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i
Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 66228-ET
INTERNATIONAL DEVELOPMENT ASSOCIATION
PROJECT PAPER
ON A
PROPOSED ADDITIONAL CREDIT
IN THE AMOUNT OF SDR 193.4 MILLION
(US$ 300.0 MILLION EQUIVALENT)
AND
FROM CRISIS RESPONSE WINDOW RESOURCES
IN THE AMOUNT OF SDR 45.2 MILLION
(US$ 70.0 MILLION EQUIVALENT)
TO THE
FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA
FOR A
PRODUCTIVE SAFETY NET APL III PROJECT
(PSNP APL III)
March 1, 2012
This document has a restricted distribution and may be used by recipients only in the performance of their
official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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ii
CURRENCY EQUIVALENTS
(Exchange Rate Effective January 31, 2012)
Currency Unit =Ethiopian Birr (ETB)
ETB17.22 = US$1
US$0.6447 = SDR 1
FISCAL YEAR
July 8 - July 7
ABBREVIATIONS AND ACRONYMS
AED Agricultural Extension Directorate
APL Adaptable Program Loan
BOARD Bureau of Agriculture and Rural Development
BoFED Bureau of Finance and Economic Development
BPR Business Process Re-engineering
CAS Country Assistance Strategy
CBHW Community Based Health Workers
CBPWDP
CCI
Community Based Participatory Watershed Development Planning
Complementary Community Investments
CFSTF Community Food Security Task Force
CGAP Consultative Group to Assist the Poor
CIDA Canadian International Development Agency
COPCU
CPAR
Channel One Programs Coordination Unit
Country Procurement Assessment Report
CRW
CSA
Crisis Response Window
Central Statistical Agency
CSRP Civil Service Reform Plan
DA
DAG
DANIDA
Development Agent
Development Assistance Group
Danish International Development Agency
DCT Donor Coordination Team
DFID
DP
DRM
United Kingdom Department for International Development
Development Partner
Disaster Risk Management
DRMFS Disaster Risk Management and Food Security
DRMFSS Disaster Risk Management and Food Security Sector
DS Direct Support
DWG Donor Working Group
EC European Commission
EFY Ethiopian Fiscal Year
EFSRA Emergency Food Security Reserve Administration
EIA Environmental Impact Assessment
EMCP Expenditure Management and Control Program
EMP Environmental Management Plan
iii
EPA Environmental Protection Agency
ERR Economic Rate of Return
ESMF Environmental and Social Management Framework
EWRD Early Warning and Response Directorate
FIC Federal Information Center
FM
FMTF
FRAs
Financial Management
Financial Management Task Force
Fiduciary Risk Assessments
FSCD Food Security Coordination Directorate
FSP
GAD
Food Security Program
Government Accounts Directorate
GDP Gross Domestic Product
GoE
GTP
Government of Ethiopia
Growth and Transformation Plan
HABP Household Asset Building Program
HIV/AIDS Human Immunodeficiency Virus/Acquired Immunodeficiency Syndrome
ICB International Competitive Bidding
ICR Implementation Completion Report
IDA
IDS
International Development Association
Institute of Development Studies
IFPRI International Food Policy Research Institute
IFR Interim Financial Report
IPM Integrated Pest Management
ISR Implementation Status Report
JCC Joint Coordination Committee
JRIS Joint Review and Implementation Support
JSOC Joint Strategic Oversight Committee
KAC Kebele Appeals Committee
KFSTF Kebele Food Security Task Force
LEAP Livelihood Early Warning Assessment & Protection
LIU Livelihood Integration Unit
LCS Least Cost Selection
MDG Millennium Development Goals
MDTF Multi Donor Trust Fund
MFI Microfinance Institution
MoLSA Ministry of Labor and Social Affairs
M&E Monitoring and Evaluation
MoA Ministry of Agriculture
MoFA Ministry of Federal Affairs
MoFED Ministry of Finance and Economic Development
MOU Memorandum of Understanding
MTEFF Medium-Term Expenditure and Financing Framework
NCB National Competitive Bidding
NGO
NNP
Non-Governmental Organization
National Nutrition Program
NRMD Natural Resource Management Directorate
iv
OFAG
OFSP
Office of the Federal Auditor General
Other Food Security Program
PASDEP Program for Accelerated and Sustained Development to End Poverty
PASS Automated Payroll and Attendance Sheet System
PBS Protection of Basic Services
PCDP Pastoral Community Development Project
PDO Project Development Objective
PEFA Public Expenditure and Financial Accountability
PFM Public Financial Management
PPA Public Procurement Agency
PIM Program Implementation Manual
PLI
PMS
Pastoral Livelihood Initiative
Performance Management System
PSCAP Public Sector Capacity Building Project
PSNP
PW
Productive Safety Net Program
Public Works
PWCU Public Works Coordination Unit
PWFU Public Works Focal Units
PWIA Public Works Impact Assessment
QCBS Quality and Cost Based Selection
RCBP Rural Capacity Building Project
RED&FS Rural Economic Development and Food Security
REPA Regional Environmental Protection Authority
RFQ Request For Quotations
RFSCO Regional Food Security Coordination Office
RIC Regional Information Center
RNE Royal Netherlands Embassy
RuSACCO Rural Savings and Credit Cooperative Organization
RRM Rapid Response Mechanism
RUFIP Rural Financial Intermediation Program
SBDs
SEA
Standard Bidding Documents
Strategic Environmental Assessment
SIDA Swedish International Development Cooperation Agency
SIL Specific Investment Loan
SNNP
SNNPR
SPIF
Southern Nations and Nationalities
Southern Nations and Nationalities Region
Strategic Program and Investment Framework
SWC Soil and Water Conservation
TA Technical Assistance
TLU
TOR
TTL
Tropical Livestock Units
Terms of Reference
Task Team Leader
VLSA Village Lending and Savings Association
UN United Nations
USAID United States Agency for International Development
USD United States Dollar
v
WADs Women‟s Affairs Desks
WFSD Woreda Food Security Desks
WFSTF Woreda Food Security Task Force
WMS Welfare Monitoring Survey
WOARD Woreda Office of Agriculture and Rural Development
WoFED Woreda Office of Finance and Economic Development
WFP World Food Program
Vice President: Obiageli Katryn Ezekwesili
Country Director: Guang Z. Chen
Sector Manager: Lynne Sherburne-Benz
Task Team Leader: Wolter Soer
vi
ETHIOPIA
PRODUCTIVE SAFETY NETS APL III ADDITIONAL FINANCING
TABLE OF CONTENTS
I. Introduction ............................................................................................................................... 12
II. Background and Rationale for Additional Financing .............................................................. 13
III. Proposed Changes ................................................................................................................... 23
IV. Appraisal Summary ................................................................................................................ 24
Annex 1: Results Framework and Monitoring.............................................................................. 34
Annex 2: Operational Risk Assessment Framework (ORAF) ...................................................... 48
Annex 3: Impact evaluation .......................................................................................................... 53
Annex 4: Financial Management and Disbursement Arrangements ............................................ 55
Annex 5: Procurement Arrangements ........................................................................................... 82
Annex 6: Revised Project Costs .................................................................................................... 89
vii
ETHIOPIA
PRODUCTIVE SAFETY NETS APLIII ADDITIONAL FINANCING
Additional Data Sheet
Basic Information - Additional Financing (AF)
Country Director: Guang Zhe Chen
Sector Director: Ritva S. Reinikka
Sector Manager: Lynne Sherburne-Benz
Team Leader: Wolter Soer
Project ID: P126430
Expected Effectiveness Date: June 30, 2012
Lending Instrument: APL
Additional Financing Type: Financing Gap
Sectors: Other social service (50%);
Public Administration-social services
(40%); Central Government
Administration (5%); Sub-national
Government administration (5%)
Themes: Social safety nets (60%);
Natural disaster management (20%);
Vulnerability assessment and monitoring
(20%)
Environmental category: B: Partial
Assessment
Expected Closing Date: June 30, 2015
Basic Information - Original Project
Project ID: P113220 Environmental category: B:Partial
Assessment.
Project Name: Productive Safety Nets APL III Expected Closing Date: June 30, 2015
Lending Instrument: APL
AF Project Financing Data
[ ] Loan [ X] Credit [ ] Grant [ ] Guarantee [ ] Other: Proposed terms: Standard Terms for IDA Credit. The Maximum Commitment Charge Rate payable by
the Recipient on the Unwithdrawn Financing Balance shall be one-half of one percent (1/2 of 1%) per
annum. The Service Charge payable by the Recipient on the Withdrawn Credit Balance shall be equal to
three-fourths of one percent (3/4 of 1%) per annum.
AF Financing Plan (US$m)
Source Total Amount (US$ m)
International Development Association (IDA) 300.00
Crises Response Window (CRW) 70.00
Total 370.00
Client Information
Borrower:
Ministry of Finance and Economic Development
Addis Ababa, Ethiopia
Tel: (251-111) 226-698
Responsible Agency:
Disaster Risk Management & Food Security Sector, Ministry of Agriculture
Addis Ababa, Ethiopia
Tel: (251-111) 503-506
viii
AF Estimated Disbursements (Bank FY/US$m)
Fiscal Year 12 13 14 15
Annual 50 150 140 30
Cumulative 50 200 340 370
Project Development Objective and Description
1. Original project development objective: The development objective of the overall PSNP
APL series is to reduce household vulnerability, improve resilience to shocks and promote
sustainable community development in food insecure areas of rural Ethiopia. The Project
Development Objective for APL III is: Improved effectiveness and efficiency of the Productive
Safety Net Program and related Household Asset Building Program for chronically food
insecure households in rural Ethiopia.
2. Project description: The Additional Financing will continue financing the four
Components of PSNP APL III:
Component 1 (US$290 million): Safety Net Grants will provide cash and in-kind transfers to
chronically food insecure households through: (i) labor intensive public works for able-bodied
households; and (ii) direct support to labor-poor households. This component will also allocate
financing for administrative costs and capital inputs for woredas to provide complementary
inputs as well as technical supervision and monitoring of transfers and public work activities.
This includes additional incentives to woredas that demonstrate improved performance in
timeliness and predictability of transfers to households and Public Works implementation.
Component 2 (US$ 70 million): Drought Risk Financing aims to provide timely resources for
transitory food insecurity in response to shocks within the existing program areas. This
component will be financed using a contingent grant, which will provide resources for scaling
up activities under Component 1 in response to localized or intermediate weather or price-
related shocks in PSNP woredas. In the event no shocks occur, the resources of this component
can be utilized to finance activities eligible under component 1 of the 2013/2014 annual plan.
Component 3 (US$5 million): Institutional Support for the PSNP will support institutional
strengthening activities focusing on (i) program management at all levels; (ii) capacity building
support for the overall program and needs specific to the Risk Financing facility; (iii) monitoring
and evaluation; and (iv) transparency and accountability.
Component 4 (US$5 million): Support to the Household Asset Building Program (HABP) will finance a core set of interventions aimed at: (i) strengthening the delivery of demand-driven
and market-oriented advisory services for household investments; (ii) improving the efficiency
and effectiveness of financial service delivery to food insecure households; and (iii) supporting
program management.
ix
Safeguard and Exception to Policies
Safeguard policies triggered:
Environmental Assessment (OP/BP 4.01)
Natural Habitats (OP/BP 4.04)
Forests (OP/BP 4.36)
Pest Management (OP 4.09)
Physical Cultural Resources (OP/BP 4.11)
Indigenous Peoples (OP/BP 4.10)
Involuntary Resettlement (OP/BP 4.12)
Safety of Dams (OP/BP 4.37)
Projects on International Waterways (OP/BP 7.50)
Projects in Disputed Areas (OP/BP 7.60)
[X]Yes [ ] No
[ ]Yes [X] No
[ ]Yes [X] No
[X]Yes [ ] No
[ X]Yes [ ] No
[ ]Yes [X] No
[ ]Yes [X ]No
[ ]Yes [X ]No
[X] Yes [ ] No
[ ]Yes [X] No
Does the project require any waivers of Bank policies?
Have these been endorsed or approved by Bank management?
[ ]Yes [X] No
[ ]Yes [ ] No
Conditions and Legal Covenants:
Financing Agreement
Reference
Description of Condition/Covenant Date Due
Schedule II, A1 The Recipient shall monitor and evaluate the
progress of the Project and prepare Project
Reports in accordance with the provisions of
Section 4.08 of the General Conditions.
Not later than 60
days after the end of
the period covered
by such report.
Schedule II, A2 The Recipient shall carry out a joint review of
the progress of the Project implementation at
regular intervals with the donor partners
financing the PSNP Program.
Every six months
Schedule II, A3 The Recipient shall carry out a joint mid-term
review of the progress achieved under the
Project.
June 30, 2012
Schedule II, B2 The Recipient shall, through MoFED, prepare
and furnish to the Association, in form and
substance satisfactory to the Association,
interim un-audited financial reports for each of
the respective Parts of the Project covering the
period.
Not later than sixty
(60) days after the
end of each quarter
of the EFY
Schedule II, B3 The Recipient shall, through MoFED, have the
Financial Statements for the Project audited in
accordance with the provisions of Section 4.09
(b) of the General Conditions. Each audit of
the Financial Statements shall cover the period
of one fiscal year of the Recipient.
Not later than six
months after the end
of the fiscal year.
x
Schedule II, B3 The Recipient shall, through MoFED, cause
the auditor to provide the Association with
quarterly interim audit reports.
Sixty (60) days of
the end of each
quarter of the EFY.
Schedule II, B4 The Recipient, through MoA, shall, as part of
the audit of the Financial Statements have the
commodity flow and status reports
(statements) for the Project audited in form
and substance satisfactory to the Association.
Not later than six
months after the end
of the EFY.
Schedule II, D2 The Recipient shall, during the implementation
of the Project, through consultants with
qualifications and experience acceptable to the
Association, carry out an independent
procurement review of the procurement under
the Project, under terms of reference
satisfactory to the Association
Annually
Schedule II, Section
IV, B(a)
The Recipient shall for payments made prior to the
date of this Agreement, except that withdrawals in
an amount not exceeding the equivalent of fifty
million dollars ($50,000,000), in respect of
payments made under Category (2) for Safety Net
Grants under Part 2 of the Project, provided that
the Eligible Expenditures thereunder shall have
been incurred after September 1, 2011, and subject
to the requirements in sub-paragraph b) of this
paragraph;
After September 1,
2011
Schedule II, Section
IV, B(b)
The Recipient shall, (under Category (2) for Safety
Net Grants under Part 2 of the Project, unless, in
the event of the occurrence of an event of the
envisaged scope and severity provided for under
the Drought Risk Financing Manual, a work plan
shall have been adopted by the Recipient
satisfactory to the Association, describing the
specific modalities, scale, and timing of safety net
support (Safety Net Grants) to be provided on
account of identified Eligible Beneficiaries in
accordance with the eligibility criteria, procedures,
and guidelines set forth or referred to in the
Drought Risk Financing Manual; and
As and when
required
xi
Schedule II, Section
IV, B(c)
The Recipient shall, under Category (4) in respect
of any payments made in respect of expenditures
for goods, consultants‟ services, audits, Training
and Operating Costs under Part 4 of the Project
(Support for Household Asset Building Activities),
for any fiscal year during the implementation of
the Project, unless the Association shall have
confirmed in writing that the HABP work plan
furnished by the Recipient for the relevant EFY, is
satisfactory to the Association.
Annually
12
ETHIOPIA
PRODUCTIVE SAFETY NETS APL III ADDITIONAL FINANCING
I. INTRODUCTION
1. This Project Paper seeks the approval of the Executive Directors to provide an additional
credit in an amount of US$370 million in IDA Credit, including US$70 million from the IDA
special Crisis Response Window (CRW) resources to the Federal Democratic Republic of
Ethiopia for the Productive Safety Nets (PSNP) APL III Additional Financing, Project P126430
(Credit number 5091-ET).
2. The proposed additional credit would help finance the costs associated with the
implementation of the PSNP APL III Program and strengthen its ability to address the current
and potential future crisis. During appraisal and negotiations of APL III in 2009, it was
recognized that there was a financing gap for the program in the amount of US$526.46 million,
which could not be met immediately by IDA or the development partners. It was agreed at the
time that this financing gap would be filled during the course of implementation. Due to several
additional commitments of various Development Partners, the financing gap was reduced to US$
478.72 million. In May 2011, following discussions with Government, the Bank therefore agreed
to consider additional financing of US$300 million for FY2012. In response to the ongoing
drought in the Horn of Africa, IDA CRW resources of US$70.0 million were added to the
original amount to finance the crisis related risk financing mechanism which will make available
a total of US$370 million in Additional Financing. Based on the revised budget estimate (Annex
6) this additional financing will reduce the financing gap to USS 108.72 million. Other
Development partners are currently working on proposals to address the remaining financing
gap. The financing gap is expected to be closed.
3. There are three main reasons for the PSNP (APL III) Additional Financing:
Filling the financing gap: The proposed US$370.0 million additional financing would
contribute towards filling the existing financing gap. Additional support from other partners is
under preparation to close the remaining gap.
Further strengthening of design and efficiency aspects: These resources would allow IDA
to continue to finance and strengthen the PSNP APL III, which unlike the previous two phases
includes the Household Asset Building Program (HABP) that requires significant effort and
resources. The additional resources would also allow IDA to continue to strengthen PSNP design
and efficiency (effective implementation of HABP approaches, effective program management
and coordination, M&E, transparency and accountability measures, etc) to achieve its objectives
of improving food security, using a multisectoral approach. Further, they would enable PSNP to
incorporate more firmly a systematic disaster risk management and climate adaptability agenda
into the social safety nets program of Ethiopia.
Strengthening crisis response capability through replenishment of the risk financing
facility: Most of the PSNP areas are affected by the current drought; this has resulted in
additional need for support to both existing PSNP clients as well as transitory food insecure
households in PSNP woredas. The additional financing will help ensure that the program
13
maintains its ability to provide timely resources for transitory food insecurity in response to
shocks within existing program areas. Part of the additional financing will be used to replenish
the risk financing facility of the program, which was triggered in July 2011 and disbursed
US$134.7 million to address transitory needs. Resources in the total amount of US$250.0 million
were made available by the World Bank for the drought affecting the Horn of Africa through the
Bank‟s IDA Crisis Response Window. In order to replenish the risk financing mechanism,
US$70.0 million of these resources have been allocated to the PSNP APLIII. The total amount of
Additional financing of US$370 million is appropriate to further strengthen the future timely
response of PSNP to such shocks.
II. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING IN THE AMOUNT OF US$ 370.0
MILLION
4. While Ethiopia has experienced high economic growth in recent years, poverty and
chronic food insecurity remain major challenges. It is estimated that about 29.2 percent of
households live below the food poverty line. Most of these food insecure households are
subsistence farmers, depending on rainfed agriculture and therefore vulnerable to weather
fluctuations. High population growth has also contributed to decline in farm sizes, and
environmental degradation remains a problem. Dramatic variations in rainfall and climate and
repeated environmental shocks further contribute to poverty and food insecurity.
5. As a result, every year for over two decades (1986-2006) the Government launched
international emergency appeals for assistance to meet the consumption needs of food insecure
households. Although this humanitarian assistance was substantial and saved many lives,
evaluations have shown that it was unpredictable for both planners and households, and often
arrived too little, too late. As a consequence, the emergency aid could not be used effectively and
did little to protect livelihoods, prevent environmental degradation, generate community assets,
or preserve physical or human household assets. Despite the large food aid inflows, there was an
increasing trend in chronic food insecurity in the wake of repeated droughts as vulnerable
households fail to cope with shocks and slide deeper into poverty.
6. Therefore, in 2005, the Government of Ethiopia (GoE) and development partners realized
the need to introduce a predictable, long term and developmental Safety Net as an appropriate
mechanism to respond to chronic food insecurity and recurrent climatic shocks. The PSNP APL
III is the third phase of World Bank financing for the Productive Safety Net Program (PSNP),
which was launched in 2005 as part of the Government‟s Food Security Program. The
implementation of PSNP over the last six years has already shown significant impact.
7. The effects of the current drought crisis in the Horn of Africa have been mitigated in
Ethiopia to a great extent due to the presence of the PSNP. The PSNP aims to reduce household
vulnerability to chronic and transitory food insecurity, improve resilience to shocks and promote
sustainable community development in food insecure areas of rural Ethiopia. The PSNP was
designed to reform and complement the existing humanitarian support system, and to be the
main instrument for assisting chronically food insecure people in rural Ethiopia. It was scaled up
significantly in 2006, and currently reaches 7.57 million people, which is roughly 8.0 percent of
the total population. It is anticipated that the PSNP will have reached in total 8.3 million people
by 2015.
14
8. The Government has received technical and financial assistance from a consortium of
10 Development Partners: United Kingdom Department for International Development (DFID),
Irish Aid, European Commission (EC), European Union (EU), Canadian International
Development Agency (CIDA) Swedish International Development Agency (SIDA), Netherlands,
Danish International Development Agency( DANIDA), United States Agency for International
Development (USAID) and International Development Association (IDA) led by the World
Bank to help prepare and implement the Program. The World Bank is supporting the
Government through a three-stage APL and has provided significant IDA financing through APL
I, II and III. APL I ran from January 2004 to December 2006 in the total amount of US$113.7
million, and APL II ran from January 2007 to June 30, 2010 in the total amount of US$ 207.9
million1. APL III, consisting of an IDA grant of US$350 million and IDA credit of US$130
million for a total of IDA US$480 million, began in January 2010 and is scheduled to close on
June 30, 2015.
9. Crisis Response Window Resources: The PSNP APLIII Additional Financing will
include US$70 million from the CRW. The main objectives of the CRW are to establish a more
systematic approach for IDA to respond to severe crises caused by exogenous shocks, to enhance
IDA‟s capacity to provide rapid response and effectively participate in global disaster response
efforts, and to provide additional and predictable financing to countries hit by crises. The current
emergency in the Horn of Africa reflects a convergence of factors that are broader than drought
alone, encompassing record high food prices and a humanitarian crisis aggravated by conflict in
Somalia. The aggregate level of resources required to address both the short and longer-term
aspects of the crisis are very substantial, and in short supply. The proposed CRW allocation for
Ethiopia through the PSNP APLIII Additional Financing would contribute towards this financing
gap.
Objectives and phases of PSNP
10. The Development Objective of the overall PSNP APL series is to reduce household
vulnerability, improve resilience to shocks and promote sustainable community development in
food insecure areas of rural Ethiopia. This is to be achieved through continued consolidation of a
safety net system that: (i) provides timely, predictable, and appropriate transfers to beneficiary
households, thereby enabling effective consumption smoothing and avoiding asset depletion; (ii)
creates productive and sustainable community assets that contribute to the large-scale
rehabilitation of severely degraded areas; (iii) stimulates local markets through demand linkages;
(iv) establishes more effective responses to drought shocks to avoid increasing destitution among
affected households; and (v) integrates and effectively supports critical interventions that build
assets, promote increased productivity, and encourage diversification at the household level.
11. Program Description: APL Phase I: The first APL phase (2005-2006, IDA US$70
million, Implementation Completion Report (ICR) “satisfactory”) focused on Transition from
emergency relief to a productive and development-oriented safety net. Phase I accomplished the
following: (i) provided predictable, multi-annual resources to the Government; (ii) replaced food
with cash as the primary medium of support; (iii) made resources available for critical capital,
1 APLI financing includes an IDA grant of US$70 million for APL I plus a US$43.7 contribution from the IDA
supported Emergency Demobilization and Reintegration Project (EDRP). APLII financing includes an IDA grant
and credit of US$175 million plus Additional Financing of US$25 million from the GFRP and US$ 7.89 million
exchange rate gains.
15
technical assistance, and administrative costs to effectively support the public works; (iv)
strengthened community involvement by supporting community targeting and local-level
participatory planning as core principles of the program; and (v) related public works activities to
the underlying causes of food insecurity, especially with respect to soil and water conservation
measures. It put in place the essential elements of the new productive safety net system.
12. APL Phase II: APL I was followed by a second APL phase (2007-2009 IDA US$175
million, Additional Financing US$25 million, ICR: “satisfactory”), focusing on Consolidation
of the progress made under Phase I and continuing to strengthen technical capacity for program
implementation. Phase II has: (i) improved the efficiency and predictability of transfers by
continuing to build capacity of government systems and by strengthening resource planning and
mobilization; (ii) strengthened program governance by enhancing existing targeting and
grievance systems as well as introducing more transparency in program procedures; (iii)
increased the productivity of public works through a systematic focus on community planning
using integrated watershed management techniques and enhanced involvement of technical staff
from Natural Resource Management Directorate (NRMD) at all levels; (iv) strengthened
monitoring and evaluation systems; and (v) developed more efficient financing instruments for
risk management to ensure a more predictable and timely response to shocks.
13. APL Phase III: It was agreed with the Government during preparation for APL III that
strengthening livelihoods to the extent that households become food secure and resilient to
shocks is a process that is longer and more complex than that suggested by the initial five-year
timeframe of the program covered by APL I and APL II. The World Bank‟s Board of Directors
therefore approved the addition of a third phase to the APL series to span a further five years
(timeframe 2010-2015, IDA US$480 million) from the end of APL II. APL III focuses on
Integration and continues to consolidate program performance and maximize the program‟s
long-term impacts on food security by ensuring effective integration and coordination with other
critical interventions. Phase III has: (i) introduced initiatives to further improve the timeliness
and predictability of transfers, notably through closer performance monitoring and provision of
incentives; (ii) initiated further work to strengthen public works, particularly focusing on
regional and federal oversight, coordination, and monitoring; (iii) strengthened program
accountability through a number of additional “bottom-up” and “top-down” monitoring and
accountability mechanisms; and (iv) supported Government to increase the efficiency and
effectiveness of the Household Asset Building Program (HABP) to further promote sustainable
graduation from food insecurity.
