Tanzania - Second Social Action Fund Project

Document of The World Bank FOROFFICIALUSEONLY ReportNo: 29664-TA PROJECTAPPRAISAL DOCUMENT ON A PROPOSEDCREDIT INTHE AMOUNT OF SDR 87.9 MILLION(US$129MILLIONEQUIVALENT) AND GRANT INTHE AMOUNT OF SDR 14.4MILLION(US$21MILLIONEQUIVALENT) TO THE UNITED REPUBLIC OF TANZANIA FOR A SECOND SOCIAL ACTION FUNDPROJECT October 27,2004 HumanDevelopment1 CountryDepartment4 Africa Region ~ 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.  CURRENCY EQUIVALENTS (Exchange Rate Effective September 30,2004) CurrencyUnit = TSh TSh1,IOO = US$1 US$1.4678 = SDR 1 FISCAL YEAR July 1 - June30 ABBREVIATIONS AND ACRONYMS A M C Asset Management Committee APL Adaptable Program Loan CAS Country Assistance Strategy CBO Community Based Organization CDD Community Driven Development CE Capacity Enhancement CFAA Country Financial Accountability Assessment CHF Community Health Fund CMC Community Management Committee COMSP Community Savings InvestmentPromotion CPAR Country ProcurementAssessment Report CSPC Community Subproject Cycle D C Development Communication DED District Executive Director DOT Direct ObservedTreatment EIA Environmental Impact Assessment EPRA Extended ParticipatoryRural Appraisal ESMF Environment and Social Management Framework FEA FullEnvironmental Assessment FMR Financial MonitoringReport FMS Financial Management System GDP Gross Domestic Product GOT Government o f Tanzania HIV/AIDS Human Immunodeficiency VirudAcquiredImmuneDeficiency Syndrome ICB Intemational Competitive Bidding IDA Intemational Development Association IEC Information, Education and Communication IFMS Integrated FinancialManagement System KIDS Knowledge Information Dissemination System LEA Limited Environmental Impact Assessment LGA Local GovernmentAuthority LGCDG Local Government Capital Development Grant LGSP Local Government Support Project LSP Local Service Provider  MACEMP Marine and Coastal EnvironmentManagement Project MDG MillenniumDevelopmentGoal M&E Monitoring and evaluation FORO F F I W USEONLY - MIS Management Information System MOU Memoranda ofUnderstanding MTEF Medium Term ExpenditureFramework MU Management Unit MWK Mfuko wa Kijiji/Shehia/Mtaa NAO National Audit Office N E M C National EnvironmentalManagement Council NGO N o n Governmental Organization NPES National Poverty Eradication Strategy NSC National Steering Committee NVF National Village Fund OED Operations EvaluationDepartment O M Operational Manual PADEP ParticipatoryAgriculture DevelopmentProgram PEDEP Primary Education Development Program PER Public Expenditure Review PFMRP Public Financial Management Reform Program PIA Project ImplementationAgency PO-RALG President's Office Regional Administration and Local Government PRA ParticipatoryRural Appraisal PRSP Poverty Reduction Strategy Paper PTS Project Tracking System RC Regional Commissioner RCC Regional Consultative Committee RPF Resettlement Policy Framework SA Special Account SBD Standard BiddingDocument SET Sector Experts Team SFA Subproject Financing Agreement TASAF Tanzania Social Action Fund TBA Traditional BirthAttendant TMAP Tanzania Multi-sectoral AIDS Project vc Village Council VFSA Village FundSystems Auditor VFC Village FundCoordinator VFJA Village FundJustification Assistant WDC WardDevelopment Committee Vice President: GobindT. Nankani Country ManagedDirector: Judy O'Connor Sector Manager: Dzingai Mutumbuka Task Team Leader: Nginya Mungai Lenneiye This document has a restricteddistributionandmay be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.   TANZANIA Tanzania Second Social ActionFundProject CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 1. Country and sector issues.................................................................................................... 1 2. Rationale for Bank involvement ......................................................................................... 2 3. Higherlevel objectives to which theproject contributes.................................................... 3 B . PROJECT DESCRIPTION ................................................................................................. 5 1. Lendinginstrument ............................................................................................................. 5 2. Project development objective and key indicators.............................................................. 5 3. Project components ............................................................................................................. 5 4. Lessons learned and reflected inthe project design............................................................ 7 5. Alternatives considered and reasons for rejection .............................................................. 8 C. IMPLEMENTATION .......................................................................................................... 8 1. Partnership arrangements (ifapplicable) ............................................................................ 8 2. Institutional and implementation arrangements .................................................................. 8 3. Monitoring and evaluation o f outcomeshesults................................................................ 12 4. Sustainability . . . ..................................................................................................................... 13 5. Critical risks and possible controversial aspects............................................................... 13 6. Loadcredit conditions and covenants............................................................................... 13 D. APPRAISAL SUMMARY ................................................................................................. 15 1. Economic and financial analyses ...................................................................................... 15 2. Technical........................................................................................................................... 15 3. Fiduciary ........................................................................................................................... 16 4. Social................................................................................................................................. 17 5. Environment...................................................................................................................... 17 6. Safeguard policies............................................................................................................. 18 7. Policy Exceptions and Readiness.................... ..;............................................................... 18  Annex 1: Country and Sector or Program Background ......................................................... 19 Annex 2: Major RelatedProjects Financedby the Bank and/or other Agencies .................22 Annex 3: Results Framework and Monitoring ........................................................................ 23 Annex 4: Detailed Project Description ...................................................................................... 34 Annex 5: Project Costs............................................................................................................... 42 Annex 6: Implementation Arrangements ................................................................................. 43 Annex 7: Financial Management and DisbursementArrangements ..................................... 56 Annex 8: Procurement Arrangements ...................................................................................... 67 Annex 9: Economic and Financial Analysis ............................................................................. 72 Annex 10: Safeguard Policy Issues ............................................................................................ 78 Annex 11:Project Preparation and Supervision ..................................................................... 80 Annex 12: Documents inthe Project File ................................................................................. 81 Annex 13: Statement of Loans and Credits .............................................................................. 82 Annex 14: Country at a Glance ................................................................................................. 84 Annex 15: Letter of Sector Policy ............................................................................................. 86 Annex 16: Map IBRD33628 ...................................................................................................... 93  TANZANIA SECOND SOCIAL ACTION FUNDPROJECT PROJECT APPRAISAL DOCUMENT AFRICA AFTH1 Date: October 27,2004 Team Leader: Nginya MungaiLenneiye Country Director: Judy M.O'Connor Sectors: Other social services (60%);General Sector ManagedDirector: Dzingai B. water, sanitation and flood protection sector Mutumbuka (1O%);Micro- and SME finance (1O%);Ports, waterways and shipping(lO%);General agriculture, fishing and forestry sector (10%) Themes: Other social development (P);Participation andcivic engagement (P);Social safety nets (S);Gender (S);Social analysis and monitoring (S) Project ID: PO85786 Environmental screening category: Partial Assessment LendingInstrument: Specific Investment Loan Safeguard screening category: Limitedimpact [ ] Loan [XI Credit [XI Grant[ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 150.00 ASSOCIATION IDA GRANT FORPOOREST 21.00 0.00 21.00 COUNTRY LOCAL COMMUNITIES 13.50 0.00 13.50 Financing Gap 1S O 0.00 1S O Total: 150.00 30.00 180.00 Borrower: Government of Tanzania President's Office, State House P.O.Box 9120 Dar es Salaam Tanzania  Responsible Agency: TASAF Management Unit Old KilwdMalindi Street P.O. Box 9381 Dar es Salaam Tanzania Tel: 255-51-123582/84 Fax: 255-51-123582 tasalB;ud.c0.tz I Estimateddisbursements(Bank N/US$m) FY 2005 2006 2007 2008 2009 0 0 0 0 Annual 5.0C 40.0C 50.0C 45.0C 1O.OC 0.OC 0.OC 0.0C 0.0 Cumulative 5.0C 45.0C 95.0C 140.0C 150.0C 150.0C 150.0C 150.0C 150.0 Does the project meet the Regional criteria for readiness for implementation? [XIYes [ ] N o Project developmentobjective: The Project Development Objective (PDO) is to empower communities to access opportunities so that they can request, implement, and monitor sub-projects that contribute to improved livelihoods linked to MillenniumDevelopment Goal (MDG) indicator targets inthe Tanzania Poverty Reduction Strategy (PRS). Projectdescription: The Project will have two components: 1. National Village Fund(NVF): The NVF component creates rules for communities to: (a) access resources that can stimulate economic activities and allow poor households to increase their incomes; (b) reduce vulnerability by empoweringthem with more instrumentsfor insuring against the risks they face; and (c) improve access and use o f social services. Thus, the Project provides a multi-sectoral response to the needs o f communities whose actions will better prepare them to take advantage o fmarket-created opportunities as well as utilize resources made available from or through Government. 2. Capacity Enhancement (CE). Under this component, communities and sectors (represented a1 Ward and District/MuniciDal levels) will be capacitated to undertake activities that assist  Tanzania meet its targets as laid out inthe PRS (inhealth, education, water and sanitation, savings mobilization, incomes for the poor, tackling vulnerability, and increasing access to the market by the poor) by mobilizing both informal and formal mechanisms for respondingto shocks. Which safeguard policies are triggered, if any? The following safeguard policies are triggered: Environmental Assessment (OP/BP/GP 4.01) and Involuntary Resettlement (OP/BP 4.12). The Borrower has prepared an Environmental and Social Management Framework (ESMF) and a Resettlement Policy Framework (WP) which have beenreviewed, approved and disclosed at the World Bank Info Shop and in-country on July 21,2004. Significant, non-standard conditions, if any: Not applicable BoardPresentation: Signed Letter o f Sector Policy. This condition has been met. Loadcredit Effectiveness: 1. Openingofthe Project Account the depositingtherein the initialcontribution; 2. Establishment at TASAFMUo f a computerizedmanagement information system for the Project satisfactory to the Association; 3. Submissionto IDA o f an OperationalManual and Service Guidelineson Community Participation, satisfactory to IDA in form and substance. Covenants applicable to project implementation: 1. The Borrower shall ensure that the Project i s carried out inaccordance with the Project OperationalManual (POM) and the Service Guidelines on Community Participation. 2. The Borrower shall maintain the National Steering Committee (NSC), Sector ExpertsTeam (SET), and TASAF ManagementUnit (MU)under terms o freference and with amembership composition that i s satisfactory to the Association. 3. The Borrower shall maintain a Regional Consultative Committee andLocal Government Authority (LGA) Finance Committees through Project implementation. 4. The Borrower shall implement the Project inaccordance with the Environmental and Social Management Framework (ESMF) and the Resettlement Policy Framework (RPF). 5. Each Village shall establish a Village Fundin accordance with the provisions o f the LGA Act. 16. TASAF MUshall enter into a memorandum o f understandingwith each LGA participating in  the Project, under terms and conditions that are satisfactory to the Association. 7. The respective LGAs and Village Councils shall enter into a Subproject Financing Agreement with each Community Management Committee (CMC) under terms and conditions that are satisfactory to the Association. 8. The CMCs shall prepare quarterly progress reports including financial reports for submission to the Village Council, and subsequent consolidated submission by LGAs o f such reports to TASAF MUand SET. 9. The Borrower shall prepare, under terms o freference satisfactory to the Association, quarterly and annual progress reports, and the MidTerm Reviewreport.  A. STRATEGICCONTEXT AND RATIONALE (a) What are the key elements of the client's sector orpoverty reduction strategy, and through what instruments is it being implemented? 1. Country and sector issues The Poverty Reduction Strategy (PRS) set within Vision 2020/2025 for the UnitedRepublic o f Tanzania outlines the main thrust o f the Government's strategy to tackle poverty. The PRS focuses on three dimensions o f eradicating poverty: (a) reduce income poverty; (b) improve human capabilities, survival and social well-being, and (c) contain extreme vulnerability among the poor. The Government o f Tanzania (GOT) has adopted the internationally-endorsed Millennium Development Goals (MDGs) as the basic minimum achievements for its citizens to have a tolerable level o f human existence. The GOT has firther adopted the Public Expenditure Review (PER) as a tool to assess the extent to which resources are being usedto meet the PRS goals, ensure fiscal discipline and accountability, prioritize between competing needs, promote efficiency, and guide the Medium-Term ExpenditureFramework (MTEF). The main development challenge for the GOT is widespread poverty as evidenced by the 200012001 Household Budget Survey which showed that 19% o f the population lives below the food poverty line while 36% live below the basic needs poverty line o f under US$1 per day. In the capital city, these figures were 13% and 18% for food and basic needs poverty lines respectively. Thus, inequalities are high as evidenced by the 2000/2001 Gini co-efficient o f 0.35, and also reflected by the overwhelming rural and peri-urban distribution o f the poor. Access to safe drinking water in 2002 was 70% for urban and 50% for rural populations. Although gross primary school enrolment inthe country i s now at loo%, there are challenges o f increasing secondary school enrolment as a strategy to improve on numbers o f entrants into vocational training and education institutions inthe strategy to build a skilled workforce. Health indicators (maternal and infant mortality, malaria-related morbidity, and Human Immunodeficiency VirudAcquired Immune Deficiency Syndrome (HIV/AIDS) -related illness) remain high in spite o f the many efforts o f Government and several NGOs. Within the strategy to attain MDGs, the GOT expects to see improvements in many indicators - including the ones mentioned above. (b) What are the key policy, institutional, and other issues that constrain the achievement of better sector or poverty reduction results? The achievement o f poverty reduction through the PER, MTEF, and other tools has been hampered by the failure o f public sector resources to reach the poorest sections o f Tanzanian society, especially in the rural and peri-urban areas. Poor performance by the public sector, skewed growth in favor o f urban areas, and limited opportunities to generate higher government revenues for targeting towards poverty-reducing programs have been identified as significant obstacles to the achievement o f better poverty reduction results. Furthermore, the limited success in mobilizing traditional/informal and market mechanisms to assist the poor in their response to shocks (drought, HIVIAIDS, low producer prices, etc.) has constrained the success of public sector measures to secure incomes for rural and peri-urban populations. (c) What is the client doing to address the issues and constraints? The GOT is promoting a community driven development (CDD) approach in a number o f sectors: especially primary education, agriculture, and social protection. Investments with a  CDD approach: like Tanzania Social Action Fund (TASAF), Participatory Agriculture Development Program (PADEP), and Primary Education Development Program) have been complemented by the implementation o f programs aimed at strengthening the decentralization process e.g. the Local Government Support Program (LGSP) so that decision-making can be brought to the Local Government Authorities (District Council, Urban Council, Town Councils, Islands, and Village Council (VC) level). Public sector reform strategies are also being supported in order to improve the efficiency o f the public sector, complemented by a national privatizationprogram aimed at mobilizing the private sector for poverty reduction goals. 2. Rationale for Bank involvement (a) What is the rationale (and underlying development hypothesis)for the Bank's involvement based on the countryhector issues defined, and what alternatives have been considered? While GOT has recognized the importance o f strengthening the three spheres of government (Central, Local Government Authority (LGA), and Village), most efforts in the past have gone into addressing capacities and actions for the first two levels. Decentralization strategies are being implemented to empower Local Government Authorities (LGAs) through a LGSP, and sector-wide approaches in a number of sectors have been adopted to facilitate joint action betweenNational and Local Governments inthe provision of services within the PRS andMDG framework. The rationale for Bank involvement through this project i s based on the need to capacitate the Village sphere of government so that it can mobilize the poor to take actions that complement those being taken at the other levels and that can assist them contribute to poverty reduction for themselves. The alternative o f budget support was considered and rejectedbecause sufficient accountability mechanisms between Village and Local Governments have yet to be built up to allow for an adequate monitoring and reporting of development outcomes against resources made available. It is expected that TASAF I1will in due course give GOT the necessary tools to facilitate the mainstreaming o f the CDD approach into budget support (where it is possible to track inputs from the budget against outputs and outcomes at the VC level). Furthermore, a District PER i s planned to produce more evidence to support the strategy o f channeling Bank lending through budget support (as planned by other clusters in the Human Development Unit-health/HIV/AIDS, and education). There are particularly important complementarities between LGSP and TASAF I1for improving governance and fiscal systems. The governance picture varies tremendously from LGA to LGA -withsomeLGAshavingtransparent andparticipatoryplanningandbudgetprocesses,audited financial statements, adequate and well-trained staff, and other indices o f good governance and sound management. At the same time, there are LGAs with inadequate planning and budgeting capacity, financial irregularities, and overall poor management. The LGSP and TASAF I1will work from two ends o f the "supply-demand chain" leading from resources to on-the-ground investments: they meet in the middle, at the LGA. While TASAF I1 works directly with communities to help them identify their most critical needs and directly finances interventions that are needed to address them, the LGSP helps finance a Local Government Capital Development Grant (LGCDG) system which i s a cornerstone o f the GOT'Slong term strategy for financing local infrastructure. The LGSP will also finance Capacity Building Grants to help LGAs address capacity constraints, so that they can participate in this new Grant system. In LGAs with well-functioning local governance systems as definedby the LGSP access criteria, TASAF I1will channel resources through the LGA systems. In those LGAs which cannot yet qualify for the new Capital Development Grants, TASAF I1 will provide supplementary 2  implementation capacity as needed, channel resources to communities through the VCs, and assure transparency and accountability. While TASAF I1i s not about buildingthe LGA systems and capacities, it i s a part of the local governance strengthening process because it makes the LGA more accountable and responsive to the demands of communities targeted by TASAF 11. As LGAsbuildtheir capacities andbeginto performbetter, theywill bemeasurablytested bythe communities that have built their own capacities and abilities to demand services through TASAF 11. Thus, the two projects are mutually reinforcing. (b) How does the Bank's involvementfit with the activities andpolicies of other international agencies and major stakeholders? What is the BankS comparative advantage? A number o f development partners are active in putting resources through budget support and basket funds; most are targeted at National and Local Governments, few at Village Governments in spite of the expresseddesire to reach the poorest sections of the population and the emphasis i s on ownership. The Bank has, over the last four years, tested the delivery o f resources to communities through direct funding, with facilitation and management being handled by Local Governments. Experience from implementingthe Tanzania Social Action Fund(TASAF I) in40 districts and the 2 Islands has convinced the GOT and the Bank that expanding this mode of resource utilization in support o f service delivery i s a pre-requisite for equipping the Village Government to partner National and Local Governments inthe attainment o f PRS objectives and MDGs. The Bank has also been able to tap into global knowledge and experience on the use of CDD approaches to empower the poor, andthis i s the maincomparative advantage the Bank has. (c) What are the incrementalhnique contributions of theBank's involvement that cannot be accomplished by other means or other sources of assistance? The social fund allows for sector-organized interventions from National and Local Governments to become responsive to multi-sectoral demands from communities. Thus, the Bank's involvement inthis project i s part of GOT'S program to empower communities while makingits structures more responsive to community demands. Given that Tanzania has over 12,000 Village Governments, lessons from TASAF I(see Section B 4 below) give the Bank a particular advantage inscaling up the CDD approach. 3. Higher level objectives to which the project contributes (a) How would theproject contribute to: The borrower's higher level objectivesfor the sector andfor poverty reduction? Therelevant CASobjective(s)? The Project will contribute to the GOT'S goal to build human capabilities through (i) reducing vulnerability and managing livelihood risks by improving health (including tackling HIV/AIDS), education, and water and sanitation, and (ii) increasing empowerment and accountability in the areas o f finance and governance. The Country Assistance Strategy (CAS) i s aligned to these goals by focusing on four areas o f strategic importance, two o f which informed the design o f TASAF as they seek to bring about (i) "sustainable rural development to improve the livelihood of the majority o f the poor, who live in rural areas", and (ii) "improved social infrastructure, to improve social indicators and enhance access to essential public health services for communities with special emphasis on the poor" (CAS, p.20). TASAF I1is a repeater project, scaling up community service provision and capacity building (including infrastructure) from 40 districts and 2 Islands to all 123 districts in the context o f (a) the PRS and its MDG-linked targets in Table 1, and (b) Tanzania as an IDA scale up country. The Project will finance investments identifiedby communities to improvetheir lives as they contribute to the MDGs (table 1). 3  TABLE1.TASAF 11,COMMUNITY PARTICIPATION, MDGSAND THE TANZANIA PRS MDG(inPRS) Indicator(in Community Participation rypicalactivities incommunitysub-projects PRS) (to contributeto JIDGs)* which TASAF I1can finance** Halve the Population below Wages from Public Works. 3ridges, community roads, reforestation, etc. Proportion o f the national Incomes from projects for Xaising animals, high value crop production, People Living poverty line (%) the vulnerable. .mprovedproduce marketing, etc. Below the Incomes from investments hading, transportation, catering, warehousing, National Poverty hndedfrom own savings. rood processing, etc. Line Achieve Net Primary Infrastructure provided. :lassrooms, desks, toilets, teachers houses, Universal Enrollment Ratio dackboards, teachers offices, etc. Primary Community Statistics Day. Training communities to gather information Education indidentify potential actions. Promote gender Ratio o f girls to Community Statistics Day. 3irls inclasses at start and end ofterms. equality boys inprimary Social mobilization. rrain school committees, VCs, etc. and secondary Service access roilets for boys and girls, water points, etc. education (YO) infrastructure. Halve the Population withou Community water points. Boreholes, wells, spring protection, etc. Proportiono f access to an Water harvesting projects. Water reservoirs (earth dams, valley tanks). People without improved water Training maintenance Training women incommunity water Access to Safe source (%) committees. maintenance committee, provide tools, etc. Drinking Water Householdsanitation. Education o f Village Assembly members. Reduce Under- Under 5 mortality Community food Grain (rice, maize, sorghum, etc.), vegetables, five Mortality by rate (per 1000) productionprojects. legumes, bananas, etc. two-thirds Immunizationpromotion. Train VC and Assembly members. Strengthening health Rehabilitation and reconstructiono f health service delivery facilities (without new constructions) Maternal Mortalit! Awareness on risks. Train Village Assembly and VC. Mortalityby rate (per 100,000) Family Planning (FP) Training and supply kits for Family Planning three quarters live births promotion. (FP) promoters. Community Statistics Day. Quarterly maternal deaths invillages recorded BirthsAttended to Training o f Traditional Training and supply kits for TBAs and CBOs by Skilled BirthAttendants (TBAs) active inthe improvement o f services. Personnel (%) and Community-Based Training communities. Organizations (CBOs) Inservice fromFPpromoters. Community Statistics Day Training o f FP promoters Prevalence o f Income support for orphans Growing crops and animals for sale. the Spread o f HIV, female (% Youth skills training. Training incarpentry, masonry, tailoring, etc. HIViAIDS ages 15-24) Income support for the Income-generating projects for households chronically ill. with the chronically illand orphans. Support Community Health Training and initial seed capital for CHFs and Funds(CHFs). community drug supplies. Community health Bed net promotion (production, use, sale, etc.) awareness (tuberculosis, as well as promotion o f community-level malaria, etc.). Direct Observed Treatment program, awareness raising, etc. * T o guide the preparation o f Commun Service Packages under T I AF. ** These are examples from TASAF Iand other Social Funds, but communities will be free to identify more. 4  B. PROJECT DESCRIPTION 1. Lendinginstrument (a) What lending instrument is to be used and why? A five-year Specific InvestmentLoan (SIL) has been selected to allow for (a) the scaling up of the CDD approach from the 40 Districts and 2 Islands that were supported under TASAF I,and (b) consolidation of the CDD approach inthe planning approaches adopted by the three spheres o f Government as a mainstreaming effort on the part o f GOT and the Bank. 2. Projectdevelopmentobjectiveandkeyindicators (a) Project developmenf objective and key indicators. The Project Development Objective (PDO) i s to empower communities to access opportunities so that they can request, implement, and monitor sub-projects that contribute to improved livelihoods linked to MDG indicator targets in the Tanzania PRS. The key outcome indicator will be the percentage of targeted poor communities receiving grants to complete their subprojects within the agreed time-frame to benefit the following: (i) households with limited access to and use of specified service packages, (ii) vulnerable individuals needing assistance, and (iii)food insecure households with limited employment opportunities. 