KERALA LOCAL GOVERNMENT SERVICE DELIVERY PROJECT (KLGSDP) PROGRAMME IMPLEMENTATION MANUAL Local Self Government Department Government of Kerala India 10th February 2011 1 KERALA LOCAL GOVERNMENT AND SERVICE DELIVERY PROJECT (KLGSDP) Program Implementation Manual (PIM) Table of Contents INTRODUCTION 1. Background 8 2. Summary of Project Development Objectives 10 3. Key Project Outcomes 10 4. Summary of Project Description and Components 10-12 SECTION 1 : FINANCING AGREEMENT 1.1. Financing Agreement for the project 13-22 SECTION 2 : DETAILED PROJECT COMPONENT DESCRIPTION Project Components and Sub-components and Costs 23 (for each Component) 2.1. Component 1: Performance Grants to Gram Panchayats and Municipalities 2.1.1. Objective 23 2.1.2. Establishment of Grant 23 2.1.3. Allocation formula and funding levels 24 2.1.4. Additionality 24 2.1.5. Use of Grant Funds 24 2.1.6. Budgeting, Planning and Execution 25 2.1.7. Reporting 25 2.1.8. Phasing in of the Grant 26 2.1.9. Procedures for allocation of Grant under Phase-1 26 Grant Access Criteria 26 Grant Allocation Announcement 27 Grant Release and Receipt 27 Grant Cycle 27 2.1.10. Procedures for allocation of Grant under Phase-2 28 Access Criteria and Performance Criteria 28 Table 2.2 Mandatory Minimum Conditions and 28 Performance Criteria for accessing Grant in Phase 2 Indicative Grant allocation Announcement 29 Grant Release and Receipt 30 Grant Cycle for Phase 2 30 2.1.11. Audit Eligibility Criteria for Local Bodies 30 2.1.12. Disbursement 32 2.1.13. Sub-project Implementation 33 2.1.14. Reporting 34 2.2. Component 2: Capacity Building For Local Bodies 2.2.1 Objective. 34 2 2.2.2 Sub Components and Activities - 34 Systems Improvements 2.2.3 Formal Institutional Training 35 2.2.4 Mentoring 36 − Subproject Technical Support − LSG Technical Support – KILA − LSG Technical Support - SIRD 2.2.5 Institutional Strengthening of KILA and SIRD 37 2.2.6 Medium and Long-term Strategic Capacity 37 Development Support 2.3. Component 3: Enhancing State Monitoring Of The Local Government System − Objective 38 − Sub-components and activities 38 − Database of GPs and Municipalities Information 38 − LSG Service Deliver Survey 38 − Project Evaluations 39 − Decentralization Analysis Cell (DAC) 39 2.4. Component 4: Project Management 2.4.1. Objective 40 2.4.2. Support to Project Management 40 2.4.3. Financing 40 2.4.4. Project reporting 40 2.4.5. Project Information, Education and Communication 41 (i) Overall Project Communication (ii) Citizens Communication (iii) IEC Cell 2.5. Implementation Arrangements 2.5.1. General 42 2.5.2. Local Self Government Department 42 2.5.3. Execution Support Agencies 42 2.5.4. Project Management 42 2.6. Detailed Project Budget 2.6.1. Project Cost by components 43 SECTION 3 : MAJOR LOAN COVENANTS AND TARGET DATES 3.1 Description of Major Loan Covenants & Target Dates 44 SECTION 4 : INSTITUTIONAL AND COORDINATION ARRANG EMENT 4.1. Overall Institutional Arrangements 4.1.1. General 45 4.1.2. Project Oversight 45 4.1.3. Project Management 45 4.1.4. Information Kerala Mission (IKM) 46 4.1.5. Implementation Support 46 3 (i). Kerala Institute of Local Administration (KILA) (ii). Social Institute for rural Development (SIRD) (iii). Gulati Institute of Finance and Taxation (GIFT) 4.2. Specific Project Management Arrangements 4.2.1. Component 1 47 4.2.2. Component 2 47 4.2.3. Component 3 48 SECTION 5 : PROJECT PLANNING AND IMPLEMENTATION 5.1. Project Implementation Period 49 5.2. Project Imple mentation Schedule Summary 49-62 (Schedule showing activity timeline for each component for Phase -1 and Phase-2) SECTION 6 : PROCUREMENT ARRANGEMENTS 6.1. Applicable Procedure and Guidelines 6.1.1. General Guidelines 63 6.1.2. For procurement under Components 2, 3 and 4 63 6.1.3. Procurement Support to GPs and Municipalities 63 6.2. Procurement Risk/Mitigation Plan 64 SECTION 7 : PROCUREMENT MANUAL 7.1. General 7.1.1. General 7.1.2. Procurement Arrangements for Component 1 65 7.1.3. Procurement Arrangements for Component 2,3 66 and 4 7.1.4. Procurement Thresholds for KLGSDP 66 7.1.5. Procurement Plan and Procurement Arrangements 66 7.1.6. Selection of Consultants 67 7.2. Procurement Plan 67 7.3. Procurement Implementation Arrangements 67 7.3.1. Procurements by GPs and Municipalities- General 67 7.3.2. Monitoring and Oversight 68 7.3.3. Operating Costs 69 SECTION 8 : FINANCIAL MANAGEMENT ARRANGEMENTS 8.1. Financial Management 8.1.1. Financial Assessment 70 8.1.2. Budget Line Item in GoK Budget and Fund Releases 70 8.1.3. Fund Flows, Expenditures and Payments: − For Component 1 70 8.1.4. Fund Flows, Expenditures and Payments: 72 − For Components 2, 3 and 4 8.1.5. Disbursement Arrangements 73 4 8.1.6. Eligible Expenditures 73 8.2. Internal control 74 8.3. Audit Arrangements 8.3.1. Internal