Colombia - Community Child Care and Nutrition Project

Decument of The World Bank FOR OFFICIAL USE ONLY Z ,A 3Z I- -coC Report No. 8028-CO STAFF APPRAISAL REPORT COLOMBIA COMMUNITY CHILD CARE AND NUTRITION PROJECT MAY 2, 1990 HRuman Resources Division Country Department III Latin America and the Caribbean Region "is document has a resticted distrbution and may be used by redpients only in the pefomance of Tb b " duties. Its contents may not otherwise be disclosed without World Bank authodzation.  CURREN^Y EQUIVALENCY UNITS Currency Unit - Colombian Peso (Col$) US$1.00 = Col$470 (April 1990) Col$l.O0 = US$0.002 (April 1990) ACRONYMS LAlPS Pre-School Child Care Centers (Centros de Atenci6n Integral al Pre-escolar) CAJANAL Social Insurance Fund for Public Sector Employees (Caja Nacional) DANE rational Department of Statistics (Departamento Nacional de Estadisticas) DNP National Planning Department (Departamento Nacional de Planeaci6n) FNH National Hospital Fund (rondo Nacional Hospitalario) HBI Child Care Home (Hogar de Bienestar Irfantil) ICBF Colombian Institute for Family Welfare (Instituto Colombiano de Bienestar Familiar) INS National Institute of Health (Instituto Nacional de Saludi ISS Social Security Institute (Instituto de Seguridad Social) MIS Management Information Syst-m MS Ministry of Health (Ministerio de Salud) NGO Non-governmental organization SENA National Training Institute (Servicio Nacional de Aprendizaje) UNICEF United Nations Internacional Children's Emergency Fund FISCAL YEAR January 1 - December 31  FoR OMCIAL USE ONLY COLOMBIA COMMUNIT? CHILD CARE AND NUTRITION PROJECT STAx? APPRAISAL REPORT Table of Contents Page No. BASIC DATA SHEET ........ . .......................................... iii LOAN AND PROJECT SUMMARY ............................................ iv I. THE SECTOR .................................................... 1 Sector Setting ................................................ 1 The Health Sector ................... 2 Child Care and Nutrition ...................................... 4 Issues in HBI Expansion ....................................... 6 Government Strategy ........................................... 10 The Bank's Role ............................................... 11 II. THE PROJECT ................................................... 12 Project Origin ........................................... 12 Project Objec'ives and Content ........... .................... 12 Detailed Project Description ............ ..................... 13 Program Implementation ....................................... 17 Project Costs and Finar.cing ................................... 19 Procurement ........................................... 21 Disbursements ............................................ 22 Accounting, Auditing and Reporting ........ ................... 22 Benefits and Risks .......................................... 23 III. AGREEMENTS REACHED AND RECOMMENDATION ....... ................. 23 This project was appraised during May/June 1989 by a team comprising Eleanor Schreiber (Mission Leader, LA3HR), Fernando Vio (Nutrition Consultant) and Jairo Arboleda (Community Organization Consultant). Earlier preparation missions, comprising staff and consultants, were led by Robert Drysdale (LA3HR) and Xavier Coll (LA3HR) during late 1988 and early 1989. 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.  - ii - MIbl, of Contents (Continued) Page No. LIST OF ANNEXES 1 Poverty Indicators by Region ................................. 25 2 Health Sector Financing and Expenditures (Public) ............ 26 3 Child Development and Pre-scho3l Programs--by Provider ....... 28 4 Comparative Costs of the CAIPs and the HBIs .................. 29 S ICBF Organization Chart ...................................... 30 6 HBI Investment Program, 1990-95 .............................. 31 7 ICBF Policy and Institutional Development--Letter of Intent and Plan of Action ......................................... 34 8 Terms of Reference for Project Studies ....................... 38 9 The ICBF Training System ..................................... 45 10 Financial and Administrative Procedures and Control for the HBIs ............................................... 46 IL Project Costs by Category of Expenditure ..................... 47 12 Procurement Arrangement and Procurement Limits by Type ...... 48 13 Estimated Disbursements ...................................... 50 14 Selected Documents and Data Available in the Project File .... 51 ftks IBRD No. 18370R  - iii - COLOMBIA COMKUNITY CHILD CARE AND NUTRITION PROJECT BASIC DATA SHEET POPULATION Population (millions) 30 annual growth (Z) 1.8 Z urban 70 Females per 100 males urban 110 rural 88 Total fertility rate 3.2 Infant mortality (per 1,000 live births) 61 GNP PER CAPITA (US$) 1,220 POVERTY Poverty line (US$ per family of five) 2,050 2 population in absolute poverty 40 NUTRITION Per capita calorie intake/day 2,588 Prevalence of malnutrition (2 children under age 5) 12 HEALTH Access to health care ( Z population) 75 Population per physician 1,900 Population per hospital bed 600 Access to safe water urban (Z population) 89 rural (Z population) 30 EDUCATION Adult Literacy (2) 88 Primay school enrollment rate (2 of age-group) 80 Data drawn from the World Bank's 'Social Indicators of Development 1988" and other sources, mainly for 1986-88.  - iv - COLOMBIA COMUNITY CHILD CARE AND NUTRITION PROJECT LOAN AND PROJECT SUMMARY Borrower: Republic of Colombia Benpficiary: Colombian Institute of Family Welfare (ICBF) Am'unt: US$24.0 million equivalent Terms: Payable in 17 years, including a 5-year grace period, at the Bank's standard variable rate Project Objectives and Description: The project forms a key part of the Government's poverty reduction program and aims mainly to strengthen an ongoing program of home-based child care. This program, the HBI, caters for nutrition, health and early childhood development needs of children aged two through six in low- incom: urban communities. 'Community mothers', chosen by parents, care for about 15 children each in their homes. The program is managed nationally by the Colombian Institute of Family-Welfare, the ICBF. The broad objectives of t.he project, which supports a six-year expansion program for the HBIs, are to enhance and maintain the quality and effectiveness of the program, in particular to: improve the cost-effectiveness of ICBF operations; strengthen the technical support, planning and program monitoring and evaluation capabilities of the ICBF; and improve HBI services principally through provision of training and home upgrading support, during program expansion. The project includes three corresponding components. The Policy Development Component will finance a study to determine future .management and financing arrangements for ICBF's center-based program of child care which predates the HBI, is more costly, and is i.sufficiently targeted on the poor; and ICBF budget support for this program will be reduced by 302 as an interim measure during project implementation. This component will also finance a study to assess the potential for the private production and marketing of an important food supplement, Bienestarina, currently supplied and distributed by the ICBF. The Management Development Component will finance technical assistance and equipment to strengthen ICBF's planning and monitoring capabilities by introducing a new Management Information System (MIS), to conduct an impact evaluation of the HBI program, and to coordinate HBI program implementation. The Service Support Component will finance equipment and materials to introduce a regular system of training for community as well as ICBF staff participating in the HBI program, and credits for minor upgrading of community mothers' homes, to ensure acceptable standards for providing day care.  Benefits: Through the expansion program for the HBIs, over one million of the country's poorest pre-school children will benefit in the near term from improved nutrition and health status and exposure to pre-school learning activities. The economic and social benefits of the approach are multiple. Investment in nutrition and early education for disadvantaged children will have a direct impact on their ability to take advantage of subsequent opportunities for schooling and employment. For the mo_hers of the children enrolled in the program, the option will be availa'le to seek additional remunerative employment. For community mothers, the program will provide modest income and home improvement. Finally, the program serves as a catalyst for community participation and mobilization in support of other self-help strategies for health, education and slum improvement. Risks: The major project risk is that the HBI program may outstrip the managerial and financial capacities of ICBF, under the pressures of continued expansion. The managerial risk will be minimized uy ICBF's implementation of well-conceived management and staffing arrangements, by designation of additional program coordinating advisors, and by measures to strengthen community-level support and managerial capacity for the program. The financial risk will be reduced by the implementation of measures to improve ICBF efficiency and to target ICBF subsidies in favor of the poor and the HBIs, and away from more costly care. Moreover, any necessary adjustments in the pace of program expansion would be effected through annual program reviews.  - vi - Estimated Costs: a/ ------------US$ Millions-------.- Local Foreign taa Policy Development Bienestarina Study 0.2 0.0 0.2 CAIPS Study 0.1 0.0 0.1 Subtotal 0.3 0.0 0.3 Institutional Development Institutional Assessment 0.1 0.0 0.1 MIS 0.2 0.8 1.0 Evaluation 0.5 0.0 0.5 HBI Program Coord. 0.3 0.0 0.3 Other Studies 0.3 0.0 0.3 Subtotal 1.4 0.8 2.2 HBI Service Support Training 7.5 2.5 10.0 House Upgrading 15.1 5.0 20.1 Subtotal 22.6 7.5 30.1 Total Base 24.3 8.3 32.6 Physical Contingencies 0.2 0.1 0.3 Price Contingencies 6.3 1.0 7.3 Total Cost 30.8 9.4 40.2 a/ Exclusive of taxes and duties, which are negligible. Financing Plan: ------ US$ M4.11ions Local Foreign Total Government of Colombia 16.0 0.2 16.2 IBRD 14.8 9.2 24.0 Total 30.8 9.4 40.2 zzzz = _ = _ Estimated Disbursement --------US$ millions-------- IBRD Fiscal Year: 1991 1992 1993 1994 1995 1996 Annual 1.2 2.4 5.3 6.0 5.3 3.8 Cumulative 1.2 3.6 8.9 14.9 20.2 24.0 Map: IBRD No. 18370R  COLOMBIA COMMUNITY CHILD CARE AND NUTRITION PROJECT I. THE SECTOR Sector Setting 1.1 Over the past 25 years, Colombia has experienced significant economic gains and diversification. With . growth rate of about 4 percent during 1988, recent performance has been relatively stronG. Social progress has bLen impressive over the last decades. Between 1964 and 1985, the average population growth rate dz-opped from 3.7 percent to 1.8 percent; and maternal and infant mortality declined appreciably over the period (from 254 to 107 deaths per 100,000 births, and from 81 to 61 deaths per 1,000 live births, respectively). These improvements are explained in part bv rapid urbanizat'on (the urban population share increased from 30 percent to 70 percent during 1950-85) and by increasing participation of females in the educati3n system and in the work force. Some 80 percent of the relevant age group, equally divided between boys and girls, attended primary schools in 1987, representing a doubling in enrollments since the 1960s; and women's particIpation in employment, while still largely (about 60 percent) in informal sector occupations, rose from about 20 percent to 30 percent between 1965 and 1985. Despite these advances, the distribution of the economic and social benefits of growth rcmains highly skewed, and severe poverty continues to affect a significant share of the population. 1.2 Based on household and proxy income indicators, the National Department of Statistics (DANE) currently classities about 40 percent of the population as living in conditions of absolute poverty, with some 20 percent living in conditions of misery.1 This general situation is confirmed by income indicators which also classify 40 percent of the population as poor, based on household incomes (including income in kind) of US$2,050 anciually per family of five. The worst poverty is associated with urban slums and squatter areas. The quality and coverage of basic services is limited or lacking in these highly populated areas, and historically vulnerable segments of the population, moqt notably, infants, young children and pregnant and lactating women, are at particularly high risk of malnutrition and illness. 1.3 Living conditions in low-income, urban districts are typically unhygienic owing to inadequate water supply, sanitary facilities, sewerage and health services. The low standards are closely essociated with high 1/ DANE indicators include three measures related to shelter and sanitation and two related to income. Households with less than satisfactory conditions in one category are classified as poor (40 percent of the population); and households with less than satisfactory conditions in two or more categories are classified as living in conditions of misery (20 percent of the population). Annex 1 presents DANE results by region based on 1985 census data. Discussion on the limitations of the current data base employed by DANE to measure poverty are presented in "Colombia: Social Programs and Poverty Alleviation: An Assessment of Government Initiatives", World Bank, 1988.  prevalence of respiratory and intestinal infections. The poorest 20 percent of the population runs a further risk of malnutrition and related health problems due mainly to inadequate income: in this group, as high as 90 percent of disposable income is allocated for food, but a substantial protein and overall calorie deficit (both of an order of one third) persist; and a lack of ready access to health services, compounded by the inability to pay for drugs and diagnostic tests, leads to a systematically higher prevalence of illness than in other population groups. Morbidity among the poorest 20 percent of the population is 1.2 times that of the rest of the population. Among those living in conditions of absolute poverty, a particularly heavy burden is also placed on women: an estimated 25 percent of poor households are headed by women reporting income substantially below the minimum wage; and within these households fertility, and maternal and infant morbidity are also higher than among the population at large. Within this group, children tend to suffer disproportionately from lack of protection, accidents, violence, and neglect. 1.4 Low educational attainment is also commonly associated with poverty. In 1985, about 30 percent of Colombia's 40 percent poor were classified as illiterate, compared with 12 percent of the population at large; 44 percent of school-aged children from poor households did not attend primary school, compared with 20 percent in the population at large. Formal pre-school and institutional nutrition programs are especially beneficial for poor children, to help ensure normal development prior to entering the formal school system. However, only 10 percent of children from the poorest 20 percent of the population are served by such programs. The Health Sector 1.5 Organization and Structure. Cclombia's health sector comprises three parts: (i) the public health system; (ii) the social insurance system, including the Social Security Institute (ISS) for private employees, the Social Insurance Fund for public sector employees (CAJANAL) and smaller funds for other groups; and (iii) the private system. Under the Ministry of Health (MS), public health services are provided at the departmental (state) and local levels, through hospitals and health centers and posts. Three main decentralized institutes are attached to the MS: the National Institute of Health (INS), which is responsible for production and control of vaccines and for research; the National Hospital Fund (FNH), which is responsible for hospital investments and maintenance; and the Colombian Institute for Family Welfare (ICBF), which is responsible for family and child welfare services, including nutrition. While the Minister of Health approves the budgets of the INS and FNH, these agencies operate autonomously, without formal coordination with MS staff or line units. ICBF is both financially and administratively autonomous of the MS. 1.6 Coverage. The target group for the public health system encompasses 75 percent of the population (social security and private health systems together serve only 25 percent of the population). Currently, however, a third of the target group (25 percent of the population) lacks access to public health care services. The shortfall is explained largely by an absence of outreach capacity and a shortage of staff and consumables (drugs and other supplies) at the local levels. The critical question facing the public sector is how to provide effective health services for the remaining 25 percent of the population--the majority of which is poor. A promising response is embodied in a June 1989 decree of the Minister of  Health, which established community committees to manage local health care services. This delegation of responsibility is accompanied by a restructuring of the system that includes provision of outreach services. Both measures are intended to improve the respons_veness of the public health system to local demand. Under the new structure, health teams will continue to be based at centers and posts. but field teams will also be mounted to serve individual communities on a rotating basis. 