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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 63726-BD
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF SDR 185.80 MILLION
(US$290.00 MILLION EQUIVALENT)
TO THE
PEOPLE‘S REPUBLIC OF BANGLADESH
FOR A
SECOND LOCAL GOVERNANCE SUPPORT PROJECT
October 31, 2011
Sustainable Development Unit
Urban and Water Unit
South Asia Region
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 EQIVALENTS
(Exchange Rate Effective March 11, 2011)
Currency Unit = Bangladeshi Taka
US$1 = BDT 72
BDT 1 = US$0.14
FISCAL YEAR
ABBREVIATIONS AND ACRONYMS
ADP Annual Development Plan
AFS Annual Financial Statement
BARD Bangladesh Academy for Rural Development
BBG Basic Block Grant
BGCC Block Grant Coordination Committee
C&AG Comptroller & Auditor General
CAO Chief Accounts Officer
CAS Country Assistance Strategy
DANIDA Danish International Development Agency
DDLG Deputy Director, Local Government
DF District Facilitator
DFT District Facilitation Team
DPD Deputy Project Director
DPP Development Project Proposal
ECNEC Executive Committee of National Economic Council
ESMF Environment and Social Management Framework
EU European Union
FA Financing Agreement
FAPAD Foreign Aided Projects Audit Directorate
FMR Financial Monitoring Report
GOB Government of Bangladesh
ICAB Institute of Chartered Accountants of Bangladesh
IDA International Development Association
IEC Information, Education and Communications
JICA Japan International Cooperation Agency
KPI Key Performance Indicators
LG Local Government
LGD Local Government Division
LGED Local Government Engineering Department
LGSP Local Governance Support Project
LGSP II Second Local Governance Support Project
MDG Millennium Development Goal
M&E Monitoring and Evaluation
MIE Monitoring, Inspection and Evaluation
MIS Management Information System
MLGRD&C Ministry of Local Government, Rural Development and Cooperatives
MOF Ministry of Finance
iii
MoU Memorandum of Understanding
MTBF Medium-Term Budgetary Framework
MTR Mid-term Review
NCB Nationalized Commercial Bank
NGO Non-Governmental Organization
NILG National Institute of Local Government
NPD National Project Director
OM Operations Manual
PBG Performance Based Grant
PDO Project Development Objective
PEC Project Evaluation Committee
PEM Public Expenditure Management
PFM Public Financial Management
PIM Project Implementation Manual
PMU Program Management Unit
PRDP Participatory Rural Development Project
PRSP Poverty Reduction Strategy Paper
PSC Program Steering Committee
RDA Rural Development Academy
RMP Rural Maintenance Program
SDC Switzerland Development Cooperation
SDLG Strengthening Democratic Local Governance
SIC Scheme Implementation Committee
SLGDFP Sirajganj Local Governance Development Fund Project
SSC Scheme Supervision Committee
SIL Specific Investment Loan
SOE Statement of Expenditures
UDCC Upazila Development Coordination Committee
UNCDF United Nations Capital Development Fund
UNDP United Nations Development Program
UNO Upazila Nirbahi Officer
UP Union Parishad
UPGP Union Parishad Governance Project
URT Upazila-based Resource Team
USAID United States Agency for International Development
Regional Vice President: Isabel M. Guerrero
Country Director: Ellen A. Goldstein
Sector Director:
Sector Manager:
John Henry Stein
Ming Zhang
Task Team Leader: Balakrishna Menon Parameswaran
iv
Table of Contents
I. Strategic Context ..................................................................................................................... 1
A. Country Context ............................................................................................................... 1
B. Sectoral and Institutional Context .................................................................................... 1
C. Higher Level Objectives to which the Project Contributes ............................................. 4
II. Project Development Objectives............................................................................................. 4
A. Project Development Objective ....................................................................................... 4
B. Project Beneficiaries ........................................................................................................ 4
C. PDO indicators ................................................................................................................. 4
III. Project Description.................................................................................................................. 5
A. Project Components ......................................................................................................... 5
B. Project Financing ............................................................................................................. 9
Lending Instrument ..................................................................................................................... 9
Project Financing ........................................................................................................................ 9
C. Lessons Learned and Reflected in the Project Design ..................................................... 9
IV. Implementation ..................................................................................................................... 10
A. Institutional and Implementation Arrangements ........................................................... 10
B. Results Monitoring and Evaluation ............................................................................... 11
C. Sustainability.................................................................................................................. 11
V. Key Risks and Mitigation Measures ..................................................................................... 12
VI. Appraisal Summary .............................................................................................................. 12
A. Economic and Financial Analysis .................................................................................. 12
B. Technical ........................................................................................................................ 13
C. Financial Management ................................................................................................... 14
D. Procurement ................................................................................................................... 15
E. Social.............................................................................................................................. 15
F. Environment ................................................................................................................... 16
Annex 1: Results Framework and Monitoring.............................................................................. 17
Annex 2: Detailed Project Description ......................................................................................... 21
Annex 3: Implementation Arrangements ..................................................................................... 33
Annex 4: Operational Risk Assessment Framework (ORAF) ...................................................... 58
Annex 5: Implementation Support Plan ........................................................................................ 64
Annex 6: Team Composition ........................................................................................................ 66
Annex 7: Summary of Key LGSP Related Studies ...................................................................... 67
v
Annex 8: Decentralization and Local Governance in Bangladesh ........................................... 70
Annex 9: Trajectories of Change from LGSP I to LGSP II ...................................................... 73
Annex 10: Governance and Accountability Action Plan .......................................................... 75
BANGLADESH
SECOND LOCAL GOVERNANCE SUPPORT PROJECT
PROJECT APPRAISAL DOCUMENT
South Asia Sustainable Development Department
Date: October 26, 2011
Country Director: Ellen A. Goldstein
Sector Director: John Henry Stein
Sector Manager: Ming Zhang
Team Leader(s): Balakrishna Menon
Parameswaran
Project ID: P124514
Lending Instrument: Specific Investment Loan
(SIL)
Sectors: Sub-national Government Administration
(100%)
Themes: Decentralization (100%)
EA Category: B-Partial Assessment
Project Financing Data:
Proposed terms:
[ ] Loan [X] Credit [ ] Grant [ ] Guarantee [ ] Other:
Source Total Amount (US$M)
Total Project Cost:
Co-financing:
Borrower: Government of Bangladesh
Total Bank Financing:
IDA
New
Recommitted
545.39
0.00
255.39
290.00
290.00
Borrower: People‘s Republic of Bangladesh
Responsible Agency: Local Government Division, Ministry of Local Government, Rural
Development and Cooperatives
Contact Person: Abu Alam Md. Shahid Khan, Secretary, Local Government Division
Telephone No.: +880-2-951 4478
Email: [email protected]
Estimated Disbursements (Bank FY/US$ m)
FY 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Annual 38.5 54.125 57.75 59.5 65.9 14.225
Cumulative 38.5 92.625 150.375 209.875 275.775 290.00
Project Implementation Period: 5 years
Expected effectiveness date: January 15, 2012
Expected closing date: November 30, 2016
Does the project depart from the CAS in content or other
significant respects?
No
vii
If yes, please explain:
Does the project require any exceptions from Bank policies?
Have these been approved/endorsed (as appropriate by Bank
management?
Is approval for any policy exception sought from the Board?
No
N/A
No
If yes, please explain:
Does the project meet the Regional criteria for readiness for
implementation?
Yes
If no, please explain:
Project Development Objective:
The project development objective is to strengthen Union Parishads (UPs) to become accountable and
responsive, supported by an efficient and transparent intergovernmental fiscal system.
Project Description:
The project will have four components. Component 1 will provide UPs with direct block grants for
improving local services and incentivizing accountability and performance. It will scale up the current
Basic Block Grants (BBGs) and establish Performance-based Grants (PBGs). Component 2 will
strengthen systems of downward and upward accountability, improve transparency and support
informed decision-making among UPs. Component 3 will build capacities of UPs to deliver public
goods and services in accountable and responsive ways, and strengthen key central agencies to make
policy and manage the local government system effectively. Component 4 will support project
management, including financial management, procurement, safeguards, grievance redress and
incremental operating costs.
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
○ Yes x No
○ Yes x No
x Yes ○ No
○ Yes x No
○ Yes x No
○ Yes x No
○ Yes x No
Conditions and Legal Covenants:
Financing
Agreement
Reference
Description of Condition/Covenant Date Due
2.I.A.1 Project Steering Committee headed by the Secretary, Local
Government Division is established.
January 31,
2012
2.I.A.2 Project Management Team with a National Project Director, two
Deputy Project Directors and other relevant officials is established
and staffed.
January 31,
2012
viii
2.I.D.4(a) Indicative BBG envelope for all UPs for FY 11/12, 12/13 and 13/14
is publicly announced and informed to UPs.
January 31,
2012
2.I.B.1 IDA approved Union Parishad Operations Manual (UP OM) and
LGSP II Supplementary Manual are finalized and approved.
January 31,
2012
2.II.E A procurement focal point is nominated within LGD and a national
consultant is recruited as procurement specialist for the project.
January 31,
and February
29, 2012
2.I.A.8/9 Block Grant Coordinating Committee (BGCCs) in each Upazila and a
District Coordination Committee (DCC) in each district is
established.
February 29,
2012
2.I.A.10 Upazila Resource Teams (URTs) are established in each Upazila and
maintained.
February 29,
2012
2.I.B.2 Training for relevant UP and Upazila officials on UP OM and LGSP
II Supplementary Manual is conducted for all UPs.
March 31,
2012
2.I.A.3(a) Fiscal cell/unit for managing intergovernmental fiscal transfers is
established under relevant Joint Secretary or equivalent in LGD.
Prior to release
of FY 12/13
second tranche
of BBGs
2.I.A.3(b) Audit cell/unit for managing local government audits is established
under relevant Joint Secretary or equivalent in LGD.
Prior to release
of FY 12/13
second tranche
of BBGs
2.V.A Full-time DDLGs are posted in all districts. February 29,
2012
2.V.A Full-time DDLGs are maintained in all districts. Continuous
2.IV.B.2(a)
(b)
Timely financial audits of UPs are conducted as a condition for
transfer of BBGs and performance audits are conducted as a condition
for PBGs
Continuous
2.II.A2(a) Project mid-term review is completed jointly by LGD and IDA. May 31, 2014
2.V.B Sustainable and long term financing mechanisms, including source
and modalities, for intergovernmental fiscal transfers to UPs are
identified, agreed and established.
August 31,
2014
1
I. Strategic Context
A. Country Context
1. Over the last decade, Bangladesh‘s economy has grown steadily, driven largely by a
vibrant textiles sector and by significant remittances from migrant workers. The country has also
made impressive strides in meeting key Millennium Development Goals, be it in reducing
population growth rates or infant mortality. Nonetheless, its development challenges remain
formidable. About 31% of the population remains poor. There are signs that socio-economic
inequalities are growing. Bangladesh also scores poorly on several global governance perception
indicators.1 Improved transparency and accountability in delivery of services with stronger public
financial management systems have been noted as critical to improve the effectiveness of pro-poor
spending.
2. Within Bangladesh‘s public sector, local government is a relatively small player. Sub-
national expenditure as a share of total government expenditure has never crossed 4%, while less
than 2% of total government revenue is collected at local levels. Most local development decisions
are prioritized by deconcentrated national agencies. Nonetheless, local governments – especially at
the lowest tiers – are key features of the governance landscape and, for the most part, enjoy a
socio-political prominence that is disproportionate to their small size and limited capabilities.
They provide communities and citizens with proximate democratic space and offer substantial
opportunities for enhancing government accountability at the grassroots.
B. Sectoral and Institutional Context
3. Bangladesh is a unitary state. At the lowest level of government, there are 4,504 Union
Parishads (UPs) in rural areas, and 308 Pourashavas (Municipalities) and 7 City Corporations in
urban areas. All are directly elected, but have limited independent powers or resources to run their
affairs. In addition, there are 484 Upazila Parishads (Sub-districts), introduced initially as an
elected body in 1983 during martial law, but became a deconcentrated and administrative arm of
the center in the early-1990s, until elections in January 2009 brought back elected representation
at this level. Annex 8 has a more detailed description of the sector context.
4. For much of its recent history, there has been numerous policy shifts and structural
changes associated with local government in Bangladesh. Local government strengthening has
always found a place in the manifestos of major political parties. Successive governments have
affirmed their intent to devolve powers to lower levels and allocate more autonomy and resources
to local governments. In spite of this, local governments have been relatively minor players in the
arena of politics largely due to the ambivalence of national parties towards truly empowering them
and in aspects of service delivery for lack of resources and capacity. Powerful countervailing
forces have often worked to thwart meaningful steps towards local autonomy and capacity. Not
only has a big bang approach to decentralization looked highly unlikely in Bangladesh, even an
incremental process has until recently had a checkered history, oscillating between reform surges
and periods of roll back.
1 In its 2009 Corruption Perception Index rankings, Transparency International ranks Bangladesh 139
th in a field of
180 countries (http://www.transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table).
2
5. Elected local governments in Bangladesh operate in a highly constrained policy and
institutional environment characterized by:
Limited autonomy: On their own, local governments, especially the UPs, have limited
discretion in fiscal and administrative spheres which constrains their ability to be
responsive to constituent demands.
Lack of functional clarity: The law assigns a set of functions to local governments, but this
is not matched with functionaries and finances. Some functions assigned to them overlap
with more powerful and well-resourced central government agencies.
Weak fiscal base: The share of local government expenditures in total public expenditures
is among the smallest in the world for countries of comparable size. Intergovernmental
fiscal transfers are not entirely predictable or transparent. They also represent a small
proportion of the total development budget spent locally, most of which is channeled
through line departments. With regard to own-sources revenues, most local governments
have little understanding of how to capitalize on their tax potential.
Low levels of capacity: Local government institutions are weak in terms of staffing
numbers and skills. Training is largely top-down and inadequate. Avenues for reaching out
to citizens are limited, as are channels for forging partnerships with the private sector.
Weak systems of accountability: On the supply side, this has been reinforced by lack of
monitoring and weak public financial management systems. On the demand side,
communities have limited scope to participate in planning and budgeting, or to complain
about the nature of public service provision.
6. Notwithstanding the above, the last few years have witnessed a steadily growing
commitment in the country to strengthen local governance institutions and practices. Reflecting
this renewed interest, a high-level ‗local government strengthening committee‘ established by the
Caretaker Government, made a number of key recommendations in 2008, among them, new rules
for reforming local election procedures, streamlining and reforming existing local government
legislations, reinstating elected Upazilas and establishing a local government commission.
Although the local government commission was dissolved, the current Government has held
elections to Upazila Parishads in January 2010 after more than 18 years, followed by elections to
UPs earlier this year, revised and legislated key local government ordinances, transferred
additional expenditure responsibilities to UPs, and enhanced resource transfers to local bodies.
7. The First Local Governance Support Project (LGSP I; US$170 million), supported by
IDA, UNDP/CDF, EU and DANIDA and implemented by the Local Government Division (LGD)
since 2006, was the first nationwide effort to strengthen the local government system. Through the
project, UPs nationwide have been provided with enhanced resources and discretion in deciding
their spending priorities through a participatory process, while being held accountable for their
performance through a number of accountability measures. The UPs have also benefitted from a
capacity building program that strengthens their capabilities in a set of core functional areas. At
the center, the project has supported improved policy making, management of intergovernmental
fiscal relations and monitoring of local bodies.
8. Overall, LGSP has been quite successful in achieving its development objectives of
strengthening local governments that provide accountable services. The project has:
3
more than quadrupled total resource transfers to UPs in the country via Expanded Block
Grants (EBGs) allocated on the basis of a simple population-based formula and disbursed
directly to UP bank accounts;
established a basic system of local audits, through which UPs are subject to annual audits
undertaken by chartered accountants and overseen by the Comptroller & Auditor General
(CAG). More than 11,000 such audits have taken place, of which 3,000 odd have been
comprehensive assurance audits;
provided basic training to nearly 50,000 local public officials in planning, budgeting,
public financial management, safeguards compliance, and good governance;
set up a system of local government reporting, whereby UPs report on a six-monthly basis
to LGD and these reports are aggregated using a Management Information System (MIS)
and used for oversight and program adjustments;
improved transparency, voice and participation through mandatory disclosure obligations,
and inclusive systems of planning, budgeting and scheme implementation; and
financed tens of thousands of small local infrastructure and service delivery schemes which
respond to local public needs.
9. IDA is also implementing a Non-Lending Technical Assistance Program (NLTA) for
Local Governance, funded in part by the SDC and the Aus-AID. Under its rubric, several
advocacy programs, sector studies and policy notes, workshops, study tours, and capacity building
activities have taken place in the last four years.
10. Although LGSP I and NLTA have created the space for deeper decentralization reforms as
well as strengthened UPs and nodal central agencies, several systemic issues continue to constrain
the local government system. For example, the share of local government revenues and
expenditures continues to be low by global standards; while matters have improved notably for
UPs, predictability and rationality continue to elude the overall intergovernmental fiscal system
(IGFS); systems for local government monitoring and audit are still in embryonic stages;
capacities at the local level are limited; and finally, the social contract between citizens and their
local governments is still weak. However, a ―big bang‖ approach to more far reaching and rapid
decentralization reforms is unlikely to succeed in the near term. Thus, new initiatives to strengthen
the local government system will need to systematically build on the recent developments in the
country, especially the foundation of reform that has been established under LGSP I.
11. Starting with the UNDP/CDF-implemented Sirajganj Local Governance Development
Fund Project in the early-2000s and the JICA-supported Participatory Rural Development Project,
there has been increasing donor involvement in local governance. The Learning and Innovation
Component (LIC) of LGSP I, implemented by the UNDP/CDF in six districts, aimed at piloting
next generation local governance reforms at the UP level, which could then be evaluated and
mainstreamed via LGSP I. Among other donor supported initiatives are the Horizontal Learning
Program, the Sharique (SDC), the Hygiene, Sanitation and Water Supply Fund (DANIDA and
others) and the Strengthening Democratic Local Governance Project (USAID). The UNDP/CDF is
currently formulating the Union Parishad Governance Project (UPGP) — the successor to the
LGSP-LIC — and the Upazila Parishad Governance Project. Both are aimed at testing further
innovations at the local level, which can then be potentially scaled up at the national level.
4
C. Higher Level Objectives to which the Project Contributes
12. Promoting devolution to local governments is one of the four pillars of the Sixth 5-year
Plan‘s strategy for capacity development. The Plan elaborates that ―the strategy will be to institute
strong elected local governments that are vested with adequate financial autonomy and
accountability for results. The local governments will be strengthened and much of the
responsibility for delivering basic services will progressively be decentralized to local
governments.‖ The National Strategy for Accelerated Poverty Reduction (NSAPR II) also foresees
a heightened role for local governments in a broad range of areas, among them, rural
infrastructure, health, education, disaster management, and empowering indigenous communities.
Supporting devolution, strengthening local governments and ensuring that they are responsive to
the needs of citizens are key elements of NSAPR‘s good governance vision.
13. The Bangladesh Country Assistance Strategy (CAS) notes that, ―the Local Government
Support Project has shown that efficiency and responsiveness of local services can significantly
improve through provision of adequate resources and strengthened accountability at the local
level.‖ The momentum provided by LGSP and the increasing political focus on local governance
are ―expected to provide greater impetus to the decentralization agenda in the country.‖ Further,
both decentralization and local governance are pillars of the governance and service delivery
agenda under the CAS. For example, Strategic Objective 3: Improve Social Delivery and Strategic
Objective 4: Enhance Accountability and Promote Inclusion recognize the importance of
decentralization and the need to empower local governments in increasing the efficiency of social
services delivery. In presenting Bank‘s approach to local governance, the CAS explicates that, ―a
multi-sectoral approach will be adopted in order to link efforts on local government to core
interventions for social services delivery. Implementation of the on-going LGSP, and a follow-on
operation, would be the main vehicles to support this agenda, which builds capacity at the village
council level by enhancing the fiscal transfer system, institutionalizing accountability
mechanisms, improving financial management and establishing effective monitoring systems.‖
II. Project Development Objectives
A. Project Development Objective
14. The project development objective (PDO) is to strengthen Union Parishads to become
accountable and responsive, supported by an efficient and transparent intergovernmental fiscal
system.
B. Project Beneficiaries
15. The main beneficiaries of the project will be the 4,504 UPs of Bangladesh and the
population of approximately 130 million served by them. Other beneficiaries are the nodal
agencies responsible for policymaking, regulating and managing the local government system.
These include the LGD, the CAG and the National Institute of Local Government (NILG).
C. PDO indicators
16. Achievement of the PDO will be measured in terms of the following outcome indicators.
Further details of this are provided in Annex 1:
5
(a) Share of beneficiaries, disaggregated by gender, agreeing that UPs are meeting local
priorities;
(b) Increase in the average performance score of UPs nationally; and
(c) Number of basic block grant tranches released on a transparent and predictable basis.
17. PDO indicator (a) measures the extent to which UPs are being responsive to the service
delivery preferences of their constituents. Indicator (b) measures aggregate improvements in
institutional capacities and effectiveness of UPs. A performance audit assessing improvements in a
number of governance and public financial management areas will determine the performance
score of UPs. Indicator (c) informs whether systemic improvements have taken place in the IGFS,
ensuring that basic block grants are formula-based (transparent), announced sufficiently in
advance and disbursed to eligible UPs on a predetermined schedule (predictable). Basic block
grants, which are disbursed biannually, represent the main modality of fiscal transfers to UPs.
III. Project Description
A. Project Components
18. The evolution of local government reforms in the country, starting in the early-2000s is
summarized below, with a detailed trajectory of change presented in Annex 10:
Pre-LGSP LGSP LGSP II
No direct or discretionary
resources to UPs
Direct block grants piloted in
one district under Sirajganj
project
Direct and discretionary block
grants, determined on population
basis and disbursed biannually
across all UPs
Supplementary grants under LGSP-
LIC
Institutionalized predictability through 3-
year indicative funding
Improved formula-based horizontal
equalization and long-term vertical revenue
sharing identified
Small scale performance grants
by Government without clear
criteria or transparent process
Performance measures and grants
piloted in 6 districts under LGSP-
LIC
Nationwide performance grant system with
clear criteria and transparent assessment
Further testing of performance measures
under UPGP before scaling up
Small scale schemes decided
mostly from top, some of
which implemented by UPs
Small scale schemes prioritized
locally and implemented by UPs and
communities
Gradual shift towards sustainable service
delivery via 5-year UP periodic plans, UP-
level asset registries and O&M emphasis
Random audits by CAG but
mostly not onsite or using clear
criteria
Independent financial audits of all
UPs via independent Chartered
Accountants with quality assurance
by CAG and assurance audits for
about 25% of UPs
Independent financial plus performance
audits nationwide
Accreditation of local government auditors
nationally and audits eventually procured
by UPs
Audit unit/cell in LGD and QA by CAG
strengthened
Limited and ad hoc reporting
mostly by central officials at
Upazila level
UPs submitting 6-monthly progress
reports nationwide and captured by a
central MIS
Decentralized district level UP reporting
infrastructure
Decentralized web-based MIS, at the
district and lower levels.
System of follow up to UP reports in terms
of oversight and support.
Little local discretion in hiring Little local discretion in hiring or Discretion to use up to 10% of fiscal
6
or procuring need-based
capacity development services
procuring need-based capacity
development services
Top down core training via Upazila-
based resource teams (URTs)
transfers for short-term local hiring, peer
exchanges, capacity development.
Creation of a marketplace through
accreditation of qualified capacity building
service providers
Greater emphasis on peer learning networks
19. The project will have four components with a total cost of US$534.86 million. A short
description of the project components is given below with a detailed description in Annex 2.
20. Component 1 - Union Parishad Grants (US$491.96 million): This component will finance
basic block grants (BBGs), known as EBGs under the LGSP I, and introduce performance based
grants (PBGs). These grants will increasingly help UPs to execute their assigned expenditure
mandate as per the 2009 UP Act. They will also aim at incentivizing improved UP performance in
a number of governance and public financial management areas.
21. Basic Block Grants (BBGs - US$436.76 million). The LGSP II will increase the average
BBG allocation by about 12% per annum from Tk. 1.1 million in 2011 to about Tk. 1.8 million in
2016. Individual UP allocations will be determined through a two step process. First, every UP
would automatically get a minimum flat amount, which will be equal shares of 25% of the total
BBG funding pool. Second, the UPs that comply with a set of minimum conditions (MCs) would
get an allocation based on a transparent formula that takes into account population and area. The
MCs would include audit clearance, evidence of participatory planning and open budgeting, and
timely submission of biannual financial and progress reports. The BBGs would be funded jointly
by GOB and IDA, with the Government`s contribution going up from 50% under LGSP I to 60%
of the total BBG funding pool by the end of LGSP II. Over the project life, GOB and IDA
allocations will average out at 55% and 45%, respectively. UPs would be informed of their
indicative 3-year BBG allocations in advance and notified of their actual allocations before end-
June of each year. With capacity support from the Local Government Engineering Department
(LGED), UPs will gradually undertake larger and more sustainable investments rather than small
schemes, as has been mostly the case till now. In addition, they would also establish simple asset
registries and assign greater emphasis towards the O&M of their infrastructure assets.
