Ukraine - Social Investment Fund Project

Document of The World Bank Report No: 23085 UA PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN IN THE AMOUNT OF US$50.21 MILLION TO UKRAINE FOR A SOCIAL INVESTMENT FUND PROJECT October 31, 2001 Human Development Sector Unit Ukraine and Belarus Europe and Central Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective October 2001) Currency Unit = Ukrainian Hryvnia (UAH) I UAH = US$ US$1 = 5.339UAH FISCAL YEAR January 1 -- December 31 ABBREVIATIONS AND ACRONYMS APL Adaptable Program Loan CAS Country Assistance Strategy CBO Community Based Organization CDP Community Development Program CIDA Canadian International Development Agency CU Country Unit CT Country Team CQ Consultant Qualification ED Executive Director ECA Europe and Central Asia EO Executive Office DFID Department for Intemational Development FMS Financial Management System HD Human Development IA Implementing Agency LAS Intemational Accounting Standards IBRD International Bank for Reconstruction and Development IC Individual Consultant IDA Intemational Development Agency DC Direct Contracting IDF Institution Development Fund IEC Information and Education Campaign IRF International Renaissance Foundation IS Intemational Shopping FBS Fixed Budget Selection LCS Least Cost Selection NIIS Management Information System MDF Municipal Development Fund M&E Monitoring and Evaluation MLSP Ministry of Labor and Social Policy MP Micro-project NIOF Ministry of Finance NCA Needs and Capacity Assessment NCB National Competitive Bidding NGO Non Governmental Organization NS National Shopping OP Operation Manual PAL Programatic Adjustment Loan PHRD Policy and Human Resource Development Fund PIP Project Implementation Plan PIU Project Implementing Unit PMU Project Management Unit RSC Regional Steering Committee SA Special Account SIA Social Impact Assessment SIF Social Investment Fund SB Supervisory Board TACIS Technical Assistance for Commonwealth Indepent States UNDP United Nations Development Program USAID United States Agency Intemational Development USIF Ukrainian Social Investment Fund VP Vice President WB World Bank Vice President: Johannes Linn Country Manager/Director: Luca Barbone Sector Manager/Director: Michal Rutkowski/Annette Dixon Task Team Leader/Task Manager: Galina Sotirova  UKRAINE SOCIAL INVESTMENT FUND PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 2 2. Key performance indicators 2 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 2 2. Main sector issues and Government strategy 3 3. Sector issues to be addressed by the project and strategic choices 4 C. Project Description Summary 1. Project components 5 2. Key policy and institutional reforns supported by the project 6 3. Benefits and target population 6 4. Institutional and implementation arrangements 7 D. Project Rationale 1. Project alternatives considered and reasons for rejection 12 2. Major related projects financed by the Bank and other development agencies 14 3. Lessons learned and reflected in the project design 16 4. Indications of borrower commitment and ownership 17 5. Value added of Bank support in this project 18 E. Summary Project Analysis 1. Economic 18 2. Financial 19 3. Technical 19 4. Institutional 20 5. Environmental 21 6. Social 22 7. Safeguard Policies 25   F. Sustainability and Risks 1. Sustainability 25 2. Critical risks 26 3. Possible controversial aspects 27 G. Main by the Ministry of Finance and the Loan Conditions 1. Effectiveness Condition 27 2. Other 28 H. Readiness for Implementation 28 I. Compliance with Bank Policies 29 Annexes Annex 1: Project Design Summary 30 Annex 2: Detailed Project Description 33 Annex 3: Estimated Project Costs 39 Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary 40 Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 42 Annex 6: Procurement and Disbursement Arrangements 43 Annex 7: Project Processing Schedule 60 Annex 8: Documents in the Project File 62 Annex 9: Statement of Loans and Credits 66 Annex 10: Country at a Glance 67 Annex 11: Targeting Approaches 69 Annex 12: Micro-Project Cycle 72 Annex 13: Micro-Project Criteria 76 Annex 14: Capacity Building at Community Level 79 Annex 15: SIF Implementation Structure 80 Annex 16: Needs and Capacity Assessment in Region of Khmelnitzky 82 MAP(S) IBRD 31552   MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO UKRAINE FOR A SOCIAL INVESTMENT FUND PROJECT 1. I submit for your approval a proposed loan to Ukraine for US$ 50.21 million to help finance the Social Investment Fund Project. The Loan would be payable in 20 years with a grace period of 5 years at the standard IBRD terms. 2. The project would assist Ukraine to: (i) improve living conditions of poorer and vulnerable groups of the population in targeted communities; (ii) empower communities and vulnerable groups to address local social needs; and (iii) facilitate the reform of social protection by creating models of targeting and service provision. 3. These will be achieved through the development of innovative, quality and cost-effective social and communal services, strengthening the solidarity sense of communities and vulnerable groups, building the decision making, organizational and managerial capacities of communities, NGOs and local government, and strengthening the policy formulation, monitoring and management capabilities of central and local government in the area of social care services financing and delivery. 4. The Project has three components: (i) Community based Micro-projects; (ii) Capacity Building; and (iii) Project Management, Monitoring and Evaluation. The project is expected to be implemented during a period of six years. 5. Recommendation. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and recommend that the Executive Directors approve it. James D. Wolfensohn President by Sven Sandstrom Washington, D.C. October 31, 2001 Vice President Johannes Linn Director Annette Dixon Sector Leader Michal Rutkowski Team Leader Galina Sotirova   UKRAINE Social Investment Fund Project Project Appraisal Document Europe and Central Asia Region ECSHD Date: October 31, 2001 Team Leader: Galina Y. Sotirova Country Manager/Director: Luca Barbone Sector Manager/Director: Michal J. Rutkowski, Annette Dixon Project ID: P069858 Sector(s): SF - Social Funds Lending Instrument: Specific Investment Loan (SIL) Theme(s): Social Protection Poverty Targeted Intervention: Y Program Financing Data '- LX] Loan [ ] Credit [ ] Grant [ Guarantee [ ] Other: For Loans/CreditslOthers: Amount (US$m): 50.21 Proposed Terms (IBRD): Variable Spread & Rate Single Currency Loan (VSCL) Grace period (years): 5 Years to maturity: 20 Commitment fee: 0.75 Front end fee on Bank loan: 1.00% Fmnancing Plan (us$m): : S;ource ;-o't --Local Foreign Total BORROWER 9.97 0.00 9.97 IBRD 47.71 2.50 50.21 LOCAL COMMUNITIES 9.91 0.00 9.91 Total: 67.59 2.50 70.09 Borrower: UKRAINE Responsible agency: UKRAINE SOCIAL INVESTMENT FUND Ukraine Social Investment Fund Executive Office Address: C/o Ministry of Labor and Social Policy 8/10, Esplanadna Str., 01023 Kyiv, Ukraine Contact Person: Ms. Natalia Yasko Tel: 380 44 463 5863, 417 2633 Fax: 380 44 417 1057 Email: Nyasko@usif.kiev.ua Estimated disbursements ( Bank FYIUS$m): FY 2 0C-- 20023 J.; .20043< 20 2005 2006 2007 <'2008 'K<, Annual 2.55 7.35 10.50 11.35 10.00 6.41 2.05 Cumulative 2.55 9.90 20.40 31.75 41.75 48.16 50.21 Project implementation period: March 2002 - December 2007, 6 years Expected effectiveness date: 03/01/2002 Expected closing date: 06/30/2008 OCS PAD F RP. Mt 2O  A. Project Development Objective 1. Project development objective: (see Annex 1) The development objectives of this project are to: (i) improve the living conditions of poorer and vulnerable groups of the population in targeted communities; (ii) empower communities and vulnerable groups to address local social needs; and (iii) assist the reform of social protection by creating mnodels of targeting and service provision. These objectives will be achieved through the development of innovative, quality and cost-effective social and cormmunal services; strengthening the sense of soli darity of communities and vulnerable groups; building the decision making, organizational and managerial capacities of communities, NGOs and local govemment; and strengthening the policy formulation, monitoring and management capabilities of central and local government in the area of social care services financing and delivery. 