1.7 Finance and Expenditure. The health system is financed through several sources. Social security is funded through worker-emp'oyer contributions, the government budget, sales of services, investment earnings and donations. The public health service is financed through the budget on the basis of a national revenue-sharing scheme, earmarked departmental and municipal taxes, and through fees collected for selected services. The ICBF is financed apart from the rest of the system, primarily through a 3 percent payroll tax on enterprises. In the public sector, excluding the ICBF, about 45 percent of funds were allocated for public service while 55 percent were allocated for social security services in 1988. This split helps to explain the shortfalls in provision of primary care. 1.8 Public expenditure on health and related services in Colombia amounted to about 3 percent of GDP in 1989 (Annex 2). The addition of private expenditures, estimated at 40 percent of total, raises this share to 5 percent of GDP. In terms of Government budget, health constituted an increasing share during 1985-88, rising from 9 percent to 12 percent. However, plans announced in 1987 to raise expenditure on basic health services during 1987-90 have not materialized: real per capita erpenditure declined by about 12 percent (to US$43 in 1987 prices) during 1985-88. Increases in civil service salaries and, in particular, in overall costs at secondary and tertiary levels of the public health and social security systems, have constrained resources available for key, basic health inputs. Renewed efforts to improve basic health services, including financing, are embodied in the current restructuring of the system (para. 1.6). 1.9 In contrast to public health resources, ICBF resources grew appreciably in 1988. Congress approved an increase in the enterprise payroll tax rate (from 2 percent to the current 3 percent) allocated for the Institute. The additional resources will help support expansion of a program of community child care and nutrition, Child Care Homes (HBIs), in poor urban areas. Despite objections on grounds of economic efficiency and equity, both to earmarked revenues and taxes on payrolls, the financial authorities chose this financing option for the ICBF because the budget process has been historically unpredictable and inefficient in Colombia. Actual annual allocations have also tended to remain well below annually approved program targets.2 Accordingly, in view of the benefits of the HBI program, in terms of improved child care and nutrition, household income for the providers, and the opportunity of mothers with participating children to engage in remunerative employment, Government took the decision to increase the payroll tax to ensure stable and adequate financing for the ICBF. The increased resources were made available to the ICBF in mid-1989. 2/ In early 1989, Congress approved a draft law to strengthen the flexibility of the budget and to streamline budget procedures. Once introduced, this law is expected to reduce substantially rigidities in the budget process.  -4- Child Care and Nutrition 1.10 Responsibility for child care and nutrition is principally lodged with the ICBF. This Institute, established in 1968, supports programs in school feeding, day care including feeding, legal assistance, and other community development artivities with a focus on pre-school children, aged less than one to seven years. It currently serves directly, or in conzert with other agencies, over two million infants and children. Other ICBF target groups include the homeless, older juveniles, wards of the court, and the ,hysically and mentally handicapped. Maternal, neo-natal and infant care is provided mainly through the public health system and voluntary agencies but is complemented by ICBF nutrition and day-care programs. The Ministry of Education is a secondary provider of support for young children, mainly in the form of pre-school education programs, which enrolled nearly 40G,000 in 1939. The Ministries of Health and Education and the ICBF also serve aboit 1.5 million infants and children less directly through a system of family health training (Annex 3 provides data on child development prograf,is). 1.11 The ICBF first became a provider of day care during 1972-74, when it e4stablished about 100 centers for children under the age of seven. At present, this center-based care is given in well-equipped Pre-school Child Care Centers, or CAIPs, by tr--ned personnel (including health workers, nutritionists and educators) 3rvices are provided mainly free of charge in some 1,100 centers for about 280,000 children. Since the late 1970s, criticism of the CAIPs emerged: they are relatively costly; they provide services largely for a middle- rather than a low-income clientele; and they do not foster significant community involvement. These outcomes led to wide experimentation with new models for day care and nutrition programs that vwould serve poor families in the urban slums more directly. UNICEF and selected foundations, including Bernard van Leer and Save the Children, provided assistance in this endeavor, which promoted both community participation and the de-institutionalization of services. In a search for low-cost approaches that could be replicated on a wide scale, experiments with "home-based" programs were carried out in several locations. By the mid-1980s, EBIs emerged as the most successful model. 1.12 The HBI program, launched on a large scale in 1987, is a creative response to resolution of several poverty issues. It combines feeding of pre-school children, aged twa to six in low income urban neighborhoods, with community-managed day care. Related health monitoring and early childhood development services for preparation for effective participation in primary schooling, are built into the model. 1.13 ;CBF social workers promote and support the establishment of HBIs in marginal urban neighborhoods based on community interest and need. Criteria, based on income, population and local service standards, are used by the ICBF to identify the target clientele, with priority given to the poorest neighborhoods. Thereafter, participation in the program is self- selective. Groups of interested parents choose a "community mother' to care for 15 children in her home. No special qualifications must be met by the community mothers, though the majority is literate. Initial training provided by the ICBF in nutrition, child care and protection helps to confirm the suitability of the women selected. The ICBF also pays the community mothers a small monthly stipend (equivalent to US$50) and arranges  loans to enable the community mothers to upgrade their homes to minimum standards for provision of day care (to install or extend roofs and wooden or concrete floors, and to provide toilets as needed). To date, the hon:e upgrading has been financed by the Low-Income Housing Credit Institute. This Institute is a conduit for housing and home upgrading under government investment programs. In addition, the ICBF finances equipment and materials for each home (including a stove, children's furniture, kitchen equipment, water filters), plans to finance simple learning aids (e.g., scissors and paper), and provides foodstuffs to meet well over half the average daily nutritional requirements of participating children. Specifically, the ICBF m.anufactures and distributes Bienestarina, a domestic nutritional supplement commonly baked in bread form, and finances the provision of other fresh foods purchased locally. In most locations, ICBF helps community leaders purchase fres) foods at wholesale prices by contracting with a network of community suppliers. 1.14 The HBIs are administered through a three-tiered community structure: first, parents of children enrolled in 10-15 centers form a parents' association; second, parents at each center elect three representatives to join a local assembly (with 30-45 members); third, the assembly elects five parent representatives to serve as its board of directors. The parents' associations, through the boards, manage the ICBF funds as well as nominal contributions from parents, used to pay community mothers' stipends and to purchase food. A wide range of private and public agencies (including universities, secondary schools, government agencies, and NGOs) also contributes supporting services on an ad hoc basis, including assistance to the community mothers in the homes, or provision of training in technical and managerial skills related to HBI services. 