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Urban Governance and Development Program: Emerging Towns Project (IDA Credit no. 4905-NP and IDA Grant no. H661-NP)

Mid Term Review: March 19- 31, 2014

Aide Memoire

I. Introduction 1. The Mid Term Review of the Urban Governance and Development Program: Emerging Towns Project (UGDP-ETP) was held from March 19 to 31, 2014. The objectives of the review were to: (i) review progress in carrying out priority actions agreed during the December 2013 review and those raised during the portfolio review meeting at the Ministry of Finance on February 3, 2014 with regard to (a) award of contracts for Track I municipal sub-projects and issuing of bid invitation notices for Track II sub-projects, (b) withdrawal application for FY2013/14 expenses, and (c) approval of Revenue Enhancement Plans, Investment Plans and Operations and Maintenance (O&M) Plans in three municipalities; (ii) carry out a comprehensive review of institutional development activities for all project agencies, including update of the Business Restructuring Action Plan (BRAP) by the Town Development Fund (TDF) and review of institutional development activities by the Ministry of Federal Affairs and Local Development (MoFALD), and (iii) prepare an action plan for improving financial performance of the project. 2. The joint IDA-GIZ review team1 (referred to as the “Team” hereafter) led by Elisa Muzzini, Sr. Economist/Task Team Leader, would like to thank the Government of Nepal (GoN), especially the Ministry of Urban Development (MoUD), the MoFALD, the Ministry of Finance (MoF), the Department of Urban Development and Building Construction (DUDBC), the Town Development Fund (TDF), the Project Coordination Office (PCO), the Urban Development Training Center (UDTC) and the municipalities supported by the Project for the hospitality and courtesies extended during the review. A one-day meeting was held with the project agencies and the municipalities in Kathmandu on March 24, 2014 to review project status and agree on key actions to address implementation challenges. The list of people met during the review is included in Annex VI. 3. This Aide Memoire summarizes the main findings and recommendations of the Mid Term Review. A draft Aide Memoire was discussed with the concerned agencies at a first wrap-up meeting chaired by Mr. Kishor Thapa, Secretary, MoUD, on Friday, March 28, 2014 and at a follow-up meeting chaired by Mr. Shambhu KC, Director General, DUDBC on Monday, March 31, 2014. As agreed at the wrap-up meeting, this Aide Memoire will be classified as a public document as per the World Bank’s Access to Information Policy.

1 The team comprised Elisa Muzzini (Sr. Economist/Task Team Leader), Silva Shrestha (Water and Sanitation Specialist), Shambhu Uprety (Procurement Specialist), Drona Ghimire (Environment Specialist), Hari Prasad Bhattarai (Social Development Consultant), Yogesh Malla (Financial Management Specialist), Pradeep Shrestha (Financial Management Consultant), Pawan Lohani (Municipal Finance Consultant), Rajivan Krishnaswamy (Municipal Finance Consultant), Noor Tamrakar (Engineer/ Consultant), Tashi Tenzing (Engineer/Consultant), Pradip Gautam (Environment Safeguards Consultant), Horst Matthäus (Team leader SUNAG) and Kalyan Nemkul (Team Assistant).

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II. Key Project Data

Project Data Project Performance Ratings Ratings Last Now

Board Approval: May 10, 2011 Achievement of PDO MU MU Effectiveness Date: October 2, 2011 Implementation Progress MU MU Closing Date: July 31, 2016 Project Management MU MU Original Gn/Cr. Amt: USD 25 million Procurement MU MU Restructuring (Level II): February 22, 2013 Financial Management MU MU Restructuring (Level I): July 19, 2013 Safeguards MU MU Cancellation: USD 6.4 million M&E MS MS Revised Gn/Cr. Amt: USD 18.45 million Counterpart Funding S S

Amount Disbursed (as of March 31`, 2014):

USD 7.68 million (41.7%)

Ratings: HS=Highly Satisfactory; S=Satisfactory; MS = Moderately Satisfactory; MU= Moderately Unsatisfactory; U=Unsatisfactory; HU=Highly Unsatisfactory; NA=Not Applicable; NR=Not Rated. III. Achievement of Development Objectives

4. A Level I restructuring was approved by the Board of the World Bank on July 19, 2013 to: (a) re-align the Project Development Objective (PDO) and PDO indicators to the institutional capacity of the participating municipalities; (b) reduce the scope of the municipal infrastructure sub-projects in line with the capacity of the municipalities; and (c) enhance municipal support. The revised PDO is to improve the capacity of the participating municipalities to plan, implement and fund urban development activities. The improved capacity will contribute to the higher-level objective of improving infrastructure and service delivery in participating municipalities. The revised PDO indicators are as follows:

• PDO # 1: Number of participating municipalities with funded investment and

Operations & Maintenance (O&M) plans. This indicator would measure the enhanced capacity of municipalities to plan for urban development in a sustainable and effective manner. (Year 3 target: 3; end of project target: 6).

• PDO # 2: Municipal infrastructure sub-projects under implementation with construction works on track as per the signed contract. This indicator would measure the enhanced capacity of the municipalities to effectively implement municipal infrastructure investments. (Year 3 target: 80%; end of project target: 90%).

• PDO # 3: Increase in municipal own source revenues in the participating municipalities. This indicator would measure increase in municipal resources for funding urban development activities. (Year 3 target: 15%; end of project target: 25%).

• PDO # 4: Total number of people (of which females and people from disadvantaged groups) benefiting from the project activities (Year 3 target: 50,000; end of project target: 92,000).

5. The likelihood of achieving the PDO has increased significantly as a result of steady implementation progress since the December 2013 implementation support review, in particular

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with regard to procurement of works for municipal sub-projects. Sustaining implementation progress will be critical to getting the project on track for achieving the revised PDO indicator targets. In order to exit problem status, contracts for sub-projects under procurement need to be awarded in a timely manner to ensure sufficient time to implement the sub-projects before project closure. The rating for the achievement of the Development Objective, therefore, remains “Moderately Unsatisfactory”. The status of the PDO indicators is reported in the table below. The updated results framework is presented in Annex V.

PDO Indicator FY14 Target Status

Number of participating municipalities with funded investment and Operations & Maintenance (O&M) plans.

3 This indicator is on track. Dhankuta, Itahari and Tansen municipalities included key performance targets from Revenue Enhancement Plans, O&M Plans and Investment Plans in the FY15 budget.

Municipal infrastructure sub-projects under implementation with construction works on track as per the signed contract.

80% This indicator is slightly below target (66%). Three sub-projects are under implementation, of which one is behind schedule.

Increase in municipal own source revenues in the participating municipalities.

15% The target for FY14 is expected to be exceeded. Increase in municipal own-source revenue is on track to achieve the target based on data up to January 15, 2014.

Total number of people (of which females and people from disadvantaged groups) benefiting from the project activities.

50,000 This indicator is slightly below target, but the end of project target is expected to be achieved. Estimated cumulative number of beneficiaries is 46,000 for end of FY14.

IV Implementation Status 6. Overall progress. The project has continued to make progress in implementation. Procurement of works for municipal infrastructure sub-projects has advanced, although with some delays as per the schedule agreed during the December 2013 implementation support review. The municipal block grant has been released to the municipalities on time. Three municipalities have approved and committed to implement Revenue Enhancement Plans, O&M Plans and Investment Plans. They have signed Performance Agreements with the PCO in December 2013 for implementation of the plans, and included the performance targets in the FY 15 budget. The PCO has completed the field visit and technical assessment for developing municipal billing software in the municipalities. It is important that implementation progress needs to be sustained over the coming months. At the minimum, the timely award of contracts for municipal sub-projects is required in order to upgrade implementation progress rating, which currently remains “Moderately Unsatisfactory”.

7. Progress with municipal sub-projects. IDA is providing funding for a total of 16 municipal infrastructure sub-projects in the six participating municipalities, including 5 Track I and 11 Track II sub-projects. Three Track I municipal sub-projects are now under implementation, and the contract for the Track I Dhankuta Hile Market Improvement sub-project

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is in the process of being awarded.2 The bid invitation notice for the Track I Mechinagar Gate Beautification sub-project has been re-issued on March 9, 2014 following cancellation of the previous bidding. Bid invitation notices have been published for nine Track II sub-projects since December 2013. Bid evaluation is in the process of being completed for three of the nine sub-projects under procurement – including the largest sub-project (USD 2 million) which is being procured under International Competitive Bidding (ICB). The PCO is finalizing the Detailed Project Reports (DPRs) and bid documents for the remaining two Track II municipal sub-projects, which required further investigation. Construction works are on track for two of the three municipal sub-projects under implementation. The Team was pleased to note that construction works for Dhankuta Market Infrastructure Improvement sub-project are ahead of schedule and is expected to be completed by June 2014. Works for the Mechinagar Gokul Marg sub-project have started, following contract award on February 4, 2014. Works for the Tansen Temple Conservation sub-project have however been significantly delayed, with only 10 percent physical progress in seven months of implementation. It was agreed that Tansen municipality, with support from the PCO, would assess the causes of non-performance and take appropriate actions to address construction delays, and would provide the Team an update on status by April 30, 2014. Detailed implementation progress by component is presented in Annex I.

8. Overall progress in implementing the Governance and Accountability Action Plan (GAAP). Activities agreed as part of the GAAP are being carried out and are gradually becoming mainstreamed as part of overall implementation. Municipal Coordination Committees (MCCs) in the municipalities have taken an active part in the selection of investment priorities and Grievance Redressal Committees (GRCs) are being established and mobilized to resolve issues at the local level. The central GRC was formed at the PCO level on October 30, 2013. Functioning of the grievance redressal system was tested with the issue related to the Mechinagar Agro-market sub-project and was found to be operating satisfactorily. The review and recommendations made by the municipality level GRC were reviewed and appropriate recommendations were made by the central GRC.

9. Safeguards. The Team noted an improvement in safeguard performance in terms of preparing pre-construction safeguard documents. The Team was informed that the Initial Environmental Examination (IEE) for the Track I Dhankuta Hile Market Infrastructure sub-project was approved by MoFALD on March 28, 2014. The Team requested the PCO to submit the approved IEE to the World Bank. Progress has been made with the preparation of revised Environmental Management Plans (EMPs) for the first nine Track II sub-projects since the December 2013 implementation support mission. The Team noted that there is a need to clarify land requirements and complete required steps for land taking (as per the Social Management Framework) for Tengra Bridge (Itahari) prior to DPR and EMP finalization for the Track II Itahari Bridge Construction sub-project. GRC has completed the investigation of the complaint for the proposed Mechinagar Agro-market sub-project. Performance rating for safeguards remains “Moderately Unsatisfactory” as most of the actions agreed in December 2013 remain pending, and they need to be completed before the rating can be upgraded. The Team emphasized that as per the Environmental and Social Management Framework (ESMF), safeguard compliance and performance of municipal infrastructure sub-projects under implementation should be monitored every three months. The detailed safeguard assessment and agreed actions are presented in Annex II. 2 No Objection has been provided to the bid evaluation report on March 23, 2014.

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10. Project Management and Monitoring and Evaluation (M&E). Efforts have been made to improve coordination with the six municipalities. A high-level meeting chaired by the Secretaries of MoUD, MoFALD and MoF was organized with the project agencies and the six municipalities on February 5, 2014 to expedite implementation. The Team commended the Ministries for their efforts and commitment to address the challenges faced by the project. However, coordination and flows of information from project agencies and municipalities to the PCO need to be further strengthened. The PCO needs to monitor and regularly update the timeline for municipal sub-projects and disbursement projections. There were delays in completing the Borrower’s Mid Term Review report because data were not submitted to the PCO by project agencies in a timely manner. The Team noted that Component Managers from all project agencies need to make themselves available to participate in implementation support reviews and regular PCO-level meetings. The rating for project management currently remains “Moderately Unsatisfactory”. Proactive follow-up of the PCO’s consulting team with the project agencies and municipalities is required to strengthen project management. The Team is pleased to note that human resources will be increased at the PCO level with the addition of a project engineer. M&E capacity of the PCO has increased with the hiring of an M&E specialist; however, the system to enable regular collection and consolidation of results indicators at the PCO level needs to be strengthened. The rating for M&E remains “Moderately Satisfactory”.

11. Project Risk Assessment. Project risk remains substantial. The lack of elected local officials and the frequent change (every 6 to 12 months) of the Executive Officers (EOs) in the six municipalities represent a significant risk for the achievement of the PDO. Another risk is the uncertainty related to the possibility of local elections, following the national elections that took place on November 19, 2013. Momentum is building for holding local elections in 2014. Local elections constitute a milestone for strengthening local governance in Nepal, but the transition to elected officials may lead to project implementation delays in the short term.

12. Partnership and aid coordination. The GIZ-funded MST will phase out in June 2014 and will be replaced by an IDA-funded MST. Arrangements have been discussed during the Mid Term Review to ensure proper handover of responsibilities between the GIZ-funded MST and the IDA-funded MST. It was agreed that the GIZ-funded MST would prepare a final report by May 30, 2014 for review by the PCO. The report would include a summary of activities, an inventory of equipment, and filing of documentation (including training material).

V. Procurement, Financial Management and Disbursement

13. Procurement. The Team noted some progress in procurement management at the PCO level. Bid invitation notices have been published for nine Track II municipal sub-projects. The Request for Proposal (RfP) for the Municipal Support Team (MST) was issued on February 19, 2014 and technical proposals were opened on March 20, 2014. However, procurement performance at the municipal level continues to be weak. The contract award for Track I municipal sub-projects has taken significantly longer than planned. Re-issue of the bid invitation notice for Track I Mechinagar Gate Beautification sub-project has been significantly delayed. The Team also noted that Tansen Municipality needs to improve contract administration to address serious delays in contract execution for the Temple Conservation sub-project. There have also been delays with the procurement of consultants for institutional development activities, in particular for the preparation of Geographic Information System (GIS) maps and third-party safeguard monitoring. The rating for procurement, therefore, remains “Moderately

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Unsatisfactory”. It has been agreed that procurement training on bid evaluation and contract administration would be organized for municipal staff in April 2014. It was also agreed that the PCO would: (a) closely monitor and update the contract signing plan prepared as part of the Mid Term Review; (b) submit a disbursement claim plan for all sub-projects; and (c) prepare contractors’ payment claim plans for all sub-projects under implementation. 14. Financial Management. The Team noted that timeliness and quality of financial reporting requires significant improvement. The rating for financial management remains “Moderately Unsatisfactory”. The Team reminded the PCO of the urgency of finalizing the un-audited account for FY 2012/13 and submitting the audit report for FY 2012/13, which is in overdue status since January 15, 2014. Submission of the first trimester Implementation Progress Report (IPR) for FY2013/14 is also overdue. The project has initiated action to maintain necessary ledgers, such as Statement of Expenditure (SoE) ledger, main and subsidiary ledgers, designated account ledger and program ledger, as required by the Government accounting system. However, these ledgers have not been maintained properly or updated. Expenditures of NPR66.17 million (USD 0.69 million), including block grants of NPR43.48 million (USD 0.46 million) released to the municipalities and loans of NPR1.06 million (USD 11,158) paid to municipalities, have been incurred till March 15, 2014 against the approved budget of NPR514.41 million (USD5.4 million) for FY 2013/14, equivalent to about 12.9% of the budgeted amount. The Team reminded the PCO that the submission of the annual work program for FY 2014/15 to the World Bank for prior review by April 30, 2014 is a legal covenant for the project. It was agreed that a draft work plan would be submitted to IDA for review by April 15, 2014.

15. Disbursement. Disbursement as of March 31, 2014 is USD 7.68 million, consisting of USD 2.93 million from the Credit and USD 4.75 million from the Grant Account, together equivalent to about 42.8% of the total IDA allocation. The net disbursement, excluding Designated Account (DA) advance, is 14.9%. Disbursement in FY 2013/14 is USD2.68 million, and the project is expected to exceed the target FY14 disbursement of USD2.8 million. Withdrawal applications have been made since December 2013 for expenses incurred up to the first trimester of FY 2013/14 for a total value of USD 0.54 million, including the first and second tranches of the municipal block grants. It was agreed that the PCO would submit by April 30, 2014 withdrawal application for partial expenses incurred up to the second trimester and by June 15, 2014 withdrawal application for remaining expenses incurred up to end of May 2014. The detailed fiduciary assessment and agreed actions are presented in Annex III.

