Bangladesh - Bangladesh Local Governance...

Document of

The World BankFOR OFFICIAL USE ONLY

Report No: ICR00004245

IMPLEMENTATION COMPLETION AND RESULTS REPORT

IDA 50190

ON A

CREDIT

IN THE AMOUNT OF SDR 185.80 MILLION

US$290.00 MILLION EQUIVALENT

TO THE

People's Republic of Bangladesh

FOR THE

December 22, 2017

Social, Urban, Rural and Resilience Global PracticeSouth Asia Region

CURRENCY EQUIVALENTS

(Exchange Rate Effective December 18, 2017)

Currency Unit = Bangladeshi Takas

BDT 82.64 = USD 1

BDT 1 = USD 0.01

FISCAL YEARJuly 1 - June 30

Regional Vice President: Annette Dixon

Country Director: Qimiao Fan

Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez

Practice Manager: Catalina Marulanda

Task Team Leader(s): Zahed Hossain Khan

ICR Main Contributor: Arun Banerjee

ABBREVIATIONS AND ACRONYMS

BARD Bangladesh Academy for Rural DevelopmentBBG Basic Block GrantBGCC Block Grant Coordination CommitteeC&AG Comptroller & Auditor GeneralCAS Country Assistance StrategyDANIDA Danish International Development AgencyDDLG Deputy Director, Local GovernmentDF District FacilitatorDFT District Facilitation TeamDPD Deputy Project DirectorDPP Development Project Proposal/ProformaESMF Environment and Social Management FrameworkEU European UnionFAPAD Foreign Aided Projects Audit DirectorateGOB Government of BangladeshICAB Institute of Chartered Accountants – BangladeshIDA International Development AssociationIMED Implementation Monitoring & Evaluation DivisionJICA Japan International Cooperation AgencyLGD Local Government Division LGED Local Government Engineering DepartmentLGSP Local Governance Support ProjectLGSP II Second Local Governance Support ProjectM&E Monitoring and EvaluationMIS Management Information SystemMLGRD&C Ministry of Local Government, Rural Development and CooperativesMOF Ministry of FinanceMTR Mid-term ReviewNGO Non-Governmental OrganizationNILG National Institute of Local GovernmentNPD National Project DirectorPBG Performance Based GrantPDO Project Development ObjectivePMU Project Management UnitPRSP Poverty Reduction Strategy PaperSDC Switzerland Development CooperationSLGDFP Sirajganj Local Governance Development Fund ProjectSOE Statement of ExpendituresUNCDF United Nations Capital Development FundUNDP United Nations Development ProgramUNO Upazila Nirbahi OfficerUSAID United States Agency for International DevelopmentWC Ward Committee

TABLE OF CONTENTS

DATA SHEET.......................................................................................................................................1

I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES.............................................................5

A. CONTEXT AT APPRAISAL...........................................................................................................5

B. SIGNIFICANT CHANGES DURING IMPLEMENTATION.................................................................9

II. OUTCOME.................................................................................................................................10

A. RELEVANCE OF PDO...............................................................................................................10

B. ACHIEVEMENT OF PDO (EFFICACY).........................................................................................11

C. EFFICIENCY.............................................................................................................................13

D. JUSTIFICATION OF OVERALL OUTCOME RATING.....................................................................14

E. OTHER OUTCOMES AND IMPACTS..........................................................................................14

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME....................................16

A. KEY FACTORS DURING PREPARATION....................................................................................16

B. KEY FACTORS DURING IMPLEMENTATION..............................................................................16

IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME.....19

A. QUALITY OF MONITORING AND EVALUATION (M&E).............................................................19

B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE.....................................................21

C. BANK PERFORMANCE.............................................................................................................22

D. RISK TO DEVELOPMENT OUTCOME.........................................................................................24

V. LESSONS AND RECOMMENDATIONS......................................................................................24

ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS..................................................................28

ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION............................39

ANNEX 3. PROJECT COST BY COMPONENT....................................................................................42

ANNEX 4. EFFICIENCY ANALYSIS.....................................................................................................43

ANNEX 5. SUMMARY RESULTS OF STAKEHOLDER CONSULTATIONS....................................................48

ANNEX 6. SUMMARY OF BORROWER, PROJECT COMPLETION REPORT.....................................50

ANNEX 7. SUMMARY OF BORROWER’S AND/OR COMMENTS ON DRAFT ICR....................................60

ANNEX 8. SUPPORTING DOCUMENTS...................................................................................61

The World BankBangladesh Local Governance Support Project II ( P124514 )

DATA SHEET

BASIC INFORMATION

Product InformationProject ID Project Name

P124514

Country Financing Instrument

Bangladesh Specific Investment Loan

Original EA Category Revised EA Category

Partial Assessment (B) Partial Assessment (B)

Organizations

Borrower Implementing Agency

Economic Relations Division, Ministry of Finance, Govt. of the People's Republic of Bangladesh

Local Government Division

Project Development Objective (PDO)

Original PDOThe project development objective is to strengthen Union Parishads to become accountable and responsive, supported by an efficient and transparent intergovernmental fiscal system.

Revised PDOThe project development objective is to strengthen Union Parishads (UPs) to become accountable and responsive, through anefficientand transparent intergovernmental fiscal transfer system to Union Parishads.

FINANCING

Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$)World Bank Financing

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IDA-50190 290,000,000 290,000,000 265,917,117

Total 290000000 265917117 0Non-World Bank Financing

Borrower 242,000,000 242,000,000 0

Total 822000000 797917117 265917117Total Project Cost 532,000,000 532,000,000 265,917,117

KEY DATES

Approval Effectiveness MTR Review Original Closing Actual Closing29-Nov-2011 22-Feb-2012 31-Aug-2014 30-Nov-2016 30-Jun-2017

RESTRUCTURING AND/OR ADDITIONAL FINANCING

Date(s) Amount Disbursed (US$M) Key Revisions

06-Apr-2015 173.08 Change in Project Development ObjectivesChange in Results FrameworkChange in Legal Covenants

15-Nov-2016 265.95 Change in Loan Closing Date(s)Reallocation between Disbursement Categories

KEY RATINGS

Outcome Bank Performance M&E Quality

Highly Satisfactory Satisfactory Substantial

RATINGS OF PROJECT PERFORMANCE IN ISRs

No. Date ISR Archived DO Rating IP RatingActual

Disbursements (SDR)

01 24-Jun-2012 Satisfactory Moderately Satisfactory 25.85

02 16-Dec-2012 Satisfactory Moderately Satisfactory 31.03

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04 19-Dec-2013 Satisfactory Moderately Satisfactory 78.19

05 16-Jun-2014 Satisfactory Satisfactory 90.92

06 24-Nov-2014 Satisfactory Satisfactory 104.79


08 17-Dec-2015 Satisfactory Satisfactory 163.73


10 25-Dec-2016 Satisfactory Satisfactory 181.77


SECTORS AND THEMES

SectorsMajor Sector/Sector (%)

Public Administration 100Sub-National Government 100

ThemesMajor Theme/ Theme (Level 2)/ Theme (Level 3) (%)Public Sector Management 100

Public Administration 100

Municipal Institution Building 100

ADM STAFF

Role At Approval At ICR

Regional Vice President: Isabel M. Guerrero Annette Dixon

Country Director: Ellen A. Goldstein Qimiao Fan

Senior Global Practice Director: John Henry Stein Ede Jorge Ijjasz-Vasquez

Practice Manager: Ming Zhang Catalina Marulanda

Task Team Leader(s): Balakrishna Menon Parameswaran Zahed Hossain Khan

ICR Contributing Author: Arun Banerjee

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I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES

A. CONTEXT AT APPRAISAL

1. Bangladesh has made impressive strides in meeting key MDGs like reducing population growth rates and infant mortality. However, its development challenges remain formidable. About a third of the population remains poor, with signs that socio-economic inequalities are not declining. Its governance perception indicators are also poor and the transparency and financial accountability in the delivery of public services are not improving rapidly enough to improve the effectiveness of the substantial Government expenditures towards poverty reduction.

2. Bangladesh is a unitary state with a unicameral parliament. The total land mass is divided into 8 Divisions which is further subdivided into 64 administrative Districts. Below this is a tiered system of elected local government. There is a single level of urban authority, primarily based on size: 7 City Corporations and 329 Municipalities. There are three levels of rural local government comprising 61 Zila Parishads, 489 Upazila Parishads, 4553 Union Parishads and 3 Hill District Parishads. The Union Parishad (UP) is the primary focus of this project.

3. Local government is a relatively small player within the public-sector governance structure of the country. Sub-national expenditure as a share of total government expenditure is less than 4%, and government revenue collected at local levels is very low. However, local governments even at the lowest tiers are a key feature of the overall governance landscape and enjoy a socio-political prominence that is disproportionate to their small size and limited capabilities. They, however, provide communities and citizens with substantial opportunities for enhancing its accountability at the grassroots level.

4. Elected local governments in Bangladesh operate in a highly-constrained policy and institutional environment characterized by limited autonomy, limited discretion in fiscal and administrative matters, lack of functional clarity, a weak fiscal base, low capacity in terms of staffing and skills, and weak systems of accountability. These constraints are further complicated by lack of monitoring and weak financial agement and communities at the lowest levels have limited scope to participate in planning, budgeting or to complain about the quality of public services.

5. However, during the last few years there has been a steadily growing commitment in the country to strengthen local government institutions and practices. Starting with the UNDP/CDF-implemented Sirajganj Local Governance Development Fund Project in the early-2000s and the JICA-supported Participatory Rural Development Project, there has been increasing donor involvement in local governance. Other donor supported initiatives are the Horizontal Learning Program (SDC), the Hygiene, Sanitation and Water Supply Fund (DANIDA and others) and the Strengthening Democratic Local Governance Project (USAID). Building on these experiences, IDA in 2006, supported the Local Governance Support Project (LGSP; IDA Credit of US$91.63 million). This was the first nationwide project to strengthen the local government system under which UPs were provided with enhanced resources and discretion in deciding their spending priorities through a participatory process, while being held accountable for their performance through a number of accountability measures. The UPs also benefitted from a capacity building program that strengthened their capabilities in a set of core functional areas.

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6. LGSP was successful in achieving its development objective of strengthening local government to provide services, with accountability. The project more than quadrupled resource transfers to UPs via Expanded Block Grants (EBGs) allocated on the basis of a population-based formula and disbursed directly to UP bank accounts; established a system of local audits through which UPs are subject to annual audits undertaken by chartered accountants and overseen by the Comptroller & Auditor General (CAG) and more than 11,000 such audits have taken place under the project; provided basic training to nearly 84,000 local public officials in planning, budgeting, public financial management, safeguards compliance, and good governance; set up a system of local government reporting, whereby UPs report on a six-monthly basis to LGD and these reports are aggregated and used for oversight and program adjustments; improved transparency and participation through mandatory disclosure obligations, and inclusive systems of planning, budgeting and scheme implementation; and provided finance for tens of thousands of small local infrastructure and service delivery schemes which respond to local public needs.

Theory of Change (Results Chain)

7. The design of LGSP II benefitted greatly from all the positive experience gained during the implementation of the LGSP and built on them. LGSP II aimed to improve and accelerate local government delivery of public goods and services by (i) making discretionary fiscal resources available to UPs in a timely and transparent manner; (ii) putting in place institutionally sustainable mechanisms for both upward and downward accountability; (iii) supporting capacity and institutional development of the inter-governmental system; and (iv) improving the ways in which local government performance and activities are monitored, evaluated and supervised. The success of the project depended on a change in norms, behaviors and performance of stakeholders (both individual and institutional) at various levels (LGD, CAG, sub-national administrations, training institutions, elected local officials, and private sector actors). In a sense, the objectives, expected outcomes and the resultant changes foreseen due to the LGSP II cannot be looked upon in isolation but as a continuum from LGSP completed in 2011 to the now completed LGSP II and to be continued under LGSP III now under implementation. Table 1 (under para. 70) provides details of the evolution of changes across the projects, including how LGSP II results will be sustained under LGSP III.

Project Development Objective (PDO)

8. Following up and building on the success of LGSP, the project development objective (PDO) of the Second Local Governance Support Project (LGSP II) was to strengthen UPs to become accountable and responsive, supported by an efficient and transparent inter-governmental fiscal system.

Key Expected Outcomes and Outcome Indicators

9. Achievement of the PDO was to be measured in terms of the following outcome indicators:

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(a) Share of beneficiaries, disaggregated by gender, agreeing that UPs are meeting local priorities;(b) Increase in the average performance score of UPs nationally; and,(c) Number of basic block grant tranches released on a transparent and predictable basis.

10. PDO indicator (a) measures the extent to which UPs are being responsive to the service delivery preferences of their constituents. Indicator (b) measures aggregate improvements in institutional capacities and effectiveness of UPs. A performance audit assessing improvements in a number of governance and public financial management areas will determine the performance score of UPs. Indicator (c) informs whether systemic improvements have taken place ensuring that basic block grants are formula-based (transparent), announced sufficiently in advance and disbursed to eligible UPs on a predetermined schedule (predictable). Basic block grants, which are disbursed bi-annually, represent the main modality of fiscal transfers to UPs. The Results Framework and Key Outputs of the project are detailed in Annex 1.

Components

11. The project had four components with a total cost of US$545.39 million. A brief description of the project components and costs is given below. Details of the project costs and components are in Annex 3.

12. Component 1 - Union Parishad Grants (US$491.96 million): This component would finance two kinds of grants: basic block grant (BBG) and a performance based grant (PBG). These grants would help UPs to execute their assigned expenditure mandate and also incentivize improved UP performance in a number of governance and public financial management areas.