3. Projectcomponents (a) What are the components of theproject? The Project will have two components: the National Village Fund(NVF) and Capacity Enhancement (CE). (b) On what basis were the componentsselected? Inresponse to country and sector issues identifiedabove, the Project, underthe NVFcomponent, creates rules for communities to: (a) access resources that can stimulate economic activities and allow poor households to increase their incomes; (b) reduce vulnerability by empowering them with more instrumentsfor insuringagainst the risks they face; and (c) improve access and use o f social services. Thus, the Project provides a multi-sectoral response to the needs o f communities whose actions will better prepare them to take advantage of market-created opportunities as well as utilize resources made available from or through Government. Communities and sectors (represented at Ward and District/Municipal levels) will, through the CE component, be capacitated to undertake activities that assist Tanzania meet its targets as laid out in the PRS (in health, education, water and sanitation, savings mobilization, incomes for the poor, tackling vulnerability, and increasing access to the market by the poor) by mobilizing both informal and formal mechanisms for respondingto shocks. (e) For each component, what is theprincipal target group and the main project-related outcomefor that group? (d) For each component, what are the key inputs and outputs? (e) Of the sector issues mentioned in A.1,which are to be addressed through theproject, and in what ways? Based on the PDO and adopting the CDD approach, the Project provides a mechanism that will allow Local and Village Governments to respond to community demand-driven interventions that improve livelihoods and contribute to the attainment of specified MDG indicator targets. The management o f NVF will require the enhancement o f capacities at National, Local and Village levels inthe empowerment o f communities to participate inrisk reducing and mitigating activities thereby contributing to poverty reduction. The principal targeted beneficiaries o f the NVF are those communities who: (a) lack access to basic social and market services; (b) have 5  able-bodied but food insecure households; and (c) have vulnerable individuals (Le., orphaned, disabled, elderly, affectedlinfected by HIV/AIDS, etc.). These beneficiary groups are expected to improve their livelihoods by: (i) Service Poor Communities availing themselves o f improved services in health, roads, education, water and sanitation, markets, banking, and others, (ii) food insecure households with able-bodied adults increasing their incomes from working in NVF- financed public works programs, and (iii) vulnerable individuals working through CBOs to access resources for increasing incomes at the household level. The NVF will be managed by LGAs (inresponse to community demands) through the VC, which will ensure that beneficiaries elect a Community Management Committee (CMC) to manage resources available for each subproject. The main outputs and outcomes are inTable 2. The NVF will provide money to a village-level fund, Mfuko wa Kijiji/Shehia/Mtaa (MWK), as the principal input for householdsto produce outputs that improve service availability anduse, as well as incomes for the able-bodied poor and the vulnerable. Beneficiaries will be facilitated to identify priority problems, design interventions, and prepare proposals which NVF will finance in the form of subproject grants given to MWK. Each subproject will be managed by a democratically-elected CMC, with specified amounts retained by the LGA and V C to finance facilitation for the successful subprojects management. The NVF also provides opportunities for other projects (e.g., Tanzania Multi-sectoral AIDS Project (TMAP), the Marine and Coastal Environment Management Project (MACEMP), the Forest Project, etc.) and funding sources to utilize NVF principles andprocesses to finance their community-based components. The CE component will provide resources for community mobilization as well as the monitoring and evaluation o f activities financed from the NVF component; the main outputs being the number of subprojects completed in a satisfactory manner. Support will also be given to individuals interested in the formation o f voluntary savings groups o f at least 10 members. Under the CE component, beneficiaries will be agencies (public and private) that support communities to make the best use o f resources made available under the NVF, as well as poor individuals participating in group savings and taking advantage o f investment opportunities created by various private-public partnerships. The CE component will respond to LGAs where various agencies need capacity to support Village Governments (communities and VCs) implement subprojects using the sub-project cycle (detailed in Table 4). Funding for limited technical assistance will be recruited into the MU to manage the NVF. This component will complement activities funded by the LGSP at the LGA levels. The main outputs and outcomes are inTable 2. TABLE2. OUTPUTSAND OUTCOMES Component Outputs Outcomes National Households with increased access to and use o f Improvement in services Village Fund services Individuals with increased employment Incomes receivedto improve opportunities from public works basic services Vulnerable individuals inreceipt o f assistance Service improvement for the vulnerable Capacity Individuals reached with training and support Application o f skills gained Enhancement Individuals participatinginsavings groups Investments made from savings 6  4. Lessons learned and reflected inthe project design (a) How does theproject design reflect the lessonsfrom analytical work, ongoing and completed operations, and international bestpractices? Analytical work in the Bank has demonstrated that social protection can be growth-enhancing if it adopts the Social Risk Management Framework: "a new conceptual framework that views social protection as a set of public measures that support society's poorest and most vulnerable members and help individuals, households and communities better manage risk. It includes three strategies to deal with risk (prevention, mitigation and coping), three levels o f formality o f riskmanagement (informal, market-based, andpublic) and many actors (individuals, households, communities, NGOs, governments at various levels and intemational organizations) against the background o f asymmetric information and different types o f risks. This view o f social protection emphasizes the double role o f risk management instruments - protecting basic livelihood as well as promoting risk taking. It focuses specifically on the poor since they are the most vulnerable to risk and typically lack appropriate risk management instruments, which constraints them from engaging in riskier but also higher retum activities and hence gradually moving out o f chronic poverty" - World Bank (2003) The contribution of Social Protection to the Millennium Development Goals, Social Protection Advisory Service, Washington, page 2-3; emphasis inoriginal. Inline with other social funds, TASAF I1will operationalize some aspects o fthe SRM approach to SP, recognizing that: "The application of the risk management framework goes well beyond social protection..., but well-designed and cost-effective Social Protection i s crucial for the achievement o f all MDGs - or phrased differently, that without appropriate social protection mechanisms the MDG targets for 2015 will not be achieved" (ibid, p. 3; emphasis in original). TASAF Ihas demonstrated that communities have the capacity to identify, prioritize, and implement subprojects if adequate rules on access to funds are made available. Furthermore, intemational experiences suggest that activities to tackle poverty are more sustainable ifthey are owned by the poor, and are implemented through Local Governments. Another lesson from TASAF Iis that broad-based management beyond Community Project Committees is necessary for the CDD approach to be successfully mainstreamed into strategies for the achievement o f PRS goals. (b) Haspast performance ofprojects in thesector beenpoor, according to ICRs, PPARs, and OED sectodthematic studies? Ifso, why, and how havepast deJicienciesbeen overcome? Using results from Operations Evaluation Department (OED) evaluations, the project will focus on transformation issues in the relationships between the poor, Village and District-level structures, and foster a better balance between supply- and demand-driven development, especially the non-infrastructural outputs that create long-term sustainable development options for the poor. Challenges posed by decentralization have been addressed by integrating project management into LGA and V C structures without abandoning meaningful community empowerment that combines giving the poor a `voice' with resources to make a choice and ensure that the choice and `voice' lead to tangible results (including operation and maintenance o f assets created). 7  5. Alternatives consideredand reasons for rejection Although TASAF Iwas successful in empowering communities to manage interventions in response to their prioritized needs, the options o f scaling it up without modifications or sub- nationally were rejected because it i s necessary to (a) fully bring LGAs into the management o f projects with a CDD approach, and (b) give all districts the opportunity learn by doing. In addition, the option o f channeling resources through the LGSP was rejected because direct funding to communities was not part o f that operation. The option of allocating resources to VGs was rejected in favor o f resource targeting because allocation would move the project towards `planning to a budget' and reduce the flexibility associated with Social Funds in their ability to respond to community problems in a multi-sectoral way. The option for IDA resources to be used by community credit schemes for on-lending was also rejected on account o f poor sustainability. An Adaptable Program Loan (APL) as requested by GOT was rejected because the Country Team advocated for a rapid movement o f Bank lendingtowards budget support, and institutional/policy issues at the LGA level are being addressed through the LGSP rather than through an APL. C. IMPLEMENTATION 1. Partnershiparrangements(ifapplicable) There are currently no other international agencies participating inthe financing o f project. 2. Institutionaland implementationarrangements (a) PVhich institution(s) will be responsiblefor implementation of theproject and its various components? Implementation arrangements are based on GOT'S Constitutional provisions that create and define the roles o f Village, LGA and Central spheres of Government. They are also informed by the CDD approach which seeks to empower communities and LGs to achieve a better alignment between communities and Governments, and build capacity and accountability at all levels of implementation. Under TASAF, Government extension staff at Ward and District levels will conduct general sensitization on all TASAF activities, but specialized activities (e.g., dealing with the vulnerable, engineering supervision, training o f savers, etc.) will require specialized skills from Government, private sector, and civil society organizations. The skills o f these experts will be strengthenedusingresources under the CE component. At the national level, the project will fall under the President's Office, with oversight vestedina National Steering Committee (NSC) drawing membership from both public and private sectors. A Sector Experts Team (SET) will be constituted to complement the work done by LGA-level teams of experts in ensuring that LGA and VGs conform to nationally-developed sector norms, The Regional Consultative Committee (RCC), consisting o f Regional Commissioners will strengthen accountability by reviewing trends in the LGAs as TASAF-funded activities are implemented; the RCC will make its reports available to the President's Office Regional Administration and Local Government (PO-RALG), TASAF NSC, and the Ministry o f Finance's Quarterly Sector Consultations forum. Fiduciary oversight for both the NVF and CE components will be vested in a Management Unit, whose Executive Director and staff will be answerable to the NSC. TASAF will also place a Village Fund Systems Auditor (VFSA) for 3 or more LGAs to audit all NVF activities and support the LGA Internal Auditing functions. At the LGA level, the approval o f sub-projects will be by the LGA Finance Committee (with representation from government and civil society organizations). For a LGA to access NVF resources, the District Executive Director (DED) must have appointed a Village Fund Coordinator (VFC) and Village 8  FundJustification Assistant (VFJA) to manage the Village Fundat the LGA level, inadditionto meetingthe access criteria for the LGCDGprovided by LGSP. At the village level, the VC will delegate the responsibility for day-to-day management o f subprojects fundedby NVF to a CMC as its administrative arm (see Table 3). Under the NVF, communities are `need-defined' rather than being geographical entities, and the CMC provides VCs with a mechanism to implement subprojects (especially financial management and procurement). TABLE GOVERNMENT 3: ORGANIZATION Level Elected body Administrative body Central Parliament Sector Ministries LGA Council LineDepartments Village Council CMCs (b) On what basis were the institutional arrangements selected? The decision to include the Village Government in the subproject cycle was motivated by the intention to mainstream TASAF support into Government structures inthe interest o f improving sustainability. It was also made on the basis o f lessons from TASAF I,where the failure to provide an explicit role for the Village Government in some instances resulted in conflicts betweenthe democratically elected subproject management committees and the LGAs mandated with ensuring community participation. While a formal assessment o f the Village-level structures has not been undertaken, a 2003 assessment o f LGAs recognizes the variability in capacity between District Councils (and most likely replicated at the Village level). The large number o f Districts and Municipalities (123) in Tanzania makes it necessary to strengthen accountability and transparency measures at the regional level through the RCC whose meetings will receive progress reports from the LGAs. The presence o f Government extension staff at the Ward levelprovides accessible technical expertise for the VC andCMCs to draw on. The location o f TASAF I1inthe President's Office i s based on the project's multi-sectoralnature and the need for effective coordination (reflecting community demands whose activities cut across several sector ministries.). The PO-RALG mechanism provides policy and operational guidelines for all LGAs. This arrangement will support the mainstreaming o f the CDD approach used by TASAF I1into planning, implementation, monitoring, and evaluation o f development procedures adopted by LGAs, with a particular focus on the Community-VC nexus. (c) What capacity constraints need to be addressed, includingfinancial management andprocurement, and how will this be done? Experience in the implementation o f TASAF Iidentified the problem o f sector norms and standards that exist, but are poorly enforced at the Village and Local Government levels for a variety o f reasons. In order to tackle this problem under TASAF 11, a SET will be constituted from senior sector experts to support the NSC, and chaired by PO-RALG, to review all subprojects from districts for conformity with sector norms and standards. The SET will either recommend their funding from the NVF or defer their funding until sector experts have done further reviews and/or further LGA field appraisals. The SET will also, on an annual basis, review proposals which were outside sector norms with a view to determining if any or some of them could offer a substantial basis for recommending changes to sector norms. Another 9  constraint identified i s the lack of sufficient accounts staff in LGAs, and this has been addressed by (a) making the availability of such staff a pre-condition for LGAs to manage NVF resources, and (b) providing a VFSA to strengthenthe fiduciary capacity o f LGAs inthe implementationo f community subprojects (in particular justification, internal audit, monitoring, and management information systems). The distribution of responsibilities in a community subproject i s summarized in Table 4. On an annual basis, PO-RALG will provide the MUwith a published list o f LGAs who have met LGSP access criteria, and only these who also need to meet NVF criteria will be eligible to directly receive NVF resources (which will otherwise be channeled directly to the VCs' MWK and CMCs). LGAs that will not have met the LGSP access criteria will only receive limited resources to facilitate the E-PRA, Desk and Field Appraisals, and undertake approvals. LGAs will not receive any NVF resources if they have not met the NVF criteria of having a Village Fundoffice staffed with VFC and VFJA. The CE component of TASAF I1will be supporting capacity building to LGAs and VCs to ensure that financial management requirements are met and participatory planning approaches are integrated into LGNIslands planning. The CE component will supportthe training o f CMCs in bookkeeping and procurement prior to funds being disbursed to them as the bulk of procurement will be undertaken by these CMCs. (d) What will be theflow of funds and the accountabilities for financial reporting? Funds will flow into two Special Accounts (Credit and Grant), to be administered by the MU, Disbursement o f all hnds to LGAs and VCs/CMCs will be against schedules o f subprojects approved at the Village, or LGNIsland level. Funds to the LGA will be accompanied by a schedule showing which subprojects have been approved, what resources are to be (i) retained at the LGNIsland level to finance facilitation o f subprojects using LGA and Ward-level extension staff, (ii) sent to a MWK account to facilitate supervision by the VC, and (iii) to an account sent inthe name of the CMC for the approved subprojects. The MUwill disburse these subproject funds to those LGAs that will have met both LGCDG and NVF access criteria; inthis instance disbursementfrom LGA to the MWK will be intwo equal tranches. Fundingfor subprojects in LGAs whose LGAshave not met the LGCDG access criteria will be disbursedby the MUto the MWK and to the CMC separately until a VC has attained a pre-definedfiduciary capacity (two half-yearly satisfactory Community Score Cards and a trained person with demonstrated record- keepingskills), when funds will go into the MWK for disbursement to the CMC. Sub-projects of under $10,000 NVFcontribution will be disbursedina single tranche. 10  TABLE4: ROLES RESPONSIBILITIESINSUBPROJECTCYCLE BYBENEFICIARYGROUP AND Benejkiary group Possible LSP Hired by Service poor communities Village Project Manager/ L G N V C (Service Packages) Technical SuDervisor. Able-bodied poor Labor-Based Contractors. L G N V C Vulnerable persons NGO/CBO/Technical Expert L G N V C Approval and disbursement o f NVF contributions to subproject costs will be as follows: (i) less than US$5,000 will be approved by VCs and disbursed in a single tranche by the MU, rising to US$lO,OOO for subprojects that are demonstrably designedto contribute to more than one MDG; and (ii) to $30,000 will be approved at the LGA level and disbursedto VCs and CMCs intwo up equal tranches (see Table 5). LGAs will only approve subprojects for funding from the NVF if they (i)have been generated from communities through an E-PRA process, (ii) the meet stipulated minimum community contributions, and (iii)do not violate any sector norms and standards. As long as subprojects meet the above three criteria, LGAs will endorse those approved by the VC, and the SET will in turn verify those approved by LGAs for final endorsement by the NSC. Only then will the MUdisburse funds. 11  Table 5: Sub-projects approval levels for NVF contributions 1 The CMC will be responsible for reporting on expenditures against amounts received. For subprojects with two tranches, the second tranche will only be disbursed upon satisfactory justification o f 70% o f funds already received. The LGA will be responsible for thejustification process using documentation available at the Village level. For accountability, the CMC will prepare reports for the VC, which will make quarterly public reports to the Village Assembly before submitting reports to the LGA. These reports will be usedto trigger releases o f tranches from VF accounts heldby LGAs/Islands. Members o f the V C will also present progress reports to the Ward Development Committee (WDC) and to the LGA as required. The MUwill provide a link between LGAs and higher levels o f technical backstoppingin planning, implementation, monitoring, evaluation, and auditing (both service and financial). A V C must fully account for all resources before it can qualify to apply for more subprojects. 3. Monitoring and evaluation of outcomes/results (a) Wherewill the datafor theproject's outcome and results indicators comefrom? The primary data will be collected by the CMC on behalf of the VC, with technical assistance from extension workers at the Ward and LGA levels, as well as specialized non-governmental organizations working inthe LGA areas. All data will go to the LGA for consolidation, analysis, and sharing with the MUfor further aggregation and dissemination. (b) Wherewill the capacity and responsibility for collection of indicator data and analysis of results be located? Does capacities have to be strengthened? If so, how? The WDC will collate data from VCs for submissionto LGAs. The LGA VFCs and VFJAs will be responsible for capturing this data in a simple computerized MIS. The necessary computing capacities technical know-how are going to be strengthenedthrough the LGSP; but a Village- level paper-based systemwill be strengthenedby the CE component. (c) What additional costs are required, ifany? Extra costs will be incurred to purchase vehicles, computers, and to cover training and training materials for National, LGA, Ward, and Village level staff needed to support NVF activities. The VFJAs at LGA level will capture input and output data from the Village andNationallevels. (d) What mechanisms will allow the indicators to be used by managers andpolicy-makers to assess the project's effectiveness during implementation and after theproject is completed? All LGAdIslands will prepare quarterly progress reports which will be used by National-level agencies (MU, SET, andNSC) to addressproblems associated with project implementation, The RCC will report on a six-monthly basis to the Ministry o f Finance's quarterly sector consultations, and the NSC. An annual report will be preparedby the MUfor discussion by SET and NSC before it i s submitted to the team monitoring the PRSC under the Vice-president's Office, andto the World Bank, andto the RCC. It i s this linkwith PRS monitoring as well as the actions of SET that will integrate community-funded activities into those ledby sector ministries 12  at National and Local levels, and ensure that investments are followed up even after the Project i s completed. 4. Sustainability (a) What is the evidence of the borrower's commitment to and ownership of theproject and the relevant policies? The President o f Tanzania as well as the Minister o fFinance wrote to the World Bank requesting a follow-up operation to TASAF I,and a high-level Government Project Preparation Team was set up to prepare TASAF 11. This i s complemented by GOT'Scommitment to policies contained inthe PRS, and Government interest inthe CDD approach as away ofempoweringcommunities to participate inthe implementation o f the PRS. On-going activities for the revision o f PRS are highly participatory, and clear milestones are expected from this process to guide its implementation for the attainment o f MDGs. There i s also commitment to decentralization below the LGA as a way o f empowering communities, and this i s demonstrated by constitutional provisions that recognize Village Government as the third sphere o f govemance (to complement Central and LGA spheres). The GOT thrust to ensure external assistance comes in the form of budget support will provide TASAF with an opportunity to mainstream the CDD approach and ensure sustainability. (b) What otherfactors are critical to the sustainability of theproject's objective? The meeting o f macro-economic milestones in the PRS will be important for TASAF I1 sustainability as this will allow LGAs to provide the necessary recurrent expenditures for any infkastmcture built through community efforts. Furthermore, GOT commitment to mobilize the private sector for the implementation o f the PRS will be necessary for TASAF I1 to be sustainable since community savings and investments will be market-mediated. (e) How has theproject design attempted to address thesefactors? The project has given LGAs authority to reject any community subproject request where such an investment would be contrary to sector norms and standards, and/or are outside the LGA's development plan. This will ensure that only infrastructure where the LGA has recurrent budgets or can be managed by communities are provided. Inthe transfer of incomes to food- insecure households, and support for vulnerable individuals and those willing to save will be market-mediated(market minimumwages will be used to determine the pay under public works, and savings groups will be linked with micro-finance institutions active in the commercial market). A capacity buildingbudget i s also provided for inthe project. 5. Critical risks and possible controversial aspects (a) What are the major risks that may affect the achievement of theproject's development objective? (b) What are the major risks that may affect the realization of each component's results? Risk RiskRating RiskMitigationMeasure Capacity development inLGAs i s too H Extensive simplification o f handbooks and low to adequately respond to community OperationalManual with resources to demands. support capacity buildingwork. Village Councils fail to become N Disbursement of funds have been split accountable to the Village Assemblies between VCs and CMCs; and resources are over use o f resources available for capacity building. 13  CMCs continue to resist their being fully M CMCs will only receive funds once the accountable to Village Councils. VCs approve sub-projects and accounts. Local Service Providers (LSPs) are not M The menu for LSPs has been widened to readily available to meet demand for include NGOs, CBOs, and skilled projectsneeding support. individual consultants and firms. Government counterpart funds are not N TASAF has a budget line inGovernment available on time. expenditures schedules from MOF. ~ Implementation o f decentralization in S Clear division o f responsibilities between the country slows down LGAs(supported under the LGSP) and VCs (supported under TASAF 11). Overall RiskRating M RiskRating-H(High),S (Substantial),M(Modest),N(Neglig Ileor Low) The major risk associated with the option o fnot undertakingthe project is the negative impact on Government's stated goals o f poverty reduction and protecting the vulnerable. This i s especially so given the experience from TASAF Ithat improved accountability between communities and service providers supported by direct community financing leads to increased efficiency and effectiveness inthe deliveryo f community-level services. 6. Loadcredit conditions and covenants Are there any signijicant, non-standard - Conditionsfor Boardpresentation and/or loan/credit effectiveness? Ifso, what are they? - Legal covenants applicable toproject implementation? Ifso, what are they? Effectiveness Conditions: 0 Prior to effectiveness, a Project Account has been opened and the initial contribution deposited the initial contribution referred to in Section 3.04 (b) o f the Development FinancingAgreement. 0 The Borrower has established, at TASAF MU, a computerized management information system for the Project satisfactory to the Association prior to effectiveness. 0 Before effectiveness, the Borrower has furnished to the Association an Operational Manual and Service Guidelines on Community Participation that are satisfactory to IDA inform and substance. Other Conditions: 0 The Borrower shall ensure that the Project i s carried out inaccordance with the POMand the Service Guidelineson Community Participation. 0 The Borrower shall maintain the NSC, SET, and TASAF MU under terms o f reference and with a membership composition that i s satisfactory to the Association. 0 The Borrower shall maintain a Regional Consultative Committee and LGA Finance Committees through Project implementation. 