2. Key performance indicators: (see Annex 1) 1. Increased number of good quality, cost-effective services operational in targeted areas, maintained and financially sustainable two years after the USIF investment (at least 500 micro-projects, including 450 communal services and 50 social care services micro-projects). Increased participation of NGO, community-based organizations (CBOs) and local communities in decision making and management of community and social care services, as measured by the proportion of participating communities initiating new activities after the USIF and the number of user associations active two years after the project irvestment (at least 400 user associations, CBOs active and new activities initiated). 3. Government capacity to formulate, monitor and evaluate social policies strengthened, measured by: (i) National and regional plans for social care services developed by March 2007 (in the two regions where social care services MP will be implemented), incorporating targeting and service provision models developed under the USIF. (ii) dissemination of evaluation reports (annual, starting with second year cf project implementation - December 2003), based on the use of a modem s% stem for monitoring and evaluation of social care services. 4. Strengthened local entrepreneurship, measured by the number of contractors trained in the USIF procurement procedures and participating in USIF activities (at lhast 500 contractors). 5. Employment created in targeted communities, measured by the number of man-days generated by micro-projects. B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: Report No. 20723-UA Date of latest CAS discussion: September 12, 21Ct00 The CAS has placed poverty and human development at the core of the Bank program in Ukraine and contemplates major expansion of assistance to reforms in the social sectors. Therefore, the (CAS aims to assist the Government and civil society in the implementation of a broad-based poverty reduction - 2 -  strategy by addressing directly the challenges faced by Ukraine, both from the demand side (civil society) and the supply side (Government). The Bank program will help civil society increase its voice for better institutions, better govemance, accountability and transparency, and better social service provision. The SIF project is an integral part of the strategy for improving social services, with a specific focus on disadvantaged and poor populations who have suffered the most from the economic and social transition and ten years of economic decline. The proposed project will also contribute to the CAS objectives of improving governance and institutions by strengthening the capacity of communities and local government to address social needs and manage community social and economic services. The project would help empower communities and vulnerable groups, strengthening a sense of solidarity at the community level, fostering social inclusion, and creating partnerships between community, local govemment and NGOs. 2. Main sector issues and Government strategy: * Poverty disparities and poorly targeted social programs. The transition from the command-and -control socialist state to a market economy has resulted in substantial dislocations, amplified by institutional weakness and emergence of rent-seeking behavior, growth of poverty and disparity of the impact of the transition on different population groups. The poverty analysis carried out by the Bank team identifies children, single, elderly and other groups with specific circumstances as having highest poverty risks. Poverty in Ukraine is characterized by significant regional disparities, with pockets of poverty also existing in relatively better-off regions. Recent studies (Social Safety Net and Poverty in Ukraine, TM Emily Andrews, ECSHD, January 2001, Project Files and Needs and Capacity Assessment in Khmelnitzky region, report prepared by Nora Dudwick, ECSSD, February 2001, Project Files) show significant regional disparities and the existence of pockets of poverty. While poverty has been on the rise, the social assistance system has remained ineffective in providing meaningful support to those most in need, mainly due to program, administration and financing fragmentation, general under-funding, and design and implementation features leading to important errors of exclusion and inclusion. For the first time since independence, the Government has acknowledged the existence of increasing poverty problems, and has assigned high priority to the development of a Poverty Reduction Strategy with Bank and other donor assistance. A first draft of the strategy (Poverty Reduction Strategy, draft March 2001) foresees reforms aimed at reducing poverty through the creation of better opportunities for productive employment and reform of social security systems, and strengthening of support to the poor and vulnerable through better targeting of social assistance. * Inadequate, socially exclusive system of social care services. The system for social care services, which has inherited the model of costly institutionalized care from the Soviet period, has been even less able to adapt to constraint resources and changing environment, thus reinforcing social exclusion and vulnerability of the client population. Fragmented administrative, management and financing responsibilities have added to inefficient use of resources and inadequate social care provision. Heavy subsidies to institutionalized care outweigh numerous benefits and subsidies provided to some vulnerable groups of the population such as disabled, children and the elderly. This, combined with the absence of alternative service provision work as a strong incentive to families to prefer residential care (there are admission queues), which reinforces inefficiencies and social exclusion. Reforms of the social care services sector will require in the first place development of a strong community-based services sector as an altemative to institutionalized care and building of strong support for the reform. The Government is aware of the efficiency, quality and social inclusion advantages of community based social care provision and is considering the preparation of a strategy for gradual downsizing of - 3 -  institutionalized care. However, de-institutionalization requires, building the alternative to institutionalized care - creating gradually a network of socially inclusive,accessible, equitable and effective conmmunity-based services, diversification of service provision and the larger involvement of communities and the NGO sector in monitoring and provision of services. This also requires building of government capacities for program formulation, contracting out , monitoring and evaluation. As first steps, the Government Poverty Reduction Strategy foresees the preparation of legislation and regulations on social services contracting, and the Government has started the establishment of community-based social services centers for some vulnerable groups. * Dysfunctional health and education systems and communal infrastructure. A sustained economic decline and the crisis management approach of the Government during the last 10 years have led also to a dramatic deterioration of social services and community infrastructure, which seriously impacts access of poorer communities and vulnerable groups to health and education. Economic and sector work carried out by the Bank HD team reveals that persistent under-funding, and the lack of clear responsibility and accountability has resulted practically in disfunctioning health and educationi sectors, worsening effectiveness and quality of services - no textbooks in schools, poor teacher training, no medicines in hospitals and health centers - (reflected in increasing morbidity, spread of conuriunicable diseases, dropping enrollment rates, etc.) The Government is aware that the crisis management approach to