Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H8530) ON A GRANT

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank Report No: ICR IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H8530) ON A GRANT IN THE AMOUNT OF SDR 33.4 MILLION (US$50 MILLION EQUIVALENT) TO THE THE REPUBLIC OF RWANDA FOR QUALITY OF DECENTRALIZED SERVICE DELIVERY SUPPORT Governance Global Practice Country Department Eastern Africa 2 Africa Region DEVELOPMENT POLICY OPERATION December 16, 2014

2 CURRENCY EQUIVALENTS (Exchange Rate Effective as of 19 November 2014) Currency Unit = Rwandan Franc Rwf 1.00 = 0,001448US$ US$1.00 = Rwf FISCAL YEAR July 1- June 30 BSHG CAS CPS CEM CPAF DPL DSA DTIS EAC EARP EDPRS EMIS EWSA FDI FSDP GDP ICA ICR IDA IFC IMF IFMIS IPPIS MDG JBSR JSR MINECOFIN MT MTEF MW M&E OAG PD PDO PEFA PETS PFM PforR ABBREVIATIONS AND ACRONYMS Budget Support Harmonization Group Country Assistance Strategy Country Partnership Strategy Country Economic Memorandum Common Performance Assessment Framework Development Policy Lending Debt Sustainability Analysis Diagnostic Trade Integration Study East African Community Electricity Access Rollout Program Economic Development and Poverty Reduction Strategy Education Management Information System Energy Water Sanitation Authority Foreign Direct Investment Financial Sector Development Plan Gross Domestic Product Investment Climate Assessment Implementation and Completion Results International Development Association International Finance Corporation International Monetary Fund Integrated Financial Management Information System Integrated Payroll and Personnel Information System Millennium Development Goal Joint Budget Support Review Joint Sector Review Ministry of Finance and Economic Planning Metric Ton Medium Term Expenditure Framework Megawatt Monitoring and Evaluation Office of the Auditor General Program Document Program Development Objective Public Expenditure and Financial Accountability Public Expenditure Tracking Survey Public Financial Management Program for Results ii

3 PPP PRSF PRSP PSI RMF RURA SCBI SEAS SWG TVET UERP Public-Private Partnership Poverty Reduction Support Financing Poverty Reduction Strategy Paper Policy Support Instrument Road Maintenance Fund Rwanda Utility Regulation Agency Strategic Capacity Building Initiative Subsidiary Entity Accounting System Sector Working Group Technical and Vocational Education and Training Urgent Electricity Rehabilitation Project Vice President: Makhtar Diop Country Director: Diarietou Gaye Country Manager Carolyn Turk Sr. Practice Director: Mario Marcel Cullell Practice Manager: Guenter Heidenhof Task Team Leader: Yoichiro Ishihara ICR Team Leader: Leif Jensen ICR Primary Author: Leif Jensen iii

4 REPUBLIC OF RWANDA QUALITY OF DECENTRALIZED SERVICE DELIVERY SUPPORT DEVELOPMENT POLICY OPERATION CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Program Performance in ISRs H. Restructuring 1. Program Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1. Bank Lending and Implementation Support/Supervision Processes Annex 2. Summary of Borrower s Comments on Draft ICR Annex 3. List of Supporting Documents MAP iv

5 A. Basic Information Country: Rwanda Program Name: Quality of Decentralized Service Delivery Support Development Policy Operation Program ID: P L/C/TF Number(s): IDA-H8530 ICR Date: 12/10/2014 ICR Type: Core ICR Lending Instrument: DPL Borrower: MINECOFIN Original Total Commitment: XDR 33.40M Disbursed Amount: XDR 33.40M Revised Amount: XDR 33.40M Implementing Agencies: Ministry of Finance and Economic Planning (MINECOFIN) Cofinanciers and Other External Partners: not applicable B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 03/08/2013 Effectiveness: 06/04/2013 Appraisal: 04/02/2013 Restructuring(s): Approval: 05/14/2013 Mid-term Review: Closing: 06/30/ /30/2014 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Highly Satisfactory Borrower Performance: Highly Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Highly Satisfactory Government: Highly Satisfactory Quality of Supervision: Highly Satisfactory Implementing Agency/Agencies: Highly Satisfactory Overall Bank Overall Borrower Highly Satisfactory Performance: Performance: Highly Satisfactory v

6 C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Performance any) Potential Problem Program at any time (Yes/No): Problem Program at any time (Yes/No): DO rating before Closing/Inactive status: No No D. Sector and Theme Codes Sector Code (as % of total Bank financing) Quality at Entry (QEA): Quality of Supervision (QSA): Original None None Rating: Central government administration Sub-national government administration Actual Theme Code (as % of total Bank financing) Administrative and civil service reform 5 5 Decentralization Other public sector governance 5 5 Participation and civic engagement Public expenditure, financial management and procurement E. Bank Staff Positions At ICR At Approval Vice President: Makhtar Diop Makhtar Diop Country Director: Diarietou Gaye Diarietou Gaye Practice Manager/Manager: Guenter Heidenhof Pablo Fajnzylber Program Team Leader: Yoichiro Ishihara Yoichiro Ishihara ICR Team Leader: Leif Jensen ICR Primary Author: Leif Jensen F. Results Framework Analysis Program Development Objectives (from Project Appraisal Document) The program development objective (PDO) is to support the Government to clarify institutional roles and responsibilities for decentralized service delivery and to enhance public transparency, fiduciary accountability, and local government capacity for improved access to quality services. Revised Program Development Objectives (if any, as approved by original approving authority) The PDO was not revised. vi

7 (a) PDO Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1 : Percentage of staff positions filled in revised organizational structures 1 Value (quantitative 0% or 70% N/A 79.2% Qualitative) Date achieved 04/02/ /04/ /04/ /30/2014 Comments The target value of 70% of "staff positions filled" was fully achieved with actual value of (incl. % 79.2%. achievement) Indicator 2 : Fees and charges collected by districts Value (quantitative Rwf134 12% increase from the or million program baseline N/A 33% Qualitative) Date achieved 12/31/ /04/ /04/ /30/2014 Comments (incl. % The target was fully achieved. Collections increased from Rwf13.9 billion in 2012 (calendar year) to Rwf18.5 billion in 2013/14 (fiscal year). Baseline value adjusted, based achievement) on district's financial reports audited by OAG. Indicator 3 : PEFA PI-23 (availability of information on resource received by service delivery unit) Value (quantitative or Qualitative) D C N/A Actual value not available at ICR Date achieved 11/30/ /04/ /04/ /30/2014 Comments (incl. % Program Objectives substantially achieved. Significant PFM capacity; new earmarked transfer framework for service delivery; and two PETS show that a PEFA assessment rating achievement) of "C" on PEFA PI-23 is likely. PEFA assessment delayed by change in framework. Indicator 4 : % of citizens who participate in the district budgetary process (o/w women) Value (quantitative 11% (10%) or 20% (19%) N/A 29% (52%) Qualitative) Date achieved 06/30/ /04/ /04/ /30/2014 Comments (incl. % The target was fully achieved. The overall citizen participation was 29% in comparison to the target of 20%. The share of women, out of the total number of citizens who achievement) participated, was 52%, against target value of 19%. Indicator 5 : % of citizens who participate in the formulation of Imihigo activities (o/w women) 1 That matches with the mandates of Local Governments approved by District Councils and Sector Ministries vii

8 Value (quantitative 24% (22%) or 30% (28%) N/A 72% (52%) Qualitative) Date achieved 06/30/ /04/ /04/ /30/2014 Comments (incl. % The target was fully achieved. The overall citizen participation was 72% in comparison to the target of 30%. The share of women, out of the total number of citizens who participated, achievement) was 52%, against target value of 28%. Indicator 6 : The number of districts with qualified audit 2 Value (quantitative 0 or 5 districts (17%) N/A Qualitative) Date achieved 06/30/ /04/ /04/ /30/2014 Actual value not available at ICR Comments Program Objective substantially achieved. Three districts received "qualified audit" in (incl. % 2012/13. Activities under the Operation supported the districts to meet the target. The achievement) outcome target for 2013/14 is being evaluated by the OAG in March (b) Intermediate Outcome Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Indicator 1 : There were no intermediate outcome indicators in the Operation Value (quantitative or Qualitative) Date achieved 06/04/ /04/ /04/ /30/2014 Comments (incl. % There were no intermediate outcome indicators in the Operation. achievement) Actual Value Achieved at Completion or Target Years G. Ratings of Program Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) H. Restructuring (if any) Not Applicable 2 A qualified audit means that except for the matters raised, proper books of account have been maintained and the financial statements do give a true and fair view of the state based on audit opinion of the Auditor General. An unqualified or clean audit means that proper books of account have been kept and the financial statements give a true and fair view (clean audit) based on audit opinion of the Auditor General. The former is a prerequisite for the latter. viii

9 1. Program Context, Development Objectives and Design 1.1. Context at Appraisal Background 1. While Rwanda has made significant progress towards addressing its development challenges, it remains among the world s poorest countries: about 45 percent of the population lives below the poverty line and 24 percent are extremely poor 3. Furthermore, while the poverty headcount is relatively low in urban areas at 22 percent, it is on average 49 percent outside the capital. Health insurance coverage and usage of district hospitals have increased but remain negatively correlated with poverty status, and so is usage of other services provided by local governments. 2. The Government has identified the decentralization process as the key focus for its overall governance reforms. The objective of the Government s decentralization program is to bring, inter alia, governance and service delivery closer to its citizens and to improve accountability to citizens. Thus starting in 2001, the Government has progressively decentralized decision-making, the provision of some public services and resources to local governments in three phases. The first phase, , focused on establishing 5 levels of government - namely: central government, provinces, districts, sub-districts and cells - and democratic and community development structures at local government level. The second phase ( ) saw a greater increase in total transfers to districts, and a concomitant attempt to build more capacity in local government institutions to enhance service delivery implementation and boost local economic development. The third phase of decentralization ( ) 4 emphasizes improvements in the targeting of service provision to meet the needs of the poor by empowering sub-national governments, including strengthening their capacity At appraisal, Rwanda was under a difficult political and economic situation. Following the publication of a UN report alleging Government involvement in the Democratic Republic of Congo, development partners suspended or delayed planned budget support to Rwanda equivalent to 11 percent of the budget in the first half of FY2012/13 (July-December 2012). This included the planned disbursement of World Bank s Poverty Reduction Support Financing (PRSF) (US$125 million). In addition, effective policy dialogue between the Government and 3 Rwanda s poverty line is Rwf 64,000 (US$100) per year at constant January 2001 prices, equivalent to Rwf 118,000 (US$185) at 2011 prices. Its extreme poverty line represents the level of expenditure needed to provide the minimum food requirement of 2,100 Kcal per adult per day which is Rwf 45,000 (US$71) at constant January 2001 prices. If the World Bank s international poverty line ($1.25 a day) is applied, the poverty rate is 63.2 percent in Decentralization Action Plan , Decentralization Sector Strategic Plan 2013/ /18 5 For example, all districts have prepared their own District Development Plans for to specify their medium term growth and poverty reduction goals. 1

