strengthen the organizational capacity of the regulatory entity in line with the new Ley General de Puertos, and supporting efforts of attracting private investment for other ports.  For the water sector, activities included supporting the National Planning Board for Water and Sanitation (CONASA) as well as strengthening the Water Sector Regulator for Water and Sanitation (ERSAPS). To support CONASA, a technical manager, a planning expert, a decentralization expert, an economist, and an information systems specialist were to be contracted. In ERSAPS, an economist, two engineers, and a lawyer were to be contracted. Other activities in this sector that could be supported included: support for an information campaign aimed at the general public, NGOs, Municipalities and Government in general on the reforms introduced by the 2003 Water Law. Finally, the project was to provide technical equipment (computers and software) to allow both agencies to operate efficiently.  For the environmental sector, consultants were to be hired to improve the quality and accuracy of information. Using this improved data, consultants were to review the sector’s policies and regulatory framework. Other activities in this sector that could be supported included: workshops to strengthen capacity to conduct environmental risk assessments, and a comprehensive diagnosis of key areas to determine necessary institutional reforms in the sector.  For the social sectors, consultants were to be hired to produce a feasibility study to expand the role of local education development associations with special attention to basic infrastructure, transportation networks, and health; and a comprehensive teacher allocation post review (auditoría de puestos) was to be carried out in the departments of Francisco Morazán and Cortés. Teacher allocation post review could later be extended to cover other departments. 15. A Steering Committee was responsible for identifying and approving sectoral activities within the context of the PRSC that were supported under this sub-component. Detailed procedures governing the identification and approval of sectoral activities were outlined in the project Operational Manual. Project Component 4: Manage PRSTAC Implementation 16. This component financed the provision of technical assistance, equipment, training and operating costs, as necessary, to establish, operate and strengthen the Project Coordination Unit and Project Execution Units to enable these units to effectively coordinate, monitor and evaluate (including periodic audits) the implementation of the project activities. 1.6 Revised Components 17. The components were not formally revised during project implementation. However, as mentioned in section 1.3, activities of Component 2 were adapted to reflect the Government decision to approve a Regulatory Decree instead of passing a new Civil 6 Service Law as initially laid out in the PAD. In 2009, as part of donor cooperation and joint preparation of a follow-up operation, a sub-component under Component 2 was added to support the Oficina Normativa de Contratación y Adquisiciones del Estado (ONCAE). The objectives of this sub-component were (i) to set-up a national procurement platform, (ii) to implement a regulatory framework on public procurement, and (iii) to conduct training on the framework and the preparation of procurement plans. These incorporations were not formally processed through an amendment of the credit agreement, but agreed upon in a number of aide memoires. 1.7 Other significant changes 18. There were a number of significant changes during the project:  Additional Trust Funds. In 2008, additional funds (TF091447) in the amount of US$4.63 million for the professionalization of the civil service and the implementation of SINACORP were received from the Government of Sweden. Furthermore, the Government of Japan granted funds (TF056792) in the amount of US$471,000 to strengthen the assistance for capacity building in Honduras. This grant was executed by the Ministry of Finance.  Changes in implementation arrangement. In April 2010, as a result of organizational changes by the new administration, a new project implementation unit (PIU) at the Secretary of the Presidency, the Unidad Administradora de Proyectos de la Secretaría del Estado en el Despacho Presidencial (UAP-SDP) and a new technical assistance unit Unidad de Apoyo Técnico Presidencial (UATP) were established. The UAP-SDP assumed the implementation responsibilities formerly carried out by the Comisión Presidencial de Modernización del Estado (CPME), and the UATP assumed the responsibilities of the former Unidad de Apoyo Técnico (UNAT). Key personnel for the implementation of the project remained the same despite this change.  Extensions of the credit and the associated TFs. The closing date of the credit was extended four times. The first two extensions mainly reflected the one-year delay in effectiveness and slow progress in implementation. In December 2009, as a consequence of paused operations in the country, the Bank approved a 2-months unilateral extension. With the new Government in place in January 2010, the fourth extension provided the time needed to complete remaining implementation activities. The closing dates of the TFs, in accordance with the donors and the Bank, were adjusted accordingly.  Reallocation of funds. In 2008 and 2009, funds were reallocated among expenditure categories, in particular to increase funds for consultant and communication services, and to finance the additional sub-component on ONCAE.  Changes in Bank’s monitoring and results framework. During the project’s life time, the Bank’s operational procedures and focus on results underwent several changes and the design and use of indicators became more sophisticated and integral to reporting on development effectiveness. Most notably are the changes in the implementation summary and results reporting (ISR) that are filed twice-a-year to inform management of progress in Bank-supported operations. Initially, the report 7 format in 2004 did not require reporting on results indicators. The following format, starting in 2005, required reporting of at least one outcome-level and one intermediate level indicator. Since 2010, the ISR measures all indicators described in the PAD, and puts emphasis on distinguishing outcome level and intermediate outcome level indicators. Hence, the Project is being evaluated at closing under a different logic than the one applicable during its design. The resulting inconsistency of reporting during the project’s lifetime makes the evaluation of the achievement of its results indicators more challenging. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 19. The quality at entry was moderately satisfactory. Objectives responded to the Government priorities in the implementation of the PRS, as laid out in the PRSP and the First PRSP Annual Progress Report 2004. The PRSTAC did not only support the Government in the implementation of the PRS, which was a condition for the HIPC debt relief initiative; it also served as a framework for the general modernization process of the country. 20. The project design reflected the objectives of the 2003 CAS which were based on supporting the implementation of the PRS process. The CAS explicitly contemplated a PRSTAC as a cross-cutting support vehicle for the policy-based PRS Credits, with the objective to consolidate reforms in the education sector, assisting the Government to address civil service reform issues, improving public resource management and increasing transparency and promoting greater civil society participation in the formulation, implementation and monitoring of the poverty reduction strategy. The project furthermore drew on recommendations from the CFAA 2004 and the CPAR 2004 and built upon the previous EFMTAC, integrating lessons learned and continuing most of the reforms initiated under this project. 21. As continuation of the EFMTAC project and technical assistance for the planned PRSCs, the project enjoyed strong Government commitment and could count on an existing implementation structure. Two external donors (Sweden and the UK) provided co-financing, not only adding financial resources and flexibility, but also contributing to donor alignment and dialogue. The components were in line with the development objectives, and in particular to support the country’s PRS process. However, the corresponding indicators were not as flexible and measured specific outcomes; for some of the indicators a baseline or even a target value was not established. Furthermore, the delay in project implementation, mainly caused by deficiencies in sequencing the closing of EFMTAC and initiation of the PRSTAC, suggest shortcomings in implementation readiness at entry. 22. The Project´s objective as defined in the project appraisal document was too broad and overambitious for a project of its nature; for the reasons discussed above, the objectives reflected more the desired outcomes of the PRS process than those that could be reasonably achieved through the PRSTAC. However, such broad and ambitious objectives provided the Bank enough flexibility to adapt and respond to changing 8 circumstances throughout project duration. As a result the PRSTAC was converted into the main vehicle of dialogue between the Bank and the Government, not only in public sector modernization issues but also in relation to sectoral activities. At the same time, by responding to the evolving operation environment the project switched its focus; activities were adjusted in several components making it difficult to monitor the achievement of indicators and to adequately evaluate the project outcomes. 23. The potential risks in meeting the development objectives were correctly identified and corresponding mitigation measures put into place. The political context was relatively stable during project preparation, and although the risk of change of administration with the resulting change of direction and lack of ownership of the reforms proposed by the project was flagged, the risks of it actually happening were considered to be low. This suggests that the initial risk rating of “moderate� was mainly based on the probability of the risk materializing, but did not consider its impact in case it did materialize. From the ex-post perspective of this evaluation, the risks should have been rated higher and the proposed mitigation measures integrated more effectively into the project to enable the team to react to the materialization of those risks. Hence, future projects should carefully assess the likelihood and the impact of potential risks especially taking into consideration the political environment. 2.2 Implementation 24. The project became effective nine months after Board approval and then started off slowly, because remaining funds under the EFMTAC were used to complete activities, and the set-up of the multi-donor trust fund was delayed. Yet, activities accompanying the reforms under the first PRSC were initiated. 25. Another setback was the 2005 presidential elections that resulted in the change of the administration and, consequently, of policy priorities. While the Government of President Zelaya (2006-2009) initially was committed to continuing the PRS process, policy priorities gradually moved away from the PRS agenda. Country dialogue and the continuation of the Bank´s involvement in the country was challenged by the significant changes brought on by the new government and by the favorable macroeconomic environment Honduras enjoyed during the first years of the Zelaya administration. During this period, and given the reversal of many critical aspects of the PRS, the PRSC operations were interrupted while the implementation of the PRSTAC was continued as a means to maintaining the dialogue in areas of coinciding interest but with lesser possibilities to support big policy changes (i.e. the civil service law or specific sector reforms). 26. As noted in the CAS Progress Report (Report No. 42344-HN, May 8, 2008), progress had been made in some areas, but favorable macroeconomic conditions and delays in the completion of measures related to key structural reforms led to the dropping of the PRSC operations scheduled for FY08 and FY09. 