13. Basic Block Grants (BBGs) - US$436.76 million. Compared to the LGSP, the LGSP II would increase the average BBG allocation by about 12% per annum from Tk. 1.1 million in 2011 to about Tk. 1.8 million in 2016. Individual UP allocations would be determined through a two-step process. First, every UP would get a minimum amount, which will be equal shares of 25% of the total BBG funding pool. Second, the UPs that comply with a set of minimum conditions (MCs) would get an allocation based on a formula that takes into account the population and area of the UP. The MCs would include audit clearance, evidence of participatory planning and open budgeting, and timely submission of bi-annual financial and progress reports. The BBG would be funded jointly by GOB and IDA, with the GOB`s contribution going up from 50% under LGSP I to 60% of the total BBG funding pool by the end of LGSP II.

14. Performance Based Grants (PBGs) - US$55.2 million. The project would introduce PBGs to reward UPs that demonstrate improvements in key governance and financial management areas. An annual performance assessment over a set of 12 indicators in 5 different areas: (i) Planning and Budgeting, (ii) Public Financial Management, (iii) Own Source Revenue, (iv) Monitoring, transparency and accountability, and (v) Effectiveness of Village Courts, would determine the performance scores of UPs, which will determine their eligibility to access PBGs. The top 75% of UPs would receive PBGs on a graded scale and the average PBG would be about 20% of the BBG. The actual PBG allocations, like BBGs, would take into account population and area of UPs. PBGs would be phased in from year 2 of the project, while year 1 would be used to establish rules and systems, train personnel, disseminate information and carry out baseline evaluations of the UPs.

15. Component 2 - Information Flows and Accountability (US$10.47 million): This component would aim to

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strengthen systems of downward and upward accountability, improve transparency, and support informed decision making through better information flows among UPs. It would finance UP audits and audit reviews, quality assurance audits by the CAG, accreditation of auditors, expansion of LGD’s MIS to district level, project-related information, education and communication (IEC) activities, and mid-term and final project evaluations.

16. Audits: Currently all UPs undergo financial audits each year, while about one-fourth of them go through comprehensive assurance audits. Under LGSP III, UP audits would be upgraded to cover both financial and performance dimensions. During years 1-3 of the project, UPs would continue to be audited annually by CA firms contracted by the LGD. The audit reports would be subject to independent review by other CA firms and further quality assurance by the CAG’s office through sample field audits and audit reviews.

17. Information flows: The UPs would submit their six-monthly financial and progress reports to their respective Deputy Directors of Local Government (DDLGs) and Upazila Nirbahi Officers (UNOs). DDLGs will enter UP reports into a web-based MIS and submit consolidated district level reports to LGD. At the national level, the LGD’s upgraded MIS will use information coming from the districts, UP audits and other sources to track UP performance, make decisions and compile lessons learned.

18. Component 3 - Institutional Development (US$37.17 million): This component would aim to strengthen the intergovernmental system at all levels to enable accountable and responsive service delivery by the UPs. It would finance direct UP training; accreditation of capacity building service providers; personnel, training and equipment to strengthen DDLG offices; dissemination of the UP Operations Manual (UP OM); capacity building of LGD and other agencies, including training and technical expertise; and policy studies.

19. Component 4 - Project Management (US$3.71million): This component would provide technical and financial support to the National Project Director (NPD) and two Deputy Project Directors (DPDs) and other project implementing staff in: (i) financial management, (ii) procurement, (iii) safeguards, and (iv) project management. It will also cover a variety of logistical and incremental operating costs associated with project implementation.

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B. SIGNIFICANT CHANGES DURING IMPLEMENTATION

Revised PDO and Outcome Targets

20. The PDO was slightly amended in March 2015. The revised PDO was to ‘strengthen UPs to become accountable and responsive, through an efficient and transparent fiscal transfer system to UPs’. The original PDO was considered too broad in the sense that the project was designed to support UPs only and not all levels of local government. An amendment of the PDO was therefore seen fit to clarify the project’s intended focus of fiscal transfers to only one level of local government – UPs. As the final PDO was only a clarification of the original PDO to specify the level of government being targeted, the achievement of the PDO has been evaluated with respect to the final PDO only and a split evaluation was not felt to be necessary and has therefore not been carried out.

Revised PDO Indicators

21. The PDO level indicators were not changed as a result of the revision of the PDO. Only some adjustments and clarification of some measuring units were made to a few of the intermediate level indicators to facilitate accurate measurement of results and ensure attribution backed by a clear results chain. The changes listed below summarize the amended/dropped intermediate indicators: The indicator of ‘Fiscal Transfer Wing established and functional in LGD’ was amended to ‘Fiscal Transfer

Wing for UPs established and functional in LGD’ to reflect the project focus of fiscal transfers to only UPs;

The indicator regarding the ‘local government institutions’ share of total public expenditure’ was dropped because this measurement was designed to track expenditures of all levels of local governments though the project deals with UPs only, and thus could not be attributable to project activities;

The number of UP performance assessment to be conducted nationally was set at 1 per year. Originally there was no such target.

The target value for the indicator on the project steering committee meetings taking stock of project progress annually was reduced to 1 from 2 to make the monitoring consistent with the procedures set out by the government;

The number of annual safeguards review to be carried out, which was missing earlier, was set at 1 UP per Upazila per year.

Revised ComponentsN/A

Other ChangesN/A

Rationale for Changes and Their Implication on the Original Theory of ChangeN/A

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II. OUTCOME

22. The outcome of this project was of substantial concern and interest to both the GOB and IDA. The investment made in this and its predecessor project was large and GOB was committed to continue and sustain the activities started under the LGSP II. The project benefited people from all over Bangladesh and at the lowest levels of government. In many ways the project was truly a transformational people’s enterprise: project content was determined by the people, financial allocation decisions were made by the people, design and implementation was overseen by the people, government was seen to be and was indeed accountable to the people, and the people, particularly women, felt much more empowered. Accordingly, the GOB wanted to have a comprehensive picture of the project’s achievements, its shortcomings and the lessons learned to guide the GOB’s future course of action. An extensive study was, therefore, carried out amongst all the project beneficiaries and stakeholders to assess the project achievements and provide data and answers to evaluate the overall outcome of the project, particularly as they compared to the objectives and goals set out at the start of the project. The major findings of the evaluation contributed substantially to this implementation completion report.

A. RELEVANCE OF PDO

23. The relevance of the project PDO has to be considered in the overall historical evolution of the local government system in Bangladesh. For much of Bangladesh’s history, local government has been plagued with numerous political uncertainties, policy shifts and structural changes. While political parties routinely paid lip service to local government strengthening and devolution of power to lower levels, actual progress had been rather limited. Indeed, promoting devolution to local governments was one of the four pillars of the Sixth 5-year Plan’s strategy for capacity development; and the National Strategy for Accelerated Poverty Reduction (NSAPR) foresaw a heightened role for local government in a broad range of areas such as rural infrastructure, health, education, disaster management and empowerment of indigenous communities.

24. It was in support of these plans and strategies that the Bank provided support for the LGSP in 2006. Bank’s FY2011-15 Country Assistance Strategy (CAS) for Bangladesh noted that “the LGSP has shown that efficiency and responsiveness of local services can significantly improve through provision of adequate resources and strengthened accountability at the local level” and the increasing political focus on local governance was “expected to provide greater impetus to the decentralization agenda of the country”. Furthermore, decentralization and local governance were pillars of the governance and service delivery agenda and essential to improve the efficiency of social service delivery which the Bank strongly supported. Bank’s current (FY2016-20) Country Partnership Framework for Bangladesh sets the twin goals of ending extreme poverty and promoting shared prosperity through improved local governance, revenue enhancement and urban services via enhanced performance and service delivery.

25. LGSP II was therefore the logical expression of the Bank’s intention to continue its support of a broad long-term agenda and build capacity at the lowest level of government by enhancing the fiscal transfer system, institutionalizing accountability mechanisms, improving financial management, and establishing effective monitoring systems. The resulting PDO that was set out for LGSP II was in a sense the culmination of the Bank’s

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long-term vision to strengthen UPs to become proactive, accountable and responsive, supported by an efficient, transparent and predictable inter-governmental fiscal system. The achievement of the project objectives was to be assessed by all the citizens of the UPs as to whether they met their preferences and expectations. The performance of all the UPs was to be measured and compared in terms of their institutional capacity and effectiveness. Finally, the timeliness and predictability of the release of all the block grants was to be monitored and measured to see whether systemic improvements had indeed taken place to improve the inter-governmental fiscal transfer system. The PDO was and continues to be highly relevant today, which is evidenced by the fact that the recently approved follow-on project, LGSP III, essentially takes the LGSP II objectives and processes further by institutionalizing them at the UP as well as other tiers of the Government, including the Central Government level, and introducing them at the Pourashava (Municipality) level.

Assessment of Relevance of PDO and Rating Rating: High

B. ACHIEVEMENT OF PDO (EFFICACY)

26. The main objective of LGSP II was to strengthen UPs by providing them with resources which would enable them to be more accountable and responsive to the needs and preferences of their constituents. The best way to ascertain whether this objective was met was to survey the beneficiaries and seek their opinion about various aspects of the project. Accordingly, a survey was conducted in 200 randomly selected UPs to collect both quantitative and qualitative data to assess the achievement of various project objectives. The discussion of the ‘efficacy’ and ‘efficiency’ in the utilization of LGSP funds and achievement of the PDO which follows is based on the findings of this survey, supplemented by a review of the various elements of the Results Framework, as well as other project documentation.

Assessment of Achievement of Each Objective/Outcome

27. The PDO of LGSP II was to strengthen UPs to become accountable and responsive, supported by an efficient and transparent inter-governmental fiscal system to be measured in terms of share of beneficiaries, disaggregated by gender, agreeing that UPs are meeting local priorities; increase in the average performance score of UPs nationally based on certain criteria; and number of basic block grant tranches released on a transparent and predictable basis. The PDO of the project has been comprehensively achieved. Regarding the first element of the PDO – to strengthen UPs to become accountable and responsive – more than 70 percent of both male and female UP beneficiaries confirm that the UPs are meeting local priorities compared to an original target of 50 percent and a revised target of 60.5 percent; the share of UPs submitting the six-monthly reports on a timely basis reached 99.5 percent compared to an original target of 50 percent and a revised target of 90 percent; the share of DDLGs submitting six-monthly reports to LGD on a timely basis reached 100 percent compared to an original target of 75 percent and a revised target of 90 percent; the year to year increase in BBGs reached more than 17 percent as opposed to a target of 12 percent. The scheme selection process is fully transparent, with minimal external influence; and participation of the citizens in selection and implementation of sub-projects reflect the needs of the communities (see Annex 5 for a summary of the results of stakeholder consultations). There were minor shortfalls in meeting a few targets. For example, the Women’s Development Forum has been formed in 470 out of 486 Upazilas, which amounts to nearly 97% and is a significant achievement. Similarly, the percentage of UPs that

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prepared a periodic plan was 97 percent as opposed to the original target of 50 percent and revised target of 100 percent and the percentage of UPs submitting annual budgets to UNOs on a timely basis was 97.5 percent as opposed to the original target of 50 percent and revised target of 100 percent. However, considering the fact that there are more than 4500 UPs in Bangladesh, where these new systems and requirements were introduced for the first time in their history, these minor shortcomings, often procedural in nature, did not in any way detract from the fundamental institutional and societal changes that LGSP II facilitated. Finally, annual safeguard reviews are being carried out in the Upazilas as planned.

28. Regarding the second element of the PDO – supported by an efficient and transparent inter-governmental fiscal system – the processes followed under the project encouraged sound investment planning and efficient use of BBG and PBG funds, which were released in a transparent, timely and predictable basis. The performance score of UPs nationally, which formed the basis of the PBGs, exceeded the targets set at appraisal. Based on a 12 point scale, the original target was set at 7.5. At closing, the project over achieved a target of 7.8, confirming systemic improvements in the performance of the UPs and the local government system in the country in areas such as planning and budgeting; public financial management; own source revenue collection; monitoring, transparency and accountability; and effectiveness of Village Courts. Third, regarding timely and transparent release of the BBGs, the target was set at twice a year. The project met this target completely. Indeed, the semi-annual release of the BBG has become routine, which encourages forward planning by the UPs, allows them to prepare realistic budgets, and has contributed to UPs own successful efforts in revenue generation from other sources. As a matter of fact, one of the intermediate indicators being monitored is the year to year increase in the BBG. The target was for this to increase by 12 percent a year. The actual achieved at completion was over 17 percent.

Justification of Overall Efficacy Rating

29. Based on the fact that all the objectives of the project have been substantially achieved and in several cases even exceeded, the overall efficacy of the project is rated ‘high’.

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C. EFFICIENCY

30. No traditional economic analysis was carried out at the time of appraisal since it was not known a priori what kinds of schemes would be undertaken by the UPs, utilizing the project funds. An ex-poste cost-benefit analysis was also not carried out, taking into account the large number of schemes and the small size of typical schemes. Under the project, some 4500 UPs were each identifying an average of about 10 schemes every year; thus, the total number of schemes undertaken by UPs over the project period was substantial. Concurrently, the size of the schemes, in financial terms, on average, is small (less than $2000). The efficiency of these schemes, it was determined, cannot be feasibly assessed through traditional cost-benefit analysis methods or meaningfully compared with schemes undertaken by any other public agency in Bangladesh. Therefore, in line with analysis undertaken in similar local government projects, the efficiency of the schemes under LGSP II was measured in terms of allocative efficiency – whether schemes met beneficiaries’ needs – and technical/productive efficiency – the unit cost of schemes.

