74163 FIDUCIARY SYSTEMS ASSESSMENT TANZANIA - URBAN LOCAL GOVERNMENT STRENGTHENING PROGRAM August 24, 2012 TABLE OF CONTENTS Executive Summary: Background and the Program’s Institutional Arrangements A. Program Description B. Institutional Framework and Implementation Arrangements C. Proposed Program’s Fiduciary Arrangements i. Financial Management .................................................................................................. 13 ii. Procurement .................................................................................................................. 20 iii. Fraud, Corruption, and Accountability ......................................................................... 24 D. Program’s Expenditure Framework Program Fiduciary Performance and Significant Fiduciary Risks A. Fiduciary Performance i. Financial Management .................................................................................................. 36 ii. Procurement .................................................................................................................. 41 iii. Fraud, Corruption and Accountability .......................................................................... 50 B. Fiduciary Risk Monitoring and addressing fiduciary performance A. Fiduciary performance B. Audit Fraud and Corruption Annex 2 Organizational Structure of Tanzania Local Government Authorities Annex 3 Government of Tanzania Existing and Proposed Open Government Measures related to ULGAs Annex 6: PUBLIC PROCUREMENT REGULATORY AUTHORITY RED FLAGS CHECK LIST 3 FIDUCIARY ASSESSMENT Executive Summary: 1. The Public Financial Management (PFM) system of Tanzania has been undergoing reform since 1998. Until around five years ago it was assessed as one of the better performing PFM systems in Africa through PEFA rankings as well through HIPC assessment reports. However the reform momentum appears to have slowed. Annual assessments now point to a deterioration in performance. For example, in FY 11 the Auditor General issued an adverse opinion on the annual financial statement of the Government of Tanzania. This was due to a number of reasons, including non compliance with international accounting standards, non compliance with the Public Finance Act, and concerns regarding inadequate disclosure of investments, liabilities and the level of overdraft. In FY12 the situation improved marginally with the annual financial statement receiving a qualified opinion. 2. At the local government level, the number of local governments that received a clean audit opinion reduced from 100 in FY2007/08 to 72 in FY2011/12. This was partly due to deteriorating performance as well as the result of changes in accounting standards. LGAs in Tanzania are now required to maintain their accounts in line with International Public Sector Accrual Accounting Standards. This has been a challenge since accrual accounting standards usually take time to be ingrained into local government practice. Mostly recently, some signs of improvement are evident e.g. the number of clean audit opinions improved from 66 to 72 between FY2010/11 and FY2011/12 in some of the key participating ULGAs. 3. Key challenges highlighted by the CAG in the FY2011/12 audit report directly impact fiduciary risk across the 133 LGAs of Tanzania. These are: (i) Internal controls and internal audit: This is a major area of concern. CAGs audit report for FY 11 has stated that internal audit is ineffective in 90% of LGAs, that the IT control environment is inadequate in 83% of LGAs, that Audit Committees are largely ineffective in 73% of LGAs and that there is no risk management framework in 53% LGAs; (ii) Fraud Prevention and Control: CAG’s Audit Report on Local Governments for FY2011/12 states that a fraud assessment of 68 LGAs was carried out in FY2011/12. This assessment disclosed that LGA managements have not documented or put in place fraud prevention plans. There is also no process for management to monitor “Red Flags� that could alert them to the symptoms of fraud. Due to this CAG has concluded that there is a high risk of concealing management or operational level fraud in LGAs; (iii) Procurement Compliance: In the audit report on LGAs for FY2011/12, CAG has expressed concern at the low level of compliance with procurement procedures, at laxity in control over contract payments, at poor supervision of LGA projects, at procurements being made without Tender Board approval, at the missing documentation in LGAs relating to procurement and the manner in which several of the assessed LGAs ordered and paid for goods that were not delivered. 4. Overall, cash management has become a binding constraint in recent years. The Rapid Budget Analysis (November 2011) noted that budget deviation deteriorated in FY2011/12 owing to incomplete and delayed releases as well as reallocations. The overall budget execution rate for the Central Government declined to 83% in FY11 compared to 90% in FY2010/11. This situation adversely affected fund flows to LGAs and LGDG program last year. In FY2011/12 CAG’s Audit Report states that only 53% of overall LGDG funds were released. No funds were released throughout the year for the Rural Water Supply window of LGDG. 5. Recent fiduciary reform efforts in Tanzania include amendments to the Public Finance Act in 2010, creation of the Office of the Internal Auditor General, and the roll out of the new version of accounting software Epicor to all local governments, which along with improved training, is expected to 4 improve the overall financial management of participating local governments. The Government is also developing a Public Finance Management Reform Program and strategy for 2012 – 2017 to focus on: (i) revenue management; (ii) planning and budgeting; (iii) budget execution, transparency, and accountability; (iv) budget control and oversight; and (v) capacity building and training, IFMS and electronic service delivery, PFM institutional and legal framework. In the effort of preventing and combating of corruption the Public Procurement regulatory Authority (PPRA) and PMO-RALG have both developed Anti-Corruption Strategies and Action Plans that include: i) registry management of information; ii) procurement procedures; iii) capacity building of human resources; iv) sensitization of public rights and duties; v) storage and safeguarding of data; vi) public service complaints handling. 6. Assessment of procurement arrangements found that: (i) fiduciary staffing in ULGAs is at a very basic level although it has been increasing consistently under the LGDG system, albeit from a very low starting point. In the four participating ULGAs visited, the PMUs are staffed by two or three officers; (ii) most procurements for goods and non-consulting services fall under new framework agreements that minimize the scale of fraud and corruption practices observed under the previous shopping procedures; (iii) most works packages are procured competitively and ULGA performance in advertising tender opportunities has increased to 90%; (iv) compliance with the use of standard bidding documents has increased to 74%; (v) records in the ULGAs are scattered, incomplete with no proper filing system or adequate space for keeping records; (vi) procurement complaints handling mechanisms exist, although log books are not systematically kept for recording these complaints; and (vii) contract management in the UGLAs was weak. 7. Procurement risk of the participating ULGAs and PMO-RALG is rated high. The major risks with regards to procurement in the ULGAs are; (i) inadequate of qualified procurement staff; (ii) poor records keeping of procurement documents; (d) possible delays in procurement process due to additional layer of the approval process embedded under the new Public Procurement Act (2011). The Law requires the Finance and Planning Committee of the ULGA to scrutinize the decision of the ULGA’s tender board before award of contract is made; (iii) too many tender board meetings; and (iv) delays in authorizing and effecting payments. 8. The October 2011 Report on Value for Money Audits of 136 Constructions Projects by the Public Procurement Regulatory Authority has flagged fraud and corruption in local governments as a major area of concern. This VFM audit covered 17 LGAs including one of the 18 Program ULGAs, six public authorities, and 7 TANROADS regional offices. It flagged fraud and corruption in local governments as a major area of concern. The audit covered aspects related to (i) planning (15%), (ii) procurement (15%), (iii) contract administration (15%), and (iv) quality of works (55%). The study audited 91 projects of LGAs for a value of Tsh19bn. The main findings of the study with regards to quality of works were that 62 projects (68%) of the LGA audited projects with a total value of Tshs10,056,982,629 (53% by value) were assessed to be of unsatisfactory quality and that serious malpractices were noted in most LGAs. A key finding of the report was that engineers and technicians especially in LGAs conspired with contractors to certify and pay work items which did not exist or with lower specifications than what was provided in the contract documents. 9. In assessing these LGAs PPRA applied its red flag checklist for identifying corruption in construction contracts. Any entity scoring more than 20% on that checklist has a strong likelihood of fraud or corruption in its procurement. The seventeen LGA’s were assessed as part of this exercise and only one is among the participating ULGAs. Ten of them (60%) crossed the threshold of 20% in which the participating ULGA (Singida) scored 24%. The finding of this report is that fraud and corruption risk in LGAs is high. 10. Based on the fiduciary context and assessment, the overall fiduciary risk for the Program is high. 5 11. These risks will be mitigated as follows: First, the key focus will be on improving the overall fiduciary environment. This will be achieved through:  The UPG and Annual Assessment. The UPG incentive mechanism and the Program’s annual performance assessment, i.e. the minimum access conditions and performance indicators have in built incentives for improving fiduciary compliance. The Annual Assessment had adopted (as a performance indicator) the 13 compliance indicators used by PPRA to assess PMO-RALG and participating ULGAs. The standardized tool used by PPRA measures: institutional set-up; procurement plan; process; quality assurance; and contract management. This will enable close monitoring of program and fiduciary compliance.  The Annual Assessment will include, as minimum access conditions and performance indicators, steps such as having systems in place for handling grievances related to fraud and corruption, publicly advertising the bidding procedures, disclosing contract awards to the public and having a consultative process for the UPG.  Capacity building program to be managed at PMO-RALG and ULGAs levels. Elements of this program will specifically focus on accountability and monitoring at the ULGA levels to minimize the fraud and corruption risk.  DLI leveraged steps that central government will take to ensure, for example, that core fiduciary staff are in place at the ULGA level for each year of the Program;  Additional agreed measures e.g. in ULGA disbursement years one and two (FY2013/14 and FY2014/15), PPRA will conduct several value for money audits in at least two or three of the Program ULGAs, respectively, to determine performance in particular regards to management of contracts and quality of works. From FY2015/16 onwards, PMO-RALG will commission PPRA to conduct value for money audits for all Program funds in all 18 Program ULGAs and the results will be incorporated into the annual assessment. 12. Second, the Government of Tanzania has agreed to implement the Program in accordance with the Anti-Corruption Guidelines applicable to PforR operations (ACG) as follows: a. Debarment list of firms and individuals. Companies and individuals debarred by the Bank and the PPRA will be posted and updated every six months on the PMO-RALG website. This will include the list of temporary suspended firms and individuals, which the PMO-RALG will obtain from the Bank. In general, the risk of having a debarred firm or individual in the Program is low, since most of the tenders will be small and carried out through National Competitive Bidding (NCB) process. Nevertheless, PMO-RALG will share this information with all Program ULGAs, instructing them to comply by appending the debarment list to the annual Grant Award announcement which will be made public - and go to all Program ULGAs. This list will also be used by procurement advisors working as part of the PMO-RALG capacity building program to monitor ULGA compliance. ULGA compliance with the debarment list will also be monitored through the Program annual assessment. b. Sharing information on fraud and corruption allegations and investigations with the Bank. In line with the ACGs, GoT will share with the Bank relevant information on fraud and corruption allegations, investigations and actions taken as needed. At the local level, each ULGA has an Integrity Committee (IC) to which fraud and corruption complaints are reported. Fraud and corruption complaints related specifically to procurement may also be made to the ULGA Accounting Officer. The Bank has been informed that under Tanzania’s legal system, the primary agency for investigating corruption is the Prevention and Combating of Corruption Bureau (PCCB). Where PCCB investigations reveal that a given case is primarily one of fraud rather than corruption, the PCCB refers it to the police for further investigation and prosecution. 6 The PCCB has 98 district offices including all the 18 Program ULGAs. The PCCB has a national workforce of about 1700 staff of which approximately half are involved in investigation. In this context, fraud and corruption allegations made in respect of Program funds to the LGAs via either the ICs or the Accounting Officer will be referred by these entities to the district offices of the PCCB. The PCCB will keep a record of such allegations, or allegations from any other source regarding Program funding, and the actions taken on them. Once annually, it will provide a national compilation of all such allegations, investigations and prosecutions throughout the Program to PMO-RALG. PMO-RALG will include this in the annual Program Report that will be submitted to the Bank. c. Investigation of fraud and corruption allegations. GoT has advised that (i) within the parameters indicated above, the PCCB is the primary Government agency for the investigation of F&C, which would include investigations under the Program; (ii) the Prevention and Combating of Corruption Act permits the PCCB to cooperate and collaborate with the Bank in the fight against corruption, and permits the PCCB and the Bank to undertake joint investigations of sanctionable practices if and when the parties so agree; (iii) the Bank may also undertake its own investigations of F&C allegations under the Program. In this context, the investigation of F&C allegations under the Program will be handled through three possible modalities, depending on circumstances.  The PCCB will undertake its own independent corruption investigations arising from allegations reported to it as per sub-par b. above.  The PCCB and INT will undertake joint corruption investigations. The initiation, scope and operational procedures will be decided on a case-by-case basis by PCCB and INT.  INT will undertake its own F&C investigations. In this case, the Program Participation Agreements to be entered into between PMO-RALG will ensure that PMO-RALG and the INT are able to acquire all records and documentation that they may reasonably request from Program ULGAs regarding the use of Program funding. 13. Third, and more broadly. PMO-RALG has developed a Local Government Anti-Corruption Strategy and Action Plan Phase III 2010 – 2015 which it will implement on an LGA-wide basis throughout the country. The plan builds on two subsequent phases corresponding to NASCAP I and NASCAP II and seeks to strengthen: i) registry management of information; ii) procurement procedures; iii) capacity building of human resources; iv) sensitization of public rights and duties; v) storage and safeguarding of data; vi) public service complaints handling. 14. It should also be noted here that the implementing entity PMO-RALG has been implementing the ongoing LGSP since 2005. For the past seven years of implementing Bank projects, there have been no governance and anticorruption issues at the PMO-RALG level and the most recent Tanzania financial management regional in-depth supervision review commissioned by the World Bank has found no incidence of fraud or corruption. 15. The conclusion of the Fiduciary Assessment is that the program systems provide reasonable assurance that the financing proceeds will be used for their intended purpose, with due attention to principles of economy, efficiency, transparency and accountability. 7 Background and the Program’s Institutional Arrangements A. Program Description 1. In 2004, GoT introduced the Local Government Capital Development Grant (LGCDG) as a grant flow to local governments. Prior to the introduction of the LGCDG, direct development grants to LGAs were minimal and not performance based. LGAs received certain additional development resources from sectoral development programs and from area-based development programs. These resources were contained within the respective line ministry’s budget or within PMO-RALG’s ministerial budget (known as Vote 56), and the use of these resources was often earmarked or controlled in a top-down manner. The LGCDG, financed by the Bank and bilateral donors, was formula based. It also introduced minimum qualification standards aimed at building fiscal decentralization and ensuring proper accountability in the use of public funds. 2. The LGCDG has evolved into the Local Government Development Grant (LGDG) Program with several sub-programs and has become a mainstream performance based fiscal transfer. By introducing LGDG –the Government program - the Government created a formula-based, transparent and predictable fiscal flow mechanism to disburse funds to all 133 LGAs in the country, on the basis of the institutional performance achieved. Initially, the LGDG was set up with two windows: (a) the Capital (later “Council�) Development Grant (CDG), which provided funding for capital expenditure selected at the discretion of recipient LGAs using their local planning and budgeting systems; and (b) Capacity Building Grants (CBG) which provided funding to support capacity building at the local level. Today, the Council Development Grant and the Capacity Building Grant are collectively known as the “LGDG core�. Overtime, new sector windows have been added as the government has rationalized and decentralized funding for development needs in particular sectors where LGAs have core responsibilities.. 3. In addition to bringing transparency, accountability and predictability to the flow of funds, LGDG also made significant resources available to LGAs. Financing made available to LGAs though grew over five fold from 2005 to 2010 (from TSh 31,268.60 million to TSh 169,999.40 million). In addition to the marked increase in LGDG and other development grants, the amount of recurrent grants also saw more than a three-fold increase over the same period. Yet despite this recent growth, at the aggregate level, local government own source revenues have remained minor, contributing only six or seven percent of local government resources. 4. LGDG started the provision of on-budget funding flow to the local government level for development purposes and it gave local governments discretion over these resources, rather than earmarking these funds centrally. Additionally, it required local governments to engage their communities in prioritizing how to spend these resources, incentivized the performance of LGAs in terms of certain administrative, fiscal and governance practices and harmonized a plethora of donor funding flows into a single, government-led development grant system. 5. Despite significant accomplishments of LGDG and the overall fiscal decentralization reforms, a number of issues remain to be addressed. The current performance assessment system which determines the LGDG disbursements to 133 LGAs has reached a plateau. A majority of qualifying LGAs (110 out of 133) that meet the minimum access conditions tend to score results of ‘very good’1 under the 1 The amount of CDG funding depends on the absolute performance of each LGA as measured by the scores under each functional area. LGAs which do not meet the Minimum Conditions receive 25% of the CDG amount, subject to strict oversight by PMO-RALG and the Regional Secretariat serving as the external monitoring agent. Their performance status is described as “Poor�. LGAs that meet all the minimum conditions receive 100% of the CDG amount if they obtain an aggregate score of 75 points and above while receiving a minimum passing score of 5 in each of the functional areas and its performance status is graded as “Very Good�. LGAs that meet the minimum conditions receive 80% of the CDG amount if they obtain an aggregate score of between 51-74 points while receiving a minimum score of 5 in each of the functional areas and its performance status is 8 LGDG performance evaluation. This reflects the fact that during the first years of the LGDG, most LGAs have attained the basic levels of performance expected of fledging government entities. 6. Tanzania has seen a demographic shift from a 5.7 percent urban population in 1967 (685,092 people) to 22.6 percent (7.6 million) living in urban centers in 2002 with projections that this trend will accelerate. Whilst the LGDG system has attempted to meet the infrastructure needs of local governments, these financing flows remained drastically short of the real and projected population growth in urban areas. Investments in systems management of urban areas and urban infrastructure have not kept pace with urban population growth, resulting in poor or declining service delivery. While a major achievement of LGDG has been to significantly increase the role played by LGAs in capital (infrastructure) development, it does not provide sufficient funds to finance typical urban local government infrastructure needs such as urban roads, lighting, drainage. 7. Recognizing the importance of urban areas towards the country’s growth agenda, their distinct institutional requirements and infrastructure investment needs, GoT intends to introduce a new window within the LGDG focused specifically on meeting the investment needs and leveraging the improved institutional performance of Tanzania’s rapidly growing secondary cities. This new window, to be known as the Urban Performance Grant (UPG) will begin by limiting itself to 18 target ULGAs. UPG will fully utilize and enhance the key elements of the LGDG system. Namely, similar to current windows, it will determine LGA allocation by a population based formula and it will disburse its funds as a result of LGA performance assessment. In doing so, UPG will leverage institutional strengthening and support local capacity building. UPG funds will be primarily used by ULGAs to meet their infrastructure needs laid out in the Program’s investment menu. The UPG window will have an associated set of activities implementation activities which will include capacity building needed for ULGAs to be able to respond to the performance incentive mechanism, as well as the independent annual performance assessment which will determine the disbursements for each ULGA in a year. These implementation activities will be managed by PMO-RALG, which is responsible for decentralization and local government affairs in mainland Tanzania. UPG the associated implementation activities form the proposed Program, the Urban Local Government Strengthening Program (ULGSP). The Program is expected to run from 2012 until December, 2018. 8. The Government program (LGDG) with its current windows as of 2010/11(solid lines), and with the proposed new (sub)Program as of 2013/14 (dotted lines) can be summarized as follows: classified as “Good�. All other LGAs meeting the minimum conditions will receive 50% of the CDG amount with a performance status of “Average�. 9 Table 1: Local Government Development Grant system- summary Actual disbursed amounts in US$/million for FY2010/11 LGDG Core Agriculture Water Sector Health Sector Proposed (CDG+CBG) Sector Development Development Urban Development Grant Grant Performance Grant (WSDG) (HSDG) Grant (ASDG) (UPG) Year started FY2004/05 FY2007/08 FY2009/10 FY2009/10 FY2013/14 Function area Discretionary for Agricultural Water and Primary Discretionary all investments extension and sanitation healthcare for within LGA development infrastructure services infrastructure mandate (CDG), and services investments in capacity building UPG menu (CBG) 2 Disbursement $ 68.3 $ 27.3 $ 10.9 $35.5 million3 Total actual funds disbursed under LGDG system - $106.5 million 9. The Program will be implemented over a six year period from 2012 to 2018 covering an estimated population of 2.914 million across the 18 ULGAs. ULGSP intends to leverage the UPG financing to increase local government capacities and to be fully embedded into the larger Tanzanian national fiscal transfer system, rather than being implemented as a stand-alone program. The proposed program will thus establish a predictable funding mechanism system which will flow through the government channels and intended for relatively large urban infrastructure investments. Smaller projects are expected to be funded using existing LGDG resources. What can be financed shall depend on the need and priority of the respective ULGA but shall be derived from the investment menu that is confined to road infrastructure, urban transport, public safety, solid/liquid waste management, parks and recreation, and markets and trade and provided in investments in water and sewerage services, land purchases, and social sector services are excluded from the menu. 10. Support to 18 ULGAs will be provided through UPG, whose main purpose will be to enhance the governance systems of urban local governments. In order to participate in the program, each ULGA will meet a set of minimum conditions that comprises the existing LGDG minimum conditions as well as additional enhanced minimum conditions. ULGAs shall be required to utilize participatory approaches to identify investments which are fully planned, designed and ready for procurement. UPG will support governance systems by leveraging the municipal infrastructure financing from the proposed grant mechanism based on ULGA performance against disbursement-linked indicators (DLIs). DLIs will primarily measure progress towards enhancing institutional systems. 11. UPG funding will comprise a progressively increasing per capita amount, designed to go up in line with the increasing capacity at ULGAs. UPG will start at US$ 3 per capita in FY2013/14, with disbursement against meeting the Program minimum access conditions (DLI 1), will go up to US$ 12 in FY2014/15 with disbursement against meeting the Program minimum access conditions (DLI 1) and performance against the institutional performance indicators (DLI 2), and reach US$ 18 in FY2015/16 and onwards, with disbursement against meeting the Program minimum access conditions (DLI 1) and performance against the institutional (DLI 2) and infrastructure (DLI 3) related performance indicators. Allocation envelope for each ULGA will be a function of the population of each council and the score 2 It has generally been reported that no funds were disbursed under WSDG in FY2010/11. However, there is conflicting information on this. 3 The UPG allocation for the first full cycle (FY2014/15) is expected to reach US$35.5million. 10 attained at the annual performance assessment. Based on this, table below provides an overview of likely annual and cumulative UPG for each ULGA, assuming the targets for DLIs 1, 2 and 3 are met exactly as set in the DLI matrix. The exact annual disbursement per ULGA will be determined according to actual ULGA performance against DLI targets. 12. The following three overall results are expected from the Program:: a. 18 ULGAs, with approximately 25% of the country’s urban population, with enhanced institutional structures and better local governance defined in terms of improved urban planning systems, increased own source generation and collection (with a particular focus on property taxation), enhanced fiduciary systems management, improved service delivery systems and enhanced accountability and oversight mechanisms; b. A set of urban municipal infrastructure investments which will be financed by the Program’s incentive element; and c. Enhanced central government mechanisms that can support decentralization including on- time disbursement from the central government to ULGAs. 13. Program scope is as follows: a. Program duration: 2012 through 2018; b. Program envelope: US$ 255 million; c. Concentration on areas where ULGAs face challenges: 1. Urban planning systems; 2. Own source revenues from property taxes; 3. Efficiency in fiduciary systems (financial management and procurement) management; 4. Infrastructure implementation and operations & maintenance (O&M) systems; and 5. Accountability and oversight mechanisms. d. (Initial) Geographic scope: 18 ULGAs: Morogoro, Tabora, Moshi, Sumbawanga, Shinyanga, Songea, Singida, Musoma, Iringa, Njombe, Bukoba, Kibaha, Babati, Geita, Korogwe, Mpanda, Lindi, Bariadi; e. Activities to be supported: Urban infrastructure investments and central government activities for supporting fiscal decentralization such as capacity enhancement, technical assistance and grant management. B. Institutional Framework and Implementation Arrangements 14. The Program will be implemented through the same institutional architecture used under the LGDG system. Participating ULGAs will take primary responsibility for implementing their own subprojects including all fiduciary, safeguards and reporting requirements. Project implementation and supervision will be mainstreamed within the existing ULGA structures, with the city or municipal director as the overall accounting officer. Management of the completed investments, including operations and maintenance, will be the responsibility of ULGAs. The 18 participating ULGAs will submit quarterly financial reports to PMO-RALG for consolidation and submission to the Bank. 15. PMO-RALG will be responsible for the overall management of Program activities, providing overall coordination and technical support to ULGAs. PMO-RALG has established a dedicated team for the implementation of ULGSP within the Directorate of Local Government, reporting to the Director of Local Government and working in collaboration with other departments in PMO-RALG. PMO-RALG has demonstrated its capacity to manage similar projects including USRP and the ongoing Local Government Support and the Tanzania Strategic Cities projects. 