22. Performance Based Grants (PBGs - US$55.2 million). The project will introduce PBGs to
reward UPs that demonstrate improvements in key governance and public financial management
areas. An annual performance assessment over a set of about 10-12 indicators will determine the
performance scores of UPs, which will determine their eligibility to access PBGs. The top 75% of
UPs will receive PBGs on graded scale and the average PBG will be about 20% of the BBG. The
actual PBG allocations, like BBGs, will take into account population and area differences of UPs.
PBGs will be phased in from year 2 of the project, while year 1 would be used to establish rules
and systems, train personnel, disseminate information to public and carry out baseline evaluations
of the UPs. It is expected that the PBG system would need to be closely monitored and, based on
field experience, further fine-tuned incrementally. The PBG system would also be further
strengthened based on piloting under the proposed UNDP/CDF-implemented UPGP.
23. Component 2 - Information Flows and Accountability (US$10.47 million): This component
will aim to strengthen systems of downward and upward accountability, improve transparency,
and support informed decision making through better information flows among UPs. It will
7
finance UP audits and audit reviews, quality assurance audits by the CAG, accreditation of
auditors, expansion of LGD‘s MIS to district level, project-related information, education and
communication (IEC) activities, and mid-term and final project evaluations.
24. Audits: Currently all UPs undergo financial audits each year, while about one-fourth of
them go through comprehensive assurance audits. Under LGSP II, UP audits will be upgraded to
cover both financial and performance dimensions. During phase 1, years 1-3 of the project, UPs
will continue to be audited annually by CA firms contracted by the LGD. The audit reports will be
subject to independent review by other CA firms and further quality assurance by the CAG‘s
office through sample field audits and audit reviews. The Institute of Chartered Accountants of
Bangladesh (ICAB) will continue to monitor the performance of the CA firms and ensure that
professional standards are maintained by its members. Further, during this phase, a national roster
of accredited local government auditors will be established, with 20-40 CA firms that meet
prescribed norms and possess high professional standards. Depending on the success of phase 1,
during phase 2, starting from year 4, UPs will themselves contract the auditors, selected from the
roster of accredited auditors. UPs in the same district will be expected to cluster together and
procure a single CA firm. Oversight and quality assurance mechanisms will continue as before.
25. Information flows: The UPs will submit their six-monthly financial and progress reports to
their respective Deputy Directors of Local Government (DDLGs) and Upazila Nirbahi Officers
(UNOs). DDLGs will enter UP reports into a web-based MIS and submit consolidated district
level reports to LGD. When necessary, they will follow up on UP reports, in terms of both
oversight and support. At the national level, the LGD‘s upgraded MIS will use information
coming from the districts, UP audits and other sources to track UP performance, make decisions
and compile lessons learned. Regular monitoring will be complemented by a comprehensive Mid-
Term Review (MTR) at the end of year 3 and a final evaluation towards the end of the project.
26. Through a focused communication strategy, LGSP II will ensure that basic information
related to UPs is made accessible to the public. This will include, inter alia, grant allocations, and
the results of UP audits and performance assessments. In accordance with the provisions of the
Right to Information Act (2009), UPs will also be expected to provide their citizens with access to
periodic plans, budgets, six-monthly reports, scheme implementation details, procurement
information, audit reports and financial statements. The project will also explore innovative use of
ICTs and social media to improve transparency and voice at the local level.
27. LGSP I established inclusive community bodies like Scheme Implementation and
Supervision Committees (SICs/SSCs) at the ward and lower levels. Further, through the NLTA
and other similar programs, a parallel set of social accountability initiatives were also piloted in
the UPs. LGSP II will further enhance the ability of communities to hold UPs accountable by
capacitating Ward Shabhas (ward-based citizen assemblies — decreed under the 2009 UP Act), as
well as strengthen the role of UP Standing Committees. Finally, the project‘s grievance redress
mechanisms will be made more effective through improved outreach and oversight.
28. Nevertheless, the bulk of social accountability initiatives will operate through independent
external initiatives that are closely linked to LGSP II systems, institutions and processes. In this
regard, it is proposed that an independent Local Governance Accountability Facility, supported
through trust funds and other external financing arrangements, is established to foster public
accountability at the grassroots level. Further details of this are given in Annex 2.
8
29. Component 3 - Institutional Development (US$37.17 million): This component will aim to
strengthen the intergovernmental system at all levels to enable accountable and responsive service
delivery by the UPs. It will finance direct UP training; accreditation of capacity building service
providers; personnel, training and equipment to strengthen DDLG offices; dissemination of the UP
Operations Manual (UP OM); capacity building of LGD and other agencies, including training
and technical expertise; and policy studies.
30. LGSP I imparted basic skills and capacities to UP functionaries through direct training
imparted by Upazila-based Resource Teams (URTs). LGSP II‘s approach to institutional
development will encompass three broad dimensions and their allied modalities and instruments,
namely environmental (policy and regulatory reform aimed at structural changes for institutional
development); organizational (for example, outsourcing, employing ICTs); and individual
(training, study tours, etc). In operational terms, this will involve four major steps.
31. One, UPs, for the first time, will have discretion to use up to 10% of their fiscal transfers to
procure technical support, peer learning, training, or organizational tools that enhance their
operational performance. Over time, this is expected to foster a vibrant marketplace of capacity
building service providers. The NILG will support this by developing curriculum, identifying
norms and criteria, accrediting service providers, and monitoring their performance. Two,
monitoring will now be linked with institutional development support. The post of DDLGs at the
district level has been recently upgraded by GOB to Deputy Secretary-level. The project will
strengthen DDLG offices with additional staff called District Facilitators (DFs), essential
equipment and training. DDLGs, supported by DFs, will help UPs with their institutional
development plans, provide backstopping support, facilitate peer learning, and extend linkages
with similar-minded programs.
32. Three, UP capacities in planning, budget preparation and execution, revenue generation,
public financial management and service delivery will be further enhanced through training and
better linkages with Upazilas and central agencies like the LGED. By year 3 of LGSP II, it is
expected that the UPs would have prepared a simple periodic plan which reflects their medium-
term priorities and identifies potential resources to implement this plan. The UP OM will be
simplified and updated, and simple ―how to do‖ guidance notes will be developed for UPs and
other stakeholders. Finally, based on the experience of a parallel pilot, to be financed under the
NLTA, LGSP II will support a UP Help Line. Managed by a private sector entity, it will consist of
dedicated call centers which will respond to queries concerning UP functions and operations.
33. At the national level, this component would provide GOB decision makers with access to a
range of institutional development services and resources aimed at enhancing policy framework
and strengthening institutions for decentralization. This would include, inter alia, support for
establishing and operationalizing a dedicated IGFT unit and local government audit unit within
LGD. Lastly, LGD‘s capabilities in M&E will be enhanced by using improved intergovernmental
information flows for enhanced oversight, support and policy development. The NILG will be
supported to become a better enabler and overseer of local government capacity development
services. A partnership framework involving the LGD, the NILG, other training institutes and key
donors is being developed to harmonize UP capacity development efforts.
34. Component 4 - Project Management (US$3.71million): This component would provide
technical and financial support to the National Project Director (NPD) and two Deputy Project
9
Directors (DPDs) and other project implementing staff in the following fields: (i) financial
management, (ii) procurement, (iii) safeguards, (iv) project management, etc. It will also cover a
variety of logistical and incremental operating costs associated with project implementation.
B. Project Financing
Lending Instrument
35. The lending instrument chosen is a Specific Investment Loan (SIL). The SIL is considered
the most appropriate instrument to support the incremental and multifaceted nature local
government reforms in Bangladesh.
Project Financing
36. The following table provides a component-wise summary of project costs.1/
IDA GOB TOTAL
Component US$ M US$ M US$ M
Component 1: Union Parishad Grants 249.28 242.68 491.96
Component 2: Information Flows and Accountability 10.47 10.47
Component 3: Institutional Development 25.72 11.45 37.17
Component 4: Project Management 2.45 1.26 3.71
Unallocated 2.08 2.08
Total 290.00 255.39 545.39 1/
Detailed projects, including sub-component costs, are provided in Annex 2
C. Lessons Learned and Reflected in the Project Design
37. The project design has been informed by the ongoing LGSP and extensive analytical work
under the rubric of the NLTA on Local Governance. A summary of various LGSP I-related studies
is given in Annex 8. It also takes into account IEG‘s evaluation of Bank support for
decentralization in client countries2 and other relevant international experience in decentralization
and local government strengthening. Key lessons thus incorporated into LGSP II design include:
adopting a results-based approach to supporting decentralization and combining support
for policy reform with technical assistance to strengthen local government capacity;
emphasis on strengthening the overall IGFS through predictable and timely release of
block grants to strengthen the UP planning, budgeting public expenditure processes;
revision of current fiscal transfer formula to better capture geographical variability in
service delivery costs and to provide for horizontal equalization between UPs with
different socio-economic profiles;
introduction of PBGs which rewards improved local revenue mobilization and service
delivery performance, in response to the need for a more incentive-driven IGFS;
increase in GOB funding share of BBGs to address issues of vertical revenue sharing and
ensure the longer term sustainability of fiscal transfers;
2 Independent Evaluation Group. Decentralization in Client Countries: An Evaluation of World Bank Support, 1990-
2007, Washington, D.C.: World Bank, 2008.
10
strengthening DDLG offices in response to the need for a more decentralized and field
based local government monitoring system;
adopting a UP institutional development strategy that goes beyond top-down training and
is more flexible, demand-driven and sustainable over the longer term; and
finally, improving project management arrangements to address slow decision making,
implementation delays and insufficient coordination that plagued LGSP I.
IV. Implementation
A. Institutional and Implementation Arrangements
38. An inter-ministerial Project Steering Committee (PSC), chaired by the Secretary, LGD will
provide the forum for important policy deliberations, inter-agency coordination, and overall
project monitoring and oversight. The LGD will be responsible for project implementation and
management. Based on the lessons of LGSP I, core functions of LGD such as fiscal transfers,
audits, monitoring, program evaluation and policy development will continue to be mainstreamed
within LGD systems, while, in a change from the past, project-management activities such as
project related financial management, procurement and safeguards oversight will now be
addressed through dedicated arrangements.
39. Within LGD, an Additional Secretary will serve as the NPD. S/he will be assisted by two
full-time DPDs (Deputy Secretaries or their equivalent, seconded by GOB), one of whom will be
responsible for managing procurement, financial management, fund flows, withdrawal requests
and disbursements, and reporting to the PSC, while the other will be responsible for managing and
coordinating all field based activities, including rolling out performance assessments and field
based monitoring and reporting, coordinating with DDLGs and DFs, and ensuring linkages and
coordination with other line agencies and the NILG. Block grants will be managed by the Deputy
Secretary/UP under the Additional Secretary, audits will be managed by the Deputy
Secretary/Audits under the Joint Secretary/Administration, and monitoring will be done by the
Monitoring, Inspection and Evaluation (MIE) wing led by a Director General (DG/MIE). Over the
medium term, intergovernmental fiscal transfers to UPs (and other local bodies) will be managed
out of a dedicated fiscal unit under a Joint Secretary, while audits, reporting, monitoring and
information management will be aligned under the DG/MIE.
40. In addition to LGD, the Office of the CAG will be involved in the implementation of
Component 2 of the project – with the responsibility to provide oversight and quality assurance of
UP audits, and advisory support for accreditation of UP auditors. The ICAB will provide external
facilitation support for the UP audit process. Finally, NILG will coordinate the UP capacity
building activities under Component 3, including development of core UP training curriculum and
modules, management of URT-based UP training, accreditation of capacity building service
providers, and monitoring and evaluating UP capacity building initiatives, while LGED, BARD
and RDA will provide support for the implementation of URT-based training activities. The NPD,
the DPDs, the Joint Secretary/Fiscal Transfers and the DG/MIE, along with one representative
each from the NILG and the CAG will constitute a core Project Management Team (PMT). A
number of project-financed consultants will provide technical and operational support to the PMT.
11
41. At the local level, UPs will be responsible for the planning, budgeting and implementation
of service delivery activities. All UP activities will be implemented in accordance with prevailing
statutory provisions. At the local level, Ward Committees (WCs) will support UPs in planning,
implement schemes and provide citizen oversight. They will be supported and overseen by
Scheme Supervision Committees (SSCs), headed by the UP Chair or a prominent community
member and having technical staff from line agencies. At the Upazila level, a Block Grant
Coordination Committee (BGCC), headed by the UNO, will provide vertical linkages for planning
and service provision, and ensure efficient utilization of block grants and coordination of capacity
building activities. At district level, coordination, monitoring and oversight of project
implementation will be handled by DDLGs, assisted by DFTs. A District Coordination Committee
(DCC) headed by the Deputy Commissioner will monitor progress, provide guidance and ensure
coordination between line agencies and local government bodies at the district level.
B. Results Monitoring and Evaluation
42. Annex 1 provides the full results framework. The LGD is the nodal ministry for local
government affairs in Bangladesh. It also has the overall responsibility for LGSP II execution,
including monitoring of activities and evaluation of results. LGSP II design makes sure that
reporting, monitoring and impact evaluation continue to be mainstreamed within LGD‘s systems
and processes to ensure long term sustainability and to integrate monitoring and impact evaluation
with policymaking. A key element of this is reforming the MIE wing within LGD and
strengthening the current systems for M&E. A senior M&E specialist will be employed at LGD to
support project‘s M&E efforts and to advice LGD regarding strengthening M&E systems.
43. At the heart of LGSP II reforms are two important elements which will play pivotal roles
in strengthening results monitoring: establishing a decentralized monitoring system, including
rolling out the MIS to sub-national levels, and introducing annual performance audits. The six-
monthly UP reports to DDLGs and district reports by DDLGs, annual performance audits and
field visit reports by LGD teams will generate data for continuous tracking of project funds and
monitoring of results. The nodal training institutions, namely, NILG, BARD, RDA and LGED
will also provide annual reports on training activities received by the UPs and other beneficiaries.
Consolidating information from various sources, LGD will prepare a comprehensive national
report annually and share this with the PSC, IDA and other stakeholders.
44. The LGSP I end-of-project survey serves as the baseline for LGSP II. In addition, the
project will undergo two critical evaluations during the mid-term and at the end of the project to
assess its performance towards achieving the PDO. Additionally, Gallup polls, spot surveys and
focus group discussions will be undertaken periodically to analyze the performance of LGSP II.
These will be carried out both directly under the project and through the NLTA, as in LGSP I.
C. Sustainability
45. The ability of the Government to continue fiscal transfers to UPs beyond the life of LGSP
II and the sustainability of the investments by UPs are two critical issues of sustainability.
46. LGSP I introduced direct and discretionary resources to UPs across the country and
substantially enhanced them over the last 4 years. Although the annual funding pool for fiscal
transfers to UPs has increased substantially over the life of LGSP I, it still represented less than
12
2% of the total ADP of GOB. Under LGSP II, the BBGs will increase by 12% annually from their
current base and the Government and IDA shares will change to 60/40 by the end of the project.
The Government has been highly committed to both LGSP II and to increasing its share of the
basic grants. Analysis suggests that the fiscal transfers under LGSP II will be at levels that the
Government can comfortably sustain beyond the life of the project. Notably, it is expected that by
project‘s mid-term, GOB would identify longer term vertical revenue sharing modalities.
47. Presently many UPs distribute their allocated funds among wards. Schemes created using
these small amounts are often not large enough to reap some economies of scale. There will be
conscious effort under LGSP II to enhance sustainability of UP investments through incentives
and capacity building efforts. For example, PBGs will encourage periodic planning, annual
budgeting based on plans, and investments which emphasize broader service delivery. They will
also induce greater focus on revenue mobilization, a portion of which will finance limited O&M of
infrastructure. The project will provide capacity support to strengthen budgeting and asset
management in UPs, as well as leverage the technical and human resource capacity of LGED to
buttress the engineering aspects of investments and to provide backstopping support to the UPs.
V. Key Risks and Mitigation Measures
48. The potential risks to achieving the PDO are captured in the Operational Risk Assessment
Framework (ORAF, see Annex 4). The risks anticipated during implementation include financial
malfeasance, delayed release of fund or theft of funds, capture of funds by local elite/public
officials, weak capacity to administer grants, weak financial management and procurement
capacity, inadequate oversight by LGD, and policy uncertainties with regard to decentralization.
LGSP I implementation leaves behind a wealth of experience with regard to understanding and
managing these risks. Appropriate mitigation measures to address key risks have been identified
and agreed with the Government and other key stakeholders. These have been described in the
ORAF. The overall risk rating for project implementation is moderate. Although the likelihood of
these risks occurring during the implementation is medium, their overall impact on project
performance and achievement of the PDO are likely to be low.
VI. Appraisal Summary
A. Economic and Financial Analysis
49. The project has several potential benefits which justify the investments in the local
government sector. Tangible benefits are the investments that the UPs will undertake in local
infrastructure and services. Intangible benefits include the enhanced processes underlying
improved service delivery and asset creation at the local level, as well as overall local government
performance. At a broader level, the project contributes to GOB‘s institutional reforms through
reforms to the IGFS, incentivizing local revenue mobilization, and strengthening the capacity of
UPs and various central agencies.
50. Since the spending choices of UPs cannot be determined a priori, a framework approach
will be adopted to estimate the economic efficiency of sample investments financed by Union
Parishad Grants. LGSP II will conduct economic analysis of UP implemented sub-projects such as
local roads, culverts, and drainage channels on a sample basis and also compare the economic
efficiency of UP implemented sub-projects with similar sub-projects implemented by central
13
agencies like the LGED and the DPHE. Smaller investments, which form bulk of UP
expenditures, will be subject to standard cost effectiveness analysis, while larger ones will be
sampled for cost benefit analysis. The project will also examine if UPs are making better
allocative choices which respond to their constituent priorities by surveying citizen satisfaction
with UP services and, by matching citizen preference for particular types of services/investments
with actual UP expenditure patterns. Finally, the project will collect data on local revenue
mobilization to examine if reforms to the IGFS and the measures to strengthen UP capacities have
led to improved own-source revenues.
B. Technical
51. Ensuring horizontal equity among UPs and getting the incentives right with regard to their
performance are key technical concerns with regard to reforming the IGFS. The population-based
formula for EBGs under LGSP I had a fairly substantial floor allocation to protect very small UPs.
While this approach was transparent and simple, it did not address horizontal equalization,
especially on a per capita basis, among UPs. Since the total EBG pool was limited, this approach
in effect penalized bigger UPs. The BBGs under LGSP II will have an implicit floor allocation via
the equal shares part of the BBG, which will be 25% of the total BBG pool. The remaining 75% of
the BBG pool will be allocated on a population (90%) and area (10%) basis. The formula-based
part will bring about improved horizontal equalization among UPs. Several simulations were
carried out to determine the BBG allocations. Based on this, it was determined that the current
formulation provides the most equitable basis for BBGs.
52. The PBG system should ensure that UPs have a strong incentive to improve performance
and a fair chance at obtaining them with sustained improvements in performance. To that end, the
PBG amounts should be right-sized to incentivize performance improvements. Further, the PBG
system should recognize both absolute and relative improvements—i.e., UPs should improve from
their own current baselines, but also compete with a peer group and show progress. Finally, the
system should accept that systemic performance improvements typically follow an incremental
path. The PBG will be initially informed by LGSP-LIC experience, which tested performance
grants in six districts for about 2 years, as well global practices. Three-fourths of the UPs in the
country will receive PBGs. UPs will be divided into three to four performance groups among a
peer group of UPs, based on performance assessments. The average PBG will be about 20% of the
average BBG initially, while the actual PBG amounts will be determined by the relative
performance of UPs and, since it is tied to the BBGs, will factor both population and area. Overall,
LGD will be supported by public finance experts and informed by rigorous evaluations and policy
analyses to set up a rational and transparent IGFS. The BBGs and PBGs will be recalibrated, as
needed, based on actual experience. Finally, the trajectory of these reforms will be incremental.
53. As the size of grants and investments goes up, it will be important to ensure that UPs have
commensurate upsurge in capacities and support systems to plan, design, execute and maintain
larger sub-projects. Discretion to procure need-based capacity support provided by LGED will
play a vital supporting role in technical and quality assurance aspects of sub-projects. Schemes
will be selected through ward level meetings and an open budget process, subject to social and
environmental screening, and implemented through community-based WCs. High level of
community awareness of UP investments, alongside regular reporting and independent annual
assurance process will result in greater technical quality of expenditures.
14
C. Financial Management
54. Risks: Although substantial progress has been made in upgrading Bangladesh‘s public
financial management system, there are still numerous fiduciary risks linked to weak and
cumbersome budgeting and accounting processes, poor internal controls, etc. These risks are
present both at the national and sub-national levels.
55. Fund flow arrangements: IDA funds will flow into two Designated Accounts, one of
which (DA1) in US Dollars will handle all Component 1 funds, and the other (DA2) in
Bangladeshi Taka will be used to deal with expenditures related to other Components. From DA1,
IDA funds will be transferred to a Taka-denominated operating bank account, to be opened in a
Nationalized Commercial Bank (NCB). The Government will also transfer its financial
contributions to the same Taka-denominated NCB account, where they will be blended with IDA
funds. Following authorization by the NPD, six-monthly disbursements will be made to UP bank
accounts from this operating account through main branches at Divisional headquarters.
56. National level FM arrangements: One of the DPDs will be responsible for the day-to-day
financial management of LGSP II at the national level. Given continued weaknesses in LGD‘s
capacity to ensure robust FM, the DPD will be assisted by a senior finance specialist and two
finance associates, all of whom will be contracted by the project. This FM team will be
responsible for accounting, reporting, replenishments, and disbursements.
57. UP level FM arrangements: UPs will manage their grants in accordance with procedures
outlined in the UP OM. These procedures will be based on existing financial management
procedures. In general, UP financial management capacities remain relatively weak – staffing
levels are minimal, systems and procedures are outmoded, incomplete, and rely largely on manual
accounts operations. Staffing constraints will be partly addressed through allowing UPs to contract
short term accountants out of their existing budgets; in the medium to long term, GOB intends to
recruit full-time UP accountants, who will reduce the burden currently borne by UP Secretaries.
58. Audit arrangements: At the national level, the project will be audited by the Foreign-Aided
Projects Audit Directorate (FAPAD) in CAG‘s office. The UPs will be audited annually by CA
firms, and will only access their full block grant allocations if their audits are ―clean‖. Up to 10%
of UPs will be sampled and further tested by the CAG. While FAPAD audits project (IDA)
expenditures, UP audits established under LGSP tracks all UP revenues and expenditures. An
expenditure identified as irregular/fictitious/unfounded in audit findings will be categorized as
questionable expenditure by IDA upon receipt of an audit report and will be deemed as ―ineligible
expenditure‖ unless satisfactorily resolved within six months of the receipt of the audit report
59. Tracking IDA funds: The UP OM provides a detailed list of eligible items (which includes,
among other items, local infrastructure and service delivery investments and procurement of
capacity building/technical assistance) and ineligible items (among them, funding of religious
establishments, salaries of local government officials, etc.) which can or cannot be financed out of
block grants. This will be tracked via annual audits carried out by independent auditors and routine
monitoring by DDLGs. Where ineligible expenditures are identified, these will be recorded by the
DDLGs/auditors in their reports and shared with LGD for follow up and recovery, if required.
15
60. Under LGSP I, biannual financial and progress statements from UPs were aggregated at
the central level by LGD using an MIS and captured in the IFRs. LGSP II aims at further
strengthening reporting and monitoring systems at all levels. DDLGs with the support of the DFs
will monitor UP activities and finances regularly. The MIS will now be decentralized to district
level and UP financial statements will be entered in the MIS at the district level. This will further
improve the timeliness of financial reporting and strengthen oversight. Any follow up with UPs
regarding their reports will now be done from the district level much more promptly and
efficiently. The district reports will be aggregated by LGD centrally and used to track unspent
balances of IDA funds regularly. Any unspent balance and/or ineligible expenditure will be
reverted back from the UP to LGD and then to IDA at close of the project.
D. Procurement
61. Risks: Overall, there have been improvements in Bangladesh‘s public procurement system.
Nonetheless, it is still subject to issues such as internal control, documentation, information
dissemination, administration of contract including delivery follow up, payments, handling
complaints etc, and their associated fiduciary risks. IDA has assessed the procurement capacity of
LGD and suggested measures for improving procurement management under the project.
