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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Water and Urban 2 Country Department 10 Africa Region Document of The World Bank IMPLEMENTATION COMPLETION REPORT (IDA-33300) ON A CREDIT IN THE AMOUNT OF SDR 8.1 MILLION (US$ MILLION EQUIVALENT) TO THE REPUBLIC OF GHANA FOR THE URBAN 5 PROJECT IN SUPPORT OF THE FIRST PHASE OF THE URBAN DEVELOPMENT PROGRAM December 30, 2004 Report No: 31037

2 CURRENCY EQUIVALENTS (Exchange Rate Effective November 17, 2004) Currency Unit = Cedi (GHC) GHC 1 = US$ US$ 1 = GHC 9,010 FISCAL YEAR January 1 December 31 ADRP AfD APL CAGD CAS DA DACF DCD DCE DFO GPRS HIPC IDA IGR ILGS KNUST LGDP LGPSU LGSA MA MLGRD MTDP MTR NDF O&M PAD PRSP PSC PSR RIAP SDR TTL UESP ABBREVIATIONS AND ACRONYMS Accra District Rehabilitation Project Agence Francaise de Développement Adaptable Program Loan Controller and Accountant General's Department Country Assistance Strategy District Assembly District Assembly Common Fund District Coordinating Director District Chief Executive District Finance Officer Ghana Poverty Reduction Strategy Highly Indebted Poor Country International Development Association Internally Generated Revenue Institute of Local Government Studies Kwame Nkrumah University of Science and Technology Local Government Development Project Local Government Project Support Unit Local Government Service Act Municipal/Metropolitan Assembly Ministry of Local Government and Rural Development Medium term Development Plan Mid-Term Review Nordic Development Fund Operations and Maintenance Project Appraisal Document Poverty Reduction Strategy Paper Public Services Commission Project Status Report Revenue Improvement Action Plan Standard Drawing Right Task Team Leader Urban Environmental Sanitation Project Vice President: Country Director Sector Manager Task Team Leader/Task Manager: Gobind Nankani Mats Karlsson Inger Andersen Charles K. Boakye

3 GHANA URBAN 5 CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 5 5. Major Factors Affecting Implementation and Outcome Sustainability Bank and Borrower Performance Lessons Learned Partner Comments Additional Information 17 Annex 1. Key Performance Indicators/Log Frame Matrix 18 Annex 2. Project Costs and Financing 23 Annex 3. Economic Costs and Benefits 25 Annex 4. Bank Inputs 26 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 28 Annex 6. Ratings of Bank and Borrower Performance 29 Annex 7. List of Supporting Documents 30 Annex 8. Borrower's Assessment of the Project 31

4 Project ID: P Project Name: URBAN 5 Team Leader: Charles K. Boakye TL Unit: AFTU2 ICR Type: Core ICR Report Date: December 30, Project Data Name: URBAN 5 L/C/TF Number: IDA Country/Department: GHANA Region: Africa Regional Office Sector/subsector: General water, sanitation and flood protection sector (31%); Sub-national government administration (24%); General transportation sector (23%); Agro-industry (15%); Other social services (7%) Theme: Municipal governance and institution building (P); Other urban development (P); Decentralization (P); Participation and civic engagement (P); Municipal finance (S) KEY DATES Original Revised/Actual PCD: 10/28/1998 Effective: 06/30/ /06/2001 Appraisal: 09/21/1999 MTR: 09/16/ /16/2002 Approval: 03/30/2000 Closing: 12/31/ /30/2004 Borrower/Implementing Agency: Other Partners: GOVERNMENT OF GHANA/MINISTRY OF LOCAL GOVERNMENT AND RURAL DEVELOPMENT Nordic Development Fund, Agence Francaise de Developpment STAFF Current At Appraisal Vice President: Gobind Nankani Callisto Madavo Country Director: Mats Karlsson Peter C. Harrold Sector Manager: Inger Andersen Letitia A. Obeng Team Leader at ICR: Charles K. Boakye Jagdish K. Bahal ICR Primary Author: Charles K. Boakye; James O. Wright 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: Sustainability: Institutional Development Impact: Bank Performance: Borrower Performance: S L M S S QAG (if available) Quality at Entry: Project at Risk at Any Time: No ICR S

