Pakistan. SPPAP supervision report. Supervision report. Main report and appendices

Transcription

1 Supervision report Main report and appendices Mission Dates: March 217 Document Date: Project No. Loan PK-825 Report No: 4434-PK Asia and the Pacific Division Programme Management Department

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3 Supervision Report: March 217 Contents Abbreviations and acronyms v A. Introduction 1 B. Overall assessment of SPPAP implementation 1 C. Outputs and outcomes 2 D. SPPAP implementation progress 5 E. Fiduciary aspects 6 F. Sustainability 12 G. Other and Lessons Learnt 13 H. Conclusion 15 List of Tables Table - 1: Summary of Physical Targets & Achievements (Livelihood Enhancement) 3 Table - 2: Summary of Physical Targets & Achievements (Agriculture & Livestock Development) 5 Table 3: Performance against Annual Budgets 7 Table 4: Disbursements from the IFAD (Additional Loan) 9 Table 5: Expected Cumulative Disbursements 9 Table 6: Reconciliation of the Designated Account (Original Loan) 9 Table 7: Reconciliation of the Designated Account (Additional Loan) 1 Table 8: Government of Punjab Contribution since Project Start 1 Table - 9: Summary of main recommendations on fiduciary aspects 12 iii

4 SupervisionReport: March 217 Appendices Appendix 1: Summary of project status and ratings 16 Appendix 2: Updated logical framework: Progress against objectives, outcomes and outputs 18 Appendix 3: Summary of key actions to be taken within agreed timeframes 221 Appendix 4: Physical progress measured against AWP&B, including RIMS indicators 23 Appendix 5: Financial: Actual financial performance by financier; by component and disbursements by category 25 Appendix 6: Compliance with legal covenants: Status of implementation 28 Appendix 7: Knowledge Management: Learning and Innovation Error! Bookmark not defined.9 Appendix 8: Audit Log 3 Annexes: Annex-I: Actiontakenon the recommendations of thelast SupervisionMission 36 Annex-II: Testing of Replenishment Withdrawal Applications and Soes (October 215 to January 217) 37 Annex-III: Mission Itinerary and Persons Met 46 iv

5 Supervision report - Mission dates : March 217 Abbreviations and acronyms AWPB Annual Work Plan& Budget BISP Benazir Income Support programme COs Community Organizations CPI Community Productive Infrastructure DMUs District Management Units FFS Farmers Field School FVA Female Veterinary Assistants GoP Government of Pakistan GoPb Government of the Punjab HHs Households IFAD International Fund for Agricultural Development IRM Institute of Rural Management LAMP Livestock Access to Market Project LSOs Local Support Organizations M&ES Monitoring & Evaluation System MIS Management Information System NARC National Agriculture Research Institute NRSP National Rural Support Programme PC-I Planning Commission Proforma 1 PCS Project Steering Committee P&D Planning & Development PBAS Performance Based Allocation System PD Project Director PDR Project Design Report PMU Project Management Unit, PSC Poverty Score Card RIMS Results & Impact Management System SPPAP Southern Punjab Poverty Alleviation Project TEVTA Technical Education and Vocational Training Authority TOR s Terms of Reference UCs Union Councils UVAS University of Veterinary and Animal Sciences VOs Village Organizations WA Withdrawal Application v

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7 Supervision Report: March 217 A. Introduction 1 1. SPPAP aims to contribute to the reduction of poverty in selected Union Councils of the Southern Punjab districts of Bahawalpur, Bahawalnagar, Muzaffargarh and Rajanpur by increasing the incomes of 8, poor households through enhancing employment potential and increasing agriculture productivity and production. Approved by IFAD s Executive Board in December 21, SPPAP became effective in September 211 and is due for completion in September 217 and closing in March IFAD supervision and Financial Management Support Mission was undertaken in two parts. Financial Management Support Mission was carried out in Feb 217 and Supervision Mission visited the Southern Punjab Poverty Alleviation Project (SPPAP) during March 217. Main objectives of the mission were to: i) review implementation progress of the project; ii) assess outcome and impact particularly those relating to Assets Creation, Housing schemes for landless women, Production Revolving Fund and Food Bank; and iii) and discuss preparatory activities for design of Phase II of the Project. 3. Mission held detailed discussions with SPPAP and NRSP on progress, outcomes and impact and key lessons learnt for scaling up. The Mission interacted with project beneficiaries during field visits (Annex III, page 44). The wrap-meeting was held under the Chairman Planning and Development Board of the Government of the Punjab in Lahore on 22 March The mission wishes to express its sincere thanks to the Government, the SPPAP project team, and all the implementation partners for their discussions, sharing of information and updates and all the support they provided to the mission during the visit. B. Overall assessment of SPPAP implementation 5. As a result of realignment of project activities by MTR of January 215, support of the Government of the Punjab Planning and Development Board, commitment of the project's and implementation partners staff the Project not only achieved a remarkable turnaround but also generated valuable lessons regarding an effective approaches and models for poverty alleviation for extremely, chronically and tertiary poor who fall in BISP Poverty Score Cards Categories of Thanks to an excellent progress, the SPPAP loan disbursement including top up amount of USD 1 million, stands at 85 percent as of 1 March Physical progress for key activities ranged between 74-1 percent for various activities. Progress under asset creation is 94 percent, community infrastructure is progressing at 81 percent, vocational training and skill enhancement has achieved 91 of the target and 81 percent of the low cost housing has been completed. 8. In view of the current excellent progress, outcomes and impact, SPPAP is highly likely to reach its target during the remaining project period and achieve its development objectives. Agreed action Responsibility Agreed date The Project and NRSP to ensure completion of housing schemes by the project completion date PMU/NRSP Immediate/Continuous 1 Mission composition: Qaim Shah, SCPO and Abdul Karim, Programme Implementation-M&E Specialist. Fiduciary Aspects including Financial management, Procurement and Audit were covered by Ms Anta Sow, FM Specialist, ArsalanVardag, Financial Management & Procurement Specialist in Feb