62. National level arrangements and procedures: LGD will be responsible for the procurement
of the goods and services required for Components 2 to 4. To enhance LGD‘s procurement
capacity, significant assistance is required and has been agreed upon. Different risk mitigation
measures have also been agreed upon with LGD, including: (i) the hiring of a senior procurement
specialist to handle the entire cycle of contract management; (ii) the establishment of a credible
procurement complaint handling system; and (iii) the provision of annual reports based on an
agreed procurement risk mitigation plan (PRMP) covering key features related to internal control,
bid openings, record keeping, publication of award of contracts, etc. In addition, the project will
ensure that procurement packages are tailored to minimize transaction costs. A procurement plan
for the first 18 months of implementation has been drawn up. This will be updated as needed.
63. Local level: UPs will be responsible for procuring goods, works and services that are to be
financed out of their budgets. The UP OM will include a comprehensive but user-friendly
description of the procurement procedures to be followed – which will be based on LGSP I
procurement procedures, but further updated and simplified. The project will support UP
procurement through training, on-the-job mentoring and backstopping support.
E. Social
64. Participatory preparation process: For the preparation of LGSP II, extensive consultations
were organized across the country with a wide range of stakeholders. Additional analytical work
was also carried out for assessing UP performance, community satisfaction, and challenges faced
by LGSP I. The results of the UP social audit, household surveys and other assessments suggest
that majority of residents were highly satisfied with UP service delivery and the project supported
greater participation of women and the poor.
65. Gender: At least one third of the 9 WCs will be chaired by UP women members, one third
of WC and SSC members will be women, and 30% of the grants will be earmarked for schemes
prioritized by women. A Women Development Forum (WDF), comprising all elected women
16
members, will be organized at Upazila level to facilitate capacity building and women‘s
empowerment in local development. At the center, a full time Gender Specialist will be recruited
to mainstream gender in local government activities and monitor gender aspects of the project.
66. Social accountability: Under LGSP II, partnership with civil society organizations will be
further strengthened and social accountability measures and communication activities will be
expanded for enhancing transparency and improving engagement between the UP and residents.
This will be complemented with external initiatives in social accountability facilitated through
trust funds and in partnership with other entities, including donors, NGOs, CBOs and academia.
F. Environment
67. An assessment of implementing the LGSP I ESMF reveals that the UPs have mostly
rehabilitated community infrastructure, such as roads, brick-soling of mud roads, culverts, foot-
bridges, general and irrigation drainage, public toilets, etc. on public lands. The LGSP funds
helped UPs and their constituents improve local environment and social cohesion, especially
enabling them to mitigate environmental problems created by other development activities. The
UPs will continue to use LGSP II grants for the provision of small-scale community infrastructure
and other schemes responding to community needs. Environmental issues that may arise in these
schemes are likely to be minor but would be addressed such as (i) arsenic and bacterial
contamination in drinking water, (ii) unplanned road construction causing drainage blocks, (iii)
improper sanitation and sewage systems, (iv) inadequate solid waste management, and (v)
improper land filling leading to loss of water bodies and biodiversity.
Safeguard policies
68. The LGSP I ESMF was revised and supplementary guidelines were drafted in both English
and Bangla during the LGSP II preparation process. The ESMF contains a negative list of
characteristics that would make a sub-project ineligible for financing. To avoid potentially adverse
environmental impacts and improve existing environmental conditions, OP 4.01 is triggered for
the project. Schemes which require land acquisition or involuntary land contribution will not be
eligible for block grants. Therefore, OP 4.12 on Involuntary Resettlement is not triggered. IDA's
OP/BP will apply as project includes areas populated by Indigenous Peoples. Assessment indicates
that schemes are implemented using informed consultation and community participation, and do
not include ancestral territories or social or political institutions of indigenous people. All schemes
would be subject to an environmental and social screening to ensure that activities with significant
negative impact will not be implemented.
69. A full time Safeguards Specialist will be recruited at the LGD, whose main responsibility
will be to ensure high quality safeguards compliance of all planned LGSP II activities. The
Grievance Redress Mechanism (GRM) under LGSP I will be further strengthened to resolve
conflicts in a transparent and fair manner. The DDLG and UP GRM Committees will be
responsible for grievance redress resulting from any alleged irregularities. All grievances and their
resolutions will be documented, filed via MIS in respective UPs and DDLG offices and disclosed
through LGSP website. The LGSP II ESMF was disclosed on the LGD website on August 14,
2011, and the Bank‘s Info Shop on August 14, 2011. In compliance with OP 4.01, the EA
category assigned is Category B and the safeguards screening category is S2.
17
Annex 1: Results Framework and Monitoring
BANGLADESH: SECOND LOCAL GOVERNANCE SUPPORT PROJECT
Results Framework
Project Development Objective (PDO): To strengthen Union Parishads to become accountable and responsive, supported by an efficient and transparent intergovernmental fiscal system.
PDO Level Results
Indicators
Co
re Unit of Measure Baseline Cumulative Target Values Frequency Data Source/
Methodology
Responsibil
ity for Data
Collection
Description
(indicator
definition etc.) FY12 FY13 FY14 FY15 FY16
Indicator One: Share of
beneficiaries,
disaggregated by gender,
agreeing that UPs are
meeting local priorities
Percentage 40% (38%) 40% (38%) 50% (45%) 66% (55%) Beginning,
mid-term
and end of
project
Baseline and
update surveys
LGD Measures the extent
to which UPs are
being responsive to
local priorities. This
will be
disaggregated by
gender. The figures
in parentheses refer
to women.
Indicator Two: Increase
in the average
performance score of UPs
nationally
Number Baseline to be
established
during FY
11/12 audits
5 7.5 Annual UP audits and
performance
assessments
LGD Measures
improvements in
UP performance.
UPs will receive a
performance score
based on their
performance in
governance and
public financial
management areas.
Indicator Three:
Number of BBG tranches
released on a transparent
and predictable basis
Number 1 0 1 2 2 2 Bi-annual MIS LGD Measures the
efficiency of IGFS.
The grants need to
be formula based
(transparency),
announced in
advance and
disbursed every
September/October
and
February/March
(predictability)
18
INTERMEDIATE RESULTS
Intermediate Result (Component One): Improved fiscal transfer system
Co
re
Unit of Measure Baselin
e
Cumulative Target Values Frequency Data
Source/
Methodolog
y
Responsi
-bility
for Data
Collectio
n
Description
(indicator definition
etc.) FY12 FY13 FY14 FY15 FY16
Intermediate result
indicator One: Fiscal
transfer cell
established and
functional in LGD
Yes/No No No Established
: yes
Functional
: yes
Functional:
yes
Functional:
yes
One time N/A LGD Fiscal cell to
compute and manage
all fiscal transfers
Intermediate result
indicator Two: Year to
year increase in basic
block grants
Percentage 12.2
average
0 12% 12% 12% 12% Annual MIS reports
and annual
progress
reports
LGD Predictable increase
in funding pool
Intermediate result
indicator Three: Local
government
institutions share of
total public
expenditures
Percentage 2% 4% End of
project
LGD,
MOF
Measures the size of
the vertical divisible
pool, this indicator is
part of the Results
Framework of the
Sixth Five Year Plan
Intermediate result
indicator Four:
Performance grant
system established for
UPs and made
operational
countrywide
Yes/No No No Established
: yes
Operationa
l
countrywi
de: yes
Operational
countrywid
e: yes
Operational
countrywid
e: yes
Annual Relevant
GOs, audit
reports, MIS
reports
LGD
Intermediate Result (Component Two): Strengthened accountability mechanisms and information flows
Intermediate result
indicator One: # of UP
performance audits
conducted nationally
Number 0 0 1 2 3 4 Annual Auditors‘
reports,
audit
reviews
LGD Performance
Assessment is
established
nationally
Intermediate result
indicator Two: % of
DDLGs submitting
six-monthly reports to
LGD on a timely basis
Percentage 0 50 75 Bi-annual MIS LGD Decentralized
oversight established
19
Intermediate result
indicator Three: % of
UPs submitting six-
monthly reports on a
timely basis
Percentage 27.5 33 50 Bi-annual MIS LGD Improved,
predictable info
flows from UPs
leading to better
management of
intergovernmental
system
Intermediate result
indicator Four: % of
UPs in which Ward
Shabhas are functional
Percentage 0 30 50 Annual MIS, UP
reports
LGD,
DDLGs,
UPs
Participatory
planning and
community oversight
are strengthened
Intermediate Result (Component Three): Strengthened UP capacities for planning, budgeting and scheme implementation
Intermediate result
indicator One: # of
UPs with a periodic
plan
Number 0 1,125 2,250 Beginning,
mid-term and
end-of-
project
MIS reports,
audit reports
LGD,
auditors,
DDLGs,
UPs
Rationale basis for
local public
expenditures is
established
Intermediate result
indicator Two: # of
UPs submitting annual
budgets to UNOs on a
timely basis
Number TBD 1125 2250 LGD,
DDLG,
DFT,
UNO
Improved budgeting
by UPs
Intermediate result
indicator Three: %
increase in UP own-
source revenues
nationally
Percentage 0 15% 33% LGD,
UPs
Improved revenue
mobilization
Intermediate results
indicator Four:# of
new UP functionaries
trained by URTs
Number 0 20,00
0
50,000 NILG UP functionaries
obtain basic training
Intermediate results
indicator Five: # of
functional Upazila
Women‘s
Development Forums
Number 80 90 121 242 Annual DDLG
annual
report
LGD Capacity building
and peer learning of
local level women
leaders
Intermediate Result (Component Four): Improved project management in LGD
Intermediate results
indicator One: # of
Project Steering
Committee meetings
taking stock of project
progress
Number 1 1 3 5 7 9 Annual LGD reports LGD Improved program
and policy oversight
20
Intermediate result
indicator Two:
Updated annual work
plans (including
procurement plans)
submitted to PSC and
the Bank by June 30 of
previous FY
Number 0 0 1 2 3 4 Annual LGSP II
work plans
LGD, Improved
functioning within
LGD on program
execution
Intermediate result
indicator Three: # of
annual safeguards
review carried out
Number 1 0 1 2 3 4 Annual LGD reports LGD Greater oversight on
safeguards issues
21
Annex 2: Detailed Project Description
Introduction
1. LGSP II aims to strengthen UPs to become accountable and responsive, supported by
an efficient and transparent intergovernmental fiscal system. At the heart of the project, as
part of reforming the IGFS, will be enhanced fiscal resources made available to UPs who will
access them subject to complying with eligibility criteria and triggers. These grants aim to
enhance the performance of UPs and strengthen the social contract between UPs and their
constituents. Other project components will complement and support the fiscal transfers – by
strengthening accountability systems at all levels, by developing UP capacities, and by
building improved reporting, monitoring, oversight, evaluation and policy articulation
capacities at various levels of the intergovernmental system.
2. The project will have four components with an estimated total cost of US$545.39
million, of which IDA financing would be US$290.00 million. These are: Component 1:
Union Parishad Grants; Component 2: Information Flows and Accountability; Component 3:
Institutional Development; and Component 4: Project Management. Detailed projects costs
are noted below.
Table 2.1: Detailed Project Costs1
IDA GOB
Component US$ M US$ M
Component 1: Union Parishad Grants
Basic Block Grants
Performance-based Grants
249.28
194.08
55.20
242.68
242.68
Component 2: Information Flows and Accountability
Audits and audit reviews
Audit QA and audit accreditation
IEC
MIS
Surveys
10.47
7.78
0.14
0.69
1.49
0.37
0.00
Component 3: Institutional Development
UP training via URTs
Capacity building accreditation
DDLG strengthening, including DFs
TA for LGD and other agencies
Policy development and training for central officials
UP OM
25.72
9.02
0.08
12.26
3.39
0.76
0.20
11.45
11.45
Component 4: Project Management 2.45 1.26
Unallocated 2.08 0.00
Total 290.00 255.39
1/ Detailed sub-component costs are indicative. They will be readjusted as needed during implementation.
3. Component 1 - Union Parishad Grants: This component will continue the
incremental trajectory of intergovernmental reforms which was initiated under the first
LGSP. It will scale up BBGs, also known as EBGs under the first LGSP, and will also
establish PBGs nationwide. Fiscal transfers under LGSP II will aim to help UPs execute their
assigned expenditure mandate as per the 2009 UP Act. They will also incentivize local
revenue mobilization and stimulate investments that support broader service delivery. As a
key element of vertical revenue sharing, the transfers would be funded by jointly by GOB and
22
IDA, with the Government`s contribution of BBG going up from 50% under LGSP I to 60%
by the end of LGSP II. Over the life of the project, GOB and Bank allocation will average
55% and 45% respectively. LGSP II will also establish a basic performance grant system
countrywide to incentivize improved service delivery and local revenue mobilization.
4. Basic Block Grants (BBGs). Prior to LGSP, all UPs received a flat amount of about
Tk. 200,000, irrespective of their size or socioeconomic profile. Within four years LGSP
increased average EBGs per UP to about Tk.1.12 million (roughly US$ 15,700 per annum).
Although these grants are a small share of the total resources available at the lowest level,
they are significant in terms of the discretionary funds available to UPs. LGSP II will
increase the average BBGs by 12% per annum from Tk.1.1 million in 2011 to about Tk.1.73
million in 2016.
Table 2.2: Annual BBG Allocations
Average BBG
(Tk) Average
BBG (US$) Total BBG
(US$) GOB (US$) WB (US$)
Year 1 1100000.00 15277.78 68750000.00 34375000.00 34375000.00
Year 2 1232000.00 17111.11 77000000.00 40425000.00 36575000.00
Year 3 1379840.00 19164.44 86240000.00 47432000.00 38808000.00
Year 4 1545420.80 21464.18 96588800.00 55538560.00 41050240.00
Year 5 1730871.30 24039.88 108179456.00 64907673.60 43271782.40
TOTAL 436,758,256.00 242,678,233.60 194,080,022.40
5. The allocation to UPs will be determined according to a two step process. First, every
UP would automatically get a minimum flat amount. This would amount to 25% of the total
BBG pool for each year distributed as equal shares to all UPs, irrespective of the whether the
UP meets minimum conditions (MCs) or not. Second, the remaining 75% of the BBG pool
would be distributed among UPs that meet the MCs, based on a formula that takes into
account population and area. The MCs would include audit clearance, evidence of
participatory planning and open budgeting, and submission of 6-monthly/annual progress
reports, including financial statements. The UPs will be informed in advance of their 3-year
indicative allocations under the Ministry‘s medium-term budget framework. This
predictability and transparency will be significant improvement from LGSP I and strengthen
UP level planning, budgeting and expenditure management.
6. Performance Based Grants (PBGs): Performance based block grants were introduced
through LGSP-LIC in six districts by the UNDP/CDF. The piloting involved testing of
performance indicators, assessment process and provision of performance based block grants.
Based on the lessons from this pilot and global experience with performance financing, LGSP
II will introduce PBGs to UPs nationwide. This would a significant addition to the IGFS and
to strengthening the social contract between UPs and their constituents. Key principles
underlying this nationwide scaling up of PBGs include:
real incentives: the performance management system should present real incentives to
UPs in terms of resources and recognition to elevate their performance. Further, the
list of UPs should be sufficiently large enough that UPs which are able to effect real
improvements at the margin are recognized and rewarded;
23
transparency and fairness: the performance grant system, including the performance
measures, the assessment processes and the system of rewards, should be transparent
and fair to all the key stakeholders. The rules of the game should be widely
communicated, discussed and finalized. Standard checks and balances as well as
independent evaluations should be an essential part of the system; and
simplicity: the system should be simple enough in terms of indicators, assessment
process, allocation of grants and monitoring of results to be expanded across the
country and sustained over time. It should represent an incremental improvement in
the IGFS. Further evolution of the system should be based on piloting through UPGP
or similar efforts.
7. The key performance measures in the initial phase will include planning, budgeting,
expenditure management, revenue management, and reporting. A small set of indicators,
typically 2-3, pertaining to each of these areas is being developed, based on LIC experience
and in consultation with UNDP/CDF implemented UPGP. In the first year of the project,
officials at all levels — the center, at the district and the upazila and in the UPs — will be
oriented and trained regarding the norms and processes governing PBGs. The first round of
performance assessments will be carried out during the first year (FY11/12) by trained audit
teams under experienced audit firms. The audit reports will be reviewed by independent audit
review firms before finalizing the performance assessments and scores. In the second year of
the project (FY12/13), PBGs will be introduced across the country to all the UPs. The top
75% of UPs, divided into three to four performance groups, will receive the PBGs on graded
scale. Those UPs that do not qualify within a particular fiscal year will continue to access
capacity support to help improve their performance in the subsequent years.
8. This reform in IGFS will be underpinned by a significant institutional change within
LGD—the establishment of a dedicated fiscal transfer unit/cell within LGD to coordinate and
manage the intergovernmental fiscal transfer system. This unit will be strengthened with
adequate technical support through the project. The institutional roadmap for this is discussed
in Annex 3.
9. Component 2 – Information Flows and Accountability: This component will consist
of two sub-components noted below.
10. Strengthening accountability systems: This sub-component will strengthen
accountability mechanisms, both upwards and downwards, so that UPs become further
accountable, both to their citizens and to higher tiers of government.
11. UP audits: A key plank in LGSP II‘s accountability strategy will be the UP audit
process. This was successfully pioneered by LGSP I, and will be improved upon and made
more institutionally sustainable by LGSP II. During years 1-3 of the project, UPs will be
audited in much the same way as before – annually by CA firms, contracted by LGD and
overseen by C&AG. The LGSP II audit strategy for this first phase will include the following
features:
UP audit packages will be consolidated at the division level and contracted out on a 2
year basis to reduce transaction costs and to improve the quality of firms. UP audits
will thus be expected to begin in September of each year and completed by the end of
the following February.
24
During LGSP I, as UP capacities in financial management were being strengthened,
auditors often assisted them finalize their Annual Financial Statements (AFSs). From
year 2, UPs will be expected to have prepared their own draft AFSs prior to the audit,
failing which they will receive a disclaimer.
Auditors will be expected to submit their draft audit and performance findings to UPs.
As in the past, the audit opinions will determine whether UPs qualify for full access to
their block grant allocations. UPs that receive an adverse or disclaimed audit opinion
can avail an appeal process, failing which they will be disqualified from accessing the
formula-based part of the BBG and any PBG.
UP audits will, from the outset, include performance assessments.
UPs with clean audit will be recognized in the performance assessment and rewarded
through PBG system while those with non-material observations will be expected to
resolve them within the next six month period.
12. Audit reports will be finalized after independent review by 2-4 well-qualified CA
firms. These reviews will ensure that UP audit reports are internally consistent and comply
with requirements as spelt out in audit ToRs. Audit reviews will be expected to be completed
by February/March, thus allowing LGD to inform eligible UPs of their grant allocations for
the following FY by May.
13. During years 4-5 of the project, the UP audit process will be further institutionalized.
Although the final audit strategy for this second phase of UP audits will be based on a further
institutional assessments and consultations with stakeholders during years 1-3, it is expected
that the following broad principles will underline the second phase of UP audit strategy:
UPs will be expected to take on the responsibility for contracting their auditors. In
order to reduce transaction costs, this is likely to involve UPs, clustered at the district
or Upazila level, pooling their procurement processes so as to select a common
auditor.
In order to ensure quality audits, UPs will only be allowed to select their auditors
from a list of CA firms, pre-certified or accredited by C&AG and LGD.
The Terms of Reference, contracts and audit costs will be standardized. Auditors will
be contracted by UPs for at least 2 years in order to ensure the integrity of their audit
opinions.
Over time, UPs will start paying for their audits out of their grant allocations or own-
source revenues.
14. Moving towards a more sustainable UP audit process will require a good deal of
preparatory work on the part of the Government and the provision of a considerable amount
of support and backstopping to UPs. Preparations will include: consultations with UPs, CA
firms and other stakeholders; developing a detailed strategy; accreditation of auditors; and
identifying suitable procurement, contracting and payment arrangements, as well as
strengthening the quality assurance process. LGD will have access to the services of a part-
time international local government audit adviser and a full-time national senior local
government audit specialist to support the roll out of this second phase UP audit strategy.
15. During both phases of the LGSP II, C&AG will strengthen its quality assurance and
oversight role. This will consist primarily of conducting sample controls of UP audits, aimed
at verifying whether CA firms have carried out their tasks diligently and rigorously. The
ICAB will also play a role in the UP audit process, by ensuring that its membership (CA
25
firms) behaves responsibly and complies with professional standards. Where there is
evidence that a CA firm, in its capacity as UP auditor, has been professionally negligent or
irresponsible, LGD, C&AG and ICAB will be expected to apply appropriate sanctions.
16. UP reporting: UPs will continue to prepare six-monthly financial and narrative
reports, but these will now be submitted to their respective DDLGs and UNOs (not LGD
directly), and made available to the public. The current UP reporting format will be revised
and further simplified. Through their six-monthly reports, UPs will provide information on
their activities, revenues and expenditures. DDLGs, with support from one-two DFs (under
component 3), will enter information from UP reports into a web-based MIS which will be
initially decentralized to the district level. When necessary, DDLGs, assisted by DFs, will
follow up on UP reports. Timely reporting by the UPs will be a trigger for grant
disbursements.
17. Information, disclosure and participation: In order to enhance transparency, LGSP II
will provide citizens with information that allows them to hold their UPs to account. This will
include information about LGSP procedures, UP audit results, grant allocations, and the
outcomes of performance assessments. Such information will be made available by LGD
through national and local newspapers and, where feasible, other forms of media (radio,
social media, brochures, etc.).
18. In addition, LGSP II will build upon the disclosure requirements of LGSP I in a
number of ways. Firstly, and through the UP OM, UPs will be given clear guidance regarding
public disclosure – on UP notice boards of a specified size, to be established at the UP office,
scheme sites and other locations. Secondly, UPs will be expected to display the following
information on their notice boards: (i) annual budgets; (ii) six-monthly and end-of-year
financial and progress statements; (iii) six-monthly and end-of-year procurement statements,
indicating initial procurement packages, actual progress and costs (both budgeted and
incurred); (iv) a copy of the auditor‘s management letter; and (v) . In accordance with the
Right to Information Act (2009), UPs will also be expected to provide citizens in their
jurisdictions with access to six-monthly reports, procurement documents, and other
information about UP activities. In order to access their full BBG allocations, UPs will be
required to provide evidence that open budget meetings have been held in the previous FY. In
addition, the UP OM will specify that such meetings are expected to include both a review of
the previous year‘s expenditures and a discussion of the next budget.
19. Participation and social auditing: In order to enhance public participation in UP
activities, by the start of year 2, all UPs will be required to activate their key Standing
Committees and to ensure that their Ward Shabhas are fully operational – both of these
internal institutions help strengthen public oversight in UP affairs. The UP OM will provide
guidelines regarding this while the district team of DDLGs and DFs will provide support.
20. Finally, LGSP II will actively encourage social audit processes at the local level.
Although the project will not itself directly support social audits, it will nonetheless work
with other programs and partners that do. In addition, based on experience gained with
various social accountability pilots tested under the NLTA, it is proposed that a Local
Government Accountability Facility (LGAF) will be set up with funding from various trust
funds and external partners. This facility, which will be managed independent of the project,
will support, facilitate and catalyze a range of social accountability/demand side governance
initiatives, among them citizen report cards, community scorecards, social audits, local public
26
expenditure tracking surveys, etc., led by NGOs, CSOs and other civic entities to hold UPs
accountable to their constituents.
21. Improving information flows and management: Through this sub-component, LGSP
II will strengthen central Government‘s capacity to monitor, evaluate and supervise local
governments. This is an important set of functions, permitting central Government to track
local government activities. They also underline any evidence-based policy- and decision-
making.
22. Sub-national activities: The foundation set by LGSP I, viz. 6-monthly reporting by the
UPs and core MIS in LGD to process UP reports, will now be expanded and enhanced to
improve efficiency, cost effectiveness and transparency in the flow of information. A key
element of this next phase to strengthening intergovernmental information flows and their
management is decentralizing monitoring and reporting. The focus of reporting and
monitoring will now shift to the district and sub-district level, wherein DDLGs, assisted by
DFs will:
receive, collate and analyze UP six-monthly financial reports, as well as enter
information from those reports into the web-based MIS;
undertake regular field monitoring and supervision visits to UPs within their
administrative jurisdictions. Such field visits will be informed by issues arising from
UP 6-monthly reports and combined with regular backstopping (see Component 3);
closely monitor LGSP II‘s capacity and institutional development activities within
their districts; and
submit six-monthly district reports to LGD on UP activities in their respective
districts. The DDLG reports will follow a standardized format based on UP reports
and field visits to UPs.
23. At the sub-district level, the Block Grant Coordination Committee (BGCC), a forum
comprising the Upazila Parishad chair and vice chairs, UP chairs, the UNO and officials from
line agencies will be further strengthened. The BGCC will receive copies of UP 6-monthly
reports, annual audit and performance reports and undertake a quarterly stock-taking
exercise, aimed at tracking overall progress in ADP implementation, ensuring coordination
between UP and Upazila, and at identifying opportunities for synergy in local development
including in areas such as planning, capacity building, etc.