VI. Key issues in Implementation and Agreed Priority Actions

16. Key implementation issues discussed during the Mid Term Review are:

• Bid evaluation for municipal sub-projects needs to be expedited to achieve the contract award milestones as per the agreed schedule. The Team noted that expediting bid evaluation is critical to ensure that contracts are awarded as per the agreed schedule and allow sufficient time to complete works before project closure. Actions need to be taken by the PCO to improve procurement capacity of the municipalities through training and provide them with the support required to complete bid evaluation in a timely manner soon after bid opening. The PCO has taken steps to expedite bid evaluation for Track II

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municipal sub-projects by sending a joint support team from the PCO and the TDF to the municipalities at the time of bid opening. The PCO would also continue providing procurement training on bid evaluation for municipal staff with support from the World Bank.

• Timeliness and quality of financial management require improvement. An action plan has been agreed with the PCO to improve project financial management performance. The Team noted that the project does not yet have in place a system that is able to collect financial data from project agencies and municipalities and report on it in a timely and accurate manner. As a result, expenditures and replenishments are not properly consolidated and reported at the PCO level. The Team and the PCO agreed on a simple excel sheet to be used for consolidating financial data for the preparation of project financial reports. The Team emphasized the importance of timely submission of SoEs to enable the PCO to regularly claim expenses as they are incurred. It is expected that disbursement would increase significantly following the award of contracts for municipal sub-projects, as mobilization advances are paid to contractors. It was agreed that the PCO would prepare reporting templates based on standard formats by April 30, 2014 to support the municipalities with the preparation of SoEs. It was also agreed that training on financial management would be carried out by the PCO, with support from the World Bank, for project agencies and municipalities by April 30, 2014.

• Business Restructuring Action Plan (BRAP) for TDF requires revision because of changes in circumstances external to TDF. The Team reviewed the BRAP with a view to ensuring the relevance of activities, in light of changes in circumstances external to TDF. Based on the review, it was agreed to drop from IDA review: (a) pre-mature activities which cannot be completed within the project period, given market conditions and TDF’s financial situation; and (b) activities funded by other development partners. New priority activities were added with the objective of strengthening the financial sustainability of TDF. The TDF Board will approve revisions to the BRAP and notify the World Bank of approval by June 30, 2014.

• Institutional development activities for MoFALD need to be expedited. The Team noted that institutional development activities of MoFALD have been significantly delayed. It was agreed that the project would continue funding the preparation of MoFALD’s policy guidelines and procedures for governance and budget planning for municipalities, since this activity is monitored as part of the results framework. It was agreed that the Terms of Reference for the assignment would be finalized by April 20, 2014. It was also agreed that MoFALD would discuss and agree with its M&E division on activities to be funded under the project for the development of the Management Information System (MIS), and the ToR would be finalized accordingly.

17. The status of the actions agreed during the December 2013 implementation support review was discussed during the review. The status is summarized in the table below.

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Status of Priority Actions agreed during the December 2013 implementation support review

Priority Action Responsible Agency Milestone Date Status

Sign contracts for Track I Mechinagar Gokul Marg Road Improvement and Dhankuta Hile Market Improvement sub-projects.

Municipalities January 13, 2014

This in the process of being completed, but is behind the original schedule. Contract for Mechinagar Gokul Marg sub-project was signed on February 4, 2014. No Objection to the bid evaluation report for Dhankuta Hile market improvement sub-project was provided on March 23, 2014; the expected date for contract signing is April 7, 2014.

Sign contract for Mechinagar Gate Beautification sub-project.

Municipalities March 17, 2014 Contract signing dates will be delayed. The bid invitation notice was re-issued on March 9, 2014, with significant delays from the original schedule. The contract is expected to be signed on June 6, 2014.

Sign contracts for the first nine Track II sub-projects.

Municipalities April 6, 2014 Good progress has been made in procuring Track II sub-projects, but contract signing dates will be delayed. Bid invitation notices have ben published for nine Track II sub-projects. Three bid evaluation reports are ready and under review. Contracts for three sub-projects are expected to be signed by April 30, 2014; by May 30, 2014 for two sub-projects; and by June 20, 2014 for four sub-projects.

Sign contracts for the remaining three Track II sub-projects.

Municipalities May 12, 2014 One sub-project will be dropped since it is not feasible. Signing of contracts for the remaining two Track II sub-projects will be delayed. Finalization of Detailed Project Reports (DPRs) for Dhankuta Hile Bus Park and Itahari Construction of Bridges sub-project has been delayed. The DPRs are expected to be completed on April 11, 2014 and April 30, 2014 respectively. Expected contract signing dates are July 23, 2014 for Dhankuta Hile Bus Park and August 12, 2014 for Itahari

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Construction of Bridges sub-project.

Issue Letter of Invitation (LOI) to short-listed consultants for the IDA-funded MST assignment.

PCO January 9, 2014 This has been completed on February 16, 2014.

Complete selection for the IDA-funded MST assignment.

PCO April 4, 2014 The selection is expected to be delayed by one month. Technical proposals were opened on March 20, 2014 and evaluation is on-going. The selection is expected to be completed by May 30, 2014, and MST is expected to start the assignment by June 25, 2014.

Approve Revenue Enhancement Plans, O&M Plans and Investment Plans as part of the FY 15 budget process starting in January 2014, and report to the PCO on status and achievements.

Tansen, Itahari and Dhankuta municipalities

February 28, 2014

This action has been completed. Tansen, Itahari and Dhankuta Municipalities signed Performance Agreements for implementation of Revenue Enhancement Plans (REPs), O&M Plans and Investment Plans on December 23 (Dhankuta), December 24 (Itahari) and December 26 (Tansen) of 2013. The key performance targets were endorsed by the Councils of the three municipalities on January 13, 2014. The municipalities incorporated the key performance targets in the FY15 budget. These achievements were documented by the PCO and evidence was submitted to the World Bank on March 31, 2014.

Submit a partial withdrawal application for expenses incurred up to the first trimester

PCO January 31, 2014

This action has been completed, with some delay. Withdrawal applications completed for USD 537,000. Disbursement for FY14 is USD2.6 million.

Submit a partial withdrawal application for expenses incurred up to the second trimester.

PCO April 30, 2014 This action is not yet due.

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18. The Team reviewed the progress made in completing the actions agreed at the joint Ministry of Finance and World Bank trimester portfolio review meeting held on February 3, 2014. The status is summarized in the table below.

Status of Actions agreed during the Portfolio Review Meeting of February 2014

Action Agency Date Status

Provide a detailed timeline to ensure completion of the actions. PCO February 12,

2014

Detailed timeline provided on February 28, 2014 and updated during the Mid Term Review.

Issue Request for Proposal for IDA-funded MST. PCO February 12,

2014 Completed on February 16, 2014.

Prepare plan to support municipalities with the implementation of Revenue Enhancement Plans, O&M Plans and Investment Plans

PCO February 21, 2014

Completed. PCO needs to cost the plan by April 15, 2014 and include it in the FY 15 annual work plan.

Convene a meeting of Secretaries of MoUD, MoFALD and MoF. PCO February 10,

2014 Completed on February 5, 2014.

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Priority Actions 19. The following priority actions have been agreed during the Mid Term Review:

Priority Action Responsible Agency Milestone Date

Sign contracts for municipal sub-projects

Municipalities Based on the following schedule: • By April 30, 2014 for three municipal sub-

projects; • By May 30, 2014 for two additional

municipal sub-projects; • By June 20, 2014 for five additional

municipal sub-projects (including Mechinagar Gate Beautification sub-project).

Publish bid invitation notice for Dhankuta bus park and Itahari bridge construction sub-projects

Municipalities with support from the PCO

Based on the following schedule: • By April 27, 2014 for Dhankuta bus park

sub-project • By May 19, 2014 for Itahari bridge

construction sub-project Submit partial withdrawal applications

PCO Based on the following schedule: • By April 30, 2014 for expenses up to the

second trimester • By June 15, 2014 for expenses up to end of

May 2014 Sign contract for IDA-funded MST PCO June 25, 2014

Publish the EoI and award contract for the municipal billing software

PCO EoI publication by May 1, 2014; Contract award by July 15, 2014

20. A summary of actions agreed during the Mid Term Review is included in Annex IV.

VII. Proposed Timing and Focus of Next Implementation Review

21. As agreed with the PCO, the next implementation support review will be held in June 2014. The objective of the next implementation support review will be to assess overall implementation progress, in particular progress with the award of contracts for municipal sub-projects, and to discuss the work plan for the new IDA-funded MST.

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ANNEX I: Implementation Progress by Component 1. This annex summarizes implementation progress for each project component.

I.I Strengthening Municipal Planning Capacity for Urban Development (Component I)

2. The municipalities have received the municipal block grant allocation and authorization for FY 2013/14 for NRs. 95 million (USD 1 million). The overall municipal block grant allocation for the period FY 2011/12 to FY 2013/14 is NRs 252 million (USD 2.6 million) benefiting a population of nearly 43,000. The delays experienced in the previous fiscal years in the transfer of the block grant to the municipalities did not occur in FY 2013/14. The budget authorization has been issued to the municipalities on time this Fiscal Year. It has been agreed that the third tranche of the block grant (due on March 15) would be released to the municipalities from the District Treasury Office (DTO) only after municipalities submit the Audit Report for the previous Fiscal Year. The release letter for the third tranche of FY 2013/14 budget has been provided to the DTO for all municipalities on February 23, 2014 as the audit reports have been received from the municipalities. The block grant allocation for the municipalities till date is as follows:

Table 1: Block Grant Allocation FY 2011/12-2013/14 in NRs. ‘000

S.N Municipality FY 2011/12 FY 2012/13 FY 2013/14 Total

1 Mechinagar 19,669 20,182 19,356 59,207 2 Dhankuta 8,346 11,098 10,028 29,472 3 Itahari 14,545 21,437 23,757 59,739 4 Tansen 7,517 8,104 10,681 26,302 5 Lekhnath 14,844 16,417 21,701 52,962 6 Baglung 7,080 7,761 9,477 24,318

Total 72,000 85,000 95,000 252,000

3. The municipalities are required to send their approved annual program, including the list of activities that will be funded with the block grants based on notional allocation, by August 15 and to submit progress reports for the activities carried out for the previous year by September 15 for each year as per the intermediate results indicators. The progress report for FY 2012/13 activities and the annual program for FY 2013/14 activities were received from all municipalities by the due dates. However, the Team noted that the municipalities allocated slightly less than the 35 percent target amount of the block grant to activities that provide direct benefits to the women and people from disadvantaged groups as required by the Local Government and Community Development Program (LGCDP) guidelines. In the December 2013 implementation support review, municipalities were requested to revise the list of activities for FY 2013/14 based on the actual block grant allocation, taking into account the need to allocate 35 percent of the funds to women and disadvantaged groups. The municipalities have revised the list of activities based on actual allocations but they have not yet submitted the required information as per the reporting

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templates developed under the project and in line with LGCDP reporting requirements. The Team noted that the revised list of activities in aggregate allocate only 32 percent of the block grant to women and disadvantaged groups. The Team requested the PCO to support the municipalities with the submission of final list of activities as per the agreed templates and follow up with municipalities that have allocated less than the target amount to women and disadvantaged groups to ensure the target is met. 4. The PCO is in the process of reviewing the list of activities proposed for funding by the municipalities for FY 2014/15. The review needs to be timely completed to ensure compliance with the target allocation to programs targeting women, children and disadvantaged groups. The safeguard review of the proposed activities needs to be carried out by the PCO and any safeguards issue communicated to the municipalities (see safeguard section).

Status of Actions Agreed during December 2013 Implementation Support Review

Action Responsibility Original Date Status

Revised Agreed Date (of Pending

Actions) Submit final plan of activities based on actual allocation to MoUD/PCO in compliance with the target 35% of funds allocated to women, children and disadvantaged groups

Municipalities February 15, 2014

Delayed. April 30, 2014

Actions for Strengthening Municipal Planning Capacity for Urban Development Component • Municipalities to submit the final list of activities for FY 2013/14 as per the agreed

reporting templates based on actual allocation and in line with the target 35 percent allocation to activities benefiting the women and disadvantaged groups by April 30, 2014.

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I.II Capacity Building for Municipal Infrastructure Development (Component II)

5. This component finances municipal sub-projects as well as engineering advisory consulting services, and associated social environment management activities of participating municipalities with the objective of improving their capacity to plan and implement municipal investments. Municipal capacity to carry out infrastructure investment is to be built through learning by doing. The section informs on the current status of Track I and Track II Municipal infrastructure sub-projects. The list of municipal sub-projects is provided in Table 2.

6. Loan and grant commitments. The Team requested the PCO to regularly update and monitor the loan and grant commitments and submit estimates to the Team before implementation support reviews. The IDA loan and IDA grant allocations for the municipal sub-projects are USD 3.3 and USD 4.5 million respectively for a total of USD 7.8 million. The estimated IDA loan and IDA grant commitments are USD 2.8 million and USD 4.2 million respectively, equivalent to about 40%-60% loan-grant mix, for a total of 16 municipal sub-projects (including 5 Track I sub-projects and 11 Track II sub-projects). The expected IDA loan and grant commitments have been estimated based on the latest available cost figures (see Table 3). Actual bid prices have been used for awarded contracts, and cost estimates from the DPRs (including a 5% contingency) have been used for sub-projects under procurement. For awarded contracts, a provision of 15% cost increase has been assumed for possible cost overruns. For sub-projects under procurement, an additional 5% cost increase over the base cost estimated in the DPR has been provided for. The loan-grant ratios are estimated on the basis of the financial appraisal carried out by the TDF in line with project’s loan grant policy.

7. Overall progress. Since the last implementation support review of December 2013, implementation has picked up, although with delays as per the agreed schedule. A number of factors have contributed to implementation progress, including a better understanding within the various responsible agencies and the participating municipalities of the sub-project processing requirements as well as high-level government review of project progress. Nevertheless, there have been significant delays of several months in completing the actions agreed during the December 2013 review. The completion of the bid evaluation for Dhankuta Hile Market Improvement sub-project and the re-issuing of the bid invitation notice for Mechinagar Gate Beautification sub-project have been particularly delayed. It is therefore critical to ensure that further delays in the signing of the contracts for the municipal sub-projects are minimized. This would require (i) improving overall communication within the project entities, including proactively seeking advice and/or assistance if un-forseen problems surface; (ii) improving contract administration, be it of consultancy contracts or construction contracts to ensure timely completion of quality outputs stipulated in the contracts and taking remedial measures on a timely basis and (iii) providing municipalities with timely procurement support during bid evaluation. The PCO has taken the decision not to recommend the Mechinagar Agro-market sub-project from IDA funding. The updated timeline for Track I and Track II sub-projects is presented in Table 4 and Table 5. Updated disbursement projections for each sub-project up to June 30, 2014 are presented in Table 6.

8. Supervision arrangements. The Team noted that Tansen Municipality needs to take actions to address the significant delays with the construction works for Tansen Temple Conservation sub-project with support from the PCO. The Team noted the delays in submitting the work schedule for the sub-projects under implementation to the World Bank. The Team

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reminded the PCO to make available the work schedules and the monitoring charts of all sub-projects to the World Bank within one month of contract signing and updated schedules on a regular basis thereafter. The Team emphasized the importance of ensuring that the supervision consultants are timely hired by the municipalities in parallel with the procurement of the works to ensure supervision consultants are on board when the works start. The Team requested the PCO to closely monitor the process of recruiting supervision consultants, and provide support to the municipalities with the preparation of the Terms of Reference and the consultant selection. The Team also requested the TDF to release the grant for supervision consultants as advance to the municipalities in to ensure timely payments of the consultants by the municipalities. The rest of the section describes the status of each sub-project.