14. The Ethiopia Productive Safety Nets Program (APL III) provides US$480 million of IDA
financing, of which US$130 million are IDA credit and US$350 million are IDA Grant.
Approved by the Board on October 22, 2009, its development objective is to improve
effectiveness and efficiency of the Productive Safety Net Program and related Household Asset
Building Program (HABP) for chronically food insecure households in rural Ethiopia. The IDA
resources leveraged more than US$1.327 billion from the Government of Ethiopia and nine
development partners. However, the total financing need is currently estimated at US$2.2896
billion and the US$478.72 million financing gap will be partially met by the proposed IDA
US$370 million additional financing. The remaining gap of US$ 108.72 million will need to be
resourced from the Government and other development partners. Current indications from
Development Partners are that the remaining gap is expected to be closed.
16
Alignment with Country Priorities
15. PSNP is the largest safety net program in Ethiopia and is a key instrument for promoting
food security and reducing vulnerability. The presence of the program has strengthened the
Government‟s capacity to manage the risks of drought and to mitigate the effects of the current
drought crisis. It forms a core component of the Government‟s Food Security Program and the
Growth and Transformation Plan (GTP), the country‟s current five year plan. In addition, the
latest Country Assistance Strategy aims to support Ethiopia in achieving four main strategic
objectives, consistent with the Government of Ethiopia‟ GTP and the World Bank‟s Africa
Strategy: (i) fostering economic growth; (ii) improving access to and quality of basic service
delivery; (iii) reducing vulnerability; and (iv) fostering improved governance. The PSNP (APL
III) is strongly aligned with all of the objectives of the CAS.
Program implementation and results
16. Disbursements: PSNP APL III became effective on January 18, 2010. Since then it has
disbursed 66.9 percent of IDA and is on schedule for full disbursements by December 2012.
17. Development Partnerships and the Multi-Donor Trust Fund: PSNP (APLIII) continues to
build on a strong partnership between the Government and ten development partners. IDA will
continue the strong commitment to donor harmonization and accountability established during
PSNP APL I and II, and ongoing under APL III. IDA‟s contribution under these projects has
successfully leveraged US$1.25 billion from nine other development partners. Of this amount, a
total of US$231.8 million in commitments to the program will be channeled through a Multi
Donor Trust Fund (MDTF) managed by the World Bank. In addition, USAID, DFID, SIDA and
Irish Aid contribute funds directly to the Program.
18. Joint Reviews and Implementation Support (JRIS) mission: Since project effectiveness in
January 2010, the Government, World Bank, and Donor Partners have conducted three Joint
Review and Implementation Support (JRIS) missions. The ISR after the JRIS mission in
November 2011 rated that the overall progress in meeting the Program‟s development objectives
as Moderately Satisfactory.
19. The JRIS Missions have focused on four thematic areas: General Program Management,
Financial Management and Procurement, Public Works, and Household Asset building. Within
these thematic areas, issues requiring attention include timeliness and primacy of transfers,
financial management and reporting, graduation, capacity building, monitoring and evaluation,
roll out of the program to pastoral areas and cross cutting issues such as gender.
20. Results (See Annex 3): Bi-annual Impact Evaluations and panel surveys have been
incorporated into implementation and design of the PSNP program. To date, three high quality
rigorous evaluations have been conducted for the program.
21. The impact evaluation found that participation in the PSNP significantly improved
household food security, as measured by changes in the self-reported household food gap. The
impact of the PSNP on food security was found to be larger when transfers were predictable and
of a higher value. Households that received these transfers and inputs from OFSP/HABP
experienced an improvement in food security by 1.53 months (or 47 days). Overall progress
towards achieving the PDO is therefore rated as satisfactory.
22. Results from the 2010 impact evaluation show that the PSNP continues to have a positive
impact on livelihoods, even during times of crisis. These findings reinforce the earlier finding
17
that the impact of the Program is greater and appears across a wider range of indicators when
households receive predictable, high value transfers. On average, households participating in
public works reported that their food security improved by 1.05 months. There is an
improvement in food security in all regions and these are statistically significant. There are
positive impacts on productive assets and livestock holdings, with an increase in livestock
holdings by one tropical livestock unit, and an increase in productive assets by 112 real birr.
There are differences in the impact on livestock holdings across regions. Direct Support also
improved food security: increasing average Direct Support payments from 500 to 2500 Birr leads
to a two month improvement in food security. Higher levels of Direct Support have led to more
rapid asset accumulation. There is no evidence that Direct Support has disincentive effects or
reduces (“crowds out) private transfers, and there is some evidence that private transfers are
crowded in.
23. A growing body of evidence2 shows that the PSNP is having a significant positive impact
at the community level. The Public Works Impact Assessment carried out in 2008 found that soil
and water conservation activities have significantly increased wood and herbaceous vegetation
cover. The construction of water conservation structures within the closed areas has reduced
surface runoff, increased infiltration and raised groundwater levels, thereby enhancing spring
yields and increasing stream base-flows. In several communities, springs last longer into the dry
season. Additionally, the number of domestic water supplies has doubled.
24. There is also evidence that these community-level benefits are resulting in improved
livelihoods. An estimated 34 percent of households surveyed reported significant benefits from
the closed areas that had increased the availability of forage for livestock. Up to 87 percent of
households reported that family health had improved as a result of access to PSNP water
supplies. It is important to note that these benefits accrue to the community at large beyond the
immediate target group of the Program.
25. Asset creation and protection: The PSNP is having a significant impact on asset
accumulation.3 The joint receipt of the PSNP and OFSP/HABP benefits leads to the
accumulation of 1.001 Tropical Livestock Unit and an additional 133.6 Birr in tools compared to
households that received neither. This is supported by evidence from other surveys that shows
that PSNP beneficiaries are using cash transfers to invest in farming inputs and livestock. These
findings also hold true during times of crises, when the PSNP has proven to be effective at
helping households avoid distress sales of assets.
26. Utilization of education and health services: PSNP beneficiaries have increased their use
of social services. In 2006, 46.1 percent of a sample of PSNP beneficiary households reported
that they used health facilities to a greater extent compared with the year before, and 76 percent
attributed this to the PSNP. In 2008, 26.7 percent of households reported increased use of health
2 Evaluation Reports Include: (i) Impact evaluations and panel surveys. (ii) Regional Information Center Reports:
Regular monthly reports. (iii) Social Assessment to confirm the effectiveness of program targeting and assess
relevant social issues. (iv)-Public Works Impact Assessment to determine if the objectives of the PSNP PW have
been met. (v)-Biannual Impact Evaluation that measures change in household food gap (vi) Risk Financing impact
assessment to determine if the objectives of Risk Financing were met. (vii) Public Works Reviews, which examine
the quality and effectiveness of the public works planning process, and the quality, effectiveness and sustainability
of the public works subprojects.
3 When transfers are made with delay, impacts are less.
18
facilities over 2007, and 47 percent attributed this increase to the PSNP. This information,
together with reports that PSNP beneficiaries use some of their cash transfers to invest in health
and education, indicates that the Program is having a positive impact on human capital
accumulation.
27. Agricultural productivity: The PSNP is enabling households to take risks that improve
household productivity. A major finding of the impact evaluation from 2008 was a synergy
between the HABP and PSNP. Conditional on receiving the PSNP for five years, households that
also had OFSP or HABP assistance produced 147kg more of grains. This suggests that by
allowing households to focus on long-term investments and providing more regular cash flow,
the PSNP is a critical element of a strategy to effectively improve agricultural productivity.
28. Improvement of Nutrition Practices and the PSNP: The Project Implementation Manual
(PIM) of the PSNP includes nutrition interventions designed on the basis of lessons learned from
a nutrition pilot implemented under the program. The pilot tested ways in which the National
Nutrition Program (NNP) and PSNP can complement each other and ways to promote nutritional
aspects in the PSNP. Lessons from the pilot have been incorporated into the PIM. The pilot also
resulted in the creation of an institutional framework and a task force, housed in the Ministry of
Health, with representation from the Food Security Coordination Directorate of the Ministry of
Agriculture. The Task Force focuses on implementation of the lessons learned from the pilot.
The PSNP prioritizes lactating women and malnourished children as its target groups for all
program interventions. Furthermore, Health Bureaus/offices at the woreda level and the Health
Extension Workers at the community levels are already members of the Woreda and Kebele
Food Security Task Forces. In addition, health extension workers use payment sites and Public
Works gatherings to disseminate nutrition information and conduct health related education and
awareness raising activities.
29. As outlined in the PIM, PSNP Public Works (PWs) can include nutrition-related
interventions. Links will be established with the PW planning process to ensure
complementarities. The PSNP PW planning process is demand driven and can therefore only
include activities, such as nutrition related interventions, when they have been prioritized by
communities. In addition, efforts will be made to promote nutrition sensitive initiatives during
the HABP business planning process at the household and community level
30. Legal Covenants: Overall, the Project is well on its way to achieve its dated covenants
on time (by the June 2012, Mid-Term Review). In particular, areas where progress is noted
include the following covenants:
a. an approved Disaster Risk Management (DRM) Policy - a draft DRM Policy is currently
before the relevant authority for approval; it is expected that the policy will be approved
during the 3rd
quarter of FY 2012.
b. the development of a National Social Protection Strategy - the National Social Protection
Platform is currently finalizing the draft policy document for submission to the Council of
Ministers in 2012;
c. Independent process evaluation of experience to date with the Risk Financing within the
broader emergency response system. The Task Team is currently preparing a concept note
for the evaluation in close consultation with GFDRR. The evaluation is expected to take
place in April/May 2012.
19
d. Independent assessments of PSNP based on representative surveys – International Food
Policy Research Institute/Institute for Development Studies (IFPRI/IDS) have now submitted
draft Impact Reports4 with the results of the impact survey completed in 2010;
e. Independent assessments of systems effectiveness for HABP - IFPRI/IDS have now
submitted draft Impact Reports with the results of the impact survey completed in 2010;
f. An agreed set of actions to address the financing gap – The Disaster Risk Management
and Food Security Sector (DRMFSS) has made a presentation of the funding requirements
for PSNP to the Development Assistance Group (DAG). Several Development Partners are
in the process of preparing additional financing proposals at present with the aim to close the
financing gap.
31. Implementation Challenges: Despite these favorable developments, implementation of
improvements to the Financial Management (FM) and Monitoring systems has been slow and
consequently have resulted in a Moderately Satisfactory rating for the overall program
implementation. These implementation difficulties were foreseen as a significant implementation
risk, and are described in more detail below.
32. Primacy of Transfers: Primacy of cash and food transfers is an agreed principle of the
PSNP program. The principle recognizes that transfers are to be made to clients of the PSNP
regardless of their participation in public works. However, a lack of administrative capacity to
oversee the implementation of the primacy of transfers principle, as well as a tendency to
withhold transfers until associated public works have been completed, may lead to significant
delays in transfers and in turn negatively affect the impact of the program. However, clear
agreements have been reached during the recent JRIS in May 2011 and this has since improved.
The commitment of primacy of transfer has been reconfirmed both at the federal and regional
level.
33. Implementation Capacity and Sustainability Despite significant improvements and
some important results, capacity gaps still exist with regard to coordination, planning,
management, results-based monitoring, financial management, and procurement. High rates of
staff turnover, which are particularly acute at the woreda-level, affect the efficiency and
effectiveness of implementation. Several ongoing procurement activities related to building local
physical capacity are yet to be finalized (for example distribution of generator sets, large-scale
vehicle procurement, etc). These will significantly address capacity constraints experienced to
date.
34. Weak capacity for HABP implementation presents a new and substantial challenge that,
if not addressed appropriately, will undermine the impact of the redesign of this component
undertaken as part of APL III. A major new capacity building facility for PSNP (financed by
CIDA) is currently being rolled out and will focus on building capacity for program management
in all areas, including HABP, particularly at the regional level. In order to address high rates of
4 PSNP List of Impact Evaluation Reports and Panel Surveys which inform program implementation decision
making :(i) IFPRI/CSA Ethiopia Food Security Program Report on the 2008 survey, IFPRI and GoE 2010 (draft)
(ii)IFPRI/CSA Ethiopia Food Security Program Report on the 2008 survey, IFPRI and GoE 2009a (iii) IFPRI/CSA
Ethiopia Food Security Program Report on the 2008 survey, IFPRI and GoE 2009b (iv) IFPRI/CSA Ethiopia Food
Security Program Report on the 2008 survey, IFPRI and GoE 2007 (v)IFPRI/CSA Ethiopia Food Security Program
Report on the 2008 survey, IFPRI and GoE 2006.
20
staff turnover, attention will be given to strengthening training programs for regional, woreda,
and kebele staff and offering these on a rolling basis.
35. Technical Design Quality and coverage of the Household Asset Building Program:
HABP must be an effective complementary intervention to the PSNP, to ensure a high
probability of household graduation. The Government has re-designed this program and
significant support from APL III is allocated to help make it more effective. Nevertheless, a
commitment to implementing the program‟s new approach is required, particularly in terms of
promoting market-based approaches to providing credit and enhancing the quality of technical
support provided by the extension service. As part of APL III, technical assistance is provided to
ensure that modalities for enhancing fund flows to financial institutions operating in food
insecure communities follow sound financial principles. Continuous awareness creation at all
levels will ensure widespread understanding of the Program. Furthermore, ongoing supervision
of the proposed reforms under the HABP will provide opportunities for taking corrective actions
as necessary during implementation.
Program Risks
36. Overall Implementation Risk is rated as Substantial. As summarized in the Operational
Risk Assessment Framework (Annex 2), the main risks associated with the operation are as
follows:
37. Prioritization of program implementation: The Government has embarked on an
ambitious Growth and Transformation Plan (GTP). This includes the implementation of the
PSNP and HABP as well as s investments in large infrastructure, such as the Complementary
Community Investment Program (CCI program).The Government sees the implementation of the
GTP as its main vehicle for graduating people out of poverty and to economic sustainability.
However, it has been observed that woredas are not always able to implement all programs under
the GTP simultaneously. In the short term, there is risk of woredas not prioritizing PSNP in
relation to their other responsibilities. This has been identified by PSNP JRIS missions as a key
source of delays in the implementation of the program, particularly affecting the timeliness of
food and cash transfers. In addition, there is a need to better balance the focus on CCI with
household level asset building as a means to graduation in order to avoid delays in the plans for
graduation at scale.
38. Vulnerability to shocks: Ethiopia remains vulnerable to significant shocks. The
possibility of price and/or weather-related shocks affecting the target population during the life
of the Program remains high, as evidenced in 2008 and most recently in 2011. In 2011, rains
were late in the low land areas of Somali, Afar, and Oromia, and severe drought conditions
occurred in many areas. The impacts of climate change are likely to exacerbate these
vulnerabilities. To mitigate this risk, the PSNP design aims to effectively respond to shocks,
including those associated with climate change by: (i) adaptive measures such as soil and water
conservation activities as well as small scale irrigation and the focus on integrated watershed
management, and (ii) building capacity to scale up in response to shocks, guided by woreda level
risk management plans and financed through the use of contingency budgets at the woreda and
regional level; and risk financing resources at the federal level.
39. Program governance and financial management: Evidence to date suggests that
overall governance of the Program is improving and that steps are being taken to address the
systemic challenges that exist. These systemic issues include: (i) Given the nature of the
21
program, there are large cash balances that are held at the region and woreda levels that entail
significant fiduciary risks, (ii) low budget execution has been observed recently; (iii) internal
audit remains weak across the country; (iv) there is inadequate follow up on audit findings to
ensure corrective action is taken at the woreda level; (v) while timeliness of Interim Financial
Reports (IFRs) has improved, there are ongoing concerns regarding their quality; (vi) inadequate
controls surrounding maintenance of payrolls; and (vii) the commodity audit report raised issues
regarding food transfers. The following measures have been implemented to strengthen the
Program‟s governance and financial management framework: (i) establishment of an
independent appeals/redress procedure; (ii) a communication campaign focusing on financial
transparency; (iii) fiduciary controls verified by the Annual Audits, interim Financial Audit, and
Procurement Review, with actions taken at woreda level and system-wide based on findings; (iv)
computerization of the payroll system (PASS) rolled out under APL II are mandatory under APL
III; and (v) introduction of client cards with charters of rights and responsibilities, which makes
it easier for clients to clearly understand their entitlements. FM Risk is rated as: High. For a full
discussion of FM arrangements, refer to Annex 4.
40. Fiscal sustainability: The PSNP is a large program with evolving financing needs.
Development partners and Government may not be in the position to maintain the necessary
long-term financing, particularly in the current climate of economic uncertainty. This could
undermine the ability of the Program to maintain current levels of support, as well as its ability to
scale up in response to shocks. Currently there is a substantial financing gap for the Program.
However, the emerging evidence on outcomes and impacts provides a solid justification for
government and existing partners to continue support for the Program. A Medium-Term
Expenditure and Financing Framework (MTEFF) for the five year life of the Program is agreed,
which maximizes the multi-annual commitments to the Program and therefore builds
predictability. Based on the MTEF, a resource mobilization strategy has been developed to fill
the residual financing gap. A similar strategy was effective at addressing significant financing
gaps during APL I and II.
41. Program Financing and Long Term Sustainability: Given the depth of poverty and the
nature of risk and vulnerability in Ethiopia, there will be a sizeable population in need of support
from the Government for some time to come. To this end, the Draft Disaster Risk Management
Policy and the Disaster Risk Management Strategic Program and Investment Framework (DRM-
SPIF) which is under preparation is clearly proposing appropriate programs for Disaster
Reduction, Disaster Risk Management, Response, and Recovery. A National Social Protection
Policy is to be finalized soon which recognizes the need for the establishment of a permanent
safety net in the country. In addition, the 10 year Agricultural Investment Framework has clearly
stipulated a number of programmatic interventions which would enhance rural livelihood and
improved production and productivity of the agricultural sector. This program is supporting the
Government to set up a much more efficient and effective safety net going forward.
42. Linkages to the enabling environment and growth: The Food Security Program (FSP)
(including the PSNP and HABP) is a necessary but not sufficient condition to enable graduation
of program beneficiaries. The broader enabling environment plays a critical role and is important
for meeting the Program‟s higher level objectives. This includes strengthening multi-sectoral
linkages to other sources of growth and basic services. If the broader rural growth process
remains weak, household level graduation will likely remain limited. As part of APL III, the
HABP includes capacity building of existing Micro Finance Institutions (MFIs) and Rural
22
Savings and Credit Cooperative Organization (RuSACCOs). The PSNP APL III finances several
studies on the viability of credit for PSNP clients. A pilot in four regions, funded by the Gates
Foundation, has been developed to test the possibilities for electronic transfers of PSNP cash
payments. The pilot may also test the introduction of financial services, such as savings. These
approaches promise to leverage the diversified package of financial services that these
institutions can offer. HABP will also actively promote off-farm income-earning opportunities.
The complementary Agricultural Growth Program (AGP) aims to improve agricultural systems
and prospects for improved agricultural productivity. This is likely to have a positive impact on
rural job opportunities.
43. The team acknowledges that FSP, and within that the PSNP, is one part of the GoE‟s
multi pronged and multi sectoral Growth Transformation Plan to achieve its desired outcome of
food security. Besides PSNP and HABP, investments in the enabling environment are necessary.
These include Complementary Community Investments (CCI) like feeder roads and small scale
irrigation, which have significant development impacts and are part of the inputs that enable
graduation of PSNP clients. CCI is fully funded by GoE and is not linked to donor funding. Both
the CCI and PSNP public works are planned within the framework of district plans. This ensures
that there is no overlap. In order to achieve a structural solution to food insecurity, a significant
number of the current PSNP clients will also need to get access to alternative livelihoods options.
The GTP envisages strong employment creation (however results so far are lagging behind.) and
complementary programs focusing on employment creation are needed. The broader issue of
main drivers for Food Security and Insecurity were discussed at the time of APLIII, and will be
revisited during the Mid-Term Review (MTR) for the PSNP.
44. Graduation targets: Use of ambitious household graduation targets by the Government
may provide perverse incentives at lower administrative levels and result in premature
graduation and therefore increased household vulnerability. To mitigate against this risk, the
Government has developed empirical evidence-based graduation benchmarks and guidelines.
Regions and woredas have been instructed not to exclude beneficiaries that have not met the
graduation benchmarks and to include households identified for graduation for one additional
year. Disaster Risk Management and Food Security Sector has communicated to Regions that
beneficiaries have guaranteed access to the Program for at least three years. Recently, it was
realized that the region level asset based benchmarks are difficult to assess and might not be
applicable to all livelihoods in a given region. Therefore, the government and development
partners have agreed to develop a flexible and simple graduation estimation tool which is
specific to individual livelihood zones.
Sustainability of community assets created by Public Works: Although an estimated 80
percent of public works are rated satisfactory or better, the technical quality and maintenance
arrangements for some types of projects remain problematic (i.e. roads and water). If public
works are not built to minimum technical standards, following good environmental practice and
with the necessary operations and maintenance arrangements in place, the sustainability of public
works, the state of the environment and the program impact will be undermined. The Natural
Resource Management Directorate (NRMD) within the Ministry of Agriculture ( MoA) is now in
a position to fulfill its mandate to provide oversight of public works, and will identify the most
effective way to upgrade capacity in key sectors. The NRMD and the Ministry of Transport are
working jointly to plan for increased technical oversight of the rural roads construction under the
Public Works program, and for possible integration of the PW rural roads into the national
23
transport network. Further cross-sectoral coordination at the federal level is planned to determine
how to best address identified capacity gaps. The NRMD is presently engaged in a major review
of training and capacity building needs for improved environmental management and
performance of the Environmental and Social Management Framework (ESMF) implementation.
In addition, an upgrading of the annual Community Based Participatory Watershed Development
(CBPWD) training will incorporate specific modules on maintenance. These modules will be
informed by the new rural road maintenance policy currently under development. The
government is currently developing a national social protection policy with active participation
of the World Bank and other development partners. The draft policy document has taken lessons
from PSNP and clearly indicates Social Safety Nets as one of the priority instruments in the
implementation of social protection in Ethiopia.
III. PROPOSED CHANGES
45. There are no changes to the PSNP design and implementation approach. Rather,
Additional Financing resources of US$370.0 million will contribute to (i) partially filling the
current financing gap of US$482.6 in the program which was recognized at the time of Board
approval and is reflected in the financing plan of APL III, and (ii) replenishing the crisis related
risk financing mechanism. Other proposals for additional financing from different development
partners are under preparation (i.e. DFID, Danida and CIDA).
46. This Additional Financing request falls within the parameters of OP/BP 13.20.
Implementation during the eighteen months of PSNP (APL III) has been moderately satisfactory.
The loan‟s covenants have been and are on track to being met. Financial management, a
recognized implementation risk, has shown some improvement in the area of timeliness of
reporting as well as improved follow-up on audit findings. Nevertheless, it continues to be a
challenge as financial audit reports have been qualified for four consecutive years. Government
is taking proactive measures to address these issues.
47. No substantial changes in the Project‟s activities accompany this request. The PSNP
program remains the largest social safety net program in Ethiopia and impact evaluation reports
show that it is has improved effectiveness and efficiency of productive safety nets for chronic
food insecure households. It is shifting the approach from one of humanitarian relief, which is
characterized by short term and unpredictable responses, to an effective safety net that is able to
move people into food security and resilience to absorb short term shocks. Additional Financing
would continue and extend support for safety net grants for food and cash transfers through
Public Works and Direct Support and for institutional capacity building.
Proposed Additional Financing Activities
48. The Additional Financing will continue financing the four Components of PSNP APL III:
Component 1 (US$290 million): Safety Net Grants will provide cash and in-kind transfers to
chronically food insecure households through: (i) labor intensive public works for able-bodied
households; and (ii) direct support to labor-poor households. This component will also provide
performance incentives to woredas to improve the timeliness and predictability of transfers to
24
households. It will further allocate financing to woredas to provide complementary inputs as well
as technical supervision and monitoring of transfers and public work activities.
Component 2 (US$ 70 million): Drought Risk Financing aims to provide timely resources for
transitory food insecurity in response to shocks within the existing program areas. This
component will be financed using a contingent grant, which will provide resources for scaling up
activities under Component 1 in response to localized or intermediate weather or price-related
shocks in PSNP woredas. In the event that no shocks occur, the resources of this component can
be utilized to finance activities eligible under component 1 of the 2013/2014 annual plan.
Component 3 (US$5 million): Institutional Support for the PSNP will support institutional
strengthening activities focusing on (i) program management at all levels; (ii) capacity building
to fill any remaining gaps in general and those specific to the Risk Financing facility; (iii)
monitoring and evaluation; and (iv) transparency and accountability.
Component 4 (US$5 million): Support to the HABP will finance a core set of interventions
aimed at: (i) strengthening the delivery of demand-driven and market-oriented advice for
household investments; (ii) improving the efficiency and effectiveness of financial service
delivery to food insecure households; and (iii) supporting program management.
Costs by component (Detailed Costs by Component in Annex 6)
Component Original
cost
estimate
Revised
cost
estimate
IDA
Commit-
ments at
appraisal
Changes
with AF
Revised
IDA
commit-
ments
1. Safety Net Grants 1936.20 1898.95 398.50 290.00 688.50
2.Drought Risk Financing 160.00
230.00 50.00 70.00 120.00
3.Institutional Support 77.35 77.35 14.00 5.00 19.00
4. Support to the HABP 83.30 83.30 17.50 5.00 22.50
Total 2,256.85 2,289.60 480.00 370.00 850.00
IV. APPRAISAL SUMMARY
Economic Analysis
49. The economic benefits of the PSNP include: (i) improvements in household well-being as
a result of consumption smoothing, asset protection, and avoidance of negative coping behaviors;
(ii) enhanced livelihoods through asset accumulation and increased productivity; and (iii)
increased use of social services, market access and agricultural productivity as a result of the
infrastructure created through the community public works. PSNP provide both protective and
productive benefits to households and communities.