24. Information Management: The MIS that was developed under LGSP I will be
upgraded so as to become web-based and more comprehensive. Basic data entry tasks will
now be delegated to UPs at the local level and to DDLGs/DFTs at the district level. The MIS
will not only allow LGD (and the Government in general) to track UPs and project activities
– importantly, it will also provide the information needed to inform key decisions such as
block grant allocations, grant disbursements, etc. The MIS will generate regular six-monthly
reports on key issues aggregated nationally and sub-nationally, which will be submitted to
LGD management, as well as relayed to districts and sub-districts for follow up.
25. The development of a comprehensive MIS will be a significant step towards
strengthening information flows and management in the intergovernmental system. This will
be done in phases and in close coordination with other efforts supported by development
partners, especially the UPGP. It is expected that by the midterm of the project, the district
level MIS will be sufficiently tested and improved. Based on this experience, the MIS will be
27
extended to UPs and Upazila Parishads. While the project will not directly finance any
equipment at the UP level, UPs which are ready to upgrade their reporting via the web-based
MIS will be supported to do so by the DFs and the firm entrusted to develop the MIS and
provide support. Further, UPs will be encouraged to utilize part of their grant allocations set
aside for capacity support/institutional development to procure services and equipment
necessary for using the MIS.
26. Component 3 - Institutional Development: The institutional development strategy for
takes into account the lessons of LGSP I as well as efforts of other agencies and partners
working to strengthen the local government system in Bangladesh. Comprehensive
evaluations of LGSP I institutional development efforts and wide ranging stakeholder
consultations underpin the approach outlined below.
27. Capacity development framework: In essence, LGSP II will provide UPs with
opportunities to strengthen their institutional capacity to manage fiscal resources and to
deliver public goods and services in more effective, efficient and accountable ways. It will
also strengthen the abilities of core central institutions, namely LGD, NILG and C&AG, to
make policy, provide support, and monitor local governments. LGSP II institutional
development framework will have three inter-connected dimensions:
environmental, which includes changes to the policy, fiscal and regulatory framework
that will enable all the institutions and agencies involved to enhance their capacities;
organizational, which includes management structures, processes and procedures
which can assist the institutions in enhancing their performance.
individual, where the focus is on equipping central, district and local officials and
local communities with the understanding, skills and access to information and
knowledge that enables them to perform and participate effectively.
28. Strengthening these dimensions to capacity will be achieved by using a variety of
modalities and instruments, as described in Table 2.3 and illustrated with an example under
Table 2.4.
Table 2.3: Institutional Development Framework
Dimension
Instrument
Policy and
regulatory
interventions
Training Mentoring and
peer learning Outsourcing TA support
Environment X
Organizational X X X X
Individual X X
Table 2.4: Examples of Building Revenue Management Capacities at the UP level
Dimension
Instrument
Policy interventions Training Mentoring and
peer learning Outsourcing
Environment Changes in regulations
covering holding tax
Organizational
Performance Grant
(incentives for
improvements)
Assessment of
revenue systems Revenue collection
28
Individual
Course on revenue
management and
administration
Structured inter UP
visits
29. This integrated framework will ensure that institutional development is approached as
a core objective of the project and integrated into all project components and activities. Thus
some of these instruments (e.g. policy interventions or organizational changes) will be
employed through other project components (Union Parishad Grants or Accountability),
while the Institutional Development component will focus on technical assistance, training,
mentoring, peer learning and outsourcing. LGSP II‘s institutional development strategy will
include both supply- and demand-driven approaches. Underlying this approach is the
employment of right kind of incentives and resources that will help align environmental
changes with institutional development and individual aspirations to effect long term changes
in the intergovernmental system as a whole as opposed to focusing on a particular institution
or level of government.
30. Core training: As with LGSP I, the project will include a basic training element for
UPs, focused on ‗core‘ topics, such as: (i) basic UP procedures (mandates, meetings, steering
committees, etc.), as defined by various local government laws and regulations; (ii) public
expenditure and financial management (planning, budgeting, accounting, procurement,
reporting, etc.); and (iii) LGSP ―rules of the game‖ (eligibility criteria, compliance issues,
etc.). The provision of this core training is essential for two reasons. One, following UP
elections in April-June 2011, the majority of the functionaries is new to public office. The
core training will equip them with the ‗basics‘ to help them understand their roles,
responsibilities and resources better. Two, the core training aims at equipping UPs with
essential compliance capacities to ensure that project resources are used appropriately.
31. Overall, NILG will coordinate this training at the national level with support from
BARD, RDA and LGED. The training will follow a cascade model, with a pool of about 150
master trainers – selected from NILG, BARD, RDA and other organizations – at the apex and
trained by NILG. At the sub-national level, NILG, BARD and RDA will split responsibility
for core training—organizing this in 2-3 divisions each. Upazila Resource Teams (URTs),
which were established under LGSP I to train and support UPs, with 5-7 Upazila level
government officials, will now be expanded to 10-12 members. Half of them will come from
government agencies like before, but the other half will now include local resource-persons
(college/school teachers, other professionals, etc.)—mainly to ensure local continuity and
inject greater accountability. The master trainers will provide training to URTs (both
substantive and pedagogical). URTs will then go on to provide UP officials and staff with
both core training in the first year and refresher training in the third year. LGED will
specifically provide support on training concerning engineering/scheme implementation
aspects to master trainers, URTs and UPs.
32. LGD and NILG will carry out regular monitoring and evaluation of the cascade
training system with assistance from DDLGs and DFs. Where URTs are identified as being
deficient, LGSP II will either provide them with additional support (in the form of more
training by master trainers or more intensive back up from DDLGs/DFs) or change their
composition.
29
33. Demand-driven capacity building: Given the inherent limitations of an entirely
supply-driven approach to capacity and institutional development, LGSP II will also facilitate
demand-driven activities. With backstopping from DDLGs/DFTs, UPs (either individually or
in groups) will be encouraged to identify priority institutional building needs, and then plan
activities that might meet such needs. These may include a wide range of activities – e.g.
outsourcing functions, peer or horizontal learning events, training events on specific subjects,
purchasing ―teach-yourself‖ books, buying in technical expertise, etc. To finance such
activities, UPs will be able to use up to 10% of their total fiscal transfers. This one reform
alone is expected to have far reaching impacts on UP institutional development over time.
First, it will enable local choice and flexibility in UP institutional development. Second, it
will foster the development of a training marketplace catering to UPs (and eventually other
local government units). Finally, it will cause a change in NILG‘s role. Apart from being a
direct training provider, the agency will now also take lead in accrediting public and private
service providers from whom UPs can purchase training. NILG will also monitor and
evaluate periodically the marketplace to ensure that ―rules of the game‖ are being observed
by all parties. UPs, often aggregated at the Upazila or District level, will be able to purchase
capacity building services from accredited public or private sector organizations that have
been accredited by NILG and/or access peer learning activities and events facilitated by DFs
and/or others, including the Horizontal Learning Center at NILG.
34. DDLGs and DFs: At the sub-national level, DDLGs and DFs will play a key role in
UP institutional development activities (as well as in monitoring, evaluation and supervision).
DDLGs, supported by DFs, will help UPs draw up institutional development plans and
budgets; provide UPs with on-the-job support, mentoring and backstopping; and facilitate
inter-UP learning, collaboration and pooling, etc. Finally, they will also help NILG and LGD
monitor supply-driven training activities. The performance of DFs, who will be recruited by a
human resources firm and employed by LGD, will be evaluated by LGD, DDLGs and UPs. A
share of their remuneration will be tied to this annual performance evaluation.
35. UP Help Line: Drawing from the experience of a similar initiative in the agriculture
sector—the Krishi Help Line, avenues will be explored, initially through the NLTA on Local
Governance, to pilot a non-governmental or private sector entity to operate a UP (telephonic)
Help Line. UP officials and staff (as well as other stakeholders, such as citizens, GOB
officials, etc.) will be able to call the Help Line free of charge to seek information and
guidance on issues related to UP regulations, procedures and operations. In the event that the
Help Line pilot proves successful, it will be scaled up under LGSP II.
36. UP Operations Manual: The generic UP OM will be updated, revised and improved
in a variety of ways; issues specific to LGSP II (such as compliance, ESMF, etc.) will be
described in an Annex to the generic UP OM. Where necessary, procedures will be changed
to make them more appropriate and better suited to local needs and capacities – this applies,
in particular, to public expenditure management processes. The revised UP OM (and the
project-specific LGSP II Annex to the OM) will also be more user-friendly and simplified.
Once the new UP OM is available, it will be printed and then widely distributed. It will serve
as the core document for UPs and all training and other capacity building activities will use it
as their main source of reference. Subsequent to the MTR, and if deemed necessary, the UP
OM will be revised.
30
Table 2.5: Component 3 - Training and Peer Learning Strategy
Core Training Program Demand Responsive Training Program for LGSP-II
Basic Training Accredited Training (Extension) Peer Learning (Bottom Up)
Joint Partnership Framework: Identifying an agreed common national course curricula for UPs and overall capacity building training activities (core training, accredited and peer learning) to be agreed by major stakeholders.
IMP
LE
ME
NT
ING
AG
EN
CY
: N
ILG
, B
AR
D A
ND
RD
A
Su
ppo
rted
By:
Res
ou
rce
Poo
l (f
rom
NIL
G,
RD
A, B
AR
D, B
AR
DT
I, D
irec
tora
te o
f S
oci
al W
elfa
re, B
RD
B,
Dep
artm
ent
of
Co
op
erat
ives
, L
GE
D &
NG
Os)
Design Features
IMP
LE
ME
NT
ING
AG
EN
CY
: A
ccred
ited
N
GO
s/ N
GO
Per
son
nel
Su
ppo
rted
By:
DD
LG
s an
d D
istr
ict
Fac
ilit
ato
rs
Design Features
IMP
LE
ME
NT
ING
AG
EN
CY
: U
nio
n P
ari
sha
ds
Su
ppo
rted
By:
Dis
tric
t F
acil
itat
ors
and
Ho
rizo
nta
l L
earn
ing
Cen
tre
Design Features
Resource Pool: of Master Trainers will be formed comprising of:
150 resource persons from LGD, NILG, RDA, BARD, BARDTI, Directorate of
Social Welfare, BRDB, Dep‘t of Cooperatives, LGED and NGOs.
ToR of the Resource Pool will include:
o Provision of training to URTs
o Provision of back-up support to URTs as per request of Upazila
Parishads
o Monitoring of the demand responsive training.
Preparation of LGSP-II Training manual: Under the leadership of LGD, a team will be
formed consisting of representatives from NILG, BARD and RDA to prepare a training
manual for LGSP-II.
ToTs for the Resource Pool: The training of the Master Trainers will comprise of:
A total of 5 training courses for LGSP-II (each for 3 days) to be carried out by
NILG to orient the Resource Pool.
ToTs for Upazila Resource Team: Training of 484URTs to be conducted by NILG,
BARD and RDA.
UP training by URTs:
URT will carry out the training for Union Parishads with back-up support from
Resource Pool (Master Trainers).
Training for SSC and Ward Committee members by URTs:
URTs will provide back up for on-the-job support to SSCs and WCs as per request.
M&E for evaluating the training program :
DDLGs and DFs will monitor the quality of the training of URTs.
Upazila Parishad will also monitor the quality of the training of UPs by the URTs.
In addition, 3rd party evaluation for UP training will be carried out, wherever
possible.
Extended Basic Course Curricula: comprising of 9 modules & 54 sessions
(under the national basic course curricula, which is under development with
the leadership of NILG) to be made available through accredited trainers.
Accredited training: to be awarded to NGOs/NGO personnel:
The following will be determined by NILG with BARD & RDA (by
November, 2011):
o selection criteria
o selection committee, and
o training topics.
Identification of Accredited Trainers:
Newspaper advertisement calling for Expressions of Interest from
NGOs against the criteria / topics / divisions to be floated by NILG.
Identification of NGOs/NGO personnel for accredited training (to be
selected by the Selection Committee.
Implementation of Accredited Training:
NILG will orient the NGOs/NGO personnel on the various topic areas
for accredited training (by December, 2011/January 2012).
UPs will be notified through newspaper advertisement (while
informing the budget allocations of each UPs) on how to use up to
10% of their fiscal transfer to procure technical support/accredited
trainers.
Monitoring of Accredited Training:
Resource Pool will conduct random monitoring and submit their
―observations‖ to NILG, BARD & RDA.
Monitoring responsibility will lie with NILG, BARD & RDA.
The above accreditation will be valid for two years period from the issue of
the accreditation. Prior to completion of two years, trainers/training
institutions should reapply again for accreditation to NILG and with proper
evaluation the accreditation will be extended.
DDLGs and District Facilitators will assist and help UPs to enroll for the
accreditation training.
Identify Good Practices:
The Horizontal Learning Centre (HLC), based at NILG. will prepare annually:
o An inventory of good practices and their proponents (currently
54).
o Fact sheets on the most replicated good practices (currently 22).
The HLC and Horizontal Learning Program (HLP) working team will make
these good practices available to UPs through dissemination of the inventory list
and the fact sheets.
Facilitate Sharing of Good Practices:
UPs to identify their best practices to be made available to peers for potential
replication.
Peer-to-peer learning support activities also will be coordinated at the district
level via DCCs, established by LGSP-II.
DDLGs and DFs to seek support from HLC and others to establish and
operationalize the District Working Team.
DCC will organize a District level Network Workshops every year where UPs
will self-select the good practices of peers that they would like to visit.
Peer learning visits identified during the network workshop will be eligible
expenditure under the 10% UP ceiling allocated for technical support/accredited
training/peer learning.
Facilitate Replication of Good Practices:
UPs in consultation with their citizens during open budget sessions may
integrate the good practices for replication from their own funds.
Replication progress to be evaluated in the annual Network Workshop.
The most replicated practices will be identified and the UP proponents of those
practices invited to make a presentation during the workshop.
DDLGs and DFs will support the UPs to carry out peer-to-peer learning
processes (with support from the HLC and others).
DDLGs and DFs shall document and disseminate good UP practices to
promoting the networking of UPs.
Lessons Learned from the Replication of Good Practices:
The lessons learned from replication will be extracted by HLP and potential
Policy Advocacy Notes will be identified.
Good practices will be published nationally with support from NILG and LGD.
Evaluation of Training Outcomes:
The effectiveness of accredited training and peer-to-peer learning will be measured through the collation of data on:
o budget allocation by UPs for the replication of the good practices of peers & implementation of training received.
o number of people served through the replication of good practices & indicator of this service.
31
37. Policy development at the national level: The project will provide support to enhance
LGD‘s policy development functions. Activities will include the provision of technical
assistance, workshops, and studies (see Table 2.6).
Table 2.6: Policy Agenda
UP performance
dimension
Policy agenda
“Small” policy – doable at the UP level Broad policy – the enabling (or
disabling) environment
1. Planning Planning horizon: medium term (periodic)
planning – approach and guidelines
Inclusive and environment friendly
planning (pro-poor, gender sensitive, pro-
environment, etc.) – tools, guidelines,
processes
Sustainable planning: (i) maintenance and
operations planning – building O&M into
the planning process; (ii) improved scheme
selection procedures
Greater clarity in functional assignments –
review UP functions
Strategy for planning systems development:
(i) link between planning, budgeting,
CIP programming and reporting
(PFM cycle);
(ii) link with asset management,
revenue management and
expenditure management systems
Coordination of planning systems between
levels of government (top down to bottom
up) – roles, responsibilities and timelines
2. Budgeting Medium term budgeting processes –
intergovernmental coordination; substantive
guidance on revenue and expenditure
projections
Better budgeting procedures and formats
Medium Term Budgetary Framework
(MTBF): a real instrument for projecting
resource availability over the medium term
– concept at LG level, approach, sequence
of reforms
3. Expenditure
management Procurement: (i) upstream: simple
procurement planning; (ii) better
procurement procedures (simpler, less
biased towards small schemes, fewer
committees, etc.); (iii) contract
management: better contract oversight to
enhance value for money;
Procurement ceilings
Asset management (registers, identification,
maintenance)
Review/improve UP accounting systems
and standards
Review/improve expenditure controls
within UPs
Procurement policy for LG level: (i)
enhancing value for money through
efficiencies; (ii) transparency initiatives;
Asset management policy statement
4. Revenue
management
Building on NLTA, LIC and other studies
Revenue administration issues
User fees and charges
Review of all fiscal transfers, both
devolved and delegated, to UPs
Fiscal base, tax rates review
5. Reporting Accessible formats, disclosure, quality and
quantity
Reporting cycle, responsibilities and
desired data
6. Oversight and
monitoring UP audit regulations (institutionalizing
LGSP
Procedures and processes for key UP
Standing Committees
Strategies to improve analysis of data
7. Local
accountability Functions and working processes for
standing committees and ward shabhas
Social audit policy
32
38. Component 4 - Project Management: Lack of adequate institutional arrangements
and support systems for efficient project management was a key challenge in LGSP I
implementation. LGSP II will effectively ensure that LGD and other stakeholders have the
resources and support to implement the project effectively. The institutional arrangements for
implementation are discussed in Annex 3. Dedicated project management support will consist
of the secondment of two GOB officials at the rank of Deputy Secretaries to serve as Deputy
Project Directors (DPDs) to the project. This will be bolstered by the provision of technical
assistance (national and international, short term and long term) and administrative staff, and
logistical/administrative support (vehicles, office equipment, ICT equipment, etc.) under the
project. Key elements of project management will include management support for the office
of the NPD in areas of financial management, procurement, safeguards, monitoring, etc.
33
Annex 3: Implementation Arrangements
Project Administration
1. Important lessons from five years of LGSP I implementation on institutional
sustainability, implementation challenges and project management have informed LGSP II
institutional frameworks and implementation arrangements. A key principle and feature of
LGSP I institutional arrangement was avoiding a projectized PMU-type approach, by
embedding implementation entirely within prevailing government systems and making the
case for incremental reforms and capacity strengthening from inside. That approach delivered
sustainable results in strengthening LGD in areas such as fiscal transfers and local
government audits, but also led to significant challenges in day-to-day project management.
Delays in procurement, lack of coordination among wings within LGD and between LGD
and other key agencies involved in implementation (NILG and CAG), limited oversight of
safeguards compliance at the local level, delays in following up on fiduciary issues (FAPAD
audit queries) and drawbacks in reporting to the PSC, IDA and to other GOB agencies were
among the project implementation challenges faced by LGSP I.
2. These lessons have been factored into the institutional design of LGSP II in the
following ways:
LGSP is essentially an institutional reform and systems development project. Hence,
long term institutional sustainability would continue to be a bedrock principle of
institutional design. Implementation of key elements of institutional reform, namely
strengthening of the IGFS and the local government audits, establishing a
decentralized monitoring and reporting system, improving information flows between
the center and sub-national units, and evaluating local government operations and
reflecting that in policy making, will continue to be embedded within the country
systems.
However, unlike LGSP I, the above reform initiatives will be phased in and supported
with adequate technical expertise. This will ensure that the institutional change is
incremental and at a pace that the public administration system can accommodate.
Further, there will be periodic institutional reviews to gauge the direction of reforms
and progress in implementation.
At the same time, project management which was largely overlooked as a focus area
in LGSP I, will now be accorded high degree of attention. Given the nature, size and
complexity of LGSP II, project management will be strengthened by having two full
time Deputy Project Directors (DPDs) at the rank of Deputy Secretary, on deputation.
Key aspects of project management, noted earlier, will now be addressed through
dedicated institutional arrangements with adequate resources and support, including
technical experts, equipment, logistics support, etc. These measures will ensure that
LGSP II project management will be much more effective than LGSP I.
3. The LGD will be responsible for project implementation and management. The local
government system in Bangladesh operates under the direction of LGD, which is one half of
the Ministry of Local Government, Rural Development and Cooperatives. LGD has broad
oversight over a range of areas including, local governments, drinking water, sanitation and
sewerage, regional and local roads, village police, local economic development, and small
scale water resource development, operation, and maintenance. Two major national level line
34
agencies operate under LGD: the LGED, which is responsible for roads, bridges, economic
development, training, and planning, and the Directorate of Public Health Engineering
(DPHE), which is responsible for water supply and sanitation. In addition, LGD oversees the
local government institutions and other autonomous organizations such as the water and
sanitation authorities in some city corporations, and the NILG. It also (together with other
government institutions) sets the basic rules of operation, manages intergovernmental
transfers and local government personnel issues, and monitors local governments, particularly
at the lowest tiers.
4. At the apex, an inter-ministerial Project Steering Committee (PSC) will provide the
forum for broader policy deliberations, inter-agency coordination, and overall project
monitoring and oversight. It will be chaired by the Secretary, LGD and have representation
from the Ministry of Finance, the Planning Commission, LGED, NILG, BARD, RDA, and
three to five UP chairs selected by LGD. The PSC will meet at least twice a year.
5. Within LGD, an Additional Secretary will serve as the NPD. S/he will be directly
assisted by two full time DPDs. The DPD/AF (Administration and Finance), a Deputy
Secretary seconded to LGSP II, will be responsible for project coordination within LGD
among its various wings, project related financial management and procurement, managing
fund flows, withdrawal requests and disbursements, coordinating IEC activities, and
reporting to the PSC and the World Bank. The DPD/AF will be assisted by a number of full-
time national specialists, including:
a procurement team comprising a Senior Procurement Specialist, a Procurement
Specialist and a Procurement Associate;
a financial management team with a Senior Financial Management Specialist and
two Financial Management Associates;
an IEC firm; and
support staff (data entry operators, etc.).
6. The DPD/FO (Field Operations), also a Deputy Secretary seconded to LGSP II on a
full-time basis, will be responsible for overseeing and supporting field operations at the sub-
national level, including rolling out performance assessments and field based monitoring and
reporting, coordinating with DDLGs and DFs, and ensuring linkages and coordination with
other line agencies and the NILG. The DPD/FO will be assisted by a number of full-time
national specialists, among them:
a Senior Local Government Planning and Public Financial Management
Specialist;
a Senior Capacity Building Specialist
a Safeguards Specialist; and
a Gender Specialist.
7. Currently, the management of both fiscal transfers and local government audits are
undertaken in a rather ad hoc manner within LGD. For example, the fiscal transfers to UPs
and Upazila Parishads are managed by Deputy Secretaries under the Joint
Secretary/Administration, while those for urban local governments are managed by relevant
Deputy Secretaries under the Joint Secretary/Development. Similarly, audits are managed by
a Deputy Secretary under the Joint Secretary/Administration, while the rest of the reporting,
oversight and evaluations functions are managed by the MIE wing of LGD under a Director
General (equivalent to a Joint Secretary). This arrangement, a legacy of many ad hoc changes
within LGD over time, is not functional or coherent.
35
8. The project seeks, at the minimum, the following key reforms within LGD:
the consolidation and management of all intergovernmental fiscal transfers under a
single wing led by a Joint Secretary. This wing will have a mandate to eventually
oversee and manage transfers to all local bodies in Bangladesh. Its functions would
include MTEF projections, estimating the size of annual funding pools, calculating
allocations to local governments, ensuring timely disclosure of allocations to local
bodies, managing disbursements, and so forth; and
the realignment of audits from the Administration wing to the MIE wing and
changing the overall orientation of the wing from the current focus on ex ante controls
to greater ex post monitoring and systematic evaluations. This unit is expected to take
lead in managing audits, accrediting auditors, managing transition in audit
arrangements from year 4, and ensuring follow up to audit observations in
coordination with C&AG. The MIE wing will also take charge of the field based
reporting and monitoring, including the DDLGs, the DFs and the MIS, once this has
been established and operationalized. With this change, the MIE wing will be in
charge of all of the activities associated with local government monitoring and
evaluations.
9. Fiscal transfers, both BBGs and PBGs, will be eventually managed out of the above
Fiscal Transfer wing. Relevant Deputy Secretaries in these wings/units will manage day-to-
day activities and report to the Joint Secretary or DG, as the case may be. The Joint Secretary
in charge of Fiscal Transfers, who will be responsible for managing Component 1, for the
purposes of LGSP II, will be assisted by the Deputy Secretary (Upazilas/UPs), as well as by
the following technical specialists:
a part-time, international Fiscal Decentralization Adviser; and
a full-time, national Public Finance Specialist and Public Finance Associate
10. The DG/MIE, who will take the lead on audits, reporting, monitoring, and information
management issues, will be responsible for managing the majority of Component 2 activities
(audit, reporting, monitoring and evaluations). S/he will be assisted by the Deputy Secretary -
Monitoring and the Deputy Secretary/Audit. Technical support will be provided by:
a part-time, international Local Government Audit Adviser;
a full-time, national Senior Local Government Audit Specialist;
a full-time, national Senior MIS Specialist;
a full-time, national Senior M&E Specialist;
a firm to provide software, maintenance and support services for the MIS; and
firms to carry out mid-term and end-of-project surveys.