10 development partners through the Budget Support Harmonization Group (BSHG) had been negatively affected by the situation and made engagement with the Government challenging. 4. The suspension/delay in aid inflows translated into a deterioration of core economic indicators in the second half of Due to the lagged effect of the aid shortfall, GDP growth rate significantly decelerated from 8.8 percent in 2012 to 4.7 percent in The weighted average rate of Treasury bills had increased by 310 basis points from 9.3 percent in June 2012 to 12.4 percent in December The level of international reserves had been ran down by about US$200 million, from US$1,050 million (about 5 months of imports) in December 2011 to around US$845 million in December 2012 (about 4 months of imports). Rising demand for imports and a shortage of foreign currency had also led to a 3.1 percent depreciation of the exchange rate over a period of six months. 5. The preparation of the Operation reflected a request from the Government in February 2013 for the operation to be presented to the Bank s Executive Board of Directors by May The Government acknowledged that additional financial resources were necessary in order not to undermine the progress made in poverty reduction and service delivery, and to further promote reforms necessary in these areas. As part of the budget revision process for FY2012/13, the Government had identified contingency expenditure items to be supported by supplemental budget support operations by development partners. In order for the Government to execute the identified expenditures in FY2012/13, it needed the Board approval by May 15, The Bank started preparing for this Operation when positive signs emerged on peace and security. In February 2013, a new peace and security framework agreement to stabilize the eastern part of DRC was signed by eleven Heads of States of the International Conference on the Great Lakes Region (ICGLR) and officiated by Ban Ki-moon, the UN Secretary-General, and Nkosazana Dlamini Zuma, the Chairperson of the African Union Commission 6. Some development partners such as the African Development Bank 7 resumed their assistance and the Board of Directors of the World Bank also approved the SSPS-2 operation of US$50 million on March 14, Rationale for Bank Involvement 7. Even though the Operation was not in the FY Country Assistance Strategy (CAS), it was fully aligned with CAS. Discussed by the Board in August 2008, the CAS was framed around two strategic pillars: (i) promoting economic transformation and growth and (ii) reducing social vulnerability. By supporting policies aimed at increasing the quality of decentralized service delivery, the proposed Operation contributed to outcomes in both CAS strategic pillars and particularly to Outcome 1.4 on Management of Public Resources at Central and Local Levels Strengthened. The FY CAS was aligned with EDPRS 1 ( ) 6 The World Bank was formulating a strategy to support economic development and promote peace and stability in the Great Lakes region. The Bank s formulation of a Strategy for the Great Lakes Region coincided with the peace deal signed in February 2013 by regional heads of states, with the objective of ending two decades of conflict in the east of the DRC. 7 The Board of Directors of the African Development Bank approved US$40 million budget support on April 3rd

11 and followed the Government s preferences for engaging with the Bank in coordination with other development partners. 8. The Operation capitalized on achievements of the past Bank interventions. In particular, the operation benefited from the three series of Poverty Reduction Support Financing (PRSF) 8, which supported service delivery by fostering sustainable delivery of basic services in education, health, energy, and water sectors ( ), and three other sectors - agriculture, transport and financial in , through reducing the cost of service delivery and expanding services to the population with a greater participation of the private sector (2011). In an annex to the PAD of this Operation, the link between the Operation and the PRSF series is outlined, with an indication of areas recovered in the DPO. 9 Furthermore, the Operation built on achievements of the Decentralization and Community Development Projects (P106834, P & P122157), the Public Sector Capacity Building Project (P066386), and the Support to Social Protection System operations (P126877, P & P146452). It complemented other Bank operations, which relied heavily on decentralized delivery mechanisms such as Land Husbandry, Water Harvesting and Hillside Irrigation Project (P114931). It also drew on the Governance for Competitiveness TA Project ( ) (P127105) which had a component supporting the national Strategic Capacity Building Initiative, skills development, and civil service reforms in specific public institutions for export promotion in horticulture and tourism Original Program Development Objectives (PDO) and Key Indicators (as approved) 9. The program development objective (PDO) was to support the Government to clarify institutional roles and responsibilities for decentralized service delivery and to enhance public transparency, fiduciary accountability, and local government capacity for improved access to quality services. 10. The key outcome indicators under the Operation were identified as follows: Policy Area 1 Strengthening Policy Framework Outcome indicator 1 - Percentage of staff positions filled in revised organizational structures, Outcome indicator 2 - Fees and charges collected by districts, Policy Area 2 Enhancing the capacity for quality service delivery Outcome indicator 3 - PEFA PI-23 (availability of information on resources received by service delivery units), Policy Area 3 Improving government transparency and accountability to citizens Outcome indicator 4 - Percentage of citizens who participate in the district budgetary 8 The first series comprised P085192, P and P The second series included P , P106083, P and P The third series included P and other two which were cancelled. 9 Please also refer to the ICR on the Eight Poverty Reduction Financing operation (ICR #2996), July 30,

12 process (o/w women), Outcome indicator 5 - Percentage of citizens who participate in the formulation of Imihigo 10 activities (o/w women), Policy Area 4 Enhancing local government fiduciary accountability Outcome indicator 6 - The number of districts with qualified audits based on audit opinion of the Auditor General Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification) 11. The PDO and key indicators were not revised Original Policy Areas Supported by the Program (as approved) 12. The Operation supported the government s reforms in four policy areas. 13. The Policy Area 1, Strengthening policy framework for decentralization, was intended to increase the effectiveness and efficiency of local governments by clarifying their roles and responsibilities. Revised local government organizational structures were to be established, facilitating the allocation of human and financial resources to national and sub-national government entities, in a way more commensurate to their functions and responsibilities. 14. Moreover, the Operation sought to create a better enabling environment for local economic development. By establishing the list of fees and other charges levied by decentralized entities and the applicable thresholds, the Operation aimed at assisting the Government in creating an improved and clear framework for collection of fees and other charges at the decentralized levels. The framework sets clear maximum allowable rates to ensure that the fees and other charges levied are consistent with the quality of services provided, therefore encouraging the utilization of services by the population. 15. In Policy Area 2, Enhancing the capacity development for quality service delivery by local governments, the Operation intended to improve administrative capacity for the delivery of quality services by local governments, in particularly on PFM. Improved PFM capacity and a new framework on earmarked transfers to subsidiary bodies/service delivery units were supposed 10 Introduced at the inception of the second phase of decentralization, the first Imihigo were signed between the President of the Republic and District Mayors in The Imihigo then became an annual undertaking through which local governments articulate their own objectives which reflect priorities of their local citizenry, and set strategies to achieve the objectives. Derived from the traditional practice where individuals voluntarily set their own targets and publicly committed to achieve them within time bound periods, the revived concept aims to strengthen participatory priority setting, bottom-up planning and accelerate implementation while focusing on time bound results. The Imihigo are set yearly, but evaluated every six months. The process is credited for strengthening the focus on results, enhancing budget execution rates, and improving local government planning, implementation and reporting. Like other processes at the local government level, a number of areas are outlined as needing improvements to further facilitate efficiency and effectiveness of the Imihigo: these include strengthening predictability of planning; monitoring and evaluation; and increasing district resources potential to enable them commit realistically [Decentralization Policy 2013; Annual Evaluation of Imihigo 2011/13]. 4

13 to improve the transparency and reliability of information on financial resources available to service delivery units. 16. Under Policy Area 3, Improving Government Accountability and Transparency to Citizens the Operation sought to improve the enabling environment for increasing transparency and public accountability. The Access to Information Law, which was the prior action, provides for the right to information possessed by public organs and some private bodies by all citizens. The policy area helps deliver the EDPRS 2 thematic pillar on Accountable Governance, including strengthening citizen participation. 17. In Policy Area 4, Enhancing Local Government Fiduciary Accountability, the operation supported improved fiduciary accountability through the sub national PFM system at and below the District level covering subsidiary entities including schools and health centers. The recommendations from the district s Audit Committees were seen as instrumental to improve the quality of the financial statements, as measured by improvements in the audit opinions provided by the Auditor General Revised Policy Areas (if applicable) 18. The Policy Areas were not revised Other Significant Changes 19. There were no other significant changes regarding the policy areas for the Operation. 2. Key Factors Affecting Implementation and Outcomes 2.1. Program Performance 20. The Operation was approved by the Board on May 14, It became effective and disbursed in June The Operation was a single-tranche development policy grant consisting of SDR 33.4 million (US$50 million equivalent). 21. The Operation had 5 prior actions. As Table 1 shows, all prior actions were fulfilled at the appraisal stage and thus demonstrated the government s commitment to the program. 5

