AND DEVELOPMENT PROJECT

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank TECHNICAL ANNEX FOR A PROPOSED GRANT OF SDR 43.7 MILLION (US$59.6 MILLION EQUIVALENT) TO Report No: T-7552-AF THE TRANSITIONAL ISLAMIC STATE OF AFGHANISTAN FOR A HEALTH SECTOR EMERGENCY RECONSTRUCTION AND DEVELOPMENT PROJECT May 6,2003 Human Development Unit South Asia Region

2 CURRENCY EQUIVALENT (exchange rate is Kabul based open market buying rate) effective as of April 23,2003 Currency Unit - Afghani US$l AFA GOVERNMENT FISCAL YEAR March 21 - March 20 ABBREVIATIONS AND ACRONYMS AACA ADB AGO AHEAD ARI ARTF CHCs BFM BPHS cc CI co CDC CHWs DFID DHMT DPT3 FIC GCMU HFA HHS HIV/AIDS HMIS HNP ICRC IMR IS/NS IDA LIB MICs MMR MPA Afghanistan Assistance Coordination Authority Asian Development Bank Auditor General Office Afghan Health and Education Assessment for Development Acute Respiratory-tract Infection Afghanistan Reconstruction Trust Fund Basic Health Centers Budget and Financial Management Basic Package of Health Services ControlKomparison Contracting In Contracting Out Centers for Disease Control and Prevention Community Health Workers Department for International Development District Health Management Team Diphteria/Pertusis/Tetanus Third Dose Fully Immunized Child Grants and Contracts Management Unit Health facility assessment Household survey Human Immunodeficiency VirudAcquired Immunodeficiency Syndrome Health Management Information System Health, Nutrition and Population International Committee for the Red Cross Infant mortality rate International and/or National Shopping International Development Association Limited International Bidding Multi-Indicator Cluster Survey Maternal mortality ratio Minimum Package of Activities.. 11

3 MOF MOH MOH-SM NBF NGO NIDs ORS PCC PHD PPAs QBS QCBS sws TB TBA TISA TSS USMR UN UNICEF USAID WHO Ministry of Finance Ministry of Health Ministry of Health Strengthening Mechanism Non-Bank Financed Non-Govemmental Organization National Immunization Days Oral Rehydration Salts Provincial Coordination Committee Provincial Health Director Per formanc e-b as ed Partner ship Age ements Quality Based Selection Quality and Base Cost Selection Safe Water System Tuberculosis Traditional Birth Attendant Transitional Islamic State of Afghanistan Transitional Support Strategy Under-five mortality rate United Nations United Nations Children s Fund United States Agency for International Development World Health Organization Vice President: Country Director: Sector Manager: Team Leader: Mieko Nishimizu Alastair McKechnie Anabela Abreu Benjamin Loevinsohn

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5 TRANSITIONAL, ISLAMIC STATE OF AFGHANISTAN HEALTH SECTOR EMERGENCY RECONSTRUCTION AND DEVELOPMENT PROJECT TECHNICAL, ANNEX Table of Contents I. PROJECT DESIGN SUMMARY... 1 II. PROJECT DESCRIPTION AND BENEFITS... 6 A. Components in Detail... 6 B. Benefits of the Project IMPLEMENTATION ARRANGEMENTS A. Organizational Structure B. Implementation Procedures C. Procurement D. Financial Management and Audit IV. EXPERIENCE OF CONTRACTING WITH NGOS FOR HEALTH SERVICE DELIVERY V. ENVIRONMENTAL AND SOCIAL SAFEGUARD ISSUES APPENDIX I: PROJECT COST BY COMPONENT APPENDIX 2: FINANCIAL MANAGEMENT. AUDIT. AND DISBURSEMENT ARRANGEMENTS iv

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7 I. PROJECT DESIGN SUMMARY Sector Related Goal: To improve human development with specific reference to improving the health status of impoverished people o f Afghanistan. Project Development Objectives Development of a health care system that can efficiently and equitably deliver a package o f basic health services to a large proportion of the underserved rural population in a sustainable fashion. 0 Infant mortality rate 0 Malnutrition in children Total Fertility Rate Maternal mortality ratio 0 Core output indicators such as: 1) coverage of adequate prenatal care. 2) contraceptive prevalence rate 3) coverage of Vitamin A 4) % of parents able to identify danger signs of ARI 5) immunization coverage (the complete list is in Table 1 of the text) Baseline and follow-on household surveys will provide robust estimates at national level 0 Provincial level household surveys at baseline and 30 months. 0 MOH supervision of health facilities Performance assessments of health facilities by 3rd party 0 Economic analysis of costs and out of pocket expenditures MOH Objectives to Government Objectives Other key aspects of human development (e.g. increased access to education) are achieved. 0 Security situation and political process remain stable. Development Objectives to MOH Objectives Other factors that influence the health status o f the population (including status of women, poverty levels, peace and stability, education, water and sanitation, and transportation, etc.) improve significantly. Output from each Component 1. Much improved delivery of essential health services, particularly among the under-served rural population. More trained, particularly female, health workers available to deliver effective health services. 1.1 % ofppas and MOH-SM that are achieving the targets set out in the agreement for the core output indicators. 1.2 % o f sampled health facilities providing the various parts of the BPHS. 1.3 Increase in the number of female health workers. 0 Provincial level household surveys at baseline and 30 months later. 0 Routine reporting system 0 Performance assessments of health facilities by 3rd party 0 MOH supervision of health facilities Outputs to Development Objective 0 Ethnic tensions do not interfere with equitable distribution of project services. 0 Political considerations do not effect choice of delivery mechanism. 1

8 Narrative Summary Key Performance Indicators Data Collection Strategy Critical Assumptions 2. 1"level referral hospitals, CHCs, BHCs that are properly equipped to provide the BPHS. 2.1 % of 1 St level referral hospitals (H2 and H3) with basic surgical equipment. 2.2 % of CHCs and BHCs that are equipped to deliver BPHS. 0 Government records 0 Performance assessments of health facilities by 3rd party Presence of equipment in BHCs etc. does not reduce outreach activities aimed at delivering services in isolated communities. 3. Definitive results from pilot tests of safe water system and health care financing interventions that aid Government and donor decision making. 4. a) Strengthening communications within and between different levels of MOH. 3.1 High quality reports of rigorously evaluated pilot tests provided to Government, donors, and other stakeholders. 4.1 More regular supervision visits by MOH 4.2 HMIS reports more timely 0 Evaluation studies by 3rd party. 0 Performance assessments o f health facilities by 3rd party MOH supervision reports 0 Results of pilot tests can be effectively scaled up. 0 MOH staff u quipment for expressed purpose. Effective supervision improves performance. 4. b) Management strengthening. 4. c) Accurate and accessible data on outcomes and outputs. 4.3 Knowledge of MOH managers on test of management skills 4.4 Increase in coverage o f BPHS 4.5 Timely collection of data. 0 Performance assessments of health facilities by 3rd party Project records 0 Special evaluation study 0 Household surveys 0 Project records 0 Management given sufficient authority to implement BPHS. MOH officials will have the incentives and slulls to use data to make decisions. 2

9 Narrative Summary Project components I sub-components I. Expand the Delivery of the BPHS 1.1 PPAs with NGOs in 7 provinces with limited coverage 1.2 MOH strengthening mechanism in 3 provinces 11. Equipping the Rural Health Infrastructure 2.1 Provision of equipment for CHCs and sub-centers. 2.2 Provision of basic surgical equipment for district and provincial hospitals Inputs Project Reports Performance assessments of health facilities by 3rd party Project records Financinal Management Reports Supervision Reports Critical Assumptions Components to Outputs There are enough capable NGOs willing to bid on PPAs. Government able to manage large number of contracts. NGOs not constrained by security or political concems. MOH able to release money to NGOs quickly. MOH has clear mechanism for releasing funds to MOH-SM provinces. High quality equipment can be procured quickly Distribution of equipment can be done effectively Pilot Tests of Import ant Interventions US$l.O million 3.1 Effective treatment and storage of drinking water 3.2 Health care financing options IV. Capacity Building and Training 4.1 Strengthening Communications 4.2 Management Strengthening 4.3 Information gathering through household surveys and health facility surveys. US$6.1 million Private sector can respond to opportunities Cultural aspects of these interventions do not limit effectiveness. Communications equipment works as well as in the past. There are enough local stafflorganizations who can help carry out surveys, surveillance, and audits. 3