8 Supervision Report: March 217 C. Outputs and outcomes Component 1: Livelihood Enhancement 9. Overall rating of component 1 is satisfactory (5). 1. Asset Creation. Performance is rated as highly satisfactory (6). The activity is specifically targeted at women that fall in the BISP Poverty Score Card category (PSC) of -18. Beneficiary are provided productive assets like goats packages and Fig-1: Small Ruminants Package - Beneficiary HHs landless women in the PSC band of -11 are provided with small land plots and construction of 14 houses Under the assets creation sub component, ,278 households have been provided goat 6 packages, against the 4 target of 35,5 about 2 94 percent progress. Rural women are traditionally Bahawalpur Bahawalnagar Muzaffargarh Rajanpur responsible for the livestock management. Target Achievement Rearing and re-production of the goats is a significant source for income generation poor households and the willingness and passion of having own livestock itself ensured the sustainability of the component. Beneficiaries themselves are involved in selection and purchase of goats. Moreover, availability of quality check of goats and veterinary guidance through veterinary doctors/experts on cattle market is a unique feature of the project implementation process. 12. The MTR, in view of the poor financial status of landless and shelter less women belonging to BISP PSC category of -11 who were provided small plots, recommended a provision of shelter/housing units. Work on Fig-2: Small Land Plots and Houses - Beneficiary HHs Rajanpur Muzfrgh B.nagar B.pur Achievement Achievement Targets 1293 houses has been completed and most of the beneficiaries have been handed over the possession of houses. The project and NRSP (implementation partner) are confident of achievement of the target of 16 houses by June 217. Feedback from the beneficiary women reveals that in addition to the socio-economic benefits to the households, the legal ownership and transfer of land title to women strengthen their role in family decision making and promoted gender equality. 64 2

9 Supervision Report: March Vocational and Entrepreneurial Training. Performance is rated as satisfactory (5). These trainings aim at landless and low-paid agricultural households to engage in remunerative off-farm employment activities. The activity is specifically targeted at youth and women. So far training of 16,8 persons has been completed against a target of 18,636 9 Percent. 14. According to a study conducted by the project, about 6 percent of the trainees are gainfully employed. 15. Community Physical Infrastructure. Performance of the sub component is rated as satisfactory-5. Under the subcomponent, the project provides support to the communities in a range of infrastructure facilities like household solar energy, sanitation, drinking water, irrigation and roads and culverts. Against a target of 1,126 CPIs, 914 CPI has been completed 81 Percent. Fig-3: Vocational Training - Beneficiary Individuals Total passouts Rajanpur 4% Muzaffargarh 22% Bahawalnagar 22% Bahawalpur 16% SPPAP s implemented CPIs benefitted a wide range of beneficiaries through social mobilization process which is the key to ensuring that the schemes are community-owned. Table 1: Summary of Target vs Achievements (Livelihood Enhancement) Outputs Appraisal Targets MTR Revised Targets Additional Top-Up Targets Total Project Target Cumulative Achievements Livestock 2 Goat Package 11,555 3, 5,5 35, Small land plots 1,541 1,3 3 1,6 1,53 96 Low Cost Housing Vocational Training 11,555 11,555 3, 14, Entrepreneurial Training 3,81 3,81 1, 4, Community Physical Infrastructure (CPIs) 1, , % Component 2: Agriculture and Livestock Development 17. Performance of Component 2 is considered satisfactory (5). 18. Productivity Enhancement Initiatives (PEIs). Performance is rated as highly satisfactory (6). Under the PEI subcomponent grants are provided to smallholder farmers to enable them to purchase inputs, like seed and fertilizer for high value agriculture crops. A 1 percent target has been reached with 1,57 households receiving grants. The activity has helped in adoption of improved seed among the small farmers through farmer to farmer contact. 19. Veterinary Training. Performance is rated as moderately satisfactory (4). Objective of the sub component is to strengthen the capacity of local men/women in livestock management. Training of 147 men/women against the target of 2 has been completed 74 Percent 2. Community Service Providers. Performance is highly satisfactory (6). 1 percent target of community service providers (368) have been provided equipment and training for assisting COs members to improve their agricultural productivity by providing mechanized farming services. 3