11. In addition to LGD, the office of the CAG will provide oversight and quality
assurance of UP audits, and technical support for accreditation of UP auditors. As in LGSP I,
the ICAB will provide external facilitation support for the UP audit process. The quality
assurance would involve field audits of a 10% representative sample of UPs and comparing
the sample audit results with the audits carried out by CA firms. In addition, the CAG will
also provide support for accreditation of audits firms and development of performance audit
systems.
36
12. Finally, NILG, which is constituted as an autonomous organization charged with
training of local government officials and representatives, as well as central government
officials who work with local governments, will coordinate the UP capacity building
activities, including development of core UP training curriculum and modules, management
of URT-based UP training, accreditation of private capacity building service providers, and
monitoring and evaluating UP capacity building initiatives, while LGED, BARD and RDA
will provide support for the implementation of URT-based training activities.
13. The NPD, the Joint Secretary of the Fiscal Transfers wing, the DG/MIE wing, the two
DPDs and one representative each from NILG and CAG together will constitute the Project
Management Team (PMT). A number of project-financed consultants and staff will provide
technical and operational support to the PMT. The PMT will operate on the basis of annual
and quarterly work plans, which will be drawn up collectively so as to ensure coordination
and maximize synergies.
14. At the sub-national level, UPs will be responsible for the planning, budgeting and
implementation of service delivery activities. All UP activities will be implemented in
accordance with prevailing statutory provisions. Since the objective of the project is to
strengthen capability of the UP to undertake its core functions, there will be no special
implementation arrangements within the UP. The UP Chair and Secretary will lead the
project related activities as part of their routine operations, with support from other UP
members, as needed. In addition, UPs can use up to 10% of their fiscal transfers to procure
local support, including for project management activities, as needed. Below the UP, the
Ward Committees (WCs) and the Scheme Supervision Committees (SSCs) will provide
grassroots support for planning, budgeting and scheme implementation activities. Both will
comprise 5-7 members and have representation from the community. WCs are mandated by
the UP Act and they represent Ward Shabhas, but SSCs are project specific entities which
will support and oversee WCs in scheme implementation and safeguards compliance.
15. At the Upazila level, a Block Grant Coordination Committee (BGCC) will support UP
activities in planning, budgeting, scheme implementation and capacity building, review the
implementation of the ADP (including the use of the block grants), ensure coordination
between the UP, the Upazila and the line agencies, and provide a forum for peer exchanges.
Its members include UP chairs and women member representatives and representatives of
line agencies. The BGCC will be headed by the UNO while the Upazila Parishad Chair and
the DDLG will be invitees. The BGCC will meet at least once a quarter. It is important to
note that the BGCC is an already existing institutional arrangement under LGSP I. However,
its efficient operations have been constrained by the lack of support from higher tiers of
government as well as lack of resources to carry out the coordination function effectively.
These lacunae will now be addressed under LGSP II, by providing resources for its operation,
and by strengthening it with greater involvement of the UNO, the DDLG and the DF.
37
Figure 3.1: LGSP II Core Project Administration Schematic Arrangements1/
1/
This figure is only
representational. The actual
units/structures may vary.
16. At the District level, project implementation will be assisted by DDLGs in all 64
districts, backed up by one or two DFs, depending on the number of UPs in each district—
Districts having more than 100 UPs will be served by two DFs. This will represent a major
improvement on LGSP I implementation arrangements, which were non-existent at the
district level. DDLGs and DFs will oversee capacity development activities, provide UPs
with on-the-job mentoring and support, and ensure UP monitoring and information
management activities. In addition, a District Coordination Committee (DCC) headed by the
Deputy Commissioner will monitor overall progress, provide guidance and ensure
coordination between line agencies and local government bodies, with a view towards
fostering an efficient utilization of ADP funds.
Project management functions
Institutionalized intergovernmental functions
NPD (Additional Secretary, LGD)
DPD 2: Field
Operations
DPD1:
Administration
and Finance
DG – MIE Wing
JS in-charge of
Fiscal Transfers
DS Audit
Data entry
& others
Procurement
team
FM team
FD
Specialist
FD Adviser
DS
UPs/UZP
DDLGs &
DFs
Safeguards
and Gender
Specialists
LG
Planning &
PFM
Specialist
LG Audit
Adviser
LG Audit
Specialist
DS M&E
MIS
Specialist &
Data
Operators
LG FM
Specialist
LG PFM
Adviser
MIS Firm
M&E
Specialist
Survey Firm
38
Financial Management
National Level Financial Management
17. Financial Management Assessment: In accordance with OP/BP 10.02 of the
Operations Manual of the World Bank, a financial management assessment of the
implementing entity was carried out during the pre-appraisal stage to determine the adequacy
of the proposed financial management arrangements for the project, including the financial
management capacities of the implementing entity, the disbursement, reporting and auditing
arrangements, to identify the key fiduciary risks and appropriate mitigation measures.
18. Implementing Entity FM Systems and Capacity: LGD is administratively headed by a
Secretary to the Government who reports to the Cabinet Minister for Local Governments,
Rural Development & Cooperatives. The Secretary, apart from being the administrative head
of the ministry, is also the principal accounting officer of the Ministry and as such has the
responsibility to exercise oversight over all the financial activities of the Ministry. Like other
ministries in GOB, a Chief Accounts Officer (CAO) reporting to the Controller General of
Accounts (CGA), is assigned to the LGD. The CAO at present performs limited financial
management functions which include pre-audits and payments of all GOB funded budgeted
expenditures of LGD and its offices and institutions located in Dhaka city and coordinating
with District Accounts Offices and Upazila Accounts Offices on payment of budgeted
expenditures of various LGD offices and establishments across the country and incorporating
those in monthly, quarterly and annual expenditure statement of the LGD under an Integrated
Budget and Accounting System (IBAS) of the CGA. An in-house Accounts Officer performs
the payroll related function and arranges payments of the Ministry‘s expenditures. The
budgeting process for LGD is coordinated by an MTBF cell.
19. The Ministry‘s planning wing coordinates with the individual development projects
on project budgeting and submits the budget proposals to the Planning Commission for
inclusion in the ADP. LGD‘s organization includes an audit branch headed by a Deputy
Secretary/Audit, who is assisted by two Senior Assistant Secretaries with responsibility to
review audit reports of local governments and development projects under LGD to ensure
follow up of audit recommendations.
20. LGD follows the GOB‘s General Financial Rules (GFR) which stipulates the
procedures for the incurring of expenditures, including expenditure approvals and payment
procedures. In addition, the specific directives from GOB (including the Table of
Organization and Equipment, the Code of Accounts, the Delegation of Financial Authorities
for Development projects and the Project Accounting Manual that provide for the internal
control arrangements on financial transactions, creating staff positions and hiring, acquisition
and use of fixed assets, accounting controls and delegations and controls on project
implementation) are followed across the units and projects under LGD. Taking a policy
decision on the line ministries‘ financial management modality, including FM organization,
has been identified as one of the priority areas of an ongoing PFM Reform Program under a
Multi-donor Trust Fund administered by the World Bank. Efforts are also underway to tailor
and apply the PFM measurement framework at the sector level. This would be an opportunity
to strengthen LGD‘s FM systems. However, LGD‘s current entity FM capacity being
inadequate, project-specific FM arrangements have been agreed to be put in place to provide
additional fiduciary safeguards and support for LGSP II.
39
21. Project FM Arrangements: The DPD/AF will be responsible for the day-to-day
financial management of LGSP II at the national level. S/he will be assisted by FM
professionals — a senior financial management specialist and two financial management
associates, all of whom will be contracted by the project. The TORs and qualification profiles
for these positions have been agreed between IDA and LGD, and they will be staffed with
adequately qualified personnel, recruited competitively, within three months of project
effectiveness. The recruited staff will perform the project financial management functions,
including project budgeting, disbursement planning and forecasting, operating the project
designated accounts (including disbursements and replenishments), financial administration
of contracts for supply of goods and services for the project, maintaining books and records
for project‘s financial transactions, submission of monthly, quarterly and annual reports to
various GOB agencies, submission of quarterly interim un-audited financial reports (IFRs) to
the Bank, preparation of annual project financial statements and interact with the project
auditors on the project audit, including audit follow up.
22. Budgeting: Every year, early in the budget and/or ADP cycle, LGD will prepare the
list of UPs that qualify for block grants. Since it follows a medium term budget framework,
LGD can allocate the necessary funds for block grants without negotiating with MOF. The
NPD, with the assistance of Fiscal Transfer wing of the LGD and the project FM group, will
ensure that annual funds required for block grants and all other project activities will be
approved for inclusion in the ADP by the Planning Commission.
23. Disbursement and Flow of funds: IDA funds will flow into two Designated Accounts,
one of which (DA1) in US Dollars will handle all Component 1 funds, and the other (DA2) in
Bangladesh Taka in a commercial bank in the form of Convertible Taka Special Account
(CONTASA) will deal with expenditures related to other Components. From DA1, IDA
funds will then be transferred to a Taka-denominated operating bank account, to be opened in
a Nationalized Commercial Bank (NCB). The Government will also transfer its financial
contributions to the same Taka-denominated NCB account, where they will be blended with
IDA funds. Following authorization by the NPD, six-monthly disbursements will be made to
UP bank accounts from these operating accounts. While the transfer to selected disbursing
banks through their branches will be directly sent from this account, transfer to those UPs
having account with other banks will be sent through a main branch of those banks. The
commercial banks will provide the LGD with the actual date of transfer of funds to UPs, and
the receipt of funds by UPs will be verified by LGD through the biannual financial reports
from the UPs.
24. The funds transferred to UPs will be considered as advances. The project will compile
biannual UP financial reports, review them and prepare a consolidated annual report showing
the aggregate utilization of grant funds at the UP level. The IFRs will include the report on
the utilization of the grant funds at the UP level annually. Unspent IDA funds for block
grants for any year will be adjusted with disbursements for the following year until the final
year. Any Grant funds provided by IDA that are not fully utilized by UPs by the Closing Date
of the project will be refunded to IDA.
25. Disbursement of the IDA fund to Designated Accounts will be based on quarterly
IFRs that would include two quarters‘ fund forecast, on the basis of project implementation
plan. In addition to the above, direct payments, reimbursements and special commitments
will also be eligible disbursement methods.
40
26. Allocations of IDA Credit proceeds and share of financing are as stated in Table3.1.
Table 3.1: Allocation of IDA Credit
Sl.
No. Expenditure Category US$ M
Credit Financing Percentage
1. Consultant Services, including training, workshops
and audits, and Goods 25.60 100% (exclusive of import
duties and VAT on imported
vehicles) 2. Operating Costs 13.04 100% 3. Sub-Grants for Part A of the Project 249.28 100% 4. Unallocated 2.08
Total 290.00
27. Accounting and Reporting: The project will follow GOB Project Accounting Manual
in maintaining books of accounts and in complying with monthly, quarterly and annual
financial reporting requirements of various government agencies. To ensure timeliness and
accuracy in accounting and financial reporting, an off-the-shelf international accounting
software will be put into operation no later than six months from the start of the project. Until
the computerized accounting system is fully operational, project accounting and financial
reporting will be done using Excel Spread Sheet. The format of the IFRs have been discussed
and agreed with the LGD during project negotiations. Fiscal transfer to UPs will be recorded
as project expenditures when such transfers are disbursed to UP bank accounts. The annual
Project Financial Statements shall indicate the aggregate unspent balances out of the total
amount paid to UPs in block grants, based on the year-end financial reporting by the UPs.
Thus at each year end, the project financial statements will reflect the actual amount spent.
28. Internal Controls: The FM Unit will ensure that project management follows the
standard internal control procedures of GOB, as embodied in its Internal Control Manual.
The project financial management will follow the provisions and approval requirements of
the GOB‘s Delegation of Power to Development Projects. Transparency and competition on
procurement of goods and services will be ensured by following the applicable selection
procedures under GOB/IDA Guidelines. FM staff will ensure due diligence on financial
administration of the contracts by matching the delivery of goods and services against each
payment milestones. Advances to districts and other implementing entities for training,
workshop and other project activities will be streamlined and closely monitored to ensure that
advances are made only when the activities requiring advances are ready for implementation
and advances are settled within the stipulated time-period. For soft expenditures such as
trainings and workshops, adequate support documentation will be required to confirm the
number of participants, and the cost and use of materials.
29. External Audit: The CAG, through the FAPAD (which carries out the external audit
of all donor funded projects), will be the principal external auditor for LGSP II. Annual audit
reports will be submitted by FAPAD to IDA no later than six months after the end of each
fiscal year. FAPAD will examine the external audit reports of UPs in forming the audit
opinion of LGSP II. The Audit Branch of the LGD, as per its mandated responsibilities, will
liaise with FAPAD and follow up on all audit recommendations relating to the project. The
following audit reports would be monitored by IDA in the Audit Report Compliance System:
41
Table 3.2: Audit Monitoring
Implementing Agency Audit Type Auditor Deadline LGD Project Financial Statement CAG December 31
30. Follow up on FAPAD audit objections under LGSP I was less than optimal. However,
in August 2011, LGD submitted its response to audit observations identified as material by
IDA. Responses to 70% of the objections met IDA‘s satisfaction, while the remaining 30%
audit objections needed further investigations and supporting documents. LGD has submitted
an action plan to IDA targeting to resolve these issues by December 30, 2011.
31. The DPD/AF and the senior financial management specialist will be responsible for
follow up on all audit issues except those related to use of block grants by UPs, which would
be the responsibility of the DG/MIE, supported by the senior local government audit
specialist. Audit follow up at UP level will be strengthened by involving DDLG at the district
level. An expenditure identified as irregular /fictitious/unfounded in the audits will be
categorized as questionable expenditure by IDA immediately upon receipt of an audit report.
Such expenditure shall turn to ―ineligible expenditure‖ unless satisfactorily resolved within
six months from the date of receipt of the audit report
Financial Management Arrangements at UP Level
32. Financial Management Systems and Capacities of UPs: Since bulk of the project
funds will be transferred to the UPs, IDA has reviewed the existing financial management
systems and practices of UPs and the experience of LGSP I to assess the fiduciary risks
associated with the use of block grants. UPs will manage their BBGs and PBGs in accordance
with procedures outlined in the UP OM. The BBG and PBG amounts received in each cycle
will be announced in a conspicuous manner on UP notice boards and in other public
locations. The details of schemes/works, including their implementation progress, will be
reported and discussed in open UP meetings and also displayed in the notice boards. To
prevent identification of the same asset against multiple source of financing and the
consequent defalcation of funds, prior to June 30, 2013, a comprehensive inventory of UP
fixed assets and schemes will be completed and recorded in a fixed assets register. UPs will
be required to update this register regularly and annual audits shall confirm if all assets
procured/schemes undertaken have been recorded in the fixed assets register.
33. Although a culture of preparing financial statements has been introduced in UPs
through annual audits and the UP Secretaries received financial management training under
LGSP I, UP financial management capacity remains weak. Staffing levels are minimal.
Systems and procedures are outmoded, incomplete, and rely largely on manual accounts
operations. Under LGSP II, UPs can address staffing constraints by procuring UP accountants
using part of the block grants, with neighboring UPs sharing an accountant, coordinated at the
Upazila level by the BGCC. Any such UP-recruited accountant will be trained by the project
so that s/he is equipped to perform the FM functions adequately.
34. Financial Reporting of UPs: UPs are required by the 2009 Union Parishad Act to
prepare Annual Financial Statements, detailing all the sources and uses of funds for the year.
The format for the Annual Financial Statements will be reviewed to ensure that they provide
relevant and comprehensive information. UPs receiving block grants under the project will
submit semi-annual financial reports, which will include information on receipts,
42
expenditures and the balance of the block grant funds, to their respective DDLGs and UNOs.
The DDLGs will consolidate the reports using the web-based MIS and send district level
reports to the NPD and the DG/MIE. Timely submission of these reports will be closely
monitored (see Results Framework in Annex 1).
35. External Audits of UPs: UPs will be audited annually by private chartered accountants
within six months after the close of the financial year. The audits will follow the International
Standards on Auditing (ISA). The auditor will express an Unqualified, Qualified or Adverse
Opinion, or a Disclaimer of Opinion. Audits will provide assurance on the Annual Financial
Statements of the UPs and also cover performance dimension. The auditor will present the
draft audit findings in person to the UPs, as well as submit copies of the audit report to the
UP, the DDLG, the UNO, the LGD and the CAG. UPs will receive their full BBG allocations
and the PBGs only if their audits are ―clean.‖ The annual external audit does not displace the
existing audits by the CAG, which are undertaken once in three years and are compliance
audits in nature.
36. Quality Assurance of External Audits: The CAG will ensure quality assurance of the
annual external audit of the UPs by checking a sample of at least 10% of the audits done
during the year. The CAG will constitute an Audit Quality Assurance Cell, which will carry
out the sample checking with the assistance of technical experts provided under the project.
The Quality Assurance Cell will present their findings to the CAG, who will share it with the
LGD. The FAPAD, as the external auditors of LGSP II, will interact with the Quality
Assurance Cell in formulating the audit opinion for the project. The ICAB, through its
professional development committee and its investigation and disciplinary committees, will
provide strong professional oversight over the Chartered Accountants conducting the audit.
An MOU will be entered between the LGD and ICAB to cement the quality control role of
the ICAB. Complaints on audit quality concerns or instances of wrongdoing by auditors
which are referred to the ICAB will be thoroughly investigated by them and, where
warranted, followed up with appropriate disciplinary action. In addition, LGD will also
blacklist those auditors against whom allegations of professional malpractice are proven and
pursue appropriate legal actions, if required.
37. Audit Review and Follow up: The LGD will engage two to four audit review firms to
assess whether the audit firms have delivered their services in accordance with the TOR and
to analyze issues identified in the audit reports. The audit review will initially segregate the
audit reports into unqualified opinions, qualified opinions, adverse opinions and disclaimer of
opinions, and will report the salient observations of the auditors to the DG/MIE wing. The
NPD will call for explanations from those UPs who have not received unqualified audit
opinions and, after evaluating the explanations, will recommend follow up actions. Where
misappropriation of funds is involved, LGD will refer the cases to DDLGs for further
investigation. If the misappropriation is confirmed, strong actions will be taken, including
immediate suspension of further disbursements of the block grant and recovery of the
misappropriated amounts. IDA will pay close attention to the follow up of such cases. In
extreme cases, IDA may seek permanent disqualification of those UPs and prosecution of
concerned UP officials against whom cases of misappropriation have been proved.
38. Risk Assessment and Mitigation: Overall financial management risk is ―substantial,‖
contributed both by high country-level inherent risk and project-specific inherent and control
risks. The selection of the UPs is based on simple and transparent criteria. The disbursement
of the project funds will be made through well-established commercial banks. The mitigation
43
of the project-level inherent risks have been built into the project design by way of
community involvement, guidance from the Project Steering Committee, strengthened
monitoring by UNOs, DDLGs and LGD‘s MIE wing, and clear incentives and sanctions for
UP level compliance. In addition, the partnership between the LGD and the private sector
auditing industry, supplemented by the quality assurance efforts of the CAG, is expected to
mitigate such risks. Overall control risk is assessed as substantial, contributed by the risks in
accounting, internal controls, financial reporting and auditing and substantial risks in
budgeting and funds flow of UPs. The project includes a strong capacity building component
to address weak capacities and systems for accounting and reporting at all levels. Specific
efforts to improve the systems and process of public financial management as well as the
insistence of independent external audits on a regular and timely basis will mitigate control
risks to a certain extent. While mitigation measures have been built into project design for
most of the factors, residual risks remain in financial reporting and auditing due to capacity
constraints. Therefore, based on the assessment of the inherent and control risks, the overall
project fiduciary risk is rated ―substantial.‖
39. Action Plan: Based on the risk assessment detailed in the previous paragraph, a set of
risk mitigation steps have been identified and an Action Plan outlining these steps and a
timeline for their implementation has been agreed with LGD. The progress in the
achievement of the Action Plan will be reviewed regularly by IDA.
Table 3.3: Financial Management Action Plan
No. Risk Mitigation Steps Time Schedule Assurance Mechanism 1 Provision for recruitment
auditors to be placed with the
CAG for providing quality
assurance on UP audits
Before Negotiations Inclusion in the DPP
2 Establishment of an audit
report follow up framework
for UPs under the DDLGs
By project effectiveness Office order issued by LGD
3 Establishment of the project
FM cell with required staff at
LGD
Within three months of project
effectiveness Recruitment notice already
published on the basis of
agreed TOR 4 Authority delegated to UPs to
procure short-term UP
accountants using part of the
fiscal transfers
Within three months of project
effectiveness Office order by LGD and
inclusion of provision in the
UP OM
5 Review and simplification of
financial reporting formats of
UPs
Within three months of project
effectiveness JS in charge of Fiscal
Transfer initiates the
process, assigning the task
to LG FM Adviser/
Specialist
40. Conclusion: Based on the Assessment conducted, the analysis of the risks identified
and the risk mitigation measures outlined, the project financial management arrangements for
the LGSP is considered to be satisfactory.
41. Supervision Plan: Considering that the overall risk of the project is ―substantial,‖ a
supervision mission will be conducted at least once every six months. The mission will
ensure that adequate financial management arrangements are maintained for the project, both
44
at the implementing entity level as well as in the UPs receiving block grant funds. Regular
reviews will be carried out to ensure that the expenditures incurred by the project remain
eligible for IDA funding. The supervision mission will review the working of the audit
regime as well as the progress in the implementation of the Action Plan.
Procurement
42. Procurement for the proposed project would be carried out in accordance with the
World Bank‘s "Guidelines: Procurement Under IBRD Loans and IDA Credits", dated
January 2011 (Procurement Guidelines); and "Guidelines: Selection and Employment of
Consultants by World Bank Borrowers", dated January 2011 (Consultant Guidelines) and the
provisions stipulated in the Financing Agreement. Major procurement of works and
consultants‘ services has been announced in the General Procurement Notice (GPN),
published in IDA‘s external website and United Nations Development Business (UNDB).
The Procurement Plan for goods works and services will specify the circumstances and
thresholds under which specific methods will be applicable.
43. Procurement Responsibility: The overall responsibility for project implementation
will be with the LGD. Total value of the project is US$545.39 million. IDA Credit will
finance US$290.00 million and the Government will finance US$255.39 million. LGD will
conduct the procurement related to project management and the value of such procurement is
US$17.73 million (excluding import duties and VAT on imported vehicles). It will involve
consulting services of value US$14.01 million and goods of value US$3.72 million
(excluding import duties and VAT on imported vehicles). The project will be implemented
by 4,504 UPs throughout the country with funds from the block grant allocation. The total
amount of block grants will be US$491.96 million, out of which around 20% will be utilized
through very small value procurements. UPs themselves will be responsible for these
procurements.
44. Particular Methods of Procurement of Goods and Works: Except as otherwise agreed
in the procurement plan, works and goods may be procured on the basis of International
Competitive Bidding (ICB). Procurement of Goods and Works having an estimated value of
less than the ceiling stipulated in the Procurement Plan may follow National Competitive
Bidding (NCB) and Shopping. Direct Contracting (Goods/Works) and Single Source
Selection (Consultants) may be allowed under special circumstances, with prior approval of
the IDA. NCB would be carried out under IDA‘s Procurement Guidelines following
procedures for Open Tendering Method (OTM) of GOB‘s Public Procurement Act 2006 -
PPA, 1st amendment to PPA (2009) and the Public Procurement Rules 2008 (as amended in
August 2009), using standard bidding documents satisfactory to the Bank. The ―Request for
Quotation‖ document based on PPA is acceptable to IDA for shopping. For the purpose of
NCB the following shall apply:
post bidding negotiations shall not be allowed with the lowest evaluated or any other
bidder;
bids should be submitted and opened in public in one location immediately after the
deadline for submission;
rebidding shall not be carried out, except with the IDA‘s prior agreement;
lottery in award of contracts shall not be allowed;
bidders‘ qualification / experience requirement shall be mandatory;
45
bids shall not be invited on the basis of percentage above or below the estimated cost
and contract award shall be based on the lowest evaluated bid price of compliant bid
from eligible and qualified bidder; and
single-stage, two-envelope procurement system shall not be allowed.
45. Procurement of non-consulting services: Except as otherwise agreed in the
procurement plan, non-consulting services may be procured on the basis of ICB. Procurement
of non-consulting services having estimated value less than the ceiling stipulated in the
Procurement Plan may follow NCB. The agencies will carry out such procurement using IDA
Guidelines.
46. Methods of Procurement of Consultants’ Services: Selection of Consultants will
follow the IDA Consultant Guidelines. The following methods will apply for selection of
consultants: Quality- and Cost-Based Selection (QCBS), Quality-based selection (QBS),
Fixed Budget Selection (FBS), Consultants‘ Qualification (CQ), Least-Cost Selection (LCS),
and Single-Source Selection (SSS). A shortlist of consultants for services estimated to cost
less than US$300,000 equivalent per contract may be composed entirely of national
consultants. For the selection of these national consultants, the request for proposal prepared
on the basis of PPA as acceptable to the Bank may be used.