14 Table 1: Prior Actions and their Status Prior Action Status At appraisal Policy Area 1: Strengthened Policy Framework for Decentralization 1) The Recipient has approved a new decentralization policy which clarifies the roles and responsibilities of central and local government 2) The Recipient has published in the Official Gazette the Presidential Order establishing the list of fees and other charges levied by decentralized entities and the applicable thresholds Policy Area 2: Capacity Development for Quality Service Delivery by Local Governments 3) The Recipient has adopted twenty eight (28) District Met capacity building plans approved by the District Councils Policy Area 3: Improving Government Accountability and Transparency to Citizens 4) The Recipient has published in the Official Gazette a new Met Access to Information Law which provides for the public s right to information Met Met Policy Area 4: Enhanced Local Government Fiduciary Accountability 5) The Recipient has reviewed twenty five (25) District Audit Met Committee reports of 2012 and issued communication to the Districts on the main areas for follow up 2.2. Major Factors Affecting Implementation Cabinet approved the new policy in January 2013 Gazetted in July 2012, Presidential Order No. 25/01 of 09/07/ District Capacity Building Plans completed Access to Information Law was Gazetted in March 2013 By December 2012, 25 Audit Committees had held quarterly meetings and reported to their respective District Councils (a). Government Commitment and Leadership 22. Decentralization continued to be a foundation of the Government s national development policy, and where the Government put in place a number of policy measures, strategies and institutions to support reform progress. First, one of key priorities in EDPRS 2 is to further improve the quality of service delivery, which requires both greater administrative capacity building skills, planning, M&E, and PFM systems and strengthened accountability for performance at the local level of government, which is the focus of service delivery implementation. Second, the PFM Sector Strategic Plan FY2013/ /18 prioritizes support to fiscal decentralization as well as the development of human resources and capacity building in PFM. Third, the need for a stronger focus on building capacity at the district and sub-district levels has been one of the key lessons that emerged from the EDPRS 1 and the evaluation of the second phase of decentralization. Subnational capacity building and PFM are considered foundational cross-cutting capacities where deficiencies need to be addressed to improve service delivery. Fourth, as noted above in Table 1, the Government had shown strong commitment by taking all the necessary measures to meet the prior actions. The government followed up by the specific implementation steps during the course of the Operation. (b). Soundness of the Background Analysis 23. The preparation of the Operation was informed by several analytic works that pinpointed out challenges associated with the decentralization process and the improvement of quality service delivery. Some of them are highlighted below. 6

15 The 2010 PEFA noted that efficient and effective PFM and fiscal decentralization requires not only adequate and transparent levels of resources for local authorities, but also financial and managerial capacity for local governments to mobilize their own revenues, manage resources efficiently and enhance accountability of how public money is spent. The Independent Evaluation of the Implementation of the PFM Reform Strategy highlighted capacity constraints, including human resources, as one of the major challenges in financial management especially in the area of procurement at the sub national government level. The Bank completed an assessment of Rwanda s progress on public service reform in 2012, entitled, Enhancing Human Resource Management for Rwanda s Vision 2020, which considered the institutional capacity constraints affecting service delivery in the agriculture and energy sectors and reviewed the literature on public service reform in Rwanda including the various Functional Reviews carried out across the public sector between The 2011 Pay and Retention Policy Situational Analysis noted that staff retention issues at district levels serve as a major hindrance to the decentralization process and good quality of service delivery The findings were taken into account, when the Operation was designed. (c). Design of the Operation 25. As previously noted, even though the Operation was not in the CAS at the time, it was aligned with the CAS 12 and the Bank s Africa Strategy, with its foundation on governance and public sector capacity. Being a stand-alone DPO, the Operation s design built on lessons learned from, for example, the successful second PRSF series, which highlighted the importance of advancing Government-owned reforms and emphasizing capacity building. The preparation of the Operation benefited from close collaboration with development partners, and other various stakeholders. For example, the development partners supported policy areas of the Operation and shared their knowledge and expertise in designing the Operation. (d). Relevance of Risks Identified 26. At the appraisal stage, four main risks that could jeopardize the expected outcomes of the operation were identified. These included (i) political risks, (ii) macroeconomic risks, (iii) stakeholder risks, and (iv) program specific risks. The design of the Operation, in collaboration with other Bank Operations (e.g. Support to the Social Protection System series) helped mitigate some of these risks. Political risks. At the appraisal, the political situation surrounding Rwanda was fluid. Following the publication of a UN report alleging Government involvement in the DRC, the international community reacted by suspending or delaying planned general budget support 11 Conducted by the Ministry of Public Service and Labor 12 It is important to note that the proposed operation is not included in the current CAS. 7

16 to Rwanda. This created a significant gap in the budget prepared on the basis on anticipated development partner s contribution. The World Bank Group mitigated political risks by formulating A strategy to support economic development and promote peace and stability in the Great Lakes region with specific projects expected to have a positive impact on easing regional tension. Though this Operation did not have a direct impact on regional security and stability, the context of regional insecurity and its potential repercussions and the donor reactions posed a risk to the operation. Macroeconomic risks. The suspension/delay in aid inflows translated into deterioration of core economic indicators (e.g. exchange rates, international reserves and interest rates) in the second half of 2012 (for details see section 1.1). Longer cessation of aid could have led to deeper deceleration of growth rates and thus held back progress made in poverty reduction, social indicators, and MDGs in the medium to long-term. With the financing provided through the Operation, the Government maintained public expenditures in priority areas for poverty reduction and service delivery as well as eased pressures on interest rates, exchange rates, and international reserves in the short-term. Therefore, the Operation mitigated a systemic risk to growth, poverty reduction, MDGs and social indicators in the medium and long-term. Stakeholder risks. The Government exercised ownership of its reform program, and development partners aligned development assistance with government strategies through effective policy dialogue under the BSHG. However, the suspension/delay in budget support had negatively affected the policy dialogue between the Government and its development partners and undermined a good track record of aid effectiveness and aid coordination. It created some mistrust on both sides and significant risks since donors contributed a significant proportion of the Government budget. In the three fiscal years prior to the aid crisis, on average percent of the budget was financed by aid inflows. 13 The preparation, and potentially the implementation, of the Operation provided a transitory framework through which the Bank remained engaged with the Government and development partners in policy discussions. It is also worth noting that the Development Partners Coordination Group has been reactivated and expanded to include DPs previously excluded from the BSHG to participate in the policy dialogue process. 14 Program specific risks. The policy reforms supported by the Operation as well as their respective intended outcomes were expected to be affected by the above mentioned risks. Most notably, the improvement of quality of service delivery was dependent on the availability of adequate budget resources. Program-specific risks included the country s relatively weak capacity, especially at decentralized levels of government, for implementing planned interventions in the Operation and producing quality and timely outcome indicators. The Operation adequately mitigated these risks with prior actions that supported the 13 In FY2009/10 (51 percent of public spending), in FY2010/11 (39 percent of public spending) and in FY2011/12 (42 percent of public spending), source: MINECOFIN, Macro Framework Public Dataset of June The Government and DPs discussed Terms of References regarding mechanisms for dialogue which led to a revitalization of the Development Partners Coordination Group (DPCG). This mechanism would allow for a number of DPs that were previously excluded from the BSHG to participate in the policy dialogue process. In terms of this operation, stakeholder risks were mitigated through consultation with Government and other DPs, a process that enabled the Bank to remain engaged in policy reform dialogue with the government. It is important to note, currently the DPCG has been operationalized. 8

17 Government to clarify institutional roles and responsibilities for decentralized service delivery and to enhance public transparency, fiduciary accountability, and local government capacity. Another potential risks for the program was that it was a single DPO to support a decentralization program that is long term. There was risk of sustainability of the outcomes achieved under the program. A key mitigating factor was that the Bank had started initial discussions and preparation for a Public Sector Governance Program-for-Results operation which partly supports fiscal decentralization. Other development partners also support decentralization through technical assistance Monitoring and Evaluation (M&E) Design, Implementation and Utilization 27. Monitoring and Evaluation Design. The M&E of the Operation relied on Government s own systems and arrangements with the aim of strengthening Government capacity and institutions. The Government had developed in close collaboration with development partners, including the Bank, a result and performance framework integrated into the planning and budgeting processes for monitoring the EDPRS. The integrated result framework/monitoring system consisted of three components: (i) a National Results and Policy Matrix, (ii) the Common Performance Assessment Framework (CPAF) which forms a subset of Performance Assessment Framework (PAF) and (iii) the Donor Performance Assessment Framework (DPAF). The M&E system has been further refined during the implementation period. The CPAF was discontinued and replaced by the M&E of the EDPRS 2. Backward and forward looking Joint Sector Reviews (JSRs), as a mechanism to monitor progress and to set priorities of sector strategies, were strengthened by tightly linking them with the M&E of the EDPRS 2. The Operation particularly utilized indicators in the PFM Sector Strategic Plan FY2013/ /18, and the Decentralization Sector Strategic Plan FY2013/ /18 for monitoring and evaluating progress on governance, public sector reforms, and decentralization. These indicators are monitored through Rwanda s Sector Working Groups structure, where the government and its development partners meet regularly, and in annual backward and forward-looking JSRs report on sector progress. The Operation also drew on the annual government Citizen Report Card which reports on citizen satisfaction with service delivery and overall quality of service delivery. 28. Implementation and Utilization. The Bank team monitored progress with implementation of the reform program, at the sector level through the JSRs with the Government and development partners. The backward-looking JSRs reported implementation status, challenges and agreed measures to move forward. The Bank s sector specialists not only participated in the JSRs in their respective areas, but also led some of the areas as co-chairs (lead donor), together with the Government. The Bank has been co-chairing the PFM coordination forum and actively participated in the Decentralization sector working group. Overall, the M&E design, implementation and utilization benefited from a commitment and the specific steps by the Government to ensure progress of the reforms. 9