10 Supervision Report: March Productivity Revolving Fund: The MTR observed that small land holders falling below BISP PSC category of -23 have no access to any form of formal financial services including micro finance and were heavily dependent on middle men and input suppliers. As a result, many were under permanent heavy debt with high interest rates charged by middlemen and local suppliers (mainly for agriculture input supply, marketing or food insecure period). In order to test a model to provide access of the small holders to financial services for agriculture inputs MTR recommended a pilot Productivity Revolving Fund initiative to address the issues of access and provision of financial services to small holders. 22. The activity is being implemented by NRSP Microfinance Bank in Muzafargarh, Bahawalpur and Bahawalnagar and by NRSP in Rajanpur. The pilot phase of the activity covers some 16 beneficiaries. 23. Food Bank. The MTR also observed that a significant number of households in villages faced food insecurity for about 3 months in a year, leading to indebtedness and/or provision of free or subsidised labour particularly by women to landlords in return for wheat/food. The MTR recommended establishment of community/women managed Food Banks on pilot basis to provide food security to vulnerable and food insecure households. Implementation of the pilot activity was initiated for 16 beneficiaries. Table-2: Summary of Target vs Achievements: (Agriculture & Livestock Development) Activities Appraisal Targets Revised MTR Targets Additional Top-Up Targets Total Project Target Overall Project Achievement Productivity Enhancement 15,47 Initiatives (PEI). 1,57-1,57 1,57 1 Training of Para-Vets Training & Equipment for Community Service Providers (CSP) Food Bank - 4* Community Agriculture Revolving Fund (CARF) - 1,6-1,6 1,6 1 % D. Project Management Unit and Implementation Partners 24. Performance of Project management and NRSP is satisfactory (5). The excellent implementation progress and quality of the interventions of the project is mainly attributed to the efforts and commitment of the Project Management and NRSP staff and with a very strong support of the P&D Department of the Government of the Punjab. 25. The Project implementation particularly registered a remarkable turnaround after the MTR Mission s realignment of activities. The Mission noticed the dedication and commitment of the staff of PMU and implementation partners and support of the P&D Department that have brought a positive change in the way the project is managed and implemented. Mission feels that with the current level of dedication and commitment of the staff including NRSP, and progress of the project, the project is most likely to achieve its objectives. 26. The Mission recommends that the project should document the management practices and process that led the project from the project at Risk category to very good performance in a short span of time. 27. Coherence between AWPB & implementation: is moderately satisfactory (4). The project with the current pace of implementation is likely to achieve all the targets by the project completion date of Sep

11 Supervision Report: March Monitoring & Evaluation: Performance is rated satisfactory (5). The M&E of SPPAP had an important objective of monitoring the progress, providing information for programme management, assessing achievements, identifying bottlenecks and knowledge management. With the execution of project activities, the data and information on project investments, activities and services are being captured in different excel records of implementing partners and PMU officers. Geo-Tagging of the small housing units is another innovative tool established by the project. Each individual housing unit has been Geo-tagged which can be monitored from any place based on the data. Besides producing data on inputs - output case studies and activity specific surveys were conducted by the implementing partners, during the course of project implementation. However, limited attention was given to measuring outcomes. During the post-mtr period, implementation of the project activities registered acceleration and the project management developed a MIS for the project. The M&E strategy was prepared in consultations with project staff, implementing partners, project documents including PC-1, PIM, AWP&B, and IFAD M&E Guideline. NRSP s technical wing provided services for developing of project MIS. 29. Innovation and Learning: Performance is rated as Satisfactory (5). SPPAP has generated key lessons that could be useful for other projects, government policy-makers and donors. However, little time or resources have been available for systematic dissemination of knowledge. A systematically build knowledge management system can help analysing the lessons produced, knowledge products, and dissemination activities with links to other projects, researchers, policy makers and beneficiaries. Projects may organize information and knowledge-sharing events (workshops, field visits, training sessions, etc.). 3. Gender focus. highly satisfactory (6). The PMU and NRSP both have a strong commitment to gender equality and women s empowerment. A number of activities have had good focus on gender. NRSP has made efforts to ensure adequate participation of women in community groups, whether women groups or mixed. 31. The goal of the SPPAP Gender Policy is to contribute to better social and economic condition for both women and men, through poverty research, policies and strategies, with due attention to gender considerations and to promote equity and equality between women and men. 32. A comprehensive Gender Action Plan has been developed which explains strategies & actions and targets for the beneficiaries with gender desegregation. Institutional responsibilities have also been specified for accomplishing the targets within the narrated timeframe. 33. The project has been regularly organising events for Internal Women Day. The events are participated by the women beneficiaries, females from civil society, Project Management Unit-SPPAP team, District Management Unit teams, females staff of Implementing Partners etc. Hence the mission feels that SPPAP has indeed very effectively targeted the poor (including the ultra-poor) in the project area, with 8% of the beneficiaries being women 34. Poverty focus and effectiveness of targeting approach. Highly satisfactory (6). Targeting approach of the project is viewed as a key strength of implementation. The use of the BISP Poverty Score Card has made it possible to identify the target households ranked between and 23, including 33, HHs ranked between -11 and in extreme poverty situation in 259 villages. Agreed action Responsibility Agreed date Documentations of best management practices and processes. organize information and knowledge-sharing events PMU Sep 217 PMU/NRSP/IRM/BZU On-going 5