10 Table 1: Core Development Objectives diarrhea and ARI and the appropriate NOTE: The targets in this table are meant to be indicative and not exact. What will matter is significant progress along these parameters in the project area. nation-wide estimate, *Data Source NID 200 1, na=not available, HHS=household survey, HMIS=health management information system, HFA=health facility assessment, BPHS=basic package of health services, FIC = fully immunized child Table 2: Management Indicators for the Project Type of Indicator Indicator Latest available data IMPACT/GOAL 1 OUTPUT (2006) Targevdate Means of measuring indicator 10. Infant Mortality Rate 165/ % decrease HHS by Moderate and Sever Malnutrition na 40% HHS Rate (under-nutrition) I 12.Coverage of antenatal care - na +30 % points HHS & Proportion of all pregnant women 1 fi-ombaseline HMIS receiving at least one antenatal care visits. 13. Proportion of pregnant women na 130% points receiving at least two doses of from baseline tetanus toxoid 14. Proportion of births attended by na + 10% points skilled attendants (excluding trained from baseline 4

11 Type of Indicator Indicator BPHS DELIVERY 15. TB detection rate (number of sputum positive cases detected as % of target based on estimated prevalence, i.e., case-finding.) 16. % of children 6-24 months who received breast milk and appropriate complimentary food in the last 24 hours. 17. % of children 0-6 who were exclusively breast fed in the last 24 hours. 18. Proportion of mothers having appropriate knowledge about introducing complimentary food. 19. Number of consultations per person per year 20. Measles coverage among children months. 21. DPT3 coverage among children months. - EPI: % of health facilities with all of the following: (i) staff trained to vaccinate; (ii) up to date vaccine register; (iii) vaccine storage facility; (iv) provided routine immunization in last month; (v) evidence of outreach activities BIRTH SPACING:% of health facilities with all of the following: (i) 3 types of contraceptives; (ii) female staff trained in birth spacing with key knowledge ; (iii) birth spacing HMIS forms being used PRENATAL CARE: % of health facilities with all of the following: (i) equipment to carry out proper prenatal care (sphygmomanometer, fetascopel stethoscope, tape measure); (ii) female staff with key knowledge ; (iii) prenatal HMIS being used. TB: % of health facilities with all of the following: (i) staff trained on DOTS with key knowledge ; (ii) TB drugs adequate for 4 months; (iii) TB HMIS forms being used; (iv) up-to-date TB patient follow-up na na na na na na na na 50% +30 % points from baseline +30 % points from baseline +30 % points from baseline 1.o +35% points from baseline +35% points from baseline 10% by end % by end % by end of % by mid of 2006 HFA & HMIS HHS HHS HHS HHS & HMIS HHS & HMIS HHS & HMIS HFA 5

12 ~ Type of Indicator PROCESS INDICATORS Indicator COIIMMUIYTY FOCZ'S: Yo of health facilities with all of the following: (i) CHW training ongoing or complete; (ii) satellite clinic held in the last month; (iii) evidence of supervision of CHWs carried out in last month EOC: % of hospitals: (i) able to perform caesarian sections; (ii) actually carried out 10 CS in last month; (iii) used vacuum extractor in last month % of population that identify PPA provided services as part of the Government's efforts to provide its citizens with services. Difference between coverage of DPT3 between richest half and poorest half of the population Decrease in variation between clusters in HHS in terms of coverage of basic services (Le. reduction in variance) na na na Targetldate 50% from baseline Means of measuring indicator *** Data Source NID 2001, na =not available, HHS=household survey, HMIS=health management information system, HFA=health facility assessment, BPHS=basic package o f health services 11. PROJECT DESCRIPTION AND BENEFITS A. Components in Detail 1. To help accomplish the above objectives, the proposed project will: (i) help expand the delivery of the basic package of health services aimed primarily at women and children through partnerships with Non-Govemmental Organization (NGOs) and through strengthening the Ministry of Health (MOH) efforts to improve service delivery; (ii) equip the rural health infrastructure to ensure that all health facilities have the equipment to provide the Basic Package of Health Services (BPHS); (iii) rigorously pilot test on a reasonably large scale the implementation of innovative approaches such as water treatment and storage; and (iv) help build the capacity of the MOH, particularly at provincial level, including the provision of communications and office equipment and monitoring and evaluation. Component 1: Expand the Delivery of the Basic Package of Health Services 2. This component will help expand the coverage of basic health services and ensure that the rural population receives the BPHS, delivery of which, the MOH has made its highest priority. The BPHS as defined by the MOH comprises: (i) preventive services such as immunization, micronutrient supplementation, and promotion of insecticide treated bed nets against malaria; (ii) 6

13 promotive health services such as increasing prevalence of breast-feeding and use of family planning; (iii) basic curative services such as treatment of acute respiratory tract infections, diarrhea, other childhood illnesses, and tuberculosis; and (iv) reproductive health services such as prenatal care, emergency obstetrical care, and post-partum care. These services will be delivered through fixed facilities, outreach activities, and community-based interventions. The MOH has selected seven under-served provinces (see Table 3) spread over different regions of Afghanistan which will have services enhanced through performance-based partnership agreements (PPAs) with NGOs. Another three provinces will have services strengthened in a phased manner through an MOH-Strengthening mechanism (MOH-SM). Table 3: Seven Under-served Provinces where PPAs will be Implemented Province 1 Population IKAPISA I 359,700 I /FARAH I I WARDAK BADGHIS 41 3, [TOTAL I 2,764,300 I 3. PPAs will be implemented in the following manner: (0 (ii) The MOH will use the published BPHS as the defined services and describe the recording and reporting requirements. As part of the BPHS the PPA will also cover operating the provincial hospital, including emergency obstetrical care and trauma management. In addition, the PPA NGO will be responsible for carrying out training aimed at ensuring that the staffing patterns envisioned in the BPHS are achieved for auxiliary mid-wives, community health workers (CHWs) and traditional birth attendants (TBAs). The MOH has defined a set of indicators for judging whether the BPHS is being successfully delivered. For example, in immunization this includes both coverage targets and process indicators, such as proper recording and proper disposal of used needles, that could be measured during supervisory visits and third party assessments audits. (iii) After discussions with stakeholders, including local and intemational NGOs, MOH, through its grants and contracts management unit (GCMU), will finalize the bid documents for the PPAs. These will include the selection criteria for NGOs (NGOs includes, in this context, other private sector entities), such as: (a) track record in delivering primary health care services; (b) quality of the key management personnel (the three senior managers to be involved in the project); (c) knowledge of the PPA area; (d) quality of the strategic plan for accomplishing the targets explicit in the PPAs; and (e) presence of audited accounts, demonstrated logistics capacity, etc. 7