31. With regard to allocative efficiency, the type of schemes implemented by the UPs catered to the needs and priorities of the community, as identified by the communities themselves as part of their annual planning process. No other agency of the government is responsible for implementing the type of schemes implemented by the UPs, using BBG and PBG resources. UPs also do not have access to many other resources for implementation of such schemes and its own capacity to generate revenues is also somewhat limited. BBG and PBG-financed schemes therefore did not duplicate the work of other agencies or source of funds. Furthermore, as mentioned above, 71.5 percent of both male and female UP beneficiaries confirm that the UPs are meeting local priorities (compared to 40 percent at the start of LGSP II);1 that the scheme selection process is fully transparent, with minimal external influence; and participation of the citizens in selection and implementation of subprojects reflect the needs of the communities.

32. Technical efficiency was measured in terms of design parameters utilized, approved and actual costs, and time overruns, which is standard in such cases. The survey of 200 UPs looked into the deviation from the approved cost, time and design parameters of different schemes. Sector-wise detailed information are in Annex 4. The design and cost estimates for almost all construction schemes were prepared by the Sub-Assistant Engineer in the local office of the Local Government Engineering Department (LGED). The item-wise cost estimates and unit rates were in line with the national rate schedule, which is developed based on nation-wide experience in the construction of both large and small public works and which the Bank considers an appropriate approach to costing. The services and works contracts were procured in line with procurement guidelines of the government. The auditors reviewed the procurement actions and decisions and reported any deviation from procurement guidelines. If not followed properly, those procured items were declared as ‘mis-procurement. After adhering to this process, actual costs were in line with approved costs and the cost over-runs of the implemented schemes were found to be insignificant, and about 85% of the schemes were completed within the stipulated time and only 15% missed the deadline. On detailed analyses, these delays are not considered significant because the contracts are often very small and of limited time duration. Further, Bangladesh is also subject to long periods of rain and floods, which often affect the construction season. No significant deviations from the design parameters were observed. Schemes were therefore generally implemented under budget, on time, and considered by auditors to be of sound quality.

1 End target is gender disaggregated (M: 66%, F: 55%). Based on the project final evaluation survey, the project achieved (Male: 71.1%; Female: 71.8%) 118% of the target at closing.

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33. In terms of implementation efficiency, 98 percent of the IDA Credit was utilized. The closing date was extended by seven months in order to utilize some funds remaining in the credit, due primarily to the changes in the exchange rate between the Taka and SDRs. The additional time was also used to finalize some remaining aspects in the operationalization of the MIS system that was delayed in the earlier part of the project implementation. The follow-up LGSP III project had already been approved and it was important to ensure that the MIS system was fully operational so that LGD could fully benefit from it.

Assessment of Efficiency and Rating

34. It can, therefore, be concluded that, considering the relatively small size of the schemes and the highly-dispersed nature of most of the activities carried out under the project, the achievements were consistent with the targets and the operations were very efficient. A detailed analysis on a sectoral basis of the impact of the project investments also confirms this finding. This is presented in Annex 4.Rating: High

D. JUSTIFICATION OF OVERALL OUTCOME RATING

35. The project’s objectives were successfully achieved. Almost all the outcome indicators were either met or exceeded and the investments made under the project were done in a timely, efficient and cost effective manner. There was a seven-month postponement in project closing, primarily to utilize some remaining funds in the credit and to complete the implementation of some aspects of the project MIS, which is now fully functional. The PDO remained totally relevant and an additional follow-up project was prepared and approved by IDA, building on the positive experience of this project and ensuring the sustainability of project achievements. Under the follow-up project the GOB plans to expand the concepts and policies which were successfully implemented under the LGSP II to other layers of local government (e.g. Municipalities). Furthermore, the GOB has also committed to fully fund the BBG from its own resources starting in year 4 of the LGSP III, which would strengthen the sustainability of fiscal decentralization in the country and the empowerment of local governments. Rating: Highly Satisfactory

E. OTHER OUTCOMES AND IMPACTS

Gender

36. Empowerment of women was a key objective of the project. Women’s participation in planning, implementation and monitoring of local development activities were strengthened through various measures. UPs formed a seven-member Ward Committee (WC) and Scheme Supervision Committees in each ward with at least two women among the seven members. 30 percent of the schemes are earmarked for the women to select and prioritize. Women also routinely participated in scheme implementation and supervision. Results of the 200 UP survey and random interactions with women members of the Ward Committees confirm that women feel empowered, that their suggestions and concerns received adequate attention and that the schemes proposed by them are given full consideration.

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Institutional Strengthening

37. This was a key element of the project, particularly the introduction of various UP level governance structures and formalization of several institutional processes. Gram Savas and Ward Committees were institutionalized, as was their structure and gender composition. The number of women members and their roles were formalized. Permanent UP staff is very small consisting of the elected Chairman and supported by a UP Secretary who handles all the administrative work. All UP Secretaries were provided specialized training in various aspects of the Ups’ increasing responsibilities related to the LGSP. This training is a continuing activity and very much appreciated by the Secretaries. Due to the increased awareness, many UP activities such as holding open budget meetings have become routine. Institutional structures at the District level were formalized. Preparation of three-year development plans became normal. A large number of people at various levels were trained to upgrade their skills so that they could perform their new responsibilities more effectively. Scheme Supervision Committees were formed and a new computer based MIS was introduced and people trained to operate these systems on a continuous and on-going basis.

Mobilizing Private Sector Financing

38. There was no explicit objective for mobilizing private sector financing in the project. Project funds were primarily used to improve infrastructure such as roads, bridges and culverts, water supply and sanitation, markets and educational facilities. These improvements led to broad increases in economic, social, cultural and educational activities within the UPs which in turn would inevitably lead to more private sector activity. A target was set to try to increase the UPs own source revenues on a national basis by 33 percent over the project period. The actual target achieved was almost 69 percent. Although there is no direct evidence, this increased generation of UPs own source revenues created a virtuous cycle of increased UP revenues leading to more UP expenditure on public schemes leading to private sector activities.

Poverty Reduction and Shared Prosperity

39. The project contributed substantially to the goal of eradicating poverty and hunger by creating employment opportunities and empowering people to plan and implement their development needs and thereby address the twin issues of poverty and hunger. The goal of universal education was addressed as infrastructure schemes facilitated children’s access to schools. The various training programs and human resource development activities carried out under the project contributed to the general improvement of skills among the local population with long-term implications for employment generation.

Other Unintended Outcomes and ImpactsN/A

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III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME

A. KEY FACTORS DURING PREPARATION

40. LGSP II was a follow-on project to the LGSP completed in June 2011, as part of the Bank’s effort to strengthen the local government system in Bangladesh at its lowest level, i.e. UPs, by providing them with enhanced financial resources and discretion in deciding their spending priorities through a participatory process, while being held accountable for their performance through a number of accountability measures. The UP’s capabilities to handle this additional responsibility were also strengthened through various capacity building programs and supplemented by improved policy making, better management of inter-governmental fiscal relations and monitoring activities.

41. Overall, LGSP was considered successful in achieving its objectives. The project quadrupled total resource transfers to the UPs via Expanded Block Grants (EBG) which was disbursed directly to UP bank accounts; established a basic system of local audits with more than 11,000 such audits conducted during the project period; provided basic training to nearly 84,000 local public officials in planning, budgeting, public financial management, safeguard compliance, and good governance; set up a system of local government reporting whereby UPs reported on a six-monthly basis to their parent Ministry (LGD) and these reports were aggregated and used for oversight and making program adjustments; improved transparency and participation through mandatory disclosure obligations and inclusive systems of planning, budgeting and scheme implementation; and financed thousands of small local infrastructure and service delivery schemes which responded to local public demands and needs.

42. Preparation of LGSP II, therefore, occurred as an integral part of the implementation of LGSP. The objectives set for LGSP II reflected the challenges faced during LGSP implementation while, at the same time, raising the standards required of the UPs at a level which could be realistically achieved. The design of the project was essentially based on the earlier project and was kept relatively straight forward. The Results Framework was also designed on the experience of the earlier project. Appropriate baseline data was collected in order to be able to set realistic targets. A fairly comprehensive system of collecting appropriate monitoring data covering all operational aspects of the project was designed and installed. With some initial delays, the collected data is now routinely transmitted to LGD and fed into a MIS for analytical purposes. LGD has learned important lessons during project implementation, which has and continue to inform its policies towards local governments. The preparation team also identified the risks associated with the project properly and the mitigation measures suggested were adequate and minimized the risks faced by the project. Overall, the project was well prepared and ready for implementation by the time of credit approval.

B. KEY FACTORS DURING IMPLEMENTATION

43. Overall project management and the implementation arrangements put in place at the LGD (central), District (intermediate) and UP (local) levels were appropriate and supported effectively by a steadily improving monitoring and reporting system. Although in the initial stages there were delays in recruitment of some key staff, the project was never at risk; a mid-term review (MTR) was undertaken as planned and the changes and adjustments agreed during the MTR were implemented. A minor project restructuring was undertaken to clarify

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that the scope of the project was limited only to UPs and did not affect all the other levels of local government. Some minor adjustments to the project’s institutional architecture were also undertaken. A discussion of the various factors affecting project implementation follows.

Factors subject to government or implementing entities control:

44. Throughout project preparation and implementation GOB demonstrated its full commitment to the project and the long-term objectives which guided its formulation and design. GOB also allowed the gradual but continuous and steady trajectory of the policy reforms initiated under the LGSP. These included direct fund transfer to all UPs based on a simple formula-based grant allocation mechanism; predictable funds disbursed in two half-yearly tranches; regular audits of UPs by private audit firms; and instilling a culture of accountability in the provision of services at the UP level. Under LGSP II the GOB continued, refined and expanded these reforms by announcing in advance three years’ indicative ceilings of Basic Block Grants (BBGs) to provide a predictable envelope of funds to the UPs to facilitate forward planning; improved the transfer formula with a basic allocation for all UPs and an allocation based on certain minimum and mandatory conditions (MMCs); provided greater discretion in allowing UPs to utilize up to 10% of BBG and PBG for acquiring essential services to improve their service delivery functions; ensured public disclosure of information regarding UP performance to improve transparency and accountability; took steps to improve participatory budgeting, reporting and auditing for better financial management; allowed rollover of unspent BBGs/PBGs to subsequent fiscal years; improved the application of environmental and social management frameworks; and established an audit cell in the LGD to help streamline the handling of audit objections and audit management issues. As a result of these actions, the predictability, timeliness and the amount of the BBGs and PBGs delivered to the UPs improved dramatically and allowed UPs to plan for longer time horizons and incentivized them to act accordingly. Commitment and disbursement goals of all allocated project funds were met consistently over the project period and the amount of the grants have also grown steadily on a year-to-year basis. GOB fully met the counterpart-funding requirements under LGSP II in a timely fashion, further indicating the GOB’s commitment to sustaining the projects longer term vision and objectives.

45. The project also made significant contributions to improve the transparency and accountability of UPs through institutionalization of the audit and performance assessment processes by engaging private audit firms. There has been a gradual shift in the behavior of UPs in that they are more serious about the open budget meetings and the preparation of budgets, preparing annual financial statements and audits, and in the establishment of a transparent audit appeals process where UPs are given a chance to appeal against audit opinions expressed by private firms. UPs are also better inclined towards adherence to environmental and social safeguards compliance. Almost all UPs regularly display information regarding their budgets, grant allocations, six-monthly expenditures and revenues, procurement related matters, etc. on their notice boards, thus improving the transparency of their operations generally and their adherence to the Right to Information Act specifically. The development and implementation of the MIS system faced some delays initially but has gradually become fully functional and its effectiveness also appears to be continuously improving. Various accountability mechanisms are also functioning better and have indeed become institutionalized due to the LGSP II. These include the ward sabhas, ward committees, open budget meetings, scheme supervision committees and UP development committees. An UP Helpline has been established to provide a cost and time-effective communication tool to promote accountability and transparency.

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46. Implementation of a project of this scope, magnitude and geographical spread requires a lot of people with various levels of skills and knowledge who are available all over the country. GOB organized and delivered a massive countrywide training program at the National level (150 Master Trainers), Upazila level (for 4400 Upazila Resource Teams each consisting of 10 trainers), UP level (62400 UP functionaries), and Ward Committees and Scheme Supervision Committee members (488,600). Additional training was also organized to address environmental and social aspects of the project. A continuous capacity development program was prepared and implemented for refresher training for various UP and Upazila functionaries. A brochure was developed to record the many experiences during the course of LGSP II implementation. Additionally, some 9000 staff were trained in the operation of the MIS developed under the project and this process is on-going.

47. For overall project management, GOB appointed a competent National Project Director and a Joint Secretary at the Ministry level to monitor all project activities. Project management at the District level was coordinated by the Deputy Commissioner, DDLG, UNO and the District Facilitators. The Deputy Commissioner headed the District Coordination Committee which oversaw overall project implementation arrangements. The system worked reasonably well on the whole. There were difficulties and delays in recruiting some key consultants due to a lack of suitable candidates and it was felt that the qualifications were perhaps too stringent. These and other similar issues were resolved after discussions with the Bank on an on-going basis.

Factors subject to World Bank control:

48. As mentioned before, LGSP II was a follow-up project to the LGSP the Bank has already approved a LGSP III which is under implementation. These overlapping operations clearly demonstrate the Bank’s strong interest in strengthening local government through long-term engagement. As such, the Bank has committed significant resources to prepare the projects properly and the loan amounts have also been substantial in order to encourage, accelerate and facilitate the GOB’s efforts to bring about the very significant changes that are necessary at the lowest levels of local government. As a follow-on project LGSP II had the advantage of being able to build on its earlier experience. There was continuity of Bank staff working on both the earlier project and LGSP II. Bank staff assigned to the project, both at HQ and in the field office, was very experienced and fortunately most of them were retained for most of the project period. The staff maintained close, continuous and harmonious relationships with GOB staff at all levels. Issues often arose during implementation, which were discussed thoroughly and resolved during supervision missions and other review meetings. The Bank paid close attention to the GOB’s viewpoints and its changing perceptions about certain aspects of project implementation based on the on-going experience. Most of the issues were resolved quickly and amicably, demonstrating the continuous learning taking place on all sides. This greatly facilitated the progress and success of the project.