18 2.4. Expected Next Phase/Follow-up Operation 29. The Operation served as a transition to the Bank s FY CPS. 15 The FY CPS is framed around three themes, which include Theme 3: Supporting Accountable governance through public financial management and decentralization. 16 Under this theme, the Bank is committed to continuously improving delivery of decentralized services and strengthening accountability. Building on achievements made through the Operation, the FY CPS proposes a Public Sector Governance Program-for-Results that aims at enhancing Public Financial Management and Statistical Systems to improve transparency and accountability in the use of public funds, revenue mobilization, and the quality and accessibility of development data for decision making. The Program aims to support EDPRS 2 s theme 4 on Accountable Governance and is fully consistent with Theme 3 of the CPS. The Program-for- Results operation was prepared during the course of this Operation. The Program was approved by the Board of Executive Directors on 31 October 2014 (P149095), and is expected to become effective by the end of The program provides a good bridge and continuity of the policy areas supported by the DPO, while broadening the engagement beyond decentralization. 3. Assessment of Outcomes 3.1. Relevance of Objectives, Design and Implementation Rating: Highly Satisfactory 30. Relevance of the Objectives. The development objective of the Operation was to support the Government to clarify institutional roles and responsibilities for decentralized service delivery and to enhance public transparency, fiduciary accountability, and local government capacity for improved access to quality services. This objective remains highly relevant to priorities of the Government s EDPRS 2 and of the Bank s FY CPS; to the foundation of the WBG s Africa Regional Strategy; and to the WBG s twin goals of shared prosperity and ending extreme poverty. 31. The DPO supports directly the mission itself of decentralization in Rwanda to promote and ensure participatory, democratic, all-inclusive and accountable governance and effective citizen-centered service delivery in Rwanda 17 As mentioned in section 1, in the context of its recent history, decentralization is a cornerstone of the accountable governance framework in Rwanda. The commitment of the government to undertake further steps to deepen decentralization at a time of political crisis, further underpins the relevance of the Operation. 32. Furthermore, direct and explicit linkages between the DPO and to overriding strategies were established, such as: 15 The Country Partnership Strategy can be found at: 16 Other CPS themes are: Theme 1: Accelerating economic growth that is private-sector driven and job creating, and Theme 2: Improving the productivity and incomes of the poor through rural development and social protection. 17 Governance and Decentralization Sector. Strategic Plan 2013/ /18, p 8. 10

19 EDPRS 2, theme four on accountable governance, where one of the key priorities is to further improve the quality of service delivery through improved citizen participation. The Government recognizes that much remains to be done to reach the country s goal in terms of participation, accountability and effective citizen-centered service delivery. Under theme 3 of the Bank s FY CPS (which is fully aligned with EDPRS 2 theme of accountable governance), the World Bank seeks to support the Government s objective of decentralising decision-making and making the Government more open and participatory in its processes. The WBG s twin goals of ending extreme poverty and promoting shared prosperity. Improving effectiveness and efficiency in the use of public resources at subnational entities is critical to maximizing progress towards the twin goals. The WBG s Africa Strategy, where governance and public sector capacity are considered as the foundation of other pillars of the strategy, including priority areas of public expenditure management systems, and strengthening citizens voices. 33. Design. The PDO identifies four components or policy areas which all are core to further deepening decentralization reforms. The policy areas are well aligned vertically, without overlap in outputs and activities. Within each policy area, the chosen indicators reflect the aspects of the PDO, and a clear results structure is established the outputs and activities leading to the output are clearly identified, as well as the outputs are likely to contribute towards the outcomes. In addition, the prior actions were critical and directly relevant as a logical sequence of actions needed for the outcome of the Operation. While the outcome targets were demanding, particularly over the course of a one-year operation, the outcome indicators were well targeted and selected in translating development objectives into measurable and important steps towards furthering the quality of decentralized service delivery. Furthermore, the design of this standalone DPO was based on areas supported by the Bank, including lessons learned in earlier operations and TA, by the Bank and development partners. In addition, with reference to the oneyear perspective, the Operation intended to improve overarching policy, capacity, transparency and accountability objectives, rather than specific improvements within sector areas. Furthermore, the design of the Operation is embedded in the decentralization reforms and processes, as the Government had been committed to for many years. Lastly, the design leveraged on the leadership and commitment of the government to decentralization by building and ensuring synergy with government s own program and support; the government was in the driver s seat and was clear about what it wanted to achieve. 34. Implementation. The Operation proved to be effective in supporting Government s policies to further enhance decentralized service delivery, capacity building, including PFM, and public participation. It also had the additional effect of mitigating the short-term economic and social impact of the aid shortfall. The Operation provided important financial resources that helped the Government maintain public expenditures in priority areas that are relevant to poverty reduction. The success in implementation across the four policy components is mainly attributable to the Government s strong ownership, commitment and leadership to the reform process, which was supplemented by engagements by development partners, including the Bank. This cooperation developed a results and performance framework integrated into the planning and budgeting processes for monitoring the EDPRS. In particular, this Operation utilized 11

20 indicators in the PFM Sector Strategic Plan FY2013/ /18, and the Decentralization Sector Strategic Plan FY2013/ /18 for monitoring and evaluating progress on governance, public sector reform and decentralization Achievement of Program Development Objectives Rating: Satisfactory Policy Area 1: Strengthening Policy Framework for Decentralization 35. This component supported the part of the PDO related to support the Government to clarify institutional roles and responsibilities for decentralized service delivery. As reflected in the two prior actions in this policy area, the Operation supported activities and outputs to strengthen policy framework for decentralization, with a view to ensure (i) increased effectiveness and efficiency of local government by eliminating duplication of efforts between central and local governments and (ii) a better enabling environment for local economic development. This outcome and its targets were fully achieved, as explained below. 36. On the clarification of the roles and responsibilities of central and local government, the local government organizational structures were revised to facilitate the allocation of human and financial resources to national and sub-national government entities, in a way that is more commensurate to their functions and responsibilities. In addition to solving co-ordination issues, the revised structure provided much clearer entry-points for citizens on the various areas of service delivery. During 2013/14, legislation was prepared and Presidential Orders were issued, outlining the organization and functioning of the various categories of sub-national governments (districts with- or without legal functions; villages and cells). The Law determining the Organization and Functioning of Decentralized Administrative Entities was approved by the Parliament and gazetted in October 2013 (law no. 87/2013 of 11/09/2013), and the Government issued guidance material to support the districts in actual implementation of the law. This included the Model Organizational Structure for Districts, guidance paper. During the course of 2013/14, the subnational government entities started filling staff positions in the revised organizational structures. Data from the IPPIS shows that 79.2 percent of staff positions were filled in 2013/14, with many districts edging close to 80-85% (see Table 2). 12

21 Table 2: Staff Positions Filled in Revised Organizational Structures, By Districts. District # Staff in Original Structure # Staff in Revised Organizational Structure Source: MINALOC, Data extracted from the Government s IPPIS # Staff Positions to be Filled Pct of Positions Filled BUGESERA BURERA GAKENKE GASABO GATSIBO GICUMBI GISAGARA HUYE KAMONYI KARONGI KAYONZA KICUKIRO KIREHE MUHANGA MUSANZE NGOMA NGORORERO NYABIHU NYAGATARE NYAMAGABE NYAMASHEKE NYANZA NYARUGENGE NYARUGURU RUBAVU RUHANGO RULINDO RUSIZI RUTSIRO RWAMAGANA TOTAL As regards the enabling environment for local economic development, by supporting the gazetting of the Presidential Order establishing the list of fees and other charges levied by decentralized entities and the applicable thresholds, the Operation established the framework for the districts to ensure that the fees and other charges levied are consistent with the quality of services provided, and thereby, encouraging the utilization of services by the population. Operationalization of the One Stop Center for all services related to construction permits and land management was the key step in improving the services in support of economic development within the new fee and charges framework. This enabled speedy treatment of the files and helped the Districts clearing backlog files that had been there for quite long time. For example, the construction permit can now be provided within only two weeks which increases the volume of fees collected. Embracing some technologies like the fiber optic wireless helped to reduce the cost of providing the services by the Districts which in turn increased the fees collected from the population. The government recorded an increase of 33% in the actual fees 13

22 collected by districts over the course of FY13/14, as appears in Table In December 2013, the Government decided to establish more ambitious targets than under this Operation, by an initiative to centralize the collection of sub-national taxes, fees and charges by the Rwanda Revenue Authority on behalf of the districts. The revenue gains from this initiative would become available in FY14/15 and later. Table 3: Collection of Fees and Charges by the Districts. 2012/ /14 Fees by Type Actuals 2012/2013 FY Actuals 2013/ Plate Number Registration fees 309, , Penality on number plate registration fees - 13, Lease Fees on Land (LG) 54,859,547 1,653,505, Abattoir Fees 162,065, ,030, Market gate entry fees 3,723,676,450 5,949,491, Laboratory Fees 505,200 9, Fee charged for advertising 11,512,823 11,252, Other Admin Fees 2,186,956,458 3,421,365, Consular Fees 1,904,935 7, Transfer of property ownership fees 301,814, ,582, Plot measurement fees 50,845,558 38,324, Boundaries marks fees 46,229,746 53,835, Billboards fees 384,478, ,001, Banners fees 15,584,298 32,395, Non engine operated boat fees 63,000 2,062, Engine operated boat fees 178, Brick yard licensing fees 2,621,900 7,209, Communication facilitation towers fees 52,105,004 35,091, Mine or quarry permit or concession fee 115,267, ,500, Mine ; quarry prospection fees and transport of material from quarries and forests 441,961, ,405, Public cleaning services fees 3,491,100,888 4,266,444, Parking charges 427,862, ,425, Annual technical inspection of transportation means - 75, Sale of flags 9,455,900 27,803, Mines exploitation license 99,091,795 79,006, Sale of specifications - 7,912, Systematic Land Registration 34,233, Land Registration Certificate Fees 2,827,311 35,989, Waste disposal Fees 124, , Court costs 1,998,644, ,127, Registration Fee 48, , Fees Charged on Public Cemeteries 500 6,773, Fee charged on civil marriage done outside the official business days 2,557,700 5,444, Forestry Exploitation Fees 356,320, ,813,126 TOTAL 13,940,795,069 18,537,496,170 Variation 33.0% Source: MINECOFIN Policy Area 2: Capacity Development for Quality Service Delivery by Local Governments 38. The component supported the part of the PDO related to local government capacity for improved access to quality services. The Operation focused on the government s initiatives to 18 The 2012/13 baseline on fee collections was verified by the OAG, as part of audit of the annual financial statements. The baseline in the PD for the Operation was based on information on the calendar year 2012, as provided in a survey carried out by a research agency. 14