27. These developments undermined several of the objectives originally supported under the PRSC/PRSTAC, notably in the area of civil service reform. Support provided under the PRSTAC was adjusted, with the result that several important reform measures 9 were eventually carried out with PRSTAC support, even though the PRSC series did not progress beyond the first loan. 28. The mid-term review conducted in November 2007 recognized these changes, and it was agreed with the Government to re-allocate funds and to extend the project closing date. In 2008, a Learning QAG report underlined implementation issues and recommended maintaining a close and intensive supervision and dialogue with the government and other stakeholders. These actions then showed positive impact as consensus with the government on activities was reached and improved implementation led to rising disbursement rates during 2009. 29. The removal of President Zelaya from power, followed by a 6-month pause of Bank operations in the country, interrupted all operations. Its resumption by the newly elected Government under President Lobo presented further challenges with an institutional and political framework weakened by the global financial crisis. Yet, the PRSTAC kept its relevance and was the vehicle to facilitate re-engagement in the country policy dialogue. Project implementation, however, progressed slowly and concentrated on a few new policy priorities. Additionally, institutional changes, including the creation of a new implementation unit, the loss of key personnel in PIUs, and of institutional memory, further delayed project processes. 30. In sum, a project that was originally intended to accompany implementation of the PRS as only one of several instruments in the Bank program served as one of the most effective means to keep policy dialogue open with the authorities in moments of dramatic changes in the country context and facilitated the reengagement process following the political crisis in 2009. Although it is true that original objectives were different from what was accomplished, it is also fair to provide a critical account of the situation and explicitly recognize the value of these unintended outcomes of the project, and the fact that it became one of the few operations the government requested to be extended through a follow-up operation. 31. Implementation arrangements were an issue throughout the entire project. The presence of four executing agencies demanded a major effort in organization and technical assistance from the implementing agency and the Bank team. These complex institutional arrangements resulted in delays, lack of coordination and administrative bottlenecks. Attempts to centralize communications with the Bank resulted in a big backlog in the implementing agency, which was later reversed, but due to a high workload in the implementing agency could never fully be resolved. 32. The fact that the project was never formally restructured drastically reduced the possibilities of achieving the PDO and indicators, and made it difficult to adequately record progress made through modified activities. Restructuring the project would have had allowed to adapt the PDO and indicators to reflect changing circumstances and to measure and assess the new activities. There have been important advances and achievements attributable to the project that have not been properly reflected by the original indicators, such as, the progress made in the public procurement system and achievements of the Supreme Audit Institution, including the audit of teacher positions. 10 However, when formal restructuring was being considered, the project was near its closing date, which could have undermined the value-added of the restructuring. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 33. The M&E of the project is rated unsatisfactory, mainly because monitoring and evaluation arrangements as agreed in the PAD were not put into practice and baseline and end-of-project targets were not established. 34. The Results Framework distinguished between four outcome indicators to measure the PDO, one intermediate result indicator per component (two in the case for component 2), and three to four result indicators for each component. The 16 result indicators were generally closely linked to their respective component, sub-components and activities. This did not reflect the otherwise rather broad description of the components and activities. Furthermore, more than half of the indicators had no baseline at project appraisal; one indicator had no yearly and end target. 35. Monitoring was also challenging as the ISR format on indicators changed several times during project implementation. The earliest format did not report on indicators at all. The second format, starting in 2005, reported on four indicators: one “overall� indicator (taken from one of the indicators measuring the PDO achievement) and three intermediate outcome indicators. Out of these three intermediate outcome indicators chosen to be tracked in the ISR, only one was in the set of indicators measuring the PDO outcome as described in the PAD. The other two were among the results indicators. In 2009, the original PDO indicator was added to the ISR, but could not be measured, as it depended on four only partially tracked indicators. The final ISR (archived on January 13, 2011) was prepared with the newest ISR structure, which includes all indicators as described in the PAD, and noted the PDO as moderately satisfactory accordingly. 36. Consequently, during most of the project implementation, only four of 16 results indicators were monitored with the ISR. With changes in government priorities and adjustments of the project’s activities, the relevance of indicators decreased: one indicator became obsolete, and two indicators could only be measured once, as the basis or data source changed or became irrelevant. Only one indicator could successfully be measured throughout implementation. 37. During the mid-term review in 2007, the Bank team undertook the effort of establishing missing baseline data and to collect data on the current status of all 16 indicators, even though many of them had become irrelevant for the project, or their achievements could not be attributed to the project. Neither the failure on measuring the existing indicators, nor the absence of indicators that could actually measure project progress brought up the need to formally restructure the project at that time to improve the M&E framework and align it with the changed priorities and changed project activities. 11 38. The Bank team instead concentrated and channeled its M&E efforts through ISRs, aide memoires and the mid-term review, where it properly reported on project progress, reorientation and issues. 2.4 Safeguard and Fiduciary Compliance 39. As a category C project, there were no safeguards issues in the PRSTAC. 40. The FM performance of the project was either “Moderately Satisfactory� or “Satisfactory� throughout most of the project life, up to 2009 when the rating was downgraded to “Moderately Unsatisfactory�, which was maintained up to the closing of the project. The reasons for the downgrade were related to: (i) non conciliated differences in the balances of the different designated accounts (credit and associated TFs), (ii) transfers of funds between the IDA credit and other sources of funds (the co-financed TFs and counterpart funding), (iii) delays in the presentation of audit reports and Financial Management Reports and (iv) internal control issues. Except for the first audit report (FY 2005) and the final audit report, audit opinions throughout the project were qualified due to the above-mentioned reasons. 41. Due to the high turnover of FM staff in addition to the institutional changes in the Implementation Agency (with the elimination of the CPME and the creation of the UAP), the follow-up of the FM issues was delayed. The auditors confirmed in the final report that no significant FM issues remained at project closing. 42. The procurement under the project is rated Moderately Satisfactory. Throughout the project, the preparation of the Annual Operation and Procurement Plans was delayed. The selection of individual consultants did not always involve procurement staff, and consultant contracts used varied by institutions; furthermore, some did not include clauses on fraud and corruption, and conflict of interest. Insufficiencies were also present in the conduct of shopping processes, and the use of Honducompras to publish procurement processes. 2.5 Post-completion Operation/Next Phase 43. Advances made in the modernization of the Honduran public sector will be continued and consolidated under the US$15 million follow-up operation Improving Public Sector Performance Project – IPSP (P110050), scheduled to be presented to the Board jointly with the new Country Partnership Strategy (CPS) and the first operation in a series of Development Programmatic Credits in FY12. 44. The IPSP project is part of a coordinated public sector program among the German Development Cooperation KfW, Inter-American Development Bank (IADB) and World Bank. While the IADB operation Honduras Fiscal and Municipal Management Consolidation Program was approved in October 2008 and started implementation in 2010, the IPSP project is intended to be implemented in parallel with a 12 €10 million KfW operation, which will focus on activities with the Supreme Audit Institution. 45. The IPSP intends to continue the reform efforts made under the PRSTAC in the areas of financial management systems and monitoring of public policies. A strong focus of the project will be on the public procurement system and the operationalization of the Honducompras platform. The IPSP will further give technical assistance in areas supported by the First Programmatic Development Policy Credit (P127331) in the area of human resources management. 46. The project design will incorporate the lessons learned under the PRSTAC, which will be reflected through a simpler project design, realistic and achievable objectives, and in institutional arrangements adjusted to the country’s circumstances (see table below). Lesson learned from PRSTAC Integration into IPSP Relative to project design  Public sector performance improvement as an overarching topic with limited but interrelated components Keep project design simple and  Clearly defined objectives and indicators goals realistic  Monitoring based on easily collectible data with baseline values determined upfront Reduced number of agencies involved in the project implementation Introduction of a Project Coordinator, exclusively Simple but well structured dedicated to the Project implementation arrangements  Introduction of transition arrangements to avoid loss of institutional memory and ensure uninterrupted implementation Relative to project implementation Use of easily accessible, collectible or existing data for indicators Integrate section on indicators in Aide Memoires to Adjust implementation share and be transparent on advancement with arrangements to country-specific counterparts circumstances  Enhanced communication arrangements among participating agencies (to be defined in the operational manual, e.g. regular meetings, sharing of reports, etc) 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 47. The project objectives were mainly consistent during project implementation, and throughout implementation the operation remained important for achieving country, Bank and global development objectives. 13 48. The CAS 2007-2010 (Report No. 37280-HN, November 30, 2006) built on the PRS strategy, representing a continuation of the previous CAS 2003-2006, and incorporated priorities of the Zelaya Government. Good governance through state modernization and civic participation represented one of the CAS pillars; transparency, accountability and the demand for good governance were addressed as cross-cutting issues. However, the CAS Progress Report (Report No 42344-HN, May 8, 2008) notes that the originally programmed PRSCs were dropped due to macroeconomic conditions and delays in the completion of measures related to key structural reforms. 