Document of The World Bank FOR OFFICIAL USE ONLY
Public Disclosure Authorized Report No: ICR00004319
IMPLEMENTATION COMPLETION AND RESULTS REPORT ON A
LOAN/CREDIT/GRANT
IN THE AMOUNT OF SDR 128.1 MILLION Public Disclosure Authorized (US$ 200 MILLION EQUIVALENT)
TO THE
REPUBLIC OF INDIA
FOR THE KERALA LOCAL GOVERNMENT AND SERVICE DELIVERY PROJECT
Public Disclosure Authorized June 19, 2018
Social, Urban, Rural and Resilience Global Practice South Asia Region
Public Disclosure Authorized
CURRENCY EQUIVALENTS
(Exchange Rate Effective {June 15, 2018})
Currency Unit = Indian Rupee (INR ) INR 68.16 = US$1 US$ 1.41 = SDR 1
FISCAL YEAR July 1 - June 30
Regional Vice President: Ethel Sennhauser Country Director: Junaid Kamal Ahmad Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager: Catalina Marulanda Task Team Leader(s): Harsh Goyal ICR Main Contributor: Harsh Goyal
ABBREVIATIONS AND ACRONYMS
APA Annual Performance Assessment BTOR Back to Office Report CAA Constitutional Amendment Act CFC Central Finance Commission CPS Country Partnership Strategy DAC Decentralization Analysis Cell DPR Detailed Project Report EIRR Economic Internal Rate of Return ESMF Environment and Social Management Framework FFM Financial Management GBV Gender Based Violence GEWE Gender Equality and Women Empowerment GIFT Gulati Institute of Finance and Taxation GOI Government of India GOK Government of Kerala GP Gram Panchayat ICDS Integrated Child Development Service IDA International Development Association IFR Interim Financial Report IKM Information Kerala Mission INR Indian Rupees ISM Implementation Support Mission IT Information Technology IUFR Interim Unaudited Financial Report KILA Kerala Institute of Local Administration KLGSDP Kerala Local Government Service Delivery Project LESA Limited Environment and Social Assessment LFA Local Fund Audit LG/LSGIs Local Governments/Local Self Government Institutions LSGD Local Self Government Department MIS Management Information System MMC Minimum Mandatory Conditions MTR Mid-Term Review OP/BP Operational Policies/Business Procedures PAD Project Appraisal Document PDO Project Development Objective PFM Public Financial Management PG Performance Grant PMU Project Management Unit SCD Systematic Country Diagnostic SC/ST Scheduled Caste/Scheduled Tribe SDR Special Drawing Rights SFC State Finance Commission SIRD State Institute for Rural Development SPAO State Performance Audit Office TTL Task Team Leader VGDF Vulnerable Group Development Framework
TABLE OF CONTENTS
DATA SHEET ...... ERROR! BOOKMARK NOT DEFINED. I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ...... 5 A. CONTEXT AT APPRAISAL ...... 5 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION ...... 8 II. OUTCOME ...... 9 A. RELEVANCE OF PDOs ...... 9 B. ACHIEVEMENT OF PDOs (EFFICACY) ...... 10 C. EFFICIENCY ...... 17 D. JUSTIFICATION OF OVERALL OUTCOME RATING ...... 19 E. OTHER OUTCOMES AND IMPACTS (IF ANY) ...... 19 N/A ...... 20 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ...... 20 A. KEY FACTORS DURING PREPARATION ...... 20 B. KEY FACTORS DURING IMPLEMENTATION ...... 21 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 23 A. QUALITY OF MONITORING AND EVALUATION (M&E) ...... 23 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ...... 24 C. BANK PERFORMANCE ...... 27 D. RISK TO DEVELOPMENT OUTCOME ...... 29 V. LESSONS AND RECOMMENDATIONS ...... 29 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ...... 31 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ...... 41 ANNEX 3. PROJECT COST BY COMPONENT ...... 43 ANNEX 4. EFFICIENCY ANALYSIS ...... 44 ANNEX 5. BORROWER’S COMMENTS ...... 54 ANNEX 6. SUMMARY OF BORROWER IMPLEMENTATION COMPLETION REPORT ...... 55
The World Bank Kerala Local Government and Service Delivery (P102624)
DATA SHEET
BASIC INFORMATION
Product Information Project ID Project Name
P102624 Kerala Local Government and Service Delivery
Country Financing Instrument
India Investment Project Financing
Original EA Category Revised EA Category
Partial Assessment (B) Partial Assessment (B)
Organizations
Borrower Implementing Agency
Government of Kerala Local Self Government Department
Project Development Objective (PDO)
Original PDO To enhance and strengthen the institutional capacity of the local government system in Kerala to deliver services and undertake basic administrative and governance functions more effectively and in a sustainable manner.
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The World Bank Kerala Local Government and Service Delivery (P102624)
FINANCING
Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing
200,000,000 192,775,692 169,987,288 IDA-48720 Total 200,000,000 192,775,692 169,987,288
Non-World Bank Financing Borrower 60,000,000 78,800,000 78,800,000 Total 60,000,000 78,800,000 78,800,000 Total Project Cost 260,000,000 271,575,692 248,787,288
KEY DATES
Approval Effectiveness MTR Review Original Closing Actual Closing 29-Mar-2011 16-Sep-2011 20-Jan-2014 31-Dec-2015 29-Dec-2017
RESTRUCTURING AND/OR ADDITIONAL FINANCING
Date(s) Amount Disbursed (US$M) Key Revisions 24-May-2017 182.83 Change in Results Framework Change in Components and Cost 02-Jun-2017 182.83 Change in Loan Closing Date(s)
KEY RATINGS
Outcome Bank Performance M&E Quality Satisfactory Satisfactory Modest
RATINGS OF PROJECT PERFORMANCE IN ISRs
Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 03-Jan-2012 Satisfactory Satisfactory 29.02
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The World Bank Kerala Local Government and Service Delivery (P102624)
02 27-Nov-2012 Satisfactory Moderately Satisfactory 60.65
03 19-Jun-2013 Satisfactory Moderately Satisfactory 60.65
04 14-Dec-2013 Satisfactory Moderately Satisfactory 84.46
05 13-Apr-2014 Satisfactory Moderately Satisfactory 84.46
06 08-Nov-2014 Satisfactory Moderately Satisfactory 125.64
07 28-May-2015 Moderately Satisfactory Moderately Satisfactory 125.64
08 29-Dec-2015 Moderately Satisfactory Moderately Satisfactory 127.82
09 02-Jun-2016 Moderately Satisfactory Moderately Satisfactory 127.82
10 02-Nov-2016 Moderately Satisfactory Moderately Unsatisfactory 182.83
11 03-Mar-2017 Moderately Satisfactory Moderately Unsatisfactory 182.83
12 10-May-2017 Moderately Satisfactory Moderately Satisfactory 182.83
13 04-Dec-2017 Moderately Satisfactory Moderately Satisfactory 182.83
SECTORS AND THEMES
Sectors Major Sector/Sector (%)
Public Administration 90 Sub-National Government 90
Social Protection 10 Social Protection 10
Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Finance 13
Finance for Development 13
Agriculture Finance 13
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The World Bank Kerala Local Government and Service Delivery (P102624)
Public Sector Management 63
Public Finance Management 7
Public Expenditure Management 7
Public Administration 56
Administrative and Civil Service Reform 7
Transparency, Accountability and Good 7 Governance Municipal Institution Building 42
Social Development and Protection 13
Social Inclusion 13
Participation and Civic Engagement 13
Urban and Rural Development 13
Rural Development 13
Rural Markets 13
ADM STAFF
Role At Approval At ICR
Regional Vice President: Isabel M. Guerrero Ethel Sennhauser
Country Director: N. Roberto Zagha Junaid Kamal Ahmad
Senior Global Practice Director: John Henry Stein Ede Jorge Ijjasz-Vasquez
Practice Manager: Ming Zhang Catalina Marulanda
Task Team Leader(s): Roland White Harsh Goyal
ICR Contributing Author: Harsh Goyal
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The World Bank Kerala Local Government and Service Delivery (P102624)
I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES
A. CONTEXT AT APPRAISAL
1. At the time of appraisal, India was on a high economic growth trajectory owing to its consistency in pursuing economic reforms over the previous two decades. India’s high economic growth was accompanied by parallel increases in spending on health, education, drinking water and sanitation, rural and urban infrastructure, and employment programs. However, the progress on improving service delivery in rural and urban areas was limited. Rural areas continued to lag in social and economic indicators as well as quality of services, with widening regional disparities between and within states. Likewise, in urban areas, cities continued to struggle with inadequate levels of basic urban services, coupled with the pressure of increasing pace of urbanization. Overall, at the local level service delivery continued to remain poor and improvements were not commensurate with the levels of public expenditures.
2. The 73rd and 74th Constitutional Amendments established States as the constitutional entities with legal jurisdiction over local government matters. India has since demonstrated a high level of heterogeneity with respect to progress on decentralization; Kerala was a notable outlier within the country in this regard. Since the late 1990s, Kerala devolved more responsibilities and resources to the lowest levels of local government, than any other Indian state. On the fiscal side, the State has implemented the recommendations of successive State Finance Commissions (SFCs) and at the time of appraisal, local government transfers constituted 20 percent of state tax revenue, with a fixed annual increase. Moreover, in line with SFC recommendations, Kerala introduced an objective, formula-based approach to the horizontal distribution of SFC transfers between local governments, which other Indian states were yet to do. However, despite the impressive track record of the state in decentralization, there were many core challenges with respect to limited expenditure autonomy, weak institutional and organizational capacities, and inadequate state management and oversight mechanisms. Addressing these core challenges was a critical priority for the state of Kerala to enable local governments to be adequately empowered, resourced and capacitated to deliver services in a sustainable and accountable manner within a strong and robust state level oversight and management framework. The Kerala Local Government and Service Delivery Project (KLGSDP) was designed to address the above identified core challenges with the ultimate objective of strengthening the local government system for effective service delivery.
3. The project was well aligned with the Government of India’s Eleventh Five-Year Plan (2007-12), which clearly laid out strengthening decentralization and empowering local governments for local service delivery as a key priority for improving governance. It was also aligned with Kerala state’s Eleventh Five-Year Plan (2007-12), which allocated 24.5% of its total plan outlay for decentralized planning and service delivery by local governments. By supporting local infrastructure and service delivery needs, as well as the institutional arrangements for promoting an enabling environment for long term sustainability, the project contributed directly to pillar three of the World Bank Group’s India Country Partnership Strategy for 2009-12, which focused on increasing the effectiveness of public service delivery. This project was one of four Bank supported local government projects (two were already under implementation in Karnataka and West Bengal and the third was under preparation in Bihar) in diverse state environments.
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The World Bank Kerala Local Government and Service Delivery (P102624)
Theory of Change (Results Chain)
4. The schematic below presents the results chain for the project as envisaged at the time of appraisal. The key assumption was that a mutually reinforcing approach of providing performance based discretionary grants and capacity building support would enable local governments to function as effective institutional entities at the local level and also address their priority investment needs, thereby improving both institutional capacities as well as service delivery systems and standards.
Project Development Objectives (PDOs)
5. The project development objective is to enhance and strengthen the institutional capacity of the local government system in Kerala to deliver services and undertake basic administrative and governance functions more effectively and in a sustainable manner.
Key Expected Outcomes and Outcome Indicators
6. Achievement of the PDO was to be measured in terms of the following outcome indicators: i. 70 percent GPs1 and Municipalities2 will have passed the performance assessments for well-functioning fiduciary, planning and service delivery systems; ii. A well-established performance-based grant system is increasingly financed by GoK; and iii. The number of direct project beneficiaries, of which a certain percentage are female.
1 Gram Panchayats are the lowest tier of rural local governments responsible for delivery of core public services as per 73rd Constitutional Amendment. 2 Municipalities are the urban local governments responsible for delivery of core public services asper 74th Constitutional Amendment
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The World Bank Kerala Local Government and Service Delivery (P102624)
Components
7. The project had four components with an estimated cost equivalent to US$260 million, briefly described below.
8. Component 1: Performance Grants (US$238.6 million - IDA and Government of Kerala, GoK). This component provided an annual, performance-based grant to all 978 GPs and 60 Municipalities (collectively referred to as ‘local governments’) in Kerala. The local governments were allocated additional formula-driven discretionary funds for local infrastructure investments in a manner which incentivized the strengthening of their institutional capacity. The performance grants (PGs) were spent both on the creation of capital assets used in service delivery and for their maintenance and operation. The PG was introduced in two phases for strengthening the institutional capacities of local governments incrementally. The administrative and institutional systems necessary for the introduction of a full performance grant were established in the first two years of the project (Phase 1). From year three onwards, the performance dimension of the grant, where qualification to receive grant is based on annual performance assessment, was applied (Phase 2).
9. Component 2: Capacity Building (US$11.2 million – IDA). This component provided capacity building inputs to strengthen and supplement the existing systems and human resources of local governments to enhance their institutional performance through: (i) development of training manuals on key aspects of local government functioning and imparting formal training to local government officials; (ii) on the job mentoring support to local governments for human resource capacity improvement and supplementation; and (iii) strengthening the institutional capacities and training delivery systems of the key organizations responsible for providing capacity building support to local governments in Kerala (Kerala Institute of Local Administration, KILA, and the State Institute of Rural Development, SIRD).
10. Component 3: Enhancing State Monitoring of the Local Government System (US$3.4 million - IDA). This component supported the strengthening of the state’s performance monitoring systems for Local Self Governments (LSGs) in Kerala, and comprised four sub-components: (a) Database of GP and municipal information. The project established a database of GP and municipal level information comprising basic data on GP and municipal profiles: population, vital statistics, livelihoods, employment, education, water and sanitation, budget expenditures and physical assets. (b) LSG Service Delivery Survey. This sub-component funded the surveys to gauge delivery trends state-wide in sectors where GPs and Municipalities have some responsibility, explored citizen satisfaction, and usage of basic services, as well as awareness of GP planning and budget processes. (c) Project Evaluations. The project supported evaluations on (i) the quality of capacity building efforts (Component 2) and service delivery of Performance Grant investments (Component 1). (d) Decentralization Analysis Cell (DAC). The DAC focused on collecting, storing, compiling and reporting GP/Municipality level and service delivery data; and (ii) providing policy advisory inputs based on an independent analysis of the state ‘s intergovernmental fiscal system and service delivery system.
11. Component 4: Project Management (US$6.8 million - IDA). This component supported the Project Management Unit (PMU) within the Local Self-Government Department (LSGD) for overall coordination, implementation, monitoring and evaluation of the project.
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The World Bank Kerala Local Government and Service Delivery (P102624)
B. SIGNIFICANT CHANGES DURING IMPLEMENTATION
Revised PDOs and Outcome Targets N/A Revised PDO Indicators N/A
Revised Components
12. New activities added under Component 1. In 2014-15 the project had accrued savings of US$62 million as a result of the depreciation of the Indian Rupee vis-à-vis the US dollar. These savings were utilized for: (i) a one-time additional financial assistance to 50 backward and tribal Gram Panchayats and 10 revenue-deficit municipalities for undertaking priority investment sub-projects focusing on service delivery improvement and local economic development; and (ii) Annual Performance Assessment 3(APA) based Performance Grants to all local governments for an additional year.
Other Changes
13. Extensions to Credit Closing Date. The original Credit closing date of December 31, 2015 was first extended by 18 months till June 30, 2017 to allow the Government of Kerala to complete the new activities indicated above. The second extension for an additional six months till December 29, 2017 was to allow local governments to complete the new activities in Component 1.
14. Credit Cancellation. IDA Credit equivalent to US$7.2 million was cancelled in May 2017 as these funds were unlikely to be utilized before the Credit closing date.
Rationale for Changes and Their Implication on the Original Theory of Change N/A
3 APA is the performance assessment tool adopted by GOK under KLGSDP to measure the performance of all the local governments every year.
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The World Bank Kerala Local Government and Service Delivery (P102624)
II. OUTCOME
A. RELEVANCE OF PDOs
15. The relevance of the PDO should be assessed in the context of the decentralized service delivery framework enshrined by the 73rd and 74th Constitutional Amendments (CAA) in the early 1990s and the importance of the agenda to date. At the time of ICR preparation, the PDO is fully aligned with current national policies and the inter- governmental fiscal framework that seeks to strengthen decentralization and federalism. The ongoing fourteenth Central Finance Commission (14CFC, 2015-20) has recommended an unprecedented increase in tax devolution to states from 32 percent to 42 percent of the sharable central tax, which is the largest increase in the history of Indian fiscal federalism. In this context, the PDO is highly relevant in terms of showcasing the outcomes of a well-established robust performance based inter-governmental fiscal transfer system for local governments, aimed at incentivizing the institutional performance of local governments for improving service delivery standards and systems. The mutually reinforcing approach of capacity building support and performance based transfers, that was adopted by the project for achieving the desired objective of strengthening the local government system, demonstrates a huge potential for a national scale-up and to influence the design of the entire inter-governmental fiscal transfer system for local governments across the country in the upcoming fifteenth Central Finance Commission as well. The Government of India is strongly supportive of this approach, as evidenced by the new performance based grant systems introduced in 2017 for allocation of 10% of the total fiscal transfers under 14th CFC, as well as the GoI support for the follow-on Bank project that has been requested by Kerala.
16. Kerala’s most recent five-year plan (2012-17) and the ongoing fifth State Finance Commission (2016-21) highlight the importance attached to deepening decentralization by empowering the local governments and strengthening their role, systems and capacities for efficient service delivery, both in terms of policy recommendations as well as higher fiscal transfers to local governments. Hence the PDO remains fully aligned with, and is relevant to, the state’s current vision of advancing the decentralization agenda and policy priorities. This is also evident from the strong interest that the GOK has shown in requesting a follow-on engagement with the Bank to continue this partnership for undertaking the next generation reforms to further strengthen local governments.
17. The PDO is aligned with the Bank Group’s current Country Partnership Strategy (CPS) for India for 2013-2017, which called for three main engagement areas of “Integration, Transformation, and Inclusion”, as well as the challenges and priorities identified by the India Systematic Country Diagnostics (SCD) 2018 for the new Country Partnership Framework that is being prepared currently. The SCD recognizes the importance of empowering and resourcing local governments adequately (as noted in page 33 of the SCD) for improving service delivery in a decentralized set-up. It also recognizes that incentivizing local governments in a competitive federalism framework can bring about a paradigm shift in their delivery of services (as noted in page 80 of the SCD). Going forward, the SCD identifies strengthening local governments as a key priority for strengthening India’s federal compact and public delivery systems.