50. Household-level benefits. The bi-annual impact evaluations concluded that the Program
is smoothing household consumption and protecting assets, even during times of crisis. The
transfers provided to households are equivalent to about 40 percent of annual food needs. While
much of the cash transfers are used for consumption purposes, roughly 25 percent of funds are
invested in productive assets. There is emerging evidence that participation in the PSNP supports
25
households to adopt high risk/high return strategies such as taking credit, leading to higher rates
of agricultural productivity.
51. Community level benefits. A composite economic rate of return is not possible to
calculate because the specific public works projects are not identified in advance and, for most of
the soil and water conservation and rural road projects, expected rates of return vary widely
depending on location. However, a growing body of evidence shows the positive impact public
works are having on rural livelihoods. Soil and water conservation projects have resulted in
significant and visible increases in wood and herbaceous vegetation cover and a broader range of
plant species diversity. Small-scale irrigation projects were found to have increased incomes
between 4-25 percent. In addition to health gains from greater access to clean water, water
projects were found to significantly reduce the distance women and children travel to fetch
water. An analysis for a sample of projects found positive benefit-to-cost ratios ranging from 3.7
for water supply interventions to 1.8 for soil and water conservation and health infrastructure.
52. Overall program efficiency. The use of cash transfers creates administrative
efficiencies, largely by reducing the costs of transporting food. These gains have been calculated
to be over US$21 million annually. PSNP compares favorably with international efficiency
benchmarks for safety net and public works programs in terms of labor intensity and targeting. In
the PSNP, 7.8 percent of program resources are absorbed in administrative costs, which is below
the international benchmark of 10 percent for a well-run safety net program.
53. Fiscal and macroeconomic implications. The PSNP annual budget is currently about
1.2 percent of GDP. In comparison, most developing countries spend between 1-2 percent of
GDP on safety net programs. To date, the shift to cash transfers through the PSNP appears to
have little, if any, inflationary effect. A 2008 woreda level analysis concluded that there is no
evidence to suggest that increasing the size of PSNP cash transfers can fuel inflation. Of more
concern, however, is the impact inflation can have on the purchasing power of the cash transfers.
Continuous monitoring is required to ensure that the value of the cash transfer is not eroded by
inflation, thereby undermining the move to the more cost effective cash transfers.
Technical Analysis
54. APL III is built upon the significant technical groundwork laid during the first five years
of program implementation as well as an extended formulation process for the new FSP that has
strengthened the design of the PSNP. There is a Program Implementation Manual (PIM) and
related Operational Summary and detailed subject-specific guidelines, including that for the
Drought Risk Financing. The PSNP PIM has been revised to reflect design changes agreed as
part of APL III.
55. Under the PSNP, Government continues to conduct training programs on the different
guidelines using a cascade training approach. Under APL III further upgrading is undertaken to
ensure a more systematic approach to transferring knowledge and skills to program
implementers. This is informed by efforts to evaluate the curricula and quality of the training
provided. This is particularly critical in light of the high levels of staff turnover within the public
service, especially at woreda level.
56. One of the most significant training programs is training on participatory planning
processes. The Development Agent (DA) training includes instruction in the work norms and
sectoral technical standards (roads, irrigation, soil and water conservation, etc.) that have been
26
developed to ensure the technical quality of the public works projects produced under the
Program5.
Financial Management
57. Annex 4 details the steps underway to mitigate against risk exposure under the PSNP
APLIII. A Financial Management (FM) assessment was conducted for APL III from May to
June 2009 in accordance with principles outlined in “Financial Management Manual For World
Bank-Financed Investment Operations” issued by the Financial Management Sector Board on
March 1, 2010 and AFTFM financial management Assessment and Risk Rating Principles. The
assessment was supplemented by a review of quarterly Interim Financial Reports (IFRs), audit
reports and Implementation Status and Results Report (ISR). The objective of the Assessment
was to determine whether the participating institutions in the program have adequate financial
management systems and related capacity in place to satisfy the World Bank‟s Operation
Policy/Bank Procedure 10.02 with respect to financial management. It is the conclusion of the
Bank‟s FM assessment that the FM arrangements meet World Bank requirements as per OP/BP
10.02 and can be relied upon to provide, with reasonable assurance, accurate and timely
information on the status of the project.
58. The FM arrangements for the project will use the country‟s public financial management
(PFM) system at the Federal Government level. It will use project specific arrangements at the
regional and woreda levels. The Government Chart of Accounts that underwent the necessary
modifications to accommodate the project specific reporting requirements will be used. These
FM arrangements will cover all program funds.
59. The strengths of the PFM system include the budget process, compliance with financial
regulations, and the well-defined accounting system, including the computerized accounting
system at the federal and regional levels. Staff responsible for the project‟s FM are experienced
in IDA financed projects. However, there are deficiencies in the system that may negatively
impact the project, such as a shortage of accountants and internal auditors mainly at woreda
level, delays in reporting, and limited focus and effectiveness of internal audit. The scale of the
project and complexities arising from the large number of implementing institutions can also
pose implementation challenges. Financial reporting for the Program requires submission and
consolidation of timely and accurate reports from a large number of institutions. As such, there
are delays in the submission of quarterly financial reports from woredas, some of which are quite
remote, and regions. This may also delay the audits.
60. Further FM challenges of the program for which an action plan is now in place (See
Annex 4) include (i) the last five consecutive annual audit reports have been qualified and have
identified a number of systemic and recurrent issues in audit management letters; (ii)
deterioration in budget execution; (iii) holding huge amounts of cash at regional and woreda
levels; (iv) mixing of program funds with other project funds at the regional level in some
regions; (v) internal audit remains weak across the country; (vi) there is poor follow up on audit
findings at the woreda level, (vii) while timeliness of IFRs has improved, there are ongoing
concerns regarding their quality; (viii) poor maintenance of payroll records, (ix) the commodity
5 The technical standards take the form of “infotechs” that provide detailed technical specifications for around 70
different project types.
27
audit report raised issues regarding food transfers and differences in the utilization reports
between the regional and woreda levels; (x) limited monitoring and supervision capacity of
MoFED and regions; and (xi) turnover and shortage of qualified accountants and auditors mainly
at the woreda level. The long process involved in producing reports from woredas to regions,
and from regions to MoFED, often delays the timely submission of financial reports to the
development partners. Timely submission of reports (both audited and unaudited) is, however,
significantly improving, although the need for constant follow up remains.
61. MoFED has restructured the Channel One Programs Coordination Unit (COPCU) which
is responsible for the financial management of the program, with the view to mitigate the risks
and resolve the challenges noted in the program. The restructuring includes recruitment of three
additional accountants to explicitly work on the program. There is also a senior financial
management specialist recruited by CIDA providing technical assistance. An additional three
accountants will be recruited to closely monitor and supervise regions and woredas and give
hands-on training. The structure has also cascaded down to the regions. The current project has
recruited and maintained a significant number of accountants and cashiers at federal, regional,
and woreda levels. The project requires 783 positions for the handling of financial management
of the project. It is expected that the current staffing levels will continue to operate for the
additional financing. The staffing level needs to be monitored to ensure that any vacant positions
during the implementation of the project are immediately filled. To tackle the high staff
turnover, COPCU has made salary adjustments to the program staff.
62. Remedial actions are in place for a number of observed weaknesses and are on track.
Significant attention has been devoted to addressing the issues raised and the financial
management of PSNP over the last year. There has been constructive engagement of MoFED
through the Financial Management Task Force for PSNP which is addressing some of the project
specific challenges that affect this project. There is also improved dialogue in identifying some
of the systemic issues that require a more strategic response at the portfolio level. To this end,
FM experts of development partners have undertaken an analysis to identify the outstanding
audit report findings for which appropriate action still needs to be taken.
63. Further, MoFED has undertaken an assessment at the regional and woreda levels to
identify the main reasons for the outstanding issues that have emerged from the audits of 2007-
2009 and submitted a report including a clear action plan for how those issues would be
addressed. For those expenditures where adequate documentation could not be provided in time
or where expenditures were found not to be in line with the Program Implementation Manual
(PIM), Government agreed to refund these amounts to the project account6. MoFED has
refunded back the total amount of ETB 22,413,225.42 (US$1,301,581) to the program bank
account. From the rest of the audit report findings which are classified as outstanding issues by
Development Partners (DPs). MoFED has indicated that they have addressed findings amounting
to ETB 310,481,909.57(US$18,030,308). To further ascertain the actions taken, DPs have
requested MoFED to allow for independent review of these outstanding findings, for which
MoFED agreed. The review is expected to be finalized by March 15, 2012.
6 MoFED noted that additional justifications were submitted by regions totaling ETB 9,0 million or US$0.522,6
million. However, these were received after the deadline due to logistical problems.
28
64. In addition, an independent audit firm has conducted a review and assessed the
qualification issues from the 2010 audit to make necessary recommendations. The report
revealed that most of the management letter issues have been properly addressed by the
implementers. The audit firm has also recommended ways to strengthen the control over cash
and the close monitoring of advances and payables which will be shared with MoFED to convert
the same into tangible action plans.
65. MoFED has made progress on the following actions agreed with them as of November
30, 2011: (i) finalized the FM manual based on the comments of Donor Partners ; (ii) submitted
the interim audit reports for the 3rd
quarter( April 8, 2011) of the fiscal year 2010/2011) and the
1st quarter (October 10, 2011) of the fiscal year 2011/2012); (iii) submitted a detailed action plan
for rectifying the findings of the commodity audit report for the year ended July 7, 2010; and (iv)
finalize the independent investigation of all issues that led to a qualification for the 2010 audit.
66. The Bank has conducted two in-depth financial management reviews which entail
detailed transaction review of program expenditures from the federal level to regions and
woredas. The review
looked into the six core financial management areas of budgeting,
accounting, internal control, fund flow, financial reporting and auditing aspects of the program.
Transaction reviews along with the source documents has been conducted. The results of the
reports have led to constructive dialogues with government on ways to improve the systems in
place. A similar exercise is planned to be conducted in March 2012. The external audit Terms of
Reference clearly indicates that the auditor should, on a sample basis, verify that payments to
beneficiaries as documented in payrolls were actually made to the beneficiaries who are engaged
in various safety net activities. This is intended to give assurance to all stakeholders that
expenditures are tracked down to the actual beneficiaries of the program.
67. The program has developed a computerized Payroll and Attendance Sheet system (PASS)
to effectively manage the payroll payment to beneficiaries. As per the PIM of the project, using
PASS is mandatory in all PSNP woredas in Amhara, Oromiya, SNNP and Tigray Regions,
including those supported by NGOs. Data on attendance is entered in the PASS by the woreda
food security office. The attendance sheet data is then transferred to the woreda finance office in
electronic form. Based on this data the woreda finance office generates a payroll through the
PASS and effects payments to beneficiaries. While there is progress regarding PASS, some
regions have reported implementation challenges in operating this software effectively.
68. Going forward, the intensive supervision plan of donors on the program will continue.
Joint Review and Implementation Support missions, monthly financial management task force
meetings, action plans of audit report findings, interim quarterly audits and commodity audits
will continue to provide up to date information on the FM of the program. Through the FM task
force meetings and continued supervision, implementation of agreed actions will be closely
monitored to ensure that other observed weaknesses, such as budget monitoring and capacity
concerns, are addressed. Annex 4 outlines an action plan of remedial actions to be taken to
address observed weaknesses related to Financial Management. Guidelines on Preventing and
Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and
Grants, dated October 15 2006 and revised in January 2011.
29
Procurement
69. A large portion of the PSNP procurement that is undertaken at federal level is
progressing well. However, there are some challenges during implementation in terms of
compliance with agreed procedures at regional and woreda level. Public works under the PSNP
include numerous small contracts in the regions and woredas which require better forecasting,
planning, selection and monitoring. Given the weak capacity at local levels there is a need to
simplify procurement procedures at woreda level which would allow woredas to carry out
procurement only through shopping procedures. Despite several training activities there are
indications that procurement procedures are still not uniformly applied across all program areas.
The Annual Procurement Audit (an agreed program action) will be expedited and closely
monitored to determine if this is, in fact, a problem and, if so, the scale and nature of the issues at
hand. The task team will work closely with Government to quickly address the recommendations
of the Procurement Audit and ensure continuous follow-up. Furthermore, to address weak
capacity, specific training geared towards the specific procurement weaknesses in a particular
region will be designed and implemented to strengthen procurement capacity at regional and
woreda levels. Training has been one of the various mitigation measures recommended in the
JRIS Missions, which needs to be carried out and strengthened in all regions. Such a
procurement training offered in one region, Oromia, resulted in improvements. Annex 5 outlines
an action plan for mitigating measures which would address the weaknesses in procurement
practices at regional and woreda levels.
Social and Poverty Impacts
70. The Program is expected to have significant positive social and poverty impacts. It targets
large parts of the population that are believed to be most vulnerable given the food and macro-
economic crisis: 7.6 million chronically food-insecure people. The additional support to the
PSNP will help to ensure that the livelihoods of PSNP clients are not threatened by a financing
shortfall that might emerge as a result of the current drought. A funding gap has the potential to
weaken the safety net just as clients have struggled to deal with the current emergency situation
in rural Ethiopia. Ensuring that the targeted households continue to be covered adequately by the
Program will therefore make a very important contribution to reducing poverty now, as well as
avoiding destitution in the future.
71. Evidence suggests that the targeting of the PSNP has been good and has improved since
2005; clients and non-clients alike report that the targeting process is fair. However, there
continues to be reports of exclusion in program woredas, which is attributed to the high rates of
poverty in rural areas. As part of APL III, the PSNP communication strategy will be enhanced to
ensure that communities are well informed of the targeting criteria for, and objectives of, the
Program.
72. A strategic assessment of the impact of the implementation of the PSNP Program on
vulnerable Program beneficiaries has been undertaken as part of the 2010 Impact Evaluation
conducted by the Central Statistical Agency (CSA) and the International Food Policy Research
Institute (IFPRI). Draft final reports have been received. Additional work to verify and
triangulate some of the findings with administrative Program data is ongoing.
73. Social Accountability: The PSNP APL III Project Appraisal Document outlines steps to
strengthen bottom-up accountability as a way of pressing for better program performance during
the phase 2010 – 2015. A number of steps have already been introduced, notably: 1) a system of
30
PSNP Client Cards; 2) a Charter of Rights and Responsibilities; and 3) a Performance
Management System (PMS). The document also called for the strengthening of the appeals
system. The planned introduction of a Social Accountability Mechanism within the PSNP fits
well within the context of the Government of Ethiopia‟s current development strategy, the
Growth and Transformation Plan. It also comes at an opportune time with the onset of the new
and expanded phase of the Protection of Basic Services (PBS) Social Accountability
subprogram, which is a strong and successful example of a program in Ethiopia that has made
important gains. The June 2010 Evaluation Report outlines a number of lessons learned on which
the PSNP can build. In line with the PBS experience, the PSNP Social Accountability
Mechanism will consist of activities that aim to institutionalize capacity building and
mechanisms for social accountability, improving service delivery by allowing citizens to
evaluate service provision. This is done through channeling funds to local civil society
organizations that enhance the ability of citizens to provide feedback on the quality and priorities
of the services provided by PSNP. The Community Score card is an important tool that will used
to gather citizens feedback. This feedback will be used as a basis for Interface Discussions
between citizen groups and service providers and the development of agreed action plans to
improve services.
74. It is proposed that a PSNP Social Accountability Mechanism be incorporated into the
PBS Social Accountability Program, with its focus on monitoring and user-based feedback as a
demand-driven intervention. The introduction of this mechanism will complement other
accountability measures such as Client Cards, Charter of Rights and Responsibilities and the
Performance Management System. Ultimately, it aims to lead to more involvement of clients in
key steps of the process leading to the receipt of their entitlement. The selection of woredas for
the PBS social accountability activities would include PSNP woredas, ensure that the food
security sector be part of the community analysis and that PSNP staff at regional and woreda
levels be invited to social accountability training sessions. The lessons from these efforts would
then be considered jointly by PSNP and PBS, and PSNP would design a separate PSNP Social
Accountability Mechanism. Implementation of the best practices from the PBS across 34 PSNP
woredas will begin by March-April, 2012.
Gender
75. Women in rural Ethiopia have a heavy workload of both productive and reproductive
tasks and their participation in decision-making can be limited. The design of the PSNP has
aimed to address these issues. Women who participate in public works are required to work
fewer hours than male participants in recognition of their reproductive work. Women who are
pregnant or breastfeeding are moved from public works to direct support. A recent study
concluded that women are well represented in most PSNP decision-making bodies, particularly
at local levels. Despite this, the study noted that some women experience difficulties expressing
their views in public forums and accessing the kebele appeals committee (KAC). In response, the
Program has ensured that representatives of the Women‟s Affairs Desks (WADs) are included in
the KAC.
Eligible Subprojects
76. Every effort is made to ensure that the subprojects implemented are environmentally,
socially, technically and operationally appropriate, and are sustainable. To do this, there is a
series of „eligibility filters‟ through which each subproject must pass:
31
(i) The PW program consists of small, stand-alone, community-level subprojects. The
design of the program limits subprojects to those that are labor intensive, and use
simple tools, have communal benefits, are accepted and approved by the community,
are feasible and sustainable, are productive, and provide for women‟s participation.
(ii) All subprojects must be covered by standard published government designs,
incorporating basic environmental mitigating measures. In particular, all Natural
Resource Management (NRM) subprojects and roads must be planned and designed
following within the „watershed approach‟, as set out in the government Community-
Based Participatory Watershed Development Guidelines (CBPWDG).
(iii) Once a subproject is proposed for implementation in the Annual PW Plan, a
subproject screening process eliminates any subprojects that lie outside the mandate
of the PSNP, or would be too complex to handle within the program design. PSNP
design limits the subprojects to those that are simple, are in a rural area within easy
reach of the beneficiaries‟ place of residence, can be planned, processed and
implemented at kebele level, within the tight annual PSNP planning and
implementation cycle, and utilize only manual labor. These constraints require the
exclusion of any subprojects that are in or adjacent to, internationally disputed areas;
or which might involve the physical re-location of residents; or any involuntary loss
to any household of assets or access to assets. For reasons of safety and potential
environmental damage that could not be mitigated at kebele level within the PSNP
planning cycle, subprojects that incorporate a high dam, or that involve a priority
forest area, or involve land-use changes such as the draining of a wetland, are also
ineligible.
Environmental Assessment and Safeguards
77. One of the key objectives of the PSNP is to address the underlying causes of food
insecurity, to which environmental degradation is universally agreed to be a major contributor.
The adoption of the integrated CBPWDG approach during APL II has already had considerable
positive impacts on the environment. Public works activities under APL III will continue to
follow the CBPWDG approach, and are thus expected to constitute a vehicle for continued
environmental transformation. Experience shows that these positive environmental impacts will,
in turn, enhance productivity and livelihoods. Thus the emphasis in APL III is on environmental
transformation coordinated with household-level interventions and opportunities for livelihood
enhancement.
78. While these environmentally beneficial impacts from the public works are expected to
continue, past mass mobilization efforts in environmental rehabilitation under previous
governments in Ethiopia have frequently failed or been abandoned. Such adverse outcomes
occur particularly if the location or design of public works does not follow good environmental
practice or are incompatible with optimum overall management of the watershed. To ensure that
standards are maintained to avoid such scenarios, the approach to the environmental performance
and sustainability of public works is three-pronged: (i) public works are derived from a
community-based approach to integrated watershed management, supported by a budget to
provide technical and material inputs; (ii) the design and implementation of the public works
follow the standards set out by MoA, which are made available along with training to concerned
woreda staff and DAs; and (iii) public works projects are screened for possible negative
32
environmental impacts thereby ensuring that these project designs not only incorporate
appropriate mitigating measures but also comply with both Ethiopia‟s Environmental Impact
Assessment (EIA) Proclamation and the ESMF.
79. While any impact from the community public works would be limited in scale and site-
specific, the ESMF is designed to identify and mitigate potential adverse impacts such as:
Community road-works activities altering drainage patterns and increased flooding and
soil erosion;
Small-scale irrigation projects causing depletion of surface or groundwater sources;
Health facilities producing medical waste with potential for contamination of water
bodies and groundwater.
80. The Public Works ESMF Screening process flags subprojects that require special
attention, and for which special procedures are provided: those involving disposal of medical
waste, those likely to use pesticides, those in the vicinity of a National Park or designated buffer
zone, and those involving a small dam (less than 15 m). In order not to exclude subprojects that
the community may wish to implement but which might involve minor asset loss of a voluntary
nature, there is a Voluntary Loss of Assets procedure which covers any cases of minor voluntary
asset loss. For such cases compensation is provided within the subproject. The ESMF Screening
process then assesses and addresses any potential social, environmental or cultural heritage
impacts, and recommends mitigating measures.
81. Responsibility for overall coordination of ESMF implementation lies with the NRMD
through its PWCU. Responsibility for managing the process and ensuring that there is sufficient
capacity at the lower levels lies with the regional PWFUs. Individual public works sub-projects
screening is conducted by the DA, and supervised by the Natural Resources Expert in the woreda
Natural Resources Desk.
82. The Public Works Reviews under APL II indicated that despite the improvements in the
rate of ESMF implementation experienced since APL I, and the lack of any significant concerns
about negative environmental impacts associated with public works, there is still a need to
strengthen implementation of the ESMF. This was due principally to the finding that in some
cases (a) ESMF screening was being applied to a Kebele-wide group of subprojects, rather than
to individual subprojects; (b) the standard of impact assessment involved in the screening
exercise fell short of the required standard; and (c) not all subprojects were being screened, due
to an assumption that environmentally positive subprojects did not need screening.
Consequently, the Federal NRMD considerably strengthened the PWCU, and made further
commitments under APL III to (i) strengthen the Regional PWFUs to ensure that the ESMF is
implemented for all subprojects, and to a high standard; (ii) upgrade the ESMF training
materials; (iii) provide further training, guidance and support in ESMF implementation to
regional and woreda technical staff and DAs; and (iv) strengthen the monitoring of ESMF
implementation in the PW M&E system.
83. During the course of 2010 and 2011 under APL III, the ESMF screening guidance was
clarified, PW subproject definitions for screening purposes were established and additional
ESMF awareness-creation and improved training was given to regional and woreda staff, and to
DAs. Consequently, the findings of the 1st 2011 PW Review (conducted in mid-2011) indicate
that the rate of ESMF implementation is now generally high, and that quality is noticeably
33
improving. It is expected that for the majority of PSNP woredas (apart from pastoral areas
where the ESMF procedures are still being rolled out), the safeguards rating will in future be
Satisfactory.
84. The HABP ESMF procedure, which is being rolled out between December 2011 and
April 2012, adopts a Strategic Environmental Assessment (SEA) approach. It requires a Woreda
Environmental Plan to be drawn up for each woreda, and the potential cumulative impacts from
each type of household-level activity to be identified. Based on this data, a list of acceptable
activities for the woreda is developed, together with a Woreda Environmental Management Plan
and impact monitoring and follow-up procedures.
85. Since subprojects involving high dams (15m or more), and their equivalent as defined by
safeguard policy OP 4.37 (Safety of Dams) are ineligible and are screened out, OP 4.37 is not
triggered. Subprojects involving smaller dams are eligible but are subject to WB Guidelines for
Small Dams. OP 4.11 (Physical Cultural Resources) is triggered. The procedure requires the
identification and avoidance of cultural or religious sites, and agreement on any mitigating
measures with the stakeholders. Chance finds such as archaeological artifacts require cessation
of construction works and notification to the relevant authorities. Since subprojects involving
any form of involuntary resettlement are ineligible, OP 4.12 (Involuntary Resettlement) is not
triggered.7 OP 7.50 (International Waterways) is triggered, and is addressed by the riparian
notifications made for APL III, which covers the period 2010-2014. Note that the
implementation period for PSNP Public Works is until December 2014, after this period only
closing activities will be undertaken. In the event that further extension of the Public Works
activities will be agreed upon in a later stage, all necessary steps to extend the timeframe will be
undertaken in accordance with OP 7.50. Finally, OP 4.10 (Indigenous Peoples) is not triggered.
7If during supervision the task team finds that land acquisition resulting in involuntary resettlement is taking place,
OP 4.12 will be triggered and a Resettlement Action Plan prepared.
34
ANNEX 1: RESULTS FRAMEWORK AND MONITORING
Ethiopia: Productive Safety Nets Project, APL III
Revisions to the Results Framework Comments/
Rationale for Change LONG-TERM PROGRAM DEVELOPMENT OBJECTIVE FOR THE PRODUCTIVE SAFETY NET
PROGRAM (2005-2014)
Current (PAD) Proposed
Reduce household vulnerability,
improve resilience to shocks and
promote sustainable community
development in food insecure areas
of rural Ethiopia.
No change proposed
Long-Term Program indicators
Current (PAD) Proposed change*
Average number of months
households report being food
insecure.
No changes proposed The first and second indicators measure
changes in food consumption, a key
indicator of food security. The two
indicators are complementary as the first
measures long-term changes in food
security, while the second captures short-
term impacts. The third indicator captures
changes in household assets.
All three indicators were measured in 2008
and 2010; the first and third indicators were
also assessed in 2006. Retaining these
indicators therefore provides an assessment
of the performance of the APL series.
% of households with consumption
below 1800 Kcal/person per day.
No changes proposed
% change in household asset
(physical).