23 strengthen capacity at the district level through adopting districts capacity building plans by the district councils. These plans aim to provide the administrative capacity for the delivery of quality services by local governments, particularly in the four top priority areas of human resource management; planning; M&E; and PFM. While human resource management is dealt with under policy area #1, this policy area #2 tracked improvements in PFM through Strengthening PFM Systems and Capacity at the Subnational Level. Timely and transparent financial information at the subnational level is key to improving the effective and efficient use of public resources not only at the subnational level but also at the national level (about 80 percent of district budgets are financed by transfers from the central government). To this end, and as a core element of the PFM Reform Sector Strategic Plan, the operation supported the development of a simplified accounting and financial reporting application (Subsidiary Entity Accounting System, SEAS) for entities below the district level. Further to a model initially piloted in Kigali, the broader pilot phase targeting all 416 sectors (sub-districts) was rolled-out in December As of April 2014, 88 of the 416 sectors (21 percent) had completed the pilot. An initial assessment of implementation experience indicated substantial success in five out of seven districts 19. As of June 2014, all 181 sectors of 14 districts had piloted the SEAS, covering 40% of all sectors. 39. Table 4 provides the review results of the roll-out in the 181 sectors, with performance scores on PFM capacity improvements. As shown in Table 4, 96% of the sectors in 14 districts were able to submit annual financial reports to their districts. Table 4: SEAS Performance by Sectors and Districts District No. of sectors Sectors that captured all data and # of Sectors that submitted District Name rank using SEAS reconciled up to June annual report to District 1 KAMONYI NYANZA RUBAVU RUHANGO RULINDO RWAMAGANA KICUKIRO GATSIBO NYARUGENGE BURERA GASABO KARONGI RUTSIRO MUSANZE Total Sectors Average performance % Source: MINECOFIN, SEAS Kick-off sessions Review. October The positive assessments of the pilot phase led the Government to include the roll-out of SEAS as a DLI in the PforR Operation, committing to the share of the sub-districts using the simplified accounting and financial reporting application at 60% in 2015/16; and 80% in 2016/17 15

24 40. The roll-out of SEAS is essential in ensuring that decentralized PFM systems are able to track and report on funding down on service delivery areas, ultimately with a view to a revised IFMIS being used for this purpose. In addition to the SEAS project, other initiatives and systems have been launched to improve the availability and transparency of resources allocated to subnational entities. The availability and transparency of central government transfers to subnational entities is a key concern of the Government. At the end of the fiscal year, MINECOFIN issues the earmarked transfer guidelines for the following year. These guidelines are designed to guide the decentralized entities in the implementation of earmarked transfers from the central government, by providing the amounts and the terms under which the earmarked funds are allocated, transferred, spent and accounted for between the parties involved 20. Improving the earmarked transfers systems have empowered the service delivery units. In the Education Sector, as an example, the capitation grant to public schools and school feeding funds are visible to all units, with explanations on which expense items are covered and by which amount. Furthermore, earlier on, there have been delays in releasing funds, which affected the services by the schools. The new transfer systems allow the funds to move directly from the national treasury to schools. With improved transfer systems in place, the earmarked grants to frontline services have increased in recent years. In the health sector, this includes grants for improving geographical access to health services; support to community health insurance; and funding of drugs and vaccination services as being decentralized to district hospitals. Table 5 provides the overall trends in increased earmarked funds in the two sectors. Table 5: Earmarked Funds Released to Service Delivery Units in Education and Health in FY 2011/12 and FY2013/14. Billion Rwf Sector FY 2011/12 FY 2013/14 Education Health Source: MINECOFIN Consolidated earmarked transfers for districts 41. In addition to funding from earmarked transfers, the Local Decentralised Administrative Entities Development Agency-LODA has been the interface for some donors who directly support Districts outside the treasury system. Also, the Development Assistance database (DAD) platform is used to fill the gap in information about resources available at sub-national levels. 42. Two Expenditure Tracking Surveys (PETS) have been undertaken since the most recent PEFA assessment was prepared in The findings in the PETS on the Vision 2020 Umurenge Programme are described in paragraph 57, and the main results of the Education PETS are presented in Box 1. Both PETS strongly indicate that an assessment of the PEFA PI-23 indicator would result in a rating of C or higher. 43. In summary, the roll-out of the SEAS; the improved framework and guidelines on earmarked transfers to service delivery units (covering 80-85% of their budget); the capture of donor funds flowing directly to the districts and to service delivery units, and the findings in the two Public Expenditures Tracking Surveys indicate, that the program objective is substantially 20 MINECOFIN, Districts Earmarked Transfers Guidelines, April

25 achieved. 21 As mentioned earlier, the PEFA exercise was delayed, due to change in the PEFA framework and measurement. Once undertaken, the PEFA most likely will result in a scoring of C or higher on the PI-23 indicator. Box 1: Public Expenditure Tracking Survey (PETS) in Education Rwanda Transparency International In a survey published in March 2012, the Rwanda Transparency International found, inter alia, that, A total of Rwf 7.3 billion that was requested by Districts for Districts Schools have been received as capitation grant by the latter Desk research indicates that there is no difference between the Capitation Grant provided by the Ministerial order and no leakage between the amount disbursed by the Ministry of Finance and what is received by Districts Schools per pupil and per teacher A very high level of awareness of all categories of respondents with regard to the fact that the Government provides Capitation Grant, i.e., 98.8% of teachers, 98.4% of parents, and 91% of pupils are aware of this The lack of leakage is due to the MINECOFIN s good public expenditure policy of transferring the capitation grant directly to the individual accounts of the school without transitioning through Districts accounts The survey also confirmed the need for strengthening PFM capacity, such as inaccurate and incomplete recording of transactions ; the financial reporting format used by schools is not uniform ; and limited knowledge of tendering procedures by some head teachers and improvement in oversight on how the funds are used at the school level. Policy Area 3: Improving Government Accountability and Transparency to Citizens 44. This policy area supported the part of the PDO related to improved accountability and transparency to citizens as fundamental elements of sustained performance results in public service delivery. It was to help achieve the Government s aims to improve citizen participation in the district budgetary process and in formulation of the Imihigo activities 22. The strength of these participatory mechanisms on service delivery performance is strongly determined by the degree to which citizens have access to public information and are empowered to use that information to influence public decision-making and demand accountability at the subnational levels. 45. During the 2013/14, the Government continued to demonstrate its commitment to the Improving Government Accountability and Transparency to Citizens by putting in place supporting regulations and mechanisms to sustain the implementation of the prior action, Access to Information Law. In terms of regulations, the Law no. 42/2013 of 16/06/2013, establishing Rwanda Broadcasting Agency and determining its mission, organization and functioning, has been gazetted. Five ministerial orders determining modalities for the implementation of the Access to Information law have been adopted and published in Official Gazette no. 03 of 13/01/2014. These ministerial orders are: (i) ministerial order no. 005/07.01/13 of 19/12/ Scoring a C on PI-23 requires, under the PEFA framework that special surveys undertaken within the last 3 years have demonstrated the level of resources received in cash and in kind by either primary schools or primary health clinics covering a significant part of the country OR by primary service delivery units at local community level in several other sectors. 22 See footnote

26 determining which information could destabilize national security; (ii) ministerial order no. 006/07.01/13 of 19/12/2013 determining in details the information to disclosed; (iii) ministerial order no. 007/07.01/13 of 19/12/2013 determining the time limit for the provision of information or explanation of not providing it; (iv) ministerial order no. 008/07.01/13 of 19/12/2013 determining the procedure of charges of fees related to access to information; and (v) ministerial order no. 009/07.01/13 of 19/12/2013 determining private organs to which the Law relating to access to information applies. A number of additional activities were undertaken to ensure the implementation of the Law. There were series of awareness campaigns conducted by the office of the Ombudsman, and media literacy campaigns by the Rwanda Governance Board. The media and the citizens are aware of the law. According to Rwanda Governance Board, in the first round of implementation, primarily the media and in particular journalists, have increasingly used the improved access to information to demand information from government entities. 46. As regards citizens participation, the annual Citizen Score Card, which was supported in the 2 nd PRSF series as a means of increasing citizen voice in service delivery, focuses on four areas: (a) citizen participation in inspection of service and requesting for accountability; (b) citizen participation in the budget process at district level; (c) citizen participation in the district development plans and (d) citizen participation in the district performance contracting (See Figure 1). These channels of participation are re-enforced by district initiatives such as Open Days, Citizen s Charter, Governance Month, and Accountability Days. As an example, the Governance Month initiative generated more than 7,000 queries from the citizens in its initial year. As appears from Figure 1, in 2013, a majority of citizens participated in the areas they most closely relate to - the Imihigo activities, and the inspection of services and demand for accountability; while the overall participation is lower on the budget preparation and the districts development plans. The share of women as compared to men is higher on all four areas. 47. Regarding the specific indicators used to measure the outcome on this policy area, as evidenced in Figure 1, the target value was exceeded on all indicators. First, on the participation in the budget process, the overall citizen participation was 29% in comparison to the target of 20%. The share of women out of the total number of citizens who participated was 52%, against target value of 19%. The visit by the ICR mission to the Gakenke district confirmed this picture, with women making up the majority of citizens participating in the budgetary process. With a view to support women s participation, all districts used a Gender Sensitivity citizens guide during planning and budgeting for FY Second, on the participation of citizens in preparing the District Performance Contract (Imihigo), the overall citizen participation was 72% in comparison to the target of 30%. The share of women out of the total number of citizens who participated was 52%, against target value of 28%. For further details, please refer to Figure 1. The increase in Imihigo participation was in particularly spurred by the introduction of Imihigo activities at the household level in the villages. 18