12 Supervision Report: March 217 E. Fiduciary aspects 35. Financial and administrative management is rated as moderately satisfactory (4). There has not been any major change in the financial and administrative management of the SPPAP. Internal controls remain strong, staffing was reinforced with the addition of one Accounts Assistant, and a few improvements have been brought on the QuickBooks accounting software as recommended by the previous mission. Overall, about two-thirds of the fiduciary recommendations issued by the last supervision mission have been implemented. 36. Accounting and financial reporting. The PMU has set up separate ledgers in QuickBooks for the original loan and the additional loan. In both ledgers, financial transactions are identified by funding source, component, expense category, AWPB activity and district. The software, however, does not provide the required financial statements and reports, which have to be prepared on Excel. Although financial reports are prepared on a monthly basis, they do not include any analysis of the financial data presented (budget execution, expenditure, cash flow, etc.). The mission reiterates its recommendation to prepare a complete and informative monthly financial report. 37. As indicated earlier, a 2 nd phase of SPPAP is envisaged, for which the GoPb has already submitted a request to IFAD. Upon confirmation of the SPPAP Phase 2, and in order for the PMU to be immediately operational while satisfying all fiduciary requirements, the mission recommends: The acquisition and installation of an accounting software designed (or customizable) for project accounting and fully meeting IFAD requirements, including the automated production of withdrawal applications. The preparation of a complete manual describing the internal controls system and providing detailed workflows and procedures, to be used as an effective guide for the financial and administrative management of the project. The launch of the recruitment process to ensure the full complement of staff needed to run the project. 38. The mission noted with satisfaction that all project assets are now tagged, and the assets register is also maintained on Excel. The PMU has launched a procurement process for both health and assets insurance. The mission recommends that a full physical inventory of assets be conducted each year in June in all project locations 2 (PMU, DMUs and implementing partners holding project assets) by staff other than those in charge of monitoring the assets. 39. AWPB. The Table-3 below shows performance against annual budgets since project start 3, up to 31/1/17 (amounts in USD using an average exchange rate of 13.5 PKR = 1 USD): Component 1 Component 2 Component 3 TOTAL Fiscal year Budget Actual % execution % 15% Fiscal year Budget Actual % execution 32% 33% 36% 33% Fiscal year Budget Actual % execution 68% 32% 63% 61% Fiscal year Budget Actual % execution 77% 81% 58% 74% Fiscal year Budget Actual (7 months) % execution 36% 57% 28% 34% 2 The inventory should be taken on blank sheets and followed by a reconciliation with the assets register. 3 The PMU was established in November 212, and project implementation started in November

13 Supervision Report: March Overall the AWPB execution rate has been constantly improving over the years. For fiscal year , the budget could not be fully executed mostly due to the late start of the low-cost housing program; the low execution rate in component 3 was due to the vacant positions and the delay in the salary increases (approved only in October 16), as well as the over-estimation of running costs and consultancies. For fiscal year , the low execution rate in component 1 reflects the delays in transferring land plots (which in turn affects the low-cost housing program), as well as difficulties in the identification of CPI schemes; the budget for component 3 is, again, over-estimated. The mission recommends that the budget be revised to reflect (i) achievements to date and (ii) realistic targets from March to June The mission noted that the annual budgets are now input into the accounting system, and budget vs. actual statements are produced each month. In order to support and facilitate monitoring and decision-making by management, budget variances should be analysed and discussed during a monthly budget review meeting headed by the Project Director, with component heads, Finance and M&E officers. 42. Treasury and funds flow. The PMU continues to submit withdrawal applications to IFAD on a regular basis (once a month on average), thus ensuring a steady flow of funds to the project and avoiding cash shortages. The cash forecast prepared by the PMU at the request of the mission, shows that no cash tensions are anticipated in the coming six months. Bank reconciliations are prepared each month and reviewed/approved by the Finance & Accounts Manager as well as the Project Director. With regard to the petty cash, the mission recommends that (i) the entire petty cash amount be kept in the office safe, (ii) the petty cash ledger be updated on a daily basis, and (iii) surprise counts be carried out at least once a month by the FAM (at PMU) and the Assistant Director Agriculture (at DMUs). 43. The mission noted that the project has already reached one of the triggers for the recovery of the initial advance (additional loan balance is less than twice the initial advance) and will reach the 2 nd trigger at the end of March 217. The mission therefore recommends that the PMU prepare an initial advance recovery plan, to be submitted to IFAD as soon as possible. The recovery plan will have to be revised/adjusted as needed, based on a cash forecast updated at least monthly. 44. Implementing Partners (IP) and Community Organizations (COs). The project is being implemented through IPs including NRSP (the social mobilization partner), IRM (partner for vocational and entrepreneurship trainings), BZU (partner for para vets training) and a large number of Community Organisations (COs). IPs were selected through competitive procurement process. 45. The contract with NRSP is budget based, and payments are made on the basis of quarterly expenditure statements. In order to ensure (i) that expenditure is genuine, incurred for the intended purpose and within the agreed budget, and (ii) that resources and equipment financed by the project are used exclusively for SPPAP activities, the mission makes the following recommendations: Each invoice and expenditure statement should show evidence of review by the NRSP internal auditor prior to submission to SPPAP. The TORs of the NRSP external auditors (for SPPAP funding) should be modified to include an opinion that funds spent/assets purchased are exclusively used for SPPAP. 46. It was noted by the mission that payments of stipend for para vet trainees(trained at BZU) and vocational and entrepreneurship trainees are made/routed through NRSP and IRM, respectively, even though NRSP's and IRM s contracts do not include these amounts. The mission recommends that either the contracts with NRSP and IRM are modified to include these amounts, or payment of stipend is made directly by the project. 47. The mission noted that payments to BZU were made on advance basis, which was not provided for in the contract (except for initial advance), and the justification provided by the project is practical difficulties. The mission recommends that the contract terms with BZU be fully complied. 48. Funding is made available to the COs once the needs identification proposals have been approved by the PMU and (if applicable) proof of beneficiary contribution has been provided. These funds are then used by the COs to procure goods/equipment or works on behalf of the beneficiaries, under the supervision of NRSP and project staff. Any unspent amount on the schemes or interventions is deposited back into the CO s account. The project has obtained approval from the PSC to utilise such savings in further schemes, and until 31 January 217 total savings of USD 287 (PKR 29.6 million) have been utilised. However, there is a need to properly and regularly 7