1.15 By mid-1989, ove, 32,000 HBIs were operating, serving 500,000 children. Notably, turnover among community mothers has been negligible, to date. By all accounts the program has been remarkably successful and demand for places is high. An evaluation, carried out by consultants to the ICBF and completed during 1989, confirmed the viability of the HBIs as a low-cost mechanism to reach children in the poorest households, especially in urban areas. The main benefits of the program extend to several client groups: the participating children are benefitting from adequate and generally improved day care and feeding; the community mothers are benefitting from increased income as well as home improvements and skills upgrading; and parents, especially the mothers of participating children (often the only source of family income), are benefitting from the opportunity to leave the home to pursue remunerative employment. More generally, the community is benefitting through the social and technical skills acquired by children and adults through participation in the program. 1.16 In view of the early success of the HBIs, the ICBF plans to expand the program to reach the entire target group of children aged two to six in the lowest income brackets, estimated currently at over a million. The Institute has extended' its HBI expansion and investment plan to cover the six-year period 1990-95 and secured the bulk of required financing through the increase in the payroll tax rate for ICBF (para. 1.9). In zonstant terms, the average annual costs of program expansion will represent about half of total ICBF expenditures and will increase the share of ICBF expenditures in total public expenditure on health from an estimated 22 percent in 1988 to about 26 percent by 1995 (based on an estimated ii.crease in overall health expenditure of 5 percent per annum during the same period).  -6- Issues in HBI Expansion Policies 1.17 The significant expansion planned for the HBI program raises policy issues requiring early resolution by the ICBF. The most critical of these are issues related to the need to reduce ICBF subsidies to the CAIPs in favor of the HBIs and the poor, and vo improve the efficiency of production and distribution of Bienestarina. The related question of appropriate sources of financing for the ICBF, e.g., whether through continued use of the payroll tax or through budgetary and other provisions, would also need to be assessed by Government in the context of the general qurstion of use of earmarked taxes. 1.18 CAIPs. The CAIPs are relatively costly, geographically inaccessible to a significant share of lower-income families, and nearly fully financed by the ICBF. Expenditure on the CAIPs program amounted to over half of the ICBF budget prior to 1987 and still accounted for about 35 percent of the budget during 1988, despite the significant growth in HEBIs. While the share of the CAIPs program in the ICBF budget will decrease as the HBI program expands, ICBF budget projections prepared during early 1989 maintained the current level of CAIPs' financing. 1.19 The quality of the CAIPs program is high. However, the average cost per child in 1989, US$33 per month, is three times the cost per HBI beneficiary in 1989 at US$11 per month (Annex 4). The elevated costs of the CAIPs preclude expansion of the program to the priority, ICBF target group. CAIPs' salaries are especially high and represent 67 percent of total expenditures; foodstuffs, 21 percent; and other materials and supplies, 12 percent. The share in total personnel costs for administration, at about 25 percent, is excessive. 1.20 Children from the lowest-income families are not deliberately excluded from the CAIPs. However, the centers are predominantly located in middle- and lower-middle income neighborhoods. Based on available data, about 45 percent of CAIPs' children come from low-income households (less than US$2,050 equivalent annually, per family of five) while 55 percent come from middle income families. Virtually free provision of the service by the Government to middle-income families is unduly regressive: only 2 percent of the budget is covered through payments by families. 1.21 The high level of government subsidization of CAIP's beneficiaries led the National Planning Department, DNP, to propose substantial reductions in the share of ICBF financing for CAIPs over the next several ye&rs. As a result, the ICBF has introduced requirements to raise fees and enforce collection. It is also exploring options for gradually transferring responsibility for CAIPs to other public or private entities, including the local government and the private voluntary sector, in line with more general government policy on decentralization. 1.22 Bienestarina. An important contribution of the ICBF in supplementary feeding is the provision of Bienestarina. Bienestar4na is a nutritional supplement made of wheat, rice or maize flour (60 percent), soybean flour (30 percent), low-fat powdered milk (8 percent), and minerals and vitamins (2 percent). The ICBF provides Bienestarina to poor groups at nutritional risk (infants, pre-school and school-aged children, pre ant ,d  nursing women and the elderly). The product enjoys widespread acceptance in poor communities. Demand for Bienestarina is increasing, and questions of cost-effectiveness of future production and distribution need to be addressed. Slight variations in composition also need to be considered in view of differences in typical diets across the country and in nutritional needs among different population groups. 1.23 Bienestarina is produced in three domestic plants, managed as public enterprises by the ICBF. Production capacity is about 27,500 tons and should be sufficient to meet requirements through the early 1990s. However, the ICBF lacks expertise as a public enterprise manager, and delays with provision of inputs and finance, together with problems of distribution and plant management, have resulted in a supply lag. While production increased from 7,500 tons in 1986 to about 13,300 tons in 1988, it represented only 60 percent of programmed production over the period. Under the expanded HBI program alone, incremental requirements for Bienestarina would reach an estimated 8,000 tons by 1994. In the immediate future, measures are needed to improve efficiency of production and distribution. Over the next few years, new modalities for expanding Bienestarina output also need to be assessed. Alternative arrangements would need to take into account the balance of payments effect of local production (nearly all current ingredients are imported) as well as comparative efficiency of government versus private sector production. An in-depth evaluation of production and marketing methods should thus be carried out to determine future arrangements. Private sector production and marketing through commercial channels should figure among alternatives. 1.24 The acceptability of Bienestarina is explained largely by its high nutritional value and relatively low cost, US$0.60 per Kg., compared to US$1.80 per Kg. for powdered milk. (All basic commodities, including foodstuffs, are traded at market rates in Colombia; no general consumer subsidies are in effect.) However, additional studies are required to establish the real food intake of users of the product, most notably, the children attending HBIs (as opposed to studies that measure the availability of food), to assess the substitution effect of use of Bienestarina and to determine appropriate adjustments in Bienestarina content, including possible needs for micro-nutrients. Management 1.25 The ICBF structure (Annex 5) includes a central office as well as regional, zonal and local offices. The central office, guided by a national board of directors, is responsible for policy development and legislation, overall planning and coordination of national activities, and technical supervision of regional programs. Twenty-six regional offices support planning and program implementation at the local levels; and about 175 zonal local offices directly implement, or support implementation of, ICBF programs. This organizational structure is basically adequate to support the ICBFs' activities over the medium-term. However, increasingly decentralized responsibilities need to be clarified; and additional staff and strengthened planning and programming will be required to support the HBI expansion over the next few years. '..26 Structure and Staffing. The ICBF initiated a process of structural and staff review during 1988 which yielded preliminary recommendations on  - 8 - modest restrurturing at the central and regional levels and straight-line projections of staff needs based on existing standards. While useful as an initial input to analysis, the results did not consider fully the changing nature of ICBF programs and responsibilities, in particular, responsibil- ities for guiding large, decentralized efforts, such as the HBI program. The ICBF needs to conduct further study to identify institutional options for a strengthened role as a facilitating rather than an implementing agency. 