0 The Borrower shall implement the Project inaccordance with the ESMF and the WF. 0 EachVillage shall establish a Village Fundin accordance with the provisions o f the LGA Act. 14  TASAF MU shall enter into a memorandum o f understanding with each LGA participating in the Project, under terms and conditions that are satisfactory to the Association. The respective LGAs and Village Councils shall enter into a Subproject Financing Agreement with each CMC under terms and conditions that are satisfactory to the Association. The CMCs shall prepare quarterly progress reports including financial reports for submission to the Village Council, and subsequent consolidated submission by LGAs o f such reports to TASAF MUand SET. The Borrower shall prepare, under terms o f reference satisfactory to the Association, quarterly and annual progress reports, and the MidTerm Review report. D. APPRAISAL SUMMARY 1. Economic and financialanalyses As TASAF complements sectoral interventions inthe improvement of service delivery, patterns o f sectoral recurrent and capital expenditures will be taken into consideration, particularly inthe social sectors. There will be a strong linkage between TASAF and the LGSP as well as the MTEF, to ensure that communities and their organizations are participants in the promotion of improved governance and use o f resources at district and national levels. There i s evidence that communities can construct assets that are cost-effective compared with costs incurred under other mechanisms, with the added benefit o f local ownership which protects the assets from vandalism and deterioration. A resource allocatiodtargeting formula will be developed following GOT'Sguidelines for development funds. TASAF's allocation formula will be based on 40% population, 20% physical size, and 40% poverty indicators relating to the selected MDGs indicator targets - reinforcing the poverty reduction and targeting objectives of the project. The budgetary impact o f the project has been taken into account, especially the recurrent cost implications o f the demand-driven social sector investments and their potential for negative fiscal effects. Similarly, the financial analysis has taken into account the resources generated and savings created through community participation. Useful lessons have been gained from a review o f TASAF Iin the ways sectors were able to respond to community efforts inproviding necessary social infrastructure. 2. Technical Technical: what is the rationalefor the selected technical design or approach? How does it conform to international standards? How is it appropriate to the borrower's needs. TASAF has been providing support to part o f Tanzania through a social fund which has supported three of the beneficiary groups targeted in TASAF I1 (the service access poor, the able-bodied food insecure, and the vulnerable). TASAF I1will have national coverage, and will continue to support both coping and mitigation efforts for both idiosyncratic and covariate shocks which affect the poor. Inan effort to further bolster the mitigation efforts, a fourth group of beneficiaries will also be targeted in TASAF 11, the poor who are interested inparticipating in group savings. While recognizing that some beneficiaries may need support to cope, assisting with ex-ante interventions also needs to play a role in order to strengthen poverty reduction measures. Given the diversity o f Tanzania and the variations among Districts and within 15  Districts with respect to potential beneficiaries, each District/Island will be given a global allocation with which to respond to the needs o f the target beneficiaries amongtheir populations. This ensures flexibility in responding to demands, while moving closer to the principles o f budgetary support for LGAs, as well as the Village level. 3. Fiduciary The Government has submitted to the Parliamentary Committee a draft new procurement Bill to repeal the current Public Procurement Act o f 2001 based on 2003 Country Procurement Assessment Report (CPAR) recommendations. The new Bill i s expected to be passed by the Parliament in 2004 and will become effective in 2005. New legislation i s being put in place to improve the current GOT procurement system. Identified future weaknesses will be addressed through training being developed by the Local Government Reform Program, especially as it affects the Village and Local Governments. Under TASAF 11, it i s not expected that any subproject will have a NVF contribution inexcess o f US$30,000, the estimated cost o f support to the able-bodied food insecure. Subprojects supportingthe able-bodied food secure are mandated to have a 40% unskilledlabor component, which would leave at most US$18,000 to cover supervision costs and any procurement necessary for goods and services. Subprojects supporting the other identifiedbeneficiaries have also had a NVF contribution of less than US$30,000. All of these funds will be managed by the CMC, which will have received training inprocurement and financial management prior to any finds being disbursed for implementation. Procurement o f computers and vehicles for use by the Districts will be handled by MU for efficiency reasons, which will also be responsible for procuring other items for its operation, as well as the contracting o f consultants. The Operational Manual (OM) has been appraised and the Procurement Manual prepared to guide the operations at national and community level. Relevant sections of the handbook form the training materials for CMCs, and will be translated into Kiswahili. A procurement plan has beenpreparedand discussed during appraisal and the packages and thresholds determined. An integrated Financial Management System (IFMS) is currently being utilized by TASAF and LGAs, and there are plans to roll out to all LGAs. The District Executive Directors (DEDs) are the accounting officers for the District level, and are accountable for the proper use o f public resources under their control. The largest proportion o f the Credit will be disbursed to CMCs, who have been granted authority bythe V C to implement subprojects; the CMC will bereporting on their use o f funds to the V C (on behalf of the Village Government), who will intum report to the LGAs. Inaddition to the training o f CMCs, other stakeholders will be provided with training on demand. The MU will receive funds in a Special Account and a dedicated financial management handbook has been prepared. Inaddition to the annual audits of TASAF 11, intemal auditors from the MUwill also be doing their own reviews and reporting on their findings to the Executive Director o f TASAF. LGA intemal auditors will also be expected to carry out audits o f the activities being financed from TASAF I1intheirjurisdiction and report to the LGAs. 16  4. Social TASAF I1will not finance any subproject where communities have been unable to successfully resolve any resettlement issues. The O M and various handbooks outline procedures which communities must follow to ensure that the safeguards are observed. TASAF I1 provides an informal learning environment in a number o f ways. It will have a demonstrative effect as community members realize that, based on their experience gained in building staff houses with TASAF support, they can also construct similar houses. The capacity of CMCs will be enhanced through the hands-on approach inproject management, and the skills that communities will acquire will enable them to seek employment elsewhere when opportunities arise. Through the E-PRA processes, communities will analyze their surroundings and become more aware o f opportunities and resources that they can tap into. TASAF I1will enhance the transformation o f the social capital created during TASAF Iinto economic capital to promote savings groups. The delivery mechanism o f TASAF I1has been designed to eliminate elite capture o f benefits by involving institutions such as Ward Development Committees and VCs to supervise implementation. Migration to areas by people looking for opportunities in TASAF funded subprojects is expected to be minimal because the projects are small and localized inthe community. TASAF I1preparations involved wide consultations at National, District and community levels with all stakeholders, including nongovernmental organizations (NGOs). The role o fNGOswill be to provide support and services to any o f the three beneficiary groups and LGAs on demand. In addition to benefits accruing to the targeted Project beneficiaries, there will be increased economic activity in the subproject locality and the rural economy as a whole. An Environment and Social Management Framework (ESMF) and Resettlement Policy Framework (RPF) have been put in place by mainstreaming community involvement at the relevant subproject cycle stages, detailing the procedure for dealing with individual's interests and rights. Community interests have been ring-fenced throughout the subproject cycle. In TASAF I1people will have voice because all community decision meetings will require 70% o f the Village Assembly to be in attendance. The participatory rural appraisal (PRA) techniques used at project identification will reflect the analyzed needs o f the beneficiaries and complement LGA plans. The Project will mainstream participatory community monitoring and evaluationto allow communities to demand accountability and transparency from service providers. Baseline data for the selected MDG indicator targets has been collected at the LGA level as the responsibility for monitoring will rest with these LGAs duringimplementation. The systemwill enable TASAF I1 to receive information on implementation progress which will feed into reports, the management decision making process, and the PRS monitoring process. Beneficiary assessments, Community Score Cards, Citizens Report Cards, and newspapers will also be used to capture the perspectives o f beneficiaries and the wider public on the Project. 5. Environment Are any of thefollowing environmental issues important in theproject? Ifso, (i) how are they integrated in theproject/program/sector reform to enhance its environmental benefits and (ii) how will the main environmental benefits be monitored? 17  . Establishingpolicy, regulatoly and institutionalframeworks for environmentally sustainable growth and resource management,particularly in sectors thatpotentially affect the environment This is a category B project whose potential adverse environmental impacts are few and site- specific. When E-PRAs are done with communities, potential environmental impacts will be identified and a Limited Environmental Impact Assessment (LEA) will be conducted under the leadership o f Ward and District extension staff trained inenvironmental issues. Sub-projects that cannot develop mitigation measures that are acceptable to the community and are in line with national environmental policy guidelines and norms will not be funded by TASAF. ' Enhancing livelihoods of thepoor through: (I,improved and transparent management of natural resources or (ii) reduced vulnerability to environmental change (e.g., natural disasters such asfloods) Where no negative environmental impacts are identified, the LGA officer responsible for environment and natural resource management will be expected to sign off at the desk appraisal stage that this i s so, and confirm that an LEA has been conducted for subprojects with identified impacts. Measures to minimise and mitigate environmental impacts will be confirmed during field appraisal, and again the leader o f the appraisal team will sign off that this has been done, Projects requiring Environmental Impact Assessments (EIAs) will be sent to the NSC for evaluation by the SET (which will send environmental experts to the LGAs to conduct the necessary EIA). All subprojects funded by NVF will be expected to have a re-forestation input where beneficiaries plant trees on land unsuitable for agricultural production as part of environmental protection and rehabilitation. ' Protectingpeople 's healthfrom environmental risks andpollution There will be many community subprojects aimed at improving the health o f poor communities through the provision o f clean water and sanitation facilities. The promotion o f environmental awareness duringproject identification, appraisal, andimplementation will have positive impacts on the attitude o fwhole populations towards environmental protection. 6. Safeguard policies Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP/GP 4.01) [XI [ I Natural Habitats (OP/BP 4.04) [ I Pest Management (OP 4.09) [ I Cultural Property (OPN 11.03, beingrevisedas OP 4.11) [ I Involuntary Resettlement (OP/BP 4.12) [XI IndigenousPeoples (OD 4.20, beingrevised as OP 4.10) [ I Forests (OP/BP 4.36) [ I Safety o f Dams (OP/BP 4.37) [ I Projects inDisputedAreas (OP/BP/GP 7.60)* [ I Projects on International Waterways (OP/BP/GP 7.50) [ I 7. Policy Exceptions and Readiness A Letter o fPolicy, duly signedbythe Minister ofFinance, hasbeenprovidedto the Association. * By supporting theproposedproject, the Bank does not intend toprejudice thefinal determination of theparties' claims on the disputed areas 18  Annex 1:Country and Sector or ProgramBackground TANZANIA: SecondSocial Action FundProject a), What are the key elements of the client's sector or poverty reduction strategy, and throughwhat instrumentsis it beingimplemented? The long-term strategies o f the Government of Tanzania (GOT) include the National Poverty Eradication Strategy (NPES) and Vision 2025. The Government adoptedthe Poverty Reduction Strategy (PRS) as a medium term instrument for realizing its long-term goals set out in Vision 2025 and the NPES, including achieving the MillenniumDevelopment Goals (MDGs). Through the PRS participatory process, key priority sectors were identified that would have maximum impact on poverty reduction: these are education, health, water, agriculture, rural roads and justice, with the cross cutting areas o f gender, environment, HIV/AIDS, employment and good governance. These PRS priorities now generally guide donor support, and GOT i s collaborating with other stakeholders to review these priorities in order to deepen and broaden interventions for poverty reduction. b). What are the key policyinstitutionaland other issues that constrainthe achievementof betterpovertyreductionresults? With an estimated annual per capita income of US$257, Tanzania is ranked as one of the least developed countries inthe world. The mainstay of the economy i s agriculture constituting about 45% o f Gross Domestic Product (GDP) and i s a source o f livelihood for 90%, a source o f employment for 81% o f the population, and in 2000 accounted for 85% of total exports. Although agriculture i s broad based, it continues to register a low growth rate, 3.4%, compared with high growth sectors like mining and quarrying at 13.9%, construction at 8.4%, and trade, hotels and restaurants at 6.5%. The overall impact o f the high growth sectors on the GDP i s not significant given their small bases. Ifsuch growthrates were recorded in agriculture, the impact on poverty would have been significant, but agricultural production continues to be impacted by erratic rainfall patterns, low production andpoor producer prices. The population in Tanzania is estimated at 34.6 million with an annual growth rate of 2.9% (2002 Census Report). The Household Budget Survey showed that 18.9% of the population live below the food poverty line while 35.7% live below the basic needs poverty line (less than US$1 per day). Poverty is more widespread and deeper in rural areas where 87% o f the population live. Urban poverty inDar es Salaam is much lower than inrural areas: there has been a decline in the proportion of population living below the food poverty line from 13.6% in 1991/92 to 7.5% in 2000/2001, and those below the basic needs poverty line declined from 28.1% in 1991/92 to 17.6% in 2000/2001. In urban areas poverty i s characterized by low and uncertain income for people engaged in the informal sector, limited employment opportunities, lack o f means o f capital accumulation for low income groups, poor conditions for people living as squatters, andlack o f voice and non-participation indecision-making by some vulnerable groups. The Household Budget Surveypointedto the fact that there is growing inequality indicatedby an increase inthe Gini co-efficient from 0.34 to 0.35 between 1991/1992 and2000/2001. The illiteracy level is high at 28.6%; 36% for women and 20.4% for men. The highest level o f illiteracy, 33.1%, i s among the rural population. Remarkable increases have been observed in 19  the net enrolment ratios inboth Tanzania mainland and Zanzibar, with the mainland registeringa 26.2% increase, while Zanzibar reached 92.2%. Life expectancy i s estimated at 45 years while maternal, child and infant mortality rates have continued to deteriorate, with indications that the deterioration inrecent years i s probably due to the prevalence o f HIV/AIDS. Despite the efforts o f GOT and other partners, the HIV prevalence rates are worsening, particularly for young women. There has been an increase in the supply o f safe drinking water, with data from 2002 showing 50% inrural areas and 70% inurban and peri-urbanareas, but poor sanitation remains a major problem for the poor households living inurban and peri-urban areas. All these aspects of poverty require higheconomic growth rates. Eventhough the economy has recorded success in macro-economic performance, the challenge o f widespread poverty remain high as a result o f insufficient translation o f the macro-economic achievements into micro-level for the benefit o f the poor (PRS, 3'd Progress Report, March 2004). Capacity limitations for service delivery and monitoring in Local Governments i s another constraint to achieving better service delivery for poverty reduction. c) What is the client doingto address the issues andconstraints? The Government recognizes the need for robust high growth to fight the nation-wide and deep- rooted poverty. While high and sustained growth i s necessary, it needs to be broad-based and centered on improving livelihoods o f the poor through programs implemented using the CDD approach. For this reason GOT has reaffirmed the participatory approach in addressing poverty issues as stipulated in the NPES and PRS. Accordingly, sector and other development policies have been revised to emphasize the importance o f decentralization and participatory approaches in the development processes. There are a number of programs inthe country usingthe CDD approach; these include the PADEP, PEDEP, the Second Health Project, TMAP, Water Supply and Sanitation Project, Environmental Management Project, Social Support to Disabled Women and Training for Tanzania Women, and TASAF I.There are also efforts to strengthenthe Local Governments through the Local Government Reform Program. Government has also pursued structural reforms, concurrent with efforts to promote private sector development. Most o f the Government parastatals have been privatized, with the privatization o f major utility companies at different stages o f implementation. GOT has continued to reform its public service sector with a view to improving service delivery, this has provided an opportunity for private sector investment. Implementation o f PEDEP has contributed to the achievements registered in the gross and net enrolment figures as a result o f the abolition o f the universal education levy and other fees. The policy o f adult literacy and non-formal education i s targeting women and girls as the country has highilliteracy levels among women. Coverage for access to safe water inrural and urban areas has also improved. However, due to high urban population growth rates, there i s increasing pressure on water leading to an increase in time spent by women and children fetching water. PADEP currently under implementation i s aimed at creating an enabling environment for improving agricultural productivity and profitability; improving farm-income and ensuring household food security. 20  Government has mainstreamed the crosscutting issues o f gender, HIV/AIDS, environment and governance into the PRS, particularly the MTEF, and within the sectors addressing the specific issues and constraints related to poverty reduction. The GOT has adopted MDGs towards which its development efforts are hamessed in an attempt to make a positive and sustainable impact on poverty. As a result o f the wide-spread nature o f poverty, there is continued overwhelming demand by communities on Government for support in meeting their needs for closing service gaps, in meeting the needs o f the vulnerable and the able-bodied poor. The GOT, through TASAF 11, i s seeking to consolidate the gains from TASAF Iand be able to respond to the needs o f the communities and enable the beneficiary groups to graduate out o f the poverty trap and attain sustainable livelihoods at individual, household, and community levels. 21  Annex 2: Major RelatedProjectsFinancedby the Bankand/or other Agencies TANZANIA: Second Social Action FundProject Each o f the Bank supported projects listed below i s addressing sector specific issues, except for the TASAF, TMAP, the Lower Kihansi Environment Management Project, and MACEMP which are cross-cutting. 1Bank-financed: Sector Implementation Development Progress (IP) Objective (DO) Second Health Sector Dev. S S Project (PO82335) Multi-Sectoral AIDS Project S s (PO71014) 1Education Primary Education (PO71012) S S 1 I------ Participatory Agric. Dev. & S S Emp.Project (PO67103) Rural andMicro Financial S S Services (P050441) Water Rural Water Supply & S S SanitationProject (P047762) Environment Lower Kihansi Environmental S S Management (PO73397) MACEMP At design stage Social Action Fund(P065372) S S Government o f Denmark, UNDP, DFID, EU, Government o f Finland, ACT VZW (BelgianNGO), the FordFoundation, ILO, CIDA, USAID, CORDAID, Austria, The People's Republic o f China, IrishAid, JICA, KFW, SIDA, AfDB, OPEC, Arab Bank for Economic Development in Africa, FAO, Swiss, Care International, Christian Social Services Commission, PlanInternational 22  Annex 3: ResultsFrameworkand Monitoring TANZANIA: Second SocialAction FundProject PDO OutcomeIndicators Use of OutcomeInformation To empower communities to 90% o f targeted YR1-YR3:Assess community access opportunities so that communities receiving capacities to access anduse grants. they can request, implement, grants complete their YR4-YR5: Document contributions to and monitor sub-projects that subprojects within intermediate MDGindicators and assess contribute to improved agreed time-frame. strategies for mainstreaming TASAF into livelihoods linkedto MDG budget support. indicator targets inthe Tanzania PRS. IntermediateResults ResultsIndicatorsfor Use of ResultsMonitoring Oneper Component EachComponent Component 1 Component 1 Component 1 Communities with improved Individuals and YR1-YR3:Assess impact of assets created access to services that reflect households with on improved service access and progress contribution to the attainment increased availability towards the attainment o f PRS/MDG o f PRSMDGs. and use o f basic and indicator targets. market services YR4-YR5:Review sustainabilitv strategies. Component 2 Component 2 Component 2 Individuals reached with Individuals and agencies YR1-YR3:Assess impact ofindividual capacity buildinginterventions supporting communities skills on efficiency o f subprojects to implement subprojects and implement and complete implementation by communities and mobilize savings. subprojects that institutions. contribute to poverty YR4-YR5:Review effectiveness o fpublic- reduction. private partnerships inresponding to community needs. 23  KEY PERFORMANCEINDICATORS The actual performance o f the project will be measured by the M&E system at sub-project and LGA levels. A set o f secondary indicators will be used to track inputs and processes for each o f the project components. There are no targets set for the following indicators as the project i s a demand-driven and the number o f sub-projects ineach specific sector cannot be determined apriori. 1. Number and % increase incitizen satisfaction with delivery of basic social services 2. Increased income from wages (income transfers) from PWPworks 3. Annual dropout rate (%) o f students inprimary and secondary schools 4. Number and % of girls and boys inprimary and secondary schools 5. Number and % o f under-fivesmalnutrition usingweight for age method 6. Number o f maternal deaths incommunities 7. Number o f households usingimpregnated bed nets 8. Number and % of persons with access to protected water sources 9. Number o f operational drug revolving funds 10. Number o f individuals receiving assistance by vulnerability type 11. Number o f households with access to safe waste disposal methods 12. Number o f individuals participatingin community saving schemes 24  Y in x in Y 0 a, 'E &  t  a5 1 Y 0 'Ea, a b N T g m x w cd I d -t-- I I I  Table 1.Tanzania: selected MDG and PRS targets and status (1990-2015)* dDG Indicator I Actual (latest) 2015 MDG 12010 PRS Taget Target lalve the Proportion Population below the 38.6 basic 35.7 basic 19.3 basic 17.8 basic )fPeople Living national poverty line needs, needs, needs, needs, 3elow the National (%I 21.6 Food 18.7 Food 10.8 Food 9.3 Food 'overty Line Zchieve Universal Net Primary 51.4 89 100 1100(literacy) 'rimary Education Enrollment Ratio 'romote gender Ratio o f girls to boys 97 93 100 :quality inprimary and secondary education loo ~ Halve the Proportion Population without 58.3 41.7 20.85 15 Rural s f People without access to an improved 32 urban Access to Safe water source (%) 5 1.5 Rural DrinkingWater Reduce Under-five Under 5 mortality rate 163 169 48 79 Mortality by two- (per 1000) thirds Reduce Maternal Maternal mortality 530 200-700 133 265 Mortality by three rate (per 100,000) live quarters births BirthsAttendedto by 43.9 36 90 80 Skilled Personnel (?A) Halt and Reverse the Prevalence o f H N , 5.5 13 <13 6-27% Sero- Spread o f HIV/AIDS female (% ages 15-24) positive prevalence ratc amongpregnaii women * Source: WorldBank (2004) Second Poverty Reduction Support redit, Report No :9616-TZ ** MDG baseline data are for 1990 (Worid Bank Develbpment Indicators) except for poverty estimates (HBS, 2000/01), maternal mortality (PHDR, 2002) 28  Table 2. CommunityParticipationinthe attainmentof MDGswithin the TanzaniaPRS MDG Indicator Community ical activities in community sub- Participation (to projects which TASAF can finance** contribute to MDGs\* Halve the Population below Wages frompublic works. Bridges, community roads, reforestation, etc. Proportion o f the national h o m e s fromprojects for Raising animals, highvalue crop production, People Living poverty line (%) [hevulnerable. improvedproduce marketing, etc. Below the [ncomes from investments Trading, transportation, catering, warehousing, NationalPoverty funded from own savings. food processing, non-formal education for Line youth groups, etc. Achieve Net Primary [nfrastructure provided. Classrooms, desks, toilets, teachers houses, Universal Enrollment Ratio blackboards, teachers offices, etc. Primary Community Statistics Day Training communities to gather information Education and identify potential actions. Promote gender Ratio o fgirls to Community Statistics Day Girls inclassesat start andend o fterms. equality boys inprimary Social mobilization. Train school committees, VCs, etc. andsecondary Service access Toilets for boys and girls, water points, etc. education (%) infrastructure. Halve the Population withour Community Water Points. Boreholes, wells, spring protection, etc. Proportion o f access to an Water harvestingprojects. Water reservoirs (earth dams, valley tanks). People without improved water Training maintenance Training women incommunity water Access to Safe source (%) committees. maintenance committee, provide tools, etc. Drinking Water Householdsanitation. Education o f Village Assembly members. Reduce Under- Under5 mortality Community food Grain(rice, maize, sorghum, etc.), vegetables, five Mortality by rate (per 1000) production projects. legumes, bananas, etc. two-thirds Immunization promotion. Train V C and Assembly members. Strengthening health Rehabilitation and reconstruction o f health service deliverv facilities (without new constructions) Reduce Maternal Maternal Mortalitj Awareness on risks: Train Village Assembly and V C Mortality by rate (per 100,000) FP promotion. Training and supply kits for FPpromoters. three quarters livebirths Community Statistics Day Quarterly maternal deaths invillages recorded BirthsAttendedto Training ofTBAs and Training and supply kits for TBAs and CBOs by Skilled CBOs active inthe improvement o f services. Personnel ("h) Community Statistics Day Training communities. Training o fFP promoters Inservice fromFPpromoters. Halt and Reverse Prevalence o f Income support for orphans Growing crops and animals for sale. the Spread o f HIV, female ("h Youth skills training. Training incarpentry, masonary, tailoring, etc HIV/AIDS ages 15-24) Income support for the Income-generating projects for households chronically ill. with the chronically illand orphans. Support Community Health Training and initial seed capital for CHFs and Funds. community drug supplies. Community health Bednet