FOR OFFICIAL USE ONLY

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 22.0 MILLION (US$33.6 MILLION EQUIVALENT) TO THE REPUBLIC OF UGANDA FOR THE KAMPALA INSTITUTIONAL AND INFRASTRUCTURE DEVELOPMENT ADAPTABLE PROGRAM LOAN (APL) PROJECT AFT: Water and Urban 1 Eastern Africa Country Cluster 1 AFRICA IN SUPPORT OF THE FIRST PHASE OF THE STRATEGIC FRAMEWORK FOR REFORM FOR KAMPALA URBAN DEVELOPMENT PROGRAM September 12,2007 Report No: UG This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective July 3 1,2007) Currency Unit = Uganda Shillings (USh) Ush 1 = US$O.O005 US$ 1.53 = SDR 1 FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS APL CFAA CPAR CTB DE0 DPP DWD EA ECOSAN EFMP ERR EMP FA FINMAP FMM FRAP GAC GIS GOU IAF ICT IDA IFMS IFR IG IGG ISR KCC KFRAP KIIDP KUSIP KUTIP LCA LGA LGDP LGFAR Adaptable Program Loan Country Financial Accountability Assessment Country Procurement Assessment Report Central Tender Board District Environment Officer Director of Public Prosecutions Directorate of Water Development Environmental Analysis Ecological Sanitation Project Economic and Financial Management Project Economic Internal Rate of Return Environmental Management Plan Financing Agreement Financial Management and Accountability Project Financial Management Manual Financial Recovery Action Plan Governance and Anti-Corruption Global Information System Government of Uganda Inter Agency Forum Information, Communication and Technology International Development Association Integrated Financial Management System Interim Financial Report Inspectorate of Government Inspector General of Government Implementation Status Report Kampala City Council Kampala Financial Recovery Action Plan Kampala Institutional and Infrastructure Development Project Kampala Urban and Improvement Project Kampala Urban Traffic Improvement Plan Leadership Code Act Local Government Act Local Government Development Program Local Government (Financial and Accounting) Regulations

3 FOR OFFICIAL USE ONLY M&E MOFPED MOLG MTEF NCRP NEMA NGO NPV O&M OAG PCU PDE PDO PDU PEAP POCA PPDA PPO RAP SFR SIL SPSCP TOR UFUP UJAS URA UTODA WID WRD WSSP Monitoring and Evaluation Ministry of Finance, Planning and Economic Development Ministry of Local Government Medium-Term Economic Framework Nakivubo Channel Rehabilitation Project National Environment Management Authority Non-Governmental Organization Net Present Value Operations and Maintenance Office of the Auditor General Project Coordination Unit Procuring and Disposal Entity Project Development Objective Procurement and Disposal Unit Poverty Eradication Action Plan Prevention of Corruption Act Public Procurement and Disposal of Public Assets Authority Principal Procurement Officer Resettlement Action Plan Strategic Framework for Reform Specific Investment Loan Second Private Sector Competitiveness Project Terms of Reference Uganda First Urban Project Uganda Joint Assistance Strategy Uganda Revenue Authority Uganda Taxi Operators and Drivers Association Wetlands Inspection Division Water Resources Department Wetlands Sector Strategic Plan This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. Vice President: Country Director: Sector Manager: Task Team Leader: Obiageli K. Ezekwesili John Murray McIntire Jaime M. Biderman Solomon Alemu

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5 UGANDA Kampala Institutional and Infrastructure Development APL 1 Project CONTENTS A. STRATEGIC CONTEXT AND RATIONALE Country and sector issues... 3 Page Rationale for Bank involvement... 4 Higher level objectives to which the project contributes... 5 B. PROJECT DESCRIPTION Lending instrument... 6 Program objective and phases... 6 Project development objective and key indicators... 7 Project components... 7 Lessons learned and reflected in the project design... 9 Alternatives considered and reasons for rejection C. IMPLEMENTATION Partnership arrangements (if applicable) Institutional and implementation arrangements Monitoring and evaluation of outcomeshesults Sustainability Critical risks and possible controversial aspects Credit conditions and covenants D. APPRAISAL SUMMARY Economic and financial analyses Technical Fiduciary Social Environment Safeguard policies Policy Exceptions and Readiness... 21

6 Annex 1: Country and Sector or Program Background Annex 2: Major Related Projects Financed by the Bank and/or other Agencies Annex 3: Results Framework and Monitoring Annex 4: Detailed Project Description Annex 5: Project Costs Annex 6: Implementation Arrangements Annex 7: Financial Management and Disbursement Arrangements Annex 8: Procurement Arrangements Annex 9: Economic and Financial Analysis Annex 10: Safeguard Policy Issues Annex 11: Governance and Anti-Corruption (GAC) Action Plan Annex 12: Project Preparation and Supervision Annex 13: Documents in the Project File Annex 14: Statement of Loans and Credits Annex 15: Country at a Glance MAP: Non-Bank Map of Uganda

7 UGANDA KAMPALA INSTITUTIONAL AND INFRASTRUCTURE DEVELOPMENT APL PROJECT IN SUPPORT OF THE FIRST PHASE OF THE STRATEGIC FRAMEWORK FOR REFORM FOR KAMPALA URBAN DEVELOPMENT PROGRAM PROJECT APPRAISAL DOCUMENT AFRICA AFTU 1 Date: September 12,2007 Country Director: John McIntire Sector Managermirector: Jaime M. Biderman Project ID: PO78382 Lending Instrument: Adaptable Program Loan Team Leader: Solomon Alemu Sectors: Roads and highways (40%); Flood protection (3 5%); Sub-national government administration (25%) Themes: Municipal governance and institution building (P) Environmental screening category: Partial Assessment For Loans/Credits/Others: Total Bank financing (US$m.): - First Phase: Second Phase: Third Phase: 17.4 estimated total US$91.O million equivalent Indicative Financing Plan Implementation Period I US$m 1 I US$m 1 US$m 1 Date IDA YO GOU Total Commitment Closing Date APL 1 Credit APL 2 Credit APL 3 Credit Total /01/ /3 1/ /01/ /3 1// /O 1 / /31 /

8 FY Annual Cumulative implkmentation ofthe SFR.- Project description [one-sentence summary of each component] Re$ PAD B.3.a, Technical Annex 4 Component 1 : Support to KCC and its stakeholders to refine and expand the SFR into a comprehensive approach to municipal development, consonant with Kampala s central role in the nation s economic and political life. Component 2: Provide city wide infrastructure and services improvements. Component 3: Support to KCC on project implementation and the establishment and implementation of a comprehensive monitoring and evaluation system. Which safeguard policies are triggered, if any? Ref: PAD 0.6, TechnicalAnnex 10 Environmental Assessment (OP4.0 1) Involuntary Resettlement (OP4.12) Natural Habitats (OP 4.04) Significant, non-standard conditions, if any, for: Ref: PAD C.6 Loadcredit effectiveness: 1. Execution of a Subsidiary Agreement between the Government and KCC. 2. KCC to establish a Procurement and Disposal Unit. Covenants applicable to project implementation: 1. Mid-Term Review: MOLG will conduct a mid-term review of KIIDP by April 30, Procurement: KCC will carry out an independent procurement audit. 3. Safeguards: KCC will open and operate an Escrow account for the implementation of the RAP. 2

9 A. STRATEGIC CONTEXT AND RATIONALE 1. Country and sector issues 1. Kampala is the capital city of Uganda with a population of about 1.8 million and an annual demographic growth rate of about 3.9%, well over the national rate of about 3.3%. It is estimated that the city s population will reach 2.4 million by The 2002 Uganda population and Housing census indicated that about 50% of Uganda s urban population lives in Kampala. The next largest urban center is less than 10% of the size of Kampala in population. It is the hub of the country s economic, political, and administrative activities. While accurate data on the spatial distribution of economic activity in Uganda are not available, it is estimated that about 80 percent of the country s industrial and services sectors are located in Kampala and the city now generates over 50 percent of Uganda s GDP. 2. The economic future of Uganda is thus intrinsically related to the performance of Kampala as a locus of productive activity and investment. This, in turn, relies on the city s ability to provide the services and infrastructure on which organizations (public and private) and residents rely. There is also evidence to suggest that urban economic growth in Uganda (and elsewhere in SSA) is disproportionately effective in reducing poverty. Over the period 1992 to 02/03, when the Uganda national poverty headcount dropped by about a third, the corresponding drop in urban areas was over a half (from 28% to 12%) even during a period of relatively high rural-urban in-migration. 3. Unfortunately, Kampala s delivery capabilities have not kept pace with its economic and demographic growth. Over time, infrastructure and service-delivery in key sectors (roads; drainage; solid waste; markets) have deteriorated, and the Kampala local authorities (Kampala City Council and five Divisions) which have primary responsibility in these areas have encountered serious deficiencies in the organizational, management, financial and human resource capacities to meet the current infrastructure and service-delivery needs of the city. Water supply and sewerage are managed by a parastatal utility (NWSC) and are not under the direct responsibility of KCC. It has also become clear that there is a fundamental lack of vision and of public service orientation. 4. Various attempts have been made to deal with these problems, the most significant of which have been supported by the Bank. The Bank funded Uganda First Urban Project (UFUP) (1991) focused on infrastructure investment with limited effort being made to strengthen Kampala City Council s (KCC) organizational capacity. In November 1996, a proposal was made by KCC for a more fundamental reform of local government in Kampala by formulating the Strategic Framework for Reform (SFR). The SFR focused on three broad areas of reform for achieving real changes in performance: (i) restructuring KCC through organizational reforms aimed at changing the administrative structure to improve efficiency and rationalizing (down sizing) staff; (ii) service delivery liberalization by means of privatization, contracting out, outsourcing and divesting services, facilities or assets to enhance private sector participation in service delivery; and (iii) financial and fiscal reform aimed at establishment of efficient and transparent budgeting, revenue enhancement, effective expenditure and budget control, and staff performance improvement. The SFR was launched by KCC in January of 1997, with a strong element of local ownership, which had been developed through consultation with relevant stakeholders including the Council, KCC management, the KCC labor union, and representatives of the public. A number of measures including testing alternative service delivery mechanisms (contracting out works and services), rationalizing the workforce, and improving financial and budgetary management were initiated. The IDA-financed projects that followed Local Government Development Program (LGDP I, Cr UG, implemented during ) and the Nakivubo Channel Rehabilitation Project (NCRP, Cr UG, implemented during ) supported the implementation of SFR. With staff and council changes since 1997, KCC s commitment to the SFR seems to have diminished. 3

10 5. Under the above two projects, a number of positive results have been achieved: (i) enhancement of KCC s ability to implement and manage complex contracts and large civil works; (ii) alternative service delivery - increased the role of the private sector in service delivery and changed the role of KCC from a provider to an enabler of services; (iii) increased competence and capacity of KCC staff in project planning, works supervision and project management; (iv) revaluation of all properties in Kampala; and (v) improved financial management and budget formulation. KCC has also benefited from being a pilot center for the Government s Integrated Financial Management System (IFMS) implemented under the IDA financed Second Economic and Financial Management Project (EFMP 11). These outputs have required steady support from the PCU and consultants outside of KCC s normal organizational structure. These successes are unlikely to be sustained or integrated into KCC s operations without additional support and deep commitment to mainstreaming the approaches and capacities that underpin these successes. Despite the efforts made in the implementation of the SFR, the progress of organizational reforms has not been as fast as earlier envisaged at the time of the formulation of the SFR. This is compounded by the extremely weak financial position of the city. The implementation of the SFR has largely focused on development of strategies, and systems and procedures in all facets of KCC operations including development of accurate information and data on revenues, manpower, financial situation, contracting out revenue assessment and collection, reliable and accurate budgeting, expenditure control, institutional restructuring, and ICT development and applications. While progress has been achieved in these areas, the intermediate results will need to be carried forward and brought to maturity through institutionalization and application of the strategies, systems and procedures to KCC s day-to-day operations. A comprehensive recommitment to, and expansion of, the SFR principles is necessary. 6. The Government of Uganda recognizes the need to broaden and deepen the SFR reforms undertaken by KCC to date. Upon closure of the NCRP and LGDP I, under which Kampala received invaluable support, the Government developed a concept paper for a follow on project for Kampala and requested IDA for support. KCC on its part had carried out a review of the achievements of implementation of the SFR up to 2004, and had developed a revised SFR 11. The SFR I1 aims at consolidating KCC s achievements during implementation of the first SFR, with a 2015 vision statement. KCC s vision a secure, economically vibrant, well managed, sustainable and environmentally pleasant city that would be enjoyable by residents and visitor. SFR I1 aims to achieve its vision through two pillars - Good governance and good urban management. Strategies to be implemented are: institutional policy formulation and enhanced performance; organizational reform through implementation of a new organizational structure that focuses on core functions; implementation of a financial recovery action plan with transparent budgeting, expenditure control and increasing revenue; and improved service delivery through enhanced private sector participation, adequate resource allocation for 0 & M and effective contracts management. 7. In response to the government request for a follow on operation to support the SFR 11, the Bank took note of the achievements scored under the previous Bank support, reviewed the risks and adopted the APL lending instrument as appropriate to achieve the institutional reforms which are key to sustained service delivery and as an exit strategy in case commitment to reforms dissipates. Project preparation activities leading to pre-appraisal were made conditional on KCC taking key measures to demonstrate commitment to the reforms. These are detailed in B5 below and demonstrate the commitment of KCC to the reform. 2. Rationale for Bank involvement 8. The Bank has been supporting Kampala City since the late 1980s through three operations - UFUP, NCRP, and LGDP I. The gains that have been made under these projects are described in A1 above. With support under these projects KCC has started implementation of some aspects of the reforms but is still lacking in areas of profound institutional reforms and financial sustainability. The rationale for 4

11 the Bank s support to Government through this project is to consolidate the gains made so far and place Kampala on a solid foundation for sustained service delivery. The gains that have been made, but not yet consolidated over the past few years, also provide powerful support for an operation of this type. With additional external assistance, there is a real prospect that these gains will coalesce into stronger, sustainable city government structures; if support ceases now, there is a real prospect that the progress achieved to date will unravel. It is thus proposed that this project functions both as a more concentrated/comprehensive effort to promote the institutional and fiscal strengthening of city government than previous efforts, as well as an exit strategy for the Bank. 9. Governance and Anti-Corruption (GAC) reforms. In order to improve governance and fight corruption, the GOU has implemented major reforms at the central level and local government level with a number of achievements although some challenges still remain to be addressed. These reforms include strengthening of existing oversight institutions and setting up new ones, enhancing the legislative framework, improving financial management and procurement and the increased collaboration with civil society organizations. The reforms carried by government to fight corruption have yielded fruits as revealed by the reduction of incidences of bribery, progress in the implementation of the Leadership Code Act, 2002, actions taken on commission of inquiries reports/recommendations, and further legal reforms to fight corruption. 10. With respect to Kampala, an assessment of the KCC GAC risk shows that although council has made progress in the area of enhancing transparency and accountability in the service delivery process, Le. informing the citizenry of its planned activities and projects including publicizing the annual budget, and establishing a Council s Stakeholder Forum, efforts still need to be stepped up. This is KCC s initiative intended to allow stakeholders participation in the oversight of service delivery processes and to provide a platform for the continued engagement of the public and increase ownership and sustainability of endeavors. 11. Despite the above positive initiative, KCC has not yet fully customized nor implemented the strategy for mainstreaming ethics and integrity in LGs. The Government is the process of reviewing this strategy along side the main National Strategy to Fight Corruption Rebuild Ethics and Integrity in Public Offices. Furthermore, little progress has also been made to implement the KCC code of conduct for councilors, members of Commissions, Boards and committees of council. The KCC customized staff regulations 2003 are yet to be fully implemented. There is still political interference in the service delivery process, weak internal control systems and a weak governance regime. This is directly impacting on the potentially high risk areas of procurement, financial management and public disclosure (efforts to promote transparency and accountability) and subsequently affecting KCC s image in the eyes of the public. Consequently, in order to mitigate the risks to the project, the oversight function of the MoLG in the implementation of the project will be enhanced as detailed in Annex 7-Financial Management and Annex 8-Procurement. A detailed GAC action plan is also prepared by KCC/MoLG (see Annex 11 for details). This action plan will be reviewed and made consistent and synchronized with the GAC framework and action plan for Local Governments which is being prepared by Ministry of Local Government. 3. Higher level objectives to which the project contributes 12. In 2005, seven major Uganda s development partners developed a Uganda Joint Assistance Strategy (UJAS) that is centered on three principles: supporting implementation of the country owned and led revised PEAP to achieve the MDGs, collaborating more effectively among the development partners The Strategy to Mainstream Ethics and Integrity in Local Governments in Uganda(2004) developed by Government to complement the National Anti Corruption Strategy( ) 5

12 and with the government, and focusing on results and outcomes. UJAS partners have agreed to focus their support on the implementation of the PEAP in general, but will focus on certain areas judged to be especially important for achieving the PEAP's overarching strategic results. These areas are: (i) strengthening the budget process and public sector management; (ii) promoting private sector development and economic growth; (iii) strengthening governance; (iv) improving education and health outcomes; and (v) promoting the resolution of the conflict in the north and fostering the social and economic development of the region. The project will clearly contribute to the first three strategic results. 13. In terms of the PEAP, the project supports Pillar 1 (Growth) and Pillar 4 (Governance). The Bank has included the project (planned to be effective in FY 2008) as one of its instruments to support the UJAS. B. PROJECT DESCRIPTION 1. Lending instrument 14. The lending instrument chosen for the IDA support is an Adaptable Program Loan (APL) to provide phased support for the implementation of KCC's long-term development program that will require step-by-step policy reform and institutional development. The project is designed to support the implementation of the SFR I1 and it will comprise of a logical sequence of sector policy enhancement, institutional development and improvement in service delivery through investment activities. 2. Program objective and phases Program Phases Years Program Objective Develop a strong governance and management capacity in KCC to enhance service delivery and economic development Phase 1 (Initiation) Development Objective Improved institutional efficiency of KCC through the implementation of the SFR Phase I1 (Transition) Development Objective Extending coverage and quality of service delivery and deepening institutional reform Phase 111 (Sustained Implementation Development Objective Consolidate institutional development and enhance enabling environment for economic development (a) Triggers New organizational system operational Establish and implement a formal public consultation process Implementation of financial recovery action plan (FRAP) Comprehensive O&M plan for infrastructure Effective implementation of the infrastructure rehabilitation and maintenance Implement high priority infrastructure investments to support city economic development and PEAP goals Continuation of the implementation of the FRAP, O&M plans and quality control systems for infrastructure Institutionalize the public consultation process and incorporate feedback into annual work plans 6

13 Program Phases Phase 1 (Initiation) I Phase I1 (Transition) I Phase I11 (Sustained I Implementation Years Program Objective Development Objective I Development Objective I Development Objective (b) Benchmarks Staffing completed, codes Infrastructure investments KCC is bankable/ of conduct enforced, a selected based on sound creditworthy performance based appraisal and public Publidprivate compensation system consultation partnership implemented and HR Quality assurance system is institutionalized information system operational Goodurban developed Financial restructuring management and Citizens score card updated completed, O&M governance annually, media strategy operational implemented and budget Customer care desk and development planning operational consultation carried out HR information system Reduce the stock of overdue fully implemented liability from Ushs 8 billion to Ushs 3 billion and increase own source revenue from Ushs 22 billion to Ushs 30 billion Provision and release of adequate O&M budget and quality control system in place and operationalized for both O&M and new construction 3. Project development objective and key indicators 15. The project development objective (PDO) is to improve institutional efficiency of KCC through implementation of the SFR 11. Achievement of the PDO will be measured in terms of the following monitoring indicators: (i) reduce overdue liabilities from Ushs 8 billion to Ushs 3 billion; (ii) the share of KCC own source revenue spent on service delivery increase from 10% to 30%; (iii) increase in KCC own source revenue from Ushs 22 billion to Ushs 30 billion; and (iv) increase in public satisfaction in service delivery in the following areas: roads from 18% to 50%, drainage from 22% to 3 1%, and solid waste from 44% to 60%. 4. Project components 16. The Phase I project will comprise of three components that are aligned to support the implementation of the SFR 11: Component 1 will focus on institutional development activities that support organizational development and governance, the implementation of the Financial Recovery Action Plan, and actions to enhance effectiveness of service delivery. Component 2 will finance infrastructure mainly focusing on rehabilitation of high priority infrastructure which were identified as critical to maintaining the productivity and welfare of the City and that the proposed activities are ready for implementation; and Component 3 will support project management and M & E activities. The objectives of the physical investments are the preservation of the current assets and arrest the deterioration of the assets. It will enable KCC to be functioning capital city and position itself to attract investors. 7

14 17. Component 1 - Institutional Development (USg5.8 million). This component will assist KCC and its stakeholders to refine and expand the SFR I1 into a comprehensive approach to municipal development, consonant with Kampala s central role in the nation s economic and political life. Activities will include: (i) developing and beginning to implement a long-term vision for the city, including an effective development plan, which identifies the steps to be taken in the near and medium term to achieve that vision with specific annual milestones; (ii) implementing a financial recovery plan designed to place KCC and its divisions in a sound and sustainable financial condition; (iii) creating and implementing a comprehensive organizational development strategy, based on financial sustainability, the capacity to sustain O&M of infrastructure and services, and on the clear and enforceable separation of council s role of policy-making and oversight from staffs management role; and (iv) introducing and sustaining mechanisms to improve the transparency and accountability of KCC, including the development and ongoing implementation of an effective and meaningful communication strategy between KCC and its stakeholders. Technical and financial support will also be provided to ensure that an effective collaborative process is put in place to identify barriers to competitiveness and to address these appropriately, in order to improve the ability of the private sector (formal and informal) to contribute to economic development and poverty reduction in Kampala. 18. Sub-components and activities (A) Support to Organizational Development and Governance. The objective of this subcomponent is to develop a comprehensive approach to municipal development, consonant with Kampala s central role in the nation s economic and political life. The project will support activities in the following areas: (i) human resource management and training; (ii) general administration; (iii) education; (iv) gender welfare and community services; (v) planning and M&E; (vi) communication strategy; and (vii) environmental management. (B) Support to Financial Recovery. The objective of this sub-component is to implement a detailed financial recovery plan designed to place KCC on a sound financial position by the end of the program. The first phase (APL1) focuses on: establishing a solid institutional and organizational base and capacity for management of KCC s revenues and expenditures; immediately curbing the deficit; and reducing the stock of overdue liabilities. This objective can be fulfilled via implementing a detailed Kampala Financial Recovery Action Plan (KFRAP) that has been developed during project preparation and adopted by all layers of KCC. The successful execution of the KFRAP requires deep-rooted changes and institutional capacity building in three areashbcomponents: (i) enhancing revenue management capacity; (ii) enhancing expenditure management capacity; and (iii) establishing a framework for the reduction, and control of expenditures. (C) Strengthening Service Delivery. This sub-component will provide support to strengthen KCC s capacity in service delivery. The project will support activities in the following areas: (i) public health and environment; (ii) quality assurances for infrastructure; (iii) urban planning and land management; (iv) information and communication technology; and (v) environmental monitoring and preparation of environmental studies. 19. Component 2 - City Wide Infrastructure and Services Improvement (US$28.5 million). This component will support activities aimed at improving the provision of critical services to the city. The investment in infrastructure and service improvements will address the following five priority areas which are critical for public confidence and which will contribute to the economic and commercial development of the city: (i) drainage system improvement - flooding from primary and secondary channels has been a major problem in Kampala. It has adversely impacted on the property values, disruption of commercial and industrial activities, traffic and damage to road infrastructure; (ii) traffic management - improved urban traffic management would reduce travel time and vehicle operating cost. It would also reduce road 8

15 accidents in the city which are very high; (iii) road maintenance and upgrading - maintenance of roads would also reduce travel time and vehicle operating cost; (iv) solid waste management - under the solid waste management, support under the project would be only for the expansion of the landfill, installation of a landfill gas collection and flaring system at the existing landfill, and design of a new landfill site that is yet to be identified. The funds to be acquired by KCC from sale of flared methane through a separate Emission Reduction Purchase Agreement (ERPA) with the Carbon Fund will be used for enhancing the solid waste collection in the city that has been privatized; and (v) urban markets infrastructure - the investment provided for market infrastructure will consist of access roads, lighting, and sanitation to selected markets. This component will also support the implementation of the Resettlement Action Plan. 20. Component 3 - Project Implementation, Monitoring and Evaluation (US$2.8 million). This component will encompass the management activities associated with the implementation of the project, the establishment and implementation of a comprehensive monitoring and evaluation (M&E) system and the preparation of the next phase of the project. Activities will include: (i) project implementation support; (ii) preparation and follow up on the annual citizen s report card; and (iii) staff and councilor survey. 5. Lessons learned and reflected in the project design 2 1. Lessons learnt from previous projects include: (i) institutional reform requires considerable political will and should be carried out in a sustainable manner; (ii) projects with an institutional change focus that also include infrastructure investments must be carefully designed to ensure appropriate sequencing and incentives to achieve institutional reforms; and (iii) project ownership reflected in participatory design and implementation arrangements that integrate with core functions are key to success. The APL instrument was selected for the project to ensure that institutional reforms are given prominence with limited investments for rehabilitation and maintenance provided. The triggers for proceeding to Phase I1 focus mainly on achievements of the reforms during implementation of Phase I. To enhance ownership, the selection and scoping of the project components was carried out with full participation of the key staff of KCC across all directorates. 22. The project preparation was pre-conditioned to KCC taking certain initial measures towards implementation of the SFR to enable KCC to demonstrate its commitment to the reform agenda encapsulated in the SFR 11. The measures taken by KCC during project preparation include: Formal approval of the SFR 11; Approval of the Codes of Conduct for both Councilors and staff; Completion of the valuation rolls for all properties in the city and institutionalizing issuance of demand notes before the end of the first quarter of the FY; Preparation of a Financial Recovery Action Plan and setting up of a Revenue Task Team; Began the implementation of the restructuring proposed under SFR 11, KCC is now rationalized under 6 Directorates instead of the original 9, and approved the retrenchment of redundant staff which is underway (the severance payment for retrenched staff is to be paid under funding from LGDP I1 project); and Contracts for outsourcing revenue collection and management of infrastructure have been reviewed and 7 model contracts prepared. 23. To enhance civil society participation, the project will, under Component 1, support the establishment of a Stakeholders Forum for-active participation in the budgeting process and prioritization 9