14 MOH will carry out a competitive bidding process where local and international NGOs, as well as any interested private sector entity could freely compete for the PPAs based on the quality and cost of their technical proposals (quality and cost based selection). MOH at the central level will evaluate the bids using the criteria in the bid documents. Representatives of United Nations (UN) agencies, NGOs, and the donor community will be included in the evaluation committee(s). MOH will sign a three-year agreement with the winning bidder for the bid amount and there will also be a performance bonus of up to 10 percent based on exceptional improvements in service delivery. The bonuses will be allotted based on the results of health facility surveys every six months and on the results of the follow-on household surveys. The NGO will receive regular payments based on satisfactory progress as judged by frequent field supervision carried out by MOH staff and a third party. Monitoring and evaluation of NGO performance will be carried out through baseline and follow-up household surveys, independent health facility assessments carried out by a third party, and community feedback mechanisms. Among the outcomes of interest is whether the services provided by the NGOs are perceived to be part of the Government s efforts. The payment of performance bonuses will depend on objective accomplishments from the household and health facility surveys. Results of the household and health facility surveys will be made available to the public through newspapers and other media. 4. MOH-SM: In the three provinces selected for this approach, the aim will be to allow MOH staff to expand the health services in a phased manner. Increasing amount of resources will be provided to the selected provinces based on their demonstrated capacity to use resources effectively and maintain proper accounts. Similar to the PPA approach, the MOH will use the provision of the BPHS as its primary goal in these provinces and use already selected indicators to judge success. In addition, (i) the MOH intends to empower provincial health directors and their staff to develop an annual plan and budget with monthly work plans after receiving training on planning and budgeting. A standard format will be provided and the planning and budgeting process will be assisted by a consultant. The final work plan and budget will have to be approved by the central MOH; (ii) the work plan and budget will have to be consistent with Government rules and regulations, including: (a) funds could only be used for expenditures directly related to delivery of the BPHS; (b) no new MOH staff could be recruited although health workers could be hired on a contractual basis within MOH recommended salary scales; (c) any incentives paid to MOH staff will have be explicitly permitted under Government decrees (MOF is working on this issue); (d) procurement of goods and services will have to follow Government guidelines; and (e) any equipment or drugs procured will have to be on the essential drug list and the MOH equipment list; 8

15 (iii) disbursement of funds will be done using a mechanism approved by MOF and acceptable to the Bank and in accordance with the approved work plan and budget. The use of funds will be externally audited; (iv) the selected provinces will receive ongoing technical assistance to help them implement their work plan (see component 4 for more details); and (v) monitoring and evaluation of provincial MOH performance will be carried out in the same way as the PPAs. 5. Coordinating Mechanisms at Provincial Level. The intention behind the PPAs and MOH- SM is not to displace any existing efforts but rather to expand and consolidate service delivery. To help ensure careful coordination among service providers, the following strategies will be employed: (i) a provincial coordination committee (PCC) will be established chaired by the provincial health director (PHD) and comprising the PPA winning bidder, and other NGOs operating in the province; (ii) in PPA provinces the PHD will be assisted by the PPA NGO in coordinating ongoing activities; (iii) NGOs bidding for the PPAs will have to indicate in their technical proposals how they will work with the Provincial Health Department and NGOs already on the ground in the particular province; (iv) NGOs already active in the province where they are bidding will receive additional points on their technical score; (v) NGOs coming into the province after the PPA or MOH-SM is in place will only be able to do so with agreement of the PCC and GCMU; (vi) a simple system of mediation (comprising one representative each from the central MOH and the NGO community) and arbitration (comprising central level MOH officials and representatives of the NGO community and donor and UN agencies) will be implemented; and (vii) the PPA NGOs or Provincial MOH will be allowed to support the work of other NGOs in the province if they obtain permission from the central MOH. The NGO with the PPA and the provincial MOH will have an interest in ensuring that progress is made on the core output indicators and the other NGOs will presumably be interested in obtaining additional resources to support their work. Component 2: Equipping the Rural Health Infrastructure 6. Currently most comprehensive health centers (CHCs), basic health centers (BHCs) and maternal and child health centers are missing simple but critically important equipment. Without this equipment it will be very difficult for NGOs or the MOH to deliver the entire BPHS. United States Agency for International Development (USAID) has indicated to the TISA that it has the funds to rehabilitate and/or construct about 500 health facilities over the next three years, although it could not provide equipment or furniture for these facilities. Hence, project funds will be used to provide basic equipment and furniture for CHCs and BHCs based on lists developed by the MOH. The equipment provided will be simple with few moving parts so that maintenance and repair can be done locally. The project will also finance basic surgical equipment for district and provincial hospitals not being provided equipment by other agencies. The list of hospital equipment will be developed by MOH in consultation with experts, including the International Committee for the Read Cross (ICRC), within a budget envelope of about US$20,000 per hospital. Most of this equipment will be surgical instruments and the like that requires limited maintenance. 9

16 Component 3: Pilot Tests of Important Innovations 7. While the BPHS will address a large proportion of the current burden of disease, new interventions will need to be developed and rigorously tested to address remaining causes of ill health. One area where field testing of new interventions makes sense is the prevention of diarrhea where recent work provides opportunities to prevent its occurrence in the first place even in areas without good water supplies. In addition to disease interventions, it will be useful to pilot test health care financing interventions. This will help the MOH shift from focusing on relief efforts to addressing development issues and will offer guidance on sustainable health care financing in the longer term. 8. Diarrhea Prevention. Oral rehydration salts (ORS) may be helpful in preventing deaths from diarrhea but will have no effect on preventing diarrhea in the first place. Improving the quality of drinking water will be important but it will take time and considerable resources to ensure most households in rural areas have access to safe drinking water. Data collected from various sources by the Centers for Disease Control and Prevention (CDC) indicates that less than 5 percent of rural households have access to improved water supplies. Hence, it makes sense to test appropriate technologies for safely treating and storing drinking water. CDC experts have developed a safe water system (SWS) that uses dilute sodium hypo-chlorite solution to disinfect drinking water that can then be stored in specially designed narrow-necked containers that prevent re-contamination. The storage containers also have a spigot and built-in soap dish that facilitates hand washing. Recent evaluations in other countries have shown that the SWS approach can reduce the incidence of diarrhea by 44 percent to 85 percent. It will be important to see whether similar results can be obtained under field conditions in Afghanistan. 9. To test this approach, experts from CDC will work closely with the MOH, to carry out a field trial of the efficacy of the SWS in Afghanistan, particularly in comparison to simply improving the water supply. Forty-five villages will be randomly allocated to one of three interventions: (i) the SWS without improvement in water supply; (ii) improvements in water supply without the SWS; and (iii) a combination of both improved water supply and the SWS. This study will provide information on how improving water supplies, which is expensive and may not happen in much of Afghanistan for many years, compares to the SWS. The study design will be reviewed by the MOH and a CDC ethics review committee. In addition, all the SWS villages will receive improved water supplies after the study was completed. During the efficacy study the disinfectant and special container will be provided for free, however, PPA NGOs will be encouraged to implement the SWS on a pilot basis to observe what happens to use when subsidies are reduced. If the efficacy trial is successful project funds and funds from other donors will be used to support the social marketing of the sodium hypo-chlorite solution and the storage containers. 10. Health Care Financing Innovations. To ensure the sustainability of public health activities, mechanisms will have to be found to generate funds from local sources. Experience in other countries indicates that community-based health insurance is difficult to manage and has often not been successful. User charges also have a mixed track record although, they have often been efficient and equitable when implemented by NGOs. Another mechanism that has rarely been used but has been quite successful is a community health contribution. Local community leaders agree on and collect a health contribution from households in their own communities soon after the harvest when households have cash. Households that are judged too poor will be exempted from the contribution and wealthy households will be expected to contribute more. In Niger, introduction of 10