social sectors is not sustainable if Ukraine is to preserve and develop its major asset for long term economic growth - its human capital. Therefore, the Government is committed to social sector reforms and has requested the Bank's assistance in reforms of health and education, aimed at bringing programs in line with limited resources, and improving equity and effectiveness of these programs. A Needs and Capacity Assessment (NCA) carried out as part of project preparation in the pilot oblast (Khmelnitzky) confirms: (i) increasingly restrained access to services, due to deterioration of infrastructure, lack of management and organizational capacities at the communal/local level; (ii) poor quality of services and public perception of deterioration and crisis; (iii) increasing informal payments which further impede the poor from benefiting from social services and limit their long-term opportunities for productive employment and improvement of living standards; (iv) deplorable state of social care institutions, inadequate capacities for management and organization of social care at the local level, and the lack of sufficient altemative community based service provision; (v) poor government capacities and the need to increase public participation and NGO involvement in dealing with social services. 3. Sector issues to be addressed by the project and strategic choices: * Poverty and poor targeting. The overall system of social assistance in Ukraine needs major reform, but passive safety-net programs will need to be complemented with more pro-active measures. This project will provide support to the Government in identifying and demonstrating the effectiveness of new targeting techniques, and implementing pro-active measures at the community level. * Social care. The strategic choice of this project is to support community-based social service development, diversification of services provision (involving NGOs and creating the environment and regulatory framework for private provision) as part of the development of a strategy for re orm of social care and gradual de-institutionalization. The project will assist the development of the strategy and will also have an important demonstration effect - it will build models of service provision which could be replicated on a national basis and will thus contribute to building support to reforms. Through the implementation of community-based social care services component, the projecl will be - 4 -  used to test legal, institutional, and financing arrangements and third sector capacities, while the capacity building component will assist in the development of the reform strategy based on experience within the project. * Health and education social service development and improvement of basic infrastructure. The project will support improvement of basic community infrastructure, basic health and education services. The strategic choice of the project is to provide the Government with innovative approaches that can be analyzed, and that can be applied for the development of national strategies. * Institutional capacity. The project will contribute to the development of institutional capacity of central Government and local governments to identify needs, monitor programs, measure and analyze effectiveness, coordinate activities, raise public awareness, and monitor and evaluate social impact. In addition, it will strengthen capacities for policy formulation, service contracting and monitoring in social care services. The project will also build the capacities of communities to address social needs and of NGOs to manage and provide services. C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The project total cost is US$70.09 million to be financed by a Bank loan of US$50.21 million and the Government and local community contributions. Some additional donor financing might be forthcoming, although no amount can be specified at this point in time) The proposed project will finance the activities under three main components briefly described below. Component 1: Community-based Micro-projects: US$ 63.23 milion (incl. contingencies) The objectives of this component are to: (i) improve living conditions of the target population by providing better quality of and access to basic social and communal services in their communities; (ii) empower communities and vulnerable groups to make decisions and manage process and assets; (iii) create new and innovative community-based social care services as an alternative to residential care; (iv) develop models for community-based service delivery; and (v) inform the development of social care services policy. These objectives will be achieved through financing the activities under the following two sub-components: (i) community-based services micro-projects; and (ii) targeted social-care services micro-projects. The Ukraine Social Investment Fund (USIF) Operational Manual which details the procedures and criteria for the micro-project financing and implementation arrangements will guide the implementation of this component. Component 2: Capacity Building: US$ 1.68 million (incl. contingencies) The objective of this component is to assist the Govenmment in social protection reform and, in particular, the preparation of a social care reform strategy by: (i) strengthening the capacity of the Ministry of Labor and Social Policy (MLSP) and Ministry of Finance (MOF) to formulate, monitor and evaluate social care services policies, and to define and implement improved social care service financing and contracting system; (ii) strengthen regional authorities' (oblast, rayon) capacity to develop, monitor and evaluate social care services programs; and (iii) improve social care services quality through professional training of social workers in social care service micro-projects in two oblasts. - 5-  Component 3: Project Management, Monitoring and Evaluation: US $ 4.68 million (incl. contingencies) The objective of this component is to ensure efficient implementation of the Social Investment Fund (SIF) project in targeted areas by using effective mechanisms of project management, proper tools of project monitoring and evaluation, and raising public awareness about project experience. This objective will be achieved through activities under the following three sub-components: (i) institutional suppiort to the USIF Executive Office; (ii) monitoring and evaluation; and (iii) public information and education. Project Summary Table 1. Community-based Micro-projects Social Funds 63.23 90.2 44.2:5 88.1 2. Capacity Building Institutional 1.68 2.4 1.5.3 3.0 Development 3. Project Management, Monitoring and Institutional 4.68 6.7 3.9.3 7.8 Evaluation Development Total Project Costs 69.59 99.3 49.71- 99.0 Front-end fee 0.50 0.7 0.50 1.0 Total Financing Required 70.09 100.0 50.21 1 l00.0 2. Key policy and institutional reforms supported by the project: The project will support the Government in furthering its key Human Development (HID) and institutional reforms by: (i) using non-traditional for (Ukraine) targeting techniques; (ii) assisti ig social protection and in particular social care reform through testing new and innovative models of service provision, establishing the example of cost effective community-based social services as an alteinative to institutionalized care and as a step towards de-institutionalization; (iii) building the institutional capacity of central, local governments, CBOs and NGOs in the formulation, management and provision of basic services; (iv) promoting NGO participation in the provision of social care services and defining the legal and institutional requirements for diversification of service provision. Evaluation of experiments and innovations, possible within the framework of the SIF, will contribute to the development of Government poverty reduction and social sector reform strategies. 