No changes proposed
PROJECT DEVELOPMENT OBJECTIVES FOR THIRD PHASE, APL III (2010-2014)
Current (PAD) Proposed
Improved effectiveness and
efficiency of the Productive Safety
Net Program and related Household
Asset Building Program for
chronically food insecure households
in rural Ethiopia.
No changed proposed The proposed Additional Financing aims to
fill a financing gap that was identified at the
time of APL III Board Approval and thus is
consistent with the PDO of the PSNP APL
III.
PDO indicators
Current (PAD) Proposed change*
% of participants reporting they are
able to plan ahead on the basis of
PSNP transfers.
No changes proposed Indicates to what extent the PSNP provides
households with reliable transfers This
indicator was measured in 2008 and 2010.
% of households reporting direct
benefit from community assets.
No changes proposed Indicates to what extent the PSNP creates
productive and sustainable community
assets that are beneficial to community
members. It was measured in 2006, 2008
and 2010.
% of PSNP households report that
they have developed an on- or off-
farm income generating opportunity
No changes proposed Indicates to what extent the PSNP the extent
to which households are accessing credit
and advisory services through HABP. This
35
Revisions to the Results Framework Comments/
Rationale for Change attributable to HABP. indicator will be carefully reviewed in the
upcoming PSNP APL III Mid-Term
Review.
Intermediate Results indicators
Current (PAD) Proposed change*
Component 1: Safety Net Grants
Transfers made on time (%)8. No changes proposed Indicators one through three measure the
extent to which the PSNP is providing
transfers to households that are (i) timely
and (ii) appropriate. Indicators four and five
assess the public works in terms of technical
quality of implementation and
sustainability.
These indicators were assessed in 2009 and
2010. Retaining these indicators therefore
provides an assessment of the performance
of the PSNP APL III Project Component 1.
% of transfers received that have an
average value of at least 15 kg of
grain per month.
No changes proposed
% of households participating in the
PSNP for 3 consecutive years or
more.
No changes proposed
% of public works reaching
satisfactory standards and
sustainability ratings.
No changes proposed
% of public works that have an
established management mechanism
at completion.
No changes proposed
People in project areas with access to
“Improved Water Sources”
(number)9.
No changes proposed
Project beneficiaries
(number), of which female
(percentage).
No changes proposed These indicators were listed out output-level
indicators in the PAD and intermediate
result indicators in the ISR. This was to
enable regular reporting as they are core
indicators. For consistency, it is recorded
here as an intermediate result indicator.
Person days provided in labor-
intensive public work (number).
No changes proposed
Health facilities constructed,
renovated, and/or equipped (number).
No changes proposed
Classrooms built or rehabilitated
(number).
No changes proposed
Roads rehabilitated, rural (km). No changes proposed
Roads constructed, rural (km). No changes proposed
Improved community water points
constructed or rehabilitated under the
project (number).
No changes proposed
Area with improved land and water
management technologies (ha).
No changes proposed
Component 2: Risk Financing
% of transfers to participants within
75 days after RF triggered.
No changes proposed Indicates extent to which the PSNP risk
financing is providing timely transfers to
transitory food insecure households.
Since the PSNP APL III launched, the Risk
Financing mechanism has only been
triggered once, in 2011. Therefore, data on
8This indicator is consistent with the World Bank Results Chain for Social Protection in Africa. Timeliness is
measured as the number of woredas that deliver 90 percent of transfers to participants within 45 days after the end of
the month to which the transfers apply in 4 of the 6 months. 9 This indicator is consistent with World Bank Core indicators.
36
Revisions to the Results Framework Comments/
Rationale for Change this indicator is currently being collected for
the first time.
No. of woredas with contingency
plans in place.
No changes proposed This indicator was listed an out output-level
indicator in the PAD and an intermediate
result indicator in the ISR for regular
reporting. It was added to the ISR because it
assesses the functioning of systems that are
required to support the RF, even without it
being triggered. For consistency, it is
recorded here as an intermediate result
indicator.
Component 3: Institutional Support to PSNP
% of beneficiaries and non-
beneficiaries reporting that the
targeting processes are fair.
No changes proposed Indicates the effectiveness of measures to
improve the transparency and accountability
of the PSNP. Evaluates whether program
procedures, implementation, coordination,
monitoring and reporting are effective and
efficient.
Data was collected on these indicators in
2008 and 2010.
% of beneficiaries who received all
information needed to understand
how the program works.
No changes proposed
Percent of woredas that have posted
budgets in public places.
No changes proposed These indicators were listed out output-level
indicators in the PAD and intermediate
result indicators in the ISR for regular
reporting. For consistency, it is recorded
here as an intermediate result indicator.
Percent of kebeles with functioning
appeals committees in place.
No changes proposed
Percent of woredas using PASS. No changes proposed
Component 4: Support to Household Asset Building Program
% of HABP beneficiaries report that
they are satisfied that their business
plans reflect their priorities, needs
and capabilities
No changes proposed Indicate the effectiveness of measures to
improve the delivery of credit to food
insecure households by shifting to
appropriate service provides and developing
a wider range of financial products.
Assesses the effectiveness of systems
change to deliver advisory services to food
insecure households that are market-
oriented and of higher quality.
This indicator and the associated targets
will be carefully reviewed in the upcoming
PSNP APL III Mid-Term Review.
Average repayment rates for HABP
credit.
No changes proposed
% of credit to food insecure
household delivered through MFIs,
RuSACCOs and VSLAs.
No changes proposed
* Indicate if the indicator is Dropped, Continued, New, Revised, or if there is a change in the end of project target value
37
REVISED PROJECT RESULTS FRAMEWORK Long-Term Program Indicators: Reduce household vulnerability, improve resilience to shocks and promote sustainable community development in food insecure areas of
rural Ethiopia.
PDO Level Results Indicators
Co
re
UOM10
Baseline
Original
Project
Start
(2008)
Progress
To Date
(2010)11
Cumulative Target Values
Frequency Data Source/
Methodology
Responsibility
for Data
Collection
Comments 2011 2012 2013 2014
Average number of months households
report being food insecure12. Number
PW -
3.64
DS -
3.80
All 3.20
3.24
3.42
Bi-
Annual13
Impact
evaluation CSA/DRMFSS Annual Numbers
households with consumption below
1800 Kcal/person per day 14. % 27
PW 33.5
DS 30.6
13 Bi-Annual Impact
evaluation CSA/DRMFSS
change in household physical assets, in
real terms ETB15. %
PW -
4,568
DS -
2,349
PW 10.3
DS 5.0
PW 15
DS 10 Bi-Annual
Impact
evaluation CSA/DRMFSS
PSNP APL III Project Development Objective (PDO): Improved effectiveness and efficiency of the Productive Safety Net Program and related Household Asset Building
Program for chronically food insecure households in rural Ethiopia.
PDO Level Results Indicators
Co
re
UOM
Baseline
Original
Project
Start
(2008)
Progress
To Date
(2010)
Cumulative Target Values
Frequency Data Source/
Methodology
Responsibility
for Data
Collection
Comments
2011 2012 2013 2014
1. participants reporting they are able
to plan ahead on the basis of PSNP
transfers16.
% 27 35 50 70 Bi-Annual Impact
Evaluation CSA/DRMFSS
Annual
percentages
10 UOM = Unit of Measurement. 11 For new indicators introduced as part of the additional financing, the progress to date column for the PDO level revised result indicators will be reported in the July 2012 ISR, as
the impact evaluation is in the process of being finalised and these indicators will be subject to change. . 12 This indicator measures the average number of months that households report being food insecure from all income sources . This measure is from the IFPRI/CSA panel survey,
which asks households to report the number of months, out of the preceding 12 months, that they had “no problems satisfying the food needs of the household.” The target
represents a reduction by 4 standard deviations. 13 Every two years. 14 This is measured as kcal/person in 7 days before survey. The detailed methodology for this measure is found in the IFPRI/CSA 2009 Impact Assessment Report. The baseline is
the unconditional means for kcal per person in the 7 days before the survey households reported in 2008. 15 Assets are the value of livestock and productive equipment used in agriculture in Birr. The methodology for this calculation follows that used in the IFPRI/CSA analysis of the
2008 panel survey. This indicator reports on agricultural assets only as information on non-agricultural assets was not collected. 16 The baseline from this figure is reported in the 2008 Panel Survey of 8 woredas. This indicator will be captured in the FSP household survey.
38
2. households reporting direct benefit
from community assets17. %
PW-86
DS-67
97
96
95
90
95
95 Bi-Annual
Impact
Evaluation CSA/DRMFSS
Annual
percentages
3. PSNP households report that they
have developed an on- or off-farm
income generating opportunity
attributable to HABP.
% 36%18 n/a 70 90 Bi-Annual Impact
Evaluation CSA/DRMFSS
Annual
percentages
Beneficiaries19
Project beneficiaries,
Number
0
7.82 mln. 8.29 mln Annual PSNP Annual
Report DRMFSS Annual values
Of which female (beneficiaries) Number
n/a n/a
4.14
mln. Annual
PSNP Annual
Report DRMFSS Annual values
Intermediate Results and Indicators
Intermediate Results Indicators
Co
re Unit of
Measur
ement
Baseline
Original
Project
Start
(2008)
Progress
To Date
(2010)
Target Values
Frequency Data Source/
Methodology
Responsibility
for Data
Collection
Comments 2011 2012 2013 2014
Intermediate Result 1: Outcome 1: Appropriate timely and predictable transfers received by households in response to chronic requirements.
Outcome 2: Quality, new and existing, community assets with operational management mechanisms established.
1. Transfers made on time20. % 6 12.5 50 60 70 80 Monthly,
Annual
Information
Centre DRMFSS
17 This indicator is measured with data from the IFPRI/CSA 2008 Descriptive Report on the FSP household survey. The baseline figures were calculated for the APL II results
framework. 18 The baseline data is the percent of households participating in the PSNP in 2008 that reported having received support from the Government‟s OFSP in 2006 or 2008. The data
source is IFPRI/CSA 2008 Descriptive Report. 19
All projects are encouraged to identify and measure the number of project beneficiaries. The adoption and reporting on this indicator is required for
investment projects which have an approval date of July 1, 2009 or later (for additional guidance – please see http://coreindicators). 20 This indicator is consistent with the agreed results chain for social protection in Africa. Timeliness is measured as the number of woredas that report delivering 90 percent of
transfers to participants within 45 days after the end of the month to which the transfers apply, in 4 out of 6 months. The wording of the target reflects the fact that payments are
made following the completion of public works requirements, which are carried-out during the month. The baseline data is based on an analysis of timeliness of payments in the 80
woredas that report to the Federal Information Center. Starting in 2010, Regional Information Centers will collect data from all woredas, which will enable an assessment of the
timeliness of transfers across the Program.
39
2. Transfers received that have an
average value of at least 15 kg of grain
per month21.
% 0 n/a 90 90 90 90 Annual Wage rate
study DRMFSS
3. Households participating in the
PSNP for 3 consecutive years or more. % 47 65 75 85 Bi-annual
Impact
Evaluation DRMFSS
4. Public works reaching satisfactory
standards and sustainability ratings. % 85 90 90 90 90 90 Annual
PW Review
and regular
monitor
NRMD
5. Public works that have an
established management mechanism at
completion.
% 94 68 95 95 95 95 Annual PW Review NRMD
6. People provided with access to
“Improved Water Sources” under the
project (number)22.
Number 13,128 2.3 mln. Annual
PSNP report
with standard
beneficiary
norms.
NRMD
No targets are included
as the planning of public
work is community
driven and thus targets
not identified in advance
by project management.
7. Person days provided in labor-
intensive public work. Number 227 mln. 235 mln.
226
mln.
229
Mln 212 mln
157
mln5772
50
Annual PSNP Report DRMFSS Annual Number
8. Health facilities constructed,
renovated, and/or equipped. Number 0 232 Annual
PW regular
monitor NRMD
No targets are included
as the planning of public
work is community
driven and thus targets
not identified in advance
by project management.
9. Classrooms built or rehabilitated. Number 0 2,077 Annual PW regular
monitor NRMD
No targets are included
as the planning of public
work is community
driven and thus targets
not identified in advance
by project management.
10. Roads rehabilitated, rural. km 0 42,417 Annual PW regular
monitor NRMD
No targets are included
as the planning of public
work is community
driven and thus targets
not identified in advance
21 Rapid food price inflation in 2008 eroded the purchasing power of the cash transfer. In response the Government increased the wage rate in 2009. However, a lag in available
data from CSA does not allow this to be calculated at present. The Government is committed ensuring that the cash wage rage can purchase 15 kg of maize per month, which is
traditionally the cheapest grain in local markets. Additionally, the wage rate for food and cash is set nationally. The annual wage rate study will be used to calculate this indicator
based on an assessment of woreda markets, rather than the national price of maize, as was the case in Y4. 22 This indicator is consistent with World Bank Core indicators.
40
by project management.
11. Roads constructed, rural. km 0 23,736 Annual PW regular
monitor NRMD
No targets are included
as the planning of public
work is community
driven and thus targets
not identified in advance
by project management.
12. Improved community water points
constructed or rehabilitated under the
project (number).
Number 0
6,857 Annual
PW regular
monitor NRMD
No targets are included
as the planning of public
work is community
driven and thus targets
not identified in advance
by project management.
13. Area with improved land and water
management technologies. ha 0 167,150 Annual
PW regular
monitor NRMD
No targets are included
as the planning of public
work is community
driven and thus targets
not identified in advance
by project management.
Intermediate Result 2: Outcome 1: Transitory cash and food needs addressed effectively in PSNP woredas, to the limit of risk financing resources.
14. Transfers to participants within 75
days after RF triggered. % n/a n/a23 70% 75% 80% 85%
Following
RF trigger
Risk
Financing
Review
DRMFSS
15. Woredas with contingency plans in
place. Number 0 243 243 255 255 255 Annual PSNP Report DRMFSS
Target is based on
current number of
woredas in PSNP
(excluding Afar and
Somali Regions)
Intermediate Result 3: Outcome 1: Transparency and accountability of PSNP improved.
Outcome 2: Institutional capacity to manage the PSNP strengthened.
16. Clients and non-clients reporting
that the targeting processes are fair24. % 85 65 90 90 Bi-Annual
Impact
evaluation CSA/DRMFSS
23
The program is currently in the process of preparing a review of the experiences with the implementation of the Risk Financing facility in the second half of
2011. Data from this review is not yet available. 24 The baseline data is from the 2008 Financial Transparency and Accountability report on the PSNP. The Y6 data is from the IFPRI/CSA 2010 Descriptive Report; this change in
data source likely explains the decline in the rating.
41
17. Beneficiaries who received all
information needed to understand how
the program works.
% 68 73 80 90 Bi-Annual Impact
evaluation DRMFSS
18. Woredas that have posted budgets
in public places. % 0 42 83 85 90 95 Annual
Information
Centre DRMFSS
19. Kebeles with functioning appeals
committees in place. % 90 90 90 90 95 95 Annual
Appeals
Audit DRMFSS
20. Woredas using PASS. % 0 93 97.3 98 99 100 Annual PSNP Reports DRMFSS
Intermediate Result 4: Outcome 1: Advisory services are demand-driven and market-oriented.
Outcome 2: Financial services channeled through appropriate institutions
21. HABP beneficiaries report that
they are satisfied that their business
plans reflect their priorities, needs and
capabilities
% 0 n/a 65 80 Bi-Annual
HABP
systems
assessment
DRMFSS &
Ag. Extension
Directorate
22. Average repayment rates for
HABP credit.
% 72
PW -50
DS - 46 90 95 Bi-Annual
Impact
evaluation CSA/DRMFSS Annual Number
23. Credit to food insecure household
delivered through MFIs, RuSACCOs
and VSLAs.
% 52 PW - 37
DS - 43 85 95 Bi-Annual
Impact
Assessment DRMFSS/CSA
42
Monitoring and Evaluation System
1. The Government has established a single monitoring and evaluation system for the Food
Security Program that includes detailed assessments of the PSNP and HABP. This system is
designed to assess progress towards higher level objectives while also responding to the realities
of collecting regular monitoring data through Government systems. The system is guided by an
integrated logical framework to ensure concerted progress towards the overall objective of
reducing food insecurity in rural Ethiopia.
2. In particular, regarding monitoring of the HABP, the Government confirmed that it will
assess progress towards achieving the objectives of the HABP, as outlined in the new program
logframe. This will be done using the FSP monitoring system, required assessments as outlined
in the Program document and logframe, and the independent FSP household survey, which is
undertaken by CSA in collaboration with an international institute every two years. As has been
the practice so far, Government will continue to share these assessment reports with development
partners. This information will be the basis for management decisions between the Government
and development partners to improve the performance of the Program.
3. The FSCD is responsible for the overall monitoring of the Program, while the NRMD,
AED, and MoFED respectively oversee the monitoring of the PSNP public works, HABP
technical services, and financial management. Program evaluations are carried out by
independent bodies. The sections below describe the various components of the M&E system. A
summary of the system is found in Table 6.
A. Regular monitoring data
4. Information at output and activity level is collected regularly through Government systems.
This includes information on beneficiaries, transfers, public works, and delivery of technical
services through the extension system. Public works monitoring records the location, number,
type, and design of all implemented public works. In addition, in APL III, watersheds will be
mapped at to track changes over time. Financial reports provide information on budget expended
according to agreed line items. Further, following the release of Risk Financing resources,
reports will be consolidated through the Government system.
5. This type of reporting aims to keep stakeholders apprised of expenditures and activities,
verify the proper implementation of processes described in the PIM and other program
documents, and identify areas where performance does not match expectations so that program
managers can take corrective actions. Information collected by the regular monitoring system is
expected to flow both “upwards” and “downwards”. As each office fulfills its reporting
requirements up the chain, it will be expected to also report back to those providing the data.
6. Regular monitoring data is collected through Government implementing bodies. Regular
monitoring of public works is the responsibility of the NRMD through its PWCU, while the
AED monitors the implementation of HABP technical services and overall financial reporting is
carried out by MoFED. FSCD combines and analyzes these data to prepare a comprehensive and
continuous assessment of progress in implementation. A summary of responsibilities follows:
(a) Community level: Weekly tracking and monthly reporting on food security activities are
submitted to kebele.
(b) Kebele level: DAs submit monthly reports on implementation progress as compared with
the FSP plan to the Food Security Desk.
43
(c) Woreda Level: The Food Security Desk regularly monitors safety net and household
asset building activities, compiles the data and reviews implementation against plans. The
Finance Office reports on resource utilization. Monthly, quarterly, and annual reports are
submitted to the regional food security coordination office; data on PSNP public works is
submitted to the Regional PWFU; data on HABP is submitted to the Extension Office; and
financial reports are submitted to BoFED.
(d) Regional Level: The Regional Food Security Coordination Office compiles data
submitted by woredas and reviews progress. Quarterly and annual synthesis reports are
submitted to FSCD. The regional Public Works Focal Units analyze data on public works
submitted by woredas and undertake additional monitoring activities as required. The
Agricultural Extension Office is similarly responsible for the monitoring of HABP technical
services. BoFED consolidates and analyzes the woreda financial reports.
(e) Federal Level: The FSCD collects reports from the Regions and implementing partners,
particularly PWCU, AED, MoFED and NGOs on a quarterly basis and also prepares an
annual report. This data is analyzed in a consolidated report to provide a comprehensive
overview of progress in implementation. The Public Works Coordination Unit analyses data
on public works submitted by Regions. The AED is similarly responsible for data on the
delivery of technical services for the HABP. MoFED prepares the interim financial reports
on the PSNP and HABP, including in-kind resources.
7. Reporting follows the Government of Ethiopia‟s fiscal year, which begins on July 8 and
ends on July 7. Annual plans for the PSNP and HABP are completed by June 30 and will be used
as the basis for preparing quarterly achievement reports of the following fiscal year.
B. Real-time monitoring data
8. Regular monitoring data is augmented with real-time data from a range of sources,
particularly on the PSNP. Real-time monitoring of the PSNP was instituted in APL I to mitigate
humanitarian risks and continues to provide a vital source of timely data on Program
performance to decision-makers at all levels.
9. The Federal Information Center (FIC) previously collected data every two weeks from
about 80 woredas to provide real-time information on the timeliness of PSNP transfers. The FIC
compiled and distributed information in response to the needs of decision-makers. As part of
APL III, Regional Information Centers (RICs) have been established. They will collect data on
transfers and other key indicators for monitoring performance targets and determining
performance incentives. They cover all PSNP woredas in Afar, Amhara, Oromiya, SNNP, and
Tigray Regions. A RIC will be established in Somali as the Program rolls out in this Region.
Once the RICs are well established, the scope of the FIC will subsequently change to focus on
quality control and data auditing, while continuing to provide program-wide analysis on program
performance.
10. As the cornerstone of Government‟s Risk Management Strategy for the PSNP, the Rapid
Response Mechanism (RRM) addresses critical implementation problems as they occur. The
RRM detects problems that warrant immediate attention and responds rapidly to resolve the
problems, thus reducing any potentially serious humanitarian or other risk. Rapid Response
Teams are regularly deployed to Kebele, woreda, and Regional levels to monitor implementation
progress. This is done through focus group discussions with implementers, beneficiaries, and
44
non-beneficiaries and a review of records. Teams also follow up to solve any problems and
ensure that consistent follow-up is provided
C. Systems assessments
11. A number of independent systems audits were adopted in APL II to improve information
flows on systems and processes, particularly at woreda level, with the aim of strengthening
implementation and overall accountability.
12. The Appeals Review assesses the effectiveness of the appeals system at woreda and Kebele
levels and disseminates best practices. This review ensures the Kebele Appeals Committee is
functioning as expected and that records are being kept. The Independent Procurement
Assessment reviews woreda procurement systems and processes to ensure that procedures and
guidelines are followed and makes recommendations on how procurement could be improved.
13. In APL III, the Financial Audit fulfills three functions: audit of accounts, systems audit,
and review of transactions to beneficiaries to ensure that funds disbursed are used for purposes
intended. Existing roving and annual audits have already been amalgamated into one
streamlined audit process with quarterly as well as annual reporting. Additionally, a Commodity
Audit of in-kind resources will be introduced into the PSNP. This audits commodity management
systems to ensure the proper oversight and management of in-kind resources with the overall aim
of strengthening accountability. The audit includes a review of transactions to beneficiaries to
ensure that resources are used for the purpose intended.
D. Assessments of output indicators
14. The Program commissions a number of independent studies and reviews to assess progress
towards outputs. These studies aim to assess if the program is on track to achieving its purpose
and to identify any adjustments needed. The results of the various studies will also inform
adjustments to program activities.
15. A set of annual woreda level reviews provides the main opportunity to assess indicators at
this level. The First Annual Public Works Review assesses the adequacy of community public
works plans and the integration of these into the woreda plan. The Second Annual Public Works
Review, which occurs towards the end of the public works season, assesses the quality of works
constructed during the season and reviews project sustainability.
16. Additional assessments of outputs are carried out at the Federal level. A Review of the
PSNP Risk Financing will be carried out each time it is triggered to determine the effectiveness
of the response. The Wage Rate Study is conducted annually to ensure that the PSNP provides an
appropriate cash wage rate by assessing market prices of key cereals in PSNP woredas.
17. Building on the review of targeting and studies on HIV/AIDS and Gender completed under
APL II, a further Social Assessment focusing on program targeting and other relevant social
issues will assess the quality of program targeting and confirm that the most vulnerable continue
to be targeted by the program.
E. Impact evaluations
18. A set of impact evaluations aim to measure the changes that are brought about for the
direct and indirect beneficiaries and/or their institutional structures as a result of the activities
initiated by the program. These are carried out through independent assessments.
45
19. A regionally representative household survey is carried out every two years to assess the
impact on direct and indirect beneficiaries as a result of activities initiated by the Program. The
2010 survey is completed and the final draft report is just issued. This survey also provides
valuable information on implementation progress. Quantitative household-level information is
augmented through qualitative assessments, addressing beneficiary perceptions and related social
issues.
20. A second evaluation assesses the impact of PSNP public works at community level using a
sample of watersheds from across program woredas. This examines the impact of PSNP public
works to determine if they have met their objective such as conserving soil or moisture, growing
crops through irrigation, or providing market access through road networks.
Table 1: PSNP and HABP M&E System
Key Reports, Assessments, Audits and Evaluations
Types of
reports
Information provided Frequency Examples of
indicators
Monitoring
Reports
Regular collection of information at output and
activity level, including regular financial reports
(IFRs).
Monthly from
woreda to
Regional level;
Quarterly to
Federal level
- Number of public
works completed
- Volume of transfers
delivered
Information
Center
Reports
Information collection from a sample of woredas
largely focused on timeliness of transfers, but also
includes price data. A key set of indicators on the
HABP may also be collected.
Every two weeks
- Date and amount of
transfers to woredas
and beneficiaries
- Average maize
prices
Rapid
Response
Mechanism
Report
Regular assessments of implementation at kebele,
woreda and regional levels to address critical
implementation problems as they occur. This includes
transfers to beneficiaries, public works, capacity issues
and others.
Every two months
from Federal level
(regularly from
Regional and
below)
- Number of
households targeted
- Beneficiary
satisfaction with
PSNP
Annual
Assessments
- Purchasing power study to set an appropriate wage
rate for the PSNP
- PW Review (planning) to assess the adequacy of PSNP
public works plans
- PW Review (technical) to review the quality and
sustainability of PSNP PW
- Risk Financing (RF) Review to determine the
effectiveness of the RF response, if triggered
- Appeals Review to assess the functioning of the
appeals system
- Independent Procurement Assessment to review
procurement processes at woreda level
- Annual
- Annual
- Annual
- As needed
- Annual
- Annual
- Average prices in
PSNP markets over
time
- Number of public
works meeting
technical standards
- Number of
Appeals Committees
established
- Volume of goods
procured
Audits
- The Financial Audit includes an audit of accounts;
systems audit; and review of transactions to
beneficiaries to ensure that funds were used for
purposes intended.