Factors outside the control of government and/or implementing entities:

49. Although the external funds for LGSP II was provided largely by IDA, there were several Trust Fund financed activities that supported the project in Third Party Monitoring activities to increase citizen engagement in the open budgeting process and in improving budgetary transparency at the UP level. A Civil Society Organization (CSO) carried out a survey of beneficiaries in the UPs about their participation in LGSP II activities. The project also received NLTA support from SDC to enhance the capacity of GOB to adopt further reforms and programs to improve local service delivery and governance and to strengthen decentralization. UNDP and UNCDF also provided support to the project by providing additional training for auditors for conducting performance

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assessments. All of these organizations also played a vital role as sounding boards in various project design and implementation activities and provided valuable and timely inputs in the implementation of the project.

IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME

A. QUALITY OF MONITORING AND EVALUATION (M&E)

M&E Design

50. Like in many other aspects, LGSP II greatly benefited from the experience gained in its predecessor project, LGSP. The design of the M&E system was perhaps one of the most important beneficiaries. Annex 1 provides the full results framework, with the objectives that were set and the outcomes that were achieved. While LGD remained the focal point of LGSP II execution, the design of the M&E system tried to ensure that reporting, monitoring and impact evaluation became mainstreamed within the LGD’s system and integrated monitoring and impact evaluation with policy making. A key element of this reform was to strengthen the MIE wing of the LGD by appointing a senior M&E specialist to advice LGD regarding M&E systems. In addition, LGSP II also introduced several pivotal activities to strengthen M&E. It rolled out the MIS to sub-national levels and introduced annual performance audits. It also introduced the six-monthly UP reports to DDLG and district reports by DDLGs and field visit reports by LGD teams to generate data for tracking project funds and results monitoring. Nodal training institutions such as NILG, BARD, RDA and LGED were to provide annual reports on training activities held for the UPs and other beneficiaries. LGD was to prepare an annual report consolidating the information collected from the various sources. LGSP end-of-project survey served as the baseline for LGSP II. In addition, there was to be a mid-term evaluation and an end-of-project evaluation to assess project performance. On the whole, M&E design can be considered to have been thorough and comprehensive. The PDO was relatively straight forward, clearly spelled out and covered all aspects of the PDO statement. To the extent that there was any ambiguity, this was clarified during the project restructuring that took place wherein the wording of the PDO was changed to reflect that the inter-governmental fiscal transfer objective was limited to the UP level only, which was the intent all along, and did not cover all the other tiers of local government. The intermediate results indicators were all measurable and time bound and baseline data was available for them whenever appropriate. Arrangements were also in place to collect, collate and analyze the necessary data.

M&E Implementation

51. The PMU and the LGD were both highly aware of the importance of M&E for this project and acted accordingly. Baseline data had already been established under LGSP and these were utilized wherever possible and appropriate. Data appear to have been collected routinely, as some of the data collection processes had already been introduced under the previous project and the collected data were communicated to the next level regularly for collation and analysis. One of the operational objectives of the overall M&E effort under LGSP II was the installation and operationalization of a properly functioning MIS from the UP all the way up to the LGD level. Operationalization of a properly functioning MIS spread out over the entire country with all kinds of capacity constraints is not an easy task at the best of times. There was a major delay in LGSP II in getting the MIS implementation started and the early delays cascaded into further delays up until very recently. There were

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difficulties in recruiting a suitable MIS Expert which led to a delay in hiring a firm for MIS software development. The unreliable infrastructure (e.g. lack of uninterrupted electricity at steady voltage) and inadequate internet band-width also did not help matters. As a result the MIS system has become partly functional only recently and it will take some more time for it to reach a steady state and become fully effective. With the approval of LGSP III, which will utilize this same MIS, the complete installation of the monitoring system and its effective utilization will be ensured.

M&E Utilization

52. The UPs, with the help of DDLGs and DFs have continued to submit all necessary operational and financial monitoring reports and data to the PMU for proper project implementation. Financial Audits have been carried out for all UPs annually by private chartered accountants and all UPs have been found to be in compliance. Performance audits have also been successfully carried out on the basis of data collected by the UPs and through inspection of completed sub-projects. The data collected has formed the basis of the various periodic progress reports prepared by the UPs, PMU and LGD to be utilized for managing project related activities and policy discussions. As a result, certain minor adjustments were made to the PDO of the LGSP II and some of the intermediate indicators were also modified appropriately. The M&E activities carried out under LGSP II made a significant impact on the timely and cost effective implementation of the project and contributed substantially to the decision by GOB and the Bank to continue with the concept of local government strengthening and empowerment with the approval of LGSP III by the Bank.

Justification of Overall Rating of Quality of M&E

53. The overall rating of Quality of M&E is “substantial”. The M&E system as designed was highly appropriate to properly assess the achievement of the project objectives and the results were utilized as intended. The only shortcoming was the initial delay in appointment of suitable staff to manage the implementation of the MIS and in the timely development of the necessary software. However, some of the reasons for the delay were totally outside PGD/PMUs control. Finding suitably qualified candidates is often difficult in Bangladesh and lack of reliable and uninterrupted power and internet bandwidth in the rural areas (most UPs are in the rural areas) is endemic. However this really did not detract significantly from the overall quality of the M&E activities since the manual system already in place continued to function well and provided the necessary information for project implementation. However, all systems are now fully functional and performing as originally intended and expected to steadily improve in the future.

Rating: Substantial

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B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE

54. Environmental Compliance: The LGSP II was classified as Category B and environment risk was moderate. An environment and social management framework (ESMF) for the project was adopted to ensure proper screening of the schemes for identifying the environmental issues, and to prepare site specific Environmental Management Plans (EMP). Two permanent committees in each UP on safeguard issues were formed namely (a) for social welfare & disaster management and (b) for environmental development, environmental protection & forestation for performing the activities properly during scheme selection, design, implementation and in the monitoring stage. However, the PMU failed to recruit a suitable environment and social specialist in the PMU for about two years due to non-availability and initially the compliance of environment management was only ‘moderately satisfactory’. It was reported that substantial numbers of land based schemes had been thoroughly screened before implementation and reviewed during implementation during FY 2014-16. In these schemes, specific environmental issues were considered and necessary mitigation measures were undertaken. Some of these measures are: (i) providing adequate openings in road and culvert construction for transverse water flow, (ii) conducting arsenic test for every constructed tube-well, (iii) undertaking awareness raising program on banned pesticides in agricultural products, and (iv) on proper disposal of clinical waste materials. The project also conducted adequate workshops and training programs for DFs and the members of WC and SSC on different technical issues, including safeguard management. It has been mentioned, however, that the questions in the screening checklist were often too long and cumbersome to be filled up at the UP level. In summary, compliance with environmental standards for the project as a whole can be considered ‘satisfactory’.

55. Social Compliance: Social safeguard performance under LGSP II remained ‘satisfactory’. Of all the activities undertaken under the project, land-based small-scale infrastructure schemes accounted for 84% in FY12, and this proportion gradually increased in the ensuing years. The physical works mostly consisted of improvement and repair/renovation of existing rural roads, and building culverts, small-scale irrigation channels, public toilets, tube-wells for drinking water and the like. As to land availability, work on the existing facilities did not use any additional land beyond their existing limits. Where additional land was needed, majority of the UPs used public land, including their own. Some private land was reportedly used for tube-wells, small-scale irrigation channels, public toilets, etc., that served the communities as a whole. Some 6,700 landowners were reported to have donated land for such community facilities. Performance with process tasks like Social Screening improved notably and continuously during the project implementation period. Compliance review of environmental and social issues by Scheme Supervision Committees (SSCs) also improved gradually. By FY15, 66% of the UPs established Grievance Redressal Committees (GRCs), which reportedly resolved 193 complaints over the four fiscal years. Of all complaints, 67 were against Ward Committees -- none against SSCs. Lessons from this project has led to the simplification of the GRM and also addressed the need to strengthen monitoring and recordkeeping systems along with training arrangements for UP functionaries.

56. Financial management (FM) assessment of LGD was carried out during preparation of LGSP II to identify FM risks and to design an appropriate set of FM arrangements to ensure that the project proceeds were used for the purposes intended. FM risk was rated ‘Substantial’ at preparation stage and remained the same mainly due to the complex nature of project activities and the fund flow mechanism. Based on the risk assessment, a time bound FM action plan was prepared and agreed with the implementing agency which was followed up during the supervision missions. FM performance of the project was ‘Satisfactory’ and there are no pending issues from the agreed FM action plan. The interim unaudited financial reports were submitted to the Bank in a timely manner

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and the Bank found them acceptable based on its desk reviews. Annual project financial statements were audited by the Foreign Aided Project Audit Directorate [FAPAD] under the C&AG and the auditors have issued unqualified audit opinions in all cases, though there were a number of audit observations reported in each year’s audit report. However, there are no pending material audit observations on any of the previous audit reports. Along with many other successes of the project, carrying out 4550 UP audits annually on a regular basis and taking actions on them were one of the great lessons learnt from the FM perspective.

57. The overall procurement performance of the project is ‘Satisfactory’. The project envisaged two sets of procurement arrangements: (a) procurement of goods and services by LGD and (b) procurement of works and goods by the UPs. There were some minor delays in selection of consulting firms and also in procurement of goods by LGD. However, the quality of procurement was satisfactory as LGD was supported by a high-quality procurement consultant throughout the project. Major procurement in terms of cumulative value was done by UPs and these were mostly satisfactory as few issues were identified in yearly UP audits. UP Procurement covered almost 90% of the project procurement. To mitigate procurement risks, a comprehensive MIS system has been developed under this project which became partly operational in the last year of the project. The MIS system covers all activities from planning to asset management including a “procurement module”. The initial MIS data has shown good results and full implementation of the MIS system is expected to further improve the transparency and efficiency in UP procurement.

C. BANK PERFORMANCE

58. Quality at Entry: LGSP II was essentially a continuation of its predecessor project LGSP. As such, it was prepared while the implementation of LGSP was in full swing and therefore benefited greatly from the experience. The PDO was therefore kept simple and straight forward, fully consistent with the government’s policy towards improved decentralization and empowerment while being fully aligned with the Bank’s FY2011-15 CAS (see section on Relevance of PDO) and long-term lending strategy for Bangladesh. Decentralization to sub-national tiers of Government is a complex matter requiring continuous research about the ever changing socio-economic and political scenario in the country. Involvement in LGSP afforded the opportunity to stay abreast of the changing environment and the design of LGSP II incorporated all the lessons learned. LGSP II continued to focus on UPs as these were the oldest and lowest tier of local government that were also closest to people in the target population; at the time of LGSP II, UPs covered approximately 75 percent of the total population of the country. International experience encouraged the introduction of performance based financing. All the project components complemented each other to achieve the project objectives and outcomes. The appraisal of the project was thorough and paid close attention to all relevant technical, economic, institutional, fiduciary, social and environmental aspects. Risk assessment was highly appropriate, as were the proposed mitigation measures. UP Operational Manuals were found to be highly useful. The Results Framework was also clear and the sources of data required for monitoring the indicators were identified well in advance and continued to provide the necessary information throughout project implementation.

59. Quality of Supervision: The Bank was fully focused on supporting the project agencies at all levels throughout the project implementation period. In the early stages, to ensure development impact, it paid special attention to the capacity building aspects of the project and to the implementation of some of the innovations introduced under the project. The Bank made particular efforts to ensure compliance with Bank policies through strengthening the implementation of the environmental, social, financial management, procurement and M&E

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aspects, considering that some of these things were being done for the first time at the UP level. In addition, the Bank team worked closely with the client to prepare LGSP III in a timely manner, contributing to the sustainability of LGSP II outcomes. The one area where progress was delayed and therefore rated only ‘moderately satisfactory’ was in the early years of project implementation and at the very end of the project implementation period. The delay was mainly in the introduction of a MIS system to improve and strengthen the M&E aspects of the project and were mostly caused due to the failure in recruiting proper staff, hiring of a MIS software development firm, in training adequate numbers of UP staff to operate the MIS, and the lack of reliable power and internet systems in the UP areas. The downgrading to “moderately satisfactory” was primarily to send a message to the Borrower and it did bring about the requisite change that was desired. Although delayed, the MIS is now running and will become fully operational in the course of the follow-up project. Deployment of Bank supervision staff and other resources was highly adequate both in terms of quality and quantity. The retinue of Bank staff in the field office played an important role in providing timely support to GOB in this large and highly complex project and the timing and frequency of supervision missions from HQ was also adequate.

Justification of Overall Rating of Bank Performance

Rating: Based on the Bank’s performance in ensuring both the ‘Quality at Entry’ and ‘Quality of Supervision’ and ensuring that the long term benefits of the project are sustained the overall rating for Bank performance is “Satisfactory”.

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D. RISK TO DEVELOPMENT OUTCOME

60. LGSP II is a follow-up project to LGSP, which was implemented very successfully in a timely fashion. The design of LGSP II, built on the successes of LGSP, reduced the difficulties and risks faced during LGSP II implementation, made more resources (in terms of Block Grants, training and TA) available to LGSP II beneficiaries and raised the bar in terms of the objectives and outcomes to be attained under LGSP II. The Operational Risk Assessment Framework (ORAF) for LGSP II anticipated various risks including financial malfeasance, delayed release of funds, elite capture, weak administrative, financial management and procurement capacity, and policy uncertainties with regard to decentralization. Appropriate mitigation measures to address these risks were identified and agreed with the GOB and other stakeholders for implementation. The overall risk rating for project implementation was considered ‘moderate’; the likelihood of these risks occurring during implementation was considered ‘medium’ and their impact on project performance and achievement of the PDO was predicted to be ‘low’.