1.27 The ICBF currently employs about 4,500 staff: 500 in the central office; 1,700 in the regions; and 1,900 in the localities (an additional 400 are assigned outside the regular structure, including 150 at the Bienestarina plants). Professional and managerial staff number 1,300; technician-level staff, 900; and administrative and support staff, 2,300. In general, staff of the Institute are characterized by a high degree of commitment and adequate overall skill levels and distribution. However, the HBI expansion will necessitate a staffing increase in both technical and administrative posts, mainly at the local level. To avert future overstaffing, flexible arrangements for employing and deploying both current and potential staff need to be adopted. Accordingly, the ICBF plans to contract experienced staff as well as to establish new permanent posts. It is also exploring potential for regularizing non-governmental organization (NGO) and other local support for the program. 1.28 Planning. Planning and programming of development of ICBF activities, including the HBI program, have been conducted in the past on the basis of short-term expectations on available resources. With assurance that the budget for HBI expansion and other ongoing ICBF programs will be available over the foreseeable future, the ICBF needs to turn its efforts to longer-term planning and programming. Annual updates of local needs assessments based on DANE data on poverty, used to identify the target group of children at risk for malnutrition or otherwise inadequate home care, would continue to constitute the core information for HBI planning. These would need to be complemented with additional data on the target group. Strategic planning will also require a system for quality and financial control, which would endure beyond the expansion phase. With these needs in view, the ICBF completed a proposal for a comprehensive Management Information System (MIS) during early 1989, which was judged to be appropriate by the Bank, and would be introduced over the coming months. 1.29 Monitoring and Evaluation. Regular monitoring and evaluation of the HBI program have not yet been introduced but will also be required to support the broad expansion planned. The information needed to monitor program coverage, and allocation and use of resources, can be included economically in the internal MIS to be introduced. In addition, a system to assess multiple outcomes of the program is needed to measure overall effectiveness, i.e., to determine how successful the program is in alleviating poverty and its effects. Comparative information on households participating and not participating in the program could serve to identify key outcomes and potential needs for improving program effectiveness. Of particular interest is the effect on HBI children and their families of the program on nutrition levels, health expenditures, health status, school attendance, female employment, and family leisure, consumption and expenditure patterns. The mounting of household surveys and analysis of results, are beyond the current expertise of the ICBF. Support would need  -9- to be provided by DANE, the National Department of Statistics, -hich has considerable survey and evaluation experience and an interest in improving systems for collecting and analyzing socio-economic statistics. Service Delivery and Support 1.30 The advantages of the HBI program are concentrated in its economic provision of integrated child care and development, *'hich is designed to merge feeding with pre-school development and health monitoring. Added strengths center on the high level of community participation required and achieved; on the attentiox to lower-income families in the community, primarily achieved through the geographic focus of the program on urban qlum areas; and on inter-agency cooperation. While present services are judged favorably by beneficiaries, quality is uneven; and the ongoing expansion is likely to place additional strains on the HBI system. In order to consolidate gains and improve the overall quality of nutritional, health and edutcational inputs, service elements require reinforcement and adjustment, and community mothers and others, more systematic training. 1.31 Delivery. Among the three main services provided through the HBIs, the nutrition component, which received emphasis in the early phase of program expansion, is the most developed. The health monitoring and early childhood development services have lagged, due bota to inadequate arrangements and resources. (a) Nutrition. The Bienestarina input and additional foodstuffs are judged sufficient to meet 60 percent to 70 percent of a child's daily needs. Training, to improve the nutritional knowledge of community mothers and their ability to monitor growth of HBI children and to ensure cleanliness in food handling, is still needed. The 1990 ICBF budget for the HBIs includes financing for anthropometric equipment to improve growth monitoring. (b) Health Monitoring. The absence of adequate basic services and effective referral systems in some low-income areas reduces the effectiveness of HBI services, in particular the benefits of improved nutrition. Despite explicit requirements that all children be fully vaccinated prior to entering an HBI, some 30 percent are estimated to be less than fully immunized; and for many ill or malnourished HBI children, access to follow-up health care is limited or lacking. The recent decisions to manage health services on a community basis and to introduce outreach services (para. 1.6) should help to improve care over the medium to longer terms. In the interim, special arrangements are being made with the Ministry of Health. These are designed to ensure that required services are provided prior to the entry of each child in the HBI program and to meet the basic and follow-up health requirements of the HBI children, thereafter. (c) Child Development. Evidence from developed and developing countries argues compellingly that low-cost interventions in early childhood development, together with adequate nutrition and health services, positively affect children's readiness for school as well as school performance, caregiver skills and knowledge, and community participation. In view of the results (see Myers, The  - 10 - Eleven Who Survive, IBRD, 1987), and a recent decision by the Ministry of Education to focus on basic (rather than pre-school) education based on financing limitations, the ICBF has decided to build up the HBI early childhood development component and has included investment resources for minimal materials support (e.g., paper, scissors, etc.) in its budget, beginning in 1990. 1.32 Support. As manifest in the continued, successful expansion of the HBIs, overall support for the establishment and operation of the HBIs, provided through the ICBF and local management structures, has been effective. However, two areas have lagged notably: support for a regular system of training for ICBF staff and community participants, especially community mothers, in the program; and support for home improvements. (a) Training. The ICBF developed a comprehensive training plan in the early 1980s, which was not introduced owing to budgetary constraints. However, the proposed system is well suited to current needs. It would draw on the knowledge and experience of technical staff of the ICBF offices without requiring the establishment of a large training infrastructure within the ICBF. Instead, ICBF would rely on assistance from outside providers specialized in designing and providing training for community-based programs. The ICBF recently entered a contract with SENA, the national training institute, to assist in developing and providing training materials for the HBI program. The training, to focus on the three service areas of nutrition (including hygiene, para. 1.31), health and child development, would support the community mothers, parents' groups and other participants at the local levels. (b) Home Improvements. Access to home upgrading credits by community mothers was limited during the initial phase of HBI expansion: during 1987-89, nearly all community mothers applied for a credit but only a third (about 15,000 through early 1990) could be serviced with resources available through the ICT. In future, funds for the home-upgrading credits for about 50,000 current and new community mothers will need to be provided. Such funding would enable approximately 75 percent of all community mothers to upgrade their homes (based on an average credit of US$500). Government Strategy 1.33 The expansion and improvement of basic social services are higL. priorities for the social and economic development of Colombia. The current Government, which assumed power in 1986, stated in its National Rehabili- tation and Poverty Eradication Programs that the main objectives are stabilization of the domestic environment and reduction of poverty. The broad strategy for achieving these objectives is based on three elements: continued economic growth; expanded provision of programs designed to increase the productivity and employment of the poor; and increased provision of basic social services in the areas of health, nutrition, education, sanitation and shelter. To ensure continued economic recovery and growth, efficient use of available resources and mobilization of additional public and private resources over the medium-term are also priorities.  - 11 - 1.34 The Government's most recent development plan, published in September 1987 by the DNP, gives central importance to strengthening social services for those groups identified as below the pov rty line, including day care and nutritional support for children from the poorest households. The program for extension and upgrading of basic health services, including maternal, neo-natal and infant care, is being developed within a decentralization plan that devolves greater responsibility, along with selected fiscal resou-ces, to local governments. As in an ongoing program for universalizatien ot primary education, the full implementation of this plan will take several years. With respect to nutrition and day care for children at risk, the ICBF has already accumulated and evaluated experience with the HBI program and drawn up a detailed expansion program. The Government now plans to extend the HBI program in carefully monitored annual stages to serve the full target population, estimated at more than a million children. The Bank's Role 1.35 The Bank's assistance strategy for Colombia focuses on continued economic growth, combined with poverty alleviation through policy adjustments and selective investments in key economic and social sectors. Priority is given to allocating resources for reducing poverty, especially among the most vulnerable segments of the population--infants, children and female heads of household. The Bank's country strategy seeks to ensure that such services are developed within a viable macroeconomic and a sustainable fiscal framework. The Bank's sector work and lending in human resources are also designed to address poverty issues and sector-specific issues of cost recovery, the balance between public and private seoitor participation and between capital and recurrent expenditures, and the composition of recurrent costs. 1.36 The Bank completed an assessment of the Government's Poverty Alleviation Program in late 1988 (para. 1.2). This review covers the areas of health, education, housing and nutrition. Conclusions support Government's medium- to longer-term objectives to expand primary health care based on a set of administrative and financial reforms. These would strengthen management of existing resources and promote mobilization of new resources. The Bank is directly supporting the extension of primary education to achieve improved coverage and quality, particularly in rural and poor urban areas, and is encouraging Government to emphasize a shelter policy of upgrading and rehabilitation of housing, which will cater directly for needs of the urban poor. In nutrition and early childhood development, the report cites the HBI program as a promising mechanism for serving poor urban children as well as mothers. The proposed project would support the second-phase expansion of this program and complement Bank operations in the areas of basic health, rural water supply, and municipal and rural development. 1.37 The Bank has previously extended support for one health and one nutrition project and for two basic education projects. The proposed project relates most closely to the health and nutrition operations. The health project, assisted by Loan 2611-CO of 1986, suffered delayed progress owing to fragmentation of project management responsibilities among several agencies, and more generally to weaknesses in institutional and financial support within the decentralized system of primary health care it supports.  - 12 - As a result, the project was substantially restructured during early 1990. The integrated nutrition project, assisted by Loan 1487-CO of 1977. met or exceeded most physical targets originally agreed but fell short in other key areas. Most notably, the feasibility of implementing a food coupon program was demonstrated under this project. In this case, however, direct benefits (calories delivered) were low; and design changes could have improved the outcome had an effective monitoring and evaluation system been in place. This was not the case in large measure due to an overly complex evaluation design and inadequate managerial attention to evaluation. Both the health and the nutrition operations confirm the difficulties of managing new and complex operations in a particular sector or subsector, particularly when several public sector agencies are involved and extensive coordination among them is required. The lessons, on the importance of a sound nutrition evaluation system and on the more general risks of complex project design and management structures, have been carefully considered in designing the proposed project. II. THE PROJECT Project Origin 2.1 The proposed project was prepared by the ICBF in collaboration with the DNP and the Bank. Preparation was carried out from November 1988 to May 1989. Appraisal was completed in June 1989. Negotiations took place in Washington, D.C. and Bogota, Colombia during April 27 - May 2, 1990. During negotiations, the Government delegation was headed by Diana Young Torres, Deputy Director, Foreign Public Credit, Ministry of Finance. Project Objectives and Content 2.2 The proposed project has three basic objectives: (a) to improve the cost-effectiveness of ICBF operations; (b) to support the institutional development of ICBF, in particular, to strengthen its technical support, planning, and monitoring capabilities vis a vis the HBIs; and (c) to evaluate, improve and maintain at an appropriate level, the quality of HBI services during expansion. 2.3 The project would finance the main investment costs of the Government's HiBI expansion program during 1990-95 (para. 1.16 and Annex 6), and focuses on policy and institutional changes and service delivery support. It wold consist of the following components, designed to: (a) Policy Development: Enhance effectiveness of ICBF resource use by: (i) assessing and establishing revised financing arrangements for the CAIPs and reducing the ICBF's budget contribution to the program; ard (ii) improving the efficiency of production and marketing of Bienestarina. (b) Management Development: Strengthen the management capacity of the ICBF by: (i) identifying and effecting key requirements for organizational and staffing changes; (ii) introducing an integrated ICBF information system, and developing planning and programming; and (iii) implementing monitoring and impact evaluation systems for the HBIs on a national scale.  - 13 - (c) Service Support: Assist in consolidating gains of the HBI program to date and improving quality by introducing systematic training for community mothers and other HBI community participants, and by providing community mothers access to home improvement credits. The policy and institutional development components are supported by a letter signed by the Director General of the ICBF and a plan of action (Annex 7). Detailed Project Description Policy Development Component (proposed outlay US$0.4 million, including contingencies). 2.4 The policy changes to be introduced under the project are designed to improve efficiency and equity in the allocation and use of ICBF resources. The measures respond to Government concerns regarding the targeting of social programs and the quality and efficiency of services provided. 