16 of infrastructure investments, and under Component 3 an annual Citizen Report Card will be conducted and executed. 6. Alternatives considered and reasons for rejection 24. The team considered and rejected a development policy design for the project. Although such an approach would have been appropriate from IDA S perspective to enhance the progress on certain policy reforms but it may not have been a robust choice capable of ensuring an acceptable level of predictability of financing for basic services in an environment already marked by a number of sources of uncertainty. The development policy design was also rejected because it would not have provided the opportunity for detailed project implementation support as is possible under investment lending. The support is necessary, especially for the provision of technical assistance to the Kampala City Council and its divisions. Given these various considerations, in particular the heightened requirements in terms of fiscal reporting, transparency and downward accountability measures, an Adaptable Program Loan (APL) instrument has been deemed appropriate for the proposed operation. 25. With respect to the lending instrument, the GOU had originally requested support for a project of about US$98 million, mainly focusing on infrastructure, to be implemented over a 5 year period. Given the need for institutional reform required to place Kampala on a firm ground both in terms of financial management and governance, a three phased, 10 year Adaptable Program Loan (APL), with Phase I to be a 3 year project, is proposed by the Bank and accepted by the government. The Phase I project will support the implementation of the SFR I1 through financing of institutional development activities, limited investment in infrastructure rehabilitation, and support to project implementation and M & E. This approach allows for a built-in incentive for implementation of the reforms since moving form one phase to the next is possible only upon fulfilling appropriate triggers, and also provides an exit strategy in case KCC falters in its commitment to reform and the triggers are not met. C. IMPLEMENTATION 1. Partnership arrangements (if applicable) 2. Institutional and implementation arrangements 26. The institutional arrangements for project implementation will be as per the government structure. At the central level, the MoLG, MoFPED, and the Office of the Auditor General shall be responsible for ensuring that project resources are budgeted for and disbursed within the national MTEF, and that project accounts are audited. 27. KCC under MoLG will be responsible for the overall implementation of the project. KCC has implemented IDA projects before, that is, Uganda First Urban Project, Nakivubo Channel Rehabilitation Project and a component of the Local Government Development Program. The MoLG has received considerable support from the LGDP projects for its institutional reform and capacity building. 28. During project execution, KCC shall coordinate project implementation and manage: (a) (b) (c) (d) (e) procurement, including purchases of goods, works, and consulting services; project monitoring, reporting and evaluation; contractual relationships with IDA and other co-financiers; financial management and record keeping, accounts and disbursements; and environmental and social issues. 10

17 29. KCC will also constitute the operational link to the IDA and Government of Uganda on matters related to the implementation of the project. 30. The Permanent Secretary (PS), MoLG, will be the Accounting Officer for the project, assuming the overall responsibility for accounting for the project funds. The Town Clerk of KCC will report to the Accounting Officer on matters concerning the accountability of KIIDP funds. Financial Management 3 1. Details of the financial and disbursement arrangements are provided in Annex 7. The project financial management is weakened by the following salient feature:. The management letter issues raised by the external audit report as of 30 June 2004 showed that the internal control systems in relation to mainly revenue collection needed to be improved. With the strengthening of the Internal Audit Department it is hoped that the monitoring and enforcement of stronger internal control systems should improve hence improving on the KCC internal control systems.. The Local Government (Financial and Accounting) Regulations (LGFAR), 2007 will be used as the Financial Management Manual (FMM) but it falls short when it comes to donor specific accounting policies and procedures. As a mitigating measure, the donor specific accounting policies and procedures e.g. on financial reporting and auditing have been included in the Project Implementation Plan. 32. The overall project implementation period for APLl is three years. KCC will be the executing agency for KIIDP and shall have overall responsibility for accounting for project fimds and coordinating activities under the project. In line with the proposed mainstreaming of tasks currently being carried out by the Project Coordination Unit (PCU) into the various departments in KCC, an SFR Core Team will provide the necessary technical support during Phase 1 of KIIDP. This is consistent with lessons from OED evaluation of where PIUs should be closely integrated into line ministries with other public entities of the borrower countries, leveraging on available resources (of existing agencies) rather than setting them up as independent units and having them operate autonomously. The SFR Core Team will also act as an interface with the Bank to ensure that KIIDP is implemented as per the IDA/GOU protocol agreement. The SFR Core Team will assist in the preparation of work plans, budgets, progress reports, and coordination of the overall implementation of the project. Procurement 33. A summary of the description of the project s procurement management is provided in section D3 of the PAD. A Procurement Capacity Assessment was carried out for KCC and the report is provided in Annex 8. The Procurement Risk Assessment carried out indicates that the overall risk is rated as high given that procurement activities will be mainstreamed within both the KCC and MoLG structures. Procurement will be processed by the Procurement and Disposal Unit (PDU) which is being set up in KCC under the Local Government (Amendment) Act, 2006, and finalized by the MoLG PDU. The assessment reviewed the organizational structure for implementing the project and the interaction between the borrower staff responsible for procurement at both KCC and MoLG. The key issues and risks concerning procurement for implementation of the project have been identified and mitigation measures suggested were discussed at the financing negotiations. The agreed measures will be monitored closely. 11

18 Project Implementation Plan (PIP) 34. A draft Project Implementation Plan (PIP) has been prepared, and it includes a description of implementation and monitoring arrangements, that spells out the sequence of all project activities, a Financial Management Plan, and an overall Procurement Plan. 3. Monitoring and evaluation of outcomeshesults 35. In line with the intention and design of KIIDP as a mainstream program, most of the routine M&E data will be made available through mainstream data collection to be performed by the Economic Planning Department in KCC. Under Component 3, Kampala City Council s Economic Planning Unit will be supported to: (i) establish a monitoring baseline; (ii) develop a council-wide M&E system which responds not only to World Bank project requirements but which can also enable KCC to monitor and evaluate progress towards fulfilling goals and targets laid out in the Kampala Strategic Framework for Reform (SFR2) and the council s overall mandate; and (iii) prepare at least two annual M&E reports and which can inform the council and its executives on progress towards meeting the goals adopted under the SFR2 as well as meeting the M&E requirements of the KIIDP. Environmental and Social Management 36. Under the project, the District Environment Officer (DEO) located in KCC, will be responsible for coordinating the implementation of the Environmental Management Plans as well as the training activities and wetland management plans as outlined in the Project Implementation Plan. To facilitate this work, the DE0 will work closely with the relevant personnel at NEMA, WID, DWD, the Ministry of Works, Housing and Communication, the Uganda Police, the Traffic Department, and the Uganda Taxi Operators and Drivers Association (UTODA). 4. Sustainability 37. KCC has sustained an intense policy dialogue with IDA, and taken actions required on key issues during preparation of the Project. Beyond this political commitment, however, sustainability remains critically dependant on the availability of adequate resources and their appropriate deployment for O&M of municipal assets. KCC has started the implementation of the restructuring plan developed as part of the implementation of its Strategic Framework for Reform. This has led to rationalization of the various directorates and also to the retrenchment of excess staff (severance packages to be paid from funds made available under a local government development project - LGDP 11). The ground work for improvement in revenue has been laid in the past two years through revaluation of all properties in the city. This has resulted in increase in the number of properties in the valuation roll by over 100% and in quadrupling of the potential revenue from property tax. The performance of existing outsourcing contracts in revenue collection and management infrastructure has been reviewed during project preparation and model contracts have been developed to make sure that the PPP works effectively and leakages in revenue are minimized. Recent revenue trends indicate that own source revenue has increased by about 10% from FY 04/05 to 05/06. The SFR I1 targets an increase of revenue by about 40% by To institutionalize improvement in revenue collection and sustain the growth, KCC has established a Revenue Task Team to coordinate revenue collection. KCC has developed Financial Recovery Action Plan. An ongoing reform in the fiscal management system in the country (implementation of an IFMS under EFMP 11, of which KCC is one of the pilot local governments) is supportive of improvement in efficiency of budget allocations, expenditure monitoring and accountability. The communications, knowledge-sharing, and the inclusive arrangements for project implementation will strengthen demand for sustainable results. 12

19 38. A recent development of relevance to sustainability is an amendment to the Constitution that was passed in September 2005, recognizing the special status of Kampala as the capital of Uganda and that it shall be administered by the Central Government. The Bill to operationalize the Constitutional Amendment No. 9/2005 has been submitted to Cabinet. The proposed Bill is intended to consolidate the management and administration of Kampala City. It is expected that the Bill will be presented to the Parliament before the end of 2007, and may possibly be enacted during Critical risks and possible controversial aspects Risk I Risk Mitieation Measure I Risk ratine To project development objective 1 Lack of effective support from national government for fundamental change in KCC. KCC s failure to develop and maintain a commitment to a viable vision and strategy for reform. Failure to develop and implement an effective fiscal discipline in KCC. Inappropriate budget and resource allocation. Change in current policies/acts by central government that would affect Kampala s ability to implement the SFR. To Component Results Delays in the implementation of the new procurement provisions in the Local Government (Amendment) Act, 2006 leading to delays in procurement of works and services Failure in timely implementation of the Resettlement Action Plan Lack of capacity in Directorates to carryout project implementation activities effectively Accounting The overall risk rating is moderate. National-Local performance contract to deliver on the Moderate agreed milestones. Semi-annual ministerial review of performance contract. Development of specific triggers to demonstrate Moderate commitment. Monitoring and reporting by KCC and civil society on progress. 0 Development and implementation of a fiscal recovery High plan. 0 Civil society participation in budgeting and resource allocation process. Adequate maintenance plan & expenditure for the investments. Measuring & benchmarking cost of service delivery Sensitize central government departments and parliament about SFR and the project Moderate High KCC is in the process of creating a PDU in compliance Moderate with the new Act and will be supported by experienced staff from the Core Team The MoLG PDU will provide quality assurance to the KCC PDU and all contracts will be adjudicated by the MoLG Contracts Committee. RAP costs included in project costs to be financed by Moderate 0 GOU/KCC Sensitize stakeholders to support RAP Ensure component managers in place for all participating High directorates, and Core Team in place to provide support Ensure clear definition and allocation of roles within directorates Training of key staff in procurement & contract management KCC is using the LGFAR, 2007 which falls short on Moderate donor specific accounting policies and procedures specifically on financial reporting and auditing requirements. As a mitigation measure, these specific requirements have been included in the Project Implementation Plan. 13

20 D. 1. Credit conditions and covenants Conditions of Eflectiveness: (i) Execution of a Subsidiary Agreement between the Government and KCC. (ii) KCC to establish a Procurement and Disposal Unit with functions, staffing, and resources satisfactory to the Association. Others: (i) Monitoring and Evaluation: KCC will submit semi-annual progress reports to IDA. (ii) Mid-Term Review: MOLG will conduct a mid-term review of KIIDP by April 30,2009. (iii) KCC to open and operate an Escrow Account in the Bank of Uganda for the implementation of the RAP. (iv) KCC will carry out an independent procurement audit annually. APPRAISAL SUMMARY Economic and financial analyses 41. KIIDP with a total base cost of US$33.3 million includes three components: (i) Institutional Development (US$5.5 million or 16.0% of the total project cost); (ii) Citywide Infrastructure and Improvement Services (US$25.1 million or 76%); and (iii) Project Management, Monitoring and Evaluation and Civil Society Participation (US$2.7 million or 8%). 42. Component 2: Citywide infrastructure and Services Improvement represents over 76% of the project base cost of US$33.3 million. It has four subcomponents: (i) Drainage works (US$8.7 million); (ii) Urban traffic improvements (US$13.9 million); and (iii) Solid waste management (US$1.5 million); and, market infrastructure (US$l.O million). The other two components totaling US$8.2 million or 24% provide the necessary conditions of realizing the benefits of the investments under component 2 on a sustainable basis. 43. Overall. For the base case, the overall Net Present Value of the first two sub component of Component 2 (above) is UShs.15,829 million and its ERR 22%. The result appears robust. A 15% increases in total costs and 15% total benefits result in NPV of UShs. 11,395 million and ERR 16%. 44. Drainage. The main benefits of the drainage are both quantifiable and non-quantifiable. Among the quantifiable are: savings from prevention of road damage, property and structures, additional income from rentals, etc. The cost-benefit evaluations of the drainage subcomponent (US$8.7 million) consisting of several drainage systems provided a Net Present Value of UShs 4,251 million and ERR of 16.8%. The result is again robust. A joint 15% increase in total baseline cost and 15% total benefit results in NPV of Ushs. 1,677 million and ERR of 13.1 %. 45. Urban Traffic improvement. The urban traffic improvement subcomponent main benefits are the savings to be made by road users in vehicle operating costs, passenger time costs and accident costs. An economic analysis was done for the each road section. The Net Present Value of urban traffic improvement subcomponent is estimated at UShs 17,296million and the ERR estimate is 32%. The result is again is robust. A joint 15% increase in total baseline cost and 15% total benefit results in NPV of UShs. 10,250 million and ERR 23%. 14

21 46. Market Infrastructure Works. A financial and an economic analyses of Market Infrastructure Works (US$l.O million) - road construction, drainage and sanitation works would be carried out in three of the 5 candidate markets (Kibuli, Kalenve, Kasubi and Kawempe and Mbuya). The financial rate of return shows that all except Mbuya have financial rate of return of 14%; and a payback period between 5 and 6 years. The economic rate of return for the urban markets infrastructure is 14% and the NPV at 12% discount rate is Ushs An increase in cost of 15% and a simultaneous decrease of benefits of 15% results in EIRR of 12% and NPV of Ushs million, indicating that this planned investment too is economically justifiable. 47. Solid Waste Management. This subcomponent is to develop a 6 acre land adjacent to the existing site; provision of a landfill gas collection and flaring system at the exiting landfill site; and preparation of design for the development of the new landfill site to be implemented during Phase I1 of the program. In the short run there is no alternative than expanding the existing site. The cost-effective way of meeting the short-term needs of KCC in solid waste management is implementing the proposed program. 2. Technical 48. Two major strategic studies were carried out under Nakivubo Channel rehabilitation project. These are the Kampala Drainage Master Plan and the Kampala Urban Traffic Improvement and Road Maintenance Plan - two key areas of high priority in the development of the city. These two areas were selected because flooding and traffic congestion are the two most serious impediments to economic activity in Kampala. The employed consultants were qualified international consultants procured competitively and their various outputs were rigorously reviewed. Under these studies, investments were prioritized to address immediate and short term needs in close consultation with the Divisions. Detailed designs including draft bidding documents were prepared for the immediate priority interventions both for drainage, and urban traffic management and roads upgrading and maintenance so that implementation can commence as soon as the project becomes effective. Any adjustments that may be necessary will be made by the technical staff of KCC and the supervising consultants who will be selected on a competitive basis. The other two areas of high priority for Kampala are improvement of markets and management of solid waste. Markets improvement studies were carried out during project preparation and the high priority markets identified for implementation. With respect to solid waste management, while the collection of solid waste in the city has been privatized, the existing disposal facility (landfill) has capacity to serve only for next few years. The Phase I project will support limited activities to prolong the life of the exiting landfill, while a feasibility study and designs will be carried out for a new site to be acquired by KCC. KCC continues to carry out timely maintenance of the infrastructures built and rehabilitated under previous projects. The financial recovery action Plan developed during the preparation of the project has taken the need to allocate adequate resources for O&M into account. 3. Fiduciary Financial Management 49. The Country Financial Accountability Assessment (CFAA) carried out by IDA in 2004 shows that Government of Uganda has made substantial progress in improving its Public Financial Management Systems since the last CFAA undertaken in The fiduciary risks associated with poor budget formulation and budget preparation processes have reduced. In terms of appropriate legislation and regulatory frameworks, significant progress has been made to ensure that the risk associated with lack of clear rules and regulations has been reduced. Also more useful information is provided in the annual accounts. However risks remain in terms of enforcement of procurement and payroll rules and procedures; completeness of data on debt; effective independent oversight, and timeliness and 15

22 effectiveness of legislative and public scrutiny. The impact of the CFAA is that Government of Uganda has come up with a strategy to mitigate these country level issues, by designing a Financial Management and Accountability Project (FINMAP) whose objective will be to address the CFAA action plan issues formulated within the Country Integrated Fiduciary Assessment (CIFA) action plan matrix and improve on Uganda s Public Financial Management - Performance Measurement Framework indicators developed by the PEFA Secretariat. The FINMAP is to be supported by a number of development partners including the World Bank that form the Public Financial Management Donor Group. 50. The project s transactions will be managed within the existing set-up in Kampala City Council (KCC). The Director Finance of KCC shall be in charge of maintaining the books of accounts and records of the KIIDP with the assistance of the Project Accountant and an Accounts Assistant. The Project Accountant will report to the Director Finance of KCC or to one of the two Deputy Directors of Finance to whom authority will be delegated. The accounting unit is computerized and using Sun Accounting Software. The Local Government (Financial and Accounting) Regulations (LGFAR), 2007 will be used as the Financial Management Manual (FMM) but because the LGFAR falls short of donor specific accounting policies and procedures e.g. on financial reporting and auditing, this will be mitigated by their inclusion in the Project Implementation Plan. The project s financial statements will be audited in accordance with statutory requirements, and suitable Terms of Reference will be developed. 51 Actions outlined in the Financial Management Action Plan will be undertaken by the project to strengthen the financial management system. The action required to be done before effectiveness of the Credit is approval by IDA of the Project Implementation Plan that will supplement the LGFAR 2007 on donor specific accounting policies and procedures where the LGFAR falls short of meeting these requirements. This action was achieved and therefore removed as a condition of effectiveness. The Interim Financial Report (IFR) formats were agreed during negotiations. The other condition that will strengthen the financial management system and should be done within six months after credit effectiveness is agreeing the terms of reference for the external auditor to ensure the project accounts are audited and submitted to the Bank in time. 52. In order to ensure that the project is effectively implemented, KCC will ensure that appropriate staffing arrangements are maintained throughout the life of the project. 53. The conclusion of the assessment is that the financial management arrangements for the project have an overall risk rating of moderate which satisfies the Bank s minimum requirements under OPA3P10.02 and are adequate to provide, with reasonable assurance, accurate and timely information on the status of the project required by IDA. With the implementation of the action plan, the financial management arrangements will be strengthened. Procurement 54. The 2004 Country Procurement Assessment Report (CPAR) indicates that the Public Procurement and Disposal of Public Assets Act, 2003, (the Procurement Act) in Uganda is a good law but there are some provisions of the Act that may be subject to abuse and are therefore, highlighted here. The provisions in question are: (i) negotiations with the best evaluated bidder. This practice is not appropriate, except for consulting services contracts, and for contracts procured through direct contracting; (ii) the use of the merit point system of evaluation is not restricted to evaluation of consultants proposals. This system is inappropriate in the evaluation of bids for goods and works contracts; (iii) each Procuring and Disposal Entity (PDE) is allowed to pre-qualify suppliers on an annual basis and bidding opportunities are not open to all pre-qualified providers but to only a few firms (at least three) at a time on rotation basis. Such a system does not ensure fairness and is open to abuse by both the prequalified firms and the PDEs; and (iv) use of the micro-procurement method for each contract 16

23 estimated to cost the equivalent of $1,100 or less. Micro-procurement is by definition, Direct Contracting, or Single Source Selection, which should be used on exceptional basis with adequate justification and prior approval. 55. The bulk of the procurement activities under the proposed operation will be carried out by the KCC which is a local government, and therefore whose procurement structures are provided for under the Local Government (Amendment) Act, 2006 with additional oversight by the MoLG as detailed in Annex 8. The act harmonized the procurement systems and practices of the local governments with those at the centre. KCC is yet to fully comply with the Act, and the Procurement Management Capacity Assessment (PMCA) that was carried out on KCC, and MoLG has identified four areas to address in order to ensure satisfactory implementation of project procurement: (i) Inadequate change and transition management and inadequate communication between KCC and MoLG PDUs; (ii) Limited skills and experience in procurement and contracts management; (iii) Inadequate Procurement Data Management System (PDMS); (iv) Inadequate procurement planning; and (v) Inadequate procurement capacity due to the redeployment of the staff who have gained experience in the management of procurement in previous Bank financed projects outside the new procurement and disposal unit (PDU) yet to be established. Based on the above weaknesses, the risk associated with the ability of KCC and MoLG to manage procurement under the project is rated HIGH. 56. The agreed measures for mitigating the high risk to procurement under the project, include: (i) complying with the Local Government (Amendment) Act, 2006, and establishing a PDU with qualified staffing without delay; (ii) sensitizing the councilors on the new procurement system and management of the transition from the old to the new procurement law; (iii) establishing satisfactory PDMS at both KCC and MoLG; (iv) training the User Departments on their role in the procurement function; (v) targeting the support of the Core Team comprised of staff with procurement experience from previous Bank financed projects; (vi) following an overall project procurement plan satisfactory to IDA; and (vii) providing procurement training to meet identified need. The Project Implementation Plan containing a comprehensive section on procurement arrangements under the project, including the actors, roles and responsibilities, templates and standard bidding documents, and the procurement plan was approved by IDA during negotiations. The establishment of PDU in KCC with functions, staffing and resources satisfactory to IDA will be a condition of effectiveness. 4. Social 57. The development objective of the project is to improve institutional efficiency of KCC through the implementation of the SFR. The key social issue therefore is to ensure that this is done in a socially sustainable and inclusive manner. The project s planned social development outcomes of greater empowerment and social inclusion are that investments identified, prioritized and funded for improvement by Kampala City Council have been done so in a participatory, transparent and more accountable manner by the use of the existing Harmonized Participatory Planning Guidelines (HPPG) for Local councils, a framework formulated and promoted by both local authorities and civil society in Uganda. In the same way, gender and other concerns like those for the most vulnerable groups like the disabled, etc, that are target groups for the services to be improved shall be addressed through the same participatory processes during implementation. Ministry of Local Government therefore has taken a lead in assisting Kampala promote community driven development through participatory planning, implementation, monitoring and evaluation. 58. The design of this project including the refining of specific features has benefited from a number of studies done and stakeholder workshops held on challenges facing Kampala. One such study is the Kampala Citizens Report Card which obtained feedback on key public services that included roads, transport and solid waste management, and made suggestions for improvement. It is imperative therefore 17

24 that mechanism for seeking citizens feedback on city wide investments in the areas of drainage, roaddtraffic management and solid waste management are part of the implementation guidelines for this project. This is expected to help improve transparency and accountability of KCC to the citizens of Kampala, while at the same time providing opportunity for the citizens to monitor project impacts and exercise their rights and responsibilities. 59. Similarly, under KIIDP, the social issue related to maintaining or improving livelihoods of the project affected persons during the improvement of city wide infrastructure has been addressed in the most participatory and inclusive manner. A Resettlement Action Plan (RAP) has been prepared and its implementation will help fulfill the obligations of the Directorate of Community Services in KCC, of which among others is to mobilize and empower communities for development. Consultations with the project affected people, local leaders and government agencies, were at the centre of the preparation of the RAP, and will continue during implementation. The consultations processes included community meetings, interviews and focus group discussions in which concerns regarding loss of land and its value, transparency in compensation, etc, were raised. The RAP indicates details of how resettlement and negative impacts will be minimized, the provisions made for disturbance and non measurable losses, the valuation considerations to ensure fair, adequate and timely compensation, and the management of the entire process including the responsible agencies. Ministry of Finance, Planning and Economic Development is responsible for the budget required to implement the resettlement process and actions. 60. The political economy currently in Uganda may undermine the projects development objectives. However risk management actions have been incorporated in the project upfront. These include wider outreach and information dissemination regarding project objectives, activities and resources, which imply intense IEC project activities and community participation in decision making at all phases of investments and services improvements. 5. Environment 6 1. Under the KIIDP, environmental issues related to the strengthening of environmental management capacity and protecting the public s health from environmental risks and pollution are of critical importance. Mitigation and monitoring measures have been included in the project s Environmental Management Plan (EMP) with a view to: (i) assist KCC s District Environment Officer in the fulfillment of hidher responsibilities (i.e. managing the boundaries of wetlands and related settlements, monitoring the implementation of the EM?, coordinating the implementation of parts of the Wetlands Sector Strategic Plan as well as environmental contributions to the Kampala Structure Plan under the KIID Project) by providing environmental training to relevant KCC staff and the necessary equipment such as office furnishings, field operations equipment for sampling and monitoring; (ii) prevent erosion and subsequent pollution of waterways and water bodies, including neighboring wetlands, as well as accidents and unauthorized access to the current land fill site and the extension site during and after decommissioning by providing the requisite fencing; and (iii) mitigate construction-related impacts by including Environmental Guidelines for Contractors in KCC s bidding documents. The EMP includes monitoring indicators as well as means of verification, Le. the preparation of Environmental Audit Reports, to verify proper implementation of mitigation measures as outlined in the bidding documents and the EMP. It is anticipated that these measures will contribute to an improvement in the quality of life of the population living in the project areas. 62. The EA report was prepared in consultation with the key stakeholders (representatives of NEMA, WID, and DWD; KCC officials, members of Parish Development Committees, Local Council Officials, and directly affected community members). Consultation methods included field visits, meetings with stakeholders, focus group discussions, literature reviews, data collection and analysis, and collaboration with other consultants. While there was overwhelming stakeholder support for the project as the 18