61. LGSP II implementation is complete and about 98% of the IDA credit has been disbursed. End of project targets of PDO level indicators have been met. The grants are being released to the UPs on a predictable and transparent basis; the amount of the block grants increased by 12% on a year-to-year basis and the GOB’s share of the block grants currently stands at 60:40 compared to 50:50 in FY 2011-12. UPs are generating more funds from internal sources than before. Financial and performance audits are carried out routinely for all 4550 UPs and audit quality is good and steadily improving. Citizen’s participation has increased for the Ward Committees, Scheme Supervision Committees, Upazila women’s development fora and open budget meetings. Capacity building and training of UP and District officials is an on-going process. The GOB has already agreed to the continuation of the LGSP II efforts by starting the implementation of a Third Local Government Support Project (LGSP III) under which the GOB’s share of the block grants would go to 100% by the fourth year of the project. The risk that the achievement of LGSP II will not be maintained is therefore low.

V. LESSONS AND RECOMMENDATIONS

62. Improving local governance by devolving more authority and responsibility to the lower levels of government is by definition an extremely difficult objective. This is particularly true for societies burdened by long held traditions of control in the exercise of social, political and fiscal authority. In such circumstances, bringing about change becomes a long-term transformational proposition for those societies. In order to engage in such endeavors, all the responsible parties and partners have to agree on and share a long-term vision for change and make long term commitments to achieve them. LGSP II was a project where the GOB, continuing with what it started under LGSP, reinforced its commitment to such change. This commitment has been further confirmed by the recent approval of the LGSP III. The Bank has also been a steady and reliable partner for the GOB at all stages in the development of the concept of local government support and development in Bangladesh and has provided substantial technical, conceptual and financial assistance in carrying this objective forward. The successful implementation of both LGSP and LGSP II is expected to be fully replicated in LGSP III also and further demonstrates the value of making long term commitment to ideas, concepts and policies which bring about fundamental changes in a society.

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63. Another important lesson from LGSP II is that decentralization and devolution should be a gradual process and all changes should not be made or tried out at one time or too quickly. Change takes time and the absorptive capacity of people and the systems within which they are used to working is also limited. It is always prudent to introduce change gradually and at a pace which can be accepted and tolerated by its potential beneficiaries.

64. BBGs and PBGs are both important and need to complement each other and be sequenced appropriately. Rightsizing the BBGs is critical to make sure UPs have enough resources to deliver their new mandates and exercise their new authorities adequately but not so large as to trigger rent seeking and patronage politics. Similarly, rightsizing the PBGs is also critical to ensure that they incentivize local governments to improve their performance and are recognized publicly for their improvements. The PBG system should also be well understood by all parties concerned: central government, local government and citizens. This is critical for success. Taking time to establish the nuts and bolts of the system is critical before starting the grants.

65. The introduction of PBGs under LGSP II instilled a sense of competitiveness and pride within and among UPs to perform better than others. This helped UPs to improve in a number of key areas in the governance and accountability measures of the UPs like tax revenue enhancement, increased peoples’ participation and improvement in public financial performance measures, planning, budgeting and reporting.

66. Political will and ownership of the Borrower is a key to the success of a local government strengthening program. In LGSP II the GOB continued to demonstrate its full ownership of the program and even exceeded various agreed outcome targets. LGSP II was also instrumental in securing GOB ownership of the program through increase in GOB funding share of BBGs to ensure the longer-term sustainability of fiscal transfers.

67. Stability and strong project teams both in the implementing agencies and the Bank and the close collaboration between them proved to be extremely valuable for the timely and effective implementation of the project. The Bank team consisted of several highly-experienced staff who continued to provide support at various stages throughout project preparation and implementation. The same was true for many of the staff on GOB side. Given that the geographical spread of project activities were so far flung and new situations presented themselves frequently, the continuity of the senior staff allowed project implementation to proceed without too much difficulty.

68. Capacity needs to be built at all levels of Government, not just local governments. Institutional development of central and local government as well as that of the communities need continuous strengthening. About 63,000 UP officials were given training on different aspects of UP management like public financial management, procurement, safeguards and monitoring through a cascade-based training system. It was realized that the class-room type training for a few days was not ideally suited for capacity building of UP officials. However, the hand-holding and need-based assistance provided later by the District Facilitators to UP officials proved to be more effective due to close interaction with the stakeholders. Alternative arrangements for training and mentoring of critical staff are essential to build sustainable capacity at the local levels.

69. As to the generation of own source revenues, as decentralization rolls out and local governments start getting more authority and resources, there is a certain lag before local governments start improving

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performance and gaining the trust of the citizens. It is therefore difficult to see big increases in own source revenues right away. The first LGSP did not focus on own source revenues. By the time LGSP II came on stream, the fiscal transfer system became more predictable, the capacity of the UPs had improved and the citizens’ trust in the UPs had also improved. This allowed the UPs to focus on increasing own source revenues, with positive results.

70. One area where the project did not succeed in meeting expectations was in the timely implementation of the MIS. While the reason for the delay was primarily due to LGD’s failure in recruiting proper staff and consultants for the design of the MIS in a timely fashion, a significant additional contributing factor was the lack of stable and uninterrupted power supply and proper internet band-width. In order to implement an advanced MIS it is imperative to evaluate the infrastructure that would be necessary to support the functioning of such systems and to take any remedial measures in advance of the installation of such systems.

71. The lessons learned through the preparation and implementation of each LGSP phase have informed the design of successive phases, with each phase gradually strengthening accountability and responsiveness of UPs. The success of this approach is reflected in the Bank and client’s engagement in three operations in a row. The trajectory of local government reforms that were adopted in the design of successive LGSP operations can be summarized as follows.

Table 1. Evolution of Local Government Reforms under LGSP OperationsPre-LGSP LGSP LGSP2 LGSP 3

No direct or discretionary resources to UPsDirect block grants piloted in one district under Sirajganj project

Direct and discretionary block grants, determined on the basis of population and disbursed bi-annually across all UPs

Institutionalized predictability through 3-year indicative funding Improved formula-based horizontal equalization and long-term vertical revenue sharing identified

Government to fund 100 % of Block Grant amount through UP Development Fund budget line in MTBF and ADP from year 4 of the project

Small scale performance grants by Government without clear criteria or transparent process

Performance measures and grants piloted in 6 districts

Nationwide performance grant system with clear criteria and transparent assessmentFurther testing of performance measures before scaling up

Use of scalable and weighted indicators to generate stronger incentives; Inclusion of indicators on local infrastructure / scheme outputs to encourage investment efficiency and sustainability

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Small scale schemes decided mostly from top, some of which implemented by Ups

Small scale schemes prioritized locally and implemented by UPs and communities

Gradual shift towards sustainable service delivery via 5-year UP development plan, development of UP-level asset registries and emphasis on O&M

Incentivize UPs to implement UP-wide large scale schemes as opposed to past practice of implementation of small scale spread over all Wards

Random audits by CAG but mostly not on-site or using clear criteria

Independent financial audits of all UPs via independent Chartered Accountants with quality assurance by CAG and assurance audits for about 25% of UPs

Independent financial and performance audits nationwide

Embedding of annual UP-audits via Independent Chartered Accountancy Firms and as a regular system in LGD

Limited and ad hoc reporting mostly by central officials at Upazila level

UPs submitting 6-monthly progress reports nationwide and captured in a central MIS

Decentralized district level UP reporting infrastructure establishedDecentralized web-based MIS, at the district and lower levels established.System of follow up to UP reports in terms of oversight and support.

UPs to submit reports through on-line MIS

Little local discretion in hiring or procuring need-based capacity development services

Little local discretion in hiring or procuring need-based capacity development servicesTop down core training via Upazila-based resource teams (URTs)

Discretion to use up to 10% of fiscal transfers for short-term local hiring, peer exchanges, capacity development.Creation of a marketplace through accreditation of qualified capacity building service providersGreater emphasis on peer learning networks

Provide capacity building training through video training materials

.

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ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS

RESULTS INDICATORS

A.1 PDO Indicators

The project development objective is to strengthen Union Parishads (UPs) to become accountable and responsive, through anefficientand transparent intergovernmental fiscal transfer system to Union Pari

Indicator Name Unit of Measure Baseline Original TargetFormally Revised Target

Actual Achieved at Completion

Share of beneficiaries, disaggregated by gender, agreeing that UPs are meeting local priorities

Percentage 40.00 50.00 60.50 71.50

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets): End Target is gender disaggregated (M: 66%, F: 55%), and the project achieved (Male: 71.1%; Female: 71.8%) 118% of the target at closing. Data was based on the project final evaluation survey.



The average performance score of UPs nationally (Based on 12 point scale)

Number 0.00 7.50 7.50 7.80

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

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Comments (achievements against targets): This indicator was modified in Feburary 2015. The original indicator read: Increase in the average performance score of UPs nationally. The project over-achieved the set target at closing.



Number of BBG tranches released on a transparent and predictable basis

Number 0.00 2.00 2.00 2.00

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets):

A.2 Intermediate Results Indicators

Component 1 - Union Parishad Grants

Component 2 - Information Flows and Accountability

Component 3 - Institutional Development

Component 4 - Project Management



Fiscal Transfer Wing for UPs established and functional in LGD.

Yes/No N Y Y Y

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

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Comments (achievements against targets): This indicator was modified in Feburary 2015. The original indicator read: Fiscal transfer cell established and functional in LGD. It was revised to more accurately reflect the project scope and PDO. Achievement of this indicator embarks on the institutionalization of the intergovernmental fiscal system for UPs.



Year to year increase in basic block grants

Percentage 12.20 12.00 12.00 17.38

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets): The project over-achieved the set target at closing (144.8%).



Performance grant system established for UPs and made operational countrywide

Yes/No N Y Y Y

30-Nov-2011 30-Sep-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets): As part of the institutional fiscal transfer, the successful introduction of PBG nationwide was one of the most notable achievements under the project.



Number of UP performance Number 0.00 1.00 1.00 1.00

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audits conducted nationally per year.

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets): This indicator was modified in Feburary 2015. The original indicator read: Number of UP performance audits conducted nationally. As the basis for PBG allocation, the set target is achieved.



DDLGs submitting six-monthly reports to LGD on a timely basis

Percentage 0.00 75.00 90.00 100.00

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets): This indicator was modified in Feburary 2015. The original target was 75 at closing. The revised target was overachieved by 110%.



UPs submitting six-monthly reports on a timely basis

Percentage 27.50 50.00 90.00 99.50

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets): This indicator was modified in Feburary 2015. The target is set to be 90.00, as opposed to the original of 50. The set target was exceeded by 110.6% at closing.



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Share of UPs in which Ward Shabhas are functional

Percentage 0.00 50.00 100.00 100.00

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets): This indicator was modified in Feburary 2015. The target is set to be 100.00, as opposed to the original of 50. The set target was achieved at closing.



Percentage of UPs with a periodic plan

Percentage 0.00 50.00 100.00 97.00

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets): This indicator was modified in Feburary 2015. The target is set to be 100.00, as opposed to the original of 50. The set target was 97% achieved at closing.



Percentage of UPs submitting annual budgets to UNOs on a timely basis

Percentage 0.00 50.00 100.00 97.50

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets): This indicator was modified in Feburary 2015. The target is set to be 100.00, as opposed to the original of 50. The set target was 97.5% achieved at closing.

Indicator Name Unit of Measure Baseline Original Target Formally Revised Actual Achieved at

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Target Completion

Percentage increase in UP own-source revenues nationally

Percentage 0.00 33.00 33.00 68.70

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets): The overachievement of this indicator at 208% has reflected the success in UP empowerment.



Number of new UP functionaries trained by URTs

Number 0.00 62382.00 78132.00 83767.00

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets): This indicator was modified in Feburary 2015. The set target was exceeded 107% at closing.



Number of functional Upazila Women's Development Forums

Number 80.00 242.00 486.00 470.00

30-Sep-2011 30-Dec-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets): This indicator was modified in Feburary 2015. The revised target is set to be 486.00, as opposed to the original of 242.00. The set target was 96.7% achieved at closing.

Indicator Name Unit of Measure Baseline Original Target Formally Revised Actual Achieved at

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Target Completion

Number of Project Steering Committee meetings taking stock of project progress

Number 0.00 1.00 1.00 1.00

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets): This indicator was modified in Feburary 2015. The original indicator read: Number of project steering committee meetings taking stock of project progress. The revised annual indicator aims to reflect the meeting taking place once per year, and it was achieved at closing.



Updated annual work plans (including procurement plans) submitted to PSC and the Bank by June 30 of previous FY

Number 0.00 1.00 1.00 1.00

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

Comments (achievements against targets): This indicator was modified in Feburary 2015. The revised indicator records results annually instead of cumulatively. The set target is achieved at closing.



Number of annual safeguards review carried out in 1 up per Upazila

Number 0.00 1.00 1.00 1.00

30-Sep-2011 30-Nov-2016 30-Jun-2017 30-Jun-2017

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Comments (achievements against targets): This indicator was modified in Feburary 2015. The original indicator read: Number of annual safeguards review carried out. The set target is achieved at closing.