2.5 CAIPs. The ICBF would conduct a study to assess alternatives for the long-term financing of the CAIPs (para. 1.21). This study, to be financed under the project, would consider privatizing the CAIPs, transferring them to local government authorities, or a combination of these measures. Management and financing through social funds maintained by public and private seLtor agencies and firms (as parts of social security systems) would be included among alternatives assessed. The study would be carried out by independent consultants to the ICBF. The ICBF would invite interested parties to participate in an advisory group for the study. Terms of reference (Annex 8) for the study acceptable to the Bank have been prepared. 2.6 While awaiting the study's recommendations, the ICBF would begin to decrease its budgetary support to the CAIPs to reduce direct subsidies to middle-income families. The ICBF and the DNP agreed on an initial reduction, equivalent to 13 percent in real terms, for 1990. This would be followed by annual adjustments (until alternative arrangements can be effected) to achieve a targeted decrease of 30 percent by 1995. To cover the resulting gap, CAIPs' fees were raised and collection criteria strengthened in accordance with an August 1989 decree of the ICBF's Board of Directors. User families are now charged 1.5 percent to 8 percent of income based on earnings. Estimates show that a 30 percent decrease would represent savings of about US$13.5 million equivalent annually by 1994 Xin 1989 Drices). During negotiations the Government agreed to reduce by 30 percent in real terms ICBF's budget support for the CAIPs during 1989-95 and to complete the study on future CAIPs' financing, and a time-bound action plan acceptable to the Bank for implementing recommendations, by June 30, 1991 (para. 3.1 (a)). 2.7 Bienestarina. In order to meet the increase in demand projected for Bienestarina after the early 1990s, and to ensure economy in its production and distribution, the ICBF and the DNP intend to evaluate alternative production mechanisms (para. 1.23). Terms of reference acceptable to the Bank (Annex 8) were prepared for this study and reviewed during appraisal. Commercial production, marketing and distribution mechanisms would be carefully evaluated. Included would be the option of  - 14 - lead to interim as well as longer-tarm policy decisions on Bier.estarina production and marketing structures. At negotiations the Government agreed to complete the study and a time-bound action plan acceptable to the Bank by December 31, 1991 (para. 3.1 (b)). Results of the study ,hould also enable the ICBF to take decisions on needs for adjustments to Bienestarina content on the basis of variations in regional food consumption patterns of HBI children (para. 1.22). Management Development Component (proposed outlay, US$2.7 million). 2.8 Structure and Staffing. Under the project. further analysis of the organization, functions and staffina of the ICBF would be undertaken (para. 1.26). Recommendations would be drawn from an independent assessment guided by a technical team of ICBF staff under the Director General. Terms of reference acceptable to the Bank are presented in Annex 8. The assess- ment would focus on mechanisms for further decentralize:ion of programs as well as financial responsibilities over the medium- to longer-terms. It is envisaged that over the coming years ICBF would continue to introduce and guide national programs of special emphasis, such as the HBI program, while shifting emphasis from implementation towards technical support in each of its areas of responsibility. At negotiations, the Government greed to complete the management study and a time-bound action plan a,.. table to the Bank by June 30, 1991 (para.3.1 (c)). 2.9 In the near-term, the ICBF would give priority to assuring adequate staff for supporting the HBI expansion program. While adjustments can be expected, the ICBF estimates that an additional 500 staff (300 permanent, 200 contracted) would be needed to support HBI expansion and other ICBF programs at the local and zonal levels during 1990-95. Funds have been budgeted for this increase by the ICBF. The bulk of new permanent staff would be local administrators while the contract staff would be mainly technical personnel, also workirg at the local levels. More systematic use of local NGOs would be desirable. However, means for expanding the involvement of qualified outside entities will need to be developed and tested. The institutional assessment (para. 2.8) would thus include consultation with community agencies with a view to designing arrangements for regular incorporation of NGO and other community resources and expertise in the HBI program. 2.10 To promote evelopment of a flexible ICBF staffing pattern the Institute plans to adopt a "global personnel" structure. Among permanent staff, the various technical professionals and sub-professionals (e.g., social workers, nutritionists, early childhood development experts and administrators) would not be assigned to specific programs as is currently the case, but shifted among ICBF programs in accordance with changing demand, with particular attention in the foreseeable future directed to the HBI program. The addition of permanent staff training in the ICBF structure, planned for mid-1990, would facilitate this arrangement. In addition, staff working at the community level would be allowed to adopt flexible working schedules to facilitate communications with community participants, e.g., meetings with parents' associations after normal working hours. 2.11 Planning. Under the project, the new MIS would be introduced in the ICBF (para. 1.28). The MIS would support planning, programming and budgeting, initially for HBIs and gradually for other ICBF programs. A  - 15 - rolling programming system would also be introduced to extend the planning horizon beyond the annual framework currently employed. For the HBIs, the HIS would include yearly updates of needs assessments; information on nutritional and basic health status of HBI children. maintained by the community mothers; selected data on parents and other pro&ram participants; and data on allocation and use of resources. The MIS would also include information required for financial moiswitorir.g and control. The system would be introduced during 1990. Initially, the MIS would be used to steer the ICBF through the end of the HBI expansion phase, and to track costs and coverage of the program. Over the medium to longer terms, it would be extended to other ICBF programs. The project would provide financing for computer hardware and software needed to introduce the new MIS. During negotiations, the Government agreed to introduce the new MIS by June 30, 1991 (para.3.1 (d)). 2.12 Monitoring and Evaluation. Under the project regular monitoring of the HBI program would be introduced (para. 1.29). The informlation generated through the new MIS would form the base for monitoring the coverage and internal eff'ciency of the HBI program (e.g., data on children enrolled and on community mothers, changes in children's height and weight, use of program financing and inputs, community participation and support, etc.). In addition. the project would support the regular evaluation of HBI impact. The evaluation would be based on a household survey to be conducted annually in several cities. It would include HBI and non-participating families, and complement a larger household survey conducted by DANE in 13 cities throughout the year. 2.13 The HBI survey work would measure both direct and indirect outcomes, e.g., impact on participants as well as other family members. In particular, it would assess the income and price effects of the program on household consumption to estimate overall impact on family nutrition and health; and analyze the income effects of the increase in mothers' free time attributable to the program (e.g., wnether spent at work, school or leisure). Small subsamples could also be derived from the survey to analyze a particular problem or issue in depth, as may be required to reorient or strengthen the HBI program. Staff of the Bank's Welfare and Human Resources Division assisted in the preliminary design of the survey. The project would include financing for the introduction of the evaluation, including the costs of equipment and consultants. Financing is also provided for studies related to evaluation findings and more general preparation of future ICBF programs. During negotiations, the Government agreed to introduce the HBI evaluation system by June 30, 1991 (para 3.1 (d)). Service Support Component (proposed outlay, US$37.1 million). 