Assessment of Relevance of PDOs and Rating Rating: High
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The World Bank Kerala Local Government and Service Delivery (P102624)
B. ACHIEVEMENT OF PDOs (EFFICACY)
18. The PDO is focused on strengthening two important and interrelated elements of local governance in an effective and sustainable manner: capacity to deliver services and capacity to undertake basic administrative and governance functions. Achievement of the PDO was measured through three PDO level results indicators: (i) by the end of the project, 70% of the GPs and municipalities will have passed the annual performance assessments for well- functioning fiduciary, planning and service delivery systems; (ii) a well-established performance based grant system is increasingly financed by the Government of Kerala; and (iii) the number of direct project beneficiaries, of which a certain percentage are female (core indicator).
19. Annual Performance Assessments (APAs). The APA is the primary tool used in KLGSDP as an objective, robust and standardized mechanism to measure the performance of the GPs and municipalities in terms of their fiduciary, planning, governance, and service delivery systems in a fair and transparent manner. The APA tool captures both elements of the PDO (as described above) well by covering the key performance aspects of local government systems through a combination of minimum mandatory conditions and performance benchmarks, and also serves as the basis for the allocation of performance based grants to GPs and municipalities that qualified based on APA results. Performance grants were allocated only to those local governments that met the mandatory conditions and achieved a minimum performance score. Thus, they laid a solid foundation for a well-established performance grant system in the state.
20. The APA was introduced in two phases. In the first phase (comprising years 1 and 2 of the project), all GPs and municipalities received performance based grants subject to certain basic minimum mandatory conditions being met that ensured that local governments will have in place the basic financial reporting systems, auditing procedures, decentralized annual plans and budgets. In the second phase (years 3 to 5), the full APA was introduced, comprising a set of mandatory conditions and performance benchmarks in four key aspects of local government functioning: (i) decentralized planning and budgeting, that focused on ensuring timely preparation of annual decentralized plans and budgets with adequate levels of community engagement and participation; (ii) project execution and service delivery, that focused on basic systems for design, planning and implementation of local infrastructure projects that lead to good quality asset creation and improve access to basic services; (iii) public financial management (PFM) and accounting and auditing, that focused on detailed financial reporting and accounting practices, as well as timely completion of external audits with no major qualifications/disclaimers; and (iv) transparency and accountability, that focused on the local governments’ level of community engagement, grievance redress, and public disclosure norms. Because of its comprehensiveness, the APA tool served as a reliable and authentic source of information for measuring the achievement of the PDO through PDO level results indicators #1 and #2. However, the project faced some challenges during the implementation of the APA, as noted in Section III. B. Key Factors During Implementation.
Achievement of PDO Level Indicator Targets
21. PDO Indicator 1: By end of project, 70% of the GP and municipalities will have passed the annual performance assessments for well-functioning fiduciary, planning and service delivery systems – ACHIEVED. As shown in the graph below, the number of GPs and municipalities that met all minimum mandatory conditions and scored above the threshold qualifying marks in the performance scoring was consistently in the range of 85-90% and hence the project consistently exceeded the annual targets of PDO indicator 1. The average performance scores of the GPs also showed
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The World Bank Kerala Local Government and Service Delivery (P102624)
a positive trend over the three APA cycles and reflect a consistent improvement in local government functioning. This improvement in the performance of local governments is principally due to the systems development and capacity building support system that the project put in place during the first phase of the APA.
22. PDO Indicator 2: A well-established performance based grant system is increasingly financed by GoK – ACHIEVED. The performance based grant system was IDA Resources GoK Resources implemented based on the APA, wherein allocations were made to FY qualified GPs and municipalities based on the SFC recommended (US$ million) (US$ million) grant allocation formula, i.e., weighted by population size and area 11-12 23.3 0.0 of the local governments. The overall size of the annual 12-13 28.6 5.4 performance based grants increased over the project period from 13-14 22.5 9.6 US$3.3 million in FY11-12 to US$93 million in FY15-16. GoK’s 14-15 39.5 26.3 contribution increased from US$5.4 million in FY12-13 to US$37.4 15-16 56.1 37.4 million in FY15-16. At the end of the project, GoK resources Total 169.9 78.8 amounted to 31.5% of the performance based transfers disbursed to the local governments in Kerala. The table below provides yearly details of IDA and GoK contributions.
23. PDO Indicator 3: The Number of Direct Project Beneficiaries, of which a Certain Percentage are Female - ACHIEVED. Most of the local governments implemented multiple sub-projects (on average 40-50 sub-projects per local government), which mostly focused on shared public infrastructure asset creation. As such, the beneficiary target of 29.54 million, of which 52% is women was achieved.
4 The cumulative number of beneficiaries for all the sub-projects exceeded the total population, and was reported by the Project to be about 43 million.
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The World Bank Kerala Local Government and Service Delivery (P102624)
Assessment of Achievement of Each Outcome
Outcome 1: Strengthened Institutional Capacity of the Local Government System to Deliver Services More Effectively and in a Sustainable Manner
24. KLGSDP has made a significant contribution to local level planning and implementation systems through focused capacity building support and by providing performance grants. The performance grant guidelines encouraged local governments to undertake more integrated infrastructure projects with robust technical designs and adequate actions to mitigate environmental and social risks. The efficacy of this outcome is demonstrated by: (i) improvements reflected in the APA results (as presented above), which include a comprehensive assessment of service delivery and project execution systems as one of the four key themes; (ii) the outcomes of the end-line technical service delivery evaluation conducted by an independent agency; and (iii) the Total Sub-Projects S. No. Key Sectors over 43,700 sub-projects (detailed sector-wise Implemented break-up presented in the table alongside) 1 Anganwadis/ICDS Centers 1593 successfully implemented by the local governments, 2 Buildings (Schools, local government offices, others)5378 which were identified following a robust bottom-up 3 Hospitals (including PHC/CHC etc) 709 decentralized planning process with a very high 4 Bus Stand/Waiting shed/Market 541 degree of community engagement and people’s 5 Burial Ground/Crematorium 139 participation. 6 Roads 25159 7 Street lights and solar energy 1367 25. To assess the impact of the local 8 Drinking water supply 1350 infrastructure and service delivery sub-projects 9 Other projects 7475 (implemented by local governments under Total 43711 Component 1) in terms of real service delivery improvements on the ground, an end-line technical service delivery evaluation was conducted, which examined technical quality, utility and usefulness of the public assets created, cost- effectiveness, and compliance with environment and social safeguard norms. The sample of 519 sub-projects was physically surveyed and the evaluation concluded that these were implemented within stipulated budgets, without cost overruns, and the monitoring systems put in place at the district level and the mentoring support strengthened the implementation capacities of local governments. The evaluation reported based on physical verifications that for 82% of the road projects, 94% of public building assets and 95% of health care building, construction quality was in compliance with technical standards/specifications and as per the design document. Likewise, compliance with ESMF was found to be very high and environmental safety measures were found to be adopted by the implementing officers in more than 90% of the sample sub-projects, while implementing the assets for various public utility purposes.
26. The evaluation findings also reflected the strength and robustness of the decentralized planning process that was adopted to identify the local infrastructure sub-projects that were implemented under KLGSDP, and the extent to which the planning process reflected local needs and priorities. The evaluation reported that the 519 sample sub- projects are benefiting 3.6 million persons across 104 local governments, and that public assets created through these sub-projects have a very high level of utility. 98% of sample beneficiaries interviewed indicated that the public utility assets created under KLGSDP (mainly drinking water, roads, Integrated Child Development Service (ICDS) centers, public buildings and street lights) are being used regularly by their families.
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The World Bank Kerala Local Government and Service Delivery (P102624)
27. The end-line evaluation confirmed that the mutually reinforcing approach of providing focused capacity building support for improving institutional systems and organizational capacities in local governments, coupled with an objective, robust performance (APA) based fiscal transfer system led to significant systemic improvements in real terms on the ground on service delivery aspects. The APA and the capacity building support also strengthened community engagement and participation in the decentralized planning process in Kerala, with a particular focus on gender issues and vulnerable/marginalized groups. (For further details on gender and vulnerable/marginalized groups, see Section E.) The decentralized planning and implementation mechanism generated strong community ownership for implementation and maintenance of local infrastructure assets and is one of the key sustainability measures supported under the project.
28. A mutually reinforcing approach of APA based performance grant allocation and the focused capacity building support led to substantial improvements in service delivery systems in the local governments. Capacity building support provided by Kerala Institute of Local Administration (KILA), State Institute of Rural Development (SIRD) and the Project Management Unit (PMU) through the preparation of local government manuals, delivery of formal training sessions, and continuous mentoring/handholding support (provided by district coordinators at the local level) on service delivery systems (including detailed project report preparation, technical design and planning, environmental and social awareness, implementation and compliance with ESMF, procurement, contract management and asset management) played a critical role in improving the institutional capacity of the local governments to implement local infrastructure sub-projects and deliver services. The capacity building support through a mix of formal training and on the ground handholding support for improving the local government’s service delivery system led to sustainable improvements in project design/DPR preparation and execution systems for various types of local infrastructure projects.
29. Additional support to backward, tribal and revenue-deficit local governments. The project also provided a one- time financial assistance to a select set of sixty backward, tribal and revenue-deficit local governments to enable them to implement additional local priority infrastructure No. of S. No. Sectors projects to address their local economic and social projects needs. This was one of the two new activities taken up 1 Integrated Child Development Service Centres 42 to utilize the savings accrued in the project (as explained in section I. B Major Changes During 2 Schools 27 Implementation) in response to the state’s priority to 3 Hospitals (including PHC/CHC etc. 39 provide additional financial support to those local 4 Bus Stand/Waiting shed/Markets 16 governments which have high levels of poverty or are 5 Burial Ground/Crematorium 5 geographically/ demographically/ economically 6 Other Utilities 28 disadvantaged, so as to enable them to address their 7 Roads 39 specific challenges that are responsible for their backwardness. This activity also contributed directly 8 Street lights 10 to the PDO and to the Bank’s twin goals of reducing 9 Drinking water supply 16 poverty and enhancing shared prosperity. The local 10 Other Projects 30 governments were selected based on an objective Total 252 assessment of their degree of backwardness, measured through: (i) high concentration of Scheduled Caste/Scheduled Tribe population, poverty level (number of below poverty line families), poor accessibility/remoteness, and non-availability of basic amenities (e.g., roads, drinking water, health facilities, electricity, and crematoria); and (ii) low levels of own source revenues. Tribal local governments
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The World Bank Kerala Local Government and Service Delivery (P102624)
were selected based on the government notified tribal clusters in the state with high concentration of indigenous tribal population. Each of these local governments was screened to ensure that they met the minimum mandatory conditions (MMCs) relating to basic fiduciary and planning systems. The table alongside summarizes the types of sub-projects implemented by the sixty backward and tribal local governments that were provided funds. However, the component faced multiple implementation challenges due to weak capacity of these local governments, which was addressed through deployment of additional mentors/district coordinators for close implementation support and supervision.
30. The table below presents the status of the relevant intermediate results indicators that contribute to the achievement of this outcome:
S. No. IR Indicators End of Project target Status 1 Number of backward, tribal and revenue deficit 51 Target exceeded, 60 LGs LGs that execute its additional block grant support received and executed on time the support 2 By EOP, #/types of sub projects built by GPs and No fixed target, framework 43,711 sub-projects Municipalities through block grants approach followed implemented 3 Performance of all GPs and Municipalities is 100% Achieved, 100% GPs and assessed each year municipalities were assessed every year
31. Based on the above discussion, Outcome 1 of the project has been fully achieved.
Outcome 2: Strengthened Institutional Capacity of the Local Government System in Kerala to undertake Basic Governance and Administrative Functions More Effectively and in a Sustainable Manner
32. As noted above, the efficacy of this outcome can be ascertained through the APA results and the extensive capacity building support provided to the local governments on key issues of local governance, local administration and service delivery. Implementation of APA as an objective and transparent tool for measuring the improvements in local government’s functioning and allocation of performance grants, enabled many sustainable institutional improvements in the local government systems on aspects relating to public financial management, decentralized planning, accountability and transparency in local government functioning, and project execution systems. One of the key achievements has been the timely preparation of annual financial statements by all the local governments and external audits, which was a mandatory condition for all local governments to qualify for PG. Likewise, the streamlined process for the preparation of annual plans with high levels of citizen engagement and community participation has been institutionalized.
33. The project provided capacity building support to local governments for institutional strengthening through: (i) preparation and formal state government notification of 12 administrative manuals on key aspects of local government functioning (including budgeting, procurement, asset management, gender budgeting, public reporting, grievance redressal, performance audit, financial management, LSGD public works, administration manual for transferred functions, social audit, and state audit); (ii) formal training for all 1,028 local governments by KILA, SIRD and PMU on the administrative manuals, APA, Environmental and Social Management Framework, and Vulnerable Groups Development
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Framework; and (iii) orientation and refresher courses for elected representatives and local government officials on Detailed Project Report (DPR) preparation, environmental audits, social audits, gender budgeting, gender based violence, and financial accounting/reporting. One of the key KLGSDP achievements is the formal adoption and institutionalization of the Procurement Manual by the state government, which all local governments are required to comply with for all procurement activities undertaken by them. This would improve local governance and service delivery through transparent and competitive procurement procedures. The state government also institutionalized ESMF compliance by all local governments for investment and development activities being carried out in their jurisdictions, irrespective of the funding source. Another achievement is the production of 12 administrative manuals that would streamline and improve the local government functioning, which is one of the most important measures for sustainable capacity building and institutional strengthening of the local governments in the long run. However, owing to the initial delays in implementation, even though the project was able to deliver the 12 administrative manuals, training and handholding support to local governments for the adoption and implementation of these manuals at the local level was not adequate. GOK/KILA have committed to take on this responsibility as a part of KLGDSP’s sustainability.
34. An end-line capacity building evaluation was conducted by an independent agency to assess the impact of all the capacity building interventions under KLGSDP on the local government systems and capacities for local governance and service delivery. The evaluation covered assessment of systems improvement support and formal trainings provided to local governments, on the ground mentoring support provided through district coordinators, and institutional strengthening of KILA and SIRD.
a. Systems Improvement through APA. The evaluation highlighted that the project, through the APAs, has made a significant positive impact on the institutional systems of the local governments. More than 90% of the local government officials surveyed responded that the APAs encouraged them to improve their institutional systems for local governance, administration and service delivery, in order to enable them to qualify for accessing additional discretionary grant resources for addressing the local service delivery related investment needs. The survey also highlighted that the APA fostered a high degree of political will and commitment in the elected local government representatives to perform better and seek a higher performance score. More than 95% of the local government secretaries interviewed responded that the APAs motivated them to improve their accounting, financial reporting and audit systems, including timely recording of expenditures and closing the books of account, timely external audit, and achieving a clean audit opinion from the external auditors. b. Formal Trainings. Formal trainings were imparted by KILA, SIRD and PMU. KILA provided trainings on local governance, local planning, local development, financial management, e-governance, skill development, child development, panchayat administration, and social accountability. SIRD provided trainings on social audit, gender budgeting, local economic development, women’s empowerment, implementation of GOI schemes, and computer training. PMU provided trainings on ESMF, APA, Refresher training for new elected representatives, DPR preparation and project execution, and Gender Based Violence. The evaluation assessed the timeliness, relevance, mix of participants, relevance of learning material and overall outcomes of training. The evaluation noted that around 75% of sample participants across different categories confirmed that the trainings that were delivered to them were useful, relevant and needed at that time. Likewise, around 70% of the sample participants confirmed that the training material was highly relevant to local government operations. 75% of sample participants confirmed that the formal training improved the overall efficiency of local government functioning. c. Mentoring support. The project also provided on the ground mentoring and handholding support on specific areas of expertise, such as accounting and IT, and monitoring project execution (for district coordinators). The end-line
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capacity building evaluation noted that the handholding and mentoring support provided by the project played a critical role in building the capacity of the local government officials in terms of familiarizing, understanding and implementing the new accounting and IT systems. More importantly it supplemented the formal training support and enhanced the effectiveness of the overall capacity building support. d. Institutional Strengthening of KILA and SIRD. This included support for training management information systems, computerization of helpdesk and expansion of faculty base. These interventions enhanced the sustainability of the training and capacity building support that was being provided by these institutes to the local governments. e. The evaluation specifically assessed the impact of capacity building interventions on local governance and service delivery. More than 75% of sample participants reported that various capacity building interventions have helped the local governments’ elected representatives and officials in terms of improved transparency in governance, improved planning systems, improved understanding and knowledge of service delivery systems, as well as in the adoption of ESMF.
35. Finally, the project supported the development and integration of institutional systems for service delivery, financial management, financial reporting and monitoring project execution, through the Information Kerala Mission (IKM), including the creation of a local government fiscal database, the development of a comprehensive MIS system, and the integration of IKM software for local governments (Sulekha, Sankhya etc,). However, while the complete MIS system was developed, the roll-out of this system across all local governments (including the training and handholding support) could not be completed due to significant delays as noted in Section III.B. Key Factors During Implementation. However, IKM has committed to completing the roll-out with its own resources, as this is key for the future success of IKM interventions and for improving local government management systems.
36. The table below presents the status of the relevant intermediate results indicators that contribute to the achievement of this outcome:
S. No. IR Indicators End of Project target Status 1 LSGs received training over life of project 1028 Achieved 2 KILA's capacity developed to provide enhanced Quality improved Achieved, as ascertained training to GPs and Municipalities by the end-line evaluation 3 Production of draft manuals in the areas of 4 Exceeded the target; 12 budget, planning,financial managementt,public manuals were produced works/procurement, institutional managementt and notified by GOK. 4 GP database established and operating with 1 Achieved annual reports produced 5 Decentralization Analysis Cell (DAC) providing 3 Partially achieved, only annual fiscal reports two fiscal reports prepared 6 Project studies/surveys complete 4 Achieved
37. Based on the above discussion, Outcome 2 of the project has been fully achieved. Justification of Overall Efficacy Rating
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Rating: Substantial, based on the discussions on the achievements of the two PDO outcomes.
