E. Description and Assessment of Program Expenditure Framework
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89811 Document of The World Bank Public Disclosure Authorized TUNISIA URBAN DEVELOPMENT AND LOCAL GOVERNANCE PROGRAM Public Disclosure Authorized Technical Assessment Report Final Version Public Disclosure Authorized June 26, 2014 Public Disclosure Authorized 1 Table of Contents A. Program Description ................................................................................................................................................ 3 Government program ................................................................................................................................................... 3 PforR Program (Program) ........................................................................................................................................... 6 B. Program Strategic Relevance ................................................................................................................................ 9 National Context ............................................................................................................................................................ 9 Strategic Relevance .................................................................................................................................................... 10 C. Technical soundness ........................................................................................................................................... 12 D. Institutional Arrangements ............................................................................................................................. 15 E. Description and Assessment of Program Expenditure Framework ............................................... 17 F. Description and Assessment of Program Results Framework and M&E ...................................... 24 Disbursement Linked Indicators ........................................................................................................................ 26 G. Program Economic Evaluation ....................................................................................................................... 27 H. Technical risk rating ........................................................................................................................................... 30 Annex 1: Detailed Program Description Annex 2: Financial Status of Local Governments Annex 3: Results Framework Materix Annex 4: Detailed DLI Matrix, verification protocols and basis fordisbursement calculations Annex 5: List of mandated LG functional assignments Annex 6 : List of LGs targeted to receive funds for improving basic infrastructure services in disadvanted neighborhoods . 2 A. Program Description Government program 1. The government program consists of state financial support to municipal infrastructure delivery and institutional strengthening covering 264 municipalities (local governments - LGs) for the period 2014-2019. Through this program, the government intends to shift from a purely “infrastructure delivery” approach to more focus on LG performance and accountability. To this end, the government’s program aims at: (i) strengthening LG institutional capabilities while transforming their relationship with their citizens through measures that are designed to foster transparency, participation and accountability; and (ii) improving municipal infrastructure delivery with special attention to disadvantaged communities. 2. In this context, the reform of the LG capital grants and municipal investment planning framework forms the main strategic actions undertaken by the government towards the implementation of its decentralization agenda recently anchored in the new Constitution adopted in January 2014. This grant system, which had operated under an ex ante system of controls, is being restructured through the revision of the Decree 97-1135 governing the LG capital grant system. Through the restructuring, the government intends to improve the efficiency of the state financial support to municipal investment, make the allocation of capital grants more transparent and predictable, strengthen the decision-making power of LGs on the use of their investment funding, and progressively introduce a performance based dimension to their capital grant system. Along with revision of the above decree, the government has also issued a Ministerial Decree to introduce participatory municipal investment planning and budgeting systems, hence promoting citizen engagement in identifying investment needs and priorities. Under the same reform, the government will progressively introduce an independent, annual assessment to measure the performance of LGs in line with the above amended decree. 3. The performance assessment system, in addition to serving as a tool for monitoring LG’s performance, has proven to be a very effective means of incentivizing LGs to strengthen their institutional performance, where access to grant funds is linked to results. The areas covered under the performance assessment will include governance, sustainability and management. The results of this performance assessment will be used to adjust the capital grant allocation starting the third year of the program. 4. The government program consists of three sub-programs, namely: Subprogram 1: Municipal infrastructure delivery; Subprogram 2: Improving access to basic municipal infrastructure in disadvantaged neighborhoods; Subprogram 3: Capacity support for improved LG institutional development and accountability. Subprogram 1: Municipal infrastructure delivery (US$591 million) 5. Consistent with past practice under the municipal investment program – the Program des Investissements Commun (PIC), the subprogram involves the preparation of five-year investment plans for each LG to deliver municipal infrastructure, underpinned by capital resources derived from three sources: (i) local government contribution; (ii) capital grants from central government; and (iii) investment loans provided by the Caisse des Prets et de Soutien 3 aux Collectivites Locales (the Caisse - - CPSCL), which is also taked with managing capitalmgrant transfers form the center to the LGs. In addition, LGs receive capacity development and technical support to prepare and implement their plans via training programs offered by the Centre de Formation and Appui à la Decentralisation (CFAD – see para 47) and technical assistance from regional offices of the CPSCL and line agencies of central government, as well as through local consultancy services. This sub-program will entail the following activities: 6. Capital Block Grants for Municipal Infrastructure Delivery (USD203 million). The use of capital grants for municipal infrastructure delivery is determined solely at the discretion of each LG (without any ex ante control), subject to its being used for municipal infrastructure investments that fall within the mandates of the LGs. The the Capital Block Grant or performance based grants (PBGs) to LGs for capital investments will be allocated according to a formula and the use of the grant resources will be determined solely at the discretion of each LG (without any ex ante controls). The PBGs, which will be reflected in the LGs’ PICs (their 5-year indicative investment programs), and their detailed annual investment plans, and will conform to municipal infrastructure (works and equipment, including engineering studies and supervision costs) that fall within the mandate of LGs. The grant will be administered by the CPSCL (on behalf of the state) and validated through a participatory planning and budgeting approach. The LGs will be responsible for planning and implementing the sub-projects comprising their investment plans and financed either in toto by the PBG, or in combination with other sources of funds. The PBG funds will be reflected in the revenues and expenditures of the LGs’ annual budgets, with the resultant assets incorporated into their asset registers. Sub- project implementation will be undertaken by LGs with the support, if needed, of private sector consultancy services. 7. The PBG will function according to the following principles: (a) a PIC whereby each LG is allocated an indicative envelope of resources available to it, according to an allocation formula, for capital investments over a five year period, to be transferred annually at the beginning of each FY; (b) the allocation formula is to be made public, as are the annual allocations to each LG; (c) the allocation formula is built around objective, measurable criteria that also include equalization considerations; (d) use of the funds is discretionary to the receiving LG and is not subject to ex ante review by central agencies; (e) access to the funds, which can be integrated with other untied LG revenues at the local level, is not tied to other parallel fiscal or financial instruments; (f) LG performance is assessed annually, ex post, by an independent evaluator, whose findings are made public and are presented comparatively across all LGs; and (g) performance assessment criteria cover three areas: (1) Governance, comprising consideration of: (i) participatory planning and budgeting; (ii) transparency in LG operations (access to information regarding: capital expenditures/consistency with budget, contract awards, investment implementation progress, financial statements/audits); (iii) procurement (timeliness, efficiency and in accordance with regulations); (iv) safeguards (planning and implementation procedures) and (v) response to complaints; (2) Sustainability,