17 a similar health contribution resulted in a doubling in the use of services by the poorest 25 percent of the population. There is little experience with the latter approach in Afghanistan and so it is important to pilot test this approach against alternatives. 11. In order to provide the MOH with credible data on how various alternatives work, a study will be undertaken in which six BHCs in each PPA province will be allocated to one of three groups: (i) user charges; (ii) community health contribution; or (iii) neither user charges nor community health contributions). The study will examine the effects of these approaches on beneficiaries, particularly the poor, and the amount of revenues generated. Component 4: Capacity Building and Training 12. Helping to ensure that the BPHS is broadly delivered and that other public health functions are carried out effectively will require that the capacity of the MOH, particularly at central and provincial levels, will need to be extensively strengthened. To accomplish this capacity building and training, the project will: (i) strengthen the communications within and between provincial, regional, and central offices of the MOH; (ii) provide ongoing technical assistance to the provincial MOHs and NGOs with PPAs in order to strengthen their management capacities; and (iii) help collect information for the MOH and other stakeholders on the performance of the health care system. 13. Strengthening Communications. Regardless of their ultimate role, the provincial health offices of the MOH need to be significantly strengthened. Currently they have limited contact with the MOH, the managers have limited experience or knowledge of management and supervision, and they lack the resources to oversee their jurisdictions. In order to address these weaknesses, the project will provide the following: (i) high frequency radios and computers powered by solar panels for voice-data communications will be provided to all the provincial offices. This technology is being successfully used by the World Health Organization (WHO) and has been trouble free. Regardless of future telecommunications plans such a data radio link would: (a) be of critical importance during natural or man-made disasters; (b) facilitate communications between the central, regional, and MOH offices which will help inform decision making and policy dialogue (it will also create an MOH that reflects all of Afghanistan); (c) assist with delivery of time sensitive materials such as disease surveillance reports; and (d) facilitate distance education for provincial staff. When regular telecommunication links are established to the provinces, this system will provide a back-up in case of emergency; and (ii) transportation to facilitate supervision, monitoring, and emergency response. Provinces that do not have vehicles will be provided a heavy duty vehicle suitable for off-road travel (a double cab pick-up type truck). The MOH will develop guidelines for the responsible use and maintenance of such vehicles. 14. Management Strengthening. Management capacity at the central and provincial levels of the MOH will be strengthened through technical assistance and training. Technical assistance, comprising a long-term international consultant and local experts, will be provided to the GCMU to help implement the PPAs and the grantdcontracts of other donors. Technical assistance to strengthen overall management will be provided to selected provincial and central offices, as well as 11

18 to NGOs who win PPAs. A long-term international consultant and two local consultants will be recruited by the MOH. Training courses, either through distance learning or abroad, will be provided to selected M OH staff. The individuals selected for training will already have facility in English, exhibit leadership potential, and will have agreed to continuing to work in the MOH for a time specified in advance by the MOH. Selection of training candidates will be done in a transparent manner by the Executive Board of the MOH. 15. Information Collection, Monitoring, and Evaluation. In order to provide MOH and other stakeholders with the information they need to assess progress, the project will support a number of ways of collecting information: A household survey will be carried out to collect data at provincial level on the indicators described in Tables 1 and 2 (although impact indicators will only be available at national level and by groups of provinces). The survey will be carried out at the beginning of the project and repeated 30 to 36 months later by third parties. The questionnaire will be used to collect information related to education, access to clean water and sanitation, and other factors that directly effect human development. The first round of the survey will likely be financed by UNICEF and the World Bank education project and the second round will be financed by this project; (ii) Health facility assessments will also be carried out by a third party contractor and will examine quality of care, knowledge of staff, maintenance and repair of the facilities, and availability of drugs and supplies. These performance audits will be performed on a sample of facilities in each province at baseline, 6, 12,24, and 36 months later; and (iii) Systematic supervision of health facilities will be carried out by provincial and central level MOH staff using a standardized approach that will assess whether the facility is providing the BPHS. The project will provide assistance in developing the standardized approach, training for supervisors, and transportation costs for central MOH staff, including high level officials. 16. Project Costs. The estimated cost of the project with contingencies is about US$59.5 million and is described in more detail in Appendix 1. B. Benefits of the Project 17. The project will provide benefits to an underserved total population of about 4.5 million people. These benefits will mostly take the form of reductions in under-5 and maternal mortality and morbidity, since the emphasis of the BPHS will be on maternal and child health. 18. An attempt was made at estimating the number of deaths of women and children that will be averted in the with-project situation. Due to a severe lack of reliable data for Afghanistan, a number of assumptions based on data obtained from developing countries with similar circumstances were used for baseline health status indicators. Conservative estimates of the impact of the Project for decreases in maternal, infant, and child mortality rates were used in the calculations. Baseline health status indicators and targets by the end of the project period are taken from Table 1, Core Output Indicators for the Project, where available. The following assumptions were made for the estimates: 12

19 19. Population and Mortality Assumptions: Current population of the ten participating provinces : About 4.5 million. Annual population growth rate: 3.5 percent Women of reproductive age (WRA): 22 percent Infants: 3 percent Children under-five: 18 percent Maternal mortality ratio (MMR): 1600 maternal deaths per 100,000 live births Infant mortality rate (IMR): 165 per 1000 live births Under-five mortality rate (USMR): 250 per 1000 Malaria accounts for 6 percent of under-five mortality rate Nationwide deaths per year from tuberculosis: 25,000; TB deaths in the project area assumed proportional to national figure. Acute respiratory infection (ARI) accounts for 25 percent of under-five mortality rate Diarrhea accounts for 25 percent of under-five mortality rate Vaccine preventable diseases account for 10 percent of under-five mortality rate 20. Effects of Project on Mortality. For each of the following, it is assumed that the Project targets are met by the end of the project period, with incremental advances in the first two years: (i) Maternal health and birth spacing: 20 percent decrease in maternal mortality ratio (MMR) for the targeted 50 percent of women; (ii) Tuberculosis: 80 percent cure rate for the 50 percent (tuberculosis) TB diagnosis rate target; (iii) Malaria: 40 percent target bed net coverage for under-five children results in 30 percent decrease in deaths attributable to malaria; (iv) Vitamin A: 23 percent decrease in mortality rate for children six months to 59 months old; (v) Breastfeeding Promotion and Weaning: 10 percent decrease in IMR; (vi) ARI: 10 percent decrease in U5MR; (vii) Diarrheal diseases: 10 percent decrease in U5MR; and (viii) Immunization: 10 percent decrease in the U5MR for the targeted 65 percent of the under-five population. 21. Under the above assumptions, it was estimated that the project will enable averting about 3,700 deaths of women of reproductive age and 65,000 deaths of children under five years of age in the three-year project implementation period alone. Of these deaths, about 1,500 deaths of women of reproductive age and 27,000 deaths of under-five children will be averted in the third year of project implementation. Beyond project completion, and provided that the activities initiated under the project are sustained (with the same degree of coverage and effectiveness), it could be expected that every year a number of additional deaths will be averted of a magnitude similar to the number 13

20 of deaths averted in the third year of project implementation. In view of conceptual difficulties in assigning a monetary value to deaths averted, no estimates of the project s economic benefits associated with deaths averted were attempted IMPLEMENTATION ARRANGEMENTS A. Organizational Structure 22. Central Level. The project will be implemented over a three year period by the MOH. MOH at the central level will have overall responsibility for project oversight and supervision through its Executive Board. The director of the MOH s Policy and Planning Department will be the Project Manager and will have responsibility for project implementation and will be the focal point for coordination. The day-to-day responsibilities for project implementation will rest with the GCMU manager, and heads of the relevant administrative units of the MOH (see Table 3). 23. Provincial Level. The Provincial Coordination Committee (PCC) will ensure: (i) coordination of all donor and NGO support in the province; (ii) reduce duplication of efforts; (iii) prevent gaps in service delivery; and (iv) expand delivery of the BPHS. The provincial health director will chair the PCC. MOH has asked donors to take on the role of focal donor for a province or set of provinces. This will entail either directly, or through an NGO, supporting the PCC in carrying out its functions and building the capacity of the provincial health department. 24. Some of the project activities will be executed under contracts that will have to be managed by the MOH and this will be handled by the GCMU. The Project will support the fimctioning of the GCMU with long-term technical assistance and needed physical resources. In addition, the MOH will be able to take advantage of the expertise of Crown Agents who have a Bank-financed contract with the Government to provide ongoing procurement expertise. The implementation arrangements for each component are as follows and are summarized in Table 4: 14