promotion(production, use, sale, etc.) awareness (TB, malaria, as well as promotion of community-level etc.). DOTSprogram, awarenessraising, etc. * To guide the preparationo f Commun Service Packages under TP AF. ** Examples from work TASAF Iand Iier Social Funds, but communities will be free to identify more. 29  Monitoring h Evaluation (Ma) The overall objective o f Monitoring and Evaluation (M&E) in TASAF I1is to ensure better planning, targeting, feedback to relevant stakeholders and timely decision making in order to improve service delivery. Itwill help to 0 improve management o f programs, sub-projects and supporting activities 0 ensure optimum use o f funds and other resources 0 draw lessons from experience so as to improve the relevance, methods and outcomes of cooperative programs 0 improve service delivery in order to promote active community participation, quality o f sub- projects, transparency and accountability with a view to ensure that resow-ces made available to sub-projects are used to meet the intendedpurposes 0 strengthen the capacity o f co-operating agencies, non-governmental organizations and local communities to monitor and evaluate and 0 improve information sharing systems and enhance advocacy for policies, programs and resources that improve the TASAF I1contribution towards poverty alleviation A results-basedM&Esystem will monitor projectprocesses usingthe followingmethods andtools : 0 A well defined results framework that is derived from clearly defined goals, objectives, outputs and activities with corresponding indicators, means o fverification and key assumptions 0 A well defined M&E strategy for project processes, information requirements, tools and methodologies for data collection, analysis and reporting 0 A comprehensive M&E plan with clear roles and responsibilities as they relate to indicators tracking with respect to data gathering and reporting 0 A Project tracking system based upon agreed indicators as derived from the logical framework matrix o f the TASAF I1program 0 Internal and External periodic assessment and evaluations which would include baseline studies, beneficiary assessments, mid-term evaluations, ex-post evaluations and impact evaluations 0 Participatory community monitoring and accountability approaches and systems TASAF I1will ensure that all stakeholders are taking part inmonitoring o f project processes according to defined roles and responsibilities based on specific performance indicators. TASAF I1will commission extemal evaluative studies such as beneficiary assessments to complement the internal monitoring arrangements. TASAF I1will collaborate with other Government initiatives such as the National Level Poverty Monitoring being facilitatedby the Vice President's office. TASAF I1 will promote participatory community monitoring to ensure that project implementation processes are executed ina satisfactory manner and that benefits are sustainable. TASAF I1KeyPerformanceIndicators TASAF I1 will assess its project management systems and procedures in respect o f their relevance, effectiveness, efficiency and impact at community, operational area and national levels. This will be carried out through input, process, output, outcome and impact tracking indicators which are geared towards meetingthe national MDGgoals. The actual performance o f the project will be measured by the M&E system at sub-project and LGA levels. A set o f secondary indicators will be used to track inputs and processes for each o f the project components. There are no targets set for the following indicators as the project i s demand driven and the number o f sub-projects ineach sector cannot be determined apriori: 30  1. Number and % increase incitizen satisfactionwith delivery o fbasic social services 2. Increased income fromwages (income transfers) from PWPworks 3. Annual dropout rate (%)o f students inprimary and secondary schools 4. Number and % o f girls andboys inprimary and secondary schools 5. Number and % o f under-fives malnutrition using weight for age method 6. Number of maternal deaths in communities 7. Number of households usingimpregnated bednets 8. Number and % o fpersons with access to protected water sources 9. Number of households with access to safe waste disposal methods 10 Number of operational drugrevolving funds 11. Number o f individuals receiving assistance byvulnerability type 12. Number of individuals participatingincommunity saving schemes InformationTechnology The project management information system (MIS) i s supposed to monitor implementation at the community level with support from the LGAs. It will be designed to incorporate a paper-based component at the community level and an interface to an LGA computerized system. T o ensure sustainability, it will be harmonized with LGA level processes and systems and progressively mainstreamed into the district systems and processes once they are capable o f meeting the business and reporting requirements o f the project. Those LGAs that do not meet the LGCDG access criteria will not handle NVF resources. Since the VC i s a recognized sphere o f government, the default position i s that funds will be transferred to the VC and the CMCs. Funds for sub-projects will only go to LGAs if they have met the LGCDG access criteria (after PO-RALG has published the list o f LGAs that pass), and NVF access criteria. This has the following implications for the MIS (summarized in figure 3.1): The decentralized computerized MIS i s no longer a responsibility o fTASAF but o f LGAs (can be funded out o f LGSP as part o f their qualification conditions) and TASAF only needs to specify the kind o f reports it would expect from LGCDG eligible LGAs. Thus, for funds to go through the LGAs, they would have to meet the LGCDG and NVF criteria (and produce evidence that they can account for the use o f the Village Fundintheir LGA). The MU will have a computerized M I S that can report on finances against physical inputs and outputs. The project design helps to strengthen the abilities o f LGAs to plan, fund, implement and monitor community empowerment and delivery o f socio-economic services to the poor. Since most o f the activities will be taking place at community and district levels, it i s imperative that the M I S for the LGAs be capable o fproducing the information neededby TASAF 11. The TASAF I1M I S (at the MU) should be capable of interfacing with other M I S systems currently existing or being proposed - both at the national and District levels. The outputs o f these various sub- systems, along with the development communication initiative, will be brought together under a Knowledge Information Dissemination System (KIDS) to strengthen learning and capacity buildinginthe context o f the CDD approach. Conceptual model of M I S The Village FundM I S will operate at three different levels and will include the following sub-systems: 31  Communitv Level (paper-based). The Community level sub-system i s a paper-based and assists communities improve the management of sub projects and facilitate the linkage between community project implementation actions with District supervision and support; there will be three simple manual processes - namely: 0 Community LevelProjectPlanning, Implementation& Monitoring (CL-PIMS) 0 Community Contractingprocess (CL-PROC) and 0 Community Level Accounting process(CL-FMS) Uptake from these community level processes will feed into similar functionsiprocesses at the District level. District Level ~responsibilitvo f the LGA). The recommended District level sub-system to support Village Fundactivities would comprise of four mainmodules. It i s the first computerized level and could comprise of the following: 0 Project Planning Implementation and Monitoring Sub System module (PPIMS) - which would enable users to track project activities including planning, costing and monitoring. Physical progress on sub-projects would be entered into this module while corresponding financial progress would be importedfrom the District level FMS; 0 Standard Operational Bills o f Quantities (SOBOQ) module - could maintain operational bills of quantities for Community service packages that meet sector norms and guidelines. This module could also maintain a District-level Unit-Cost database containing materials, labor and transport data withhistorical capability; 0 District level Procurement module (LGA-PROC); and 0 District level Financial Management System to track the financial inputs and outputs associated with sub-projects and initiatives. The systems could feed into the FMS at national and District levels inrespect tojustification of expenditures and physical progress reports through certificates that form the basis for disbursement of funds and reporting to donors. It would feed financial informationto the PPIMS through an ExportAmport mechanism. While the LGA MIS is not the responsibility of TASAF, the experience of working with communities duringTASAF Icould be made available to LGAs when they develop an appropriate system to facilitate the reporting of inputs/outputs against budgets. TASAF IUNationalLevel The national level sub-system is mainly used for consolidation of TASAF I1information from the VCs and LGAs.Its main role i s to perform comparative analyses and produce monitoring and financial reports for IDA, GOT and other stakeholders at the national level. Itwill comprise of a single module, the Project Trackmg System (PTS), which i s an information consolidating system at MU to monitor and track national level performance indicators; in order to maintain both physical and financial data related to TASAF 11. OTHERSUB-SYSTEMS Knowledge & Information Dissemination System (KIDS) - will support information and resource sharing within TASAF I1as well as other relevant stakeholders. The KIDS will capture, organize and share systematically the knowledge and experience of TASAF I1 staff, stakeholders and development partners. This will be used to facilitate the development of TASAF I1into a learning and knowledge sharing organization and for effective and quality program delivery. 32  Geographic Information System (GIs) - will be developed (at a later stage - if necessary) to complement the TASAF I1PMIS. It will present social data at the District and community level and the corresponding location o f specific sub-projects. Figure3.1 National Village FundM I S conceptualmodel National Level Project Tracking System (PTS) Financial module Management System(MU) A ___________- ---------.----------------- --- rl District Level (Responsibility U G A ) U I I H b I I I Financial Std. Operational Project Planning, Implementation & Management Billof Monitoring System(PPIMS) System Quantities (District-FMS) (SOBOO) \ , Community Level Community level Project Planning Community Community level Implementation & Contracting Accounting Monitoring (CL-PROC) (CL-FMS) (CL-PIMS) (Paper-based) (Paper-based) (Paper-based) -The Note: Community level information capture and processing is paper based. The district level information capture, processing and dissemination i s the responsibility of the LGAs. The TMUportion of the M I S i s the responsibility o f MU. 33  Annex 4: DetailedProjectDescription TANZANIA: Second SocialAction FundProject TASAF I1is a program to empower communities to access opportunities so that they can request, implement and monitor sub-projects that contribute to improved livelihoods linked to MDG indicator targets inthe Tanzania PRS. Based on the PDO and adopting the CDD approach, the Project provides a mechanism that will allow Local and Village Governments to respond to community demands for interventions that improve livelihoods so that communities can contribute to the attainment o f specified MDG indicator targets. The locus of the program i s at the lowest level o f Local Government Authorities (Le., the VillageKijiji inrural areas, the Mtaa in urban areas, and the Shehia on the Islands), and there will be two components: National Village Fund(NVF), and Capacity Enhancement (CE). The management of NVF will require the enhancement o f capacities at National, Local and Village levels inthe empowerment o f communities to participate inrisk reducing and mitigating activities thereby contributing to poverty reduction. The principal target groups (beneficiaries) of the NVF are those communities who: (a) lack access to basic social and market services; (b) have able-bodied but food insecure households; and (c) have vulnerable individuals (i.e., orphaned, disabled, elderly, affectedinfected by HIV/AIDS, etc.). These beneficiary groups are expected to improve their livelihoods by: (i) Poor Communities availing themselves of Service improved services inhealth, roads, education, water and sanitation, markets, banking, and others, (ii) insecurehouseholdswithable-bodiedadultsincreasingtheirincomesfromworkingin food NVF-financed public works programs, and (iii)vulnerable individuals working through community-based organizations (CBOs) to access resources for increasing incomes at the household level. The NVF will be managed by LGAs (in response to community demands) through the Village Councils (VCs) - which will ensure that beneficiaries elect a Community Management Committee (CMC) to manage resources available for each subproject. The main outputs and outcomes are inTable 4.1. TABLE 4.1: OUTPUTS AND OUTCOMES ~ Component Outputs Outcomes National Households with increased access to and Improvement inservices Village Fund use o f services Individuals with increased employment Incomes received to improve opportunities from public works basic services Vulnerable individuals inreceipt of Service improvement for the assistance vulnerable Capacity Individuals reached with training and Application o f skills gained Enhancement support Individuals participating insavings groups Investments made from savings. An Operational Manual (OM) will guide the operation o f TASAF 11, and relevant technical handbooks for use by the various stakeholders will be prepared. These documents will contain 34  objectives, guiding principles, eligibility criteria, the community subproject cycle (CSPC), and the monitoring and evaluation arrangements. National Villape Fund (Total US$144 million, IDA U S 1 2 0 million, Government US$12 million, Communities US$12 million) The NVF will provide money to a Village level fund, Mfuko wu Kijiji/Shehia/Mtua (MWK), as the principal input for households to produce outputs that improve service availability anduse, as well as incomes for the able-bodied poor, and the vulnerable. Beneficiaries will be facilitated to identify priority problems, design interventions, and prepare proposals that NVF will finance in the form o f subproject grants given to MWK. TASAF I1resources for NVF will be allocated globally to the District/Islands on the basis o f a formula that includes population (40%), poverty data (40%), and geography (20%) for funding subprojects. An element o f equity, 25%, will be applied prior utilizing the allocation formula. Local Government Authorities (LGAs) will only approve subprojects for funding from the NVFifthey (a) have been generated from communities through an E-PRA process, (b) meet the stipulated minimum community contributions, and (c) are in line with sector norms and standards. Any District approving subprojects outside these criteria will be ineligible to receive financing from the NVF. Inaddition to satisfying the three criteria above, to be eligible for NVF funding each subproject will have on file, at the LGA level, a Project Interest Form, and will have undergone an E-PRA to confirm the community's interest and eligibility for accessing funds from TASAF. Duringthe E-PRA, a Village-level CMC will be elected by the Village Assembly attended by at least 70% of its members; a representative o f the VC will serve as an ex-officio member o f the CMC. After the E-PRAYan application will be filled in and submitted for funding to the appropriate approval authority. Relevant sector staff from the District and/or Village will conduct the desk and field appraisals, and those subprojects that successfully complete the appraisals will be eligible for funding. The employment o f a Local Service Provider (LSP) with technical responsibilities, among others, for supervision will be the responsibility o f the LGAs or VCs from the funds provided to them for supervision. The responsibilities o f the LSP will be described in detail in the FA, and in the contract entered into between the LGA and the LSP. Upon completion the subproject will, depending on the asset created, be handed over to the community where operation and maintenance will be undertaken at the District or kijiji level as outlined inthe FA. The Grant portion of the Project, amounting to US$21 million, will be "ring-fenced" to finance support provided to the able-bodied food insecure, andthe vulnerable. Once these amounts have been exhausted, the Credit portion o f the NVF can provide funding for these beneficiary groups. It is envisaged that, ifdesired, funding from other sources including other IDA financedprojects (e.g., the community support component o f Tanzania Multi-sectoral AIDS Project (TMAP), the Marine Coastal Environmental Management Project (MACEMP), the Forest Project, etc.), or other donor financing for community activities desirous o f following the TASAF principles and processes, will formalize their intent in their legal agreements and Operational Manuals. The modalities for funding could be either: (a) have all subprojects submitted to their Management Unit for direct financing from their resources once sub-project schedules havebeenreviewedby the SET and endorsed by the NSC; or (b) provide funding to TASAF which would establish a 35  Special Account for each funding source, from which disbursements will be made for the specified sub-project types; andreports prepared for the provider o fring-fencedresources. The roles o f the stakeholders as they pertain to implementation and supervision are provided in Annex 6: Implementation Arrangements, and are defined in the OM and relevant handbooks. The Memorandum o f Understanding entered into between the MUandthe LGAs, as well as the Subproject Financing Agreement (SFA) to be entered into by the parties for subproject implementation will each contain informationrelevant to the purpose o fthe document. The levels for approval o fNVF contributionsto subprojects (inTable 4.2) will be as follows: (a) Village Councils (VCs) are authorized to approve subprojects whose NVF contribution i s less thanUS$5,000, risingto US$lO,OOO equivalent for subprojects that are demonstrably designed to contribute to more than one MDG; and (b) subprojects above the VC approval level, up to a maximum NVF contribution of US$30,000 will be approved by the LGA. The subprojects approved by the VCs will be sent to the LGA for endorsementprior to submissionto the SET to verify, and the NSC for endorsement. As long as subprojects meet the three criteria defined earlier, Local Government will endorse those approved by the Village Council (VC), and the Sector Experts Team (SET) will inturn verify those approved by the Local Government for final endorsement by the National Steering Committee (NSC). Only then will the MU disburse the funds. Suh-project vc LGA Addressinga single MDG <US$5,000 US$5,00 1-3.0,OOO Addressing 2 or more MDGs =us$lo,ooo US$10,001-30,000 The basis for disbursement from NVF will be a costed subproject. Costing of subprojects will include Prime Costs (materials, transport, labor and any other physical inputs), and 10% for supervision costs. Disbursement of funds will be against the Total Cost (TC) of a subproject provided in the application form (TC = Prime Cost + 10%). The NVF will disburse TASAF's contribution to a subproject either directly to the CMC, or via the Mfuko wa Kijiji/ Shehia/Mtaa (MWK), or via LGA to MWK. Fundsto the LGA will be accompanied by a schedule showing which subprojects have been approved, what resources are to be (a) retained at the LGNIsland level (2.5%) to finance facilitation and reporting on subprojects using LGA and Ward-level extension staff, (b) sent to a MWK account (2.5%) to cover cost o f facilitation, monitoring, and reporting by the VC, (c) 5% to either the V C or LGA for sub-project supervision, and (d) sent to an account (900/) in the name o f the CMC for approved subprojects. For an LGA to receive funding for subprojects from the NVF, it must meet the LocalGovernment Capital Development Grant (LGCDG) access criteria, as well as the NVF access criteria. The LGCDG access criteria includes: (a) having the position of Council Director, Treasurer and Internal Auditor substantially filled; (b) Final accounts for the previous fiscal year produced as per section 45(4) of the Local Government Act 1982 submitted for audit on time; (c) not receiving an adverse audit report for their last audited accounts; (d) having no financial irregularities reported either by the internal or external Auditors in the previous 12 months; (e) preparing monthly bank reconciliation statements for all accounts; (0 an internal audit i s in place and functional as provided under section 45(1) of the Local Government Act 1982 and the LGFM 1997 orders 12- 36  16 (at least 4 internal audit reports duringthe previous fiscal year); and (g) regular production o f financial audits - all quarterly reports duringthe previous financial year presented to the Council with copies to PO-RALG. The NVF access criteriaconsistsofthe LGAhaving appointed aVFC andaVFJA. LGAsthat meet LGCDGandNVF access criteriawillreceive subproject funds ina single tranche from the MU. Disbursement from LGA to the MWK for LGA-approved sub- projects will be intwo equal tranches; the second tranche will be released once 70% o f the first tranche has been satisfactorily accounted for. Sub-projects under a NVF contribution o f US$lO,OOO will be disbursed in a single tranche. Funds from the NVF by TASAF MU or LGAs will be disbursed to the MWK and the CMC separately until a V C has attained a pre-defined fiduciary capacity (two half-yearly satisfactory Community Score Cards, and a trained person with demonstrated record-keepingskills) when funds will go into the MWK for disbursementto the CMC. TABLE4.3: ROLES RESPONSIBILITIESINSUBPROJECTCYCLE BYBENEFICIARY AND GROUP ~ Process Service Poor Able-bodied Poor Vulnerable ExtendedPRA ledbv GOT staffl NGOs GOT stafflNGOs GOT stafflNGOs Appraisal by: VCILGA VCILGA VCILGA Approval o fprojects by VCILGA VCILGA VCILGA Disbursements to:* CMC CMC CMC Implementationby: CMC IC M C L G A CMC Signatories to the bank CMC CMC CMC I accounts: I I I I Reports sent to: VCILGA VCILGA VCILGA Justification Reports CMC CMC+LSP** C M C prepared by: Completionreports done by: CMC CMC+LSP CMC Inaugurationdone by: LGA LGA LGA Operation & Maintenance Defined inSFA Defined inSFA Defined inSFA **Each type o f subproject will require a different type o f local service provider (LSP), with the following beingpossible LSPs for each beneficiary group: Beneficiary group Possible LSP Hired by Service poor communities Village Project Managed L G A N C (Service Packages) Technical Supervisor. Able-bodiedpoor Labor-Based Contractors. L G A N C Vulnerable Dersons NGOICBOlTechnical ExDert 1L G A N C 37  CommunityService Packageswill guide communities on activities that are eligible for funding and support from TASAF. The service packages, defined by the respective sector ministries, comprise a minimum set o f interventions that (a) are affordable and suited to community level management and maintenance, (b) are within national sector norms and standards, and (c) will contribute to specified MDG indicator targets. The relevant MDG, the indicator target, the variety of community participation, andpossible subprojects are detailed inthe relevant manuals and summarized below. Table4.4: CommunityParticipationin subprojects Indicator(in CommunityParticipation Typical activitiesincommunity sub-projects PRS) (to contributeto MDGs)* whichNVFcanfinance** Halve the Populationbelow Wages from Public Works. Bridges, community roads, reforestation, etc. Proportion o f the national Incomes fromprojects for Raising animals, highvalue crop production, People Living poverty line (%) the vulnerable. improvedproduce marketing, etc. Below the National Incomes from investments rrading, transportation, catering, warehousing, Poverty Line fundedfromown savings. food processing, etc. Achieve Universal Net Primary Infrastructureprovided. Classrooms, desks, toilets, teachers houses, Primary Education Enrollment Ratio blackboards, teachers offices, etc. Community Statistics Day. Training communities to gather information andidentifypotential actions. Ratio o f girls to Community Statistics Day. Girls inclasses at start and end o f terms. equality boys inprimary Social mobilization. Train school committees, VCs, etc. and secondary Service access Toilets for boys and girls, water points, etc. education ("h) infrastructure. Populationwithoui Community water points. Boreholes, wells, spring protection, etc. access to an Water harvesting projects. Water reservoirs (earth dams, valley tanks). improved water Training maintenance Training women incommunity water source (%) committees. maintenance committee, provide tools, etc. Household sanitation. Education o fVillage Assembly members. Under 5 mortality Community food Grain (rice, maize, sorghum, etc.), vegetables, rate (per 1000) production projects. legumes, bananas, etc. ;Train V C and Immunizationpromotion. Assembly members ;Rehabilitation and Strengthening health reconstruction o f health facilities (without new service delivery I constructions) Reduce Maternal Maternal Mortalitj Awareness on risks. Train Village Assembly and VC. 1Mortality by three rate (per 100,000) Family Planning promotion Training and supplykits for FP promoters. live births Community Statistics Day. Quarterly maternal deaths invillages recorded BirthsAttendedto TrainingofTraditional Training and supplyI t s for TBAs and CBOs by SIlled BirthAttendants (TBAs) active inthe improvement o f services. Personnel (%) and CBOs Training communities. Community Statistics Day Inservice fromFPpromoters. Training o f Family Planning (FP) promoters Halt and Reverse Prevalence o f Income support for orphans Growing crops and animals for sale. ~ the Spread o f HIV,female (% Youth skills training. Training incarpentry, masonry, tailoring, etc. HIV/AIDS ages 15-24) Income support for the Income-generating projects for households chronically ill. with the chronically illand orphans. Support Community Healtf Training and initial seed capital for CHFs and Funds(CHFs). community drug supplies. Bednet promotion Community health (production, use, sale, etc.) as well as awareness (tuberculosis, promotion o f community-level Direct malaria, etc.). Observed Treatment program, awareness raising, etc. 38  Service access for poor comm nities. The objective for supporting this group o f beneficiaries is to provide social services to poor communities who currently lack access to such services as (i) health, (ii)education, (iii) and sanitation, (iv) roads, (v) banking, and (vi) markets. NVF water resources will be used to support subprojects which are suitable for implementation by communities and which will contribute towards improvements in service delivery, contribute to attainment o f specified MDG indicator targets and are within sector norms and standards. Funding for subprojects to these beneficiaries requires a minimum community contribution o f 20%, except for water subprojects which will require a minimumcommunity contribution o f 5%. Safety nets for the able-bodied poor. The objective o f supporting this beneficiary group i s to increase cash income, skills, and opportunities to enable them to meet food security and other basic needs (coping), and avoid falling into deeper poverty (mitigating). This will be accomplished by providing temporary employment through supporting labor-intensive activities that will lead to community asset creation. The guidingprinciple for the safety net operationwill be the use of labor-based methods, with at least 40% o f the subproject budget accounting for unskilled labor wages. Wealth rankingwill be used during the E-PRA to target beneficiaries, and the payment o f a wage rate 10% below the market wage rate for the unskilled labor not only serves as a self-targeting mechanism, but i s considered to be the community contribution to the subproject. LGAs will select subprojects for funding on the basis o f chronic food insecurity, lack o f service access, and conformity to the guiding principles. Subprojects will be appraised by the LGA, with approval vested in the V C or LGA depending on the NVF contribution. Implementation will be carried out by the CMC supported by an LSP. Depending on whether the subproject i s being implemented in an LGA that has met LGSP access criteria, either the LGA or the VC will have responsibility for supervision costs, including the hiring o f the LSP using the 5% received from NVF. The Ward Development Committee will have a coordinating role but will not be a cost center. TASAF will also provide funding for costs associated with maintenance o f a subproject on a sliding scale o f 75, 50 and 25% o f the unskilled labor value, where the LGA agrees to fundingthe balance for maintenance. Potential sources for fundingthe balance, including the possibility o f utilizing the fuel levy allocated to the LGAs are being explored. The vulnerable. The objective o f support to this group o fbeneficiaries is to provide assistance to vulnerable individuals (orphans, disabled, elderly, widows/widowers, and those infected or affected by HIV/AIDS, among others). Inthe case o f these beneficiaries, the CMC can link up with a NGO or community based organization (CBO) to implement the subproject, and the supervision o f the subproject, from the supervision costs given to the LGA or VC, will be their responsibility using their own staff, or hiring an LSP. If a CMC wants to work with an NGOKBO, the cost o f the subproject will include all the costs associated with the implementation of the subproject, including the inputs required from the NGO/CBO. Selection criteria for NGOs/CBOs will be that it i s registered with the relevant LGA. Community contribution for subprojects supporting the vulnerable will have to be at least 5%. It i s expected that most o fthe subprojects will be small insize, amounting to not more than a NVFcontribution of U S $ l0,000 and therefore approved by the V C anddisbursed ina single tranche. The appraisal criteria will need to include sustainability issues to ensure that the subprojects will not only assist the vulnerable incoping, but also inmitigating risks. 