5 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: As stated in the Project Appraisal Document (PAD), the objective of the project was to strengthen the technical, financial and management capacities of the 23 participating District Assemblies (DAs) and to finance the provision and/or rehabilitation of basic infrastructure. Ghana has 42 towns classified as urban settlements under the Local Government Act and the project had been preceded by four other urban projects that dealt with infrastructure and capacity constraints in the largest seventeen urban settlements. The Accra District Rehabilitation Project (ADRP) supported infrastructure investment in Accra in the late 80 s and early 90 s. The Urban II Project and the Urban Environmental Sanitation Project (UESP) supported improvements in the five largest cities, while the Local Government Development Project (LGDP) supported the next twelve secondary towns, all in the late 1990 s and early 2000 s. The twenty-five remaining urban settlements, located in 23 DAs, contained a large percentage of Ghana s urban poor and had received little donor attention, due to their limited sizes and remote locations. The Urban V project was to be the first phase of a three-phase Adjustable Program Loan (APL) planned for the urban sector in Ghana over a period of eleven years. Each phase was to constitute a separate project with its own credit agreement, but all three shared a common objective. This Phase 1 project, covering three years, was to strengthen the technical, financial and management capacities of the 23 participating DAs and to finance the provision of a limited amount of basic infrastructure. Phase 2, with similar objectives, was to strengthen and deepen the capacity building initiatives of Phase 1 and provide basic infrastructure to participating DAs on a demand-driven basis. It would expand to an additional 12 secondary towns, and continue to provide training and technical assistance. Phase 3 was to continue to finance infrastructure and training needs and capacity building in all 39 urban cities and towns in Ghana on a demand-driven basis. The project supported two of the goals of the Country Assistance Strategy (CAS) for Ghana of September 4, 1999, namely: (i) to promote private investment, and ii) to alleviate poverty. The goals were to be supported by improving basic infrastructure and services, involving private contractors and strengthening the management of local governments. The objectives were also in accordance with the Government s priorities of infrastructure provision in urban areas through decentralized services management under the constitution of the second Republic of Ghana (1992), and the Local Government laws (1988 and 1994). 3.2 Revised Objective: The project objectives were not changed. 3.3 Original Components: The project consisted of five components: COMPONENT 1: Training for DAs - US$1.13 million This component provided training in planning and management, including: (a) infrastructure management (procurement and management of consultants and contractors); (b) maintenance management (development of maintenance programs); (c) management of private contract maintenance; (d) updating and monitoring development plans; (e) financial management; (f) revenue mobilization; and (g) property tax improvement. DA staff members were to be trained to involve the communities in planning and prioritizing needs. No set - 2 -

6 amount was reserved for a particular DA. DAs were to be provided training as requested. COMPONENT 2: Strengthening Financial Management - US$0.92 million Technical assistance was tailored to enhance the planning, management and resource mobilization capacities of the DAs. This included: (i) strengthening financial management capacity using Revenue Improvement Action Plans and establishing financial management systems; and (ii) property revaluation following the completion of the mapping exercise. These activities were to be managed by the Local Government Project Support Unit (LGPSU) involving studies and consultants and covering each of the 25 towns. COMPONENT 3: Mapping - US$3.43 million This was to be financed by the Nordic Development Fund (NDF), producing digital and printed base maps for all 25 towns and building capacity in the Survey Department Head Office, eight regional survey offices and the 23 DAs to make information more available for planners, engineers, providers of utility services, land valuation officers, revenue collectors and title registrars. This activity was to be carried out in phases over the 11 year APL program period. During this project, printed and digital maps would be developed for all 25 towns for use by the eight professional surveyors located in the capitals of the regions covered by the project (Ashanti, Brong-Ahafo, Central, Eastern, Greater Accra, Northern, Volta and Western regions). Computer-based digital mapping equipment was to be installed in one pilot region (Brong-Ahafo). COMPONENT 4: Infrastructure and Municipal Services Sub-Projects - US$12.90 million This was to finance infrastructure investments including (a) water supply; (b) liquid waste management; (c) solid waste management; (d) roads and footpaths; (e) storm drainage; (f) security lighting; (g) markets; (h) lorry parks/transport terminals; (i) community infrastructure upgrading; and (j) slaughterhouses. Sub-projects were to be demand-driven, reflecting the highest priorities of the communities themselves by involving them in the planning process. Road projects under this component were to be co-financed by the French Aid Agency (AfD). COMPONENT 5: Project Implementation Support - US$2.02 million This was to help the DAs to perform their responsibilities to develop local infrastructure. The overall responsibility for the implementation of the project was with MLGRD. The Local Government Project Support Unit (LGPSU) in the Ministry of Local Government and Rural Government (MLGRD) was to provide project management and implementation support to the DAs. LGPSU was to operate with a core team of 8 specialists, 4 in Accra and 4 in the field office (2 engineers, 2 finance specialists, 2 training administrators and 2 planners) to support technical and institutional development and capacity building in the DAs. The eight specialists would be provided for a three-year period, as well as operational support to LGPSU including vehicles, equipment, and financing other operating costs. The position of Project Director (PD) was to be funded under the on-going Local Government Development Project. CONTINGENCIES: (physical and price) - US$1.9 million Assessment of Components The design of the components was appropriate for achieving the project objectives, especially with the weight given to local capacity building in Component 1 and to technical assistance to DAs in Component