3. Benefits and target population: (i) The main benefits of the project will be: 1. Innovation in social care service provision and targeting approaches which could be used natimn-wide; lessons leamed and used in Government reform and poverty reduction strategies; 2. Generation of visible development impact in terms of social and economic benefits for participating poor and vulnerable communities and population groups through improved quality and access to communal services and social care; 3. Increased community participation and local capacity to organize, plan, and manage their activities, - 6 -  and to monitor, deliver and maintain services; 4. Strengthened social capital through the establishment of a basis of ownership and accountability at the local level; 5. Strengthened local entrepreneurship and short term employment created in targeted communities. (ii) Target population. The USIF will target: (a) poor and disadvantaged communities in both rural and small urban areas (with a stronger targeting of rural areas, as the NCA indicates that the rural - urban gap in terms of poverty is widening, when access to health and education services is taken into account in the poverty measurement); (b) vulnerable groups, such as children from dysfunctional families -- the so called "social orphans"-, youth and children at risk, elderly persons living alone, large families, physically and mentally disabled, and other disadvantaged groups of the population. Considering the size of Ukraine and the regional dimension of poverty and social distress, SIF programs can be successful only if very well targeted at two levels: (i) geographic - intervene in rayons and communities which are most disadvantaged and poor; and (ii) within selected rayons and poor populations target groups who are by nature more disadvantaged and at higher risks of poverty and social exclusion. To ensure effective poverty targeting and reaching of vulnerable populations the USIF will use a range of targeting technique which include: * geographic targeting - the SIF will operate in the 2 most disadvantaged and poor rayons in each oblast * targeting at the micro-project level through self-targeting (the menu of micro-projects limited to only basic services) and through the micro-project evaluation. Further detail of the targeting approaches of the SIF is provided in Annex 11. These approaches are being used in the pilot oblast and could be modified to further strengthen targeting, based on lessons learned during the pilot. 4. Institutional and implementation arrangements: Institutional Arrangements The proposed project will be implemented over a period of six years (March 1, 2002 - December 31, 2007). The project's institutional and implementation structure is developed at central and local levels. It has been tested in the pilot phase of the project and has proven to work effectively. The following sunmnarizes the institutional arrangements and project management structures (see Annex 15). 1. The Supervisory Board (SB) is the highest governing body of the USIF and is composed of representatives of the Government of Ukraine, Parliament, the Office of the President of Ukraine, trade unions, representatives of non-governmental organizations and international donor organizations. The SB is headed by the Vice-Prime Minister of Ukraine, responsible for social issues. The SB defines the policies of the Fund, and ensures their correspondence with the overall policy of the Government in the social and economic spheres, oversees the work of the SIF Executive Office. The SB has had an important role in project preparation. During project implementation, a special consultative council to the SB will be established comprised of representatives of regional and rayon authorities. - 7 -  2. Central and regional project management arrangements. Project implementation will be coordinated by the USIF Executive Office (EO). For the purposes of implementation of the capacity building component, a component coordinator is assigned in the MLSP to ensure effective coordination within central government and with regional authorities. The EO implements the tasks specified in the Operational Manual according to its annual work program and budget which is approved by the SB. It ensures the purpose-oriented use of funds; prepares quarterly and annual reports for the Supervisory Board (SB), WB and donors. Also, the EO carries out competitive selection of consultants and supervises comrnmunity procurement, maintains and updates the USIF Operational Manual, other regulatory documents and the MIS. It provides training and technical assistance for MP project preparation, implementation and service maintenance to community based organizations (CBOs); local NGOs, local contractors; and local self-governments to implement and sustain micro-projects. The EO is headed by an Executive Director. The Executive Director is responsible for overall project coordination, including management of staff, procurement and disbursement, annual budget, fund-raising, relations with intemational and national donors and partners, regular reporting to the SB and the World Bank, project monitoring and evaluation. The ED is appointed by the SB, based on competitive selection, reviewed and approved by the World Bank. The EO has the following units (Departments): Finance and Administration Department (a total of 6 staff and consultants) with the functions of financial planning, budgeting, accounting, disbursement, procurement supervision and contracts management at the central level. The Promotion. Monitoring and Evaluation, and Communications Department (a total of 5 persons) is responsible for (i) promotion of the USIF to the general public and communities (iil planning and coordination of various M&E studies and activities; (iii) coordination of activities under the capacity building component; (iv) public relations and fund-raising. The Micro-projects Department (6 persons) is responsible for micro-projects identification, appraisal and follow up, i.e. (i) monitoring of micro-project selection/approval process, mncluding monitoring of environmental aspects; (ii) preparing and updating of micro-project implementation standards documents, operational guidelines, instructions; (iii) in collaboration with regional coordinators selection and training of regional staff and consultants, including in environmental requirements of the l;SIF; (iv) supervision of regional consultants' activities related to all stages of the micro-project cycle; (v) representation of the USIF EO at the Regional Steering Committees' meetings; etc MIS Unit (2 persons) is responsible for development, updating and maintenance of EO computer network (including regional sub-networks) and computerized Management Information System (M[S). Procurement/Legal Unit (I person) is responsible for ensuring consistency of USIF procedures with the provisions of the Loan Agreement and national Ukrainian legislation, for the preparation of standard bidding documents and samples of community framework agreements, as well as prcicurement training of community implementing agencies (IA) and supervision of community procurement. USIF regional units. In order to achieve cost-effective operation and increase local capacities the USIF will have 8 regional units, one in each of the 8 project zones, each one comprised of 2 to 6 oblasts (see Annex 15). The USIF regional unit includes a Regional coordinator (one per zone), an implementation specialist (one per zone), a social care services specialist (one per each oblast where social care service micro-projects will be implemented). The Regional units are responsible for (i) regiDnal and local level promotion and identification of micro-projects; (ii) micro-projects' appraisal and approval (in - 8 -  coordination with regional Steering Committee); (iii) supervision of community procurement and community selecting of local/field consultants, (iv) supervision and monitoring of micro-project implementation; (v) provision of technical assistance and training to implementing partners. 3. Regional Steering Committee (RSC). Regional Steering Committee (RSC), comprised of representatives of rayons and oblasts radas/administrations and civil society (local NGOs and academia), will be established at oblast level. RSC will participate in micro-projects pre-approval. 