39  CaDacity Enhancement (Total US$34.5, IDA US$30 million, GOT US$3.0 million, Communities US$l.5 million) The CE component will provide resources for community mobilization as well as the monitoring and evaluation o f activities financed from the NVF component; the main outputs being the number o f subprojects completed in a satisfactory manner. Support will also be given to individuals interested in the formation o f voluntary savings groups o f at least 10 members. Under the CE component, beneficiaries will be agencies (public and private) that support communities to make the best use o f resources made available under the NVF, as well as poor individuals participating in group savings and taking advantage o f investment opportunities created by various private-public partnerships. The CE component will respond to LGAs where various agencies need capacity to support Village Governments (communities and VCs) implement subprojects using the CSPC (Table 4.3 above). Funding for limited technical assistance will be recruited into a MUto manage the NFV. This component will complement activities fundedby the LGSP at the LGA levels. A critical aspect o f the CE will be the mobilization o fpoor communities to utilize public-private partnerships for improved management o f social risks and shocks affecting them. The CE activities will support the NVF by (a) facilitation o f the processes o f the NVF; (b) capacity enhancement to LGAs; (c) the promotion o f savings by the poor as a way o f equipping them with tools to better manage social risks and respond to shocks; and (d) demand driven capacity enhancement to NVF stakeholders. To facilitate the stakeholders in making contributions to the implementation o f interventions through the CSPC, a key aspect o f the CE will be transparency and accountability. This will be include development communications to raise awareness o f the rules o f access to the NVF, as well as the systems necessary to monitor and evaluation the NVF, and the publication o f these findings. Details are covered in the OM and various handbooks to guide all those who have a role inthe CSPC. The key areas to be coveredwill be as follows: 1. At the National level, consultants will be engaged to strengthen financial management, procurement, internal audit, monitoring and evaluation, management information system, research, training, and development communicatiodinformation, education and communication. This team will form the core of a management unit (MU), whose primaryfunction will be to disburse funds directly to the CMC directly or via the MWK, or to the MWK via the LGA, once the requests have been endorsed by the SET and the NSC for TASAF funding. The MU will also coordinate the provision o f capacity enhancement interventions in response to demands from LGAs - against a schedule o f approved subprojects and a planto support their implementation. 2. All LGAs will be strengthened to address issues o f participatory planning, subproject appraisals, approvals, monitoring, and evaluation using 2.5% o f NVF sub-project contributions. As noted above, the LGAs (when they meet defined access criteria) will receive a further 5% o f NVF contribution to finance supervision during implementation, andthe funds can be used to hire private consultants to assist with technical supervision 40  o f subprojects where there i s a shortage o f skills within the LGA. Vehicles, computers, andother supplies will beprovided to the LGA from the CE component for this oversight ere will be provisions for the LGAs to demand capacity strengthening funds from NVF for the successful facilitation of the CSPC. The 42 existing TASAF Accounts Officers will be re-assigned with the responsibility o f providing audit and training support to the LGAs (on average one Officer per three Districts) as Village FundsSystems Auditors. 3. Within the LGAs, Ward-level extensionstaff will be capacitated from the LGAs so that they can respond to the needs o f Village Governments and communities in the implementation o f subprojects. Again, the 2.5% o fNVF subproject contribution given to the LGAs to strengthen facilitation and reporting will be used for this purpose. 4. For the Village Government, TASAF resources will be made available to strengthen the implementation o f accountability measures at that level over the use o f resources. For all subprojects approved for NVF funding, 2.5% o f the NVF contribution will be provided for use by Village Council to facilitate, monitor and report on adherence to CSPC as outlined in the OM and various handbooks o f TASAF. For subprojects where the V C is responsible for supervision, a further 5% o f NVF total contribution will be made available to the VC. 5. At the Community level, each CMC will be given training and other support needed in the implementation o f subprojects as outlined in the CSPC. The CMCs will be better equipped to ensure that they play their roles in assisting poor communities, the vulnerable, poor households, and potential savers access NVFresources. With respect to transparency, experience reinforces the view that information symmetry is a strong element in improved governance and accountability. TASAF I1will seek to intensify, integrate and innovate Development Communication (DC) activities in an inclusive manner to promote these objectives and assist in converging the capacities o f stakeholders to contribute to the achievement o f the MDGs in the context o f Tanzania's PRS. The findings o f the Information, Education and Communication (IEC) Impact Assessment and the lessons learned from the on-going operations will be factored into the strategy. The project will support the regular implementation o f Community Statistics Days, Community Score Cards, and Citizen Report Card exercises. The focus on radio and newspapers, at national and district levels, will continue, as will the use o f targeted posters and occasional brochures. There will be an intensification o f efforts to promote the use o f folk drama. Institutionally, there will be a clear focus on strengthening the capacity and involvement o f the District-level D C Committees in formulating and implementing the D C strategy. The project will also focus on developing a targeted D C initiative for the savings promotion element. As TASAF moves into an expanded (geographically and thematically) development context, it becomes critical to have a mechanism that systematically collects core data, analyses these data, integrates the results o f these analyses into the D C strategy, and feeds back this information to the relevant stakeholders, thereby enriching the subproject cycle. The project will support the setting-up o f a Knowledge and Information Dissemination System (KIDS) which will enrich TASAF I1 monitoring and evaluation initiatives. 41  Annex 5: ProjectCosts TANZANIA: Second SocialAction FundProject Local Foreign Total Project Cost ByComponent and/or Activity U S $million U S $million U S $million National Village Fund 130.00 130.00 Capacity Enhancement 32.00 4.00 36.00 Total Baseline Cost 162.00 4.00 166.00 Physical Contingencies 3.49 0.04 3.53 Price Contingencies 8.73 0.04 8.77 TotalProjectCosts' 174.22 4.08 178.30 Interest during construction 0 0 0 Front-end Fee 0 0 0 Total FinancingRequired 174.22 4.08 178.30 IIdentifiabletaxes andduties are US$ 16m, andthe total project cost, net oftaxes, is US$l50. Therefore, the share ofproject cost net oftaxes i s 92 %. The table below sets forth the Categories of items to be financed out of the proceeds of the Financing, the allocation of the amounts of the Credit and the amounts of the Grant to each Category andthe percentageof expendituresfor items so to be financed ineach Category: Category Amount ofthe Amount ofthe CreditAllocated GrantAllocated %of (Expressedin (Exmessedin Expenditures to be Financed 95% ofamountsdisbursed . . households (b) VulnerableGroups 6,850,000 (c) Service Poor 61,300,000 0 Communities (2) Goods 2,730,000 0 100%offoreign expenditures, 90% oflocal expenditures (3) consuitants' services I 6,850,000 93% (4) Training 5,410,000 1OO O ! (5) Operating costs II 3,400,000 90% 8,210,000 700,000 ~(6) Unallocated I Total 87,900,000 14,400,000 42  Annex 6: ImplementationArrangements TANZANIA: Second SocialAction FundProject Background. The institutional arrangements for TASAF I1 were informed by institutional lessons f?om workshops, desk reviews as well as stakeholders' consultations. The lessons learned from TASAF Iimplementation indicate that the TASAF Management Unit (MU): structured itself in `rigid silos' rather than as a flexible, functional service providing structure, leading to a `components' focused approach rather than a needs oriented one; the organizational structure did not streamline leadership challenges at the national, and district levels, i.e., it did not address issues on the harmonization o f roles, reporting lines andresponsibilities at these levels; focused more on ceilings o f sub-projects rather than on service providing performance o f sub-projects; and grappled with challenges o f leadership and group dynamics throughout the three spheres o f operation: Central, LGA andVillage governments. External factors that affected implementation included the ongoing institutional reform processes at national and sub-national levels which were being spearheaded by the Local Government Reform Program (LGRP) under PO-RALG. Ongoing changes in the roles and responsibilities o f regional and ward levels o f government continued to affect delivery o f services and functional relationships. Partial coverage o f the districts by the LGRP meant that the interface with ongoing operations such as TASAF remained arbitrary. DesignChallenges. Inview o f the issues that relate to govemance by sphere, approval, norms enforcement, and compliance authority as well as those that affect the MU management and support to implementation, the following challenges will needto be addressed: 0 Strengthening Village Governments so that they can become more effective partners with Local and Central Governments, and other development partners as they support decentralized TASAF I1operations within the Local Government framework; 0 Ensuring that Sector Ministries produce and make available sector norms and standards for use by the committees as they approve sub-projects for implementation at community and LGA levels, as well as enhance the capacity o f communities and Local Governments to planand manage; 0 Enabling the MUto build itself into a responsive and efficient cross-functional team at the national level supporting communities and the three spheres o f government; 0 Recognizing the need to scale up from 42 to 125 Operational Areas, outlining TASAF's role at the district and village council levels, while acknowledging and specifying a clear division o f responsibilities - convergence around objectives between (Quality Assurance, Systems Development, Finance andAdministration, and Audit; 43  0 Ensuring that TASAF I1builds into its core a culture of strong leadership and team dynamics with vision and focus to foster strong coordination and efficiency in the delivery o f services at all levels; and 0 Complementing other ongoing development programs through specific sectors e.g. the Primary Education Development Plan (PEDP), Rural Water Supply and Sanitation (RWSS), Tanzania Multi-sectoral AIDS Project (TMAP), Participatory Agriculture and Empowerment Program (PADEP), Marine and Coastal Environmental Management Project (MACEMP), etc. Inaddition to the challenges noted above, the implementation arrangements for this Project are also based on constitutional provisions that create Village, LGA and Central spheres o f Government. These provisions are hrther elaborated upon under the Local Government (District Authorities) Act No. 7 o f 1982, and the Local Government (Urban Authorities) Act No. 8 of 1982 which provide for the division o f each District into Wards, and for each Ward to establish a Ward Development Committee (WDC). The WDC i s responsible for ensuring implementation o f the decision and policies o f the District Council, development schemes (including social welfare o f its inhabitants)' in the Ward, supervision and coordination o f the implementation o f projects and programs o f the District Council within the Ward, planning and coordinating the activities o f and rendering assistance and advice to the residents o f the ward, managing environment related activities, and promotion o f gender issues. The WDC is also responsible for informing all persons in the Ward of development schemes that have been approved by the VCs concerned, and the time and place when persons liable to participate inits implementation shall report. The Act calls for each village in a Ward to elect a VC, which i s conferred with the powers to do, among others, all acts and things necessary or expedient for the economic and social development o f the village and encourage the residents o f the village in undertaking and participating in community enterprises. Capacities o f both the WDC and VCs to fulfill their responsibilities will be strengthened through the CE component o fthe Project. At the national level, TASAF I1will fall under the Office o f the President, with oversight being vested in a National Steering Committee, appointed by the President, whose membership will include representation from both public and private sectors. It will be responsible for setting policy, clearing the annual work plans andbudgets o f the MU, as well as reviewing the progress reports and monitoring the impact o f TASAF activities on communities. The NSC will also be charged with the responsibility o f endorsing subprojects which have been scrutinizedthrough the established TASAF procedures. Implementation experience from TASAF Iidentified problems relating to sector norms and standards, which exist but are poorly enforced at the Village and Local levels for a variety o f reasons. In order to address this issue, a Sector Experts Team (SET) will be constituted from senior sector experts to support the NSC. Prior to NSC meetings, the SET will review subprojects submitted to the NSC for endorsement to make ajudgment on their conformity with sector norms and standards, and either recommend their funding using TASAF I1resources, or defer their funding until review has been undertaken by sector experts. The SET will also, on an ' Includesagriculturalor pastoraldevelopment; constructionofroads or public highways; constructionofworks or buildings, of the social welfare ofthe inhabitantsofthe Ward. 44  annual basis, review the cases which have been outside sector norms with a view to determining if any or some of them could offer a substantial basis for recommending changes to sector norms. The MU, headed by an Executive Director, and staffed with appropriately qualified individuals, will be responsible for the day-to-day operation o f TASAF 11, and answerable to the NSC. The responsibility for the preparationo f the OM and relevant handbooks for use by stakeholders also rests with the MU,which will be responsible for managing the financial aspects o f TASAF 11, as well as all procurement that will not be undertaken at community level. The MUwill align its institutional structure to (a) deliver services to the beneficiaries o f TASAF 11, (b) contribute to the attainment o f the MDGs, (c) strengthen institutional development at national and district levels in support o f communities andvillage governments byproviding service packages, and (d) carry out regular service audits, Le., performance and financial. A primary responsibility o f the MUwill be the Development Communication (DC) function; ensuring incollaboration with the Ward-level D C Committees that the appropriate information i s available inthe public domain in a timely manner and also gathering and disseminating information on lessons learned and good practices. The MU will also have oversight responsibility for the demand-driven capacity enhancement activities funded through the Project, including those required for beneficiaries o f the community savings and investment promotion activities. The institutional set up, structure by level, MUand levels o f Government, a summary of bodies andtheir functions, a framework for the organization structure, and the organigram are presented at the end o fthis Annex. The Regional Consultative Committee, through which the Regional Commissioner, District Commissioners, District Executive Directors (DEDs), and District Council Chairmen meet, will provide a platform for collating and coordinating TASAF accountability reports from their districts. The Committee will inform PO-RALG , the NSC, and the Ministry o f Finance Quarterly Sector Consultations on progress intheir Region. At the LGA level, the Project will be managed by the DED, with LGA Finance Committee having responsibility for approving subprojects with a NVF contribution o f US$10,001 - US$30,000, and endorsing subprojects with aNVFcontribution o fupto US$lO,OOO approved by the VCs. The MUwill enter into Memoranda o f Understanding (MOU) with LGAs to clearly articulate their respective responsibilities as it relates to TASAF supported activities including responsibilities at each stage o f the subproject cycle. The LGA level i s expected to provide the relevant staff for involvement in all stages o f the subproject cycle: E-PRAs (where subprojects are identified), appraisal (where subprojects are checked against sector norms and NVF rules), implementation and operation and maintenance. The lack o f sufficient accounts staff in Local Governments has been identified as a weakness, and this has been addressed by (a) makingthe availability o f such staff a pre-condition for an LGA to operate a Village Fund, and (b) providing funds under the CE component to strengthen their capacity in fiduciary matters required by community subprojects (in particular intemal audit, monitoring, accounting and MIS) through the VFSA. The scale-up of TASAF I1will lead to the combination o f LGAs into clusters o f three or more (one from those currently receiving support from TASAF Iand the others from previously non-TASAF LGAs) to facilitate mutual learning between LGAs and communities. The current TASAF Accounts Officers will bere-oriented to act as VFSAs, located in a District, under the day-to-day management o f the DED while remaining technically accountable to the 45  MUIntenalAuditor ,supporting the cluster of three or more LGAs. A dedicated Village Fund Coordinator (VFC), previously known as TASAF Project Coordinator, will be appointedby the LGA and report to the DED. EachLGAwill also select an accounts assistant from their staff to serve as the Village FundJustification Assistant (VFJA). TASAF 11 will set up a NVF under the MU to finance subprojects resulting from a CDD approach at the Village Government level. Every Village/Shehia/Mtaa shall establish a fund "Mfuko wa Kijiji/Shehia/Mtaa" as provided for in the Local Government Finance Act No. 9 o f 1982. The subprojects will be in line with activities (service packages) pre-identifiedby sector ministries as suitable for community-level implementation. Subprojects to be funded must contribute, at the community level, to the attainment o f selected MDG indicator targets, and in line with sector norms andstandards; the SET will, inparticular, review those applications which have not complied with sector norms and standards with a view to ascertaining whether the communityinnovations should leadto anadjustment ofthe service packages. The NVF will use LGA mechanisms to disburse funds for sub-projects with a NVF contribution of $10,001-$30,000 to LGAs that have met LGCDG and NVF access criteria. Where the above does not hold, i.e. LGAs that have not met LGCDG and NVF access criteria, the NVF will disbursedirectly to the Mfuko wa Kijiji (MWK) for sub-projects with a NVF contribution of less than $10,000 ina single tranche. NVF criteria are that an LGA must have a VFC and VFJA designated from amongst its employees. Access criteria for a VC is the existence of two satisfactory Community Score Card reports and a personwith demonstrated record-keeping skills. Each Village will establish an MWK, and subproject funds from the NVF will go into this account which i s under the management o f the Village Council (VC), elected by the Village Assembly, which consists of every person who is ordinary resident in the Village and who has attained the apparent age o f 18. Implementationo f subprojects funded by NVFwill be delegated from the V C to the respective CMC. For TASAF purposes, a community i s "need-defined", and the CMC will be elected from subproject beneficiaries wherein 70% of the Assembly is represented. The CMC will be responsible for implementing the subprojects and linked to an LSP for technical support. Subprojects with a NVF contribution o f less than US$5,000 will be released ina single tranche; those sub-projects that address more than one MDG andhave a contribution of less than US$lO,OOO will also be released in a single tranche. Funding for all other subprojects, i.e., up to $30,000 will be released in a single tranche to LGAs which have met both LGCDG and NVF access criteria, which inturn will release them on a 5050 basis; inthe case o f support for the vulnerable, tranches may, if more appropriate, be disbursed on an activity basis. The follow-on tranche will only be disbursed once 70% of the previous tranche has been accounted for. The CMC will make quarterly progress reports during the Village Assembly meetingsconvenedbythe VC. The CE component of TASAF I1will be providing capacity building to communities, Village, Local and National levels to ensure that the financial management requirements, including 46  reporting, are met. TASAF 11's CE activities will complement those o f the Local Government Support Program. It i s expected that the bulk o f the procurement will be undertaken by CMCs, and the members o f these elected bodies will, as was the case in TASAF I, training in receive book-keeping and procurement prior to funds being disbursed to them for management. At the start o f TASAF 11, each LGA will be informed o f their total NVF allocation, which is based on population, geographic size, and agreed to poverty indicators. The principles o f intra-LGA resource targeting (the same poverty indicators as were used for the global allocation) will be communicated to the LGA and, as with the LGA allocation, this information will be put into the public domain, through the mass media. Approval o f subproject applications will be at the V C or the LGA, based on TASAF's contribution to the subproject as follows: Sub-project VC LGA Addressing a single MDG <US$5,000 US$5,00 1-30,000 Addressing 2 or more MDGs <Us$10,000 US$lO,OOl-30,000 Subprojects are only eligible for funding from the NVF if they have (i) been generated from communities through an E-PRA process, (ii) minimum community contributions have been met (20% for subprojects to improve service access and 5% for subprojects to increase incomes for households with vulnerable individuals), and (iii) violated any sector norms and standards. not At the Local level, weak financial capacities have been identified, and to directly receive NVF funding from TASAF, an LGA must be certified as LGCDG compliant by PO-RALG, andmeet the NVF access criteria. Funds will flow from IDA into two Special Accounts, to be administered by the MU. Disbursement o f funds to LGAs will be against schedules o f subprojects approved at the V C or LGA (approval levels set on the basis o f NVF contribution). The NVF will disburse TASAF's contribution to a subproject either directly to the CMC, or via the Mfuko wa Kijiji/ Shehia/Mtaa (MWK), or via LGA to MWK. Funds to the LGA will be accompanied by a schedule showing which subprojects have been approved, what resources are to be (a) retained at the LGNIsland level (2.5%) to finance facilitation and reporting on subprojects using LGA and Ward-level extension staff, (b) sent to a MWK account (2.5%) to cover cost o f facilitation, monitoring, and reporting by the VC, (c) 5% to either the V C or LGA for sub-project supervision, and (d) sent to an account (90%) in the name o f the CMC for approved subprojects. For an LGA to receive funding for subprojects from the NVF, it must meet the Local Government CapitalDevelopment Grant (LGCDG) access criteria, as well as the NVF access criteria. The LGCDG access criteria includes: (a) having the position o f Council Director, Treasurer and Intemal Auditor substantially filled; (b) Final accounts for the previous fiscal year produced as per section 45(4) o f the Local Government Act 1982 submitted for audit on time; (c) not receiving an adverse audit report for their last audited accounts; (d) having no financial irregularities reported either by the internal or external Auditors in the previous 12 months; (e) preparing monthly bank reconciliation statements for all accounts; (f) an internal audit is in place and functional as provided under section 45(1) o f the Local Government Act 1982 and the LGFM 1997 orders 12- 16 (at least 4 intemal audit reports during the previous fiscal year); and (g) regular production o f financial audits - all quarterly reports during the previous financial year presented to the Council with copies to PO-RALG. The NVFaccess criteria consists o fthe LGAhaving appointeda VFC 47  and a VFJA. LGAsthat meet LGCDG andNVF access criteriawill receive subproject hnds ina single tranche from the MU. Disbursement from LGA to the MWK for LGA-approved sub-projects will be in two equal tranches; the second tranche will be released once 70% o f the first tranche has been satisfactorily accounted for. Sub-projects under a NVF contribution o f US$lO,OOO will be disbursed in a single tranche. Funds from the NVF by TASAF MU or LGAs will be disbursed to the MWK and the CMC separately untila V C has attained a pre-defined fiduciary capacity (two half-yearly satisfactory Community Score Cards, and a trained person with demonstrated record-keeping skills) when funds will go into the MWK for disbursement to the CMC. Other funding sources interested in financing activities following NVF processes can either provide funding to the MU for deposit into a dedicated account from which their specific activities would be financed and report on, or directly finance subprojects from funds that they manage once the SET and NSC have endorsed the sub-projects. The CMC will be responsible for reporting on expenditures against the amounts received; upon satisfactory justification o f 70% o f the funds received for multi-tranche subprojects, the subsequent tranche will be released. The LGA will be responsible for the justification process. For accountability, the CMC will prepare reports for the VC, which will make quarterly public reports to the Village Assembly before submitting reports to the LGA. Members of the V C will also make presentations on progress to the WDC and to the LGA as required. The MU will provide a link between LGAs and higher levels o f technical backstopping in planning, implementation, monitoring, evaluation, and auditing (both service and financial). The primary data for monitoring and evaluation (M&E) will be collected by CMCs supervised by the VC, with technical assistance from Government extension workers at the Ward and LGA levels, with additional support coming from specialized non-governmental organizations working inthe districts. The WDC and VFCs employed by LGAs will be responsible for collecting primary data from CMCs, but they will be able to tap into capacities available in the LGA's Planning Department. Computing capacities as well as technical know-how are limited inVillages, Wards, and LGAs, and these will be strengthened usingthe CE component. Extra costs will be incurred to purchase vehicles, computers, and to cover training and training materials for National, LGA, and Ward level staff needed to support capacity enhancement activities. Justification Assistants at LGA level will capture input and output data from communities andnational levels. All LGAs will prepare quarterly progress reports which will be used by Regional Consultative Committees, national-level agencies to address problems associated with poor accountability during project implementation. The RCC will share its reports with the NSC, PO-RALG, and the Ministry o f Finance Quarterly Sector Consultations. An annual report will be prepared by the MUfor discussion by SET and NSC before it is submitted to the team monitoring the PRSP under the Vice-president's Office, GOT and the World Bank. It i s this link with PRS monitoring as well as the actions of SET that will integrate community-funded activities into those led by sector ministries at National and LGA levels, and ensure that investments are followed up even 48  after the project i s completed. The NSC will also report to the Ministry of Finance's quarterly sector consultations, a fora consisting o f Government, civil society, and the development partners. 