49. The Institutional and Governance Review (IGR) (Report No. 53517-HO) concluded that there is a need to strengthen the country’s accountability framework and to focus the policy discussion on performance. To address weaknesses in the implementation of public policies, it suggested adopting a new approach towards the professionalization of the public administration in order to ensure that reforms take into consideration the country context and become an integral part of public sector management reforms. 50. The Interim Strategy Note (ISN) (Report No. 56405-HN, September 29, 2010) identified intensified support for efforts to improve governance and fight corruption as one of its four basic principles. Civil service reform and the strengthening of public financial management and transparency form part of the support for macro stability and growth. 3.2 Achievement of Project Development Objectives 51. Despite slow and interrupted implementation, change in political priorities, and the broad and ambitious reform agenda, the project made advances towards several project development objectives. Even though the majority of indicators were not fully met, progress was made in many areas and achievements from former projects were consolidated. 52. As noted in the CAS Progress Report and the ISN, advances had been made in the area of governance in Honduras, as well as in building stronger relationships with civil society. Other advances have been reached through the Governance and Anti-Corruption (GAC) agenda and in fostering transparency, in particular through social audits and the introduction of an Access to Information Law. However, as noted in the IGR, the country still faces a lack of transparency and information in the decision-making process, and the organizational capacity of groups representing public interest remains weak. PDO 1 (Component 1): Develop government capacity to manage, monitor, evaluate and improve PRS implementation by giving all stakeholders access to effective mechanisms for the design and control of the government’s poverty reduction programs. 53. Overall project activities contributed to the strengthening of the implementation and monitoring capacity of the Central Government. A results-based management system was established, which tracked progress of PRS and Government goals and indicators, and which introduced a result-oriented mind set in the public sector in Honduras. 14 Analytical capacity was built up in earlier stages of the project through training and technical assistance; planning methodologies and systems were developed and integrated in administrative processes. As a result, public expenditure allocated to poverty reduction programs increased during project implementation. As a result of the turnover of key staff and the re-structuring of the implementation unit, capacity was lost, but many of the staff that benefited from the project remain in (or have been called back to work in) the Central Government. 54. Significant progress has been made in donor coordination, initiated during the PRS process. The preparation of strategic plans, engagement with civil society, and the set-up of sector specific round tables has established a culture of cooperation and communication among donors, the Government and, to certain extend, civil society. During, and in particular after the political crisis in Honduras, the donor community played a crucial role in maintaining the dialogue with the country. 55. The dialogue with the civil society, initiated under the PRS Consultative Process, has led to a now established participation of civil society in the areas of transparency and anti-corruption, in particular through social audits and monitoring initiatives. 56. Due to the fact that during the project cycle, the PRS process lost its momentum and, consequently, its importance in the Government’s development agenda, some key indicators that depended on the PRS process were not met PDO 2 (Component 2): Improve public sector management by ensuring a more equitable working environment with better performance incentives and improved civil service quality, as well as strengthening the Government’s fiscal, financial and fiduciary management. 57. A major achievement of this component was the set-up of the integrated human resource system (SIARH) and its linkage to SIAFI. As a result, today several Central Government agencies are using SIARH, facilitating automated payments of salaries and pensions. 58. Steps towards strengthening the Government’s fiscal, financial and fiduciary management have been achieved by upgrading SIAFI to a web-based system, and extending its functions with modules for budget, treasury, accountancy, HR and administration of goods. As a result, 100 percent of the central government expenditures are now processed using a single treasury account, constituting a significant improvement in the financial and fiduciary management. Further advances are needed to connect decentralized agencies and the public procurement information platform (Honducompras) to the SIAFI. 59. The Integrated National Control System for Public Resources (SINACORP) substantially contributed to the strengthening of the management of public resources. Implemented by the Supreme Audit Institution (TSC) it supports the country’s external audit function. The internal control function has been enhanced through the set-up of a National Office for the Development of Internal Control in Public Institutions (ONADICI). The TSC managed to link the follow-up of social monitoring outcomes into 15 its processes, to establish guiding frameworks and manuals for internal and external control and audit, and to train over 2000 public servants. It is also worth mentioning that the TSC conducted the audit of the teacher posts. 60. The improvement of the public sector management and the civil service was mainly dependent on the passing of the new civil service law. But due to lack of political consensus the law was never presented to Congress; instead, a bylaw on professionalization of the civil service was passed. Revisions of nearly all public servant positions and the definition of strategically important positions throughout all secretaries of the Government, follow-up activities and implementation were never undertaken. As a result, the envisioned re-engineering process of the public service, the reduction of Central Government staff and the recruitment through a merit-based system was not achieved. Similarly, the target to reduce government spending on salaries was not accomplished. PDO 3 (Component 3): Support sector specific activities within the framework of the PRSC for improving public service management and delivery in key economic and social sectors. 61. Successful support was given to the decentralization efforts in the water sector to the municipal level, benefiting over 50 municipalities, nine water associations, and other stakeholders, inter alia, through situation analysis of the water and sanitation structure, studies on water price structures and the corresponding operating costs in 15 municipalities, and training and dissemination of the water decentralization law, administration, operation and maintenance of drainage system, and other water and sanitation related topics. 62. Another successful sector support was the conduct of the teacher posts audit, which was carried out by the TSC upon request by SEFIN. The main finding of the audit was that the database on teachers is incomplete, unreliable and hence not a proper and functioning instrument for planning purposes. “Phantom� teachers, duplicate posts, and unrecorded absenteeism are rampant. Conducting the audit required major political will and constituted a significant effort on the part of Government. Even further, the findings provided a platform from which to discuss needed reforms to the sector. The country has initiated a policy reform dialogue in the education sector, which also involved civil society through parents’ associations. 63. Due to changed government priorities, only one of the three initially planned PRSCs materialized; as a result this component lost its overarching policy reform framework. Nevertheless, efforts were undertaken to support other sector-specific lending and technical assistance activities, which resulted in improved inter-sector dialogue. 64. As for the telecommunication sector, attempts to liberalize the national telecommunication company (HONDUTEL) failed. Notwithstanding, the tele- communication sector is much more liberalized today (with four companies vs. two companies at Project appraisal, and approximately 8 million additional new telephone lines in the country, mainly mobile phone lines). However, main attribution of this achievement belongs to the advances in mobile phone technologies, and not the Project. 16 65. Similarly, the project gave no or minimal support to the power, ports and environmental sectors. While studies for the restructuring of the national electricity enterprise (Empresa Nacional de Energía Eléctrica - ENEE) and the national ports company were conducted, no further actions were taken or significant impact was achieved. Consequently, ship loading/unloading was not increased. 3.3 Efficiency 66. As an institutions-building and technical assistance project, computations of rates of return are difficult to quantify. Nevertheless, as expected in the PAD, economic and fiscal savings resulting from project activities are likely to have occurred. I.e., the introduction of a more efficient financial management system paired with increased civil society involvement has permitted a more transparent and efficient budget process, which has possibly contributed to financial savings. The improved internal and external control through the TSC has led to greater accountability and more effective monitoring and control of financial flows. 67. Several activities that were part of the PRS process are likely to have had positive fiscal impacts during the project, but due to the discontinuation of the process these savings were probably not maintained throughout the end. Examples are a more efficient alignment of resources through a monitoring system for PRS advances, and an increased rate of return for public investments through enhanced assessment and analysis capacities. 68. Considering the small progress made towards the achievement of the PDOs and the result indicators during the slow and lengthy implementation, the overall efficiency of the project can be considered as rather low. 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 69. The most notable achievements of the project are the upgrading of SIAFI to a web-based system with additional modules, and the consolidation of the independent Supreme Audit Institution; both have played a crucial role in the improvement of the Government’s fiscal, financial and fiduciary management. As well, the teacher posts audit, and the decentralization of the water sector constitute important steps towards sector reforms. The country had also established a state-of-the-art results-based management system, which tracked progress of PRS and Government goals and indicators. Unfortunately, this system was discontinued when the Government decided to phase out the PRS process. 70. Through the discontinuation of the PRS many indicators and part of the PDO became irrelevant, as they were directly linked to the PRS process. The project missed an opportunity to restructure and to reflect those changes in priorities and activities. As a result, the PDO was only partially achieved and indicators were not monitored and measured. As mentioned above, later attempts to restructure the project were deemed impracticable and unjustified as the remaining project life was only of another year. 17 71. However, it must be mentioned that the project’s relevance, even in times of political changes and instability, remained high throughout its implementation. The PRSTAC became the vehicle for a continuous dialogue with the Government on its public sector and governance reform agenda, and a flexible instrument to quickly respond to the client’s needs and priorities. The request for the preparation of a follow-up operation with mainly the same stakeholders reflects the continuous need for Bank support in public sector modernization in Honduras. The rating also takes into consideration the overall rating of the PRSCs as the project has significantly contributed to the PRS process. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 72. The project contributed to the implementation of the country’s Poverty Reduction Strategy, in particular by strengthening planning and monitoring processes. Furthermore, it supported the PRS consultative process with civil society, as well as stakeholder dissemination and consultation workshops for the OECD survey on the accomplishment of the Paris Declaration indicators. (b) Institutional Change/Strengthening 73. Institutional strengthening was a cross-cutting desired impact of this project. The main institutional change happened at the Supreme Audit Institution, which consolidated its role as the national independent audit function. However, the reliance in external consultants’ contributions remains an institutional challenge ahead. Analytical and implementation capacity was created at the central government level, at the project implementation unit and the executing agencies. Furthermore, public sector staff and other stakeholders benefited from training in project-related areas, such as (i) use of the SIAFI, (ii) internal and external control, (iii) public procurement, and (iv) water management. It must be noted, that high turnover of staff with the change in administration could potentially undermine these results. (c) Other Unintended Outcomes and Impacts (positive or negative) 74. As mentioned earlier, the PRSTAC unexpectedly evolved from a small technical assistance loan to the major vehicle for country dialogue and engagement during several administrations and critical political circumstances. This enabled the Bank to respond to specific client demands and to continuously engage, even if marginally, in critical aspects of the public sector reform agenda in Honduras. 75. The sector dialogue initiated under the PRSC and the PRSTAC gave the impulse for operations in the energy (Power Sector Efficiency Enhancement Project (PROMEF) P104034), water (Honduras Water and Sanitation Sector Modernization Project- P103881) and the education sectors (Honduras Education Quality, Governance, & Institutional Strengthening P101218). 18 76. As noted in the CAS progress report, the approval of the Transparency Law represented a significant advance in the governance reform agenda in Honduras. The Transparency and Access to Information Law came into force in January 2008, followed by the creation of the Access to Information Institute, and the appointment of public information officers and information offices in most public institutions. The project supported the GAC dialogue around the approval of the law, and gave operational support to the IDF which contributed to finance the creation of the Access to Information Institute. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 12. No beneficiary surveys or stakeholder workshops were undertaken for the preparation of this ICR. 4. Assessment of Risk to Development Outcome 77. The risk to Development Outcome is rated as Substantial as institutional capacity remains weak and the sustainability of the achievements continue to depend on the political will and commitment to sustain and advance governance reforms. The follow-up operation builds on achievements made and intends to consolidate the PRSTAC outcomes. 78. The SIAFI and its related modules, including SIARH, enjoyed strong ownership for a period of time and were well established within the public administration. Even throughout changing administrations, the SIAFI remained a priority. However, the maintenance and further development of SIAFI will depend on the availability of continued financing and uninterrupted political support. 79. The continuation of the support and development of the national control system SINACORP is restrained by dependence on external finance. With the closing of the PRSTAC, the TSC is working with minimum capacity and resources, and had to a discontinue support given by specialists (mostly consultants). The institution will receive further donor support and financing by the KfW, which intends to focus its involvement in Honduras on the TSC. 80. Continuous the communication among the donor community will act as a platform for constant donor coordination and aid harmonization. It will also maintain and further develop the coordination and implementation capacity of development programs. However, much of this human capital depends on external financing, and is not formally integrated into the government’s capacity. 81. Civil society involvement and increased transparency has started to anchor in society and the government, and informed, conscious and organized civil society groups are continuing advances in social monitoring and civil participation. However, there is an increasing risk that these civil society groups are being captured by power groups to advance their political agendas. 19 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 82. The Bank, together with the donor community, strongly supported Honduras’ PRS process and its public sector modernization agenda. The PRSTAC together with a series of PRSCs were designed to support the country’s PRSP and its implementation process, in particular in the technical aspects of control mechanisms, monitoring, implementation, and analytical capacity, and the involvement of civil participation in the PRS process. Reform was supported not only in the public administration, but also to important public service sectors, such as water and sanitation, electricity and education. Analytical work, such as the CFAA and the CPAR, as well as CAS objectives were taken into consideration and integrated into the project design. The PRS process enjoyed high Government commitment at the time of the appraisal, and the project responded to the demands and needs of the client. 83. The PRSTAC continued achievements made under the EFMTAC project, and was able to build on an existing structure of project implementation capacity. However, the country’s history of slow implementation should have been considered while designing the implementation arrangements. In fact, implementation of the PRSTAC was delayed, as remaining funds under the EFMTAC were used to complete activities, and the set-up of the multi-donor trust fund was delayed. During implementation the presence of five implementing units, coordinated by one coordination unit proved to be a bottleneck for timely implementation and fiduciary aspects in a setting with low coordination and weak institutional capacities. 84. The results framework was well aligned with the expected outcomes of the PRS process and the project components. However, lacking baseline data at project initiation, weak monitoring and shortcomings of communicating the state of indicators to the client, resulted in irregular reporting on the framework. (b) Quality of Supervision Rating: Moderately Unsatisfactory 85. As in the early stages of the project, most of the supervision team was based in Washington, in the later years the fiduciary teams (Financial Management and Procurement Specialists) were based in the country office, allowing just-in-time support to the counterpart. Support from other country office staff, including the country manager, contributed to the good working relationship and continuous involvement with the changing administrations. The PRSTAC had four task team leaders, and transition processes might have slightly slowed down implementation. Only in one case was the incoming team leader already a team member and familiar with the project and the country, hence facilitating the transition process. 20 86. Shortcomings in the quality of supervision are the missed opportunities to restructure the project and to adjust the PDO and/or the results framework according to new government priorities. Opportunities to reconsider the relevance and achievability of the PDO were, for example, the agreement with the government on passing the bylaw on the professionalization of the civil service instead of a new civil service law; the agreement in 2006 not to meet the target for public expenditure for poverty reduction programs, and the mid-term review, which showed that many of the initial components and the results framework did not reflect the actual reality of the project. As a result, most ISR ratings reflect a satisfactory or moderately satisfactory progress, which in retrospective seem to have been overoptimistic. It must be noted that the Learning QAG report carried out in 2008 stated the need to maintain the close and intensive supervision of the project, but provided no rating or further recommendation on project supervision and implementation, nor did it flag the need to restructure. 87. The difficult and changing country and political context interrupted implementation and supervision per se several times. Nevertheless, the task team maintained a continuous dialogue using the PRSTAC as the platform and as a tool to react to upcoming needs and Government demands. The flexible design of the project and in particular the flexible use of the Swedish TFs allowed adjusting activities without formal restructuring. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Unsatisfactory 88. Despite the quality of the project at appraisal, which correctly identified and captured the Government’s development program and the Bank´s proposed strategy for the country; supervision had several shortcomings with task teams failing to restructure the project (even though as mentioned before, project was adapted to changing circumstances) and to monitor its progress. Yet, the task team´s effort to maintain an open dialogue and to respond to the Government´s request for assistance under challenging circumstances should be acknowledged as it permitted the Bank to maintain engagement with the country and advance on important reforms. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Unsatisfactory 89. As the project was directly linked to the country’s PRSP and the PRS process, Government ownership and commitment during preparation was high. The PRS process and the PRSTAC enjoyed government support, and the cooperation with the Bank and other donors was effective. Unfortunately, consensus for passing the new civil service law was not reached before the change in administration. While the following government was initially committed to the PRS process, the focus of priorities shifted and political commitment for the implementation of various components (and the achievement of the PDO) decreased significantly. This affected especially the civil 21 service reform and the support for sector activities. After the political crisis in 2009 and the 6-months pause of Bank operations, the newly elected government re-engaged in policy dialogue with the Bank, with the project and its activities serving as a platform and means for addressing the new Government’s priorities. However, changing Government priorities and a volatile political environment paired with a lack of political will and country ownership during most of the project’s life significantly contributed to the low performance of the project. (b) Implementing Agency or Agencies Performance Rating: Moderately Unsatisfactory 90. This project was implemented by up to five implementing agencies and one coordination unit, which was in charge of the fiduciary aspects and reported directly to the Secretary of the Presidency. The implementing agencies generally showed commitment for the implementation of their respective components and the corresponding objectives. Nevertheless, they were dependent on political decisions, and often had to struggle with lack of political support, as well as insufficient personal and technical capacity. This directly influenced fiduciary aspects of the implementation, with continuous delays and unsatisfactory performance in procurement and financial management processes. 91. The coordination unit was responsible for handling a broad portfolio of development projects, resulting in work overload which hindered smooth project implementation. The existing number of staff and technical capacities were insufficient and made it difficult to efficiently handle the portfolio, which in turn negatively influenced the fiduciary performance. Considering these circumstances, the unit, and in particular a core team, dedicated considerable efforts and time to the project. 