14 Supervision Report: March 217 calculate the savings and thereafter utilise them. Current estimate of the remaining savings is USD 163 (PKR 16.7 million). 49. Disbursement is rated as moderately satisfactory (4) 4. The original IFAD loan of SDR 19.3 million has been 1% disbursed and the initial advance fully recovered. Following the approval of a USD 1 million supplementary financing by IFAD in December 15, the financing agreement was amended in May 16 and a new initial advance transferred to SPPAP on 26/12/216. As shown in the Table-4 below, the project has disbursed 46% of the additional loan as of 13/2/17 (amounts in SDR): Category # DESCRIPTION Allocated Disbursed WA #1 to 3 % disbursed Available balance 1 Civil works Community Infrastructure % Technical Assistance, training &studies % Grants to beneficiaries % Salaries & allowances % Operating costs % Unallocated 29 % 29 Initial advance TOTAL % The combined disbursement rate for the loan and additional loan stands at 85% (including the initial advance), which is in line with the current implementation stage of the project (considering the new closing date of 31/3/218, the project is 89% implemented). 51. At the request of the mission, the PMU prepared a forecast of expenditure from February 217 to loan closing date (31 March 218). The expected cumulative disbursements are shown in the Table-5 below, in USD and SDR: Category # Disbursed to date (USD) WA #2 and 3 WA #4 (USD) Forecast 2/17 to 3/18 USD Total forecast (USD) Total forecast (SDR) Loan allocation (SDR) Expected % disbursed % % % % % Unallocated 29 % TOTAL % 52. According to these projections, the additional loan would only be 87% disbursed by closing date (subject to exchange rate fluctuations). However, the allocation for Category 4 would be insufficient and would need to be supplemented with the unallocated amount. The mission recommends that financial commitments and expenditures in the coming months be closely monitored in order to ensure funds availability under the various categories. 53. The mission considers it crucial to maintain the current project team in the interest of efficiency and in order to avoid unnecessary delays in the launch and implementation of the project s 2 nd phase. Any unused balance from the additional loan would therefore be used for (i) Phase 2 preparatory activities 5 and (ii) salaries and running costs during the interim period to be complemented with GoPb funding, as required. 54. Withdrawal applications. The SPPAP has submitted 16 WAs since October 215. Generally, the PMU submits a monthly WA and it takes less than a month to receive the funds in the designated account. From the review of the WAs, the mission observed that (i) Form 12 for Rural Finance is not being used and instead Form 12 for Civil Works is being used, and (ii) Form 12 is not fully filled e.g. accounting software payment voucher number is not entered in the WA for Category The detailed review of the SOEs was conducted and it was noted that posting of data in the accounting software has improved considerably since last mission. Results of detailed testing of WAs and SOEs are annexed to this report. 4 Although the disbursement is satisfactory, the rating has to be revised downwards for projects that have been extended (as per IFAD Portfolio Review Guidelines). 5 Including targeting (for the extended geographical area), baseline survey, installation/training on new accounting software, drafting of procedures manuals, recruitment of additional staff, etc. 8