21 Component/subcomponent 1. PPAs 2. M OH Strengthening mechanism 3. BHC & sub-center equipment 4. Hospital Equipment 5. Safe water system efficacy study Table 4: Responsibility for Implementation and Supervision (with assistance from Crown Agents) " I I MOH Procurement Unit (with assistance from Crown Agents) MOH through Unicef with CDC technical assistance office MOH PHC Unit a) MOH Environmental Health Unit b) special study unit Evaluation firm/ organization a) Auditing firm b) 3rd party Evaluation firm/ organization 6. Health care financing NGOs with PPA, MOH's MOH - Planning party evaluation pilots Health Financing Unit Department firm/ organization.7. Training of CHWs NGOs with PPA MOH - human 3'd party evaluation and auxiliary mid-wives- I resource firm/ organization development unit 8. Communication Contractors MOH - IT unit strengthening 9. Management strengthening Individual consultants I MoH- GCMU 10. Household Surveys and evaluations 3rd party evaluation firm/ organization with MOH or MOH- Planning Department TISA entity CDC = Centers for Disease Control and Prevention, TISA = Transitional Is: nic Government of Afghanistan, GCMU = Grants and Contracts Management Unit, MOH = Ministry of Health B. Implementation Procedures 25. Expansion of Delivery of the BPHS (Component 1) will be done through two modalities: (i) PPAs through NGOs selected on a competitive basis. The MOH's contracting unit (GCMU) and the provincial directors of the MOH will evaluate the proposals with technical assistance from UN agencies, and a representative (non-bidder) of the NGO community. The GCMU and provincial directors will also select the winning NGOs and will monitor and supervise their performance. Training of female staff will be 15

22 carried out utilizing the competency-based training materials being finalized by MOHs Human Resource Development Unit. (ii) MOH-Strengthening Mechanism will expand service delivery through the provincial health departments, with technical assistance. MOH at the central level will monitor and supervise performance. Semi-annual independent evaluations will be carried out at the health facilities. Financial mechanisms will be established to facilitate the transfer of funds by the GCMU to the provincial level. (iii) Environmental Management Plan. The activities under this Plan will be implemented by the contracted NGOs, under the PPAs, and by the MOH for MOH-SM health facilities. MOH s Environmental Health Unit will monitor and supervise implementation of the Plan. 26. Equipping the Rural Health Infrastructure (Component 2). Medical and office equipment and vehicles for MOH, at the central and provincial levels, will be procured by the MOH s Supply and Logistics Unit, with technical assistance from the procurement agent (Crown Agents), and will be distributed by the suppliers to the lowest possible administrative level. 27. Test of Important Innovations (Component 3). Two pilot tests of important innovations will take place: (i) Safe Water System (SWS) field efficacy and effectiveness study (Component 3) will be carried out through the CDC Foundation, in cooperation with, and under the supervision of the MOH s Environmental Health Unit and the Special Studies Unit. (ii) The health care financing pilot study will be carried out through NGOs (under the PPAs) and will be evaluated by the third party evaluation firm, in coordination with the Health Financing Unit of the MOH. 28. Capacity Building and Training (Component 4). Activities under this component will be coordinated at the MOH s central level, by the Planning Department. (0 Procurement of goods and services will be done by the MOH s Procurement Unit with technical assistance from procurement agents. (ii) The GCMU will monitor the implementation of the technical assistance and ensure that contractors and suppliers are paid on a timely basis, and also, that transfer of resources to the Provincial Health Departments takes place efficiently and in a timely manner. (iii) Household surveys and semi-annual health facility evaluations will be implemented by firms/organizations hired on contract and supervised by MOH s Planning, Monitoring and Evaluation, and HMIS Unit. 16

23 C. Procurement 29. Given limited experience and procurement capacity of the MOH which is responsible for implementing the proposed Project, the TISA procurement agent (Crown Agents) will work on behalf of, and closely with, the MOH to carry out some of the procurement, where it has relevant expertise and experience. The following procurement methods will be used: (0 Services. There will be seven packages for the PPAs worth about US$40 million and this will be done using quality and cost based selection (QCBS). The MOH will prepare a shortlist of NGOs, based on an evaluation of expressions of interest to be received by the middle of May A draft Request For Proposal (RFP) has been prepared and reviewed by the Bank, but complete details in respect o f these packages are still to be finalized by the MOH. Issuance of the RFP is expected by around June 1, 2003 so that awards could be finalized by mid-august, Implementation of the SWS pilot (US$O.8 million) will be done by the CDC on a sole source basis due to their unique expertise in this area. The CDC developed the SWS and has overseen its implementation in more than 15 countries worldwide, (ii) Procurement of Goods (US$5.4 million). These items include medical and hospital equipment and vehicles for which international competitive bidding (ICB) procedures will be used to a value of US$4.5 million. International and/or National Shopping (Isms) procedures will apply for procurement of office equipment, radios, computers and furniture (US$O.9 million). Equipment supplies will need to be synchronized with the construction period of the new facilities to be built under USAID funding over the three-year period of proj ect implementation, for proper utilization. (iii) Individual Consultant Services (US$1.2 million). Two international consultants will be recruited using Quality Based Selection (QBS) procedures. This selection process will include: (a) inviting expressions of interest by advertisement in the Development Business and the national press: (b) preparing short lists; and (c) awarding contracts to them. D. Financial Management and Audit 30. The financial management assessment and action plan is in Appendix 2. IV. EXPERIENCE OF CONTRACTING WITH NGOs FOR HEALTH SERVICE DELIVERY 31. This section briefly describes the experience in other post-conflict, low income settings, of contracting with NGOs for delivering primary health care services. The results of evaluations in Cambodia, Guatemala, and Haiti, are presented. In addition, the results from nutrition projects in Senegal and Madagascar which also used contracting with NGOs are also discussed. 32. Cambodia. Many years of war and political upheaval left Cambodia with a limited health infrastructure, particularly in rural areas. Health worker morale was poor, management capacity at the district level was very weak, and access to service was inadequate. A 1998 demographic and health survey found that, nation-wide, only 39 percent of children were fully immunized. To address these serious issues, the MOH devised a coverage plan which included: (i) the 17

24 construction or rehabilitation of health centers; (ii) merging smaller administrative districts into operational districts with a population of about 150,000; and (iii) developing a minimum package of activities (MPA) to be carried out at health center and comprising basic preventive and curative services such as immunization, family planning, antenatal care, and provision of micronutrients. 33. Approaches Used: Using loan funds from the Asian Development Bank, the MOH tested three approaches to improving service delivery: (i) Contracting Out (CO) in which the contractors had complete line responsibility for service delivery, including hiring, firing and setting wages, procuring and distributing essential drugs and supplies, organizing and staffing health facilities. (ii) Contracting In (CI) in which the contractors worked within the MOH system and had to strengthen the existing district structure. The contractors could not hire or fire staff, although they could request their transfer. Drugs and supplies were provided to the district through the normal MOH channels. The contractor received a budget supplement of US$0.25 per capita per year to spend on incentives for staff, operating expenses, etc. (iii) ControYComparison (CC) in which the management of services remained in the hands of the District Health Management Team (DHMT) and drugs and supplies continued to be provided through normal MOH channels. As with the CI, the DHMT receives a budget supplement of US$.25 per capita per year to spend on incentives for staff, operating expenses, etc. Technical assistance and training on management were provided to the DHMT. 34. Evaluation Methodology. Twelve districts were randomly assigned to the three different approaches and baseline household and health facility surveys were carried out in late Contracts were signed with the NGOs in December 1998 and follow-on surveys were carried out in August 2001, about 2.5 years after implementation began. The surveys were carried out by a third party and data was collected on the parameters stipulated in the contract. Households were divided into poor or not poor based on observable assets. 35. Results. As can be seen in Figure 1, the districts were very similar at baseline but after 2.5 years of implementation the CO districts were providing many more services than the C I districts which were providing significantly more services than the Government was in the control districts. This pattern held for all the indicators stipulated in the contracts (see Figure 2). The cost of CO was about US$4.50 per capita per year to the Government, however people in the community were paying significantly less out of their own pockets (see Figure 3). The difference in cost between the CI and control districts in cost was the price of the management contracts with the NGOs. 18