49  Tanzania SecondSocialActionFund InstitutionalSet-Up Approval Implementation Planning& Authority +b & Technical AppraisalProcess VillageIShehia Authority Management Shehia Committee t ..................................................................................................... $. ................................................................................................................................ ChiefMinister Regional Sector Experts Consultative < ............................ ..................................................................... .> Team C o m t t e e National Steering Committee (NSC) President's Office 50  Tanzania Second Social Action Fund InstitutionalStructure by Level VILLAGE GovernmentLevel Level 1 +-------------- Village Assembly -1 I>> Village Council -Village ExecutiveOfficer III & CMC/CSOs/NGOs/Pnvate sector Level 2 /--- -**- DISTRICT COUNCIL AND TOWNSHIP AUTHORITIES Level&-- > District Council/Township Authority % District ManagementCommittee/TownshipMgt Committee > District Technical Staff, District BasedCSOs/"NS/Private sector, VFC, VFSA Level3 - Sub-projectApprovalFlow -----_------ > TechnicalSupport andOversight * Consultative Committee comprises Regional Commissioner, Regional Administrative Secretary, District Commissioner, District Council Chairperson, District Executive Director 51  Tanzania Second Social Action Fund Management Unitand Levels of Government Level. Issuesboints to note National -Produces policies, norms and guidelines, including those related to compliance with Bank's safeguards -Endorses all sub-projects -Allocates resources to districts based on poverty, population and geography -Local Government Act defines a strategy to decentralize F resources and responsibilitiesto the district level. -Receives feedback and monitoring reports from districts. M Regional -Consultative Committee advises on progress on accountability A on the basis of inputs from RC, DCs, DEDs, DC chairperson -Support LGAs implement the NVF N District -Has structures at District, urbdtownship, ward and villagel A shehia (and these constitute the Local Government). -Undertakes priority setting inallocating resources. G -Receives demandshequests for services from CMCs through E the Village Council. M -Prepares and approves district plan. -Carry-out desk and field appraisal E -Channels resources to VCs, and CMCs N -Provides technical support and targets resources in line with T priorities. -Transmits government policies to Village Government, u NGOs/CBOs, and communities. -Uses approved criteria to approve resource targeting within and N between fundable elements -Disburses funds to sub-projects through the VFC's Office I Ward -Supports single and multi-village faciltation T -Provides technical appraisal and recommends to DMT -Ensures technical oversight Village -Works through elected CMCs -Works through CBOs/CSOs/NGOs in responding to specific issues (e.g. vulnerable groups) -Targets resources households and whole communities (ir response to demands) L -Uses harmonized E-PRAs for successfbl participatory planning and imdementation o f sDecific investments 52  Tanzania Second Social Action Fun Summary of Bodies and their Functions Body Broad Membership Meeting Functionshfandates Freauencv NSC ApprovaVpolicy for Government & Quarterly TASAF NGOs/CSOs MOF Quarterly Foster accountability GOT, Civil Society, Quarterly Sector Consultations inPRS reporting Development Partners SET Oversee sector Line Ministry Quarterly norms Representatives MU-M C Direct management Executive Director & Fortnightly & oversight of Directors TASAF Regional. Accountability RC, DC, District Half-Yearly Consultative monitoring Chairpersons, DED Committee District Finance Approval o f VF Councilors and Quarterly Committee subprojects Technicians DMT Technical appraisal DED& Technical Monthly Departments WDC Coordinate Councilor & Village development Council members Village Government Appoint CMC All over 18 years + As needed Extension staff vc 1 Oversee village I Electedvillage I Quarterly i development representatives Monthly CMC ' Implementationo f Elected & V C ex- Fortnightly sub-projects officio Communities 1Mobilization for sub- Village Assembly As needed projects ~ 53  Tanzania Second Social Action Fund Organization Structure Design Objectives 1. Ensuringfiduciary compliancebylevel (withinceilings) -financial and procurement; 2. Ensuring compliance with norms (by level and sphere o f Government)- outputs/outcomes ; 3. Quality Assurance through technical engineering, systems and participatory processes review andjustification; 4. Buildingcapacity for 1- 3, (Capacity Enhancement). VEO procurement, etc. Facilitators (E- PRA) 54  TASAF I1OrganigramDesignPrinciples I I 1 Finance and Adminstration QuelityAssurance Systems Development _. - -- I I 55  Annex 7: FinancialManagementandDisbursementArrangements TANZANIA: SecondSocial ActionFundProject 1. Summary of the FinancialManagementAssessment CountryRisks A Country Financial Accountability Assessment (CFAA), carried out in 2001, concluded that: "significant advances have been made in Tanzania inthe last few years, particularly interms o f accounting and expenditure control as well the introduction o f the Medium Term Expenditure Framework (MTEF). Equally there are other areas, which for various reasons have not advanced as quickly, such as the internal auditing, budget execution & monitoring and capacity o f the national audit office or the ability o f the anti corruption/ethics bodies to undertake their duties effectively. Generally, Tanzania has a sound system o f formal rules for financial management andmany o fthese rules haverecently beenupdated andstrengthened". GOT has clearly made great steps in improving financial management and through the revised Public Financial Management Reform Program (PFMRP) which sets out a methodology to carry the process forward. These initiatives are significantly supported by the donor community at, for instance, the Accountant General and the National Audit Office (NAO) as well as the Accounting Departments o f a number o f line ministries. The speed o f progress o f implementation and integration o f the IFMS and the legislative changes has however left a number o f gaps, which unless filled, will negate the benefits o f the achievements of the recent past. In addition, issues of non-compliance, limited execution, inadequate monitoring, insufficient capacity and lack o f enforcement need to be addressed. Theses issues indicate that inadequate financial accounting and auditing systems both at central and local government level pose a high fiduciary risk. Priority issues identified in the CFAA include strengthening of planning and budgeting, improved governance and integrity, strengthening o f local government financial management and maintenance o f high standards o f financial reporting and auditing. The country's financial accountability framework, andtherefore financial management, would be considerably more effective and the associated fiduciary risk mitigated, if these areas were strengthened. The revised PFMRP, which i s soon to be launched, i s designed to address these weaknesses. Although the CFAA has not been updated, the recent Public Expenditure Management Assessment Report found that GOT has made significant progress in public financial management and continued to implement comprehensive reforms at both National and Local level with improvement in (a) budgeting process and execution, (b) developing the internal audit functions in all MDAs, (c) strengthen the fiscal reporting system, and (c) enhance public financial management systems through IFMS and accountability. A full CFAA update will be carried out inyear 2005. 56  Project Risks Keyrisks that may face the project include: 0 Funds may not used inan efficient andeconomical way and exclusively for purposes intended; 0 Staffing shortages and LGA's capacity to implement the control procedures (accounting, internal audit and inspection) are considered low, 0 Funds flow delays; 0 Inadequate levels o f counterpart hnding; 0 Lack o fbothinternal and external audit capacity; 0 Failure o f the Local Government Support Program operation. Inmitigation ofthese, TASAF I1will establish a strong accountingandinternal control system at National, Local and Village level by: Re-deploying TAOs (to be called VFSAs) to provide the Districts with technical support in accounts, audits, and justifications. Each systems auditor will be responsible for three districts and any reports issued by them will be submitted to the District Executive Director with copies sent to the Regional Consultative Committee through the District Commissioner, andthe MU. Internal and external verification o f expenditures will be carried out during project implementation in order to ensure compliance with all accountability rules and procedures. This will be through VFJAs (Accounts Assistants) at the District to support subprojects, and carrying out bi-annual external audits. Making the availability of adequate and qualified accounting staff and unqualified audit report from previous two years will be a pre-condition for a District/Island to handle TASAF I1resources. Providing adequate hnds under the Capacity Enhancement component to strengthen the capacity o f Local and Village Governments in fiduciary capacities required by community subprojects (in particular internal audit, monitoring, and management information systems) in order to ensure that the financial management requirements, including reporting, are met. Havingthe quarterly financial reports prepared by the CMC made public. Quarterly disbursements from IDA to MU will be based on the six month cash forecast and on report-based method. Disbursements from MU to LGAs will be against schedules o f subprojects approved at the V C and LGA levels. To avoid punishing communities for failures o f their Local Government, provisions have been made for TASAF funds to flow directly to VCs and CMCs in LGAs that fail to meet the LGCDG access criteria. Main Strengths and Weaknesses Stvengths. P Over the last three years the government has initiated public financial management reforms in terms of: (a) Rollout the central government IFMS to 32 LGAs out o f 114, with an additional 30 LGAs expected to be trained and equippedwith IFMSby o f end o f this FY; (b) The Accountant General has beguntraining o f fresh graduates on the IFMS, and in the areas o f information technology, accounting and materials management to be 57  able to provide support to the LGAs. (c) Enhancement o f budget formulations at local government, LGAs are now using MTEF planning fkamework for developing their budgets; (d) Monthly accounts are now being prepared by LGAs and quarterly financial reports are being submittedto the central government. The 32 LGAs accounting system is based on Epicor computerized, double entry, accrual- based system. The Local Government Reform Program i s improving accounting system through the IFMS and training o f Council Directors and District Treasurers and Accountants on Epicor system. TASAF 1's accounting system andquarterly FMRsis based on the Epicor. Local Authorities have a set o f Financial Rules and Regulations, which describe the internal control system and a set of accounting procedures; these are currently being updated. The government is now putting quarterly allocations of LGAs in the public domain via local newspapers, national website andpublic notice boards to enhance transparency and accountability. There has been a steady improvement in auditing in the last three years. Based on the Report o f the Controller and Auditor General on Local Government Authority Accounts for the year ended 31st December 2002, all LGAs were able to submit their final accounts on time for audit. The total number o f LGAs awarded a Clean Certificate amounted to 17 (equivalent to 15% o f all LGAs) compared with only 12 LGAs (out o f 114that submitted final accounts) in2001. Majov weaknesses `i. Weak budget discipline and controls in LGAs as evidenced by losses of cash, questionable payments, store losses, and unsatisfactory accounting and banking of revenues. P Most o fthe LGAs also lack effective internal audit units and internal audit manual. P Follow-up on the implementation o f auditor's recommendations by the Accounting Officer i s very poor. > Weak capacity o f the NAO P Low capacity in most o f the LGAs, particularly in terms of finance, accounting and internal auditing skills to carry out appropriate accounting and financial management. Financial Management System and Reporting FinanciaVAccountingPolicies & Procedures The accounting systems, policies and procedures to be employed by the MUin accounting and managing for TASAF I1 funds have been documented in the Financial Management Manual which was reviewed during appraisal. The Manual includes detailed descriptions o f the accounting system and procedures. A Chart o f Account structure has been developed to allow for project costs to be directly related to specific work activities and outputs o f the project and formats o f the various periodic financial reports. LGAs will follow accounting system governed by the Local Government Finances Act of 1982 and Local Authorities Financial Memorandum of 1997. LGAs accounting system is based on double entry, accrual-based system. 58  For the Grant component o f the credit (US$2lmillion), a separate Special Account will be opened as a first step towards ring-fencing such proceeds. This will be the first amount out of the total financing to be consumed or disbursed for financing sub projects for TASAF 11. The MUhasestablished special codeswithin its chart ofaccounts for the proceeds ofthe grant. These codes will depict the special sub projects to be financed out o f the grant component to communities. Using information from LGAs and VCs, the funds disbursed out o f the grant component will be tracked up to sub project level and details o f the make up of the beneficiaries tracked and recorded for purposes o f monitoring and recording impacts after fully disbursing the grant. Information systems The LGC computerized IFMS i s known as Epicor and i s the same system being used by the central government. The system i s user friendly and can produce various financial reports. The properties o f the system are still being studied to determine their ability to generate andproduce FMRsstraight from the system. During 2002 and 2003 the Local Government Reform Program focused on getting the first 32 LGAs to fully use IFMS. An additional 30 LGAs are scheduled to be fully on IFMS by end of FY. With regard to preparation for eventual roll-out o f IFMS to other LGAs, the Accountant General has begun training o f fresh graduates on the IFMS, and in the areas o f information technology, accounting and materials management to be able to provide support to the LGAs. Increased effort has also been put on strengthening support systems to implement IFMS at all levels. A Systems Development Unit for LGAs housed inACGEN i s now inplace. Training in EPICOR is being provided to 23 specialists and they are to be deployed to the zones from July 01, 2004. Other support by the Accountant General include defining a chart of accounts for LGAs, and supervision o f 5 LGA support zones. TASAF I recently started using Epicor software to produce IDA required FMRs. These reports are still under development, modification and review. The software i s expected to interface with the M I S currently being established at the Local level throughout the country which would produce the status o f implementationo fvarious sub projects as well as financial information from districts. FinancialManagement Reports (FMRs) Project FMRsto be generated from the IFMS have been developed. A clear linkage between the information in these reports and the Chart o f Accounts has been established. The financial reports have been designed to provide quality and timely information to project management and various stakeholders on project performance. The contents o f the designed FMRs have included the following at the minimum: o FinancialReports: Sources andUses o f Fundsby FundingSource Uses o f Funds by Project Activity/Component o PhysicalProgress or output monitoringreports o Procurement Report The format o f such reports has been defined and agreed and has been hrther reviewed and attached to minutes o f negotiation. While the FMR format has been reviewed and agreed to by TASAF andthe World Bankteam, the possibility o fusing traditional disbursement mechanisms 59  as a fall-back position should still be provided for in the accounting systems manual and in the legal agreement until the comfort and confidence level with the FMRs has been attained. Project Financial Statements The Local Government Finance Act 1982 governs the financial administration andmanagement of the LGAs annual financial statements. The project financial statement shall be in accordance with Generally Accepted Accounting Practice (which inter alia includes the application of the accrual basis o f recognition o f transactions). The Development Financing Agreement will require the submission o f audited financial statements to the Bank within six months after the fiscal year-end. These Financial Statements2will comprise: A Balance Sheet reflecting the assets, liabilities and funding of the project based on the accrual bases. 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 for this project; and separately identifies payments by thirdparties on behalf o f the entity. This report will also include a briefprocurement and output monitoringreports. a The Accounting Policies Adopted and Explanatory Notes. The explanatory notes should be presented in a systematic manner with items on the Balance Sheet and Statement of Cash Receipts and Payments being cross-referenced to any related information in the notes. Examples ofthis information include: . . a summary o f fixed assetsby category o f assets; a summary o f SOE Withdrawal Schedule, listing individual withdrawal applications; A Management Assertion that Bank funds havebeenexpended inaccordance with the intendedpurposes as specified inthe relevant World Bank legal agreement. Monitoring Project monitoring will take the following forms: a Management oversight o f the IDA/MU; 9 ... Annual external audit o f the Project finances; The LGAs would be required to submit quarterly financial statements and output reports inorder to properly document the useofthe fundsreceivedthrough the IFMSsystem; Productiono f systems audits by systems auditors; Production o f internal audit reports by the Internal Audit Directorate which will be discussed every quarter at a senior management meeting o f the MU, and an action plan developed which will be shared with the World Bank's Task Team Leader o fthe project. I t should be noted that the project financial statements should be all inclusive and cover all sources and uses of funds and not only those provided through IDA funding. It thus reflects all project activities, financing, and expenditures, including funds fromother donorslparties and contributions inkindsuch as labor and accommodation, irrespective o f whether the project implementing agency controls the funds for a particular aspect of the project. However, the IDA components would have to be identified separately. 60  Staffing and Training Stuffing Lack of adequate and qualified accounts staff in Local Governments has been identified as a weakness, and this has been addressedby (a) making the availability o f such staff a pre-condition for a District/Island to handle more resources, and (b) providing finds under the Capacity Enhancement component to strengthen the capacity o f Local Governments infiduciary capacities required by community subprojects (in particular internal audit, monitoring, and management information systems). The TASAF Accounting Officers (also known as VFSAs) employed by TASAF I,and currently based in TASAF IDistricts, will be redeployed and placed under the DED and each responsible for three districts in order to provide Districts with technical support inaccounts, audits, andjustifications. Appropriate qualifiedFinancial Specialist and Accountant will be recruited at MUlevel to coordinate and handle all project financial arrangements o f the project. Training Significant training efforts are being made to enhance accounting skills and LFMS for local government staff by the office of Accountant General and under support o f Local Government Reform Program. Duringthe project implementation more training will be provided on World Bank financial, disbursement, and auditing procedures and guidelines. It i s also expected that more training will be given to accounting staff within the MU, internal auditors, and systems accountants so that they can better support the implementation and delivery o f the various sub projects country wide. A project budget and a disbursement schedule has been drawn up and included in the Project Appraisal Document and the Operations Manual. It is from this disbursement schedule (as may be subsequently revised) that annual budgets will be drawn. Based on the district annual allocation and the number o f sub projects approved by each Local government either annually or per quarter, the Management Unit o f TASAF will consolidate the district sub project annual budgets and coordinate its finalization. The annual estimates will be finalized three months before the beginning o f the financial year so that they can be included inthe National Budget for purposes o f counter part funds. Audit Internal. The internal audit function is weak and not clearly established throughout the LGAs. Where it is established there are clearly concerns about the effectiveness o f its operations. The role o f internal audit function in assessing internal controls and recommending improvements to systems and procedures is not well defined. The scope is limited to financial verifications such as receipts and expenditures without sufficient emphasis on the efficiency and effective use o f public resources. This is due to the inadequate capacity, resources, lack o f manual, and guidelines. Other reasons for this ineffectiveness is lack o f enforcement o f punitive measures, 61  inadequate technical and managerial capacity in the finance function and lack o f accountability of Accounting Officers. Adequate funds will be provided under the CE component to strengthen the capacity o f internal audit units. The terms o f reference for Local Government internal auditors have been revised and have since been forwarded to the Accountant General for clearance before they are issued to guide them intheir work at District level. External Audit. As per Public Finance Act, 2001, the NAO has the responsibility for the audit o f all government organizations including local authorities and public corporations and donor funds. Controller and Auditor General has the power to authorize any person carrying on the profession o f accountant to conduct an audit on hisbehalf. The auditors will be required to express an opinion on the audited project financial statements only, in compliance with International Standards on Auditing(PAC pronouncements). Inaddition, provide a detailed management letter containing the auditor's assessment o f the internal controls, accounting system and compliance with financial covenants inthe Development Financing Agreement. TASAF I1will provide resources for annual audits for the project. Since TASAF I1support will rollout to more districts, the NAO will carry out a bi-annual audit review o fTASAF I1systems to ensure uniform application o fthe procedures, and check on adequacy o f internal controls and timely submission o f final audit. Supervision Plan The Financial Management Specialist (FMS) will carry out financial management supervision regularly at least twice a year. In addition, the project may be subjected to regular Statement of Expenditure reviews as required by the World Bank. The supervision will be further aided by quarterly internal audit reports and systems accountants' reports to provide basis of risk planning to guide aspects on which to concentrate. The FMSwill also: 1 Review the financial component o f the quarterly FMRs as soon as they are submitted to the World Bank; and, Review the annual Audit Reports and Management Letters from the external auditors and follow-up on material accountability issues by engaging with the TTL, Client, and/or Auditors. Conclusion The evaluation above indicates that the project's financial management arrangements satisfy the Bank's minimumrequirements under OP43P10.02. However, some improvements remain to be effected for the system in order to establish an acceptable control environment and to mitigate financial management risks. The project financial management risk is assessed as being medium provided that the financial management arrangements are properly implemented and the following financial management actionplan is satisfactorily addressed inpractice: 62  Financial Management Action Plan :conditionsfor effectiveness 1 Deposit of Initial counterpart funds inthe project accounts Completedbefore Effectiveness B DisbursementArrangements Flow of Funds Arrangements Flow o f funds from IDA to Management Unit IDA funds will be disbursed into two US$ denominated Special Accounts to be heldat the Bank of Tanzania managed by the Management Unit. The first Special Account will be for the credit component o f the project while the second Special Account will be for the Grant component ($2lmillion). The level o f funds to be deposited into the first Special account will be determined by the first six monthly cash flow estimate submitted by the MUbased on their estimate o f the sub projects to be funded initially. The level will subsequently change accordingly based on subsequent cash flow projections included in FMRs submitted. The amount o f funds to be deposited into the second special account will also depend on cash flow estimates submitted by the MU. The Grant component will be the first part o f the financing to be used disbursed out o f the financing. Arrangements for ring fencing such amount o f grant have been provided for and considered adequate as outlined above. A report-based disbursement method will be used to account for these funds based on the submission to the World Bank acceptable quarterly FMRs by MU; the latter will consist o f the following information inorder to support report-based disbursement: ....FMRas indicated above. SA Activity Statement. . SA Bank Statements. Summary Statement o fSA Expenditures for Contracts subject to Prior Review. Summary Statement o f S A Expenditures not subject to Prior Review. In the case the MU fails to meet the FMR requirements o f the project at any one point, disbursement o f funds to the project will be made using traditional disbursement procedures. Full documentation will be required for payments on all contracts over the respective prior review thresholds for goods and consultancies. The Statement o f Expenditures procedure will be used for (i) 150,000 or less for goods; (ii) 100,000 or less for consulting firms; (iii) US$ US$ US$ 50,000 or less for individual consultants; (iv) US$ 30,000 or less for subprojects; and (v) training, workshops, studies and incremental operating costs, all under such terms and conditions as the Association shall specify by notice to the Borrower. When the Statement o f Expenditure procedure i s used, supporting documents will not be submitted to the Bank with withdrawal 63  applications, but will be maintained by the MU and made available for review by Bank supervision missions and the project auditors. Generalfund flow rules Disbursement of funds to LGAs will be against schedules o f subprojects approved at the Village and LGA levels. Funding will be released either in tranches of 50/50 for sub-projects above $10,000 NVF contributions; but inthe case o f support for the vulnerable, tranches may, if more appropriate, be disbursed on an activity basis. Follow-on tranches will only be disbursed once 70% o f the previous tranche have been accounted for; Funds to the Local Government will be accompanied by a schedule showing which subprojects have been identified, what resources are to be (i) retained at the local government level to finance facilitation o f subprojects usingDistrict and Ward-level extension staff, (ii) sent to an MWK account to facilitate CMCs and report on activites by the Village Council (not to exceed 2.5% o f NVF contributions), (iii) used to finance supervision costs (not exceeding 5% of NVF contribution), and (iv) sent to an account in the name o f the C M C for the approved subprojects (accounting for 90% o fNVF contributions). Single tranches to MWK will be done for NVF contributions o f under US$5,000, and for subprojects that tackle two or more MDGs at a total cost o fup to US$lO,OOO. Flow of funds from Management Unitto Local Government Authorities Access by Local Governments (LGAs) to TASAF funds is premised on their ability to have designated a dedicated Village Fund Coordinator (VFC) and a Village Fund Justification Assistant (VFJA), as well as being LGCDG compliant. It i s expected that the VFJA will be paid and financed out o f a LGA own h d s . Under the Local Government Support Project, direct access to development funds (which include TASAF funds) by LGAs is based on the LGA's ability to meet the Local Government Capital Development Grant access riter ria.