25 improvements would lead to a healthier environment and improved economic opportunities, there were also some concerns (potential loss of livelihoods among businesses that depend on their current locations, traffic accidents during construction, injuries to scavengers and workers at the landfill, a decrease in property values, bad odors, flies and other pests, blockages of drains with excavated soils during construction, and the potential increase in malaria and diarrhea near the landfill). 63. Their suggestions have been incorporated into the design of component 2 which will provide bridges, pedestrian walkways, traffic control humps, pedestrian crossings, and road signs. A berm will be constructed as part of the Lubigi channel improvement works to: (i) control land use; (ii) restore the wetland as well as flora and fauna species; and (iii) alleviate floods. Concerns regarding potential accidents during construction will be addressed through Environmental Guidelines for Contractors which will be included in KCC s bidding documents. 64. The EA report notes that malaria control is the responsibility of the Ministry of Health, and several initiatives are underway to control it. In this respect, the Public Health Department of KCC is already working in close collaboration with the Ministry of Health and relevant NGOs as well as the various communities to support malaria control in the city. Similarly, other diseases such as diarrhea, skin diseases and tuberculosis are also handled by KCC and the Ministry of Health. The EA report further notes that the occasional spraying activities in the landfill area designed to deal with flies and other pests, will not lead to adverse environmental and social impacts. These spraying activities are limited to the landfill site, and are carried out by professional contractors according to KCC s Vector Management Procedures (a copy is included in the Final EA Report). 6. Safeguard policies 65. The KIIDP has triggered OP 4.01 Environmental Assessment and OP 4.12 Involuntary Resettlement due to its support for construction activities related to the planned infrastructure investments (drainage improvement; traffic and road maintenance; rehabilitation of urban markets; and solid waste management). OP 4.04 Natural Habitats applies as the project will contribute to the improvement of wetlands management. In addition to strengthening KCC s environmental management capacity, the KIIDP will assist in the implementation of parts of Uganda s Wetlands Sector Strategic Plan ( ) as well as in the development of the environmental aspects of the new Kampala Structure Plan ( ). The safeguard screening category is S2, and the environmental screening category is B. 66. The key safeguard policy issues raised by the project include potential soil and water pollution from construction activities, blockages and siltation of the drainage channels emanating from unpaved roads and construction sites; loss of vegetation due to construction activities; higher pollution rates due to increased water flow velocity in the channels; traffic accidents, noise, dust, and potential loss of livelihoods in areas where existing infrastructure are to be rehabilitated or expanded. 67. In an effort to mitigate potential adverse environmental and social impacts of the KIIDP as well as to improve existing environmental conditions in the project area, the Borrower has prepared: (i) an Environmental Analysis (EA) Report, including an Environmental Management Plan (EMP), dated November 2006; and (ii) a Resettlement Action Plan, dated October Both documents have been disclosed in Uganda and at the Bank s Info shop on December 4, The EA recommendations focus on the need to (i) develop and strengthen environmental management capacity at KCC; (ii) ensure effective environmental monitoring as outlined in the EMP; and (iii) establish and strengthen strong inter-agency relationships between the KCC and NEMA, WID, DWD and others. In support of these recommendations, the EMP makes provisions for the implementation and monitoring of mitigation measures, including monitoring indicators and means of verification, as well as 19

26 the requisite environmental training; the total costs are $1 15,000. The key elements of the EMP are as follows: (a) To assist KCC s District Environment Officer in hlfilling hidher mandate, the KIIDP will fund an environmental training program for relevant KCC staff. The purpose of this training is to: (i) strengthen staff scientific field research capacity; (ii) enable staff to educate communities in environmental issues, hygiene, sanitation, and safety management skills; and (iii) enable staff to enforce environmental regulations. The training will focus on: Environmental monitoring; Environmental assessment and management skills including field sampling techniques, community advisory and facilitation skills; and Environmental law and legislation enforcement skills and techniques. (b) To further strengthen KCC s District Environment Officer, the KIIDP will provide: (i) equipment and other consumables for environmental monitoring, environmental assessment, and environmental management; and (ii) field operations equipment for sampling and monitoring to facilitate field operations of the trained staff in ensuring that the recommendations of the EMP are strictly adhered to and that any unforeseen negative environmental impacts are concurrently mitigated and prevented as much as possible. (c) Fencing of the current landfill site and the extension site to prevent unauthorized access and accidents as well as erosion and subsequent pollution of waterways and water bodies, including neighboring wetlands, during and after the decommissioning phase. (d) In an effort to mitigate potential adverse environmental and social impacts effectively, KCC s bidding documents will include Environmental Guidelines for Contractors. These guidelines will include provisions for HIV/AIDS education. (e) To verify the effective implementation of the monitoring measures as proposed in the EMP: (i) Environmental Audit Reports will be prepared by the District Environment Officer to verify that re-vegetation measures (planting of papyrus species and other sedges downstream of the channels) have been carried out as required under the contracts for drainage investments; and (ii) under the solid waste management component (a) Environmental Audit Reports and laboratory tests (monthly reports of treatment efficiency) will verify whether or not the.requisite steps were taken to pre-treat and stabilize leachate prior to disposal into waterways and to rehabilitate the constructed wetland; and (b) reports from communities and site audit reports as well as laboratory sample tests of proximate surface water bodies or streamdrivers will verify whether or not temporary storm water drains were installed at the construction sites to protect against erosion; these reports will be prepared by KCC consultants. (0 To implement the Resettlement Action Plan, this includes continued community participation in the implementation of measures agreed on in the RAP including those to ensure that the vulnerable groups such as youth, disabled and others are adequately represented and communicating the institutional arrangements. The Directorate of Community services will be strengthened to implement the RAP, and an early review of resettlement will be done to provide ample time to undertake corrective actions if any. 69. As discussed earlier in Section 5, both the EA and RAP reports were prepared in consultation with the key stakeholders (representatives of NEMA, WID, and DWD; KCC officials, members of Parish Development Committees, Local Council Officials, and directly affected community members), and their suggestions have been incorporated into the design of component 2 which will provide bridges, pedestrian 20

27 walkways, traffic control humps, pedestrian crossings, and road signs, while concerns regarding potential accidents during construction will be addressed through Environmental Guidelines for Contractors which will be included in KCC's bidding documents. ~~ ~ Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.0 1) [XI Natural Habitats (OP/BP 4.04) [XI [I [I Pest Management (OP 4.09) [I [I Cultural Property (OPN 11-03, being revised as OP 4.1 1) [I 11 Involuntary Resettlement (OP/BP 4.12) [XI [I Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I 11 Forests (OP/BP 4.36) [I [I Safety of Dams (OP/BP 4.37) [I 11 Projects in Disputed Areas (OP/BP/GP 7-60)' [I [I [I [I 7. Policy Exceptions and Readiness 70. The project complies with all applicable Bank policies. The Project Implementation Plan and procurement plan were reviewed and approved during negotiations. * By supporting the proposedproject, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas 21

28 Annex 1: Country and Sector or Program Background UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project 1. Introduction: In mid 2004 Uganda s population was estimated at 26 million. The urban population of Uganda is about 12% of the total or about 3.1 million. Kampala is the capital city of Uganda with a population of about 1.8 million and an annual demographic growth rate of about 3.9%, well over the national rate of about 3.3%. The population of Kampala thus constitutes about 58% of the total urban population of Uganda. It is the hub of the country s economic, political, and administrative activities. Legal and Policv Framework 2. The policy and legal framework under which Kampala is governed evolved over time. Until 1997 Kampala was administered under the Urban Authorities Act, which defined the functions of Kampala city Council. This Act did not allow for a comprehensive approach to urban planning, nor did it address the challenges facing the city and its aspirations. Other Acts are the Town and County Planning Act (1964), which does not empower Kampala City to address urban sprawl on its periphery. The power to declare the urban sprawl areas as planning areas rests with the Town and Country Planning Board. 3. The existing legal and policy framework governing the city, embodied in the Local Government Act (LGA) of 2000, has taken cognizance of the need to democratize local governance through citizen participation by creating a 3 tier decentralized unit namely the DistricVCity Council, the Division Council and the Parishes. However the roles and responsibilities of the three are not equitably defined and separated resulting in the duplication, disharmony and conflict. Revenue sharing arrangements where the Divisions collect revenue and remit 50% to city Council constrains the capacity of the City Council to plan and invest in infrastructure and services throughout the entire city. The LGA provides for the District/City council to prepare an integrated Development Plan, incorporating plans of the Lower Level Local Governments for submission to the National Planning Authority. However, it does not provide for handling of Structural Plans and how to integrate them into development plans. While the LGA is the key law governing the City, there are numerous laws that have a bearing on service delivery in the city including: Town and Country Planning Act (1964), Land Act (1998), Public Health Act (1964) water statute, the NEMA Statute (2000) among others. Recently, Parliament amended the Constitution (The Constitution (Amendment) Act 2005 which stated that Kampala the Capital city of Uganda shall be administered by the Central Government, the territorial boundary of Kampala shall be delineated by Act of Parliament, and that Parliament shall, by law, make provision for the administration and development of Kampala as the capital city. The Constitution (Amendment Act), 2005, entered into effect on September 30, The effect of the constitutional amendment is to accord the City of Kampala a special status vis-a-vis other municipal and district cities under the LGA, entered into effect on September 30, KIIDP support to accountability and efficient service delivery is an important factor in ensuring sustainable operations of the city, irrespective of whether its administration is decentralized or not. When the Constitutional Amendments are implemented, there will be a transitional arrangement to ensure that successor to KCC will take over the current responsibilities of KCC, as well as assume its existing rights and obligations. Economic significance of Kampala 4. Kampala is the largest center for industrial, commercial and service activities in Uganda. While accurate data on the spatial distribution of economic activity in Uganda are not available, it is estimated that about 80 percent of the country s industrial and services sectors are located in Kampala and the city 22

29 now generates 60 percent of Uganda s GDP. Furthermore most of the import-export traffic passes through Kampala. Since 1991 most (71%) of the new investment projects licensed by Uganda Investment authority are located in or near Kampala. These projects accounted for 66% and 63% of planned investment and employment respectively. The city is also growing rapidly as one of the major investment and technology development hubs in eastern Africa. The neighboring districts of Wakiso, Mukono, and Mpigi are fast growing districts especially the sub-counties surrounding Kampala city. In this regard, Kampala City faces the challenge of maximizing the growth potential of the urban centers within surrounding areas as an important engine of economic growth of the whole country. It must therefore create an enabling environment for accelerated economic growth through provision of adequate and quality infrastructure as well as promotion of Public Private Partnerships for economic and social transformation. 5. The economic future of Uganda is thus intrinsically related to the performance of Kampala as a locus of productive activity and investment. This, in turn, relies on the city s ability to provide the services and infrastructure on which organizations (public and private) and residents rely. There is also evidence to suggest that urban economic growth in Uganda (and elsewhere in SSA) is disproportionately effective in reducing poverty. Over the period 1992 to 02/03, when the Uganda national poverty headcount dropped by about a third, the corresponding drop in urban areas was over a half (from 28% to 12%) even during a period of relatively high rural-urban in-migration. 6. Unfortunately, Kampala s delivery capabilities have not kept pace with its economic and demographic growth. Over time, infrastructure and service-delivery in key sectors (roads, drainage, solid waste) has deteriorated, and the Kampala local authorities (Kampala City Council and five Divisions) which have primary responsibility in these areas have encountered serious deficiencies in the organizational, management, financial and human resource capacities to meet the current infrastructure and service-delivery needs of the city. It has also become clear that there is a fundamental lack of vision and of public service orientation. Past Bank Support to Kampala City 7. Various attempts have been made to deal with these problems, the most significant of which have been supported by the Bank. The First Urban Project (1991) focused on infrastructure investment with limited effort being made to strengthen Kampala City Council s (KCC) organizational capacity. In November 1996, a proposal was made by KCC for a more fundamental reform of local government in Kampala by formulating and implementing the Strategic Framework for Reform (SFR). The SFR focuses on restructuring KCC through organizational reforms and rationalization, implementation of financial and fiscal reform, and enhanced private sector participation in service delivery. The SFR was launched by KCC in January of 1997, with a strong element of local ownership, which had been developed through consultation with relevant stakeholders including the Council, KCC management, the KCC labor union, and representatives of the public. A number of measures including testing alternative service delivery mechanisms, rationalizing the workforce, and improving financial and budgetary management were initiated. The IDA-financed Local Government Development Program (LGDP I) and the Nakivubo Channel Rehabilitation Project (NCRP) supported the implementation of SFR. With staff and council changes since 1997, KCC s commitment to the SFR seems to have slowed down. 8. Under the two projects, a number of positive outputs have been achieved: (i) enhancement of KCC s ability to implement and manage complex contracts and large civil works; (ii) alternative service delivery - increased the role of the private sector in service delivery and changed the role of KCC from a provider to an enabler of services; (iii) increased competence and capacity of KCC staff in project planning, works supervision and project management; (iv) revaluation of all properties in Kampala; and (v) improved financial management and budget formulation. The SFR was reviewed and revised and 23

30 SFR I1 developed with technical assistance under LGDP I. These outputs have required steady support from the PCU and consultants outside of KCC s normal organizational structure. These successes are unlikely to be sustained or integrated into KCC s operations without additional support and deep commitment to mainstreaming the approaches and capacities that underpin these successes. 9. Despite the efforts made in the implementation of the SFR, the progress of organizational reforms has not been as fast as earlier envisaged at the time of the formulation of the SFR. This is compounded by the extremely weak financial position of the city. The implementation of the SFR to date has largely focused on development of strategies, and systems and procedures in all facets of KCC operations including development of accurate information and data on revenues, manpower, financial situation, contracting out revenue assessment and collection, reliable and accurate budgeting, expenditure control, institutional restructuring, and ICT development and applications. While progress has been achieved in these areas, the intermediate results will need to be carried forward and brought to maturity through institutionalization and application of the strategies, systems and procedures to KCC s day-to-day operations. A comprehensive recommitment to, and expansion of, the SFR principles is necessary. The Kampala Institutional and Infrastructure Development Project: 10. The Government of Uganda recognizes the need to broaden and deepen the SFR reforms undertaken by KCC to date. Upon closure of the NCRP and LGDP I, that provided invaluable support to Kampala, the Government developed a concept paper for a follow on project for Kampala and requested IDA for support. The GOU had originally requested support for a project of about US$98 million, mainly focusing on infrastructure, to be implemented over a 5 year period. Given the need for institutional reform required to place Kampala on a firm ground both in terms of financial management and governance, a three phase, 10 year Adaptable Program Loan (APL), with Phase I to be a 3 year project focusing on support to institutional reform and high priority infrastructure, was proposed by the Bank and accepted by the government. This approach allows for a built in incentive for implementation of the reforms embodied in SFR 11, since moving from one phase to the next is possible only upon fulfilling appropriate triggers, and also provides an exit strategy in case KCC falters on its commitment to reform and fails to meet the triggers. Development Objectives, Triggers and Benchmarks for the Three Phases of the Program Program Phases Years Program Objective Develop a strong governance and management capacity in KCC to enhance service delivery and economic development Phase 1 (Initiation) Development Objective Improved institutional efficiency of KCC through the implementation of the SFR Phase I1 (Transition) Development Objective Extending coverage and quality of service delivery and deepening institutional reform Phase I11 (Sustained Implementation Development Objective Consolidate institutional development and enhance enabling environment for economic development (a) Triggers 0 New organizational system operational 0 Establish and implement a formal public consultation process Implementation of 0 Implement high priority infrastructure investments to support city economic development and PEAP goals 0 Continuation of the imdementation of the 24

31 financial recovery action plan (FRAP) Comprehensive O&M plan for infrastructure Effective implementation of the infrastructure rehabilitation and maintenance FRAP, O&M plans and quality controi systems for infrastructure Institutionalize the public consultation process and incorporate feedback into annual work plans (b) Benchmarks Staffing completed, codes of conduct enforced, a performance based compensation system implemented and HR information system developed Citizens score card updated annually, media strategy implemented and budget and development planning consultation carried out Reduce the stock of overdue liability from Ushs 8 billion to Ushs 3 billion and increase own source revenue from Ushs 22 billion to Ushs 30 billion Provision and release of adequate O&M budget and quality control system in place and operationalized for both O&M and new construction Infrastructure investments selected based on sound appraisal and public consultation Quality assurance system is operational Financial restructuring completed, O&M operational Customer care desk operational HR information system fully implemented KCC is bankable/ creditworthy Public/private partnership institutionalized Goodurban management and governance 11. In 2005, seven of Uganda s major development partners developed a Uganda Joint Assistance Strategy (UJAS) that is centered on three principles: supporting implementation of the country owned and led revised Poverty Eradication Action Plan (PEAP) to achieve the MDGs, collaborating more effectively among the development partners and with the government, and focusing on results and outcomes. UJAS partners have agreed to focus their support on the implementation of the PEAP in general, but will focus on certain areas judged to be especially important for achieving the PEAP s overarching strategic results. These areas are: (i) strengthening the budget process and public sector management; (ii) promoting private sector development and economic growth; (iii) strengthening governance; (iv) improving education and health outcomes; and (v) promoting the resolution of the conflict in the north and fostering the social and economic development of the region. The KIIDP will clearly contribute to the first three strategic results. In terms of the PEAP, KIIDP supports Pillar 1 (Growth) and Pillar 4 (Governance). The Bank has included the KIIDP (planned to be effective in FY 2008) as one of its instruments to support the UJAS. 25

32 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project Project (Bank-Financed) Completed Projects Uganda First Urban Project (Cr UG) Nakivubo Channel Rehabilitation Project (Cr UG)) Local Government Development project (LGDP I) (Cr UG) Second Water Supply Project (Cr UG) Small Towns Water Supply Project (Cr UG) Second Economic and Financial Management Project (EFMP 11) (Cr UG) Ratings Outcome Sustainability ID Impact S L M S L M S L su U UN N S L H S M Ongoing Projects Local Government Development project (LGDP 11) (Cr UG) Second Private Sector Competitiveness Project (SPSCP) (Cr UG) Latest Supervision (ISR) Ratings Outcome Sustainability Implementation Development Progress (IF) Objective (DO) S S S S 26

33 Annex 3: Results Framework and Monitoring UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project Project Development Obi ective Improve institutional efficiency of KCC through implementation of the SFR Intermediate Results Component 1: [mproved approval process of building plan permits Component 1 : KCC issues property rate demand notes no later than :he end of the first quarter of the fiscal year Component 2: [mproved city wide infrastructure (roads and drainage) Zomponent 3: <CC incorporates the results if the annual Citizens Score 2ard in the planning process Project Outcome Indicators 0 Reduce overdue liabilities from Ushs 8 billion to Ushs 3 billion 0 The share of KCC own source revenue spent on service delivery increase from 10% to 30% 0 Increase in public satisfaction with service delivery in: o Roads from 18% to 50% o Drainage from 22% to 3 1% o Solid waste from 44% to 60% 0 Increase in KCC own source revenue from Ushs 22 billion to Ushs 30 billion Intermediate Results Indicators Component 1: Reduction in processing from one year to 60 days Component 1: 90% of the property rate demand notes issued to property owners Component 2: 9 km of gravel roads upgraded to bitumen standard by FY2009 ( km EOP) 13 km of roads and associated drains improved and strengthened by FY2009 (26 km EOP) 2 km of primary drainage channel expanded and lined by FY2009 (3.6 km EOP) 4 km of secondary drainage channels expanded and lined by FY tertiary drainage black spots improved by FY2009 Component 3: KCC utilizing results of annual Citizens Score Card to measure service delivery satisfaction Use of Project Outcome Information YR1-YR2 Measure the achievement of the KPIs YR3 Lead into the implementation of the second phase of the program Use of Intermediate Results Monitoring YRl-YR2 Low level of reduction will further reduce KCC s credibility to the public Delays in the issuance of the demand notes will have adverse impact on KCC s own revenue Delays in the completion of the planned infrastructure improvements will have an adverse impact on public satisfaction on KCC s ability to deliver services ~~ ~ Low level of satisfaction will lead to intensification of public consultation andor increase in resource allocation for service delivery 27

34 Arrangements for results monitoring Project Outcome Indicators Reduce overdue liabilities from Ushs 8 billion to Ushs 3 billion The share of KCC own source revenue spent on service delivery increase from 10% to 30% Increase in KCC own source revenue from Ushs 22 billion to Ushs 30 billion Increase in public satisfaction in service delivery in: o Roads from 18% to 50% o Drainage from 22% to 31% o Solid waste from 44% to 60% Baseline 2005l06 Ushs 8 billion Ushs 6 billion Ushs 4.5 billion Data Collection and Reporting Ushs 3 billion 10% 20% 25% 30% Ushs 22 billion 18% 22% 44% Ushs 25 billions Ushs 27 billion Ushs 30 billion 50% 3 1% 60% Frequency and Reports Quarterly Progress Reports Quarterly Progress Reports Quarterly Progress Reports Annual Citizen Report Data Collection Instruments KCC annual financial reports KCC annual financial reports KCC annual financial reports Citizen s Score Card Responsibility for Data Collection KCC, Director of Finance KCC, Director of Finance KCC, Director of Finance KCC, Director of Planning 28

35 Results Indicators for each Component Component 1: Reduction in building plan permit approval processing Component 1: Percentage of property rate demand notes issued to property owners Component 2: Gravel roads upgraded (Kms) Poor quality bitumen roads and associated drains improved and strengthened (hs) Primary drainage channel expanded and lined (Kms) Secondary drainage channels expanded and lined (Kms) Tertiary drainage block spots improved Component 3: KCC utilizing results of annual Citizens Score Card to measure service delivery satisfaction Baseline 2005/06 1 year Data ollection and Rl iorting 60 days Frequency and Reports Quarterly Progress Reports 30% 90% Quarterly Progress Reports KCC utilizing results of annual Citizens Score Card KCC utilizing results of annual Citizens Score Card KCC utilizing results of annual Citizens Score Card KCC utilizing results of annual Citizens Score Card Annual & midterm evaluation reports Quarterly monitoring and progress reports Mid term evaluation reports; Annual monitoring and progress reports Annual surveys Data Collection Instruments Physical progress report Annual financial reports Physical progress report Three Year Rolling Development Plans Responsibility for Data Collection KCC, Director of Planning KCC, Director of Finance KCC, Director Works and Physical Planning KCC, Director of Planning Phasing of APL Periodic Monitoring (IDA) Triggers Assessment Appraisal next phase (US$33.6 million) (US$40.0 million) (US$17.4 million) Twice a year Twice a year Twice a year February 2010 February 2014 June 2010 June

36 Annex 4: Detailed Project Description UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project The Phase I project will comprise of three components that are aligned to support the implementation of the SFR 11: Component 1 will focus on institutional development activities that support organizational development and governance, the implementation of the Financial Recovery Action Plan, and actions to enhance effectiveness of service delivery. Component 2 will finance infrastructure mainly focusing on rehabilitation of high priority infrastructure which were identified as critical to maintaining the productivity and welfare of the City and that the proposed activities are ready for implementation; and Component 3 will support project management and M & E activities. The objectives of the physical investments are the preservation of the current assets and arrest the deterioration of the assets. It will enable KCC to be a functioning capital city and position itself to attract investors. Component 1: Institutional Development (US$5.8 million) 1. Support to Organization Development and Governance. This sub-component will support Kampala to develop a comprehensive approach to municipal development, consonant with Kampala s central role in the nation s economic and political life. The project will provide support in the following areas: 1.1 Human Resource Management. Activities will include: (i) carrying out a HR information management study including the pension management; (ii) sensitization of councilors and staff on codes of conduct to be carried out; (iii) capacity building assessment for KCC, including the preparation of the annual training program; and (iv) carry out staff training across the organization in order to improve performance capacities Training: After undergoing the restructuring process, an assessment of the retained staff will be done. This is expected to show that most staff do not have the proficiency needed to operate the systems which will be set up. Some basic training e.g. in computer operation has been carried out in KCC s own centre but this is not enough. A cross section of staff have also benefited from the LGDP, capacity building component but KCC needs further training programs, especially tailor-made courses for the various sectors e.g. Contract management, revenue collection, etc. and in the new corporate environment. This will require implementing a comprehensive capacity building plan over the next 3 years at an estimated cost of US$300,000 with GOU contributing 10% General Administration. Support will be provided to: (i) develop efficient and effective records management systems; and (ii) develop KCC s capacities through learning from best practice from other local governments Education Information System. Activities will include: (i) design of an Education Information System; (ii) development of an education work place policy; (iii) HIV/AIDS situation analysis in schools; and (iv) training of teachers on collection, analysis and generation of comprehensive education information reports. All these activities will customize the National Education Information System to KCC requirements and needs Welfare h Community Service. Support will be provided to develop Kampala s Gender and Welfare Strategy. This will assist KCC to customize the National Gender Policy to Kampala s needs and requirements. 30

37 1.1.5 Communication Strategy. Activities will include: (i) public awareness campaigns through radio, newspaper and television; (ii) complaints management systems study; (iii) training of KCC staff on customer care; and (iv) Civil Society Participation and establishment of stakeholder forum Environmental Management. Activities will include: (i) implementation of the environmental training program; (ii) provision of equipment to ensure effective environmental monitoring; and (iii) fencing of the current land fill site as well as the extension site to prevent unauthorized access, accidents and soil erosion and water pollution. This sub-component will furthermore support activities related to the implementation of Uganda s Wetlands Sector Strategic Plan ( ). The project will also provide resources for goods which will include: (i) computers and laptops; (ii) office equipment; and (iii) vehicles. 1.2 Support to Financial Recovery. This subcomponent aims to assist the implementation of the financial recovery plan designed to place KCC on a sound financial condition by the end of the program. The following activities will include: Enhancing Revenue and management capacity. Activities will include: (i) establishing the framework for a complete, consistent, and up-to-date revenue base in all revenue areas (rate, licenses, ground revenues, billboards, contract management); (ii) enhancing revenue collection capacity, control, and efficiency through implementing the newly drafted model revenue contracts; (iii) enhancing receivables management; verifying all debtors and establishing a dynamic aging receivables database; and (iv) enhancing revenue management capacity Enhancing Expenditure Management (transparency, accountability, and timeliness). Activities will include: (i) enhancing procurement management; (ii) enhancing liability management: verifying all liabilities and establishing a dynamic aging payables/liabilities database; (iii) enhancing expenditure planning, budgeting, and budget appropriation (this subcomponent is linked through effective implementation of the recently acquired IFMS); and (iv) enhancing outsourcing and PPP for expenditure rationalization purposes Expenditure control (reduction/rationalization). Activities will include: (i) establishing expenditure management for operation and maintenance; (ii) establishing a reliable framework and system for asset management (asset inventory study, clean asset register, asset replacement policy); (iii) establishing a framework for integrated infrastructure financing and capital improvement planning; and (iv) capacity building in expenditure management. 1.3 Strengthening Service Delivery Public health and environment. At the moment the following programs are on going in Kampala within the field of public health and environment: Kampala Urban Sanitation & Improvement Project (KUSIP), Ecological Sanitation Project (ECOSAN) and Kampala Integrated Environment Management and Planning (KIEMP) Project. The three programs are addressing issues of environmental management and sanitation improvement in Kampala. However, there is no specific policy and strategy addressing the HIV/AIDS at the city level. KIIDP will support the preparation of the city wide HIV/AIDS strategy which will assist to localize a national HN/AIDS policy and make it more responsive to the council needs. The support will also help KCC to develop a work place HIV/AIDS policy and program, identify the internal and external dimensions of a city HIV/AIDS profiles and sensitization of councilors and management on the impact of HIV/AIDS on the supply and demand of city services. 31