92. Insufficient transition arrangements between governments slowed down implementation progress, as project knowledge and information was not sufficiently handed over to the incoming staff. The combination of the general lack of capacity and technical skills in the administrative body and the country in general, and the major part of staff appointments being politically motivated, led not only to high turn-over rates, but, in many cases, also to weak staffing of (key) positions. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Unsatisfactory 93. This rating is based on the difficulties in implementation and achievement of the development objective described above. 22 6. Lessons Learned 94. The main lesson learned is that the project and its implementation arrangements need to be carefully designed and adapted to respond to the country’s circumstances. Firstly, the political context is volatile, political will is not constant and country ownership is generally low. Secondly, implementing capacity is weak and technical skills limited, resulting in a slow implementation pace. Recruiting and sustaining technically skilled staff is difficult, time-consuming and often undermined by political appointments without the matching professional profiles. Furthermore, the number of externally- financed projects has led to a heavy workload of the UAP at the Secretary of the Presidency, causing bottlenecks through a lack of communication, planning and technical assistance to the executing agencies. The following provides recommendations for the preparation of the follow-up project:  Keep project design simple and realistic with results indicators specifically calibrated and linked to the activities financed by the project. In addition, design the M&E arrangement around available data and existing systems in Government or relevant external and reliable monitors.  Avoid fragmented implementation arrangements that can slow down the project. Involvement of several executing agencies, which are coordinated by one implementing agency, causes fragmentation and makes communication difficult. While complex public sector reforms might require the involvement of several agencies, these might actually interfere with the achievement of the project objective.  Make sure that there is enough staff dedicated to the project  Consider the introduction of the figure of a Project Coordinator  Involve technical agencies/staff and enhance communication  Prepare operational plans on a longer-term basis  Consider to concentrate on a few specific public sector reforms instead of trying to cover a wide range of reforms  Employ available Bank tools to improve prospects for achieving project development objectives at exit. Restructuring should be seen as a helpful instrument to adjust the project, especially in an environment like Honduras  Project flexibility enhances client responsiveness. Implementation took place during three elected Governments and a pause in Bank operations. Flexibility in financing activities and categories through a Swedish Trust fund gave the PRSTAC the opportunity to respond to the changing needs of the country, and to act as a vehicle of dialogue for the Government and the Bank. However, flexibility should not go beyond the core focus of the project, but assure that the final goal is the achievement of the PDO. 23 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 95. The Borrower provided the Bank with their project completion report and comments on this ICR (see Annex 7). The main issues raised were related to performance and their corresponding ratings of the implementing and executing units and the project M&E. 96. While the Borrower’s completion report considers the performance of the implementing and executing units “satisfactory�, the Bank’s rating is “moderately unsatisfactory�. This rating derives from the fact that the ICR considers the project design characteristic of having four executing and one coordinating agency as being too complex. Delays in the implementation process are therefore attributed to this complexity as well as the high workload of the UAP, as the unit was in charge of a large number of projects. Furthermore, during implementation and during the preparation of the ICR, this issue had been raised several times by the UAP itself. 97. Borrower comments on the Bank’s assessment and rating of M&E and achievement of PDO state that the described shortcomings should be mainly attributed to the changed project focus. While this ICR describes the circumstances and reasons of the difficulties to monitor project progress, the actual outcomes and outputs of the project are compared and rated against the formally agreed results framework. Unfortunately, the significant changes of the project have not been reflected through an update of this framework, leaving the original, even though outdated one, as the only base against which to measure results. The ratings and its explanations specifically and the ICR in general tries to objectively illustrate the facts. 98. Other comments raised by the Borrower have been duly noted by the Bank team. All comments raised have been carefully taken into consideration during the preparation of the follow-up operation and most have been included in the lessons learned sections. (b) Cofinanciers 99. Annex 8 presents the comments received by the Swedish Development Agency SIDA. The main issues raised were donor coordination and the significance of the staffing choices to achieve progress on the government side. 100. While the ICR recognizes the excellent donor coordination in the policy dialogue with the country, SIDA has pointed out shortcomings in the administrative coordination and communication among donors. This has been reflected in the lessons learned within the general need of improving communication within project participants. (c) Other partners and stakeholders 101. No comments. 24 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) Develop capacity to manage, monitor, evaluate and improve the Poverty 1.10 1.97 179 Reduction Strategy (PRS) Improve implementation of public sector 4.96 2.80 56 management Support for sectoral activities within the 5.23 2.65 51 framework of the PRS Project Management 0.75 2.69 359 Total Baseline Cost 12.05 10.11 84 Contingencies 0.80 0.00 Total Project Costs 12.85 10.11 Front-end fee PPF 0.00 0.00 Front-end fee IBRD 0.00 0.00 Total Financing Required 12.85 10.11 *Based on information from the PAD (b) Financing Appraisal Actual/Latest Percentage Type of Estimate Estimate Source of Funds of Co-financing (USD (USD Appraisal millions) millions) Borrower Counterpart 0.80 0.69 86 UK: British Department for International Development (DFID) Multi-Donor 4.05 1.56 39 SWEDEN: Swedish Intl. Dev. Trust Fund Cooperation Agency (SIDA) International Development 8.00 8.36 105 Association (IDA) Other* 0.06 Sub-Total 12.85 10.73 83 Additional Trust Funds SWEDEN: Swedish Intl. Dev. Trust Fund 4.62** 4.21 91 Cooperation Agency (SIDA) JAPAN: Ministry of Finance Trust Fund 0.471** 0.462 98 Total 17.95 15.40 86 *This amount results from incorrect classification of project funds by the Honduran Treasury **As per grant agreement 25 Annex 2. Outputs by Component Project Component 1: Develop the Government’s Capacity to Manage, Monitor, Evaluate and Improve PRS Implementation. Output anticipated at Appraisal 9.4 percent of public expenditure allocated to poverty Partially achieved. reduction related programs (9.1 percent in 2007) Percentage of foreign assistance channeled through sector- Not achieved. No SWAps were wide programs (SWAPs) according to PRS priorities done in Honduras 4 progress reports and 6 Poverty and Social Impact Analysis Achieved. (PSIAs) produced using the PRS Evaluation & Monitoring system 9 pilots social audit programs conducted at the community Achieved. However, level contribution from project is unclear. 1.1 Develop UNAT’s Analytical Capacity: Coordinator, research staff and consultants were hired and supported the planning process through the preparation of annual progress reports on the PRS process. This also included the preparation of Poverty and Social Impact Analysis (PSIAs) until 2007. The UNAT furthermore supported Government officials and Planning and Evaluation Units with training and technical assistance in areas of strategic planning, results-based management, and institutional and sectoral goals and their linkage to the PRS global indicators. A results-based management system was developed, which tracked progress of PRS and Government goals and indicators. However, planning methodologies and systems established by the UNAT in the beginning of the project, such as the PSIAs, decreased to be used during the project’s life cycle and work was focused on monitoring. Eventually, in early 2010, the UNAT was dissolved and its responsibilities were distributed among the newly formed Secretary of Planning (SEPLAN) and the UATP. The indicators measuring the percentage of public expenditure allocated to poverty reduction related programs were last measured in 2007 (9.1percent). The Bank team was informed that due to a lack of fiscal space, the Government, in accordance with the Bank had agreed in 2006, to not meet this indicator. 1.2 Strengthen the Government’s Capacity to Coordinate Foreign Assistance: this component supported three main activities: (i) a strategic plan on alignment and harmonization of foreign assistance, (ii) dissemination workshops and consultative process on the OECD survey on the accomplishment of the Paris Declaration indicators, and (iii) sector specific round tables. The preparation of sector-wide programs, as planned in the PAD, was never realized, however, the Millennium Development Goals Report for Honduras 2010 states that in 2008, 38.7 percent (US$218.8 million) of the official development aid is channeled towards social sectors; of which 26 percent benefit the education and 14 percent the health sector. The biggest part with 36 percent supports governance and civil society. 1.3 Enhance the PRS Consultative Process: The work of the PRS Consultative Council was supported through technical assistance and the purchase of office equipment. Furthermore, information workshops and consultative processes with communities to 26 update the PRS process were conducted, but not continued after 2007. The ultimate objective of this sub-component was to create a viable system of social audits as part of the national poverty monitoring system, and to support the PRS Consultative Council to implement decentralized regional strategies. By 2007, 47 social audits at community level were conducted by the National Commission for Human Rights (CONADEH), and today, social audits and monitoring have been widely established in the Honduras civil society landscape. However, it is not clear, to what extend the project and Consultative Council has contributed to this progress. Project Component 2: Improve the Implementation of Public Sector Management Output anticipated at Appraisal Central Government expenditures on wages and Not achieved. The expenditure was salaries reduced to 10.4 percent of GDP 11.1 percent of GDP in 2009. 6,191 staff positions reduced in the Central Not achieved. Reengineering Government as a result of reengineering processes. process did not take place. 3,150 civil servants recruited through competitive Not achieved. New civil service law processes or confirmed under the new Civil Service was not approved. legislation 100 percent coverage of upgraded web-based SIAFI Partially achieved. 100 percent Budget Modules in the Central Government and coverage of Central Government, but Decentralized Agencies only 1 decentralized agency. Development of Budget, Treasury, and Accounting Partially achieved. The modules are modules operating in both Central and Decentralized operating in the central government Agencies; Procurement, HR, and Asset Management only; the procurement module is modules operating in the Central Government being developed by ONCAE. 