16. Reflecting the decentralized nature of the Program, participating ULGAs will take primary responsibility for implementing their own subprojects including all fiduciary, and reporting requirements. Namely, ULGAs will be responsible for: (i) using nationally guided participatory budgeting arrangements to plan for the way in which they will use grant funds, both for infrastructure investments and capacity building activities (planning and budgeting); (ii) using the funds they receive according to the participatory budgeting priorities and national laws and regulations ( fiduciary systems, 11 anti-fraud & corruption mechanisms and oversight mechanisms); and (iii) monitoring and reporting on the use of the funds and the associated outputs and outcomes (reporting). As such, ULGAs will have primary responsibility for the institutional strengthening activities and implementation of infrastructure subprojects. Program implementation will be done using the existing ULGA structures with the respective Municipal/Council Director as the ULGA level accounting officer. The relevant council officials will be responsible for the implementation, supervision and oversight of their respective subprojects and institutional strengthening activities. Management of the completed investments, including O&M, will be the responsibility of ULGAs. 17. PMO-RALG will be responsible for the overall management of Program activities, providing overall coordination and technical support to ULGAs. Specifically, it will be responsible for (a) providing the necessary staffing for each ULGA according to nationally set norms; (b) providing the hard and soft infrastructure (i.e. IT), technical assistance and capacity building to ULGAs in many areas including financial management and procurement; (c) commissioning and executing the oversight of the independent annual performance assessment; (d) communicating the results of the annual performance assessment to the Bank and obtaining the Bank’s verification of it; (e) making public the results of the annual performance assessment and the corresponding grant funds to be disbursed to ULGAs mass media; (f) requesting and following up with the Ministry of Finance and the Bank of Tanzania to disburse the funds to ULGAs on time; (g) collecting and aggregating data from ULGAs to track the use of grant funds; and (h) overall management of the Program, including preparing the Program report. Chart 1: Institutional Arrangements for implementation of ULGSP PMO-RALG Permanent Secretary Directorate of Urban Development Urban Unit Respective Regional Program Coordinator Secretariats ULGSP Sub-Coordinator Oversight, Advisory Financial Management Specialists and Mentoring Procurement Specialists Social and Environment Specialist Monitoring and Evaluation Specialist 18 ULGAs 16. PMO-RALG will manage and coordinate the Program, with the Permanent Secretary of PMO- RALG as the overall accounting authority for Program funds. The specific team which will manage the Program’s operation is an established unit dedicated to urban issues. This unit consists of its own personnel within the Directorate of Urban Development and works in collaboration with other departments. The team is led by a Program Coordinator, supported by Sub-Coordinators for each of the Government’s urban programs and staffed by two full time financial management specialists, two procurement specialists, a social and environment specialist, a monitoring and evaluation specialist and support staff. All staff members of the unit have participated in multiple training programs in their areas of work. The unit is housed in a dedicated fully equipped office space. PMO-RALG has demonstrated its capacity to manage externally supported Government programs and projects such as the World Bank 12 supported Urban Sector Rehabilitation Project (USRP, 1997 to 2003/4; LGSP, since 2004/5; and TSCP, since 2010). C. Proposed Program’s Fiduciary Arrangements i. Financial Management 17. Starting from 1998, the Public Financial Management (PFM) system of Tanzania has been undergoing reform. It had been assessed as one of the better performing PFM systems in Africa in 2005. In recent years the reform momentum appears to have slowed. There has been deterioration in the Public Expenditure and Financial Accountability (PEFA) scores of Tanzania between 2005 and 2009. 4 Gradual weakening of financial management systems has translated into reduction in CPIA scores and lower IDA allocation for Tanzania over the last few years. Some of the key areas of concern are the following: i. Planning: The MTEF process is particularly weak in Tanzania. Budget ceilings and budget guidelines have little to do with the previous year’s MTEF. The forward looking estimates are presented only at a very aggregate level and are not considered reliable indication of future allocation patterns. The forward estimates are not supported by a clear medium-term prioritization process, but rather reflect data extrapolation. ii. Chart of Accounts: The budget and accounts are classified according to administrative and economic classifications. Economic classification has been updated to GFS 2001. Functional GFS 2001 classification was initiated in the FY 09 budget, but has only been partially implemented. This was a particularly challenging area for LGAs since several LGA until very recently were using a CoA that had not been updated for five years and was different than the one being used by the Central Government. iii. Fund Flows and Budget Volatility: Cash management has become a binding constraint in recent years. The Rapid Budget Analysis (November 2011) noted that budget deviation deteriorated in FY 11 owing to incomplete and delayed releases as well as reallocations. The overall budget execution rate declined to 83% in FY 11 compared to 90% in FY 10. The development budget execution rate declined to 59% in FY 11 compared to 75% the previous year. This was partly due to the fact that 45% of the development budget was released in the last quarter of the FY. In terms of recurrent expenditures, the budget deviation index increased to 13.9% compared to 12.9% the previous year. Service delivery ministries suffered severe dislocations. In FY 11 the Ministry of Health and Social Welfare received only 44% of its annual budget for goods and services (including medicines), a significant portion of it in the last month of the financial year. iv. IFMIS: The KPMG review of 2010 identified major weaknesses in implementation of the IFMIS in the Central Government and LGAs. The report had noted that only 7 of the 12 modules had been implemented over the last decade and that there were ongoing fiduciary concerns in the manner in which the system was being used. Some of these were the following: inbuilt IFMIS controls not having been adequately activated, there were ongoing bank reconciliation weaknesses, there were poor interfaces between manual and automated systems and purchase requisitions were being raised manually instead of through the system. KPMG had also noted that a walkthrough of the procurement process revealed purchase order controls with the system being able to be manipulated to generate multiple original documents. Treasury is taking steps to implement the key recommendations of the report. 4 PEFA score declined due to reduced ratings in some of the following indicators: PI 1—variance in expenditure composition; PI 3—revenue outturn compared to original approved budget; PI 4 —arrears; PI 11— orderliness and participation in the annual budget process; and PI 28—legislative scrutiny of external audit reports. 13 v. Internal controls including internal audit: The office of the Internal Auditor General of Tanzania was established through an amendment to the Public Finance Act in 2010. Staffing of this institution is underway and the office is in the process of getting established. This should help professionalize the internal audit function which till now is weak. vi. Financial Reporting: Tanzania follows the International Public Sector Accounting Standards (IPSAS) cash basis of accounting at the Central Government level. On the Annual Financial Statement of the Government of Tanzania for FY 10, the Auditor General issued an Adverse Opinion. The main reasons for this opinion were non compliance with IPSAS 6, non compliance with the Public Finance Act, non disclosure of investments of T.sh 100 billion, non disclosure of liabilities of T.sh 48.75 billion, total overdraft that was not disclosed of T.sh 1.3 tr., unexplained outstanding liabilities of T.sh 160 bn. For FY 11 the Audit Report for the Central Government was released in April 2012. The Annual Financial Statement has received a Qualified Opinion and there are ongoing concerns that IPSAS Cash Accounting standards are not being complied with, that Government payables nor Government deposits are reflected correctly in the financial statements. vii. Arrears: The 2009 PEFA report noted deterioration in performance on arrears over the last three years since the stock of arrears almost doubled during this period. It increased from 5% (06/07) to 9.5% (08/09). This could well be an underestimation since salary arrears were not included and arrears information is held in several databases that are in the process of getting consolidated. The Rapid Budget Analysis (November 2011) noted a major increase in arrears in FY 11. It estimated that arrears increased by Tsh. 420 billion (4% of the budget for FY 11) on both the recurrent and development budget side. Around 80% of these arrears are estimated to have arisen from the road sector due to unpaid certificates for which work had been completed by June 2011. The actual magnitude of overall arrears is not fully known. It is estimated that there will be a substantial increase in arrears in FY 12 since the allocation in the draft budget for arrears of Tsh 348 million was reduced by Tsh 95 million in the budget that was finally approved. 18. Local Governments face similar challenges. Local Government spending currently accounts for around 23% of overall government spending in Tanzania. This is below the target of 25% that the Government had set for itself a few years ago. While Development spending in the current year is around the same level as it was five years ago, there has been a significant increase in recurrent spending. As can be seen in the table below, three sectors account for over 80% of local government spending. Table 2: Local Government Budget for 2011/12 (T.sh.) Development Budget Recurrent Budget Total Percent Foreign Local Other Charges Personal Emoluments Education 69,895,772,608 23,311,925,860 243,192,701,574 1,073,890,495,000 1,410,290,895,042 48% Administration 74,267,510,797 63,313,455,600 277,373,634,099 151,994,397,679 566,948,998,175 19% Health 67,766,230,607 26,762,350,662 43,131,448,746 244,949,653,000 382,609,683,015 13% Others 64,121,192,355 47,125,378,842 46,974,947,338 4,727,406,321 162,948,924,856 6% Roads 27,513,921,990 97,840,621,204 11,468,648,941 15,416,178,000 152,239,370,135 5% Agriculture 61,932,236,588 3,151,614,251 7,853,456,823 52,031,104,000 124,968,411,662 4% Water 82,966,644,455 4,031,317,581 12,138,593,479 12,904,877,000 112,041,432,515 4% Total 448,463,509,400 265,536,664,000 642,133,431,000 1,555,914,111,000 2,912,047,715,400 Percent 15% 9% 22% 53% 19. Own source revenues account for a small percentage of local government budgets. During the current year, own source revenues are expected to account for less than two percent of local government budgets. As can be seen in the table below, during the current year, around 98.7% of local government revenues will be on account of conditional and unconditional transfers from the Central Government to 14 Local Government. There are close to 30 different conditional grants flowing to Local Governments. 5 An illustrative list is at Annex 5. 95% of intergovernmental transfers are therefore conditional grants. Local Governments therefore have minimal own source revenues (<2%) and also very limited flexibility regarding Central Government transfers since only 5% are unconditional. Table 3: Selected LG indicators Selected Statistics 2008/09 2009/10 2010/11 2011/12 LGAs Budget as a share of total GoT Budget 19.2% 25.6% 25.0% 23.3% Direct Transfers to LGAs as a share of total GoT Budget 17.9% 23.9% 23.3% 20.5% Total LGAs Budget as a share of GDP 5.5% 5.1% 7.3% 7.5% Direct Transfers to LGAs as % of Total LGAs Budget 92.6% 89.9% 97.6% 98.7% 20. Accounting, planning, budgeting and financial reporting processes of ULGAs are subject to the Finance Act (2010) and Local Government Finance Act (1982). This is supported by the Local Authority Financial Memorandum (LAFM, 1997), the Local Authority Accounting Manual (1992), and the Planning and Management Guide (PMG). These documents specify the financial procedures and management control of local government finances as well as relationships among various stakeholders from different levels of the local government structure. 21. Some key PFM challenges faced by Local Governments are the following: i. Planning and Budgeting: There are multiple bottom-up planning processes in LGAs. The Opportunities and Obstacles to Development (O&OD) is only one of many participatory planning processes. The others are program and sector specific. These do not connect well with top-down budget guidelines. The multiplicity of planning, budgeting and reporting requirements undermines the integrity of the whole budgeting/planning process, and raises the question as to whether funds are being efficiently and effectively directed to local needs. The budgeting process is further undermined due to changes to Local Government ceilings by the Central Government after the budget is approved by the local authority. These changes can be substantial. This adversely affects the authority of Local Councils who have approved these budgets before local authorities transmitted them to the Central Government. This adversely affects the authority of Local Councils who have approved their budgets before transmitting them to the Central Government. ii. Accounting and Financial Reporting: Since FY 2009 all LGAs are required to adhere to the IPSAS Accrual Accounting standards. There is weak capacity in LGAs and limited training has been provided to staff to implement accrual accounting standards. LGAs have struggled to achieve minimal standards and basic procedures such as bank reconciliation remains an area of concern. 2010 LGDG Assessment noted that 21 (16%) LGAs had the General Fund Accounts overdrawn during the period July 2008 to June 2009 while 26 (19.7%) LGAs had other accounts overdrawn during the same period. Nine LGAs (6.8%) had both the General Fund and other accounts overdrawn during the period. The recent MOF directive to LGAs to reduce the number of bank accounts to six at the local level could result in the emergence of additional fiduciary risks with LGAs facing greater difficulties in tracking payments into and expenditures from these six accounts. The amendment to the Public Finance Act of 2010 created the office of the Assistant Accountant General for Local Governments and for the first time brought the accounting function of LGAs under the technical purview of the Accountant General of Tanzania. At the local government level, the number of local governments that received a clean audit opinion reduced from 100 in FY 07 to 66 in FY 10,though this was partly a result of the introduction of an enhanced audit process over this period which required the participating ULGA financial statements disclosure to accord with International Public Sector Accrual 5 World Bank (2010), Tanzania Local Government Stocktaking Exercise. 15 Accounting Standards. This is not surprising considering the fact that accrual accounting standards usually take time to be ingrained into local government practice. More recently, some signs of improvement are evident e.g. the number of clean audit opinions improved from 66 to 72 between FY10 and FY11. iii. Treasury Management and Fund Flows: Cash management challenges being faced by the Central Government have had an adverse impact at the Local Government level. Salaries are by and large paid on time, but other than that there has been a major increase in the unpredictability of resource flows to local governments. Budget execution of the development budget for LGA’s reduced to 56% in FY 11 compared to 62% the previous year. There has been a marked deterioration in budget execution by the main service delivery sectors in local governments. LGAsBudget Chart 2: Development execution Developement by LGAs Budget Execution Rates 90.0 80.0 Exp as % of the Budget 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Education Health Roads Water Dev Agricult Admin Other 2008/09 2009/10 2010/11 i. There are multiple IT systems in Local Governments which do not exchange data in an effective manner and there are also multiple reporting requirements that strain weak LG capacity. For example, a large number of LGAs use IFMIS (Epicor) for financial management and Planrep for monitoring physical progress. These systems do not have a standardized interface for exchanging data. This results in duplication of data input into different software programs. Reporting is also a major challenge for Planning and Accounting Departments. While the Council Financial Report and the Council Development Report has reduced the burden somewhat, LGAs are still required to produce between 20 to 40 monthly reports for various projects and stakeholders. ii. The roll out of the IFMIS has been underway in LGAs since 2000. It has been a challenge. Until 2011 around 100 LGAs were covered. The KPMG review of 2010 noted that the system was largely underutilized, was being used primarily as a voucher processing system, several sites had an outdated software version running that had not been upgraded to the version running at the Central Government, had an old Chart of Accounts than what was being used by the Central Government and there was inadequate training of staff. Data integrity had been compromised in some Epicor installations. PMORALG has over the last 12 months rolled out the new version of Epicor (Version 9.05) to all 133 LGAs and the training on the new version is being provided. iii. Internal controls and internal audit: This is a major area of concern. CAGs audit report for FY 11 has stated that internal audit is ineffective in 90% of LGAs, that the IT control environment is inadequate in 83% of LGAs, that Audit Committees are largely ineffective in 73% of LGAs and that there is no risk management framework in 53% LGAs. The amendment to the Public Finance Act in 2010 created the Office of the Internal Auditor General for Tanzania and the 16 purview of this office has been extended over internal auditors working in Local Governments. This should help improve their independence, professionalism and technical competence. iv. Fraud Prevention and Control: CAG’s Audit Report on Local Governments for FY 11 states that a fraud assessment of 68 LGAs was carried out in FY 11. This assessment disclosed that LGA managements have not documented or put in place fraud prevention plans. There is also no process for management to monitor “Red Flags� that could alert them t o the symptoms of fraud. Due to this CAG has concluded that there is a high risk of concealing management or operational level fraud in LGAs. v. Procurement Compliance: In his audit report on LGAs for FY 11, CAG has expressed his concern at the low level of compliance with procurement procedures, at laxity in control over contract payments, at poor supervision of LGA projects, at procurements being made without Tender Board approval, at the missing documentation in LGAs relating to procurement and the manner in which 13 LGAs ordered and paid for goods that were not delivered. vi. External Audit: This is governed by the Local Government Finances Act No.9 of 1982 (revised 2000). The Act stipulates that accounts of every ULGA shall be audited by the National Audit Office. The Auditor General is required to prepare and submit a report to the Parliament on the final accounts of each ULGA not later than six months after the closure of the Financial Year. CAGs reports on LGAs have repeatedly pointed out that there is poor follow up of audit findings. The number of LGAs that did not satisfactorily resolve audit findings increasing from 52 in FY 07 to 126 in FY 09. 22. There are implementation challenges associated with the operation of LGDG. The budget for LGDG Core funds in FY 11 was only 6% of the LG budgets. After including the sectoral windows, the budget for LGDG increases to 11%. LGDG funds are therefore a fraction of LG budgets. However, they provide the only source of discretionary funding for local government and so, while the relative amount is small, LGDG funding may have a disproportionate impact on local government behavior. The UPG will greatly increase the discretionary amounts potentially available to the target LGAs, and incentive impact is consequently expected to be significant. 23. The assessment criteria for LGDG have not changed since it was introduced in 2004. Over the last three years as per the annual LGDG assessments around 97% have met the minimum conditions and 91% have been rated as “Very Good�. One reason for this could be that the bar is now so low that LGAs can easily qualify to receive LGDG funds and this is no longer a stretch limit for them to improve performance.6 Another could be that a “performance plateau� has now been reached (something the UPG seeks to address). 6 The LGDG system has two grant elements, the Council Development Grant (CDG) and the Capacity Building Grant (CBG). Before the LGAs fully access the LGDG system funds, they are required to meet a set of minimum requirements that ensure that funds transferred to them are properly used and in compliance with the laid down GoT statutory and administrative requirements. In addition to the MCs, a set of performance ind icators are used to provide incentives for performance improvement by rewarding good performance and penalizing poor performance. Unlike the MCs, the Performance Measures (PMs) are more qualitative and seek to evaluate the performance of the LGA in key functional areas such as financial management, Development Planning, transparency and accountability, interaction with Lower Local Governments (LLG), human resource development, procurement, project implementation, and Council functional processes. 17 Table 4: LGDG Assessment Results Grant Minimum Conditions Total Performance Measures Yes No Very Good Good Average Poor FY 12 CDG 128 4 132 110 2 16 4 DADG 128 4 132 125 3 0 4 FY 11 CDG 128 4 132 128 DADG 128 4 132 125 3 4 FY 10 CDG 129 3 132 126 1 2 3 DADG 129 3 132 108 16 5 3 Average 97% 3% 91% 3% 3% 2% 24. Over the last few years sectoral windows have been opened in the LGDG framework and these now cover health, agriculture and rural water supply. The criteria that apply for these sectoral windows are in addition to the criteria for determining LGDG eligibility. Due to this there is now a multiplicity of assessment criteria used for assessing flow of funds to LGA’s. Some of the main criteria used are the following: Table 5: Existing Assessment Criteria for Release of Funds to LGAs (Selected examples) 25. The quantum of Capacity Building Grants as well as LGDG funds are low when compared to LG budgets. Capacity Building Grants (CBG) only amount to 0.8% of the Development Funds available to LGAs and the discretionary Local Capital Development Grants (CDG) only amounts to 16% of LGA budgets. The table below provides details of LGDG funds that were transferred in FY 10. The bulk of the funds available to LGA’s are still recurrent grants for salary payments and conditional grants from the Central Ministries. World Bank funds from projects such as the Tanzania Strategic Cities Project - that provides infrastructure funding for the seven biggest cities in Tanzania flows – uses its own criteria for evaluation and disbursement, outside the LGDG system. There seems to have been a deterioration in release of LGDG funds during FY 11. CAG’s Audit Report for FY 11 provides details of releases. It seems that only around 50% of LGDG funds were released during FY 11 and there were major shortfalls in releases for LGDG Core funds, as well as for Health and Agriculture. No funds at all were released for rural water supply. Considering the fact that LGDG Core 18 funds are only one of two unconditional grants available to LGA’s this has adversely impacted the credibility of the program and is an issue that needs to be addressed. Table 6: LGDG Funds (FY 11) % not S/N Fund Budget Released Amount not released released 1 LGDG Core 175,248,000,200 109,295,521,453 65,952,478,747 62% 2 HSDG 30,284,700,000 17,401,420,000 12,883,280,000 57% 3 ASDG 55,645,745,550 43,744,164,283 11,901,581,267 79% 4 RWSSP 63,206,207,009 0 63,206,207,009 0% Total 324,384,652,759 170,441,105,736 153,943,547,023 53% Source: CAG’s Annual Audit Report on Local Governments for FY 11 (page 118) 26. Formula based allocations for recurrent grants exist on paper but are not followed through in practice. In FY 11 the gap between better served and the underfunded LGAs has widened. On a per capita basis, for primary education, the best funded LGA in FY 2010/11 was allocate 30 times more than the least funded, while in the health sector, the best funded LGAs was allocated 27 times more than the least funded LGA. The analysis indicates that, in primary education four LGAs (Mafia, Longido, Meatu and Biharamulo) have maintained their positions in the list of the bottom five least funded LGAs as compared to the last year while in the health sector it is only Tabora district council which has consistently appeared in the bottom five least funded LGAs. This has adversely affected the incentive for improved performance by LGAs. Chart 3: Per capita Releases of Health and Education Sector Grants to LGAs 19 27. The Government is committed to further strengthening PFM systems and is developing a Public Finance Management Reform Program. Phase IV for a five-year period beginning 2012, in close coordination with DPs. The Government’s new strategy for FY2012/13-2016/17 is intended to respond to identified weaknesses with implementation expected July 2012. Specifically, the strategy will focus on five Key Results Areas (KRAs): (i) revenue management; (ii) planning and budgeting; (iii) budget execution, transparency, and accountability; (iv) budget control and oversight; and (v) change management and program management including capacity building and training, IFMS and electronic service delivery, PFM institutional and legal framework, program coordination, monitoring, and communication. ii. Procurement 28. The Legal and Regulatory Framework for this program’s procurement is governed by the Public Procurement Act of 2004 (PPA 2004). Currently, procurement for the 18 ULGAs and PMO- RALG follows the Public Procurement Act No.21 of 2004 and the associated Regulations of May 2005 as well as Regulations for Local Government Authorities (Establishment and Proceeding of Tender Boards) of 2007. The Act of 2004 established the Public Procurement Regulatory Authority (PPRA) as an oversight body regulating procurement in the country and the Public Procurement Appeal Authority (PPAA) as the highest independent body responsible for handling procurement complaints. The PPA 2004 and its Regulations provide the procedures on how the procurement functions should be handled in the procuring entities using the organs established within the procuring entities. These organs are Accounting Officer (AO), Tender Boards, Procurement Management Unit (PMU) and User Departments. It also provides the mechanism on handling the disagreement between these organs within the procuring entity in course of a procurement process. Furthermore, it has provisions for handling the complaints for aggrieved bidders in the procurement process. 29. The PPA 2004 complies with applicable obligations deriving from national and international requirements. The procurement policies under the PPA 2004 are based on the need to make the best possible use of public funds, whilst conducting all procurement with integrity and fairness. All public officers and members of tender boards who are undertaking or approving procurement are required to be guided by the basic considerations of the public procurement policy; the need for economy and efficiency in the use of public funds; give all eligible bidders/consultants equal opportunities to compete in providing goods or executing works or providing services; encourage national manufacturing, , contracting and service industries and the importance of integrity, accountability, fairness and transparency in the procurement process. 30. For better implementation of the Act, three sets of regulations have been issued; the Public Procurement (Goods, Works, Non-consulting Services and Disposal of Public Asset by Tender) Government Notice No. 97 of 2005, the Public Procurement (Selection and Employment of Consultants) Government Notice No. 98 of 2005 and Local Government Authorities’ (Establishment and Proceeding of the Tender Boards) Government Notice No.177 of 2007. In line with issued regulations various documents as working tools have been issued including Standard Bidding Documents (Procurement of Works, Procurement of Goods and Procurement of Non-consulting Services), Standard Request for Proposals, Guidelines on the Tenders Evaluation (Works, Goods and Non-consulting Services), Guidelines on the Technical & Financial Proposals Evaluation and Report Preparation, Guidelines for Preparing Responsive Proposal, Guidelines for Preparing Responsive Bid and Procedural Forms. All these documents are accessible on the PPRA’s website free of charge7. 