38 1.3.2 Works - Quality Assurance for Infrastructure. Under this sub-component, KCC will put in place performance measures that will ensure efficient and effective service delivery capable of making real beneficial impacts on KCC residents. It will introduce quality control systems and manuals in order to have a foolproof mechanism for control on the quality of works. In the areas of roads, drainage, urban markets and solid waste for which KCC is responsible. Technical staff shall strictly be required to abide by quality control tests prescribed in the manuals. In addition third party quality control will be required for all works above a prescribed threshold. The manuals shall provide the details and modalities of third party quality control where applicable Urban Planning. Kampala Structure Plan: This sub-component will support activities which will enable KCC to develop a new structure plan which can guide physical development of the city over the next decade. The structure plan currently under force was prepared prior to 1994 and is now absolutely outdated. The pace and extent of physical growth within the city limits has far outpaced the extent of the old structure plan. At the same time, KCC s internal systems (including rules and regulations, records management, etc.) of monitoring and managing land development and building construction are not commensurate with the requirements of a fast developing city. Under such circumstances, it is no surprise that a large part of the city which has developed over the past decade (and that could be as much as 70 percent of the current city), has inadequate (or non-existent) formal documentation from the KCC. Not only does such a situation create severe problems for trunk and linking infrastructure networks, it impacts the ability of the council in determining, demanding and collecting applicable taxes, fees and levies. Preparation of the structure plan will involve: (i) background studies and documentation; (ii) review of the existing structure plan; (iii) studies on Development control approvals and monitoring; (iv) developing a new structure plan; and (v) preparation of environmental studies in cooperation with NEMA, DWD, WID, and others as appropriate to coordinate future environmental management efforts. Planning and development monitoring related ICT facilities: KCC will be supported to acquire appropriate computer hardware and software to support the physical planning and monitoring process, including environmental monitoring as required under the Environmental Management Plan (EMP) and developing of a Geographical Information System (GIs). This will also include very specifically targeted training of key staff using such facilities. Coordination with another Bank-financed Project: The World Bank is currently financing the Second Private Sector Competitiveness Project (SPSCP) which includes a substantial component supporting land administration, including district land registries. KCC, with its large number of documented land parcels, will receive support from SPSCP which will include the rehabilitation and modernization of land records and registration as well as all related systems and processes Information and Communication Technology. Activities will include: (i) enhancement of the service management systems; and (ii) extension and improvement of the Data & Voice Communication Network. Component 2: Kampala City Wide Infrastructure and Services Improvement (US$28.5 million) KCC has just completed the implementation of the Nakivubo Channel Rehabilitation Project and the Local Government Development Project. Attempts to rehabilitate a limited number of infrastructure (roads and drains) was carried out. During the NCRP, a comprehensive Kampala Drainage Master Plan (KDMP) and Kampala Urban Traffic Improvement Plan were prepared. 32

39 2. This component will support activities aimed at improving the provision of critical services to the city and the implementation of the Resettlement Action Plan. The investment in infrastructure and service improvements will address five priority areas which are critical for inducing the confidence of the public and service recipients and will contribute to the economic and commercial development of the city. The investment in infrastructure will be limited in this first phase to only high priority interventions: 2.1 Drainage system improvement: under this sub component, the capacity of a high priority primary drainage channel in a highly flood prone area will be expanded over a length of 3.6 km, including expanding and lining of a total of 4 km of secondary channels at critical locations in the city, and remedial measures of 4 tertiary drainage black spots. 2.2 Trafic management: This subcomponent will include: (i) area traffic management: dealing with measures for improved traffic flow and provision of traffic management infrastructure including guard rails, signs etc; and (ii) junction improvement: providing localized widening and signalizing at the junctions. This will be complementary to the four junctions and round about improvements that is planned to be carried out in parallel under Japanese funding. 2.3 Road maintenance and upgrading: Activities under this subcomponent will include: (i) maintenance of roads: a total of 26 km of selected tarmac roads will be maintained by reconstruction/overlay of surfaces and improvement to the drainage system; and (ii) upgrading of gravel roads: a total of about 11 km of high priority of gravel roads will be upgraded to bitumen standard. The roads were selected on the basis of improving connectivity and economic rate of return 2.4 Solid waste management: Activities under this subcomponent will include: (i) developing of a 6 acre land adjacent to the existing site; (ii) provision for supply and installation of a landfill gas collection and flaring system phase 1 at the existing landfill site; and (iii) preparation of design for the development of the new landfill site to be implemented during Phase I1 of the program. 2.5 Urban markets infiastructure: Activities under this subcomponent will include: (i) provision of markets infrastructure e.g. access roads, lighting, sanitation, shades, stowers, etc to selected markets; and (ii) preparation of detailed designs for the high priority markets to be developed during Phase I1 based on the feasibility study carried out. 2.6 Implementation of the Resettlement Action Plan as detailed in the plan. (Details are in Annex 10 (B) and the RAP report). Component 3: Project Implementation Support, Monitoring and Evaluation (US$2.8 million) 3. This component will encompass the management activities associated with the implementation of the project, the establishment and implementation of a comprehensive monitoring and evaluation (M&E) system and the preparation of the next phase of the project. Activities will include: 3.1 Project Implementation Support. The project will be implemented by KCC through direct involvement of its various directorates acting as component managers, supported by a Core Team of experts. It will be coordinated by the Town Clerk and the Permanent Secretary, Ministry of Local Government will be the overall accounting officer. 3.2 Monitoring and Evaluation. KCC has prepared and adopted its own Second Structural Framework for Reform (SFR2) which lays out a roadmap for reform including a listing of specific monitorable goals and targets. KCC has a functioning Economic Planning Unit which, under KIIDP will be enabled to: 33

40 Establish a Baseline: A critical initial activity under the M&E component will be to establish an appropriate baseline which accurately describes the situation before project effectiveness with respect to the council s institutional and infrastructural status. In many respects, the SFR2 includes a preliminary framework for the baseline including indicators for which data is either generated within the KCC itself or are easily collectable from the external environment. 0 Develop an M&E Strategy: The SFR2 lays out a clear roadmap for institutional reform and service delivery which requires an effective strategy for M&E and its reporting on a regular basis. KIIDP will support the development of an overall M&E strategy which responds not only to World Bank project requirements but which can also enable KCC to regularly monitor and evaluate progress towards fulfilling its overall mandate. An important element of the strategy will be to ensure the sustainability of the M&E system which informs KCC policy formulation and effective service delivery beyond the life of KIIDP. Bi-annual Reporting: The project will support the preparation o f at least two M&E reports every year which can inform the council and its executives on progress towards meeting the goals adopted under the Second Structural Framework for Reform (SFR2) as well as meeting the M&E requirements o f the KIIDP. Social Impact Assessment: The project will provide resources to KCC to carry out a social impact assessment of the project and the findings of the report will be incorporated into implementation completion report. 3.3 Annual Citizen s Report Card: KCC was facilitated by the World Bank to develop and conduct its first Citizen s Report Card. This initiative has been instrumental in establishing a baseline of Kampala citizen s perceptions of the council. As part of its institutional reform process, KIIDP will support the conduct of a similar annual exercise such that the KCC gets a regular feedback from its citizens and provides a benchmark for M&E. 3.4 Staffand Councilor Survey. A survey will be conducted to ascertain the level of efficiency and effectiveness of the KCC staff and councilors to carry out its functions. 34

41 Annex 5: Project Costs UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project Project Cost By Component Local Foreign Total US $million US $million US $million Institutional Development Citywide Infrastructure and Services Improvement Project Implementation Support and M&E Total Baseline Cost Physical Contingencies Price Contingencies Total Project Costs' Interest during construction Front-end Fee Total Financing Required

42 Annex 6: Implementation Arrangements UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project 1. Implementation period. The Project will be executed over a period of about three years, from January 2008 to December The full APL has three phases - Phase I to be implemented over 3 years, Phase I1 over 4 years and Phase I11 over 3 years. This PAD focuses on Phase I project 2. Proiect coordination and implementation arrangements. The institutional arrangements for project implementation will be as per the government structure. At the central level, the MoLG, MoFPED, and the Office of the Auditor General shall be responsible for ensuring that project resources are budgeted for and disbursed within the national MTEF, and that project accounts are audited. 3. The overall project implementation period for APLl is three years. KCC will be the executing agency for KIIDP and shall have overall responsibility for accounting for project funds and coordinating activities under the project. The Ministry of Local Government will have an over all oversight function. In line with the proposed mainstreaming of tasks currently being carried out by the Project Coordination Unit (PCU) into the various departments in KCC, an SFR Core Team will provide the necessary technical support during Phase 1 of KIIDP to the various departments. The SFR Core Team will also act as an interface with the Bank to ensure that KIIDP is implemented as per the IDNGOU protocol agreement. The SFR Core Team will assist in the preparation of work plans, budgets, progress reports, and coordination of the overall implementation of the project. 4. The various Directorates of KCC will be responsible for the corresponding components and sub components of the project. Members of the Core Team will be mapped to the relevant directorates and will provide support to implementation of the project and also assist in the various core activities of the respective directorates. They will be coordinated by the Core Team Coordinator who will be reporting to the Town Clerk, who as chief executive of KCC will have overall responsibility for the day to day implementation of the project. 5. Financing. The total Project cost is US$37.1 million of which IDA will finance 91% of the total project costs, of which GOUKCC will pay 9% percent. These counterpart funds will be paid annually to cover GOUKCC contributions. IDA credit proceeds will be made available by the Government of Uganda to KCC under a subsidiary credit agreement between the two tiers of government, with terms and conditions acceptable to IDA. 6. Monitoring and Evaluation. M&E procedures and reports are described in Section (2.3, Monitoring and Evaluation of OutcomesResults. In line with the intention and design of KIIDP as a mainstream program, most of the routine M&E data will be made available through mainstream data collection to be performed by the Economic Planning Department in KCC. The mission carried out a review of the status of the various monitoring and information systems in KCC. Under component 3, support will be provided to KCC to develop a council-wide M&E system and to strengthen the Economic Planning Department to implement it. 7. Proiect Implementation Plan (PIP). A detailed draft PIP has been prepared by KCC, and will be updated from time to time in agreement with IDA to guide execution of each component and the implementation of the Project as a whole. The PIP will set forth all operational and procedural steps regarding reviews and approvals of specific activities, flow of information, detailed description of the 36

43 functions of Project management and implementing bodies, procurement and financial management arrangements, reporting requirements, and manual amendment procedures. 8. Procurement Arrangements. KCC will be responsible for all procurement, planning process, implementation and supervision. The MoLG Contracts Committee will be responsible for approving contract awards. Details of procedures to be followed are provided in the Project Implementation Plan. 9. Financial Management Arrangements. Financial Management services for KIIDP will be provided by the Directorate of Finance of KCC. KCC will deploy a full project financial management team to undertake the financial management responsibilities required during implementation of the project, in terms of an agreed Memorandum of Financial Management Services (to be agreed before project effectiveness) and further supported by a FM procedure manual, which needs to specify in sufficient detail the operational procedures, controls and sanctions to ensure effective and efficient FM for KIIDP. The FM staffing requirement will be revisited as the need arises. 10. Engineering Design Services and execution of Works. The detailed engineering designs and draft bidding documents for works to be implemented during the Phase I have been prepared already. Any updating that may be necessary will be made by the technical staff of KCC and the supervision consultants who will be selected on a competitive basis. Private consultants, based on detailed terms of reference, will carry out the supervision of major works contracts. The works will be contracted out, based on detailed technical specifications, to private contractors Environmental and Social Management. The District Environment Officer (DEO) located in KCC, will be responsible for coordinating the implementation of the Environmental Management Plans as well as the training activities and wetland management plans as outlined in the Project Implementation Plan. To facilitate this work, the DE0 will work closely with the relevant personnel at NEMA, WID, DWD, the Ministry of Works, Housing and Communication, the Uganda Police, the Traffic Department, and the Uganda Taxi Operators and Drivers Association (UTODA). 37

44 Annex 7: Financial Management and Disbursement Arrangements UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project Introduction 1. This report is a record of the results of the assessment of the proposed financial management arrangements for the Kampala Institutional and Infrastructure Development Project (KIIDP) implemented by Kampala City Council (KCC) under the Ministry of Local Government (MoLG). The objective of the assessment is to determine: (i) whether KCC has adequate financial management arrangements to ensure KIIDP funds will be used for purposes intended in an efficient and economical way; (ii) KIIDP financial reports will be prepared in an accurate, reliable and timely manner; and (iii) the entities assets will be safe guarded. The financial management (FM) assessment was carried out in accordance with the Financial Management Practices Manual issued by the Financial Management Sector Board on November 3,2005. Country issues 2. In recent years, significant improvements in public sector accounting and reporting have been achieved. Most notably, the annual public accounts of Government have been produced within the statutory period of four months after the end of the financial year for more than 5 years and the audit had been conducted timely. 3. The Country Financial Accountability Assessment (CFAA) carried out by IDA in 2004 shows that Government of Uganda has made substantial progress in improving its Public Financial Management Systems since the last CFAA undertaken in The fiduciary risks associated with poor budget formulation and budget preparation processes have reduced. In terms of appropriate legislation and regulatory frameworks, significant progress has been made to ensure that the risk associated with lack of clear rules and regulations has been reduced. Also more useful information is provided in the annual accounts. It is recognized however that the process of implementation of new rules and ways of working does take time and does require changes in attitude, continued capacity building and widespread demand for greater accountability. 4. Risks remain in terms of: 0 enforcement of procurement and payroll rules and procedures; completeness of data on debt; effective independent oversight; and timeliness and effectiveness of legislative and public scrutiny. 5. In addition, the appropriate legislative framework for integrity is still being developed. There remain significant legal, institutional and capacity constraints on the ability of the integrity bodies (IGG, DEI, Police, DPP) to carry out their various functions including public education, detection, investigation and prosecution of offenders. 6. With the support of a number of donor assisted initiatives, such as the Second Economic and Financial Management Project (EFMP 11) and the Second Local Government Development Program (LGDP) supported by IDA, the Financial Accountability and Decentralization Support Project funded by DFID, and the planned Financial Management and Accountability Project (FINMAP), Government is seeking to rapidly enhance the financial accountability framework in order to: mitigate fiduciary risk in 38

45 public expenditure management; achieve economy, efficiency and effectiveness in the use of public funds; enhance transparency and accountability; enhance staff capacity in public financial management; and to establish an appropriate enabling environment for private sector development and regulation. These initiatives and reforms have been supported and strengthened through PRSC 1 to 5 budget support programs. Risk assessment and mitigation 7. The objectives of the project s financial management system are: 0 0 to ensure that funds are used only for their intended purposes in an efficient and economical way; to ensure that funds are properly managed and flow smoothly, adequately, regularly and predictably in order to meet the objectives of the project; to enable the preparation of accurate and timely financial reports; to enable project management to monitor the efficient implementation of the project; and to safeguard the project assets and resources. 8. Furthermore, the following are necessary features of a strong financial management system: KCC should have an adequate number and mix of skilled and experienced staff; the internal control system should ensure the conduct of an orderly and efficient payment and procurement process, and proper recording and safeguarding of assets and resources; the accounting system should support the project s requests for funding and meet its reporting obligations to fund providers including Government of Uganda, IDA, other donors, and local communities; the system should be capable of providing financial data to measure performance when linked to the output of the project; and an independent, qualified auditor should be appointed to review the Project s financial statements and internal controls. 9. The table below shows the results of the risk assessment from the Risk Rating Summary. This identifies the key risks project management may face in achieving project objectives and provides a basis for determining how management should address these risks. Risk Risk Risk Mitigating Measures Rating Incorporated into Project Design Inherent Risk Country Level I M I Condition of Negotiations, Board or Effectiveness (y/n?). 1 Entitv Level ( M I I I W Project Level / L / Control Risk W Budgeting / L / 39

46 I rn Risk Accounting Risk Rating M Risk Mitigating Measures Incorporated into Project Design KCC is using the LGFAR, 2007 but this falls short of donor specific accounting policies and procedures e.g. on financial reporting and auditing which are to be included in the Project Implementation Plan as a mitigation measure. Condition of Negotiations, Board or Effectiveness (Y/N?) Initially assessed as a Condition of effectiveness but given that it has been met by the inclusion of the policies and procedures in the Project Implementation Plan, this issue is now resolved. rn FundsFlow Financial Reporting Auditing Overall Risk Rating L M M M M - Modest L - Low 10. The action plan below indicates the actions to be taken for the project to strengthen its financial management system and the dates that they are due to be completed by Action Agreement of Interim Financial Report (IFR) formats. Approving a Financial Management Manual for the project that would supplement the Local Government (Financial and Accounting) Regulations, 2007 in order to cater for the donor specific accounting policies and procedures. Agreement of terms of reference for external auditor. Date due by Negotiation (August 6, 2007) Initially assessed as a Condition of Credit Effectiveness but given that it has been met by the inclusion of the policies and procedures in the Project Implementation Plan, this issue is now resolved. Six months after Credit Effectiveness Responsible KCCand IDA KCCand IDA I KCC and IDA Strengths and weaknesses of the Financial Management System 11,. The project financial management is strengthened by the following salient features:- The accounting personnel are adequately qualified and experienced; Budgeting arrangements are in place;. 40

47 ... External auditing arrangements are adequate; Internal auditing arrangements are adequate although staff training needs to improve their skills should be strongly considered by KCC. Particularly they should all become members of the Institute of Internal auditors - Uganda Chapter to keep abreast with the new developments in Internal Audit; Funds flow arrangements are adequate; There is good understanding of the Financial Reporting requirements given that the Project Accountant has implemented World Bank projects before and has had training in Financial Management and Disbursement Guidelines for the World Bank; and There is adequate accounting software The project financial management is weakened by the following salient feature:- The management letter issues raised by the external audit report as of 30 June 2004 showed that the internal control systems in relation to mainly revenue collection needed to be improved. With the strengthening of the Internal Audit Department it is hoped that the monitoring and enforcement of stronger internal control systems should improve hence improving on the KCC internal control systems.. The Local Government (Financial and Accounting) Regulations (LGFAR), 2007 will be used as the Financial Management Manual (FMM) but it falls short when it comes to donor specific accounting policies and procedures. As a mitigating measure, the donor specific accounting policies and procedures e.g. on financial reporting and auditing have been included in the Project Implementation Plan. Institutional and implementation arrangements 13. The institutional arrangements for project implementation will be as per the government structure. At the central level, the MoLG, MoFPED, and the Office of the Auditor General shall be responsible for ensuring that project resources are budgeted for and disbursed within the national MTEF, and that project accounts are audited. KCC under MoLG will be responsible for the overall implementation of the project. KCC has implemented IDA projects before, that is, Nakivubo Channel Rehabilitation Project and a component of the Local Government Development Program. 14. During project execution, KCC shall coordinate project implementation and manage: (a) procurement, including purchases of goods, works, and consulting services; (b) project monitoring, reporting and evaluation; (c) contractual relationships with IDA and other co-financiers; and (d) financial management and record keeping, accounts and disbursements. 15. KCC will also constitute the operational link to the IDA and Government of Uganda on matters related to the implementation of the project. 16. The Permanent Secretary (PS), MoLG, will be the Accounting Officer for the project, assuming the overall responsibility for accounting for the project funds. The Town Clerk of KCC will report to the Accounting Officer on matters concerning the accountability of KIIDP funds. 41

48 Budgeting Arrangements 17. Budgeting arrangements are defined under Part I11 of the LGFAR, The capacity of the accounting staff to fulfill budgeting needs of the project is adequate. The Sun accounting software can adequately cater for the budgeting arrangements of the project. Accounting Arrangements Books of accounts and list of accounting codes 18. KCC will maintain similar books of accounts to those for other IDA funded projects. The books of accounts to be maintained specifically for KIIDP should thus be set up and should include: a Cash Book, ledgers, journal vouchers, fixed asset register and a contracts register. 19. The books of accounts will be maintained on a computerized system. A list of accounts codes (Chart of Accounts) for the project should be drawn up. This should match with the classification of expenditures and sources and application of funds indicated in the Financing Agreement (FA). The Chart of accounts should be developed in a way that allows project costs to be directly related to specific work activities and outputs of the project. 20. Books of Accounts to be used for the project will be opened and a Chart of Accounts will be completed in accordance with the requirement in the FA of KIIDP of maintaining books of accounts for the project. Staffing Arrangements 21. KCC has an accounting unit that is headed by a Director Finance who will be responsible for maintaining the books of accounts and records of KIIDP funds. The Director of Finance will be assisted by a Project Accountant and an Accounts Assistant. The Project Accountant will report to the Director of Finance or in his absence to any of the two Deputy Directors to whom authority will be delegated. In this regard, the staffing arrangements are adequate for KCC to ensure that KIIDP funds are accounted for. 22. Most of the accounting staff dealing with this project except for the Project Accountant shall need training in the World Bank Financial Management and Disbursement Guidelines. This can be arranged in consultation with the Senior Financial Management Specialist at the Country Office during the implementation period of the project. 23. In order to ensure that the project is effectively implemented, KCC will ensure that appropriate staffing arrangements are maintained throughout the life of the project. Information Systems 24. KCC will be using Sun accounting software as the information system for KIIDP and accounting staff are comfortable using it to produce accounting reports. This accounting software is accessed as adequate for accounting and reporting on the use of KIIDP funds. 25. Important to note is that KCC has been part of the roll out of the Integrated Financial Management System (IFMS) which is the Government of Uganda (GoU) information system. We recommend that in the long run project accounts be captured within the IFMS and arrangements in this regard should be effected such that all KCC projects are eventually accounted for using the GoU accounting system. 42

49 Internal Control & Internal Auditing Internal Controls and Financial Management Manual 26. The project s internal controls policies and procedures are documented in a Financial Management Manual (FMM) of KCC which is the LGFAR, 2007 but this falls short of the donor specific accounting policies and procedures e.g. on financial reporting and auditing that have been included in the Project Implementation Plan as a mitigation measure. The FMM should be a living document that can be updated to strengthen the internal control system when the need arises. 27. The procedures used by the project to maintain its records are documented in the LGFAR 2007 and Financial Management section of the Project Implementation Plan. These will include the requirement for cross references to supporting documentation in the SOE supporting schedules in order to facilitate the inspection of these schedules and improve the maintenance of the project s records. 28. The FMM will describe the accounting system: the major transaction cycles of the project; funds flow processes; the accounting records, supporting documents, computer files and specific accounts in the financial statements involved in the processing of transactions; the list of accounting codes used to group transactions (chart of accounts); the accounting processes from the initiation of a transaction to its inclusion in the financial statements; authorization procedures for transactions; the financial reporting process used to prepare the financial statements and interim financial reports, including significant accounting estimates and disclosures; financial and accounting policies for the Project; budgeting procedures; financial forecasting procedures; procurement and contract administration monitoring procedures; procedures undertaken for the replenishment of the Designated Account; and auditing arrangements. Internal Audit 29. KCC has an Internal Audit Department that is headed by the Chief Internal Auditor. The department is supposed to have one Chief Internal Auditor, one Principal Internal Auditor, two Senior Auditors and eight Auditors according to its current structure. All positions have been filled. The Internal Audit arrangements for KCC are adequate. However, we recommend that the Position for Principal Internal Auditor be filled up by an experienced and professionally qualified accountant. Training needs of the current staff in the Internal Audit Department should also be determined such that they keep abreast with the current developments in Internal Audit More specifically; the staff should strongly consider becoming members of the Institute of Internal Auditors - Uganda Chapter. 30. The role of Internal Audit is clearly spelt out in the LGFAR The Chief Internal Auditor reports to the Council but works in co-operation with the Town Clerk. The duties of the Chief Internal Auditor involve reviewing the internal control systems of KCC, conducting value for money audits and special investigations. Procedures for internal audit are documented in the Internal Audit Manual. Funds Flow Arrangements Bank Accounts 3 1. The following bank accounts will be maintained for the purposes of implementing the project: 0 Designated Account: Denominated in US dollars, disbursements from the IDA Credit will be deposited on this account. 43

50 0 Project Account: This will be denominated in local currency. Counterpart funds and transfers from the Designated Account (for payment of transactions in local currency) will be deposited on this account in accordance with project objectives. 32. These bank accounts shall be opened at Bank of Uganda in accordance with the FA for KIIDP. Initial cash flow forecasts upon which the advance disbursement will be made from the IDA Credit should also be prepared by the same date. 33. The account signatories for both of the accounts will be three for each authorized payment. They will sign from each of the three categories as follows: Flow of Funds Category I: Permanent Secretary, MoLG who will be the principal signatory or designate. Category 11: The Town Clerk of KCC or designate. Category In: Project Accountant of KIIDP or designate Funds flow arrangements for the project (through the two bank accounts above) are as follows: IDA will make an initial advance disbursement from the proceeds of the Credit by depositing into a Borrower-operated Designated Account (DA) held at Bank of Uganda (central bank) and denominated in US Dollars.... Actual expenditure will be reimbursed through submission of Withdrawal Applications and against Statements of Expenditure which will be approved in accordance with internal control measures applied in KCC. All expenditures will be paid centrally from KCC in accordance with the approval mechanisms documented in their FMM. Counterpart funds from the GoU Consolidated Fund and transfers from the DA (for payment of transactions in local currency) will be deposited in the Project Account to pay all local currency project transactions denominated in Uganda Shillings (UGS). The Government will allocate and pay over counterpart fimds for the project by check (Warrant of funds). Counterpart funds are allocated through the normal central government budgetary process. Counterpart funds is accessed through compliance with the country specific Financial Regulations. 44