Table 2: List of Municipal Sub-projects Municipality No. Sub-project Name

Track I Sub-projects Tansen 1 Amar Narayan Temple Conservation Dhankuta 2 Dhankuta Weekly Market Infrastructure Improvement

3 Hile Market Infrastructure Improvement Mechinagar 4 Mechinagar Gate Beautification

5 Upgrading of Gokul Marg

Track II Sub-projects Baglung 1 Sahid Smriti Park Development

2 Upgrading of Access Road to Deprived Community (Track I and Track II) Tansen 3 Upgrading of Existing Roads in Urban Areas, including: a) Bus Park to

Mission Hospital; (b) Mission Hospital to Eye Hospital; (c) Gaurishanker to Holangdi; (d) Bandevi to Laxmi School and (e) Prabash to Baghkhor

4 Multi Purpose Building (shops and guest rooms) 5 Shrinagar Park Improvement

Lekhnath 6 Barah Chhetra Improvement

7 Picnic Spots & Amusement Zone at Mandare Park 8 Upgrading of Roads in Urban and Peri urban Areas, including (a) Oil Nigam

To Rithe Pani; (b) Dahar No.3; (c) Dahar No.4; (d) Wada Sewa Kendra To Deurali Khola; (e) Buddha Tole To Dadapari and (f) Universal Chowk To Kholako Chheu

Itahari 9 Upgrading of Link Road

10 Construction of Bridges on the Link Road Dhankuta 11 Hile Bus Park (Terminal)

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Status of Track I Municipal Infrastructure Sub-projects Tansen Amar Narayan Temple Conservation sub-project: 22. This is the first sub-project to enter implementation phase with the work order issued on 17 August 2013. However, the progress of this sub-project is very slow. Only about 10% of works have been completed in about 7 months of contract period. The major works of the contract have not started yet. It is therefore unlikely that this sub-project will be completed within the stipulated contract period of 15 months. The Team is very concerned with the slow progress of the sub-project and requested Tansen municipality to monitor the progress closely and take necessary action to expedite the works with support from the PCO. The Team has not yet received updated work schedule and the performance monitoring chart of this sub-project.

Dhankuta Weekly Market Infrastructure Improvement sub-project: 23. This sub-project is making good implementation progress. About 60% of physical works have already been completed within 6 months period. The financial progress is about 43%. The implementation progress with construction works is ahead of the contract schedule and the sub-project is on track to be completed by the scheduled date of November 2014.

Dhankuta Hile Market Infrastructure Improvement sub-project: 24. This sub-project has been in procurement stage since long time. There has been significant delay in bid evaluation. The bid invitation notice was published on October 9, 2013 and the received bids were opened on November 13, 2013. But the bid evaluation process has taken long time and the bid evaluation process was only completed on March 21, 2014. The World Bank provided no objection to the evaluation report on March 23, 2014. The municipality will now sign contract agreement with the successful bidder by April 14, 2014.

Mechinagar Gate Beautification sub-project: 25. The bid invitation notice for Mechinagar Gate Beautification sub-project has been published on 9 March 2014 after revising the earlier bid document. The bidding process for this sub-project has been cancelled earlier after it was found that the bidding process did not meet the procurement guidelines. The cost estimate of sub-project has been revised based on rate analysis of the Government for the current Fiscal Year. The revised cost estimate of sub-project is now NRs 14.05 million including contingencies and VAT. The received bids will now be opened on April 9, 2014 and the contract signing is expected to be completed by June 6, 2014.

Mechinagar Gokul Marg Road Improvement sub-project: 26. Mechinagar Municipality has signed contract agreement with the successful bidder for Gokul Marg Road Improvement sub-project on February 4, 2014. The contract amount for the subproject is NRs 32.59 million including VAT. The contractor has commenced the work from March 10, 2014. The construction period of contract is 15 months and the sub-project is expected to be completed by June 2015.

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Status of Track II Municipal Infrastructure Sub-projects Baglung Shahid Smriti Park sub-project: 27. Baglung Municipality has published bid invitation notice for this subproject on January 20, 2014 and opened the bids on February 20, 2014. Altogether 7 bids were received. Municipality is conducting bid evaluation with the support from PCO. The municipality has submitted bid evaluation report to PCO on March 24, 2014. The bid approval process is expected to be completed by April 7, 2014 and the contract signed with the successful bidder by April 28, 2014. The construction period of this subproject is 9 months and so construction works are expected to be completed by February 2015. The total estimated cost of sub-project is NPR 14.815 million including contingencies and VAT.

Baglung Upgrading of Access Road (combined Track I and Track II) sub-project: 28. Baglung Municipality has published the bid invitation notice for this sub-project linking the Mid Hill highway with the municipal office and the deprived communities, on December 27, 2013. The bids were opened on February 10, 2014. Altogether 11 bids were received. The municipality has completed bid evaluation and has submitted the bid evaluation report to the PCO on 19 March 2014. The bid approval process is now scheduled to be completed by April 3, 2014 and the contract signing with the successful bidder completed by April 24, 2014. The construction period of this work is 18 months. The construction works are expected to be completed by November 2015. The total estimated cost of this combined road is NRs 206.05 million including contingencies and VAT.

Tansen Urban roads Upgrading sub-project: 29. The DPR for this sub-project which includes improvement/upgrading of five existing roads in Tansen municipality has been completed. The five roads and their length are: (a) Bus park to Mission Hospital (1.91 Km), (b) Mission Hospital to Eye Hospital (1.61 Km), (c) Gaurishanker to Hollangdi (0.72 Km), (d) Bandevi to Laxmi School (1.00 Km) and (e) Prabash to Baghkhor (1.01 Km). The total estimated cost of sub-project is NPR 125.53 million including contingencies and VAT. The TDF has completed the financial appraisal of the sub-project. The loan agreement between Tansen municipality and TDF has been signed on March 25, 2014. The bid invitation notice has been published on April 1, 2014. The signing of contract with successful bidder is expected to be completed by June 20, 2014.

Tansen Srinagar Park Improvement sub-project: 30. The DPR for Tansen Shrinagar Park Improvement sub-project has been revised and finalized on February 19, 2014. The total estimated cost for the sub-project is now NPR 13.277 million including contingencies and VAT. Tansen Municipality has published the bid invitation notice for the sub-project on March 9, 2014. The municipality will complete bid evaluation by April 30, 2014 and the contract signing is scheduled to be completed by June 5, 2014.

Tansen Multi Purpose Building sub-project: 31. The DPR for multipurpose building sub-project in Tansen has been revised and finalized on February 19, 2014. The total estimated cost of the building is now NPR 29.038 million including contingencies and VAT. The bid invitation notice for the sub-project has been published by the municipality on March 4, 2014. The bid will be opened on April 3, 2014 and

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bid evaluation completed by the municipality by April 24, 2014. The contract signing for the subproject will be completed by May 29, 2014.

Lekhnath Barah Chhetra Improvement sub-project: 32. Lekhnath Municipality has published the bid invitation notice for Barah Chhetra Improvement sub-project on February 16, 2014. The received bids were opened on March 18, 2014. The municipality is currently conducting evaluation of received bids. Bid evaluation is expected to be completed by April 10, 2014. The signing of contract with the successful bidder is expected to be completed by May 15, 2014. The total estimated cost of this sub-project is NPR 11.749 million including contingencies and VAT.

Lekhnath Mandare Park sub-project: 33. The bid invitation notice for Mandare Park sub-project has been published by Lekhnath municipality on January 27, 2014. Only one bid was received which was opened on February 26, 2014. The municipality has completed bid evaluation with the support from PCO and has submitted evaluation report to PCO on March 21, 2014. The signing of contract is expected to be completed by April 25, 2014. The total estimated cost of this sub-project is NPR 5.766 million including contingencies and VAT.

Lekhnath Urban and Peri-urban Roads sub-project: 34. Lekhnath road subproject consists of upgrading/improvement of six existing roads located at various parts of the municipality. The six roads and their lengths are: a) Oil Nigam to Rithe Pani (3.19 Km), b) Dahar No.3 (1.05 Km), c) Dahar No.4 (0.87 Km), d) Wada Sewa Kendra to Deurali Khola (0.79 Km), e) Buddha Tole to Dadapari (1.36 Km) and f) Universal Chowk to Kholako Chheu (1.36 Km). The total estimated cost of this subproject is NPR 150.349 million including contingencies and VAT. The municipality has published bid invitation notice for this subproject on March 11, 2014. The received bids will be opened on April 10, 2014. The bid evaluation will be completed by May 1, 2014 and the contract signing is expected by June 12, 2014.

Mechinagar Agro market sub-project: 35. The residents of Mechinagar municipality have registered a complaint on the land procured by Itahari municipality for construction of proposed agro market. The complaint has been reviewed by the central GRC for the project. The committee has decided not to recommend construction of the proposed agro market with IDA funding. The agro market construction sub-project has therefore been dropped and will not be funded by the project.

Itahari Link Road Improvement sub-project: 36. The DPR of Link Road Improvement sub-project in Itahari Municipality was completed and finalized on February 18, 2014. TDF has signed loan agreement with Itahari municipality on February 18, 2014. The municipality has published the bid invitation notice for the sub-project on March 14, 2014. The received bids will be opened on April 15, 2014 and the evaluation of bid expected to be completed by May 7, 2014. The signing of contract agreement with the successful bidder is expected by June 11, 2014. The total estimated cost of this subproject is NPR 116.849 million including contingencies and VAT.

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Itahari Bridges sub-project: 37. This sub-project consists of construction of two bridges, one over Kheti Khola and other over Tengra Khola in Itahari municipality. The design consultants have prepared the DPR for this sub-project earlier but there was a problem with the approach road to Kheti Khola bridge. The consultants have now re-surveyed the bridge site and have proposed change in the alignment of the bridge. However there is a small piece of private land, which lies along the alignment of approach road to the bridge. The consultants, PCO and the municipalities are working closely to solve the land issue. The DPR will be finalized only after the land issue is resolved. The expected date for finalization of DPR is April 30, 2014. The publication of bid invitation notice is scheduled for May 19, 2014. The contract signing will be completed by August 12, 2014. The construction period of this contract is 18 months; construction works are therefore expected to be completed by March 12, 2016.

Dhankuta Bus Terminal sub-project: 38. The design of Hile Bus Terminal sub-project has been revised to include only the bus terminus and the parking facilities. The shopping complex proposed in the original DPR has been deleted. The finalization of the DPR has however been delayed because of lack of clarity on the right of way of the district road linked to the bus park. The PCO has now received a letter clarifying that the right of way of the district road is only 10 m. This is expected to leave sufficient space for construction of the bus park. The consultants are preparing final designs for the sub-project. The DPR is expected to be completed by April 11, 2014. The publication of the bid invitation notice is scheduled for April 27, 2014. The expected date for contract signing is July 23, 2014.

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Status of Actions Agreed during December 2013 Implementation Support Review

Action Responsibility Original Date

Status

Revised Agreed Date

(of Pending Actions )

Make available to the World Bank work implementation schedules and project monitoring charts for Track I sub-projects under implementation (including safeguard monitoring)

Tansen and Dhankuta Municipalities

December 31, 2013

Delayed. April 15, 2014

Sign contracts for Dhankuta Hile market infrastructure improvement sub-project and Gokul Marg upgrading sub-project (priority action)

Dhankuta and Mechinagar Municipalities

January 13, 2014.

Partially completed, with delays. Contract for Mechinagar Gokul Marg sub-project was signed on February 4, 2014.

Expected date for contract signing is April 14, 2014 for Dhankuta Hile market infrastructure sub-project.

Publish re-bidding notice for Mechinagar Gate beautification sub-project

Mechinagar Municipality

December 31, 2013

Completed with delay on March 9, 2014

Award contract for Mechinagar Gate beautification sub-project

Mechinagar Municipality

March 17, 2014

Delayed. June 6, 2014

Publish bid invitation notices for the first nine Track II sub-projects

Municipalities January 10, 2014

Completed with delay. Bid notice publication of 9 sub-projects completed.

Sign contracts for the first nine Track II sub-projects

Municipalities April 6, 2014

Delayed June 20, 2014

Inform the Team about the feasibility of the remaining three Track II sub-projects and future course of action by.

PCO

January 15, 2014

Completed with delay on March 24, 2014.

Publish bid invitation notices for the remaining three Track II sub-projects.

Municipalities February 15, 2014

Delayed May 19, 2014

Complete contract signing for the remaining three Track II sub-projects

Municipalities May 12, 2014.

Delayed August 12, 2014

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Actions for Capacity Building for Municipal Infrastructure Development Component • The PCO will make available to the World Bank work implementation schedules and

project monitoring charts for Track I sub-projects under implementation (including safeguard monitoring) by April 15, 2014.

• Municipalities will sign contracts for the sub-projects under procurement based on the

following schedule: (i) three municipal sub-projects by April 30, 2014; (ii) two additional municipal sub-projects by May 30, 2014; (iii) five additional municipal sub-projects (including Track I Mechinagar Gate Beautification sub-project) by June 20, 2014. (priority action)

• Municipalities will publish bid invitation notices for Dhankuta Hile Bus Park and Itahari

Bridge Construction sub-projects by April 27, 2014 and May 19, 2014 respectively (priority action).

• Tansen municipality with support from the PCO will assess the causes of non-

performance and take appropriate actions to address the construction delays, and provide an update on status to the team by April 30, 2014.

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Table 3: Loan and Grant Commitments for Municipal Sub-projects (as on March 25, 2014)

Municipality Name of Sub Project

Sub Project Category (U=Utility, S=Social)

Infrastructure Financing (in USD '000) (1 USD=95 NPR)

Total Cost IDA (TDF) Loan

IDA (TDF) Grant GoN Grant Municipal

Matching Fund

Track I Sub-projects Mechinagar Mechinagar Gate Beautification Project S 148 15 66 53 15

Upgrading of Gokul Marg U 343 (A) 103 114 91 34 Dhankuta Weekly Market Infrastructure Improvement S 172 (A) 17 76 61 17

Hile Market Infrastructure Improvement S 364 (A) 36 162 130 36 Tansen Amar Narayan Temple Conservation S- 58% U - 42% 362 (A) 67 144 115 36 Consulting services (DPRs , safeguards and supervision) 130 0 117 0 13 Track II Sub projects

Itahari Improvement of Link Road U 1230 369 410 328 123 Construction of Bridges in the Link Road U 1032 310 344 275 103

Dhankuta Improvement of Hile Bus Park S 158 16 70 56 16 Baglung Improvement of Shahid Smriti Park S 156 16 69 55 16

Upgrading of Baglung Access Road U 2169 651 723 578 217 Tansen Improvement of Existing Road U 1321 396 440 352 132

Improvement of Shreenagar park S 140 14 62 50 14 Construction of Multipurpose Building U 306 92 102 82 31

Lekhnath Improvement of Barah Chhetra Park S 124 12 55 44 12 Improvement of Mandare Park S 61 6 27 22 6 Improvement of Existing Road U 1583 475 527 422 158

Consulting services (supervision) 345 0 310 0 34 Total 10,143 2,594 3,820 2,715 1,014 TDF service fee (1.5% of grant disbursement) 0 0 57 0 0

Contingency for sub-projects under implementation 186 33 75 60 19

Contingency for sub-projects under procurement 843 237 290 232 84

Grand Total 11,171 2,864 4,241 3,006 1,117

(A) = Actual

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Table 4: Timeline for Track I Sub-projects

SN Sub-Projects Bid Notice

publication Bid

Opening Bid

Evaluation

Bid Approval from various

agencies

Completion of IEE and

approval by MoFALD

Contract Signing

Construc- tion Starts

by

Construction Period Remarks

Months Comple- tion Date

1 Dhankuta Hile Market

O - 8-Nov-13 22-Nov-13 6-Dec-13 30-Nov-13 13-Dec-13 12-Jan-14 15 11-Apr-15

R - - 6-Dec-13 22-Dec-13 29-Dec-13 13-Jan-14 28-Jan-14 15 27-Apr-15

R1 28-Mar-14 14-Apr-14 14-May-14 15 14-Aug-15

A 9-Oct-13 13-Nov-13 10-Feb-14 23-Mar-14

2 Mechinagar

Gate Beautification

O 7-Jun-13 8-Jul-13 30-Oct-13 15-Nov-13 N/A

R 25-Dec-13 24-Jan-14 9-Feb-14 24-Feb-14 N/A 17-Mar-14 2-Apr-14 15 1-Jul-15 Rebidding

R1 9-Apr-14 30-Apr-14 15-May-14 N/A 6-Jun-14 5-Jul-14 15 4-Oct-15 Rebidding

A 9-Mar-14 Rebidding

3 Mechinagar Gokul Marg

O - 31-Oct-13 15-Nov-13 30-Nov-13 N/A 7-Dec-13 6-Jan-14 15 5-Apr-15

R - - - 22-Dec-13 N/A 13-Jan-14 28-Jan-14 15 27-Apr-15

R1 - - - - N/A - - 15 9-Jun-15

A 30-Sep-13 11-Nov-13 6-Dec-13 13-Jan-14 N/A 4-Feb-14 10-Mar-14

O = original as of Oct 2013, R= Revised as of Dec 2013, R1= Revised on March 20, 2014, A= Actual as of March 24, 2014.