- The Commodity Audit review to ensure in-kind
resources are used for the purpose intended
- Quarterly
rolling, annual
- Annual
- Percent of
households receiving
full payment
- Quality of food
stock records
Evaluations
- Social Assessment to confirm the effectiveness of
program targeting and assess relevant social issues
- Public Works Impact Assessment to determine if the
objective of the PSNP PW were met
- Once
- Every two years
-Qualitative review
of targeting
- Benefit-cost
assessment of public
46
Types of
reports
Information provided Frequency Examples of
indicators
- Biannual Impact Evaluation, a regionally
representative household survey, to assess outcomes
and impacts of all component of FSP
- Risk Financing impact assessment to determine if the
objectives of RF were met
- Every two years
- As needed
works
- Change in
household food gap
Source: FSP Formulation Document 2009.
21. Government and development partners carry out Joint Review and Implementation Support
(JRIS) Missions twice a year following an agreed schedule from 2010-2014. The monitoring
activities below have been established for each of the JRIS Missions:
Semi-Annual Review by June 2010
Review implementation of PSNP Client Card System and Charter of Client Rights and
Responsibilities.
Adopt a revised monitoring system based on the FSP (including PSNP and HABP) logframe
and systems review to include, inter alia, PSNP cash and food transfers, public works, HABP
technical and financial services, and risk financing.
Review PSNP Rolling Training Program (and each subsequent June JRIS).
Completed semi-annual Public Works Review (planning) and recommendations identified
(and each subsequent June JRIS).
Review functioning of federal and regional Information Center systems and agreed steps to
further strengthen the system, as necessary (and each subsequent June JRIS).
Progress report on program implementation, including woreda performance and public works
monitoring, completed and recommendations identified (and each subsequent June JRIS).
Woreda-by-woreda assessment of implementation of PASS in Amhara, Oromia, SNNP, and
Tigray Regions and recommendations agreed (and each subsequent June JRIS).
Review progress of pastoral program roll out and identify recommendations to strengthen
implementation (and each subsequent June JRIS).
Semi-Annual Review by October 2010
Agree Appeals Review findings and recommendations (and each subsequent October JRIS).
Agree Procurement Review findings and recommendations (and each subsequent October
JRIS).
Semi-Annual Public Works Review (technical) completed and recommendations identified
(and each subsequent October JRIS).
Review of the performance management system for all PSNP woredas (and each subsequent
October JRIS).
Provide evidence that the revolving funds and credit lines under HABP are being managed
according to sound financial principles, including commercial interest rates.
47
Semi-Annual Review by June 2011
Additional to the above, review findings of 2010 Household and Public Works Impact
Assessments and agree modifications to program design, as necessary.
Semi-Annual Review by November 2011
The November 2011 JRIS will focus on the review of impact and outcome of the
program.
48
ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF)
Project Stakeholder Risks Rating High
Description : Description :
In May 2010, Ethiopia held parliamentary elections. The
ruling party won 499 out of 547 seats, while regional and
opposition parties received 46 and 2 seats, respectively.
Though the Government on its part declared the process was
democratic and the political space wide open, the results
have raised concerns among some Development Partners on
the narrow space for citizen‟s formal political engagement.
.
Donors are under increasing pressure to demonstrate their
funds are delivering results and not leading to a reduction in
political space. Without credible, survey-based evidence of
results and strengthened transparency and accountability
mechanisms, they might decide to withdraw support to
maintain their institution‟s reputation.
Risk Management: The “Aid Management and Utilization Report” finds that the numerous
PSNP accountability mechanisms are quite robust, though could be further strengthened.
To this end, the Bank will continue to work through the country program on further
improvements for citizens engagement, by promoting improved local transparency and
accountability measures.
Resp: Bank Stage: Imp. Due Date : Continuous Status: Ongoing
Risk Management: PSNP works to ensure food security and timely transfers of food and
cash and to strengthen monitoring and evaluation systems that monitor progress towards
these goals. The program promotes independent survey-based quality checks on results,
and opportunities for local multi-stakeholder engagement for accountability.
Resp: Client Stage: Imp. Due Date : Continuous Status: Ongoing
Implementing Agency Risks (including fiduciary)
Capacity Rating: High
Description: The last four audit reports for PSNP have been
qualified and internal control weaknesses were noted. Weak
follow up of findings and action plans to resolve issues.
Delays are also noted in submitting audit reports.
Risk Management: Regular FM Task force meetings, comprising key Government and
Development Partner agencies will be conducted to closely monitor the implementation of
agreed actions related to FM issues.
Resp: Client/DPs Stage: Impl. Due Date : Monthly Status:Ongoing
49
Weaknesses are still noted in the budget monitoring/control
aspect.
There are still concerns regarding the quality and timeliness
of financial reporting. There are apparent weaknesses in internal audit functions at
all levels. Capacity constraints continue to exists, especially
at lower levels, and particularly regarding fiduciary aspects.
Weak capacity at the regions level in supervising and
supporting woredas
Risk Management : MoFED‟s Channel one coordination unit will be strengthened to improve on supervisory
capacity, including hiring of additional FM staff.
Resp: Client Stage: Impl. Due Date : 07 July
2012
Status: Partially
am Completed
Risk Management: For most of the systemic and structural issues (e.g. the internal audit
function), the Government has agreed to undertake a joint diagnostic with development
partners to formulate an appropriate response to these structure challenges.
Resp: Client/DPs Stage:Impl. Due Date :March 2012 Status:Not yet
due
Risk Management : FM Manual revision will be finalized and necessary training will be
conducted to all levels.
Resp: Client Stage: Impl.
Due Date :31 March
2012
Status: Partially
completed
Risk Management : The 2010 Audit reports is being investigated by DPs and the current
status of the past audits action plans are being investigated.
Resp: DPs Stage: Impl. Due Date :31 March
2011
Status:
Substantially
Completed
Risk Management : Action plans (short and long term) were developed and agreed with the
Government to address FM issues of the project in May/June 2011 JRIS. Implementation
of these action plans will be closely monitored.
Resp: Client/DPs Stage:Impl. Due Date :Continuous
Status:In
progress. Not yet
due
Governance Rating: Moderate
Description :
The Government completely backs this Program. It is an
integral for the GoE‟s Growth and Transformation Plan, and
it has created the institutional infrastructure to facilitate its
implementation.
Risk Management : Risk Management :
The following measures have been implemented to strengthen the Program‟s governance
framework: and to mitigate the low risk of fraud corruption (i) an independent appeals/
redress procedure; (ii) a communication campaign focusing on financial transparency; (iii) fiduciary controls
verified by the Annual Audit, including the interim Financial Audit, the Procurement
50
There is no evidence to date that program resources may be
used for personal ends or special interests, a situation which
can reduce the availability of resources to vulnerable
households. Such an occurrence, though it has not occurred
in the Program, could significantly damage the credibility of
the Program at local and national levels. If it were to occur it
could also imply significant reputational risk for the World
Bank. Evidence to date suggests that overall governance of
the Program is good and that there are no systematic
problems. Concerns around the accuracy of payments to
beneficiaries in some woredas have been investigated and
actions agreed to strengthen the system. A large number of NGOs participate in the PSNP providing
support in specific woredas to all aspects of program
implementation. These NGOs are financed directly and
solely by USAID. The newly approved CSO law may affect
their ability to be effectively involved in the program.
Review, with actions taken at woreda level and system-wide based on findings; (iv) computerization of the payroll system (PASS) rolled out under APL II is mandatory
under APL III The PSNP activities are related to service delivery, an activity that is explicitly permitted
under the law. The PSNP DWG is in the process of revising the MOU with the
Government, which will reflect the role of NGOs.
Resp: Client Stage: Prep.. Due Date :Jan 18,
2010
Status:
Completed
Project Risks
Design Rating: Moderate
Description: If the HABP is not an effective complementary
intervention to the PSNP, the probability of household
graduation will be reduced. Significant support from APL III
is envisaged to help make it more effective. Nevertheless, a
commitment to implement the new approach is required,
particularly in terms of promoting market-based approaches
to providing credit and enhancing the quality of technical
support provided by the extension service.
Risk Management: Technical assistance will be provided to ensure that modalities for
enhancing fund flows to financial institutions operating in food insecure communities
follow sound financial principles.
Resp: Client Stage: Impl. Due Date : Continuous Status:Ongoing
Risk Management : Continuous awareness creation at all levels will ensure widespread
understanding of the Program.
Resp: Client Stage:Impl. Due Date :Continuous Status:Ongoing
Risk Management : Ongoing supervision of the proposed reforms under the HABP will
provide opportunities for taking corrective actions as necessary during implementation.
Resp: Client/Bank Stage: Impl. Due Date :Continuous Status:Ongoing
Social & Environmental Rating: Low
51
Description :
The latest reviews based on structured sampling show that
the regions in which the PSNP is established are now
approaching 100% in ESMF screening compliance.
However, due to the very large number and dispersed nature
of the community-driven sub-projects, there are complexities
in achieving full safeguards compliance. Thus there is the
risk of not achieving 100% safeguards compliance is
Moderate. However, even if not fully mitigated, any potential
negative impacts are likely to be modest, localized and
limited in scale. Furthermore, the standard designs followed
for PW subprojects incorporate basic mitigating measures,
even before application of the ESMF. Thus the risk of
significant negative impacts even if not fully mitigated is
judged to be very low. Therefore overall, the risk of
significant negative impacts is rated as Low.
Risk Management : The following measures have been taken to strengthen the Program's
safeguards framework: The NRMD is engaged in a program of recruitment with support
from CIDA, to ensure adequate capacity for safeguards monitoring; the definitions of PW
subprojects have been revised to facilitate quality Screening following ESMF procedures;
a training program for the launch of the HABP component of the ESMF has been
launched; the data collection instruments to be used in the PW Implementation Reviews
are being strengthened in terms of ESMF monitoring, and work has commenced on
establishing a GIS-mapped database of all subprojects to facilitate monitoring of the
implementation of safeguards mitigating measures.
Resp: Client Stage:Impl. Due Date :Continuous Status: Ongoing
Program & Donor Rating: Moderate
Description : Harmonized donor support.
The PSNP is a large program with evolving financing needs.
Existing/new development partners and Government may not
be in the position to maintain the necessary long-term
financing, particularly in the current climate of economic
uncertainty. This will undermine the ability of the Program to
maintain current levels of support, as well as its ability to
scale up in response to shocks. Currently there is a
substantial financing gap for the Program
Risk Management: The emerging evidence on outcomes and impacts provides a solid
justification for existing partners to continue support for the Program. A revised MTEFF
for the five-year life of the Program is being agreed, which will maximize the multi-annual
commitments to the Program and therefore build predictability
Resp: Client/DPs Stage:MTR Due Date :Nov, 2012 Status:Not yet
due
Risk Management : Depending on the outcome of this exercise, a resource mobilization
strategy will be developed to fill the residual financing gap. A similar strategy was
effective at addressing significant financing gaps during APL I and II.
Resp: Client Stage:MTR Due Date :Nov, 2012 Status:Not yet
due
Delivery Monitoring & Sustainability Rating: Moderate
Description : Although an estimated 80 percent of public
works are rated satisfactory or better, the technical quality
and maintenance arrangements for a significant minority of
projects are problematic (i.e. roads and water). If public
works are not built to minimum technical standards,
following good environmental practice, and with the
Risk Management : The NRMD is now in a position to fulfill its mandate to provide
oversight of public works, and will identify the most effective way to upgrade capacity in
key sectors. Further cross-sectoral coordination at the federal level is planned to determine
how to best address identified capacity gaps.
Resp: Client Stage: Impl. Due Date :07 July Status: Partially
52
necessary operations and maintenance arrangements in place,
the sustainability of public works, the state of the
environment and the program impact will be undermined
2012 completed
Risk Management : The NRMD is presently engaged in a major review of training and capacity-building needs for improved environmental management and performance of ESMF implementation. An upgrading of the annual CBPWDP training will incorporate specific modules on maintenance, informed by the new rural roads policy
Resp: Client Stage: Impl. Due Date : 07 July
2012
Status: Partially
completed
Risk Management :. A program of collaboration between and the Ministry of Transport is underway to support the rural roads component of the public works program.
Resp: Client Stage: Impl. Due Date : Continuous Status: Ongoing
Overall Implementation Risk Rating Substantial
53
ANNEX 3: IMPACT EVALUATION
1. The Government and development partners employ a set of independent impact
evaluations to measure the changes brought about by the Productive Safety Net Program (PSNP).
These are: (i) an assessment of the impact of the Program on beneficiary and non-beneficiary
households, including male and female members; and (ii) an assessment of the impact of the
public works investments, particularly related to soil and water conservation.
Delivering predictable transfers to the poorest rural citizens
2. Analysis of regionally representative data collected in 2010 covering Amhara, Oromia,
Southern Nations and Nationalities Region (SNNPR) and Tigray Regions concluded that the
PSNP continues to be well targeted to the poorest households in chronically food insecure rural
woredas. Further analysis carried out using 2008 data shows that nationally, the PSNP is well
targeted to the poorest households. This suggests that the geographic and community-based
targeting, which applies an administratively determined targeting criteria, is working well. There
continue to be widespread reports that the size of the poor population in PSNP woredas outstrips
available resources. Within this context, there appear to be renewed efforts to ensure that all
members in targeted households are included in the Program.25
3. While earlier studies had found that implementers, non-beneficiaries and beneficiaries
widely understood poverty to be the reason for household participation in the PSNP, it appears
that this understanding has declined in recent years. Instead, there is a growing perception in
some areas that households are randomly assigned to participate in the PSNP or by a quota.26
This is attributed, in part, to the fact that the PSNP caseload has stabilized over time, with over
60 percent of households participating in public works in 2008, 2009 and 2010.
4. Significant investments have been made since 2006 to improve the predictability of cash
and food payments to program clients. These investments appear to be paying off: woredas with
dedicated accountants trained in the use of the automatic Payroll and Attendance Sheet System
(PASS), available vehicles, and advance transfer of cash resources from the Region make more
timely cash payments than other program woredas. There is also some suggestion that clients are
more likely to report that they have all the information needed to understand how the program
works, although there is some variation across regions and between men and women.
5. These improvements seem to be leading to the provision of more predictable payments in
some regions to a greater extent than others. Households are more likely to report that payments
are made on a timely basis in 2010 than 2008, but overall, this ranges between 14 percent in
Oromia and 54 percent in SNNP. The majority of households report that they are paid in full,
with the exception of Oromia where this was reported by 44 percent of households. Analysis of
household-level data draws attention to regional differences in the level of payments provided to
similar households.
6. The PSNP is increasingly being used to respond to shocks. The woreda and regional
contingency budgets are regularly used to respond to emergencies, such as drought and food
price increases. The Government triggered the PSNP Risk Financing facility to respond to the
2011 drought
25
This is referred to as full family targeting. 26
In contrast, between 2006 and 2008, households increasingly described the PSNP targeting as fair and transparent
and directed to the poorest households.
54
Building productive public works
7. Public works are planned through the Community-Based Participatory Watershed
Development Planning and are integrated into the woreda development plan. Women are less
likely to participate in these processes than men.
8. Public works are widely perceived to be beneficial. In 2010, roughly 80 percent of
respondents reported benefiting from the construction or maintenance of roads, 72 percent from
wells and 64 percent from water harvesting. It appears that male-headed households are more
likely to report benefiting from such investment than female-headed households.
9. An estimated 90 percent of public works were assessed to reach the satisfactory standards
and sustainability ratings. Efforts are being made to ensure that sufficient arrangements are made
for the operations and maintenance of public works. Most recently, 68 percent of public works
reviewed had an established management mechanism at completion.
Program impacts
10. Results from the 2010 impact evaluation suggest that the PSNP continues to have a
positive impact on livelihoods, even during times of crisis. These findings reinforce the earlier
finding that the impact of the Program is greater and appears across a wider range of indicators
when households receive predictable, high value transfers.
11. On average, households participating in public works reported that their food security
improved by 1.05 months. There is an improvement in food security in all regions and these are
statistically significant. This improvement is 0.75 months in Tigray, 1.84 months in Amhara,
0.88 months in Oromia and 1.32 months in SNNPR. While households receiving five years of
payments in Tigray saw their food security improve by 1.64 months, even household obtaining
one year of payments saw a positive improvement in their food security and this reduces the
magnitude of the double difference impact estimate for Tigray.
12. There are impacts on productive assets and livestock holdings with an increase in
livestock holdings by one tropical livestock unit, and an increase in productive assets by 112 real
birr. There are differences in the impact on livestock holdings across regions. Five years
participation raises livestock holdings by 0.38 TLU relative to receipt of payments in only one
year. There is no impact in Tigray. This is likely because in Tigray, beneficiaries are discouraged
from accumulating livestock as part of a general effort aimed at reversing environmental
degradation. In Amhara, households receiving transfers for only one year saw their holdings fall
by -1.32 TLU while those receiving payments for all five years experienced a small increase,
0.29 animals. This leads to a 1.62 TLU impact. In SNNPR, the PSNP increases livestock
holdings by 0.55 TLU.
13. Direct Support improved food security as measured by the number of months that the
household reported that it could meet its food needs. In the few cases where average Direct
Support transfers have been large, this effect is substantial. Increasing average Direct Support
payments from 500 to 2500 Birr leads to a two month improvement in food security.
14. There is no evidence that Direct Support has disincentive effects. Higher levels of Direct
Support have led to more rapid asset accumulation. There is no evidence that Direct Support
reduces (“crowds out) private transfers and there is some evidence that private transfers are
crowded in.
55
ANNEX 4: FINANCIAL MANAGEMENT AND DISBURSEMENT ARRANGEMENTS
1. Introduction. A Financial Management (FM) assessment was conducted for APL III
from May to June 2009 in accordance with the financial management principles outlined in the
“Financial Management Manual For World Bank-Financed Investment Operations” issued by the
Financial Management Sector Board on March 1, 2010 and AFTFM Financial Management
Assessment and Risk Rating Principles. In addition, reviews of the quarterly Interim Financial
Reports (IFRs), audit reports and implementation support and review missions were assessed.
The objective of the assessment was to determine whether the participating institutions have
adequate financial management systems and related capacity in place to satisfy the World Bank‟s
Operation Policy/Bank Procedure 10.02 with respect to financial management.
2. PSNP is one of the largest safety net programs of its kind in the world operating in 320
woredas. It provides support to around 7.6 million individuals in Ethiopia through cash and food
transfers – with the bulk of the transfers taking place during the first six months of the calendar
year. Due to the scale of the program and the volume of cash transfers – this program faces a set
of fiduciary challenges. The last four consecutive annual audit reports have been qualified and
have identified a number of systemic and recurrent issues as outlined in the management letters.
Some of the key issues identified by audit are weaknesses in budget discipline, periodic
excessive cash balances maintained at the woreda and regional level, limited monitoring and
supervision capacity of MoFED and regions, internal control weaknesses, untimely submission
of IFRs and their related quality and weak follow up on audit findings at the woreda level.
Significant attention has been devoted to addressing several of these issues over the past years.
While gains have been made - notably enabled by the constructive engagement of MoFED
through the Financial Management Task Force - it is increasingly clear that there is need for
more remedial action on project specific FM challenges as well as FM challenges of more a
structural nature, which are currently in progress. To address the project specific challenges, the
FM experts of the development partners have undertaken an analysis to identify the outstanding
audit report findings for which appropriate action still needs to be taken. Further, MoFED has
undertaken an assessment at the regional and woreda level to identify the main reasons for the
outstanding issues that have emerged from the Audit of 2007-2009. Based on the assessment,
MoFED has submitted a report including a clear action plan for how those issues would be
addressed. In addition, an independent audit firm has been recruited to review and assess the
qualification issues from the 2010 audit and make necessary recommendations. Through the FM
task force meetings and continued supervision, implementation of agreed actions will be closely
monitored to ensure that other observed weaknesses, such as budget monitoring and capacity
concerns, are addressed. The FM challenges of a more structural nature are addressed through
the existing PFM reform activities.
3. Government has demonstrated commitment to improve the financial management of
channel one programs of which the PSNP is part by significantly strengthening its capacity
through the channel one program coordination unit (COPCU). As a result, COPCU has been
reorganized at the Federal level and COPCU units have been established at the Regional levels.
The COPCU staffing capacity and its senior management has been strengthened.
Executive Summary
4. The FM arrangements for the project will continue to mostly use the country‟s regular
public financial management (PFM) system at the Federal Government level and use project
56
specific arrangements at the regional and woreda levels. The Government Chart of Accounts, has
undergone the necessary modifications to accommodate the project specific reporting
requirements. These FM arrangements will cover all program funds..
5. The strengths of the PFM system include the budget process, compliance with financial
regulations, and the well-defined accounting system, including computerized accounting at the
federal and regional levels. Staff responsible for the project‟s FM are experienced in IDA
financed projects. However, there are deficiencies in the system that may negatively impact on
the project, such as a shortage of accountants and auditors mainly at woreda level, delays in
reporting, and limited focus and effectiveness of internal audit. The scale of the project and
complexities arising from the large number of implementing institutions can also pose
implementation challenges. Financial reporting for the Program requires submission and
consolidation of timely and accurate reports from a large number of institutions. This is
challenging as there are regular delays in the submission of quarterly financial reports from
woredas, some of which are quite remote, and regions. This may also delay the audits.
6. The APL II audit reports noted a number of accounting and internal control weaknesses
for which the Government will take actions to rectify and improve. These have been detailed in
action plans, the implementation of which will be reviewed by the World Bank and development
partners. Design features of APL III that aim to address these weaknesses include: (a) ensuring
that there is a clear and revised FM Manual and provision of necessary and adequate training (b)
providing FM support/supervisions/monitoring and close follow-up by MoFED and BoFEDs to
lower levels of Government (c) appointing auditors early (d) ensuring a more robust use of the
interim audit function (transaction-based system and internal control testing), and (e) linking the
interim audit with the final financial audit to minimize delays or facilitate early completion of the
external audit.
7. The FM risk for the project is rated as High and is expected to be Substantial after taking
into account mitigation measures. . APL III has a revised FM manual. This manual would ensure
that the current situation is well captured and that new developments, such as the procedures
pertaining to the asset building component and other relevant aspects, are included. Action plans
on the various activities to be completed with regards to FM arrangements have been agreed and
documented.
8. The FM-related covenants include: submission of Interim Financial Reports (IFRs) for
the project for each fiscal quarter within 60 days of the end of the quarter; quarterly submission
of reports on the findings noted during the interim audit due within 60 days of the end of each
fiscal quarter; submission of annual audited financial statements and audit report within 6
months of the end of each fiscal year and submission of the commodity audit report within 6
months of the end of each fiscal year.
9. It is the conclusion of the Bank‟s FM assessment that the FM arrangements meet World
Bank requirements as per OP/BP 10.02. It is adequate to provide, with reasonable assurance,
accurate and timely information on the status of the project required by the World Bank.
57
Risk Assessment and Mitigation
Risk Risk
Rating Risk Mitigating Measures
Incorporated into Project Design
Residual
Risk
Rating
Conditions for
Effectiveness
(Y/N)? Inherent Risk Country Level Risk arises from
weak capacity,
including turnover
and shortage of
qualified accountants
and auditors.
S This is being addressed by the ongoing
Civil Service Reform Program
supported by PSCAP and Protection of
Basic Services (PBS)II.
S N
Entity Level There are a number
of players
implementing the
project. Monitoring
and enforcement of
financial regulations
and rules of the
project needs
improvement.
H The program still faces challenges on
monitoring and coordination amongst
various implementers. The APL III
revised manual stipulates the respective
responsibilities of players in the
program. This is expected to help
remove latent overlaps and confusion
and also helps deal with key issues of
monitoring and coordination. In
addition, there is experience in
managing World Bank financed projects
within MoFED and MoA. MoFED‟s
Channel One Program Coordinating
Unit (COPCU), which is restructured
recently, will facilitate and monitor FM
aspects of the project.
S N
Project Level The project is
complex with the
involvement of a
large number of
dispersed entities and
a mix of large and
small amounts of
disbursement.
H As above. Capacity building trainings/workshops
to project accountants and relevant
internal auditors will be planned and
conducted.
S N
Inherent risk H S Control Risk Budgeting Low budget
utilizations are noted
particularly for the
first three quarters of
a year. Lack of satisfactory
variance analysis to
monitor budget
implementation was
H The annual work plan and budget of the
program will be finalized timely and
submitted to regions and woredas to
ensure that the implementation of the
program begins as planned. Budget will be closely monitored by
MoA, MoFED and DPs to tackle
challenges in slow implementation of
the program.
S N
58
noted. Variance analysis training should be
offered by MoFED and developed on a
continuous basis. Proper follow up will
be done by MoFED and MoA on the
utilization of budget. The FM manual lays out detailed budget
preparation and control procedures Accounting Cutoff and some
accounting problems
such as posting and
coding errors were
noted in the past. There is also the risk
of delays in recording
of transactions. IBEX is not fully
utilized at the regions
and woredas. There
is also high turnover
of staff
H The FM manual has been revised to
outline clearly the cut-off procedures
and areas where accounting processes
are not explicit, as well as to address
FM issues pertaining to additional
components like the support to HABP.
Regular training to regional and woreda
staff and close follow-up of woreda
accounts will help with timely recording
of transactions. Regular supervision and
close follow-up will be made by
MoFED and BoFEDs. The FM
taskforce meeting on monthly basis will
also follow up on pertinent issues
related to accounting.
S N
Internal Control Internal audit
function is weak. Further, satisfactory
action has not been
taken on issued audit
management letters
on a timely basis. Weaknesses in cash
management are
noted Cash and in-kind
support may not
reach the target
clients. Huge amount of
resources are usually
seen at the lower
levels.