4. Implementing Agencies (IA). The SIF will support local level initiatives identified and implemented by beneficiaries themselves, organized into a community-based organization (CBO), by agencies, which prove to represent the beneficiaries (Representing Agencies), by local government in cooperation with community representation. These could be small urban and rural municipalities, local associations, NGOs and others, supported by communities. The IA will identify needs, prepare micro-project proposals, enter into agreement with the SIF to request funding. They will also implement micro-projects when approved by the SIF and carry out procurement of works, goods and service envisioned under the micro-project. During the implementation they will report regularly to the SIF and the beneficiary community on the progress of the micro-project. 5. The role of central and local government. Building effective partnership with local and central government and their full involvement in the USIF activities is considered of utmost importance for achieving project development objectives and ensuring sustainability of project results. Therefore, central and local government will be closely involved in the work of the USIF through the following arrangements: (i) representatives of the central and local govemment sit on the USIF's Supervisory Board which is the main strategy/policy formulation body of the USIF; (ii) representatives of local govenmment participate in the RSC which are involved in micro-project pre-approval; (iii) local authority and local budget participation in the monitoring and maintenance of rehabilitated services and particularly social care services will be ensured. Implementation Arrangements 1. Implementation strategy. In order to achieve its development objectives in a cost-effective way, the project has developed the following implementation strategy, which varies for the different components of the project: (a) Community based services. This sub-component will be implemented in all 25 oblasts of Ukraine in the two most disadvantaged rayons in each oblast, selected on the basis of agreed indicators of poverty and vulnerability (see Annex I1). The implementation strategy is as follows: (i) funds will be initially pre-allocated to each of 25 oblasts proportionally to the average population of a rayon in a specific oblast; (ii) within each oblast funds will be pre-allocated to the 2 targeted rayons on per capita basis; (iii) the 25 oblasts will be grouped in eight zones covering on average 2-6 oblasts; (iv) implementation will start in the 34 zones in the center of the country which are expected to be covered with promotional activities in approximately 8 - 9 months. Deadlines will be set up at the beginning of the promotion campaign in each rayon, and the micro-projects proposals which do not meet those deadlines will not be registered by the USIF; (v) while micro-project implementations is under way in the first zones (expected to stretch over a period of up to 18 months), promotion activities will start in the first oblast of the next zones; (vi) gradually, as pre-allocated funds are committed/disbursed, oblasts and zones that have started work first will phase-out and new zones will phase-in covering all the oblasts by the end of the forth year. In case total amount of funds requested in quality micro-projects proposals, submitted by the deadline is less than funds pre-allocated for any specific oblast, the USIF SB will reallocate the remaining funds. This strategy will allow sufficient presence at the time of project activities in any given area, with limited operating costs. -9-  (b) Targeted Social Care Services. In order to ensure a critical mass of community bised social care micro-projects to allow the development and testing of new service provision, financing and monitoring schemes, this sub-component will be implemented in only two oblasts selected by the USIF SB and agreed with the World Bank, as well as in the cities of Sevastopol and Kiev. The following criteria for oblast selection will be used: (i) overall commitment of oblast authorities to reforms in the area of social care services, as witnessed in a framework agreement with the USIF; (ii) commitment of oblast authorities to cooperate with USIF and introduce innovative approaches to social care services provision; (iii) commitment of oblast authorities to co-finance micro-projects. The funds for micro-projects financing will be pre-allocated by the SB in the target regions by semi-annual portions. Promotion, preparation and approval of the micro-project proposals will be carried out on semi-annual basis. Detailed description of the micro-projects implementation strategy is provided in Annex 2 (c) Capacity building. The capacity building activities will be carried out at the central government (MLSP and MOF) and regional level (oblast and rayon governments) in the regions where SIF social care services micro-projects will be implemented. The MLSP will appoint a coordinator for this component, who will be in charge of TOR preparation, training planning and other activities, while the USIF EO will coordinate procurement, contracting and provide logistic support. 2. Implementation arrangements. The following implementation arrangements have been made: 1. Operational Manual (OM), Project Implementation Plan (PIP). A detailed project Operational Manual (OM), summarizing procedure and criteria for micro-projects identification, preparation and selection, procurement, disbursement and financial management and specifying procedures, roles and responsibilities for project implementation has been prepared. The OM includes a Finance and Administration Manual and a Procurement Manual. The draft OM has benefited from the Bank team's comments and recommendations and a final version of the OM, including arrangements for environmental review and clearance procedures in the micro-project evaluation process and sample enviromnental mitigation measures and review checklists, has been reviewed by the Bank and approved by the SB. The EO has also prepared a Project Implementation Plan (PIP). It includes a project implementation schedule, detailed project cost tables, detailed description of financial, procurement and disbursement arrangements for the project, assessments of management capacity of the implementing agency, detailed description of implementation strategy, strategy for pre-allocation of funds, draft terms of reference for consultancies, and standard bidding documents (see Annex 8 for the Project Implementation Plan detailed outline). The Operational Manual will be attached to the Project Implementation Plan. 2. Financial Management System. A project financial management system has been established at the USIF EO with the assistance of external consultants. The system is based on IC accounting software, which has been used in other Bank financed projects in the Region. In addition, all project related information (micro-projects) will be kept on a Management Informnation System (MIS), that will be linked to the 1C system. The accounting system will be maintained in accordance with International Accounting Standards (IAS). The system is capable of providing accurate and timely information regarding project resources and expenditures, including planning, accounting and financial reporting related to the project. Formats for the reports have been agreed with USIF. Operational procedures and guidelines for overall project management, including financial management are documented in the Operational and Financial Manuals, encompassing all levels of project management and administration. The status of the Financial Management System (FMS) for the project has been reviewed by the Bank and the system was found - 1 0-  satisfactory and the FMS certificate has been issued. 3. Disbursement. The Ministry of Finance will sign a Subsidiary Grant Agreement with the USIF for the transfer of loan funds to the USIF. To facilitate disbursement of funds, a Special Account in a commercial bank acceptable to the Bank will be open. The account will be operated under terms and conditions satisfactory to the Bank and as outlined in the Loan Agreement. The USIF EO has developed sufficient disbursement capacity through implementation of 2 Policy and Human Resource Development Fund (PHRD) grants at the project preparation stage and one grant for the pilot phase, provided by the UK Department for Intemational Development (DFID). Disbursement under the project will be done using traditional disbursement methods (e.g., direct payments, replenishments of the Special Account on the basis of SOEs). 