15 Supervision Report: March Designated accounts reconciliations. The reconciliation of the designated account (original loan) prepared by the PMU as of 12/1/217 is shown below intable-6 (amounts in USD): Initial deposit (A) 3 5 USD Designated Account Bank balance at 12/1/ WA 36 (Adjusted against Initial Deposit) WA 38 (Adjusted against Initial Deposit) WA 39 (Adjusted against Initial Deposit) WA 4 (Adjusted against Initial Deposit) Subtotal (B) Difference (C) = (A) - (B) (15 18) Explanation Exchange rate difference Short payment by IFAD (WA 36) The mission observed that the exchange rate difference was not justified and advised the PMU to prepare schedule/calculation to justify the exchange rate difference. 57. The reconciliation of the designated account (additional loan) prepared by the PMU as of 31/1/217 is shown in Table-7 below (amounts in USD): Initial deposit (A) 3 5 USD Designated Account Bank balance at 31/1/ WA 2 - Claimed but not credited WA 2 - Not yet claimed Subtotal (B) 3 5 Difference (C) = (A) - (B) Counterpart funding is rated as satisfactory (5). Government contribution is essentially in cash 6 and covers (i) duties and taxes and (ii) GoPb share of project expenditure as specified in Schedule 2 of the financing agreement. The Table-8 below shows GoPb contribution since project start (amounts in PKR): Fiscal year Allocation Amount received Amount actually Amount unspent approved by GoPb spent TOTAL Total government contribution received since project start therefore amounts to approximately USD 5.17 million. Cumulative expenditure made by SPPAP from GoPb funds as of 31/1/17 amounts to USD 3.75 million or 91% of the total expected contribution 7 ; the difference has either lapsed (in ) or was returned unspent to the GoPb (in ). The project anticipates that the entire current year contribution will be spent by 3 June 217. The mission recommends that the budget for the GoPb annual development plan (which is the basis for the government contribution to the project) be calculated so as to take into account the financial resources necessary to maintain the project team and prepare for Phase 2 of the project. 6. Beneficiary contributions, which are calculated as a percentage of the cost of certain interventions 8, are made in cash and deposited in the Community Organizations bank accounts. However, the amounts collected by the COs are only recorded in the M&E (MIS) system and not in the project accounts. According to the MIS, cumulative beneficiary contributions as of 31/1/17 amount to PKR 12.6 million (approximately USD 991 5). The mission reiterates its previous recommendations to create a specific funding source in QuickBooks for beneficiary contributions, and to record these in the project accounts, along with the corresponding expenditure. 61. Compliance with loan covenants is rated as satisfactory (5). As detailed in Appendix 6, most of the financing agreement covenants were met by the PMU, except: 6 At project start, the government of Punjab also made a contribution in kind (one vehicle and some equipment) valued at approximately USD Following the MTR and the downsizing of the project costs, government contribution was reduced to USD 4.1 million. 8 Beneficiaries contribute 1% of the cost of Community Physical Infrastructure (CPIs), 11.77% of Productivity Enhancement Initiatives (PEIs) and 5% of equipment for Community Service Providers (CSPs). 9

16 Supervision Report: March 217 The audit report for fiscal year and were submitted after the deadline of 31/12/15 and 31/12/16 respectively. Unaudited annual financial statements for were not submitted by the deadline of 3/1/16. These were only submitted along with the audit report in January 217. Project assets (other than vehicles) are not insured. 62. Procurement is rated as moderately satisfactory (4). The bulk of SPPAP procurement is carried out by the COs with oversight by a Procurement Committee including representatives of the COs, the beneficiaries, the concerned DMU (and PMU as needed) and the social mobilization partner (NRSP). The procedures applicable to community procurement have been defined by the PMU and described in the project implementation manual. The mission noted with satisfaction that the Procurement Officer has undertaken specific training in public procurement and is now fully in charge of the procurement function, as recommended in the previous mission. 63. Procurement planning. The format used for the procurement plan (PP) was not found adequate (no indication of thresholds, no separation by type of procurement, no detailed timeline showing the dates for each procurement step, no information on actual implementation), as indicated previously. In terms of content, the PP is a mere replication of the AWPB, and some items (such as studies and consulting services for M&E are either omitted or not detailed enough to allow proper monitoring). The mission has provided the PMU with a proper format, and recommends that future PPs contain the full detail of all the items that actually require a procurement process. 64. Execution of procurement plans. After adjustments under the guidance of the mission, the execution rate for the PP amounting to USD 1.5 million is 74%, mainly due to delays in low cost housing construction (see AWPB variance analysis above). The PP (totalling USD 8.7 million after adjustments) is 31% executed at 31/1/17, in line with the AWPB execution. The mission observed that the PMU still has not put in place any system for monitoring the PP execution, and reiterates the need for the Procurement Officer to (i) update the PP on a real-time basis (i.e. as procurement actions are completed), (ii) reconcile actual procurement data with the Finance and M&E data, and (iii) prepare a monthly schedule showing planned vs. actual procurement by component and by type of procurement, to be discussed at the monthly budget review meeting (and integrated in the monthly financial report). 65. Procurement process and procedures. No significant post-review procurement was undertaken directly by the PMU since the last supervision mission. The mission selected a sample of 9 community procurements (2 land plots, 3 low-cost housing units, 2 small ruminants, and 2 CSPs) for testing and found no exceptions other than the absence in the files of documentation evidencing the handover of the houses to the beneficiaries. The mission recommends that the DMUs ensure that evidence of assets transfer to the beneficiaries is systematically included in the files. 66. The PMU maintains a contract register using the new IFAD format. The register is up-to-date but is not sent to IFAD on a monthly basis. Although contract-monitoring forms are prepared for each contract, the payment schedule section of the form is not correctly filled in. The mission has issued recommendations to ensure that the register is completed accurately (including AWPB reference, name of contract coordinator and type/method of procurement) and sent to IFAD each month, and has provided guidance to the PMU for the preparation of the contract monitoring forms. 67. Audit is rated as moderately satisfactory (4). Annual audits are conducted by the Auditor General of Pakistan (SAI) for SPPAP. The mission noted that the audit reports for the years and and the reports were submitted late to IFAD in January 216 and January 217 respectively. The Auditor's report comprised of the audit opinion (which was unqualified), the project financial statements including notes and the management letter. 68. The financial statements prepared by the Project need to be improved to include all statements required by IFAD (currently they do not include the statement of cash receipts and payments by category, the statement of special account reconciliation and the WA statement by category). 69. The Auditor has provided an opinion only on the financial statements, as well as a statement that the proceeds of the loan have only been utilised for purposes of the Project. Opinions on the SOEs and the designated accounts are not provided. There is a need to agree the TORs with the Auditor General of Pakistan's office and ensure that audit opinions are also provided on SOEs and designated accounts. 1