47. Procurement and Selection Planning:
Procurement by UPs: UPs will procure and approve their own project implementation plans
which will include the schemes along with implementation schedule. UPs will follow the
procurement procedure of UP Operations Manual acceptable to IDA.
Procurement by LGD: A procurement plan for goods and consultants‘ services has been
prepared. The plan covers the whole project period, and will be updated as needed or
annually. The use of procurement method mentioned in the plan is mandatory.
48. Operating Costs: This will include incremental operating costs for office utilities,
office supplies and stationeries, O&M of equipment and vehicles, hiring of vehicles, fuel,
office rent, souvenirs, events, bank charges, advertising costs, and salaries and contractual
allowances of contracted staff, but excluding salaries of Government officials.
49. Assessment of LGD’s Capacity to Implement Procurement: Bangladesh has a nodal
procurement policy agency and a Public Procurement Act 2006 (PPA) with associated Public
Procurement Rules 2008 (PPR) and bidding documents. It has created a critical mass of
about 25 procurement professionals and, as of now, provided training to over 3,200 staff from
about 300 organizations. To sustain the reform, with IDA assistance, GOB has been
implementing a second procurement reform project since late-2007, focusing largely on the
implementation and monitoring of PPA, including the introduction of e-procurement in key
sectoral agencies.
50. Notwithstanding the above, the Government has recently effected some amendments
to the PPA, parts of which are not consistent with IDA‘s Guidelines. For its projects, IDA has
allowed the use of PPA / PPR for local procurement with those exceptions.
51. A procurement capacity assessment revealed that LGD will require additional
procurement staff to manage procurement under this project. LGD also needs more training
and experience in ICB, following IDA guidelines. Like any other ministry or government
agency, LGD also is not immune to systemic issues affecting procurement efficiency and
46
performance. In addition to adequate staffing for procurement needs, emphasis also needs to
be laid on areas of internal control, documentation, information dissemination, administration
of contract, including delivery follow up, payments, handling complaints etc. The project risk
is rated as ―Substantial‖ from procurement operation and contract administration viewpoint.
52. In order to minimize procurement associated risks, the following measures have been
agreed upon with the Government. Some of these measures is already in place, while the
remaining shall be undertaken as the project is implemented:
Nominate procurement focal point: LGD shall nominate a procurement focal point for
the project. The focal point shall take necessary training, both on PPR 2008 and
IDA‘s Procurement Guidelines. The focal point will support the project agencies in
day-to-day procurement follow-up and in the preparation of procurement reporting.
Overseeing the project‘s procurement processes will be one of DPD/AF‘s primary
tasks.
Services of national procurement consultants: LGD will be supported by a full-time
procurement consultant team headed by a senior procurement specialist. This team
will have sound knowledge of IDA‘s Procurement Guidelines and GOB‘s PPA/PPR.
Its members will support the evaluation committee for all procurements carried out by
LGD.
Establish a procurement webpage for LGD accessible to the public: All information
pertaining to bidding and procurement above the specified thresholds, as per PPR,
will be published on the Central Procurement Technical Unit‘s (CPTU) website. LGD
will also publish procurement information on its own website. This information will
include: invitations to bid, bid documents and RFPs (wherever applicable); latest
information on procurement plan/contracts; status of evaluations once completed;
contract award information; and information covering the performance of contractors,
suppliers and consultants, including a list of debarred firms. The website would be
accessible to all bidders and interested persons equally and free of charge.
Establish a system for handling complaints: This will include a database for
recording, monitoring and follow up on all the procurement activities under the
project in the LGD.
Introduce a procurement risk mitigation plan (PRMP) through reports submitted to
IDA on a periodic (annual) basis.
53. The Procurement Risk Mitigation plan (PRMP) for LGD will have following features:
Alert bidders in pre-bid meeting: In a pre-bid meeting, LGD will brief the bidders on
the correct preparation of bids, as well as alert them regarding the consequences of
corrupt practices (fraud and corruption, collusion, coercion, etc.). The alert message
will mention that, if bidders are found to have adopted corrupt practices, remedial
actions, including debarment from bidding processes, may be taken in conformity
with IDA‘s Guidelines. For NCB, national bidders debarred under the PPA will not be
able to participate.
47
Alert internal officers/staff: LGD will issue alert letter(s) notifying the concerned
officials about fraud and corruption indicators and the possible consequences of
corrupt and similar behavior in procurement practices and the action(s) to be taken
against official staff if they are involved in such practices. Moreover, LGD will
highlight that, in case of noncompliance or material deviation from IDA‘s
Procurement Guidelines, IDA may take remedial actions (such as withdrawal of funds
and declaration of mis-procurement) for the concerned contracts.
Multiple dropping: Multiple dropping of bids (i.e., bids submitted in more than one
location and opened in one location) will not be permissible for any procurement
under the project.
Bid Opening Committee (BOC) and Bid Evaluation Committee (BEC): A formally
structured BOC will be constituted for each contract package. The BEC will have at
least five members, with two experts from outside the procuring entity with a proven
track record of experience in procurement. Depending on the type of procurement,
such experts shall be either from public offices and/or from professional bodies and/or
individuals of known probity. Formation of such BECs shall be in conformity with
the IDA‘s Guidelines and be acceptable to IDA.
Bid opening minutes: During the same day of bid opening, photocopies of the Bid
Opening Minutes (BOM), with read out bid prices of participating bidders, will be
submitted by the BEC for circulation to all concerned. For prior review packages,
such BOM will be shared with IDA.
Low competition among bidders and high price of bids: The case(s) of low
competition (not solely based on number of bidders) in ICB and NCB cases, coupled
with high-priced bids will be inquired into and further reviewed by LGD. The review
and decision in this regard would be in the context of qualification criteria, the
contract size (too small or too large), location and accessibility of the site, capacity of
the contractors, etc.
Measures to reduce coercive practices: Upon receiving allegations of coercive
practices resulting in low competition, LGD will look into the matter and take
appropriate measures. For prior review contracts, the observations of LGD will be
shared with IDA, along with the evaluation reports. LGD may seek assistance from
law enforcing agencies to provide adequate security for bidders during bid
submission. For ICB contracts, provision for bid submission through
international/national courier services will be allowed and confirmation of the receipt
of the bid will be informed to the bidders through e-mail.
Rebidding: In case of re-bidding, LGD will inquire into the matter, record and
highlight the grounds of re-bidding (corruption, high bid prices etc.), along with
recommended actions to be taken. For prior review of cases, all such detailed reports
will be sent to IDA.
Filing and record-keeping: LGD will preserve all records and documents regarding
its public procurement in accordance with provisions of the PPA. These records will
be made readily available on request for audit/investigation/review by the
Development Partners and the Government.
48
Publication of award of contract: LGD will publish contract award information
within two weeks of contract award on its website, UNDB online (if applicable), and
CPTU‘s websites (if applicable) with the following information: identity of contract
package, date of advertisement, number of bids sold, number of submitted bids, name
of the winning bidder and the price offered, proposed completion of date of contract,
as well as a brief description of the contract awarded.
54. The PRMP for UPs will have the features noted below.
A simplified procurement checklist will be developed for UPs to follow, while
carrying out procurement under the project;
Procurements will be conducted through WCs, where the majority of members will be
from community selected through ward-level open meetings;
Extensive and intensive training will be provided for relevant stakeholders on
procurement procedures noted in the UP OM;
Extensive and intensive dissemination of sub-project and procurement information
will be provided among the local community, including information about the
formation and functions of the BGCC, WC and SSC;
Use of public billboards, wide verbal publicity, holding open community meetings,
formal and informal training for community groups, UP bodies and concerned
stakeholders at individual and/or institutional levels;
Awareness programs will be conducted among the community about LGSP II using
the most efficient methods of dissemination, including those noted above;
UP bank accounts will operate under the joint signatures of the UP Chairman, one UP
woman member and the UP Secretary;
Beneficiaries /communities will be involved in project monitoring by holding open
ward meetings, to be widely notified among the ward residents (by town criers, verbal
communication, etc.);
Proper recording, maintaining and following up on the decisions and discussions of
the meetings; and
Collection of data from the UPs and preparation of annual report on procurement
performance indicators covering the parameters noted below, by LGD.
Table 3.4: Procurement Indicators
SL Procurement Steps /
Subjects Indicators
1 Formation of Ward
Committee Percentage of cases WCs have formed as per the UP manual.
2 Receipt, evaluation and
contract awarding Percentage of cases the procurement process have been
followed according to the approved procedure
49
3 Delivery within the
original schedule Percentage of works completed within the original deadline
as stated in the agreement /work order 4 Payments Average number of days taken for release payment 5 Procurement Training Share of UPs obtaining training on procurement
55. Review by IDA of Procurement Decisions: The review by IDA of procurement
decisions and selection of consultants will be governed by Appendix 1 of the Bank‘s
Guidelines. For each contract to be financed by the Credit, thresholds for prior review
requirements and post review of contracts will be identified in the Procurement Plan. During
the first 18 months of the project, IDA will carry out prior review of the contracts noted
below. This prior review threshold will be updated annually based on LGD‘s performance.
For Goods: All the ICB Contracts and Direct Contracts irrespective of estimated cost.
The NCB Contracts estimated cost equivalent or more than $600,000.
For Works: All the ICB contracts and Direct Contracts, irrespective of estimated cost.
The NCB Contracts estimated cost equivalent or more than $4,000,000.
For Non-consulting services: Contracts estimated equivalent or more than $600,000.
For Consultant Services: Prior review will be required for consultants‘ services
contracts estimated to cost $200,000 equivalent or more for firms and $100,000
equivalent or more for individuals. All single-source contracts will be subject to prior
review by and in agreement with IDA. All Terms of References of the consultants are
subject to the IDA‘s prior review.
56. For post-review:
Contracts implemented by LGD: For compliance with the IDA‘s procurement
procedures, IDA will carry out sample post review of contracts that are below the
prior review threshold. Such review (ex-post and procurement audit) of contracts
below the threshold will constitute a sample of about 15% of the contracts.
Contracts implemented by UPs: A key aspect of LGSP II‘s accountability strategy
will be the UP audit process which was successfully pioneered by LGSP I. This will
be strengthened and made more institutionally sustainable. Procurement process
followed by the UPs will be reviewed on sample basis by these CA firms.
Environmental and Social Safeguards Issues
57. Environmental and Social Management under LGSP I: The ESMF for LGSP I
provided general policies, guidelines, codes of practice and procedures to be integrated into
preparation and implementation of the project. Consistent with the national legislation and
IDA‘s operational policies, the objective of the ESMF was to help ensure that activities under
the project would protect human health, prevent or compensate any loss of livelihood,
mitigate environmental degradation as a result of either individual schemes or their
cumulative effects, enhance positive environmental and social outcomes, and ensure
compliance with IDA‘s safeguard policies.
58. During the MTR of LGSP I, a study was carried out to assess how the UPs performed
in implementing the provisions of the ESMF. Its findings indicate that UPs used the EBGs for
small-scale rural community infrastructure, such as rehabilitation of existing rural roads,
rehabilitation and construction of culverts/footbridges, drainage systems, water and sanitation
facilities, and rain or spring water harvesting, social forestry, solid waste management, etc.
The civil works were all carried out according to the ESMF guidelines that are consistent
with the IDA‘s OP 4.01 on Environmental Assessment.
50
59. The study also confirmed that the schemes under LGSP were implemented on public
lands that were free of squatters and encroachers, and so there was no need for land
acquisition or involuntary displacement. Therefore, OP 4.12 on Involuntary Resettlement was
not triggered. Barring acquisition, the ESMF however provided guidelines for use of public
and private lands and mitigation of impacts as and when necessary. Assessment in the
Chittagong Hill Tracts and other areas populated by ethnic communities indicated that they
were both decision makers and major beneficiaries of block grant schemes. The communities
were able to come together for implementing the block grant schemes. This helped increase
social cohesion and reduce conflicts. The OP 4.10 on Indigenous Peoples was triggered for
informed consultation, community participation and enhanced inclusion. The study indicated
that given the opportunity, flexibility and discretionary resources, UPs and people can
prioritize their needs and implement demand driven projects in ways that strengthen the
social contract between the citizens and their UPs.
60. Environmental and Social Management under LGSP II: The ESMF for LGSP I was
revised during the LGSP II preparation process. In addition to the inputs received from the
MTR, LGD organized consultations with UP functionaries, communities, Upazila and
District level officials and other stakeholders around the country. Supplementary guidelines
were also prepared in both English and Bangla, which are included in the UP OM.
61. ESMF Objectives: The key principles of the ESMF are enhancing environmental and
social awareness of the UPs and communities; avoiding adverse environmental and social
impacts and improving existing conditions; reducing social conflicts; and enhancing inclusion
of vulnerable groups in sharing the project benefits. The objectives of the ESMF are to:
establish clear procedures and methodologies for environmental planning, review,
approval and implementation of schemes to be financed under the project;
specify appropriate roles and responsibilities, and outline necessary reporting
procedures, for managing and monitoring environmental concerns related to schemes;
establish clear procedures and methodologies for assessing social safeguards
(involuntary displacement and indigenous peoples) issues and impacts in the
selection, design, review, approval and implementation of schemes;
establish principles, policies, guidelines, practice codes, and procedures to:
(a) assess whether the safeguards policies would apply to particular schemes;
(b) assess alternatives, in terms of scope, design, location, etc., to avoid or minimize
adverse impacts; and
(c) deal with the adverse impacts where they are unavoidable.
specify the roles and responsibilities of UPs, wards, and others, and outline the
necessary reporting procedures for managing and monitoring social concerns related
to the selected schemes; and
determine capacity building and technical assistance needs to successfully implement
the provisions of the ESMF.
62. Basic Principles of the ESMF: The Framework is based on an assessment of the
schemes that the UPs currently undertake using EBGs and those that are likely to be
undertaken under LGSP II, and their capacity to address environmental and social safeguards
issues. The following principles are adopted for scheme selection and implementation:
51
Prior to selection of specific schemes, UPs will undertake community consultations
regarding their objectives, scope as well as environmental and social safeguard
implications, especially with respect to environmental impacts and use of public and
private lands.
All schemes proposed to be funded by block grants will be subjected to an
environmental and social screening in order to prevent those with significant negative
environmental and social impacts that the UPs would be unable to mitigate with their
existing capacities and resources.
UPs will not undertake schemes which will require private land acquisition, will focus
on development works aimed at rehabilitating existing infrastructure, and use their
own or other public lands for new schemes.
Where use of private land is essential for critical schemes, UPs may seek voluntary
contribution from the concerned landowners, or members of the beneficiary
communities would collectively explore alternatives to voluntary contribution,
including ―contribution against compensation.‖
63. Safeguard Screening and Mitigation Guidelines: Safeguard screening will consist of
an examination of requirements of the possible schemes, and the guidelines that will apply in
terms funding eligibility and impact mitigation. The following guidelines, practice codes and
requirements will apply in selection, design and implementation of particular schemes:
Negative List: The schemes that are in the ‗Negative List‘ will be ineligible for
funding under LGSP II (ESMF Attachment 1);
Guidelines for Environmental Management: Provides principles, policies and codes
of practice for the mitigation of potential environmental impacts (ESMF Attachment
2);
Guidelines for Land Use: Provides principles, policies and guidelines for use of
public and private lands and adverse impact mitigation; impact assessment procedure;
and implementation and monitoring arrangements (ESMF Attachment 3); and
Guidelines for Indigenous Peoples Plan: Provides principles and guidelines to
identify and deal with adverse impacts on ethnic communities, and a consultation
framework for adoption of mitigation and development measures, where schemes
would adversely affect IPs (ESMF Attachment 4).
64. ESMF and Scheme Implementation: UPs will be supported by a minimum of two
committees for implementation of the LGSP block grants and scheme preparation,
implementation and supervision: the WC and the SSC. These committees will be formed in
open meetings, where communities will nominate members and they will have representation
from poor, women, professionals and other groups. The UP Secretary will not be a member
of any Committee. No one can be a member of more than one committee. The WC will be
chaired by a Ward member, and at least in 30% of the WCs will be chaired by women
members. The SSC will be chaired by either the UP Chairman or a community member, and
it will include government technical staff (LGED, DPHE, agriculture and livestock extension
workers, teachers, health workers) and members of community with technical knowledge.
Each Committee will have around 7 members. While the UPs will manage and allocate the
resources, the WCs will select and implement the schemes, and will arrange for collective
mitigation of their environmental and social impacts. SSC will provide technical support in
design, implementation and impact mitigation.
52
65. The WCs and SSCs will play key roles in scheme implementation, supervision and
monitoring. The WC, along with community members, will screen and select the desired
schemes for consideration by the UP. SSC will visit scheme locations and verify relevant
records with the communities, especially with those who would contribute lands for the
schemes, for approval of ward or UP level proposals. The WCs will implement the schemes,
while the SSC will oversee the implementation, and independently prepare a completion
record for each scheme. The Grievance Redress Mechanism (GRM) established under LGSP
I will be further strengthened for handling complaints (see section on GRM in this annex).
66. Screening and Mitigation Responsibilities: The safeguards performance of WCs and
SSCs will be monitored and evaluated routinely. The LGD will appoint a full time
Environment and Social Safeguards Specialist, who will review safeguards performance
quality, working closely with relevant government counterparts, such as the DDLGs, the DFs
and the UNOs. As outlined in Attachment 1D of the ESMF, responsible agents will prepare
review reports and ensure that these are entered in the MIS once it is operational, so that
safeguards recordkeeping is up to date, accurate, and readily accessible. The Screening Form
(Attachment 1A) for each scheme will be completed by the WC. The SSC will review the
screening results and, if problems/discrepancies are detected, follow up with the concerned
WC regarding remedial measures. The SSC will also carry out monthly inspection of
implementation progress using an Implementation Review Form (Attachment IB), and if
there are problems, follow up with the concerned WC regarding remedial measures. The SSC
will again review the completed scheme and prepare the completion report (Attachment 1C).
For Category B schemes, Attachment 2A LEA form will be filled in by a specialist contracted
by the UP, and reviewed by LGD‘s Safeguards Specialist. All these forms will be kept in the
scheme file at the UP office for further reviews and follow up, as needed.
67. Six-Monthly Review: The screening and implementation progress will be reviewed
every 6 months using random samples and all SSC follow-up actions by the:
DDLG (5% of total) supported by DFs, at the District level
BGCC (5% of the total at the UZ level), supported by URT.
If the BGCC finds problems with screening and implementation forms, it will be
communicated to the DDLG. The DDLG will write to the concerned UP, SSC and WC to
take remedial actions (e.g. re-screen the scheme through a consultative process or implement
schemes adhering to rules) and follow up on these till the issues are resolved. All of the
reviews and actions will be documented and kept in the scheme file at DDLG and UP offices.
The DDLG will summarize the findings, highlighting the problems and remedial actions, and
report to the NPD as part of the six-monthly progress reports. If the DDLG and UP cannot
resolve the problems, it will be referred to the NPD and DPD/FO for further action.
68. Annual Review of Safeguards: The LGD Safeguard Specialist will conduct an annual
review of safeguards, which will include a review of all LEA and a 10% random sample of
Screening, Implementation and Completion Reports, and undertake field visits to assess if
these were done as per the ESMF guidelines.
69. Annual Performance Audit: The LGD will contract CA firms to conduct annual
Performance Audits which will include financial management, procurement and safeguard
compliance. The firms will visit the UPs to review safeguard compliance. In addition,
separate CA firms will independently review all audit findings and the CAG‘s office will
conduct spot checks of 10% of UPs.
53
70. Independent Third Party Review: This review will be carried out at project mid-term
and completion by an independent organization.
71. Capacity Building: The UPs have a limited institutional capacity to implement the
ESMF. UP functionaries will be provided training on safeguards issues, including the ESMF,
through URTs. This will be completed through Upazila-based peer learning and horizontal
learning programs. All training programs will be funded under the institutional development
component of the project.
Table 3.5: ESMF Reporting and Monitoring Matrix (ESMF Attachment 1D)
Action Responsible
Agent
Expected
Output
Output to be Reviewed by*
and Actions
Overall output to be
submitted to
Consultation and
SG Screening
(for all Schemes)
WC SG Screening form (Attachment
1A) given in this ESMF.
SSC to review and sign all
screening forms. If forms have
problems, SSC will ask WC to revise, and follow up till
remedial actions are taken. All
these will be documented and kept in the Scheme file at the UP
office.
The UP will review problems
and remedial actions at monthly meetings
A 6 monthly review:
- DDLG (5% of total), supported by DFT (at the
District level)
- BGCC or UZP (at the UZ level), supported by URT, (5%
of the total). DD-LG will send
written communication to UP, SSC and respective WC to take
remedial action (
The DD-LG will summarize
findings highlighting the problems and remedial
actions taken, and send the
report to the LGD (NPD) as part of their six monthly
reporting on general project
progress.
Only if a problem cannot be
resolved by DD-LG, LGD (NPD) will be informed for
taking action.
Review at Scheme implementation
(for all Schemes)
SSC SSC to review monthly and sign all implementation forms
(Attachment 1B). If there is
problem, SSC will ask WC to revise, and follow up till
remedial actions are taken. All
these will be documented and kept in the Scheme file at the UP
office
The UP will review problems and remedial actions at
monthly meetings
6 monthly review
- DDLG (5%), supported by
DFT(at the District level)
- BGCC or UZP (at the UZ level), supported by URT, (5%
of the total
DDLG will send written communication to UP, SSC
and respective WC to take
remedial action.
The DDLG will summarize findings highlighting the
problems and remedial
actions taken, and send the report to the LGD (NPD) as
a part of their six-monthly
reporting on general project progress.
If a problem cannot be resolved by DD-LG, LGD
(NPD) will be informed for
taking action.
Safeguards
supervision at
Completion
(for all Schemes)
SSC Scheme Implementation
Completion Record Form
(Attachment 1C) given in this ESMF
Copies of all Completion Record forms to be filed and maintained
at Union level.
The UP will review monthly
meetings
An annual review:
DDLG (5% of total),
supported by DFT (at the
District level),
- 5 % by BGCC or UZP (at the
UZ level),
The DD-LG will summarize
findings highlighting the
problems and remedial actions implemented, and
send the report to the LGD
(NPD) as a part of their
annual reporting on general
project progress.
LGD will review the DD-LG report with technical
support by the LGD
Env&Soc Safeguards Consultant. .
LEA
(only for category B Schemes)
Contracted
specialist
LEA form (Attachment 2A) given
in this ESMF, and sent to the
LGD Env and Soc Safeguards Consultant.
LGD Environment and Social
Safeguards Consultant will
review 100% of LEA. This review will be done whenever
LEAs are required. Consultant
to make recommendation for correction, if any
The LGD Env and Soc
Safeguards Consultant will
make sure any proposed changes to the Scheme
design are included by the
WC.
Safeguards Review LGD Env &
Soc SG
Annual Safeguards Review
Report. .
This review will be done
annually and provide recommendations to LGSP-II
management and LGD on
safeguard implementation..
NPD, Steering Committee
and Development Partners will receive the report.
Based on the report, LGD
will take actions
Annual CA firms Audit findings with 10% field Two firms to review all audit All audit reports to be
54
performance audit
including FM, Proc and SG
check reports, and send for
corrections if any
C&AG office 10% spot checks
submitted to LGD and
shared with relevant UP and disclosed in public. UPs
with severe transgressions
may not receive funds in the next FY
Independent
review of
safeguards quality for a sample of
schemes
Third party
organization
Independent Safeguards Review
Report
.
This review will be done at
project Mid Term and at
project Completion.
NPD, Steering Committee
and Development Partners
will receive the report.
72. Grievance Redress Mechanism: The GRM already established under LGSP will be
further strengthened to address complaints and grievances concerning scheme selection,
design and implementation, procurement, use of environmental and social guidelines, and any
other issue that may come up.
73. Defining Grievance or Complaints: For the purposes of the LGSP II, a complaint is a
notification (in written, verbal or electronic form) regarding project activities and/or conduct
of UP functionaries, project staff, consultants, partners and/or sub-contractors, directly
supporting the project or associated with its implementation, which the complainant believes
is wrong, either under the law or on the grounds of unacceptable behavior. The
complainant(s) need not be personally aggrieved or impacted, and may be acting merely in
with a sense of civic duty in bringing an occurrence to the attention of project authorities. All
complaints, whether notified by persons who feel personally aggrieved or acting out of a
sense of civic duty, will be acknowledged and acted upon by LGSP II authorities.
74. Principles of the GRM
Accessibility: Complaints may be submitted in writing, by phone, emails or through
the project website. They may be made by or on behalf of an individual, a community,
or an organization. Individual communities and citizens may submit complaints either
directly, or through an organization, e.g., civil society organizations. The structure
and processes of the GRM will be kept simple so that it can be easily understood by
all citizens and stakeholders.