31. The PPA 2004 mandates PPRA as an oversight body with powers to institute; (i) procurement audits during the tender preparatory process; (ii) contracts audits in the course of execution of an award tender; and (iii) performance audit after the completion of the contract in respect of any 7 www.ppra.go.tz 20 procurement as may be required. For the purposes of the discharging of its functions under the Act, PPRA among others is empowered to have access to all books, records, documents or other property belonging to the procuring entity or a contractor or a supplier or a consultant whether in the possession of any officer of a procuring entity or a contractor or a supplier or a consultant or any other person and to conduct an investigation in matters relating to the registration of contractors, suppliers or consultants in relation to specific procurement, tender procedures relating to contracts awarded by the public bodies, the implementation of the terms of any public bodies and the practice and procedures relating to the grant, suspension, issue or revocation of any prescribed license. Furthermore, PPRA is mandated to recommend disciplinary action to competent authority against public officer or public body if finds during the course of its investigation there is evidence of a breach of duty or misconduct or criminal offence on the part an officer or member of a public body. 32. The Government has enacted a new Public Procurement Act to repeal the PPA 2004. The Parliament passed the new public procurement act in November 2011 to update the existing Public Procurement Act 2004 to make the law compatible with emerging contemporary needs in the public sector, such as Public Private Partnership (PPP), e-procurement, and procurement under emergency situations, while strengthening some public procurement systems, such as regulatory functions of PPRA and establishment of the public procurement policy division in the Ministry of Finance. The new Act, the Public Procurement Act No.7 of 2011 (PPA 2011) was assented by the President in December 2011 and will become operational once the regulations are issued by the Minister responsible for Finance – expected to be in July 2012. This implies that this operation will use the new Act expected to be effective soon. The Government is still drafting the new regulations to accompany the new Act. A copy of the draft regulations will be shared with stakeholders including the Bank for review and provide comments. 33. Generally, the new Act has maintained the same institutional arrangements as that of PPA 2004. Equally, it has maintained the overall basic principles of the public procurement. However, the PPRA functions have been strengthened among of them being powers to cancel procurement proceedings after conducting an investigation and reasonably satisfied that there is a breach of the Act. The new Act enhanced the definition of Fraud and Corruption in a broader term by including definitions of coercive practice, collusive practices and obstructive practices that were missing in the PPA 2004. Furthermore, the new Act gives powers to PPRA to blacklist and debar a bidder who has been debarred by international organizations such as the World Bank in cases related or unrelated to fraud and corruption for such period as is debarred by the international organization plus a further period of ten years (for fraud and corruption cases) or five years (for non fraud and corruption cases). 34. However, it is worth to note that the new Act has added one layer of the approval process at the local government level which may affect the efficiency of procurement under this program. The Finance and Planning Committee of a ULGA is now required to scrutinize the decision of the ULGA’s tender board before award of contract. In the event that the Committee is dissatisfied with the decision of the tender board after its scrutiny, it shall request PPRA to conduct an investigation as part of their powers under the Law. It is expected that the regulations will provide detailed procedures on how to operationalize this provision to address: (i) a clear definition of the word scrutiny in the rationale of the function of the tender board in awarding contracts; (ii) a requirement for the Committee to provide reasons in the case it is dissatisfied with the decision of the tender board; and (iii) timelines for scrutiny and PPRA’s investigations. 35. PMO-RALG and all participating ULGAs have established organs to process procurement.. The organs established by PPA 2004 are Tender Boards, Accounting Officer, PMU, User Departments and Evaluation Committees. The same organs have been retained under the new Act. Under this institutional set up; AO or Chief Executive of a procuring entity has the overall responsibility for execution of the procurement process. The AO is mainly responsible for establishing a tender board; creating a PMU staffed to an appropriate level; advertising tender opportunities; appointing the evaluation committees; certifying the availability of the funds to support the procurement activities; 21 signing contracts; investigating complaints by bidders; submitting a copy of complaints and reports of the findings to the PPRA; and ensuring that the implementation of the awarded contracts is in accordance with the terms and conditions of the award. 36. Tender board is charged with the responsibility of adjudicating on recommendations from the PMU and award of contract; review all applications for variations, addenda or amendments to ongoing contracts; approving tendering and contract documents; ensuring that best practices in relation to procurement are strictly adhered by procuring entity and ensure compliance with the Act. According to the Act no public body can advertise, invite, solicit or call for tenders or proposals in respect of a contract or award or sign any contract unless authorized by the appropriate tender board. 37. The PMU is responsible for managing all procurement and tender activities of the procuring entity; supporting the tender board; planning the procurement and disposal by tender activities of the procuring entity; preparing tender and contract documents; maintaining and archiving procurement records and coordinate the procurement and disposal activities of all the departments of the procuring entity. Evaluation committees are charged with evaluation of bids and submission to the PMU prior to submitting to the tender board for adjudication. User Departments are responsible for liaising with and assist the PMU throughout the procurement or disposal by tender process to the point of contract placement; propose technical specifications and inputs to statements of requirements; input with technical evaluation of tenders received; certify for payments to suppliers, contractors, or consultant and report any departure from the terms and conditions of an awarded contract to the PMU. Under this institutional set up each organ is accountable for its decisions and actions. The Act requires each organ to act independently in relation to their respective functions and powers. 38. Thresholds for use of procurement methods. The PMO –RALG and ULGAs follow the procurement methods prescribed in the Regulations under the PPA 2004. The procurement methods are set by the thresholds stipulated in the Second Schedule of Government Notices No.97 and 98 of 2005. The procurement methods and thresholds are outlined in Table 8 below.. Table 7: Tanzania Public Procurement Regulations Methods of Selection and Limit of Application8 Goods, Works and Non-consulting Services Minimum Non-Consulting Tendering Method of Procurement Goods/US$ Works/US$ Period Services/US$ International Competitive 45 days No limit No Limit No Limit Selection National Competitive Up to 30 days Up to 1,875,000 Up to 312,500 Selection 500,000 21 days – National competitive Restricted Competitive bidding & 30 days Up to250,000 Up to 937,500 Up to125,000 Selection9 international competitive bidding 8 Currency conversion using 1 TZS = 0.000625 USD, The New PPA 2011 is expected to include substantially higher limits, but these have not yet been published 9 Limited to number of bidders who have already pre-qualified; specialized nature or can be obtained from a limited number of contractors, suppliers; the estimated contract values are within the limit and there is an urgent need goods, works or services such that there would be insufficient time to engage in open competition. 22 Single Source Selection10 Up to312,500 Up to 500,000 Up to 62,500 7 days – National Competitive Quotations shopping & 14 Up to 50,000 Up to 62,500 Up to 31,250 (Shopping) days – International shopping Minor Value procurement Up to6,250 Up to 12,500 Up to 6,250 Selection and Employment of Consultants International Competitive Selection No limit National Competitive Selection Up to 625,000 Restricted Competitive Selection Up to 312,500 Single Source Selection Up to 187,500 Individual Selection Up to 93,750 Minor Value procurement Up to 4,687.5 39. The procuring entity may exceed the threshold, but must inform the PPRA at commencement of the procurement process. There is likelihood of these thresholds to be increased in the new Regulations under preparation as stakeholders consider the thresholds outlined above too low taking into account the prevailing inflation. 40. Review of Procurement Decisions and Resolution of Complaints under the PPA 2004 . The PPA 2004 and its Regulations provides three-tier system of handling procurement complaints which are AO, PPRA and PPAA. The AO is the first appeal level in handling the procurement complaints. If the complaints are not handled in specified time or aggrieved party is not satisfied with the decisions of the AO, submit to PPRA as a second level. PPAA serves as the third level for further appeal of the decision of PPRA or failure to adjudicate in a specified time. The Act provides provision of judicial review in case of the three levels fail to make a decision within the prescribed time-limit. 41. Under the new Act, PPRA will no longer be involved in reviewing complaints. It has reduced the complaints handling to two-tier system involving the AO as a first level and PPAA as second level. Still there is a judicial review in case the second level fails to decide within the prescribed time-limit or the aggrieved party is dissatisfied with decisions of the PPAA. Under the PPA 2004, it takes 161 days to complete a complaint handling cycle if all three levels are involved. Under the new Act, this period has been reduced to 87 days. This is a substantial improvement in the complaints review mechanism system. Besides the new Act has introduced a cool-off period of fourteen days for bidders to submit complaints prior to communicating the acceptance of tender and entry into force of a procurement contract. This move will cut down considerably number of days used to handle complain if a complain has to pass all three levels and also it is envisages that it will reduce number of complaints to be submitted to PPAA once the contracts have come into force. On the contrary, there is a risk of receiving frivolous complaints during this cool-off period, which may delay the procurement process. 42. Data collected from the PPRA Annual Performance Reports indicates that for: (i) FY 2008/09 out of 17 applications received for procurement decision review two were from the LGAs; (ii) FY 2009/10 out of 20 received three were from the LGAs; and (iii) FY 2010/11 out 21 received two were from the LGAs. All these applications were reviewed with decisions issued and some were referred to the PPAA because procurement contracts were already in force. PPRA also conduct investigations on the 10 Apply where goods or services are available only from a particular supplier or service provider; there is an urgent for the goods or services and engaging in tendering proceedings would be impractical; PE having procured good, equipment or technology, service or spare parts from a supplier following national or international competitive method and determines that additional suppliers are the same type as those procured under an existing contract are required. 23 allegations from the whistle blowers or reported cases for mis-procurements. For FY2007/08, 16 cases were received, investigated and reports were prepared. However the annual performance report does not specify cases originating from LGAs; (iv) FY 2008/09, ten cases out of which one was from LGAs; (v) FY 2009/10, four cases all from Kilwa District Council; and (vi) FY 2010/11, three cases none from participating LGAs and PMO-RALG. These cases revealed a number of shortfalls and measures for improvement were recommended. Normally the rulings of PPAA are published in the PPAA website and also summary of the cases and ruling are published in the Tanzania Procurement Journal issued by PPRA bi-weekly (every Tuesday). The graph below summarizes complaints, which have been handled by the PPAA. Chart 4: Complaints Received by PPRA 43. On the other hand PPAA records indicate that since FY 2007/08 to March 2012 a total of 102 complaints have been registered, out of which 23 were from LGAs which account 22.5%. Most of the complaints from the LGAs originate from the Revenue Collections tenders and few complaints were for works contracts. PPAA in its efforts to build awareness to the stakeholders so far has conducted awareness workshops in 17 regions and districts in the country out of which five are among the participating ULGAs. iii. Fraud, Corruption, and Accountability 44. The prevalence and public perception of corruption in Tanzania generally remains high. Some of the key problems observed at national level will also affect the program because it will be implemented in the same environment with the same public sector norms. Corruption within construction and civil works may affect the quantum of results to be achieved and may give rise to reputational risks to the Bank and government. Transparency International’s Corruption Perception Index (CPI) of 183 countries ranked Tanzania at 100 indicating a high level of perception of corruption, although when benchmarked against its neighbors Kenya, Uganda, and Mozambique, the country is perceived to be performing better. 45. The recently completed Report on Value for Money Audits of 136 Constructions Projects by the Public Procurement regulatory Authority has flagged fraud and corruption in local governments as a major area of concern. This study audited 91 projects of LGAs for a value of T.sh 91 bn. The main finding of the study was that 68% of the audited projects with a total value of Tshs. 10,056,982,629 (53% by value) were assessed to be of unsatisfactory quality and that malpractices were noted in most LGAs. In assessing these LGAs PPRA applied its Red Flag Checklist (attached at Annex 7) for identifying corruption in construction contracts. Any entity scoring more than 20% on that checklist has a strong likelihood of fraud or corruption in its procurement. Seventeen LGA’s were assessed as part of this exercise. Ten of them (60%) crossed the threshold of 20%. 24 46. The Prevention and Control of Corruption Bureau (PCCB) as the primary anti corruption agency in Tanzania has steadily increased the total number of cases prosecuted. Conviction rates have been low but these have started to improve in recent years reaching 7% in 2010. Table 8: Prevention and Control of Corruption Bureau Statistics Year Allegations Cases Administrative New Cases Total Cases Conviction Percent of Assets Received Investigated Actions Taken Into Courts Prosecuted Cases Conviction Recovered compared to (Bn. Sh.) cases investigated 2000 1,244 1,244 - 49 42 6 0% 11.1 2001 1,354 1,354 1 57 53 - 2.5 2002 1,383 1,383 42 52 191 12 1% 2.7 2003 2,285 1,796 21 51 178 9 1% 3.8 2004 2,223 1,149 126 60 202 6 1% 4 2005 3,121 677 111 50 218 6 1% 2.5 2006 6,320 1,528 209 71 251 18 1% 1.3 2007 8,235 1,266 280 196 352 35 3% 1.6 2008 6,137 928 74 147 416 37 4% 13.2 2009 5,930 870 40 222 463 46 5% 0.4 2010 5,685 870 29 224 587 64 7% 10.1 Source: PCCB, May 2011 47. The judicial system in general functions relatively independently although it suffers from a significant lack of resources11. The Bertelsmann Foundation, in its 2012 Transformation Index report found the judiciary inefficient with corruption, especially at lower administrative levels as well as among government officials, posing a serious problem. The Heritage foundation also found that the judicial system is subject to political interference and high levels of inefficiency12. Enforcement of anti-corruption laws and penalties is perceived to be weak or ineffective. 48. The National Anti-Corruption Strategy and Action Plan (NACSAP) was introduced in 1999. A strategic evaluation of NACSAP in 2004 exposed several weaknesses in the anticorruption strategy. The scope of stakeholders’ involvement was narrow and excluded some key actors and considerations for corruption in local governance. NACSAP had not only failed to engage non-state actors effectively, but their role was not well defined or clarified: civil society, the media and private sector and other critical state actors were left out. The supply-side of corruption was overlooked. Implementation was also hampered by weak human, institutional and organizational capacities of the key executing agencies and an absence of effective structures for national dialogue over corruption. Responding to these concerns the government introduced an enhanced NASCAP II for the period 2008 – 2011, as well as passing the 2007 Prevention and Combating of Corruption Bill. The new act transformed the Prevention of Corruption Bureau (PCB) (on the mainland only) into the Prevention and Combat of Corruption Bureau (PCCB), with extended investigation powers. 49. The PPA 2004 has provisions that address issues related to Fraud and Corruption. Under the provision of prohibition, the Law requires procuring entities as well as tenderers, suppliers, contractors and consultants to proceed in a transparent and accountable manner during procurement and execution of such contracts. It requires bidders, suppliers, contractors and consultant to disclose payments made by way of commissions or gratuities. Furthermore, the Act attaches the penalties or fines for non-compliance including rejection of a proposal for award of such contract, declare any person or firm ineligible for a 11 Bertelsmann Foundation, (2012), Transformation Index - Tanzania. Available at: http://www.bti-project.org/country- reports/esa/tza 12 Heritage Foundation, (2012), Index of Economic Freedom – Tanzania, online at: http://www.heritage.org/index/country/tanzania#rule-of-law 25 period of ten years to be awarded a public financed contract, cancel the portion of the fund allocated to a contract. These provisions are also reflected in the Standard Bidding Documents and Standard Request for Proposals. 50. In the effort of preventing and combating of corruption PPRA has established Public Procurement Anti-corruption Strategy. On February 11, 2010, PPRA and Prevention and Combating of Corruption Bureau (PCCB) signed a Memorandum of Understanding (MoU) for implementing the anti- corruption strategy with the objectives of forming a working group of PPRA and PCCB staff on prevention of corruption in public procurement; training stakeholders in public procurement; detection of corruption in public procurement within the framework of the PPA 2004; Prevention and Combating of Corruption Act 2007 (PCCA 2007) by providing training to PCCB investigators on public procurement procedures and providing training to PPRA staff on basic corruption detection techniques and methodologies; and investigating of corruption in public procurement within the framework of PPA 2004 and PCCA 2007 by exchanging technical expertise in the investigation of corruption in public procurement. 51. Complaints Handling Mechanisms are required at central and local government levels. Complaints may either be related to procurement process or to fraud and corruption misconduct. Complaints related to procurement process are handled under the Public Procurement Act (PPA 2004) as illustrated in the flow chart below. The flow chart shows three levels of handling complaints as outlined in the PPA of 2004 that is still applicable todate. However, these levels will be reduced to only two after the new PPA (2011) becomes effective any time from now. Under the new Act, Public Procurement Regulatory Authority (PPRA) will not be involved in handling complaints. Complaints related to fraud and corruption, but of procurement nature, are handled in accordance with the Prevention and Combating of Corruption Act (PCCA) of 2007. However, investigation of offences and institution of proceedings for offences in procurement are done pursuant to the public procurement law (PPA 2004). 26 Chart 5: Procurement Complaints Handling Mechanism 1st Level 2nd Level 3rd Level Accounting Officer- Public Procurement Public Procurement District/Municipal Regulatory Authority Appeal Authority Director [PPRA] [PPAA] Complaint should be A complaint should be All complaints that contracts submitted within 28 days submitted to PPRA within 14 have entered into force should from the date the bidder days from the date of be submitted within 14 days became aware of communication of the from the date the bidder circumstances. decision of the Accounting became aware or should have Officer. become aware of circumstances Accounting Officer will not PPRA will not entertain a All complaints not handled in entertain a complaint after complaint after the time with PPRA provided that procurement contract has procurement contract has submitted within 14 days been entered into force been entered into force. Accounting Officer should PPRA shall deliver a written PPAA is required to issue a deliver a written decision decision within 30 days after written decision within 30 within 30 days after receipt of days stating the reasons for receipt of the complaint. the decision and the remedies the complaint. grated, if any. The decision of PPAA is final Where Accounting Officer The decision of PPRA is final unless Judicial Review does not issue decision within unless a bidder decides to commence for review of 30 days or bidder dissatisfied appeal to Public Procurement decisions made by bodies or with the decision, a bidder Appeals Authority (PPAA). failure of those bodies to may submit a complaint to make a decision within PPRA. prescribed time limit. 52. The Prevention and Combating of Corruption Bureau (PCCB) functions include investigation and prosecution of offences related to corrupt transactions. As outlined under Part III of the Act, corruption and related offences include general corrupt transactions (solicit, acceptance, giving etc), corruption transactions in contracts, corrupt transactions in procurement, corrupt transactions in auctions, corruption transactions in employment, etc. The Government has prepared and implements the National Anti- 27 corruption Strategy and Action Plan (NACSAP II). The NACSAP II has 7 strategic goals. Goal 2 relates to the introduction of systems integrity, accountability and transparency in Local Government Administration (LGAs). Under this goal, all LGAs are required to establish Council Integrity Committees (ICs). All the 18 participating ULGAs have already established the (ICs). To ensure compliance PCCB is directly involved in monitoring the implementation of NACSAP II.. 53. Accountability and integrity measures include the introduction of Client Service Charters in Government Institutions and Institutional Integrity Committees at central and local government levels. These are aimed at enhancing transparency and accountability in public service delivery. The Charter specifies the services and goods that the clients are expected to receive from the institution, clients’ rights and obligations and the feedback mechanisms available to enable the institution monitor and evaluate its performance. Institutional Integrity Committees are responsible for ensuring that staff in the relevant institutions adheres to ethical behavior and professional standards at work places. D. Program’s Expenditure Framework 54. The expenditure framework of the PforR Program will be a total of US$ 255 million. US$ 201 million will constitute the UPG and will go directly to Program ULGAs for investments specified under the investment menu (see above). US$ 44 million will support and leverage PMO-RALG activities and results directly linked to the execution of the UPG. US$10 million will support the overall Government program strengthening, based on UPG experience. The UPG funds will be for: i) investments for enhancing institutional capacity of ULGAs; and ii) physical infrastructure investments. Both types of investments have been stipulated as being priority areas for LGAs in the government’s LGRP II program vision document. These funds will flow from the central to the local governments and will be disbursed on a bi-annual basis. The Government’s LGDG system currently uses flow mechanisms to disburse funds to the local governments, and this Program funds will be channeled through those existing mechanisms that are well established within the Tanzanian budget system and described in Error! Reference source not found.. 55. Provision has been made for the Program in the 2012/13 budget and i n future years the Program’s envelope will be entered into the national budget and the details of the Program’s funds use will be captured in the national budget frameworks. Tanzania has a well developed budget classification where local governments classify expenditures in terms of capital expenditure, operating costs, goods and services. The current financial management reporting system as explained in the LGDG and Medium Term Expenditure Framework (MTEF) manuals currently used will be used for the UPG funds will be to finance capital costs. The performance grant will be aligned with the local planning and budgeting process and be managed in three phases. 13 a. First Phase14: The phase-in period (Minimum Conditions) will be the establishment of the grant on the basis of compliance with minimum access conditions, and will decide the allocations in FY 2013/14, with expected performance assessments in March/April 2013. During this period, the grant system will be established in the following way: A minimum requirement assessment will be conducted to measure the ULGAs’ compliance with the enhanced minimum access criteria for the Program. These criteria build on the minimum conditions of the ongoing Government program and the enhancement is on social and environmental systems management. Namely, ULGAs will agree to carry out the processes and procedures of a technical manual for Environmental and Social Management tailored to 13 The full assessment and disbursement cycle is made to ensure full alignment with the national and local government budget cycles from the second year of disbursements. This first assessment of the minimum conditions will also make a baseline assessment of the ULGAs' performance against the performance indicators (not to be used for allocation purposes), and this will be applied to track the performance development from the onset of the Program as well as in the final calibration of the scoring in the assessment manual to be applied in the first assessment of the minimum conditions and performance indicators, see details on second phase. 14 The assessments in this year will be made later than in the subsequent years due to Program start up. 28 the Program activities. Discussed in detail in the Program’s Environmental and Social Systems Assessment (ESSA), the manual is consistent with Tanzanian systems and bridges the gaps between those systems and OP 9.00. Performance Measures will also be assessed at this annual assessment, but will only be applied to establish a baseline. Based on the results of this basic MC assessment, ULGAs will receive their allocations for the first FY 2013/14, which will be disbursed bi-annually. The timeline for the grant establishment phase is expected to be as follows: FY 2013/14: Allocations  December 2012: Indicative planning figures (IFPs) based on expected full ULGA compliance with the MCs;  January 2013: Local government budgeting process starts using the IPFs;  Minimum requirement assessment (upon completion of contracts with company, expected in March - April 2013);  April 2013: Initial assessment completed, final disbursement amounts announced;  July 2013: ULGAs receive 50% of the first FY´s disbursement (first half of FY 2013/14)  January 2014: ULGAs receive 50% of the first FY´s disbursement (second half of FY 2013/14) b. Second Phase: The MC/PM assessment, scaled down with performance measures, which are not yet relevant for this first PM assessment15: Based on compliance with all minimum access conditions and the performance indicators in the assessment, the disbursements will be determined by assessment results. The second period is expected to process as follows: FY 2014/15: Allocations  September 2013: First minimum conditions/performance measure assessment started  December 2013: Assessment complete and allocations announced16  January 2014: Local government budgeting process starts, using the results from the assessments  July 2014: 50% of annual allocation disbursed17  January 2015: 50% of annual allocation disbursed18 c. Third Phase: The full MC/PM assessment period with the full number of performance measures, based on compliance with all minimum access conditions and performance indicators in the assessment, will begin with the assessment of MCs and PMs and the subsequent disbursements, which will be determined by full assessment results. The third period is expected to be as follows: FY 2015/16 Allocations:  September 2014: First full assessment started  December 2014: Assessment complete  January 2015: Local government budget process starts using the results  July 2015: 50 % of the allocations disbursed19  January 2016: 50% of annual allocation disbursed20 FY 2016/17  September 2015: Second full assessment started 15 Some of the performance measures, e.g. disbursements and infrastructure achievements will only be applicable a year after the first disbursement of the UPG. 16 Will apply to FY 2014/15 allocations in alignment with local and national government budget cycles. 17 As determined by the Sept-Dec 2013 assessment 18 As determined by the Sept-Dec 2013 assessment 19 As determined by the September - December 2014 assessment 20 As determined by the Sept/December 2014 assessments. 