C. EFFICIENCY
38. At appraisal, it was noted that sub-project investments would reflect local preferences and would be identified through a local planning process. However, a priori, it would be difficult to determine the exact types of sub-projects that would be carried out in a GP. The PAD highlighted that evaluations of similar sub-projects such as those anticipated under the project have shown positive economic rates of return.
39. Ex-post Evaluation. Under Component 1, which utilized 92 percent of the IDA Credit, nearly 44,000 sub projects were implemented using performance grants provided by the project for a total investment of INR14,103 million ($225 million). Tables in the Efficacy section above provide details of the types and numbers of sub-projects implemented. As anticipated at appraisal, these sub-projects were identified through participatory processes and were in line with existing GoK procedures. Various project capacity building activities, particularly in procurement and environmental and social management, as well as project management support, contributed to efficient implementation of these sub-projects.
40. Six sample sub-projects with costs ranging between US$2,000 and US$60,000 were selected for quantitative economic analysis: (i) construction of a new gravel road; (ii) converting an earthen road to a concrete road; (iii) rehabilitation of public wells to improve water supply; (iv) construction of a bus terminal; (v) construction of a drainage system; and (vi) street light improvement. The results of the economic analysis are presented in the table below. The estimated EIRRs for the sample projects are in the 15.5 percent to 43.5 percent range, well above the social discount rate (SDR) of 8 percent. Sensitivity analysis confirms that the economic returns are robust. Annex 4 provides details of the efficiency analysis.
Economic Internal Rate of Return (EIRR) Sample Sample Sample Sample Sample Project Sample Project Project 1: Project 2: Project 3: Project 4: 5: Construction 6: Replacing Construction Constructio Rehabilitation Construction of Bus Stand Tube lights with of Concrete n of Gravel of drinking of Drain with a Link Road CFL lamps in Road Road water wells street lighting Base Case 33.65% 43.49% 15.49% 20.50% 20.17% 19.36% 20% increase in 11.01% 18.99% 14.52% 19.71% 19.75% 18.64% O&M Cost 20% decrease in project 8.11% 15.05% 10.87% 15.22% 15.65% 14.22% benefit
41. Design and Implementation Efficiency. Over 1,000 local governments spread across the state participated in the introduction of the APA process and the selection, design, and implementation of a very large number of sub- projects. Project implementation resulted in both elements of the PDO being achieved. Environmental, Social, and Fiduciary compliance was effective, and contributed to the overall efficiency of the project.
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42. Utilization of IDA Credit, accrued savings and closing date extensions. The original Credit closing date required an extension of 24 months for utilization of the savings that accrued because of the significant depreciation of the Indian Rupee against the US dollar. The equivalent of US$7.2 million was cancelled from the Credit in May 2017. At project closure, the equivalent of US$6.3 million remained unutilized, while an additional amount of US$ 6.5 million was incurred as an exchange loss by the GOK. Accordingly, out of the total disbursed Credit of US$ 182.83 million, US$ 169.98 million was utilized by end of the project. Section III. B. Key Factors During Implementation, highlights that the extension of the Credit closing date was in part due to the original ambitious target of completing the entire project, including four cycles of annual performance grants, in a little over four years. In addition, the last two years of the project also witnessed two elections within a span of 18 months (each election imposed a three-month long code of conduct when, as per election laws, no new procurement could be initiated) and unusually long spells of monsoon rains (ranging between 3 and 6 months, when no physical works can be carried out on the field), which further added to implementation delays.
43. The project successfully supported fifty backward/tribal GPs and ten revenue-deficit municipalities with additional financial assistance for poverty alleviation and local economic development projects as a new activity during the extension that was granted for use of IDA credit savings. GoK proposed that this additional activity, which was supported by GoI and accepted by the Bank, as it was directly aligned with the Bank’s priority of poverty alleviation. Despite the serious challenges posed by the weak institutional capacity and the remote locations of these sixty local governments, the project (through the deployment of additional manpower and by establishing rigorous mechanisms for implementation supervision) ensured that the activities supported under this sub-component were completed as planned and led to real on the ground results in terms of improved access to services.
44. PMU Leadership. The project faced a high turnover of Project Directors (around 5 transfers) during the last two years of the project, which impacted project implementation. However, the last project Director (who was deputed in November 2016 and continued till the end of the project) provided stable, proactive and dedicated leadership, and ensured extensive monitoring and supervision by the PMU to complete the final stages of implementation satisfactorily.
45. Implementation Arrangements and inter-institutional coordination. The necessarily complex implementation arrangements, with involvement of multiple institutions and conflicting reporting relationships, as well as weak inter- institutional coordination issues (as noted later in Section III. B. Key Factors During Implementation) led to delays in the implementation of Components 2 and 3 during the initial years.
46. At the time of project closure, less than 1% of the total sub-projects (approximately 323 sub-projects, as per the last AM) remained incomplete, most of which were in advanced stages of implementation and had to be completed with GOK’s budgetary sources, in compliance with the technical and safeguards requirements. Implementation was monitored closely by the Bank after the project closure, and GoK reported that these were completed by March 2018.
Assessment of Efficiency and Rating Rating: Substantial. The efficiency analysis of the sample sub-projects shows strong results in terms of economic cost- benefits at the local level. Project implementation was overall quite efficient in terms of completing the implementation of almost 99% of sub-projects and completing the implementation of sub-projects in backward/tribal GPs and revenue- deficit municipalities, despite various exogenous factors (elections, monsoon rains) and capacity challenges. Implementation delays experienced can be attributed to the overly ambitious design in terms of the implementation period, weak PMU leadership at a critical period, and complex implementation arrangements. In the context of the
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complexity and wide geographical coverage of the project, the impact of these delays is not considered significant. Hence, the efficiency is rated as Substantial.
D. JUSTIFICATION OF OVERALL OUTCOME RATING Rating: Satisfactory, based on the discussions on, and ratings of, relevance of PDO, achievement of PDO, and efficiency.
E. OTHER OUTCOMES AND IMPACTS Gender
47. The project implemented many gender focused activities which have led to substantial outcomes in terms of gender mainstreaming, inclusion and gender based violence related issues. The project issued specific guidelines to local governments to identify and prioritize sub-projects with substantial focused benefits to women and vulnerable sections of society. The project integrated gender mainstreaming in the Environment and Social Management Framework (ESMF) and the Vulnerable Group Development Framework (VGDF). This was supplemented by focused and periodic trainings to elected representatives and local government officials across the state on integrating gender aspects as a part of the annual planning and implementation processes. As a result, many KLGSDP sub-projects targeted women and vulnerable groups. Some of the major sub-projects targeting women include Kudumbasree Centres/Canteens, Skill Development Centres, and Working Women’s Hostels.
48. A gender budgeting manual was prepared by KILA after a series of consultations and was formally notified by the GoK for implementation by local governments as a part of the annual planning and budgeting exercise. KILA provided trainings to local government officials to implement the manual as a part of the annual training calendar. In addition, KLGSDP supported the preparation of Gender Action Plans mandated by GoK as per the state’s Gender Equality and Women’s Empowerment Policy (GEWE Policy). The Gender Action Plan for KLGSDP aimed to build the requisite capacity for implementing the GEWE policy at the local government level and lays down processes to ensure that gender considerations are systematically and strategically integrated into interventions proposed by the local governments.
49. KLGSDP also supported several interventions on gender based violence. The PMU conducted Stale Level Workshops for Elected Representatives and Implementing officers of Local Governments and District Coordinators of KLGSDP to address Gender Based Violence (GBV) in collaboration with the Police Department and the Social Justice Department. Subsequently, the performance grant was used for financing sub-projects focusing on the creation and maintenance of assets for supporting the local governments to address the GBV; these include increased infrastructure facilities to accommodate GBV Victims, facilities for Legal Assistance, rehabilitation programs for livelihood generation, awareness creation against GBV by installation of boards and bulletins, strengthening existing Jagratha Samitis, regular medical camps for periodic checkups & counseling, promotion of Self Protection programs for women, and increased surveillance mechanisms to address GBV in collaboration with the Police and the Social Justice Department.
Institutional Strengthening
50. Strengthening local government institutions to deliver public services and undertake administrative functions was one of the core objectives of the project and is prominently captured in the PDO and the project design. The mutually reinforcing approach of providing performance grants based on institutional performance and focused capacity building
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support worked very well, as recorded in the end-line project evaluations. The key interventions and outcomes have been highlighted in the section on Efficacy.
51. The project also supported the institutional strengthening of KILA and SIRD as the two key nodal state agencies responsible for capacity building and institutional strengthening of local governments. The focus was on modernizing training infrastructure, training facilities and organizing faculty development programs. The end-line capacity building evaluation noted that this support has been beneficial to KILA and SIRD in enhancing their in-house capacities.
Mobilizing Private Sector Financing N/A Poverty Reduction and Shared Prosperity
52. The project contributed to reducing poverty and enhancing shared prosperity. Sub-projects implemented through performance grants were identified through a robust decentralized bottom-up planning process that reflected the needs and priorities of the local communities and were largely focused on services that directly contributed towards poverty reduction through boosting rural connectivity, creating local employment opportunities, providing good quality social infrastructure through ICDS, health centers, and schools, as well as core public services that lead to improved public health outcomes. In addition, the project also supported backward, tribal and revenue-deficit local governments through additional financial assistance to finance local priority infrastructure requirements.
Other Unintended Outcomes and Impacts N/A
III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME
A. KEY FACTORS DURING PREPARATION
53. Lessons learned from other projects were incorporated. KLGSDP design benefited from lessons learned in other recent World Bank local government projects in India and in South Asia. In particular, the project drew on the experience of the Karnataka PRI project, which experienced a number of difficulties since the beginning of its implementation. Some of the key learnings incorporated in KLGSDP design included: (i) allowing complete discretion to local governments over performance grant expenditures; (ii) performance grants being disbursed in a single tranche at the beginning of the financial year and local governments being permitted to draw these funds according to their cash-flow requirements; and (iii) commitment of significant counter-part funding by GoK.
54. GoK demonstrated strong commitment and provided an enabling environment. The political and policy environment in Kerala was very committed to the decentralization agenda and this cut across political lines. This was demonstrated by GoK committing significant counterpart funding for the performance based grant allocation system. The commitment of GoK was also evident from some of its important initiatives, such as the People’s Plan Campaign, as well as embedding the decentralized planning process in the local government system with a high level of community engagement and participation.
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55. Risks were assessed and mitigated. It was recognized that poor decision-making on some of the key aspects of design and implementation may hinder the achievement of the PDO. Accordingly, a detailed governance and accountability action plan was prepared based on a thorough analysis of the key transactions which are intrinsic to the project design and included the potential risks thereof at every stage, along with the corresponding mitigation measures. The action plan also identified the responsible agency for implementing the mitigation measures and the cost of their implementation.
56. The project was designed in a detailed and meticulous manner based on robust analysis. The APA based performance grant system was designed carefully with a phased implementation approach, being mindful of the learning curve that the local governments would go through. This design of the APA and the performance grant system struck the right balance between motivation and performance factors from local governments’ perspective. In addition, the mutually reinforcing approach of providing capacity building and awareness generation support to local governments through multiple channels (formal training, on the ground mentoring and systems development) under Components 2, 3 and 4 addressed the supply side constraints and contributed to improvements in institutional performance. Financial management systems, fund flow and procurement systems were also designed based on capacity and risk assessments of the implementing agencies. However, considering the scale of the operation in terms of geographical coverage and the inherent challenges of implementing the APA, performance grants, an enormous number of sub-projects, and capacity building, as well as exogenous (but known) factors such as state and local elections and currency depreciation, the original implementation period of the project was overly ambitious and did not leave any room for slippages.
57. Implementation arrangements were complex and involved too many execution support agencies. While the roles of the PMU, as well as the other execution support agencies were spelt out clearly, inter-institutional coordination issues were not fully assessed and the reporting/accountability relationships were not well defined. In addition, many of the execution support agencies were superior to the PMU in the institutional hierarchy of the state government system and the project specific reporting requirements were not completely aligned with the state government’s reporting systems.
B. KEY FACTORS DURING IMPLEMENTATION
58. Implementation delays in Components 2 and 3. Activities under Component 1 started in September 2011 after the Credit was declared effective. However, actions agreed during project preparation to strengthen the capacities of KILA, SIRD, Information Kerala Mission (IKM) and Gulati Institute of Finance and Taxation (GIFT) to ensure implementation readiness of Components 2 and 3 were not implemented until much later. As a result, activities under Components 2 and 3 began to make progress only by the time the mid-term review (MTR) in early 2014. The PMU stepped-in to compensate for some of these delays during the initial years of implementation, e.g., by conducting training sessions for local governments on key topics such as project orientation, procurement, ESMF, and APA.
59. Weak institutional coordination between PMU and execution support agencies. For the reasons discussed earlier, institutional coordination suffered and many key project activities, such as finalization of training manuals and the development of the fiscal database for local governments were significantly delayed.
60. Implementation modality of APA was changed mid-course. Overall, implementation of the APA was one of the key success of the project. However, the APA implementation modality was changed mid-course, wherein the state government decided to hand over the mandate of conducting the APA to the State Performance Audit Office (SPAO)
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instead of an independent agency (which conducted the first year of APA). This led to some transitional issues that occurred during this process of internalization as the SPAO was not completely geared up in terms of organizational capacity (skills and adequacy of the staff needed). Consequently, the robustness and technical soundness of the APA declined in the later years, which was reflected in the rising number of formal appeals by local governments against the incorrect APA results in these years. However, the results were rectified during the formal appeal process instituted by the GOK to examine the claims of the local governments on a case-by-case basis, and final correct results were used for PG allocation.
61. Decentralization Analysis Cell (DAC) faced multiple implementation issues that led to sub-optimal outputs in Component 3. Since inception DAC faced issues relating to its institutional positioning (finally anchored in GIFT) and organizational capacity, which resulted in a delay of two years before it was fully operationalized. This was followed by institutional coordination issues with IKM due to which some of the key deliverables were further delayed. The quality of some of the 27 policy studies completed by DAC was not satisfactory, as reflected in the DAC’s decision to publish only 14 policy studies. While DAC completed most of its KLGSDP activities, the overall objective of DAC providing policy advisory support to the state government and developing/maintaining a comprehensive local government fiscal and service delivery database was not fully accomplished.
62. Monitoring and reporting systems at the state level were inadequate. Monitoring and evaluation systems for tracking the utilization of grants was an area of concern throughout the project period. The project relied on a manual system of monitoring with the help of the district coordinators, with inadequate mechanisms at the state and the local levels for periodic monitoring of project execution, fund utilization, quality of assets being created, and compliance with technical design specifications. The district coordinator led field level monitoring also had its own constraints in terms of periodicity, reliability and accuracy. Owing to this, the physical and financial progress monitoring of the large number of sub-projects that were implemented by the local governments every year continued to be a challenge through-out. During the later years of the project, the PMU developed a sub-project implementation database based on information provided by district coordinators, as well as information fed by the local government officials on Sulekha and Saankhya software in IKM. This constrained the implementation monitoring capacity of the project and made it much more resource intensive for the PMU.
63. The original time-frame for project implementation proved to be inadequate. For the reasons highlighted in the earlier section, the project was unable to complete four cycles of performance grants in a period of four years. In practice it took an average of 15-18 months to complete each cycle of performance grants, i.e., from APA to utilization of the performance grants; effectively three to four months were rendered unworkable every year due to heavy monsoon rains.
64. The full Credit amount was not utilized by the project closing date. The project accumulated savings of US$62 million as the Indian Rupee depreciated from INR46 for US$1 (PAD estimate) to nearly INR65/67 per US$ in 2017. While the financing agreement was signed for US4 200 million, US$ 182.83 million of Credit was actually disbursed and a small portion of the Credit, equivalent to US$7.2 million, was cancelled in May 2017. US$6.3 million of Credit remained unutilized which will need to be returned by GOK to the Bank along with additional amount of US$6.5 million that accounts for the exchange rate loss that accumulated over the implementation period for the Credit resources that were disbursed at a lower exchange rate but documented at a higher exchange rate at different points in time. Accordingly, out of the total disbursed Credit of US$ 182.83 million, US$ 169.98 million was utilized by end of the project.
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IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME
A. QUALITY OF MONITORING AND EVALUATION (M&E)
M&E Design
65. The results framework comprised three PDO indicators (including one core sector indicator) and eight intermediate results indicators (two for each of the four components). The PDO indicators were well targeted to measure the achievement of the PDO through APA results. The intermediate results indicators were clearly measurable and time bound. Baselines, data/information sources, and responsible agencies for data collection/compilation were clearly defined for all indicators. The APA was made the focus of M&E, as it ensured 100% coverage in terms of the local governments which participated in KLGSDP. Annual targets were well defined for the PDO indicators; however, annual targets were not defined accurately for one IR indicator relating to the number and type of sub-projects being implemented by LSGs, owing to the framework approach adopted for the project. The targets defined for a few unlinked IR indicators including intended beneficiaries aware of project info. and project investments (female) and intended beneficiaries (female) were not defined accurately and hence led to their partial achievement, although they were fully achieved based on actual population data.
66. Institutional responsibility for M&E was clearly defined for results monitoring: the PMU had the overall responsibility, while KILA, SIRD and GIFT were responsible for specific component focused IR indicators. Component 3 was to conduct baseline and end-line service delivery surveys, as well as project evaluations to evaluate the results on service delivery and capacity building aspects. For Component 1, a system of semi-annual administrative reporting system was defined for upward accountability and budget/plan execution report dissemination for downward accountability. Standard reporting procedures, comprising semi-annual progress reports and quarterly IUFRs, were also put in place. A mid-term review was to be conducted within 30 months of project implementation.
M&E Implementation
67. M&E systems were implemented as per the original design. The PMU took the prime responsibility for putting in place the required arrangements for M&E. Project surveys and evaluations were undertaken jointly by the PMU and the DAC. The baseline service delivery survey was delayed due to the initial implementation related challenges described earlier. However, the end-line survey and the two evaluations were conducted on time and were completed by the end of the project. The APAs were conducted timely on an annual basis. The execution support agencies provided information for IR indicators for their respective components.
68. The PMU struggled with the monitoring of sub-project implementation, owing to the lack of appropriate systems for the local governments to report on financial and physical progress. IKM software (Sulekha and Sankhya) provided some information, but the categorization of works undertaken by the local governments was not appropriate and ultimately KLGSDP-specific information could not be captured well from the software. The position of M&E specialist was vacant for some time during project implementation, and it impacted the quality of the M&E systems. However, a very competent expert was hired and the M&E systems improved thereafter. By the end of the project, the PMU developed a full database of the 43,711 sub-projects that were implemented by the local governments under KLGSDP.