4. Audit. The Borrower and the USIF will be responsible for providing to the Bank the project's audited financial statements within six months of the end of every fiscal year. The accounts and financial statements of the project will be audited by independent auditors acceptable to the Bank. The audit will be comprehensive and cover all aspects of the project (i.e. all sources and utilization of funds, and expenditures incurred) and it will be carried out in accordance with Intemational Standards of Auditing. The USIF EO will appoint independent auditors under terms of reference acceptable to the Bank. Cost of the audit will be financed through the Bank Loan. 5. Procurement Arrangements. Procurement of small works, goods and consultants' services under the micro-projects will be delegated to the Implementing Agencies of the communities. They will be specially trained, provided with standard procurement documents and templates developed by USIF as prescribed in the Operational Manual. Procurement of goods and consultants' services under the second and third components will be done by the USIF EO. The procurement capacity of the USIF EO is being developed. While preparing the project, the USIF has benefited from training and gained experience in procurement management under two PHRD grants procuring minor goods and individual consultants. The USIF EO is gaining additional procurement experience during the pilot project, funded by DFID grant, which is expected to be largely implemented before project effectiveness. Due to the demand driven nature of the project, the Implementing Agencies for micro-projects have not received any training yet and it could be expected that their procurement knowledge is weak and that their procurement capacity has to be built. The project contains activities and funds specifically targeted at strengthening of the procurement capacity of the USIF EO and in particular the MP Implementing Agencies - procurement launch workshops and training for each micro-project, consultants services. An Action Plan to strengthen procurement capacity and detailed arrangements are presented in Annex 6. 6. Monitoring and Evaluation. Monitoring is essential to the success of the project. It would support tracking project performance and development impact; and reaching the objective of assisting the reform of social protection and helping govemment formulate reform strategies. Monitoring will be carried out at the micro-project level, and at the overall project level and will be in two directions: (i) project performance monitoring; (ii) impact monitoring. (i) Project Performance will be monitored through the following activities: (a) procurement and technical audit of at least 20% of completed micro-projects once every two years; (b) annual financial audit; (c) opinion surveys; and (d) on-going supervision and monitoring by Supervisory Board, state monitoring and control agencies, World Bank and donor supervision missions. Project performance monitoring will rely on information gathered in the USIF Management Information System (MIS) (including the special software developed by USIF, please see below), regular project reports (annual, quarterly and special reports) - 11 -  (ii) Impact Monitoring will be conducted through the qualitative and quantitative impact assessment studies to be carried out at oblast and rayon level. Beneficiary impact assessment; will be carried annually. Monitoring will include baseline data collection and analysis at oblast, rn.yon and community (micro-project) level (desk studies of oblasts, socioeconomic studies of targetec. rayons, preliminary and final micro-project appraisal, the appraisal report form will incorporate a base-line data section and this data will be entered into the MIS). Special studies for social care services will -be carried out to collect information on baseline capacity for policy formulation, monitoring and supervision, needs and availability (access and quality). The USIF Management Information System (MIS) will track down the infonnation collected throughout the micro-project life cycle. The MIS will assist the EO and Regional staff in day to day management of the USIF, it ensures proper information flow between the EO units. The USII; regional units will have access to the MIS (including all its modules, database structure, user interface, etc.). The link between the regional and central parts of the MIS, and the accounting system will allow to process all the payments to the contractors directly from central office and under the centralized accounting; system. The synchronization of information betveen the Regional Units and the Central Office will be carried out on regular basis (at least daily) by packets. These packets will be transferred throughout dial-up Internet connection (via SMTP, HTTP or FTP protocols). On-line synchronization and informnation exchange is considered as a future development approach, depending on reliability and speed of connection lines. The USIF MIS will be a modular system which will consist of the following main modules: (i) resources targeting; (ii) promotion module; (iii) micro-project portfolio; (iv) micro-project appraisal; (v) unit price database; (vi) micro-project budgeting module; (vii) micro-project approval module; (viii) micro-project ranking module; (ix) micro-project follow-up module; (x) social follow-up and sustainability module; (xi) monitoring module; (xii) security subsystem; (xiii) synchronization module; and (xiv) ink with IC Accounting System. All MIS modules except of micro-project ranking, social follouv-up and sustainability and monitoring modules, will be in place prior to Loan effectiveness. The MIS will be fully operational by September 2002. 0. Project Rationale 1. Project alternatives considered and reasons for rejection: The following project alternatives have been considered: I. Sector Investment operation (healthieducationisocial care). The SIF approach was prefzrred for the following reasons: (i) CAS assessment of relative ineffectiveness of sector specific operations in Ukraine to deal with cross-sectoral institutional and governance issues; (ii) multi-dimentional cha-acter of poverty and social exclusion requires cross-sectoral approach; (iii) SiFs address cross-sectoral issues, bring about quickly, limited country wide, but important impact at the community level, which can have powerful demonstration effect. The strengths of multi-sector SIF instruments are their demand responsiveness, efficiency and quality gains in out-reach, social mobilization and community capacity building, enhanced impact on poverty reduction which are more difficult to achieve through sector investment operation. ("Scaling up Community Driven Development for Poverty Reduction Draft, August 28, 2000); (iv) SIFs have proven to be very good in adjusting to changed circumstances as reforms progress or are stalled and are more immune to political changes, which is very important given Ukraine's track record of political swings; (v) SlFs are well targeted and reach the poorest households and marginalized groups very effectively; (vi) SlFs are accountable, both in terms of financial and public accountability and 'tend to outperfonn" other development interventions (Jorgensen Steen and Julie Van Domeleni). The las: two are - 12-  also of particular importance in Ukraine; (vii) weak government capacity and commitment to reform in the past has led to the cancellation of a health and education projects, fragmented responsibility and lack of accountability has advised exploring bottom-up approaches for addressing poverty and strategies for strengthening of demands for reform. 