^ For a LGA to access such funds it must meet all the seven categories o f conditions. For LGAs that are both NVF and LGCDG compliant (expected to be few inthe initial year), the MUwill disburse 100% basedon a consolidatedapproved budget for all sub-projects directly to a LGA (figure 7.1). The LGA will retain 7.5% out o f such funds to cover the cost o f facilitation, supervision, and any other activities for backstopping village government capacity. The LGA will disburse sub-project amounts in tranches o f 50:50, except for those under $10,000 from NVFcontribution which will be disbursed ina single tranche. Receipt o fthe second tranche will require satisfactory justification o f 70% o f the first tranche. The LGSP criteria i s divided into seven categories which are: Financial management, fiscal capacity, procurement, planning, Councils functional structures and process, and project implementation, monitoring and evaluation capacity. Financial management is further sub dividedinto (1) filling inpositions o f Council Director, Treasurer and Intemal Auditor, (2) Final accounts for previous financial year produced as per sec 45(4) LGA 1982 and submitted for audit on time, (3) clean audit opinion for the last fiscal audit accounts, (4) no financial irregularities have been reported either by the intemal or external auditors inthe past twelve months, (5) bank reconciliation statements for all accounts prepared monthly,(6) internal audit inplace and functional, (7)regular production o f financial reports-on a quarterly basis. 64  Figure7.1 Flow of funds fromMUto LGAs,VCs, andCMC (for LGAsthat havemetLGCDGandVillage Fundaccess criteria) Disbursements b 4 50 5 0 LGA Retains 7.5 % SFA ~ Council & CMC CMC & V C member from Finance Committee Disburses 2.5% Disburses 90% - Managedby the V C Made up o f elected beneficiaries- Economic & Finance committee Has a V C member as ex-officio - - Executes activities Reports to V C Finance & - for money received Economic Committee on use o f funds - Seeks expertise From Wards/ Reports to V C N A on progress - DistrictshTGOs Its reports & budgetsapproved - - Receives any byVC before forwarding to subproject savings Council 65  Those LGAs which are not LGCDG compliant will only be eligible to receive 2.5% o f the NVF contribution for a sub-project, which will be used for financing the E-PRAYdesk appraisal, field appraisal, approval, and general reporting. Of the NVF contribution to a sub-project, 7.5% will be disbursed to MWK (of which 5% will be used for supervision and 2.5% to cover facilitation and reporting on CMC activities), and 90% will be deposited into an account opened by the CMC specifically for the sub-project. Once a VC has attained a pre-defined fiduciary capacity (two half-yearly satisfactory Community Score Cards and a trained person with demonstrated record-keeping skills), funds will go into the MWK for disbursement to the CMC. The following are some measures which will be taken against any LGA should it misuse any funds meant for itself, a Village Council or Community: P The LGA will be suspended from participation inany NVF financed activities untilthe misappropriationhas beenrepaid. > The account out o f which the LGA's funds have been paid out and misused will be blocked. > Funds meant for communities will be retrieved by the MU and disbursed directly to communities via the Village Council > The misuse and name o f the LGA will be published in three of the most popular daily newspapers inTanzania Should a Village Council misuses funds that are meant for its own capacity building and supervision, the following rules shall apply: P The VC's account shall be frozen until those that were responsible for misuse havebeen identified. > The amount misused will be deducted from the next amount disbursed to the Village Council. k The individuals identified for misuse will not participate inthe activities relatedto NVF andtheir names shall be published intwo o fthe most popular newspapers inTanzania. Accountability o f Disbursed Funds The following are the ways inwhich the funds from NVFwill be mitigated against misuse:- 1. VFSAs shall ensure that the Fundssystem is operating as described country-wide. Any shortcomings shall be reported and action taken to correct the deviation. 2. Internal auditors both at MUand LGAs shall continuously conduct their audits annually to check on misuse. 3. Punitive measures put inplace at every level o f implementation shall at face value act as a deterrent against misuse. 4. There shall be semi-annual audits undertakento check on misuses and operation o fthe system annually. 5. Village Councils and LGAswill assist incurbing any malpracticesthat happen at any level. 6. The DEDcan exercise their discretion to stop flow o f funds to a community or V C where there are serious intemal audit queries. 66  Annex 8: Procurement Arrangements TANZANIA: Second Social Action FundProject A. General 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 o f Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for pre- qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank inthe Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Procurement of Works: Works procured under this project will depend on community driven development activities to be identified at community level and include activities such as rehabilitatiodconstruction o f health centers, classroom blocks, staff accommodation, latrines, earth dams, savings club houses, rural roads utilizing labor-based technologies, etc. Since contracts o f these activities are anticipated to be small in size, there will be no procurements using International Competitive Bidding (ICB) or National Competitive Bidding (NCB) procedures. Inthis respect, Bank's Standard BiddingDocuments (SBDs) for ICB and National SBDs for N C B will not be applicable. Procurement arrangements are described in the OM as well as the community procurement handbook which will be prepared for use bybeneficiaries, as well as relevant stakeholders. Procurement of Goods: Goods procured under this project would include: vehicles and computers for the Districts, furniture, and supplies (including software). The procurement will be done usingthe Bank's SBD and Standard Bid Evaluation Forms for all ICB contracts. Since the Government has prepared SBDs for procurement o f goods under N C B procedures, procurement o f goods under N C B will be carried out using these documents. For smaller quantities o f goods, shoppingmethodwill be utilized. Procurement of non-consulting services: Services required under the Project will include workshops, and training, as well as the production and dissemination o f messages inprint, radio, and video. Venues for workshops and training will be chosen on the basis o f at least three quotations. The production o f messages will be procured through shopping. The dissemination in the public media may be sole sourced on the basis of communication means that exist in various parts o f the country. Selection of Consultants: The project will finance various consultancy services including TASAF MU key staff, designing o f score-card, technical audit, improvement o f TASAF web site, etc. Other consultant services required under the Project include the undertaking o f assessments, and evaluations o f the support being provided to the various beneficiaries; these consultancies may be undertaken by firms or individuals. Consultants will also be hired to design messages for the dissemination o f development communication messages; these 67  consultancies might be individuals or firms. Short lists o f consultants for services estimated to cost less than $200,000 equivalent per contract may be composed entirely o f national consultants inaccordance withthe provisionsofparagraph2.7 ofthe Consultant Guidelines. OperatingCosts: The operating costs for TASAF I1shall consist o f support staff remuneration inthe MU,per diem andtravel costs for staff from the National Auditor's Office when travel on duty duringcarrying out annual financial audit, office supplies, operation and maintenance costs for vehicles and equipment, communication charges, utility expenses among others. These will be procured using the procedures described inthe Procurement Manual which will be reviewed bythe Bank for its acceptability. Others:Under the NVF component, CMCs will be responsible for the procurementnecessary to implement their subprojects. Prior to disbursement o f funds to CMCs, they will receive training inprocurement, andbeprovidedwiththe CommunityProcurement Handbook. TheHandbook is under preparation and will be cleared by IDAprior to its utilization. The procurement procedures, methods and arrangements are presented inthe OM, andpresented inmoredetail inthe Procurement Manual. The Community Procurement Handbookwill contain the necessary information relating to contracting by the CMCs, and model contracts for works and goods will also be provided inthe Handbook currently under preparation. B. Assessment of the agency's capacityto implementprocurement Procurement activities will be carried out by the MU at central level for those items requiring ICB or NCB, as well as procurement o f consultants and operating costs. The majority o f the procurement will be undertaken by CMCs at Village level; District level will be responsible for the hiring o f the LSP for the support to able-bodied food insecure beneficiaries. The District Councils would also hire consultants (firms or individuals) such as NGOs, architects, etc to supplement technical capacity in the event the District Councils determines that they have inadequate capacity to provide technical backstopping to CMCs. The MU is staffed by an Executive Director, a Director o f Finance and Administration, and a Director o f Internal Audit, among others, and the Procurement Unit, reporting to the Executive Director, will be staffed by a Procurement Specialist, and a Procurement Officer. A Supplies Officer, who is proposed to report to the Director o f Finance and Administration, will be responsible for the supplies function, which includes receiving and storage o f consumable goods. Every district has a procurement unit under the District Treasurer (DT). The Procurement Unit is currently headed by a Supplies Officer (PO), who reports to the DT. Apart from beinga Secretary to the Tender Board as stipulated inthe Local Government procurement Regulations, the PO is responsible for the day-to-day procurements o f a district council. Every village has a council, which i s responsible for overseeing development activities within their geographical village. The village council consists of 25 members inclusive o f a Village Executive Officer (VEO) and Chairman. VEO is a village Accounting Officer and, does day-to-day activities on behalf o f the village council. An assessment o f the capacity o f the Implementing Agencies to implement procurement actions for the project was carried out inAugust 2004. The assessment was carried out at three different levels -TASAF MU, District Council, and Village Council. The key issues andrisks concerning 68  procurement for implementation o f the project, including experiences from TASAF I, beenhave identified and include (a) inadequacy o f staffing at the MU for procurement; (b) possible influence, as in the past, o f procurement processes by the management; (c) incomplete procurement files; (d) lack o f LGA experience inprocurement as well as procurement planning; and (e) lack o f experience o f Village Governments in procurement as well as record keeping. The corrective measures which have been agreed are to (a) that the MU will enhance its procurement capacity by adding a Procurement Specialist; (b) members o f the MU involved in procurement attend procurement workshops to acquire basic procurement knowledge; (c the MU to ensure that for each procurement the file contains all o f the documentation associated with the tender; (d) staff at LGA involved in tender will attend procurement training to acquire knowledge; and (e) capacity o f the Village Governments inprocurement and record keeping will be enhanced. The overall project risk for procurement is high. Following the procurement capacity assessment, actions were designed to mitigate the procurement risk; those which will take place during implementation are given in the table below. C. ProcurementPlan The Borrower, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan was agreed to between the Borrower and the Project Team on October 12, 2004 (during Negotiations) and will be available at the TASAF Management Unit, address, Dar-es-Salaam, Tanzania. 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 implementationneeds andimprovements ininstitutional capacity. D. Frequencyof ProcurementSupervision In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment o f the Implementing Agency has recommended semi-annual supervision missions to visit the field to carry out post review o f procurement actions. 69  E. Details ofthe ProcurementArrangements Involving International Competition and Other Category ProcurementMethod Prior reviewThreshold ContractsSubject to (US $ Equivalent) Prior Review Goods ICB Above 150,000 All NCB Below 150,000 None (Post Review) Shopping Below 50,000 None (Post Review) Subprojects Community Participation Above 30,000 (sub-projects) All ickages to e procured fc owing CB and otl r methods. 3 4 5 6 7 8 Contract Estimated Procurement P-Q Domestic Review Expected (Description) cost Method Preference by Bank Bid- (millions) (yesho) (Prior / Post) Opening Date 1/05 Motor Vehicles US$3.1I ICB N Yes Prior March 2005 2/05 IT Equipment US$1.01 ICB N Yes Prior March 2005 3/05 Development US$0.38 ICB N Yes Prior March Communication 2005 Equipment 4/05 Supply of US$O.O9 NCB N Yes Post February software licenses 2005 ' 5/05 Computer US$0.07 NCB N o Yes Post February Supplies and 2005 Stationery 6/05 Repair services US$0.07 NCB N O Yes Post February o f vehicles and 2005 office machines 7/05 Supply of US$0.002 N S N o Yes January Furniture 1/06 Computer US0.07 NCB N o Yes Supplies and 2006 Stationery I I 70  2. ConsultingServices (a) Prior review threshol Category I Selection Method Prior review Contracts Subject to Threshold (US $ Prior Review Equivalent) Services QCBS Above 100,000 All Firms LCS Above 100,000 All QBS Above 100,000 All LCS Below 100,000 None (Post Review) CQS Below 100,000 None (Post Review) sss All values All Services IC Above 50,000 All Individual IC Below50,000 None (Post Review) sss All values All (b) Listof consultingassignmentswith short-list of internationalfirms andother selection methods. Ref. No. Description of Assignment Estimated . Selection Review Expected Cost Method 1 byBank Proposals ~ (c) Short lists composed entirely o f national consultants: Short lists o f consultants for services estimated to cost less than US$ 200,000 equivalent per contract, may be composed entirely o f national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Notes: ICB International Competitive Bidding SSS Single Source Selection NCB National Competitive Bidding I C Individual Consultants QCBS Quality- andCost -Based Selection ZCS Least-Cost Selection QBS Quality-Based Selection CQS Consultant' Qualification Selection 71  Annex 9: Economic and Financial Analysis TANZANIA: Second Social Action FundProject Macro-economic Situation Tanzania has made substantial progress in implementing structural reforms in the economy and achieving macro economic stabilization. At the start o f the reform process, economic growth was slow, but increased over the last 5 years, averaging over 5% and reaching 6.2% in 2002. Not only has growth accelerated but also become much more resilient to adverse shocks; this i s illustrated by the fact that despite the poor rains in 2003, GDP i s still expected to grow at an average o f 5.5%. Fiscal policy consolidation has been central to the success in macroeconomic stabilization. Continued conservative fiscal policy management, supported by cautious monetary policy contributed to a decline in inflation fi-om 7% at the end o f 1999 to 4.5 % in 2002. However, due to recent draughts, the inflation rate rose to 6.5% in 2003 but the 2004/2005 national target is an inflation rate o fbelow 4 percent. While there has been commendable macro-economic stability in Tanzania, poverty reduction remains a challenge and an overarching objective in the PRS. A comprehensive household budget survey o f 2000/1 indicates the challenge: between 1991 and 2001 basic needs poverty decreased marginally, from 39% to 36%, and food poverty fi-om 22% to 19%. Thus inequalities are high as evidenced by the 2000/2001 Gini co-efficient o f 0.35 and also reflected by the overwhelming rural and peri-urban distribution o f the poor. The 2000 PRSP identifies the priority sectors as primary education, primary health care, agricultural research and extension, rural roads, the judiciary and HIV/AIDS. Government is now preparinga revised PRS that will focus on growth and diversification o f the economy and integration o f the MDGs for which TASAF I1is tryingto contribute. Finance: TASAF operates under a project modality, rather than direct budgetary support, thus funding will be consistent with the MTEF envelope for those subprojects which will be handed over to the LGAs upon completion as their recurrent cost implications will have been considered at Appraisal stage. Poor communities who have been difficult to reach with adequate services will be eligible for additional subprojects as long as the community has an operation and maintenance (O&M) arrangement inplace. Districts will operate a special NVF account incases where they will undertake disbursements themselves. Economic Returns TASAF I1 is primarily demand driven. Under the NVF, representing 80% o f the h d s , communities identify and decide on the type o f subprojects demanded in their area. Poor communities are rational economic actors whose choices will reflect those subprojects that provide the greatest return to their input o f labor, time materials and cash. As a consequence, and since the benefits gained are longer rather than short-term, a traditional cost benefit analysis i s not suitable for the project. Much of the returns to TASAF I1 investments will be in the form o f social capital and sustainability o f community assets as a result of involvement o f Local Government, and the communities through the CMC's. The interaction o f the communities as subproject implementers and Local Govemments as overseers, will promote both upward and downward 72  accountability, thus increasingthe delivery o f services at the community level. The community service package approach where community priorities are linked to the MDGs and the PRS, and appraised against the sector norms and standards will re-in force ownership and sustainability o f the assets created. The following four beneficiary groups will be supported (i) the service poor; (ii) able-bodyfoodinsecure;and(iii) vulnerable. the the The economic rationale for TASAF i s based on the following principles: 0 TASAF fhnds are essentially public funds and the activities financed by TASAF represent the highest priority use o fpublic resources 0 Cost effectiveness o f subprojects will be facilitated byprovision o f costed design options, a unit cost databank, encouragement o f local competition in procurement o f goods and services and involvement o f sector staff at appraisal to ensure that sector norms and standards are met. 0 Savings from the poor will be available for on-lending and investment through community and commercial micro-financing institutions. 0 TASAF also has a number o f extemalities such as building community skills, strengthening decentralization o f service delivery in the long term and community capacities to prevent, mitigate andmanage riskdshocks. Poverty Targeting and Resource Allocation Mechanism for TASAF As TASAF is an overall targeted intervention with an objective to improve living conditions of the poor, a targeting framework has been established through which NVF resources will be allocated to LGAs in a transparent and objective manner. A targeting framework i s necessary as the nature o f poverty, and demographic and geographic characteristics differ across the LGAs. The Government o f Tanzania has formulated a national resource allocation criteria based on existing Local Level poverty, population and geography indicator^.^ A group o f poverty indicators5 related to access and availability o f health, education, and water and sanitation services, vulnerability and food insecurity will be used to assess poverty level o f a district. Population size and geographic size will also be important determinants for the district level allocation as needs as cost o f accessing and delivering goods and services and markets differ proportionate to geographic area and population size. The indicative Local level resource allocation will be for the total duration o f the TASAF project. However, during mid-term, indicative allocations and rate o f expenditures by each LGA will be reviewed with a view to making adjustments and to re-deploying resources which are not being effectively used. Resource use by LGA will be monitored continuously through monthly/quarterly monitoring reports to enable identification and resolution o f absorptive capacity problems. Regular monitoring will allow the MUto help districts with low take-up through capacity development, more intensive PRA and IEC efforts. The targeting o f resources within a LGA will also be guided by poverty and service coverage indicators as well as community demands in line with A composite index consisting of a poverty index , proportion of population per district, and proportion of geographic area per district, with respective weights of 40, 40 and 20 percent proposed to be used to allocate resources. The poverty indicators indude: net primary school enrollment ratio, studenuteacher ratio, % of population with access to protected source of water, ratio of population per dispensary, proportion of food insecure households, and total number of vulnerablepeople 73  their capacities. The LGAs are expected to target needier or service poor areas within a district through more intensive and/or issue specific sensitization and E-PRA efforts. CE funds will be allocated based on need and demand. These funds will primarily facilitate the implementation o f the NVF and can be usedto finance pre and post sub-project cycle activities, requisite equipment, materials, and training and/or to buy services from national, regional, local, or ward level government technical staff or private service providers. LGAs will be eligible to access capacity enhancement funds based on their requirements as per their submissions o f approved subprojects andimplementationplans. Guidelinesfor targeting resourcesbelow the Local Level: This methodology will cascade below District levels whereby districts (and structures below them) will undertake resource targetingfor their village councils by targeting andprioritizing the more deprived and weaker communities and by carrying out more focused facilitation processes in order to stimulate demand. This process has been outlined in the CSPC as part o f the mobilization phase. At the community level, gender equity is taken on board by ensuring 50% female membership at the CMCs. FinancialAnalysis Community participation is a core principle o f TASAF, generating and mobilizing additional resources to meet project costs and creating a more sustainable environment after the project completion. Communities are expected to contribute at least 20% under subprojects to improve service access (including village banking infrastructure), and at least 5% for subprojects that increase incomes for households with vulnerable individuals. Projections indicate that the share of the community contributions will reach more than U S $13.5 million over the life o f the project; these will also be tracked duringimplementation. IDA Govemment Community Contribution to NVF Total Project Project Cost 150 15 13.5 178.5 % ofTotal 84% 8.5% 7.5% 100% Beyond the community financial contribution, however, is the philosophy o f self help and ownership that is developed through project identification and implementation. The project will buildcapacity at community level interms o f financial planning, budgeting and reporting. The skills gained by communities during the project to use and account for funds, and to build, rehabilitate and maintain infrastructure will lead to more sustainable development. As such, it is expected that: 0 The life o f the community asset generated under the participatory planning approach will be longer than others as communities will provide operation and maintenance support, as appropriate. 0 The recurrent cost burden o f the National and Local Governments will be lower thaninthose without community ownership. 0 Appropriate beneficiary, cost-effectiveness, and impact studies will be conducted regularly to determine the status of TASAF I1 subprojects and to develop database that will permit comparisons of costs and performance of similar projects provided using different approaches. 