Outreach: Information about the GRM and the alternative ways to access it will be
posted on the LGSP II website, described in the UP OM, through brochures, on the
UP notice board and at other public places, and will be presented at UP and ward
level meetings. Project publications, especially those reaching citizens, communities
and UPs, will contain key information detailing the alternative channels for
submitting complaints and explaining the process involved. The UP Helpline will also
provide information regarding the GRM.
Neutrality: At the district level, the DDLG will head the GRM and ensure access and
fairness in the handling of grievances. DDLGs will also help UPs form independent
Grievance Redress Committees (GRC). The GRC will have three members—
typically, respected and neutral members of the community, e.g., head teacher of
schools, college principals, retired judge, retired government officials, legal aid or
NGO staff.
Responsiveness: Receipt of all submissions will be acknowledged by the GRM within
two weeks. Consideration of valid complaints by the UP GRC will occur within 30
working days, giving time for collection and examination of evidence. Additional
time may be required for negotiation with aggrieved parties, but resolution will not
normally exceed 60 working days.
55
Openness and transparency: The UPs and DDLGs, supported by the DTs, will keep a
record of all complaints submitted, including their outcomes, and details of time taken
to consider and resolve the complaints. A regularly updated summary of this record
will be posted on the project website biannually.
Anonymity and confidentiality: Citizens submitting complaints may request
anonymity, in which case their names will not be made public through the website or
released to the media. Confidentiality will also be observed during the period in which
the GRM Committee is considering a case (e.g., the source and any person, company
or entity accused of wrongdoing should be protected).
Flexibility: The overall GRM will remain flexible in order to ensure alignment with
the evolving mechanisms and processes and to be able to incorporate the lessons and
experience that will be made available in the course of project implementation. To
this end, the overall GRM will be subject to annual review by the LGD
75. The GRM will however not preempt an aggrieved person‘s right to seek redress in the
courts of law. The redress process is as follows:
At the District level, the DDLG will head this grievance redress or complaint handling
mechanism. There will be a ―LGSP complaint box‖ at the DDLG office, and all
complaints will be managed by the DDLG, supported by the DF.
The DDLG will open the ―LGSP Complaint Box‖ every month and send the
complaints to relevant UP GRC. The UP level GRC cannot receive any complaints
personally. These complaints can be sent by mail, email, or fax, addressed to ―LGSP
complaint box‖ at the DDLG office.
If there are complaints against the WC, SSC or the UP, the DDLG will send these to
the concerned GRC on a monthly basis. The GRC will sit every month to resolve
pending complaints, and its decision has to be unanimous. It will discuss these in
meetings (whether open or closed will be decided by the complainant) and try to
resolve them amicably between the parties. If it fails, GRC will refer the complaints to
the DDLG, with the minutes of the hearing. When a complaint is resolved, copies will
be kept in the respective scheme files at UP and DDLG offices.
The DDLG will hold a GRM meeting every 6 months at the Upazila level to review
GRM records and resolve any undisposed cases. S/he will review the minutes, hear
unresolved complaints and try to resolve the matters amicably. If DDLG is unable to
resolve the complaint, she/he will forward the complaint to the NPD and the DPD/FO
as well as other appropriate authorities.
All complaints received and resolved will be disclosed using the LGSP website.
These will be compiled by DDLG office and sent to NPD for 6 monthly review and
disclosure through the website. These will be captured in the LGSP II MIS for follow
up, if needed.
A decision agreed with the aggrieved person at any level of hearing will be binding on
the UP.
76. Capacity Building of GRM: Adequate capacity support will be provided under the
project to the GRM, including training, resources and equipment, to ensure that the systems
are robust and well-equipped to handle issues at all levels.
56
77. Reporting and Documentation: The UP will send a quarterly report to the DDLG
about the GRM committee hearing and resolutions. The UP GRC and DDLG, with support
from DF will record the hearings and the reasons that led to decisions against or in favor of
the complainants. The UP and DDLG will keep the records of all resolved and unresolved
complaints and grievances and make them available in the scheme files for review by the
government, audit and development partners.
Role of Partners
78. A notable development has been the increasing interest in decentralization and local
governance issues among key development partners, which started with the Sirajganj Pilot
Project and gained considerable momentum with LGSP I. Experience with LGSP I and
NLTA implementation suggest that there is a fair degree of agreement among development
partners on the broad policy contours. However, the increasing interest among various donors
on local government issues, while beneficial overall, can potentially lead to duplication of
efforts and institutional fragmentation unless managed well. There will also be some jostling
for visibility and influence among various donors which can have some potentially
deleterious effects on project implementation.
79. Among the various partners currently engaged on decentralization and local
governance issues, of particular importance are the SDC, UNDP, UNCDF, JICA, GIZ, the
Aus-AID, DANIDA and USAID. These agencies have ongoing programs that support
improved local governance. There is much to learn from the experience of various initiatives
supported by the institutions, especially with regard to those operating at the grassroots level.
Most notable of these are the Sharique supported by SDC and the PRDP supported by JICA.
The efforts to strengthen the social contract between citizens and their local governments
under these projects provide important lessons for IDA.
80. On the ground, it is expected that LGSP II will gradually offer a platform which
allows other proven and sustainable local governance innovations to achieve scale. The LIC
pilot aimed to do this but was only partly successful due to weak transmission mechanisms.
Led by the Government, LGSP II and the UNDP/CDF implemented UPGP will coordinate
closely and synergize in a number of common areas. As with LIC, UPGP will take lead in
piloting and evaluating some of the next generation local initiatives before being considered
for mainstreaming under LGSP II. However, based on LGSP I experience, this time around
clear agreements are being drawn up, defining specific areas of policy coordination and on-
the-ground piloting, modalities of piloting and evaluating, and clear transmission mechanisms
for scaling up, where viable. Specific areas of on-the-ground partnering include UP planning
and capacity strengthening, performance grants, district level monitoring, strengthening of
DDLG offices, etc. At the center, LGSP II and UPGP will coordinate in the areas of M&E
and policy development.
Another area where donor synergy is being realized with LGSP II offering a platform for
various smaller but important initiatives to come together is in the area of local government
capacity building. Herein a partnership framework is being finalized involving key
government agencies—among them the NILG, LGED, RDA and BARD—and donors—
including the SDC, UNDP, JICA, DANIDA and IDA—to synergize efforts. The platform
approach will also extend to other local governance initiatives supported by the government,
donors and the civil society through strengthened evaluation and policy capacities within
LGD, as well as utilizing channels such as the local consultative group more effectively. The
57
Local Government Working Group is now co-chaired by the Government and a donor
(currently SDC). Overall, IDA will wholeheartedly support efforts to strengthen the
Government‘s ability to lead policy articulation and to manage donor support.
58
Annex 4: Operational Risk Assessment Framework (ORAF)
BANGLADESH: SECOND LOCAL GOVERNANCE SUPPORT PROJECT
Project Development Objective(s)
To strengthen Union Parishads to become accountable and responsive, supported by an efficient and transparent intergovernmental fiscal system.
PDO Level Results
Indicators:
Share of beneficiaries, disaggregated by gender, agreeing that UPs are meeting local priorities.
Increase in average performance score of UPs nationally.
Number of basic block grant tranches released on a transparent and predictable basis.
Risk Category Risk
Rating Risk Description Proposed Mitigation Measures
Timing for
Mitigation:
Prep/Impl.
Project Stakeholder
L A possible faltering commitment to
intergovernmental reforms.
Opposition to strengthening local
government. Local governance and
service delivery reforms could be
threatened by political and
bureaucratic opposition to changing
power relationships.
Possible differences in engagement
with other development partners in
the local government sector.
Regular political economy analyses
to guide engagement. Continuous
and strategic engagement with
counterpart on strengthening local
governance as emphasized in CAS.
Finally, reforms which have broad
ownership in the country will be
pursued, while advocacy and
analysis will be pursued through
NLTA on Local Governance.
LGSP I and LGSP II have been
built around a continuous
consultative process with major
stakeholders. The NLTA has been a
catalyst for complementing LGSP
activities. There is consensus among
the National Local Government
Working Group that LGSP is an
X X
59
umbrella program of the GOB.
Implementing Agency Risks
FM and procurement risks
M-L Limited implementation capacity at
the UP level
Weak project implementation
capacity at the central level
Potential for accountability
weaknesses in project
implementation, especially at the
local level, leading to misuse of
project funds. This may negatively
impact on the efficiency and
transparency of service delivery.
A comprehensive approach to
institutional development at three
levels—environmental,
organizational and institutional—to
address institutional development at
UP level. This includes, support
through DDLGs and district
facilitators; better linkages with
Upazila level institutions; discretion
to use up to 10% of fiscal transfers
to procure need based capacity
support; and focus on enhancing
demand side capacity initiatives.
Based on the experience of LGSP I,
a ‗hybrid model‘ of project
implementation will be established,
combining dedicated arrangements
for project management
(procurement, FM, safeguards,
project reporting, etc.) with two
full-time DPDs, while
mainstreaming systemic elements
(such as IGFTs, local government
audits and monitoring, etc.). The
project also establishes a
decentralized MIS as part of the
monitoring and reporting system.
Emphasis on further strengthening
UP reporting, monitoring audits and
disclosure from LGSP I. A
comprehensive audit strategy,
involving financial and performance
audits, will help reduce corruption.
UPs that fail the audits will not
receive the performance grants and
X
60
LGD has limited human resources in
place to manage procurements under
the project.
the formula share of basic grants.
Strengthened monitoring via
DDLGs and District Facilitators
(DFs) will add oversight. LGD will
assess the UPs procurement
performance through procurement
performance indicators.
One of the DPDs shall be the
procurement focal point for the
project. S/he will take necessary
procurement training.. There will
be a procurement team led by a
senior procurement consultant for
the entire life of the project.
Project Risks
Design
M-I
Scaling up the size of block grants
may create absorptive capacity issues.
Operationalizing performance grants
nationwide will be challenging.
Experience of LGSP-Learning and
Innovation Component, which
tested supplementary block grants in
six districts, and other analyses
suggests that there is no problem of
absorptive capacity in UPs.
This will indeed be a major
challenge. Nevertheless,
performance grants have been tested
under LGSP-LIC. LGSP II will start
with a simple system initially. More
complex assessments and reward
systems will be piloted under the
UNDP/CDF supported UPGP
before being considered by LGSP
II. Performance grants will start in
year 2. Year 1 will be used for
preparations. It is expected that
having a fully operational
performance grant system
nationwide will take 2-3 years.
X
61
Establishment of a district level
monitoring system for local
government may seem to be an over-
ambitious undertaking.
Shifting from centralized
procurement of audits to UP
procurement of audits in years 4 and
5 will be challenging.
Staffing problems/challenges at the
UP level and failure to have district
facilitators recruited.
Inability to deliver predictable and
timely block grants to the UPs.
Central and district level capacities
will be strengthened with personnel,
equipment and training to monitor
UP performance. Capacity support
through district teams (DDLGs and
DFs) will help in enabling the UPs
to improve their reporting.
Capacity support will be provided
during years 1 to 3 to prepare UPs
for decentralized procurement of
audits. The project design is flexible
— progress in preparing UPs to
self-procure audits will be reviewed
during the mid-term. If required,
this will be rolled out in phases.
The Government will be encouraged
to fill allocated posts (such as UP
accounts assistant). Placement of
DDLGs in all 64 districts is a
covenant and procurement of DFs
will start prior to negotiations.
Finally, UPs will have discretion to
use part of their fiscal transfers to
procure capacity support.
Indicative BBG allocations for each
UP for years 1-3 will be announced
in advance. Learning from LGSP I
experience, additional Bank
branches will be used centrally to
disburse funds to UP accounts. By
year 2, a dedicated fiscal cell will be
established in LGD. This cell will
be well staffed and supported to
make it efficient in processing the
grants.
62
UPs will focus on small and
fragmented investments which are not
sustainable.
Failure by the Government to honor
its commitments of increasing the
contribution toward sustaining the
fiscal transfers –both the performance
grants and the block grants
Capacity support will be provided to
elected representatives to re-orient
them toward thinking of broader
service delivery rather than
schemes. In addition, more
resources at UPs will allow for more
meaningful investments.
GOB contribution to BBGs will
increase from 50% at the beginning
to 60% in the last year of the
project. Commitment will be sought
from GOB to identify long term
financing modalities.
Social and Environmental
Activities undertaken by UPs using
grant funds may cause adverse
environmental impacts and social
outcomes.
There is a risk that vulnerable groups
who have limited voice in the
planning and implementation will be
excluded from the local decision
making processes.
Evidence from LGSP I suggests that
UPs have undertaken projects which
have no significant negative social
and environmental risks. LGSP II
places high focus on strengthening
use of the environmental social and
management frameworks (ESMF).
The ESMF is integrated in the UP
planning processes to aid select of
socially and environmentally
enhancing projects. One of the
DPDs will be in charge of
overseeing safeguards and
grievance redress mechanisms. S/he
will be supported by a senior
safeguards specialist.
The project will provide training on
local planning to the vulnerable
groups and to sensitize the UP
officials on the inclusion policies
pertaining to local government
activities. Furthermore, the project
supports a communication strategy
X
63
to help minimize on potential
capture of the project.
Delivery Quality
Lack of data and measurement
systems may make measuring project
results difficult.
Weak institutional capacity in LGD
may be an obstacle to effective public
sector performance as manifested in
weak service delivery.
The project builds upon the MIS
that was set up under LGSP I.
Under LGSP II the MIS becomes
more comprehensive, collecting
financial and service delivery data
and is anchored to a decentralized
monitoring system. The UPs will
continue to use simplified formats
to capture relevant data for
monitoring purposes.
The project will contribute to
ongoing efforts to improve
institutional capacity in LGD—by
establishing a fiscal and an audit
cell. Capacities in monitoring and
evaluation and policy/legal aspects
will be strengthened.
X
Overall Risk Rating at
Preparation
Overall Risk Rating During
Implementation Comments
M-I M-L
Bangladesh remains a rather centralized country with several obstacles to
strengthening local governments. At the same time, the Government and other
stakeholders (including UPs, citizens, and elements of the civil society) have
shown remarkable commitment to LGSP I and the overall approach it
embraces. Hence, while the likelihood of many of the risks occurring during
the implementation is medium, their impact on project performance is likely
to be low implying the project will achieve its intended objective.
Risk Ratings scale:
1=L (Low impact/Low likelihood)
2=ML (Low impact/High likelihood)
3= MI (High Impact/Low likelihood)
4= H (High Impact/High Likelihood)
64
Annex 5: Implementation Support Plan
I. Implementation Support
1. Implementation of LGSP I required considerable handholding from IDA for two
critical reasons: one, the pioneering nature, scope, size and complexity of LGSP I was
unprecedented; and two, provision of technical and operational support to LGD and other
implementing entities under the project was less than optimal. Nevertheless, LGSP I leaves
behind five years of hands on experience, which would aid the implementation of LGSP II
and the reform of the local government system. LGSP II should require less intensive
implementation support over the longer term for several reasons: one, there is considerable
ownership to LGSP II among a broad swath of stakeholders at all levels, especially within the
Government; two, LGD is now much more familiar with the ―LGSP-approach‖ and there is
an experienced and committed team within LGD that is capable of taking on the challenges
of LGSP II implementation; and three, appropriate levels of technical assistance has been
factored into the project design and costing.
2. The above notwithstanding, it is expected that up to project mid-term LGSP II
implementation will be intense, especially when major reforms such as performance grants,
audit transition, field-based reporting and monitoring, decentralized MIS and demand-side
capacity building are rolled out. Taking this into consideration, areas for support for the first
30 months of LGSP II implementation are listed in the following table.
Table 5.1: Implementation Support - Focus and Needs
Period Focus Skills needed Resource
estimate
Up to
project mid-
term
Component 1: Union Parishad Grants
Improving predictability and timeliness of
block grant disbursements
Rollout of UP performance grants
Establishing a dedicated Fiscal Transfers
Unit in LGD
Component 2: Information Flows and
Accountability
Operationalizing performance audits
Transition strategy towards UP-financed
audits
Establishing integrated reporting and
monitoring systems, including upgrading
and operationalizing MIS
Establishing and strengthening Local
Government Audit Unit in LGD
Use of modern communication tools for
project branding and strengthening citizen
interface
Component 3: Institutional Development
URT-based core training
Operationalizing demand-driven CB
activities
Rolling out sub-national support
Fiscal decentralization
Local government
performance
management
Local government PFM
M&E and MIS
IEC
Local government
capacity building
Total estimated
supervision costs
for first 30
months =
$500,000
65
(DDLGs/DFs)
UP helpline
Component 4: Project Management
Project management
Fiduciary and safeguards
Other: donor coordination
Institutional
development
FM, procurement and
safeguards
II. Skills Mix Required
Table 5.2: Skills Mix Required
Skills Needed Number of Staff Weeks Number of
Trips
Comments
Fiscal decentralization
Performance assessments
Local PFM
FM, procurement and
safeguards
Institutional development
M&E and MIS
Local government capacity
building
IEC
18
18
18
10 weeks each
12
12
18
6
At least three full
implementation
support missions
annually, along
with need-based
backstopping
support in
specific areas.
These estimates are for
the first 30 months.
Some of the skills and
staff are interchangeable.
66
Annex 6: Team Composition
Name Title Unit
Abdu Muwonge Economist SASDU Akram- ul-Aziz Consultant SASDU Amani Haque Program Assistant SASDU Azizur Rahman Siddique Consultant SASDU Badiul Alam Majumdar Country Director; Peer Reviewer The Hunger
Project Balakrishna Menon Sr. Urban Specialist; Task Team Leader SASDU Burhanuddin Ahmed Sr. Financial Management Specialist SARFM Charles Undeland Sr. Governance Specialist SASGP David Savage Consultant (Fiscal) AFTU Dr. M. Khaliquzzaman Consultant (Safeguards) SASDI Jose R. R. Pascual Counsel LEGES Maitreyi Das Lead Social Development Specialist; Peer
Reviewer SDV
Mark Ellery Water and Sanitation Specialist TWISA Michael Winter Consultant (Institutional Development) AFTUW Nicholay Chistyakov Sr. Finance Officer CTRFC Nilufar Ahmad Sr. Gender Specialist SDV Paul Smoke Professor of Public Finance and Policy; Peer
Reviewer New York
University Santanu Lahiri Sr. Decentralization Specialist TWISA Serdar Yilmaz Sr. Economist; Peer Reviewer AFTPR Shahpar Selim Safeguards Specialist SASDI Sumbo Adeyemo Program Assistant SASDU Syed Khaled Ahsan Institutional Specialist SASDU Tanvir Hossain Sr. Procurement Specialist SARPS Tara Sharafudeen Sr. Operations Officer SASDU Tarak Chandra Sarkar Program Assistant SASDO Teen Kari Barua Consultant (Safeguards) SASDU William Fox Consultant (Public Finance) SASDU Zahed H. Khan Sr. Urban Specialist SASDU
67
Annex 7: Summary of Key LGSP Related Studies
1. A number of studies and evaluations were carried out by IDA and the Government
jointly, many under the rubric of the NLTA on Local Governance, as part of LGSP I
implementation and as a precursor to LGSP II preparations. This includes:
Field surveys, both households and UP functionaries, evaluating LGSP I performance
Evaluation of the LGSP I Audit Strategy
Evaluation of the LGSP I UP Capacity Building Strategy
Policy Note on Formula Grants for Union Parishads in Bangladesh
Updates on Political Economy of Decentralization and Local Governance
Bangladesh Public Expenditure Review: Local Government Chapter
2. A summary of the first three, which were completed in 2010-11 in preparations for
LGSP II, are provided below.
Review of the Expanded Block Grants (EBGs) under LGSP I
3. The UP officials are supportive and enthusiastic about LGSP in general and the EBG
schemes in particular. There is a strong feeling of ownership with the EBG activities, with
minimal interference from officials and elected representatives of higher echelons of the
government and political establishment. EBG activities can be attributed towards greater
empowerment of women representatives at the grass root level. The UP female members
closely associate themselves with the design and planning, involving the local people, and in
implementing the schemes.
4. The EBG payments are made in two installments during a fiscal year. Often the UPs
receive the second payment late in the financial year, creating considerable challenge in
meeting the deadline of completing outlays by 30th
June. In relative terms, central
government‘s development budget allocation continues to be the main source of revenue for
the unions – around 56%. The local government upazila collection (12% to 14%) and EBG
funding (14% in 2008) are other key source of financing of union outlays. In terms of per
capita, each union received around Taka 16 in 2007 and Taka 34 in 2008 as revenue or
income. Almost half of the total UP budget is spent on road, transportation and construction
activities. Overhead or administrative expenditure (10% in 2007 and 6% in 2008) and health
and sanitation (9% in 2007 and 5% in 2008) are two other identified high outlay line items.
Almost all EBG schemes relates to infrastructural improvements in the community. In
percentage terms, the highest amount under EBG efforts was apportioned for the following:
tube wells (15%), brick soling (14%), culverts (13%) and road construction (11%). Despite
the relatively low share of EBG, the level of enthusiasm, commitment, and participation
evident amongst UP officials is indisputable, attributed largely to the transparent nature of
funds, the discretion accorded to UPs in making local allocative choices, and to the lack of
political and administrative interference from top.
5. Community participation both in the design and implementation efforts of the LGSP
schemes is commendable. A small but significant and growing segment of the citizenry –
male and female, poor and non-poor – is not only aware of these activities but are involved in
producing the listing of the schemes. The small allocations per ward coupled with delays and
uncertainties of receiving funds from the center serve as a discouraging factor for UP officials
to reach out for greater public participation either in attending meetings or serving in different
design and implementation committees. If the size of the grants is enhanced and the physical
68
improvements achieved are more palpable, the interest amongst the public will definitely
grow. On the quality of service, from those who acknowledged being direct beneficiaries of
such UP functions, the response was very assuring.
Review of the LGSP I Union Parishad Capacity Building Program
6. This study reviewed the cascade-based training strategy that has been employed
across the country for UP capacity building to learn from it and to build future initiatives
recognizing its successes and problems. The study methodology included field visits,
interviews and focus group discussions with different stakeholders, among them UP
chairmen, members and secretaries, members of District Training Teams (DTTs) and
Upazila Resource Teams (URTs), key personnel from LGD and NILG, field level
government functionaries, and relevant development partners including the SDC, UNDP, and
the World Bank. Relevant project documents, especially those concerning capacity building,
were also reviewed.
7. The Capacity Building component of LGSP I was originally designed to provide UPs
with access to training from private sector (or non-governmental) Capacity Building Service
Providers (CBSPs). However, for various reasons, the CBSP option was abandoned. Instead,
a cascade-based training model was applied by using Master Trainers (selected from a
number of national level institutions), DTTs and URTs. The training cascade involved five
steps. The first four steps primarily focus on the training of trainers at various levels, while
the training of UP functionaries via URTs formed the final and most important step
8. The study reveals that the entire training material preparation process, including the
development of training curriculum and modules, was not adequately planned and
coordinated. As a result, it became a long drawn process. Training of UP functionaries was
organized at Upazila headquarters and implemented in phases. URTs consisted of
government officials who imparted training to UPs with the help of LGSP Operations Manual
and training manual. The participants mentioned that quality of trainers was variable — while
some trainers performed adequately others were poor. It was also reported that sometimes
trainings were provided by non-trained URT members keeping the trained ones idle.
9. On training methodology, the participants noted that the trainers in most of the cases
relied on lecture method. Participation from the participants was minimum in many training
sessions. Regarding training modules, many participants reported that the modules on
Financial Management and Procurement and Environment and Social Safeguards were
relatively more difficult to comprehend as these were new concepts. The participants also
suggested that the training modules need further simplification. The monitoring mechanism
to ensure quality and consistency of the training was not adequate. Further, no in-depth
participants‘ evaluations were also conducted after the completion of training program to find
out relevance, suitability of methodology and appropriateness of the training modules and
manual. The implementation of the training program was the joint responsibility of the LGD
and the NILG. But there has been limited coordination between them and this affected the
implementation of the training program.
10. Study reveals that, the only knowledge obtained by the UPs about operational
procedures of the LGSP was provided via URT training. The other important aspects of skill
development were not given due attention in LGSP I. This inhibited the overall institutional
development of the UP
69
11. On the basis of these findings and observations, the study recommends developing a
comprehensive and broad-based UP capacity development plan, deploying a range of
capacity building approaches (i.e., cascade training, skills based training, demand-driven
capacity building, study tours, horizontal learning, etc.). While developing training programs,
modules and other materials, the primary focus must be on participatory planning/budgeting,
financial management and procurement- the basic foundation of the LGSP approach. The
NILG should create of a National Pool of Trainers. This Pool will be responsible in providing
training to the Upazila Resource Team members (s). The composition of the URTs should be
widened to include prominent civil society members, based on pre-determined competency
criteria.