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69. The project also funded a comprehensive local government MIS system that was envisaged to integrate the existing fragmented IT enabled monitoring and reporting systems, including the IKM software. However, this activity was delayed significantly owing to a variety of reasons, including institutional coordination and data access issues with IKM. Consequently, the activity culminated with the development of a prototype system. However, during the project closure discussions, IKM committed to complete the remaining stages of full system roll-out and handholding support to local governments under its own state funding.
70. Reporting by PMU was satisfactory overall and was specifically very good on compliance with the safeguard policies.
M&E Utilization
71. The M&E reports were utilized by the PMU, execution support agencies, and the Bank team to make corrections and improvements in the work program. The Bank team utilized the progress reports for project monitoring and evaluation. Particularly during the last two years of implementation, when additional new activities were taken up, the task team and the PMU jointly developed M&E formats for close monitoring of sub-projects under implementation in each district. These reports were reviewed monthly and any slippages were identified and issues were addressed. The APA provided good information on key aspects of local government functioning, which was used not only for providing incentive grants but also on focusing the capacity building interventions. The APA also highlighted the service sectors where local governments were facing implementation issues owing to which they were not able to demonstrate any performance improvement in the APA; such issues were taken up with the LSGD for early resolution.
Justification of Overall Rating of Quality of M&E Rating: Modest.
B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE
Social Safeguards
72. The overall performance of social safeguards management for this project is rated satisfactory. Despite the initial challenges and delays, considerable efforts were made by the PMU to coordinate and carry out the necessary tasks to ensure due diligence on social safeguards management, which yielded good results.
73. The project triggered OP 4.10 Indigenous Peoples. Annual reporting on the management of this safeguard issue was a part of the Vulnerable Group Development Framework reports, which captured how Scheduled Castes/Scheduled Tribes were being included in project activities. Bank Policy OP 4.12 on Involuntary Resettlement was not triggered for the project; however, the PMU prepared an annual Land Database to inform the Bank on land use for sub-project activities. As noted in the Land Database reports, land used for sub-projects included land that was either already owned by the local government or donated, with proper documentation being available. The Bank provided additional technical guidance to improve knowledge and skills on the application of OP 4.12 in sub-project implementation and supported the inclusion of specific questions on land acquisition in the screening of the DPRs for backward panchayats.
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74. The Bank worked with the PMU to address gaps in covering social safeguards aspects under the ESMF, carrying out necessary due diligence on obtaining lands for project purposes, and conducting proper consultations. Gaps in the ESMF and due diligence related to land were addressed in the revised ESMF, which included an expanded checklist to screen sub-projects and procedures to follow in acquiring lands from titleholders, encroachers or squatters. A number of sub-projects were delayed in the first round because of inadequate consultation with the communities and stakeholders involved. Subsequent capacity building of the local bodies included training on consultation and set processes for consultations at the local level. The PMU also became more proactive in consulting with relevant stakeholders (such as the Forest Department) early on during subsequent sub-project preparation to ensure the timely issuance of necessary approvals. Citizen engagement processes were observed and discussed with local bodies during Bank supervision missions. All local bodies had a system for receiving complaints and feedback from project beneficiaries; however, this system was not integrated in the project MIS.
Environment Safeguards
75. The project involved the creation of a large number of public / community assets in rural and semi-urban areas in Kerala. No environmental impacts of grave significance were expected. However, in isolated cases low to medium level impacts could not be ruled out. Accordingly, the project was classified as Category B as per World Bank norms. The project triggered the Bank’s Environmental Assessment safeguard policy (OP/BP 4.01). An ESMF was prepared and implemented successfully. All sub-projects were screened for environmental impacts and appropriate mitigation measures were implemented. Bank policy on Natural Habitats (OP/BP 4.04) was triggered, but none of the sub-projects financed by the performance grant resulted in any adverse impact on any natural habitat. Bank policy on Forests (OP/BP 4.36) was triggered and due measures were taken to prevent any conversion of forest areas or other adverse impacts. Bank policy on Physical Cultural Resources (OP/BP 4.11) was triggered and all relevant personnel involved in sub-project implementation were apprised on the procedures to be followed to suitably protect monuments of cultural/historic importance; no adverse impact was noticed under any of the sub-projects.
76. All sub-projects were screened and appropriate mitigation measures were incorporated as per the limited environmental and social assessments (LESAs) carried out, wherever applicable. Copies of LESAs are available in the PMU. The project has complied with all triggered safeguards policies.
77. ESMF Implementation. The key activity of building the capacity of District Coordinators and local government officials to understand and ensure compliance with the provisions prescribed by the ESMF was critical and challenging owing to the scale of the project and the ESMF being the first of its kind in the local government sector. A series of capacity building activities were undertaken to address the key challenges relating to the district coordinators’ understanding and awareness of the ESMF, as well as resource and systemic constraints in local governments. Implementation of the ESMF picked up pace during project implementation, and it was mainstreamed into the sub- projects implemented by the local governments. The consistent capacity building and awareness generation efforts of the PMU led to a widespread awareness of the importance of environmental issues and the need to comply with the ESMF at the local level (district / GP level officials as well as elected representatives). Ultimately, GoK issued a Government Order mandating the ESMF as a compulsory compliance requirement for all asset creation/local infrastructure sub-projects implemented by local governments in the state.
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78. Environmental Audits. The project conducted two Environmental Audits: one at mid-term in 2014 and the other at the end of the project in 2017. The audits were carried out by a specialized firm which looked at the documentation, interacted with stakeholders, and inspected selected implemented sub-projects. The first environmental audit found that ESMF compliance varied from 52.1% to 83.6% in most districts. However, the overall knowledge of Implementing Officers on the different aspects of environment was found to be less than satisfactory. A total of 99 sub-projects out of those audited were found to be non-compliant with certain mandatory regulatory requirements. The audit found a number of design related shortcomings in many instances, which tended to compromise the service delivery potential of the asset created or its sustainability. The audit made several specific recommendations, such as inclusion of safety aspects, waste management, etc., as well as several suggestions for modifying the ESMF procedures and other aspects to improve its effectiveness. All sub-projects found non-compliant, except three. Corrective actions were taken by the PMU for these three sub-projects subsequently for ensuring full compliance with ESMF. The ESMF, including all relevant proformas and procedures, was modified according to the suggestions of the auditors and the revised ESMF procedures were used during the remainder of the project.
79. The second environmental audit was conducted with an overall sample size of 2,500 sub projects, with representation from sub-projects completed in the third, fourth and fifth Performance Grant Cycles, as well as projects implemented under the one-time additional financial assistance to backward and tribal local governments. The audit found “Satisfactory” compliance of ESMF provisions. Monitoring of ESMF compliance was reported to have improved significantly. It was felt that a better institutional structure and better capacity building might have led to better results. Effective mainstreaming of the ESMF has definitely led to the creation of mass awareness amongst LG elected representatives / office bearers and district level staff on the need and importance of building in provisions for the protection of the environment in all asset creation activities.
Procurement
80. Local governments were the key implementing agencies in KLGSDP and about 85% of the funding was provided to the local governments as performance grants, which signifies the role of decentralized procurement in this project. The design of the procurement program and systems focused on the principles of community demand driven planning and implementation of procurement. Special attention was given to developing an institutional system for procurement that took into account: (i) the already diffused level of capacities at the LG level; (ii) the low values of individual procurements at the LSG level; (iii) limited local market; (iv) linkages with progress of annual performance assessments; and (v) ensuring vertical and horizontal assurance arrangements.
81. A manual for procurement of goods and services was prepared for local governments based on the state’s development planning process and the state’s procurement guidelines (including the system of development and procurement committees) which were in sync with the shopping and community procurement procedures as per the Bank’s procurement guidelines. The Manual was notified through a Government Order covering procurement for all activities/investments undertaken by local governments. This state-wide institutionalization of the procurement process and guidelines for all local governments is one of the most significant sustainable achievements of the project.
82. Compliance of the local governments with the procurement guidelines was high. Decentralized procurement strengthened and supplemented the overall decentralized planning and implementation process at the local level. The project also witnessed many innovations in identifying markets, streamlining construction processes and strengthening
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contract management, etc. It was also noted that there was a high level of community involvement in procurement, contract management and implementation supervision, which improved overall transparency and accountability. Post procurement reviews undertaken by the Bank every year showed that the Local Fund Audit Team ensured vertical fiduciary assurance and also helped in concurrent monitoring that allowed local governments to make mid-course corrections. Social Audit Committees provided horizontal fiduciary assurance.
83. Procurement was carried out by state level institutions for select services and goods. While the procurement specialist was in place from the beginning, significant delays were faced in state level procurement and contract management due to institutional coordination issues, which had a cascade effect on timely delivery and led to multiple extensions of contracts.
Financial Management
84. Overall, KLGSDP complied with the designed financial management systems and fund flow mechanisms in a satisfactory manner. FM staffing arrangements in the PMU were robust and strong throughout the project period and contributed positively to manage certain complex project arrangements. The project submitted accurate and timely Interim Financial Reports (IFRs) as per due dates. Submissions of annual external audit reports were satisfactory with a few occasional delays; however, the delays did not exceed the deadlines prescribed by the Bank. Audit observations in the external audit reports did not raise issues of serious concern. However, the project faced some delays and weaknesses in internal audit arrangements, delays on the part of Local Fund Audit (LFA) in audit certifications, and reconciliation issues. Delays in internal audit process and delays in submission of internal audit reports by State Performance Audit Office (SPAO) were systemic issues. One of the key learnings on FM aspects is that the minimum mandatory condition in the APA relating to local government audit reports proved to be very effective in improving the timeliness and quality of financial reporting & auditing in local governments.
C. BANK PERFORMANCE
Quality at Entry
85. KLGSDP was the first Bank engagement with the state of Kerala in the local government sector and covered all 1,028 local governments. The project was designed very carefully and meticulously, based on a sound technical approach of strengthening local government institutions through a mutually reinforcing approach of incentive grants for service delivery and focused capacity building support. Project components were designed with care and resulted in a clearly identified set of activities and outputs. The project benefited from the experience and learning from similar operations in India (West Bengal and Karnataka), South Asia (Bangladesh) and elsewhere (Africa, East Asia, etc,). The PDO was clear and focused, and consistent with the state’s policy focus and commitment towards strengthening and advancing decentralization. The project was fully aligned with the Bank Group’s Country Partnership Strategy FY 2009-12 and contributed directly to the pillar on strengthening public institutions for service delivery. The project was prepared in a very sound and strategic context, in full alignment with (i) GOI’s eleventh five-year plan, (ii) GOK’s eleventh five-year plan, and (iii) contemporary CFC and SFC recommendations.
86. Project design focused adequately on the fiduciary and safeguards requirements. FM and procurement arrangements were designed in a detailed manner and addressed the principal risks identified by the capacity and risk
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assessments. The required environment and social safeguards policies were triggered and the ESMF and the VGDF were in compliance with Bank requirements. A comprehensive economic and financial analysis was also carried out in line with Bank requirements.
87. Project appraisal was comprehensive and thorough, with proper assessment of technical, institutional, fiduciary, environment and social safeguards, gender issues and economic aspects to ensure that the project development objective could be achieved. A detailed project implementation manual was prepared by the government with inputs and guidance from the Bank’s task team and included detailed implementation and M&E/reporting arrangements. The Bank confirmed that the results framework was clearly defined with baselines and annual targets, along with data sources and responsibilities for data collection/compilation and reporting.
88. As noted in Section III. Key Factors during Project Preparation, the original implementation period of the project (a little over four years) was overly ambitious.
Quality of Supervision
89. The project was thoroughly supervised by the Bank’s task team throughout the implementation period. A total of fourteen implementation support missions (ISMs) were conducted over the six years of implementation; these were supported by numerous technical missions as needed to support and guide the PMU on key issues. All core team members participated in the implementation support missions. Local consultants were hired for close coordination and follow-up on implementation issues. During the last two years of implementation, the TTLs were Delhi-based and ensured very close follow-up, including bi-monthly reporting by the PMU and brief monthly follow-up technical missions to speed up implementation, identify and address issues proactively. Key decisions were taken in a timely manner, especially on conditions for Credit extensions, utilization of Credit savings, and adding new activities, which helped the project remain focused on achieving its PDO, while optimizing utilization of the Credit. The mid-term review was very thorough and detailed and contributed to making the necessary mid-course corrections.
90. Supervision was focused on helping the project achieve the PDO and the overall development impact of the project, as reflected in many key decisions; e.g., the Bank agreed to include a new activity on additional one-time financial assistance to backward and tribal local governments as it contributed to the overall development impact, was aligned with the project’s strategic focus, and the state’s priorities. Close and continuous supervision ensured that: (i) the APA was conducted broadly on time every year and allocations were made in a transparent manner based on the APA results; (ii) KILA and SIRD delivered planned outputs, despite initial issues and consequent delays; and (iii) implementation issues were escalated in a timely manner and were discussed with the Chief Secretary and the Finance Secretary, as needed. Reporting was timely, frank and candid (including downgrading the rating of Implementation Progress to Moderately Unsatisfactory in November 2016 and March 2017), as reflected in the Management Letters, Aide Memoires and Implementation Status Reports (ISRs). The transition between Task Team Leaders (TTLs) was handled smoothly, with proper handover missions.
91. The Bank’s safeguards specialists worked very closely with the PMU and provided guidance on the preparation of key safeguards instruments, such as the ESMF and VGDF, as well as their timely revision. They engaged proactively and provided extensive support for mainstreaming environmental, social and gender aspects in the project. The task team paid attention to gender and social aspects with the assistance of a dedicated gender specialist.
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92. The Bank’s FM and procurement specialists provided extensive support and closely monitored fiduciary compliance of the project activities with Bank policies. Since most of the funds were being disbursed to the 1,028 local governments, monitoring required intense effort on the part of the Bank FM Specialist; this is reflected in the detailed and candid reporting in aide memoires and Back to Office Reports (BTORs). Interventions such as the finalization of the procurement manual for local governments required close, intense, and continued engagement from the Bank. Post procurement reviews were conducted on an annual basis as per the norm, corrective actions were suggested and compliance was monitored closely. On the FM side, compliance with key FM covenants was closely monitored and reported.
Justification of Overall Rating of Bank Performance Rating: Satisfactory
D. RISK TO DEVELOPMENT OUTCOME
93. The key development outcome that KLGSDP sought (improved institutional capacity of the local governments in Kerala to deliver services and undertaking mandated governance/administrative functions) has been achieved, as explained in Section II. Deepening decentralization and strengthening of local governments is a long-term agenda and needs on-going efforts to sustain on-the-ground results and further advance the agenda. While Kerala has taken the lead in advancing this agenda, a lot more remains to be done. The state government’s commitment to this agenda at the policy level continues to be very strong, as is evident from the state’s current five-year plan and SFC recommendations. GoK has also shown strong interest to continue the partnership with the Bank through a follow-on engagement to advance this agenda.
94. To ensure sustainability, GOK must: (i) seek to institutionalize the APA based performance grant allocation system by adopting it formally as a part of the state’s inter-governmental fiscal transfer system; (ii) allow local governments to earmark a portion of the development grants to operate and maintain local infrastructure assets financed under KLGSDP; (iii) continue to provide capacity building support to local governments to enable them to understand, adopt and implement the 12 local government operations manuals prepared under KLGSDP and notified; (iv) complete the development and roll-out of the comprehensive MIS system through IKM; and (v) review and leverage the policy studies prepared by DAC to adopt policies that strengthen decentralization in Kerala. As in the case of West Bengal in India, the proposed follow-on Bank project would be a good vehicle to support GoK in these tasks, especially for the institutionalization of APA process in the fiscal transfer system of the state government.
V. LESSONS AND RECOMMENDATIONS
95. The two key critical success factors for a Bank local government strengthening operation are: strong political will and policy commitment towards decentralization, and smooth and robust implementation operational arrangements. In the case of KLGSDP, while the political will and policy commitment was very strong, implementation arrangements were not robust owing to weaknesses in the PMU, including frequent changes of Project Directors and many key positions remaining vacant for an extended period during project implementation. This is particularly relevant for projects like KLGSDP with large geographical coverage and weak capacity constraints, which was implemented as a first Bank financed state-wide project in the local government sector, and involve more than 1,000 LGs. Strong state level implementation
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arrangements, as well as monitoring, oversight and reporting mechanisms, can make the implementation smooth and highly efficient.
96. In order to be successful, the APA process to measure local government performance and to allocate incentive grants needs to be introduced in a phased manner and should be conducted in a transparent and objective manner with strong third-party quality assurance and verification. The phased approach (of introducing mandatory conditions in the first phase and performance benchmarks in the second phase) worked well in the case of KLGSDP and should be considered for similar projects. The first KLGSDP APA was conducted in a very robust and objective manner by an external agency; however, the subsequent APAs were conducted by the SPAO, which led to some challenges in maintaining the quality and objectivity of the process. Eventually this led to appeals from many local governments and the APA results had to be reviewed. The pros and cons of the various alternatives to implement the APA need to be evaluated in a robust and transparent manner in the institutional context of the state/country where the APA is being implemented. Where the government can assign the APA implementation responsibility to a competent government agency which is completely independent from the ministry/department/agency responsible for allocation of performance grants, the system of government implemented APA is likely to work well (as is the case with the Indonesia Local Government and Decentralization Project); otherwise it may be better to opt for a competent external agency to implement the APA.
97. Capacity building of local governments is an on-going activity and should therefore be delivered through the local institutes for long term sustainability. Under KLGSDP, support to KILA and SIRD (the key state-owned institutes) through infrastructure augmentation and systems modernization for delivery of training programs, curriculum development and strengthening HR capacities, had a positive impact on their delivery capabilities and was well-acknowledged by the state. This was one of the key sustainability measures put in place to ensure that KLGSDP supported capacity building interventions (preparation of manuals, training needs assessment, training curriculum and calendar) continued beyond the project on a sustainable basis.