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Table 5: Timeline for Track II Sub-projects

S.N. Sub-Projects Preparation of EMP DPR finalized

DPR Clearance from central

agencies

Endorsement from the

municipality

Bidding Documents

Finalized

TDF appraisal completed

Approval from World Bank

Appraisal Approved

by TDF Board

1 Baglung Sahid Smriti Park Development

R 15-Dec-13 15-Dec-13 15-Dec-13 15-Dec-13 16-Dec-13 9-Dec-13 9-Dec-13 16-Dec-13 R1 A 3-Mar-14 15-Jan-14 NA 12-Dec-13 15-Jan-14 29-Dec-13 15-Jan-14 29-Dec-13

2 Baglung Upgrading of Access Road

R 15-Dec-13 3-Dec-13 NA 15-Dec-13 5-Dec-13 5-Dec-13 5-Dec-13 NA R1 A 10-Mar-14 24-Dec-13 NA 12-Dec-13 24-Dec-13 16-Dec-13 24-Dec-14 16-Dec-13

3 Tansen Upgrading of Road

R 25-Dec-13 22-Dec-13 25-Dec-13 25-Dec-13 29-Dec-13 29-Dec-13 3-Jan-14 6-Jan-14 R1 A 3-Mar-14 26-Feb-14 NA 9-Dec-14 11-Mar-14 19-Mar-14 19-Mar-14 23-Mar-14

4 Tansen Multi Purpose Building

R 25-Dec-13 22-Dec-13 25-Dec-13 25-Dec-13 20-Dec-13 20-Dec-13 22-Dec-13 24-Dec-13 R1 A 3-Mar-14 19-Feb-14 NA 9-Dec-13 19-Feb-14 12-Jan-14 21-Feb-14 12-Jan-14

5 Tansen Shrinagar Park Improvement

R 25-Dec-13 22-Dec-13 25-Dec-13 25-Dec-13 29-Dec-13 29-Dec-13 3-Jan-14 6-Jan-14 R1 A 16-Mar-14 19-Feb-14 NA 9-Dec-13 19-Feb-14 29-Dec-13 27-Feb-14 29-Dec-13

6 Lekhnath Barah Chhetra Improvement

R 15-Dec-13 15-Dec-13 15-Dec-13 15-Dec-13 20-Dec-13 16-Dec-13 19-Dec-13 24-Dec-13 R1 A 16-Mar-14 9-Feb-14 NA 11-Dec-13 9-Feb-14 29-Dec-13 11-Feb-14 29-Dec-13

7 Lekhnath Picnic Spots at Mandare Park

R 15-Dec-13 15-Dec-13 15-Dec-13 15-Dec-13 20-Dec-13 16-Dec-13 19-Dec-13 24-Dec-13 R1 A 16-Mar-14 19-Jan-14 NA 11-Dec-13 19-Jan-14 29-Dec-13 24-Jan-14 29-Dec-13

8 Lekhnath Upgrading of Roads

R 15-Dec-13 15-Dec-13 15-Dec-13 15-Dec-13 20-Dec-13 16-Dec-13 19-Dec-13 24-Dec-13 R1 A 3-Mar-14 19-Feb-14 NA 11-Dec-13 19-Feb-14 29-Dec-13 25-Feb-14 29-Dec-13

9 Itahari Upgrading of Link Road

R 25-Dec-13 22-Dec-13 25-Dec-13 25-Dec-13 29-Dec-13 29-Dec-13 3-Jan-14 6-Jan-14 R1 A 12-Mar-14 18-Feb-14 NA 24-Jan-14 23-Feb-14 17-Feb-14 26-Feb-14 17-Feb-14

10 Itahari Construction of Bridges

R 15-Jan-14 21-Jan-14 31-Jan-14 31-Jan-14 3-Feb-14 3-Feb-14 6-Feb-14 10-Feb-14

R1 30-Apr-14 30-Apr-14 30-Apr-14 4-May-14 30-Apr-14 7-May-14 12-May-14 14-May-14 A

11 Dhankuta Hile Bus Park

R 15-Jan-14 21-Jan-14 31-Jan-14 31-Jan-14 3-Feb-14 3-Feb-14 6-Feb-14 10-Feb-14 R1 11-Apr-14 11-Apr-14 NA 14-Apr-14 11-Apr-14 16-Apr-14 18-Apr-14 21-Apr-14 A

R= Revised as of Dec 2013, R1= Revised on March 31 2014, A = Actual as of March 31, 2014

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S.N. Sub-Projects

Loan Agreement Signed with TDF

Bid Notice publication

Bid Opening

Bid Evaluation

Bid Approval

from various

agencies

Contract Signing

Construction Starts by

Construction Period

Months Completion date

1 Baglung Sahid Smriti Park Development

R 20-Dec-13 25-Dec-13 24-Jan-14 14-Feb-14 28-Feb-14 21-Mar-14 6-Apr-14 9 5-Jan-15 R1 7-Apr-14 28-Apr-14 28-May-14 9 28-Feb-15 A 31-Dec-13 20-Jan-14 20-Feb-14 24-Mar-14

2 Baglung Upgrading of Access Road

R 11-Dec-13 13-Dec-13 12-Jan-14 11-Feb-14 13-Mar-14 20-Mar-14 19-Apr-14 18 R1 3-Apr-14 24-Apr-14 24-May-14 18 24-Nov-15 A 19-Dec-13 27-Dec-13 10-Feb-14 19-Mar-14

3 Tansen Upgrading of Road

R 11-Dec-13 13-Dec-13 12-Jan-14 11-Feb-14 13-Mar-14 20-Mar-14 19-Apr-14 18 R1 25-Apr-14 16-May-14 30-May-14 20-Jun-14 20-Jul-14 18 20-Jan-16 A 25-Mar-14 1-Apr-14

4 Tansen Multi Purpose Building

R 11-Dec-13 13-Dec-13 12-Jan-14 11-Feb-14 13-Mar-14 20-Mar-14 19-Apr-14 15 R1 3-Apr-14 24-Apr-14 8-May-14 29-May-14 28-Jun-14 15 27-Sep-15 A 22-Jan-14 4-Mar-14

5 Tansen Shrinagar Park Improvement

R 11-Dec-13 13-Dec-13 12-Jan-14 11-Feb-14 13-Mar-14 20-Mar-14 19-Apr-14 R1 9-Apr-14 30-Apr-14 15-May-14 5-Jun-14 5-Jul-14 9 5-Apr-15 A 31-Dec-13 9-Mar-14

6 Lekhnath Barah Chhetra Improvement

R 11-Dec-13 13-Dec-13 12-Jan-14 11-Feb-14 13-Mar-14 20-Mar-14 19-Apr-14 R1 10-Apr-14 25-Apr-14 15-May-14 15-Jun-14 12 15-Jun-15 A 31-Dec-13 16-Feb-14 18-Mar-14

7 Lekhnath Picnic Spots at Mandare Park

R 11-Dec-13 13-Dec-13 12-Jan-14 11-Feb-14 13-Mar-14 20-Mar-14 19-Apr-14 R1 4-Apr-14 25-Apr-14 24-May-14 9 24-Feb-15 A 31-Dec-13 27-Jan-14 26-Feb-14 21-Mar-14

8 Lekhnath Upgrading of Roads

R 11-Dec-13 13-Dec-13 12-Jan-14 11-Feb-14 13-Mar-14 20-Mar-14 19-Apr-14 R1 10-Apr-14 1-May-14 16-May-14 12-Jun-14 12-Jul-14 18 12-Jan-16 A 31-Dec-13 11-Mar-14

9 Itahari Upgrading of Link Road

R 11-Dec-13 13-Dec-13 12-Jan-14 11-Feb-14 13-Mar-14 20-Mar-14 19-Apr-14 R1 15-Apr-14 7-May-14 21-May-14 11-Jun-14 11-Jul-14 18 11-Jan-16 A 18-Feb-14 14-Mar-14

10 Itahari Construction of Bridges

R 11-Dec-13 13-Dec-13 12-Jan-14 11-Feb-14 13-Mar-14 20-Mar-14 19-Apr-14 R1 16-May-14 19-May-14 18-Jun-14 7-Jul-14 22-Jul-14 12-Aug-14 12-Sep-14 18 12-Mar-16 A

11 Dhankuta Hile Bus Park

R

10-Mar-14 9-Apr-14 19-Apr-14 1-May-14 11-Apr-14 21-Apr-14 18 20-Oct-15

R1 24-Apr-14 27-Apr-14 27-May-14 17-Jun-14 2-Jul-14 23-Jul-14 22-Aug-14 12 21-Aug-15 A

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Table 6: Status of Contracts for Track I and Track II Subprojects (USD)

S.N. Sub- Project Name Estimated Amount

(US$)

Contract Amount

(US$)

Contract Date (Actual/

Estimated)

Construction period

(Month)

Disbursement till

June 2013 (US$)

Disbursement in FY 2013-14 (Quarters) Cumulative

Annual First Qtr

Second Qtr

Third Qtr

Fourth Qtr

Actual Actual Actual Est.

Track I Sub-projects

1 Tansen Amar Narayan Temple Conservation 397,061 362,402 20-Jun-13 (A) 15 0 25,719 0 0 87,180 112,899

2 Dhankuta Market Area Improvement 187,853 171,693 12-Jul-13 (A) 15 0 12,102 44,000 17,000 66,160 139,262

3 Dhankuta Hile Market Area Improvement 408,256

13-Jan-14 (O)

15 N/A 0 0 0 44,092 44,092 14-Apr-14 (R)

4 Mechinagar Gate Beautification 147,912

22-Nov-13 (O)

15 N/A 0 0 0 15,975 15,975 6-Jun-14 (R)

5 Mechinagar GokulMarga Road 682,311 343,030 4-Feb-2014 (A) 15 N/A 0 0 0 52,827 52,827

Total for Track I Sub-projects 1,728,236 37,821 44,000 17000 266,233 365,054

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S.N Sub- Project Name Estimated Amount (US$)

Contract Amount

(US$)

Contract Date

(Actual/ Estimated)

Constru- ction

Period (Month)

Disbursement till June

2013 in US$

Disbursement in FY 2013-14 (Quarters) Cumula-

tive Annual First Qtr

Second Qtr

Third Qtr

Fourth Qtr

Actual Actual Actual Est. Est

Track II sub-projects

1 Baglung Sahid Smriti Park Development 155,956 N/A 28-Apr-14 9 N/A 0 0 0 16,843 16,843

2 Baglung Upgrading of Road 2,192,462 N/A 24-Apr-14 18 N/A 0 0 0 236,786 236,786

3 Tansen Upgrading of Roads 1,321,322 N/A 20-Jun-14 18 N/A 0 0 0 0 0

4 Tansen Multi Purpose Building 305,672 N/A 29-May-14 15 N/A 0 0 0 22,008 22,008

5 Tansen Shrinagar Park Improvement 139,762 N/A 5-Jun-14 9 N/A 0 0 0 10,063 10,063

6 Lekhnath Barah Chhetra Improvement 123,681 N/A 15-May-14 12 N/A 0 0 0 8,905 8,905

7 Lekhnath Picnic Spots at Mandare Park 60,700 N/A 25-Apr-14 9 N/A 0 0 0 6,556 6,556

8 Lekhnath Upgrading of Road 1,582,631 N/A 12-Jun-14 18 N/A 0 0 0 0 0

9 Itahari Upgrading of Link Road 1,229,991 N/A 11-Jun-14 18 N/A 0 0 0 0 0

10 Itahari Construction of Bridges 1,031,731 N/A 12-Aug-14 18 N/A 0 0 0 0 0

11 Dhankuta Hile Bus Park 157,895 N/A 23-Jul-14 12 N/A 0 0 0 0 0

Total of Track II sub-projects 8,301,802 0 0 0 301,161 301,161

Consulting services 310,379

31,038 5,000 5,000 18,300 59,338

Total of Track I & II Sub-projects and consulting services 10,340,417

68,859 49,000 22,000 585,694 725,553

A = Actual date; O=Original estimated date; R = Revised estimated date 1 US$ = NPR 95.00

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I.III Institutional Development Component

9. Good progress has been made with the implementation of the institutional development activities for the municipalities since the December 2013 implementation support review. Some progress has also been made with the recruitment of consultant for the institutional development activities for the MoUD. However, institutional development activities for DUDBC, TDF, MoFALD and UDTC are lagging behind. This section reviews institutional development activities for the (a) municipalities; (b) DUDBC; (c) TDF (including BRAP); (d) MoFALD; (e) MoUD; and (f) UDTC, and review M&E system and performance.

(a) Institutional Development for the Municipalities 39. The institutional development component for the municipalities aims to provide the participating municipalities with a systemic method to plan their O&M expenditures and capital investments based on their own and assigned sources of revenues. Specifically, this component provides support to municipalities for enhancing own-source revenues, prioritizing O&M expenditure based on a costed inventory of assets needing repair and using the surplus for new investments through borrowings. The PCO through the MST supports all these activities in the municipalities, including (a) preparation and annual update of Revenue Enhancement Plans (REPs), O&M Plans and Investment Plans, (b) assisting the municipalities in budgeting the performance targets included in the plans, with a focus on increasing own-source revenue, increasing O&M expenditure based on prioritized needs and budgeting for new investments; and (c) supporting the municipalities with the implementation of the plans, including the development of a revenue billing software and the organization of collection drives to improve revenues; and (d) documenting and monitoring achievements in the implementation of the plans. Three municipalities – Dhankuta, Itahari and Tansen – have prepared REPs, O&M Plans and Investment Plans in FY 2013/14 in line with the PDO target indicator.

Performance Agreements and Implementation Plans 40. The three municipalities have signed with the PCO performance agreements specifying the responsibilities of both parties and the target achievements for the implementation of REPs, O&M Plans and Investment Plans in December 2013. The municipalities have approved the REPs, O&M Plans and Investment Plans in January 2014, and the PCO provided support to the municipalities for incorporating the performance targets in the FY 15 budgeting process. These achievements were documented by the PCO and evidence submitted to the World Bank on March 31, 2014. The Team noted that the finalization and the costing of the implementation plans for the REPs, O&M Plans and Investment Plans have however been delayed. It has been agreed that the PCO would finalize and cost the implementation plans and send them to the Team for review by April 15, 2014.

41. The Team emphasized the importance of closely monitoring achievements and implementation of the plans as per the signed performance agreements. The PCO needs to properly document progress in achieving the targets set in the performance agreements as well as the support provided to the municipalities by the project (including support to the budgeting process and support to prioritizing O&M expenses).

Revenue enhancement plans (REP). 42. The three municipalities – Dhankuta, Itahari and Tansen – have incorporated the revenue targets in their budgets for FY 2014/15 with respect to overall own-source revenue including

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Integrated Property Tax (IPT) and Business Tax. On this basis the municipalities have also developed Financial Operating Plans that project these revenues and expenditures and enable the estimation of surplus available for O&M and investments. During FY 2014/15, the PCO will assist the municipalities in organizing collection campaigns . The PCO will prepare a detailed action plan for revenue collection campaign and submit it to the Team for review as part of the finalization of the implementation action plan by April 15, 2014.

O&M Plans. 43. Based on the costed inventory of the municipal assets prepared by the PCO, all three municipalities have budgeted an increase in the O&M expenditures for FY 2014/15 in line with the target expenditures in their Financial Operating Plans. The municipalities used the O&M plans for the budgeting of O&M expenses and deciding priorities. The actual assets chosen for repair include those in the asset inventory as well as other investments based on local decisions. The Team recommended to the PCO that the updating of the asset inventories and O&M Plans for FY 2015/16 be carried out in conjunction with the municipal budgeting process so as to ensure relevance of the inventory to actual field conditions. The PCO would include the support required for updating the O&M Plans in the implementation action plan to be finalized and costed by April 15, 2014. Investment Plans. 44. All three municipalities have budgeted their capital investment plans, and incorporated the borrowings from TDF and ensuing debt service in their projected cash flows. The own-source contributions to the borrowing and the phasing of capital expenditures as per project needs has also been completed. The capital investment plans also contain the risks perceived and measures to address these risks. The PCO will monitor progress so that targeted expenditures are achieved in the annual and multiyear investments.