H In addition to the risk mitigation
measures mentioned in “Accounting”
above, internal auditors of
Regions/woredas will review the project
at least once per year. It is expected that
the capacity building component of PBS
will enhance the effectiveness of the
current regional/BoFED internal audit
departments. The interim audit, focusing
on internal control and transfer of funds
and resources to clients will be
conducted, thereby helping to ensure
that funds are used for the purposes
intended. The need to act on
management letter weaknesses was
agreed during APL III Negotiations and
COPCU at MoFED will be involved in
facilitating actions and follow-up at
regional level. The strengthened use of
PASS (payroll system) and the rolling
out of client ID cards in tracking clients
will be given attention to ensure that the
target clients are being addressed. Circulars are distributed instructing the
woredas to minimize cash on hand. In
addition, discussions are underway with
MoFED to identify other risk mitigating
S N
59
measures. MoFED will also track the
size of cash at hand at woredas, and DPs
will follow up on this. Funds flow There may be delays
in flow of funds to
the lowest
implementation
levels.
S Close supervision by development
partners will continue. The interim audit
will continue to focus on internal
control and transfer of funds.
Appropriate planning and projection of
disbursements will be monitored
frequently.
M N
Financial Reporting Delays in reporting,
which was noted in
the past, has
improved. However,
there are still quality
issues on the
submitted IFRs
H All woredas will be required to submit
monthly reports to BoFEDs, which will
consolidate reports every quarter. Heads/deputy heads of WoFEDs need to
review the IFRs issues by the woredas
to ensure the accuracy and quality. Regular training on the preparation of
IFRs will be conducted by MoFED.
Close follow-up will be done by
MoFED and development partners.
S N
Auditing Delay in submission
of audit reports. Lack
in resolving and
following up of audit
report findings and
action plan.
H Follow up on the timely closure of
yearly accounts will be done by DPs.
COPCU will strengthen its effort to
follow up actions plans. DPs will
continue to follow up on the
implementation of action plans.
S N
Control Risk H S
Total Project FM
Risk H S
10. In the view of the above table, the inherent and control risk of the project is assessed as
Substantial. The overall financial management risk rating of the additional financing remains
Substantial as in the main project (APL III).
Strengths and Weaknesses of Proposed Financial Management System
11. The main weaknesses of the FM arrangements continue to be turnover and shortage of
qualified accountants and auditors, mainly at woreda level, delays in reporting, limited attention
to the internal audit, and capacity limitations. The long process involved in producing reports
from woredas to regions, and from regions to MoFED is delaying the timely submission of
financial reports to the development partners. Delayed submission of reports (both audited and
unaudited) is, however, significantly improving, although the need for constant follow up
remains.
12. Lessons from APL II: Audit reports noted weaknesses in the accounting and internal
control areas. These include: (i) repeated problems in supporting payments with adequate
documents; (ii) cutoff problems/errors; (iii) posting/coding errors; (iv) issues with cash
certificates and bank reconciliation; (v) some control weaknesses in connection with payroll
payments to clients; (vi) inconsistencies between woreda and regional reports; (vii) idle
60
resources, (viii) lack of ledgers and transaction registers including not being up-to-date; and (ix)
lack of analysis and follow up of long outstanding debtors and creditors. MoFED is taking steps
to address these weaknesses, and these efforts have been detailed in action plans. The World
Bank and development partners will monitor the implementation of the agreed actions. In
addition, MoFED and BoFEDs will intensify efforts to support the WoFEDs. This will include
regular field visits to WoFEDs and robust reviews and checks on the reports. Ongoing trainings
will also address accounting problems noted.
Financial Management Implementing Entities
13. At the federal level, MoFED will continue to be responsible for the overall financial
management of the project. This includes, but is not limited to, the management of the
designated and the pooled Birr accounts, transferring funds to BoFEDs and MoA (based on the
direction of MoA), producing regular financial reports, and facilitating the annual audit of the
project account. MoFED will ensure that acceptable financial management systems are in place
and are well documented in the FM manual. The MoA is responsible for oversight and
coordination of the project. It will also be responsible for the funds transferred to it from
MoFED.
14. At the regional level, BoFEDs continue to be responsible for ensuring that a suitable
accounting system covering both regional and woreda levels are established. BoFEDs will
continue to collect and aggregate all financial data and information from BoA and woredas on
the Project, review the effective use of accounting procedures by woredas, and provide technical
support and assistance to them. Each region will prepare quarterly and annual reports, which will
be sent to the federal level. BoAs are responsible for the management of the funds transferred to
them for implementation.
15. At the woreda level, a suitable accounting system is established for the disbursement of
funds for activities financed under the PSNP, including the HABP component. The records of
funds utilized will be maintained in accordance with sound accounting practices that are capable
of generating accurate and timely information for verification. Woreda accounting personnel will
receive training on how to maintain accurate accounts for the funds. In case woredas face
difficulties in accounting or handling financial records, the region will provide timely assistance
and training to resolve such difficulties. WoFEDs (i) ensure that the budgets for the PSNP are
received in a timely manner and monitored closely at the woreda level to guarantee smooth
implementation of approved plans and activities; (ii) undertake timely PSNP (and Risk
Financing) payments to beneficiary households, supervising personnel, and for the purchase of
relevant equipment and materials; and (iii) exercises necessary fiduciary controls and reports on
fund utilization to Regional BoFEDs.
16. MFIs at regional level or below and RuSACCOs at woreda or kebele levels will benefit
from the capacity building activities financed under the HABP. They will not directly receive
development partner financing from BoFEDs or WoFEDs but they will receive support from the
capacity building activities of the program.
17. There should be strong coordination and communication between MoA and MoFED in
implementing the project. A number of committees like the Joint Strategic Oversight Committee,
Regional Steering Committees, and Technical Committees at federal and regional levels will
help foster linkages between Government implementing agencies and development partners.
61
Budgeting
18. The overall budgetary arrangements of APL III will continue to prevail for the Additional
financing. Based on the government‟s budget manual, the Budgetary Institutions prepare their
budgets in line with the budget ceilings and submit these to MoFED within six weeks following
the budget call. The budgets are reviewed first by MoFED and then by the Council of Ministers.
The final recommended draft federal budget is sent to Parliament in early June and is expected to
be cleared at the latest by the end of the EFY.
19. The PSNP is on budget at the federal level with the project budget being proclaimed in
the budget of the Federal Ministry of Agriculture.
20. Each region is required to prepare a consolidated PSNP work plan and budget for all
components for each budget year based on inputs from lower levels and submit this to MoA. A
consolidated budget will be submitted by MoA to MoFED. This budget is broken down by
appropriate project category or components along with quarterly classifications. Based on the
Program budget, a detailed and comprehensive fund transfer schedule by region and woreda will
be prepared and disseminated by MoA to all relevant stakeholders in July of each year.
21. The FM Manual of PSNP has been revised to reflect the current situations in terms of
budgeting, accounting, fund flows, internal controls, financial reporting, and auditing issues and
to include new developments like the procedures pertaining to the HABP component and other
relevant aspects.
22. Activities continue to be identified within the Government‟s Chart of Accounts, thereby
facilitating budgeting, accounting and financial reporting for the project funds.
Accounting
23. As in APL II and III, the Government‟s accounting policies and procedures are expected
to be largely used for the accounting of the project. The Ethiopian Government follows a double
entry bookkeeping system and modified cash basis of accounting. This is documented in the
Government‟s Accounting Manual. This has been implemented at the federal level and in many
regions. The Government‟s Accounting Manual provides detailed information on the major
accounting procedures. On the basis of this manual, the APL III FM Manual has been revised to
include the new HABP component, food resources, aid in-kind accounting, and strengthen other
relevant aspects. This updated FM manual will be used for this additional financing.
24. The project currently uses manual accounting system in most places. The existing woreda
level accounting software (IBEX) does not have a project accounting module as yet, so the
accounting for PSNP has to be completed outside of the IBEX system. The Chart of Accounts
(budget codes) described above helps with the preparation of relevant quarterly and financial
statements, including information on the total project expenditures.
25. The program has adopted a computerized Payroll and Attendance Sheet system (PASS)
supported through IT Helpdesks at Regional level. As per the Project Implementation Manual
(PIM) of the project, using PASS is mandatory in all PSNP woredas in Amhara, Oromia, SNNP
and Tigray Regions, including those supported by NGOs. Data on attendance is entered into
PASS by the woreda Food Security Office. The attendance sheet is transferred to the woreda
62
Finance Office in electronic form as required by PASS. The payroll is generated by the system
and payment effected to beneficiaries.
26. There are weaknesses and problems observed in the accounting and internal control
areas, which need attention, as discussed in the “Strengths and Weaknesses” section above.
Further weaknesses are noted in the yearly audit reports of the project. MoFED is taking steps to
address these weaknesses but much still remains to be done. MoFED and BoFEDs should
intensify efforts to support the WoFEDs. Regular field visits to WoFEDs and robust reviews and
checks on the reports should be continued. Ongoing capacity building trainings would also
address the accounting problems noted.
27. The current project has recruited and maintained a significant number of accountants and
cashiers at federal, regional, and woreda levels. The project requires 783 positions for the
handling of financial management of the project. The reports submitted by MoFED do not
explicitly indicate the positions that are vacant. It is expected that the current staffing levels will
continue to operate for the additional financing. The staffing level needs to be monitored to
ensure that vacant positions are filled during the implementation of the project.
Internal Control and Internal Auditing
28. Internal control comprises the whole system of control, financial or otherwise,
established by management in order to: (i) carry out the project activities in an orderly and
efficient manner; (ii) ensure adherence to policies and procedures; (iii) ensure maintenance of
complete and accurate accounting records; and (iv) safeguard the assets of the project. Regular
government systems and procedures will be followed, including those relating to authorization,
recording and custody controls. The project‟s internal controls, including processes for recording
and safeguarding of assets, are also documented in the FM Manual which is under revision.
These procedures will continue to be applicable.
29. It is widely accepted that one of the weakest features of the entire PFM system in Ethiopia
is the weak Internal Audit system across the country. This in turn affects the strength of the
overall internal control environment. For PSNP the internal control environment over payment to
beneficiaries is strengthened by the usage of a computerized system of maintaining attendance
sheets electronically through PASS and client cards. “Client cards” were introduced in all
Regions to provide evidence of entitlements under the Program and proof of payment. The client
cards have a picture of both the husband and wife and enable the beneficiaries, local decision-
makers and Federal level officials to better track receipt of payments over time. Attached with
client cards, there is a charter of rights and responsibilities which clearly describes the rights and
responsibilities of the clients. Such cards enable the program to control that payments are being
made to entitled beneficiaries only. In addition to this the interim audit Term of Reference (TOR)
of the program indicates that the external auditor should track payments to beneficiaries on a
sample basis quarterly. The TOR clearly indicates that the auditor should, on a sample basis,
verify that payments to beneficiaries as documented in payrolls were actually made to the
beneficiaries who are engaged in various safety net activities. .
30. The nature of the project is that at certain periods, large cash amounts have to be held to
meet anticipated payments to program beneficiaries. Owing to the serious risk such arrangements
entail, cash safes have been purchased. A new requirement has been instituted to keep program
63
funds separate from funds held for other purposes. These requirements have been supplemented
by MoFED directives on the subject matter.
31. For PSNP Internal audit (post audit reviews) will be carried out by the Internal Audit
Departments of the respective entities. MoFED, BoFEDs and WoFEDs have internal audit
departments that perform this function, including an assessment of whether the budget utilization
is in line with the intended purposes. Furthermore, there are Inspection Departments in MoFED
and BoFEDs that (i) ensure the quality of internal audits in the Ministries at federal level and
Sector Bureaus at region level; (ii) follow-up on the audit recommendations noted by audit
reports at different Ministries and Sector Bureaus; and (iii) provide training and improving
manuals, among other responsibilities. The staffing of Departments varies from region to region.
However, the lack of effective and value adding internal audit function at all levels was noted in
APL II has continued in APL III. The action plan for APL III has noted actions to improve this
function. Despite these weaknesses, given that the program avails huge resources to regions and
woredas, the internal audit departments at regions and woredas must conduct reviews on the
accuracy of payments to beneficiaries, accuracy of financial reports produced, cash on hand
management, record keeping and follow up of external audit report findings.
32. To ensure transparency and social accountability in the program, the annual woreda-by-
woreda resource allocation plan for the PSNP is posted on the MoFED website. The safety net
budget and public works plan are posted for public review at the woreda and community levels.
The program also promotes posting of beneficiary lists and lists of appeals and appeal resolutions
in woredas and kebeles. A number of specific structures and processes have been established
with the aim of deepening local accountability. To guarantee timely and objective treatment for
those who might have a grievance, an appeals system was introduced across the program
woredas. By design, this system is separate from that for the beneficiaries targeting committee
and reports directly to locally elected councils to maintain integrity and independence. For APL
III, the Appeals Review will continue to provide advice and guidance to Kebele Appeals
Committees (KAC) and relevant woreda and regional decision-makers in order to strengthen the
overall appeals system. The internal audit units of both woredas and regions have the
responsibility to review appeals which relate to resource management of the program and follow
up on their resolution.
Funds Flow and Disbursement Arrangements
33. From a design perspective, the bulk of the support provided under PSNP is planned to be
utilized during the period January to June which is the period when most support is required in
the food insecure areas that PSNP operates in. From the track record so far, it is seen that there
are some delays in timely release of funds for this program both for cash disbursements as well
as for food transfers.
34. The flow of funds and disbursement arrangements for APL III will continue to be
applicable for the additional financing. The additional financing will be part of the IDA credit.
The Segregated US Dollar Designated Account already opened for the IDA credit and grant at
the National Bank of Ethiopia will be used for the additional financing. Other existing
operational bank accounts will continue to be applicable.
64
35. The project will continue to use report based disbursement arrangements. The current
fund flow mechanism will continue to prevail. Withdrawal Applications will continue to be
submitted along with the quarterly IFR. The World Bank in its own capacity and on behalf of
other development partners for Bank-administered Multi-Donor Trust Funds (MDTFs) will then
deposit their share of financing to a Designated Account that Government has designated for that
purpose in the National Bank of Ethiopia.
36. The Government and development partners, including the World Bank, will continue to
agree on the annual budget and work plans. Definitive proportions of financing between the
Government and the development partners will be established each quarter. The World Bank
Task Team Leader (TTL) will advise the World Bank‟s Loan Department of the share of
financing to be disbursed by the World Bank for the project by linking it to the projected cash
flow.
37. The project will follow the advances method, using Designated Accounts as outlined
above as well as the Reimbursement, Direct Payment, and Special Commitment methods.
38. Retroactive financing for payments made after September 01, 2011 under the Drought
Risk Financing component of the program up to an aggregate amount not to exceed US$ 50
million will be allowed. This will enable the program to maintain its ability to provide timely
responses to transitory food insecure households within existing program areas as and when the
need arises.
39. The following chart illustrates the funds flow system:
65
IDA
Separate US$ segregated
Designated Accounts at NBE
Pooled Birr account at MoFED
BoFEDs
Fund flow
Report flow
MDTF for
PSNP
DPs
MoA
WoFED
clients/ local suppliers
BoARD
WoARD
Other DPs
66
Financial Reporting
40. The project will continue quarterly preparation of the Consolidated Interim unaudited
Financial Reports (IFR). This will be submitted to the World Bank within 60 days of the end of
the quarter. The format and the content, which are consistent with the World Bank‟s standards,
have been agreed with MoFED and MoA as well as development partners and are documented
in the minutes of Negotiation for APL III. A common single IFR will be used for all the finances
of the program including this additional financing. The existing format of IFRs for APLIII will
continue to be used.
41. MoFED, in the quarterly IFR, should ensure that advances received as well as
documentation of expenditure for each financier including this additional financing are
separately identified and reflected. The undocumented balance of each financier must be solely
monitored and reported accordingly.
42. The annual financial statement of APL III will include transaction of this additional
financing.
43. Although there have been significant improvements as a result of the steps taken by
MoFED and MoA to enhance the timeliness of reporting and auditing, the program continues to
experience some delays in the completion and submission of quality reports. The reports coming
from woredas and regions to MoFED are usually delayed and are sometimes incomplete with
inadequate documentation. Training, adequate support and follow up of woreda staff on the
preparation of reports and stringent review of woreda reports by MoFED and BoFED could help
alleviate this problem. While timing has improved, quality of IFRs remains still a challenge.
44. Financial reports are sent from WoFEDs to the BoFEDs on a monthly basis. These
reports must be backed up with trial balances to ascertain that reports are generated from the
accounting records of the program. Zonal accountants will play a role in ascertaining that the
financial reports they receive from woredas are backed with trial balances and must check for
accuracy and quality. The BoFEDs will ensure that the reports received from the lower level are
complete and meet all expected standards. After performing this quality control, BoFED will
consolidate and submit quarterly financial reports including the respective Trial balances to
MoFED. MoFED will in turn check, consolidate, and submit quarterly IFRs to development
partners within 60 days of the end of the quarter. A consolidated trial balance for the program
needs to be attached with the quarterly IFR that MoFED submits to DPs.
Auditing
45. The project will continue to have its annual financial statements audited by an external
auditor acceptable to the Bank.
46. The auditor will continue to submit the audit report in a form and content satisfactory to
the World Bank within six months of the end of the Ethiopian Fiscal Year. As part of this annual
audit, the same audit firm will continue to conduct a review of the financial transactions of the
program at woreda level which constitutes the Interim audit.
47. The audit Terms of Reference (TOR) which has been agreed for APL III at negotiation is
applicable for the additional financing. The TOR clearly indicates that along with other internal
control checking procedures, the auditor should, on a sample basis, verify that payments to
beneficiaries as documented in payrolls were actually made to the beneficiaries who are engaged
in various safety net activities. This is intended to give assurance to all stakeholders that
67
expenditures are tracked down to the actual beneficiaries of the program. The agreed terms of
reference is annexed to the minutes of negotiation of APLIII.
48. Reports summarizing the findings of the interim audit will continue to be submitted on a
quarterly basis to the World Bank and development partners within 60 days of the end of the
quarter. The auditor will use, among other tools, the results of the interim audit in forming an
opinion on the Project Financial Statements. The auditor will plan and perform the interim audit
in such a manner that it will add value and reduce the time it takes to produce the final financial
audit report. The findings of the interim audit reports will be followed up by the Government,
World Bank and other development partners.
49. Lessons from APL II show that the audit reports are being qualified year after year with
recurring issues on the management letter. Although action plans have been submitted on a
yearly basis, there was a need to ensure that appropriate actions are being implemented. To this
end, per request of donor partners, MoFED submitted an internal assessment report on the
findings and actions taken for the audit reports of the years 2007, 2008 and 2009. Where
adequate documentation could not be provided or where expenditures where found not to be in
line with the PIM, Government agreed to refund those amounts to the project account. MoFED
has in total refunded back ETB 22,413,225.42 to the program bank account as indicated by an
official letter of MoFED sent to the Bank on January 3, 2012. From the rest of the audit report
findings which are classified as outstanding issues by DPs, MoFED has indicated that they have
addressed findings amounting to ETB 310,481,909.57. To further ascertain the actions taken,
DPs and MoFED have agreed to commission an independent review of these outstanding
findings. The review is expected to be finalized by April 15, 2012.
50. The latest audit report for the year ended July 7, 2011 was qualified. The report was
submitted before the due date. The qualification points are: (i) lack of cash count certificates presence of significant amount of outstanding and un-cleared suspense vouchers in the ending
cash balances, (ii) long outstanding receivable and payable balances which were not cleared
subsequently and (iii) Improper end-of-year treatment of expenditures and cut-off period
problems. The auditors are of the opinion that in the absence of a satisfactory system to ensure
that all expenditures made from these advances have been properly accounted for, they were
unable to certify that these advances fairly represent the account receivables and payables as of
the balance sheet date. In addition, there are a number of internal control weaknesses noted in the
management letter. These include issues such as: (i) unexplained differences between cash
counts and accounting records and discrepancies in Bank reconciliations; (ii) treating advances
as expenditures; (iii) lack of supporting documents for payments/expenditures; (iv) failure to
comply with procurement guidelines in some procurements; (v) control weaknesses with payroll
payments to clients; (vi) inconsistencies between woreda and regional reports; (vii) the repeated
existence of idle resources; (viii) occasional lack of ledgers and transaction registers including
not being up to date; and (ix) lack of analysis and follow up of long outstanding debtors and
creditors. The audit report was accepted on the basis that MoFED agrees to an independent
investigation of all issues that have led to a qualification and that MoFED will monitor the
implementation of the resultant action plan to address the weaknesses. A major challenge at the
woreda level is the poor follow up on audit reports.
51. An independent consultant, a consortium of local (HST chartered Certified accountants
and authorized auditors) and international consultants (Deloitte Nairobi) has done an
independent review of the audit report findings for 2010 audit report. The report revealed that
68
most of the management letter issues of the visited woredas have been solved. The reason for the
repeated qualification points was investigated and the consultants found that the internal control
system is appropriately in place but the execution needs to be strengthened. The overall capacity
limitation in the country leads to systemic issues which cannot be solved within the scope of
PSNP alone. The report has identified useful recommendations to improve the control over cash,
advances and payables. Further discussion will be held with MoFED on the findings and
recommendations to have concrete action plans to rectify the recurring issues. MoFED, in
collaboration with MoA, has issued a plan of action to address the weaknesses noted on the
audit report. Development partners including the World Bank will monitor implementation of
the agreed actions.
52. Food transfers managed through Government systems currently account for around 35 %
of the annual payments planned under this program. The Commodity Audit for 2010 raised some
fiduciary concerns regarding the arrangements for food transfer. Mitigating measures have been
identified and action plans to address these measures have been developed and are currently
under implementation.
Financial Covenants
53. MoFED will submit the audited Program accounts to the World Bank 6 months after the
end of each fiscal year, which ends on July 7. The audited financial statement will include all
sources of funds for the Program, including this additional financing, and funds from other
development partners and the Government. In addition, reports on the findings noted during the
interim audit will be submitted quarterly to the World Bank and development partners within 60
days of the end of the quarter.
54. MoFED will submit quarterly IFRs to the World Bank 60 days after the end of each
quarter period.
55. MoA will submit annual commodity audit report within 6 months of the end of the fiscal
year ending of July 7 of each year.
Financial Management Action Plan
56. The May and November 2011 Joint Review and Implementation Support missions rated
the financial management of the program as Moderately Unsatisfactory (MU). Clear action plans
were presented to improve the situation. Most of the agreed up on actions have been completed.
The action plan below incorporates the unmet actions of the May 2011 JRIS along with
continued actions to be taken by the project to strengthen its financial management system and
the dates they are due to be completed by.
Table 1: Financial Management Action Plan
Action Date due by Responsible
1 Budgetary discipline should be monitored; BoFEDs
should review major variances from woreda reports and
prepare variance analysis as part of their report.
Ongoing BoFED
2 MoFED should coordinate with BoFEDS and MoA to
prepare variance analysis and report on variances with
valid justifications to use this as a management tool
Quarterly MoFED
69
Action Date due by Responsible
3 Develop critical performance indicator March 31, 2012 MoFED/BoFE
D
4 Staffing data of the project to be maintained and
monitored to ensure that there are no vacant positions
affecting project implementation
Quarterly as part of
the IFR MoFED/BoFE
D
5 Trainings on the revised FM manual with particular
emphasis on budget preparation and variance analysis;
all relevant issues on accounting, reporting and fund
flow arrangements will be provided.
March 31, 2012 MoFED/ MoA
6 Ongoing trainings will be conducted, including budget
analysis training, IFR preparation training, etc. Ongoing MoFED
MoFED and BoFEDs should undertake adequate robust
reviews and checks on the reports submitted to them
from Regions and woredas, respectively. MoFED/
MoA should take action on woredas that delay reports.
Ongoing MoFED
8 MoFED should track the submission date of quarterly
reports from BoFEDs to monitor the regions and exert
effort in identifying the problems behind late
submissions. The same will also be done by BoFEDs
for the woredas.
Quarterly/should
form quarterly IFR MoFED/BoFE
D
9 Finalize the independent review of outstanding issues
of audit findings of the years 2007, 2008 and 2009 for
ETB310, 481,909.57.
April 15, 2012 DPs
10 Implement action plans to address weaknesses noted in
the audit reports of the year ended July 7, 2010. March 31, 2012 MoFED/ MoA
11 Prepare an action plan based on the independent
assessment of the 2010 audit report and monitor the
implementation of the resultant action plan to address
the weaknesses.
March 15, 2012 MoFED and
DPs
12 MoFED and BoFED should conduct regular field visits
to support as well as monitor the performance of
WoFEDs.
Quarterly MoFED
13 Management meeting involving decision makers to
discuss progress on the FM aspects of the program Quarterly MoFED/ MoA
14 Increased engagements of Internal Audits at all levels
to identify control weaknesses early. In this respect,
workshops or capacity building activities/training will
be conducted for auditors at regional and woreda level.
Ongoing MoA/MoFED
15 Follow up and take action on the agreed FM action
plans of JRIS and related supervision mission reports As per dates stated
in the action plan MoFED/ MoA
16 Regular coordination meetings between BoFED and
BoAs on FM issues Monthly BoFEDs &
BoAs
17 Close supervision by the World Bank and development
partners including the FM Task force meeting
conducted monthly.
Ongoing Development
partners and
MoFED
70
Supervision Plan
57. The project will be subject to a minimum of two annual supervision missions to be
conducted jointly with development partners. Supervision activities will include: review of
quarterly financial management reports; review of annual audited financial statements, and
timely follow up of any resulting issues; transaction review; participation in project supervision
missions as appropriate; and updating the FM rating in the Implementation Status Report (ISR).