7 It addressed the risk of implementing financial management systems in the local governments, and focused on eight pilot towns, one in each region. However, the selection process based on geographical spread (one town per region) was questionable, as some DAs that wanted to participate in the project could not be selected, and others that were less enthusiastic were selected. Component 3, wholly financed by NDF, was critical for enabling proper planning, revenue mobilization and infrastructure investments during subsequent phases of the program. Component 4 gave each of the 25 DAs the opportunity to learn by doing contract management and administration for at least one infrastructure subproject. The component was necessarily broad to allow a flexible response to demand, and it included the preparation of a second set of sub-projects for financing under the next phase of the program. AfD contributed about 70% of the funding for this component, focusing on road projects in 10 towns. 3.4 Revised Components: The components were not changed. However, about US$2 million was used to procure waste management equipment at the request of the DAs and the MLGRD. It was procured from funds earmarked for the second set of subprojects and savings from project components, with concurrence from the Bank. 3.5 Quality at Entry: Quality at entry is rated as satisfactory. The project objective was consistent with the Government s strategy for the urban sector. Under the Local Government Act of 1993, Ghana s Metropolitan, Municipal and District Assemblies had already been given the status of autonomous local governments with legislative and executive powers within their areas of jurisdiction, and the power to approve budgets, raise revenue, borrow funds, and provide infrastructure and basic services. The Local Government Service Act was to grant autonomy to DAs to recruit, retain and manage their staff. The government evidenced its commitment to the project and to the longer-term program during preparation. The Minister of MLGRD announced the Government s commitment to the project and used funds from the LGDP to assess the needs of the 25 secondary towns. This was reviewed during the first project preparation mission in April This commitment was reflected in a letter elaborating an eleven-year program on the goals of the urban sector, in lieu of a revised urban sector strategy. The Adaptable Program Lending (APL) tool and the demand-driven approach were expected to generate development incentives and flexibility. The project and program design enabled the DAs to progressively meet development objectives as country conditions and partnerships evolved, with defined milestones, performance indicators, and triggers for moving from one phase to the next. Both supported development and reform of the sector, with institutional development and an incentive system for the DAs. The previous urban projects, which had been implemented satisfactorily in the largest towns, provided a good body of experience and lessons that were taken into account during project preparation. The project also benefited from project unit staff members who had been involved in the implementation of the previous projects. Key project staff in each DA attended short training courses during the preparatory stages and prior to effectiveness to build capacity for early-learning activities in project budgeting, accounting, consultant selection, procurement and development planning. An overall environmental assessment was carried out prior to appraisal. The potential environmental and social impacts were adequately assessed. Most of the works were small and had a low potential for negative environmental impact, with the exception of the waste disposal sites, which were located away from settlements. Moreover and in accordance with Ghana EPA laws, an Environment Impact Assessment (EIA) was mandatory as part of the design and construction of projects with environmental impact

8 A delay in effectiveness slowed some of the momentum gained in preparation. The project was negotiated in February 2000 and approved by the Bank Board in March 2000, but there was a 14-month delay before effectiveness due to elections in December 2000, delays in parliamentary approval and the recruitment of the auditor for the project. The delay, however, did not affect initial procurement activities, which proceeded with funding from LGDP. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The overall outcome of the project is rated as satisfactory, in view of the achievement of the development objectives and of the activation of most of the triggers established to move the APL to its second phase. Strengthening the Technical, Financial and Management Capacity of District Assemblies Capacity Building - Capacity building through training was the main goal of the project and the project outcome has broadened the perspective of the staff of the Assemblies. The project contributed directly to the strengthening of technical, financial and management capacities in the 23 participating DAs. At the end of the project, all 23 DAs had a full team of key technical, financial and management staff in place (Annex 1B), compared to 60% staff capacity before the project. In effect, all the Assemblies have District Engineers, Planners and Finance Officers. The project actually required the DAs to have personnel in place as a condition for drawing funds for subprojects under the next phase. About 2,200 staff members in the 23 DAs improved their skills in planning, management, consultant supervision and works procurement and supervision, financial management, revenue improvement, municipal engineering and information technology. Personnel in the DAs have used these skills during project implementation. A Training Impact Study was carried out at the end of the project that concluded that the training program has improved capacity, both individual and organizational. The DAs and their staff now have tools to establish strategic perspectives within the decentralized local government administrative system. The study indicated that training has achieved behavioral change as well as skills transfer. Courses in computer use, financial management, revenue mobilization, project management, communication and interpersonal skills had a substantial impact on senior management, and they helped to improve teamwork among staff. Most of the participants (up to 98% in one group) expressed satisfaction with the overall organization of the training regarding the delivery, facilitation, course contents learning materials, and logistics. Individuals most positively affected were the District Financial Officers (DFOs), District Budget Officers (DBOs) and the Deputy District Coordinating Directors (DDCDs). The groups whose effectiveness was most positively impacted were the works departments, tender boards and committees, district evaluation teams and finance units. Improved intra and inter departmental relationships, better teamwork and improved team performance were cited as key impact areas. Data gathered suggests that the training had a lesser impact on DCE and DCD s as individuals. This could be attributed to their inability to actively participate beyond the opening and closing sessions. DCEs and DCD's are the political and administrative heads respectively of the District. All 23 districts reported increases in locally generated revenue as a result of the improved capacity of revenue collectors, supervisors and finance staff, and increased use of computers by finance units. In 2000, only three DAs had Internally Generated Revenue (IGR) of more than half a billion cedis ($130,000), but by 2003, all with the exception of two DAs, had exceeded that mark, some by more than tenfold. In aggregate, total revenues of the 23 DAs increased by 11% in 2001 over the previous year. In 2002, they grew much faster, posting a gain of over 60%. Although the rate of increase declined to 54% in 2003, the - 5 -