29  December 2015: Assessment complete  January 2016: Local government budget process starts using the results  July 2016: 50% of annual allocation disbursed  January 2017: 50 % of the annual allocation disbursed FY 2017/18  September 2016: Third full assessment started  December 2016: Assessment complete  January 2017: Local government budget process starts using the results  July 2017: 50% of annual allocation disbursed  January 2018: 50% of annual allocation disbursed  December 2018: End of Program 56. The exact annual disbursement per ULGA will be determined according to their performance against DLIs. These are intended to capture the ULGA’s annual performance against criteria set in four main areas ((i) leveraging the UPG to improve own source revenue management systems (with an emphasis on property tax); (ii) strengthening ULGAs fiduciary systems (financial management and procurement); (iii) strengthening urban service delivery systems (urban infrastructure developed and council-citizen interface); and (iv) enhanced oversight systems (environment and social). Performance of ULGAs will be assessed annually by an independent firm. Depending on the score each ULGA receives as a result of annual performance assessment, they will receive UPG financing to be used only for municipal infrastructure investments from the fixed investment menu. The grant ULGAs will receive as a result of this assessment is intended to be used for capital investment at levels that can be absorbed and utilized effectively by each participating ULGA. 57. Under a scenario where all 18 ULGAs perform on the annual targets, total UPG disbursement would be US$ 9 million for FY2013/14, 35.5 for FY2014/15 and US$52.2m for FY2015/16 and following years. The initial disbursement of US$9 million for FY2013/14 will be based on the performance of ULGAs against the Program minimum access conditions, as assessed by DLI 1. These funds will complement the larger LGDG financing pool, which disbursed US$ 106.5 million in FY2010/11 and is expected to continue to increase as per historical trend explained above. While the existing LGDG flows serve all 133 local governments in the country, the UPG will be introduced to initially to serve the selected 18 ULGAs. It is expected that the grant will be mainstreamed into the larger fiscal decentralization architecture over time. This would be consistent with the established precedent in Tanzania where a series of development grants funded by development partners were initially introduced to serve a select group of local governments and over time were rolled out nationwide and receive an increasing proportion of their financing from the Government. Only those ULGAs which fully meet the minimum access conditions will be eligible to receive UPG funds. Those ULGAs which do not meet all of the minimum access conditions will not be able to access funds, but will receive capacity building support from PMO-RALG to support accessing the funds in the subsequent years. 30 Table 11: Projected UPG allocations to 18 Urban Local Governments Population UPG Approximate disbursement Maximum possible @ US$ 18 per capita, disbursement over Program FY2015/16 ULGA Period 2002 2012 (per year/ USD Million) (USD Million) Census Estimate Assuming actual Assuming actual performance performance against DLIs 1, against DLIs 1, 2, 3 meets 2, 3 meets target for target throughout Program FY2015/16 1 Tabora MC 188,005 420,000 7.5 28.9 2 Morogoro MC 227,921 327,000 5.8 22.5 3 Shinyanga MC 134,523 222,000 4 15.3 Sumbawanga 4 146,842 222,000 4 15.3 MC 5 Moshi MC 143,799 217,000 3.9 14.9 6 Musoma MC 107,855 205,000 3.7 14.1 7 Songea MC 130,860 189,000 3.4 13 8 Singida MC 114,853 184,000 3.3 12.6 9 Iringa MC 106,371 165,000 2.9 11.3 10 Bukoba MC 80,868 164,000 2.9 11.3 11 Kibaha TC 77,831 112,000 2 7.7 12 Geita TC 72,482 105,000 1.8 7.2 13 Babati TC 64,652 93,000 1.7 6.4 14 Korogwe TC 53,986 78,000 1.4 5.4 15 Mpanda TC 47,272 68,000 1.2 4.7 16 Lindi MC 41,075 72,000 1.3 4.9 17 Njombe TC 34,630 49,000 0.8 3.3 18 Bariadi TC 15,462 22,000 0.4 1.6 Total 1,789,287 2,914,000 52.5 201 58. A verification protocol will be used to assess disbursement allocations. Disbursements made on the basis of aggregation of results attained in the annual performance assessments (APAs), which will constitute the verification protocol. According to this protocol, the Government will commission an APA to be undertaken independently each year. The APA will score the performance of each ULGA according to the detailed performance indicator criteria set out in Annex 1. As per this Annex, the Performance indicators which will be used in the assessment to measure progress are the following: Table 12: Performance indicators for the Annual Performance Assessment Improved Urban Planning System  General Planning Scheme (GPS) for Council adopted Increased Revenues from Property Tax  Updated Local Government property tax system in place  Increase in the number of properties in the property register  Increase in taxable properties valued  Billing collection ratio of property taxes 31  Increase in property tax collected Efficient Fiduciary Systems  Average score on the PPRA for targeted ULGAs  Efficient FM system in place Improved Infrastructure, Implementation and Operation & Maintenance (O&M)  Performance Grant Utilization Plan in place and updated annually  Physical targets for utilization of performance grant achieved  Increase in amount of Own Source Revenues (OSRs) transferred to the development account  Annual disbursement of performance grant  O & M plan in place and executed Strengthened Accountability and Oversight Systems  Consultative process for Performance Grant Utilization in place.  Annual progress reporting and disseminating systems in place.  Information on use of OSR publicly disclosed  ULGA Service standards in place  Systematic records maintained on all environmental and social management activities implemented by ULGAs  Robust system established for handling social, environment and resettlement grievances  All participatory consultative processes on ULGA UPG activities address the relevant environmental and social considerations  Resettlement Action Plans implemented and Environmental Management Plans prepared prior to initiating civil works 59. The grant ULGAs will receive as a result of this assessment is intended to be used for capital investments from the menu detailed in the box below, at levels that can be absorbed and utilized effectively by each participating ULG. Table 9: Urban Performance Grant Investment Menu Sector Eligible Expenditures City roads and  Road rehabilitation/upgrading: Grading, graveling, brick paving, tarmac, upgrading or related rehabilitation for which the ULGA is responsible (maximum 15 km per year) infrastructure  Road side open storm water drains/ stand-alone storm water drains for flood alleviation or erosion control  Street lights  Culverts  Small Bridges: 6m span or less  Minibus stands and bus stops (e.g. minibus parking areas for approximately 25 vehicles)  Taxi stands  Truck stands  Public car parking  Other road-related infrastructure (street furniture, vending platforms, signage) Markets and Trade  Slaughterhouse/abattoir (maximum capacity of 100 head of cattle per day)  Commercial market infrastructure Public Space  Public green space  Sports fields and facilities Solid waste  Dumpsite rehabilitation management  Community waste collection points  Equipment Project preparation  Expenditures related to preparation of infrastructure projects (design, supervision etc) Equipment  Equipment related to enhancement of relevant capacities for urban planning and OSR management, etc. 32 Capacity building21  Urban planning  Revenue mobilization (up to a maximum  Financial management of 5% of the annual  Procurement UPG disbursement  Accountability/oversight for each ULGA)  Infrastructure implementation  Areas of weaknesses identified during the annual UPG assessments The following exclusionary criteria apply to works financed with the UPG, which will be included in the manual’s screening criteria and has been agreed with PMO-RALG – these parameters will be communicated to participating ULGAs:  Road works outside of existing rights-of-way;  Works involving relocation of more than 20 households;  New landfills;  Activities that would significantly convert natural habitats or significantly alter potentially important biodiversity and/or cultural resource areas. 60. The investment menu above explicitly excludes possible high-risk activities. The infrastructure investments which will be supported by the Program will remain at the municipal level and the procedures for preparing projects will include criteria to screen for significant negative impacts that are sensitive, diverse, or unprecedented on the environment and/or affected people. Projects with these types of impacts are excluded from financing with the UPG. Contract values will typically remain low in line with the nature of municipal infrastructure activities in secondary urban areas in Sub-Saharan Africa. In- depth fiduciary, social and environmental capacity assessments have been conducted for the ULGAs which will carry out the activities. Risks and mitigation measures have been identified and agreed upon with the Government and ULGAs. It is confirmed that risk levels are manageable. 61. Disbursements for the Program will be made under a performance based modality. The exact annual UPG allocation to each ULGA will be a function of the performance of each local government. The maximum possible allocation is reflected below. For year one, if the participating ULGAs meet the Program’s enhanced minimum access criteria, an initial US$ 15.9 million of UPG funds will be advanced to ULGAs immediately after the credit becomes effective. Similarly, an advance of US$ 1.5 million will be made to PMO-RALG for the second element of the Program immediately upon effectiveness. Program disbursements for both elements, from IDA to Government as well as from Government to ULGAs will be determined on the basis of progress made against Program’s disbursement linked indicators and will done bi-annually. Table 10: ULGSP Budget classification and annual disbursement forecast (US$, million) FY2012/13 FY2013/14 FY2014/15 FY2015/16 FY2016/17 FY2017/18 Total @ Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Program end Grant Flows to 0 9 35.5 52.2 52.2 52.2 20122 ULGAs via UPG window 21 Investments under capacity building element of the UPG menu are bound by the same limitations as the LGDG Core Capacity Building Grant with restrictions including foreign study tours or long-term education. 22 The amount disbursed annually against this expenditure item will be determined by the scores achieved by ULGAs on the annual assessment. The annual amounts for DLIs 1, 2 and 3 are fixed against expected targets for each FY. If ULGAs perform below the expected level, actual disbursement will be lower. If they perform higher than expected, actual disbursement will be higher than planned. If ULGA performance exceeds expected targets cumulatively, there will potentially be a financing gap and additional financing will be needed. Any financing gap or surplus arising out of the difference between expected and actual performance (hence actual disbursement against this budget line item) will be assessed and addressed within the Program during mid-term review and throughout implementation. 33 Funds for 0 8.8 8.8 8.8 8.8 8.8 44 PMO-RALG results to execute the UPG Funds for 0 10 10 improvements to the Government program based on UPG experience Total ULGSP budget 0 17.7 44.3 71 61 61 255 Total IDA 0 17.7 44.3 71 61 61 255 financing 62. Financial and institutional sustainability is at the core of the Program. The Program will be fully embedded into the overall intergovernmental fiscal transfer architecture of Tanzania, as part of LGDG. The Program will require that ULGAs prepare formal estimates of the long-term recurrent cost implications for any infrastructure to be funded by UPG. Further, ULGAs will prepare detailed revenue generation estimates and table them for discussion by the full Council. Councils will be required to discuss these estimates in a full council session prior to adoption of the annual budget plan (including UPG investments) as a requirement to receive the UPG funds. 63. The fund flow arrangements for this program will use government systems. There are slight differences in the arrangements for funds flowing to PMORALG and the funds flowing to the 18 ULGAs. 64. The arrangements for PMORALG are the following: Action Frequency 1. PS PMO-RALG requests, through PS Treasury, the disbursement of funds Bi-annually from the WB 2. WB transfers funds to MoF Bi-annually PS PMO-RALG submits TFN 358 to PS Treasury requesting transfer of funds to Bi-annually PMO-RALG VOTE (ministry account) 56. Internal MoF process: i. PS MoF submits TFN 358 to MoF, Budget Dept. ii. Budget dept (MoF) confirms the availability of funds with Accountant General’s Office (ACGEN) iii. Budget dept issues a Treasury Release Warrant (TRW) iv. ACGEN instructs BoT (copying PS, PMO-RALG) to transfer the funds to the revenue development account (A/c No. 9921139901) 3. ACGEN instructs BoT to transfer the funds to sub-treasury where VOTE 56 Bi-annually account is hosted. 4. ACGEN enters the allocation amount into EPICOR which produces the Bi-annually Exchequer Issue Notification (EIN). PMO-RALG also sees the allocation 34 simultaneously. 65. The arrangements for the 18 ULGAs are the following: Action Frequency 1. PS PMO-RALG requests, through PS Treasury, the disbursement of funds Bi-annually from the WB based on the APA score/results 2. WB transfers funds to MoF on the basis of the APA score/results (funds will Bi-annually be available on BoT, managed by MoF) 3. On the basis of the APA recommendation, PS PMO-RALG submits TFN 358 Bi-annually to PS Treasury requesting transfer of funds to LGAs, under the Government Exchequer system. The internal MoF process follows: i. PS MoF submits TFN 358 to MoF, Budget Department ii. Budget dept (MoF) confirms the availability of funds with Accountant General’s Office (ACGEN) iii. Budget dept issues a Treasury Release Warrant (TRW) iv. ACGEN instructs BoT (copying PS, PMO-RALG) to transfer the funds to the revenue development account (A/c No. 9921139901) 4. ACGEN instructs: i) BoT to transfer the funds to NMB where LGAs maintain Bi-annually their accounts as a lump sum; and ii) NMB to do the specific allocations to individual LGA accounts. 5. ACGEN enters the allocation amount into EPICOR which produces the Bi-annually Exchequer Issue Notification (EIN). LGAs receive the EIN from the regional secretariats and see their funds. In the future, when EPICOR’s most updated version becomes available, all ULGAs will be able to see amounts simultaneously from the system, without having to go through regional secretariats. 66. The schematic arrangements through which this fund flow arrangement will take place is shown below: 35 Program Fiduciary Performance and Significant Fiduciary Risks A. Fiduciary Performance i. Financial Management 67. A financial management assessment has been carried out of the 18 Urban LGAs that are the beneficiaries of this program. The generic issues identified in the previous section of this report are applicable to the 18 ULGAs including the challenges relating to the MTEF, budgeting process, accounting, reporting, internal controls and internal audit. 68. The summary budget execution figures for FY 10 are the following: 36 Table 12: Summary Budget Execution data for 18 ULGAs Budget FY 10 Actuals FY 10 US D Mn.* US D Mn.* Own Source Revenues 9,108,385 9,475,516 Intergov. Transfers 138,728,594 117,809,436 Local Borrowing 96,971 46,616 Total Revenues 147,933,951 127,331,568 Recurrent Expend. 102,046,401 88,540,506 Development Expend. 39,453,660 23,403,426 Total Expend. 141,500,061 111,943,932 Source: www.logintanzania.com. Exchange rate used is USD 1=Tsh 1600 69. As can be seen above: i. Own source revenues only account for 9% of the budget of these 18 local governments. ii. Development spending only accounts for 21% of overall expenditures. iii. Overall development spending amounted to $23 mn. in FY 10. Increasing this by over 100% p.a. (by $35 mn. p.a. under this project) would require substantial capacity building iv. On average, in FY 10 only 59% of the development budget was executed by these ULGAs. There is wide variability in the capacity of these ULGAs in executing their budget. The range is between 28% and 78%. 70. Late release of funds, weak capacity to implement combined with complex procurement procedures are some of the reasons for chronic under spending of development funds in LGA’s. At a national level, around 32% of development funds that were released were unspent in FY 11. The 18 Urban LGAs that are the focus of this program also has unspent balances ranging from close to 100% to 7%, with the average being 32%. Having such large unspent balances at the end of the year results in a related challenge of carry forward of large unspent balances to subsequent years since LGAs are not required to surrender unspent funds at the end of the year. This results in challenges in properly budgeting for these funds in subsequent years and related fiduciary challenges. Efforts have been made to ensure that such unspent amounts are budgeted for an included into the next year’s budget after seeking approval from Local Government Council. Table 13: 18 ULGAs utilization of Development Budget (FY 10) S/N LGA Dev Budget Available Expenditure Unspent % Unspent 1 Moshi 2,055,646,229 1,404,600 2,054,241,629 100% 2 Korogwe 1,070,890,311 407,996,654 662,893,657 62% 3 Morogoro 3,970,511,319 2,011,769,015 1,958,742,304 49% 4 Lindi 2,707,372,420 1,521,893,239 1,185,479,181 44% 5 Iringa 2,321,875,070 1,349,539,990 972,335,080 42% 6 Bariadi 6,108,322,651 3,638,523,957 2,469,798,694 40% 7 Musoma 2,702,719,559 1,632,490,763 1,070,228,796 40% 8 Songea 2,173,215,626 1,436,012,307 737,203,319 34% 9 Shinyanga 3,592,382,620 2,416,778,359 1,175,604,261 33% 10 Njombe 3,129,171,772 2,304,401,241 824,770,531 26% 11 Mpanda 2,823,978,970 2,200,368,022 623,610,948 22% 12 Singida 2,947,537,608 2,371,079,990 576,457,618 20% 37 13 Babati 2,343,522,681 1,939,763,378 403,759,303 17% 14 Kibaha 2,779,621,452 2,313,161,732 466,459,720 17% 15 Bukoba 1,695,118,254 1,420,491,188 274,627,066 16% 16 Tabora 4,379,255,313 3,737,735,893 641,519,420 15% 17 Sumbawanga 2,317,295,541 2,009,824,524 307,471,017 13% 18 Masasi 2,129,254,135 1,982,267,687 146,986,448 7% Total: 51,247,691,531 34,695,502,539 16,552,188,992 32% 71. There are ongoing financial management challenges at these 18 LGA’s. An In-depth Supervision Report was conducted by the Bank on the Local Government Support Project (LGSP) in 2011. The findings of that report are very relevant to this program, since the FM challenges are similar. 72. Some of the key findings of this report were that there was:  Low program implementation resulting from untimely release of funds for program activities, and adoption of impracticable work schedules  Submission of quarterly interim financial reports was not timely and showed weak variance analysis, and explanation of corrective measures  At the District level, the approved budget was not well communicated to the public  EPICOR software usage indicated poor value-for-money due mainly to inadequate computer skills  District treasurers were found to be out of date in knowledge of financial management and accounting  Poor staff awareness of existing regulations  Book keeping problems identified included available reports or bank reconciliation statements not consistent with the underlying records and significant errors and omissions rendering available reports unreliable. Bank reconciliations were not regularly prepared  Program fixed assets management was weak. Physical verification of the assets was either not conducted or done just once a year. At several places, assets identification codes were not provided for the assets. In addition, many of the assets were not insured.  Periodic reconciliation of records among all levels, such as Program Secretariat and Implementing ministries; Ministries and Districts;  Program funds are commingled with other funds in all Districts  Lack of adequate supervisory reviews of payment documents, and lack of adequate supporting documents were noted in the implementing offices  Internal audit function was performed on the Program activities; but the effectiveness of the internal audit is constrained by lack of independence, inadequate resources, and lack of training of staff 73. One area that is particular relevance to this program is the issue of property taxes. 25% of the rating under the Annual Performance Assessment under ULGSP is assigned for improving property tax revenues. This is in a way a key focus area of this program since it has a large potential for increase. At present property tax revenues are one of many for local governments and miniscule as a percent of total revenues, given the fact that own source revenues are around 7% of LGA budgets. 38 Table 14: LGA Own Source Revenues Property taxes Land Rent Produce Cess Service Levy Hotel Levy Licences Fees and charges Other revenues Total own revenues Municipal Council 1 Singida 11% 2% 0% 3% 8% 5% 14% 59% 100% 2 Tabora 14% 3% 6% 5% 8% 3% 31% 29% 100% 3 Shinyanga 7% 0% 1% 10% 6% 12% 59% 4% 100% 4 Musoma 14% 2% 0% 26% 8% 3% 40% 7% 100% 5 Moshi 14% 2% 0% 19% 0% 10% 35% 20% 100% 6 Bukoba 11% 1% 1% 13% 6% 2% 50% 16% 100% 7 Lindi 19% 9% 13% 7% 9% 2% 17% 23% 100% 8 Morogoro 14% 2% 0% 11% 11% 1% 40% 20% 100% 9 Iringa 16% 4% 0% 16% 6% 3% 17% 39% 100% 10 Songea 20% 2% 5% 8% 3% 14% 13% 35% 100% 11 Sumbawanga 7% 1% 33% 1% 7% 2% 34% 16% 100% Town Council 12 Babati 1% 53% 1% 7% 6% 3% 16% 14% 100% 13 Masasi 0% 0% 36% 0% 0% 0% 0% 63% 100% 14 Kibaha 14% 3% 0% 8% 1% 65% 4% 5% 100% 15 Njombe 5% 6% 37% 7% 10% 8% 19% 9% 100% 16 Mpanda 14% 1% 20% 4% 3% 18% 21% 20% 100% 17 Korogwe 8% 25% 2% 4% 3% 3% 41% 14% 100% 18 Bariadi 0% 0% 63% 0% 3% 1% 7% 25% 100% Average 10% 7% 12% 8% 5% 9% 25% 23% 100% 74. As in the table above, the range of property tax collections for these 18 LGAs varies between 0- 20%. Undertaking a quantum increase in property taxes will require a major increase in capacity building in this area. 75. There is limited automation of the financial management function at the 18 LGA’s. Six of them currently are not running on the IFMIS (Integrated Financial Management Information System) and of the 11 that are, seven are not using the system for making payments but mainly for processing vouchers. Accounting is therefore largely manual in these 18 ULGAs despite most of them having the IFMIS. 23 23 This was the situation as at the time of the assessment in early 2011. PMORALG has since advised the Bank that Epicor Version 9 has since then been rolled out to all LGAs in Tanzania. 39 Table 15:Utilization of IFMIS in 18 LGAs (FY 12) S/N LGA Use of Epicor Epicor for Payments YES NO YES NO Municipal Council 1 Singida   2 T abora   3 Shinyanga   4 Musoma   5 Moshi   6 Bukoba   7 Lindi   8 Morogoro   9 Iringa   10 Songea   11 Sumbawanga  Town Council 12 Babati   13 Masasi  14 Kibaha  15 Njombe  16 Mpanda  17 Korogwe  18 Bariadi   76. Over the last three years there has been variability in financial management practices in these 18 ULGAs as assessed by CAG over the last three years. The number of ULGAs that received a clean audit opinion over the last three years has been 14, 6 and 12 respectively. This variability is partly on account of application of stricter standards applied by CAG to ensure compliance with the IPSAS Accrual accounting standard. Table 16: CAG's Audit Opinion LGA 2008/09 2009/2010 2010/11 1 Singida Unqualified Qualified Qualified Unqualified Unqualified 2 Tabora Qualified Unqualified Unqualified 3 Shinyanga Unqualified Unqualified Qualified 4 Musoma Unqualified Qualified Qualified 5 Moshi Unqualified Unqualified 6 Bukoba Unqualified Unqualified Unqualified 7 Lindi Qualified Unqualified Unqualified 8 Morogoro Unqualified Qualified Unqualified Qualified 9 Iringa Unqualified Unqualified Qualified 10 Songea Qualified Qualified 11 Sumbawanga Qualified Unqualified 12 Babati Unqualified Qualified Unqualified 13 Masasi Unqualified Qualified Unqualified 14 Kibaha Qualified Unqualified Unqualified 40 Unqualified 15 Njombe Qualified Unqualified Unqualified 16 Mpanda Qualified Qualified 17 Korogwe Qualified Qualified Qualified 18 Bariadi Unqualified Unqualified Unqualified 77. At the centre of the fiduciary challenges that the ULGAs face is the quality of the staff that they employ. Currently there are only 4 qualified accountants out of 225 financial management staff in the 18 ULGAs (2%). 78. Successful implementation of this project will require effectively addressing systemic weaknesses that exist and putting in place adequate risk mitigation measures. ii. Procurement Procurement Profile of the Program 79. The table below presents the volume of public procurement works by participating ULGAs. It shows numbers of large works contracts procured over Tshs. 100 million (US$ 62,500) and the size of largest public procurement of works (municipal, and towns councils). Table 17: Volume of Public Procurement Works #of Works S/ # of Large Amount Amount/ Size of largest Amount ULGA Over N Works (2011) Tshs (mil) Tshs(mil) public work procured Tshs(mil) (100mil) 1 Singida 14 1,287.3 1 663.8 1.02 kms of tarmac road 663.8 2 Tabora 25 1,190.8 6 1,357.7 maintenance work for 11kms 520.0 Upgrading kenyata road tarmac 3 Shinyanga 55 1,769.3 2 323.1 road 1.75km - 4 Musoma 11 616.3 0 0 Construction of storm water drains 75.4 5 Moshi 10 1,128.5 2 878.3 Roads infrastructure 608.3 Periodic maintenance of road 6 Bukoba 49 876.5 2 261.3 0.7km (tarmac) 125.9 7 Lindi 12 1,185.5 2 462 Tarmac road construction 1.42kms 247.0 8 Morogoro 9 996.0 2 581.4 2.1 km road to bitumen standard 414.8 9 Iringa 17 1,449.2 2 792.2 Constr. of maternity ward 564.2 10 Songea 9 998.6 3 767.8 Road maintenance 372.9 Construction of municipal head 11 Sumbawanga 35 3,086.4 3 1,229.1 office 500.0 Construction of Babati TC 12 Babati 10 1,485.5 2 849.0 headquarters 676.8 13 Masasi 38 2,336.9 4 1,226.4 Construction of hall and offices 620.3 14 Kibaha 4 2,093.4 2 1,940.7 Construction council building 1,740.0 15 Njombe 4 1,563.6 2 2,263.6 Construction of admin. block 1,500.0 1flat building construct. of council headquarter (started 2007, still in 16 Mpanda 27 1,180.6 1 3,100.0 progress) 3,100.0 17 Korogwe 14 657.7 2 416.0 Construction of council conf. hall 300.0 18 Geita 19 1,683.6 6 1010.6 Boreholes drilling for water 285 Source: The Fiscal Assessment of Local Government Authorities and Design of Urban Infrastructure Grant in Support of Preparation of the Proposed LGSP II – Report by DEGE Consult Note: Currency conversion using 1 TZS = 0.000625 USD 80. The sizes of the largest public works procured in FY2010/11 across ULGAs were to a larger extent construction and/or periodic maintenance of roads (roads infrastructure). Under the program, the budget for the infrastructure will increase by 6-7 times and budget may increase depending on the 41 municipals priorities derived from the investment menu. PMO-RALG will not undertake any infrastructure project. Procurement Planning 81. The PPA 2004 and its Regulations require all procuring entities to prepare Annual Procurement Plans linked with annual work and budget. To maximize economy and efficiency in its procurement, all procuring entities are required to aggregate their requirements within the departments of the institution. In compiling such plans procuring entities are required to establish appropriate method of procurement and timescale for each package to be calculated on the basis of the standard processing times prescribed in the regulations. It is also mandatory that procuring entities should advertise the Annual Procurement Plans in the form of General Procurement Notice in the newspapers and submit a copy to PPRA for publishing in its website and for monitoring purpose. It was observed that Annual Procurement Plans are prepared based on the annual work plan of different departments within the ULGAs and PMO-RALG and linked with the budget. 82. The Bank’s review has found that most of the plans are not comprehensively prepared; aggregation of requirements from the user departments are not done appropriately; there is a mixing of the templates for works/goods and consultancy services; plans include non-procurable items; there is an excessive use of competitive quotations as a default method for most of procurement and splitting of the contracts was observed. Procurement plans are not used as an instrument to monitor progress of implementation of procurement activities, but rather compliance with the law. According to PPRA Annual Performance Report for FY 10/11, the compliance level for preparation of Annual Procurement Plan is 46% below the average (50%) for the 19 LGAs audited. One of ULGA that is in the program, Kibaha Town Council scored 20% on this indicator and PMO-RALG scored 40% on preparation and adherence to procurement plan in the audit carried out FY 2008/09. Weaknesses noted were: none use of appropriate templates; processing times for different stages of procurement process not indicated; requirements from the user departments not aggregated, too many tender board meetings; extensive use of quotations under minor value procurements and unrealistic plans. 83. Most of the goods/services in the ULGAs and PMO-RALG are procured through Common Used Items Systems (CUIS) under Framework Agreements introduced by the Government in February 2011 and are managed by the Government Procurement Services Agency (GPSA). The GPSA is an Executive Agency of the Ministry of Finance, established under the Executive Agencies Act No. 30 of 1997 responsible for overseeing the implementation of the CUIS in the country. According to PPRA Annual Performance report for FY2010/11, by February 2011 a total of 34 tenders were advertised in various news papers which included 21 tenders for goods and 13 tenders for non-consulting services. The invitation attracted 9,621 applicants and 8,683 bidders submitted bids. The Framework Agreements are entered between the GPSA and respective suppliers and service providers. UGLAs are required to send call-off orders to pre-selected suppliers who offer most economical prices. This shift of paradigm has resulted in PMO-RALG and ULGAs preparing procurement plans for a few goods or services which are not covered under common used items. Works contracts are not subjected to this system. By 30 th June 2011 the call-off orders totaling Tshs.24.7 billion (equivalent to US$ 15.4 million) were already placed by 16 regions. The use of Framework Agreement has replaced the conventional shopping method that was at a great extent abused by PEs. This approach will in addition, minimize the small scale of fraud and corruption practices that was entrenched in the shopping procedures. Procurement Processes and Procedures 84. Most works packages procured through National Competitive Tendering are advertised in the local newspaper and UGLAs’ notice boards. According to the data in the PPRA’s Annual Performance Report for FY10/11, a total of 105 out 134 LGAs submitted contracts awarded through National Competitive Tendering of which 52.11% of the awarded contracts were works contracts amounting to 42 Tshs. 167.7 billion (equivalent to US$ 104.8 million). The remaining packages were executed through competitive quotations which are advertised only in the UGLA’s notice board. The report revealed that the performance of the LGAs in advertising tender opportunities has increased from 73% to 90% in FY10/11. Audit carried out FY 2008/09 PMO–RALG, scored 89% on tenders advertisement. Advertisements are published in the local newspapers of wider circulation and PPRA’s website and Procurement Journal that is issued weekly (every Tuesday). The PPA 2004 and its associated Regulations require procuring entities wishing to commence competitive tendering to provide all eligible bidders with timely and adequate notification of the procuring entity’s requirements and an equal opportunity to tender for the required goods, works or services. 