Billing Software Development 45. The PCO has mobilized a team of consultants to assess the software requirements and costs for introducing billing for Integrated Property Tax (IPT) and integrating IPT with business and rent taxes and other related fees. The Team has mobilized resources from AusAID to recruit a team of international consultants to support the PCO with this assignment. The software would have the capacity to separate tax demands into arrear and current due and hence provide an accurate measure of collection effort. The consultants are expected to provide a detailed ToR for software development by April 15, 2014. The PCO would issue the Request for Expression of Interest (REOI) for procuring this software by May 1, 2014 and ensure the consultant for the software development is in place by July 15, 2014. The PCO would also consult with MOFALD to ensure conformity with the ongoing LGCDP program.

Equipment. 46. The approved annual program for FY 2013/14 includes procurement of IT equipment required for the municipalities. The PCO has carried out a rapid IT needs assessment in the municipalities to finalize the list of IT equipment to be procured. Based on this list, the PCO is expected to complete the procurement of the equipment for the municipalities this fiscal year. The bid documents have been prepared and the procurement process is expected to start by April 10, 2014 for the first batch of equipment. The contract for the purchase of the equipment is expected to be signed by June 15, 2014. The bid process for the second and remaining batch of IT equipment will be done next Fiscal Year.

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Training 47. The PCO will prepare a plan to provide trainings to the municipalities on critical areas such as bid evaluation, contract management and financial management for this Fiscal Year. It has been agreed that procurement and financial management trainings will be held for all municipalities and project agencies in the month of April. Status of Actions Agreed during the December 2013 Implementation Support Review

Action Responsibility Original Date Status

Proposed Revised

Date (of Delayed

Actions) Send the REPs, O&M Plan and Investment Plans to the three municipalities

PCO December 31,2014 Completed with delay.

Submit the World Bank the signed Performance Agreements with the three municipalities

PCO December 31,2014 Completed. The Performance Agreements were signed on Dec 23 (Dhankuta), Dec 24 (Itahari) and Dec 26 (Tansen) of 2013. The signed agreements were submitted to the World Bank on Jan 2, 2014.

Send support team to municipalities to assist municipalities in budgeting the targets in the REP, O&M Plan and Investment Plan

PCO January 15,2014 Completed.

Submit the finalized budget as part of the reporting requirements under the Performance Agreements

Municipalities with the support from PCO

February 28,2014 Completed with delay. These achievements were documented by the PCO and evidence submitted to the World Bank on March 31, 2014

Include the IPT software development in FY 14 work

PCO January 15, 2014 Delayed April 30, 2014

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plan in lieu of FMIS Finalize and cost the implementation action plan for REPs, O&M Plans and Investment Plans

PCO January 31,2014 Delayed April 15, 2014

Submit the World Bank the TOR for carrying out an assessment of the existing revenue management software and identifying requirements for developing a GIS-linked billing software in the municipalities

PCO January 10,2014 Completed with delay

Hire consultants for carrying out an assessment of the existing revenue management software and identifying requirements for developing a GIS-linked billing software in the municipalities

PCO January 31, 2014 Completed with delay

Complete the assessment of the existing revenue management software and identifying requirements for developing a GIS-linked billing software in the municipalities

PCO February 28,2014 In the process of being completed, with delays.

April 15, 2014

Issue EOI for the procurement of the consultant for billing software development

PCO March 15,2014 Delayed May 1, 2014

Mobilize the consultant for billing software development

PCO June 30, 2014 Not yet due. July 15, 2014

Actions for Institutional Development Component for Municipalities

• The PCO will document in writing to the Team the support provided to the three municipalities for budgeting of REP, O&M Plans and Investment Plans by April 15, 2014

• The PCO will finalize and cost the implementation action plans (including activities such as billing software development, collection campaigns and surveys) and send it to the Team by April 15, 2014

• The PCO will issue the request for EOI for the billing software development by May 1, 2014 and hire the consultant by July 15, 2014

• The PCO will finalize the bid documents for the first batch of IT equipment and start the procurement process by April 10, 2014 and sign contact by June 15, 2014.

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(b) Institutional Development for the DUDBC 10. The procurement of consultants for the institutional development component related activities under DUDBC has been delayed; as a result, there has been limited progress under this component. Main progress since December 2013 include the recruitment of consultants for the preparation of building bye-laws for three municipalities and the publication of the EoI for the Drainage Master Plan in Itahari. Progress with the recruitment of consultants for the institutional development activities is as follows:

11. Building and planning bye-laws for three municipalities. The Team provided comments on the Terms of Reference (ToR) for the preparation of the building and planning bye-laws for three municipalities on February 13, 2014 and received a copy of the revised during the Mid Term Review. The ToRs has addressed most of the Bank’s earlier comments. The Team learnt that the bye-laws are at and advance stage of preparation; the first draft is expected to be completed by April 15, 2014 and the bye-laws will be finalized by May 31, 2014. The Team noted that it would be critical to review the bye-laws to ensure that they are in line with the building bye-laws framework under preparation by MoUD. The Team reminded the PCO that ToRs for all assignments have to be reviewed and approved by the World Bank before activities are initiated.

12. Preparation of GIS maps in the six participating municipalities. The procurement process for the GIS maps was cancelled in March 2014 for the second time as per the recommendation of the evaluation committee. The process of re-bidding has been initiated based on Consultant Qualification Selection (CQS). The continuous delay in the procurement of this activity is concerning for the Team given that the mapping of properties will have to be linked with the billing system for the municipalities. It has been agreed that the new EOI notice for the GIS maps will be re-published by April 15, 2014 and the procurement process would be completed by September 30, 2014.

13. Drainage Master Plan for Itahari Municipality. The Team has provided its comment on the ToRs for the proposed Itahari Drainage Master Plan study. The ToRs encompass two assignments – preparation of a drainage master plan as well as carrying out some detailed engineering designs. The PCO is now considering reviewing the ToRs to separate the two assignments. The Team agreed to separate the activities or conducting them in a phased manner under one ToR. If a phasing approach is adopted, the first phase would entail preparing a drainage master plan and have it approved by the appropriate authorities and the second phase would entail conducting a detail engineering study for the urgent or immediate works to alleviate the drainage problems. The EoI for the drainage master plan has been published on March 28, 2014. The Team looks forward to receive the revised ToRs and a schedule, from processing to completion, for the study.

14. Equipment for GIS unit of DUDBC and municipalities. There has been delay in procuring the equipment for establishing the GIS unit for DUDBC and the municipalities. The list of hardware and software for information systems needs to be finalized and the procurement process started by May 15, 2014.

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Status of Actions Agreed during December 2013 Implementation Support Review

Action Responsibility Original Date Status

Revised Agreed Date

(of Pending Actions)

Mobilize consulting firm for GIS urban maps

DUDBC January 31, 2014

Delayed: procurement process cancelled and needs to be restarted.

September 30, 2014

Award the contract for third-party monitoring

PCO January 31, 2014

Delayed: technical evaluation is ongoing. See safeguard section.

June 20, 2014

Submit the ToR to the World Bank for preparation of building bye-laws in three municipalities

DUDBC January 15, 2014

Completed with delay.

Prepare a preliminary model bye-law and draft specific bye-laws for three municipalities

DUDBC March 30, 2014 In process. April 15, 2014

Actions for Institutional Development Component for DUDBC

• The PCO will submit to the World Bank for review the preliminary model bye-law and draft specific bye-laws for three municipalities by April 15, 2014 and finalize the bye-laws for three municipalities by May 30, 2014.

• The PCO will finalize the ToR for Master Plan for Drainage in Itahari Municipality by April 20, 2014.

• The PCO will re-publish the EoI for the GIS maps by April 15, 2014 and complete the procurement process by September 30, 2014.

• The PCO will finalize the list of hardware and software for the GIS unit of DUDBC and the municipalities by May 15, 2014.

(c) Institutional Development for the TDF and Business Restructuring Action Plan 48. The BRAP has been under implementation since FY 2011-12. The critical actions under the BRAP for strengthening TDF’s financial health (conversion of debt into equity), open access lending policies and improved security mechanisms (with the adoption of escrow accounts) have been completed. However, the BRAP requires an update to take into account changes in circumstances external to the TDF. The Team and the TDF carried out a review of the BRAP with the objective of removing from the IDA review: (a) activities whose implementation was

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considered pre-mature given current market conditions and TDF’s financial situation (such as issuance of bonds and PPP lending) as well as (b) activities which are funded by and required concurrence of other development partners (such as uniform lending policies and approval of Revolving Fund guidelines). New actions have been added (preparation of a municipal finance strategy) and existing activities under the ID component of the BRAP have been streamlined (such as training and appraisal strengthening). It was agreed that the TDF would obtain its board approval for the revised BRAP by June 30, 2014 and submit it to the World Bank.

49. The Team reviewed progress made with the institutional development activities of TDF. The TDF has completed the gap analysis for micro banking. The borrowing capacity analysis for 15 municipalities has been completed by the consultant. The TDF will review the consultant’s report and shared it with the Team and the municipalities by April 30, 2014. Two regional trainings n TDF lending policies have been carried out for all 58 municipalities on January 23-24, 2014 in Pokhara and on February 19-20, 2014 in Biratnagar; the third training will be completed by June 30, 2014. The preparation of the ToRs for the institutional development activities for TDF for FY 2013/14 has however been significantly delayed. It was agreed that the TDF will finalize the revised ToRs (including costing and timeline for completion) for the following assignments by April 30, 2014:

• Review of TDF’s financial appraisal manual and training of TDF staff in financial analysis

• Legal review of TDF’s capital structure • Brochures for borrowers • Policy brief on municipal financing

It was agreed that the preparation of brochures for borrowers and the legal review of the TDF’s capital structure would be completed by June 30, 2014. The TDF would discuss with MoUD whether a thought piece/policy brief on municipal finance could be prepared as an input to the National Urban Development Strategy (NUDS) before proceeding with the finalization of the ToR, given the short timeframe for completion of the NUDS. It was agreed that the development of management contracts for municipal sub-projects would be done by the PCO under the institutional development component for municipalities, and therefore it will be dropped from the list of activities funded by TDF in FY 2013/14. The TDF has requested the hiring of the Deputy Manager (Project Development) in lieu of a director level position. TDF would send separate proposal for the same to seek World Bank concurrence through PCO.

50. A review of TDF’s financial status measured by standard metrics of capital adequacy, asset quality, earnings and liquidity was carried out as part of the review. The analysis show:

• Significant capital at risk, especially loans under the Small Towns Water Supply and Sanitation (STWSSP) II project as these loans will become due on June 2015 despite doubts on whether the sub-projects would be ready by then

• Over 65% of earnings from water users associations that are already in default of 41% as of June 2013

• 50% of assets in liquid form of fixed deposits – inappropriate for a long term lender • Overall recovery rate of 78% as on July 2013.

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While the TDF is on track to achieve the target indicator of 80% collection rate for FY 2013/14, the 90% target for FY 2015-16 is unlikely to be achieved without significant actions to improve collection. These facts indicate the need for TDF’s debt finance to be unlocked by matching grants from GON. At present TDF is in a situation where debt finance meant for long-term infrastructure is locked up in short-term bank accounts due to distortions in the municipal financing system. It was agreed that the TDF could prepare a policy brief including a situation analysis and proposed actions needed at GON/TDF levels to address these distortions.

Action Responsibility Original Date Status

Proposed Revised

Date (of Pending

Actions) Hire a consultant for establishment of escrow accounts

TDF January 31, 2014 Completed.

Adopt escrow based mechanism

TDF June 30, 2014 Completed in February 2014

Submit Revolving Fund Guidelines for GoN concurrence

TDF January 31,2014 Completed in January 2014. GoN returned it with queries to TDF.

Re-submission to GON by July 30, 2014

Procure software for micro-banking and MIS in consultation with GIZ

TDF January 31,2014 Delayed June 30, 2014

Install micro banking and MIS

TDF June 30, 2014 Not yet due.

Submit TOR to the World Bank for hiring of a consultant to provide options to GON on capital stricture

TDF December 31,2013 Delayed April 30, 2014

Hire a consultant to provide options to GON on capital stricture

TDF January 31,2014 Delayed May 30, 2014

Submit TOR to the World Bank for the review of the BRAP

TDF December 31,2013 Delayed and dropped

Hire a consultant to review BRAP

TDF January 31,2014 Delayed and dropped

Submit financial achievements against the business plan targets

TDF December 31,2014 Completed with delay.

Submit TOR to the World Bank for preparation of brochures for borrowers and development of generic

TDF December 31,2013 Delayed April 30, 2014

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management contract Hire consultants for preparation of brochures for borrowers

TDF January 31, 2014 Delayed

May 30, 2014

Development of generic management contract

TDF January 31, 2014 Dropped

Resolve the default situation with GON

TDF June 30, 2014 Not yet due.

Actions for Institutional Development Component for TDF

• The TDF will finalize the revised ToRs to the Team for the 4 agreed consultancies including cost estimates and timeline by April 30, 2014.

• The TDF will complete the review of borrowing capacity analysis and share the results with the Team and the municipalities by April 30, 2014

• The TDF will obtain its Board approval for the revised BRAP and communicate the approval to the World Bank by June 30, 2014.

• The TDF will complete the brochures for borrowers and the legal review of TDF’s capital structure by June 30, 2014.

• The TDF will procure software for micro-banking and MIS in consultation with GIZ by June 30, 2014.

• The TDF would resolve the default situation with GON by June 30, 2014.

(d) Institutional Development for the MoFALD 15. The Team noted with concern that institutional development activities of the MoFALD have been significantly delayed. The preparation of ToRs for policy guidelines and procedures for governance and budget planning for the municipalities was suspended by MoFALD on the ground that the Municipal Management Division (MMD) of MoFALD had started the same assignment. A meeting with officials at MoFALD was held to discuss the scope of the activities to be funded under the project and ensure coordination with programs carried out by other divisions within MoFALD. It was agreed that the project would continue funding the policy guidelines and procedures for governance and budget planning for the municipalities since this activity is monitored as part of the results framework, and coordination with other divisions within MoFALD will be ensured to avoid duplication. Preparation of ToR for this assignment will therefore resume. It was agreed that the project would fund the preparation of guidance material (e.g. templates and forms) to support the municipalities implement the budget planning framework prepared by MoFALD. It was agreed that the MoFALD would submit to the Team a copy of the framework document for budget planning for which the guidance material will be prepared. It was agreed that ToR for the assignment would be timely finalized by April 20, 2014 in order to avoid further delays.

16. MoFALD has prepared the draft ToRs to develop the Management Information System (MIS) strategy. The Team has reviewed the ToRs for this assignment and is of the view that this is a very worthwhile initiative to support if proper expert guidance is made available. The system

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that is to be developed should cater to the information and monitoring needs of the government and municipalities. In order to operate the MIS in a sustainable manner, a dedicated unit in MoFALD adequately staffed and funded would be required. The Government’s commitment to maintain the MIS is critical for sustainability. The team discussed the possibility of including the conceptualization of the MIS as well as the development of the MIS under one contract. It was agreed that MoFALD would inform the team on activities to be included under MIS development after consultations within the ministry by April 20, 2014. The team will provide necessary technical support as required for the development of MIS.