90 percent of public expenditure managed through a Partially achieved. 100 percent of Single Treasury Account central government expenditure is managed through STA, which constitutes about 83 percent of public expenditure. 100 percent of operational Internal Audit Units in the Achieved. Central Government under regulations established by the TSC 2.1 Implement the new civil service legislation and continue efforts to reengineer the public sector: The main achievement of the civil service component is the successful set- up of the integrated human resource system (SIARH) and its linkage to SIAFI. Today, the entire Central Government and two decentralized agencies are using SIARH; it also incorporated pension and scholarship payments. Due to lack of political consensus, the new Civil Service Law, as envisioned during project preparation, was never submitted to Congress. Instead, a bylaw to the existing civil service law was passed, backing-up the professionalization plan for the public service. In this regard, the DGSC undertook an extensive exercise reviewing and preparing descriptions of nearly all public servant positions. The unit also reviewed and defined strategically important positions similar throughout all secretaries of the Government in the areas of public administration, financial management, planning, procurement, HR and internal audit. The objective was to identify those positions to protect them from politically-motivated personnel replacements, which take place with each newly elected government. However, actions to 27 follow these studies and reports did not occur. As the objective and outcomes, as proposed in the PAD, were mainly based on and linked to support the implementation of a new civil service law, many of the planned activities could not be carried-out and expected results could not be met. Similarly, the targets to reduce government spending on salaries, the reduction of positions and introduction of a competitive recruitment process were not achieved. 2.2 Upgrading and expanding the capacity of SIAFI: The upgrading of the SIAFI is one of the success stories of the project. The country operates today an integrated financial management system with all central government agencies using the real time information produced by the web-based SIAFI. During the project life, modules for budget, treasury, accountancy, HR and administration of goods were added, and more than 8,000 users were trained in their use. Consequently, 100 percent of the central government expenditures are processed using the single treasury account (STA). SIAFI also features public access, although there is room to make public consultation easier to access, allowing citizens to request and download information on budget execution has been a notable step forward in Honduras. On the other side, of the decentralized agencies, only the national electricity enterprise (ENEE) is connected to SIAFI and none to the STA, mainly because the law does not mandate the integration of the agencies into SIAFI. The public procurement system (Honducompras) has been developed by the National Procurement Agency, and efforts will be conducted to link it to SIAFI. 2.3 Strengthening institutional capacity to ensure accountability through internal and external control: The support to the Supreme Audit Institution (Tribunal Superior de Cuentas – TSC) was a follow-up component on the EFMTAC project, which supported the constitution of the TSC. Today, the institution has assumed all its responsibilities and is operating as a fully independent institution. While the PAD foresaw mainly office equipment for the TSC, and training for the TSC and the internal audit offices, the completed activities exceeded this initial objective. Early in the project, priority was given to the implementation of an Integrated National Control System for Public Resources (SINACORP), and the connection of social audits through civil society organizations to the external auditing process of the TSC. Activities related to the internal audit units were intended to be executed under the Project to Strengthen Control of Public Resources - PAFICORP (part of SINACORP) through the set-up of a National Office for the Development of Internal Control in Public Institutions (ONADICI). Main achievements under this component were: (i) follow-up of social audits outcomes into the processes of the TSC, (ii) development and implementation of SINACORP, (iii) set-up of ONADICI, (iv) guiding frameworks for internal and external control and audit, (v) manuals in topics related to internal and external control, and (vi) training of over 2000 public servants in areas of internal and external control. It is also worth mentioning, that the TSC conducted the audit of the teachers post described in subcomponent 3.6. Additional activities: Supporting ONCAE (Oficina Normativa de Contratación y Adquisiciones del Estado): With support of the IADB, ONCAE had started to develop and set-up HONDUCOMRPAS, a platform to publish and manage government purchases and contracts. In 2009, parts of the projects funds were allocated to continue the on-going work of the national procurement agency ONCAE. The objectives of this sub-component 28 were (i) to set-up a national procurement platform, (ii) to implement a regulatory framework on public procurement, and (iii) to conduct training on the framework and the preparation of procurement plans. Honducompras has been developed by the National Procurement Agency (ONCAE), but still faces major development needs. The current platform only allows for: (i) the publication of all business opportunities and associated results, but to date compliance is very low, (ii) publication of agency procurement plans, and (iii) partial registration of suppliers. ONCAE delivered a large number of training sessions on the national procurement framework and the preparation of procurement plans to government agencies, including hospitals and entities on the departmental level. This training has proven to be an advance but has been clearly insufficient to generate a change in culture as to the way governmental entities procure goods and services. In November 2010, ONCAE opened an office for transparency and client service. Project Component 3: Support for Sectoral Activities within the Framework of the PRS Output anticipated at Appraisal 100,000 new public telephone lines available as a result of Achieved. But without direct Telecommunications Sector Reform contribution of the project. 40 percent increase percentage of average ship Not Achieved. Both the total loading/unloading turn-around in ports number of ships, as well as the TEU decreased slightly. 30 percent increase coverage of rural electrification Not measurable. Data on rural coverage was not available. 22,000 teacher posts audited Achieved. 3.1 Telecommunications Sector: A draft bill for the restructuring of HONDUTEL was prepared and submitted to Congress, but never approved. Independently from the project, the telecommunication sector underwent liberalization and as a result there are now four companies offering landline and mobile phone services (vs. two companies at Project appraisal). Mainly due to the extreme progress in mobile technology, the country counts a total of approximately 8 million additional new telephone lines (mainly mobile phone lines) since appraisal (www.conatel.gob.hn). 3.2 Power Sector: A consultancy for the restructuring of the national power company ENEE was carried out. As for the indicators, no data on the current coverage of rural electrification was available. However, the total coverage has increased to 81.27 percent in 2010, compared to 64.64 percent at project appraisal (www.enee.gob.hn). 3.3 Ports Sector: A couple of consultancies on restructuring of the National Ports Company, as well as privatization possibilities were undertaken, but after a change of Government, their recommendations were not implemented and partial results were not followed up. In the last year of the Project, a study on PPP possibilities for the Port of Castilla was prepared, but no further actions have been taken. In regard to the indicators, 29 the number of ships that were loaded/unloaded in Honduran ports in 2010, decreased slightly from 2269 ships in 2004 to 2162 ships in 2010 with no major discrepancies during this time period. Likewise, the TEUs 1 handled in the ports decreased from 592,460 TEUs in 2004 to 484,148 TEUs in 2010, after having reached lows of 507 TEUs in 2005 and 484 TEUs in 2009 and peaking at 572 TEUs in 2008. (Empresa Nacional Portuaria, www.enp.hn) 3.4 Water and Sanitation: Successful support was given to the decentralization efforts of the water sector to the municipal level, benefiting over 50 municipalities, nine water associations, 70 staff of water and sanitation entities, and individual water consultants. Main activities included: (i) situation analysis of the water and sanitation structure in 12 municipalities, facilitating the assumption of responsibilities by municipalities, (ii) studies on water price structures and the corresponding operating costs in 15 municipalities, (iii) training and dissemination of the water decentralization law, administration, operation and maintenance of drainage system, and other water and sanitation related topics, (iv) preparation of an investment plan, identifying the water access gaps and financial requirements for infrastructure upgrading, (v) support of the National Water and Sanitation Council (CONASA) in the form of office equipment and studies on the situation of water services in over 30 municipalities, and (vi) support of the water sector regulating entity (ERSAPS) through diagnostics of the status of the water structure in 33 municipalities. No indicator was designed to measure this subcomponent. The PAD states the strengthening of CONASA and ERSAPS as the main objectives. With the completed activities exceeding this initial objective and having given substantive support to the decentralization process, the objective of this subcomponent is considered achieved. 3.5 Environmental Sector: No activities were undertaken. 3.6 Social Sector: An audit on the teacher allocation post was conducted by the TSC, verifying the existence of teachers and posts as described in the Government’s database. Results were never published by the government, but as part of the PETS (Public Expenditure Tracking Survey) and in cooperation with the Community-based Education Project (P007397) and the IADB, successfully sample survey was conducted and presented to the Government in November 2010. The main finding was that the database on teachers is incomplete, unreliable and hence not a proper and functioning instrument for planning purposes. “Phantom�-teachers and unrecorded absenteeism is high; the study estimates that up to US$19 million are lost on phantom teachers each year. 1 Twenty-foot equivalent unit, measure used for capacity in container transportation 30 Annex 3. Economic and Financial Analysis As an institutions-building and technical assistance project, quantitative computations of rates of return are difficult to quantify. Nevertheless, as expected in the PAD, economic and fiscal savings resulting from project activities are likely to have occurred. i.e., the introduction of a more efficient financial management system paired with increased civil society involvement has permitted a more transparent and efficient budget process, which has possibly contributed to financial savings. The improved internal and external control through the TSC has lead to greater accountability and more effective monitoring and control of financial flows. Several activities that were part of the PRS process are likely to have had positive fiscal impacts during the project, but due to the discontinuation of the process these savings were probably not maintained throughout the end. Examples are a more efficient alignment of resources through a monitoring system for PRS advances, increased rate of return for public investments through enhanced assessment and analysis capacities. Considering the small progress made towards the achievement of the PDOs and the result indicators during the slow and lengthy implementation, the overall efficiency of the project can be considered as rather low. 31 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Alberto Leyton Representative LCCSV Amparo Ballivian Lead Public Sector Specialist LCCNI Ana Bellver Vazquez-Dodero Senior Public Sector Management Specialist LCSPS Carolina Rendon Public Sector Specialist LCSPS Etel Patricia Bereslawski Aberboj Senior Procurement Specialist LCSPT Florencia T. Castro-Leal Senior Economist LCSPP Christian Yves-Gonzalez Country Economist LCSPE Blanche M. Cotlear Consultant LCSSO Jose Eduardo Gutierrez Ossio E T Consultant LCSPS Dante Ariel Mossi Reyes Senior Country Officer AFCW1 Fabienne Mroczka Financial Management Specialist LCSFM Beate Gisela Mueller Procurement Specialist LCSPT Maria Poli E T Consultant LCSSO Jose Simon Rezk Financial Management Specialist LCSFM Rebeca P. Santos Operations Officer LCSHS-DPT Silvio V. Solarte Leiton Consultant LCSPS Javier Armando Soriano Arce Consultant LCCGT Rajeev Kumar Swami Senior Financial Management Specialist ECSO3 Maria Guadalupe Toscano Nicolas Public Sector Management Specialist LCSPS Josef S. Trommer Senior Operations Officer FPDID Rosa G. Valencia De Estrada Consultant LCSPT Joao N. Vian Lanceiro da Veiga Malta Senior Procurement Specialist LCSPT Fanny Weiner E T Consultant LCSPS Valerie Hermann Team Assistant LCSPS (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY04 43 135.77 FY05 16 21.90 FY06 1 1.46 Total: 60 159.13 Supervision/ICR FY05 14 55.53 FY06 28 103.99 FY07 30 107.70 FY08 29 152.20 FY09 27 12.65 FY10 25 8.23 FY11 14 16.08 Total: 167 456.39 32 Annex 5. Beneficiary Survey Results Not applicable. Annex 6. Stakeholder Workshop Report and Results Not applicable. 