98. Project implementation arrangements should be simple and should be aligned with the government systems/accountability relationships to avoid conflicts and consequent delays during implementation. KLGSDP implementation arrangements were designed with clear roles and responsibilities. However, they involved multiple agencies and the project reporting relationships conflicted with government structural reporting relationships. This led to institutional coordination issues and resulted in substantial delays in many project activities. KLGSDP implementation arrangements could also have been supported by stronger systems for monitoring, evaluation and reporting in a bottom- up approach. These posed challenges in monitoring the progress of sub-project implementation at the local level. Eventually the project had to rely on district coordinators, which had its own constraints and challenges in terms of information. flow.
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ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS
A. RESULTS INDICATORS
A.1 PDO Indicators
Objective/Outcome: Strengthen the institutional capacity of the local government system in Kerala to deliver services and undertake basic governance and administrative functions Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator one: 70% GPs and Percentage 0.00 70.00 85.00 87.00 Municipalitieswill have passedthe performance 24-Feb-2011 31-Dec-2015 29-Dec-2017 29-Dec-2017 assessments for well- functioningfiduciary,planning and service deliverysystems 18 (total =1030)
Comments (achievements against targets):
Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator two: A well- Percentage 0.00 30.00 60.00 78.80 established performance based grant system in 24-Feb-2011 31-Dec-2015 29-Dec-2017 29-Dec-2017 increasingly financed by GoK
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Comments (achievements against targets):
Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator three: The number Number 0.00 29500000.00 29500000.00 29500000.00 of direct project beneficiaries of which a certain number 24-Feb-2011 31-Dec-2015 29-Dec-2017 29-Dec-2017 are female.
Comments (achievements against targets):
Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Direct project beneficiaries Number 0.00 29500000.00 29500000.00 29500000.00
11-Feb-2014 31-Dec-2015 29-Dec-2017 29-Dec-2017
Female beneficiaries Percentage 0.00 51.00 51.00 52.00
11-Feb-2014 31-Dec-2015 29-Dec-2017 29-Dec-2017
Comments (achievements against targets):
A.2 Intermediate Results Indicators
Component: Performance grants to local governments
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Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of backward, tribal Number 0.00 0.00 51.00 60.00 and revenue deficit LGs that execute its additional block 31-May-2016 31-Dec-2015 29-Dec-2017 29-Dec-2017 grant support on time
Comments (achievements against targets):
Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator one: By EOP, Text 0.00 #/type of subprojects #/type of subprojects 43,711 #/types of sub projects built from block grants are from block grants are by GPs andMunicipalities not predetermined. not predetermined. through block grant However, the project However, the project will be reporting upon will be reporting upon the #/type of outputs the #/type of outputs through semi-annual through semi-annual reports. reports.
24-Feb-2011 31-Dec-2015 29-Dec-2017 29-Dec-2017
Comments (achievements against targets): The annual and EOP targets were not defined for this indicator as the project was designed with a framework approach and sub-projects were supposed to be selected through a bottom-up decentralized planning process at the local level with community participation
Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Formally Revised Completion
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Target Indicator two: Performance Percentage 0.00 100.00 100.00 100.00 of all GPs and Municipalities is assessed each year. 24-Feb-2011 31-Dec-2015 29-Dec-2017 29-Dec-2017
Comments (achievements against targets):
Component: Capacity building support to local governments
Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator one: LSGs received Number 0.00 1028.00 1028.00 1028.00 training over life of project in areas mentioned under 24-Feb-2011 31-Dec-2015 29-Dec-2017 29-Dec-2017 component 2.
Comments (achievements against targets):
Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator two: KILA's capacity Text Quality as assessed by Quality improved as Qualityimproved as Quality of trainings developed to provide independent assessed during final assessed during improved and KILA enhanced training to GPs and evaluation. evaluation finalevaluation. strengthened as an Municipalitie institution, as per the Capacity Building evaluation
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24-Feb-2011 31-Dec-2015 29-Dec-2017 29-Dec-2017
Comments (achievements against targets): The final capacity building evaluation noted considerable improvement in the quality of the training and capacity building support provided by KILA, which was directly attributed to project interventions such as computerization of help desk and institutional strengthening and systems modernization support to KILA.
Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator three: Production Number 0.00 4.00 4.00 12.00 of draft manuals in the areas ofbudget,planning,financial 24-Feb-2011 31-Dec-2015 29-Dec-2017 29-Dec-2017 mgmt,public works/procurement, institutional mgmt.
Comments (achievements against targets):
Component: Enhancing state monitoring of local government system
Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator one: GP database Number 0.00 1.00 1.00 1.00 established and operating with annual reports 24-Feb-2011 31-Dec-2015 29-Dec-2017 29-Dec-2017 produced
Comments (achievements against targets):
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Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator two: Number 0.00 3.00 3.00 2.00 Decentralization Analysis Cell (DAC) providing annual fiscal 24-Feb-2011 31-Dec-2015 29-Dec-2017 29-Dec-2017 reports
Comments (achievements against targets):
Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator three: Project Number 0.00 4.00 4.00 4.00 studies/surveys complete 24-Feb-2011 31-Dec-2015 29-Dec-2017 29-Dec-2017
Comments (achievements against targets):
Component: Project management
Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator one: LSGD PMU Number 6.00 10.00 10.00 10.00 fully staffed and functioning to provide project support 24-Feb-2011 31-Dec-2015 29-Dec-2017 29-Dec-2017 and oversight to GPs &Municipalities
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Comments (achievements against targets):
Unlinked Indicators
Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Intended beneficiaries aware Percentage 0.00 100.00 100.00 100.00 of project info. and project investments (%) 11-Feb-2014 31-Dec-2015 29-Dec-2017 29-Dec-2017
Intended beneficiaries Number 0.00 21000000.00 21000000.00 15340000.00 aware of project info. and project investments - 11-Feb-2014 31-Dec-2015 29-Dec-2017 29-Dec-2017 female
Intended beneficiaries Number 0.00 11000000.00 11000000.00 14160000.00 aware of project info. and project investments –male 11-Feb-2014 31-Dec-2015 29-Dec-2017 29-Dec-2017
Intended beneficiaries - Number 0.00 20000000.00 20000000.00 15340000.00 female (number) 11-Feb-2014 31-Dec-2015 29-Dec-2017 29-Dec-2017
Intended beneficiaries - Number 0.00 12000000.00 12000000.00 14160000.00 male (number) 11-Feb-2014 31-Dec-2015 29-Dec-2017 29-Dec-2017
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Comments (achievements against targets):
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B. KEY OUTPUTS BY COMPONENT
Objective/Outcome 1: Strengthen the institutional capacity of the local government system in Kerala to deliver service and undertakebasic governnce and administrative functions 1. 70% GPs and Municipalitieswill have passed the performance assessments for well-functioning fiduciary,planning and service deliverysystems 18 (total =1030) Outcome Indicators 2. A well-established performance based grant system in increasingly financed by GoK 3. The number of direct project beneficiaries of which a certain number are female. 1. Number of backward, tribal and revenue deficit LGs that execute its additional block grant support on time 2. By EOP, #/types of sub projects built by GPs andMunicipalities through block grant 3. Performance of all GPs and Municipalities is assessed each year. 4. LSGs received training over life of project in areas mentioned under component 2. 5. KILA's capacity developed to provide enhanced training to GPs and municipalities Intermediate Results Indicators 6. Production of draft manuals in the areas ofbudget,planning,financial mgmt,public works/procurement, institutional mgmt. 7. GP database established and operating with annual reports produced 8. Decentralization Analysis Cell (DAC) providing annual fiscal reports 9. Project studies/surveys complete 10. LSGD PMU fully staffed and functioning to provide project support and oversight to GPs &Municipalities
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1. 43,711 sub-projects implemented Key Outputs in Component 1 2. 100% GPs and municipalities assessed every year through APA
1. 12 local government manuals prepared and adopted by the government Key Outputs in Component 2 2. Formal trainings delivered to all 1,028 local governments on key aspects of local governance and service delivery 3. Systems and infrastructure of KILA and SIRD modernized 1. Baseline and end-line service delivery surveys completed 2. 2 project evaluations completed Key Outputs in Component 3 3. 27 policy research studies completed 4. Local government fiscal database prepared 1. Fully functional PMU provided project management support Key Outputs in Component 4 throughout the project implementation period.
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ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION
Name Role Preparation Roland White Task Team Leader Soma Ghosh Moulik Senior Institutional Development Specialist Abdu Muwonge Economist Atul Deshpande Senior Financial Management Specialist Andre Herzog Senior Urban Specialist Susan Wong Senior Social Development Specialist Kalesh Kumar Senior Procurement Specialist Priti Kumar Senior Environmental Specialist R.R. Mohan Senior Social Development Specialist Nirmala Chopra Team Assistant Lilian MacArthur Program Assistant Parimal Sadaphal Team Member
Supervision/ICR Harsh Goyal Task Team Leader Sangeeta Patel Procurement Specialist Bernadeen Enoka Wijegunawardene Financial Management Specialist Anand Mathew Team Member Michelle Lisa Chen Team Member Uri Raich Team Member Hiska Noemi Reyes Social Safeguards Specialist Lakshmi Narayanan Team Member Parimal Manmohan Sadaphal Environmental Safeguards Specialist
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A. STAFF TIME AND COST
Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY07 0 33,154.24 FY08 16.748 211,260.02 FY09 42.704 355,494.17 FY10 42.747 294,143.85 FY11 41.188 467,925.31 FY12 0 0.00
Total 143.39 1,361,977.59
Supervision/ICR FY11 0 3,483.74 FY12 19.825 128,799.48 FY13 21.783 154,663.76 FY14 16.714 182,184.74 FY15 20.492 158,386.91 FY16 13.487 117,080.98 FY17 22.665 151,663.82 FY18 18.077 115,375.13 Total 133.04 1,011,638.56
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ANNEX 3. PROJECT COST BY COMPONENT
Amount at Approval Actual at Project Percentage of Approval Components (US$M) Closing (US$M) (US$M) Performance Grants 238.6 235.88 98.8% Capacity Building 11.20 8.10 72.3% Enhancing State Monitoring of the Local Government 3.40 1.005 29.4% System Project Management 6.80 3.80 55.9% Total 260.00 248.78 95.68%
5 Under-utilization is partially due to declining exchange rate as well as due to implementation delays. The same is true for component 2 and 4 as well.
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ANNEX 4. EFFICIENCY ANALYSIS A. Introduction
1. Economic efficiency analysis carried out for KLGSDP indicates that the economic benefits are wide-ranging and mutually strengthening. Moreover, a number of institutional strengthening in rural areas specific reviews of the major investments show: (i) a high-level value for the money; (ii) that the investments are highly labor intensive/ conducive to job creation, and income-generating for local communities; (iii) that the modalities for delivery are efficient compared to other modes of service delivery; and (iv) general high levels of economic rate of return (ERR) on investments.
2. This review below deals with the major element of the program, (i) the performance grants (PG), which was be rolled out to the entire State of Kerala6 over the Program period and (ii) additional grant support to revenue deficit backward and tribal LGs7 implemented only towards the end of the program in 2017-18. In order to provide a realistic and feasible mechanism of strengthening the institutional capacities of LGs, the PG was introduced in phased manner. Administrative and institutional system necessary for the introduction of a full PG were established during initial two years (Phase I). During this period, all LGs were becoming eligible for PG subject to some basic fiduciary requirements. From the third year onwards, the performance dimension of the PG based on the annual performances of LGs were applied (Phase II). In the final year of the program, a special assistance grant to revenue deficit backward and tribal LGs was introduced benefiting 60 LGs across the state. In addition to the tangible impact of specific expected investments sourced from these new grants, more in-tangible benefits of the broader institutional strengthening elements of the program are also analyzed.
3. Previous experiences with the KLGSDP, have been reviewed8 under the recently conducted impact evaluation study of KLGSDP in the Kerala and shows that local governments (LGs) have a strong ownership in the operations, and that the incentives provided improve performance and capacity in core areas of LGs operations and management such as procurement, revenue mobilization and assets management. The box below summarizes some of these findings.
Box 1: Key core benefits of KLGSDP investments • coverage of significant infrastructure and service delivery gaps with more than a doubling of the resource available at the GP/municipality level for infrastructure investments; • better utilization of available funds; • Marginal reduction in project expenditure and significant reduction in projects completion time; • significant employment creation; • high economic rate of return in areas where most of the funds are utilized, and competitive costs compared to other modalities and investments; • strong support of institutional improvements, incentives and longer-term sustainability in terms of strengthening of core institutions, planning, PFM, procurement, and safeguard management.
6 Covered 978 Gram Panchayats and 60 municipalities in the state to create and maintain the capital assets for improved service delivery and local governance. 7 Around 240 sub projects were taken up in 60 revenue deficits backwards and tribal LGs spread over the state. 8 End line Study of the Kerala Local Government Service Delivery Project – Final Report, July 2017, Centre for Socio-economic & Environmental Studies, Kochi.
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B. Justification for Public Sector Intervention
4. In terms of planning through decentralized approach, assigning more responsibilities in service delivery, increased financial allocations through SFC recommendations over the period, and availability of human resources, the GPs and municipalities in the Kerala State had improved considerably. Despite this impressive growth, the following core challenges remain: (i) expenditure autonomy, (ii) institutional capacities in the areas of budgeting, planning, financial management and asset management and (iii) oversight of local government system in the state management. The completed KLGSDP was developed as a key vehicle to address the above constrains so as to achieve the long-term objective of taking the challenges stipulated by the state for LGs in managing their internal administration capacity as well reducing poverty impact9. It was done by providing additional discretionary grants (allocated based on a transparent formula using size of the population and size of the area of each GP) to all high performing LGs covering all the districts in the state. This would result in increased revenue base for LGs to be used for infrastructure development expenditure. Also, the institutional strengthening component of the completed KLGSDP could improve the incentives and capacity of LGs in the management of funds leading to a greater and more effective fund utilization (not only from the PBG, but for other funding sources as well) leading to a more targeted and effective local service delivery. In addition to the funds for investments, KLGSDP could provide both training, mentoring and backstopping support to improve the planning, absorption capacity and implementation effectiveness for LGs. Also, the performance monitoring component of KLGSDP could provide a unique opportunity for the state to improve the quality of information for governance and service delivery. These reasons provide the justification for the completed KLGSDP intervention for the development in Kerala State, where private sector may not have the incentive to do so, at least in the short run. Assessment of (i) the counterfactual scenario where Program is not introduced and the fiscal gap continues, and (ii) the potential economic impact of the Program discussed here, shows strong rationale for the proposed intervention.
C. Economic Return
5. About 43,711 sub projects were implemented under PBG program spread all local government units 10 (LGs) in the state (Table 1) and another 242 sub projects for 60 revenue deficits backward and tribal LGs (Table 2). Total investment on the completed projects is INR 14,103 million with 94.2% for PBG program and 5.8% for special assistance program (Figure 1). Most of the sub projects were found in the development of basic infrastructure facilities in LGs in the areas like roads, storm water drain, water supply, street lighting, health facilities. On detailed review, few sub projects were selected for further probe and subsequently for economic analysis. Apart from building sub projects, the major share of 60.1% of completed sub projects were in the road sector followed by drinking water supply (3.1%), street lighting (3.1%) and solid waste management (0.2%). Purchase of equipment for modernizing public institutions like schools, health centres, panchayat office etc is the major group under ‘others’ category.
Table 1: Sub Projects implemented under PBG in KLGSDP Details Total Projects % Buildings 8360 19.1% Roads 26286 60.1% i. New Roads 4419 10.1% ii. Maintenance Roads 20740 47.4%
9 About 7% population were found to BPL (5% in urban areas and 9% in rural areas) in 2011-12. Source: Press Note on Poverty Estimates 2011-12, Planning Commission, Government of India, July 2013. 10 Local Government units include gram panchayats (GPs) and municipalities.
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iii. Culverts/Bridges 715 1.6% iv. Storm- water drains 412 0.9% Other Projects 9065 20.7% i. Solid & Liquid waste 85 0.2% management ii. Drinking water supply 1350 3.1% iii. Street lighting 1367 3.1% iv. Others 6263 14.3% Total 43711 100.0% Source: PMU reports, KLGSDP
Table 2: Details of Sub Projects under Special Assistance to Backward & Tribal LGs in KLGSDP Sl. No. District No. of sub projects % 1 Thiruvananthapuram 8 3.3% 2 Kollam 4 1.7% 3 Alappuzha 10 4.1% 4 Pathanamthitta 18 7.4% 5 Kottayam 17 7.0% 6 Idukki 14 5.8% 7 Eranakulam 16 6.6% 8 Thrissur 12 5.0% 9 Kasaragod 16 6.6% 10 Kozhikode 14 5.8% 11 Malappuram 22 9.1% 12 Palakkad 47 19.4% 13 Wayanad 20 8.3% 14 Kannur 24 9.9% Total 242 100.0% Source: PMU reports, KLGSDP
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6. Analytical work shows that there was a strong beneficiary preference with focus on creation of basic infrastructure assets in the areas including road construction, water supply improvement, drainage facilities, transport infrastructure, street lighting Figure 1: Total expenditure on etc under KLGSDP. The key benefits of the KLGSDP investments on basic completed projects INR Million infrastructure projects include reduced transport costs, reduced flood damage impacts, increased water borne diseases-based health benefits, 3,000.00 reduced water collection related time cost and increased job creation 2,500.00 activities. The End-line Survey (2017)11 had confirmed about the benefits 2,000.00 of the completed sub projects from the user’s perception, mainly for road 1,500.00 development, street lighting, bus stand etc. However, certain category of 1,000.00 sub projects like e-toilet, improvement of LG office did not receive much appreciation from the users. 500.00 - 7. Accordingly, six sample sub-projects with project cost investment ranging between US$ 2,000/- and US$ 60,000/- were selected for quantitative economic analysis. A specific economic evaluation, with cost benefit analysis, was undertaken for (i) construction of a new gravel road; Special assitance to Backward Areas (SAB) (ii) converting an earthen road to a concrete road; (iii) rehabilitation of Performance grant (PG) public wells to improve water supply, (iv) construction of a bus terminal (v) construction of a drainage system and (vi) street light improvement. ‘With’ and ‘without’ project scenarios have been defined in order to identify the net benefits of the investment, with cash flow discounted. The analysis considers the stream of costs and benefits over a 21-year period (2017-2037). Under the cost stream, construction cost during the one- year construction period and annual / periodical maintenance cost during the remaining 20 years operation period from 2018 were considered. Benefits considered for the sample projects include: (i) construction of concrete / gravel road – (a) savings in vehicle operating cost; and (b) savings in travel time cost for passengers; (ii) rehabilitation of wells for drinking water – reduction in water collection time related benefit to the beneficiaries; (iii) construction of drain – (a) reduction in earning loss due to waterborne diseases caused by the waterlogging issues on the Box 2 street; (b) avoidance of flooding related issues during heavy rain and ‘In Meenja Gram Panchayat and savings in earning loss during these flood days; (iv) construction of a Guruvayur Municipality, the bus terminal with link road - (a) savings in travel time cost for implementation of solar panel passengers; and (v) replacement of CFL bulbs for fluorescent tubes – installation sub projects has brought savings in power consumption cost. Apart from the above discussed down their electricity charges by more quantitative benefits considered for the analysis, there are several than 50%. The amount saved through other potential qualitative benefits that are not factored into the cost- reduction in electricity charges could be used for other purposes….’ benefit analysis. And this is because of lack of reliable data or analytical tool. Land use change, environmental cleanliness, safety, Source: Endline Study of the Kerala Local public cost of water borne diseases treatment, direct and indirect Government Service Delivery Project, Final employment generation are few among the many qualitative benefits Report, November 2017. for the sample sub projects. Therefore, the estimated benefits from the identified investments can be considered conservative, and it can reasonably be assumed that the actual benefits will
11 Endline Study of the Kerala Local Government Service Delivery Project, Final Report, November 2017, Kerala Local Government Service Delivery Project, Govt. of Kerala.