17. The MoFALD would like to include the preparation of Transport Master Plans for the municipalities for funding under this component. It was agreed that the Ministry would prepare a short concept note for the proposed new activity for discussion with the Team. The Team reminded the MoFALD all activities funded under this component would need to contribute to strengthening the capacity of the ministry and contribute to the achievement of the PDO. Status of Actions Agreed during December 2013 Implementation Support Review

Action Responsibility Original Date Status

Revised Agreed Date

(of Pending Actions)

Agree on the final ToRs for the assignments and send to World Bank for review

MoFALD December 31, 2013

Delayed April 20, 2014

Hire the consultants for the agreed tasks

MoFALD January 20, 2014

Delayed May 20, 2014

Complete the tasks MoFALD June 15, 2014 Delayed October 20, 2014

Actions for Institutional Development Component for MoFALD

• MoFALD will finalize the ToRs for the preparation of templates for budget planning procedures and submit a copy of the budget planning framework document to the Team by April 20, 2014

• MoFALD will consult with other divisions within the ministry on the scope of the work for MIS to be funded under the project and inform the Team by April 20, 2014

• MoFALD will finalize the ToR for MIS by April 30, 2014 (e) Institutional Development for the MoUD

18. Some progress has been made since the December 2013 implementation support review with the institutional development activities for the MoUD. As per the agreed scope of the institutional development component related activities, the project would support the ministry with the preparation of the National Urban Development Strategy (NUDS). The ToR for the NUDS Team Leader has been agreed with the Team and the recruitment of the consultant has been initiated. The Team noted the very tight timeline of the Ministry for completing the NUDS.

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The target is to complete first draft of the NUDS by April 20, 2014 and finalize the strategy this Fiscal Year. The Team therefore recommended the MoUD to expedite the process of recruitment of the consultant to ensure relevance of his/her inputs to the strategy preparation process. Logistics and equipment for MoUD have been procured in FY 2012/13.

Status of Actions Agreed during December 2013 Implementation Support Review

Action Responsibility Agreed Date Status

Revised Agreed Date

(of Pending Actions)

Finalize the ToR for hiring the consultants

MoUD December 31, 2013

Completed with delay

Hire the consultants for the agreed tasks

MoUD January 15, 2014

Delayed April 15, 2014

Actions for Institutional Development Component for MoUD • Complete the hiring of the NUDS consultant by April 15, 2014. (f) Institutional Development for the UDTC

19. The Team had a meeting in Kathmandu with Urban Development Training Center (UDTC) based in Pokhara to discuss the status of the institutional development activities and review progress. The planned activities for FY 2013/14 include training programs offered to the municipalities in the areas of disaster risk management, planning/budgeting, project management/leadership and solid waste management. While the activities have been delayed, the UDTC confirmed that the training programs would be completed as planned by the end of the Fiscal Year. The Team requested the UDTC to submit regular updates on planned and delivered activities to the PCO. It was agreed that the UDTC would submit the list of activities completed in FY 2012/13 to the PCO, including deliverables such as the training manuals, by April 30, 2014. It was also agreed that the proposed FY 2014/15 activities for funding under the project would be communicated to the PCO by April 15, 2014. Training areas to be supported under the project in FY 2014/15 would be identified based on priority needs emerging from the training needs assessment to maximize impact of the institutional development activities. It was agreed that the UDTC would consider the possibility of developing a training program in procurement and contract management – a priority area for the project municipalities. It was also agreed that institutional support to UDTC for FY 2014/15 would include hiring of consultants as trainers of trainers to strengthen the human resource capacity of the center.

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Actions for Institutional Development Component for UDTC

• The UDTC will prioritize training areas for funding under the project based on training needs assessment and submit the FY 2014/15 work plan to the PCO by April 15, 2014

• The UDTC will submit report documenting activities carried out in FY 2012/13 with project funding to the PCO by April 30, 2014

• The UDTC will complete the planned training activities for FY 2013/14 by June 30, 2014

(g) M&E

20. The PCO has hired an M&E specialist to monitor progress of the project and regularly update the project results framework. The Team noted the need to further strengthen and streamline the M&E system, in particular information collection efforts. The Team reminded the PCO of the importance of developing an integrated M&E reporting system based on standard formats to allow timely collection and consolidation of data and information on the project’s activities from all project agencies and municipalities. For example, the number of expected beneficiaries for each municipal sub-project needs to be consolidated in the M&E reporting system at the PCO level. The Team noted that the preparation of the excel-based template for the results framework has been delayed, and needs to be expedited. It was agree that PCO would submit M&E report with updated results framework to the World Bank within one month of the completion of the each trimester and before each implementation support review. Status of Actions Agreed during December 2013 Implementation Support Review

Action Responsibility Original Date Status

Revised Agreed Date

(of Pending Actions)

Prepare excel-based results framework templates to enable regular collection and consolidation of results indicators from the project agencies and the municipalities

PCO January 31, 2014

Delayed April 30, 2014

Actions for M&E • PCO will prepare excel-based results framework templates to enable regular collection

and consolidation of results indicators from the project agencies and the municipalities by April 30, 2014.

• PCO will submit M&E report with updated results framework to the Team by June 1, 2014.

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ANNEX II: Social and Environmental Safeguards

1. The Team held discussions with the PCO, MST, TDF and executive officers of the six municipalities on the following key areas: (a) safeguard compliance for the civil works funded with the municipal block grants; (b) safeguard issues relating to the municipal infrastructure sub-projects; (c) safeguard capability of the municipalities; (d) third-party monitoring of safeguards compliance; (e) preparation of brochures for the municipal sub-projects, (f) environmental profile of the municipalities, and (g) grievance redress mechanisms. The Team noted that some actions agreed during the December 2013 implementations support review have been fulfilled, some actions have been partially complied with, and a few have been delayed or not-complied. Provided below is a summary of the discussions and agreed actions.

I. Safeguard Compliance for Civil Works Funded by the Municipal Block Grant Mitigation measures for civil works carried out in FY 2012/13.

2. The PCO informed that the annual program (red book) includes activities to complete the following works that were noted as incomplete works in the previous reviews: (i) surface drain in Mechinagar (Construction of Surface drain from Keshab Sapkota’s House to Khola, Ward- 5 and Ward-7), Mechinagar, and incomplete culvert construction (Kamal Chimriya House’s East to Devi Khola Ward No.4), Mechinagar. PCO re-confirmed that these works would be completed within this fiscal year (June 2014) by the municipality.

Screening and field verification for civil works funded by the municipal block grant in FY 2013/14.

3. As agreed during previous review, the following actions have been carried out: (i) the proposal for the Hile Bus Park sub-project has been revised and the scope of work as per the draft revised DPR do not include the Plain Cement Concrete (PCC) work; (ii) Gajur Hotel –Chiyabagan-Tallosijali Tole Road improvement in Dhankuta Municipality exclude road widening in order to avoid taking up of additional lands; (iii) construction of road side drain from east side of Rajan Khadak’s house (Mechinagar) will start from the drain outlet point; (iv) Chameko Kulo- Omshanti Road Construction work (Baglung) is excluded from UGDP-ETP, (v) activities for Baraha Kshetra Promotion (Lekhanath Municipality) have been excluded from UGDP-ETP support. It was agreed that the PCO would follow up with the municipalities to confirm these actions have been taken.

4. The PCO informed that the environmental and social risks of covering the drain/sewer with slab coast in some section of the settlement in Dhankuta Municipality have been reviewed. The review found that this would not have additional environmental and/or social risks; rather it will augment the betterment of the surrounding environment of the settlements. The activity is expected to be completed by June 2014. It was agreed that the PCO would record the finding of the assessment in writing. The Team emphasized the need for due diligence on the issues of indigenous peoples and vulnerable groups as reflected in the ESMF while implementing activities under the municipal block grant.

Screening and field verification for civil works funded by the municipal block grant in FY 2014/15.

5. The PCO confirmed that, as agreed in the previous review, desk screening of the civil works proposed to be funded with the municipal block grant for the fiscal year 2014/15 will be completed by April 2014 and field verification of the same will be done by September 2014.

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Grants to the municipalities will not be released without the reports from the field verification. The PCO informed that to date the list of proposed activities have been received from Dhankuta Municipality.

II Safeguard Issues relating to Municipal Sub-projects 6. Progress has been made with regard to the IEE and EMPs. The Team was informed that the IEE for Dhankuta Hile Market Improvement sub-project has been approved by the MoFALD on March 28, 2014, and requested the PCO to submit the approved IEE to the World Bank. Revised draft EMPs of 9 Track II sub-projects have been prepared. World Bank comments have been shared prior to and during the review. It was agreed that the final EMPs would be submitted by April 30, 2014. Previously, it was agreed that the draft EMPs would be prepared before the publication of bid invitation notices and the EMPs would be finalized before the contracts are awarded. The Team clarified, once again, that there must not be any civil works without approved safeguard documents (IEE, EMP etc.). It was noted that it is the PCO’s responsibility to review the DPRs, engineering designs and bidding documents to ensure that the social and environmental concerns/suggestions noted during the screening and other safeguard documents (such as in the EMP, IEE and various field visit notes) are incorporated. The Team advised that all DPRs, drawings and design details should be verified in the field to check for safeguards issues and the appropriateness of designs specific to a site/ location.

7. In the December 2013 review, it was agreed that the EMPs of the 9 Track II sub-projects would be finalized by January 31, 2014; and EMPs for the remaining Track II sub-projects would be finalized by February 2014. However, finalization of the remaining EMPs has been delayed and they are now expected to be completed by end of April, 2014. Table 6 provides the summary of the progress made in the preparation of safeguard documents until the review.

8. The PCO informed that the scope of work for the sub-project Dhankuta Hile Bus Park has changed, and is under finalization: this will now include only social infrastructure such as ticket counter, toilet and waiting room for elderly people etc. The Team reminded that the detail design of the sub-project should consider access restrictions to the adjacent residents and shops and hold consultations with the likely affected people. Further, environment-friendly design features such as climatic orientation, use of solar energy, rainwater harvesting, recycling/re-use of wastes should also be considered while finalizing the design. These considerations will be addressed in the EMP. The PCO will provide guidance to the municipality on the subject. The Team noted that the central GRC has concluded that the agro-market construction in Dhulabari (Mechinagar) would not be recommended for UGDP-ETP support.

9. Land issues for Itahari Tengra Bridge sub-project. The PCO reported that a small plot of private land may be needed for the Tengra Bridge sub-project (Itahari). But there is no clarity on the amount of the land required as well as the ownership of the land. The Team advised that the land ownership should be confirmed through field verification. The area required for the bridge needs to be demarcated in the ground and a land surveyor (Amin) needs to check the land parcels where the bridge falls. In case private land is needed, the provisions as specified in SMF (Table 8.1, Principle 10) must be followed. Requirements include: (i) fill out the Voluntary Land Donation Agreement Form (see SMF Annex 3a and/or 3b), (ii) in case Affected People (APs) are directly benefiting from the sub-project and thus are willing to voluntarily donate their land after they are fully informed about their entitlements, the municipality will assess their socio-economic status and potential impact of land donation and accept land donation only from those APs who do not fall below the poverty line after the land donation; (iii) in no case land donation shall be received from families living below poverty line and those who are marginal or small

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farmers, and in case land donation involves giving away of more than 10% of the total land holding, such donation may be permitted only after confirming that such donation shall not adversely affect the future economic status of the willing donor. This verification needs to be completed prior to DPR and EMP finalization.

10. Environmental monitoring of ongoing works. Works are ongoing for three sub-projects (Dhankuta Weekly Market Infrastructure Improvement, Amar Narayan Temple Conservation, Tansen, and Upgrading of Gokul Marg, Mechinagar). The Team noted that environmental monitoring is not taking place as envisaged in the ESMF and Project Implementation Manual (PIM) as well as relevant EMPs. The ESMF and PIM require regular monitoring and reporting of environmental and social compliance and performance every three months. PCO informed that the Department of Archeology (DoA) made one site inspection to Amar Narayn Temple Conservation’s sub-project site. There is however no written report on the DoA’s observations and recommendations. The Team agreed that: (i) the PCO will obtain written report from DoA, (ii) the PCO with support from MST will carry out the first of the three-monthly environmental monitoring of the above mentioned ongoing works by April 30, 2104, and (iii) the PCO will ensure that all civil works under municipal sub-projects, from now onward, will be subjected to environmental compliance and performance monitoring every three months.

III Safeguard capability of the municipalities 11. The Team noted that until now, the safeguard related training and awareness raising events listed below have been carried out. Despite the training and awareness raising, it has been noted in the past reviews that the capacity of the municipalities to prepare safeguards documents (including screening, EMPs etc) in timely manner and of good quality as well as monitoring during construction remained low. Therefore, it has been noted that municipality staff needed hands-on and practical/on-the job type of training as well as expert site support to ensure transfer of knowledge and skills related to social and environmental management. In light of this, the PCO with support from MST, started to review the trainings conducted thus far. Based on the findings of the review, the PCO will prepare a training and technical support plan to address the needs of the municipal staff. The PCO agreed to prepare the action plan for additional safeguard training/ support by May 21, 2014. The team re-emphasize that in consideration of the limited capacity of the municipalities and slow progress, the PCO and TDF would have to provide increased guidance and support to the municipalities in addressing social and environmental safeguard issues and in carrying out monitoring. 1. 2-3 February, 2012

(Kathmandu). 77 participants from six municipalities and PCO. Training on PIM covered social and environmental safeguards requirements.

2 6-11 June 2012 (Tansen, Baglung, Lekhnath)

61 participants from Tansen, Baglung and Lekhnath. Short Training on Social and Environmental Safeguards.

3 25-29 November 2012 (Pokhara)

34 participants from all six municipalities. Training on Social, Environmental Safeguards and Procurement

4 3-5 September, 2013 (Tansen)

16 participants from Tansen, Baglung, and Lekhnath. Regional Refresher Training on Environmental and Social Safeguards

5 15-17 September, 2013 (Dhankuta)

12 participants from Mechinagar, Itahari, and Dhankuta. Regional Refresher Training on Environmental and Social Safeguards.

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Table 6: Status of environmental safeguard documents of Track I and Track II subprojects

Municipality Sub-project Name Track Status Status of environmental safeguard documents

Tansen Amar Narayan Temple Conservation I Under

construction EMP was cleared; monitoring reports not yet received.

Dhankuta

Dhankuta Weekly Market Infrastructure Improvement

I Under construction

EMP was cleared; monitoring reports not yet received

Hile Market Infrastructure Improvement

I

Bid evaluation completed; contract is being signed.

EMP was prepared and cleared; as per the GoN requirement, IEE was submitted to the MoFALD and awaiting for final approval

Mechinagar

Mechinagar Gate Beautification I Bid notice re-

issued EMP was cleared; sub-project still under procurement.

Upgrading of Gokul Marg I Construction

started

EMP was cleared; safeguard monitoring report is expected along with the construction progress report

Baglung

Sahid Smriti Park Development II Bid notice

published Final comments on revised EMP provided

Access Road II Bid notice published

Final comments on revised EMP provided

Tansen

Upgrading of Existing Road in Urban Areas

II Bid notice published

Final comments on revised EMP provided

Multi Purpose Building II Bid notice

published Final comments on revised EMP provided

Shri nagar Park Improvement II Bid notice

published Final comments on revised EMP provided

Lekhnath

Barah Chhetra Improvement II Bid notice

published Final comments on revised EMP provided

Improvement of Mandare Park II Bid notice

published Final comments on revised EMP provided

Improvement of Existing Road II Bid notice

published Final comments on revised EMP provided

Mechinagar Construction of Agro Market in Dhulabari II Dropped -

Itahari

Improvement of Link Road II Bid notice

published Final comments on revised EMP provided

Construction of Bridges on the Link Road (two bridges)

II DPR under preparation.

EMP under preparation.

Dhankuta Hile Bus Park (Terminal) II DPR under

preparation. EMP under preparation.

IV Third-party monitoring of safeguards compliance 12. The recruitment of third-party monitoring consultants for safeguards compliance has been further delayed. The PCO informed that the evaluation of the technical proposals is expected to be completed by April 10, 2014. The revised date for completing the hiring of the consulting firm for third-party monitoring is June 20, 2014. The consulting firm will be hired for carrying out the annual monitoring of safeguard compliance for the remaining period of the project.

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V Preparation of Sub-project Brochures 13. Brochures for sub-projects have been finalized. A total of seven brochures have been prepared: one for each municipality covering all sub-projects in the respective municipality, and one for the overall project. The Team noted that Information, Education and Communication (IEC) activities have not been started yet. The Team advised the PCO to start the implementation of IEC activities at the sub-project level as soon as possible. The PCO has agreed to distribute the brochures by the first week of April 2014.