33 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR 7.1 Summary of the Borrower Completion Report2 During the first semester of 2011, the Government of Honduras produced a completion report of the credit and its associated trust funds. The document contains a description of the project’s background, and its objectives and components as stated in the PAD and the legal agreement, as well as performance rating for the Borrower and the Bank, and recommendations on the sustainability of the project. The report the points out the main achievements of the project as follow:  Update and implementation of the PRS consultation process, strengthening of capacity and analytical skills of the PRS Consultative Council.  Strengthening of the implementation units, and linkage of institutional and sectoral goals with the global PRS indicators.  Expansion and integration of the integrated HR system in SIAFI.  Conceptualization of the new civil service regulator’s structure and functions.  Purchase of furniture and other equipment for the civil service regulator.  Training in classification of positions, recruitment selection and performance evaluation delivered to HR staff.  Studies and consulting services on the evaluation of fiscal impact and implication on salaries in the public sector were conducted.  Training in topics of public debt, integrity and ethics, financial auditing, evaluation of the chart of accounts, public procurement and other delivered to the staff of the Supreme Audit Institution.  Development of SIARH, including norms, methodologies and computer systems. These achievements are then described in more detail and by implementing institution: Ministry of Finance (SEFIN) Component 2: Improve the Implementation of Public Sector Management a) Sub-component 2.1: Implement the New Civil Service Law and Continue with Efforts to Reengineer the Public Sector, activities under this sub-component included:  SIARH was expanded and integrated with SIAFI, staff was trained and infrastructure to operate the updated system was installed.  Conceptualization of the new civil service regulator’s structure and functions (which will replace the DGSC with additional supervision and regulating functions in accordance with the new normative framework); purchase of furniture and other equipment for the operations of the new civil service regulator.  Public sector staff received training in classification of positions, recruitment selection, performance evaluation, career development and staff motivation. 2 Full original version in Spanish is filed in the project files. 34  Studies and consulting services on the evaluation of fiscal impact and implication on salaries in the public sector were conducted to assure fiscal sustainability of the borrower.  Organizational structures of selected pilot organizations were re-engineered, and an analysis of HR missing to effectively implement civil service reforms in those institutions was conducted. Also, e-government strategies were implemented.  Current staff and new recruitments in the pilot institutions were evaluated to initiate the implementation of the new legislation. Capacity was developed in the pilot institutions to apply the new HR policies with regard to classification of positions, recruitment selection, performance evaluation and career development. b) Sub-component 2.2: Upgrading and expanding the Capacity of SIAFI. The main achievements of this sub-component were:  Launch of the new SIAFI portal, including access by citizens to real time information on budget execution.  Central administration is operating with the SIAFI production modules, including real time information.  Issue of technical norms for each subsystem and integration of the norms and user manuals in each module.  During 2005 and 2010, more than 8,000 SIAFI users were trained in 500 training courses.  172 executing agencies and 1,175 work stations were connected to SIAFI via intranet. The remaining 103 institutions are using SIAFI via web-based access.  A virtual training platform was designed and launched in April 2010. It contains 42 courses on SIAFI usage and competencies. Up to date, 208 users are subscribed.  All payments to staff and suppliers are made through bank transfers. Supreme Audit Institution (TSC) a) Implementation of SINACORP  SINACORP organized and implemented, including normative framework.  Information session on SINACORP and ONADICI and its objectives delivered to authorities of TSC, Presidency, Council of Ministers.  Institutional capacity strengthened.  Information sessions delivered to approximately 1,800 public servants of 80 entities.  Issue of several guiding frameworks on internal and external control.  Preparation and launch of ONADICI, including regulating framework. b) Strengthening of Internal Control  Policies on Institutional Internal Control signed by the President and disseminated to the Council of Ministers and Institutions of the International Cooperation.  In 15 workshops, more than 500 public servants of 85 entities have received training on the use of the manuals to implement the five components of internal control. 35  Strengthening of the internal audit function.  Preparation of manuals on internal control and computer-supported internal audits.  Approximately 160 internal auditors of 69 entities received training on the use of the internal audit manual and framework. c) Strengthening of External Control  Guidelines for the use of computer-supported audits.  Manual on a Quality Control System in the Public External Audit.  More than 40 supervisors within TSC received training on the Quality Control System in the Public External Audit manual. Civil Service Office (DGSC) Main activities and achievements included the following:  Audit on allocation posts was conducted.  Preparation, approval and publication of the new regulatory framework of the Civil Service of the Civil Service Law.  Definition and analysis of positions with horizontal strategic importance for the public sector. The objective was to guarantee the stability of these civil servants and to ensure sustainability with changes of the administration.  Manuals with description of position.  Elaboration of recommendation to improve the professionalization program; implementation of the SIARH in all central government institutions.  Purchase of IT equipment.  Administrative unit of SIARH was strengthened with technical staff, which participated in the pilots and gives technical support to all the State Secretaries. Following, the report features a section on the design and implementation of the project, which describes the main activities, objectives and achievements for each component (by implementing agency). In addition to the achievements and activities mentioned above, the report states the achievements made by the National Procurement Agency ONCAE:  Preparation and launch of module for a simplified registration of suppliers, and the registration of annual procurement plans on the platform Honducompras (33 institutions have published their procurement plans).  More than 3,000 purchase processes have been published, and the website receives an average of 500 visits daily.  All public institutions have a unified tool for the preparation of tender documents.  Training has been delivered to a total of 91 public institutions, including hospitals.  Opening of a transparency center for the public . Borrower Performance The performance of the coordinating unit and the executing agencies is rated satisfactory, even though not all of the funds could be executed nor all activities completed due to the “pause� of Bank operations as a reaction to the political events from June 2009. The CPME and the UAP-SDP as coordinating units complied with administrative and financial responsibilities by assuring the availability of funds for the executing agencies. 36 Those agencies complied by preparing financial reports using the established accounting procedures. Each executing unit keeps a proper archive on all the supporting documents which justify the use of assigned resources for each component. The procurement processes were conducted in a transparent way, following the recommendations received from the Bank and applying the corresponding guidelines and rules. This is reflected in the evaluation and audit reports. Bank Performance The resident Bank mission played a key role and maintained communication with the important entities. The technical and administrative team in Washington gave continued constant support to the project and responded to all requests made by the executing agencies. The team visited the project in numerous occasions, and delivered training in the procurement and financial management which contributed to professional development of the executing agency’s staff. Sustainability of the Project SEFIN has developed an action plan to convert the technical personnel into permanent staff to avoid high turn-over rates as a result of instable contract situations. Since May 2010, the Government of Honduras is financing all staff with national funds and it is planned to convert them into permanent staff in 2011. To assure technical sustainability, a sustainability component has been included in a new loan by the IADB (Loan 2032), which included activities to improve the server capacity, a back-up site and the certification of SIAFI. The Supreme Audit Institution (TSC) prepares its annual budget based in the needs to continue the implementation of the developed mechanisms with the objective to comply efficiently with its function. The advances made under the project and through the Swedish TF are not enough to fully achieve the general objective of SINACORP, but need immediate support to assure continuity, completion and consolidation of the results achieved by the end of the project in December 2010. The next phase will be financed by the KfW, and the TSC is working closely on the documents that will be the base for this future cooperation. The DGSC considers the following activities necessary to assure the sustainability of its component: i) editing of the new civil service law and its regulatory framework, ii) complete auditing the positions in the Ministry of Health and the Ministry of Transport, iii) complete the update of the positions manual, iv) strengthening the technical units of DGSC through additional staff, extended physical space, purchase of equipment, training, and other, v) continue the recruitment of HR specialists for the sustainability of the SIARH, and vi) logistical support for the implementation of new SIARH modules. The reforms in the water sector need further consolidation of the regulatory bodies and the implementation of the Strategic Modernization Plan for the Water and Sanitation Sector (PEMAPS). This would support to achieve the objectives of the framework law 37 and guarantee the delivery of efficient quality services. As part of the PROMOSAS project these reforms are continued and expect to achieve the following objectives: i) improve sustainability, efficiency and responsibility of the water and sanitation services in eligible municipalities, ii) improve the performance of the national institutions and the compliance with the law. The PROMEF project is continuing the achievements made in the energy sector. It mainly concentrates on the improvement of the financial and operational performance of the energy company ENEE, as well as upgrading the distribution network and strengthening the institutional capacity and corporate governance of ENEE. 7.2 Summary of Comments from Implementing Agency on the Draft ICR The task team received the following comments on the draft ICR: 1) On section 1.7 “Other significant changes�: With the change of the project’s implementing agency only part of the key personnel transferred from the former CPME to the newly created UAP-SDP. 2) Section 2.2 “Implementation� refers in paragraph 8 to the issues resulting from having four executing agencies. The implementing agency (UAP) carried out its tasks of quality control and consolidation of operational plans according to the implementation arrangements of the Project. Furthermore, the coordination was undertaken involving all concerned parties and communication with the Bank was never centralized. 