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A. KEY OUTPUTS BY COMPONENT

Objective/Outcome 1 Improved fiscal transfer system

Outcome Indicators 1. Number of BBG tranches released on a transparent and predictable basis

Intermediate Results Indicators

1. Fiscal Transfer Wing for UPs established and functional in LGD.2. Year to year increase in basic block grants3. Performance grant system established for UPs and made operational countrywide

Key Outputs by Component(linked to the achievement of the Objective/Outcome 1)

1.Two tranches of formula-based BBG disbursed directly to UPs in a timely manner2. Annual 12% increase in the intergovernmental transfers to UPs3. Institutional arrangement set up in place for long-term fiscal transfer function.4. PBG disbursed to eligible UPs annually proportionate to their performance scores

Objective/Outcome 2 Strengthened accountability mechanisms and information flows

Outcome Indicators1. Share of beneficiaries, disaggregated by gender, agreeing that UPs are meeting local priorities2. The average performance score of UPs nationally


1. Number of UP performance audits conducted nationally per year.2. DDLGs submitting six-monthly reports to LGD on a timely basis. 3. UPs submitting six-monthly reports on a timely basis4. Share of UPs in which Ward Shabhas are functional

Key Outputs by Component 1. Annual audits carried out to cover both financial and performance

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(linked to the achievement of the Objective/Outcome 2)

dimensions for all UPs.2. Average UP performance improved year to year3. The ability of community that hold UPs accountable strengthened (Empowering Ward Shabhas)4. The overall information flow established and streamline through decentralized district level UP reporting5. Decentralized web-based MIS, at the district and lower levels

Objective/Outcome 3 Strengthened UP capacities for planning, budgeting and scheme implementation

Outcome Indicators 1. Share of beneficiaries, disaggregated by gender, agreeing that UPs are meeting local priorities


1. Number of new UP functionaries trained by URTs2. Percentage of UPs with a periodic plan3. Percentage of UPs submitting annual budgets to UNOs on a timely basis4. Percentage increase in UP own-source revenues nationally5. Number of functional Upazila Women's Development Forums


1. 83767 of new UP functionaries trained by URTs.2. 470 Upazila Women's Development Forums are functional3. UP own-source annual increase reached 68.7%4. 97% UPs developed periodic planning

Objective/Outcome 4 Improved project management in LGD


1. Number of Project Steering Committee meetings taking stock of project progress2. Updated annual work plans (including procurement plans) submitted to PSC and the Bank by June 30 of previous FY3. Number of annual safeguards review carried out in 1 up per Upazila

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1. Enhanced project management capacity in LGD in the aspects of fiduciary, safeguards, etc.

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ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION

A. TASK TEAM MEMBERS

Name Role

Preparation

Abdu Muwonge Sr. Urban Specialist

Akram-ul Aziz Consultant (Local Government)

Amani Haque Program Assistant

Azizur Rahman Siddique Consultant

Badiul Alam Majumdar Peer Reviewer (Hunger Project)

Balakrishna Menon Lead Urban Specialist, Task Team Leader

Burhanuddin Ahmed Sr. Fin. Mgmet. Spec.

Charles Undeland Sr. Governance Specialist

David Savage Consultant (Fiscal)

M. Khaliquzzaman Consultant (Safeguards)

Jose R.R. Pascual Counsel

Mailreyi Das Peer Reviewer

Mark Ellery Water & Sanitation Specialist

Michael Winter Consultant (Institutional Development)

Nicholay Chistyakov Sr. Finance Officer

Nilufar Ahmad Sr. Gender Specialist

Paul Smoke Peer Reviewer

Santanu Lahiri Sr. Decentralization Specialist

Serdar Yilmaz Sr. Economist; Peer Reviewer

Shahpar Selim Safeguards Specialist

Sumbo Adeyemo Program Assistant

Syed Khaled Ahsan Institutional Specilist

Tanvir Hossain Sr. Procurement Specialist

Tara Sharafudeen Sr. Operations Officer

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Tarak Chandra Sarkar Program Assistant

Teen Kari Barua Consultant (Safeguards)

William Fox Consultant (Public Finance)

Zahed H. Khan Sr. Urban Specialist

Supervision/ICRZahed Hossain Khan Task Team Leader

Shenhua Wang Task Team Leader

Tanvir Hossain Procurement Specialist(s)

Mohammad Reaz Uddin Chowdhury Financial Management Specialist

Teen Kari Barua Social Safeguards Specialist

Bridget Rosalind Rosario Team Member

Michelle Lisa Chen Team Member

M. Akram-ul Aziz Team Member

Iqbal Ahmed Environmental Safeguards Specialist

Fen Wei Team Member

Md Kamruzzaman Team Member

Arun Banerjee ICR Author

B. STAFF TIME AND COST

Stage of Project CycleStaff Time and Cost

No. of staff weeks US$ (including travel and consultant costs)

PreparationFY11 14.610 89,165.15

FY12 43.242 159,496.83

Total 57.85 248661.98

Supervision/ICR

FY12 9.729 62,022.19

FY13 47.506 291,024.18

FY14 44.787 182,569.18

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FY15 67.077 370,384.00

FY16 39.917 267,539.96

FY17 23.073 125,655.42

FY18 5.550 58,667.45

Total 237.64 1357862.38

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ANNEX 3. PROJECT COST BY COMPONENT

Components Amount at Approval (US$M)

Actual at Project Closing (US$M)

Percentage of Approval (US$M)

Union Parishad Grants 460.42 460.40 100 Information Flows and accountability 8.92 8.21 92

Institutional Development 30.21 24.02 80Project Management 3.83 2.81 73

Total 503.98 495.44 98.42

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ANNEX 4. EFFICIENCY ANALYSIS

The economic benefits of LGSP I emanated mainly from (i) the physical investments made in the UPs funded by BBGs and PBGs; and (ii) the benefits from the increased financial capacity and the improved governance efficiency of UPs. The investments supported implementation of community identified and prioritized subprojects in a number of sectors. However, at the time of appraisal, it was a priori not known for which kinds of schemes the UPs will allocate their funds for investment. As such, no traditional economic analysis such as Economic Rate of Return (ERR) or Net Present Value (NPV) was calculated. The economic analysis, therefore, is primarily based on a proxy cost-effectiveness analysis. This methodology is consistent with the analyses carried out in similar local government projects undertaken by the Bank.

The main objective of the project was to strengthen UPs by providing them with resources which would allow them to be more accountable and responsive to the needs and preferences of their constituents. The only way to ascertain whether this objective was met was to survey the beneficiaries and ask for their opinion about various aspects of the project. Accordingly, a survey was conducted in 200 randomly selected UPs to collect both quantitative and qualitative data to assess the achievement of various project objectives. A summary of the overall investments made and their sector-wise distribution is provided in the two tables below:

Physical Assets Constructed & Services Provided under LGSP II

Sector Types of Assets Built Unit Quantity

Funds Spent ($ M)

% of Total

Physical Infrastructure

New roads (earthen/brick soling/concrete) KM 7457.1 78.9 29.22Maintenance/Repair of Existing Roads KM 2097.3 9.56 3.54Culvert/pipe culvert/U drain KM 521.2 26.4 9.78Protection wall KM 368.1 11.0 4.07Bridge/bamboo bridge/foot bridge 5.5 2.04Public toilets, bathing ghats, etc.) 11.8 4.37

Water & Sanitation

Tube wells Number 170016 29.0 10.74Sanitary Latrines Number 670590 11.3 4.18Drainage Km 657 10.3 3.81

Agriculture Irrigation Canals KM 84.3 1.7 0.63Health Community Clinic Support Number 649 0.96 0.36Education School buildings repaired Number 5698 49.09 18.18

Furniture & Equipment supply to schools Number 43182 17.31 6.41EmploymentGeneration

Supply of sewing machines to women Number 12001 1.4 0.52Training for women for self-employment Number 7097 0.41 0.15

Digital Centre Photo-copier, multi-media-projector, 5.4 2.00Others Community Infra. (toilets, bathing ghats, etc.) 11.8 4.37Total 270.00 100.00

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Sector-wise distribution of schemes implemented in sample UPs

Types of schemes

Number of UPs

implementing the schemes

Number of schemes

Average No. of

Schemes per UP

Total Expenditure (000' US $)

Average Cost per scheme (US $)

Transport 200 1264 69.0 1948.55 1,542Water supply 78 223 12.2 268.91 1,206Education 80 149 8.1 246.15 1,652Sanitation 43 80 4.4 87.01 1,087Latrines 12 28 2.33 77.11 2,754Health 4 5 0.3 8.43 1686Human resource development

8 9 0.5 8.39 0.9322

Information Technology 23 26 1.4 19.97 0.7603

Natural Resources 3 3 0.2 3.63 1,210

Agri & Market 7 8 0.4 13.81 1,726Others 25 36 2.0 62.16 1,727Total 1831 100.0 2761.48 1,508

A total of 1831 implemented schemes were physically verified. Among these, 1264 schemes were for roads (69%), 223 for water supply (12%), 149 for education (8%), and 80 for sanitation (4%). Analysis of the survey data clearly indicates that the implementation of different schemes has benefitted the local communities significantly. Perhaps the most significant finding of the survey was that implementation of many of the schemes helped bring about a very significant change in the general lifestyle of UP citizens (92%); marketing facilities improved greatly (61%), growers benefited (47%) and income generating activities increased (16%). Transport costs came down (31%) as did commuting time (11%). Benefits also included improved prices for producers, increased mobility as a result of the increase in motorized & non-motorized vehicles, attendance in schools increased particularly during the monsoon season, increased provision of safe drinking water, reduction in water borne diseases, increase in irrigation acreage, and provision of improved health services by community clinics also increased.

Efficacy of Investments/funds utilization

The scheme selection process was totally transparent and almost exclusively based on community needs. There was minimal external influence, and participation of the citizens in selection and implementation of sub-projects reflected the needs of the communities. The project encouraged sound investment planning and efficient use of BBG and PBG funds.

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Efficiency in implementation of Schemes

The type of schemes implemented by the UPs catered to the needs and priorities of the community, as identified by the communities. No other agency of the government is responsible for implementing the type of schemes implemented by UPs using BBG and PBG resources. UPs also do not have other resources for implementation of such schemes. As a result, the efficiency of implementation of the schemes cannot really be compared with any other schemes undertaken by either by the UP or any other agencies. The efficiency of the schemes was therefore measured in terms of design parameters, cost, and implementation time. The survey in the UPs measured the deviation from the approved cost, time and design parameters of different schemes. Information collected for different types of schemes is provided in the tables below:

Construction of Brick Soling Roads

Description Number of Schemes AverageAverage estimated cost (Tk) 482 121142Average actual cost (Tk) 482 120649As per contract average length (M) 482 127.5As per contract average width (M) 346 2.7Actual average length (M) 482 127.0Actual average width (M) 346 2.8

Pucca Bridge

DescriptionR.C.C (Pucca

Bridge) Wooden Bridge Bamboo Bridge

N Average N Average N AverageAverage estimated cost (Tk) 19 159756 27 129853 3 66667Average actual cost (Tk) 19 157646 27 129833 3 66667As per contract average length (M) 19 17.3 27 12.7 3 29.0As per contract average width (M) 17 2.1 27 1.6 3 3.4Actual average length (M) 19 17.2 27 12.6 3 28.1Actual average width (M) 17 2.2 27 1.6 3 1.9

Culverts (Box culvert/ Pipe culvert)

DescriptionPipe / Box culvert Pipe culvert

Number of Schemes Average Number of

Schemes Average

Average estimated cost (Tk) 147 108020 19 52793Average actual cost (Tk) 147 107791 19 52741As per contract average length (M) 141 8.1 19 11.3As per contract average width (M) 138 13.1 19 2.2As average depth (M) 131 2.6 17 1.0

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DescriptionPipe / Box culvert Pipe culvert

Number of Schemes Average Number of

Schemes Average

Actual average length (M) 144 7.9 19 11.4Actual average width (M) 142 12.8 19 2.0Actual average depth (M) 134 2.5 17 1.0

School Buildings

DescriptionSchool building

constructedexpansion of class

roomfitting-fixing of

gateN Average N Average N Average

Number of schemes implemented 9 1.1 1.2 6 1.0Average estimated cost (Tk) 9 379018 17 186058 6 116833Average actual cost (Tk) 9 378998 17 189018 6 116833As per plan, average length (M) 8 23.2 17 24.6 5 71.3As per plan, average width (M) 8 7.5 14 4.5 4 2.5As per plan, average height (M) 5 2.2 11 1.4 2 0.7Actual average length (M) 8 23.2 17 22.8 5 71.3Actual average width (M) 8 7.5 14 4.5 4 2.5Actual average height (M) 6 1.9 10 1.3 2 0.7

Water Supply (Tubewells/Dug well)

Description STW DTWN Average N Average

Number of schemes implemented 111 2.7 100 3.0Average estimated cost (Tk) 111 90099 100 100284Average actual cost (Tk) 111 89844 100 100141Average Platform size (M) 57 6.0 84 4.6

Community Clinic

DescriptionDevelopment of

Community ClinicN Average

UPs implemented the schemes 4Average number of schemes implemented 1.3Average cost (Tk) 5 132373Room No As per plan, design & Estimate 3 0.7Height (M) As per plan, design & Estimate 4 2.2Width (M) As per plan, design & Estimate 4 2.6Length (M) As per plan, design & Estimate 4 9.2

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DescriptionDevelopment of

Community ClinicN Average

Length (M) As per field measurement 4 9.2Life risk decline 4 80.0Get time for better treatment 4 80.0Others 1 20.0

Sanitation Facilities

Descriptioncommunity

latrinessupplied sanitation

materialsrepair previously

constructed latrinesN Average N Average N Average

UPs implemented the schemes 7 29 8Average number of schemes implemented 1.9 1.9 1.5

Average estimated cost (Tk) 13 216637. 54 103228 12 71652Average actual cost (Tk) 13 216319 54 102927 12 71485Size of latrine as planned 8 13.1 18 5.8 6 33.1Size of latrine as actual 7 14.8 20 68.5 6 43.1No of latrines sets 8 20.3 41 50.1 6 15.5Number of rings 8 59.6 49 163.3 6 3.3Water Seal 13 100.0 50 92.6 12 100.0

The design and estimates for construction were provided by the Upazila Sub-Assistant Engineer of the Local Government Engineering Department (LGED). The item-wise cost estimates are prepared centrally by the LGED based on unit rates that have been developed based on their experience nationwide. The officials of LGED at the field level use these unit rates to prepare estimates for schemes. This is a standard practice all over South Asia in preparing cost estimates for small scale public works projects The services and works contract are procured as per the procurement guidelines of the government. The auditor’s report deviation from procurement guidelines if not followed properly and those procured items are declared as ‘mis-procurement’. The cost over-run of the implemented schemes is insignificant and about 85% of the schemes were completed within the stipulated date and only 15% missed the dead-line. No significant deviations from the design parameters were observed.