51 -r KIIDP FUNDS FLOW CHART GoU Consolidated Designated Account in BOU denominated in USD... Project account in BOU denominated in UGS Project transactions paid in either USD or UGS L J Disbursement Arrangements 35. Disbursements from IDA would be initially made on the basis of incurred eligible expenditures (transaction based disbursements). IDA would then make advance disbursement from the proceeds of the Credit by depositing into a Borrower-operated Designated Account to expedite Project implementation. The advance to a Designated Account would be used by the Borrower to finance IDA S share of Project expenditures under the proposed Credit. Another acceptable method of withdrawing funds from the Credit is the direct payment method, involving direct payments from the Credit to a third party for works, goods and services upon the Borrower s request. Payments may also be made to Bank of Uganda for expenditures against IDA special commitments covering Bank of Uganda s Letter of Credit. IDA S Disbursement Letter stipulates a minimum application value for direct payment and special commitment procedures. 36. Upon credit effectiveness, KCC will be required to submit a withdrawal application for an initial deposit to the Designated Account, drawn from the IDA Credit, in an amount to be agreed to in the Disbursement Letter. Replenishment of funds from IDA to the Designated Account will be made upon evidence of satisfactory utilization of the advance, reflected in SOEs andor on full documentation for payments above SOE thresholds. Replenishment applications would be required to be submitted regularly on a monthly basis. If ineligible expenditures are found to have been made from the Designated Account, the Borrower will be obligated to refund the same. If the Designated Account remains inactive for more than six months, the Borrower may be requested to refund to IDA amounts advanced to the Designated Account. 37. IDA will have the right, as reflected in the Financing Agreement, to suspend disbursement of the Funds if reporting requirements are not complied with. 38. In order for KCC to move from transaction based disbursement to report based disbursement where six monthly forecasts of expenditure are paid quarterly hence ensuring the project has adequate funding at all times, KCC will during implementation have to meet the following requirements: (i) sustain 45

52 satisfactory financial management rating during the project s supervision; (ii) submit Interim Financial Reports consistent with the agreed form and content within 45 days of the end of each reporting period, and (iii) submit all expected Audit Reports by the due date. Financial Reporting Arrangements 39. Formats of the various periodic financial monitoring reports to be generated from the financial management system will be developed. There will be clear linkages between the information in these reports and the Chart of Accounts. The financial reports will be designed to provide quality and timely information to the project management, implementing agencies, and various stakeholders monitoring the project s performance. 40. The following quarterly Interim Financial Reports (IFRs) will be produced by KCC:. Financial Reports: o Sources and Uses of Funds o Uses of Funds by Project Activity/Component o Designated Account activity statement Physical Progress (Output Monitoring) Report Procurement Report on prior review contracts The formats were agreed at negotiations and the project must demonstrate its capability to produce the IFRs to the Country Financial Management Specialist. 42. KCC may later become eligible to use the report-based disbursement upon fulfillment of the conditions listed in the Disbursement Arrangement section of this report. The project will then be required to submit to the Bank the following information in order to support report-based disbursement:. Interim Financial Report (IFR)... DA Bank Statements.. Designated Account (DA) Activity Statement.. Summary Statement of DA Expenditures for Contracts subject to Prior Review. Summary Statement of DA Expenditures not subject to Prior Review. 43. The financial statements should be prepared in accordance with International Public Sector Accounting Standards (which inter alia includes the application of the cash basis of recognition of transactions). The IDA Credit Agreement will require the submission of audited financial statements for KIIDP to the Bank within six months after the year-end. 44. The KIIDP Financial Statements will comprise o f 1. A Statement of Sources and Uses of Funds / Cash Receipts and Payments which recognizes all cash receipts, cash payments and cash balances controlled by the entity; and separately identifies payments by third parties on behalf of the entity. 2. The Accounting Policies Adopted and Explanatory Notes. The explanatory notes should be presented in a systematic manner with items on the Statement of Cash Receipts and Payments being cross referenced to any related information in the notes. Examples of this information include a summary of fixed assets by category of assets, and a summary of SOE Withdrawal Schedule, listing individual withdrawal applications; and 46

53 3. A Management Assertion that Bank funds have been expended in accordance with the intended purposes as specified in the relevant World Bank legal agreement. 45. Indicative formats of these statements will be developed in accordance with IDA requirements and agreed with the Country Financial Management Specialist. Auditing 46. The Auditor General is primarily responsible for the auditing of all government projects. Usually, the audit is subcontracted to a firm of private auditors, with the final report being issued by the Auditor General, based on the tests carried out by the subcontracted fm. In case the audit is subcontracted to a firm of private auditors, IDA funding may be used to pay the cost of the audit. The audits are done in accordance with International Standards on Auditing. 47. The audit report for KIIDP must be submitted to IDA within six months after the end of each financial year. The new Audit Policy Guidelines allow KIIDP accounts to be included in the KCC accounts but because KCC has a reporting deadline to submit audited accounts to Parliament of 9 months which is different from IDA S 6 months reporting deadline, KIIDP s accounts will be audited separately from KCC s accounts. Any firm of auditors subcontracted to carry out the audit should meet IDA S requirements in terms of independence, qualifications and experience. 48. KCC has managed a number of IDA projects and none of the projects has an outstanding audit report. No significant issues were raised in the project audit reports managed by KCC. In addition to the project audit reports, IDA was also receiving the entity audit reports for KCC. The external audit report of KCC for the period ended 30 June 2004 highlights a number of internal control weahesses mainly in relation to revenue collection. Although the revenue collection problems are being addressed, this will impact on the method of disbursement. KCC will be expected to start on transaction based disbursements then eventually move to report based disbursements subject to getting confirmation that it has a satisfactory Financial Management system. 49. The arrangements for the external audit of the financial statements of KIIDP should be communicated to IDA through agreed terms of reference. Appropriate terms o f reference for the external auditor must also be developed and agreed within six months of Credit Effectiveness. 50. GoU does not have a policy that allows public disclosure of audit findings but Article 41 (1) of the Constitution of Uganda allows the public to access this information. The Access to Information Bill, No. 7 of 2004 has been drafted to complement the clause in the constitution and is currently with Parliament. The media under the Press and Journalist Act also has access to information such as audit findings. In addition, the public is allowed to attend the Public Accounts Committee of Parliament when it is addressing audit issues are: The audit reports that will be required to be submitted by KCC and the due dates for submission 47

54 Statements, i.e., KCC s annual audited accounts 2) Project Specific Financial Statements, i.e., KIIDP annual audited accounts audited accounts to Parliament within nine months after the end of the financial year, it was agreed during negotiations that given the fact that the LGFAR requires KCC to prepare books of accounts for audit within 3 months after the end of the financial year, they should liaise with the Auditor General to ensure the audited accounts are finalized and submitted to the Bank within six months after the end of the financial year. Submitted within six months after the end of each financial year. Conclusion of the Assessment 52. A description o f the project s financial management arrangements above indicates that although they satisfy the Bank s minimum requirements under OPBP10.02, there remain improvements to be effected for the system to be adequate to provide, with reasonable assurance, accurate and timely information on the status of the Project as required by the IDA. The recommended improvements are detailed in the Financial Management Action Plan. Supervision Plan 53. A supervision mission will be conducted at least once every year based on the risk assessment o f the project. The mission s objectives will include that of ensuring that strong financial management systems are maintained for the project throughout its life. A review will be carried out regularly to ensure that expenditures incurred by the project remain eligible for IDA funding. The Implementation Status Report (ISR) will include a financial management rating for the component. This will be arrived at by the Country Office Senior Financial Management Specialist after an appropriate review. 48

55 General Annex 8: Procurement Arrangements UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project 1. Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, revised October 2006, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. Each contract to be financed by the Credit will be in the procurement plan to be prepared by the Borrower and agreed with the Bank. The procurement Plan will indicate for each contract the method for procurement of goods and works, and method for selection of consultants. The plan will also indicate the planned and actual for each contract, the need for prequalification, estimated costs, prior review requirements, and time fiame for key processing activities. The Procurement Plan will be updated at least semi-annually or as required to reflect the actual implementation progress of each contract against planned benchmarks. The Bank's standard bidding documents will be used for procurement under International Competitive Bidding (ICB), and for procurement under National Competitive Bidding (NCB) with appropriate modifications. Alternatively standard tender documents prepared and issued by the Public Procurement and Disposal of Assets Authority (PPDA) may be used for NCB subject to their being acceptable by the Bank. The Bank's Standard Request for Proposal document will be used in the selection of consulting firms. Short lists of consultants for consulting services contracts estimated to cost less than $200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Scope of procurement under the Project 2. Procurement of Works: Works procured under this project would include improvements and construction of new drainage system, upgrading and rehabilitation of roads, traffic management schemes and rehabilitation of markets. Other works will include development and expansion and improvements of landfill and supply and installation of landfill gas extraction systems. This category will also include a number of technical services for maintenance of facilities. 3. Procurement of Goods: Goods procured under this project would include vehicles, office, field and communications equipment (including computers), miscellaneous items o f supplies and stationery, Information and Communications Technology (ICT) equipment, a Geographical Information System (GIS) and satellite maps. 4. Selection of Consultants: Consulting assignments will include engineering services, auditing, management contracts (e.g. support Organization Development and Governance in the area of human resource management, strengthening Service Delivery and Monitoring and Evaluation) and various studies (e.g. the development of records system, the design of an Education Information System, complaints management system, a city wide HIV/AIDS Strategy, quality control systems and manuals and financial management systems). 5. Operating Costs under this project will include technical services for maintenance o f building services, equipment, and vehicles, fuel, office supplies, utilities, telecommunications, and contract staff (other than salaries o f personnel of KCC or of the civil service). 49

56 Applicable national procurement procedures 6. All contracts following National Competitive Bidding, and other lower procurement procedures (shopping, and selective tender for smaller works contracts) will follow the national public procurement law (Local Government (Amendment) Act and its Regulations). These procedures have been reviewed by the Bank and found to be acceptable except for the following provisions which will not be applicable under this project. (i) (ii) (iii) (iv) (v) Invitation to bid for NCB shall be advertised in at least one national newspaper with a wide circulation, at least 30 days prior to the deadline for the submission of bids; Negotiations with the best evaluated bidder. This practice is not appropriate, except for consulting services contracts, and for contracts procured through direct contracting; Use of the merit point system for bid evaluation will not be allowed for goods and works contracts procured on basis of competition (ICB, NCB or restricted tender); For shopping procedures, the Procuring and Disposal Entity (PDE) will not be allowed to pre-qualify suppliers on an annual basis and invite all pre-qualified providers to submit proposals. Shopping will be to a few firms (at least three); and There will be no use of the micro-procurement method for each contract estimated to cost the equivalent of $1,100 or less. Micro-procurement is by definition, Direct Contracting, or Single Source Selection, which should be used on exceptional basis with adequate justification and prior approval. Procedure for Request for Quotations 7. Because of the risk associated with procurement under shopping and selective tendering and the ambiguities in the national procedures, for clarity and removal of doubt, the following procedures will be will be followed. Request for quotations shall be from as many suppliers or contractors as practicable, but from at least three. The request for and quotations shall be in writing and the quotations shall be submitted and opened at the same time. The request for quotations shall contain all required specifications (and drawings, if needed, in case of works); standards etc. to enable the supplier or contractor provide a complete quotation. Each supplier or contractor from whom a quotation is requested shall be informed of the place, time and method of submission of quotations and whether any elements, apart from the charges for the goods or services themselves, such as transportation and insurance charges, customs duties and taxes, are to be included in the quotations or not. Each supplier or contractor may only give one price quotation and may not change this quotation, once the quotations are submitted and opened. No negotiations shall take place with respect to a quotation submitted by the supplier or contractor. Procurement Capacity Assessment 8. The project will be implemented by KCC and MOLG, carrying out specific tasks of the procurement process. The procurement capacity assessment of KCC to implement procurement under the project was carried out on February 15, 2006 (assessment still valid) by Richard Olowo, Senior Procurement Specialist (AFTPC) and that of MOLG was carried out by Howard Centenary and Grace N.M. Munanura (Procurement Specialists AFTPC) in May In each case the assessment reviewed the organizational structure, regulations and staffing for implementing project procurement, including internal effectiveness of the interaction between the procurement staff and administration and finance units. 50

57 9. Procurement capacity assessment of KCC: KCC is a large cost. center with technically trained staff in many procurement-related disciplines, i.e. engineering, surveying, procurementlsupplies, accounting/finance, law, pharmacy and economics. KCC has wide experienced staff in procurement of goods works and services as this forms the core business of KCC. Procurement is carried out under various technical departments as there is no central procurement unit. KCC has some experience in managing procurement under a World Bank financed project (Nakivubo Channel Rehabilitation Project), which was implemented by a Project Coordination Unit (PCU). PCU staff will be absorbed in other technical departments o f KCC. The performance o f the PCU was rated satisfactory. KCC has not yet formed a PDU as required by the public procurement law. The competence o f individual procurement staff was not assessed. Procurement Planning, record keeping and contract management were rated as inadequate. Information gathered as part of this assessment indicates that procurement at KCC is riddled with malpractice and blatant violations of existing procurement regulations, including flouting of procurement procedures by the political leadership, with impunity. The general conclusion is that while KCC has some reasonable capacity that could be effectively harnessed for managing procurement under the project. There are three major risks. (9 (ii) (iii) Inherent risk: Procurement regulations are flouted by KCC with impunity. This is orchestrated by political leadership interfering with procurement processes. Apparently KCC staff has not been able to stand against this interference. It is reasonable to conclude that staff themselves may be taking advantage of this situation and flouting the regulations for own benefit. Apparently there does not seem to be a mechanism for taking action in case of noncompliant cases. This risk is heightened when non-icb procurements are carried out using the national procedures through abuse of: (i) short listing of bidders from annual pre-qualification of providers; (ii) merit point system for evaluation of bids; and (iii) pre-contract negotiations with the lowest evaluated bidder in procurements where competition on price has taken place. This is a high risk for the project. Orpanizational risks: KCC has not yet formed a PDU that would transition to the new procurement systems and practices under the Local Government (Amendment) Act, User Departments that carry own procurement lack skills and awareness of their role in the procurement processes. The staffing levels and competencies of such a future PDU unit are not known. There is a possibility that such a new Unit may not be properly staffed and may not operate efficiently through new structures of a PDU and a Contracts Committee. It is not yet clear how the PDU and the Contracts committee would react to residual political influence and resistance to change. A functional PDU is key to procurement processing, so this is rated as high risk. Procedural risks: There is no culture in KCC of holding public officers (including senior managers) accountable for their actions, including timely performance of tasks. There are very few cases where officials have been sanctioned for poor procurement performance and/or failure to comply with agreed procedures. As a result it is difficult to enforce efficiency, preparation of adequate procurement plans, keeping proper procurement records and sound contract management. Required procurement tasks may therefore not be carried out with due diligence, as a result of which procurement would hold hostage project implementation. Staff is often influencedinstructed by political leadership on how to conduct procurement. The key question is whether senior management in KCC will be prepared to take action in case of poor or inadequate procurement performance. This is rated as high risk. The risk to proiect procurement management by KCC is HIGH. 51

58 10. Procurement capacity assessment of MoLG: The Ministry of Local Government is more or less a supervisory Ministry that that does need same kind of structures like KCC, Le. it does not run such activities as roads, schools, health, etc. So its procurement function is limited to procurement of goods and operating items, and review of procurement documents of the Bank-financed project, LGDP. The Ministry has a Procurement and Disposal Unit (PDU) which is headed by a Principal Procurement Officer (PPO). The PPO is supported by a Senior Procurement Officer and a Supplies Officer. The PDU is due to be expanded with additional staff for the newly approved structure of the PDU. The Ministry lacks the Technical Expertise for works procurement and contract management. Procurement officers have limited experience with IDA Procurement from the LGDP I1 where their participation is limited to review of documents prepared by the LGDP I1 Procurement Specialists. The PDU s current workload is high mainly due to the required review of the LGDP I1 procurements. This should however be significantly reduced after closure of LGDP in December The Ministry has a fully functional Contracts Committee consisting of 5 members in accordance with the Procurement Act. The Committee has been fully involved in the review and approval of Procurement Documents (Bidding Documents, Evaluation Reports and Contracts) and therefore has experience in the review of these documents. The Committee exercises close supervision of the PDU. The general conclusion is that it would take a lot of staff recruitment into the PDU to manage the procurement implementation under the project. However there are certain tasks that PDU andor Contracts committee can do to enhance procurement implementation under the project. The key issues and risks concerning procurement under the project have been identified and include: (i) (ii) (iii) Inherent risk: There is no evidence that procurement regulations are flouted by MOLG nor that there is political interference in procurement processes. So the inherent risk is low for the project. Organizational risks: The PDU is not adequately staffed to carry out the procurement tasks under the project. The staffing levels and competencies of the PDU would require a lot of consultant support to enable it carry out procurement management under the project. In addition, it would be difficult for PDU to function effectively as it would need to the services of the KCC technical staff to manage certain procurement tasks. Poor interaction between KCC and MoLG would cause delays. A functional PDU is key to procurement processing, so putting procurement implementation under MOLG would be a high risk. Procedural risks: The Ministry has a poor procurement records and data management system which is compounded by the lack of sufficient space and equipment for the storage of procurement records. The records are filed by document type rather than by Procurement contracts and there are therefore no complete stand alone procurement files. There is no evidence of sound procurement planning and contract management. The general conclusion is that staff performance may not be monitored properly, so required procurement tasks may therefore not be carried out with due diligence, as a result of which procurement would hold hostage project implementation. This is rated average. The risk to uroiect procurement management by MOLG is HIGH, given the risk under (ii) is crucial to procurement imulementation. Overall Risk to Drocurement manapement rated as HIGH. 52

59 Implementation arrangements and actions to mitigate against the Overall Risk 11. Establish a PDU in KCC: A PDU in KCC should be established with functions, staffing and adequately resourced. There is great potential and future gain in using this project to strengthen the PDU and the Contracts Committee in KCC. This would be an action in the right direction, to support the implementation of the public procurement law and building procurement capacity in KCC for long term benefits. The desired staffing should contain at least the Head of PDU (who should be a principal procurement officer involved in procurement) and at least four senior Procurement Officers. 12. Once the PDU is established, it should be provided with adequate accommodation and equipment. The PDU will be expected to keep proper procurement records and in order to ensure that the new PDU is up and running, a Procurement Consultant with qualifications satisfactory to IDA will be recruited to support the setting up of the PDU, its capacity development, and to provide back up for the procurement function for the first 12 months. MoLG will supervise the process of establishing the PDU and selection of the procurement consultant to ensure KCC recruits the people with correct qualifications and experience. As soon as the PDU is established, PPDA and IDA should organize orientation training in procurement to brief the KCC mangers, PDU, Contracts committee and Councilors of their tasks under the project and applicable procedures. 13. The PDU and the Contracts Committee and linkage with MOLG will cushion the KCC against political interference in procurement. Any interference will be reported by the Town Clerk to the Minister of MOLG and copied to IGG and PPDA for action. This does not mean Council will not exercise its mandate in ensuring that KCC staff performs their tasks in an acceptable manner. More specifically, the roles and responsibilities for procurement tasks are shown on Table 1 below. The rewired action bv Effectiveness: PDU for KCC should be established with functions. staffing and resources. 14. Procurement process: the technical staff in KCC will be responsible for project planning and preparing schedules of requirements including contract management. The PDU, under strict supervision of the Town Clerk and the Contracts committee, will be responsible for processing all procurement (preparing bidding documents, advertising, opening of bids/proposals, organizing bidproposal evaluation, forwarding reports to contracts committees, preparing contract documents, and supervising contract execution jointly with technical staff) including organizing for bid and proposal evaluations. Proposed contract awards will be submitted by the Town Clerk KCC to the Contracts Committee of MoLG for review and approval. Proposed contract amendments will follow the same procedure. 15. Completing the PIP: by Credit Effectiveness KCC should have launched an IDA approved PIP containing the procurement plan, Standard Bidding Documents and Request for Quotations Templates. The PIP will describe the service standard to be observed by PDU and Contract committees in carrying out their part of the procurement process. 16. Procurement Plan: the Borrower has at appraisal developed a procurement plan for project implementation which provides the basis for the procurement contracts, methods of procurement and timelines (see Table 3). This plan has been agreed between the Borrower and the Project Team as on June 01, 2007 and is available at City Hall, Room 210, Appolo Kaggwa Road, Kampala. It will also be available in the project s database and in the Bank s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. However this plan shown in Table 3 is not sufficient for monitoring of procurement implementation. PDU of KCC will prepare and submit to 53

60 the Bank a detailed Procurement Plan with more detailed information on key processing dates, with plan and actual columns. The actual format of the detailed procurement plan will be provided by IDA 17. Quality and compliance control: in order to ensure that project staff at all levels comply with the agreed procurement procedures, the project will finance an independent procurement consultant who would review project procurement on a quarterly basis. The Consultant would prepare a report and submit the report to KCC, MOLG and to the bank. The report would include how each contract is processed, progressed and implemented. The report would also highlight any grey areas and make recommendations on remedial measures. The specific TOR of the Consultant will be included in the PIP. 18. Procurement supervision: for the first 12 months of project implementation (which could be extended to another 6 months if need be), the Town Clerk will organize and chair quarterly procurement review meetings to be attended by the project implementing staff of KCC (including PDU and members of the Contracts Committee), members of the MOLG Contracts Committee, a representative of PPDA, and World Bank project team. The main purpose of the quarterly meetings will be to review progress on procurement implementation and direct in a timely manner on actions required to make good any shortcomings on the implementation. The PDU will prepare for the quarterly meetings an update of the procurement plan indicating how each contract on the plan has progressedwill progress and highlighting emerging issues (if any) that require the meetings consideration. The quarterly meeting will: (i) review the updated procurement plan and emerging issues; (ii) review reports from the Independent Procurement consultant; and (iii) take decisions on actions required to put procurement on track. The meetings decisions will be specific and will include an indication of who (by person) would be responsible for the action and by when. Each meeting will also review actions taken on previous meetings decisions and instructions and direct on further actions, if any are needed. Approval and clearance authorities 19. The clearance and approval procedures are tabulated on Table 1. All requests for non-objection must be sent only when the item to be given a non objection has been cleared with the highest authority in KCC or MOLG as per table 1. Requests must be accompanied with documentary evidence of such authority. Procurement Information and Documentation 20. The PDU of KCC will maintain a file for each contract and the file shall contain procurement records of the procurement proceedings containing the following information. Procurement Records maintained by KCC shall upon request be made available for inspection by authorized officials of the Government, Audit Service, Independent Procurement consultant and World Bank Officials. (i) A copy of the current Procurement Plan and identifying the particular contract on the plan; (ii) A brief description o f the goods, works or services to be procured, or of the procurement need for which KCC invited proposals or offers; (iii) Contract documents, including advertisement notices, bidding and proposal documents, bids received, bid and proposal evaluation reports, minutes of relevant approving committees, letters of acceptance, contract agreements, securities, related correspondence, certified payments, any disputes and information on their resolutions, etc. These records will be maintained in an orderly manner so as to readily available for review, audit and any reference; 54

61 The names and addresses of suppliers or contractors that submitted tenders, proposals, offers or quotations, and the name and address of the supplier or contractor with whom the procurement contract is entered; Information relating to the qualifications, or lack of qualifications of suppliers or contractors that submitted tenders, proposals, offers or quotations; The price, or the basis for determining the price and a summary of the other principal terms and conditions of each tender, proposal, offer or quotation and of the procurement contract if these are known; (vii) (viii) Evaluation reports and comparison of tenders or proposals, offers or quotations; If the tenders, proposals, offers or quotations were rejected a statement to that effect and the grounds for the rejection; If procurement proceedings did not result in procurement contract, a statement to that effect and the reasons; A statement of the grounds and circumstances upon which KCC relied to justify the selection of the method of procurement used; In procurement proceedings involving direct invitation of proposals for services, a statement of the grounds and circumstances on which KCC relied to justify the direct invitation; (xii) (xiii) A summary of any requests for clarification of the pre-qualification or invitation documents, the responses received as well as a summary of any modification of the documents; and A record of any complaints received ffom suppliers, contractors or consultants and the responses received. 55

62 Table 1: Roles and Responsibilities for procurement tasks between KCC and MoLG 10. Evaluate bids/proposals and I prepare report 11 I Forward bidproposal Evaluation I TC KCC Bidproposal Evaluation I Committee Report to Contracts Committee of MOLG Approve proposed contract award Contracts Committee MOLG Regulation 72 of PPDA, Include amendments to contracts Prepare contract Documents Sign Contract PDU KCC Permanent secretary, MOLG & TC KCC Role of Town Clerk 15 Supervise contract performance, PDU/Technical staff KCC including preparation of payment certificates 16 Monitor implementation of Town Clerk by use of Quarterly Procurement Plan meetings. 18 Prepare Annual Procurement Audit An Independent Procurement Consultant has overall responsibility to ensure project delivers as planned. 56

63 Table 2: Thresholds for Procurement Methods and Prior Review' The Thresholds for procurement methods show below will be used for procurement methods on the procurement plan. Expenditure Category Contract Value Threshold (US$) Procurement Method Contracts Subject to Prior Review (US$) 1. Works and Technical services Above US$350,000 US$50,000 to US$350,000 ICB NCB All contracts The First two Contracts Below US$50,000 Shopping/selective bidding None 2. Goods Above US$150,000 ICB All contracts US$20,000 to US$150,000 NCB The First two Contracts Below US$20,000 Shopping None 3. Consulting Services' and Training With firms above us$loo,ooo With individuals above US$50,000 QCBSLeast Cost Individual All contracts All contracts With Firms below us$100,000 Quali fications/other First contract With Individuals below US$50,000 Individual First Contract Technical Services All types of contracts Above US$lOO,OOO ICB All contracts us$20,000 to us$loo,ooo NCB The First two Contracts Below US$20,000 Shopping None All Types of contracts None Sole source and TORS All contracts ' Short list of consultants for services, estimated to cost less than $200,000 equivalent per contract, may comprise entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 57