9 performance of the previous year helped achieve an average growth rate of 55% during the period 2001 to 2003, while annual inflation averaged 15% during the period. The increased internal revenues have enabled DAs to undertake more development projects. Though this is only 20% of participating DAs current total revenues, the remaining 80% being grant transfers from DACF, HIPC, GET fund, the stage has been set for more rapid increases in the DAs revenues over time. All 23 districts documented a timely submission of financial reports due to computer usage and improved staff capacity. More than half of the districts reported improvement in communication and information flow between the DA staff and units, departments and the public, improved responsiveness of DA staff to public and assembly-persons, and improvement in contracting and execution of projects. The maps produced will support land-use and infrastructure planning, revenue mobilization through property rating, and future title registration. The maps will promote proper development control and reduce the spread of slums and urban sprawl. The maps are essential to enable land users, planners, engineers, land valuers, and providers of utility services to carry out their work properly. Strengthening Capacity Building Institutions - A new Local Government Service Act, one of the triggers for moving to the next phase was enacted in conjunction with this project in early 2004 to give the DAs the autonomy to recruit, retain and manage their own staff. In line with the Decentralization program, the Act places civil servants working for local governments on a separate roster and enables DAs to participate with the Central Government in decision-making regarding human resource development in the District Assemblies. Parliament has also passed an act establishing an independent Institute of Local Government Studies (ILGS) to support district assemblies training programs, and initial training programs have been undertaken. The Inspectorate Department of the MLGRD is also in a better position to monitor the financial performance of DAs by facilitating the processing of monthly financial returns and improving coordination between MLGRD and the Controller and Accountant General s Department (CAGD). The reporting of the assemblies revenue and expenditure programs has since improved. According to DFOs, due to computer and financial management training and usage, trial balances that took three to four months to prepare, are now prepared within one month. Manuals have been prepared on the existing financial management systems in all participating DAs and recommendations have been made for improvement. A major outcome of the study is the awareness in participating districts of the inadequacies of the existing systems and the potential for improvement. Rehabilitation of Basic Infrastructure Assemblies implemented priority infrastructure projects which, in addition to their direct benefits to communities, provided an opportunity for learning-by-doing. About 65% of the total project funds was spent on infrastructure improvements that included town roads and drainage (42%), general environmental and waste management improvements (18%), and market and lorry park rehabilitation (15%). There are improved sanitary conditions, greater accessibility, and better solid and liquid waste collection enabled by the provision of cesspit emptiers and skip trucks. Roads financed by the AfD roads have opened up isolated areas of the towns, improved traffic conditions and helped to improve social conditions. The improved roads are leading to increased property values, ultimately increasing the potential for increased property tax revenue. A number of skilled and unskilled laborers were temporarily employed from over 38 civil works contracts that were awarded. An unspecified number of low-income people, including traders and commuters who did not have access to proper sanitation benefited from latrines built in markets, lorry parks and other public areas. While a gender objective was not explicitly stated, women benefited more from improved working environment and health conditions at the markets and lorry parks

10 4.2 Outputs by components: Component 1 - Training for DAs (US$1.13 million PAD; US$0.85 million ICR) The output under this component is rated as highly satisfactory. Out of the target of 2,220 training days forecast in the PAD, the project achieved 92% of the planned target, or 2,036 training days. This exceeds the 70% target established as the trigger for moving to the next phase of the program. The training included 1911 days of outreach and coaching courses carried out in the 23 beneficiary districts and 125 training days of courses held in ILGS and KNUST. This performance, after initial delays, was possible because of the shift from centrally delivered courses to district-based outreach and coaching courses. As shown in Table 1 below, out of the targeted 2036 training days, 512 days (23% of the target in the PAD) were hands-on coaching, while 1394 days (63%) were outreach courses, while about 5.6% were for centrally delivered courses. DAs have confirmed that this combination of coaching and field work enhanced knowledge and skills in the DAs (see Section 4.1). Table 1: Training Days Delivered Compared to Planned Targets Planned Mode of Delivery Training Days planned Target (70% of planned) Training days Delivered Training Days Delivered (%) DA Hands-on Coaching % (23%) DA Outreach Courses % (63%) Centrally delivered courses by ILGS and KNUST % (6%) Total % (92%) Course structure of Assemblies training program Table 2 presents the number of attendances and training days per skill area recorded in the DAs under the Hands-On and Outreach Program. The total number of attendances recorded in the 23 beneficiary districts through district-based training courses (i.e. outreach and hands-on coaching) was 4,681. Attendance was preferred as the unit of measurement over number of trainees, because the same trainees attended more than one course. Table 2: Attendance and Training Days by District-Based Training (centrally-based training excluded) Skill Areas No. of Attendances % of Total Attendances No. of Training Days (Actual) 1 Development Planning % % 2 Engineering & Contract Management % % 3 Financial Management & Revenue Mobilization % % 4 Computer Skills % % 5 Human Resource & People Management % % Skills TOTAL % % % of Total Training Days (Actual) Training in computer skills received the most attention (886 days, 46.4% of the total number of