VI Environmental profile of the municipalities 14. An environmental profile of each municipality is to be prepared as a chapter of the respective municipality’s GIS report for the urban maps. However, the GIS report preparation has been further delayed. This has affected the preparation of the environmental profiles as well. The GIS report including environmental profiles of the concerned municipalities will not be completed by June 2014 as proposed before. The Team advised that PCO should consider alternative options for the preparation of the environmental profiles for the municipality, should GIS report preparation be further delayed.

VII Grievance Redress Mechanisms 15. As agreed during the previous review, the PCO received response on the complaint on the agro-market sub-project proposal in Mechinagar Municipality from the Mechinagar GRC and forwarded it to the central GRC. The central GRC met on 2070/12/5 (19 March 2014) and reached the decision that the site is not appropriate for the construction of agro-market building under the World Bank financed project, because there is no clarity on the following issues: (i) procurement process/ procedure followed for purchasing the land, and (ii) full ownership of the land proposed for agro-market building (the land is currently mortgaged in a bank). Hence, the central GRC decided not to recommend the sub-project for funding under the World Bank financed project.

VIII Implementation of the IP-VC Framework 16. Some measures have been taken to ensure inclusion of disadvantaged groups, women and children while selecting of the municipal grant activities as per the requirements of the LGCDP (35 percent of the funds are utilized for activities benefiting these groups). The requirements stipulated in the Indigenous People-Vulnerable Communities (IP-VC) Framework have however not been fully followed arguing that indigenous people and vulnerable communities are not adversely affected by the project. It was noted that the IP-VC framework requires consultations with and support, if necessary, to the IPs and VCs. The Team advised that this issue should be addressed while implementing EMPs of Track II sub-projects.

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Status of Actions Agreed during the December 2013 Implementation Support Review

Action Responsibility Original Date Status

Revised Agreed Date (if action

pending) Report progress by Mechinagar municipality to complete incomplete surface drain (Construction of Surface drain from Keshab Sapkota’s House to Khola, ward- 5 and ward-7) and culvert construction (Kamal Chimriya House’s East to Devi Khola Ward No.4)

PCO January 31, 2014

PCO is following up on progress.

New progress update by April 30, 2014

Complete incomplete surface drain (Construction of Surface drain from Keshab Sapkota’s House to Khola, ward- 5 and ward-7) and culvert construction (Kamal Chimriya House’s East to Devi Khola Ward No.4)

Mechinagar municipality

June 30, 2014 Not yet due. Expected to be completed on time.

Follow up on the implementation of screening and field verification recommendations made on FY 2013/14 civil works under the block grant and submit status report.

PCO February 28, 2014.

PCO is following up on progress.\

New progress update by April 28, 2014

Carry out desk review for the proposed civil works to be funded by the municipal block grants in FY 2014/15 in all municipalities

PCO April 30, 2014 Not yet due. Expected to be completed on time.

April 30, 2104

Carry out field verification for the proposed civil works to be funded by the municipal block grants in FY 2014/15 in all municipalities

PCO September 30, 2014

Not yet due. Expected to be completed on time.

September 30, 2014

Submit final IEE of Dhankuta Hile Market Improvement sub-project to MoFALD

Dhankuta municipality

January 10, 2014.

Delayed. Presentation made to MoFALD, formal clearance awaited.

April 15, 2014

Support municipalities in finalizing EMPs of the 9 Track II sub-projects : (i) Improvement of Existing Road and Sahid Smriti Park

PCO January 31, 2014

In progress. Revised draft EMP prepared and commented by the Team.

April 30, 2104

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in Baglung; (ii) Srinagar Park, Multipurpose Building, and Improvement of Existing Roads in Tansen Municipality; (iii) Improvement of Existing Road, Mandare Park, and Barah Kshetra Park in Lekhanath Municipality; and (iv) Improvement of Existing Road in Itahari Municipality. Support municipalities in finalizing EMPs of remaining three Track II sub-projects

PCO February 28, 2013

Delayed. April 30, 2014

Review the trainings undertaken and assess further needs, and prepare an action plan for safeguard training/support

PCO January 15, 2014.

Delayed. April 30, 2014

Complete the hiring of the consulting firm for third-party monitoring

PCO January 31, 2014.

Delayed June 20, 2014

Prepare the sub-project brochures for completed sub-projects in Nepali

PCO January 31, 2014.

Completed. Brochures are ready for printing.

Review and scrutinize the Mechninagr GRC response on compliant related to Agro-Market sub-project proposal

Central-level GRC

January 31, 2014

Completed. The sub-project is not recommended for UGDP-ETP support.

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Actions for safeguards Safeguard Compliance for Civil Works Funded by the Municipal Block Grant • PCO will report progress on safeguard compliance for the activities funded under the

municipal block grant by Mechinagar (drain from Keshab Sapkota’s House to Khola, ward- 5 and ward-7 and culvert construction, Kamal Chimriya House’s East to Devi Khola Ward No.4) by April 30, 2014 and Mechinagar Municipality will complete the works by June 30, 2014.

• PCO will follow up on the agreed actions regarding FY 2013/14 civil works funded by the block grant with the municipalities and submit status report by April 28, 2014.

• PCO will carry out desk review and field verification of the proposed civil works to be funded by the municipal block grants in FY 2014/15 in all municipalities by April 30, 2014 (desk review) and September 30, 2014 (field verification) respectively.

Safeguard Issues relating to municipal infrastructure subprojects • PCO will submit approved IEE for Dhankuta Hile Market Improvement sub-project to the

World Bank by April 15, 2014. • PCO will support municipalities in finalizing EMPs incorporating the consent letter from the

respective forest/irrigation user groups where needed of all the Track II sub-projects by April 30, 2014

• PCO will clarify land requirement for Tengra Bridge (Itahari) and complete required steps for land taking (as per SMF) by April 15, 2014 prior to DPR and EMP finalization.

• PCO will obtain written report from the DoA on the inspection visit carried to Amar Narayan Temple Conservation in Tansen by April 30, 2014.

• PCO with support from MST will carry out first three-monthly environmental monitoring of the Dhankuta Weekly Market, Gokul Marg and Amar Narayan Temple by April 30, 2014. PCO will ensure that all civil works under municipal infrastructure subprojects, now onward, will be subjected to three-monthly environmental compliance and performance monitoring.

Safeguard capability of the municipalities

• PCO will review the trainings undertaken and further needs, and prepare an action plan for safeguard training/ support by May 21, 2014.

Third-Party Monitoring of Safeguards Compliance

• The PCO will complete the technical evaluation report for Third Party Monitoring by April 10, 2014 and award the contract by June 20, 2014

Distribution of Sub-project Brochure

• PCO will distribute brochures in Nepali to all municipalities by April 15, 2014.

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ANNEX III: Financial Management and Procurement

FINANANCIAL MANAGEMENT Budget for FY 2013/14 and Expenditures

1. The budget of NPR 514.41 million for the FY 2013/14 has been approved including block grants of NPR 95.00 million to be provided under Part A by MoUD. The approved recurrent, capital and financing budgets of the project of the FY 2013/14 are as follows:

Budget Budget

Head Budgeted amount in NPR million

GoN IDA Grant IDA Loan Total DUDBC Recurrent 3473163 58.53 120.66 13.85 193.04 Capital 3373164 4.00 39.13 49.46 92.59 Total 62.53 159.79 63.31 285.63 MOUD Recurrent 3478043 0 52.30 42.70 95 TDF Financing 5011645 47.79 0 85.99 133.78 Grand Total 110.32 212.09 192.00 514.41

2. The annual program of FY 2013/14 was approved on October 2, 2013 by the National Planning Commission. The grant and loan to be provided to the participating municipalities through TDF for the municipal sub-projects and grant for institutional development activities for TDF have been budgeted under the recurrent budget and financing budget. The PCO has not released any budget to TDF and municipalities for the FY 2013/14 due to surplus fund of the last fiscal year. TDF has not requested budget from the financing budget for the FY 2013/14 against budgeted amount of NPR 133.78 million. Reimbursable expenses of NPR 66.17 million have been incurred in the FY 2013/14 up to second trimester (March 15, 2014) by the following implementing agencies;

Implementing Agencies Amount in NPR million

MOUD (Block Grant) 43.48 DUDBC/PCO/MoFALD 5.64 TDF 15.99 Total 65.11 TDF - Financing 1.06 Grand Total 66.17

3. The expenditures incurred by MOUD under the institutional development component have not been included as the statement of expenses has not yet been received. The Team reviewed the supporting documents of expenses at PCO and TDF and they are found to be satisfactory except for the payment of per diem for the day of return from travel by PCO.

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Disbursement

4. Total disbursement as of March 31, 2014 is USD 7.68 million consisting USD 2.93 million from Credit and USD 4.75 million from the Grant Account, and equivalent to about 42.76% of the total allocation. The net disbursement (excluding DA) was about 14.95%. Amount of USD 14,076.47 (equivalent NPR 1.42 million) for expenses incurred up to March 15, 2014 already transferred from the DA to Government treasury is yet to be claimed. Reimbursable expenses of NPR 12.07 million incurred in FY 2013/14 are yet to be transferred from the DA to Government treasury.

Financial Management 5. The PCO needs to increase its efforts to improve financial management for the project and better coordinate financial management activities across different project agencies and components. It was agreed during the December 2013 implementation support review that since the financial management for the project is carried out by the PCO based on a manual system and the project is already in the third year of implementation, the PCO may not need to continue the procurement of the FMIS, so the recruitment process was cancelled. However, given the difficulties in collecting and maintaining the financial information for the project, the manual reporting format needs strengthening to facilitate timely flow and consolidation of information at PCO level. The project needs to establish an accounting system that is able to timely and accurately collect financial data from project agencies and municipalities and report on it. The following action plan has been agreed with the PCO to improve financial management performance for the project:

• The Team and the PCO agreed on a simple excel sheet to be used for consolidating and reporting financial data for preparation of the project financial reports at the PCO level;

• The PCO would prepare reporting templates based on standard formats would be prepared by the PCO by April 30, 2014 to support the municipalities with the preparation of SoEs;

• A training on financial management would be carried by the PCO with support from the World Bank for the project agencies and the municipalities by April 30, 2014.

6. Some of the actions agreed during the December 2013 implementation support review are still pending, including the submission of revised unaudited project account of FY 2012/13 and the first trimester IPR of FY 2013/14. The following are some other observations of the Team:

• SOE Ledger: The SOE ledger has been maintained by the PCO to account SOE and monitor reimbursement of SOE from the IDA without mentioning expenditures incurred, amount requested, withdrawal application date, authorization number and value date.

• Other Ledgers and Subsidiary Ledgers: The Team also noted that other ledgers such as main and subsidiary ledgers and designated account ledger have not been properly maintained and updated. The program ledger has not been maintained as required by the Government accounting system. The review team guided on how these records should be maintained.

• Internal Control and Internal Audit: The review team observed that supporting documents of expenses have not been defaced with the PAID stamp. This is required as part of a good control system to avoid any double payments. The review team reviewed the internal audit report of the TDF and observed some internal control weaknesses, which need to be strengthened.

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Implementation Progress Reports

7. The Team noted that the finalization of the first trimester IPR has been significantly delayed. The Team reminded the PCO that revised first trimester IPR of FY 2013/14 has to be submitted at the earliest. The PCO as agreed to submit it by April 15, 2014. The Team also reminded that the second trimester progress report is due on April 30, 2014.

Audit Report and unaudited Project Account

8. The PCO has agreed to finalize the revised unaudited project account of FY 2012/13 by April 15, 2014. The Team also reminded the PCO of the urgency of submitting the audit report for the project, which has become overdue on January 14, 2014. The PCO has agreed to submit the audit report by April 15, 2014.

Action Responsibility Original Date Status

Proposed Revised Date (of Pending

Actions) Submits the unaudited accounts for FY 2012/13

PCO December 27, 2013

Delayed. April 10, 2014

Submit the first trimester IPR PCO December 31,2013

Delayed. April 10, 2014

Submit disbursement projection for FY 2013/14

PCO December 31, 2013 and monthly updates thereafter

Delayed April 15, 2014

Submits the audited accounts of FY 2012/13

PCO January 15, 2014 Delayed April 15, 2014

Submit withdrawal application for partial expenses incurred in FY 2013/14 up to the first semester

PCO January 31, 2014 Completed.

Submit l withdrawal application for expenses incurred in FY 2013/14 up to the second semester

PCO April 30,2014 Not yet due.

Actions for Financial Management

• PCO will send the revised first trimester IPR for FY 2013/14 and revised unaudited project account for FY2012/13 by April 10, 2014.

• The PCO will submit a draft annual work program of FY 2014/15 for review by the Team by April 15, 2014

• The PCO will submit the audited project account of FY 2012/13 by April 15, 2014 • The PCO will submit disbursement projections for the remaining part of FY 2013/14, FY

2014/15 and FY 2015/16 by April 15, 2014

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• The PCO will prepare reporting templates based on standard formats by April 30, 2014 to support the municipalities with the preparation of SoEs;

• The PCO will maintain required ledgers such as main and subsidiary grant and credit registers, SOE ledger, and program ledgers in required format with complete information by April 30, 2014

• The PCO will complete financial management training for the project agencies and municipalities with support from the World Bank team by April 30, 2014

PROCUREMENT 9. Municipal procurement training. Municipal procurement capacity remains low. Bid evaluation of the municipal sub-projects need to be expedited to achieve the contract award milestones as per the agreed schedule. Municipalities also require training on contract management to ensure effective supervision of the works and administration of the contracts. Contract management improvement is critical to address the delays with the works for Tansen Temple Conservation sub-project. Procurement training on bid evaluation and contract administration would be organized for municipal staff in April 2014 with support from the World Bank. It was also agreed that the PCO would strengthen monitoring of contract signing and claims by contractors. The PCO would need to closely monitor and regularly update the contractsigning plan prepared as part of the Mid Term Review. Disbursement claim plans would be prepared, along with contractors payment claim plans, for all sub-projects under implementation.

10. Recruitment of IDA-funded Municipal Support Team. The Request for Proposal (RfP) for the Municipal Support Team (MST) has been issued on February 19, 2014 and technical proposals have been opened on March 20, 2014. The selection is expected to be completed by May 30, 2014. The contract with the IDA-funded MST is expected to be signed no later than June 25, 2014. The PCO will initiate the process for procuring vehicles (two SUVs and 5 motorbikes) for the IDA-funded MST. The procurement process will start immediately to ensure the vehicles are delivered within June 30, 2014 such that they are available for use when the consultants are mobilized. It was agreed that the GIZ-funded MST would prepare a final report of activities, inventory of equipment and filing of documentation, including training material, for review by the PCO by May 30, 2014. The updated timeline for MST recruitment is reported below.

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Template for Timeline for MST Recruitment

Step # Activity

Revised Original

Start date End date Start date End date

1 Finalize and publish EOI notice Completed Completed Sep 30, 2103

2 Receive EOIs Completed Completed Oct 1, 2013 Oct 15, 2013

2 Prepare RFP Completed Completed Oct 1, 2103 Oct 31, 2013

4 Evaluate EOI Completed Completed Oct 16, 2013 Oct 31, 2013

5 Obtain WB clearance to shortlist &RFP Completed Completed Nov 1 2013 Nov 5, 2013

6 Issue LOI to shortlisted consultants and receive proposals

Feb 16, 2014 Mar 15, 2014 Nov 7, 2013 Dec 23, 2013

7 Conduct technical evaluations Mar 20, 2014 Apr 10, 2014 Dec 24, 2013 Jan 15, 2014

8 Obtain WB clearance to technical evaluation Apr 11, 2014 Apr 20, 2014 Jan 16, 2013 Jan 25, 2013

9 Inform firms for opening financial proposals Apr 22, 2014 Jan 26, 2014

10 Public opening of financial proposals May 1, 2014 Feb 15, 2014

11 Select consultant May 25, 2014 Feb 20, 2014

12 Invite consultants for negotiations May 28, 2014 June 5, 2014 Mar 01, 2014

13 Obtain WB clearance to selection and draft of negotiated contract

June 8, 2014 June 15, 2014 Feb 21, 2014 Feb 28, 2014

16 Finalize contract Jun 20, 2014 June 25, 2014 Mar 21, 2014 Mar 25, 2014

17 MST starts work July 1, 2014 April 01, 2z4

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Status of Actions Agreed during December 2013 Implementation Support Review

Action Responsibility Original Date Status

Revised Agreed Date (of Pending

Actions) Issue the Letter of Invitation (LOI) to the short-listed consultants for the IDA-funded MST assignment

PCO January 9, 2014 Completed on February 16, 2014.