25 A, Figure 1: Percent of Poor People Sick in the Last Month Who Used Health Facility 0 Baseline Control CI CO Figure 2: Change in Key Indicators, Follow-on Minus Baseline in Percentage Points 6o 1 50 I I ANC TT2+ HF del. Birth EPI, FIC ~ Spacing % Utilization 19

26 Figure 3: Annual Per Capita Expenditure on Health Care (US$) Out-of-pocket Gov tldonorrvgo 5 0 Control CI co 36. Guatemala. As part of the agreement ending many years of civil war, the Government of Guatemala was obliged to improve the delivery of services to the indigenous people who make up about 50 percent of the population. The indigenous communities suffered from infant mortality rates that were 50 percent higher than that of the rest of the country. To improve the delivery of primary health care, the Government tried three approaches: (i) in remote areas it contracted out service delivery to NGOs (this was called the direct method and resembles contracting out ); (ii) in less remote areas it gave NGOs contracts to manage existing health facilities (this was called the mixed approach and was similar to contracting in ) based on a per capita fee; and (iii) also in the less remote areas, it allowed Government officials to manage some of the facilities (this was called the traditional approach and resembled the control group in Cambodia). 37. Evaluation Methodology. There was no baseline data available in Guatemala, however three years after the contracting process began, household surveys were carried out in randomly selected areas implementing the three different approaches. Unfortunately, the areas implementing the direct approach appear to have been more isolated and had less physical access to services than the other experimental groups (see Table 5). Table 5: Characteristics of the Areas Implementing the Different Approaches used in Guatemala Household Characteristics I Traditional 1 Mixed 1 Direct 1 1 % Mavan SDeaking. I 96 % Illiterate % of households with MOH facility less than 10 km. away % of households with MOH facility more than 21 km away % of households in areas with difficult access Results. It appears that the mixed approach performed better than the Government providing services itself in the less remote areas where these two approaches were implemented. It is not clear whether the direct approach worked well or not given the absence of baseline data and the fact that the areas where it was implemented were more remote. This study is usefbl because it was carried out in nearly half the country and so covered a population of about five million. 20

27 Table 6: Results of the Different Approaches to Service Delivery in Guatemala Parameter % Coverage of prenatal care % Tetanus toxoid coverage among pregnant women % coverage among children of DPT3 Immunization % coverage among children of Measles Immunization % of children with diarrhea receiving ORT I Traditional I Mixed I Direct I Haiti. USAlD had been supporting NGOs in Haiti to provide health services in the countryside, because Government service delivery post-conflict had nearly ceased. However, USAID was somewhat disappointed in the performance of these NGOs who were paid on the basis of inputs. In an attempt to improve performance, it offered NGOs a chance to receive 95 percent of their contract payment in exchange for the opportunity to receive performance bonuses worth 10 percent of the contract payment if they achieved specific targets for service delivery. Three NGOs accepted the offer and baseline and follow-on surveys were carried out by a third party, seven months apart. 40. Results. As can be appreciated from Table 7, all three NGOs made truly remarkable progress in improving child immunization coverage, given the short period of observation. The average increase of 32 percentage points will be expected to have a large impact on child health. However, for other services the picture is mixed. On prenatal care no progress was made and for family planning discontinuation rates (the lower the better), and two of the three NGOs made significant progress while the other actually lost ground. Table 7: Baseline, Target, and Follow-up Data (in Percent) for Three NGOs in Haiti Parameter NGO #1 NGO #2 baseline target followup baseline target followup Immunization Coverage Prenatal Care Coverage Family Planning Discontinuation Rate NGO #3 baseline target followup Madagascar and Senegal. Marek et a1 described two World Bank supported projects in Madagascar and Senegal which contracted with NGOs to provide nutrition services for women and children. The services included: (i) monthly growth monitoring for children; (ii) weekly health and nutrition education activities for the women; (iii) referral of unvaccinated children, pregnant women, severely malnourished children, and beneficiaries who were sick; and (iv) supplementary feeding for malnourished children. The projects covered 311,000 and 23 1,000 women and children respectively. 42. Results. There were non-project (control) communities. However, these neighborhoods were contaminated by large proportion of children who participated in the program. Before and 21

28 after surveys in one project community in Senegal found that severe malnutrition declined from 6 percent to 0 percent and moderate malnutrition declined from 28 percent to 24 percent in 17 months. The study also found that there was a large reduction in malnutrition rates among cohorts of proj ect participants. 43. Conclusions from the Literature. From the available studies it appears that contracting with NGOs to deliver health or nutrition services is effective and the improvements can be achieved rapidly. However, there are methodological concerns with all the studies: (i) the evaluation in Guatemala suffered from a lack of baseline data and the likelihood that the most difficult communities were contracted out; (ii) the study in Haiti from a likely volunteer bias among the NGOs and a lack of control areas; and (iii) the study in Madagascar and Senegal from the lack of an uncontaminated control group. Only the study in Cambodia rigorously compared NGO provision of services to government provision and found that NGOs performed better in terms of effectiveness, efficiency, and equity. Based on the available information, it appears likely that contracting with NGOs to deliver services will provide better results than government provision of the same services. V. ENVIRONMENTAL AND SOCIAL SAFEGUARD ISSUES 44. This project is being prepared under OP8.50 Emergency Recovery Assistance. Nonetheless, the procedures and approaches being proposed under the Environmental and Social Safeguards Framework for other projects in Afghanistan (infrastructure, education, and community driven development) will also be applied to this project. The project is classified as environmental category "B", and safeguards classification "S2". 45. Environmental Issues. Most of the environmental issues in the proposed project relate to the management of wastes generated in BHCs and rural hospitals. The most important medical waste arising from these sources will be sharps (needles, syringes and lancets) and other pathological materials such as used dressings. The main approach to dealing with health care waste will be segregation of pathological materials and deep burial. Sharps will be collected in safety boxes which will be buried deeply according to WHO guidelines. A draft environmental plan has been developed and disclosed to the public which envisions three phases: (i) pilot testing of simple and appropriate approaches during the first year of the project with guidelines and training modules developed based on field experience; (ii) widespread dissemination of and training on the guidelines will be carried out during the last two years of the project; and (iii) a longer-term development of an Action Plan for Management of Health Care Waste based on analysis of waste volume and field experience. The procedures to be followed for the collection and disposal of wastes will be included in the PPAs and monitored as part of the third party performance audits of health facilities. 46. Indigenous Peoples. In order to ensure that all ethnic groups obtain equitable benefits from project investments, the MOH will: (i) ensure that the distribution of BHCs by district is fairly and transparently decided; (ii) ensure that PPAs are differentially focused on provinces which are currently under-served (many of which have significant populations of ethnic minorities); and (iii) use the results of household surveys to gauge the access of services to the different ethnic minorities and have the MOH and NGOs make course corrections where needed. 22

29 ~ Item PPAs (per capita) Training of Female Health Workers PPA sub-total MOH-SM APPENDIX 1: PROJECT COST BY COMPONENT Component 1: Expansion of Basic Health Services I Year 1 I Year2 I Year3 I Total 1 Total Newly Constructed Health Facilities MCHCs BHCs Existing Health Facilities Emergency Obstetric Care in Hospitals ( lst referral) MOH clinics Total 1 3,3 00,000 13,3 00,000 13,3 00, ,900, , , , ,000 13,400,000 13,500,000 13,600,000 40,500, ,500,000 4,500,000 6,000,000 13,400,000 15,000,000 18,100,000 46,500,000 Component 2: Equipping the Rural Health Infrastructure Item 1 Year1 I Year2 I Year3 I Total 1 100, , ,000 1,000, , , ,000 1,200, I 1,265,000 I 1,120,000 I 1,300,000 13,685,000 I Item Safe water system pilot Health care financing pilot Total Year 1 Year2 Year3 Total 0 500, , , , , , , ,750 1,012,500 Component 4: Capacity Building and Training Item Strengthening communications within MOH Management strengthening Data Collection Total Year 1 Year2 Year3 Total 1,650, , ,000 1,850, ,000 1,124, ,000 2,895, , ,000 1,050,000 1,350,000 2,580,000 1,424,000 2,091,000 6,095,000 23