The monthly financial management taskforce meeting with MoFED will continue on a monthly
basis to follow up on agreed action plans and deliverables.
71
Overview of progress made on improvements to the financial management system and
future implementation support strategy for the PSNP APL III
58. Significant improvements to the financial management system of the PSNP have been
made since the first phase of the project. Further improvements are still in the process of being
rolled out that will have a positive impact on the financial management system of the program.
An overview of these improvements is outlined in the following section:
Change in the design of the fund flow arrangement of PSNP from Channel 2 model to
Channel 1(b)
59. The shift to Channel 1(b)27
from Channel 2 (effective on January 1, 2006) was a positive
development that brought additional activities to both the Ministry of Finance and Economic
Development (MoFED) and regional Bureaus of Finance and Economic Development (BoFED),
in line with the core financial management system of the Government. To prepare for this shift
from the original arrangement (MoFED-FFSCB-RFSCO-WoFED) to MoFED-BoFED-WoFED,
a financial management assessment on the capacity of MoFED and BoFEDs was undertaken.
The assessment focused on staffing, training, recording and reporting, auditing and roles and
responsibilities of MoFED, FFSCB, BoFEDs and RFSCOs. The assessment concluded that there
was sufficient capacity to implement the PSNP through these government systems. Following
the shift to Channel one the financial management arrangements for the PSNP mostly use the
country‟s regular public financial management (PFM) system.
60. The strengths of the PFM system are associated with the budget process, compliance with
financial regulations and a well-defined accounting system, including the computerized
accounting system at federal and regional levels. This has had a positive impact on the
implementation of the PSNP.
61. Finally, Channel 1 is stronger in terms of internal control, funds flow and transfers in
addition to reporting compared to Channel 2. As such, the shift has had a positive impact on the
implementation of the PSNP from a financial management perspective.
Institutional strengthening and staffing 62. PSNP has been managed by MoFED‟s Government Accounts Directorate (GAD) since
the shift to Channel 1 became effective. This arrangement had its flaws in that the unit was
already stretched with general government accounting work. During the November 2009 JRIS a
case team was established to provide technical assistance as needed to Regions for the
accounting of donor financed programs within treasury and accounts departments and an
additional accountant was hired for the PSNP at the federal level.
63. GoE has realized the need to establish a separate unit within MoFED (Channel One
Programs Coordination Unit (COPCU)) to better coordinate similar projects within the ministry
and give focus to the strengthening of the financial management of these programs. In August
2011, MoFED further realized that there were some overlaps between the GAD and COPCU and
27 Channel 1(b) uses the full treasury system of the country at the Federal level only. Channel 2 fund flow arrangement uses the
treasury system partially and only at the federal level. Under this line, budget is proclaimed federally but does not use the
government disbursement system and accounts are not consolidated with federal accounts.
72
hence restructured COPCU to focus on specific programs. The PSNP now has 4 accountants in
this unit. The same structure has been cascaded to the regions. The regional coordinators are
already recruited and recruitment of additional accountants is underway. In addition it was
decided to increase the number of staff in the COPCU with three further positions in order to
have sufficient capacity to travel to the regions and woredas to provide hands on training and
monitoring.
64. To ensure that there are sufficient human resources to deliver the program objectives
minimum staffing levels have been set. It has been agreed that 80% of woredas/regions must
meet minimum staffing standards for financial management and 80% of training program should
be implemented as scheduled (and evaluated). The quarterly IFR of the program (April 8 – July
7, 2011) provided a summary of available FM staff by region (see table below), confirming that
at least 80% of woredas meet the agreed minimum staffing levels.
Table 1: Summary of FM staff by Region-
s/n Region No. of
Accountants
No. of
Cashiers
Total
1 Amhara 110 141 251
2 Tigray 28 50 78
3 Oromia 96 92 188
4 SNNP 123 113 236
5 Harari 2 - 2
6 Somali 14 11 25
7 Afar 2 - 2
8 Dire
Dawa ?
1 - 1
Total 367 407 783
65. Although staff turnover, particularly at woreda level, is high in the country and cannot be
solved by specific projects Government has increased salaries of contract staff working on
Channel one projects to reduce the level of turnover at program level.
Interim financial reports
66. Timeliness. The timely submission of IFRs has improved throughout the years. The
below graph shows the progress seen in this area. (The data is taken from the record in PRIMA,
WB).
73
Figure 1: Trends in timely submission of IFRs
67. Quality. The program has been working on the quality of IFRs over time. The main
problems with quality revolved around inconsistency among different reports and schedules,
casting errors, inadequate explanation/ notes /supporting schedules to the reports (eg variance
analysis detailing reasons why actual expenditure is different from the agreed budget),
incomplete reports, and substantive issues related to budget monitoring, under spends and
overruns not adequately explained; excessive cash holding at woredas; etc. The review of the
recent IFR for the quarter ended July 7, 2011 revealed that most of the shortcomings in the
reporting observed earlier have now been rectified and reporting has been further strengthened
by including additional information such as a summary of donations in kind, a cash forecast
table, a list of contracts subject to Bank‟s prior review and a budget utilization explanation from
the regions and FFSCD. The Government has committed itself to introduce further
improvements to the reporting as and when required in close consultation with the development
partners.
Audit reports
68. Annual audit reports. The project had received qualified audit reports for four
consecutive years. The management letters accompanying the audit reports also revealed a
number of weaknesses. Based on the audit findings and the comments in the management letters,
the Government has prepared detailed action plans to rectify these findings. However, some of
the repetitive weaknesses observed, proved to be difficult to address. DPs therefore agreed with
Government that all the audit report findings from the period 2007 to 2009 should be
investigated by MoFED and that an overview of concrete actions implemented to address the
observed weaknesses should be provided to the DPs. Accordingly, MoFED conducted an
extensive investigation of all the findings and submitted a report on the actions taken to address
these findings. The report revealed that most of the findings have been properly addressed but
that there are also a number of unresolved issues. The unresolved issues are mainly related to
capacity limitations and recording problems rather than fraudulent actions. To resolve the
0
50
100
150
200
250
300
350
1st
Q 2
00
9
2n
d Q
20
09
3rd
Q 2
00
9
4th
Q 2
00
9
1st
Q 2
01
0
2n
d Q
20
10
3rd
Q 2
01
0
4th
Q 2
01
0
1st
Q 2
01
1
2n
d Q
20
11
3rd
Q 2
01
1
4th
Q 2
01
1
1st
Q 2
01
2
Days submitted
Submision deadline
74
outstanding issues, MoFED and the regional BoFEDs have reviewed the records and have
provided relevant documentation and justification for the majority of the findings. For those
expenditures where adequate documentation could not be provided or where expenditures where
found not to be in line with the PIM, the Government has made a refund to the project account.
In total an amount of USD 1,299,305.71 has been refunded. In addition, the Government and
Development Partners have agreed that an independent auditor will review the additional
documentation provided by the Government to ensure that the evidence provided indeed
constitutes eligible expenditures in the context of the PSNP. This exercise is expected to be
finalized by the end of February 2012.
69. Furthermore, to better understand the reasons behind the qualification points of the audit
reports, the Bank recruited a consortium of local (HST chartered Certified accountants and
authorized auditors) and international consultants (Deloitte & Touche Kenya) to do an
independent review of the audit report findings for 2010 audit report. The consulting firms
finalized their report in November 2011. The report revealed that most of the management letter
issues of the visited woredas have been resolved. The consultants observed that the internal
control system is in place but that the regular execution of internal control functions needs to be
strengthened. The consultants further noted that overall capacity limitations of the Government
system at local levels lead to systemic constraints in the implementation of the PFM system.
These constraints cannot be solved through a program like the PSNP. The team has flagged
these issues to the CMU to be included in the current CPPR. Further discussions with MoFED on
how to address the systemic weaknesses in the implementation of the PFM system are ongoing.
Meanwhile, at program level further institutional strengthening activities, especially at regional
and woreda levels, are ongoing as outlined in the action plan presented in the table below.
Internal control mechanisms
70. Financial management manual. The financial management manual of the program,
which provides for detailed internal control procedures, has been revised. Training on the manual
will be conducted in February 2012.
71. Cash Management. Due to the nature of the project, large amounts of cash are expected
to be held at the woreda level. To mitigate the fiduciary risk, safes have been purchased and
installed in all PSNP woredas. Woredas are now expected to keep PSNP funds separate from
funds held for other purposes. MoFED has issued directives that all cash should be deposited in
the Bank in a timely manner and that PSNP funds should not be mixed with other funds.
72. Interim audits. As part of the annual audit process the program conducts quarterly
interim audits. Interim audit reports for the year 2010/2011 lagged behind whilst the
restructuring of COPCU was underway and the workload of the GAD was a problem. However,
as of to date all interim audit reports have been received. Based on the current structure of
COPCU, the interim audits are expected to be conducted in a timely manner to give real time
information on the program performance and to take appropriate action as early as possible.
73. Commodity audit. The program has in place a commodity audit arrangement to ensure
that the commodity flow of the program is going smoothly. The audit for 2010 has been received
and an action plan has been agreed with government to address the audit findings.
75
74. Expenditure tracking. The interim audit Terms of Reference (TOR) of the program
indicates that the external auditor should track payments to beneficiaries on a sample basis
quarterly. The TOR clearly indicates that the auditor should, on a sample basis, verify that
payments to beneficiaries as documented in payrolls were actually made to the beneficiaries who
are engaged in various safety net activities. In addition, the FM team of the bank conducts in-
depth reviews on a yearly basis. This includes a detailed transaction review of selected projects.
75. Payroll management (beneficiary payments). The program has developed a
computerized Payroll and Attendance Sheet system (PASS). As per the PIM of the project, using
PASS is mandatory in all PSNP woredas in Amhara, Oromia, SNNP and Tigray Regions,
including those supported by NGOs. Data on attendance is entered in the PASS by the woreda
food security office. The attendance sheet data is then transferred to the woreda finance office in
electronic form. Based on this data, the woreda finance office generates a payroll through the
PASS and effects payments to beneficiaries.
76. Client cards for beneficiaries. The internal control over payments to beneficiaries is
further strengthened by the use of client cards. These client cards were introduced in all Regions
to provide evidence of entitlements under the Program and proof of payment. The client cards
have a picture of both the husband and wife and enable the beneficiaries, local decision-makers
and Federal level officials to better track receipt of payments over time. A charter of rights and
responsibilities, which clearly describes the rights and responsibilities of the clients, is attached
to the client card.
77. Transparency and social accountability. To ensure transparency and social
accountability in the program, the annual woreda-by-woreda resource allocation plan for the
PSNP is posted on the MoFED website. The safety net budget and public works plan are posted
for public review at the woreda and community levels. The program also promotes posting of
beneficiary lists and lists of appeals and appeal resolutions in woredas and kebeles. A number of
specific structures and processes have been established with the aim of deepening local
accountability. To guarantee timely and objective treatment for those who might have a
grievance, an appeals system was introduced across the program woredas. By design, this system
is separate from the targeting mechanism and reports directly to locally elected councils to
maintain integrity and independence. For APL III, regular Appeals Reviews will continue to
provide advice and guidance to Kebele Appeals Committees (KAC) and relevant woreda and
regional decision-makers in order to strengthen the overall appeals system. The internal audit
units of both woredas and regions have the responsibility to review appeals which relate to
resource management of the program and follow up on their resolution.
Implementation support plans
78. Based on the risk based approach for supervision, there will be implementation support
and supervision missions for the PSNP two times a year jointly with donors and government.
Regional visits, including visits to selected woredas, will back these joint missions. The
Financial Management Task Force (FMTF) meets on a monthly basis in MoFED to follow up on
financial management action plans, deliverables, audit report findings and any challenges that the
76
program is facing. As mentioned earlier, the Bank conducts in-depth reviews, which go beyond
the normal supervision, to look into documents and transactions in a detailed way.
Other assessments and coordination
79. Independent Fiduciary Risk Assessments (FRAs) conducted by DFID. The FRA of
the PSNP undertaken in 2005 assessed the fiduciary risk as “between B (medium risk) and C
(high risk)”. This assessment was on a 3 point scale (low medium or high.) The FRA of 2007
assessed the risk against the 4 point scale published by DFID in September 2007 as “between B,
low to moderate risk and C moderate to substantial.” The FRA of 2009 classified the overall
fiduciary risk as moderate, “classification B, according to the scale in the DFID How to Note of
March 2009”. There was therefore an improvement between the FRA undertaken in 2005, the
assessment in 2007 and again in 2009. The 2009 FRA concluded that, whilst there is still scope
for improvements, the trajectory of change is positive and for this reason the fiduciary risk is
deemed to be lower than it was in 2007.
Coordination with other donor financed projects to strengthen the FM of the program
80. Safety Net Support Facility (SNSF). This is a Canadian International Development
Agent (CIDA) project which aims to strengthen capacity building and improvement of the PSNP.
FM is one of the pillars. The project has already assigned technical assistants on FM to every
region. The project was launched a while ago but is now picking up its activities. This is
expected to enhance the capacity of the program in the regions.
81. Food Management Improvement Program (FMIP) – DPs are exploring ways to use
this World Food Program (WFP) funded project to strengthen the commodity management
system of the program.
82. A number of studies and diagnostics have been undertaken to understand the Public
Financial management aspects at various tiers of government. Based on these studies, a number
of activities have been initiated. Government, with the support of DPs, is carefully implementing
a number of recommendations aimed at strengthening the systems at various levels. Recently, the
focus is on woreda level staffing and internal controls since the CIDA concluded that remarkable
improvements have been made at Federal and regional level.
Progress on agreed actions to improve financial management aspects of the program
83. The table below outlines the progress on agreed actions related to financial management
aspects of the project as described in the Project Paper.
Table 2: Status of agreed actions
Action Date due by Responsible Status as of Dec 14, 2011
77
Action Date due by Responsible Status as of Dec 14, 2011
1 Budgetary discipline should be
monitored; BoFEDs should review
major variances from woreda reports
and prepare variance analysis as part
of their report.
Ongoing BoFED MoFED has begun to attach
the variances with
justification for the regions
to the quarterly IFRs. This is
an ongoing process.
2 MoFED should coordinate with
BoFEDS and MoA to prepare
variance analysis and report on
variances with valid justifications
and use this as a management tool
Quarterly MoFED Ongoing
3 Adjust accountant job description
and develop critical performance
indicators
December 15,
2011
MoFED/BoFE
D
Job description has been
developed but the critical
performance indicator is
still outstanding
4 Staffing data of the project to be
maintained and monitored to ensure
that there are no vacant positions
affecting project implementation
Quarterly as part
of the IFR
MoFED/BoFE
D
Ongoing
5 Finalize the FM manual based on the
comments of Donor Partners
November 30,
2011
MoFED Finalized
6 Trainings on the revised FM manual
with particular emphasis on budget
preparation and variance analysis; all
relevant issues on accounting,
reporting and fund flow
arrangements will be provided.
December 31,
2011
MoFED/ MoA Due to logistical issues, the
training was postponed. It is
planned to be conducted
before May 31, 2012
7 Ongoing trainings will be conducted,
including budget analysis training,
IFR preparation training, etc.
Ongoing MoFED Ongoing
8 MoFED and BoFEDs should
undertake robust reviews and checks
on the reports submitted to them
from Regions and woredas,
respectively. MoFED/ MoA should
take action on woredas that delay
reports.
Ongoing MoFED Ongoing
9 MoFED should track the submission
date of quarterly reports from
BoFEDs to monitor the regions and
to exert effort in identifying the
problems behind late submissions.
The same will also be done by
BoFEDs for the woredas.
Quarterly/should
form quarterly
IFR
MoFED/BoFE
D
Ongoing
10 Submit detailed action plan for
rectifying the findings of the
commodity audit report for the YE
July 7, 2010
November 30,
2011
MoA Submitted. A
comprehensive action plan
for the overall commodity
management is still being
worked out so that findings
may not repeat themselves
again next year
78
Action Date due by Responsible Status as of Dec 14, 2011
11 Submit the interim audit reports for
the 3rd
quarter ( April 8, 2011) of the
fiscal year 2010/2011) to
the 1st quarter( October 10, 2011) of
the fiscal year 2011/2012)
November 30,
2011
November 30,
2011
MoFED All reports submitted
12 Finalize the action on the outstanding
audit findings of the years 2007,
2008 and 2009
November 30,
2011
MoFED and
DPs
MoFED already submitted
the report and refunded back
ineligible expenditures to
the program account
13 Implement action plans to address
weaknesses noted in the audit reports
of the year ended July 7, 2010.
March 31, 2012 MoFED/ MoA Ongoing
14 Finalize the independent
investigation of all issues that have
led to a qualification for 2010 audit
November
30,2011
MoFED and
DPs
Finalized
15 Prepare an action plan based on the
independent assessment of 2010
audit report and monitor the
implementation of resultant action
plan to address the weaknesses.
December 15,
2011
MoFED and
DPs
The report is being reviewed
by DPs and expected to be
finalized by January, 2011.
The action plan will be
developed afterward. The
submission of the report by
the consultant was delayed
and awaiting comments
from DPs took more time
than anticipated.
16 MoFED and BoFED should conduct
regular field visit to support as well
as monitor the performances of
WoFEDs.
Quarterly MoFED Ongoing
17 Management meeting involving
decision makers to discuss progress
on the FM aspects of the program
Quarterly MoFED/ MoA Ongoing
18 Increased engagements of Internal
Audits at all levels to identify control
weaknesses early. In this respect,
workshops or capacity building
activities/training will be conducted
for auditors at regional and woreda
level.
Ongoing MoA/MoFED Ongoing
19 Follow up and take action on the
agreed FM action plans of JRIS and
related supervision mission reports
As per dates
stated in the
action plan
MoFED/
MoA
Most actions have already
been taken. The status of the
action plan is attached
below.
20 Regular coordination meetings
between BoFED and BOAs on FM
issues
Monthly BoFEDs &
BoAs
Ongoing
21 Close supervision by the World Bank
and development partners including
the FM Task force meeting
conducted monthly.
Ongoing Development
partners and
MoFED
Ongoing
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Table 3: May 2011 Joint Review and Implementation Support (JRIS) mission action plan update.
OUTPUT 4B: CAPACITY TO MANAGE: FINANCIAL MANAGEMENT & PROCUREMENT
Issue Agreed Action Responsible Party
Period Status
I. Immediate Short Term Actions- To be resolved by the next JRIS
Follow-up on agreed FM actions of APL III
a. Submit revised FM Manual b. Trainings on revised FM manual c. Submit Commodity Audit Reports.
a. MoFED (COPCU)
b. MoFED c. FFSCD
a. 10 July 2011 b. End
September 2011
c. June 05, 2011
a. Done b. Ongoing (will start by mid Dec 2011) c. Done
Monitoring a. MoFED should conduct at least two field visits to four regions (including sample woredas) to monitor the performances of Regions and woredas. Simple field visit report will be maintained after each visit.
b. BoFED should conduct two field visits to at least 25% of woredas support as well as monitor the performances of WoFEDs. Simple field visit report will be maintained after each visit and will be communicated to MoFED.
2 MoFED, FSCD & DPs
3 BoFED
a. Before the next JRIS
b. Before the next JRIS
a. Done b. Done( field visit done, but report was not shared with DPs)
Commitment-Involvement of high-level decision makers
a. Conduct Quarterly management meeting involving decision makers (Relevant State Ministers of MoFED and MoA and senior technical staff) to discuss progress of the FM aspects of the program-one meeting before the next JRIS.
b. Continue the FMTF monthly meeting involving Directors, senior technical staff of MoFED and MoA as well as donors to coordinate the implementation of agreed actions. Update to Action plan will be provided by COPCU
c. Conduct one FM consultative meetings between MoFED, MoA, BoARD and BoFED to discuss project FM issues
a. MoA (FFSCD)
b. MoFED (CoPCU)
c. MoFED (COPCU) & FSCD
a. Before the next JRIS b. Monthly c. Before the next JRIS
a. Ongoing b. Ongoing c. Done (MoFED and BoFED, but not inclusive of BoA). Agreed to undertake at least once before the next May JRIS Mission
Follow up and coordination efforts at regional level
Conduct regular monthly coordination meetings between BoFED and BoARD (just like the federal FMTF). Minutes will be sent to MoA and MoFED for information purposes.
BoARD (RFSCO) & BoFED to be followed by FFSCD
Before the next JRIS
Ongoing, but not systematic (scheduled on regular basis)
FM Staff Capacity and accountability
a. Adjust all FM job descriptions and develop critical performance indicators (the SNNPR experience could help) to clarify duties and responsibilities - Revised FM manual to take on Board. Disclose this to all
b. Regions to report on staffing data to MoFED (COPCU) and FSCD
c. MoFED will in turn submit program wide staffing data to FM TF
a. MoFED & BoFED b. BoFED c. MoFED
a. Before the next JRIS b. June 30 2011 c. July 10 2011
a. Pending b. Ongoing (agreed to include this as of quarter IFR)
80
Issues raised on Audit
a. Submit interim audit reports for EFY 2003 1st and 2nd quarter;
b. Submit interim audit reports for EFY 2003 3rd quarter;
c. For the year ended July 7 2010 audit conduct a review or investigation on issues leading to qualification;
d. Respond to DPs letter of April 26 2011- in reference to Both July 7 2009 and 2010 audit issues;
e. Generally For the past audit issues (last four year issues) finalize and submit report on the result of the MoFED teams of experts visit to regions on issues/reasons and status of action plans of the past;
a. MoFED (GAD)
b. MoFED c. DPs d. MoFED e. MoFED/
DPs
a. May 31 2011 b. For 3rd quarter
by June 30 2011
c. Before the next JRIS
d. Include in internal assessment report by 15th June 2011
e. June 30 2011
a. Done b. Done c. Ongoing d. Done e. Done
Issues raised on IFRs
a. Issues concerning IFRs Timeliness MoFED will track on deadlines and will
bring to the attention of BoFED and MoA and the FM TF the issue of delays in the submitting reports by highlighting the region failing to submit on time; remedies on defaulter region will be agreed at FMTF;
BoFED will send a report tracking of deadlines recording the timing they received quarterly reports from each woredas and submit the same to MoFED as part of the IFR. The region will take action on defaulting woredas and will inform MoFED
b. Issues concerning IFRs-Quality-MoFED and BoFEDs should undertake adequate robust reviews and checks on the reports- use of checklist on IFRs; spot checks through field visit; etc
a. For IFR timeliness-as follows:
MoFED BoFED
b. For IFR quality-as follows:
MoFED/ BoFED
MoFED
a. For IFR timeliness issues-as follows:
To be presented on each FM TF
For the 3rd qrt IFR- May 31 2011 and 4th qrt IFR by Sept 7 2011
b. Before the next JRIS
a. Partly done (Submission dates are done, but remedies on defaulting woredas and regions pending b. Ongoing (partly done)
Budgetary issues a. Follow up with regions to adhere to the instructions on budget discipline
b. Review management and administrative budget issues and discuss with FFSCD to come up with proposals (e.g. the management budget calculation to include the cash and food as a base cost or assessing the impact on management budget as a result of the directive using a consultant) to be discussed at federal level FM TF and JSOC for decision.
c. BoFEDs should review woreda reports and follow up on budget utilization. For major variances the BoFEDs should collect explanation from woredas on budget variances as part of reports. BoFED should then submit detail explanations on regional budget variances as part of IFRs to MoFED
a. MoFED/FFSCD
b. (PMFC (comprising MoFED, FSCD and DPs)
c. MoFED
a. Before the next JRIS
b. July 15 2011 c. Part of IFR-
ongoing basis
a. Done (MoFED sill share information on the discussion done in Assosa and Adama) b. Done c. Ongoing
Transfer and Fund Flows
Ensure that transfers to clients/ beneficiaries from woredas are on time. Ensure on time payroll preparation and on time submission of attendance sheet
BoFED/WoFED/WoARD
Before the next JRIS
Ongoing (Oromia and SNNPR have already put deadlines). Needs proper communication
81
Issues with the revised MoFED’s Directive staffing & miscellaneous expenditures
MoFED/ MoA should resolve issues with the directives so that it is encompass MoA sectoral concerns.
a. FFSCD/MoFED
Before the next JRIS
Done
Log frame deliverables
EFY 2003 3rd quarter IFR will have information on indicators 4.1 & 4.7.
MoFED Before the next JRIS
Pending (agreed to be included in the 1st IFR)
Training a. Review training modality (content, targeting, duration, methodology, etc) using a consultant or SNSF (Safety Net support facility) by consulting with stakeholders. Prepare a strategy on training.
b. Rolling Training on FM manual training will be conducted on a regular basis- using consultant
c. Ensure adequacy of capacity building budget
a. MoFED b. MoFED/
FFSCD c. MoFED/
FFSCD
a. December 2011
b. Ongoing c. Ongoing
a. Ongoing b. Ongoing (will start by mid Dec 2011) c. Ongoing
Staff Turnover a. Complete assessment of HR needs and current vacancies
b. ensure that there is adequate staffing at all levels and that staffs have adequate capacity to perform duties
MoA/MoFED
a. Assessment to be completed before submission of Annual plan for EFY04; b.Ongoing
a. Pending b. Ongoing
Accountability and commitment
a. Informing senior level management regularly at all levels
b. Prepare/review or implement performance (result) based management system.
c. WoFED head will be held accountable for PSNP issues on. This will be communicated by higher officials at regions (regional BoFED Head or regional presidents)
d. BoFEDs and MoFED should take appropriate action on weak performers (FM staff that are not delivering should be held accountable). Their action should be communicated to all woredas as a lesson to the rest of woredas
e. Introduce result based performance management system and take action on the results coming out of the management system
MoFED/BoFED (including FSCD and Regional FSOs for (e))
ongoing a. Ongoing b. Pending c. Ongoing (improvement observed in some regions) d. Ongoing e. Ongoing (MoFED to submit data base of staffing, prepare short note and send to regions)
Log frame deliverables
Collect data and report to FM TF on whether the FM indicators “institutional capacity” are being adhered. Review log frame assumptions, activities, indicators are valid or realistic. MTR discussion on this is needed
MoFED ongoing Pending. MoFED needs to send out to regions to include information as part of the IFR. CoPCu coordinators will be responsible for this
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ANNEX 5: PROCUREMENT ARRANGEMENTS
Introduction:
1. The procurement arrangements described in this Annex are by and large those provided
for PSNP APL III. Most of the procurement arrangements related with procurement under the
PSNP APL III remain unchanged and the risk rating also remains the same. Procurement under
the project has remained a challenge owing mainly to capacity limitations particularly at regional
and woreda level and also because of lack of commitment of implementing agencies. In this
Annex developments in the procurement environment are highlighted. Moreover findings of
procurement capacity assessments carried out in the Federal Implementing Agency as well as in
the Oromia Region are also provided. On the basis of the forgoing the procurement risk ratings
as well as the recommendations are reviewed to reflect the existing reality.