85. The regulations spell out the contents of invitation to tender and it is mandatory that invitations to tender to be made through written invitations. The format of advert used to publish the adverts is issued by the PPRA and it contains adequate information to the prospective bidders to make decision to participate. It is mandatory that the solicitation documents to be issued immediately after first publication of the tender notice to all bidders who respond to the tender notice. The minimum tendering period for International Competitive Bidding (ICB) and National Competitive Tendering (NCT) is 45 days and 30 days respectively or more depending on the nature and complexity of the services or works. On average seven prospective bidders normally purchase bidding documents and all submit bids. The bids are opened in public in the presence of the bidders/representatives who choose to attend. Minutes of bids opened are prepared and although in most cases are not sent to bidders who submitted bids. A sample of an advert for the tender advertised in the local newspaper for NCT by one of the participating ULGA, Morogoro Municipal Council is included in Annex 4. 86. For consultancy services, it was observed that ULGAs are not conversant with the selection process for employing of consultants as they are not engaging consultants frequently. All ULGAs have a limited experience in selection of consultants that they have acquired through implementation of Water Sector Development Programme which has a few consultancy services packages. PMO-RALG has staff conversant with selection and employment of consultants. PMO-RALG currently is implementing projects such Local Government Support Project, Tanzania Strategic Cities Projects and other donors funded projects whereby PMU staff are involved in the selection process. 87. Bidding Documents used are those developed by the PPRA including: (i) standard bidding documents for the procurement of goods, works, and non-consulting services as well as standard request for quotations; (ii) request for proposal for selection and employment of consultants; and (iii) guidelines for evaluation of bids and proposals. Generally, PMO-RALG and all the ULGAs are using these standard bidding documents issued by the PPRA. In the Follow-up Audit Report of PPRA for FY10/11 shows that there is a tremendous increase in the 32 LGAs audited from 49% to 74% of compliance using the Standard Bidding Documents issued by PPRA as per the requirement of the Law. Audit of FY 2008/09 PMO-RALG scored 100% on the use of standard bidding documents. The regulations provide the contents of solicitation documents and all the requirements stipulated in the regulations have been incorporated in the Standard Bidding Documents. 88. The Standard Bidding Documents contain the evaluation criteria relating to eligibility of the bidders, qualification of the bidders and it mandatory to disclose evaluation criteria to be used in determining the successful tender in the solicitation documents. Regulations are clear on the evaluation criteria to be used in the evaluation of the bids and there is emphasis that procuring entities’ determination of a tender’s responsiveness should based on the contents of the tender itself without recourse to extrinsic evidence. The standard bidding documents issued by PPRA have been reviewed and accepted by Bank with some exception on NCB procedures. However, the challenge has been to customize the bidding documents to suit the requirements of particular procurement. The review done to the sample bidding documents during assessment revealed that information provided in the Data Sheet and Special Conditions of Contract was adequate although improvement is required in the evaluation/qualification 43 criteria. In terms of specifications especially for works contract ULGA relies very much on the specification issued by the Ministry of Works with minor modifications depending on the circumstance. 89. Bids Evaluations are carried out by Evaluation Committees constituted according to the PPA 2004 and its Regulations. Normally, evaluation committees are comprised of a minimum of three members for works, goods, non-consulting services and financial proposals and a minimum of five for technical proposals. Evaluation committees comprise members from the user departments, technical staff and sometimes from outside the PMO-RALGA andULGAs where expertise is lacking internally. Generally, evaluations follow the evaluation/qualification criteria specified in the bidding documents although it has been noted that at times no reasons are recorded as to why particular bidders are disqualified. Evaluations are done in three stages; preliminary examination, detail evaluation and post- qualification analysis and these stages are adhered to in most of the evaluation reports reviewed by the Bank, especially in the works contracts. Sometimes however, the provision in the PPA 2004 and its Regulations have not been abided to by the evaluation committees as well as Tender Board24. 90. Significant delays have been noted in bid evaluations.. There are also significant delays in evaluation process, adjudication of evaluation reports and awards recommendation s and getting necessary approvals which lead to tenders being awarded after expiration of bids validity period. Unsuccessful bidders are informed on the award decisions and publications of awards are placed at ULGAs notice board. Transparency is among the fundamental pillars of public procurement and disclosure of information is one of the elements of transparency. The Law requires PPRA to publish contracts awards in its Journal and website; the names of those who have been awarded the contracts, contract amount, the date when the awards were made, contracts period and final contracts amount. For PPRA to fulfill this requirement procuring entities are required to notify PPRA on the awarded contracts so that can be published. However, from the audit reports, it is reported that the compliance on the publication of contract awards has been a problem since PPRA commenced procurement audits. Overall level of performance on publication of contract awards is 43%. The average level of compliance for LGAs for FY10/11 is 54%. Two participating ULGAs in the program scored below average in this indicator, i.e., Kibaha Town Council (40%) and Njombe Town Council (30%). FY 2008/2009 audit revealed that PMO-RALG scored 100% in publication of contracts award. Controls and Integrity 91. Procurement oversight in ULGAs is done by the PMO-RALG and ULGA Internal Auditor, PPRA and Controller and Auditor General (CAG). PMO-RALG and ULGA Internal Auditors prepare quarterly audit report, which cover procurement issues and provides recommendations for improvement in adherence to rules and procedures. PPRA has the responsibility of ensuring that there is application of fair, competitive, transparent, non-discriminatory and value for money procurement standards and practices in public procurement system as well as monitoring procurement compliance. PMO-RALG and all visited ULGAs have been audited at least once by PPRA and in some ULGAs PPRA has carried out Value for Money Audits for selected contracts. Audits by PPRA are not carried out yearly. The procurement audits carried out by PPRA measure the compliance level and detect corruption using the 13 performance indicators and Red Flags Checklist. Results of procurement audits and VFM are published in the local newspapers and PPRA’s website. Non-performing procuring entities (Accounting Officer) are summoned by PPRA’s Board of Directors to discuss the findings and corrective measures to improve compliance in their entities. 92. The CAG has the responsibilities of undertaking external financial and performance audit of all government entities, public authorities and other bodies at least once a year. The performance audit performed by CAG covers also expenditure of funds being used for procurement of goods and services by 24 For instance, in Singida Municipal Councils one bidder was not awarded the contract for reason that his bid price is below engineer’s estimate by more than 10%. This practice is forbidden by the Act and its regulations. 44 the government entities. The PPA 2004 has a provision that requires CAG to state in its annual report every year whether or not the provisions of PPA 2004 have been complied with by the public entities. PMO-RALG and all ULGAs are audited by CAG as per requirement of the Law. 93. PPRA and CAG on May 31, 2011 signed a Memorandum of Understanding (MoU) in the effort of intensifying the oversight role and improve of public procurement system in the country. The objectives of the MoU are to: conducting procurement audits; special investigations in public procurement; performance and forensic audits by exchanging and sharing technical expertise and information; and co-operating in building the capacity of staff of the two institutions on areas such as; training on the basic techniques for carrying out forensic and VFM audits, sharing guidelines for procurement audits, forensic audit and VFM audits in relation to public procurement. As result of this, now the procurement and VFM audits feed in the CAG annual report in the procurement chapter. 94. In the efforts to increase control in the implementation of civil works contracts, PPRA signed the Memorandum of Understanding (MoU) with the Construction Sector Transparency Initiatives (CoST) – Tanzania on May 24, 2010. CoST is a forum of stakeholders that aims at enhancing the transparency and accountability of public financed construction projects. The signing of MoU is part of the implementation of the resolutions of CoST Annual General Meeting, which requires that both the PPRA and Prevention and Combating of Corruption Bureau (PCCB) to enter to into memorandum with CoST to implement activities which will lead to increased transparency and accountability in construction sector. It was not ascertained if CoST has sufficient capacity to cover contract monitoring at the local government level in particular for ULGAs included in this program. 95. As part of Annual Performance Assessment, the program will adopt the compliance indicators used by PPRA to measure the level of compliance of participating ULGAs and PMO-RALGG. The tool used by PPRA to measure level of compliance has 13 indicators that measures, institutional set-up; procurement plan; process; quality assurance; and contract management. Currently, PPRA is revising the existing compliance indicators and the new indicators will be applied for the first time in FY 2012/13 audits after completing the first cycle of procurement audits of all the 393 procuring entities (PEs) countrywide. The revision will include adding indicators to measuring the efficiency, assigning more weight, removing or modifying some of the indicators to have a robust tool to measuring procurement compliance in PEs. The Table below describes the current compliance indicators being used by PPRA. Table 18: Performance Compliance Indicators used by PPRA S/No. INDICATOR PERFORMANCE DATA 1. Establishment and composition of Existence of a Tender Board in accordance with the Tender Board requirements of the Act and Regulations 2. Establishment and Composition of PMU Existence of a PMU in accordance with the requirement of the Act and Regulations 3. Functioning of AO, Tender Board and Percentage of tenders in which there was no interference PMU between individual functions 4. Preparation of Annual Procurement Plan Prepared and adherence to the Annual procurement plan 5. Approvals Percentages of tenders/ contracts which received compulsory approvals in various processes 6. Advertisement of Bid opportunities Percentage of open bidding procedures publicly advertised 7. Publication of awards Percentage of contract awards disclosed to the public 8. Time for preparation of bids Percentage of tenders complying with the stipulated time in the Act and Regulations 9. Method of Procurement Percentage of tenders using authorized methods of procurement in accordance with their limits of application 45 10. Use of standard tender documents Percentage of tender using standard/approved tender documents 11. Records keeping Percentage of tenders with complete records 12 Quality assurance Formation and Function of inspection committees (goods) and project managers 13. Contract implementation Percentage of contracts which have been implemented as per the terms of contract 96. PPRA has been conducting procurement audits since FY 2006/07 with the initial target of reaching compliance of 80% by 2010/11, but this target has been deferred until 2014. Overall there has been gradual increase in compliance level calculated from the 13 compliance indicators. The overall compliance level for (i) FY 2006/2007 is 39% based on 20 PEs; (ii) FY 2007/08 is 50% based on 100 PEs; (iii) FY 2008/09 is 55% based on 99 PEs; (iv) FY 2009/10 is 73% based on 91; and (v) FY 2010/11 is 68 based on 174 PEs. The compliance levels of the participating ULGAs and PMO-RALG which have been audited are indicated in the table below. Table 19: Procurement Compliance Scores of ULGAs Audited by PPRA S/No. ULGAs 2006/07 2007/08 2008/09 2009/10 2010/11 1. Morogoro MC 79% 2. Tabora MC 49% 3. Sumbawanga MC 72% 4. Moshi MC 5. Shinyanga MC 72% 6. Songea M C 78% 7. Singida MC 60% 75% 8. Musoma MC 77% 9. Iringa MC 68% 10. Bukoba MC 41% 11. Lindi MC 12. Njombe TC 57% 64% 13. Kibaha TC 46% 14. Bariadi TC 15. Babati TC 53% 16. Korogwe TC 41% 17. Mpanda TC 18. Geita TC 18. PMO-RALG 79% 97. The four ULGAs and PMO-RALG visited do not maintain log books for recording of complaints and it was reported that no official complaints had been lodged by aggrieved bidders. This does not imply that bidders are not aggrieved in the procurement processes, sometimes aggrieved bidders do not complain in order to maintain their business relationships with LGAs and PMO-RALG or for fear of being sidelined in in future procurement process. 98. The PPRA also carries out Value for Money audits (VFM), also referred to as performance audits, for selected contracts. The procurement audits and value for money audits are supplemented by the Red Flags Checklist on fraud and corruption in the procurements carried out by procuring entities. As part of auditing process, PPRA in its effort to prevent and combat corruption has established Public Procurement Anti-corruption Strategy. The implementation of the fraud and corruption strategy for public procurement started with testing the Red Flags in 307 tenders processed by 40 procuring entities. Overall the percentage of “YES� for all the assessed PEs was low at 9.3%. Five PEs were assessed to have percentages of “YES� of more than 20%. A score of “YES� meaning non-compliance to the requirements 46 of the Law. None of the participating ULGAs or PMO-RALG are among of the five PEs assessed. The tools for procurement audit, performance audit (VFM) and Red Flags Checklist are attached at Annex 6. Procurement Capacity 99. Assessment of procurement staffing indicates that most ULGAs have a very basic level of planning, fiduciary and safeguards capacity. Such capacity is a requirement of the LGDG system. According to PPRA compliance inspections, ULGA procurement and contracting capacities have been increasing consistently as a result, albeit from a very low level. However analysis shows that few ULGAs have significant practical experiences with design, procurement and supervision of large infrastructure projects which this Program intends to fund. Even a mature municipality like Morogoro has last year implemented only two projects with a value above 100 million Tshs (approximately 65,000 USD). The largest recent capital investments of the surveyed ULGAs would typically be constituted by 2 km of road rehabilitation (upgrading to bitumen standards) at a cost of around 280,000 USD. The recent experience of Morogoro showed that annual municipal investments do not exceed 350,000 USD or approximately 1.5 USD/capita. 100. Capacity to deal with large investments does not exist in the ULGAs. This is in part a result of the fact that ULGAs do not receive enough financing to undertake these investments. Thus, it is clear that the existing capacity needs to be enhanced, and new capacity needs to be built in areas such as civil engineering and ICT. The enhancement of existing levels of capacity and building capacity in new areas is not simply a means to an end under the proposed ULGSP, rather this is the actual development objective of the Program. 101. In all municipal and town councils there are procurement officers although the number of staff is inadequate to meet the procurement volumes. Existing experience of procurement officers vary significantly from one council to another as there are councils with officers with experience and other with junior officers with no adequate experience. Due to lack of adequate number of staff in most of the councils members are drawn from different user departments to work with PMU under ad-hoc committees to handle procurement issues contrary to the requirement of the Law. Some of the officers have attended procurement trainings conducted by PPRA. It was noted that still more trainings are required in areas of procurement planning, preparation of bidding documents and request for proposals, evaluation of bids/proposals and contract management. 102. PMO-RALG will be charged with overall responsibility of coordinating and managing implementation of activities under the program. Assessment revealed that PMO-RALG PMU is well staffed with adequate number of staff and experience in procurement process. PMO-RALG PMU has total of 13 staff including Head of PMU. PMU staffs are divided into four strategic sections; procurement section (4), stores section (5), clearing and forwarding (1) and Local Government Loans Board (2). Most of the staffs have attended PPRA trainings and are involved in the processing procurements under World Bank projects. The Table below shows numbers and qualification of staff in the PMU in the four visited ULGAs and PMO-RALG. Table 20: Qualification of Procurement Staff Academic Qualification S/No. ULGAs Master Degree/Advance Diploma Certificate Store Total Degree Diploma Keeper 1. Morogoro MC 1 1 1 3 2. Kibaha TC 1 1 2 3. Singida MC 1 1 2 4. Shinyanga MC 1 2 1 4 5. PMO-RALG 2 6 2 2 1 13 47 103. The PPA 2004 directs that the PMU should be staffed to an appropriate level and should consist of procurement and other technical specialists together with necessary supporting and administrative staff. It is the responsibility of the procuring entity to identify all those engaged in procurement within the organization and identify the skills needs in each post and set out strategies to meet the needs of the PMU. In the effort to address this issue, PPRA has put a proposal of categorization of procuring entities in accordance with the volume of procurement and has proposed manning levels for PMU for each category. It is envisaged that most of the participating ULGAs will fall under Class II with annual volume of procurement of up to Tshs. 5 billion (US$ 3 million). According to the proposal the manning level proposed is one Senior Procurement Officer (Head of PMU), one Procurement Officer I, two Assistant Procurement Officers, one Personal Secretary II and one Office Attendant. It is expected that the volume of procurement in participating ULGAs will increase and there is need of capacitating the ULGAs in terms of number of staff and knowledge and skills to match with increased volume. 104. In works departments which combine civil works and building works are headed with qualified engineers. However it was noted that there is inadequate number of staff who are qualified and have experience to assist the engineer in day to day supervision of works. There are municipal/town councils which have adequate qualified and experience staff. For instance, Morogoro Municipal Council has five civil engineers, two quantity surveyors, one architect and one technician while Singida Municipal Council has one civil engineer, one quantity surveyor, one architect and one road technician. The Table below presents the existing manning level in engineering departments in the visited ULGAs. Table 21: Technical Staff in 18 ULGAs Professionals S/No ULGAs Civil Building Quantity Architect Road Building Total Engineer Engineer Surveyor Technician Technician 1. Morogoro 5 2 1 1 9 2. Kibaha 1 1 1 3 3. Singida 1 1 1 1 4 4. Shinyanga 1 1 2 2 6 105. PMO-RALG has established Infrastructure Development Unit which report direct to the Permanent Secretary. This unit serve as infrastructure department within the Ministry responsible for overseeing effective implementation of roads projects in the LGAs. The unit is staffed with 13 civil engineers and one economist. As part of its oversight duties the unit does also provide technical backup to the LGAs in all matters related to infrastructure. Assessment also revealed that PMO-RALG has established a dedicated Urban Program Unit which is under Directorate of Urban Development. The unit is staffed with four engineers and two procurement specialist/engineer. The unit is led by a program coordinator and supported by sub-coordinators for each program. Currently the unit is managing four projects financed by the World Bank; Local Government Support Project (LGSP) which is losing on June 30, 2012, Tanzania Strategic City Project (under execution), Urban Local Government Strengthening Program (under preparation) and Dar es Salaam Metropolitan Development Project (under preparation), All staff in the unit have attended various training in their areas of works. The unit has a fully equipped office in Dar es Salaam with constant communication with the Headquarter Offices in Dodama where the Ministry is operating. The Unit will oversee the implementation of activities in this program. 106. Records Keeping: PPA 2004 and its Regulations prescribed the procurement records that should be maintained and archived by the procuring entities in the procurement proceedings including decisions taken and the reasons for it. The record ranges from planning to contract closure and to be kept for five years after contract closure. Generally, records in the ULGAs are scattered, incomplete with no proper 48 filing system. Despite the regulations mandate Procurement Management Units to maintain and archive all records of procurement process and User Departments to maintain and archive records of contract management, the requirement to date has not been complied. 107. PMUs are maintaining and archiving records of tendering process while respective user departments are maintaining and archiving contract management records with consequent difficulties to trace records of particular tender on file. As a result PMUs are out of picture when it comes to records relating to contract management. It is expected that one stop centre for all procurement records is PMU. Of concern is the missing records in both PMUs’ and User Departments’ files such as various minutes of tender board approvals, site meeting minutes, progress reports, tests results, taking-off measurement sheet (calculation of the quantities executed) to support payment certificates, final inspection reports and inspection and acceptance report for goods. Generally, there is inadequate space for PMU staff and documents storage. In all visited ULGAs, it was observed that maximum office space allocated for PMU is a room of approximately 16 square meters shared with three – five staff including storage documents. Based on the Report for FY10/11, the overall level of compliance on records keeping is 51% and compliance at the LGAs level is 37% and PMO-RALG scored 52.5% audit of FY 2008/09. Major weaknesses noted during audits include lack of a comprehensive list of tenders, procurement records scattered in different departments, lack of records on contracts managements, inadequate space and inappropriate filing. Contract Administration 108. Contract Management for any procurement of goods, services or works contracts is the responsibility of procuring entities mandated under PPA 2004. These are required to ensure that the contracts are implemented in accordance with the terms and conditions governing those contracts, and to take or initiate steps to correct or discipline deviations from observance of contract conditions. Contract management in the UGLAs has been observed to be weak due to limited capacity of human resources, knowledge, experience and logistical constraints. For works contract; contract documents normally mention the ULGAs districts engineers as a Project Manager. Due to lack of qualified and inexperience staff in ULGAs; engineers are unable to delegate their power given by the contract to their subordinate as a result most contracts suffer inadequate supervision. For instance in Singida and Shinyanga Municipals there is only one Civil Engineer (Head of Department) and Road Technician who are responsible for supervising municipal’s civil works. 109. According to the PPRA Annual Performance Report for FY 2010/11 about 41% of the audited procurement contracts were not implemented as per terms and conditions of the contract carried out in 106 PEs. Out of 106 PEs, 19 PEs were LGAs with an average of 41% in contract management and PMO- RALG scored 100% audit of FY 2008/09 on the contract management The high score for PMO-RALG is attributed by the fact that goods contracts dominates the procurement of PMO-RALG compared to works or consultancy services. In the same fiscal year, PPRA conducted VFM audits of 136 construction projects with total value of Tshs. 183,999,965,718.92 (US$ 115 million). Out of the 136 projects, 61 projects equivalent to 45% of the audited projects performed well (75%), 59 projects equivalent to 43% of the audited projects performed fairly (between 50% and 75%), and 16 projects equivalent to 12% of the audited projects performed poorly (below 50%). The overall score on contract management was assessed to be fair at 62%. Weak contract management was observed in most of the audited LGAs with 30% of all audited entities performed poorly. The performance of LGAs in contract management ranged from 12% to 77% with an average of 50%. Singida Municipal Council one of the participating ULGAs in the program its three projects were audited with overall score of 66% and an average of 55% in contract management. Among the findings in the contract management were; delay in payments, non-enforcement of liquidated damage clause, issuing variation order without following appropriate procedures, issuing extension of time without justifiable reasons, paying advances without guarantees and poor records keeping. 49 110. Most of the contracts are not completed on time, with late payments to contractors, delayed decision making to correct contract variations, and poor enforcement of for non-performers. In some ULGAs payments to the contractors are not made until the special committees constituted submit their reports to initiate payments. Sometimes these committees are not constituted until after the ULGA Engineer has already certified works done and interim payment certificate have been submitted to ULGAs. To great extent delays caused by these procedures are attracting interest for unpaid sums due to contractors. Other noticeable bottlenecks for effective contact management in the ULGAs are logistical constraints such as absence of quality assurance and control mechanism, inexperience contractors and unavailability of equipment/plants. Most of the ULGA councils have no experience of handling large works contracts above $500,000 (single contract). On average large works contracts which have been handled by most of the municipal/district councils vary between Tshs 250,000,000 – 500,000,000 ($ 156,250 – 312,500). Noticeably Morogoro Municipal is constructing Mwere Bridge which worth Tshs. 1.6 billion ($1 million) using in-house expertise. iii. Fraud, Corruption and Accountability 111. The recently completed Report on Value for Money Audits of 136 Constructions Projects by the Public Procurement regulatory Authority has flagged fraud and corruption in local governments as a major area of concern. This study audited 91 projects of LGAs for a value of T.sh 91 bn. The main findings of the study were that 68% of the audited projects with a total value of Tshs. 10,056,982,629 (53% by value) were assessed to be of unsatisfactory quality and that serious malpractices were noted in most LGAs. A key finding of the report was that engineers and technicians especially in LGAs conspired with contractors to certify and pay work items which did not exist or with lower specifications than what was provided in the contract documents. In assessing these LGAs PPRA applied its red Flag Checklist for identifying corruption in construction contracts. Any entity scoring more than 20% on that checklist has a strong likelihood of fraud or corruption in its procurement. Seventeen LGA’s were assessed as part of this exercise. Ten of them (60%) crossed the threshold of 20%. In this context, and given the fiduciary weaknesses discussed earlier, fraud and corruption are considerable risks under the Program. B. Fiduciary Risk 112. Financial Management risk of the participating ULGAs is high. Challenges stressed in PEFA 2009 and more recent diagnostics include macro and fiscal forecasting, predictability of budget execution, harmonization of debt systems, and timely implementation of audit recommendations. All these increase the fiduciary risk that public funds are subjected to at the local government level. The worsening cash management situation and the increase in fiduciary risk as noted by the CAG are matters of concern for the program as these are particularly acute at the local government level, and the situation has deteriorated due to a variety of reasons – including the dismantling of Zonal Reform Teams in 22 regions of Tanzania following the end of the first phase of the Local Government Reform Program Phase I in 2008, the lack of support provided to LGAs in sustaining the IFMIS system after the initial roll out phase in 2000, and increased resource flows without adequate capacity building over the last five years. Incentives for further enhanced performance under LGDG are weak given the fact that almost all LGA’s performance is classified as “Very Good� and LGDG Core funds only accounted for 4% of LGA budgets last year. 113. Central to improvement is the need to put in place a well functioning incentive structure for which this program is designed. In addition adequate mitigations measures are essential for this program to provide additional resource flows. The mains areas for concern in designing financial management risk mitigation measures are: i. Planning: The MTEF process is particularly weak in Tanzania with the forward looking dimension in budget preparation, budget ceilings and budget guidelines loosely connected 50 with the previous year’s MTEF. Given the size of the program it will be important to ensure that adequate allocation is provided for in the planning processes of Local Governments and that these proposals are retained in the final approved budget. ii. Chart of Accounts: Functional GFS 2001 classification was initiated in the FY 09 budget, but has only been partially implemented. There is need to ensure that the 18 ULGAs are implementing the most recent CoA and that adequate codes have been assigned for this program. iii. Fund Flows and Budget Volatility: there are major challenges in fund flows and budget execution. In order to ensure that funding for this program is predictable, there may be need to specify exact dates for flow of funds in the Financing Agreement, as was done in case of the SEDP project in Tanzania. iv. Integrated Financial Management Information Systems: For the purpose of this project there will be need to ensure that the system is rolled out to the target 18 ULGAs and that staff is adequately trained in the use of this system. v. Internal Control and Internal Audit: The size of the funding provided through this program is likely to more than double the development budget of the target LGAs. There is therefore need to ensure that the weak internal control and internal audit environment is improved. Support will need to be sought from the newly appointed Assistant Accountant General for Local Governments to ensure that internal controls are robust and support will also need to be sought from the newly appointed Internal Auditor General to ensure that internal audit staff are adequately trained and have the requisite skills to discharge their duties. vi. Arrears: Given the weaknesses in fund flows to LGAs there is strong likelihood of the buildup of arrears in the system. There will be need to monitor this issue closely. 