64 Table 3: Procurement Plan for Goods and Works Ref. No. Contract (Description) Estimated Cost (% mill) -excludes Procurem ent Method local taxes Pre- Domestic Review qualificati Preference by Bank On (yes/no) (yesho) (prior 1 Post) Expected Bid-Opening Date Comm ents ~~ Records Centre & Archive - Modifications to office space Drainage System: Lot 1-Nakivubo tributaries, Lot 2-Nalukolongo secondary Channel 2, Lot 3-Nakivubo - Reticulation System, Lot 4-Priority tertiary drains, Lot 5-Lubigi channel. Traffic Management Schemes and Road Rehabilitation: Lot 1: Traffic Improvement Schemes & Rehabilitation of Bitumen Roads in CBD, Lot 2-Rehabilitation of Bitumen Roads Outside CBD. Upgrading gravel roads to Bitumen-Phase 1 : Lot 1 -Kawempe Mperenve Rd & Kalerwe Rd, Lot 2- Bukoto - Kisaasi Rd, Shopping No No Post 8" September ICB No Yes Prior 16" April ICB ICB No No Yes Yes Prior Prior 25" May 09 17" October 08 Upgrading gravel roads to Bitumen-Phase 2: Kimera Rd & Lukuli Rd. Extension to Mpererwe landfill site Landfill gas extraction system Phase 1. Improvement of Markets: Lot I-Kibuli Mkt. Lot 2- Kawempe Mkt. Phase ICB No Yes Prior 26" January ICB No Yes Prior 22nd October ICB No Yes Prior ICB No Yes Prior 20" August 09 58

65 ~ I B) GOODS EQMT-1 Computers & Other Electronic Office Equipment ICB 1 1 NO I No 1 Prior EQMT-2 Non-Electronic Office NCB No No Post 19" August 08 Equipment (including Records Management Equipment) VEH-I Vehicles & Motorcycles: Lot 1-Motor Vehicles EQMT-3 Lot 2-Motor Cvcles Field Equipment for Imolementation of EMP I EQMT-4 Engineering Software I EQMT-5 Acquisition of Urban Planning Satellite Maps ICT-1 Extension and Maintenance of Network. ICT-2 Increase bandwidths for: leased voice lines of KCC's Wide Area Network OPC-2 Fuel I ICB NCB :February I No No Prior 14" March 08 No No post 14" July 08 NCB No No Post 19" June 08 Shopping No I 1 Post 1,llSeptember 1 No I Prior I 5"June08 NCB 1 No I No NCB Direct Direct No I No I Post I 10* December 1 Direct I No I No I Prior No No Prior I I O 8 OPC-3 Stationary I I Post I Shopping I No I No I ~ OPC-4 OPC-5 OPC-6 Advertisement Field testing and 9 analyses' consumables for EMP Tools, equipment and materials required for Shopping I ~~~ No 1 No Prior 1 Post OPC Shopping No I No I Post I I OPC-1 7 Coordination Desks at divisions and the headquarters C) NON CONSULTANCY SERVICES OPC-8 I Maintenance of vehicles Shopping No I Post I Servicing office Shopping OPG9 equipment OPC-10 I Office running costs Direct I No No I No I Post I I OPC-11 ~ OPC-13 Outsourced field laboratory analyses and servicing field equipment for EMP Preparation and payment of compensation packages, monitoring resettlement and follow up on effectiveness, outcomes and dealing with outstanding issues Shopping Direct 59

66 Table 5: Procurement Plan - Consultancy Assignments ': Ref. No. Description of Assignment IDCS-01 Management Information Systems: Human Resource, Education, Assets, Court Case, Urban Development & Contracts. 1 1 Review and Update of KCC's M&E Framework, Citizens Score Card & Staff and Council Survevs IDCS-04 IDCS-05 IDCS -07 IDCS-08 IDCS-09 IDCS-IO IDCS-I 1 IDCS-12 Estimated cost (US% mill) 1 4 Selection Method Review Bank (Prior I Post) QCBS Prior 1 Source QCBS I Prior Expected Proposals Submission Date Implementation of Records Management System I Single I Prior I 20" February 08 Implementation of PR Strategy QCBS Prior 19" June 08 Developing & piloting a Gender Community Policy QCBS Prior 20" November and a Strategic Plan for Public Health & Environment Services. 08 Legal Services - Implementation of KIIDP RAP QBS Post 1 20" March 08 1 IDCS-06 1 Technical Support- Implementation of RAP for I I Single 1 Prior 1 31" January 08 infrastructure works Source Supplementary Valuation & Rating of New LCS Prior 20" December Properties (5 Contracts) 07 Revenue Enhancement & Management Systems and QCBS Prior 20" March 08 Ground Rent Register & Development System KCC HIV/AIDS Work Place Strategy QCBS Prior 20" August 09 Quality Assurance System for Infrastructure Works QCBS Prior 14" November 08 Updating Kampala Structure Plan QCBS Prior 19" February 09 I ISCS-I 1 Design update and construction supervision of I QCBS I Prior I S"June08 drainage improvement works Design update, detailed design and construction supervision for upgrading priority gravel roads to bitumen QCBS Prior 6" December 07 Comments I IDCS-13 I Upgrading of KCC's GIS I I QCBS I Prior I 17 January08 I I ISCS-4 Design update and construction supervision of QCBS Prior 9" October 08 I Landfill extension ISCS-5 I Design &construction supervision of landfill gas QcBs Prior I Detailed design and construction supervision of I QCBS I Prior 1 7"August08 I ISCS4 I markets improvement works PMS-1 Project Implementation Support - Professional Single Prior Expected Personnel & Support Staff (several contracts) Source Commencement Date: 1 January 08 PMS-2 PMS-3 I PMS-4 1 Design update, detailed designs and construction supervision for traffic management schemes and rehabilitation of bitumen roads i ISCS QCBS 1 Prior 17" April 08 1 extraction system. I I ~ Project Audit LCS Pnor 28 March 08 Mid-Term Progress Review CQS Post 14Lh August 09 Social Impact Study at Implementation Completion CQS I Post 1 ;:November I Preparation. I 60

67 C. ImulementinP Agencv Cauacitv Building Activities, Imulementation Oueratinp Costs and Other Supuort Services/ Activities with Time Schedule 1. In this section the agreed Capacity Building Activities (some items could be from CPAR recommendation) are listed with time schedule Ref. No. Contract (Description) Estimated cost ($ mill) -excludes local taxes Procure ment Method (yesho) Review by Bank (Prior I Post) Expected nt Date TR- 1 TR-2 TR-3 ws-1 Training including capacity building training for EMP & RAP implementation Technical Cooperation (Twining) RAP sensitization workshops, meetings and focus group discussions for KCC implementation staff, area politicians, affected communities and households SFR Performance Review Workshops (biannual) QSS Single Source Direct No No No I No No No Prior Review of Annual Training Plans Prior Post Prior 16'h January 09 29'h September 08 I 61

68 Annex 9: Economic and Financial Analysis UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project 1. KIIDP with a total base cost of US$33.3 million includes three components: (i) Institutional Development (US$5.5 million or 16.0% of the total project cost); (ii) Citywide Infrastructure and Improvement Services (US$25.1 million or 76%); and (iii) Project Management, Monitoring and Evaluation and Civil Society Participation (US$2.7 million or 8%). 2. Component 2: Citywide Infrastructure and Services Improvement which represents over 76% of the project baseline cost is to address four priority areas for which the cost-benefit/financial/costeffectiveness analyses have been carried out: A. Drainage system (US$8.7 million); B. Urban traffic improvement (US$13.9 million) consisting of: area traffic management schemes (without junctions) Junction improvement schemes; Upgrade gravel roads to bitumen C. D. standard; Periodic maintenance/ Rehabilitation of bitumen roads; Urban markets infrastructure (US$1.O million); and Solid waste management (US$l.5 million). A. Economic Analyses of Drainage Works Table 1: Proposed Drainage Works 3. Methodology. The drainage systems in Kampala form integrated networks. The construction and rehabilitation works to be carried out on specific spots, in the secondary or primary channels would impact on the performance of the channels both downstream and upstream. Improvement in the selected drainage should therefore be seen in terms of both local impacts and within the broader context of better 62

69 operation of drainage channels as a whole. The KIIDP would finance many of the black spots prioritized in the Kampala Drainage Master Plan (KDMP) as noted in Table 1: Proposed Drainage Works. 4. The basis of the economic analysis of the drainage sub component is the costhenefit analysis. The design of the channel is for a 10-year return storm period with an economic life of 40 years. Construction period for most subprojects are expected to be over a two year period, although some works may be completed in shorter periods. The cost-benefit evaluations of the drainage subcomponent are based on detailed data collected and presented in Kampala Drainage Master Plan (KDMP) in March 2003 with updated costs to January 2006 as part of the Appraisal of KIIDP. B. Assumptions 5. Costs. Construction, operating and maintenance costs are based mainly on design estimates and are updated to January Assessment of land acquisition costs, building expropriation costs and relocation factors are included in the overall land acquisition costs. 6. Benefits. Flooding from primary and secondary channels has impact on residential, commercial and industrial buildings, road network, environment, health; mitigation measures to be used and even on peri-urban agriculture produces. Some of the costs to individuals and society attributed to flooding are quantifiable and others are non-quantifiable. Table 2: Coefficients for the estimation of flooding costs provides main category of benefits and respective costs. drainage are summarized below. Table 2: Coefficients for the Estimation of Flooding Damages Costs The savingshenefits attributed to improved 7. Damages to Residential and Commercial Properties. The flooding of residential property damages buildings and structures, adversely impacts the value of property, and causes additional expenses in cleaning-up and flood prevention and reduction measures. Flooding impacts significantly rental value. Residential houses in flooded areas have rents below the rents of similar houses in non-flooded areas of the city. For example, a residential room has rental value of UShs. 375hquare meter per month in flooded areas. A comparable room in non-flooded areas rents for UShs. 625hquare meter; represents an increase of 67% indicating the importance of drainage in residential investments. The savings in cleaning-up, maintenance and flood prevention measures attributable to improved drainage is estimated to be about 5% of the construction cost per m2 and is expected to grow at about 5% starting

70 Table 3: Estimated values for flood damages to property Building Type Low level Medium High Rental Values Construction costs per m2 Attributed flood (UShs per room per month) (UShs) repair costs (Ushs) ,000 2, ,000 5, Commercial I25000 I 50,000 I 25,000 Shackshoutiques Solid Construction I 60,000 I 100,000 I 50, Disruption of commercial and industrial activities. The impact of flooding on commercial and industrial activities is reflected both in delays to transport of goods, raw materials and personnel, as well as damages to goods in transit and storage. However, it is not easy to assess the full impact of the disruption to commerce and industry. An income survey of retail traders was carried out based on a sample of 251 traders in a Social Impact Assessment Study for the Nakivubo Channel. The study estimated that the trader s average income was around UShs.250, 000 per month or UShs 3 billion per annum. On this basis the estimated loss of benefit per trader per year due to lack of improved drainage was around UShs.150,OOO.OO or 5% of the average annual income. 9. Road damages. Drainage reduces the pace of deterioration of the road network and results in cost savings of vehicle operating costs. With improved drainage systems, less frequent repairs and periodic maintenance and rehabilitation will be required. The expected economic life of the road network will be enhanced and the resulting reduced roughness of the road surface resulting in savings of vehicle operating costs to the road users. 10. Disruption to Traffic. Under the Uganda rainfall condition, the frequency of flooding in Kampala is between 10 to 15 times in a year lasing 3 to 4 hours per flooding. Private and commercial vehicles are blocked from passing. Table 4 shows the estimated coefficients for value of time for passengers. Table 4: Estimated coefficients for the value of time for passengers 11. Savings in agricultural produce. Agricultural crops on the sides of the drainage channels are often damaged by flooding. The saving estimates in losses are valued on the basis of the compensation schedule agreed by KCC and the Ministry of Lands and Environment. 12. Non-quantifiable benefits. Improvements to the environment, health benefits from water borne disease due to improved drainage, better functioning of markets and reduction in the loss of goods, etc., 64

71 are significant. The impact of such benefits is not fully reflected in the cost-benefit assessments indicating that the cost-benefit estimates are conservatives. C. Cost-Benefit Results Table 5: Cost-Benefit Results Makindaye Division M6- Railway Line /Queen s way N/A N/A Base Case I 4,251.0 I 16.8% Sensitivitv at IS% increase in total costs I I 13.1% I andls%decrease in total beneflts Sensitivity Analysis 13. The base case represents a Net Present Value of Ushs.4,25 1 million at a discount rate of 12% and overall EIRR of 16.8%. A simultaneous increase of 15% in total construction and maintenance costs on one hand and a decrease of total benefits on the other resulted in an overall of Ushs million of Net Present Value at a discount rate of 12% and an overall EIRR of 13.1%, indicating that the selected projects represent a positive return on investment. Economic Analysis Urban TrafJc Improvement (US$I3.9 million) 14. The Urban Traffic improvement subcomponent covers: (a) area traffic management: dealing with measures for improved traffic flow and provision of traffic management measures including guard rails, signs, etc; (b) junction improvement: providing localized widening and signalizing at junctions. This will be complementary to the four junctions and round about improvements that is planned to be carried out in parallel under Japanese funding; (c) road maintenance and upgrading: periodic maintenance (28.6 km) and upgrading of gravel roads (1 1 km) to bitumen standard. The roads were selected on the basis of improving connectivity and economic rate of return. 15. Methodology. The approach used for the economic analysis is the costhenefit analysis o f with or without project case. The Urban Traffic improvement component (US$12.1 million) is expected to provide Kampala City with improved integrated road networks for more efficient traffic flow 65

72 Road Name From To Length Current Maintenance Cost Division (km) Condition Strategy US$ million Acacia Ave Kira Rd YK Lule Rd 1.8 Fair Overlay 0.36 Central Buganda RD The Squre Nakasero Hill Rd 2.0 Fair Overlay 0.40 Central Bukoto-Ntinda Lugogo bypass Ntinda 3.0 Fair Overlay 0.60 Nakwa Rd Eight St. Mukwano Rd I Mbogo Rd I 0.6 Poor IReconstruct 0.12 Central Hioma Rd I Bakuli Junction I Nakulabye Rd I 1.0 I Fair I Overlay I 0.25 I Lubaga I A~~ollo Kawa I Mekerere Hill I Nasal0 Rd I 1.5 I Fair I Overlav I 0.30 I Central Wandegeya Rd Mackenzie Vale Sub-total Bukoto -kiasi Rd Karenve Rd Bombo Rd Lumumba Rd 0.3 Fair Overlay 0.06 Central Lugogo bypass Malcolm X drive 1.0 Fair Overlay 0.25 Central Kira Rd Kisaasi Rd 3.0 Poor Upgrade 1.21 Kawaka Cayaza Rd Ttula Rd 3.8 Poor Upgrade 1.40 Kawempe Bombo Rd Cayza Rd 3.0 Poor Upgrade 1.00 Kawempe Kawempe- Mperenve Rd St. Barnbas Rd Tankhii Rd Kisugu Rd 1.0 Poor Upgrade 0.32 Makindye Subtotal I 10.8 I The construction period for most subprojects i s expected to be over two years, although some works may be completed in shorter periods. The cost-benefit evaluations of the civil works are based on detailed cost, traffic and accident data collected and presented in Kampala Urban Traffic Improvement Plan (KUTIP) July 2003 and updated to January 2006 as part of the Appraisal of KIIDP. The discount rate was set to 12% and the evaluation period is 8 years for overlay and 20 years for the upgrading road sections. The exchange rate used is US$l.OO equals Ushs.1820 (January 2006). 17. Main assumptions. The main assumptions used in estimating the Net Present Value and ERR are as follows: 66

73 18. Investment costs. The investment costs for both periodic maintenance and upgrading are shown in Table 6. The costs for periodic maintenance range between US$153,000/km and US$253,000/km. The investment costs of the upgrading works ranges between US$333,000/km to US$403,000/km. Road maintenance unit costs is an average of US$3,800/km for paved and US$6200/km for gravel road. Project benefits 19. Benefits. The main benefits of the urban traffic improvement are savings in vehicle operating costs to the growing number of road users, savings in passenger travel time and reduced costs due to reduced incidents of fatal and severe injuries to passengers and the traveling public. Net benefits estimates were based Highway Development and Management Model (HDM-4), which stimulates highway life cycle and vehicle operation conditions and costs for multiple road design and maintenance alternatives. Vehicle operating costs were for six vehicle classes. Periodic maintenance and upgrading costs estimated in financial terms were converted into economic terms (net of taxes). 20. Traffic Count. The post-construction traffic is based on traffic counts made in 2003 KUTP study projected to January Post-construction traffic growth is assumed to grow from 2006 levels at annual rate o f 2% for the economic life of the project. The average daily traffic count is presented in Table Vehicle Operating Cost savings. Net Benefits due to savings in vehicle operating costs were computed using Highway Development Management Model (HDM-4). Savings in VOC result due to improvement in surface condition from fairhad to good. The resultant savings for each vehicle type and changes in road condition are presented in the Table 8 and Table 9 provides the aggregate net saving in VOC per vehicle km. 22. Travel time Savings. The benefits due to travel time savings are calculated based on driver wage per hour, crew wage per hour, passenger work time value, and non-work time value. The benefits are aggregated value of occupant time in Ush/hr for the vehicle type shown. The urban traffic improvement subcomponent would help minimize VOC, travel distance and travel time. Table 9 summarizes the value of travel time savings in UShs.h per vehicle-km. 23. Accident saving. Currently road accidents on Kampala Urban road network are very high. Over the period 2002 to 2003 the average fatality was 230 persons per year and severe injuries averaged over the same period some 8,434 persons. Costs of damaged property are not available. A major benefit of the road improvement in traffic management subcomponent is reduction of accidents due to improved signs, and minor civil works improvements. Insurance companies for various types of injuries form the basis of the unit accident cost. Such costs are not available for Uganda at the time. Kenya s figures are as follows: Accident records do not permit a detailed analysis of the accident history of the road. The base case assumes an average accident cost per fatality of US$13,600 and US$2,200 per person injured. The figures used in estimating the accident cost are for Kenya. 67

74 Vehicle Operating Cost Table 7: Vehicle Fleet Characteristics and Economic Unit Costs provide Passenger working time USWlt Passenger non-working time USh/lt Cargo Time Discount rate ("3) Source: KUTIP Table 8: VOC and Time in Ushshehicle-km 'I Table 9: Accident Unit cost Fatal Injury Damage to property Accident rate per 1 million vehicle -km Two lane Road actual Accident costs" (US$) Accidents (Uganda) 13, , ,200 NIA 2 accidents 2 accidents 68

75 Results of the Cost-benefit analysis 24. Table 10 summarizes the Net present Value at 12% discount rate for each of the road sections. Overall the overlay has a Net Present value of UShs.ll,l23.0 million and ERR of 38%. Some road sections have high rate of return while others have less than the discount rate of 12%. However, the road maintenance subcomponent has an overall Net Present Value of Ushs.8,516.0 million at the discount rate of 12% and ElRR of 28% for the base case. The road subcomponent has overall Ushs. Net Present Value of 17,296 million at a discount rate of 12% and ERR of 32%. Overall the result is robust. With simultaneous increases of 15% in total costs and 15% decreases in benefits the NPV at 12%discount rate is UShs.10,249.0 million and the ERR is 23%. Table 10: Traffic Estimates (AADT) and Traffic Composition (%) Base Case +15% cost& -15% benefits Road Section Length Net Present Value ERR Net Present Value ERR I Accessroad I 1.8 I I 1670 (km) I I UShs.Million YO UShs. Million % Hoima road Kibuli Road St. Barnabas road* Average

76 Table 11: Distribution of Benefits I Distribution of Net Benefits I PV (millions Ushs.) I Percent (%) I I I Increase in road agency cost 116, % I I Decrease in Vehicle Operating Costs Decrease in passenger time costs Decrease in accident costs 28, % 5, % % I Net societal benejits(npv % 25. Table 12 presents the results of the sensitivity analysis eliminating passenger time savings, eliminating accident benefits, increasing costs and decreasing benefits by 15%. The result shows that the entire project has positive NPV and ERR. Table 12: Economic Evaluation Sensitivity Analysis Type of construction Overlay Upgrading Internal Rate of Return (YO) Base Case I No Time I No Accident I Cost +15% Benefits - 15% 38% 28% 37% 28% 28% 27% 28% 21% I I I I Total 132% I 27% 132% I 23% 26. Urban markets Infrastructure (US$l.O million). This investment will provide for markets infrastructure (access roads, lighting, sanitation, shades, showers, etc) to selected markets; and prepare detailed designs for the high priority markets to be developed during Phase I1 based on the feasibility study carried out. A financial analysis was carried out by KCC for the five markets proposed. These are: Kibuli, Kalerwe, Kasubi and Kawempe and Mbuya. The financial rate of return shows that all except Mbuya have financial rate of return of over 12% indicating that the market infrastructure works is financially feasible. Moreover, the analysis shows that the four markets have a pay back period of between 5 and 6 years indicating a sound return on investment (for detail see project file). The overall economic rate of return of the urban markets infrastructure is 14% and the NPV at 125 discount rate is Ushs million. An increase of 15% in cost and reduction of 15% in benefits results in ERR of 12% and NPV of Ushs million, indicating that the urban markets subcomponent too is economically justifiable. 27. Solid Waste Management (US$1.5 million). This subcomponent is to develop a 6 acre land adjacent to the existing site; provide a sorting and composting facility at the exiting landfill site; and prepare design for the development of the new landfill site to be implemented during Phase I1 of the program. In the short run there is no alternative than expanding the existing site. The function of the compositing facility is to optimize the operation of the existing facility and is considered the most costeffective alternative available for KCC in the short run. 70

77 Annex 10: Safeguard Policy Issues UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project 1. Phase 1 of the KIID Project will support infrastructure investments designed to improve (a) drainage (through channel lining, culvert upgrading, slope improvement and general bush clearing on channel embankments, the construction of a berm, and reticulation systems), (b) road maintenance and traffic management (rehabilitation, periodic maintenance), (c) urban markets (access roads, lighting, sanitation, shades, stowers etc.), and (d) solid waste management (extension of the existing landfill) in the Kampala District3. Kampala is the commercial and political capital city of Uganda, with a population of about 1.2 million, and an annual demographic growth rate of about 3.9%4. The Kampala District accounts for about 80% of the country s industrial and commercial sectors, over 60% of the urban population, and generates over 60% of the national GDP. Kampala is built on a series of hills and valleys, with gentle slopes separated by valleys consisting of natural streams, drainage channels, and wetlands of varying gradients. 2. Uganda has a National Wetlands Policy (1995), designed to curtail the rampant loss of wetland resources; wetlands are also protected under the Constitution (1995), the National Environment Statute (1995), and the Land Act (1998). The national wetland policy specifically addresses issues related to water supply and effluent treatment as the rapidly growing population requires increased water supplies and discharge of effluents at affordable costs. Many urban settlements, including Kampala City, are dependent on wetlands for water supply, treatment, and discharge of effluent. 3. Consistent with Uganda s environmental policies and legislation as well as the Bank s safeguard policies, the Borrower has carried out an Environmental Analysis (EA) of the planned infrastructure investments in the proposed project areas. The Final EA report, dated November 2006, and Final RAP, dated October 2006, were disclosed in Uganda in publicly accessible places and at the Bank s Info Shop on December 4, The EA report includes an Environmental Management Plan (EMP) which outlines institutional arrangements for the implementation of appropriate mitigation and monitoring measures during construction and operation of the above-mentioned infrastructure investments as well as related capacity building measures and cost estimates. 5. The main elements of the (a) EMP are discussed below, as are (b) the current institutional framework; (c) the environmental and social conditions in the project areas; (d) the potential environmental and social impacts of the planned infrastructure investments, and (e) the outcome of stakeholder consultations carried out in the course of EA preparation. A. Environmental Management Plan (EMP) 6. The EA recommendations focus on the need to (i) develop and strengthen environmental management at KCC through the KID Project (KCC, under the Ministry of Local Government, will be responsible for the overall implementation of the KID Project); (ii) ensure effective environmental monitoring of the various project activities as described in the EMP; and (iii) establish and strengthen strong inter-agency relationships between the KIID ProjectKCC and NEMA, WID, DWD, the Uganda 3About 189 square kilometers in size according to the Kampala Urban Sanitation Project Report, While some of this area is fully urbanized, a significant portion is semi-urbanized, and the remainder is regarded as rural settlements. Uganda Bureau of Statistics,

78 Police; the Traffic Department, and the Uganda Taxi Operators and Drivers Association (UTODA). Specific measures designed to strengthen KCC s environmental management capacity in the areas of wetland management, roads management, and the management of urban markets are presented in the EMP. 7. As regards wetland management, the EA report proposes specific measures such as: (i) training of relevant staff in environmental management skills; (ii) supporting the District Environment Officer (DEO) in the identification of all plots that are likely to be within wetland boundaries by facilitating the process in terms of logistics and other needs; (iii) implementing a public awareness campaign to prevent encroachment into wetlands; (iv) instituting in-house capacity for information management, including provision of computers and data management software to the District Environment Office to generate and track a variety of documents; including information on environmental monitoring, environmental audits, as well as the status of mitigation and monitoring plans and to manage in-coming and out-going information generated by the upgraded investments. 8. The EA report further proposes that - after a proper assessment - training in general areas be provided, for example, Training in project management and compliance with the proposed mitigation measures in the EMP; Training in general environmental management and wetlands management in particular; and Senior staff members should be provided with training at a workshop for Training of Trainers (TOT) to be organized jointly with NEMA and WID. 9. As regards roads management and the management of urban markets, the EA report proposes capacity building for KCC staff in the following areas: (i) establishment of minimum operational standards for the management of outsourced facilities; for example, solid waste management standards for urban markets need to be developed and instituted; (ii) transformation of the engineering department into a professional unit, capable of supervising the outsourced works; (iii) establishment and implementation of routine maintenance procedures; (iv) training in procurement procedures; and (v) training in contract supervision. 10. The EMP outlines the institutional arrangements for the implementation and monitoring of mitigation measures, capacity building measures, and cost estimates for the proposed infrastructure investments. The main elements are summarized below: 1 1. Implementation of mitigation measures: The contractors will be primarily responsible for implementing the proposed mitigation measures as detailed in the Environmental Guidelines for Contractors (see chapter 6 in the EA report) which will be attached to the bidding documents. There is a clear link between these environmental guidelines and the relevant mitigation measures presented in the EMP. KCC will be responsible for the implementation of mitigation measures under the following components: (a) drainage component where KCC s District Environment Officer (DEO) will arrange for the planting of papyrus species and other sedges downstream o f the channels to mitigate potential impacts due to higher pollution rates that are likely to result from increased flow rate in the channels; (b) traffic and road maintenance component where KCC will ensure surface dressing and regular maintenance of shoulders; (c) urban markets component where KCC will arrange for the provision of temporary alternative market sites as reported in the RAP; and 72