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ANNEX 5. SUMMARY RESULTS OF STAKEHOLDER CONSULTATIONS

Confirmation of the achievement of the PDO and the intermediate outcomes was to a large extent dependent on the opinions of the various project stakeholders. This included the citizens of the more than 4500 UPs, members and officials of the UPs, the Deputy Commissioners and officials at the various levels of Upazilas, etc. GOB was highly interested to know the opinions of the stakeholders for an objective assessment of the projects overall achievements, the lessons learned from the experience, and to inform future decisions regarding political and fiscal decentralization. An extensive stakeholder survey was carried out involving a total of 6156 male (68%) and 2844 female (32%) from 9000 households in 200 UPs to collect their opinion about the project’s activities and their level of satisfaction in respect of various aspects of the project. A brief summary of the survey findings are presented below:

Almost all respondents, male and female, were aware of development activities undertaken by the UPs in the last 3 years. Most of them opined that the development programs undertaken in their UPs were highly suitable for their areas and about 70% of the respondents said that UPs were accountable both with respect to utilization and transparency in the use of LGSP II funds.

Most of the schemes that were suggested by respondents were taken up for implementation. Both male and female respondents viewed road construction, repair and maintenance as the most important responsibility of the UPs (89%), followed by supply and installation of tube wells (46%), construction of culverts (39%), drainage improvement (32%), and electrification (24%).

Overall, about 25 different kinds of services were requested from the UPs. Frequently requested services during the last 3 years were: construction and repair of local infrastructure (89%), birth and death registration (86%), issuance of National ID Cards (85%), issuance of character certificates (75%), use of village police (69%), repair of school buildings (53%), tube-well installation (50%), shalish/arbitration (49%), law and order related (48%), disaster relief (42%), safety net benefits (42%), on-line services (41%), sanitation services (41%), village court/family court services (34%), etc.

Most of the respondents rated the services received from UPs as good or fairly good. The services included birth and death registration, shalish/arbitration services, village police for maintenance of law & order, development of schemes/projects, village/family court services, construction of local utilities, issuance of trade licenses, issuance of character certificates, motivating for and distribution of sanitary latrines, distribution of safety net benefits, different on-line services, etc.

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Almost all respondents felt that there were qualitative changes in service delivery by UPs during the last 3 years. Consequently, relationship between the UP and the community has improved significantly.

About three-quarters of the respondents reported that access to information on project costs improved during the last 3 years. Similar improvement was also reported with respect to information on UP budgets.

About 88% respondents expressed that availability and access to UP members improved during the last 3 years. Similar improvements in the availability and access to UP Chairperson and UP secretary was also noted.

Participation of citizens in UP activities during design and implementation of schemes, projects and activities has improved over the last 3 years. About 80% of respondents were of the opinion that citizens’ participation in ward shava meetings increased over the last 3 years and 70% reported that participation in open budget meetings also improved.

About 58% (61% male and 52% female) reported that they participated in the 2015-16 budget meetings compared to 44% during 2014-15 budget meetings.

About 80% of respondents reported that the Annual Budget was disclosed to the public. Proportion of respondents mentioning the disclosure of Annual Income and Expenditure Statement and Audit Reports was about 75% and 56% respectively. Notice board was mentioned as the main means of disclosure (88%), followed by bill boards (35%) and Annual Reports (31%).

More than 9 out 10 respondents were aware of ward shava meetings and viewed them as a key means of enhancing citizen’s participation in UP affairs. They know about the Ward Shava meetings primarily from UP Members (73%), loud speakers (46%), village police (41%), their neighbor (34%), notice boards (33%) friends and relatives (33%), and UP Chairmen (26%).

More than 80% respondents answered in the affirmative when asked whether UP officials cared for their problems more compared to the past. About 95% of respondents felt that elected representatives were more likely to act in the interest of citizens than before. More than 80% of the respondents reported that it has become easy to get service from the UP than in the past.

Almost 70% UP members reported that they received complete scheme implementation support from the LGED Sub-Assistant Engineer (SAE), while 30% received such support only partly. More than 97% UP members have received technical support from the SAE in relation to budget and design of schemes. All UP members properly followed activities related to design and budget allocation.

Almost all UP members reported that their respective UP Chairperson regularly informed them about the BBG and PBG allocation. According to 64% UP members, spending of funds is fully transparent.

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ANNEX 6. SUMMARY OF BORROWER, PROJECT COMPLETION REPORT

Government of the People’s Republic of Bangladesh

PROJECT COMPLETION REPORT

01. Name of the Project : Second Local Governance Support Project (LGSP-II)

02. Administrative Ministry/Division : Ministry of Local Government, Rural Development &

Cooperatives

03. Executing Agency : Local Government Division (LGD)

04. Location of the Project : 4553 Union Parishads all over Bangladesh

05. Objective of the Project

To strengthen and accountable local governments providing services that meet community priorities, supported by an efficient and transparent intergovernmental fiscal system.

Estimated Cost (In lakh Taka)

Original Latest Revised

(a) Total 391181 390434

(b) Taka 183880 181764

(c) RPA 207301 208670

Implementation Period

Date of Commencement Date of Completion(a) Original July, 2011 June 30, 2016

(b) Latest Revised July 2011 June 30, 2017

(c) Actual July, 2011 June 30, 2017

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ACHIEVEMENT OF OBJECTIVES OF THE PROJECT

Objectives as per PP Actual achievement Reasons for

shortfall, if any

The development objective of LGSP-2 is to strengthen inclusive and accountable institutions of local governance, through empowering communities to make choices on their development priorities and basic local service needs, and empowering local governments to respond to community priorities.

Ensuring people’s participation in planning, implementation and monitoring of development activities at local level;

Enhancing Union Parishads’ capacity to provide better services to the common people of local level;

Preparation of development plan based on local needs;

Mobilization of local revenue;

Promoting women empowerment; and

Reducing poverty at local level

The Project achieved the objectives. The UPs conducted Ward Shabhas with the voters of the respective wards for selection and prioritization e the schemes were to be implemented by UPs. In the Ward Shabhas the participant voter take account of project implementation. The UPs conducted open budget meetings

The UPs formed Ward Committees (WCs) and Scheme Supervision Committees at ward level. They participate in the scheme implementation and supervision.

The project has achieved this objective. The common people are satisfied with UPs’ service delivery (ref: Final Evaluation Report on LGSP-2).

The Project has achieved the objective.

The Project has achieved this objective. The UPs mobilized local resources at an incremental rate by year

30% schemes are earmarked for women to select and prioritize the scheme. Two women represent in each Ward Shabha and Scheme Supervision Committees. The project contributed to the goal of MDG-1 to eradicate poverty and hunger by creating employment opportunities and empowering people to plan and implement their development needs and thereby address issues of poverty and hunger. The goal of MDG-2, universal education also addressed as infrastructure schemes facilitated children’s access to schools.

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MONITORING

(a) Ministry / Agency :

Monitoring of LGSP-II activities is being carried out at three levels: (i) performance monitoring System Introduced by LGD; (ii) monitoring by PMU; and (iii) monitoring by field administration.

(i) Monitoring System Introduced by LGD. The LGD has formed around 30 monitoring teams comprising officers from LGD and other departments to monitor the projects implemented by LGD either through departments or LGD throughout the country. Every monitoring team has its designated districts-wise jurisdiction, comprising two technical experts, one from LGED and one from DPHE. During their field visits, these monitoring teams monitor LGSP activities also. These 30 monitoring teams also monitored the LGSP-2.

(ii) Monitoring by PMU. The National Project Director (NPD), Deputy Project Directors (DPDs), and consultants of LGSP- II closely monitored the project implementation process through regular field visits. The PMU also took advantage of Ward Sabhas to monitor the process of scheme selection and project implementation at beneficiary level. At UP level, two ward meetings were held annually, one of which one was treated as the Annual Ward Sabha meeting The PMU monitored activities of the UPs through DFs and auditors (CA firms).

The PMU performs oversight supervision of the CA firms through DF, DDLG as well as field administration In addition, during the exit meeting of the CA firms, presided by the UNO, a detailed discussion takes place on the audit findings of the firms, which helped the UPs to understand their shortcomings or voice their views on the audit reports. In order to ensure the integrity and quality of the audit process and strengthening of UP monitoring, the ICAB monitored the performance of the audit firms to ensure professional standards of the audits.

(b) Monitoring by the Field Administration.

District Level Structure. At field level, the Deputy Commissioners (DC), Deputy Directors of Local Government (DDLG), Upazila Nirbahi Officers (UNO), District Facilitators (DF), Scheme Supervision Committees (SSC), had their respective roles in monitoring project performance.

The District Coordination Committee (DCC) headed by the DC, as part of the management of the LGSP-II, was entrusted with the responsibility for oversight supervision and assessment of implementation progress of the project at regular interval. The DCC met twice a year. Deputy Commissioners were mandated to visit UPs every month as per instruction of the Cabinet Division, when they monitored progress in development activities.

Monitoring by UNO. At the Upazila level, the Block Grant Coordination Committee (BGCC) headed by Upazila Nirbahi officer (UNO), was responsible for reviewing , and endorsing the UP. The UNOs had been engaged in the implementation process of LGSP-II, not only as the head of the BGCC, but also by virtue of their pos ition in the administrative structure.

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Monitoring By DDLG. DDLGs were responsible for monitoring all activities of local government institutions in the district. DDLGs visited the UPs on a regular basis.

Monitoring by District Facilitators. DFs visited UPs regularly to monitor UPs activities. The DFs inspected UP documents and gave advice to UP personnel, as and when required, about the procedures to be followed in the implementation of LGSP-II. DFs used a pre-designed format developed by the PMU for reporting on UP activities in terms of disclosure of information, people’s participation in selecting and implementing schemes, periodic plan, open budget meeting, BGCC’s review of schemes maintenance of cashbook, register, asset-register, safeguard compliance, women’s participation status etc. In short, they used to report about UP performance around 12 indicators.

Reporting by UP. UPs prepared and submitted six-monthly financial and narrative reports to their respective DDLGs and UNOs, which are also available for the public. Through the six-monthly reports, UPs provided information on their activities, revenues and expenditures, etc. which are examined and reviewed at PMU, as and when required.

DESCRIPTIVE REPORT

1. General Observations/Remarks on the Project

1.1 Background

The Local Government Division (the LGD) of the Ministry of Local Government, Rural Development & Cooperatives were involved in implementing a number of pilot projects such as the Sirajganj Local Governance Development Fund Project (SLGDFP) and the Participatory Rural Development Project (PRDP) to test initiatives on fiscal devolution and reforms of local government system with active community participation. The experiences gained from the pilots revealed that community participation could result in a higher level of accountability, an improved quality of service delivery as well as a low level fund leakage.

Based on the experiences gained from the implementation of the pilots, the government implemented the Local Governance Support Project (LGSP) during 2006-11 with assistance from the World Bank. The design of the Second Local Governance Support Project (LGSP II) implemented during 2011- 17 was underpinned by a broad and inclusive stakeholder consultation process jointly drawn up by the Government and the World Bank.

1.2 Justification/AdequacyArticles 59 and 60 of Bangladesh constitution have set the foundations of the roles and structures of Local Governments in Bangladesh. Importance of local governments in Bangladesh has been recognized by several policy documents, including the National Rural Development Policy (NRDP) and the Poverty Reduction Strategy Paper (PRSP). The NRDP provides support for the development of mechanisms to develop the role of the local governments as a facilitator and creator of the necessary conducive environment for providing

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services to the local communities-rural and urban. It underlines the importance of accountable and responsive local government institutions.

LGSP was the first nationwide effort to strengthen the local government system. Through the project, UPs nationwide have been provided with enhanced resources and discretion in deciding their spending priorities through a participatory process, while being held accountable for their performance through a number of accountability measures. The UPs have also been provided capacity building support to strengthen their capabilities in a set of core functional areas. At the center, the project has supported improved policy making, management of inter-government fiscal relations and monitoring of local bodies. Based on the success of the LGSP, the Second Local Governance Support Project (LGSP-2) was designed and implemented to strengthen inclusive and accountable local government institutions through empowering communities to make choices on their development priorities and basic local service needs and empower the local government to respond to the community priorities.

1.2.1 Lessons Learned

o Annual UP audit for ensuring accountability of the UPs has proved to be successful strategy for ensuring the accountability of UPs.

o Annual Performance Assessments incentivized UPs to improve their performance in enhancing local own-resource mobilization through collecting tax and revenue, ensuring people’s participation and transparency and accountability in planning and budgeting.

o A web-based UP MIS has system has been developed. o Direct fund transfer to the UPs has empowered UPs. It has been proved that the UPs are

capable of implementing demand driven schemes using the funds. o LGSP-2 followed formula-based criteria for distributing BBGs among 4553 UPs all over the

country. LGSP-2 aimed and achieved in empowering women by earmarking 30% of the annual schemes for schemes selected by women.

o Under the project, UPs were informed of 3-year indicative BBG allocation in advance to help UPs prepare their plans in advance.

1.3 Objective

The project objective is to strengthen accountable local governments providing services that meet community priorities, supported by an efficient and transparent intergovernmental fiscal system.