27 Figure 1. Citizens participation in Four Areas of District s Administration in 2013/14 72 Male Female Total Yes No Don't know Yes No Don't know Yes No Don't know Yes No Don't know Citizens participation in preparing the District Budget (District Council) Citizens participation in preparing the District performance contracts ( ihi ) Citizens participation in in the District Development Plan Source: RGB. Database compiled for the 2013 Rwanda Citizen s Scorecard 2013 Policy Area 4: Enhanced Local Government Fiduciary Accountability Citizens participation in inspection of Services and requesting for bili 48. The Operation supported policy changes towards a better clarification of institutional roles and responsibilities for service delivery, which requires improved fiduciary accountability through the sub national PFM system at and below the District level. The Operation also supported increased sub-national capacity and accountability, in support of improving the quality of service delivery. The Audit Committees constitute a core element of the fiduciary accountability framework, but although the Audit Committees were established in all 30 Districts in June 2011, none of the districts had received a qualified audit 23 report as of FY2011/12. The OAG also expressed serious concerns over persistent failure to implement prior years audit recommendations The Operation supported initiatives to follow up on recommendations from the District s Audit Committees, by issuing communication to the districts on the main areas for improvements. This includes the implementation of audit queries (e.g. weak accounting and financial reporting systems) to ensure that public funds are used for the intended purposes in an efficient and effective manner and they contribute positively to improved service delivery and local governments fiduciary accountability. In July 2012 MINECOFIN published a model audit 23 A qualified audit indicates that except for the matters raised, proper books of account have been maintained and the financial statements do give a true and fair view of the state based on audit opinion of the Auditor General. 24 Required by Article 74 of Organic Law on State Finances and Property 2006 and Ministerial Instructions no. 004/09/10/MIN of 01/10/2009 for Audit Committees 19

28 committee charter, followed by a Handbook in 2013 that provides broad guidelines that can be used by audit committees in the Districts and elsewhere in public sector. All 30 district councils have had audit committees since 2011, and as of December 2013, 83 percent of them were submitting reports to the District Councils. Since the 2011, the districts have been able to better implement prior years recommendations from the Auditor General. The districts implemented 63% and 67% of the recommendations in 2012 and 2013, respectively, as seen against 46% in A study in 2013 by the Transparency International in Rwanda found, however, that continued information and training of the members of the District Councils of the role and mandates of the Audit Committee may be needed going forward Improvements in the audit opinions on the districts financial statements are expected as a consequence of the work on the audit committees, including implementation of earlier year s audit recommendations. With a baseline of zero in 2011/2012, three Districts received a qualified audit opinion for their financial statements in FY2012/ This makes strong progress towards the achievement of the outcome target of having 5 districts with qualified (except for) audit opinion in FY2013/ These achievements were being supported throughout 2013/14 by continuous capacity building of Council Committees and staff involved in accounting and financial reporting. 25 Reports of the Auditor General of State Finances for the years ending 2012 and Analysis of the involvement of District Councils in ensuring effective financial management of District s resources Transparency International Rwanda, September District with except for are: Ruhango, Gakenke and Kamonyi 28 MINECOFIN confirmed this assessment during the ICR mission. The OAG audits all subnational government entities on a yearly basis and issues the results of the audit as part of the Annual Report presented to Parliament, under Volume III. The OAG report is presented to the Parliament 9 months after the closing of the related financial year. 20

29 Table 6: Summary on Prior Actions, PDO and Key Outcome Indicators, by Policy Area Prior Action 1) The Recipient has approved a new decentralization policy which clarifies the roles and responsibilities of central and local government 2) The Recipient has published in the Official Gazette the Presidential Order establishing the list of fees and other charges levied by decentralized entities and the applicable thresholds 3) The Recipient has adopted twenty eight (28) District capacity building plans approved by the District Councils 4) The Recipient has published in the Official Gazette a new Access to Information Law which provides for the public s right to information (Access to Information Law was Gazetted in March 2013) 5) The Recipient has reviewed twenty five (25) District Audit Committee reports of 2012 and issued communication to the Districts on the main areas for follow up (By December 2012, twenty five District Audit Committees had held quarterly meetings and reported to their respective District Councils) Outcome Indicator Program baseline Program Target Actual (2013/14) Policy Area 1: Strengthened Policy Framework for Decentralization Percentage of staff 0% 70% 79.2%. Target achieved by 100% positions filled in (2012/13) revised organizational structures Fees and charges collected by districts Rwf 134 million (2012) 12% increase from the program baseline Policy Area 2: Capacity Development for Quality Service Delivery by Local Governments PEFA PI-23 D C (availability of (2010) information on resource received by service delivery unit) Policy Area 3: Improving Government Accountability and Transparency to Citizens % of citizens who participate in the district budgetary process (o/w women) % of citizens who participate in the formulation of Imihigo activities (o/w women) 11% (10%) (2010) 24% (22%) (2010) 20% (19%) 30% (28%) Policy Area 4: Enhanced Local Government Fiduciary Accountability The number of districts with qualified audit 29 0 (2011/12) 5 districts (17%) Target achieved by 100%. Collections increased from Rwf 13.9 billion in 2012 (calendar year) to Rwf18.5 billion in 2013/14 (fiscal year). Baseline adjusted, based on district s financial reports audited by OAG. Program objective substantially achieved. PEFA assessment has been delayed due to change in PEFA framework and measurements. Significant PFM capacity building; a new earmarked transfer framework for service delivery units in place; and two PETS strongly indicate, that the upcoming PEFA assessment most likely will result in a C rating. 29% - Target achieved by 100% (52%) Target achieved by 100% (2013) 72% - Target achieved by 100% (52%) Target achieved by 100% (2013) Program objective substantially achieved. The outcome targets for 2013/14 are being evaluated by the Office of Auditor General in March With three districts achieving qualified opinion in 2012/13, in combination with the activities undertaken by the Government, the districts were on track to achieving the outcome targets in 2013/ The number of districts in which except for the matters raised, proper books of account have been maintained and the financial statements do give a true and fair view of the state based on audit opinion of the Auditor General. 21

30 3.3. Justification of Overall Outcome Rating Rating: Satisfactory 51. The ICR rates the overall achievement of the development outcomes as Satisfactory. The Relevance of Objectives, the Design, and the Implementation were rated Highly Satisfactory, and the achievements towards the program objectives and hence the important steps taken to improve the quality of decentralized service delivery was rated Satisfactory. The overall improvements in the policy framework, the subnational capacity, including PFM, and transparency and accountability to citizens were significant over the course of the Operation. 52. Out of the six development outcome indicators, four indicators were fully achieved, while program objectives were substantially met on areas covered by those two indicators not yet being evaluated. Of the four indicators fully achieved, the two on policy area #1 filling staff positions and increased revenues on fees and charges were results of the Government specific steps to clarify the roles and responsibilities for the districts and the framework on fees and charges, which are of outmost importance to improving accessibility and quality of decentralized service delivery. The full achievement of the other two indicators related to transparency and accountability (including the targets on women participation) witness the progress on citizens voice and involvement in decision-making related to decentralized service delivery. The Government took specific steps to support an increase in the participation of women. As regards the two indicators not yet evaluated, on the number of districts with qualified audit the ICR finds the program objectives substantially met due to the progress observed by the OAG for FY , and the technical PFM activities undertaken during the Operation. The districts seem on track to meet the target level in 2013/14. Finally, on the second outcome indicator not yet evaluated a PEFA score of C on information on financial resources to frontline units -- the ICR finds the program objective substantially met, with reference to the implementation of the SEAS roll-out in line with expectations in the Program Document; the new framework on earmarked transfers to the districts; and the two PETS undertaken since the most recent PEFA assessment took place. The ICR findings point to a most likely score of C or higher on this indicator once the PEFA assessment will be prepared. The PEFA assessment was delayed, due to changes in the PEFA framework and measurements Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 53. The analysis of poverty and social implications found that the Operation has no significant impacts on distribution. Improved service delivery at decentralized levels is thought to benefit all segments of the population. As poor households are more dependent on public services which currently lack quality (for instance public education), the Operation can be thought to benefit the poor more than the wealthier households. 54. Support in the first policy area, strengthening policy framework for decentralization, is thought to have a positive impact on poverty reduction. Through an improved clarity on roles and responsibilities between the central and local governments, service delivery and the administrative capacity at the local government level improves. Moreover, the new and clearer 22

31 framework of fees and other charges has a pro-poor impact as it limits the number of fees and charges levied by local government by introducing a closed list system and establishes maximum allowable limits on the associated rates, ensuring they are more proportionate to the services rendered. 55. Support to capacity development for quality service delivery is thought to have a positive impact on all segments of the population. As regards improved information on resources to service delivery units or local programs, the Operation would have a pro-poor impact, since poor people are benefitting from public services and programs 30 With an improved capacity of institutions and local civil servants, the quality of services is high and positively impacts all users of those services. 56. Improved government transparency and accountability to citizens is key to improve service delivery. Through the increased availability of quality public information and an improved access to the information, beneficiaries are now better placed to proactively approach the Government (both central and local) and make their demands for improved services heard, as well as participate in defining and implementing local development plans. 57. Enhanced local government fiduciary accountability has an indirect positive impact on poverty reduction over the medium- to long-term. The policy action, by improving local government compliance with PFM laws and procedures, would ultimately improve the efficiency and effectiveness of public funds; thereby ensuring decentralized entities provide better services for a given budget. 58. Two of the Outcome indicators focused on improving gender-related aspects of citizens participation. Both targets were met, indicating higher share of women s participation in the budget preparation and the Imihigo preparation, due to interventions under this Operation. (b) Institutional Change/Strengthening 59. Institutional strengthening and capacity building were supported in this Operation. The Operation supported the approval of the decentralization policy that clarified roles and responsibilities of central and local government. This is an institutional strengthening that was important to increase the effectiveness and efficiency of local governments by eliminating duplication of efforts. In addition, the Bank supported the government s initiative to improve administrative capacity for the delivery of quality services by local governments, particularly in the four top priority areas of human resource management, planning, M&E, and PFM. These plans constitute an important milestone for the capacity building efforts because they are: (i) bottom-up, owned by the Districts and based on a holistic diagnostic tool, and move Rwanda 30 In March 2014, the RW Transparency International prepared a PETS on the Vision 2020 Umurenge Programme which contribute to reduction of extreme poverty, through employment on community projects, cash transfers, and minor financial services. Amongst the findings, the report mentions that above 70% of beneficiaries were aware of eligibility criteria on entitlements; 84% of beneficiaries felt the transparency in selecting and approving beneficiaries sufficiently good; and compliance in fund requests, disbursement and provision to beneficiaries stands very high (e.g. 5 sectors out of 6 sectors examined under DS component) (p 12). 23