11 training days) in the districts, though it covered the least number of attendance (308 out of 4,681 or 6.5%). Training in Financial Management recorded the least number of days, 172. Additional training was carried out after the completion of the financial management systems. Courses in leadership, human resource development, and people management skills were carried out for 1,351 people. A total of 125 days of training was provided in centrally delivered courses run by the ILGS (85 training days) and KNUST (40 training days) to build capacity in the planning and management of sub-projects (planning, engineering and financial management). These centrally-based courses brought DA personnel together to gain a shared understanding about World Bank procedures and project implementation skills. In order to contribute to the development of ILGS as a long-term provider of quality training, the Institute received an administrative fee of 15% of the cost of each training activity that it delivered, which covered overhead expenses, such as equipment, facilities and operational support. ILGS signed 6 contracts to deliver courses at a cost of $357,178. Component 2 Technical Assistance (US$0.92 million PAD; US$0.68 million ICR) The output under this component is rated as satisfactory. The studies for the improvement of the financial management systems were completed, and recommendations were made for improvements in the assemblies systems. Guidelines and operational and training manuals were prepared to support the establishment of financial management systems in the assemblies. The financial management and revenue enhancement subcomponents (including property revaluation) were to be implemented in the second phase of the three-phased APL program. However, with the cessation of the program, the MLGRD and DAs have set up a committee to follow up on the recommendations and solicit support from other donors for implementation. During the installation of computerized accounting and revenue management systems in eight pilot DAs, it became clear that the number of transactions was so high that processing was slow and cumbersome. Moreover, with the accounting system and revenue management system on two different computers there were problems with reconciliation. The system was consequently expanded to a local area network (LAN), with the procurement of three additional computers to support the system in each pilot DA. A Revenue Improvement Action Plan (RIAP) study was also completed and the recommendations adopted by DAs. Useful recommendations have been made that would enhance not only Urban V project DAs, but also all other DAs in the country. The recommendations included policy reforms for the revenue departments to enhance resource mobilization. Component 3 - Mapping (US$3.43 million PAD; US$3.71 million ICR) The output under this component is rated as moderately satisfactory. The start-up of this component, financed by the Nordic Development Fund, was delayed by almost one year because of the reconstitution of the Central Tender Board after the December 2000 elections. The NDF Credit was signed two years after the IDA Credit, and the implementation of the component lagged about one year behind the IDA-financed components. The NDF credit has been extended by one and a half years, to December 31, 2005, to enable completion of the mapping and capacity building in the Survey Department. The targeted coverage for the mapping was 750 sq. km. but about 2000 sq. km. of large-scale maps (1:2500) will be produced for all 25 towns. The additional 1,250 sq. km. cover the undeveloped areas of the towns to enable future planning. The maps, which will be delivered in both digital and printed form, will be used for infrastructure planning and revenue mobilization. The component was implemented by - 8 -

12 both foreign and local private sector contractors under the supervision of the Survey Department. The planned installation in the Brong-Ahafo regional office of the Survey Department (SD) of digitized plotter and other facilities to support map maintenance on a pilot bases is not yet completed. Formal training and refresher courses for the SD staff is also ongoing. The NDF had approved US$10.83 million for 11 years under the 3-phased Urban V program to support surveying, mapping and titling for the DAs and the land agencies. This comprised US$3.43 million under Phase 1, US$3.0 million under Phase 2, and US$4.4 million under Phase 3. Since the Bank decided not to continue with Phases 2 and 3 of the APL, NDF has also decided not to proceed further. NDF has indicated that the balance of $0.9 remaining from the procurement could be used for activities that should have been carried out under Phase 2. Component 4 - Infrastructure and Municipal Services (US$12.90 million PAD; US$16.51 million ICR) The output under this component is rated as satisfactory. This component was intended to enable each DA to learn by doing contract management and administration by financing at least one infrastructure subproject in each of the 25 towns. Each town has implemented at least one infrastructure works contract costing about US$250,000 per town, somewhat more than the original allocation of US$200,000 due to additional works. A total of $6.5 million was spent on 38 IDA-financed sub-subprojects. These included i) 10 km of access roads and 5 km of drainage works, ii) rehabilitation of 5 markets and lorry parks, iii) construction of 64 public toilets and rehabilitation of 9 toilets, iv) extension of water supply services v) improvement of liquid and solid management works, and vi) construction of slaughter houses. In general, quality of work was satisfactory, and there was regular monitoring of contractors and consultants performance to ensure correct application of contract conditions. Three contracts, two in Savelugu and one in Agogo were however, terminated for non-performance. The works were repackaged and re-awarded through selective tendering and have been completed. All DAs procured consultant services for contract supervision, except for one that used its own personnel for supervision. AfD funded roads (US$6.00 million PAD; US$9.42 million ICR). The 50% increase in the loan amount (Euro 8 million) in US$ terms was due to the depreciation of the US$ with respect to the Euro. The actual AfD financed road subprojects was US$9.42 million, implemented in 10 of the 25 towns, with an average final cost of US$800,000 per town. About 28 km of town roads and 5 km of storm drains were constructed or rehabilitated. AFD funded 100% of the works, and the participating districts funded supervision services from the DA s matching funding contribution. In addition to funding the road subprojects, AfD also provided technical assistance to the MLGRD and LGPSU costing US$1 million. The AfD loan closes in December Component 5 - Project Implementation Support (US$1.93 million PAD; US$3.55 million ICR) The output under this component is rated as satisfactory. Local Government Project Support Unit: Staff in LGPSU identified weaknesses in the technical capabilities of DA staff, especially in works departments, and recommended the recruitment of additional staff where necessary. Staff participated in hands-on coaching on contract administration and management, construction supervision and management, maintenance planning, scheduling and costing. LGPSU was responsible for facilitating, managing, monitoring and reporting on project activities. It was also responsible for procurement of the technical assistance component. Eight professional staff were originally planned to assist the DAs with implementation (two engineers, two planners, two training administrators and two finance officers). However, only six were hired. These staff members were initially - 9 -