17 Supervision Report: March The management letter of comprised of 23 audit observations amounting to USD 8.86 million (PKR 886 million), however 22 audit observations amounting to USD 8.84 million (PKR 884 million) were settled in the Special Departmental Accounts Committee (SDAC) and only 1 audit observation amounting to USD 14 (PKR 1.4 million) is outstanding, which is related to taxes and does not impact IFAD funding. The management letter of comprises of 7 audit observations amounting to USD 1.58 million (PKR 158 million). We have reviewed the audit observations and discussed with the Project team who is confident that most of these observations will also be settled in the next SDAC meeting. Also most of these observations are related to taxes and have no impact on IFAD financing. The observations of the Auditor for , , and are summarised in the audit log annexed to this report. 71. The project also needs to ensure that the unaudited financial statements and the audit report for the year are delivered to IFAD by 31/1/17 and 31/12/17, respectively. 72. The Table-9 below summarizes the mission s main recommendations on fiduciary aspects: Agreed action Responsibility Agreed date Acquisition & installation of an adequate accounting software for Phase 2 PD and FAM Upon confirmation of Preparation of a full procedures manual Launch of recruitment process to ensure full complement of staff Revision of AWPB to reflect achievements to date and realistic targets for PD Phase 2 15 March 217 the period March-June 217 FAM Monthly budget review meetings to monitor AWPB physical and financial PD and FAM Continuous execution, including variance analysis Preparation of initial advance recovery plan and submission to IFAD FAM 31 March 217 Review of invoices and expenditure statements by the NRSP Internal 3 April 17 and Auditor and TORs of NRSP's auditors (for SPPAP funding) to include FAM continuous opinion on exclusive utilisation of funds/assets for the project Contracts of NRSP, IRM and BZU to be either modified to cater for deviations or contracts to be fully complied by SPPAP FAM Continuous Accurate and regular reporting of COs savings and utilisation of saved FAM Continuous amounts; inclusion of COs financial status in the monthly financial report Allocation of unallocated funds to Category 4 to avoid overspending IFAD 31 May 217 Use of any unused balance from the additional loan for Phase 2 PD and FAM From October 17 preparatory activities salaries and running costs during the interim period Calculation of GoPb allocation based on resources needed to PD, FAM 31 March 217 maintain the project team and prepare for Phase 2 Recording of beneficiary contributions in project accounts FAM Immediate/continuous Preparation of an adequate procurement plan, update and reconciliation Procurement Continuous od actual data with Finance and M&E; implement PP monitoring system Officer Completion of performance evaluation process for all SPPAP staff PD - GPS 31 March 217 Full physical inventory and reconciliation to assets register FAM 3 June 17 Inclusion of documentation evidencing asset handover to beneficiaries in each procurement file DMUs PO Continuous Preparation of financial statements and audit report as per IFAD 31-Oct-17 PD and FAM guidelines and requirements and submission to IFAD within set deadlines 31-Dec-17 F. Sustainability: 73. Sustainability of the project is rated as Satisfactory (5). Experiences in Pakistan have shown that long-term sustainability of outcomes and community institutions mainly depends on (i) continuation of the institutional set-up established through the projects/programme (in particular, coordination and institutional mechanisms for linkages with line departments, NGOs etc.); (ii) the maturity and eventual sustainability and graduation of community organizations, (iii) linkages with government and other services providers, and (iv) the technical, economic and financial sustainability of the activities supported by the Project/Programme. Elements of all these factors could be found in SPPAP. 74. Since the Project is mostly working with the existing community/village organisations who have achieved significant level of institutional maturity and the key service provider (NRSP) responsible for social mobilisation and capacity building that has a permanent presence in the project area. It is expected that NRSP will continue to interact with the same COs/VOs after completion of the Project 11