30 APPENDIX 2: FINANCIAL MANAGEMENT, AUDIT, AND DISBURSEMENT ARRANGEMENTS Country Issues 1. Since there is no Country Profile of Financial Accountability (CPFA) or Country Financial Accountability Assessment (CFAA) for Afghanistan, and there is inadequate knowledge of country issues and related strengths and weaknesses, reliance is to be placed on altemate compensating controls to help ensure that the Project s financial objectives are accomplished. Financial management capacity in the country is not yet fully functional. Mitigation measures taken by the Interim Administration include the engagement of a Financial Management (FM) Agent under the recently approved Intemational Development Agency (IDA) financed Emergency Public Administration Project. Under these contracts, two intemational Agents-Financial Management and Audit-approved by Bank regional management are responsible for working with the Transitional Islamic State of Afghanistan (TISA) line ministries to carry out these core functions. Financial Management Arrangements 2. Financial management and audit functions for the proposed project will be undertaken with appropriate support from the FM Agent and the Audit Agent. The FM Agent will be responsible for assisting the MOF to maintain the accounts for all Government expenditures, including IDA-financed projects and the proposed Project, in addition to building capacity within TISA for these functions. To supplement this function, a Chief Financial Adviser (CFA) with extensive international public sector financial experience will be engaged in the MOH to coordinate financial management and reporting for the Project. The government s budgeting and accounting systems will be used, and systemic accounting and expenditure reports will be supplemented with more detailed spreadsheets and analyses as deemed necessary. Quarterly Financial Monitoring Reports will be prepared by the MOH s accounting unit (the Budget and Financial Management Unit), consolidated by the CFA, reviewed and approved by the MOF, and supported by the FM Agent. Strengths and Weaknesses 3. In the Interim National Health Policy , the MOH sets as its first goal: stewardship of the health sector by the MOH to ensure transparency, accountability, advocacy, and regulation. The engagement of the FM Agent and recruitment of the CFA, along with the TISA s commitment to transparent and accountable financial management, are strengths of the project s financial management system. System protocols and procedures will include preventive controls as far as is practical in the existing environment. Further, the project s program of social controls, health surveys and independent field monitoring by journalists and non-governmental organizations (NGOs) will provide additional security that transgressions will be discovered. The MOF has also expressed his preference for the amounts being provided to the provincial health departments to be publicized. Transitional Islamic Government of Afghanistan, Ministry of Health, Interim Health Strategy, : A Strategy to Lay Foundations (February 2003) 24

31 4. The weaknesses and suggested corrective action plan are set out below under the sections Accounting Challenges and MOH Strengthening and Suggested Actions. Project Staffing 5. The CFA will provide a proper interface and systems support to the MOH to assist its performance on the Project s necessary financial management functions. The MOH has selected seven under-served provinces (Kapisa, Farah, Badghis, Nimroz, Hilmand, Wardak, and Sari-Pul) and will select another three provinces, to have basic health services enhanced in one of two ways. In seven provinces NGOs2 will be recruited to deliver services under performance-based partnership agreements (PPAs). In the other three provinces, a MOH strengthening mechanism (MOH-SM) will be implemented in which the provincial health departments will have their capacity strengthened and provided the resources to implement an annual plan that they devise. 6. At the MOH, program monitoring and oversight will rest with the BFM under the Management and Administration Department, and reconciliation of the grant transfers and budgetary allocations will be the responsibility of the Grants and Contracts Management Unit (GCMU) under the Policy and Planning Department. Following the current reorganization of the MOH, the staff and capacity within these units will be increased and strengthened in order to perform the required management, work, checks, balances and reconciliations of project expenditures. Given the existing fiamework and environment, there is clearly a need to recruit a CFA within the MOH appointed as a consultant in the first year, reporting to the new Director, Management and Administration Department. The incumbent should possess an accounting degree with at least five years of public sector financial experience and be capable to provide leadership, management and oversight in areas including finance, accounting, auditing, and information systems. In the interim period following grant effectiveness, the FM Agent will need to provide the MOH with accounting support and capacity (see paragraph 15 below under Accounting Challenges and MOH Strengthening). 7. The need for good financial management systems and people is shared with most other ministries. Ad hoc donor funding is not a sustainable solution, and IDA is encouraging the government to promulgate a decree allowing market related remuneration of key personnel in ministries. In addition, the Afghanistan Reconstruction Trust Fund (ARTF) is financing a Chief Financial Advisers project. As Health is one of the key spending ministries, the funding for the CFA and management and systems support falls under the ambit of such ARTF funding. If appropriate resources are not available by a mutually agreeable date, project funds could be used to finance this activity. In addition, under the first Afghan Public Administration Project, IDA is financing a contract with the FM Agent to establish government financial management systems. Accounting Policies and Procedures 8. The Project will follow standard TISA financial management policies and procedures, including use of the TISA Chart of Accounts to record project expenditures in various line ministries, and will be processed by the Free Balance automated financial system currently NGO selection criteria should include audited financial statements with clean audit opinions in the past three years, and evidence of operations on a going concern basis.. 25

32 being implemented in the MOF by the FM Agent. The use of these procedures will allow for adequate recording and reporting of the Health Project expenditures along similar lines to those used for the earlier IDA projects. 9. Project expenditure at the provincial level will be maintained by the provincial offices, and monthly reports submitted to the MOH. It is expected that provincial reporting to the Center will be performed on a timely basis. Accounting records will be consolidated centrally by the CFA based at the MOH with the assistance of the new financial system, and reviewed and approved by the MOF. Funds Flow 10. The project will use the existing government system as much as possible. As is the practice for government expenditure, all project payments will be routed through the MOF. The FM Agent will assist the MOF in executing and recording project payments. 11. Treasury officials at the MOF will be the authorized persons to operate the USD Special Account for the IDA projects at the Da Afghanistan Bank (DAB); IDA funds will be deposited into the Special Account. When a project payment is required to be made, implementing agencies (line ministries and other government departments) will submit a standard payment request to the MOF-Treasury. Treasury officials, after verifying the documents and checking the availability of finds in the Special Account and budget will: (a) for payments in Afghanis, issue a check in Afghanis for encashment at the DAB; and (b) for a payment in foreign currency, instruct DAB to execute the payment. Payments to the PPA NGOs will be handled through this funding system controlled at the Center. 12. Project payments to MOH provincial officials implementing the MOH-SM approach, will also follow the Government s financial management and administrative procedures and will be accounted for by the provincial MOH administration and bank accounts at the DAB S provincial offices, if operational in the selected provinces. 13. For purposes of funds flow planning, it is important that the Project s CFA, NGOs, MOH provincial officials, FM Agents, MOF-Treasury Officials, and DAB staff closely coordinate, monitor and communicate cash flow requirements for project activities. 14. Due to reasons related to security, damaged infrastructure, and a breakdown in communication between the branches and the Kabul office of DAB, the TISA will face a challenge in effecting payments throughout the country. Although not all of DAB S branches are currently fully functional, efforts are being made to rehabilitate the branches so that the TISA s payment needs throughout the country can be met, including making arrangements for secure transport of cash notes around the country. In the short term, there could be a shortage of Afghani currency notes within the government. 15. The PPA NGOs will receive hnds transfers at the center or in foreign currency outside Afghanistan if they have international bank accounts, and they will be entirely responsible for the transport, custody, safekeeping and distribution of funds in the provinces and districts. From an MOH perspective, this arrangement presents a far lower level of fiduciary risk than the transfer of funds to provincial MOH officials in the other three provinces, by use of the 26