Select the IDA-funded MST

PCO April 4, 2014 Delayed by one month. Technical proposals were opened on March 20, 2014 and evaluation is ongoing.

May 25, 2014.

Organize regional training on procurement focusing on bid evaluation and reporting

PCO January 31, 2014

Completed. Training provided as part of TDF regional training.

Actions for Procurement • The PCO will carry out training on procurement and contract management with support

from the World Bank by April 30, 2014 • The GIZ-funded MST would prepare a final report of activities, inventory of equipment

and filing of documentation, including training material, for review by the PCO by May 30, 2014.

• The PCO will sign the contract with IDA-funded MST by June 25, 2014

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ANNEX IV: Summary of Agreed Actions

Area Action Agency Timeline

Strengthening Municipal Planning Capacity for Urban Development (Component I)

Submit the final list of activities for FY 2013/14 as per the agreed reporting templates based on actual allocation and in line with the target 35 percent allocation to activities benefiting the women and disadvantaged groups

Municipalities April 30, 2014

Capacity Building for Municipal Infrastructure Development (Component II)

Make available to the World Bank work implementation schedules and project monitoring charts for Track I sub-projects under implementation (including safeguard monitoring)

PCO April 15, 2014

Publish bid invitation notices for Dhankuta Hile Bus Park sub-project

Dhankuta Municipality April 27, 2014

Sign contracts for three sub-projects under procurement Municipalities April 30, 2014

Assess the causes of non-performance and take appropriate actions to address the construction delays, and provide an update on status to the Team

Tansen Municipality April 30, 2014

Publish bid invitation notices for Itahari Bridge Construction sub-project Itahari Municipality May 19, 2014

Sign contracts for two sub-projects under procurement

Municipalities May 30, 2014

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Sign contracts for five sub-projects under procurement (including Track I Mechinagar Gate Beautification sub-project)

Municipalities June 20, 2014

Institutional Development (Component III)

Municipalities

Finalize the bid documents for the first batch of IT equipment

PCO

April 10, 2014

Document in writing to the Team the support provided to the three municipalities for budgeting of REP, O&M Plans and Investment Plans

PCO

April 15, 2014

Finalize and cost the implementation action plans (including activities such as billing software development, collection campaigns and surveys) and send it to the Team

PCO April 15, 2014

Issue the request for EOI for the billing software development PCO May 1, 2014

Sign contract for the first batch of IT equipment PCO June 15, 2014

Hire the consultant for the billing software development

July 15, 2014

DUDBC

Submit to the World Bank for review the preliminary model bye-law and draft specific bye-laws for three municipalities

DUDBC April 15, 2014

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Re-publish EoI for the GIS maps DUDBC April 15, 2014

Finalize the ToR for Master Plan for Drainage in Itahari Municipality DUDBC April 20, 2014

Finalize the list of hardware and software for GIS unit of DUDBC and municipalities DUDBC May 15, 2014

Finalize the bye-laws for three municipalities DUDBC May 30, 2014

Complete the procurement process for GIS maps DUDBC September 30, 2014

Award the contract for third-party monitoring DUDBC June 20, 2014

TDF

Finalize the revised ToRs to the Team for the 4 agreed consultancies including cost estimates and timeline

TDF April 30, 2014

Complete the review of borrowing capacity analysis and share the results with the Team and the municipalities

TDF April 30, 2014

Obtain Board approval for the revised BRAP and communicate the approval to the World Bank

TDF June 30, 2014

Complete the brochures for borrowers and the legal review of TDF’s capital structure TDF June 30, 2014

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Procure software for micro-banking and MIS in consultation with GIZ TDF June 30, 2014

Resolve the default situation with GON TDF June 30, 2014

MoFALD

Finalize the ToRs for the preparation of templates for budget planning procedures and submit a copy of the budget planning framework document to the Team

MoFALD April 20, 2014

Consult with other divisions within the ministry on the scope of the work for MIS to be funded under the project and inform the Team

MoFALD April 20, 2014

Finalize the ToR for MIS MoFALD April 30, 2014

MoUD

Complete the hiring of the NUDS consultant MoUD April 15, 2014

UDTC

Prioritize training areas for funding under the project based on training needs assessment and submit the FY 2014/15 work plan to the PCO

UDTC April 15, 2014

Submit report documenting activities carried out in FY 2012/13 with project funding to the PCO

UDTC April 30, 2014

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Complete the planned training activities for FY 2013/14 UDTC June 30, 2014

M&E

Prepare excel-based results framework templates to enable regular collection and consolidation of results indicators from the project agencies and the municipalities

PCO April 30, 2014

Submit M&E report with updated results framework to the Team PCO June 1, 2014

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Safeguards

Complete the technical evaluation report for third party monitoring PCO April 10, 2014

Distribute brochures in Nepali to all municipalities. PCO April 15, 2014

Submit approved IEE for Dhankuta Hile Market Improvement sub-project to the World Bank

PCO April 15, 2014

Clarify land requirement for Tengra Bridge (Itahari) and complete required steps for land taking (as per SMF) prior to DPR and EMP finalization.

PCO April 15, 2014

Follow up on the agreed actions regarding FY 2013/14 civil works funded by the block grant with the municipalities and submit status report.

PCO April 28, 2014

Carry out desk review of the proposed civil works to be funded by the municipal block grants in FY 2014/15 in all municipalities.

PCO April 30, 2014

Obtain written report from the DoA on the inspection visit carried to Amar Narayan Temple Conservation in Tansen.

PCO April 30, 2014

Carry out first three-monthly environmental monitoring of the Dhankuta Weekly Market, Gokul Marg and Amar Narayan Temple

PCO April 30, 2014

Report progress on safeguard compliance for the activities funded under the municipal block grant in FY 2012/13 by

PCO April 30, 2014

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Mechinagar (drain from Keshab Sapkota’s House to Khola, ward- 5 and ward-7 and culvert construction, Kamal Chimriya House’s East to Devi Khola Ward No.4)

Support municipalities in finalizing EMPs incorporating the consent letter from the respective forest/irrigation user groups as needed for Track II sub-projects.

PCO April 30, 2014

Review the trainings undertaken and further needs, and prepare an action plan for safeguard training/ support.

PCO May 21, 2014

Award the contract for third party monitoring PCO June 20, 2014

Complete the works for the activities funded under the municipal block grant in FY 2012/13

Mechinagar Municipality June 30, 2014

Carry out field verification of the proposed civil works to be funded by the municipal block grants in FY 2014/15 in all municipalities.

PCO September 30, 2014

Financial Management

Send the revised first trimester IPR for FY 2013/14 and revised unaudited project account for FY2012/13

PCO April 10, 2014

Submit the audited project account of FY 2012/13 PCO April 15, 2014

Submit a draft annual work program of FY 2014/15 for review by the Team PCO April 15, 2014

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Submit disbursement projections for the remaining part of FY 2013/14, FY 2014/15 and FY 2015/16

PCO April 15, 2014

Prepare reporting templates based on standard formats to support the municipalities with the preparation of SoEs

PCO April 30, 2014

Maintain required ledgers such as main and subsidiary grant and credit registers, SOE ledger, and program ledgers in required format with complete information

PCO April 30, 2014

Complete financial management training for the project agencies and municipalities with support from the World Bank team

PCO April 30, 2014

Procurement

Carry out training on procurement and contract management with support from the World Bank

PCO April 30, 2014

Prepare a final report of activities, inventory of equipment and filing of documentation, including training material, for review by the PCO

GIZ-funded MST May 30, 2014

Sign the contract with IDA-funded MST PCO June 25, 2014

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ANNEX V: Results Framework

Year 1: FY 2011/12; Year 2: FY 2012/13; Year 3: FY 2013/14; Year 4: FY 2014/15; Year 5: FY 2015/16. Estimates for FY 13/14 as of March 2014. Project Development Objective (PDO): To improve the capacity of the participating municipalities to plan, implement and fund urban development activities.

Project Development Objective Indicators

Base- line (Y1)

Target and Achievement Reference Comments

Year 2 Year 3

(est) Year 4 Year 5

Increase in municipal own source revenues in the participating municipalities.

Percentage annual increase 15

Target % 15 15 20 25 Revenue statements of municipalities

Target for FY 13/14 is expected to be achieved. Indicator is on track to be achieved in FY 13/14 based on progress in the first six months of the FY.

Actual % 18 36 (est)

Number of participating municipalities with funded investment and O&M plans.

Number

0

Cumulative Target 0 3 6 6

Target is on track to be achieved. Three municipalities have approved REPs, O&M Plans and Investment Plans and included performance targets in the FY15 budget.

Cum. Achievement 0 3

Municipal sub-projects under implementation with construction works on track as per the signed contracts.

Percentage of Component2 Sub-projects 0

Target % 0 80 80 90 Indicator for FY 13/14 slightly

below the 80% target. Two of the three municipal sub-projects under implementation are on track. Progress in Tansen temple conservation sub-project is behind schedule (10% progress in 7 months).

Actual % 0 66

Total number of people benefiting from the project activities.

Number

25000

Cumulative Target 36,000 50,000 70,000 92,000

Progress reports submitted by the municipalities

Indicator is slightly below target for FY 13/14, but on track to meet end of project target. Methodology for beneficiary counting was revised and strengthened in August 2013. As a result, number of total beneficiaries in FY11/12 was lowered to 9,807. Number of beneficiaries in FY

Cum. Achievement 26,733 46,000

(est)

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12/13 is 16,926. Estimated number of beneficiaries for FY 13/14 19,125.

Female beneficiaries, percentage of total beneficiaries

Percentage Sub Type Supple- mental

35

Target % 35 35 35 35 Progress reports submitted by the municipalities

Target is expected to be achieved for FY 13/14.

Actual % 51 50 (est)

Disadvantage groups, percentage of total beneficiaries

Percentage Sub Type Supple- mental

10

Target % 10 10 10 10 Progress reports submitted by the municipalities

Target is expected to be achieved for FY 13/14.

Actual % 59 57 (est)

Intermediate Results Indicators

Component I: Strengthening Municipal Planning Capacity for Urban Development Municipal grant allocated to programs targeting women, children and disadvantaged groups.

Percent of Municipal Grant allocated to target groups 35

Target % 35 35 35 35 Progress reports of UGDP for FY 2013 and Annual program of UGDP for FY 2014 submitted by municipalities

Indicator for FY 13/14 is slightly below target. Indicator monitors the allocation and utilization of funds targeting women, children and disadvantaged groups. Planned activities for FY13/14 need to be revised by municipalities to ensure target is met for this FY.

Actual % 35 32 (planned)

Number of municipalities submitting satisfactory annual plans for the municipal block grants to the MoUD by August 15 (one month after the start of the FY).

Number

n/a

Target n/a 6 6 6 PCO records Target Achieved for FY 13/14:

All six municipalities submitted annual plans of activities to PCO for the FY 2013/14 municipal block grant by August 15, 2013.

Actual n/a 6

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Number of municipalities submitting satisfactory annual progress reports to MoUD for the municipal block grants by September 15 (two months after the end of the Fiscal Year).

Number

n/a

Target n/a 6 6 6

PCO records Target Achieved for FY 12/13. All six municipalities submitted progress reports to PCO for activities funded with the FY 2012/13 municipal block grant by September 15, 2013.

Actual 6

Component II: Capacity Building for Municipal Infrastructure Development

Number of municipal infrastructure sub-projects successfully appraised and ready for bidding (i.e. procurement notice published)

Number

0

Cumulative Target 3 13 18 18

Target exceeded for FY 13/14. 11 bid invitation notices published in FY 13/14 as of end of March 2014. A total of 16 bid invitation notices are expected to be published by the end of the FY. The total number of municipal sub-projects has been reduced from 18 to 16 because two sub-projects have been consolidated at the bidding stage and one sub-project has been dropped.

Cum. Achievement 3

14 (actual as of March 31, 2014)

Percentage of funds for municipal sub-projects disbursed.

Percent of subproject's budget

0

Cumulative Target 0 20 60 100

The target for FY 13/14 will not be met. Target of 20% for FY 2013/14 unlikely to be achieved because of delays in preparation of sub-projects. Expected disbursement for FY 2013/14 is 10% if agreed actions are met.

Cum. Achievement 0

3 (actual as of March 31, 2014)

Component III: Institutional Development

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Policy guidelines and procedures for municipalities on governance and budget planning updated and implemented by MoFALD.

Text

No

Target No Yes

(Updated)

Yes (Imple- mented)

Yes (Imple-mented)

Target for FY 13/14 will not be met. ToR for the assignment has not yet finalized.

Actual No No Policy guidelines and procedures for municipalities on physical planning and infrastructure development developed/updated and implemented by MoUD.

Text

No

Target No Yes

(Updated)

Yes (Imple- mented)

Yes (Imple-mented)

Target for FY 13/14 is expected to be met since activity is a priority for MoUD. MoUD has finalized ToR for the assignment and preparation of the policy documents is underway.

Actual No -

TDF collection ratio meets prescribed thresholds.

Percentage

75

Target %

80 90 TDF Data Target of 80% for FY 13/14 is

expected to be met. As of 15th July 2013, receivables NPR 1,225 millions and received NPR 950 million. Actual % 78 80

(est)

Standard lending policies and procedures applied to all ETP municipal sub-projects.

Text

No Target No Yes Yes Yes

Target for FY 13/14 has been met.

Actual Yes Yes Number of municipalities that have developed and approved planning norms and building byelaws based on the guidelines by MoUD.

Number

0

Cumulative Target 0 3 6 6

Target for FY 13/14 is expected to be met. DUDBC is preparing framework bye-law for the municipalities and has started preparation of specific bye-laws for 3 municipalities. Cum.

Achievement 0 3 (est)

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ANNEV VI: List of Persons Met

Ministry of Urban Development Mr. Kishore Thapa, Secretary Dr. Mahendra Subba, Joint Secretary Ministry of Finance Mr. Bhuban Karki, Under Secretary

Ministry of Federal Affairs and Local Development Mr. Gopi Krishna Khanal, Joint Secretary Ms. Laxmi Pandey Gautam, Under Secretary/ Component Manager Mr. Ramchandra Tiwari, Section Officer Mr. Anil Paudel, Section officer

Department of Urban Development and Building Construction (DUDBC) Mr. Shambhu K.C., Director General Mr. Ramesh Prasad Singh, Deputy Director General/Project Director Mr. Dwarika Shrestha, Sr. Divisional Engineer/Deputy Project Director Mr. Tika Ram Paudel, Component Manager Mr. Sailendra Dulal, Account Officer Mr. Yam Nath Neupane, Financial Management Consultant Mr. Shakti Shrestha, Procurement Consultant Mr. Basant Dhakal, Accountant Mr. Carsten Zehner, Team Leader, MST Ms. Bandana Sharma, MST Mr. Arjun Koirala, MST Mr. Sunil Pradhan, MST Mr. Iswar Joshi, MST

Town Development Fund (TDF) Mr. Sushil Gyawali, Managing Director Mr. Uttar K Shrestha, Director/ Component Manager Mr. Dron Pun, Manager- Environment and Social Safeguard Mr. Kileshwor Malla, Manager- Finance Mr. Maniram Singh Mahat Director, PME Center Mr. Harka Chhetri , Director Mr. Nawa Raj Koirala, Assistant Manager Mr. Dewan Rai Finance Officer, TDF Mr. Ram Chhusyaki , Senior Assistant Accountant

GIZ Dr. Horst Matthaus, Program Manager Mr. Lxman Rajbhandari, GIZ consultant

Urban Development Training Center (UDTC) Mr. Gajendra Wagle, Principal Mr. Chandi Chaudhari, Account officer

Tansen Municipality

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Mr. Niran Bhattrai, EO

Itahari Municipality

Mr. Pashupati Khatiwada, EO

Dhankuta Municipality Mr. Kumar Prasad Koirala, EO

Baglung Municipality

Mr. Haridatta Kandel, EO Mr. Yogendra Raj Parajuli, Accountant

Lekhnath Municipality

Mr. Jagannath Koirala, Acting EO Mr. Nirajan Shrestha, Engineer

Machinagar Municipality

Mr. Krishna Pd. Panthi, EO