2. A component within the Community Development Program (CDP). This approach was rejected due to the following: (i) different development objectives. The CDP/Municipal Development Fund (MDF) is aiming at creating the financial and budget environment at municipal level which will be conducive to sustainable local service delivery; (ii) different financing models - MDLF provides loan financing, while the SIF awards grants; (iii) different project evaluation criteria and implementing agencies. It was considered that it would be difficult to package these two funds in one coherent operation, such a packaging would be confusing to the borrower and lead to unintended implementation difficulties. 3. The place of social care services micro-projects. At the very early stages of project preparation the option of excluding social care services micro-projects from the USIF menu was considered. This approach was rejected as the Poverty Update and the analysis of the NCA confirmed the vulnerability of specific populations groups (such as single elderly, children in special circumstances, disabled and others) in terms of risk of poverty and social exclusion, and indicated strong perception of the lack of adequate social services to meet their special needs. In addition, the Government has confirmed its intention to restructure social service provision and has made its first steps in that direction and the SIF project will support this effort by exploring and testing approaches, institutional and legislative arrangements. Later on, the option of not separating community-based services from social care services was considered but was rejected for the following reasons: (i) the two sub-components, although very similar at first glance - e.g. the same funding components - differ in their specific objectives. While the community based micro-project component will contribute mainly to the first project development objective (improving the living conditions of targeted communities), the social care services micro-project component aims at assisting the Government in formulating a strategy of social care reform by providing the models/experiences and lessons learned during the SIF implementation; (ii) social care services micro-projects are expected to be smaller in total amount, but with a relatively bigger share of technical assistance/training, relative to civil works; (iii) micro-project proposal preparation and implementation is expected to be different with a much bigger involvement of NGOs and local authorities. 4. Nationwide project coverage versus concentrating project activities in only a few poorer oblasts. A limited coverage was rejected and keeping the project open to all Ulkrainian oblasts was agreed for the following reasons: (i) poverty and social distress in Ukraine vary significantly within oblasts and important pockets of poverty exist even in more affluent oblasts; (ii) broader (nationwide) coverage would allow building countryside ownership and support for the project's targeting and the approaches for addressing poverty issues and community empowerment. 5. Including a micro-credit component in the project. This was rejected as an extensive experience has shown that the better results are achieved when the micro-credit programs are designed as financially sustainable financing institutions and are not mixed with grant programs such as proposed Ukraine SIF project. Moreover, this type of micro-projects are usually less well targeted to the poor and most valnerable (Jorgensen and Van Domelen). - 13-  2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). I La~tes4Spervision j I0: : :ffiASectorlWWf Issue I W - ;Project : P at Implementation Development Bank-financed Progress (IP) Objective (DO) Issue: Mitigating of social 1. Coal Pilot Project - S S consequences of coal mines closure mitigating of social consequences of coal mines closure (completed) Issue: Improving management 2. Odessa Participatory Client HS HS efficiency and quality of municipal Initiative - providing assistance services through consultations with to Odessa City administration communities and local NGOs in improving management efficiency and quality of municipal services through client consultations, building capacity of local NGOs - completed in 1999 Issue: Providing support to most 3. Coal Mining Restructuring vulnerable members of communities Project - Donbass Labor Redeployment Program component, sub-components: providing consultations for prelaid-off miners and their family members, temporary employment, community economic development planning - planned Issue: Improving local services delivery 4. Municipal Development APL (phase 1) - developing sustainable fiscal systems at local level that will improve municipal services delivery - planned (delayed) Issue: improving social risk Programmatic Adjustment loan management through better targeting - PAL 1, HD component (under and more cost effective and quality preparation) social services, improved effectiveness of health and education systems Issue: enhancing the quality of People's Voice project - govemance by supporting local reform implementing mechanisms and initiatives and by monitoring the procedures that promote public - 14 -  delivery of local services through the participation in building an establishment of NGO coalitions effective, responsible and open government in: Temopyl, Ivano-Frankivsk and the third city to be yet selected (under implementation) Other development agencies 1. USAID. Issue: improving social 1. USAID: Social Protection services delivery system at oblast level development at local level, t/a to regional and local authorities in Mykolaiv oblast - completed in 2000 2. UNDP. Issue: sustainable social 2. UNDP: development 2.1 Crimea Integration and Development Program - community development in refugees communities and ethnic minorities in Crimea 2.2 Civil Society Development Program - support to local initiatives on social development, NGOs capacity development 3. DFID. Issue: building civil society 3. DFID: capacity 3.1 NGO Support Project - building capacity of local NGOs in Donetsk, Kharkiv, Lviv, Odessa 3.2 Community Development in Donetsk Project - building civil society capacity in isolated mining and rural communities in Donetsk region 4. TACIS. Issue: improving social 4. TACIS: Development of services delivery at local level Social Assistance Policy and Services in Ukraine - improving provision of essential social services including community development and mobilization in Dnipropetrovsk region - completed in 2000 IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) - 15-  3. Lessons learned and reflected in the project design: Country specific lessons: This project will build on the experience accumulated and lesson- leanied in Ukraine through the implementation of the Odessa IDF, the Coal pilot, Social Protectic n St pport project, the People's voice project, the community development programs funded by IUNI)P md DFID and other donors, most of which however have been very limited in scope and coverage. The CAS acknowledges that one of the lessons learned from the implementation of Bank assistance in th. past few years is that the limitations of sectoral approaches in addressing institutional weakne;ses. weak institutional capacity in Ukraine and political paralysis have been the main factors underlying poor performance. Experience and evaluations of completed operations point out that the key to s iccess are: (i) institutional capacities of Government, PMUs and nongovemment organizations; (ii) participation at the local level, broad based support from Government and stake-holder involvement; and (iii) intensive TA. The SIF project builds upon these and addresses the development of these aspects in both p-oject preparation and implementation. In addition, specific lessons leamed through the implemrentation of the pilot project, parallel to project preparation, have informed project design, inclt iing: (a) institutional and operational aspect; (b) functional partnership between the USIF, local go' ernments, NGO and communities, central government; (c) public information and awareness campaizn design; (d) development of the monitoring and evaluation system with special focus on social inpact and sustainability; (e) development of project targeting strategy, including criteria for identificarion