2. Rationale of the project in respect of Concept, Design, Location and Timing.

In order to provide services better, government launched LGSP 2 with the aim to decentralize the service delivery system to reach local communities at the grassroots level. Effective decentralization needs people’s participation in decision making process. LGSP-2 provided such windows for people’s participation. In Bangladesh, the service delivery arrangements by the central government agencies are too much centralized for it to be accessible to the grass-roots level people.

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Union Parishad had its own limitations in terms of resources, interaction with its constituents and inertia in mobilizing local own-revenue resources. They were not accountable to the people and they lacked transparency in implementing schemes and financial management and had weak capacities in performing its roles. LGSP-2 has introduced accountability and transparency mechanisms. LGSP 2 provided the vehicle for promoting GoB’s Sixth-Five Year Plan (2011-15) strategy ‘--to institute strong elected local governments that are vested with adequate financial autonomy and accountability for results’.

Project Design

The project design was appropriate in terms of the interventions, resource allocation, outputs, involvement of stakeholders, and policy relevance. The fiscal transfer arrangement was unique and consistent with the key objectives of the project, the capacity building component was elaborate and responsive to the needs of the UP representatives, learning and innovation space was kept, the resource allocation for the components were consistent with the activities. The outputs were relevant and contributed towards achieving the objectives of the project. The involvement of the community and UP functionaries was the essence of the project while the intended policy changes were relevant to the existing status of local governance in Bangladesh.

The project had four components, namely Union Parishad Grants, Information flows and Accountability, Institutional development and Project management.

3. Brief description on planning and financing of the project and its applicability.

Project Identification

The Union Parishad is the grass-roots level local government institution. Second Local Governance Support Project (LGSP-2) stands in a series of various initiatives taken by the government over a period of time for strengthening Union Parishads with a view to taking the service mechanism at the doorsteps of people.

Based on the experience of Sirajganj Local Government Development Fund Project (SLGDFP) implemented during 2000-2006, the government started transferring increased amount of resources directly to the Union Parishad in the form of BBG. The system was established countrywide through the first phase of Local Governance Support Project (LGSP), jointly funded by Bangladesh government, World Bank, UNDP, UNCDF, DANIDA and European Union (EU). The successful implementation of LGSP and to sustain the reforms in UPs introduced by LGSP the government took the Second Local Governance Support Project.

Project Preparation

As part of project preparation exercise, a series of workshops were carried out on reforming intergovernmental systems, strengthening local government institutions, and improving accountability in local service delivery in 7 divisional headquarters of the country and participated by all relevant stake-holders. The preparation team also made field trips to select UPs and held meetings with UP and Upazila

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officials, and rural communities to incorporate their feedback into project design, and held consultations with key development partners, LGD, the Ministries of Finance and Planning, and the Office of the C&AG.Appraisal

An Appraisal Mission Team prepared the Project Appraisal Document (PAD) on October 31, 2011. They made appraisal of the project on different aspects such as Economic and Financial analysis, Technical aspects, financial management, procurement, social and Environment safeguard.

4. Analysis of the Post-Implementation situation and result of the project :

4.1 Whether the beneficiaries of the project have clear knowledge about the Target/ Objectives of the project.

The main beneficiaries of the project are 4553 Union Parishads of Bangladesh and the population of approximately 130 million served by them. The other beneficiaries are the nodal agencies responsible for policy making, regulating and managing the local government system. These include LGD, the Comptroller and Auditor General (C&AG) and the National Institute of Local Government (NILG), Bangladesh Academy for Rural Development (BARD), Rural Development Academy (RDA) and Local Government Division (LGD). The Union Parishad and the nodal agencies have clear knowledge about the Target/Objective of the project.

However, grass-root level beneficiaries (citizens) of the project do not have clear knowledge about the target/objective of the project as the project has wide range of objectives and spread all over the country. However, the beneficiaries of each Union Parishad have knowlege about the objective of LGSP-2 since they participated in the preparation and implementation of schemes undertaken by their respective UPs. The beneficiaries participated in the Ward Shbhas and open budget meetings and through their participation in those meetings they could ensure the accountability and transparency of UPs.

4.2 Program for use of created-facilities of the projectThe facilities created under the project have benefited the local citizens as they use those facilities. 4.3 Impact of the project

4.4.1 Direct

Efficient and transparent fiscal transfer system: The Project Development Objectives (PDO) of LGSP-2 is to strengthen Union Parishad to become accountable and responsive through an efficient and transparent fiscal transfer system to Union Parishad. Through the implementation of the project efficient and transparent fiscal transfer system to Union Parishad has been established.

People’s participation: LGSP-2 has increased the participation of people in the affairs of the UPs significantly. Due to people’s participation in scheme selection and implementation the quality of workmanship of the

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projects has improved. LGSP-2 has ensured transparency in UP activities and financial management and increased the accountability of elected representatives of the UPs to the people.

Open Budget meeting: The importance of open budget meeting on the ground has been recognized by UP functionaries because the open budget meeting has contributed to increased awareness of the citizens in participatory budget preparation improving UP’s awareness and accountability.

Ward Committee and Scheme Supervision Committees: LGSP-2 has brought changes in the culture of Union Parishad through different reforms measures. The project has contributed to the operationalization Union Parishad Act (2009) to make it accountable to the citizens through formation of Ward Committees (WSs) and Scheme Supervision Committees (SSCs). The Ward Committees implement the schemes while the Scheme Supervision Committees supervise the scheme implementation process.

Ward Shabha: Ward Shabha has become an instrument for ensuring transparency and accountability of UPs to citizens. Direct transfer of funds from the project to UPs has eliminated the leakage of funds at the intermediate level and UP has become empowered to invest without interference from outside. The project has strengthened institutional capacity of the UPs for it to identify and select and implement schemes through people’s participation.

Social capital: LGSP-2 has distributed BDT31507.2 million as BBG and BDT 4663.4 million as PBG throughout the project cycle among around 4550 UPs which have invested in different sectors like communication, water supply, health, education, sanitation and waste management agriculture and markets, natural resource management and human resource development for creating social assets/capital.

Women empowerment: Empowerment of women was one of the key concerns of LGSP-2. Women’s participation in planning, implementation and monitoring of local development initiatives strengthened through various measures built into LGSP-2. UPs had formed a seven-member Ward Committee (WC) in each ward with at least 30% women (at least two women among seven members).

Audit and its impact: LGSP-2 implemented intensive audit system for the UPs. Private CA firms audited 100% UPs (around 4550) every year. Due to annual audit by CA firms, all UP Secretaries have become conversant with preparing Annual Financial Statement (AFS). The annual audit conducted by CA firms has brought positive changes in UPs accountability, transparency and people’s participation. It has also increased the performance and capacity of UPs to maintain cash book, register, financial management and compliance and has reduced the corruption.

Changing Attitude of Citizen towards UPs: There has been a positive change in the attitude of the citizens, who earlier did not have much interest in the affairs of UPs. They only visited the UPs for their own business like character certificate, birth certificate to mention a few. With interventions of LGSP people’s interaction with the UP functionaries has increased as they now participate in the meeting of Ward Shabhas where they identify, prioritize schemes for their own choices. The quality of service delivery to the beneficiaries has improved.

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Capacity building: The project has contributed significantly in raising the capacity building for institutional development. The project has trained 62382 (UP functionaries (people’s representatives and UP secretaries) and 471768 WC committee and Scheme supervision committee members. It has organized two-day long workshops on sharing experiences in implementation of LGSP-2 and nine Divisional Workshops.

4.4.2 IndirectUPs have invested the resources received from LGSP-2 in construction of different types of infrastructures. This investment created job opportunities directly for the local unskilled and semi-skilled wage laborers during construction phase. After the construction phases, the communication infrastructure has facilitated employment opportunities for transport workers like rickshaw pullers, and drivers of the small mechanized vehicle popularly known as Nosimon, Korimon. It has reduced the transport cost of goods by easing the transportation of goods and hence has created impact in economic activities facilitating easy access to market places, reduced travel times, etc. The investment in water and sanitation sectors has created positive impact in health and environment fields. The investment in education sector (supply of furniture, education materials, construction/renovation of school building/houses) has contributed to improve education sector.

4.4 Transfer of Technology and Institutional Building through the project The project successfully transferred technologies like, environmental management, infrastructure development and innovation. The project worked successfully for the institutional building at local level through decentralizing power and decision for the UP and community.

4.5 Employment generation through the project.The project allocated grants for the UPs to work for the development of local communities which also includes infrastructure works. So, it also generated employment opportunities at local level.

4.6 Possibility of Self employment Development of infrastructure like, market shed, health facilities have contributed towards reduction of poverty. The UP also organized several capacity developments training for the selected community people, like, IT, tailoring etc. which opened doors for the self-employment.

4.7 Possibility of women-employment opportunityWomen always got preference to receive training and at least 30% women friendly schemes had been selected to implement throughout the project period.

4.8 Women's participation in developmentLGSP-II gives special consideration to ensure women’s participation at all steps, committee formation, scheme selection and supervision and so on. According to UP Act 2009, 30% members of each WC should be

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women (from community) and 3 WCs will be chaired by UP women members. Safeguard audit report of FY 2014-15 shows that WC of 100% UP has 30% (at least 2 women) women membership.

4.9 Probable Impact on Socio-Economic activity Under LGSP-2 mostly labor intensive community infrastructure schemes were implemented. These included construction or rehabilitation of roads, culverts, drainage, embankment system, water and sanitary facilities, school and clinic repairs, etc. These schemes had created part time jobs and increased income to some extent of the poor households. Better road connectivity and access to basic services have improved health outcomes and better drainage has improved crop production.

4.10 Impact on environment Scheme specific issues were considered during scheme implementation to mitigate adverse impact on environmental and social issues. Adequate opening for water flow for communication related structures, arsenic test for any newly constructed water point, awareness raising on using banned pesticide for agricultural items, proper disposal of clinical and waste materials etc. are considered for environmental safeguard issues. Social safeguard issues give emphasis on ensuring community’s participation from scheme selection to implementation, occupational health & safety for any construction work and using public land for land based schemes. 4.11 Sustainability of the projectLGSP introduced direct and discretionary resource transfers to UPs across the country and substantially enhanced them over the years. Under LGSP-2, the BBGs increased by 12% annually from their current base and the Government and IDA shares changed to 60/40 by the end of the project. LGSP-III will be on board after completion of LGSP-2. The main policy objectives of LGSP-3 will be to consolidate and institutionalize the key local governance and fiscal reforms introduced through the two predecessor operations over last decade – LGSP-1 and LGSP-2 – namely Basic Block Grants (BBGs). The government will provide full financing of BBG funding pool starting from fourth year of the project (FY2019-20), using national budgetary allocations, through LGD’s Annual Development Program (ADP).

ANNEX 7. SUMMARY OF BORROWER’S AND/OR COMMENTS ON DRAFT ICR

The ICR document is well articulated and those who were involved in its preparation deserve appreciation

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for proper reflection of the achievement of LGSP-2. It has highlighted the achievements of LGSP-2 in

pursuing transparency, accountability, and participatory in UPs activities.

Observation:

Original cost estimate of LGSP-2 was USD 545.39 million. Out of which IDA financing was USD 290.00 million

(equivalent of SDR 185.80 million) and remaining USD 255.39 million was from GOB. But during the five year

of the project, the IDA financing has decreased substantially due to changes in conversion rate between USD

and SDR. As per PMU calculation, the available financing of IDA has come down approximately to USD 271.00

million against SDR 185.80 million. The client connection of World Bank also shows the amount as about

USD 264.00 million. Accordingly, the GOB contribution to the project has been reduced. The ICR requires

reflection of the above changes in the cost estimate due to conversion loss and the latest cost estimate may

be used in making comparison with actual, if any.

Para-16: Audits: Currently all UPs undergo financial audits each year, while about one-fourth of them go

through comprehensive assurance audits. Under LGSP II, UP audits would be upgraded to cover both

financial and performance dimensions. During phase 1, years 1-3 of the project, UPs would continue to be

audited annually by CA firms contracted by the LGD. The audit reports would be subject to independent

review by other CA firms and further quality assurance by the CAG’s office through sample field audits and

audit reviews.

[ Comments: During phase 1, is not clear. Is it LGSP phase-3? ]

Rating of M&E: Should be satisfactory instead of “substantial”

It has very objectively stated the fact about MIS and M&E system. However, rating of M&E should be

satisfactory instead of substantial as systems are now fully functional and performing as intended.

ANNEX 8. SUPPORTING DOCUMENTS

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o Government of the People’s Republic of Bangladesh, Planning Commission, 2011, Sixth Five Year Plan (FY 2011-15): Accelerating Growth and Reducing Poverty

o Center for Resource Development Studies Ltd. (CRDS) Final Evaluation Report of Second Local Governance Support Project, May, 2017

o Implementation Progress Report of First Six-monthly report of FY 2016-2017 of Second Local Governance Support Project

o Implementation Completion and Results Report of Local Governance Support Project, May, 2012 o Implementation Completion and Results Report of West Bengal Institutional Strengthening of Gram

Panchayats Project, December, 2016o Local Government Division, Ministry of Local Government, Rural Development Cooperatives,

Comprehensive Report on Environment and Social Safeguard Assessment, June, 2017o Local Government Division, Ministry of Local Government, Rural Development Cooperatives, Union

Parishad Operations Manualo Local Government Division, Ministry of Local Government, Rural Development Cooperatives,

Implementation Progress Report of First Six-monthly report of FY 2016-2017 of Second Local Governance Support Project, August, 2017

o Local Government Division, Ministry of Local Government, Rural Development Cooperatives, Draft Project Completion Report of Second Local Governance Support Project, October, 2017

o Project Appraisal Document of Second Local Governance Support Project, October, 2011o Restructuring Paper on A Proposed Restructuring of Second Local Governance Support Project,

March, 2015

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