Audit Arrangements 75 8.3.2. Statutory Auditors and External Audit 75 8.4. Staffing 76 8.5. Allocation of Credit Proceeds 76 SECTION 9 : MONITORING AND REPORTING (Component 3) 9.1. Results Framework 77-83 9.2. Consolidated Project Summary Report 9.2.1. Physical Progress Report of GPs and Municipalities 82 9.2.2. Reporting 82 − Formal Training Report − GPs and Municipalities − External Reporting 9.2.3. PMU to World Bank 82 − Semi Annual Project Progress Report 9.3. Mid -term Review 83 9.4. Implementation Completion Report 83 SECTION 10 : DESCRIPTIONS OF THE RISKS (INTERNAL AND EXTERNAL AND MITIGATION FRAMEWORK 10.1. Operational Risk Assessment Framework 84 10.2. Detailed Economic Analysis of the Project 87 SECTION 1 1 : GOVERNANCE AND ACCOUNTABILITY POLICY 11.1. Anti-Corruption Guidelines 94 11.2. Governance Arrangements 99 11.3. Governance and Accountability Action Plan (GAAP) 100 SECTION 12 : ENVIRONMENT AND SOCIAL SAFEGUARDS MANAGEMENT FRAMEWORK (ESMF) 12.1. Introduction 104 12.2. Need for an ESMF 105 12.3. Overview of the Environment and Social Assessment 105 Study 12.4. Review of Enactments, Rules and Regulations on 106 Environment 12.5. Summary of the Review 108 12.6. World Bank’s Environment and Social Safeguards Policies 108 12.7. Review of Functions of LSGs and the Environment 108 Implications 12.8. Environment and Social Analysis of Development 109 Interventions 12.9. Environment and Social Management Framework 109 5 Table of Annexures Annexure Contents Page No. Annexure- I 1-24 GRANT OPERATIONS MANUAL A. Universe of GPs. 1 B. Block/Performance Grant Size 1 C. Grant Allocation Model 2 Allocation formula and funding levels D. Use of Performance Grant 3 E. Negative list of activities that are not funded under the Grant 3 F. Grant Disbursement Procedures 4 Phase 1 – Basic fiduciary Access Criteria 5 G. Model Resolution for Participating GPs and Municipalities 6 H. Performance Assessment Manual 7 I. Grant Award Allocation Cycle 8 J. Initial Grant Timelines (Phase1) 8 Project Process Timing for Years -1, 2, 3 and 4 K. General Grant Timelines (Phase 2) 9 Table 2 : Project Process Timing 10-13 L. Planning and Budgeting Cycle of LSGs in Kerala 14 Steps in the Planning Process 1.1. Preparation of Annual Plans 1.2. Pre-Gram Sabha/Ward Sabha Consultations 1.3. Conducting Gram Sabhas/Ward Sabhas 1.4. Development Seminar 1.5. Reorientation of newly formed LSGs 1.6. Preparation of Detailed Project Reports (DPRs) 1.7. Plan Finalization 1.8. Plan vetting by TAG 1.9. Approval by DPC 1.10. Post Approval Steps 1.11. General Co-ordination 1.12. Timetable for Finalization of Annual Plans M. Procurement System for GPs and Municipalities 21 N. Accounting System in GPs and Municipalities 22 O. Audit Arrangements in GPs and Municipalities 23 P. Reporting Audit Arrangements in GPs and Municipalities 23 Annexure- II : GP ANNUAL PERFORMANCE ASSESSMENT MANUAL 24 -35 1. Introduction 24 2. Overview of the Assessment Themes and Criteria 25 Table 3:Mandatory Minimum conditions and Annual 26 Performance Criteria by Key Performance Area 3. The Grant Cycle 27 4. Overview of the Assessment Process 28 5. Detailed requirements by Theme 28 Minimum scores required each year Theme 1 : Planning and Budgeting 6 Annexure Contents Page No. Theme 2 : Project Execution and Service Delivery Theme 3 : Accounting, Financial Reporting and Audit Theme 4 : Transparency and Accountability 6. The Assessment Report 34 7. List of GP documents to be consulted during the assessment 35 8. Retention of supporting evidence collected by the assessment team 36 Annexure- III : DETAILED COMPONENTWISE ANALYSIS OF BUDGET 37-43 Annexure IV : MOU BETWEEN PMU, LSGD - KILA, SIRD and GIFT 44-52 Annexure- V(A) & (B): TOR FOR INTERNAL & EXTERNAL AUDIT ORs 53-76 Annexure - VI : LIST OF GRAM P ANCHAYATS AND MUNICIPALITIES 77 -86 Annexure- VII : PROCUREMENT PLAN of KLGSDP FOR FIRST 18 87-95 MONTHS Annexure- VIII : PROCUREMENT MANUAL FOR GOODS AND SERVICE 96-120 AND CONSOLIDATION OF WORK RULES. Annexure- IX : MONITORING & REPORTING FORMATS 121-123 Annexure - X : FORMAT FOR SUBMISSION OF HALF YEARLY REPORT 124 Annexure- XI : FORMAT FOR SUBMISSION OF INTERIM UNAUDITED 125-133 FINANCIAL MANAGEMENT REPORT (IUFR) 7 INTRODUCTION I. Background 1.1. Kerala has a long history of Panchayati Raj (rural local government system). The evolution was by no means uniform across the state since some parts of the State were under princely rule and the rest under the British province of Madras. On July 1949 the Travancore-Cochin State came into being followed by Travancore Cochin Panchayat Act in 1950. Following this, Panchayat Delimitation Committees were formed. Based on their recommendations 542 Panchayats were formed, with their activities confined mostly to public works such as roads and buildings.