114. Procurement risk of the participating ULGAs is rated to be high. This assessment proposes a set of measures, to be taken both before as well as during program implementation, to address the risk. Main areas of significant risk to the program are; inadequate staffing in ULGAs in procurement and engineering departments; staff have inadequate knowledge of procurement planning, bidding documents & request for proposals preparation and evaluation of bids/proposals; weak records keeping; delays in completion of procurement processes and weak contract management. These risks will need to be addressed, monitored and evaluated throughout the program. 115. The major stages at which fraud and corruption may arise in procurement in this Program are during: i. selection and prioritization of municipal infrastructure investments - ULGAs may channel funds to locations which may benefit specific individuals, groups and entities. ii. Procurement of works, goods and services – may suffer from collusion between bidders, leaking of bid estimates or tampering with bid documents, collusion between PMU and suppliers iii. Supervision and quality control – collusion between supervisors and contractors iv. Receipt of goods – weak stock verification and inventory records v. Authorizing and effecting payments 116. Overall Fiduciary risk for the program is high. Whilst mitigation measures are proposed for each of the identified fiduciary elements, it is also worth recalling that the overall ULGSP operation is focused particularly on the institutional performance strengthening to address weak fiduciary capacities in the LGAs charged with service delivery, and that the choice of PforR instrument is a core design feature 51 that seeks to align incentive structures for local government performance with very clear and transparent performance metrics including fiduciary performance. Monitoring and addressing fiduciary performance A. Fiduciary performance 117. The Program will address fiduciary risk in various ways. It is important to note that these measures will complement a number of other interventions and reforms introduced or supported by the Government, Bank and development partners to improve central and local government fiduciary capacity. First, through the UPG incentive mechanism and the Program’s annual performance assessment, namely through minimum access conditions and performance indicators. For example, the UPG will require that a grievance handling system is in place in each ULGA as a minimum access condition, and no ULGA which receives an adverse audit opinion in the previous year will be eligible for UPG funding. It will also adopt (as performance indicators) the 13 compliance indicators used by PPRA to assess PMO-RALG and participating ULGAs. Second, the Program will finance a set of capacity building activities at the PMO- RALG and ULGA level. These activities will include financial management and procurement areas. Third, Program DLIs, particularly those directed at leveraging central government actions (e.g. fulfillment of core staffing at each ULGA and timely disbursement of funds) will help reduce fiduciary risk. Fourth, PMO-RALG and PPRA will begin conducting performance (value for money) audits of the 18 target ULGAs during the Program (see below). 118. These measures are detailed in the table below: Table 22: Fiduciary risk key mitigation measures Fiduciary Risk Description Mitigation Measures Cross-cutting Coordination challenges due to the PMO-RALG has established a program coordination Program large number of entities involved. unit that will be responsible to provide overall Management Activities will take place at 18 supervision role including financial management and ULGAs. procurement. Record keeping Weak ULGA record keeping system Record keeping systems will be incentivized and form the focus on capacity building activity (DLI 1 and 3) Efficiency and/or UPG funding could be inefficiently corruption in spent , or corrupted, and quality of Annual value for money audits will be introduced from ULGA infrastructure investments could year 2 of the Program expenditures of suffer UPG funds Procurement Risks Inadequate staffing in ULGAs in procurement and engineering Recruit/appoint core staff as per DLI 2 departments Procurement Staff have inadequate knowledge of, Capacity Capacity building program executed by PMO-RALG procurement planning, bidding will have procurement as a key focus area (DLI 3 and documents & request for proposals 4). ULGAs will have incentives to improved capacity- preparation, evaluation of building performance, hence improve skills of bids/proposals and contract procurement staff - DLI 1) management. Delays in completion of Processes & Adherence to the standard procession time of ULGAs procurement processes and lack of Procedures: throughout project implementation (DLI 1 and 3/4) internal control manual 52 Contract Inadequate knowledge and skills in PMO-RALG capacity-building program will address Management contract managements (DLIs 3 and 4) Financial Management Risks Low execution of LGA Execution of UPG funded projects will form part of Planning and development budget annual assessment (DLI 1) Budget Annual financial reports and Accounting & Those ULGAs with EPICOR will receive support from quarterly financial reports are Financial PMO-RALG capacity-building system (DLI 3 and 4). currently prepared manually outside Reporting the Epicor Accounting System Delays in the funds transfer from the Verification Protocol for DLI 1 will ensure that all Treasury UPG funds for ULGAs are disbursed in a timely central level to 18ULGAs affecting Management & manner. DLI 6 will ensure that timely disbursement of implementation of annual work Funds Flow funds for broader LGDG is incentivized. plans Capacity will be enhanced through capacity building to be provided by the program to strengthen internal control functions straddling entire management and A majority of the ULGAs visited staff at 18 ULGAs (DLI 3 and 4) have inadequate staff, resources and Having adequate IA staff and resources allocation to inadequate skills in modern internal IA units of all 18 ULGAs will be among condition to auditing techniques. disburse funds to respective ULGAs (DLI 1). The internal audit departments may Audit committee will be strengthened in terms of Internal Control not review the activities of the training and ensuring they follow up on measures taken program due to lack of adequate by the respective ULGAs in implementation of the staff, skills and recourses. audit queries. Every six months, audit In some cases, there may be lack of recommendations undertaken and implemented as follow up on implementation of recommended by audit committee will count towards audit recommendations. performance assessment. Where more than 20% recommendations are not implemented, such an ULGA will not receive funds. (DLI 1) Program Audit ToRs will be agreed by negotiations and should include comments on release of funds, The CAG will be in charge of execution of development of budget, progress in auditing all program funds including financial reporting, strengthening controls, covering the 18 ULGAS. There is a maintenance of fixed assets amongst others in defining Program Audit risk that the audit reports may be the quality of the audit expected. Also included in the received after the due date and that NAO’s audit plan well in advance. audit recommendations may not be implemented PMO-RALG will convene an annual UPG stakeholder review/learning event, which will discuss the Program Audit. 119. The primary reference for monitoring fiduciary performance of the 18 ULGAs in the program will be the Annual Performance Assessment to be commissioned by PMO-RALG. The primary reference for monitoring fiduciary performance of PMO-RALG will be the biannual implementation support missions by the Bank team. The Bank team will also draw on a variety of regular and ad hoc assessments of relevance to the program in order to support its performance monitoring as well as the use of field visits by bank fiduciary teams. These include: (i) The annual assessment of LGA performance for the broader LGDG system; (ii) The Controller and Auditor General (CAG) annual financial audit reports; (iii) Procurement Compliance Audits provided by PPRA; and (iv) Performance (Value for Money) Audits to be carried out by the PPRA. 120. A major risk mitigation measure in the program is the allocation of $30 mn. under DLI 5 for supporting capacity building activities in PMORALG and in the 18 ULGAs. This funding is to be utilized for: 53  Recruiting one international and one national capacity building specialist to be based in PMORALG  For setting up four mobile teams of six experts each to provide ongoing support during the project period to the 18 ULGAs. These teams will include an accounting expert, an internal audit expert and a procurement expert. They will provide hands on support to these 18 LGAs.  IFMIS operations will be substantially strengthened. PMO-RALG has rolled out IFMS to all 133 LGAs. New IT equipment and the latest version of the IFMIS software (Epicor version 9.05) has been installed in these 18 LGAs. Configurations to the central servers have been completed and LGAs have been connected to Central servers via four technologies25. All 18 LGAs ULGP are connected to the network via ADSL technology. Their performance can be monitored online through the Data Center in PMORALG. Training of 3-4 staff from all LGAs was conducted between April 2011 and July 2012. ULGSP funding will be used for improvement of infrastructure support of the centralized IFMS by creating support desk, installing physical access control and additional hardware and software for the 18 councils and datacenter at PMO-RALG headquarters. In addition, to improve access to information, a web portal for each of the 18 LGAs under this program will be created by PMORALG.  ULGSP funding will also be used for continuing capacity building in the area of upstream PFM processes. Under these interventions training, awareness and change management for councilors, head of departments and internal auditors. Improvement of upstream processes is essential in ensuring integrity of IFMS data especially when we plan to introduce approval rights for head of departments in IFMS.  On the revenue management side, there will be a major focus to improve collection of property taxes as that is a key focus area of ULGSP. Under this support, a number of interventions are planned: preparation of valuation guideline, conducting valuation for the 18 councils and amendment of Urban Ratings Act, 1983. Valuation of Assets and Liabilities of these LGAs will help establish their credit worthiness and enable them to access the capital markets. MA key intervention is roll out of the revenue management information system (prepared by GIZ) in these 18 LGAs.  Improvement in internal audit is planned under ULGSP. Activities in this area that will be undertaken include improvement of internal control procedures, strengthening of pre-audit section, improving the performance of audit committees and strengthening the role of regional secretariat in performance monitoring and evaluation of the LGA control environment. All these capacity building initiatives will build the FM and PFM capacity of the LGAs and help reduce the fiduciary risk. B. Audit 121. The CAG undertakes the audit of all LGAs on an annual basis. These audits are of a financial nature and primarily comprise transaction level testing, but internal controls are examined and reported on. Moreover, issuance of Value for Money (VfM) audit reports has been initiated recently. The CAG also has the power to authorize professional accountants to conduct audits on its behalf. NAO is required to prepare and submit a report to the Parliament on the final accounts of each ULGA not later than nine months after the closure of the Financial Year. These audit reports have been submitted on time for the last five years. 122. As this P4R operation uses country systems, CAGs regular audits of these 18 LGAs which covers all of their operating and development expenditures will be sufficient for meeting the audit requirements 25 120 on ADSL, 14 on Broadband, 11 on fiber and 15 on VSAT 54 of this project. This is only logical since ULGSP funding will be comingled with funding from other projects (such as LGDG) and Governments own allocations for development activities in the ULGAs. 123. The program audit will be carried out annually by the National Audit Office (NAO). The auditor will be required to express an opinion on the audited financial statements of in compliance with International Standards on Auditing (IFAC) or INTOSAI pronouncements and submit the audit report within nine months of the end of the financial year. In addition, the auditors will provide a detailed management letters containing the auditor’s assessment of the internal controls, ac counting system and compliance with financial covenants in the Financing Agreement. 124. With a view to ensure that funds flowed in a timely manner to the beneficiary institutions, CAGs normal audit will be supplemented by an additional project audit which will focus primarily on the area of providing assurance to the Bank that project funds reached the budget of the beneficiary institutions in a timely manner. This special audit report will also be produced within nine months after the end of the FY. 125. CAG audits of the target ULGAs will be taken into account in the Annual Performance Assessment.In addition, in year two of the program, PMO-RALG will begin engaging PPRA to conduct performance audits (value for money audits) annually in all the 18 ULGAs to determine performance in particular with regards to design, planning management of contracts and quality of works. Fraud and Corruption 126. In this context, and given the fiduciary weaknesses discussed above, fraud and corruption are considerable risks under the Program. These risks will be mitigated as follows: 127. The main factor that leads to F&C is a weak fiduciary environment. Improving this environment in the target ULGAs is a specific goal of the Program, and will be addressed directly through the various main modalities outlined elsewhere in this document. More specifically: 128. The UPG and annual assessment. The annual assessment will include, as minimum access conditions and performance indicators, steps such as having systems in place for handling grievances related to fraud and corruption, publicly advertising the bidding procedures, disclosing contract awards to the public and having a consultative process for the UPG. 129. Capacity building program to be managed at PMO-RALG and ULGAs levels. Elements of this program will specifically focus on accountability and monitoring at the ULGA levels to minimize the fraud and corruption risk. 130. DLI leveraged steps that central government will take to ensure, for example, that core fiduciary staff are in place at the ULGA level for each year of the Program; 131. Additional agreed measures e.g. in ULGA disbursement years one and two (FY2013/14 and FY2014/15), PPRA will conduct several value for money audits in at least two or three of the Program ULGAs, respectively, to determine performance in particular regards to management of contracts and quality of works. From FY2015/16 onwards, PMO-RALG will commission PPRA to conduct value for money audits for all Program funds in all 18 Program ULGAs and the results will be incorporated into the annual assessment. 132. Second, the Government of Tanzania has agreed to implement the Program in accordance with the Anti-Corruption Guidelines applicable to PforR operations (ACG) as follows:  Debarment list of firms and individuals. Companies and individuals debarred by the Bank and the PPRA will be posted and updated on the PMO-RALG website. This will include the list of temporary suspended firms and individuals, which the Bank will furnish with PMO-RALG. In general, the risk of having a debarred firm or individual in the Program is low, since most of the tenders will be small and carried out through National Competitive Bidding (NCB) process. 55 Nevertheless, PMO-RALG will share this information with all Program ULGAs, instructing them to comply by appending the debarment list to the annual Grant Award announcement which will be made public - and go to all Program ULGAs. This list will also be used by procurement advisors working as part of the PMO-RALG capacity building program to monitor ULGA compliance. ULGA compliance with the debarment list will also be monitored through the Program annual assessment.  Sharing information on fraud and corruption allegations and investigations with the Bank. In line with the ACGs, PMO-RALG will share with the Bank relevant information on fraud and corruption allegations, investigations and actions taken as needed. At the local level, each ULGA has an Integrity Committee (IC) to which fraud and corruption complaints are reported. Fraud and corruption complaints related specifically to procurement may also be made to the ULGA Accounting Officer. Under Tanzania’s legal system, the primary agency for investigating corruption is the Prevention and Combating of Corruption Bureau (PCCB) which has 98 district offices including all the 18 Program ULGAs. The PCCB has a national workforce of about 1700 staff of which approximately half are involved in investigation. In this context, fraud and corruption allegations made in respect of Program funds to the LGAs via either the ICs or the Accounting Officer will be referred by these entities to the district offices of the PCCB. The PCCB will keep a record of such allegations, or allegations from any other source regarding Program funding, and the actions taken on them. Once annually, it will provide a national compilation of all such allegations, investigations and prosecutions throughout the Program to PMO-RALG. PMO-RALG will include this in the annual Program Report that will be submitted to the Bank.  Investigation of fraud and corruption allegations. Tanzanian law permits the PCCB to undertake joint investigations with foreign and international agencies. Consequently, the PCCB shall collaborate with INT in respect of allegations of fraud and corruption in the use of Program funds. The initiation, scope and operational procedures will be decided on a case-by-case basis by PCCB and INT. In addition the Program Participation Agreement between ULGAs and PMO- RALG will ensure PCCB and the Bank have access all records and documentation that they may reasonably request regarding the use of Program funding. 133. Third, and more broadly. PMO-RALG has developed a Local Government Anti-Corruption Strategy and Action Plan Phase III 2010 – 2015 which it will implement on an LGA-wide basis throughout the country. The plan builds on two subsequent phases corresponding to NASCAP I and NASCAP II and seeks to strengthen: i) registry management of information; ii) procurement procedures; iii) capacity building of human resources; iv) sensitization of public rights and duties; v) storage and safeguarding of data; vi) public service complaints handling. 134. It should also be noted here that the implementing entity PMO-RALG has been implementing the ongoing LGSP since 2005. For the past seven years of implementing Bank projects, there have been no governance and anticorruption issues at the PMO-RALG level and the most recent Tanzania financial management regional in-depth supervision review commissioned by the World Bank has found no incidence of fraud. Implementation Support Plan Reviewing Implementation Progress 135. Program disbursements will be linked to Disbursement Linked Indicators (DLIs) and verified achievement of program implementation progress according to the Verification Protocol as outlined in the PAD. The main characteristics of the disbursement mechanism will be: i. Disbursements will be made upon receipt of verification and receipt of proof of achievement of a DLI or set of DLIs 56 ii. Once the DLI achievement is verified, PMO-RALG will present to the World Bank a disbursement request using an IFR supported with a withdrawal application. iii. The World Bank will disburse the amount equivalent to the DLIs achieved into a US Dollar Designated account to be maintained at the Central Bank after which the funds will be transferred into the respective ULGAs. 136. The task team is responsible for making initial decision confirming the achievement of the results and the DLIs and for verifying the documentation submitted. 137. The Bank team will conduct twice yearly implementation support missions. These will target: i. Monitoring and Evaluation: Review APA, verification protocol and provide technical input; ii. Environmental and social: Provide the necessary training and support during implementation of the manual produced by the Government for the Program. iii. GAC: Support the implementation of the agreed fraud and anti-corruption measures under the program and provide guidance in resolving any issues identified; iv. Review of procurement performance from annual performance assessments and provide procurement training and guidance on Procurement to PMO-RALG and ULGAs; v. Financial Management: Review the UIFRs and the assessment results reports as the basis for disbursements, audit reports, and agreement on measures to address any audit observation and monitoring their implementation; Resolving Implementation Issues and Institutional Capacity Building 138. Risk-mitigation measures and actions to enhance capacity and performance of agencies involved form the backbone of the Program action plan and respond to these issues. The ULGSP includes substantial activities to be undertaken at both central and local government level to build capacity to address the issues identified in this assessment. The implementation of these results will be monitored by Bank teams during the biannual implementation support missions. Monitoring the Performance of Fiduciary Systems and Audit Reports 139. Most of Bank’s implementation support team members (fiduciary, safeguards, and Governance and Anti-Corruption), including the Task Team Leader, are either based in the Tanzania Country Office or in the Region. This will ensure timely, efficient and effective implementation support to PMO-RALG and the ULGAs. Formal implementation support missions and field visits will be carried out semi- annually, or as deemed necessary. 140. The implementation support needed is summarized below: Table 24: Implementation Support required Area Skills Needed Estimate Staff Time Needed/year Procurement support Procurement Specialist 5 SWs Procurement Training Procurement Specialist 1 SW FM training and supervision FM Specialist 4 SWs Task Team Leadership TTL 10 SWs Financial Management, disbursement FM Specialist 2 SWs and reporting Local Government Specialist 8 SWs Technical and Procurement review of Procurement Specialist 4 SWs the bidding documents Municipal Engineer 4 SWs 57 GAC Environment Specialist 4 SWs Social Specialist 4 SWs Fiscal flows/ fiscal decentralization/ Economist 5 SWs LG performance measurement eGovernment and Citizen engagement eGovernment expert 4 SWs City management software specialist Monitoring Changes in Fiduciary Risks to the Program 141. The frequency and breadth of fiduciary systems implementation support missions, expected to begin as twice each year, may be varied in accordance with changes in the risks to the program. It is expected that as implementation progressed, substantial improvements in procurement and financial management capacities will reduce the risk profile and may afford a reduced supervision schedule. This will be determined by the bank’s fiduciary systems team which all at stages will continue to monitor compliance with the fiduciary provisions of legal covenants. 58 DRAFT – NOT FOR DISTRIBUTION Annex 1: Disbursement Linked Indicators, Arrangements and Verification Protocols Disbursement-Linked Indicator Matrix Indicative timeline for DLI achievement Total As % of Financing Total DLI Allocated to Financing FY12/13 FY13/14 FY14/15 FY15/16 FY16/17 FY17/18 Baseline DLI Amount DLIs 1, 2 and 3: Strengthened institutional performance and infrastructure delivery by ULGAs DLI 1 ULGAs have strengthened institutional performance and N/A N/A 18 ULGAs 18 ULGAs 18 ULGAs 18 ULGAs 18 ULGAs achieve Program minimum conditions in the annual assessment Allocated amount: 45 17.65% 0 9 9 9 9 9 DLI 2 ULGAs have strengthened institutional performance26 as N/A N/A N/A 60 70 80 90 scored in the annual performance assessment Allocated amount: 106 41.57% 0 0 26.527 26.5 26.5 26.5 DLI 3 Local infrastructure targets as set N/A N/A N/A N/A 70 80 90 out in the annual action plans are met by ULGAs utilizing the Program funds Allocated amount: 50 19.61% 0 0 0 16.728 16.7 16.7 26 In the areas of urban planning, revenue enhancement, fiduciary systems, implementation of infrastructure, operations and maintenance and oversight systems including environmental and social systems management. 27 Rising targets against constant allocation amounts are deliberately established to leverage increasing performance for each Program year. 28 Same as in DLI 2, rising targets against constant allocation amounts are deliberately established to leverage increasing performance for each Program year. Indicative timeline for DLI achievement Total As % of Financing Total DLI Allocated to Financing FY12/13 FY13/14 FY14/15 FY15/16 FY16/17 FY17/18 Baseline DLI Amount DLIs 4 and 5: Strengthened ULGA public sector management and capacity DLI 4 Number of ULGAs with all core 0 N/A 100% 100% 100% 100% 100% staff in place29 Allocated amount: 14 5.49% 0 2.8 2.8 2.8 2.8 2.8 DLI 5 Capacity Completion of annual PMO-RALG building N/A N/A 50% 60% 70% 80% capacity building activities for activity plan Program ULGAs adopted Allocated amount: 30 11.76% 0 6 6 6 6 6 DLI 6: Overall LGDG Strengthening DLI 6 PMO-RALG has adopted an enhanced LGDG assessment N/A N/A N/A N/A 100% N/A N/A system derived from lessons learned from the annual Program assessments Allocated amount: 10 3.92% 0 0 0 10 0 0 Total Financing Allocated: 255 100% 0 17.7 44.3 71 61 61 29 PMORALG is responsible for providing core staffing. Core staffing composition is explained in detail in the Verification Protocol and Bank Disbursement tables. 60 DLI Verification Protocol Table # DLI Definition/ Scalability of Protocol to evaluate achievement of the DLI and data/result verification Description of achievement Disbursements (Yes/No) Data Verification Procedure source/agency Entity 1 ULGAs have The indicator will be satisfied when: Yes Private firm PMORALG PMORALG hires a reputable private sector consulting/audit firm strengthened will carry out to carry out the independent annual performance assessment institutional (i) The annual performance the annual (APA) to measure the performance of each ULGA against the performance assessment, using only the minimum assessment Program’s minimum conditions.AP A determines whether all MCs and achieve conditions, has been completed and have been met, including the MC condition that the performance Program the allocations to Program ULGAs of a ULGA should not decrease by more than maximum 20 points minimum have been determined on this basis; compared to the previous year’s assessment. The firm will conditions in calculate the allocation to each ULGA as per the formula in the the annual (ii) The Government has disbursed Bank Disbursement Table, and provide the aggregate assessment the previous UPG tranche to all 18 disbursement amount. ULGAs. PMORALG will verify that: (i) The assessment results are accurate (for the Program duration); (ii) The disbursement from the central government to ULGAs of UPG funds in the last 6-month period has been done on time, based on verifying the date on the Exchequer Issue Notification (EIN) which is the final transfer step from the MoF to ULGAs as explained in detail in Annex 1 (starting with the second disbursement of UPG for Program duration) As part of implementation support, Bank will: (i) review the assessment results and the allocation amounts; (ii) check the EIN to ensure the timely disbursement of UPG funds from GOT to ULGAs. 2 ULGAs have The indicator will be satisfied when Yes For (i) Private PMORALG As in DLI 1, PMORALG hires a reputable private sector strengthened the annual performance assessment firm will carry consulting/audit firm to carry out the independent annual institutional has been completed (based on the out the annual performance assessment (APA) to measure the performance of performance30 minimum conditions and assessment each ULGA against the Program’s performance indicators. as scored in performance indicators) and the 30 In the areas of urban planning, revenue enhancement, fiduciary systems, implementation of infrastructure, operations and maintenance and oversight systems including environmental and social systems management. 