Review of the LGSP I Union Parishad Audit Program
12. As part of LGSP II preparations, an independent evaluation of LGSP I audit strategy
was carried out to analyze LGSP‘s current UP audit process (strengths, weaknesses,
opportunities and threats); to assess the extent to which there is Government (the CAG and
the LGD) ownership of the external audit system; to examine how the audits could be
organized in a more efficient manner; and to make recommendations regarding the way
forward for the next phase of the audit program under LGSP II.
13. Assessment of the demand side of the audit process under LGSP revealed the private
audit firms assist the UPs to prepare their financial statement. As a worldwide practice
and also mandated by the International Standards on Auditing, the auditors cannot engage
themselves in the preparation of financial statements. There should be system of reporting
status update of the audit issues of earlier year. This may be included in the terms of
reference of the audit, wherein auditors will also report on the remedial action taken by the
UP management on the audit issues of the earlier year.
14. Physical tracking of the schemes under LGSP suggested that the UPs should maintain
a measurement book for recording the progress of the work. To promote better transparency
and presentation of financial status and operation of the UPs implementation of the accrual
based Double Entry Accounting System at the UPs may be considered. This has been the
trend in other developing countries in the region wherein all the local bodies and panchayati
raj institutions are going for accrual based double entry accounting system. This will also
help in asset accounting.
15. Assessment of the supply side of the audit process suggested that the Government
should appoint an International firm as nodal agency for monitoring and supervision of the
audit work conducted by the local CA firms and also to make the UP audit work more
effective by training and capacity building for performance audit. Financial audit should be
supplemented by the physical tracking of the work undertaken by the UPs
16. Assessment of LGD‘s Audit Strategy suggested that there was a need to
institutionalize the management of external audits of the UPs. Ownership of the management
of external audits of the UPs should be transferred to the UPs. The Office of the CAG should
play a vital role in this process by maintaining the list of empanelled audit firms and also
ensuring monitoring and supervision through a nodal firm of international repute. Finally, the
ICAB should extend the coverage of Cold Review by including the non-listed clients also.
Possibility of performing file review of LGSP audits on a test check basis may be explored
with the ICAB.
70
Annex 8: Decentralization and Local Governance in Bangladesh
1. Modern local government started in Bangladesh in the 19th
century under British rule,
first with urban local bodies, followed by rural and intermediate local bodies. During much of its
recent history, first as East Pakistan between 1947 and 1971 and since then as Bangladesh, there
have been time and again experimentations in decentralization and local government reform in
the country. Local government has always found a place in the manifestos and agendas of major
political parties. Successive governments have appointed high level committees to recommend
changes to existing local government systems and structures. There have been frequent policy
changes and rearrangements of the tiers of local government. But to what extent have these
changes aimed to strengthen government accountability or improve service delivery is moot.
2. The local government system in Bangladesh is largely deconcentrated. Elected local
governments in Bangladesh are relatively weak, with poor resources, little revenue raising
authority, and limited influence on how the central government uses its resources in their
jurisdictions. They are dominated by higher level administrations, which exercise ex ante
control, especially with regard to planning, utilization of central funds, and deployment of staff.
The local government share of total public expenditures—estimated is not to exceed 4%—is
among the lowest globally (World Bank, 2009). Key services such as education, health, nutrition,
family planning, irrigation, agricultural services, and secondary roads are all managed directly by
central government entities with very little role for or input from elected local governments.
3. Whilst the Constitution allows for elected representation at every administrative level,
presently UPs, Upazila Parishads, Pourashavas (municipalities) and City Corporations are
directly elected.3 Higher tiers of sub-national government, such as the Zilas (districts) and
Divisions are administered by officers of central government agencies, whose accountability
linkages are more upward than to the citizens. Indeed, it has been estimated that about 35
ministries, 50 departments, and over 400 directorates or autonomous line agencies are
represented at these levels (GHK, 2003). Adding to this is the influence and control exerted by
the Members of Parliament (MPs) at the local level—through a system of patronage and
clientilism driven by personal and party political priorities—that serve to distort local
government autonomy and authority.
4. Bangladesh is administratively divided into 7 Divisions and 64 Zilas (Districts). As local
governments, there are 4501 UPs, 484 Upazila Parishads (Sub-districts), 310 Pourashavas
(Municipalities) and 7 City Corporations in the country. More than 65,000 elected functionaries
lead and manage these bodies. Of them, about one-third is women. More than 120,000
permanent paid employees support the work of the elected functionaries in these local bodies.
5. At the bottom, UPs are the lowest and longest serving tier of elected local government in
Bangladesh. The UP elected body comprises of a directly elected Chairperson and a council
comprising of 12 ward members, which includes 3 women members. The Chairperson is the key
executive functionary of the UP. The only permanent administrative staff comprises of a UP
Secretary, who is appointed by the central government. Salaries and members payments are met
partly from government grants and partly from own-source revenues. Pourshavas and City
Corporations are headed by a Mayor and have an elected local council. Pourashavas are the
lowest level of elected urban local governments. They are sorted into three categories—A, B and
3 Elected Upazila Parishads (UPZs) came to power in January 2009 after a hiatus of about 18 years
71
C—based on their own-revenue collection records. City Corporations have much more
resources, and far greater discretion in deciding their service delivery priorities than either
Pourashavas or UPs, but a frequent criticism against them is that only a fraction of their own
revenue potential is realized by these urban local governments.
6. In principle, elected local governments in Bangladesh are broadly responsible for
economic, social and community development at the local level and have a list of mandatory
functions and shared functions assigned to them. In practice, the lists of functions they undertake
are far more limited. Often, the lowest tier local governments pick and choose the services they
wish to deliver. The rest are either delivered through deconcentrated agencies or NGOs, or
simply do not get delivered.
7. Local government revenues come from two main sources: central grants and own
sources. Central resources comprise of block grants under the Government‘s Annual
Development Program (ADP) represent the main inter-governmental fiscal transfer mechanism
to the local governments and other special purpose grants for earmarked expenditures. In
general, the block grant allocation process lacks transparency and predictability. The timing is
also not synchronized with the local budget process. The block grants have been traditionally
small. Local governments also receive development resources from various special relief works
programs. However, these are controlled by the central government and local governments have
little influence or discretion over them. Local governments have some revenue raising powers.
However, their own-source revenues have remained weak over the years, in part due to the
reluctance of elected members to raise taxes and, in part due to the weak tax collection efforts
and poor enforcement. For these reasons, larger projects and bigger contracts are undertaken by
central line departments.
8. All elected local bodies have Standing Committees for oversight. For example, UPs have
13 Standing Committees that are expected to oversee ADP preparation and provide oversight in
public spending at the local level. Since the responsibilities for the implementation of programs
in health, education, water and other services lie with central government line departments
operating at higher levels, these Committees have little more than a liaison and advocacy role.
Moreover, in practice, only few of these Committees are actually operational. The situation in
urban local governments is a bit a different though. Given the higher level of resources and
degree of discretion available, Standing Committees in Pourshavas and City Corporations have
the potential to play a more visible role, although it is moot if they actually do.
9. Summing up, elected local governments in Bangladesh have, for most part, operated in a
highly constrained policy and institutional environment that is characterized by:
limited discretion in fiscal and administrative spheres, which constrains their ability to be
responsive to constituent demands;
mismatch between expenditure and revenue assignments. Some functions assigned to
them overlap with more powerful and well-resourced central government agencies which
decide bulk of the local spending priorities;
weak fiscal base, both transfers and own revenues. Transfers are neither predictable nor
transparent, while most local governments do little to capitalize on their tax potential;
weak capacities in terms of staffing numbers and skills, as well as limited avenues to
reach out to citizens or to forge partnerships with the private sector;
72
weak systems of accountability, both upward and downward, because of weak PFM
systems and transparency requirements, and lack of institutionalized mechanisms for
participation in planning and public expenditure prioritization.
10. From the above discussion it is evident that historically public service delivery
arrangements in Bangladesh have been very centralized and strongly controlled by a large
administrative system. Larger and more visible service delivery projects are undertaken by line
agencies, especially in rural areas. The political system at the local level has been underpinned
by a system of patronage. The MPs, who are mostly opposed to devolution, play an unusually
direct role in local development, thus reinforcing the political control exerted by the center. This
not only dilutes the role and effectiveness of MPs as national lawmakers, but also opens avenues
for more rent seeking and patronage politics. This has become a recipe for partial
decentralization, whereby citizens have assigned the burden of and recognition for service
delivery and local development to the central government or its agents, thus emboldening the
center to extend even more control on local governments and leading to their further
incapacitation.
Recent Decentralization Initiatives in Bangladesh
11. Notwithstanding the above, the last few years have seen a steadily growing commitment
on the part of the Government, the broader civil society and the donors to strengthen local
governance institutions and practices in the country. This interest has come about essentially
because of three major reasons: to improve service delivery; to improve accountability of
government at the grassroots level; and to create a political market aimed at fostering
competitive electoral processes across multiple tiers of government.
12. Renewed interest in decentralization and local governance is also linked to poverty
reduction. There is some thinking within the country that transforming local governance as a
political and institutional process will enhance developmental choices at the local level, while
greater inclusion of different social groups in making these choices will strengthen poverty
reduction efforts (Rahman 2001). Reflecting this, the 2005 National Strategy for Accelerated
Poverty Reduction identified local governance as one of eight priorities in the medium-term
strategic agenda for the country (Government of Bangladesh 2005).
13. A high level committee established by the Caretaker Government that was in power
between 2007 to 2009, to examine local governance issues in the country made a number of key
recommendations, among them, new rules and procedures for reforming local election
procedures; streamlining and reforming existing legislation for different tiers of local
governments; establishment of elected Upazilas; and establishment of a local government
commission. Many of these reforms have been subsequently followed up by the elected
Government that assumed office in December 2009. Under this Government, elections to
Upazila Parishads were held in January 2010 after a hiatus of more than 18 years. Although the
local government commission was dissolved, a number of key local government ordinances that
were passed by the CTG, were further revised and legislated by the current Government.
73
Annex 9: Trajectories of Change from LGSP I to LGSP II
LGSP I features TRAJECTORY of CHANGE LGSP II features
Fiscal transfers
• reliance on ad hoc arrangements within LGD to
handle fiscal transfers
• narrow approach to fiscal framework
• gradual uptake of all UPs
• gradual phase-out of ADP grants to UPs
• expanded block grants (relatively inequitable given
high floor allocations)
• performance incentives limited to compliance
• 50/50 funding of block grants by GoB and IDA
• eligible expenditure menu for UPs limited to
schemes
INSTITUTIONALISING FISCAL MANAGEMENT
STRENGTHENING PERFORMANCE INCENTIVES
INCREASED RESOURCES
GREATER CHOICE/DISCRETION
• intention to establish dedicated Fiscal Transfers Unit
within LGD
• wider approach to fiscal framework
• inclusion of all UPs at the outset
• no separate ADP grants to UPs
• basic block grants (more equitable given smaller
floor allocations)
• performance grants focusing on core performance
indicators
• gradual increase (to 60/40) in GoB funding for basic
block grants
• eligible expenditure menu for UPs expanded to
include financing of CB activities (including out-
sourcing)
Accountability
• UP financial and assurance level audits introduced
• UP audits conducted by CA firms procured and
contracted by LGD
• audit reviews by CA firms
• BGCCs at the Upazila level for grievance redress
• open budget meetings as UP compliance issue
• six-monthly UP reporting introduced
• UP reports only used as triggers for block grant
disbursements
GREATER INSTITUTIONAL SUSTAINABILITY
INCREASED OVERSIGHT & TRANSPARENCY
• UP financial audits and performance assessments
• move towards UP audits conducted by accredited CA
firms procured and contracted by UPs
• audit reviews by CA firms and sample spot checks
by OC&AG
• Upazila Parishad as forum for grievance redress
• open budget meetings as UP compliance issue +
more emphasis on disclosure & oversight
• six-monthly UP reporting to be consolidated
• UP reports to be used as triggers and as tools for
monitoring and backstopping by DDLGs/DFs
74
LGSP I features TRAJECTORY of CHANGE LGSP II features
UP processes
• primary focus of UP expenditures on small-scale
infrastructure schemes GREATER EMPHASIS ON SERVICE DELIVERY
• intention to shift focus to UP-wide delivery of public
goods and services
Capacity building and IEC
• CB strategy focused only on individual dimension
• CB service providers (failure)
• 100% supply-driven training as only CB instrument
• reliance on URTs composed only of GoB staff
• no out-sourcing options for UPs
• attempt to implement ambitious IEC strategy
EXPANDED APPROACH TO UP INSTITUTIONAL
DEVELOPMENT
MORE FOCUSED COMMUNICATIONS
• CB strategy recognizes environmental,
organizational and individual dimensions
• DDLGs and District Facilitators to provide on-the-
job mentoring and backstopping
• supply-driven training and demand-driven training
and peer learning as core CB strategy
• URT membership expanded to include local
resource-persons as well as GoB staff
• out-sourcing (contracted accountants, engineers)
possible for UPs
• limited focus on core citizen information
requirements
Monitoring & evaluation
• 100% reliance on national level M&E
• embryonic MIS
• limited use of MIS reports
MORE OPERATIONAL M&E
• reliance on DDLGs/DFs for sub-national monitoring,
as well as national level M&E
• web-based MIS accessible in districts\
• MIS reports to be generated and used for
management and feedback
Procurement
• multiple and repeater procurement packages
• UP procurement procedures establish multiple
committees and bias expenditure towards small-scale
schemes
RATIONALIZATION
• reduce number of multi-year procurement packages
• UP procurement procedures to be rationalized and
reformed
Project management arrangements
• 100% mainstreamed into LGD
• NPD = DG/MI&E Wing HIGHER LEVEL, MORE SUPPORT
• hybrid mainstreaming and PMU model
• NPD = Additional Secretary LGD
75
Annex 10: Governance and Accountability Action Plan
Introduction and Background
1. This Governance and Accountability Action Plan (GAAP) has been drawn up to address
governance and accountability issues associated with LGSP II. The GAAP seeks to ensure good
governance and cost-effectiveness in the management and implementation of LGSP II activities,
at both national and sub-national levels. As such, the GAAP has an added significance in being
part and parcel of what is explicitly a governance project. It is based on Bangladesh‘s existing
governance and legal framework, including legislations on anti-corruption, right to information,
procurement, and good governance. In addition, elements of the World Bank‘s access to
information policy have been incorporated into this document. It draws on lessons learned from
LGSP I (the predecessor to LGSP II), as well as on experience from other IDA-funded projects
in Bangladesh and elsewhere. The GAAP will be a living document and will be updated and
revised, as necessary, based on lessons learned during the implementation of LGSP II. There will
be bi-annual reviews of GAAP implementation.
2. LGSP II aims to improve local government delivery of public goods and services by: (i)
making discretionary fiscal resources available to UPs in a timely and transparent manner; (ii)
putting in place institutionally sustainable mechanisms for upward and downward accountability;
(iii) supporting capacity and institutional development of the inter-governmental system; and (iv)
improving the ways in which local government performance and activities are monitored,
evaluated and supervised. The success of the project will depend on sound management and
performance at several levels (national, district, sub-district, and UP) and involve a range of
institutional stakeholders (LGD, CAG, training centers, sub-national administrations, elected
local governments, private sector actors). Importantly, the design of LGSP II has benefitted
greatly from the experience gained during the implementation of its predecessor project, upon
which it builds and goes beyond.
Key Governance and Accountability Issues
3. For the purposes of this GAAP, key governance and accountability issues at the
central/national and UP levels are treated differently.
Central/national levels
4. Given the somewhat checkered history of decentralization and local government in
Bangladesh, a fundamental issue that needs to be addressed by the GAAP is the extent to which
the incremental policy and institutional reforms fostered by (LGSP I and) LGSP II will be
sustained and expanded. Strengthened local government, with access to discretionary resources
and the ability to take decisions regarding local development signifies a paradigm shift away
from the prevailing public administration and service delivery model. This goes beyond the
ambit of the project itself and, if it is to be addressed, will require wider engagement by all
stakeholders on broad policy issues.
5. Fiscal transfers from central to local government, which are at the heart of LGSP II, are
susceptible to arbitrary decisions – for example, with respect to which local governments benefit
and how much each local government receives. In the absence of built-in mechanisms, fiscal
76
transfers can become instruments for political patronage and rent-seeking. Although there was
little evidence that this took place during LGSP I, this remains an issue that needs to be flagged
and addressed.
6. Moreover, LGSP II explicitly aims to institutionalize a greater degree of predictability
and efficiency in the area of inter-governmental fiscal relations. This will require changes in the
way that central government is structured and in the ways in which it functions. LGD, in
particular, will need to rethink its functions and structure so as to become a highly effective
linchpin in the system of inter-governmental relations. As in most countries and with all such
reforms, there is a risk that they will be slowed down by inertia and a degree of resistance.
7. Bangladesh remains a country where ―top-down‖ approaches are predominant in service
delivery. At the national level, there is a tendency to view local government as being
―subordinate‖ and of marginal importance. Overall, this can potentially translate into a highly
town and authoritarian approach towards local government. The outcomes of this are varied –
withholding fiscal resources, according a very low priority to local government needs, issuing
highly restrictive regulations and guidelines for local governments, etc. This is clearly an
important governance issue for LGSP II, a project which explicitly aims to strengthen local
discretion and accountability in decision-making.
8. Finally, and in common with other IDA-supported projects in Bangladesh, LGSP II faces
fiduciary issues at the central/national level. Malpractice in procurement (although often difficult
to prove) remains a continuing and major concern. ―Leakages‖ in the flow of funds are also an
issue – especially so in the case of LGSP II, where funds will be managed by many national
agencies and where cash is likely to be the only way of financing certain activities (e.g. training).
The potential for both large and small sums to go ―astray‖ should not be under-estimated.
UP-level issues
9. Approximately 85% of total IDA funds (approx. US$249.28 million) earmarked for
LGSP II will be channeled directly to UPs; if the Government‘s contribution is included to the
total estimated cost of the project, the proportion that will be channeled to UPs rises to around
92%. These funds are expected to be allocated to up to 4,504 UPs per year. Although each UP
will only be handling relatively small annual allocations (approximately, on average, US$18,000
per year over the life of the project), total fund flows to the local level will be significant and – at
the same time – will be dispersed among a large number of local bodies. Any governance issues
associated with UP budget and financial management are thus likely to be major ones.
10. In general, UP financial management capacities remain under-par. In most UPs, the
Secretary is the only full-time staff member – responsible for a wide range of tasks, and with
relatively little time to ensure adequate financial management. FM procedures are out-moded,
accounts are usually kept on a manual basis, and internal control systems are weak. Procurement
at the UP level suffers from the same problems and is thus likely to result in less than optimal
outcomes. There is a need to be watchful of and insure against the possibilities for graft and
corruption in financial management and procurement. Given that most of LGSP II‘s funds will
be used to finance UP expenditures, this is an important governance issue for the project.
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11. Another issue concerns weak horizontal accountability at the local level, especially with
respect to the relationship between UPs and de-concentrated line departments (such as LGED).
In theory, UPs are able to draw on technical and other support from such line departments; in
practice, this is often problematic.
12. Downward accountability – between UPs and local citizens – is weaker than it should be.
This is partly to do with poor information flows and a lack of disclosure. It is also linked to a
lack of empowerment and insufficient citizen participation. Deficits in downward accountability
can lead to poor oversight and thus to UP officials and staff being able to act without regard to
their constituents. This is clearly an issue that needs to be addressed by LGSP II, especially given
the largely discretionary nature of the project‘s block grants.
13. A final issue at the UP level concerns the ways in which expenditures tend to be
distributed across wards – as a way of ensuring that all elected ward members can claim to be
getting a ―slice of the cake‖. This can lead to less than optimal ways of delivering public goods
and services. Many of the investments financed through LGSP I‘s EBGs were very small-scale
investment schemes. Because of the nature of UP governance, larger works or wider services
tend to get a lower priority than small-scale infrastructure schemes. There are clearly trade-offs
here – but finding the ―right‖ balance between the need to satisfy ward politicians (and their
ward constituencies) and to meet wider service delivery priorities is an issue.
GAAP Objectives
14. The GAAP‘s main objective is to contribute towards strengthening governance and anti-
corruption systems in LGSP II. It will achieve this objective by:
Supporting robust inter-governmental processes and institutions;
Building better mechanisms for accountability at the national and sub-national levels.
Scope of the GAAP
15. Several areas for governance improvement have been identified: the political
environment, organizational arrangements, procurement, financial management, monitoring, and
accountability arrangements. The GAAP proposes actions for each of these issues, a timeline for
each action, and responsible agencies for implementation. There are also some ‗early warning
indicators‘ which – if monitored properly – will trigger timely actions for course correction.
Monitoring Arrangements
16. The GAAP will be monitored regularly against agreed actions which will be reflected in
the project‘s periodic progress reports and aide-memoires. This will be a joint responsibility of
LGD, other project entities, and the IDA. The GAAP matrix will be used widely for monitoring
purposes. If any ‗red flag‘ is triggered, the LGD will initiate enhanced supervision through
specific third-party audits, reviews by sector experts, training workshops, and joint interim
missions with the IDA. If the investigation confirms corrupt, fraudulent or collusive practices at
any stage of the project, appropriate sanctions will be applied by the relevant agency, depending
on the nature of the case. In addition, any ‗early warning‘ indicators of governance and
accountability risks will be monitored regularly so that corrective measures can happen in time.
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Table 10.1: Governance and Accountability Action Plan
Area of work Issues likely to affect
project performance Actions to address the issues Responsible
agency Timeline Early warning signs
Political environment
High-level policy/political
support to the project
Wavering or diluted
commitment to
strengthening the
local government
system
Support for broad-based dialogue
on local governance issues to
ensure that all stakeholders
understand the issues and widen
public endorsement of the local
governance agenda
LGD 2013
Annual
Dissolution of elected
Upazila Parishads Reduced ADP
allocations for BBG
funding pool
Inter-governmental relations
Predictability,
transparency and
efficiency of the system of
inter-governmental
relations (fiscal,
administrative, etc.)
Arbitrary decisions
concerning grant
allocations to UPs
Resistance to
institutional and
policy reforms
Top-down approaches
compromise local
government
accountability and
discretionary
decision-making
Establishing rigorous
mechanisms for determining the
size of overall funding pools and
for calculating grant allocations
Announcing indicative three-year
allocations to all UPs
Ensuring buy-in to change and
reform through wide
consultations and open
discussions
Strengthening inter-UP solidarity
in order to build up a broad-
based sub-national constituency
Establish clear principles
regarding UP decision-making
powers and functions
LGD
LGD
LGD
LGD
LGD
Start-up of
project and
annually
Project start-
up and year 3 October 2013
Regular
Start-up and
mid-term
Allocation of block
grants to non-eligible
UPs
No announcement
made in year 3
Fiscal transfers unit
within LGD is
dysfunctional
Curtailment of UP
discretionary authority
Fiduciary (national level)
79
Table 10.1: Governance and Accountability Action Plan
Area of work Issues likely to affect
project performance Actions to address the issues Responsible
agency Timeline Early warning signs
Financial management and
procurement Sub-optimal
procurement practices
and outcomes
―Leakages‖ in cash-
based operations
Carrying out robust audits of
project FM and procurement
Closely monitoring advances and
rigorous follow-up on the settling
of advances
FAPAD
LGD NILG
Annual
Regular
Major audit objections
UP governance and activities
Fiduciary Weak UP capacities in
financial management
and procurement
Establishing simple but robust
procurement regulations for UPs
Undertaking capacity building
activities that strengthen FM and
procurement at the UP level
Undertaking regular financial
audits of UPs and insisting upon
follow-up to audit observations
Providing incentives for UPs to
strengthen their FM and
procurement capacities
LGD
LGD
LGD
LGD
December
2011
Continuous
Annual
Annual
Increasing number of
―unclean‖ UP audits
Accountability Weak mechanisms for
downward
accountability
Weak mechanisms for
horizontal
Promoting social audits and
better oversight of UPs
Improving public disclosure by
UPs
Improving coordination between
line departments and UPs
LGD DPs
LGD
LGD
Annual
Mid-term
survey Annual
Decreasing citizen
satisfaction with UP
delivery of public
goods and services
(surveys)
80
Table 10.1: Governance and Accountability Action Plan
Area of work Issues likely to affect
project performance Actions to address the issues Responsible
agency Timeline Early warning signs
accountability
through district and sub-district
level committees
Political economy of UP
governance Ward-focused
approach to planning,
budgeting and
expenditure
Ensuring that procedures are not
biased towards ward-level
expenditures (UP/OM, FM and
procurement procedures)
Providing incentives for UP-
wide investments and
expenditures
LGD
LGD
Project start-
up and mid-
term
No evidence of UP-
wide investments and
services being
financed