32 from the previously top-down and often uncoordinated interventions of the past decade, and (ii) being coordinated with District Development Plans (DDPs) that form part of the EDPRS 2. (c) Other Unintended Outcomes and Impacts (positive or negative, if any) 60. This subsection is not applicable because there were no other unintended outcomes and impacts Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 61. This subsection is not applicable because there were no beneficiary survey or stakeholder workshops. 4. Assessment of Risk to Development Outcome Rating: Moderate 62. While designing the Operation, risks to development outcome were expected to arise from (i) political risks, (ii) macroeconomic risks, (iii) stakeholder risks, (iv) program specific risks and (v) sustainability risks. The design of the proposed program and successful implementation helped mitigate some of these risks with moderate risks to sustainability. As noted above the publication of a UN report alleging Government involvement in the DRC and the reaction of development partners by suspending or delaying planned budget support to Rwanda was a significant political risk that could have undermined the operation and its development outcomes if the operation had been opposed by the key partners. The choice of the area of support (i.e. decentralization and issues of transparency, accountability and participation) which was supported by most development partners helped mitigate this risk. Also peace talks to resolve the situation in DRC and Rwanda s acceptance to sign the regional peace framework agreements significantly led to changing attitudes. The World Bank was also able to tackle upfront some of the concerns that major development partners in Rwanda had expressed. The macroeconomic risks did not directly affect the operation but provided the context within which the operation became more urgent. The speed of preparation and delivery to the Board, as well as the one tranche disbursement of the DPO were driven by the need to help mitigate the effects of the budget shortfall by bridging some the financing gap that could have undermined the funding of the government program and the achievement of the outcomes. One program risk to achieving the development outcomes was that it was a single DPO to support a decentralization program that is long term. There was risk of sustainability of the outcomes achieved under the program. A key mitigating factor was that the Bank had also started initial discussions and preparation for Public Sector Governance Program-for- Results operation, which partly supports fiscal decentralization. Other development partners also support decentralization. Risks to sustainability of outcomes: As noted above, the Government and DPs have reactivated dialogue and in the form of the Development Partners Coordination Group 24

33 (DPCG). The tensions that led to the suspension of budget support and the consequences on gaps in the budget has largely been addressed. Even though general budget support has not resumed. A number of DPs has continued with sector budget support, including support to decentralization. The Bank funded Public Sector Governance Program-for-Results operation includes support to fiscal decentralization. The risks to sustainability of outcome are thus moderate. 5. Assessment of Bank and Borrower Performance 5.1. Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Highly satisfactory 63. The Bank s overall performance in ensuring quality at entry was highly satisfactory. The structural and macro-economic framework and context is appropriate. Under extreme time constraints - the operation was prepared in record time of about 12 weeks from concept to Board approval - the Bank managed to identify and prepare a highly successful operation, which was underpinned by comprehensive analytical work and lessons learned from the previous operations (i.e., advancing Government-owned reforms, providing substantial financing and fostering better donor coordination). The analytical works informed the preparation for Government mediumterm development strategy, i.e., the EDPRS. The preparation benefitted from excellent collaboration across the Bank, as well as extensive consultations and collaboration with internal as well as external stakeholders took place over a very short period of time. The speed of preparation responded to the Government s need for finance, while maximizing opportunities for dialogue with government and collaboration within the Bank was remarkable. The Bank s effort to align the Government s own M&E systems (e.g., JSRs) with the Operation s results framework and close collaboration and coordination with Development Partners on the ground proved effective. Furthermore, the Bank staff continued to participate in the Sector Working Groups and took a leading role in translating the EDPRS objectives into prior actions. Identification of the four policy areas reflected the government priorities and the outcome targets were established by taking into account the government s capacity in these areas. (b) Quality of Supervision Rating: Highly Satisfactory 64. The Government and development partners (including the Bank) undertook annual JSRs to monitor progress and set priorities at the sectoral level. The review is based on the indicator and policy action. The review process provided the Bank an opportunity to closely monitor reform progress and to address key issues in coordination with the Government and Development Partners. Despite the unavailability of data on some of indicators, this close supervision process, as well as continuous implementation support and engagement enabled the Bank to monitor progress in these indicators. The quality of supervision and the continuous dialogue enabled the Bank to prepare with the Government in another record time the Public Sector Governance Program-for-Results operation, which builds on the achievements of this DPO. 25

34 (c) Justification of Rating for Overall Bank Performance Rating: Highly Satisfactory 65. Consistent with the ICR guidelines, the overall Bank performance is rated Highly Satisfactory, when taking into account the highly satisfactory Bank performance in ensuring quality at entry and the highly satisfactory performance in quality of supervision Borrower Performance (a) Government Performance Rating: Highly Satisfactory 66. The government implemented all prior actions and undertook a very broad range of activities over the course of one year, towards achieving the program objectives, including the targets on the Outcome indicators. As mentioned earlier, the government ownership, leadership and strong commitment to reforms aimed at improving the quality of decentralized service delivery were evidenced by these efforts. The monitoring and evaluation arrangements relied on Government arrangements with the aim of strengthening Government capacity and institutions. As previously noted, the Government has developed in close collaboration with development partners, including the Bank, a results and performance framework integrated into the planning and budgeting processes for monitoring the EDPRS. A strong and trustful collaboration between the Government and development partners were in place during this Operation and during implementation. Despite the initial difficult circumstances, the Government remained focused on results and ready to work with the Bank and take measures to ease the cause of tensions with development partners. The remarkable achievement of all the prior actions by appraisal testifies to the Government s readiness and performance. (b) Implementing Agency or Agencies Performance Rating: N/A 67. According to harmonized evaluation criteria guidelines for the ICR, in situations where the government and implementing agency are indistinguishable, particularly for development policy lending operations, only an overall rating is necessary. (c) Justification of Rating for Overall Borrower Performance Rating: Highly Satisfactory 6. Lessons Learned 68. There are a number of lessons to learn from this Operation, especially from the context to design and implementation. 69. Difficult context and circumstances provided opportunities for stakeholders to cooperate and think outside the box on what is politically feasible. The Operation was designed in a difficult context when most development partners had either suspended and/or delayed their support, especially general budget support including the Bank s PRSF9 (US$125 million 26

35 scheduled to be disbursed in Q3 2012). General budget support had provided a platform for the Bank and other donors to engage government in policy dialogue on cross cutting governance issues under the BSHG. The suspension of general budget support meant that the space for dialogue collapsed. In this difficult context, stakeholders were concerned about possible negative macroeconomic and social consequences of the suspension of aid. A DPO focusing on decentralization and service delivery was acceptable and supported by most development partners. For example, during the preparation of the Operation, some development partners were concerned to directly disburse un-earmarked funds to the treasury single account. Against this concern, the Letter of Development Policy of the Government identified expenditure items to be funded by the Operation. 70. Understanding the political economy context of the operation was critical: This operation demonstrates the need to understand and navigate the political economy context. The Bank had to understand and respond to the political sensitivities surrounding the UN report and consequent withdrawal of general budget support. At the same time it had to maintain entry points for dialogue with the Government and keep DPs on board by supporting an area of governance that most DPs and stakeholders will not oppose but will concur. The Bank s operational choice and decision was thus strategic in continuing to engage with the Government on policy dialogue and rally support of development partners to the Operation. The Bank seems to have understood the political economy context and learned to handle the sensitive political issues and maintain dialogue with development partners and the Government. The key lesson here is that political economy matters and even in difficult circumstances such as suspension of general budget support to a country, there is still room for engagement and continued dialogue. In order to make this happen, teams have to be sensitive to the political context and respond innovatively on how and when to engage with clients. The continued engagement and dialogue with clients and key stakeholders, even in difficult circumstances is crucial for achieving the goals of the Bank. 71. Leveraging cooperation within the World Bank to ensure timely client responsiveness: The operation was prepared in record time of about 12 weeks from concept to Board approval. This was largely made possible through the support and coordination of different units of the Bank various parts of PREM, the Social Protection sector, AFTOS, OPCS and the CMU. The collaboration was also expressed by the preparation being led by a TTL and two co-ttl to ensure the diversity of sector expertise represented at the level of TTL. The speed of preparation to respond to the Government s need for finance, while maximizing opportunities for dialogue with government and collaboration within the Bank was remarkable. The main lesson is here the need/value of team work and collaboration across different units of the Bank to be able to respond in a timely fashion to client needs. 72. Government commitment and leadership as a critical success factor. This Operation illustrated the importance of government commitment and leadership as critical ingredients for success. The Operation was aligned with the government s strategy and program on decentralization, though the Operation was not specifically included in the Bank s CAS formulated in Rwanda has exercised a culture of performance contracts (Imihigo) and result-based development management. It has a strong track record to meet agreed targets. The good track record may have given confidence to the Bank team that sustainability would be assured even with a stand-alone DPO. In most other contexts, it would have been too risky go for a single tranche DPO on the area of decentralization which is clearly programmatic in nature. 27