33 Mustaufiats or through other couriers. Therefore, less than one-third of proj ect expenditures will be vulnerable to a potentially higher level of risk in the transfer of funds from the center. Accounting Challenges 16. The MOH is in the midst of a major reorganization which is expected to be shortly completed, approved by the Minister of Health and ratified by the President and cabinet of the TISA. At that point, the incumbents selected as department directors and unit heads will be announced. (i) As mentioned in paragraph 6 above, the financial, accounting, auditing and information system aspects of MOH operations will need to be led, managed and coordinated by a CFA, a position not currently reflected on the MOH organogram. As an immediate "stop gap" measure until the new CFA is recruited as part of the upcoming ARTF-funded project, it is imperative that the FM Agent and the MOF assist and support the MOH in providing a sufficient level of accounting capacity, resource and oversight, to control and protect IDA'S funding and disbursement on this project. (ii) The new unit head of the BFM Unit will need at least one project accounting staff member with at least three years of accountinglfinancial experience in the public sector to handle the accounting, reporting, reconciliation and control requirements of the health project expenditures. (iii) It is very likely that the accounting and reporting skills of MOH provincial accounting and financial staff will need to be considerably strengthened and appropriate support, on the job and "classroomyy training will need to be provided for at least 12 months through technical and on-site assistance from the MOF FM Agent (and the CFA's team following the appointment), on a continuing, sustainable basis for at least nine to 12 months. 17. The MOH, with support from the Department of Intemational Development (DFID), has begun to examine its financial management system. In order to adequately handle the processing, accounting, reporting, reconciliation and monitoring of Project expenditures, the MOH will have to do the following: (i) MOH project expenditures will need to be carefully defined/classified to fit in with the MOF financial system chart of accounts; (ii) MOH financial forms/formats will need to be revisedhedeveloped for project transactions; (iii) MOH central reconciliation and control procedures will need to be developed for oversight, monitoring, checking and reconciling funds transfers to and reporting of project expenditures by NGOs and provincial health offices; and 27

34 (iv) Appropriate reconciliation and checking procedures will need to be developed between MOH central and provincial accounting records and between MOH and MOF financial records. 18. Payments to the PPA NGOs will be made at the center or in foreign countries if the NGOs have intemational bank accounts. The NGOs assume the entire risk of transport, custody, safekeeping, distribution of and reporting on the funds received from the government. Payment releases to the MOH provincial health departments under the MOH-SM will be done under a mechanism acceptable to MOF and IDA. 19. Once the above staff recruitments are in process, and procedures and protocols are being implemented, a simple first draft of the FM sections of the MOH Project Implementation Plan will need to prepared with the assistance of the FM Agent, MOF and MOH financial managers and officials on board, in liaison with the IDA FM team. These sections should cover the key recording, accounting, checking, reporting, auditing and monitoring procedures. They should be refined and approved by the MOH CFA on taking office. MOH senior officials expressed the view that if successful, this approach and manual will be cloned to other MOH health projects in the interests of better accountability and transparency. Suggested Actions 20. For ease of reference, a list of the various suggested actions, other than the immediate need to require the FM Agent and the MOF to assist and support the MOH in providing a sufficient level of financial consulting and accounting capacity, resource and oversight, is set out in the following table. 1.Recruitment of MOH CFA reporting to Director, Management and Administration Department 2. Recruitment of Budgeting and Financial Management Unit staff accountant 3. Support and on-the-job training and assistance to MOH provincial accounting and financial staff in MOH-SM Provinces 4. Development and customization of chart of accounts 5. Development of financial management procedures governing MOH-SM acceptable to IDA MOF officials, assisted by FM Agent. MOH officials, assisted by FM Agent and MOF MOH officials, assisted by FM Agent and MOF MOF officials, assisted by FM Agent MOH officials, assisted by FM Agent and MOF MOF Director, Management and Administration Department BFM Unit Head/ CFA MOF Director, Management and Administration Det.lartment/CFA Within six months of grant effectiveness Within thee months of grant effectiveness On a continuing basis for nine to 12 months after grant effectiveness Within three months of grant effectiveness Prior to disbursement funds for the MOH-SM 28

35 Audit Arrangements 21. The accounts of the Project will be audited by the Auditor General (with the support of the Audit Agent), whose appointment has been approved by IDA S management, and who is extemal auditor for the earlier IDA Afghan projects on terms of reference satisfactory to IDA. In line with other IDA financed projects in Afghanistan, the accounts will be audited in accordance with International Standards of Auditing (ISAs) or other auditing standards approved by IDA. The annual Project financial statements to IDA will include a summary of funds received (showing funds received fi-om all sources), and a summary of expenditures shown under the main Project components within the main categories of expenditures. The format of the annual Project financial statements will be a compilation of the quarterly Financial Monitoring Reports (FMRs). The audit of the Project accounts will also include an assessment of: (i) the adequacy of the accounting and internal control systems over Statements of Expenditure (SOEs) and Special Accounts; and (ii) the eligibility of incurred expenditures for IDA financing. The annual Project financial statements, audited by the Auditor General, are to be submitted within six months of the close of TISA s fiscal year. The following audit reports will be monitored in the Audit Reports Compliance System (ARCS): and Special Account General Reporting and Monitoring 22. Quarterly Financial Monitoring Reports will be produced showing: (i) sources and uses of funds by disbursement category and project component as applicable; (ii) physical progress if applicable; and (iii) status of procurement activities. These will be submitted to IDA within 45 days of the end of the quarter. Disbursement Arrangements 23. Disbursement Method. Disbursements from the IDA Grant will be transaction-based (replenishment, reimbursement, direct payment, and payments under Special Commitments) with full documentation or against statements of expenditures as appropriate. All withdrawal applications to the IDA, including replenishment, reimbursement and direct payment applications, will be prepared and submitted by the MOF. 29

36 Allocation of Grant Proceeds Goods - MOH-SM Consultant Services & Training Consultant Services & Training-MOH-SM Incremental Operating Costs Incremental Operating Costs-MOH-SM Sub-Grants Unallocated Total Financing Percentage. Since collection of tax revenue has just begun and is sporadic, disbursement percentages have been set at 100 percent, with the understanding that MOF will submit withdrawal applications on a net-of-tax basis. The TISA s tax structure will be reviewed within six months of Grant signing, at which time standard disbursement percentages will be set and financing percentages amended accordingly. 25. Use of Statements of Expenditures. Disbursements will be made on the basis of SOEs for: (i) consultants and training for contracts not exceeding US$lOO,OOO for firms and US$50,000 for individuals; (ii) goods for contracts not exceeding US$200,000; and (iii) incremental operating costs. 26. Special Account. A Special Account will be opened and maintained in a bank acceptable to IDA, and will be operated by MOF in accordance with the IDA S operational policies. The Authorized Allocation of the Special Account will be about US$6 million which represents the estimated amount of expenditures to course through the Special Account in a four-month period. Given the short disbursement period and the immediate need for special account funds, the full amount of the Authorized Allocation of the Special Account will be available to MOF upon effectiveness. In order to meet immediate cash needs, MOF may convert Special Account funds into Afghani for distribution to provinces outside Kabul. Such advances will be limited to estimates of the cash needs for a 30-day period and must be reconciled within 90 days of disbursement from the Special Account. 27. Minimum Application Size. Applications for replenishment to the Special Account should be submitted monthly, regardless of amounts disbursed, and must include reconciled bank statements as well as other appropriate supporting documents. The minimum application size for withdrawal applications for reimbursement, direct payment, or for applications for Special Commitments is 20 percent of the Authorized Allocation of the Special Account. In the event that banking facilities are not fully functional at the time of Grant effectiveness, IDA may, on an exceptional basis, waive minimum application size requirements in order to accommodate urgent needs. 30