13 split between the Accra and Kumasi offices, to assist DAs in the southern and northern sectors respectively. Eventually staff in Kumasi moved to Accra. Three professional staff members from MLGRD were seconded to the project unit as counterpart funds. Support to DAs: DAs each received one vehicle, one motorcycle, one personal computer, and US$3,600 for operating costs. In all, 23 pickup trucks and 23 motorbikes were procured for each of the DAs at a cost of $0.5 million. Twenty-six additional computers for networking were procured for 8 DAs. Waste Management equipment: After a request by the MLGRD and DAs, 23 cesspit emptiers, 20 skip trucks, 20 covered containers and 180 open containers were delivered to the assemblies to assist in the collection and disposal of DAs liquid and solid waste. The $2 million equipment cost was agreed during project implementation and the funds were obtained from the amount set aside for second set of sub-projects and savings from project components. As a condition for the use of funds, MLGRD agreed that each DA would adopt a maintenance agreement before the equipment was delivered. However, this condition was not invoked. Performance Indicators and Triggers There were fourteen Performance Indicators listed for the project (see Annex 1 B). Four of the indicators were related to project outputs at the DA level, three were related to output at the project management level, five were related to planning and management practices expected in place in the districts, and the remaining two were related to policy reforms at the central government level. All the indicators were closely related to achieving project objectives. At closing, twelve out of the fourteen target indicators were achieved, and seven out of nine triggers which had been established as conditions for proceeding to the next phase of the APL program were met. This achievement would have qualified the project for moving to the next phase of the Urban V program. The two targets that were not achieved relate to Operation and Maintenance. The last indicator i) O&M funds are established for all approved Subprojects, and (b) an initial deposit of at least 3% of Subproject costs is made (50% by the DA and 50% by IDA) was not achieved because all the subprojects were completed in the last year of the project. However, the O&M funds were due one year after completion of the subproject. With respect to the twelfth indicator, Annual routine maintenance budgets for all DA infrastructure are prepared and are sufficient to cover needs estimated in annual maintenance programs in at least 60% of DAs), information on all Assembly infrastructure could not be determined to allow accurate assessment of their maintenance needs. 4.3 Net Present Value/Economic rate of return: ERRs were not calculated due to the small size of the sub-projects, the difficulty of quantifying benefits ex ante the lack of experience at the local level. A methodology for economic analysis of typical sub-projects was established during the project for the investments that would have been undertaken during Phase 2 of the APL. However, the subsequent phases have been cancelled to allow for other priorities in the CAS. The methodology remains available for future urban development projects. Resources are available in the CAS to assess the linkages of urban and rural development. 4.4 Financial rate of return: Not Applicable 4.5 Institutional development impact: As reflected in the Training Impact Study (see Section 4.1), many departments in the DAs have been