36 Thus a combination of leadership and commitment and the track record of result-based development management were critical success factors. 73. Setting demanding targets with flexibility. The Operation used well-defined and precise metrics to assess enhancements in the framework on decentralized service delivery, subnational capacity and participation, and the indicators were applied with high requirements on the Government s actions and commitment. As evidenced in this Operation, significant progress was achieved, while also acknowledging, as similar to the vast majority of countries implementing decentralization reforms, the needs for adjustments identified during the course of the Operation. In Rwanda, further adjustments to sectoral decentralization, including refinement of functional allocation of responsibilities across levels of government, are core elements of the Decentralization Sector Strategic Plan for FY 2013/ /18 and onwards. On the improvements in revenues from fees and charges, the Government decided in December 2013 to establish more ambitious targets than under this Operation, by an initiative to centralize in the Rwanda Revenue Authority, the collection of sub-national taxes, fees and charges, while also helping districts to build capacity in this area. 74. Strategic choice of DPO to keep the door open for engagement on governance: The difficult circumstances under which the Bank had to make a quick decision on which financing instrument to use are informative. With the collapse of the space for dialogue under general budget support, there was an urgent need to keep the dialogue going; the choice was between having a DPO or no operation on governance. Under normal circumstances, a stand-alone DPO to support a decentralization program would not be appropriate, since implementation stretches over a medium to long term period. Under the complex political environment surrounding the preparation of the DPO, and demand from the Government to prepare for the Operation within a few months, the Bank management made a decision to go for the stand-alone DPO. The choice was strategic to open the space for dialogue on cross cutting governance issues within decentralization, including policy framework; accountability and transparency; and PFM capacity building. The strategy paid off in keeping the dialogue open, leading also to the Public Sector Governance PforR operation (approved by the Board in October 2014) which has national and subnational PFM as key elements. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies 75. The Borrower s comments on the program and on the ICR are included in Annex 2 (b) Cofinanciers 76. This subsection is not applicable for the ICR. The program did not have cofinanciers. (c) Other partners and stakeholders 77. This subsection is not applicable for the ICR. 28

37 Annex 1. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility/ Specialty Lending Yoichiro Ishihara Senior Economist AFTP2 Task team leader Tessa MacArthur Senior Governance Specialist AFTP2 Co-Task Team Leader Alex Kamurase Senior Social Protection Specialist AFTSE Co-Task Team Leader Wolfgang Fengler Lead Economist AFTP2 Peace Niyibizi Economist AFTP2 Geoff Handley Consultant AFTP2 Winston Percy Onipede Cole Sr. Financial Management Specialist AFTME Toru Nishiuchi Consultant AFTP2 Nightingale Rukuba-Ngaiza Senior Counsel LEGAM Hassine Hedda Financial Officer CTRLA Tom Bundervoet ET Consultant AFTP2 Marco Hernandez Economist AFTP1 Paolo Zacchia Lead Economist AFTP2 Birgit Hansl Senior Economist ECSP2 Peer reviewer Khwima Nthara Senior Economist EASPT Peer reviewer Yasuhiko Matsuda Senior Public Sector Specialist EASPW Peer reviewer Supervision -- Yoichiro Ishihara Senior Economist Task team leader Peace Aimee NIYIBIZI Consultant (b) Staff Time and Cost Stage Staff Time and Cost (Bank Budget Only) No. of staff weeks USD Thousands (including travel and consultant costs) Lending FY ,887 FY Total: ,887 Supervision/ICR FY FY ,431 FY ,932 Total: ,363 29

38 Annex 2. Summary of Borrower s Comments on Draft ICR The Government of Rwanda (the Government) appreciates this opportunity to express our views on the implementation of the Quality of Decentralized Service Delivery Support DPO. We note that Rwanda s economy has recorded strong growth (exceeding 7% on average) in the last 3 years, although 2013 growth decelerated to below 5% mainly due to the lagged effect of the aid shortfall in While Rwanda has made significant development progress in the past decade, the country remains one of the poorest in the world with 45% of the population below the poverty line and 24% extremely poor. Improving the delivery of basic services to the poor, including health, education and water among others, is fundamental for Rwanda to address its large development challenges. Furthermore, improving service delivery and making it more responsive and accountable to citizens' needs through decentralization is a key priority of the second Economic Development and Poverty Reduction Strategy (EDPRS 2). When the Government requested this Operation, many of Rwanda's social achievements were at risk as a result of a shortfall in donor budget support equivalent to approximately 11% of the budget in the first half of FY2012/13. Given the importance of expenditures on poverty reduction, service delivery as well as macroeconomic stability, the Government believed that the aid shortfall would lead to setbacks of development progress made. To encounter the situation, we attempted to protect our poverty reduction/service delivery expenditures by decelerating capital expenditures and increasing domestic borrowing. In addition, a list of earmarked poverty reduction and service delivery expenditures were identified, where the budget execution was subject to additional financing in FY2012/13. The Government thus much welcomed this Operation as very timely and much helpful, since the financing (US$50 million) allowed for the execution of 90% of the human and social development programs through earmarked transfers from the central government to districts. The earmarked transfers from the central government to districts accounted for more than two thirds of districts' revenues and were central to improving service delivery at the local government level. In this perspective, this Operation was very timely and much helpful. An equally important point is that the Operation helped the Government accelerate key policy reforms mainly in the area of decentralization. Decentralization has been pursued by the Government since 2000, and accelerated since 2006, as one important means of promoting national unity, good governance, better and more accountable service delivery, and national development. Sub-national district and sub-district governments have become responsible for planning, coordinating working through sub-district entities and implementing the provision of a large and increasing number of basic services, ranging from health and education, to water, sanitation, and agricultural development. The early steps of the Government's decentralization program coincided with rapid improvements in access to public services in Rwanda, especially in rural areas, where 98% of the poor live. For example, the use of public primary education by poor rural households increased from 68% in 2006 to 75% in 2011, while access to health centers increased from 63% in 2006 to 81% in Despite these dramatic improvements in access to public services, much remained to be done, both in improving the quality of service delivery and, relatedly, its responsiveness to local priorities and local feedback. This could only be achieved by a deepening of the decentralization framework in Rwanda, which would help to improve service delivery. 30

39 During the preparation of the Operation, the Government was (i) reforming policy framework of decentralization; (ii) enhancing capacity building at the district level; (iii) formulating a legal framework for transparency; and (iv) improving public financial management at the district level. The Government notes that the Operation helped the Government accelerating these reform areas. Overall, the Government views that the Operation was thoughtfully designed to tackle critical issues that confronted Rwanda supported by a solid analytic foundation. The Operation was designed with the following principles: Relevant to the country s development priorities; Achievable in the expected timeframe in most cases; and Consistent with the Bank s CAS and the Government s EDPRS 2. The Operation sought to increase the Government s capacity to deliver on its priorities. The conditions for disbursement included prior actions (critical to the success of a Government s program) which the Government fulfilled satisfactorily. Bank Performance The Government commends the quality of dialogue with the Bank before and during the Operation the design, appraisal missions and the day-to-day business related to implementation. The Bank reacted swiftly on our important, short-term needs, and significantly contributed to policy discussions within the community of Development Partners as the design of the Operation started in February The Government recognizes that the preparation of the Operation benefited from close collaboration with other development partners and various stakeholders. As the Government had difficulties in holding policy discussions with development partners, the Government appreciates that the World Bank reconvened dialogues. Overall, the Government views that Bank s performance has been highly satisfactory with regards to alignment with the EDPRS 2; engagement; valuable policy discussion and performance; and mitigation of systematic risks which might have negatively affected poverty reduction and service delivery through the economy. The Bank has also been catalytic mostly in critical areas where Rwanda was in need of support including public sector capacity building, strengthening PFM systems and importantly the government s decentralization program to bring, inter alia, governance and service delivery closer to its citizens and to improve accountability to citizens. The Bank has offered relentlessly implementation support to the Government in the delivery of the key programs. The Bank s effort to align with the Government s own M&E systems (e.g., Joint Sector Reviews) with the Operation s results framework and close collaboration and coordination with Development Partners proved effective. Government Performance (Borrower Performance) The Government s met all the prior actions and launched a range of actions and implementation activities towards meeting the demanding program objectives over the course of one year. The Government benefitted from its own strong capacity and knowledge on the decentralization agenda. Furthermore, the design of the Operation was embedded in the decentralization reforms and processes that the Government had been committed to for many years. Although the number of services whose provision had been decentralized had grown rapidly during recent years, there 31

40 was an urgent need to formally and clearly specify the different roles of different levels of government in the provision of basic services. To this end, the Government adopted a new decentralization policy with newly passed legislation and executive orders that clarified the responsibilities of various levels of government in the provision of basic services. In addition, the Government believed that strong accountability mechanisms would be fundamental to ensuring that sub-national governments perform their functions in an efficient, effective and responsive way. To that end, since the beginning of the decentralization process, the Government of Rwanda placed a strong emphasis on creating mechanisms for the population to not only elect local government officials, but also to be able to monitor and provide feedback on local government activities. This was done by passing a new Access to Information Law, which served to enhance public transparency and the accountability of the state (at all levels of Government) to the citizens and by further initiatives to support participation and voice. The success in implementation across the four policy components of the Operation is mainly attributable to the Government s strong ownership, commitment and leadership to the reform process. Progress has also continued in relation to coordinating with development partners. Rwanda stands out in enhancing aid effectiveness principles, particularly facilitating policy dialogue and regular assessments on the performance of Government as well as development partners. The strong and trustful collaboration between the Government and development partners were in place during this Operation. Conclusion In closing, the Government of Rwanda expresses its gratitude to the World Bank for its continued support to the development of Rwanda and reiterates its strong commitment to reduce poverty and foster sustainable growth. The Government greatly appreciates the Operation s assistance in the implementation of its policy reform program. 32

41 Annex 3. List of Supporting Documents 1. Rwanda Country Assistance Strategy (CAS) , Report No RW 2. Rwanda Country Partnership Strategy (FY ) 3. The Draft of Rwanda Citizens Report Card Rwanda Citizens Report Card Africa s Future and the World Bank s support to It 6. Rwanda s Official gazette no. 30 of July 28, Rwanda s Official gazette no. 02 of January 13, MINECOFIN SEAS Pilot Kick-off sessions review under Phase 1., SmartFMS Coordinator, October World Bank Group, The PforR operation. PD and Technical Assessment 10. Transparency International Public Expenditure Tracking Survey in Vision 2020 Umurenge Programme (VUP),, Rwanda, March The Government of Rwanda, PFM Sector Strategic Plan FY2013/ / The Government of Rwanda, Decentralization Sector Strategic Plan FY 2013/ / The Government of Rwanda, Decentralization Action Plan The World Bank Group, Quality of Decentralized Service Delivery Support DPO. 15. MINECOFIN, Districts Earmarked Transfers Guidelines. April Decentralization Policy Annual Evaluation of Imihigo 2011/ MINECOFIN, Macro Framework Public Dataset of June

42 34