79 (d) solid waste management component where KCC will (i) arrange for the fencing of the existing landfill site and the extension site to prevent accidents and unauthorized access during and after the decommissioning phase; costs under Phase 1: $15,000 for the existing site; $10,000 for the extension; (ii) arrange for the fencing and replanting after decommissioning to prevent erosion and subsequent pollution of waterways and water bodies as well as neighboring wetlands; costs under Phase 1: $10,000 for the current site; $5,000 for the extension; and (iii) ensure pre-treatment and stabilization of leachate prior to disposal into waterways, and rehabilitation of the constructed wetland to ensure its proper functioning. Costs under Phase I: $40, KCC will also be responsible for the implementation of (i) activities related to compliance with the environmental safety and health regulations as outlined in the Environmental Guidelines for Contractors; and (ii) the proposed environmental training program (see below). 13. Monitoring: Throughout project implementation, NEMA, WID, and DWD will play a significant role in monitoring the implementation of the proposed mitigation measures. For example, NEMA and WID will monitor (i) the compliance of contractors with the environmental safety and health regulations that are part of the above-mentioned Environmental Guidelines for Contractors; (ii) the reticulation to protect flora and fauna under the drainage component; (iii) the planting of papyrus species and other sedges downstream of the channels; and (iv) the re-vegetation programs using indigenous species at the end of the construction phase. 14. DWD, NEMA and WID will jointly monitor (i) the pretreatment and stabilization of leachate prior to disposal into water ways; (ii) the rehabilitation of constructed wetlands as part of the planned solid waste management investments; and (iii) the implementation of the proposed environmental management training. 15. Monitoring indicators: The EMP includes monitoring indicators for each project activity, including capacity strengthening. For example, (i) number and types of project-related accidents and illnesses; (ii) scope of reticulation established; (iii) scope of re-vegetation; (iv) extent of erosion during construction; (v) surface drains and wetlanddwater clear of wastes; (vi) extent of community cooperation in environmental regulation enforcement; (vii) extent of observed environmental hygiene, sanitation, and safety, (viii) scope of the maintenance contracts; (ix) affected persons resettled; and (x) safety on and around the fenced off and fully tree-replanted former waste disposal facility and presence or absence of site related pollution in the proximate environs. 16. Means of verification: Under the drainage component, Environmental Audit Reports will be prepared to verify that re-vegetation (planting of papyrus species and other sedges downstream of the channels) has been carried out as required under the contracts. Under the solid waste management component, reports from communities and site audit reports as well as laboratory sample tests of proximate surface water bodies or streamdrivers will show whether or not construction sites were protected against erosion through the construction of temporary storm water drains. In addition, Environmental Audit Reports and laboratory tests (monthly reports of treatment efficiency) will show how effective.efforts to (i) pre-treat and stabilize leachate prior to disposal into waterways, and (ii) rehabilitate the constructed wetland, have been. 17. Environmental management training: The training program will be implemented by KCC and aims to (i) strengthen staff scientific field research capacity; (ii) enable staff to educate communities in environmental issues, hygiene, sanitation, and safety management skills; and (iii) enable staff to enforce environmental regulations. The training will focus on: 0 Environmental monitoring 73

80 0 0 Environmental assessment and management skills including field sampling techniques, community advisory and facilitation skills Environmental law and legislation enforcement skills and techniques Costs for Phase 1: $30, OfJce strengthening: This would involve the purchase of office furnishings, equipment, and other consumables. The purpose would be to facilitate office operations of the team responsible for environmental monitoring, environmental assessment, and environmental management. Costs under Phase 1: $10, Facilitating impact monitoring: This would involve the purchase o f field operations equipment for sampling and monitoring plus the facilitation of field operations staff, i.e. those engaged in talung field samples, lab tests, community awareness outreach, environmental audit operations and regulation enforcement. The purpose would be to facilitate field operations of the trained staff in ensuring that the recommendations of the EMP are strictly adhered to and that any unforeseen negative environmental impacts are concurrently mitigated and prevented as much as possible. Costs under Phase 1: $35,000. Total Costs for Phase 1: $115,000 (i) Current environmental and social conditions in the project areas 20. Drainage: The EA assesses specific drainage systems in the Lubigi wetland, Nakivubo tributaries and wetland, Nalukolongo upper reach and minor systems (drainage black spots) as well as in the Central, Kawempe and Makindye Divisions. The EA report notes that most drainage channels are narrow and shallow, and are frequently blocked by solid waste and silt (generated by unpaved roads and compounds, construction sites, agricultural areas) which is carried into the drainage channels by storm water runoff and leads to frequent floods. In the course of EA preparation, water samples were taken in several locations. The results showed that water quality in the drainage channels is generally laden with pollutants that do not meet the National Effluent Discharge Standards, except for total phosphorus5. The Nakivubo catchment recorded the highest values for the variables measured by the EA consultants, followed by the Lubigi, Nalukolongo, and Kinawataka catchments. The results will serve as baseline data for water quality testing during project implementation. 21. It was observed that the above wetland areas are currently settled and used for commercial development. For example, one of the drainage channels that empties into the Lubigi wetland passes through residential and commercial areas. In the Nalukolongo drainage system, most of the original natural habitat has been modified through agricultural activities and settlements, and the communities experience frequent flooding. Flooding disrupts industrial activities, delays traffic, disrupts commercial activities such as shops and open markets, and damage people s homes. There are no centralized waste water treatment facilities in Lubigi and Nalukolongo; instead, septic tanks are used, or in some cases, domestic and industrial waste waters are discharged directly into the drainage channels. 22. The Nakivubo wetland separates Kampala City from the Inner Murcheson Bay of Lake Victoria (a sole raw water supply for Kampala). Much of the Nakivubo wetland has been settled and is used for industrial development or for the cultivation of cocoyam and sugarcane which have replaced the papyrus vegetation. The Nakivubo wetland receives untreated and partially treated effluents from the Nakivubo The Nakivubo catchment recorded the highest values for the variable measured [Total Nitrogen (mg/l); Total Phosphorus (mg/l); Biochemical Oxygen Demand (mg/l) and Total Coliforms (CFU/100 ml)], followed by Lubigi, Nalukolongo, and Kinawataka, in that order. This is mainly due to the fact that most establishments in Kampala are not connected to the sewer lines and in some cases, there are leakages into the channels due broken sewer lines. 74

81 channel which ultimately discharges its polluted contents into Lake Victoria at the Inner Murcheson Bay. Studies6 on waste water treatment processes have shown that the Nakivubo wetland performs considerable tertiary treatment of the effluents it receives from the sewage works and Kampala. According to the EA report, the wetland protects the Inner Murcheson Bay from eutrophication and excessive loads o f pathogens which otherwise would be transported to the nearby Gaba waterworks. The reticulation of the papyrus within the lower reaches o f the Nakivubo wetlands enhances this process by spreading the polluted water over a large area and hence increasing the purification activity. 23. Solid waste management: The current solid waste management facility in Mpererwe-Kitezi is located on a 29-acre site owned by KCC and is operating since April It is a containment site with a clay liner system and a leachate treatment facility, subject to regulatory control. The site i s surrounded by hills, is accessed via a bitumen road, its vegetation consists mainly of short grasses and a few shrubs, and it is bounded on the lower edge by a seasonal stream that flows along the bottom edge of both the current disposal area and the proposed extension area. Management problems at the current landfill site relate to the inability of the constructed wetland to provide tertiary treatment; the lack of a manned gate to prohibit unauthorized access, and dust in the dry season and muddy soils in the rainy season. 24. At the current disposal volume ( tons of waste per day, year-round), the existing Mpererwe-Kitezi site is expected to be full by the end of In light o f this fact, and given that KCC intends to improve its waste management services, Phase 1 o f the KIID Project will support the extension of the current waste disposal site by developing 6 acres of adjacent land. The EA report describes the vegetation and fauna (i.e. subsistence crops, various grasses, marabou stork, egrets, monkeys) in the extension area and notes that none of the flora and fauna in this area are endangered species and will not be significantly impacted by the project as they occur in the neighborhood of the project and area also widely distributed all over the country. 25. Road rehabilitation and maintenance: The current state of roads and traffic management in Kampala is very poor. The roads are generally poorly planned, are full of potholes, some roads are narrow, others have no marked traffic lanes, and few roads have traffic signs. This leads to traffic accidents and congestion during peak hours. Some of the roads to be rehabilitated and maintained, including urban traffic improvements, under Phase 1 of the KID project are located in the vicinity of the Nakivubo channel and pass through commercial and residential areas. Vegetation in these areas tends to be limited to shade trees and various types of grasses. 26. Urban markets: Kampala s markets are characterized by inadequate sanitary and waste disposal facilities; irregular waste removal by the private sector operators; drainage channels blocked by market wastes; and, depending on the season, they become very muddy or very dusty. In the case of the Kalerwe market, this situation is aggravated by the fact that several unlined secondary drainage trenches feeding into the main Nsooba drainage channel pass through this market. The Kasubi market is located in a road reserve, and some vendors operate within the road and on top of the drains, thereby inconveniencing traffic. The Kawempe market has no drainage and floods during heavy rains. (ii) Current institutional framework 27. The EA report identifies those institutions that will be responsible for environmental management, including wetlands management, under the KIID Project; a brief overview is given below: Kansiime and Nalubega, 1999 At the time of the environmental assessment, the constructed wetland was being planted with another type of reed that has been found capable of acclimatizing. 75

82 The National Environmental Management Authority (NEMA): NEMA, established under the National Environment Statute in 1995, is responsible for supervising, monitoring and coordinating environmental management in Uganda, including the review and clearance of EIA reports. NEMA reports to the Ministry of Water, Lands and Environment. The Wetlands Inspection Division (WID): Located in the Ministry of Water, Lands and Environment, WID is the lead agency for wetlands management in Uganda, responsible for the formulation of policy, setting of standards and guidelines, supervision, monitoring, technical support, and resource mobilization for wetlands management. In addition to preparing a management plan for the Nakivubo wetland8, the WID, in close coordination with NEMA, is implementing the Wetlands Sector Strategic Plan for the period (WSSP) with the overall goal to contribute to human welfare and to enhance the health of the environment. WID is currently implementing the WSSP in different parts of the countryg. However, due to a lack of resources, some of the activities have not yet been carried out in Kampala. The EA report recommends that the KID Project supplement some activities of the WSSP, for example carrying out inventories, protecting vital wetlands, management planning of wetlands in Kampala and enforcing wetlands policy as well as raising awareness among the public and key stakeholders regarding the importance of wetlands. The Directorate of Water Development (DWD): DWD is the lead agency for the management of industrial and municipal effluents that discharge to receiving waters or to land. Its main responsibilities include (i) advice to NEMA on the environmental control measures to be included in development proposals submitted to NEMA; (ii) issuance of permits for discharge of wastes on to land or into water; (iii) monitoring of discharges to ensure compliance with discharge standards. The Kampala City Council (KCC); KCC is responsible for orderly development in Kampala City. Over time, KCC developed by-laws and regulations to assist in carrying out its mandate, however, enforcement of these by-laws and regulations remains a problem. Within the Kampala District, the District Environment Officer (DEO) is responsible for monitoring the wetlands, and reporting any shortcomings to NEMA and WID. The EA report recommends that under the KIID Project, the DE0 will be responsible for monitoring the implementation of the Environmental Management Plan (EMP) and report any issues or problems to NEMA for remedial action. The DE0 will coordinate KID Project support for the WSSP as well as the environmental and wetlands management aspects of the new Kampala Structure Plan To ensure that the DE0 can carry out hisher responsibilities efficiently, the KIID Project will support measures to strengthen hisher capacity as required. The District Environment Office and Environment Committee: Consistent with the Local Government Act (1997), wetlands management is a decentralized function. In Kampala City, wetlands management is the responsibility of the district, in this case Kampala District. The institutional responsibility for managing wetlands lies with the District Environment Directorate which reports to and is supervised by the Chief Administrative Officer. Since the directorate is politically and administratively under the control of the mainstream district management arrangements, operational autonomy, particularly in matters of enforcing NEMA guidelines quite often becomes a challenge. Elevating the District Environment Offices to the level of Directorates, and providing them with the The management plan has not yet been finalized due to a lack of funds; the EA report notes that it would be institutionally difficult for the KIID project to get directly involved in the activities of another agency, and hence there is limited scope for the project to support these efforts. i.e. (i) Wetlands Management Plans have been formulated for 27 sites including Nabajuzzi in Masaka District; Lutembe in Mpigi, and Nabugabo in Masaka; (ii) halting unauthorized human settlements and other activities that degrade wetlands (Le. in Kampala where NEMA is currently demolishing structures that are illegally constructed in the wetlands); (iii) District Wetland Action Plans have been developed in about 30 districts; these are two-year rolling plans that assist districts to prioritize wetland protection activities in their DPPs. 76

83 same autonomy as the District Tender Boards, could ensure operational autonomy for the District Environment Offices. However, given that KCC has just undergone a restructuring, these changes may not be readily implemented, and therefore, the most practical approach is to strengthen KCC s District Environment Office through capacity building, training, and overall institutional strengthening initiatives. (iii) Potential environmental and social impacts of infrastructure investments 28. Drainage: The EA report identifies and assesses potential positive and negative environmental and social impacts that are likely to result from the planned infrastructure investments in the project area. Thus, positive social and environmental impacts are likely to include improved employment and income earning opportunities, a decline in the mosquito population as there will be less standing water, increases in property values, and improvements in quality of life of the surrounding communities. There are plans to construct a berm as part of the Lubigi channel improvement works under component 2; the berm will be constructed with excavated material. The positive impact will be that the berm will (i) allow for the control of land-use in the Lubigi wetland (particularly to discourage human settlement), (ii) restore the wetland as well as its flora and fauna species; and (iii) alleviate floods. 29. Potential adverse social and environmental impacts are likely to include accidents and flooding during construction, interruption of utility services and commercial activities, accumulation of silt and other excavated materials, erosion o f channel banks, and destruction o f flora and fauna. There i s also a concern that higher pollution rates may occur due to increased water flow rates beyond the natural purification capacity o f downstream wetlands and water bodies. 30. As regards malaria, the EA report informs that malaria was reportedly the most common disease among residents in the drainage investment areas. Malaria control is the responsibility of the Ministry of Health, and several initiatives are underway to control it. In this respect, the Public Health Department of KCC is already working in close collaboration with the Ministry of Health and relevant NGOs as well as the various communities to support malaria control in the city. Thus, the KIID Project has only an indirect contributing role to play in the control of malaria diseases. Other common diseases include diarrhea, dysentery, stomach pains, cough, flu, athlete s foot, tuberculosis, and slun diseases. These, too, are being dealt with by KCC and the Ministry of Health. The consultants were informed that the breeding of mosquitoes in stagnant waters is the main cause of malaria, while the main cause for diarrhea and dysentery appears to be poor drainage, inadequate waste disposal practices and unhygienic pit latrines which attract house flies Solid waste management: The EA report identifies and assesses potential positive and negative environmental and social impacts that might result from the planned investments in the existing solid waste management facility and the planned extension in Mpererwe-Kitezi. Thus, during the construction and operational phase of the land fill site, increased employment and,income generation activities are anticipated as positive impacts. Potential negative environmental and social impacts during the construction and operational phase may include soil erosion, groundwater contamination due to contaminated leachate, altered groundwater patterns, sedimentation of downstream water bodies, noise, dust, and health problems due to water and air pollution. The EA report proposes measures for the decommissioning phase of the landfill site such as (i) placement of a secondary cover across the waste area, and re-vegetation after final landscaping; and (ii) increased vegetation in the root treatment zone. 32. The EA report further notes that no adverse impacts are to be expected as a result of occasional spraying activities in the landfill area; these spraying activities are limited to the landfill site The operations of both sites include occasional light spraying using diluted insecticides to reduce the presence of flies and other pests that come with the waste. The KIID Project will follow KCC s Vector 77

84 Management Procedures which call for the controlled and occasional use of chemicals and require that the spraying be carried out by professional contractors. 33. Road maintenance and upgrading: The EA report identifies and assesses potential positive and negative environmental and social impacts that are likely to occur during activities related to road maintenance, upgrading of gravel roads. Thus, potential positive environmental and social impacts are likely to include improved traffic flows and driving practices, improvement of road drainage as culverts will be upgraded, and improvements in the physical environment of the upgraded roads. Potential negative environmental and social impacts during construction are likely to include accidents, flooding, interruption of utility services, soil erosion, accumulation of silt, soil and water contamination, and destruction of flora and fauna. 34. Urban markets: The EA report identifies and assesses potential positive and negative environmental and social impacts that are likely to result from activities related to the improvement of market infrastructure. Thus, potential positive environmental and social impacts are likely to include improved environmental conditions at the markets which in turn will attract more customers and vendors, improved income generation opportunities. Potential negative environmental and social impacts during the construction phase are likely to include interruption of market activities and utility services, soil erosion due to site clearance, silting of storm water drains. During the operational phase, increased solid waste generation will be an issue that will require attention. (iv) Stakeholder consultations 35. Stakeholder consultations (with representatives of NEMA, WID, and DWD; KCC officials, members of Parish Development Committees, Local Council Officials, and directly affected community members) were carried out in the course of EA preparation. Consultation methods included field visits, meetings with key stakeholders, focus group discussions, data collection and analysis, literature reviews, and collaboration with other consultants. The stakeholders' views are summarized below. 36. Drainage: In discussions with KCC officials, the poor state of the drainage system in Kampala was confirmed. Local officials noted that there is a settlement problem as people settle in the wetlands and thereby block the natural flow of the drainage system, as is the case, for example, in Nalukolongo wetland. Community members indicated that they expect to see improvements in environmental health and hygiene through a reduction in floods and water pollution which in turn will reduce the disease burden associated with these conditions. They further expect to see a reduction in vector borne diseases, especially malaria, because the stagnant waters that encourage mosquitoes will be eliminated, and the prevalence of cholera and diarrhea will also be reduced. They suggested that channel investments should include bridges that will facilitate easy access from one side of the channel to the other, and would also reduce accidents among pedestrians during floods. 37. At the same time, stakeholders were concerned about accidents during construction, and recommended that KCC take appropriate actions with contractors to ensure that accidents are minimized. Others noted that many households in the communities earn their livelihood along the drainage channels, and they expressed their concern that during the construction, these people will be displaced and will lose their livelihoods (activities most likely to be affected are commercial activities along the channels and along roads crossing the channels, car washing activities, and brick making). 38. Solid waste management: In discussions with various stakeholders, the consultants identified the benefits for people working in the vicinity of a landfill". Thus, benefits include boda-boda cycling, brick lo Land disposal is the most common waste disposal technique in Kampala 78

85 making, recycling of usable wastes found at the dump site, the operation of grocery shops to satisfy the household demands of local communities, and some make-shift eating places that have developed over the years, mainly to provide services to landfill workers. However, the stakeholders also noted the negative aspects of living in proximity to a landfill, namely (i) a decrease in property values due to bad odors, birds, and insects feeding on the landfill; (ii) an increase in the disease burden of malaria and diarrhea because the landfill is a breeding ground for vectors, especially flies and mosquitoes, if the landfill is not properly constructed and maintained; (iii) a cause of injuries for scavengers and workers during collection and disposal, because solid wastes include sharp objects (glass plates, forks, spoons) and metals. In focus group discussions it was learned that some children had to be hospitalized with food poisoning as a result of consuming expired foods and beverages found at the landfill. The main environmental concern of the communities living in the vicinity of the current landfill is the spread of polythene bags due to poor delivery of garbage from the collection centers to the landfill. Polythene bags prevent the infiltration of rainwater into the soil, thereby destroying agricultural lands, even if they are not close to the landfill. 39. Road improvements: Consultations with stakeholders confirmed the poor state of the roads in the project area. In-depth interviews with key stakeholders (city authorities, government officials, local council authorities, business persons, and public transport personnel, and pedestrians) identified a number of positive and negative impacts. Thus, positive impacts of the road improvements will include an increase in the economic activities of commercial enterprises along the roads as well as in property rates along the roads, leading to higher returns to owners and subsequent investments along the roads. They further indicated that traffic flows in the affected areas will be improved if the road improvements include the development of road infrastructure such as pedestrian walkways, traffic control humps, pedestrian crossings, and road signs. 40. The stakeholders identified potential negative impacts on: pedestrian traffic, motor vehicle traffic, commercial activities of shops and bars along the roads, newspaper vending, boda-boda transport services, telephone services, public transport operations of the public transport system along these roads, and the activities of people who earn their livelihoods on the roads such as mechanics in road-side garages, car washers, and food vendors. There was concern that excavated soils may block drains when construction takes place during the rainy season, and that this would lead to flooding in the surrounding areas. Others observed that unless drainage is a component of the roads improvements, it may result in flooding in some areas. Environmental pollution was another concern, as oil used by construction equipment may drain from the construction vehicles, plant and equipment which in turn could lead to contamination of the soil and water bodies through run off water. Oil wastes were expected to be a problem along the roads where heavy machinery/equipment are used or kept. Some stakeholders were concerned about air pollution during construction activities. 41. Urban markets: Consultations with vendors, market authorities, community leaders and KCC officials, confirmed the deplorable state of the urban markets. There are expectations that the market improvement process will include a built up market area with stalls for goods, electricity, adequate water, sanitation, appropriate solid waste disposal systems, good road access, adequate drainage, parlung spaces for delivery vehicles and employers. Community leaders and KCC officials expect to see improvements in (i) public health as a result of a reduction in the risk of diseases that proliferate in dirt and transmissible through food such as diarrhea, respiratory infections, and parasitic diseases; (ii) short-term employment opportunities for a number of workers mainly in the engineering and construction business (engineers, masons, carpenters, unskilled workers); (iii) property values in the vicinity of the markets; (iv) increased sales and profits; and (iv) the market environment due to the planting of shade trees and strategically located access roads and drainage networks. 79

86 42. Concerns were raised during focus group discussions that (i) there will be displacement of vendors who are likely to lose their livelihoods as a result of upgradinglconstruction activities; (ii) the market dues might increase so that KCC could recover the costs for market improvements, and (iii) the allocation of market stalls may become a source of conflict if the exercise is marred by corruption and a lack of transparency, and, as a result, a number of project beneficiaries might be pushed out when they are unable to secure a stall after the improvement of the markets. 43. Institutional concerns: There were concerns among key stakeholders regarding KCC s weak institutional capacity for environmental management as well as wetlands management. Thus, NEMA S Deputy Director indicated that District Environment Officers (DEOs) lack the institutional autonomy to act independently. He pointed out that Section 34 of the Local Government Act decentralizes responsibility for environmental management to the local governments; however, the respective arrangements are such that the DEOs lack the institutional autonomy to act independently. In order to resolve this anomaly, it is important that the institutional profiles of the DEO s be raised, perhaps to be equivalent to that of the Tender Boards. In this way, the DEOs would gain the freedom to act without undue political interference. The offices have recently been elevated to Directorate levels, which is a step in the right direction, but not yet sufficient to resolve the underlying issue. This concern was subsequently discussed with the Coordination Unit at KCC, and it was understood that in KCC, the Division Environment Offices have not yet been elevated to Directorates. 44. The Assistant Commissioner of the Wetlands Inspection Division (WID) noted that one of the weaknesses limiting proper management of wetlands in Kampala is the apparent unclear demarcation of the roles of the various players. Whereas KCC is mandated by the Local Government Act to manage the wetlands in there area of jurisdiction, they often turn to NEMA to play this role, which is outside its responsibility. 45. KCC s Medical Officer of Health suggested that the former Vector Control Department be reinstated. However, the EA consultants concluded that this approach would not yield any results unless radical reforms based on a sound Vector Management Plan are implemented. 46. The Acting Principal Water Officer, Water Resources Department (WRD), Entebbe, recommended that a Surface Water Application be submitted to WRD, detailing the nature of the works planned so that a no-objection to proceed can be obtained, or, a permit is issued. He explained that Cap. 152 o f the Water Act require that the Director of the Directorate o f Water Development (DWD) subject all hydraulic works to regulations. Hydraulic works cover all works that are likely to alter or impede the natural flow of water in a water body. These include works such as diverting a river, building a dam or a bridge. Any person planning hydraulic works is required to apply for a Surface Water Permit from the Water Regulation Section of the Water Resources Department of the DWD. The Commissioner for Water Resources would, after studying the application, advises the Director whether the proposed works require a surface permit or not. B. Resettlement Action Plan (RAP) 47. The RAP has been prepared in close consultation with and participation of impacted persons. After an initial assessment of impacts had been conducted, an alternate scenario was proposed and adopted which reduces the number of people impacted as well as the level of impacts. Preliminary compensation values have been calculated based on the most recent available established rates. These values, however, will be up-dated to reflect values which coincide with the year o f actual compensation delivery. This will ensure impacted persons receive current value at the time of impact. 80

87 48. The RAP provides a grievance mechanism by which impacted persons may seek redress from project activities. During RAP preparation complaints focused on the fact that due to project design changes compensation would not be received as there was no longer an impact on lands, assets, or livelihoods. (i) Institutional Framework 49. The Directorate of Community Services within Kampala City Council (KCC) will manage the resettlement process with technical support from the Principal Valuer located in the Directorate of Finance. A resettlement desk will be established within KCC to implement the RAP and directly interface with affected peoples. 50. KCC will be firther supported by the Chief Government Valuer to deliver compensation while the Ministry of Local Government would ensure timely release of funds for project activities from the Ministry of Finance Planning and Economic Development The Directorate of Community Services within KCC works directly with communities and is best suited for mobilizing communities. The staff also works closely with NGOs and other external groups who demand time input from KCC staff. Due to the added work program, KCC will reassign staff to ensure proper coverage and workforce to meet the needs and demands associated with implementing the RAP. (ii) Impacts 52. The majority of impacts will occur within existing road reserves that have been predominately respected and thus has minimal encroachment. The two areas having the greatest amount of impacts occurs at Bwaise Junction where buildings will be acquired in order to expand the road way to provide better movement of traffic and the Lubugi Channel which is being rerouted thus affecting commercial and residential buildings. The RAP provides a detailed list of people and assets impacted based on individual project activity. (iii) Costs 53. Scenario One entailed a total estimated cost of US$6,222,805. However, as noted earlier, alternate scenarios for each project activity were adopted which predominately entailed narrowing of road reserves in highly populated areas. By adopting the alternate scenario the final compensation cost estimate totaled US$2,501,577. All valuations were based on market rate rather than replacement value as the market rate was the higher amount of the two options. (iv) Consultation 54. As noted earlier, impacted persons were directly consulted during the preparation of the RAP. KCC will continue to solicit input and participation throughout RAP implementation by incorporating existing community forums such as Parish Development Committees. The Parish Development Committees will then be empowered to continually up-date the public on the different stages of project implementation and seek community views. This system will forestall anxiety while promoting cooperation within the community. 81