of the poor rayons and vulnerable and marginalized groups to be targeted by the project, 2s well as micro-project selection and approval criteria; (f) identification of mechanisms for financing sustainable services. The pilot phase of the project also helped in generating data for the development c" the USIF project procedures and documents, including the legal, procurement and disbursement documents and operational manual and standard document forms. SIF specific lessons. The extensive experience accumulated in the Bank with SIF-type operations, and in particular in the ECA region, and their evaluation was used to inform project desi.n Commonly highlighted shortcomings of SIFs and main issues that need to be addressed (see Steen Jorgensen and Julie Van Domelen, "Helping the Poor Manage Risk Better: The Role of Sociil Funds', Armnenia SIF - I ICR) include: (i) Targeting. Leakages of benefit to the non-poor and gaps in coverage of the poorest, desp' te general effectiveness in reaching poor, under-served areas and marginalized populations. To address this issue. the USIF has excluded from its menu for financing, micro-project types which by their nature arc less well targeted (micro-credits, urban sewerage and others). The project will target the poorest and most disadvantaged rayons in every region and funds will be pre-allocated to rayons on a per-capita l7asis The project's targeting methodology is described in Annex I 1. (ii) Sectoral Policies and Investment Priorities. To ensure coordination with sectoral strategies, the project foresees the following: (a) participation in the Supervisory Board of high level represe-tatives of concerned sectoral Ministries, chaired by the Deputy PM for Human Development. The Supervisory Board is responsible to ensure consistency of the USIF policies and investments with sector speci Fc reform strategies. A positive list of types of services to be eligible will be used (e.g. only primary health care facilities, no hospitals, no investment in institutionalized care etc.); (b) to ensure that investment are not made in facilities and institutions slashed for restructuring or closing, the USIF will require front the micro-project proposals assurance that the proposed investment is consistence with relevant Na:iona and Local Government service restructuring; (c) parallel to the preparation and implementation of t-e project, the Bank team is involved in the preparation of health and education reform strategies, intensivt dialogue on social assistance reform and assistance to the Government for the preparation of a medium tenn Poverty - 16 -  Reduction strategy. In addition, reforms in health, education, social assistance and social services will be supported by a Programmatic Adjustment Loan. (iii) Monitoring and Evaluation System. One of the lessons learned from SIF is the need to have well developed evaluation systems and attention to measuring SIF project impact in order to identify types of micro-project investment maximizing the effectiveness of interventions. The project incorporates a monitoring and evaluation system and funds are allocated in the financing plan for this purpose. (iv) Sustainability and Maintenance of the investment after the micro-project is completed (Armenia SIF - I, ICR). Experience shows that on health and education investments SIFs "tend to do better than traditional line Ministries due to the emphasis on community participation; on economic infrastructure they do as well or as poorly as other agencies" (Steen Jorgensen/Julie Van Domelen). Nevertheless, the proposed project pays special attention to this, particularly in the case of social services where extensive experience is not yet available. Specific measures in project design are the requirement of at least 10 percent of community contribution to the project cost, and the preparation in coordination with local government of a sustainability and maintenance plan as part of criteria for project approval. In addition, local governments are fully involved in the project through the Regional Steering Committee which participate in micro-project pre-approval and guarantee the maintenance of the services after the SIF. In addition, on of the criteria for the selection of oblasts for the social care services component is the commitment of the oblast to co-finance the micro-project and maintain the service. (v) Bank Exit StrategY. One of the project objectives is to help the Government to test certain approaches, learn lessons from this project, and incorporate changes and approaches into the mainstream government social care service system. Therefore, the project will assist the government in the preparation of a social care reform strategy and will build the capacities needed for its implementation. In addition, the project foresees the creation of local user and client associations which will contribute to the maintenance of the services after the project. 4. Indications of borrower commitment and ownership: The borrower has indicated that this project is a key part in the Government medium term-term (2000-2004) program for poverty reduction during the CAS discussions in Spring 2000 and subsequent meetings with CU, CT and the VP's visit to Ukraine in June 2000. An indication of strong commitment is the establishment of the institution of the Ukraine Social Investment Fund (USIF) by a Cabinet of Ministers resolution (COM Resolution No 740 of April 2000) and of the Supervisory Board of the USIF (COM Resolution No 234 of May 2000). In addition, a number of donors have been invited to participate in the Supervisory Board. The Government has provided the USIF with a fully equipped and renovated office. A first PHRD grant for project preparation has been implemented in a record time of 6 months and a second PHRD grant agreement is being implemented quickly. The Government has undertaken an energetic fund-raising effort - raised 750,000 pounds from DFID for the pilot project implementation in Khmelnitzky obalst, a CIDA grant and an IRF grant for USIF capacity building have been received and activities funded by these grants have been already carried out. The pilot project activities in Khmelnitzky oblast are proceeding very successfully, oblast and rayon authorities participate actively. Communities in the pilot region have shown significant interest and as of now 78 proposals have been already submitted to the USIF, 62 out of them were pre-appraised, out of which 26 were pre-selected. A workshop on the definition of activities for the Capacity Building Component of the project was held in March 2001. Representatives from the Ministry of Labor and Social Policy of Ukraine, Ministry of Finance, Cabinet of Ministers, Trade-Unions took part in the workshop. Meetings with members of - 17-  parliamentary committees on Finance and Banking, on Social Policy Issues, on Disabled and Pensioners, on International Affairs, as well as with the leaders of key parliamentary factions demonstrated high level of commitment to the project. 5. Value added of Bank support in this project: The Government has placed poverty reduction and reform of its social protection systeml at the core of its program and has requested the Bank to assist in development of its strategy for reform. The Bank is already engaged in intensive dialogue on social protection reform. In fact, adjustment support co reforms in pension, social assistance and social services is being considered within a cross sectoral PAL project. Policy discussions on health and education reform are also under way. Also, the Bank has gained considerable experience and expertise in design and supervision of operations using demand driven financing mechanisms through SIFs and other community-based projects under supervision or preparation in Armenia, Azerbaijan Bosnia, Bulgaria, Georgia, Lithuania, Moldova, Romania and Tajikistan. Based on this experience, and the Bank's experience with social protection and social services in other middle income countries in the region, the Bank is well-placed to provide assistance to the Government of Ukraine. E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4): o Cost benefit NPV=US$ million; ERR -