Procurement Environment:
2. The new Procurement Law of the Federal Democratic Republic of Ethiopia, No.
649/2009 which came into effect upon its publication in the Negarit Gazeta on September, 9,
2009 provides for the establishment of bodies including the Public Procurement and Property
Administration Agency (PPA), and the Complaints Review Board. The proclamation has
entrusted the PPA with the responsibility of preparing, updating and issuing authorized versions
of the procurement directive and manuals, Standard Bidding Documents (SBDs), procedural
forms, and any other attendant documents pertaining to procurement and property
administration. Currently, updated National SBDs for procurement of goods, works, and services
commensurate with the new proclamation are being prepared by the Public Procurement and
Property Administration Agency through support provided by the Bank. However, the
documents which include SBDs, manuals and forms have not been issued as yet. Until such new
National SBDs are issued, the procurement system continues to follow the National SBDs issued
under the old proclamation.
3. The World Bank has reviewed the existing national bidding documents for procurement
of goods and works and has found them to be generally acceptable. Based on this review,
contracts that will be procured under National Competitive Bidding (NCB) may follow the
Recipient‟s procurement procedures, subject to the following additional procedures: (i) the
Recipient‟s standard bid documents for procurement of goods and works shall be used; (ii) if
pre-qualification is used, the World Bank‟s standard prequalification document shall be used;
(iii) margin of preference shall not be applicable; (iv) bidders shall be given a minimum of 30
days to submit bids from the date of availability of the bidding documents; (v) use of merit
points for evaluation of bids shall not be allowed; (vi) foreign bidders shall not be excluded from
participation; and (vii) the results of evaluation and award of contract shall be made public, and
(viii) in accordance with paragraph1.16(e) of the Procurement Guidelines, each bidding
document and contract financed out of the proceeds of the Financing shall provide that: (1) the
bidders , suppliers, - contractors and subcontractors shall permit the World Bank, at its request,
to inspect their accounts and records relating to the bid submission and performance of the
contract, and to have said accounts and records audited by auditors appointed by the World
Bank; and (2) the deliberate and material violation by the bidder, supplier, contractor or
subcontractor of such provision may amount to an obstructive practice as defined in paragraph
1.16(a)(v) of the Procurement Guidelines. Under the project, the Recipient is obliged to continue
to apply the above mentioned NCB modifications to its procurement procedures notwithstanding
83
the adoption of the new procurement proclamation. The World Bank will review the new
procurement proclamation together with the new directives and revised SBDs in order to
determine the modifications needed for Ethiopia‟s revised NCB procedures to be acceptable for
use in World Bank-financed contracts.
4. The “Ethiopia 2002 Country Procurement Assessment Report” (CPAR) identified
weaknesses in the country procurement system and recommended actions to address these areas.
The new federal procurement law addresses some of these shortcomings but the Bank will need
to assess the new procurement regime when the new directives and revised SBDs are available to
it. In October/November 2010 the draft Ethiopia Country Procurement Assessment Report was
produced to update the 2002 CPAR. Key findings include lack of directives, manuals and SBDs
at federal and regional level, lack of independent procurement bodies at Regional level, low
management capacity, capacity problem of procurement personnel at all level, and low level of
monitoring and oversight, and non-functional complaint mechanisms. This is now being
supplemented by Regional CPARs by incorporating the assessment of the procurement systems
in the Regional States. As the current CPAR is validated by stakeholders and finalized the
Federal and Regional Governments are expected to follow-up and implement the
recommendations provided under the 2010/11 CPAR to address the shortcomings identified.
5. Procurement under the Productive Safety Net Program Additional Financing to be
financed through funding contributed by IDA as well as by other development partners, whether
through an MDTF administered by the Bank or directly into the Government‟s pooled birr
account at the federal level, will be carried out in accordance with the World Bank‟s "Guidelines:
Procurement under IBRD Loans and IDA Credits" dated January, 2011; "Guidelines: Selection
and Employment of Consultants by World Bank Borrowers" dated January, 2011; and the
provisions stipulated in the IDA Financing Agreement, MDTF Grant Agreements, and bilateral
grant agreements.
6. Procurements at the regional level would generally involve contracts procured through
National Competitive Bidding (NCB) and Shopping procedures whilst procurement at the
woreda level would be limited only to shopping procedures. The NCB and Shopping procedures
at the regional and woreda levels would be carried out in accordance with regional procurement
proclamations which will have been reviewed and modified to be acceptable to the World Bank
and using national SBDs issued by PPA in 2006 subject to the exceptions provided in Para. 2
above. Under APL III additional financing, the Recipient is obliged to continue to follow the
NCB modifications to its procurement procedures as stated above notwithstanding the adoption
of the new procurement proclamations. When the revised SBDs will be available, the World
Bank will review the new procurement proclamations at Federal and Regional level together
with the new directives and revised SBDs in order to determine the modifications needed for
Ethiopia‟s revised NCB procedures to be acceptable for use in World Bank-financed contracts.
The PIM for the Project would then be revised as necessary to capture the World Bank‟s
comments.
7. Procurement under the Additional Financing: The Additional Financing will continue
financing the four components of PSNP APL III. Hence the procurement to be conducted under
the additional financing to provide inputs for public works, goods and equipment needed for
institutional support; procurement of bulk food items; small value works contracts; procurement
of non-consulting services such as transport, operating costs and training and workshops for
84
capacity building needs, will follow procurement procedures similar to those stipulated for PSNP
APL III.
8. Margin of Preference for Domestic Goods: Under the Additional Financing in
accordance with paragraph 2.55 and 2.56 of the Procurement Guidelines the borrower may grant
a margin of preference of 15% (fifteen percent) in the evaluation of bids under ICB procedures to
bids offering certain goods produced in the Country of the Borrower, when compared to bids
offering such goods produced elsewhere.
9. Assessment of the Implementing Agencies’ Procurement Capacity: Procurement
Capacity Assessment for PSNP Additional Financing was undertaken by the World Bank
procurement specialists in two PSNP implementing agencies: Food Security Coordination
Directorate (FSCD) and the Oromia Food Security, Disaster Prevention & Preparedness
Commission. The procurement capacity of the two implementing agencies was assessed in
October 2011. The procurement capacity assessment was carried out using the questionnaires
provided in the Procurement Risk Assessment and Management Systems (P-RAMS). In general,
although there are encouraging efforts at all levels to recruit procurement staff and introduce
public procurement procedures, there are major procurement performance limitations in all
Ethiopian public procurement implementing entities. The procurement capacity assessment
indicates that there are significant capacity limitations and systemic constraints in the Ethiopian
public procurement environment. In particular, due to its highly decentralized implementation
arrangements and high turnover of procurement staff common in public organizations, the
procurement risk of the proposed project is rated ”HIGH”.
10. The procurement assessment of the two implementing agencies included a review of the
eleven risk factors of the P-RAMS.
Risk Factor 1: Accountability for Procurement Decisions in the Implementing Agencies;
Risk Factor 2: Internal Manuals and Clarity of the Procurement Process;
Risk Factor 3: Record Keeping and Document Management Systems;
Risk Factor 4: Staffing;
Risk Factor 5: Procurement Planning;
Risk Factor 6: Bidding Documents, Pre-qualification, Short listing and Evaluation Criteria;
Risk Factor 7: Advertisement, Pre-bid/proposal Conference and Bid/Proposal Submission;
Risk Factor 8: Evaluation and Award of Contract:
Risk Factor 9: Review of Procurement Decisions and Resolution of Complaints;
Risk Factor 10: Contract Management and Administration;
Risk Factor 11: Procurement Oversight
11. The FSCD and the procurement unit under the Early Warning and Response Directorate
had several years of experience with multi-development partner collaboration in several sectors
related to the present project. In addition, the PSNP has been under implementation for over a
decade (APL I, II and III). Regardless of over a decade of experience with World Bank and
Multi-Donor supported projects, the FSCD and the procurement unit under the EWRD have not
developed the procurement capacity needed to handle the large amount of procurement under
85
these institutions. The FSCD and the procurement unit under the EWRD, through which all
procurement activities of both Directorates are processed, are dependent on procurement
consultants who are hired for specific World Bank supported projects. PSNP APL III is
currently being handled by one procurement consultant hired for the project, but there is a need
to assign a counterpart staff to work with the consultant and learn on the job.
12. The procurement capacity assessment was carried out at the procurement unit of the
EWRD which handles the procurement of the FSCD with the assistance of the procurement
consultant. The assessment carried out in light of the above parameters reveals that the
procurement capacity situation of the agency is weak to handle procurement of projects financed
by the World Bank. The agencies internal manuals and clarity of the procurement process,
record keeping and document management systems, procurement planning, staffs with
experience and satisfactory track record, handling procurement processes in a professional
manner, contract management and administration are all found to be requiring strengthening.
The unit is staffed with one coordinator and two purchasers and is engaged in handling the
routine purchasing activities of the two Directorates under the DRMFSS. There are no staffs
with experience and satisfactory track record in procurement in general and on donor funded
projects specifically to handle all aspects of procurement under the two Directorates. Moreover,
there seems to be no attempts to provide quality training to staff for continuous skill
development in procurement and contract management.
13. The procurement capacity assessment was also carried out in Oromia Region. The
general procurement capacity situation of the Region, as revealed through the above parameters,
is also found to be weak. The agency‟s procurement processes, organization and staffing, control
mechanism, staff capacity, procurement planning and completeness of procurement records
leaves much to be desired. Moreover, lack of an independent procurement oversight body is
another limitation in the accountability of the procurement function of the Region.
14. At regional and woreda levels, limited capacity of the staff to plan and process
procurement under donor supported projects is a major weakness. Consequently under PSNP
APL III non-compliance to agreed procedures, procuring without procurement plan and
inadequate procurement documentation owing by and large due to limitation in capacity has
remained a major challenge. Particularly, lack of clarity on procurement procedures to be
followed at regional and woreda levels when there are discrepancies between Regional
regulations and Bank Guidelines remains a major challenge which needs to be tackled under the
Additional Financing. This combined with inadequate internal and external control mechanism
in procurement makes the procurement risk rating for the project “high”.
15. Institutional Setup for Procurement: The institutional setup for procurement under the
Additional Financing will remain the same as in PSNP APL III. The Ministry of Agriculture (
MoA) is responsible for oversight and coordination of the Additional Financing through the
Food Security Coordination Directorate (FSCD). The Ministry provides necessary technical
support for PSNP planning and implementation. The Program will be largely implemented
through decentralized arrangements at regional and woreda level. The more decentralized
implementation arrangements coupled with the general public procurement performance gaps
in the country and high procurement staff turnover may undermine procurement
implementation of the Additional Financing unless specific capacity building actions are
designed and implemented.
86
16. At regional level, Regional Food Security Coordination Offices of the BOAs of the
participating regions will be responsible for overall implementations, including developing and
consolidating annual implementation plans, procurement plans, mobilizing technical assistances
from other line agencies. The procurement section of BOA (and other line ministries) will have
the primary responsibility for NCB procurement for goods and procurement of consulting
services. Regional Procurement Coordinators of the PSNP will continue to provide technical
assistants for the planning, processing and supervision of procurement activities. Because of the
limited procurement capacity, woredas will have primary responsibility for the procurement of
off the shelf goods and equipment and small scale procurement of works through Shopping
procedures only. Contract awards will follow established government procedures acceptable to
the World Bank.
17. Procurement risk rating and mitigation plans: The key systemic issues and risks
concerning procurement for implementation of the Additional Financing have been identified.
The overall project risk for procurement is rated “HIGH” and the thresholds for prior review, for
ICB, including the maximum contract value for which the short-list may comprise exclusively
national firms in the selection of consultants are agreed (Table below).
Table5.1: Thresholds
Category Prior Review
Threshold (US$)
ICB
Threshold
(US$)
National Short-List
Max Value (US$)
Works
Goods
≥5,000,000
≥500,000
≥5,000,000
≥500,000
NA
NA
Consultants (Firms)
≥200,000
NA
<200,000
Consultants (Individuals)
≥100,000
NA
NA
18. Table 5 summarizes the procurement issues identified and the proposed action plan to
enhance the capacity of the executing agencies to implement project procurement. The matrix
covers findings and actions to be taken at both the federal and regional/woreda levels. Some of
the actions were provided in the PSNP APL III PAD but have not been implemented. Hence
these recommendations need to be strictly followed and implemented for a proper
implementation of the procurement aspect of the project.
Table5.2: Summary of Findings and Actions (Risk Mitigation Matrix)
Major
findings/issues Actions proposed Responsibility Targeted date
1 Inadequate
procurement
planning and
execution
1. The FSCD will recruit an additional
procurement specialist at the federal level
and provide more technical support to the
sub-national implementing agencies.
2. The procurement unit under the DRMFSS
shall recruit at least two additional
procurement staff and the staff shall be
provided with basic procurement training
equivalent to the courses provided at regional
FSCD At the beginning
of the
implementation
of the Additional
Financing
87
procurement training centers (e.g. ESAMI
and GIMPA) 2
. Lack of
procurement
technical
assistance to
the sub-
national level
1. Procurement advisors recruited under PSNP
APL III should be functional by being placed
in Regional Food Security Coordination
Offices (RFSCO) in the Bureaus of
Agriculture and by ensuring their mobility to
provide support to the woredas
FSCD/RFSCO At the beginning
of the
implementation
of the Additional
Financing
3 Lack of clarity
on
procurement
procedures at
regional and
woreda levels.
1. The FSCD should revise and simplify the
PSNP Procurement Manual to provide clarity
on procedures to be followed, and
disseminate them to implementing agencies
to follow the procedures stipulated in the
manual for procurement under PSNP APL III
and Additional Financing
FSCD At the beginning
of the
implementation
of the Additional
Financing
4 Lack of
procurement
supporting and
control
systems.
Annual independent procurement reviews. FSCD/RFSCO Annually two
months after the
end of the FY
5 Lack of staff
skilled in
procurement
management
1. Specific capacity building actions are
designed and implemented; 2. The procurement coordinators recruited for
each Region under PSNP APL III shall be
placed in the Regional Food Security
Coordination Offices in the Bureau of
Agriculture and shall provide the necessary
technical assistance to staff at woreda level. 3. The procurement staff and the tender
committee members at regional and woreda
levels should undertake basic procurement
training.
FSCD/RFSCO In the first six
months of
implementation
of the Additional
Financing
6 Inadequate
Procurement
records
keeping
1. Training on procurement records keeping
will be provided to all regions and woredas. 2. The regional offices are to be supported
with necessary office equipment and supplies
(scanners, computers and printers, box files,
file folders, etc) from the project.
FSCD/RFSCO At the beginning
of the
implementation
of the Additional
Financing
7 At woreda
level
procurement is
carried out
without
procurement
plan
1. Simplified procurement plan templates for
use by woredas should be developed and sent
to all PSNP woredas and they should be
required to have procurement plans approved
by the Woreda Cabinet before starting
procurement activities.
FSCD/RFSCO Before project
launch
8 At the
woredas, the
procurement
arrangement is
“pool” system
1. The pool in each woredas will assign one
existing staff from the pool to be responsible
for PSNP procurement.
Each region Before project
launch
88
and this seems
to create delays
in the project
procurement 9 The Regional
Food Security
Coordination
Offices have
limited
capacity and
facilities
1. Each region to provide timely access to
transport facilities for procurement staff to
be able to support procurement monitoring
under the project. 2. The Regional Food Security Coordination
Office will be capacitated with manpower
and training
FSCD/RFSCO Within the first
six months of
project
implementation
19. Procurement Plan: The Borrower has drafted a procurement plan for the Project that
will provide the basis for the procurement methods and implementation schedule. The approved
final procurement plan will be included in the project database and made available for inspection
at each Regional bureau and at the office of the FSCD. The Plan will be updated in agreement
with the Project Team annually or as required to reflect the actual project implementation needs
and improvements in institutional capacity.
20. Frequency of Procurement Supervision: In addition to the prior review of procurement
actions under ICB and QCBS to be carried out from the World Bank Country Office, at least two
supervision missions per year will be carried out.
89
ANNEX 6: REVISED PROGRAM COSTS
Program Cost By Component and/or Activity Local Foreign Total
US$ million US$ million US$ million
Component 1: Safety Net Grants
A. Sub-component: Public Works 1,077.02 1,077.02
B. Sub-component: Direct Support 269.26 269.26
Contingencies for Food and Cash Transfers 269.26 269.26
Capital and Administrative Budgets 200.44 1.50 201.94
Performance incentive grants 14.16 14.16
Component 2: Drought Risk Financing 150.00 80.00 230.00
Component 3: Institutional Support to PSNP 71.85 5.50 77.35
Component 4: Support to HABP 79.30 4.00 83.30
Total Baseline Cost 2,198.6 91.00 2,289.60
Physical Contingencies 0 0 0
Price Contingencies 0 0 0
Total Program Costs 2,198.6 91.00 2,289.60
Total Financing Required 2,198.6 91.00 2,289.60
1. Estimated taxes and duties are US$13.65 million, and the total project cost, net of taxes,
is US$2,275.95 million. Therefore, the share of project cost net of taxes is 99 percent.
2. Of the total project cost of US$2,289.60 million, IDA will finance US$850.0 million
(37 percent); other development partners, US$1,330.88 million (58 percent) of which US$580.9
million from USAID and WFP will be provided in the form of in-kind resources, and
Government will provide cash counterpart financing of US$10.0 million. The total remaining
financing gap for all the components is estimated at US$108.72 million or some 5 percent of
total estimated Program costs. Other development partners are currently working on additional
financing proposals to close this gap. Current indications from development partners are that the
remaining gap can be addressed
3. Should the PSNP remain underfinanced, measures will be taken to scale back the design
of the Program during the last year of implementation, which is sufficiently flexible to allow
such changes. This approach is, however, undesirable given the vulnerability of target
households, which, if not covered by the PSNP would likely require support through the
emergency appeal system. Development partners recognize that the PSNP is a more effective and
efficient response than the emergency appeal system providing an additional incentive to ensure
that the PSNP is fully financed.
4. In addition to the financing for the PSNP and HABP detailed above and in Tables 7
through 9 below, the Government will allocate significant resources to finance the credit
component of the HABP, complementary community infrastructure, and the resettlement
program. This amounts to 2 billion ETB annually (equivalent to US$160.3 million) for at least
the first three years of the current program phase. This budget is allocated to Regions on the
90
basis of a Vulnerability Index and is transferred in the form of a Federal block grant. Regions
then allocate the block grant to the initiatives of the Food Security Program depending on their
local requirements and priorities. Simultaneously, the Government allocates significant in-kind
resources (amounting to an estimated US$53.0 million) to the Program through, for example, the
use of dedicated government staff at all levels and logistic support.
5. Historic contributions of development partners to APL I and II are detailed in Table 7:
Table 2: Development Partner Financing for Phase 1 and Phase 2 of PSNP
Phase Sources of Financing from Partners (in USD million)28
CIDA DFID EC IDA29
Irish
Aid
RNE SIDA USAID WFP Total30
1st Phase
2005-2006
34.0 95.9 37.5 113.7 21.3 0 4.3 102.4 0
409.0
2nd
Phase
2007-2009
72.5 138.5 187.8 200.0 44.2 34.8 23.0 314.2 25.1 1,040.2
Total: 106.5 234.4 225.3 313.7 65.5 33.7 27.3 416.6 25.1 1,449.2
Source: World Bank Project Document.
6. The details of financing for APL III are detailed below.
Table 3: Updated Program Total Cost by Component (including contingencies)
(in US$ million)
Program Component Total Updated IDA Contribution
1. Safety Net Grants 1,898.9 688.5 2. Drought Risk Financing 230.0 120.0 3. Institutional Support to PSNP 77.4 19.0 4. Support to HABP 83.3 22.5 Total Program Cost 2,289.6 850.0 Source: Government of Ethiopian 2009.
28
Contributions from USAID and WFP are in-kind. The methodology that underpins these calculations is described
in the footnotes of Table 9. 29
This includes an IDA grant of US$70 million for APL I plus US$44 from the World Bank‟s portfolio in Ethiopia
(EDR project) and an IDA grant of US$175 million for APL II plus Additional Financing of US$25 million from the
GFRP. 30
The reasons for this increase in financing to APL II as compared with APL I are as follows: APL II was one year
longer than APL I; PSNP beneficiary numbers increased from 5.4 to 7.57 million; the wage rate was increased twice
from 6 to 8 to 10 birr currently; additional resources were provided through the PSNP in 2008; the value of food
increased in 2008 and 2009.
91
Table 4: Ethiopia Productive Safety Net Program, APL III (2010-2015)
Updated breakdown of Costs by Sources of Financing (in US$ millions)
Sources of Financing (signed and indicative)
Project Component Budget
1 GoE IDA DFID EC CIDA
Irish
Aid USAID2 WFP SIDA RNE Danida Subtotal
Financin
g Gap
COMPONENT 1: SAFETY NET
GRANTS 1,898.95 0.00 688.50 239.41 76.91 108.19 68.80 457.00 50.00 21.50 66.32 18.20 1,794.93 -104.02
I. Transfers
(i) Public Works Subcomponent 1,077.02 0.00 390.00 134.52 43.26 61.25 38.74 261.14 28.57 12.29 37.33 10.40 1,017.56 -59.46
(ii) Direct Support Subcomponent 269.26 0.00 97.50 33.63 10.82 15.31 9.69 65.29 7.14 3.07 9.33 2.60 254.39 -14.87
II. Other
(i) Contingencies (Cash & Food) 269.26 0.00 97.50 33.63 10.82 15.31 9.69 65.29 7.14 3.07 9.33 2.60 254.39 -14.87
(ii) Capital Budget 201.94 0.00 73.13 25.22 8.11 11.48 7.26 48.96 5.36 2.30 7.00 1.95 190.79 -11.15
(iii) Administrative Budget 67.31 0.00 24.38 8.41 2.70 3.83 2.42 16.32 1.79 0.77 2.33 0.65 63.60 -3.72
(iv) Performance incentive
grants3 14.16 0.00 6.00 4.00 1.20 1.00 1.00 0.00 0.00 0.00 1.00 0.00 14.20 0.04
COMPONENT 2: RISK
FINANCING4 230.00 0.00 120.00 31.45 0.00 0.00 0.00 73.85 0.00 0.00 0.00 0.00 225.30 -4.70
COMPONENT 3:
INSTITUTIONAL SUPPORT5 77.35 0.00 19.00 27.00 5.55 13.80 5.50 0.00 0.00 1.50 5.00 0.00 77.35 0.00
PSNP SUB-TOTAL 2,206.30 0.00 827.50 297.86 82.46 121.99 74.30 530.85 50.00 23.00 71.32 18.20 2,097.58 -108.72
COMPONENT 4: SUPPORT TO
HABP 83.30 10.00 22.50 36.12 0.00 8.39 6.29 0.00 0.00 0.00 0.00 0.00 83.30 0.00
TOTAL PROGRAM: 2,289.60 10.00 850.00 333.98 82.46 130.38 80.59 530.85 50.00 23.00 71.32 18.20 2,180.88 -108.72
92
Footnotes: (i) The budget for APL III was calculated based on a number of assumptions. These are: a) Public Works will be completed by 2014, b) 40% of program beneficiaries
graduate between 2009 and 2014, with no graduation in pastoral regions; c) the wage rate increases progressively from 10 to 16 birr; and, d) a progress move towards cash in
highland areas. (ii) Contributions from USAID for the PSNP are stated in-kind. For APL II, in-kind contributions to the PSNP have been valued at the prevailing market rate per
year. To calculate the value of the in-kind contribution to APL III, an average price per MT per year was used, ranging from USD 450 to USD 550. It is also important to note
that the USAID contribution to the PSNP is allocated through NGOs and WFP. USAID has also allocated financing to NGOs to support HABP-like activities that are not
reflected here. (iii) The performance incentive grant will be allocated annually to those woredas that meet a set performance standard. The grant is equivalent to 30% of the
administrative budget and will be used to supplement the administrative and capital budgets. As such, use of this grant will be reported against administrative and capital budget
lines. (iv) The overall resource envelope for Risk Financing is increased to USD 230 million in order to ensure the ability of the program to respond to another drought shock in
the remaining program period. This is based on requirements for emergency response resources in PSNP woredas during 2011. (v) The Institutional Support to PSNP component
is financed through allocations to Government and to the Multi-Donor Trust Fund (MDTF), a Trust Fund managed by the World Bank. Of the IA allocation to Institutional
Support, an estimated 300,000 will be channeled through the MDTF. US$13.8 million of the CIDA allocation to this component is channeled through the CIDA Regional
Support Facility.