88 ~~ ~ Annex 11: Governance and Anti-Corruption (GAC) Action Plan UGANDA: Kampala Institutional and Infrastructure Development APL 1 Project 1.0 INTRODUCTION 1.1 The Government of Uganda (GoU) through the Ministry of Local Government (MoLG) and Kampala City Council (KCC) has prepared the Kampala Institutional and Infrastructure Development (KID) project which will be implemented with support from IDA through an Adaptable Program Loan (APL) for the next 10 years. Phase I of the project, which is three years, will comprise three components: Component 1 will focus on Institutional Development activities that support organizational development and governance, the implementation of the Financial Recovery Action Plan, and actions to enhance effectiveness of service delivery. Component 2 will finance the rehabilitationheconstruction of high priority infrastructure which has been identified as critical to maintaining the productivity and welfare of the City. The proposed activities are ready for implementation. Component 3 will support project management activities. 1.2 The efficiency of public expenditure depends highly on the governance environment and practices. Therefore, any effort to improve resource allocation must be preceded by creating an enabling governance framework" that facilitates accrued efficiency, and inhibits corrupt practices12. Accountability forms the core of good governance. 1.3 Corruption, abuse of office and mismanagement of public affairs thrive where there is no demand for accountability and transparency. The emergence of corruption in Uganda has a historical background which dates back to the 197Os, an error characterized by gross mismanagement of public affairs whch culminated into economic and political collapse. At that time the country was highly centralized and there was a high dependency on the state to provide and finance all basic social services to the population. This provided opportunities for those with power and corrupt tendencies to act for personal gain rather than for the common good. The long-standing culture of patronage in Uganda society also played a significant role in moulding public attitudes to corruption. 1.4 Corruption in Uganda is manifested in different forms: (i) loss of public funds through mishandled procurements; (ii) outright embezzlement of public funds; (iii) briberv; (iv) neuotism; (v) politicians recouping their heaw election expenses; and (vi) situations of insecuritv that provides opportunity for profiteering. 1.5 Government has clearly made an effort to fight corruption. The capacity of GoU to deal with corruption has been undermined by legal complexities (burden of proof), lack of cooperation from the public and weak institutional framework for public accountability. 'I The World Bank Institute (WBI) defines governance as the traditions and institutions by which authority in a country is exercised for the common good. This includes (i) the process by which those in authority are selected, monitored and replaced, (ii) the capacity of the government to effectively manage its resources and implement sound policies, and (iii) the respect of citizens and state for the institutions that govern economic and social interactions among them. Corruption is generally defined as the abuse of public office for private gain. In an environment of weak governance, corruption may thrive; however weak governance itself is not necessarily synonymous with corruption, but rather with different manners of inefficiencies. For example poor budgetary structure, bureaucracy, scarce resources or inadequate management capacity, may distort priorities, or otherwise not adequately prepare programs - all of which lead to inefficiency, but not necessarily as a result of corrupt practices. The distinction between corruption and governance is that corruption is deliberate intent and action for private gain with public goods while governance failures provide opportunities or inducements for rent seeking behavior. 82

89 1.6 KCC supported by the Ministry of Local Government has developed the GAC action plan which will be implemented together with KIIDP, and will guarantee maximum efficiency and transparency during and after the Project implementation period. The action plan is divided into five parts: Part one gives a brief introduction to the KIIDP project, history and nature of corruption in Uganda and highlights the importance of an enabling governance environment framework to ensure efficiency and reduction of corruption. Part two gives a brief highlight of the national anti-corruption strategy in terms of its goal, objectives and linkage to poverty reduction. Part three of the plan discusses the GAC reforms undertaken by government, achievements and challenges. Part four looks at the current GAC at KCC within the context of the legal status of KCC, assessments of the GAC risks and the proposed framework to improve the GAC status at KCC. Part five discusses the proposed KIIDP GAC Action Plan in terms of its structure, implementation arrangements, and the action (responsibility) matrix. 2.0 NATIONAL ANTI-CORRUPTION STRATEGY Corruption which can be defined as the use of public office for private gain includes amongst others acts of embezzlement, bribery, influence peddling and nepotism. It is not only a question of individual criminal actions, but also a result of failure in public administration systems. Weak public administrative and financial management systems have contributed significantly to the spread of corruption in Uganda, as they have elsewhere. Corruption and abuse of office is one of those public management evils that continue to threaten governments and institutions despite the many interventions to build public ethics and integrity for development. Both elected and appointed officials continue to use their positions for personal gains or those of their fiiends and cronies. As a result, governments/institutions and the improvement of public welfare have continued to suffer. It is against this background that in 2001, GoU launched the first country strategy to fight corruption and rebuild ethics and integrity in Uganda public offices. A Second phase of this strategy ( )'3 was launched in April 2004, and is currently being reviewed in light of Uganda's re-commitment to zero tolerance to corruption. 2.1 THE STRATEGY TO FIGHT CORRUPTION The goal of the Uganda National Anti-Corruption Strategy ( ) is to minimize levels of corruution and increase transparencv and intemitv in uublic offices. The strategies for achieving this goal are by (i) strengthening enforcement, (ii) strengthening the coordination function to improve effective anti-corruption action, (iii) strengthening the legislative framework, (iv) ensuring that the public is actively and increasingly involved in the fight against corruption, (iv) building sustainable systems and institutional capacities within anti-corruption agencies and addressing key bottlenecks that hamper effective action, (v) enhancing and sustaining political support at all levels in the fight against corruption. l3 National Strategy to Fight Corruption and Rebuild Ethics and Integrity in Public Office ( ) by the Directorate for Ethics and Integrity, Office of the President. 83

90 2.2 ANTI-CORRUPTION STRATEGY AND POVERTY REDUCTION The National Anti-Corruption Strategy identifies the connections between poverty and corruption. Corruption thrives in an environment of ignorance and apathy within the population. Ignorant and uniformed people are highly susceptible to demands for bribes and in most cases; corruption erodes the quality of services and undermines development. The strategy therefore, is an over-arching policy and approach which is intended to address key issues that are central to moving forward the anti-corruption agenda. This is intended to improve service delivery and poverty reduction consistent with the national Poverty Eradication Action Plan (PEAP).The strategy recognizes and supports all members of the Inter- Agency Forum (IAF), in their individual capacities, to protect and defend the rights of poor people against the actions of corrupt public officials. 3.0 GOVERNANCE AND ANTI-CORRUPTION (GAC) REFORMS AT NATIONAL LEVEL The GoU embraces good governance because it is one of the pillars which support poverty reduction and sustainable development. Corruption in all its forms undermines good governance. In 2000 the Government of Uganda developed and launched the first three-year strategy and plan of action to fight against corruption and rebuild ethics and integrity in public offices. The thrust of the first strategy was to mobilize the public, the media and civil society to participate in the fight using both reactive and proactive means. The implementation of the first strategy ( ) greatly informed the design of the second strategy ( ). The Government has now embarked on the development of the third national strategy which will support the renewed commitment to zero tolerance to corruption. The Government in November 2004 launched a complementary strategy to mainstream ethics and integrity in local governments in the country. Since then government has made major reforms at the central level and local government level with a number of achievements although some challenges are yet to be addressed. 3.1 THE GAC REFORMS GoU has carried out a number of reforms to improve governance and fight corruptions. These reforms include institutional, u, financial, urocurement and the engagement of civic societv organizations Institutional reforms - The Government has set up a number of anti corruption institutions not only to fight corruption, but also to build ethics and integrity in public service. These are: the Insuectorate of Government (IG), the Directorate of Ethics and Integrity (DEI) and the Public Procurement and Disposal of Public Assets Authority (PPDA). In addition, to complement the existing traditional agencies like the office of the Auditor General (OAG), Public Accounts Committee (PAC) of Parliament, the office of the Director of Public Prosecutions (DPP) and the Criminal Investigations Department (CID) of the police, they are given facilitation to expedite their work. The IG is created by the Constitution of Uganda and an Act of Parliament and is mandated to, among other things, fight corruption in Uganda. The DEI plays a coordinating role in bringing together all oversight agencies while the PPDA regulates public procurement and disposal of public assets. The accountability and oversight agencies are brought together through the Inter Agency Forum (IAF), chaired by the DEI. In addition Government has set up the Accountabilitv Sector Working Grouu (ASWG) to bring together the key anti corruption agencies and provide an avenue for comprehensive policy dialogue and mobilization of resources through the sector wide approach (SWAPS). Within the Judiciary, which is part of the Justice, Law and Order Sector (JLOS), the Government has set up and operationalized the Commercial Court and is now able to expeditiously handle commercial disputes. Alternative Dispute Resolution Mechanisms (ADR) such as mediation and arbitration has been introduced and provide an alternative track for resolution of commercial disputes. This is done under the Centre for Alternative Dispute Resolution (CADER) which provides an array of alternative dispute resolution modalities. In addition, the 84

91 Government is also in the final process of setting up a special anti corruption court and Leadership Code Tribunal as mandated by Article 232 and 235A respectively of the Constitution Legal reforms - Government has promulgated a number of important specific anti- corruption laws which are already in effect. Prominent among these laws are the Leadership Code Act (LCA) 2002, the Public Finance and Accountability Act 2003: Local Government Financial Readations 1999, the Public Procurement and Disposal of Public Assets Act No. 1 of and theaccess to Information Act (2005). These laws have a direct bearing on the implementation of the KIIDP project and provide the legal framework for a range of prevention and enforcement aspects, as well as strengthening the anticorruption efforts of institutions and agencies in Uganda Financial manaaement reforms - Overall, Government has provided support to comprehensive, cross-cutting reforms in public financial management both at central government and Local Governments including oversight. Government has introduced key management systems intended to enhance performance and efficiency in public service. These include among others: budget management; human resources information and payroll management through the introduction of an integrated personnel and payroll system (IPPS) and payroll audits. Other systems also include: results-oriented management (ROM) and output oriented budgeting (OOB) as an integrated performance management system to strengthen accountability for result; and the integrated financial management system (IFMS) to fight fraud by ensuring timely production of final accounts for audit. Over the years the oversight institutions such as the Office of the Auditor General (OAG) have been strengthened and made more independent, the Public Accounts Committees (PACs) at District level and Parliament have been facilitated to follow-up the reports of the auditor general and appropriate actions taken on persons found to have flouted public financial laws and regulations Procurement reform - In order to ensure that public procurement and disposal is conducted in a fair, transparent and non-discriminatory manner, in 1997 Government embarked on far-reaching Procurement Reforms for the public service. The reforms covered the following measures: i) disbanding the Central Tender Board (CTB), ii) decentralization of the public procurement and disposal function to Procuring and Disposing Entities (PDEs) in MDAs and LGs, iii) creation of Contracts Committees, Procurement and Disposal Units (PDUs) to service PDEs, and iv) liberalization of third party Procurement Providers. These reforms were aimed at professionalizing and depoliticizing procurement in public entities (MDAs and LGs). Prior to 1997, Procurement was based on a centralized system with the CTB as the sole buyer for all Government entities for goods, services and works above US$lOOO. There was no regulator in the procurement and disposal sector and there was only one third party procurement provider to advise GoU. In 2003, the Public Procurement and Disposal of the Public Assets regulations were promulgated and the Public Procurement and Disposal Authority (PPDA) - a regulatory Authority was established. The Regulations provided guidelines to be followed by public entities (both central and LGs). Under the framework, there are four actors; the Authority - PPDA; over 110 Public Disposal Entities (PDE); Providers; Civil Society Organizations and the Public. Under the Act, the Authority does not approve procurement or disposals (this is done by PDEs) and has no involvement in individual tenders or contracts, except in reviewing appeals/administrative reviews of procurements. The Authority reports to the Minister of Finance, Planning and Economic development. Functions of the Authority include the following: o Policy and regulations on Government procurement and disposal. o Regulatory functions in the sector and provision of standards, guidelinedadvice as well as audit of procurement and disposals. 85

92 o Monitoring Compliance of all Government Entities against set standards, guidelines of procurement and disposals. PDEs comprise of the following: o The Accounting officer for the MDAs and LGs who has overall responsibility for the execution of the procurement and disposal process in the PDE. In particular; he/she communicates award decisions, investigates complaints by providers, signs contracts and is the link between the Authority and the Procurement structures. o The Contracts Committee which is responsible for the contract award and ensures compliance with the procurement regulation. o The Procurement and Disposal Unit (PDU) is responsible for the management of the procurement process by carrying out activities such as; preparing bid documents, issuing contracts, and acting as the Secretariat of the Contracts Committee. The PDU also nominates the evaluation committee which is approved by the Contracts Committee and evaluates bids according to criteria set by user departments. o The user department initiates the procurement, provides specifications and TOR, participates in evaluation and responsible for the management of the contract. Under this framework, the providers are obligated to prepare complete and accurate bids based on the specifications in the bid documents and to meet all requirements in the bid documents. They are also required to adhere to the procurement law and code o f ethics. The procurement reforms have led to a number of improvements in procurement management in Uganda including i) providing an elaborate and clear set of rules to guide procurement and disposal actions, ii) separation of duties and powers to ensures checks and balances and to ensures that contacts between government and service users are free from undue and improper influence, iii) adherence to procurement and disposal guidelines, thus promoting transparency, accountability, competition and value for money in the process, iv) establishing mechanisms for channeling complaints and requests for administrative reviews of procurement and disposals, and v) providing code of ethical conduct in business for both PDEs and providers Civil Societv Oraanizations ( CSO) enaaaement - Civil Society engagement in the anti corruption area is growing. National and regional civil society organizations are increasingly participating in the anti corruption discourse in the country. Organizations such as the Uganda Debt Network and the Anti Corruption Coalition in Uganda with their attendant regional affiliates are such examples. The Government through the DEI has signed a framework agreement with CSOs to guide these collaboration efforts. The Civil Society and the public on their part are expected to whistle blow (raise complaints where there is cause to do so), expose cases of corruption, recommend changes to the law and play an oversight role. 3.2 ACHIEVEMENTS BY GAC REFORMS The reforms carried by government to fight corruption have yielded h its as revealed by the reduction of incidences of bribery, progress in the implementation of the Leadership Code Act, 2002, actions taken on commission of inquiries reportsh-ecommendations, and further legal reforms to fight corruption Reduction in the incidences of bribew - The Government of Uganda has carried out a survey to assess public experiences and views on corruption twice in the last 10 years. The first survey was 86

93 undertaken in The Second National Integrity Survey of 2003 indicated that anti-corruption efforts have yielded positive results. The survey revealed a marked reduction in the reported incidence of bribery since the 1998 survey, down to 46% from 63% for the Police, 31% from 40% for the Uganda Revenue Authority (URA), and 29% from 50% for Magistrates Courts. The report also revealed that there has been an improvement in specific services in health, education and agriculture despite a general dissatisfaction being expressed with tendering procedures and contract management, thus confirming the linkage between corruption and poverty. A new survey is due to be carried out in September 2007 to track progress since then. The July to December 2006 Inspectorate of Government Report indicate Police as the institution with fourth highest number of complaints against by the public at 16.7% of the total number of complaints, KCC is ranked 19* with only 0.9% of complaints during this period and URA ranked 27 with only 0.5% of total complaints during the same period Progress in the imulementation of the leadership code - The Leadership Code Act (LCA) 2002 aims to ensure that all leaders are accountable by establishing that their acquisitions of assets were not through corruption. The Act defines leaders to include Political Leaders and certain specified officers under the Second and Third Schedule of the Act. Political Leaders as defined range from the President all the way down to district leaders. Specified officers, on the other hand include Judges, Magistrates, Permanent Secretaries, Heads of Department and others. The Code prohibits conduct that compromises honesty, impartiality and imposes penalties on leaders who breach it. The law requires officers to declare their incomes, assets and liabilities every two years in order to ensure their integrity and accountability. By May 2004 the Inspector General of Government s (IGG) office had i) analyzed declared assets and information collected from key categories of leaders; ii) investigated all complaints received from the public by lst November 2003; iii) initiated assets verification; and iv) presented a time-bound action plan for the implementation of the Code. This was a marked improvement compared to the period July - December 2003 when the Inspectorate of Government had a workload of 3,773 complaints comprising 1,827 (48%) complaints brought forward and 1,946 (52%) complaints received during the period, only 25.1% (948) complaints were investigated and completed by end of December However the number of new cases reported has been decreasing since 2003 as the implementation of the LCA started to show some results. In 2006, two leaders were barred from standing for public office for the next five years (Councilor from Moyo district for a conflict of interest case, and a member of parliament (MP) for Rubaga South for failure to declare assets on time), hence breaching the LCA Imulernentation of Commission of Inauirv reuortshecommendations - Government has instituted a number of Commissions of Inquiry to probe corruption in a number of public institutions like the Police (2001), Uganda Revenue Authority (2002) and the mismanagement of the Global Fund for Aids, Malaria and TB (2006) in the Ministry of Health. These Inquiries have had prominent coverage in the media and have set a milestone in Government s efforts to fight corruption. A former Minister of Health and the two ministers of State for Health were arrested and charged in May 2007 as a result of a commission of inquiry report into the misuse of Global Alliance for Vaccines and Immunization (GAVI) funds. The fact that corruption has become an issue of national discussion and action is in itself an achievement in the fight against corruption Further legal reforms to fipht corruution - As part of the Constitutional review process in 2005, the office of the Inspectorate of Government (IG) was strengthened. The revision of the Constitution made provision for the President or any local authority to report to Parliament at least once every year on reports submitted to them by the Inspectorate of Government. In addition provisions for setting up a Leadership Code Tribunal and a special anti corruption court to combat corruption were introduced. Arising from the Constitutional Amendment, government set up task forces to revise the Leadership Code Act and look into ways of setting up Anti Corruption Courts. These two will strengthen the mandate of the Inspectorate of Government in the fight against corruption. 87

94 The Prevention of Corruption Act (PoCA) 1970 has also been undergoing revision to bring it in line with the provisions of the UN convention against corruption. The scope of the legislation and definitions of corruption have been widened and penalties increased. The Prevention of Corruption Act is a key piece of legislation in the fight against corruption in Uganda. The preparation of the Bill and implementation plan were completed during 2005 and approved by the Inter Agency Forum. Cabinet approved it in 2005 and it is now pending parliamentary deliberations and enactment into law. At the same time Government is in the process of developing Whistle Blower protection legislation to encourage citizens to report cases of corruption without fear of reprisals. Principles for the proposed law have been approved by Cabinet and the first parliamentary council has commenced drafting the bill. 3.3 CHALLENGES IN THE FIGHT AGAINST CORRUPTION Notwithstanding the major achievements highlighted above, there are a number of factors (both external and internal) that are still curtailing government efforts in the fight against corruption. The following are some of the challenges which need to be addressed over time: Developing an effective accountability sector; Ensuring that the anti-corruption agenda is understood and actively supported by the political establishment; Achieving improved success in enforcement and reducing levels of corruption; Ensuring legal and regulatory framework is up to date and effective; Promoting anti-corruption awareness and engagement with anti-corruption policy in all sectors; Improving the capacity of anti-corruption agencies to perform; and Convincing the public at large to reject corruption and corrupt enrichment within Uganda society. 4.0 CURRENT STATUS OF GAC AT KCC 4.1 LEGAL STATUS OF KCC KCC is a Local Government with the status of a district as per the Local Government s Act 2003, as amended. It is therefore a corporate body charged with service provision responsibilities, which are clearly delineated in the Second Schedule. In general, the cumulative effect of the legal provision (both in the Constitution and the LGs Act) has been to i) transfer political, administrative, financial and planning authority from the Centre to LGs, ii) make LGs increasingly responsible for the delivery of the bulk of services and accountable to their constituents, and iii) promote popular participation and empowerment of the local people to make decisions. In addition to all the functions performed by a rural district Local Government, Kampala city is also required to provide services equivalent to other cities of the world. It is the hub of the country s economic, political, and administrative activities. It is estimated that about 80 percent of the country s industrial and services sectors are located in Kampala and the city now generates a substantial percentage of Uganda s GDP. The realization that the economic future of Uganda is intrinsically related to the performance of Kampala as a locus of productive activity and investment made government during the Constitutional Amendment of 2005 to redefine the status of Kampala as a Capital City for Uganda to be administered by the Central Government. The Constitutional amendment requires Parliament to enact a new law which will delineate 88

95 the territorial boundary, make provision for the administration, financing and the development of Kampala as a capital city. 4.2 ASSESSMENT OF GAC RISKS AT KCC An assessment of the KCC GAC risk shows that council has made progress in the area of enhancing transparency and accountability in the service delivery process i.e. informing the citizenry of its planned activities and projects including publicizing the annual budget, and establishing a Council's Stakeholder Forum. This initiative is intended to allow stakeholders' participation in the oversight of service delivery processes, provide a platform for the continued engagement of the public and increase ownership and sustainability of KCC activities. Despite the above positive initiative, KCC has not yet fully customized nor implemented the strategv for mainstreaming ethics and inteeritv in LGs currently under review alonmide the National Anti Corruption Strate~v'~. Little progress has also been made to implement the KCC code of conduct for councilors, members of Commissions and Boards The KCC customized staff regulations 2003 are yet to be fully implemented. There is still political interference in the service delivery process, weak internal control systems and a weak governance regime. This is directly impacting on the potentially high risk areas of procurement, financial management and public disclosure (efforts to promote transparency and accountability) and subsequently affecting KCC's image in the eyes of the public. 4.3 PROPOSED FRAMEWORK FOR IMPROVED GAC IN KCC KCC framework for GAC will be based on the National Anti-corruption Strategy, the strategy for mainstreaming ethics and integrity in the LGs, the KCC code of conduct for councilors, members of commissions, boards and the customized staff regulations. It will also include the various reforms taken to fight corruption, enhanced Civil Society Organizations engagements, and a strong oversight by MoLG. The KCC GAC strategy will be revised when an over arching LG GAC strategy, which is still currently under design by the MoLG and the new law to govern the administration, financing and boundaries of KCC to be enacted by Parliament become operational. However in the interim there is need to put in place implementation arrangements that would strengthen Government oversight in the potentially high risk areas of procurement, financial management and public disclosure for KCC. This proposal therefore explains the implementation support that will be provided by the MoLG and other GoU agencies and also the safeguards that will be put in place to ensure that corruption in KCC is eliminated and that KIIDP is implemented efficiently. 5.0 KIIDP GAC ACTION PLAN The objective of this action plan is to strengthen GAC around KIIDP and eliminate corruptive practices, so that the full impact of the project is realized. This action plan has been specifically designed for KIIDP although some elements could be applied to projects/programs implemented by LGs generally in Uganda. l4 The Directorate for Ethics and Integrity, Office of the President, prepared a national strategy for mainstreaming ethics and integrity in LGs in Uganda (November 2004). The objective of the strategy is to put in place a harmonized, nationally agree upon understanding of ethics and integrity and a value system in the public service that is responsive to both the positive societal expectations and the requirements of a modem public service. 89

96 5.1 ACTION PLAN STRUCTURE The KIIDP GAC action plan is a tool to improve the impact of the project and to transfer a number of good practices to KCC as an institution to improve on its efficiency. The plan has three elements: preventive actions, deterrent, and detection mechanisms Preventive actions - these are actiodmeasures that will be taken within the project cycle and processes to mitigate risks associated with KIIDP implementation. These will include stringent oversight arrangement by the MoLG of project implementation activities especially in the areas o f procurement and financial management to ensure transparency and accountability Deterrent measures - these will include control mechanisms and sanctions. Sanctions will be applied as per Government Standing Orders in case of proven corruptive practices. To this end specific investigative arms of government will be supported to carry out investigations of reported cases of corruption or abuse of office during the project implementation Detection measures - These will be identified through two indicators i) potential inefficiencies (unnecessary delays, unfair practices, non compliance o f set procedures etc) and ii) potential fkaud (over pricing, embezzlement etc). 5.2 IMPLEMENTATION ARRANGEMENT This GAC plan will be implemented by two parties: i) the KCC/Core team and ii) the MoLG through an enhanced oversight arrangement. The Bank project team in the context of project supervision will monitor KCC s performance and the effectiveness of the GAC plan in maintaining good governance and the fight against corruption KCC/Core Team s role in the imulementation of the GACulan - KCC Core Team will provide technical support to the respective KCC Directorates to ensure that the Project is properly and professionally implemented. The Core Team will provide in house quality assurance to all procurement documents before they are forwarded to the Contracts Committee of the MoLG for approval, and will provide support to ensure that all technical reports from respective consultancies are of acceptable quality. Payment certificates for works and services supplied under the project will be prepared by the respective component managers within the Council s Directorates and will be reviewed by the Core Team before they are finally paid. The Core Team will provide support to the Directorates and KCC Divisions in supervision and monitoring of Works and performance of Consultants. The KCC Council will participate in the monitoring of various activities to ensure that the project is well implemented Role of the MoLG in the imulementation of the GAC ulan - The MoLG shall provide the oversight in procurements, financial management, and technical supervision to ensure accountability and transparency. The MoLG may request other Government Departments or Agencies to provide support to KCC when it is deemed necessary to ensure that the Project is implemented in time. The MoLG will ensure that financial management and procurement procedures are adhered to during its oversight function for the implementation of KIIDP. These measures will also help transfer knowledge, good practices and build the capacity of KCC as an institution. Financial management of theproject resources: There are 3 main risks in this area: (i) misuse of project funds (ii) poor accountability (iii) failure to provide the required counter-part funds in time 90