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be much higher. Results of the project economic viability as measured by the economic internal rate of return (EIRR) and its sensitivity analysis to changes in cost and benefit streams are summarized below:
Table 3: Details of Sample Projects for Economic Analysis Sl. No. Details of the Project Name of LG Project Cost Project Cost INR Million US $ Construction of Private Busstand with Karunagapally 1 3.19 50,000 Link Road Municipality Construction of Gravel / Brick Road Veeyapuram GP in Ambakattu - Aarattu Road in Ward 8 0.35 5,000 Alapuzha District 2 of Koratty GP (Thrissur Rehabilitation of 64 Wells 3.84 60,000 3 District) Construction of Drain - Nambakkaveli Punnapura North GP in 0.16 2,000 4 Todu Kalungu in Alappuzha District Construction of Concrete Road Karunagapally Kaniyamadam - II nd Thazhathur Road 0.73 11,000 Municipality 5 connection Replacement of CFL lamps in 169 Veeyapuram GP 0.20 3,000 6 street lights (Alappuzha District)
Table 4: Summary of Economic Analysis Economic Internal Rate of Return (EIRR) Sample Sample Sample Sample Sample Sample Project 1: Project 2: Project 3: Project 4: Project 5: Project 6: Sl. Sensitivity Constructio Constructio Rehabilitatio Constructio Constructio Replacing No Scenario n of n of Gravel n of drinking n of Drain n of Bus Tube lights . Concrete Road water wells Stand with with CFL Road a Link Road lamps in street lighting 1 Base Case 33.65% 43.49% 15.49% 20.50% 20.17% 19.36% 20% increase 2 11.01% 18.99% 14.52% 19.71% 19.75% 18.64% in O&M Cost 20% decrease 3 in project 8.11% 15.05% 10.87% 15.22% 15.65% 14.22% benefit
8. Estimated EIRRs in the range of 15.5 percent to 43.5 percent all above the accepted minimum level of EIRR indicate that sample projects investments are economically viable, even without considering other non-quantifiable benefits. The economic impacts of the project for all economic agents, including the facility users as well as the residents of the Program GPs / municipalities is significant. An analysis of the project sensitivity test results at 20 percent increase in cost and 20 percent reduction in benefits shows that the rate of return remains at acceptable levels, thus confirming the viability of the project under various scenarios.
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9. The economic benefit of the program towards private sector development is particularly significant. This is because large parts of KLGSDP infrastructure investments, including the key infrastructure investment are executed by local small and micro enterprises at the LGs level, with the involvement of the local community.
10. The box below illustrates the benefits for some of the most important sample projects considered for analysis:
Box 3: Example of benefits from sample projects
A. Construction of Concrete Road Although many benefits were obtained by the construction of a concrete road, the main one resonates around the benefit related to the streamlined transport that came after its completion. Along with this is a reduction in transportation cost for the citizens living in the LGs and surrounding areas. Being the sample road construction considered for the analysis is an internal road that will provide better transport connectivity resulting in reduction in transportation cost for the citizens living in the ward and surrounding areas in the LG.
The completed 0.27 km length of concrete road is estimated to benefit about 563 motorised vehicles (450 two wheelers, and 113 cars), 113 cycles and 450 pedestrians daily who will be using this road. Before construction this road section was a gravel one with less travel speed and the new road has increased the travel speed. Benefit is mainly in the reduction of transportation cost for the road users consisting of (i) reduction in vehicle operating cost (VOC) and (ii) reduction in travel time cost. With a total 27,860 annual vehicle km, the existing gravel road is estimated to incur INR 0.4 million annually as VOC and this is estimated to decrease to INR 0.27 million resulting annual VOC benefit of INR 0.13. Similarly the annual travel time for the existing gravel road was estimated to 16,425 passenger hours and this will reduce to 12,319 passenger hours. This reduction of travel time of 4,106 passenger hours will result in annual time cost savings of INR 0.07 million. This annual transport benefits are assumed to @3% yearly due to the increase in the traffic. During the analysis period of 20 years, the annualized total transport benefits together is estimated at INR 5.62 million (US$ 0.09 million).
With the project economic cost of INR 0.66 million (project financial cost – INR 0. 73 million with 0.9 conversion factor) and economic cost of maintenance during the 20 years operation period totaling INR 0.15 million (financial cost 0.16 million), and the economic benefits discussed above, the EIRR is estimated at 33.6 percent.
B. Rehabilitation of Drinking Water Well The sample water supply project of rehabilitating 64 drinking water wells in Koratty GP in Thrissur District considered for analysis is estimated to benefit about 640 households. Existing piped water supply could not provide adequate water supply and the low-income households have to resort alternative sources involving more time and resources like rivers / waterbodies. This involves about 30 minutes of water collection time on an average for a household and 33% of this water collection time will be reduced once the rehabilitated wells are available in their locality. With the existing unskilled wage rate of INR 150 for women during non-working hours (50% of unskilled wage rate of INR 300) and 10 minutes daily savings in water collection time, the average annual time savings benefit per household is estimated at INR 1,129. During the analysis period of 20 years, the annualized total benefits together is estimated at INR 14.45 million (US$ 0.23 million).
With the project economic cost of INR 3.46 million (project financial cost – INR 3.84 million with 0.9 conversion factor) and economic cost of maintenance during the 20 years operation period totalling INR 2.32 million (financial cost INR 2.58 million), and the economic benefits discussed above, the EIRR is estimated at 15.49 percent.
C. Construction of a Drain The sample drainage project (Nambakkaveli Todu Kalungu) in Punnapura North GP in Alappuzha District considered for analysis is estimated to benefit about 30 households. In the absence of planned storm water drainage, water logging is the
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main problem resulting in more risk for waterborne diseases for these households. Also during the rainy season, flooding is the other major issue affecting these households is denying their access to work. Thus the benefits considered for the sample drainage project include (i) reduction in the average annual earning loss due to the waterborne diseases and (ii) reduction in average annual earning loss during flooding days. With average daily household income of INR 720 and one day affected by flood in a year, the average household annual income loss due to flood is estimated at INR 720. Similarly, with average daily household income of INR 720 and 10% of eight days affected by waterborne diseases in a year, the average household annual income loss due to waterborne diseases for drainage component is estimated at INR 576. During the analysis period of 20 years, the annualized total benefits for the benefited 30 households together is estimated at INR 0.7 million (US$ 0.01 million).
With the project economic cost of INR 0.14 million (project financial cost – INR 0. 16 million with 0.9 conversion factor) and economic cost of maintenance during the 20 years operation period totaling INR 0.07 million (financial cost 0.08 million), and the economic benefits discussed above, the EIRR is estimated at 20.5.
D. Replacement of CFL lamps in 169 street lights The sample streetlight project (Replacement of CFL lamps in 169 street lights) in Veeyapuram GP in Alappuzha District considered for analysis is estimated to benefit about 1700 households and the GP. Present street lights with fluorescent tube is causing heavy recurring electricity bill to the GP. Annual power consumption for the existing tube lights (169 nos.) is estimated at INR 0.150 million and for the replaced CFL lights will be at INR 0.108 million resulting annual savings in the electricity bill payment of INR 0.042 million annually to the GP. During the analysis period of 20 years, the annualized total benefits for the GP is estimated at INR 0.84 million (US$ 0.01 million).
With the project economic cost of INR 0.18 million (project financial cost – INR 0. 2 million with 0.9 conversion factor) and economic cost of maintenance during the 20 years operation period totaling INR 0.12 million (financial cost 0.13 million), and the economic benefits discussed above, the EIRR is estimated at 19.36.
E. Qualitative Benefits Direct and indirect employment generation during the construction and maintenance period is one of the major qualitative project benefits. Being all the work contracts are labor intensive, about 30 – 40 percent of the project cost is spent for unskilled labor and this portion is benefiting to the local population in terms of direct employment generation.
Apart from the quantitative benefits considered for the sample projects, there are many qualitative benefits that include cleaner environment, reduction in public health expenditure cost in treating waterborne diseases, increase in school attendance for school children, land use change, safety, improved civic service delivery etc. Source: Analysis
D. Employment Generation
11. KLGSDP investments are highly labor intensive and support job creation. The independent studies in India have found that the rural infrastructure projects have highest multiplier effects for formal and informal employment in India12. Though uneven across in the states and sub sectors, there is considerable rural employment generation in terms of man- days linked to the infrastructure investments like road construction13. A Study by the Planning Commission had observed that the rural infrastructure investment in seven states in India had resulted in the increase of agriculture income by 17
12 ‘Impact on Infrastructure Investment on Quality of Job Creation: Closed Input-Output Analysis for Indian States’, Anushree Sinha, 22nd IIOA Conference in Lisbon. 13 ‘Infrastructure for Agriculture and Rural Development in India – Need for a Comprehensive Program & Adequate Investment’, Dr Amrit Patel, September 2010
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percent and non-agriculture income by 12%14. An independent impact evaluation study for KLGSDP carried out in 2017 also concluded that the completed KLGSDP could achieve their set objectives, including benefits to the rural citizens15. It should be underlined that most infrastructure investments have a large share of women, youth and un-skilled labor, involved in project implementation as well. During the KLGSDP period, using the united fund of $ 220 million (INR 14,104 million) community infrastructure was created in the LGs in Kerala, by using labor intensive contracts which have about 40% for unskilled labor. With the assumption of existing daily wage of INR 300 for unskilled labor, about 18.8 million man- days direct employment for unskilled labor was created during the KLGSDP (2011-12 to 2017-18) in the state. This direct employment will lead to indirect employment to the tune of about 20% and all benefiting the local LG community, mostly of poor unskilled workers.
E. Institutional Strengthening
12. Experiences show that completed KLGSDP modality of incentive-based allocations promote planning, PFM, and governance improvements across a broad range of core areas and has introduced a good sense of competition and awareness across the LGs. Compared to the baselines, there are significant improvements in areas of audit reports, planning documents (procurement plans, revenue enhancement plans, planning and budgeting for maintenance and operations), fund absorption (not only the PBG, but also of all untied, grants), project completion rates16, 17 as well as in accountability and involvement of citizen groups in local planning and implementation18.
13. A recent evaluation study19 to gauge the public perception about the service delivery of the completed KLGSDP had established that respondents from KLGSDP project LGs had perceived significant improvement in the basic public service areas as compared to their counterpart from the non-project LGs or the services at pre – KLGSDP period in the LGs and also have changed their standard of living to a large extent. An impact evaluation study carried out for the completed KLGSDP in 2017 had assessed the critical activities/interventions in the project that has contributed towards achievement of project goals and objectives. Performance of KLGSDP LGs vis-à-vis pre- KLGSDP LGs was compared to understand the benefit accrued in KLGSDP LGs for the interventions carried out at the LG level. A total of 1,632 sample households spread over 48 GPs and 16 municipalities benefited from KLGSDP were included in the entire sampling frame. Major findings include:
14 Evaluation Study on Rural Roads Component of Bharat Nirman, Programme Evaluation Organization, Planning Commission, GoI, May 2010 15 Ibid 16 Of the 36 sample sub projects reviewed during the end line survey in 2017, only 22% were found with delay in implementation with average of 143 days. This delay was mainly due to inadequate assessment of construction period, technology related and delays in getting approvals. 31% of the sub projects were completed before the target date (with average of 49 days) and another 14% were completed on time. For the remaining 33% sub projects, adequate data on project time line were not available. 17 On detailed review of six completed contracts spread over in Kollam, Alapuzha, Ernakulam and Thrissur districts during the PCR Mission had revealed that the contracts were completed before the estimated contact estimation period. Thus, the reduction in project completion period had reduced to 16% and this improved performance is due to the KLGSDP. In the same LGs, average completion period for non-KLGSDP projects was generally more than the estimated time. In case of comparing the project completion days during pre-KLGSDP and during the KLGSDP period, the project completion days had reduced considerably between 20% to 30%. 18 It is observed that some road sub projects were implemented by the LGs with the involvement of beneficiary population (Beneficiary Committees), without going for tendering (Eg: Construction of a 100-m new road in Punnapura North GP in Alapuzha District). 19 Ibid.
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a. Level of satisfaction for civic services other than waste management improved by 6% to 11% in GPs and municipalities. b. In general, there is remarkable improvement in the infrastructure development for the service delivery institutions like health centers, anganwadis, schools etc. However, the service delivery through operational facilities in these institutions need to be improved, though this was not under the scope of KLGSDP. c. About 81% of the projects found to be functional, as per the plan objectives. d. KLGSDP’s initiatives in monitoring at district and state level helped LGs for to complete most of the sub projects within time. e. Community participation in identification of sub projects through Gram Sabha was there in many LGs. However, beneficiaries felt that their involvement in monitoring need to be improved. f. previous practice of fragmentation of funds with smaller asset projects had reduced drastically (there are more evidences that major projects were undertaken by combining the grant fund with other internal funds); g. assistance provided by coordinators under KLGSDP in capacity building component was important in improving the performance of the GP; h. sub project selection, procurement and monitoring support to LGs under KLGSDP had improved the system, participatory approach, quality of construction and considerable reduction in implementation period. Procurement and construction period have reduced resulting in time and cost overrun, and i. consideration to environmental and social review for all works carried out using KLGSDP funds and other united funds.
14. However, the following issues were also observed from the end line survey (2017):
a. Level of satisfaction for waste management had declined substantially in LGs between baseline and end line. b. Though a substantial portion of KLGSDP funds was spent on in improving office infrastructure and computerization, the quality of service from these LG offices could not be improved significantly. c. However, many projects in the initial stage were found with delay in implementation, which was mainly attributed to delay in receipt of funds and fixing arbitrary time line during the tender without adequate assessment. d. During Phase II of KLGSDP, planning of sub projects were affected to some extent, as the LGs were not sure of amount of grant they will be getting during the planning stage.
15. And finally, and very important, the completion rate of projects and thereby the ability of LGs to deliver core services and infrastructure has increased from the start of the Program 2012 to 2017 by the end, not only for the PBG funding part related with the entire LGs portfolio of investments and this will help in future in managing their own fund.
F. Counterfactual scenario
16. Under the counterfactual scenario without the Bank supported program, the target LGs would continue to face the large rural / urban fiscal gap related with core services and infrastructure. The absence of necessary investments in infrastructure and institutional capacity needed in the targeted LGs, would hinder the economic development of the Kerala State. This alternative route will mean that the Program LGs will face a serious challenge in meeting their ever- increasing residents’ expectations of delivering reliable civic services, as well as a possible deterioration of existing infrastructure. It is evident that without the proposed Bank Supported Program (combining PBG with a comprehensive set of capacity support modalities), the support to LGs under the existing intergovernmental fiscal architecture would be
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severely inadequate, in achieving the proposed objective in the increased LGs performance in expanding local government infrastructure.
17. The investments supported under the Program are core public goods/services such as roads, water supply, drainage, sanitation, hospitals, school facilities, public buildings and street lighting, which would not be provided without significant public interventions. The World Bank’s expertise within support of those areas in India and elsewhere are comprehensive, and the experiences from KLGSDP shows that in addition to the necessary support for financing of these interventions, the expertise the Bank could offer in the support of the design, technical advice, monitoring and backstopping, was highly appreciated and valuable.
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ANNEX 5. BORROWER’S COMMENTS
18. The draft ICRR of the KLGSDP has been prepared meticulously by the World Bank. The ICRR critically evaluates the entire activities of the Project under the four components and rated appropriately based on relevant data and evidence available from the Project website, published success stories and other documents. The ICRR critically analyses the achievements in the implementation of sub projects in various sectors, utilizing performance based grants. The report highlights the efforts undertaken by the Project for capacity building and development of different manuals. The manuals would be a significant contribution for developing suitable modules for future training to be undertaken by KILA. The output and outcome indicators of the Project activities have been beautifully demonstrated wherever necessary. The World Bank appreciates the efforts and commitment of the GoK especially in counterpart funding and issuing appropriate Government Orders. The report also points out the efforts of PMU for the achievement of Project Development Objectives of the Project as per the Results Framework while pointing out sharply the slippages.
19. The Aide Memoires issued after each Mission helped PMU to revise and speed up the activities and to plan the way forward. The four Task Team Leaders and the Team assigned by the World Bank for KLGSDP during the project period of seven years were keen in closely monitoring the project activities to keep the timelines. The Project is grateful to the World Bank for allowing the project to utilize the savings amount by adding new activities in the area of backward LBs including tribal, which were not envisaged in the original design of the Project.
20. Along with institutionalization of local governance systems and making the accounts systems in LSGIs up-to-date and almost error free, 43,000 sub projects in different sectors were successfully implemented. Replicable models of Anganwadis, BUDS Schools, Crematoria, Fish Markets, Bus Stations, Smart Class rooms, Dialysis centers in hospitals, renovation of ponds and construction of small check dams, drinking water schemes, road connectivity, front offices etc. are some of the commendable contributions of KLGSDP. This project has yielded rich outcomes in terms of improvement in quality of service delivery, transparency in administration and enhanced utilization of financial resources, which have largely contributed in improving the quality of lives of the people. The Government of Kerala and the Project is thankful to the World Bank Team for making the implementation of the KLGSDP a great success.