74  NationalVillage FundResource Allocation Njombe District Council 1,198,781 Kagera Biharamulo District Council 1,189,447 BukobaDistrict Council 1,081,225 Bukoba Town District 566,278 Karagwe District Council 1,175,669 Muleba District Council 1,149.297 ~ 75  Local Government INVF allocation1 Regiodsland AuthorityDsland US$ KilwaDistrict Council 996,934 76  * NVFtotal is less than US$ 120milliondue to rounding-off errors invarious formulae used. 77  Annex 10: SafeguardPolicyIssues TANZANIA: Second SocialAction FundProject As part o f TASAF I1appraisal mission, an assessment o f the status o f environmental and social safeguard work was carried out. The assessment revealed that, in general, TASAF Ipractices duringthe subprojects cycle were minimal for ensuring that environmental and social safeguard aspects are taken into account partly due to limited capacity on environmental issues at the district, ward and village councils, inadequate environmental screening tools and appraisal processes. The lessons learnt from TASAF Iprovide input into the design o f TASAF 11. The Operational Manual for TASAF I1 has been reviewed and relevant sections o f the Environmental and Management andthe Resettlement Policy Framework havebeen reflected inthe document. The implementation o f a CSPC will identify and determine the type of activities that are to be undertaken from an environmental and social safeguard standpoints; who should be involved, capacities requiredto carryout the work andwho should be responsible at the LGA, ward and the kijiji/shehiu/mtuu level to ensure that safeguard aspects are mainstreamed throughout the subproject cycle process. The Capacity Enhancement component will finance activities that will contribute to community awareness on environmental and social safeguards engendering sustainable resource management. The determination and mainstreaming o f the environmental and safeguards aspects at various stages byvarious actors will be as follows: A. Pre-subproject cycle targeting and promotion stage will ensure that environmental and social safeguard issues are introduced to beneficiaries through sensitization meetings, print and electronic media, drama and coding. This will mobilize communities to be able to scope their environment for effects o f any proposeddevelopmentprojects. B. Subproject cycle. Environmental and safeguard screening will follow a subproject cycle process as follows: (i) At subproject identificationthe communities will identify the negative and positive environmental and social impacts o f the proposedprojects; (ii) determine the mitigation measures, classify the measures into those that the communities are able to incorporate into the subproject activities at no cost, and those that require funding for inclusion inthe project budget; (iii)DeskandFieldAppraisal: theLGAappraisalteamwillensurethat alltheenvironmental requirements have been addressed accordingly by using checklists; (iv) Approval: the SET will ensure that the sector norms and standards on environment and safeguards have been adhered to duringthe development o f the subproject; Inclusion of the listing o f the project affected people (PAP); (v) The CMC will undergo training in project management which will include environment and social safeguards aspects. At the actual launching communities will re-confinn their commitment to implementing the mitigation measures and ensuring that those households negatively affected by the development have been identified and retumed to the status qou ante; (vi) Implementation, monitoring and supervision: During execution, the CMC will carryout all the mitigation measures as detailed in the subproject activities. The LGA, LSP, the village council and the extension staff at the ward will ensure that the mitigation measures are implemented in full; (vii) Completion & Inauguration: The CMC will report full status on the 78  execution o f the mitigation measures and the supervising cadres will sign-off before inauguration. C. Post Subproject Cycle: During this stage the village council in conjunction with the committee responsible for community resource management will continue to mobilize the communities for dialogue on sustainable environmentalmanagement. Safeguard Policies Triggered and Instruments Applicable to the Project. From an environmental and social safeguard point o f views, TASAF I1is a Category B project as the environmental and social impacts o f the project, for the most part, are expected to be minimal, site specific and manageable to an accepted level. The range, scale, locations and number of subprojects, as part o f community development initiatives will emerge from the participatory process. It i s premature in a CDD operation to determine what the real social impacts are, in terms o f land acquisition, loss o f economic activities and who the Project Affected People (PAP) are. The difficulties inherent indefining what the real environmental and social impacts o f these subprojects are and determining what mitigation measures should be put in place in advance, necessitated the development of: (1) an Environmental and Social Management Framework (ESMF); and (2) a Resettlement Policy Framework (RPF). These two safeguard policy instruments were prepared by the Borrower through the safeguard study team led by NEMC, including other NEMC specialists, and relevant resource people from TASAF and Local Government. The instruments were developed in line with national and World Bank policies, reviewed, approved and disclosed in-country and at Bank Info Shop on July 19,2004. In light of the above issues, there will be need to strengthen the various levels of local government through training, capacity and awareness building o f the various actors and other relevant stakeholders to mainstream environmental and social safeguard activities into the community sub-project cycle. Coordination and Oversight of Environmentaland Social Safeguard Activities in TASAF 11.Monitoring and ensuringthat mitigationmeasures, as they relate to project environmental and social impacts, are properly and timely implemented will be paramount to the success o f the project. Oversight responsibility o f project overall compliance with national andBank safeguard policies will be the responsibility o f LGA, as the main entity incharge o f subprojects monitoring and supervision. The LGAs will be responsible for carrying out Limited Environmental Assessments (LEAS)for sub-projects prior to approval. In addition, the SET shall assume responsibility for overall coordination and liaison with relevant sectoral ministries, including the Ministry o f Land and Human Settlements. The NEMC will be responsible for technical backstopping, review and clearance o f TORS for subproject-specific EIAs, and carrying out studies Full Environmental Assessments (FEAs) as applicable. In case additional funds are neededto carry out FEAs, the MUwill finance it out o f the Capacity Enhancement Component. Finally, PO-RALG, SET, and MU shall assume overall quality assurance o f safeguard capacity and awareness building campaigns and ensure that environmental and social safeguard aspects are mainstreamed in LGA subproject review, approval, implementation and monitoring processes. The VFCs will also be responsible for the checking that the mitigation measures have been implementedby the CMC. An MOUbetween TASAF and LGAs will clearly outline these hnctions. 79  Annex 11:ProjectPreparationandSupervision TANZANIA: Second SocialAction FundProject Planned Actual PCNreview 311112004 412612004 Initial PID to PIC 511012004 InitialISDS to PIC 511912004 Appraisal 911312004 911312004 Negotiations 1011112004 1011212004 BoardRVP approval lll23l2004 Planned date of effectiveness 2/21/2005 Planned date of mid-termreview 913012007 Planned closing date 6130l2010 Keyinstitutions responsible for preparation ofthe project: Government o fTanzania Project Preparation Team (PPT), P.O.Box 9120, Dares Salaam, Tanzania Bank staff and consultants who worked on the project included: Name Title Unit NginyaMungai Lenneiye Sr. Social Protection Specialist AFTH1 Hisham Abdo Kahin Counsel LEGAF WimAlberts Sr. Social Protection Specialist AFTH1 Steve Gaginis Finance Officer LOAG2 Fatu Gbedema ET Consultant, InstitutionalDevelopment HRSDP Lori Geurts Sr. ProgramAssistant AFTH1 Muthoni Kaniaru Counsel LEGAF EvelyneKapya ProgramAssistant AFC04 Amadou Konare ET Consultant, Safeguards AFTS1 Rest Lasway Education Specialist AFTH1 EmmanuelMalangalila Sr. Health Specialist AFTH1 IdaManjolo Social Protection Specialist AFTH1 DonaldMneney Procurement Analyst AFTPC PC Mohan LeadIEC Specialist AFTKL DonaldMphande Sr. FinancialManagement Specialist AFTFM Norbert Mugwagwa Lead Operations Officer AFTH1 Suleiman Namara Social Protection Specialist AFTH1 MireyOvadiya Operations Officer AFC03 Hope PhillipsVolker Operations Officer AFTH1 Ktlshna Pidatala Sr. Information Officer AFTKL Mercy Sabai Sr. Financial Management Specialist AFTFM PascalTegwa Sr. Procurement Specialist AFTPC Bank funds expendedto date on project preparation: 1. Bank resources: $ 186,625 2. Trust funds: 0 3. Total: $ 186,625 Estimated Approval and Supervision costs: 1. Remaining costs to approval: $ 200,000 2. Estimated annual supervision cost: $ 150,000 80  Annex 12: Documentsinthe ProjectFile TANZANIA: SecondSocialAction FundProject Statement o fMission Objectives for Pre-appraisal Mission, June 2004 Back-to-Office Report: Pre-appraisal Mission, June 2004 Project Concept Note prepared by Government Project Preparation Team. March2004 Back-to-Office Report: TASAF MidTerm Review, June 2003 TASAF: Beneficiary Assessment inTASAF Operating Areas, FinalReport, September 2003 TASAF I1DesignChallenges TASAF 11,Empowering Communities Through Decentralization Village Governance inTanzania 81  Annex 13: Statementof Loans andCredits TANZANIA: SecondSocialAction FundProject Differencebetween expected andactual Original Amount inUS$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. orig. Frm. Rev'd PO78387 2004 TZ-CentralTransport Corridor Prj (FY04) 0.00 122.00 0.00 0.00 0.00 112.87 7.68 0.00 P074624 2004 TZ-EmergencyPower Supply (FY04) 0.00 43.80 0.00 0.00 0.00 21.80 -23.14 0.00 PO71014 2004 TZ-HIV/AIDS APL (FY04) 0.00 0.00 0.00 0.00 0.00 71.32 8.35 0.00 PO57234 2004 TZ EastemArc Forests 0.00 0.00 0.00 7.00 0.00 7.00 1.50 0.00 PO82335 2004 Second HealthSector Dev. 0.00 40.00 0.00 0.00 0.00 47.56 13.33 0.00 PO83080 2004 TZ-Secondary Edu Dev Prj (FY04) 0.00 123.60 0.00 0.00 0.00 149.61 50.07 0.00 PO59073 2003 DAR WATER SUP & SANITATION 0.00 61.50 0.00 0.00 0.00 55.51 10.03 0.00 PO67:03 2003 Partic.Agr. Dev. and EmpowermentProj. 0.00 56.58 0.00 0.00 0.00 56.62 4.65 0.00 PO74072 2003 TZ PRSCl 0.00 100.00 0.00 0.00 0.00 0.19 -132.56 0.00 1'002797 2002 TZ SONGO SONGO GAS DEV. & 0.00 183.00 0.00 0.00 0.00 100.50 68.61 0.00 POWERGEN. PO58706 2002 TZ Forest Conservationand Management 0.00 31.10 0.00 0.00 0.00 33.27 11.11 0.00 PO71012 2002 PrimaryEduc. Dev. Program 0.00 150.00 0.00 0.00 0.00 55.65 44.04 0.00 PO47762 2002 RURAL WATER SUPPLY 0.00 26.00 0.00 0.00 0.00 25.65 10.88 0.00 PO73397 2002 LowerKihansi Environmental 0.00 6.30 0.00 0.00 0.00 4.64 1.93 0.00 Management PO69982 2001 RegionalTrade Fac. Proj.- Tanzania 0.00 15.00 0.00 0.00 0.00 8.84 4.85 0.00 PO65372 2001 SocialAction Fund 0.00 60.00 0.00 0.00 0.00 2.24 -10.82 0.00 PO60833 2000 PUBLIC SERV REF PROG 0.00 41.20 0.00 0.00 0.00 24.57 -18.11 0.00 PO57187 2000 FID? I1 0.00 27.50 0.00 0.00 0.00 12.06 10.86 7.57 PO50441 2000 RURAL& MICRO FIN SVC 0.00 2.00 0.00 0.00 0.00 0.91 0.81 0.61 PO49838 2000 PRIVATIZATION 0.00 45.90 0.00 0.00 0.00 30.12 27.32 0.00 PO47761 1999 TZ-Tax Administration SIL (FY99) 0.00 40.00 0.00 0.00 0.00 20.65 16.30 15.26 PO02789 1998 HumanRes. Dev. I 0.00 20.90 0.00 0.00 0.00 0.53 0.03 0.00 PO46837 1997 TZ-Lake Victoria Environment (IDA) 0.00 10.10 0.00 0.00 0.00 4.22 -4.14 0.00 PO02758 1996 URBAN SECTORREHAB 0.00 105.00 0.00 0.00 0.00 3.65 10.36 0.00 PO02770 1994 TZ ROADSI1 0.00 170.20 0.00 0.00 63.53 15.49 83.95 36.51 Total, 0.00 1,481.68 0.00 7.00 63.53 865 47 197.89 59.95 82  TANZANIA STATEMENT OF IFC's HeldandDisbursedPortfolio InMillionsofUSDollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 1997 AEF Aquva Ginner 0.68 0.00 0.00 0.00 0.68 0.00 0.00 0.00 2001 AEF BoundaryHi1 0.20 0.00 0.00 0.00 0.20 0.00 0.00 0.00 1998 AEF MajiMasafi 0.18 0.00 0.00 0.00 0.18 0.00 0.00 0.00 2000 AEF Zan Safari 0.52 0.00 0.00 0.00 0.52 0.00 0.00 0.00 1997199 Aminex 0.00 0.12 0.00 0.00 0.00 0.12 0.00 0.00 2002 Exim Bank 2.08 0.00 1.oo 0.00 2.08 0.00 1.oo 0.00 1996 IHP 0.23 0.00 0.00 0.00 0.23 0.00 0.00 0.00 2000 IOH 2.50 0.00 0.00 0.00 2.50 0.00 0.00 0.00 2000 NBC 0.00 10.00 0.00 0.00 0.00 3.63 0.00 0.00 1993 TPS (Tanzania) 3.50 0.87 1.04 0.00 3.50 0.87 1.04 0.00 1991.I97 TPS Zanzibar 0.00 0.03 0.00 0.00 0.00 0.03 0.00 0.00 1994 Tanzania Brewery 0.00 3.43 0.00 0.00 0.00 3.43 0.00 0.00 Total portfolio: 9.89 14.45 2.04 0.00 9.89 8.08 2.04 0.00 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. Total pendingcommitment: 0.00 0.00 0.00 0.00 83  Annex 14: Countryat a Glance TANZANIA: Second Social ActionFundProject Sub- POVERTYand SOCIAL Saharan Low- Tanzania Africa income Developmentdiamond* 2003 Population mid-year (mihOns1 35 9 703 2,310 Life expectancy GNI per cap@ (Atlasnrfhod US$) 290 490 450 GNI(Afias method, #E$ bf//m)si 104 347 1,038 Average annualgrowth, 1997.03 Populatioil (%) 2 3 23 1 9 Laborforce (%I 24 2 4 23 GNI Gross per PnmaFy Most recent estimate (latest year available, 1997-03) capita enrollment Povettyi%ofpomdatiOn below nationalpovertyIiile) 36 Uban populatron(% of tofa1powlatfonj 35 36 30 Life expectainy at birth &ears1 43 46 58 Infant mortalih/(per 1,ouOiivebirths1 104 103 02 Childmalnutntioii (% ofchildrenunder5) 29 44 Access to improvedwater source Access to an improvedwater source (% ofpopiiiatiwi) 68 58 75 llliteracv(96 ofpowiafioti age 7%) 23 35 39 Grriss pnmanjeniollinent r% ofschd-age population) 70 a7 92 Tanzania Male 71 94 99 Low-incomegroup Female 69 80 85 KEY ECONOMIC RATIOSand LONG-TERMTRENDS 1983 1993 2002 2003 Economicratlos' GDP (US$bill,om) 4 3 94 9 9 Grossdomestic investnienffGDP 25 1 16.7 178 Expoitsof go& and sewices/GDP Trade 180 76 7 17 6 Grossdomestic savingdGDP -46 9 7 8 0 - Gross natfoiialsavings/GDP 2 4 9 1 7 6 Curreiitaccount balance/GDP -26 2 7 6 -102 InterestpaynlentsiGDP 24 0 4 0 3 Total debffGDP 1594 78 1 76 1 Total debt servicefexwrts 323 34 2 7 2 5 7 I Presentvalueof debVGOP I 8 7 Presentvalue of debtlexmrts 107.4 Indebtedness 1983-93 199343 2002 2003 2003.07 iaveiageanntialgrowfh) " _ -Tanzania GDP 3 0 4 5 6 3 5 6 6 6 GDP peer capita -02 1 9 4 1 3 5 4 5 Low-incomearouct STRUCTUREof the ECONOMY (% of GDP) Agriculture 48.1 44.4 43.4 I lndustw 15.6 16.3 16.9 15 Manufacturing 7.5 7.6 7.7 10 Services 36.3 39.3 39.8 5 0 Privateconsumption 85.2 77.4 77.2 5 Generalgovernmentconsumption 19.4 12.9 14.8 I GDI Importsof goods and services 47.7 23.7 27.4 GDP I 1983-93 1993-03 2002 2003 (averageannualgrowth) Agnculture 3 7 5 0 3 5 Industw 6 5 9 3 9 7 Manufactunnq 5 0 8 0 8 0 Services 4 4 6 2 6 3 Pnvate consumption 4 5 4 2 I 9 Generalqovemmentconsumption 3 6 176 239 Gross domestic investment 2 5 2 3 149 Importsof qoods andsewices 4 0 2 3 6 8 * The diamonds showfour kev indicatorsIn the CnuntN(In bold)commred wth its income-orouoaveraoe If data are msslno the diamondwill be incomolete 84  PRICES and GOVERNMENT FINANCE 1983 1993 2002 2003 Domestic prices 1 (% change) Consumer prices 27.1 25.3 4.6 5.0 ImplicitGDP deflatoi 24.5 4.1 7.2 Government finance I (% of GDP,includescurrent grants) Current revenue 9.5 11.5 11.7 lo' i 9, 00 01 02 03 Current budgetbalance -4.4 -1.4 -2.3 GDP deflator v""o-"CPI Overallsurpluddeficit -8.2 -5.7 -7.4 TRADE I 1983 1993 2002 2003 /US$ millions) Exportand import levels(US$ mill.) Total exports(fob) 377 411 737 814 Coffee 130 96 35 41 Cotton 62 78 29 36 2 000 Manufactures 44 52 66 73 1500 Total imports (cifl 957 1,353 1,658 2.287 Food 91 1WO 58 147 Fueland energy 241 101 5W Capital goods 406 628 813 1 "I 0 97 98 99 00 01 02 Exportprice index(1QQ5-100) 82 73 156 175 Importprice index (IQQ5=100) 77 101 110 119 I CI Exports 0Imports Terms oftrade (1995=100) 107 72 141 148 BALANCE of PAYMENTS 1983 1993 2002 2003 1 (US$ millions) Current account balanceto GDP(0% Exportsof goods and services 509 603 1,568 1.722 Importsof goods and services 1,015 2,017 2,226 2.682 Resourcebalance -507 -1,414 -658 -960 Net income -73 -164 -52 -54 Net currenttransfers 22 463 -2 Current account balance -558 -1,115 -712 -1,002 Financingitems (net) 572 992 1,083 1,452 Changesin net reserves -14 123 -371 -450 Memo: Reserves includinggold (US$ millions) Conversionrate (DEC, locaVUS$) 11.1 405.3 966.6 1,038.4 EXTERNAL DEBT and RESOURCE FLOWS 1983 1993 2002 2003 (US$ millions) :omposition of 2003 debt (US$ mill.) Total debt outstandingand disbursed 6,864 6,786 7,324 7,515 IBRD 223 140 6 3 A 3 IDA 475 1,759 2,869 3,474 G. 831 Total debt service 164 211 118 102 IBRD 27 45 3 3 IDA 4 23 22 29 Compositionof net resourceflows Officialgrants 256 786 804 Officialcreditors 302 108 142 504 Private creditors 31 34 -22 15 Foreigndirect investment 2 21 240 Portfolioequity 0 0 0 c:437 World Bank program Commitments 81 345 63 219 - IBRD L E Bilateral Disbursements 90 I46 148 397 - IDA -- I D - Other multllateml F Pnvate Principai repayments 14 42 8 12 :- IMF G- Short-ten Net flows 76 104 140 385 Interestpayments 17 26 17 20 Net transfers 59 78 123 364 'Note: Inis table was prooucea trom tne Ueveiopmenrtconomics central a a t a b a S a 85  Annex 15: Letterof Sector Policy TANZANIA: Second SocialAction FundProject THE UNITED REPUBLIC OFTANZANIA THE MINISTERFOR FINANCE Telephone: 2112854 THETREASURY, Fax: 2117790 P.0. BOX9111, Inreplypleasequak: OAR S SALAAM, TANZANIA. Ref. No: TYC/B/30/55/81 20mOctober, 2004 Ms. Judy O'Conmr Countty Director for Tanzania and Uganda The World BankCountry Office DARESSALAAM. Dear Ms. O'Connor Re: THE PROPOSEDTANZANIA SECOND SOCIALACTION FUND PROJECT -LETTER OF DEVELOPMENTPOLICY 1. IamwritingtorequestonbehalfoftheGovernmentoftheUnitedRepublicof Tanzania a credit of USD 129 mlllkm and a grant of USD 21 minlon equivalents f"theIntemationalDevelopmentAssociation(IDA) tofinancetheproposed TanzaniaSecondSoclalAction Fund. BACKGROUNDAND RATIONALE 2. In year 2000, the Government, through the Poverty Reduction Strategy (PRS), identined priority sectors which would have maxlmom Impact In poverty reduction. The sectors include education, health, water, agtlcutture, rural roads, and judlclary. In the subsequent reviews, key cross cutting areas for poverty reduction were added; these include gender, environment, HN/AIDS, employmentand good govemance. In the same year the Govemmentestablished the Tanzania Social Actlon Fund which was financed by IDA and the Government. IDA provlded an SDR 45.5 mllilon Credit while the Govemment contributed Tshs. 3.752 billion (USD 3.474 mlllion). 86  The Project Development Objective for the first phase was to increase and enhance the capacities of communities and other stakeholders to prioritize, implement and manage sustainable development initiatives and in the process increase socio-economic servicesand opportunities. The project would help the govemment sustain the momentum of on going economic and administrative reforms by facllitating improvement in socio- economic infrastructure, enhancing capacity and skills among rural and peri- urban communities and creating safety nets for the poorest section of the communities. This first phase of TASAF covered 40 Districts in the mainland Tanzania andthe Islands of Unguja and Pemba in Zanzibar. 3. Following satisfacto~yperformance in the first phase of TASAF and the Governments resolve to continue with povetty reduction programs in the priority areas mentionedabove, the Govemment has designed to implementa.successor project named TASAF E. It was agreed that TASAF 11 will be national in coverage and responsive to an expanded scope of community demands. The project wlll be anchored on the PRS and is set to contribute to attainment of a set of selected MDG indicabrtargets. TASAF If OBIECTIVEAND DESCRIPTION - 4. Social proteetion through community empowerment continues to be the main focus of TASAF EI. The project therefore seeks to empower communities to access opporhrnities so that they can request, implement and monitor sub projects#at contribute to improvedlbelihoods linked to MDG indicabr targek in the PRS. The interventions will contribute to the achievement of the selected MDG indicator targets within the PRS and the strengthening of decentralization processes. The projectresources will be usedin creating (a) A NationalVillage Fund (NW) that providesmoney tu a Village levelfund- "Mfuko wa kijijijshehialMtaa"(MWK), which will be a principal instrument for responding to community demands in service delivery, safety net for the able bodiedpoor, and support to the vulnerable groups. (b) A Capacity Enhancement (CE) fund that finances activities at National, LGA and community levels to facilitate the attainmentof the objectivesof the NW as well as promotionof the communttysavings and investment TASAFI1AND DEClENTRAUZAnON 5. TASAF IIwill among other things strengthen Government`s commitmentto fiscal decentralization as resources held at the national level in the NVF will be disbursed directly to the MWK or through the LGAs to finance community sub 87  projects managed through a process defined in the eight stages of the sub project cycle. Targeted capacity enhancement at the LGA (including the Village Councils) and communlty level is set to improve the capacities of individuals, households and groups to define their needs, prioritke them, mobtlize resources and rake awareness on possibilities of accessing extra resou~es,when needed so as to addressthem. The interplaybetweenthe communitiesand LGAs in their areas is expected to further increase the voke of the poor in determining the allocation of public resources and thus promobe transparency and accountability. The implementationarrangements are mainstreamedto the LGA institutional set up with a focus on Community Driven Development (CDD) prindples. Thus direct financhng and capacity enhancement are key pillars in operationalization of TASAF II.Rolesof keyactorsat eachof thethree spheresof Govemmentareas defined below: 5,s At the National level, TASAF IIwill fall under the Office of the President, with oversight being vested in a National Steering Committee (NSC), appointedby the President, whose membershipwill include representation from both public and private sectors. It will be responsible for setting policy, clearing the annual work plans and budgets of the MU, as well as reviewing the progress reports and monitoring the impact of TASAF activities on communities. The NSC will also be charged with the responsibility of endorsing subpmjects whkh have been scrutinized through the establishedTASAFprocedures. A Sector Experts Team (Smchaired by a Senior Ofker from Ministry of Finance and membership from the Ministries responsible for education, heatth, water, environment, works, labour and youth, poverty, community development, agriculture and food security will be established to ensure that community sub-projects receiving TASAF support comply with the Sector norms and standards, are compatible w'Rh, or part of the District Development Pbns, and that upon completion the operations and maintenance costs are provided for in the recurrent expenditure of the dlsbkts/islands. To accomplish the day-today task of establishing and operationaliziig the "Mfuko wa Kijfli" the Govemment will create a ManagementUnit in the President's Offke with its Chief Executive Officer appointed by the President. The Unit will mainty be responsible for promoting Mfuko wa K@ji/Shehia/Mtaa at all levels of Govemment and the public in general, The unitwill thus be accountable for funds disbursementand accounting, development and institutionalization of Mfuko wa Kijifi, institutional and opemtlonalizatjon arrangements that will include oversight at the 88  LGhVIsiand management, monitoring evaluation, and reporting on progressto S n , NSC, PO-RALG, MOF, PresidentsOffice and IDA. 5.2 The LGAjXsland is responsible for supporting the Village Councll and Communtties bo realize their sub projects within ae sector norms and standards, inlie with Ute CDD sub project cycle process. The LGA through its Finance ComrniRtee is responsible for approval of ammunity sub-projects within the prescribedTASAF funding limits and inlinewith the LGA overall annual plan as indicatedby communiRy priorities ascertained duringextended PRA processatthe community level. In regard, the r o k of the Regional c"ltative ammittee In oversight and coordination are also spelt out The roles of the Ward Development Committee relating to coordination and technical support are also spelt Out. 5.3 At the community level, the commun-ity is need defined rather than geographically defined; a Community ManagementCommittee (CMC) will be responsible for the preparation, implementation and submission of progress reports to the benefKiaries and Village Council/Shehia Advisory Council. The Vlllage Council/Shehfa Advisory Council will be responsible for monitoring and supervision reporting on prescribed schedules to the community and the LGA/Island management TASAF AND THE LOCALGOVERNMENTSUPPORTPROGRAM(LSGP) 6, In the fist phase of TASAF which covered 40 dlstrkts in Tanzania Mainland and the Islands of Unguja and Pemba in Tanzania Zanzibar, funds were and are transferred from the national level (TMU account) to communw owned account operatedand managed by a democratically electedCommunity ProjectCommittee. Evidence Is available to show that almost all community sub project bank accounts were and are satisfacborilymanagedand planned outputs succesfui~realized. It IS therefore evident that capacity exkk at the community level to manage resourcesfor development On the bask of this positive experkme, the Govemment will, through TASAF II contkrue to support direct financing of community managed wb-projeck in line with its standing commitmentto promote community empowerment through fiscal decentralbation. Capacity building of the community members to manage resoutces provlded for specific outputs and oul"e as in TASAF I will be replicated, intensfled and aligned to the LGSP proposed syst~msof fiduciary managementat community level. 89  TAsAF IItherefore lays ground work for the planned fiscal decentmlizationunder SP the LocalGovemmentCapitalDevelopmentGrant(LGCDG). The through LSGP's planned capacity bullding at the LGAs paves the way for TASAF IIdirect community flnancing through the LGA. To the extent that the LGSP is centered at the LGA level and plans to roll out to the Village Council level, and TASAF IIk centered at the Village Council leveland seeks to access resources heldat the LGA and national level, the hrvo projects complement each other and their interface creates a platformfor communities to presenttheir demands to higher authorities and the opportunities fbor the authorities to respond and thus be accountable to the public they serve. The Government therefore will continue to support this framework during implementationof these projects. It is also an opportunity for the Govemment and other stakeholders to strengthen CDD by using public resources baddress ascertained community needs. TASAF II's speciflc focus on communities' contribution to the achievement of selected MDG targets within the PRS creates a community and ffiA partnership, that provides sufficbnt resources, and offefs a credible and monitorable instrumentfor fighting poverty. Speciflc area5 between the two projects which the government has harmonized, and will continue to ensure that the projects complimentand reinforceeachother during implementationare: Access condwns: In additionalto NVF access criteria, Dktrict and Urban Councils will have to meet LGSP access criterla in order to receive funds. TASAF would receive from PO- RALGan annual published list of Councils that have met LGSP access criteria and can receivefunds, and those that have failed to qualffl. In Councils that are not compliant, TASAF would disburse funds tD the VC and CMC untll the Councjl is TASAF compliant. This approach for access criteria for TASAF resources will ensure that communities are not penalized on account of poorperformanceby District and UrbanCouncils, while notundermlningthe LGSP. The Resource Allocation criteria: The LGSP and TASAF will use a criterla of population, poverty and geographkal size of Districts/Islands in the global allocationof resources. In its focus on poverty, TASAF will use the agreed formula of allocating resources as follows: 40% on the $asis population 40% on the 'basis poverty index 20% onthe basisgeographicalske The above formula will be used after applying an equalizing allocation of 25%; this amount of the NVF will be shared equally among the LGAs and Islands. The capacity enhancement fund will be allocated on ascertaineddemands and is notsubjectto the above formula. 90  Planning Procedure: TASAF X I will support an E-PRA pmess at each targeted community so as to confirm communky priority in the District plan, and assist communities in the preparationof subprojectfor funding. The District plan will be developed using participatory planning approach funded through the LGSPand/or other SOUIT~Sother thanTASAF IIfunds. To avoid duplkation of efforts and overspending in capacity building the Governmentwill ensure that those LGA receiving LGSP capacity building remums will not at'the same time access TASAF resourcesfor the same purpose. TASAF resciurcesfor capacityenhancementwill thus be used in non-LGSP districts but on specific demands that address ascertained capacityrequirementfor the operationalizationof Mfuko wa Kijlji. 6.5 In T M F Ithe sub projectapprovalfor funding was done at the national and distrlct levels In accordance wlth prescribed funding ceiling. A Steering Committee chaired by the Dktrict Commissioner in Tanzania mainland and a Relgbnal Commissioner in Unguja and Pemba was responsible tbr the approval. In order to support decentrallzation, the approval of sub prqject knding will be done by the Councils Finance Commltbee inTanzania Mainlandwhile the arrangementin Zanzibar will be retaineduntilsuchtime the necessityfor reviewoccufs. To address this apparent shortcoming the Regional Consultative Committee will have specifically defined oversight function on TASAF 11 operation. It is envisaged that the current Districts News letters wltl be replacedw-kha RegionalNewsletterproduced twice yearly covering allthe LGA in that region. This is expected to be mote cost effecthre than the present arrangemerits and provide an opportunity for inter district development communication framework providing the govemment with yet another monitoringtool. COMMUNITY CONTRIBUTIONTO THE ACHIEVEMENT OF SELECTED MDG TARGETS 7. The Government recognizes that achievement of the MDG target requires the partkipation of all citizens among other actors and that a combination of community contributions arid TASAF provided resources will lead to psftive outcomes inmat regard. Thus the Govemmentis committedto the creationof the Mfuko wa Kijiji/Shehiaas key instrument of enabling commonitles to sufficiently relate to the LGA in addressing needs for the identified categories of beneficiaries. The Government further recognizes that communities suppoited through this project contribute to povertyreductionwithin the frameworkof PRS, 91  TASAFAND GOVERNANCE 8. Good Govemanee is an important determinant of economic growth, social developmentand poverty reduiction. The Govemment will continue to strengthen the LGA through the LGSP and other ongoing reform programs so thatthe goals of TASAF IIin promoting accountability are realized and factored into the overall processes of management of public resources to promote sustainable economic growthand povertyreduction. Broad based and inclusive pisrticipatory approach in sub project identification, appraisal, approval, implementation, operation and maintenance promoted by TASAFwill continuebbe suppad incourse of this projectMe. 9. Finally, the Government will act as regulator and facilitator of TASAF implementation to ensure that the components of the pmject !.e. (a) National Village Fund, (b) Capacity Enhancementare ImplementEd in the mast rationalway wlth maximum participation of target groups of the poor population. In addition the government is mmmiW to strengthen the social pmtection aspect built into the design and implementationofTASAFsupported sub projects at the community level. Yours Sincerely I 92  Annex 16: Map IBRD33628 TANZANIA: SecondSocialAction FundProject 93   MAPSECTION