14 strengthened through formal and on-the-job training. Some profited more than others. Groups most positively impacted were works department, district tender boards, district evaluation teams and the finance units. Improved intra- and inter-departmental relationships, better teamwork and improved team performance were also cited as areas where institutional development took place. However, opportunities to use and to further develop the new skills are not fully in place, and the lack of continuance of the subsequent phases of the APL may adversely affect the maintenance of skills and the retention of some staff. A new Local Government Service Act has been passed to govern the recruitment, retention and management of DA staff. Its implementation within the DAs will start soon. The project also provided support to the ILGS through its training and institutional development program. The ILGS has developed during the project (see Section 4.2). Parliament has passed an act establishing the ILGS to support managerial, administrative, financial and operational efficiency of organs and units of local government. The Inspectorate Department of the MLGRD has been strengthened with the procurement of transport and communication equipment, and reports on the DAs financial performance are now generated on time. DAs are in a position to increase their internally generated revenue (IGR) as a result of the training provided under the project and of the RIAPs and FMS studies that have been carried out. The actual impact will also depend on the ability of the Government institutions to oversee the revenue generation and capacity building efforts. The new financial management system introduced in eight pilot DAs already helped improving their financial performance. Maps to be delivered to DAs will support long term planning and property revaluation system, and also enable planners, engineers and utility agencies to function properly. On balance, the institutional development impact of the project is rated as modest. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: In February 2004, a decision was taken to remove the Urban V program from the CAS 2004 to This decision affected the momentum and enthusiasm that the DAs had gained on the project and the preparation made towards their participation in the next phase of the program. The Urban V program, originally foreseen under the APL was terminated for several reasons. First the new CAS sought to re-balance investment lending and budget support operations. Second, the multiplicity of operations dealing with the district assemblies called for mainstreaming support at this level. Finally, the decision was also taken to allow the Bank time to take stock of the urban portfolio and consider other priorities, including harnessing the potential of the urban growth agenda, urban linkages with the rural development sector, and harmonization with other partners though an ESW on Urban and Cities Growth Study, which remains in the CAS. This could provide the basis for future initiatives in the urban sector with available funding, and guide further reforms in urban development and local government administration. 5.2 Factors generally subject to government control: All the District Chief Executives were changed in 2001 after the new Government took over the administration of the country at the beginning of the year. The new Chief Executives attempted to change the priorities that had been agreed upon by their predecessors, causing some delay in implementing subprojects. The financial capacities and performance of DAs depended to a great extent on the fiscal relationship between the central and local governments. However, there was no clear direction from the MLGRD to

15 lead the various resource mobilization efforts. This work under the project was assigned to consultants. More effort could have been made to establish a financial management system satisfactory to Government and the requirements of donors. 5.3 Factors generally subject to implementing agency control: Good progress was achieved on the project despite its effectiveness delays and short implementation period of three years. This was due in mainly to the work of the implementing agency. Staff coached DA personnel on contract management. Monthly monitoring meetings improved the performance under the project. Action was taken to ensure that funds in the DAs accounts were in order prior to closing. Though the unit successfully monitored the DAs accounts, staff of the accounting and engineering departments did not regularly coordinate their work resulting in weak financial planning and forecasting. Out of 38 contracts awarded under the project for completion in 6 months, only three were completed on schedule. The rest were delayed for periods of up to eight months, and three were terminated. Though there were legitimate reasons for extensions in some cases, generally, there were inadequate incentives for contractors and supervising consultants to complete construction on time. Contract provisions, such as liquidated damages, were not enforced, and payments to contractors were sometimes delayed. Attempts were made to establish monitoring systems to supervise the performance of contractors and consultants, but this was not adequately followed up on by LGPSU. 5.4 Costs and financing: The project cost at appraisal was estimated at US$22.30 million equivalent. Out of the cost, US$10.83 million was to be financed by IDA, US$6 million (Euro 8 million) by AfD, US$3.43 million by NDF, US$0.34 million by GoG, and US$1.53 million by the District Assemblies. At closing, the actual amounts had increased to US$25.30 million, made up of US$11.23 million disbursed from the IDA credit, US$9.42 million provided by AfD, US$3.6 million by NDF, US$0.34 million by GoG and US$0.59 million by the DAs. The increase in project cost was due to: i) the depreciation of the US dollar with respect to the SDR resulting in a US$0.4 million increase from IDA, ii) an increase in the NDF credit of US$0.17 million (to US$3.60 million), and iii) an increase in the AfD contribution from US$6.0 million to US$9.42 million due to the depreciation of the US$ against the Euro. IDA funds were 99.98% disbursed, with only US$1,296 remaining undisbursed, subject to cancellation. The 60% reduction in the counterpart fund contributions by the DAs was the result of AfD s decision to finance 100% of the cost of road subprojects. The DAs also deducted a 7.5% tax from contractors certificates in lieu of matching funds. The actual cost of most of the goods procurement was below appraisal estimates. Savings were made on procurement of vehicles, computers, and motor cycles. As stated in Section 4.2, an amount of $1.5 million was set aside for a second set of sub-projects and savings from project components were used to procure the waste management equipment. About $850,000 was used from the training budget of $1.3 million. The DAs operated an Urban V Advance Account in US dollars that received IDA s share of financing for subprojects, and payments below $50,000 were made from the account. This was the first time DAs received IDA funds directly in foreign currency. It was designed in this manner to stabilize the purchasing power of Assemblies funds, as a result of constant depreciation of the Cedi. As it turned out, the Cedi was relatively stable during implementation, depreciating by an average of 8% with respect to the US dollar. All 23 Advance Accounts were fully recovered at the closing of the credit. 6. Sustainability 6.1 Rationale for sustainability rating:

16 Despite the curtailment of the Urban V program, the sustainability of the phase 1 of the Urban V program is rated as likely. There were sustainable improvements in capacity and understanding by DAs of their roles and responsibilities, particularly in planning, budgeting and financial management, and contract management to manage their own investment programs. Improved project management was introduced into the managerial and technical structures of each DA, which in turn has improved the capacity of DA personnel. No parallel implementation structure was established in the DAs for the project. The staff of the DAs gained improved understanding of their roles in planning, procurement, contract management, and revenue mobilization that should endure. However, some staff turnover will occur as a result of low remuneration. The LGSA (Section 4.1) that will grant DAs the authority to recruit their own staff is in place, and the Public Services Commission has improved the posting of professional staff to the DAs. The Controller and Accountant General s Department (CAGD) also trains and posts finance officers to the DAs and will continue to do so. Despite problems in the implementation of civil works contracts, private sector contractors have gained experience through constructing civil works, and the opportunity has been created to involve them in maintenance. Contractors are now more able to implement the DAs own development projects. DAs revenue mobilization has increased under the project. DAs now have the capacity to prepare investment plans and implement projects, and this is likely to continue with the increase in DAs investment funds. Grant transfers available to the DAs have also increased substantially in recent years, largely through District Assembly Common Fund (DACF), donor-assisted projects, Highly Indebted Poor Country (HIPC) funds and Ghana Education Trust (GET) fund. The inability of the DAs to establish their own O&M funds does not mean that the financial resources will not be available for maintenance. Those accounts were expected to be set up one year after the completion of the subprojects. In fact, most DAs were not in a position to set up the accounts because almost all their subprojects were completed late in the project period. DAs run their own maintenance accounts, which should provide some limited resources for maintenance. 6.2 Transition arrangement to regular operations: The project contributed to enhancing critical institutional reforms and activities. ILGS and LGSA are more fully integrated into the MLGRD and DAs. Most of the project components are under the management of the DAs. Some of the key elements of the national support system have not yet been sufficiently internalized by MLGRD, especially the financial management and revenue mobilization aspects. The Ministry has established a committee to follow up on existing recommendations and to request support from donors. 7. Bank and Borrower Performance Bank 7.1 Lending: The Bank's lending performance is rated as satisfactory. The project was originally conceived as a traditional, centrally-implemented project to provide infrastructure to secondary cities. However, due to the level of capacity in the DAs, it was redesigned as a three-phased APL. Bank missions introduced a more challenging concept of building implementation capacity in the DAs, which had limited technical capacity and managerial experience. Sub-projects were to be demand-driven by DAs and implemented by DAs. The Bank team provided critical expert inputs and recommendations to the borrower and worked closely with them on all aspects of project preparation. 7.2 Supervision: The Bank's supervision performance is rated as satisfactory

17 There was only one task team leader for supervision during the project, who was based in the Country office. This ensured continuous follow-up and monitoring of the project. Other Bank staff members from Washington and the Country Office also contributed to supervision. A contract management specialist (CMS) was regularly engaged for implementation review to check each contract and recommend improvements in implementation. The CMS visited at least half of the DAs on each visit and made recommendations to improve, inter alia, the quality of work of contractors, the quality of supervision, and the application of the price adjustment formulae. A training specialist was also engaged regularly who visited DAs and recommended ways to improve the development effectiveness of the component. The Bank could have done more to prevent the 17 month delay in project effectiveness with better forward planning of outstanding activities. Although it was an election year, the team should have encouraged the borrower to appoint the auditor sooner, which was a condition of effectiveness. The decision by Bank management to discontinue the second phase of the APL three months before the closing of the project affected momentum in the DAs and the LGPSU. The supervision missions of Phase 1 had originally been planned to coincide with the preparation missions of Phase Overall Bank performance: Because of the innovative design of the project, adapting earlier urban development experience in Ghana to a large number of small local governments, and the Bank s consistent follow-up during supervision, the overall Bank performance is rated as satisfactory. Borrower 7.4 Preparation: The Borrower's performance during preparation is rated as satisfactory. The Government prepared the project in a fairly short time. It shaped a project involving the small DAs that had not been involved in previous urban development initiatives. The borrower and DAs took up the challenge to prepare and test an innovative project involving a large amount of outreach to smaller towns and the innovative APL concept. 7.5 Government implementation performance: On balance, the Government's implementation performance is rated as satisfactory. The project commenced after the change of Government in early The new Government took charge at both the DA and Ministry levels, and assigned the project to a new Deputy Minister. New District Chief Executives (DCEs) were appointed in 2001 at the time of effectiveness, which gave impetus to the project, but they tried to change some of the priorities of the subprojects. The Government was less committed during implementation than during preparation. Critical decisions were often left with the implementation unit, possibly due to the rapid turnover of Chief Directors at the ministry who needed time to become familiar with the project. There were four Chief Directors during project implementation. There was an eight-month delay in signing contracts under the NDF credit because Central Tender Board was not in place to approve the contracts. This delayed the mapping component. The Mid-Term Review was held only 14 months after effectiveness. At that time deficiencies in the management of the project unit were identified. An action plan was agreed upon with the Ministry, and monthly meetings were instituted to monitor progress. The meetings, chaired by the Minister, Deputy Minister or the Project Director throughout the rest of the project, greatly helped to improve the management of the project. The Government did well in achieving twelve out of the fourteen indicators, and seven out of nine triggers that were conditions for proceeding to the next phase of the APL program were met