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ANNEX 6. SUMMARY OF BORROWER’S IMPLEMENTATION COMPLETION AND RESULTS REPORT
1. Introduction
1. The Government of Kerala (GoK) with the support of the World Bank implemented the Kerala Local Government Service Delivery Project (KLGSDP) from 2011 to December 20 17. Kerala was of the forerunner in India in terms of decentralization and initiating legislative and political reforms to strengthen local governments in this process. The people of the state emphatically rallied behind the experiment of the People’s Plan Campaign (1997) that magnified the importance of local level planning and turned rural and urban governments at the village and city level into defacto the third level of local self-governments.
2. The genesis of the project had to with the need for institutionalization of the different processes and procedures in the local government system to infuse more efficiency in governance at the local level along with providing local services to the citizens effectively and in an optimal manner. Furthermore, local governments in Kerala as opposed to other states in India had transformed from being mere extensions of state agencies to being fully functional self-governing institutions. Specifically, project intervention looked to address the gap in the local governments organizational and operating systems in the areas of planning and budgeting, financial management, procurement, asset management and so on. The project on a parallel sought to upgrade and improve the skill levels of the local officials and elected representatives at the local level. Additionally, there was also an initiative to substantially increase the capacity of the Government of Kerala to oversee and manage the local government system.
3. The project aimed to:
a. establish a long-term institutionalized local government system with improved budgetary, local planning, procurement, transparency and accountability in relation to service delivery by the local bodies, b. ensure linkages in the preparation of comprehensive and integrated district plans and long plans with the planning and budgeting activities in other tiers of government, c. establish a robust system (Management Information System) for creating and maintaining a fiscal database, d. institutionalizing procedures for planning, budgeting and accounting which ensure increased accountability of funds and activities taken up by the local governments.
4. The above aims and objectives had to be carried out in the face of many challenges that the local governments in Kerala were facing. Key among them were tackling second-generation issues like how to address service quality issues in institutions like schools, primary health centers, agriculture and water entities that were transferred to the local bodies. The state was struggling to come up with a proper mechanism of management and administration that would work in a collaborative and participatory manner that had to encompass both the local officialdom and the elected representatives at the local bodies. Therefore, the KLGSDP strived to provide some answers to these questions and challenges and to be an agent of change in this transitional journey of the Government of Kerala.
II. Project Objectives
5. The project objectives were to enhance and strengthen the institutional capacity of the Local Government system in Kerala to deliver service and undertake basic administrative and governance functions more effectively and in a
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sustainable manner. This would be implemented through the project beneficiaries who were the 978 GPs and 60 Municipalities in the state of Kerala. The various investments that were made by the gram panchayats and municipalities will indirectly benefit the entire population of the state of Kerala outside the five city corporations. In the final tally at the end of the project period, the number of Grama Panchayats and municipalities changed, especially after the local body elections in 2015. At present the total number of Grama Panchayats stand at 941 and Municipalities at 87.
6. As the project could not be completed by the original period of December 2015 and with the corresponding accumulation of savings due to the exchange rate fluctuation between the dollar and the rupee, it was mutually decided to extend the project till June 2017. During this period a substantial amount of the savings was released as an additional component of a special financial assistance to select backward local governments and revenue deficit municipalities.
III. Key Components
Component 1: Block Grants/Performance Grant:
7. This component was the block grant to the gram panchayats and the municipalities with the aim to introduce the performance grant system to the then 978-gram panchayats and 60 Municipalities. This was to be an integral part of states local government fiscal framework that would continue beyond the life of project. This component would provide additional discretionary funds for local investment in a manner that incentivizes the strengthening of their institutional capacity. The grant could be spent on both the creation and maintenance of capital assets used in service delivery. The overall goal is to improve gram panchayat and municipal performance in areas of planning, budgeting, procurement, transparency and accountability and thereby ensuring efficient and citizen centered public service delivery.
8. During the financial years 2011-12 and 2012-13 performance grant was released subject to the local governments following basic fiduciary conditions such as getting “clean” audit certificate and submission of approved copy of the annual plans. In 2013-14 and 2014-15 the performance grant was released based on the eligibility assessed through Annual Performance Assessment (APA). In 2013-14 APA was conducted and the performance grant was released to 898 Grama Panchayats and 39 Municipalities, while in 2014-15 the APA was conducted and the performance grant was released to 848 Grama Panchayats and 46 Municipalities. In 2016-17, another APA was conducted by the Performance Audit Wing of the LSGD in which 834 gram panchayats and 64 municipalities qualified for the performance grant.
Allotment details of performance grant (amount in Crore) 2011-12 2012-13 2013-14 2014-15 2016-17 No District PG-Grand Total Allotment Allotment Allotment Allotment Allotment 1 Trivandrum 12.74 25.86 25.69 31.9 36.59 132.78 2 Kollam 11.35 23.04 23.77 27.77 30.97 116.9 3 Pathanamthitta 6.13 12.44 12.55 14.45 15.45 61.02 4 Alappuzha 10.33 20.98 20.05 23.18 23.51 98.05 5 Kottayam 9.02 18.32 15.4 20.34 25.26 88.34 6 Idukki 7.26 14.72 14.44 14 16.78 67.2 7 Eranakulam 11.5 22.67 20.87 26.38 30.24 111.66 8 Thrissur 12 24.21 24.21 28.84 33.32 122.58
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2011-12 2012-13 2013-14 2014-15 2016-17 No District PG-Grand Total Allotment Allotment Allotment Allotment Allotment 9 Palakkad 13.02 26.43 21.98 26.32 31.15 118.9 10 Malappuram 15.12 30.7 30.87 38.22 37.98 152.89 11 Kozhikode 9.9 20.09 18.48 21.85 26.15 96.47 12 Wayanad 4.47 9.08 8.92 7.54 9.83 39.84 13 Kannur 10.95 22.24 20.94 26.2 25.96 106.29 14 Kasargod 5.95 12.47 11.93 12.69 15.05 58.09 Total 139.73 283.22 270.11 319.68 358.24 1370.98
9. During the project period, 43711 projects were implemented by the gram panchayats and municipalities by the end of December 2017. During 2017-18 the local governments carried out only the implementation of their spillover projects as no fund was allocated during this year under KLGSDP. In each year the number of projects prepared and completed varied from district to district. During the first two years of the project, the budget allocation for each local government was included in the budget document-Appendix IV. But in later stages as the selection of local governments was based on the APA results the allocation of funds could not be included in Appendix IV. Therefore, the quantum of funds was mentioned in the budget document and allocation to the gram panchayats and municipalities were made through separate Government Orders issued by the GoK. District wise approved & completed sub projects including special assistance
10. The number of approved projects under KLGSDP was the highest during the year 2016-17 (10384 projects) followed by 2012-13 (9513 projects). Considering the number of projects approved and completed in the districts throughout the project period it can be seen that the maximum number of projects prepared as well as completed was in Malappuram district followed by Palakkad, both in the northern part of the state.
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11. Backward Support Component: Special financial assistance was provided to select 60 backward local governments (40 Backward GPs, 10 Revenue Deficit Municipalities and 10 backward LGs having sizable tribal population). This special financial assistance was extended to each selected local government with a one-time support of Rs 2 crore each to take up comparatively major subprojects that addressed requirements of overcoming the backwardness of these local governments. For this project identification and preparation of DPRs were done with the support of reputed NGOs working in the state specifically who had the reach and vision to work in these districts. 252 sub-projects were implemented by 60 local governments under this support.
12. During the project period from 2011-12 to the end of December 2017 a total of 43711 sub projects were completed/implemented throughout the state of Kerala. These projects were implemented in different sectors like construction activities, roads, energy related activities, drinking water supply and other infrastructure related activities. Under this, key assets created were Anganwadi buildings, Schools, local government offices, hospitals, bus stand/ waiting sheds, crematorium/burial grounds. Similarly, sanitation facilities (toilets at critical public spaces, toilets specifically for women, e-toilets), check dams, renovation of ponds/protection of water bodies, slaughter houses and reclamation of agricultural land for productive agriculture were other key initiatives under the sub projects.
Component 2: Capacity building for local bodies:
13. This component would provide capacity building inputs to strengthen and supplement the existing system and human resource of local governments to enhance their institutional performance. The focus would be in four main areas; e. The development and improvement of administrative systems used by the local governments; f. Formal training to strengthen the human resource capacities of local governments using these systems; g. Mentoring that aimed at human resource capacity improvement and supplementing existing and upgrading skill sets; and h. Strengthening of the overall institutional capacities of the key organizations responsible for delivering local government training in the state. i. Apart from key studies and assessments in the longer term, the component will support the formulation of a statewide capacity building strategy for the local governments.
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14. The project was able to bring out 11 manuals by Kerala Institute of Local Administration (KILA), one each by State Institute of Rural Development (SIRD) and the Kerala State Audit Department (KSAD). The manuals developed by KILA included; i) Procurement manual, ii) Budget manual, iii) Asset Management manual, iv) Performance Audit manual, v) Grievance redressal manual, vi) Office management manual, vii) Gender Budgeting manual, viii) Public Reporting manual, ix) Finance Management (Revenue) manual, x) LSGD Public Works manual and xi) Administration Manuals for transferred functions (manuals were prepared for 8 transferred Institutions namely a) Primary Health Centres, b) Homoeopathy Dispensaries, c) Ayurveda Dispensaries, d) Primary Schools, e) Anganwadis, f) Veterinary hospitals, g) Matsya bhavan and h) Krishi Bhavan). While SIRD prepared the manual on Social Audit and Kerala State Audit Department came out with the Audit manual. As part of the modernization process, KILA upgraded training facilities, modernization helpdesk, faculty skills enhancement (attended international training programmes) and faculty recruited (Accounting, Finance and social development).
15. Two studies were commissioned and completed that looked at the institutional strengthening of both KILA and SIRD. However, by the end of the project the two entities were merged into a single unit as part of the GoK plan to streamline the states training and capacity building process with respect to the local governments. Additionally, a training needs assessment study was completed by KILA and it also produced a state-wide capacity development strategy for local governments. The strategy puts forward a combination of training, orientation, hand holding, mentoring, learning by doing, experience sharing, peer learning and regular refresher training looking at the current needs and demands of the local government system while also recommending a link between training needs and training design.
Component 3: Enhancing state monitoring of the Local Government system
16. This component would provide support to strengthen the system of performance monitoring of local governments in Kerala. This component comprised four sub-components: j. Establishment of Database of local government information; k. LSG service delivery survey; l. Project evaluation, and m. Establishment of a Decentralization Analysis Cell (DAC) to provide policy advisory functions to GoK and the State Finance Commission (SFC) with independent analysis of the State’s intergovernmental fiscal system, service delivery and institutional issues.
17. A baseline survey and an end-line survey were completed during the project tenure under the overall supervision of DAC and the PMU. DAC was able to finally publish 14 research studies out of the initially planned 31 studies that focused on various development sectors in the state with a focus on local governments. Specifically, DAC managed to come out with the following outputs by the end of the project with the following consultants;
n. ICRA Management Consultancy Services: (Capacity Building Evaluation) o. Sambodhi Research and Communications Private Limited: (Service Delivery Technical Evaluation), and with p. Centre for Socio Economic & Environmental Studies (CSES): Endline Survey.
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Component 4: Project Management
18. This component was for providing support to the Project Management Unit (PMU) within the LSGD in the overall coordination, implementation, monitoring and evaluation of the project. Frequent turnover of the Project Director had its impact on the functioning of the PMU. There were staffing delays and the key post of the monitoring and evaluation specialist was vacant for a prolonged period.
IV. Summary of Key Issues and Achievements
19. The KLGSDP project has charted new pathways for improved performance of local governments with respect to their daily development and administrative functions with a focus on citizen centered service delivery. The activities under KLGSDP were closely monitored by the PMU that had the responsibility to provide support and act as a strong facilitator between the state government (LSGD/Finance/Planning Departments) and the local governments. The project went beyond the initial period of four years and ended in December 2017. The main reason was the inability to utilize the performance grants within the stipulated time/project period. During the project period two critical challenges emerged that affected implementation. One issue was the absence of a full-time project director for the entire duration of the project. There was frequent change of project directors, with the officer posted holding additional charge as project director, with the main responsibility as the Director of the Panchayat Department at the state level. This duly affected the coordination among different support agencies and other development departments.
20. Another major issue that also emerged was the delay in the implementation of sub-projects by the local governments under KLGSDP. Frequent elections in 2014, 2015 and 2016, insufficient engineering staff in many local governments, frequent transfers of implementing officers of the project and insufficient staff in local governments in backward areas were the main reasons for the delay in timely implementation of the sub projects. The elections to the local governments took place in 2015, the year the project was supposed to end. As many of the elected representatives were new to the system, it took time to orient them in the local plan process and implementation, thereby causing delay. Yet another issue was the formulation of a large number of smaller sub projects within a local government as opposed to focusing on a critical larger project that would benefit a bigger cross section of the local population.
21. The delay in the process of the APA affected the timely preparation and finalization of the list of the qualified local governments. Therefore, the funds were released only towards the fag end of the financial year in the third and fourth years of the project. This led to further delays on the part of the local governments’ as they could not prepare their projects in advance and obtain the necessary approvals before implementation.
22. The APA system for disbursing the performance grants was embraced to a large extent by the local bodies. This process helped local governments to streamline the fiduciary conditions, planning and budgeting, procurement that went a long way in improving their day to day functioning. Importance was placed on maintaining clean and audited financial reporting and statements of accounts by the local governments through the process. While initially the APA was conducted by outsourcing to private consultants, the responsibility was gradually vested with the performance audit wing of the LSGD. This has introduced the institutionalization of the process within the state system.
23. Some of the key physical achievements of the project are: • 43711 subprojects have been implemented under KLGSDP • 1593 anganwadis have been constructed/renovated, • 709 hospitals have been constructed/renovated,
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• 2845 construction activities - buildings of GPs, Municipal offices have been completed. • Many school buildings, bus stand/waiting sheds etc were renovated/newly constructed. • Construction of 139 burial ground/ crematorium were completed • Many replicable models have emerged under KLGSDP • Comparatively major projects were taken up under KLGSDP especially under special assistance by the backward local governments.
24. The delay in project orientation trainings for local government functionaries, especially the support staff severely affected the institutional capacity of local governments in the conceptualization and timely implementation of sub- projects, and in identifying critical service delivery related projects and adhering to the guidelines of ESMF and procurement. A big gap was the absence of customized training on specific areas such as ESMF, procurement, APA, environmental audit and so on. The delay in refresher trainings also affected environmental considerations in development works. This was later addressed through trainings provided and managed by the PMU.
25. The manuals on the key sectors could not be completed on time and this affected the planned training programs on the manuals. Training on the manuals could not be imparted in a timely manner. Similarly, the training needs assessment of the local governments was also delayed due to the local government elections and was completed late. Therefore, the trainings that were envisaged based on the needs assessment of the local governments could not be taken up.
26. The e-governance system introduced by the government through the IKM to improve the service delivery of the local governments faced innumerable technical issues related to integration of various functions and lack of regular refresher trainings on e-governance.
27. The absence of an action plan for training and capacity building affected its conduct in an organized/institutionalized manner at the start of project implementation. The KLGSDP training programs were arranged on an ad hoc basis as these did not figure in the training calendar and modules of the executive support agencies (KILA and SIRD).
28. A major challenge faced by the project was the absence of a monitoring and evaluation specialist for a major part of the project. This affected the setting up of a proper monitoring system at the PMU. Orienting district coordinators and key district officials about the reporting system also suffered due to the absence of the M&E specialist. There was also a severe lack of coordination between the IKM, DAC and the PMU.
29. For the major part of the project DAC was not properly staffed and operational and this resulted in the delay in the key data being collated related to the socio-economic and basic database of local governments. This also impacted the timely preparation of fiscal reports and in delay of hosting the DAC website. Another major issue was the non- completion of the MIS which presently has no ownership.
30. Although very late in the project, towards the later stages the PMU developed an online monitoring system with the application of Google Sheet. District coordinators and the local government officials uploaded the latest status of the sub-projects on this sheet. Sulekha data and information was also integrated with the Google Sheet used by the PMU and these results were uploaded on the project website. As mentioned above, DAC was successful in publishing 14 studies across important development sectors of the state’s economy. DAC also has uploaded important data and information
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regarding local governments on their website. The project was also successful in developing a database of sub-projects and project-wise beneficiary details.
31. The ESMF has proved to be a relevant tool for local governments in dealing with environmental and social issues. The local governments were able to consider important environmental and social issues while planning and implementing their programs. The ESMF tool aided the local governments in identifying the environmental and social impacts of local government interventions and its mitigation. It also laid down a framework of roles and responsibilities of various local government functionaries with regard to the granting of various environment and social safeguards approval for any proposed local government activity.
Appendix 1: Note on manuals for local governments
32. With a view to improving the functions of Local Self Governments, the Project has provided support for developing operational manuals in key functional areas. Altogether 12 manuals were envisaged. Out of 12, KILA documented 11 manuals except Social Audit manual which was developed by SIRD. The manuals developed by KILA are the following - i) Procurement manual, ii) Budget manual, iii) Asset Management manual, iv) Performance Audit manual, v) Grievance redressal manual, vi) Office management manual, vii) Gender Budgeting manual, viii) Public Reporting manual, ix) Finance Management (Revenue) manual, x) LSGD Public Works manual and xi) Administration Manuals for transferred functions (manuals were prepared for 8 transferred Institutions namely a) Primary Health Centres, b) Homoeopathy Dispensaries, c) Ayurveda Dispensaries, d) Primary Schools, e) Anganwadis, f) Veterinary Hospitals, g) Matsya Bhavan and h) Krishi Bhavan).
33. KILA followed a systematic methodology for development of manuals. An initial internal brainstorming session for stakeholders was organized to prepare a draft table of contents of a specific manual. Thereafter a small team consisting of internal experts was formed and extensive review of secondary literature was carried out for evolving key concepts related to the theme of the module. This includes relevant Acts, Government Orders and Rules etc. to ensure that the manual is developed in the context of the prevailing administrative and management framework.
34. The team prepared the draft chapters based on the draft table of contents and findings from the review of literature. The chapters prepared by various experts are consolidated and the first draft of the manual is produced. A new team of internal experts are entrusted for vetting the draft manual. Once the internal vetting process is over, KILA consults with the experts of IKM (for those manuals having software implications) to see whether any changes should be brought in to ensure that the draft module is in alignment with the software developed.