61 Data Verification Procedure source/agency Entity the annual allocation based on the score of all APA assigns a score to each ULGA. The private firm will performance ULGAs has been determined. For (ii) MoF calculate the allocation to each ULGA as per the formula in the assessment Bank Disbursement Table, and provide the aggregate disbursement amount. PMORALG will verify that: (i) The assessment results are accurate (for the Program duration); (ii) The disbursement from the central government to ULGAs of UPG funds in the last 6-month period has been done on time, based on verifying the date on the Exchequer Issue Notification (EIN) which is the final transfer step from the MoF to ULGAs as explained in detail in Annex 1 (starting with the second disbursement of UPG for Program duration) As part of implementation support, Bank will: (i) review the assessment results and the allocation amounts; (ii) check the EIN to ensure the timely disbursement of UPG funds from GOT to ULGAs. 3 Local Achievement under this indicator for Yes Private firm PMORALG Similar to DLIs 1 and 2 above, this DLI will also be measured infrastructure FY2015/16 will be measured on the will carry out through the annual assessment and therefore the same process will targets as set basis of actual delivery of the annual apply. out in the infrastructure against targets laid out assessment annual action in the plan for the former year using and PPRA APA assigns a score to each ULGA (which starting in FY2016/17 plans are met UPG funds. For FY2016/17 and will carry out will include the value for money audit outcomes). The private by ULGAs FY2017/18, in addition to the actual the value for firm will calculate the allocation to each ULGA as per the formula utilizing the delivery of infrastructure against money audits. in the Bank Disbursement Table below, and provide the aggregate Program targets, the achievement of the DLI Private firm disbursement amount. funds will also include the outcome of the will include value for money audits. the PPRA’s PMORALG will verify that: findings on (i) The assessment results are accurate (for the Program duration); the value for (ii) The disbursement from the central government to ULGAs of money audits UPG funds in the last 6-month period has been done on time, to the overall based on verifying the date on the Exchequer Issue Notification data. (EIN) which is the final transfer step from the MoF to ULGAs as explained in detail in Annex 1 (starting with the second disbursement of UPG for Program duration) As part of implementation support, Bank will: (i) review the assessment results and the allocation amounts; 62 Data Verification Procedure source/agency Entity (ii) check the EIN to ensure the timely disbursement of UPG funds from GOT to ULGAs. 4 Number of Each ULGA has the requisite core Yes PMORALG World Bank No less than 60 days prior to the beginning of the new fiscal year, ULGAs with staffing in place (assessed every PMORALG will submit to the Bank a schedule listing the names all core staff year of the Program). and positions of all core staff for all 18 ULGAs. Also, prior to 60 in place days of the beginning of the new fiscal year, each ULGA will Core staffing is defined in the PMO- submit to the Bank a list of the names and positions of core staff. RALG scheme of service and The Bank will review consistency of the lists. comprises council director, council treasurer, council internal auditor, council engineer, council community development officer (in charge of environmental and social systems management), council supplies officer, council assistant supplies officer (in charge of procurement), council town planning officer, council planner and council human resources officer. 5 Completion of Achievement of the DLI will be Yes PMORALG World Bank PMORALG will put in place an annual plan to build capacity of annual PMO- determined on the basis of execution ULGAs. Among other things, the plan will specify the activity, its RALG of activities specified in the PMO- objective, the resources assigned and the implementation timeline. capacity RALG capacity building plan for The template for the plan will be included in the operations building ULGAs. manual. activities for Program Within 60 days of the beginning of the forthcoming fiscal year, ULGAs PMORALG will submit the plan to the World Bank which will verify that the plan is in the agreed format and is satisfactory. Within 30 days of the beginning of the fiscal year, PMORALG will submit a report of the implementation of the annual capacity building plan for the previous year to the World Bank. World Bank will verify the extent to which the plan has been executed and determine the DLI amount to be disbursed. 6 PMO-RALG Following the Program midterm No PMORALG World Bank When the enhanced system is introduced, PMORALG will share has adopted review, PMO-RALG, in with the World Bank task team (i) the circular to all local an enhanced consultation with the World Bank, governments indicating the changes to the assessment and (ii) the LGDG will develop an enhanced performance assessment manual for the LGDG assessment which 63 Data Verification Procedure source/agency Entity assessment performance assessment system for will include the enhanced performance indicators and process. system the LGDG Core and introduces it for derived from the following fiscal year. lessons learned from the annual Program assessments 64 Bank Disbursement Table # Bank Of which Minimum Maximum financi Financing DLI value to DLI value(s) Deadline ng available for be achieved expected to for DLI Determination of Financing Amount to be disbursed against achieved and DLI allocat Prio Adva to trigger be achieved Achieve verified DLI value(s) ed to r nces disbursemen for Bank ment the resu ts of Bank disbursemen DLI lts Financing ts purposes ULGAs 1. Disbursement from the Bank is calculated on the basis of compliance of have ULGAs with minimum access conditions (including the MC that the performance of strengthene a ULGA should not decrease by more than maximum 20 points compared to the d previous year). institutiona l By 2. Disbursement will be made provided that previous disbursements from GoT performanc Program to ULGAs have all been made. 1 e and 45 0 0 0 18 completi achieve on Formula for disbursement from the Bank to GoT is: Program  [total annual disbursement] = [total population in all minimum condition minimum compliant ULGAs] X [3.1USD] conditions in the Formula for disbursement from GoT to ULGAs is: annual assessment  [disbursement to each ULGA] = [total population in that ULGA] X [3.1USD], provided that the ULGA has complied with the minimum conditions ULGAs have Disbursement from the Bank to GoT will be determined as: strengthene 1. Compliance of ULGAs with minimum access conditions measured (as above); d 2. Sum of scores of all ULGAs calculated (non-MC compliant ULGAs are institutiona By assigned a score of zero) and divided by 18; l Program 3. A. If score equal to target for FY, full allocation, 2 106 0 0 0 100 performanc completi B. If score below target for FY, pro-rata reduction, e31 as on C. If score above target for FY, pro-rata increase. scored in the annual Disbursement will be made provided that previous disbursements from GoT to performanc ULGAs have all been made. e 31 In the areas of urban planning, revenue enhancement, fiduciary systems, implementation of infrastructure, operations and maintenance and oversight systems including environmental and social systems management. 65 # Bank Of which Deadline Minimum Maximum Determination of Financing Amount to be disbursed against achieved and DLI financi Financing for DLI DLI value to DLI value(s) verified DLI value(s) ng available for Achieve be achieved expected to assessment allocat ment to trigger be achieved Disbursement from the GoT to ULGAs will be determined as: Total disbursement ed to disbursemen for Bank amount (as calculated above) divided across compliant ULGAs in accordance with the ts of Bank disbursemen population and score. DLI Financing ts purposes Formula for disbursement from the Bank to GoT is:  [total annual disbursement] = [{sum of individual scores of all ULGAs/18}/ {target score for the FY}] X [target disbursement amount i.e. $26.5m] Performance targets for this DLI are: FY14/15: 60 FY15/16: 70 FY16/17: 80 FY17/18: 90 Formula for disbursement from GoT to ULGAs is:  [disbursement to any ULGA] = [population of ULGA X performance score of ULGA] / [∑ (population of ULGA 1-..18 X performance score of ULGA 1-..18)] X [total disbursement amount for the FY], providing that the ULGA has complied with the minimum conditions Disbursement from the Bank to GoT will be determined as: 1. Compliance of ULGAs with minimum access conditions measured (as above); 2. Sum of score of all ULGAs calculated (non-MC compliant ULGAs are assigned a score of zero) and divided by 18 Local 3. A. If score equal to target for FY, full allocation, infrastructu B. If score below target for FY, pro-rata reduction, re targets C. If score above target for FY, pro-rata increase. as set out in the annual Disbursement will be made provided that previous disbursements from GoT to action By ULGAs have all been made. plans are Program 3 50 0 0 0 100 met by completi Disbursement from the GoT to ULGAs will be determined as: Total disbursement ULGAs on amount (as calculated above) divided across compliant ULGAs in accordance with utilizing population and score. the Program Formula for disbursement from the Bank is: funds  [total annual disbursement] = [{sum of individual scores of all ULGAs/18}/{target score for the FY}] X [target disbursement amount i.e. $16.66m] Formula for disbursement from GoT to ULGAs is  [disbursement to any ULGA] = [population of ULGA X performance score of 66 # Bank Of which Deadline Minimum Maximum Determination of Financing Amount to be disbursed against achieved and DLI financi Financing for DLI DLI value to DLI value(s) verified DLI value(s) ng available for Achieve be achieved expected to allocat ment to trigger be achieved ULGA] / [∑(population of ULGA 1-..18 X performance score of ULGA 1-..18)] X ed to disbursemen for Bank [total disbursement amount for the FY], providing that the ULGA has complied the ts of Bank disbursemen with the minimum conditions DLI Financing ts purposes Performance targets for this DLI are: FY15/16: 70 FY16/17: 80 FY17/18: 90 Core staffing is: Council director, council treasurer, council internal auditor, council engineer, council community development officer (in charge of environmental and Annually social systems management), council supplies officer, council assistant supplies Number of , starting officer (in charge of procurement), council town planning officer, council economist, ULGAs in council human resources officer. 4 with all 14 0 0 Program 9 ULGAs 18 ULGAs core staff year 2 Qualifications of core staff are specified in GoT Scheme of Service. in place (FY13/1 4) $155,500 per ULGA with required staffing per year, if less than 9 ULGAs have the full staffing, no disbursement will be made. PMORALG FY13/14: PMO-RALG submits plan in agreed format. capacity Completion building plan Provided that PMORALG has prepared the capacity building plan for the of annual Annually formulated forthcoming year and that for 2014/15 at least 50% of the 2013/14 activities have PMO- , starting for the been executed, for 2015/16 at least 60% of 2014/15 activities have been executed, for RALG in forthcoming 2016/17 at least 70% of 2015/16 activities have been executed, for 2017/18 and 2018 capacity 5 30 0 0 Program year and N/A at least 80% of 2016 and 2017 activities have been executed, $6 million will be building year 2 minimum disbursed. activities (FY13/1 execution for 4) rates Program specified ULGAs achieved for the preceding year. PMO- RALG has Upon DLI achievement, $10 million will be disbursed. By adopted an Program 6 enhanced 10 0 0 N/A N/A completi LGDG on assessment system 67 # Bank Of which Deadline Minimum Maximum Determination of Financing Amount to be disbursed against achieved and DLI financi Financing for DLI DLI value to DLI value(s) verified DLI value(s) ng available for Achieve be achieved expected to derived allocat ment to trigger be achieved from ed to disbursemen for Bank lessons the ts of Bank disbursemen learned DLI Financing ts purposes from the annual Program assessment 68 Program Minimum Access Conditions (MACs) for DLIs 1, 2 and 3 ULGSP MACs U L L G # G Indicators of Minimum Access Information Source and Assessment Procedures D S G P Grievance handing 1. X System in place for handling grievances 32 Systemic record kept of all grievances related to Program social and environmental management and fiduciary issues. As part of APA, records will be obtained from designated staff for handling grievances on number of grievances filed, nature of grievances, status, and resolution and the status of grievances included in overall Program reporting to PMO-RALG will be verified. Establishment of operational grievance & dispute resolution desk at Mtaa & Ward Offices. Establishment of a functioning and participatory Resettlement Action Plan Committee. [Year 2 and on] Environmental & Social Management 2. LGA Environmental and Social Management Council ratifies use of the Environmental and Social Management Manual (ESM) to guide infrastructure X System in place and operational. investments. [Year 1] From LGAs, obtain list of staff with designated responsibilities for Environmental & Social Management and Resettlement Action Plans (including compensation). [Year 1 and on]. As part of the APA, verify all UPG projects have completed an environmental and social screening checklist per the ESMM procedures prior to start of the projects. Verify all projects requiring Environmental and Social Management Plans have included them in contracts for civil works and securing of Environmental and Social Impact Assessment Certificates from VPO and their associated specifications and conditions from NEMC. Where required, verify Resettlement Action Plan completed and implemented for all projects involving resettlement. [Year 2 and on] Resettlement Action Plans implemented prior to initiating civil works: All Project Affected People eligible for compensation are paid prior to relocation and/or initiation of civil works; and/or eligible Project Affected People relocated to alternative surveyed plots. The team will obtain records from the Council on the number of Project 32 As the establishment of grievance systems in all 18 ULGAs will take time, this indicator will be effective in the second assessment round of the Program. 69 ULGSP MACs U L L G # G Indicators of Minimum Access Information Source and Assessment Procedures D S G P Affected People compensated and/or resettled; approval of compensation by Full Council, and evidence from the accounts department and RAP Committee that compensation has been paid, and reconcile with date of initiation of civil works. (Year 2 and on) Implementation of UPG 3. X Use of the UPG in accordance with the As part of the performance assessment the appropriate use of previous year grant resources will be assessed to investment menu (yes/no) avoid misuse of funds for other purposes than intended. (Year 2 and on) Financial Management 4. X X Final Accounts for the previous FY produced as From the NAO get the names of all LGAs that submitted the final accounts of the previous FY on time noting dates per section 45 (4) of the LGA 1982 and of submission. submitted to National Audit Office (NAO) within three months after the end of the FY (by September 30). 5. X X Internal audit in place and functional as provided  From the Internal Auditor, obtain and review the quarterly internal audit reports to verify that Internal Audit under section 45(1) of the LG Act 1982 and the Reports are produced. LAFM 1997 orders 12-16. (At least 4 Internal Audit Reports prepared during the previous 12  From the Council Director obtain and review the minutes of the Finance and Planning committee for the past months and presented to Finance and Planning 12 months to verify that Internal Audit reports are presented to the Finance and Planning Committee. Committee). Planning and Budgeting 6. X X LGA having annual budget for the current FY From CT, obtain and review the budget for the current FY to establish whether: prepared as per guidelines and approved by  The budget was approved by the council two months before start of the FY; Council two months before the start of the  The budget was prepared as per the guidelines and LAFM regarding estimation of revenue and allocation financial year (by April 30th) expenditure;  The budget is presented in the stipulated format. Procurement 7. X Tender Boards and Procurement Management Review the existence of the tender board and its composition. Units and Engineering Departments properly From PMO-RALG get the set up of the Procurement Management Units and Engineering Departments established and adequately staffed as per PMU. regulations Council’s Functional Processes 8. X X Regular meetings of the council - at least one From the Council Director obtain the minutes of the full council meetings and verify whether the council met meeting held every 3 months (quarterly). quarterly during the previous FY. Audited Accounts - CAG Reports to be compiled by PMO-RALG. 70 ULGSP MACs U L L G # G Indicators of Minimum Access Information Source and Assessment Procedures D S G P 9. X X No adverse Audit Report for Audited Accounts From the National Audit office, get the names of all LGAs with adverse Audit Reports for Audited Accounts of of Council in previous FY. Council with the CAG report for Previous FY. Capacity Building Planning, Reporting and Accountability 10. X X LGA having a Comprehensive Capacity From the CHRO obtain and review the Capacity Building Plan for the current FY to establish, whether it was Building Plan for the current FY incorporating approved by Council and incorporates crosscutting sector capacity building needs. all crosscutting/generic capacity building needs of all sectors approved by Council on time (by April 30). 11. X X LGA has prepared quarterly reports on the From the RS obtain names of LGAs that submitted quarterly reports on utilization of development grants and CBG utilization of development grants and CBG for (CFR and CPR) reports for all the quarters for the previous FY. At the point of time of the assessment, all quarterly the previous FY indicating activities reports from previous FY should have been submitted to PMO-RALG. The team will check the submission by the implemented and funds spent and submitted to ULGA during the field visits and also review the issue at the RS level. PMO-RALG on quarterly basic (CFR and CPR reports). Additional MC on incremental performance (minimum sustainability in results achieved) 12. X The performance of a ULGA should not Review the assessment results from previous FY and compare with the current results of the performance decrease by more than maximum 20 points from assessments. If the score has decreased by more than 20 points, e.g. from 90 to 67 points, the ULGA has not passed one assessment to another this MC. 71 Program Performance Indicators Performance Indicators related with Institutional Improvements (scoring is between 0-100) for DLI 2. Performance Indicators in the table below will be assessed during the annual assessments. As mentioned, in the first assessment only the minimum access conditions will have impact on the UPG allocations. In the second assessment, which will encompass both minimum access conditions and performance indicators, few (2) of the performance indicators will not be applied. The two performance indicators which will only be applied from the third assessment, which will start from September 2014, are mentioned in the column with the Description, Information Source and Assessment Procedure. Performance indicators and scoring guide for the Annual Performance Assessment Performance # Scoring Guide Description, Information Source and Assessment Procedure Indicators I. Urban Planning System Improved (maximum 10 points) 1. General Planning GPS for Council adopted by Council  The GPS plan needs to be completed as per MLHHSD guidelines and discussed at Scheme (GPS) for Management Team: Points are allocated per step Council Consultative meetings. Council adopted of completion in the MLHHDS guidelines:  The Process is handled by the Council GPS Technical Committee (Max 10 points)  The team will review whether there is compliance with each step in the guidelines and Step 1: Preparation Process: 1 point award points per step. Step 2: Initiation and Mobilization: 1 point Step 3: Data collection and processing, including maps and socio-economic data: 1 point Step 4: Data analysis: 1 point Step 5: Plan conceptualization: 1 point Step 6: Plan Preparation: 1 point Step 7: Plan adoption: 3 points Step 8: Plan approval: 1 point II. Increased Revenues from Property Tax (maximum 25 points) 2. Updated Local Computerized Property Register in place and  Since the project is targeting Urban LGA the priority is to get computerized systems, Government updated. which will help them to handle larger data bases. property tax system Yes: score 1 point; No: score 0 point in place Computerized billing and invoice delivery  Sound databases must be followed up by effective billing and invoice delivery systems to (Max 5 points) system in place. ensure full coverage and inclusion of the entire tax base. Yes: score 2 point; No: score 0 point  Review of the billing system and the level of computerization. Multiple channels for property tax payment  Multiple channels refer to different option for tax payer to make payment such as regular (collection) system in place. bank, mobile payment system, etc. Yes: score 2 point; No: score 0 point  Strengthened collection systems will lead to higher revenues. 72 Performance indicators and scoring guide for the Annual Performance Assessment Performance # Scoring Guide Description, Information Source and Assessment Procedure Indicators 3. Increase in the Increase in the number of properties in the  Widening of the property tax base and maintaining pace with the physical growth of the number of properties property register, measured in percentage ULGA is important for sustained growth of revenues from property tax. The team will in the property By more than 30 %: score 5 points review the property registered for the last two years. register By 21% - 30 %: score 4 points (Max 5 points) By 11% - 20% score 3 points By 6% - 10 %: score 2 point By 1% - 5% score 1 Note: if the coverage is 100 %, then maximum points is given. 4. Increase in taxable Percentage of taxable properties valued as  Property taxation is based on valuation as prescribed in relevant Acts and government properties valued compared to the total taxable properties in the guidelines. (Max 5 points) property register:  Review of the share of the taxable properties valued in the register. Between 10 to 30%: score 1 point Between 31 to 50%: score 2 points Between 51 to 60%: score 3 points Between 60% to 70:score 4 points More than 70%: score 5 points 5. Billing collection Billing collection ratio of property taxes (%)  Measurement of collection ratio (actual collection / total of all invoices distributed) ratio of property Between 20 to 39%: score 1 point taxes Between 40 to 59:score 2 points (Max 5 points) Between 60 to 70%:score 3 points Between 71 to 80%:score 4 points More than 80%: score 5 points 6. Increase in property If the ULGA has increased collected revenue  Measurement of real collection growth from the previous year but one to the previous FY. tax collected from property tax in the previous FY as (Max 5 points) compared to the previous year but one: By more than 10 %: score 5 points By 7% - 10 %: score 3 points By 4% - 6% score 2 points By 1% - 3 %: score 1 point Less than 1% score 0 73 Performance indicators and scoring guide for the Annual Performance Assessment Performance # Scoring Guide Description, Information Source and Assessment Procedure Indicators III. Efficient Fiduciary System (maximum 25 points) 7. Average score on the Application of the PPRA scoring system with the The Public Procurement Regulatory Authority (PPRA) uses a standardized assessment tool. PPRA for targeted following implications on the points: The assessment manual contains the exact definition of each element and scoring guidelines. ULGAs PPRA determines an annual target score and which is used to benchmark MDAs and LGAs. (Max 10 points) PPRA: Score 95-100: 10 points PPRA indicators include: Score 90-94: 9 points 1. Existence of a Tender Board in accordance with the requirements of the Act and Score 85-89: 8 points Regulations Score 80-84: 7 points 2. Existence of a PMU in accordance with the requirement of the Act and Regulations Score 75-79: 6 points 3. Percentage of tenders in which there was no interference between individual functions Score 70-74: 5 points 4. Prepared annual Procurement Plan Score 65-69: 4 points 5. Percentages of tenders/ contracts which received compulsory approvals in various Score 60-64: 3 points processes 6. Percentage of open bidding procedures publicly advertised Below benchmark: 60: 0 points. 7. Percentage of contract awards disclosed to the public 8. Percentage of tenders complying with the stipulated time in the Act and Regulations 9. Percentage of tenders using authorized methods of procurement in accordance with their limits of application 10. Percentage of tender using standard/approved tender documents 11. Percentage of tenders with complete Records 12. Formation and Function of inspection committees (goods) and project managers 13. Percentage of contracts which have been implemented as per the terms of contract 8. Efficient FM system Audit committee in place and operational  Review composition of the audit committee and ensure that it has had regular in place meetings (quarterly) with minutes for the proceedings. (Max 15 points) Yes: score 2 point; No: score 0 point Timely reconciled accounts in place and  Review the accounts and letters to the departments, meet with departments and Communication to Implementing Departments check the communication to ascertain that they have been informed about funds of funds received documented received. Yes: score 2 point; No: score 0 point Unspent balances from previous FY are included  Review budgets and actual accounts from previous year as well as budget from this in the budget (as supplementary) for the on- year, and minutes from decision-making on budget allocations to see if the carried going FY forward funds have been properly budgeted for. Yes: score 3 point; No: score 0 point Cash flow and procurement plans for following FY in place with clear prediction of revenue and  Review cash-flow and procurement plans. expenditures 74 Performance indicators and scoring guide for the Annual Performance Assessment Performance # Scoring Guide Description, Information Source and Assessment Procedure Indicators Yes: score 2 point; No: score 0 point  Review audit report from previous FY. Clean audit report from previous audit. If yes: Score 6  Review audit report and ascertain that all queries have been addressed, review All Issues from previous audit report rectified minutes from meetings, etc. (yes/no). If Yes: score 4 point; No: score 0 point (note that if there was a clean audit report the points are provided above and not under this sub-indicator) I.V Improved Infrastructure, Implementation and Operations & Maintenance (Maximum 20 points) 9. Up-dated annual plan Annual Plan for Development Budget, including  This is a measure for the planning process and for the utilization of the UPG. The annual including investments financed by the Performance Grant plan preparation process has to be consultative and must involve the relevant investments from developed, and up-to-date with Annual Action departments as well as the CMT included elected members of the Council. UPG is in place Plan for all UPG funded activities with clearly  Review of the annual action plan and ascertain that all UPG projects are included, with (Max 5 points) identifiable project targets. full budget, and clearly identifiable targets for achievements. Yes: point 5 No: point 0 10. Increase in amount Increase in amount of OSR transferred to the  Review the level of transfers from OSR to development account (account number 2 of OSR transferred development account ULGA level) for the last two FY. Note that only score can be obtained, e.g. 4 points (not to the development 2 +4 points). account More than 10% over last year amount = score 5 (Max 5 points) More than 7 %: score 4 point More than 5 %: score 3 points More than 3 %: score 2 points 3 % and below: score 0 points. 11. Annual utilisation of Use of the annual UPG compared to plan:  Review the development plan including the planned investments from UPG, and UPG More than 85 %: Score 5 compared with the actual spending by the end of the FY. (Max 5 points) More than 75 %: Score 4 More than 65 %: Score 3 More than 55 %: Score 2 This will only be applied from the third annual assessment, starting September 2014, as 55 and below: Score 0 only then will there be a FY with UPG spending to review. (Note if there are no options to ascertain the 75 Performance indicators and scoring guide for the Annual Performance Assessment Performance # Scoring Guide Description, Information Source and Assessment Procedure Indicators planning and use of the grants, the score is also rated as 0.) 