18 Supervision Report: March 217 either through their own or some government/donor resources which will ensure sustainability of project benefits, activities and institution. Additionally, NRSP has also set up a Microfinance Bank which is based in the Project area. It is also expected that the Microfinance operations of NRSP Bank will also be extended to the existing Project COs/VOs. 75. COs are also involved in selecting beneficiaries of household-level project activities like housing, and asset transfer, procurements for household level and community level interventions and planning, implementing and maintenance of community physical infrastructures. 76. Institution Building: rated satisfactory (5). The planning and implementation of the Project interventions are mostly carried out with the existing COs/VOs/LSOs established by Social Mobilization Partner i.e. NRSP under various projects and programmes, and these institutions have achieved considerable degree of institutional maturity. 77. Empowerment: rated as satisfactory (5). In view of existing levels of institutional maturity and capacity of the COs/VOs/LSOs of the project area there is considerable evidence of community control, management and decision making authority with respect to economic relationships and institution. CO members actively participated in all phases of planning and implementation of project activities including selection and verification of beneficiaries and there is a sense of strong ownership of the project financed activities like asset transfer, community infrastructure, training etc. Operation and maintenance of project finances Productive Infrastructure and other facilities are being successfully undertaken by COs/VOs/LSOs. 78. The asset creation interventions particularly low cost housing and goad packages for women has not only improved soci-economic status of the beneficiary households, but also greatly contributed to empowerment of women 79. Vocational and entrepreneurial training has been instrumental for increased employment. According to impact study undertaken by IRM 9, around 6 per cent of the trained people were employed and their income was improved. 8. Quality of Beneficiary Participation: Performance is rated satisfactory (5). CO members particularly women are actively and meaningfully involved in all aspects of planning and implementation of project activities. CO Representatives are represented on all committees for purchase of assets distribution packages and material etc. for community infrastructure. Women have been increasingly engaged in COs and represent 78% of memberships. Large majority of women members of COs benefited from the capacity development support, asset creation, livestock, land plot and low costs housing distribution and improved community infrastructure Responsiveness of Service Providers: rated as satisfactory (5). The project is being implemented through IPs including NRSP (the social mobilization partner), IRM (partner for vocational and entrepreneurship trainings), BZU (partner for para vets training) and a large number of Community Organisations (COs). 82. The main service provider (NRSP) is a specialized national level institution for social mobilization and capacity building and follows the principles and practices of participatory development for selection of beneficiaries and planning and implementation of project activities. NRSP has played a key role in improvement of the project performance. IRM which has been contracted for provision of skills and capacity building is providing quality services. IRM is a prime national level institution for enhancing human productivity through build the capacities of rural communities and empowering them to harness their human, social and economic potential. 83. Exit Strategy: rated as satisfactory (5). There are several key elements in the design of SPPAP which are aimed at ensuring post project sustainability and in ensuring a natural strategy for exit of key project activities. The first key element is working with the existing structures/cos/vos/lsos which have already been established in the Project districts and partnership with NRSP which has a permanent presence and is likely to provide social mobilisation 9 IRM, ETO Post training Assessment report, July,

19 Supervision Report: March 217 and linkages of CO/VO with government department and other sources of funding. Furthermore, the Project is designed to make investments which are selected based on key sustainability criteria. For example, investments in physical and productive infrastructure is made only after it has been ascertained that the infrastructure provided at the community level can be sustained by the community in terms of management, operation and maintenance. Similar analysis is made for investments made at the household level. In terms of the livelihoods enhancement component, investments are made in skills training and enterprise development at the individual household level after a careful analysis of the potential for employment and self-employment 84. Potential for scaling-up: rated as satisfactory (5). In view of positive experiences of social mobilisation, targeting, poverty graduation and reduction and the fact that SPPAP covered 27 out of 86 poor Union Councils of the Project Districts, there is a scope for scaling up of the project to remaining 59 Union Councils with identified households of about 216,93 who fall in the BISP Poverty Score Card band of -23 and other poor districts of the Province.. G. Other 85. Physical and Financial Assets: rated as satisfactory (5). A major reason for rural poverty in the project area is the highly unequal distribution of assets particularly land and access to water, livestock, productive assets, low level of skills, limited access to finance, employment opportunities and lack of voice in decisions that directly affect the poor. The project has successfully contributed to creation of assets through livestock packages; land and housing units for landless women headed households; building a range of productive physical infrastructure and productivity enhancement initiatives, technology transfer to farmers using the farmer field schools approach and training of service providers in agriculture and livestock and equipment as grants for extremely poor for productivity enhancement and; enhanced capacity for employment and productive self-employment though skill and capacity development initiatives. 86. The MTR Mission observed that small land holders falling below BISP PSC category of -23 had no access to any form of formal financial services including micro finance and were heavily dependent on middle men and input suppliers. As a result, many were under permanent heavy debt with high interest rates charged by middlemen and local suppliers (mainly for agriculture input supply, marketing or food insecure period). In order to test a model to provide access of the small holders to financial services for agriculture inputs, the MTR recommended a pilot Productivity Revolving Fund initiative to address the issues of access and provision of financial services to small holders. The activity is being implemented by NRSP Microfinance Bank in Muzafargarh, Bahawalpur and Bahawalnagar and by NRSP in Rajanpur. The pilot phase of the activity covers some 16 beneficiaries. 87. Food Security: rated as moderately satisfactory (4). SPPAP is contributing to beneficiaries food security in multiple ways. This is being achieved through asset creation and productivity enhancement The poorest are being helped through asset distribution (goats package). Investments in water source development, both for irrigation and drinking purposes, is contributing to improved production and food security. Employment and productive self-employment though skills and capacity building is resulting in improved incomes and improved access to food. 88. Additionally, the MTR observed that a significant number of households in villages faced food insecurity for about 3 months in a year, leading to indebtedness and/or provision of free or subsidised labour particularly by women to landlords in return for wheat/food. The MTR recommended establishment of community/women managed Food Banks on pilot basis to provide food security to vulnerable and food insecure households. Implementation of the pilot activity was initiated for 16 beneficiaries. 89. Lessons Learnt and Impact: A key lesson generated by SPPAP relates to the interface between social protection, food and nutrition security, agriculture and livelihoods for building resilient and sustainable rural livelihoods. The project experience and outcomes indicate that social Protection 13