35. Once this process is over, a state level expert team is formed for reviewing the manual. The state level expert team consists of representatives - Director of Panchayats, Director of Urban Affairs, Director of Local Fund Audit, State Performance Audit Officer, Director of IKM, Capacity building Specialist of KLGSDP, representatives of Panchayat Association and other subject matter experts. The State level expert team through a number of meetings discusses the manual and prepares an interim draft of the manual. Thereafter a national expert team is formed for vetting the manuals. The national experts’ team consists of experts such as Mr. S M Vijayanand, Mr. Meenakshisundaram, Mr. M N Roy, and Mr. T. R. Reghunandanan. After the review and vetting by the national expert team the final draft of the manual in English is finalized. The final draft is translated into Malayalam by translators and edited by language experts.
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Figure -1: Process adopted for development of Manuals
Source: KILA
36. Once the final draft is ready, KILA submit it to the Project Management Unit (PMU). For the quality assurance of the manuals, the Government constituted a State Level Committee through Government Order (G.O. (Rt) No.1652) on 01 June 2016 for the final vetting and quality assurance of manuals. The members of the Committee consist of the Principal Secretary- LSGD, Project Director- KLGSDP, Director of Panchayats, Director of Urban Affairs, State Performance Audit Officer, LSGD, Director-KILA, President - Gram Panchayat Association, and Chairman - Municipal Chairman’s Chamber. Later during August 2016, a sub-committee was formed through Government Order ((G.O.(Rt) No.2420) dated 11 August 2016 for carrying out a initial vetting of the manuals before bringing the manuals for the consideration of the State level Committee. Each and every manual was vetted by the Manual Vetting Committees and the comments, suggestions and recommendations of the Committees if any are being incorporated. After the incorporation of comments, the modified version of the manual is submitted to the Government for issuing Government Orders by approving the manuals. Once the Government Order is issued, the manuals will be operational.
Budget Manual
37. Budgeting, being a significant aspect of financial management in Local Self Governments, need to follow systematic procedures by adhering to the provisions of the Kerala Panchayat Raj Act 1994 and allied Rules. As per the provisions of Section 214 of the Act, Grama Panchayats shall prepare and pass their Budget for the next financial year on or before 31st March every year. The manual details the procedures to prepare the Budget of LSGs by adhering to the provisions in the Act. The features of the Budget envisaged in the manual are participatory budgeting, need based budgeting, gender budgeting, inclusive budgeting, surplus budgeting and performance budgeting. The manual is an
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operational guideline describing the process of Budget preparation and time line for various activities connected with Budgeting. It also dealt with in detail about budgetary control and budget document. Specimen of Budget note, formats of Budget statement and Budget schedules along with various worksheets included in the manual for ready reference. Government approved the manual and issued Order through G.O. (Rt) No.3291/2016/LSGD dated 02.12.2016.
Public Reporting Manual
38. The Kerala Panchayat Raj Act, 1994 envisages participation of the people in planned development and in local governance. The active participation of the people in the local governance can be ensured only if they are informed duly about the affairs and performance of the Local Governments. The presence of a sound public reporting system enables the LGs to act efficiently and effectively due to the voicing capacity of citizens. To facilitate this, the present Public Reporting manual was developed.
39. The purpose of the Public Reporting Manual is to establish a public reporting system in LSGs which can ensure a healthy transparency and accountability between elected representatives, staff and all those assigned with responsibilities of managing the affairs of LSGs. The manual is designed considering the public reporting requirements as per the Kerala Panchayat Raj Act 1994. It also dealt with communication channels, reporting structures and responsibilities and procedures as prescribed in KPRA. The documents that need to be disclosed are clearly indicated. The periodicity of various reports are categorized as monthly, quarterly, half yearly and annually. In total the manual can be used as a reference material for preparing various reports related to proactive disclosure. Government approved the manual and issued Order through G.O. (Rt) No.1747/2017/LSGD dated 27.05.2017.
Performance Audit Manual
40. The Performance Audit is an internal audit process for the strengthening of the functioning of the Grama Panchayats, Its objective is to evaluate the functioning of the Panchayat and to see whether the developmental and welfare functions vested in the Panchayat and the financial and controlling powers entrusted to the Panchayat are being executed effectively, efficiently and in accordance with directions in Acts, Rules and Orders.
41. Performance Audit of Grama Panchayats involves systematic evaluation of its functioning, scrutiny of accounts, records, proceedings, assessment, demand and collection of Tax and Non- Tax revenues, the projects implemented by the Panchayats and all the process involved in the formulation, execution and monitoring of the projects with a view to ensure the 5 E of principle namely Equity, Economy, Efficiency, Effectiveness and Environmental friendliness. The scope of Performance audit extends to the functioning of all the Institutions under the Administrative control of the Grama Panchayats.
42. Performance Audit cover all the aspects of the management process including planning, organizing, executing, supervising and the outputs and outcomes. Other than the monthly routine checks, the performance audit shall conduct special audit and reviews on themes in selected intervals in the four core areas namely i) public administration, ii) planning & finance management, iii) sponsored schemes and iv) service delivery & good governance.
43. The manual deals with the approaches and scope of audit along with the role of Performance Audit Officials, types of performance audit and contains tools for auditing and reporting format.
Social Audit Manual
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44. Social Audit is an emerging concept that has become popular and relevant in the context of Good Governance. Social audit could be defined as a systematic process in which the civil society identifies the gap between the desired and actual impact of a project/programme/services implemented. It allows people to enforce accountability and transparency. Conducting social audits regularly and systematically and also initiate follow up actions would make qualitative changes in governance. For the Local Self Government Institutions of Kerala which are the hub of multifarious development works and several services, social audit will help to affirm that their functioning are in tandem with the declared objectives. Thus, there is a need for a Social Audit manual to provide a clear set of guidelines to carry out and sustain the process of social audit.
45. The present Social Audit Manual comprises of two sections. Section - I elaborates the concept, process and procedures, approaches, strategies that can be adopted. Emphasis is given to social audit forum, information gathering for social audit, social audit follow up activities etc. The contents focus more on Local Self Government Institutions of Kerala, considering them as the entry point for institutionalizing social audit. Section II introduces the various tools that could be used in the social audit process.
Office Management Manual
46. The enactment of the Kerala Panchayat Raj Act, 1994 witnessed a paradigm shift in the administrative system of the Grama Panchayat Offices in the State. Unlike other Government offices, it is the headquarters of a Local Government, where an Elected Representative is the Executive Authority. The Panchayat, being a body corporate as per Section 5(1) of the Act, is entrusted with the responsibility in administration relating to local governance. The expansion of the Panchayat to self-governing institution with multifarious activities has necessitated an Office Management Manual for the Grama Panchayat.
47. The ultimate objective of all Government machinery is to meet the citizens’ needs and to further their development and welfare, without undue delay. At the same time, those who are accountable for fair conduct of duties and responsibilities should ensure that public offices are managed with utmost care and prudence. This Manual is intended to promote and institutionalize the principles of good governance based on models emerged during the last two decades and also incorporating the Total Quality Management (TQM) principles.
48. The manual extensively deals with office procedures, movement of files, record management, committee meetings, duties & responsibilities of officials, Grama Sabha, Total Quality Management and transparency & accountability. Every effort has been made to use definitions established through legislation and other guidelines on office management. For ready reference, formats prescribed under various statutes and Government Orders which are commonly used in Grama Panchayat Offices are also attached in the manual.
Grievance Redressal Manual
49. The Grievance Redressal Mechanism is vital for participative and responsive governance. The rationale for Grama Panchayat’s Public Grievance Redressal Mechanism is that if the desired level of service delivery is not achieved or if a right of a citizen is not honored, then the citizens should be able to take recourse to a mechanism for redressing their grievances. This mechanism should be able to ensure faith of the citizens. Therefore, every Grama Panchayat should have such a mechanism in place.
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50. The objectives of this Manual are i) to secure a greater measure of participation of people in local governance through ensuring their rightful space to express and communicate grievances and suggestions related to any or all the activities of the Grama Panchayats and its Institutions and ii) to enable the Grama Panchayats to develop and maintain an institutional mechanism and due process to receive and redress the grievances and suggestions of the public.
51. The scope of this manual shall extend to all the activities that are coming under Grama Panchayats and the Institutions of Grama Panchayats. The manual describes the procedure for receiving grievances, registration of grievances and grievance redressal process. The manual also includes the Ombudsman for LSGIs and the Tribunal for LSGIs.
Gender Budget Manual
52. The Local Self Government Institutions (LSGIs), being the primary institutions of participatory democracy, are the key actors in imparting gender equality and equity at grassroots level. The active involvement of women in decision making is seen as a key to success of the efforts of LSGIs. Women have to be treated as equal partners in decision making and implementation, rather than only beneficiaries. By this process, LSGIs can be more people-friendly in general and gender-friendly in particular in upholding social justice.
53. Gender budgeting is a relatively new development concept that seeks to provide gender perspective to the budget. The term ‘gender budgeting’ is sometimes known by different names - ‘gender budget work’, ‘gender-sensitive budget’, and ‘gender budget analysis’ - but in essence they refer to the same concept. It addresses the needs and interests of different groups of citizens - women and men, girls and boys - and aims to allocate government resources in an equitable way so that the most pressing needs of individuals and groups are satisfied. The purpose of gender budgeting is to understand the allocation of funds, monitor expenditure, and public service delivery from a gender perspective; as a means of mainstreaming women's concerns in all activities and improving their access to public resources.
54. State of Kerala initiated the gender budgeting process at the local government level as far back in 1998 and mandated the local bodies to allocate at least 10% of the plan funds devolved by the state specifically for women through Women Component Plan (WCP).
55. The objectives of this manual are i) to provide guidance to the Elected Representatives, Working Groups, Implementing Officers, and all stakeholders involved in planning process for further improving LSGIs’ budget with a gender lens and ii) to explain engendering process of the Planning and Budgeting of LSGIs.
56. The manual discusses the gender and development approach, status of women in the State, gender initiatives in LSGs, Gender planning, process of Gender budgeting and Gender auditing. Checklist for conducting Gender analysis is also included.
Procurement Manual
57. Local Self Government Institutions (LSGIs) in the course of carrying out their administrative and developmental responsibilities, have to procure Goods, Assets and Services. The Goods, Assets and Services are procured by LSGIs for performing mandatory, sectoral and general functions, by utilizing own sources of revenue and other funds that are set apart in the approved projects of LSGI during a specified financial year. The process of procurement by LSGI is not the sole responsibility of any particular designated Officer. The various stakeholders include Elected Representatives (ERs), officers of Institutions of LSGI, the Secretary of LSGI, Implementing Officials, Beneficiaries, and Social Auditors who are involved in
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the process of Procurement. This Manual incorporates all aspects of functional procedures for the ERs, Officers and all other Stakeholders, in carrying out procurement process applicable to all LSGIs in the State
58. The objectives of this Manual are to ensure i) an efficient Procurement mechanism ensuring transparency and accountability, ii) a due process and participatory procedure in all kinds of procurements, iii) economy in procurement by assuring value for money spent, iv) quality in procurement by ensuring best product/service, v) that the Procurement is cost effective, eco-friendly, ethical, need based and of high technical quality.
59. This Manual is applicable for Procurement of Goods, Assets and/or Services by LSGIs including Institutions of LSGIs. It envisages the general principle of procurement, procurement process, procurement plan, procurement committee, mode of procurement, execution of procurement (conditions for contract etc.), and duties and responsibilities of Procurement Officer. Social audit committee of procurement and responsibilities of social audit committee are also discussed.
Manual for Asset Management
60. Asset Management is the combination of management, financial, economic, and engineering disciplines applied to assets; with the objective of providing the required level of service in the most efficient manner. Asset Management includes whole gamut of activities of the Asset's life cycle viz. planning, acquisition, operating, maintaining, repairing, modifying, replacing, rejuvenating, and disposal of various forms of assets.
61. This Manual covers all the activities in managing the assets of LSGIs and Institutions of Local Governments (IoLGs) in the State. It deals with the preparation of Asset Management Plan, documentation & accounting of assets (asset database, codification etc.), asset disposal and duties & responsibilities of custodian of assets. Information for the preparation of Asset Register is given in detail. Asset Management Framework and checklist for Annual Status Assessment of Asset’s Condition Report (ASAACR) are also included in the manual.
Manual on Revenue for LSGIs
62. The Seventy third amendments to the Constitution of India had made the Local Self Government as the third tier of the Government structure. Based on the constitutional amendment, the State had enacted the Kerala Panchayat Raj Act in 1994 which in turn resulted in devolving Funds, Functions and Functionaries to the Local Self Government Institutions (LSGIs). In this context the Grama Panchayats have a decisive role in the development activities by utilizing all the available resources. In order to achieve economic development and social justice in a time bound manner, all available resources shall be utilized. In addition to the Own Fund of Grama Panchayats, the resources that can be mobilized include grants and assistance from State and Central Governments and other agencies, contributions from the public and voluntary organizations, beneficiary contributions etc. It is the prime responsibility of the Standing Committee for Finance (SCF) of the Grama Panchayat to maximize the resources at the best.
63. The objectives of this manual are to enable the Grama Panchayats to i) Identify, assess, collect and monitor revenue, ii) expand the revenue base and increase the efficiency in collection, iii) Improve the demand and collection of Own Source of Revenue (OSR), iv) Keep proper records of demand, collection and balance of OSR, v) Improve the transparency and accountability of revenue mobilization and vi) improve monitoring and evaluation of revenue.
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64. Manual discusses in detail about the revenue (sources of funds) of Grama Panchayats, mobilization of own source revenue, taxation and levy, procedures for the collection of arrears and duties & responsibilities of both Elected Representatives and officials. Models of different formats for assessing property tax, profession tax, entertainment tax etc. are also provided for ready refence.
Administration Manuals for Transferred Functions
65. The functions, institutions and schemes of Government related to the matters enumerated in the 3rd, 4th and 5th schedule of the Kerala Panchayat Raj Act, 1994 and in the 1st schedule of the Kerala Municipality Act, 1994 has been transferred to the concerned local bodies as per G.O. (P) 189/95/LAD dated 18/09/1995 (Annexure 1). Government had also directed the Heads of the various Departments to issue orders showing the details of transfer of institutions to the appropriate LSGIs and the posts transferred from the concerned offices. Based on this various departments have issued orders relating to transfer of institutions, posts etc. to the LSGIs. Guidelines to be followed for the effective implementation of schemes transferred to LSGIs have also been issued by the Departments.
66. Administration manuals were prepared for 8 Transferred functions namely i) Primary Health Centers, ii) Homoeopathy Dispensaries/ Hospitals, iii) Ayurveda Dispensaries/ Hospitals, iv) Primary Schools, v) Anganwadis, vi) Veterinary Hospitals, vii) Matsya Bhavan and viii) Krishi Bhavan. These manuals dealt with in detail the services rendered by these transferred Institutions and responsibilities of the officials.
LSGD Public Works Manual
67. Public works in LSGIs are done by utilizing various sources of funds, like Annual Plan and own funds of Local Bodies, Asset Development scheme, Member of Legislative Assembly – special development fund (MLA-SDF), Natural calamity Flood Relief works, Member of Parliament Local Area Development Scheme, Pradhan Manthri Grameens Sadak Yojana (PMGSY), Hill Area Development Authority, Integrated Watershed Management Plan and all other State & Central sponsored schemes. The LSGD Engineering wing is assisting the LSGIs in implementing various infrastructure related works and its maintenance. The purpose of the manual is for streamlining the public works in LSGIs and to provide guidelines on various aspects of design and execution of works carried out in LSGIs. The manual explains project formation, investigation & design, preparation of estimates & sanctions, mode of execution, contract management, execution of works, measurements & payments, maintenance of structures, modern materials & advanced technologies in construction, quality control and safety measures.
Appendix 2: List of policy studies by DAC
PUBLICATIONS
• A Study of Local Finance in Kerala
• Study on the reliability problems of Annual Financial Statements (AFS) of Grama Panchayats in Kerala.
• Functional and Financial Autonomy of Local Governments: A case study of Grama Panchayats in Ernakulam District, Kerala.
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The World Bank Kerala Local Government and Service Delivery (P102624)
• Service Delivery of Local Self-Government Institutions in Kerala: A Study of Seven Grama Panchayats in Thiruvananthapuram District, 2012-13
• A Study on Funding Sources and Effectiveness of Project Implementation of GPs in Kerala
• Role of Grama Panchayats in Waste Management and Environment Protection
• Role of Local Governments in the Empowerment of Women in Kerala: A case Study of Three Grama Panchayats
• Asset Management in Local Governments: A Case Study of Grama Panchayats in Kerala
WORKING PAPERS
• Interstate Migrant Labour in Kerala and scope for intervention by Local Governments
• Public Health Intervention and the Role of Local Governments in Kerala
• Dynamics of Rural-Urban Transition and Performance of Local Governments – A Historical Analysis of Maradu Municipality in Ernakulam District
• Scope and methodology for PPP model in the Project Implementation of Grama Panchayats in Kerala
• Joint Projects among the Grama Panchayats of Kerala: A study of selected districts in Kerala
• Outcome Budgeting of Projects under Decentralized Planning: A case study of primary sector of Grama Panchayats in Kerala
OTHER STUDIES
• Study on Tax efforts of Local Bodies in Kerala
• Effectiveness of auditing practices in Local Governments in Kerala
• Convergence of Government supported housing schemes for low income group through Local Self Governments
• Functions and Functionaries of Local Governments in Kerala – The Case of Engineering wing of Panchayats
• Efficacy of beneficiary committees in the Local Governments in Kerala
• Local Self Governments and Inclusion of the Excluded: Study on the Impact of Decentralization among the Kattunaicken-Particularly Vulnerable Tribal Group of Kerala
• Functional Efficiency of Transferred Institutions to Grama Panchayats in Kerala: A Case Study
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The World Bank Kerala Local Government and Service Delivery (P102624)
• Cost Benefit Analysis of Hazardous Economic Activity and Natural Resource Exploitation: Impact of Local Governments in Kerala
• Diffusion of Best Practices in the Local Governments of Kerala in selected Service Delivery functions - Implications based on case studies from three Village Panchayats
• Role of Panchayats in the Inclusion of the Excluded- A Case Study of Fishermen Communities in Kerala
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