3) Regarding the “unsatisfactory� rating of the M&E (Section 2.3), both the Bank and the Government should be hold accountable, based on the paragraph from the ICR reading: At the same time, by responding to changing requests the project switched its focus; activities were adjusted in several components making it difficult to monitor indicators achievements and to evaluate the project. (Section 2.1) 4) As for the Section 2.4 on “Safeguards and Fiduciary Compliance�, as per recommendation of the Bank, procurement personnel did not take part in evaluation committees, and that the format used for contracts was approved by the Bank, while it was agreed to change the format under a new loan. Furthermore, comments state that the CPME always published its contracts in Honducompras, as they were a pilot of this system. To avoid generalizing it would be useful to specify the executing agencies to which the insufficiencies in the processes refer to. 5) In Section 3.2 “Achievement of Project Development Objectives�, the description under PDO 3 refers to a study on the restructuring of the electricity ENEE. This consultancy was not carried out under the PRSTAC. 6) The conclusion of the Section 3.3 on “Efficiency� reads the following: “Considering the small progress made towards the achievement of the PDOs and the result indicators during the slow and lengthy implementation, the overall efficiency of the project can be considered as rather low.� This statement seems contradictory. During several missions, 38 the Bank stated that no evaluation of indicators would be done as they were obsolete, so it is not clear why they are being considered in the ICR. 7) Section 3.4 “Justification of Overall Outcome Rating� states that the results-based system introduced by the Government was discontinued when the Government decided to phase out the PRS process. This system was actually interrupted during the “pause� and is currently being re-installed. 8) In Section 5.1 (a) “Bank Performance in Ensuring Quality at Entry� states that “During implementation the presence of five implementing units, coordinated by one coordination unit proved to be a bottleneck for timely implementation and fiduciary aspects in a setting with low coordination and weak institutional capacities.� This statement seems inappropriate and incorrect. The coordinating unit did at no point delay the activities of the executing agencies, as they did not depend on the coordinating unit, as this unit only consolidated POAs, PACs, and managed funds. 9) In Section 5.2 “Borrower Performance�, the justification for the Implementing Agency or Agencies Performance, the text states that “the combination of the general lack of capacity and technical skills in the administrative body and the country in general, and the major part of staff appointments being politically motivated, led not only to high turn- over rates, but, in many cases, also to weak staffing of (key) positions.� It should be made clear that this statement refers to the Government as a whole and not specifically to the UAP. 10) In Section 6 “Lessons Learned� the ICR states that “the number of externally- financed projects has led to a high workload of the UAP at the Secretary of the Presidency, causing bottlenecks through a lack of communication, planning and technical assistance to the executing agencies.� Similarly to the previous comment 8, this statement seems inappropriate as the UAP despite the high workload responded to the demands of the project. As mentioned earlier, each executing agency was in charge of procurement and payment, and therefore the UAP has had no influence on the delays. 11) In Annex 2 “Output by Component�, in Component 3.4 the following additional achievements in the water and sanitation sector should be mentioned: 45 situation diagnostics of urban aqueducts, 15 studies on water tariffs, training of 70 technicians, certification of 25 consultants in the area of water and sanitation regulation certification, and 22 diagnostics on service delivery institutions. 39 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders 1) Comments from the Swedish Development Agency (SIDA) Relevance of development objectives: The objectives were relevant for Honduras, but some were in particular relevant to the World Bank, such as the strong efforts paid at the beginning of the implementation of the project to pass a new Civil Service Law and other legislation processes within the PRSTAC. Such policy processes often have little impact on institutional strengthening and the Bank should take earlier experiences as lessons- learned. Bank performance and cooperation: Bank performance assuring quality at entry and technical capability during implementation as good. However, coordination with the co- financier was poor, information was not shared on a regular basis and follow-up had to be made on financial and audit reports. Government Performance: Government performance has been satisfactory, especially during the Maduro Administration. The more technocratic approach that characterized the Maduro administration suited well the implementation of the PRSTAC. Implementing Agency Performance: The performance of the implementing agency was good, but very much linked to the person in the management position. 2) Comments from the Inter-American Development Bank (IADB) Compartimos las conclusiones sobre el avance del proyecto, específicamente sobre el componente para la implementación del sistema SIAFI que cofinanciaron ambos Bancos. Sobre las recomendaciones del informe nos gustaría puntualizar lo siguiente: 1. En el diseño de la nueva operación, sería conveniente precisar las diferencias de esta nueva figura – Coordinador de Proyecto - respecto a la figura de Asesor Técnico Principal (ATP) establecida por los préstamos PRSTAC y 1546/SF-HO. En el caso del SIAFI, el ATP fue seleccionado por el GHO y ambos Bancos de una terna de consultores internacionales. Sus TDRs fueron acordados por todas las partes y el consultor seleccionado permaneció desde el arranque del proyecto hasta junio de 2009. Este consultor tuvo la responsabilidad de coordinar, en forma exclusiva y desde el punto de vista técnico, la ejecución de las dos operaciones que financiaban el proyecto SIAFI. En nuestra opinión, esta figura de ATP fue clave en los logros del componente. Sin embargo, no creemos que es suficiente. Otros componente tuvieron ATPS y los resultados no fueron similares. 2. Creo que es importante resaltar la importancia de los estudios previos –ejemplo el CFAA- que apoyaron el diseño de la operación y facilitaron el arranque. 3. Es necesario resaltar, también, el apoyo que recibió el proyecto por parte de las autoridades de SEFIN, especialmente durante el periodo de crisis, que le dio sostenibilidad a los resultados alcanzados hasta la fecha. 40 Annex 9. List of Supporting Documents/People interviewed Secretaria en el Despacho Presidencial (2011), Project Completion Reports of UAP and implementing agencies for the PRSTAC project, Tegucigalpa (unpublished files) United Nations Development Program (UNDP) (2010), Millennium Development Goals, Honduras 2010, Third Country Report, Overview, United Nations System in Honduras, September 2010, Tegucigalpa World Bank (2010), Interim Strategy Note for the Republic of Honduras, Report No. 56405-HN, September 29, 2010, Washington, D.C. World Bank (2009), Institutional Governance Review: “Strengthening Performance Accountability in Honduras� (in two volumes), Report No. 53517-HN, March 9, 2009, Washington, D.C. World Bank (2008), Country Assistance Strategy Progress Report, Report No. 43244-HN, May 8, 2008, Washington, D.C. World Bank (2008), Country Assistance Strategy for the Republic of Honduras, Report No. 37280-HN, November 30, 2007, Washington, D.C. World Bank (2004 -2010), Ayuda Memorias of supervision missions and Implementation Status Reports (ISR), Washington, D.C. and Tegucigalpa (internal files) World Bank (2004), Project Appraisal Document on a Poverty Reduction Support Technical Assistance Project, Report No. 29065-HN, June 3, 2004, Washington, D.C. People interviewed for this ICR: Government of Honduras Elena Calidonio Coordinator of UAP Belinda Zepeda Procurement Manager Rocio Tabora Director of UATP Conrado Gomez and team Tribunal Superior de Cuentas Alejandro Aplicano and team UAP-SEFIN Luis Cosenza Secretario del Despacho Presidencial (2002-2004) Renan Sagastume Ex-official of Tribunal Superior de Cuentas World Bank Alberto Leyton TTL (2003-2007) Joseph Stig Trommer Co-TTL (2003–2007) Amparo Ballivian TTL (2007-2008) Ana Bellver TTL (2008 –2010) Carolina Rendon TTL (2010-2011) Dante Mossi Country Officer Honduras (2004-2010) Jose Rezk Sr Financial Officer 41 89°W 88°W 87°W 86°W 85°W 17°N 17°N B ELI Z E Caribbean Sea HONDURAS Roatán A BAHI LA DE Gulf of S Honduras LA 16°N IS 16°N Trujillo Iriona Puerto Cortés za Barra Patuca Tela La Ceiba Balfate Corocito r an Brus C O L Ó N Es pe G U AT E M ALA A T L � N T I D A bre de Dios La Laguna ya CORTES Tocoa La ula Nom Sonaguera a M Pa Lago de San Pedro ll e r a u an Ag rr o s Ahuas Izabal Sula Cordi Olanchito e q El Progreso Si GRACIAS u i t Quimistan Las Vegas El Carbón Puerto Sico Morazán YORO ia Lempira Higuerito A DIOS Ulú San Esteban a Nuevo Arcadia S A N TA Embalse General Francisco Morazán Dulce Nombre Sirsirtara Yoro B�RBARA de Culmí Su ula 15°N n 15°N OLANCHO ló co c COP�N Santa a Co uc Bárbara Lago de Catacamas Salamá de at CO Copán Ruinas Santa Rosa Yojoa P Hu San Luis Guaya l s ca pe tu Awasbila m de Copán de Pa ña uya Jaitique M M To a To Mon as nt Puerto AY Chiquimula Juticalpa de C taña añ Gracias o Cabezas o m a y Cedros t M on AG AG O C O T E - Cerro Comayagua agua Guaimaca M re Las Minas mb Nueva P E Q U E (2,870 m) La C� UA aa AZ SCO Ocotepeque Esperanza y La Paz A Gu LEMPIRA n BU AN á Valle de Jal To o San Salvador Angeles TI oc OR CI Marcala EL PARA�SO C IN Mapulaca L A PA Z M AN 14°N Camasca TEGUCIGALPA Danlí 14°N Yuscarán H ONDURAS FR To Sabana Las Manos E L S ALVAD OR San Miguel Grande SELECTED CITIES AND TOWNS VALLE To NICA RAGUA Estelí DEPARTMENT CAPITALS To Nacaome San Marcos San Salvador de Colón NATIONAL CAPITAL San Lorenzo Choluteca ECA RIVERS LUT 0 20 40 60 80 100 Kilometers O nsec a CH PAN AMERICAN HIGHWAY e Fo Triunf El Triunfo 0 20 40 60 Miles 13°N o lfo d 13°N MAIN ROADS IBRD 33418R1 G This map was produced by the Map Design Unit of The World Bank. FEBRUARY 2008 To RAILROADS PAC IF IC OC EAN Managua The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any DEPARTMENT BOUNDARIES endorsement or acceptance of such boundaries. 89°W 88°W 87°W 86°W 85°W INTERNATIONAL BOUNDARIES