12. O & M plan in place ULGA has Operations and Maintenance Plan  Review the plan and budgets and compare the total development budget with the budget and executed including budgeting in place and the budget is for O&M. minimum 5 % of the total development budget. (Max 5 points) Yes: score 2 point; No: score 0 point ULGA actual expenditure on O&M higher than  Review the actual use of funds on O&M for projects planned and budgeted for against 90% compared with annual O&M budget. the budget. (note only one score, e.g. 2 points (not 3 +2 points) can be obtained for this Higher that 90 %: score 3 indicator) Higher than 80 %: Score 2 Higher than 70 %: Score 1 70 % or below: score 0 point V. Accountability and Oversight Systems Strengthened (Maximum 20 points) 13. Consultative process The development plan is developed and  Review minutes from meetings in council, committees and from the meetings with the for the development discussed by (a) Full Council; (b) respective public. Cross-check information with various sources. plan in place. Ward Development Committees; and (c) the respective Regional Secretariat and with public (Max 2 points) consultations. Yes in compliance will all: score 2 point; No: score 0 point 14. Annual progress Annual and quarterly financial and physical  Review minutes from the council and discuss the issues with administration and reporting and progress report presented to and discussed by the councillors. disseminating Council. systems in place. Yes: score 2 point; No: score 0 point Annual financial and physical progress report  This refers to the Councils overall financial and physical progress. Not only restricted to (Max 3 points) disseminated to the general public via suitable performance grant utilization. (newspapers, local radio stations, web pages etc.) commonly available media. Yes: score 1 point; No: score 0 point 15. Information on use Information on use of OSR publicly disclosed  Information disclosed on use of OSR could be part of annual budget report or other of OSR publicly (e.g. newspaper, notice boards, radio etc.). implementation reports. Review the documentation for disclosure of information. disclosed Yes: score 3 point; No: score 0 points (Max 3 points) 16. ULGA Service Service Charter including service delivery  Review Service Charter and ascertain that it complies with the scoring guide. Charters with improvement plan and targets adopted by the standards in place Council and disseminated to and made available 76 Performance indicators and scoring guide for the Annual Performance Assessment Performance # Scoring Guide Description, Information Source and Assessment Procedure Indicators to general public. (Max 2 points) Yes: score 2 point; No: score 0 point 17. Systematic records Environmental and Social Performance Reports  As part of overall Program reporting from LGAs to PMO-RALG, staff with designated maintained on all sent to PMO-RALG quarterly. responsibilities for environmental & social management and Resettlement Action Plans environment and Yes: score 5 point; No: score 0 point (including Compensation) report on a quarterly basis according to guidelines and social activities manuals provided by PMO-RALG. implemented by ULGAs (max. 5 This will only be applied from the third annual assessment, starting September 2014, as points) only then will there be a FY with UPG spending to review. 18. All participatory Procedures for public participation in  Verify in meeting minutes that at least one public meeting for infrastructure projects consultative Environmental and Social Impact Assessment included environmental and social issues. processes on ULGA and Resettlement Action Plans followed.  Verify from LGA that projects requiring environmental and social impact assessment program activities has made document publicly available, including dates for local disclosure and comment address relevant Yes: score 5 point; No: score 0 point period, media outlets and location of documents. environmental and  For projects requiring resettlement and compensation, verify that public sensitization social considerations meeting was held and that affected people have been involved in the consultations. (Max 5 points)  (this indicator should be applied already from the September 2013 assessment as the plans and budgets for FY 2013/14, should apply this new system). TOTAL Maximum Points: 100 77 Physical Progress on Local UPG Funded Investments – Second Component in the Annual Performance Assessment for DLI 3 (Assessment in September 2014 with impact on FY 2015/16)33 Performance indicators and scoring guide for the Annual Performance Assessment # Performance Indicators Scoring Guide Description, Information Source and Assessment Procedure 1. Local infrastructure targets as set out Physical targets as included in the annual action Achievement under this indicator will be measured on the basis of actual delivery in the annual action plans met by plan implemented. of infrastructure against targets laid out in the action plan for the previous year ULGAs utilizing the Program Funds. using UPG funds. The means for verification are: (Max 100 points) The % of implementation will be reflected directly in the score, i.e. 80 % = 80 points.  Measurement of the utilization of the UPG and ensure timely implementation of projects. Review all planned projects and the degree to which they have The score on this indicator will be between 0- been implemented by the end of the FY. 100.  Review annual and quarterly action plans and reports  Check sample projects from the field-work (on-the-spot of implementation rates)  Check the contract implementation progress and contract completions through the review of bills of quantities, see the description below. Implementation rate of each project will be assessed and there will a weighting of these to get a total score. The weight of each project will depend on the budgeted size of the projects. This will only be applied from the third annual assessment, starting September 2014 (impact on the FY 2015/16 allocations), as only then will there be a full previous FY with UPG spending to assess. Total Score Maximum Score is 100 points 33 The indicators in the assessment will be different for the assessment in 2014 with impact on FY 2015/16 and the following years, as assessment of value for the money will start in the assessments from 2015 with impact on FY 2016/17. 78 Physical Progress on Local UPG Funded Investments – Second Component in the Annual Performance Assessment for DLI 3 (Assessment in September 2015 and following years) This will only be applied from the fourth annual assessment, starting September 2015 (impact on the FY 2016/17 allocations). Performance indicators and scoring guide for the Annual Performance Assessment # Performance Indicators Scoring Guide Description, Information Source and Assessment Procedure 1. Local infrastructure targets as set Physical targets as included in the annual Achievement under this indicator will be measured on the basis of actual out in the annual action plans met action plan implemented. delivery of infrastructure against targets laid out in the action plan for the by ULGAs utilizing the Program previous year using UPG funds. The means for verification are: Funds. The % of implementation will be reflected (Max 50 points) directly in the score multiplied by 50 %  Measurement of the utilization of the UPG and ensure timely (weight of this indicator), i.e. 100 % = 50 implementation of projects. Review all planned projects and the points, 70 % = 35 points. degree to which they have been implemented by the end of the FY.  Review annual and quarterly action plans and reports The score on this indicator will be between  Check sample projects from the field-work (on-the-spot of 0-50. implementation rates)  Check the contract implementation progress and contract completions through the review of bills of quantities, see the description below. Implementation rate of each project will be assessed and there will a weighting of these to get a total score. The weight of each project will depend on the budgeted size of the projects. Assessed by the performance assessment teams. 2. Value for the money in the % of projects implemented with a infrastructure investments funded satisfactory level of value for the money, The value for the money of each project (level of satisfactory value for the by the Program calibrated in the value for the money money) will be assessed and there will a weighting of these to get a total assessment tool. score. The weight of each project will depend on the budgeted size of the projects. The % of projects with a satisfactory level of value for the money will be reflected in The input from this will be provided by the PPRA (value for the money the score multiplied by 0.5 (which is the audits) to the assessment teams to include in the calibration and in the final weight of this indicator), i.e. 80 % calculation of the size of the allocations. satisfactory projects= 40 points, 70 % = 35 points. 79 Performance indicators and scoring guide for the Annual Performance Assessment # Performance Indicators Scoring Guide Description, Information Source and Assessment Procedure The score on this indicator will be between 0-50 (max). Total Maximum Score = sum of indicator 1 and 2 = 100 points. 80 MUNICIPAL COUNCIL (Generalized Structure) Annex 1 Organizational Structure of Tanzania Local Government Authorities Municipal Director Member of Parliament Mayor Elected by Ward Executive Officers / Departments: Councilors Legal COUNCIL Finance and Trade All Directly Elected Ward Councilors Internal Audit Information & Communication Procurement & Supply Council Committees: Works (and Fire) Finance Health Urban Planning & Environment Water Economy, Education & Health Urban Planning & Land Planning, Statistics & Monitoring Elections Administration and HR Ward Environment Education (primary & secondary) Ward Ward Ward Councilor Ward Directly elected by residents of all Sub-wards (Mtaa) that make up the ward Executive Officer Ward Development Committee All Mtaa Chair Persons and Executive Officers of the Council Extension Officers Mtaa Chair Person Mtaa Chair Person Elected by Mtaa electorate Elected by Mtaa electorate Mtaa Sub-committees Mtaa Sub-committees formed by residents formed by residents Finance & Planning Finance & Planning Security & Administration Security & Administration Social Services Social Services Mtaa Mtaa General Assembly Mtaa General Assembly Executive Sub-ward (Mtaa) Electorate Sub-ward (Mtaa) Electorate All residents of Sub-ward (Mtaa) All residents of Sub-ward (Mtaa) Officer Executive Elected 81 Annex 2 Government of Tanzania Existing and Proposed Open Government Measures related to ULGAs CATEGORY EXISTING MEASURES DRAFT OGP COMMITMENTs for April 2012 Transparency 1. Three Parliamentary Watchdog Committees to oversee LGA 1. Overall dashboard of progress against Tanzania Open Government commitments and and parastatal organizations and community oversight update quarterly by July 2012. boards monitoring public service delivery. 2. Publish online within one month all reports, studies, data, circulars, and other public 2. Public Complaint desks and suggestions boxes in central gov interest data; 50% of ministries by July 2012, rest by July 2013. and LGAs. 3. citizen's budget document yearly by July 2012. 3. Establish PPRA requiring advertising tenders and award 4. Review formula based grant allocation system to suit current needs of LGAs by decisions. December 2013, publish all allocations to LGAs online, and LGAs publish budgets 4. Publish and publicly post quarterly Budget Expenditure and expenditures in public places by July 2012. Reports and disbursements from treasury to LGAs. 5. Post quarterly disbursements and execution reports and tax exemption grants on MoF website in a friendly format by July 2012. 1. LGA budgets formulated through O&OD with villages Improve citizens website by July 2012 and produce monthly reports on website's Citizen submitting plans and budgets to LGAs responsiveness Participation 2. Citizens website www.wanachi.go.tz Enable mobile phone based commenting by citizens and responses by December 3. Village Land Act requires Village Assembly to allocate land 2012. to individuals or firms in open and transparent manner Launch Civil Society Open Forum to review OGP commitments starting March 2012 Accountability 1. Client Service charters Improve National Audit office/Comptroller and Auditor General Website to be and Integrity 2. National Anti-Corruption Strategy and Action Plan requires machine readable formats by December 2012 LGAs to initiate concrete measures to address corruption Review LGAs Clients Service Charters and make accessible to citizens by July 2013 3. Institutional Integrity Committees at Central and LGA level Review complaints register to ensure complaints are attended and feedback on action and Chief Internal Auditor General to oversee is documented and posted to LGAs website quarterly by July 2013 4. Introduction of Public Expenditure Tracking Surveys Review response rate at complaint register and ensure LGAs Service Boards and 5. Formula based grant to LGAs based on population, access to committees strengthen by July 2013 services, poverty index and land area, with utilization of Strengthen mechanisms for enforcement of laws, regulations, standing orders IFMS connected to LGAs Prepare legislation to strengthen asset disclosures of public official and make accessible online by December 2012 Technology 1. National ICT Policy 2003 to facilitate ICT solutions to Finalise Water point mapping system for LGAs and publish data by December 2013 and support service delivery including: Financial Management Strengthen use of sectoral MIS by making facility level information available online Innovation systems, National payroll Systems, Human resources in machine readable format by July 2013 management systems websites etc.. Publish data on allocation, disbursements and use of funds for all roads managed by 2. Connect Central and LGAs to Terrestrial National Fiber TANROADS and other relevant agencies Optic backbone to enhance data access and sharing Digitise and publish online in GIS format all surveyed plots allocated 3. Establishment of Water Sector management information explore a citizen guide website for accessing public services and grievance redressal Systems with web based water point mapping systems for Study global good practice on data disclosure and launch www.data.go.tz with planning and monitoring of water distribution services. substantial machine readable datasets by Dec 2012 82 Annex 4 Example of advertised tender in local newspaper for NCT by a ULGA 8 3 Annex 5 Conditional Grants Flowing to Local Governments Sector Funding Flows Tanga Chamwino Iramba Cross sec LG x x x LGDCDG x x x Health Health Basket x x x TACAIDS x x x TMAP x x JRF x x MAAM x x Agriculture ASDP x x x Water RWSSP x x x WSDP x x x Roads LGTP x x Road Fund x x x VTTP x x Education PEDP x x x Capitation Grant x x x SEDP Others TSCP x UDEM x TASAF x x x UKEDA x x TUNAJALI x PFM x Others (Non GoT) North to South x World Vision x WaterAid x x Belgian Survival Foundation x Action Aid x Source: World Bank (2010): Local Government Stocktaking Exercise 8 4 Annex 6: PUBLIC PROCUREMENT REGULATORY AUTHORITY RED FLAGS CHECK LIST Procuring Procuring entity Tender Name of Procureme Red Flag Yes No N/A Date of nt phase Pre-bid phase 1. The procurement is not in the procurement plan 2. The objective of the procurement is unclear or vague 3. Insufficient or inconsistent planning timeframe applied 4. The tender is not packaged with other tenders for similar goods (i.e. splitting) 5. Significant deviations from standard bidding documents 6. Technical specifications are weak or unclear 7. Technical specifications are narrow or appear tailored 8. Selected procurement method does not observe existing thresholds 9. Insufficient advertising 10. Inadequate time given for preparing bids 11. Lack of mandatory approvals by appropriate authority 12. Inaccurate minutes of pre-bid meetings 13. Clarifications are not circulated to all bidders 14. Incomplete records of the pre-bid phase Evaluation 15. Evaluation Committee members do not have the technical and award expertise necessary phase 16. The evaluation is being conducted by a small number of persons 17. The same Evaluation Committee members are involved in many procurements 18. Qualified bidders are voluntary dropping out of tender process 19. Disqualification of bidders on minor technicalities 20. Unreasonable delays in evaluating the bids and awarding the contract 21. Evaluation criteria are amended after receipt of bids 22. Narrow variance between the cost estimate and the bid amounts received 23. Major similarities between competing bids (e.g. similar format, errors, prices) 8 5 24. Unusually large variance between the price of competing bids 25. The same shareholders are involved in several bids using different company names 26. Failure to disqualify bids despite major errors 27. Falsification of submitted documentation (e.g. authorisations, CVs, etc.) 28. Failure to publicise award decisions simultaneously to all bidders 29. Contract is not in conformity with bid documents (e.g. specification or quantities) 30. Non-responsive bids are made responsive as result of clarification from procuring entity 31. Quality criteria are not defined in the contract 32. Incomplete records of evaluation and award Contract 33. Negotiation team does not include adequate technical management expertise and audit 34. Minutes of the negotiations are not in line with Terms phase and Conditions of Contract 35. Contract specifications altered after award of contract 36. Contract is not signed by duly authorised officer 37. Failure to deliver the quality specified in contract 38. Failure to deliver the right quantities of goods and materials 39. Delays in delivery of goods, works or services 40. Replacement of nominated consultant by less qualified personnel 41. Instructions are not given in writing to contractors 42. Cost overruns are inadequately justified 43. Contract variations are not approved by appropriate authority 44. Failure to impose liquidated damages in case of delays 8 6 Procurement Red Flag Yes No N/A phase 45. Failure to make progress payments or final payment within stipulated timeframe 46. Failure to pay retention money in a timely manner 47. Double payment of supplier 48. No or insufficient evaluation of the contractors’ quality of performance 49. Client dissatisfaction with completed products 50. Incomplete contract management records 8 7 VALUE FOR MONEY (VFM) FORM � BUILDINGS Agency: Contract Price: Project: Project Length Supervising Engineer: Contract Period: Contract Number: Audit Date: EVALUATION SCORE S/N ASPECT Poor Fair Good A. Planning Stage 1 2 3 1 Was the project in the approved/revised budget? 2 Was the project in the approved procurement plan? 3 Was the procurement plan/revised procurement plan followed? 4 Was the Consultant timely engaged before the Contractor? 5 Was the problem properly identified? 6 Was feasibility study/survey carried out correctly before detailed designs? 7 Were designs and drawings complete and adequate? 8 Were engineer's estimates prepared and adequate? 9 Were BoQs for the works prepared and adequate? 10 Were Technical Specifications, including Specifications of Particular Application, written properly? 11 Were bidding documents satisfactorily prepared? Average Performance Planning Stage #DIV/0! B. Procurement Stage 1 2 3 1 Was tender notice in compliance with Section 61(2) of PPA 2004? 2 Was the tender document approved by TB in compliance with Section 30 of PPA 2004 and R 54 of 3 Was the procurement method used in line with Section 59 of PPA 2004? 4 Was the selected contractor appropriate with respect to the size of the works 5 Were appropriate bidding documents used in compliance with Section 63 of PPA 2004? 6 Was the prequalification and shortlist carried out as per Section 47 of PPA 2004 7 Were evaluation and award in line with the PPA 2004? 8 Was adequate time given to bidders in compliance with Section 61(3) of the PPA 2004? 9 Were clarifications (if any) communicated to all bidders? 10 Was the tender evaluation committee constituted as per Section 37 of PPA 2004 11 Was the tender evaluation report comprehensive? 12 Was the approval for award by the TB in compliance with PPA 2004? 13 Were unsuccessful bidders notified in line with Reg. 97(11) of G.N. No. 97? 14 Were awards published in line with Regulations 21 and 97(12) of G.N. No. 97? 15 Were minutes of Tender Board meetings properly prepared? 16 Was the procurement process efficient in comparison with the standard procession times 17 Were contract documents adequately prepared? 18 Was the contract properly signed? 19 Were records for this tender properly kept and readily available? 20 Were there any other deviation from PPA 2004? (Explain Average Performance Procurement Stage #DIV/0! C. Contract Administration 1 2 3 1 Did the contractor submit the performance bond? (If applicable?) 2 Did the Contractor submit a contractually complying Advance payment Bond? (If applicable 3 Was the work program prepared, approved and satisfactory? 4 Was the work implemented according to the approved work program? (within contract period 5 Were site meetings held regularly as per the contract? 6 Was the project completed in time? 7 Were the variations approved according to laid down procedure 8 Were extensions of time contractually justifiable and were legally approved? 9 Was the project completed within the approved budget (Including approved variations) 10 Did payment certificates include measurement sheets? 11 Was the contractor paid in accordance with provisions in the contract 12 Are the records of selecting and testing of the materials used and completed works complete and 13 Were claims properly managed? 14 Were site Instructions properly and timely issued? 15 Was the snag list prepared and signed by parties? (Client, Consultant, Contractor) 16 Was Final Certificate Issued and on time? 17 Were communications from the contractor timely acted upon? 18 Were liquidated damages contractually claimed for delayed completion? 19 Any other aspect noted (specify)? Record keeping Average Performance Contract Administration and Quality Aspects #DIV/0! D. Quality of Works 1 2 3 1 Was there a quality assurance plan (supervision, stage approvals, testing and test results) 2 Were the materials tested and approved? 3 Were there stage approvals? (where applicable 8 8 4 Were specifications adhered to? 5 Are the dimensions (lay out) in accordance to drawings? 6 Quality of materials used and completed works assessment 7 Floor (assess general quality appearance) 8 Walls (assess general quality appearance) 9 Roof (assess general quality appearance) 10 Ceiling (assess general quality appearance) 11 Doors (assess general quality appearance) 12 Windows (assess general quality appearance) 13 Ironmongeries (assess general quality appearance) 14 External works 15 Were final inspections carried out properly? → Weighting #DIV/0! Average Performance 0% � 49% Poor 1 = Poor 50% � 74% Fair Evaluation Scale 2 = Fair 75% �100% Good 3 = Good #DIV/0! 8 9 ANNEX 6 VALUE FOR MONEY (VFM) FORM � ROADWORKS Agency: Contract Price: Project: Project Length Supervising Engineer: Contract Period: 9 0 Contractor: Contract Number: Audit Date: EVALUATION SCORE S/N ASPECT Poor Fair Good A. Planning Stage 1 2 3 1 Was the project in the approved budget? 2 Was the project in the approved procurement plan? 3 Was the procurement plan/revised procurement plan followed? 4 Was the Consultant timely engaged before the Contractor? 5 Was the problem properly identified? 6 Was feasibility study/survey carried out correctly before detailed designs 7 Were designs and drawings complete and adequate? 8 Were engineer's estimates prepared and adequate? 9 Were BoQs for the works prepared and adequate? Were Technical Specifications, including Specifications of Particular Application, written 10 properly? 11 Were bidding documents satisfactorily prepared? Average Performance Planning Stage #DIV/0! B. Procurement Stage 1 2 3 1 Was tender notice in compliance with Section 61(2) of PPA 2004? Was the tender document approved by TB in compliance with Section 30 of PPA 2004 and R 2 54 of GN No 97? 3 Was the procurement method used in line with Section 59 of PPA 2004? 4 Was the selected contractor appropriate with respect to the size of the works 5 Were appropriate bidding documents used in compliance with Section 63 of PPA 2004? 6 Was the prequalification and shortlist carried out as per Section 47 of PPA 2004 7 Were evaluation and award in line with the PPA 2004? 8 Was adequate time given to bidders in compliance with Section 61(3) of the PPA 2004? 9 Were clarifications (if any) communicated to all bidders? 10 Was the tender evaluation committee constituted as per Section 37 of PPA 2004? 11 Was the tender evaluation report comprehensive? 12 Was the approval for award by the TB in compliance with PPA 2004? 13 Were unsuccessful bidders notified in line with Reg. 97(11) of G.N. No. 97 14 Were awards published in line with Regulations 21 and 97(12) of G.N. No. 97? 15 Were minutes of Tender Board meetings properly prepared? 16 Was the procurement process efficient in comparison with the standard procession times? 17 Were contract documents adequately prepared? 18 Was the contract properly signed? 19 Were records for this tender properly kept and readily available? 20 Were there any other deviation from PPA 2004? (Explain) Average Performance Procurement Stage #DIV/0! C. Contract Administration 1 2 3 1 Did the contractor submit the performance bond? (If applicable? 2 Did the Contractor submit a contractually complying Advance payment Bond? (If applicable) 3 Was the work program prepared, approved and satisfactory? Was the work implemented according to the approved work program? (within contract 4 period) 5 Were site meetings held regularly as per the contract? 6 Was the project completed in time? 7 Were the variations approved according to laid down procedure? 8 Were extensions of time contractually justifiable and were legally approved 9 Was the project completed within the approved budget (Including approved variations)? 10 Did payment certificates include measurement sheets? 11 Was the contractor paid in accordance with provisions in the contract Are the records of selecting and testing of the materials used and completed works complete 12 and adequate? 15 Was the snag list prepared and signed by parties? (Client, Consultant, Contractor) 16 Was Final Certificate Issued and on time? 17 Were communications from the contractor timely acted upon? 18 Were liquidated damages contractually claimed for delayed completion? 19 Any other aspect noted (specify)? Record keeping Average Performance Contract Administration 9 and Quality Aspects #DIV/0! 1 D. Quality of Works 1 2 3 1 Was there a quality assurance plan (supervision, stage approvals, testing and test results)? 2 Were the materials tested and approved? 3 Were there stage approvals? (where applicable 4 Were specifications adhered to? 5 Are the dimensions in accordance to drawings? 6 Pavement thickness in comparison with specified and paid for thickness 7 Camber and / or super elevation 8 Quality of materials used and completed works assessment 9 Bridge dimensions (assess compliance with specified dimensions in the drawings 10 Culverts dimensions (assess compliance with specified dimensions in the drawings 11 Catch water drains (assess compliance with specified dimensions in the drawings 12 Side drains (assess compliance with specified dimensions in the drawings) 13 Mitre drains (Do they conform to specifications / drawings?) 14 Road signs (assess compliance with specified dimensions in the drawings) 15 Were final inspections carried out properly? → Weighting #DIV/0! Average Performance Quality of Works 0% � 49% Poor 1 = Poor 50% � 74% Fair Evaluation Scale 2 = Fair 75% �100% Good 3 = Good #DIV/0! 9 2 ANNEX 6 VALUE FOR MONEY (VFM) Agency: Contract Price: Project: Project Length Supervising Engineer: Contract Period: Contract Contract Number: or Audit Date: EVALUATION A. Planning Stage 1 Was the project in the approved budget? N/A N/A N/A 2 Was the project in the approved procurement plan? 3 Was the procurement plan/revised procurement plan followed? 4 Was the Consultant timely engaged before the Contractor? 5 Was the problem properly identified? 6 Was feasibility study carried out correctly before detailed designs 7 Were designs and drawings complete and adequate? 8 Were engineer's estimates prepared and adequate? 9 Were BoQs for the works prepared and adequate? 10 Were Technical Specifications, including Specifications of Particular Application, written properly? 11 Were bidding documents satisfactorily prepared? Average Performance Planning Stage #DIV/0! B. Procurement Stage 1 Was tender notice in compliance with Section 61(2) of PPA 2004? 2 Was the tender document approved by TB in compliance with Section 30 of PPA 2004 and R 54 of GN No 97? 3 Was the procurement method used in line with Section 59 of PPA 2004? 4 Was the selected contractor appropriate with respect to the size of the works? 5 Were appropriate bidding documents used in compliance with Section 63 of PPA 2004? 6 Was the prequalification and shortlist carried out as per Section 47 of PPA 2004? 7 Were evaluation and award in line with the PPA 2004? 8 Was adequate time given to bidders in compliance with Section 61(3) of the PPA 2004? 9 Were clarifications (if any) communicated to all bidders? 10 Was the tender evaluation committee constituted as per Section 37 of PPA 2004? 11 Was the tender evaluation report comprehensive? 12 Was the approval for award by the TB in compliance with PPA 2004? 13 Were unsuccessful bidders notified in line with Reg. 97(11) of G.N. No. 97 14 Were awards published in line with Regulations 21 and 97(12) of G.N. No. 97? 15 Were minutes of Tender Board meetings properly prepared? 16 Was the procurement process efficient in comparison with the standard procession times? 17 Were contract documents adequately prepared? 18 Was the contract properly signed? 19 Were records for this tender properly kept and readily available 20 Were there any other deviation from PPA 2004? (Explain) Average Performance Procurement Stage #DIV/0! C. Contract Administration 1 Did the contractor submit the performance bond? (If applicable? 2 Did the Contractor submit a contractually complying Advance payment Bond? (If applicable) 3 Was the work program prepared, approved and satisfactory? 4 Was the work implemented according to the approved work program? 5 Were site meetings held regularly as per the contract? 6 Was the project completed in time? 7 Were the variations approved according to laid down procedure 8 Were extensions of time contractually justifiable and were legally approved? 9 Was the project completed within the approved budget (Including approved variations)? 10 Did payment certificates include measurement sheets? 9 11 Was the contractor paid in accordance with provisions in the contract? 3 completed works complete 12 Are the records of selecting and testing of the materials used and and adequate? 13 Are there records of claims from the Contractor and approval by the Engineer 14 Were site Instructions properly and timely issued? 15 Was the snag list prepared and signed by parties? (Client, Consultant, Contractor 16 Was Final Certificate Issued and on time? 17 Were communications from the contractor timely acted upon? 18 Were liquidated damages contractually claimed for delayed completion 19 Any other aspect noted (specify)? Record keeping Average Performance Contract Administration and Quality Aspects #DIV/0! D. Quality of Works 1 2 3 1 Was there a quality assurance plan (supervision, stage approvals, testing and test results)? 2 Were specifications adhered to? 3 Are the dimensions in accordance to drawings? 4 Quality of materials used and completed works assessment 5 Was the borehole drilled as per specifications? 6 Were pipe casings laid as per specifications? 7 Were gravel pack, inert backfill and sanitary seal provided as per the specifications 8 Was pump test conducted? 9 Was well capping provided? 10 Were final inspections and testing carried out properly? 11 Any other aspect noted? (specify) Average Performance #DIV/0! 1 = Poor 0% � 49% Poor Evaluation Scale 2 = Fair 50% � 74% Fair 3 = Good 75% �100% Good Overall Project #DIV/0! Performance 9 4