2.14 Training. The project includes financirg for the introduction of a program of regular training and technical supervision for HBI staff and community participants. The training would complement the other program inputs to support achievement of the nutrition, health and early childhood development objectives of the HBI program. The training system is being developed under the SENA contract (para. 1.32), which includes the development of materials and the training of trainers--technical and administrative staff--at the regional, zonal and local offices. The plan aims to provide training annually for all key participants, e.g., all community mothers and parents' groups. Periodic training would also be provided for other selected community groups and volunteers, including  - 16 - municipal administrators, local contractors and food suppliers (for purposes of orientation to the HBI progra&'- In the interests of improving the quality of HBI services, the tl:..,ng would emphasize nutrition education, food handling (cooking and hygiene), child growth and health -.onitoring, design of pre-school development activities for community mothers, and program and related financial management and control for parents' groups. 2.15 For nutrition management and health monitoring, training would focus on appropriate combinations of Bienestarina and other foods and on measurement of actual consumption by the children. As part of the monitoring system for the HBIs, the community mothers would also be trained to maintain information cards on each child. These cards, with a simple format, would be used to record attendance, height, weight and vaccinations received by the HBI children on a periodic basis. They would be used to measure progress as well as to identify problems. Supervisory staff at the local levels would be responsible foi periodic review of results with the methers and for helping to arrange for health services follow-up for children with growth or health problems. For this purpose, a letter from the Minister of Health to the Director General, ICBF, dated December 19, 1989, provides an acceptable broad framework for providing basic health care servic'!s to HBI childrer on a priority bas,s. During negotiations the Government agreed to ensure that each child would be fully vaccinated before entering the HBI program and that criteria and arrangements satisfactory to Lhe Bank for identifying and meeting the basic health requirements of HBI children would be established by October 31, 1990 (para. 3.1 kd)). The criteria would be used to identify HBI locaticns and children with inadequate access to basic health care and programs (mainly existing) would be tapped to provide the necessary vaccination and follow-up services. Related information would to be provided to HSI families, and to community mothers. 2.16 The training would also include regular orientation workshops for community mothers as well as parents and other community volunteers on the importance of social interaction, constructive play, and other pre-school learning activities for promoting the cognitive and social development of the child, as well as ago-appropriate physical skills. Subsequent sessions would include demonstrations for making simple games and toys and for organizing individual and group activities. Early childhood educators from the Ministry of Education are working with the ICBF educators and involved SENA staff to develop these training activities. 2.17 The training system would be based on modular materials prepared at the central level a9d on supplementary materials prepared locally (Annex 9). Included are print and non-print materials. SENA has designed many of the materials based on skills needs identified by ICBF technical staff. While the modules are oriented towards self-learning, tutors drawn variously from ICBF zonal and local staff and community participaRts wouAld support small group sessions. Follow-up demonstration and support, both group and individual, would be provided mainly by ICBF zonal and local staff in the course of regular supervision activities. ICBF staff would train the tutors. The training plan calls for one week of initial training for small groups of new community mothers, foliowed by evening sessions once each week for the first three months of service and once each two weeks there-fter. The current group of community mothers would also participate in the evening sessions. Sessions for parents and other groups would be held on weekends. Details on the content of training have been completed and materials are  - 17 - materials and printing) and distribution of cer,erally prepared materials, includirq selected audiovisual equipment; supplies to prepare local materials; and the cost of delivery of the training. 2.18 Home Upgrading. To facilitate nutrition and health improvements in the expanding HBI program, the ICBF would make available funds required to upgrade about 50,000 comiunity mothers' homes to minimum standards for providing day care. The credits would be provided to new community mothers as well as those not served during 1987-89 (para. 1.32). The maximum credit amount would be US$750 (in 1989 prices). Loans would be repayable in 60 months and carry an interest rate of 18 percent annually and a 1 percent guarantee fee. This interest rate is about 45 percent of the current commercia'l rate and two thirds of the current deposit rate. It implies a grant element of about US$175 equivalent on an average credit of US$500 equivalent. The overall subsidy implied in these credit terms 'rould be of the order of US$1.0 million equivalent annually in constant prices during the implementation period (scheduled for 1990-93). However, the cost of this subsidy to the ICBF is well justified. The benefits accrue directly to the HBI children and mothers and thus represent an efficient form of transfer to the lowest-income urban household on equity grounds; and the total subsidy and cost of the upgrading program represent a small volume of funds which pose no threat in the form of market distortions. The ICBF developed simple zriteria for assessing requirements for home upgrading as well as for ensuring the effective implementation of the credit program. On balance, the interest charged can best be characterized as a mechanism for securing partial cost recovery of the marginal benefits accruing to the community mothers from the minor improvements made to their homes. It develops a repayment discipline among the community mothers which would not be fostered through grant arrangements. Loan payments would be drawn automatically from the monthly stipend received by the community mother. The project would include financing required for the home upgrading. Program Implementation 2.19 Management. The project comprises discrete elements of the larger HBI expar.sion program (Annex 6) and would be implemented by the ICBF as part of that program. Overall authority for management of the HBi program is vested in the Director General, ICBF. At the policy level, the Director General is supported by the ICBF Board of Directors. Day to day management of the program is the responsibility of the rirector of Planning, ICBF. To facilitate continuity in program management and implementation during expansion, technical advisors would be contracted to support the Director of Planning in the central ICBF. Included would be an experienced program coordinator and a financing/procurement officer and assistant. These advisors would all be appointed as a condition for effectiveness (para. 3.2 (a)). The project would finance this coordinating assistance. At each regional office, three technical staff serve as program coordinators and at each local office, one project coordinator is also designated. 2.20 The policy and institutional development components would be managed by the ICBF's Planning Office. Annual project planning ar.d programming would also be the direct responsibility of the ICBF Planning Orfice, in cooperation with the relevant technical units. The service delivery components would be guided by the relevant ICBF technical or administrative units, as i8 currently the *ase. These include directorates  - 18 - and subdirectorates responsible for nutrition, health, child protection and early childhood development. Implementation guidance for service delivery is provided through the regional and local offices of the ICBF. The service support components would be guided from the central off4-e of the ICBF. The training system is being developed under the guidance oi a group of staff drawn from central ICBF tecihnical units. These staff have been in place since early 1988 and would contit.ue to be responsible for overseeing the implementation o' th. trainit.- system by regional and local staff. The lhome upgrading would be guided by the ICBF's Planning Office with support from the Finance Directorate. 2.21 Financial oversight at all administrative levels would he vested in ICBF budget and finance units. The ICBF has appropriate and well.tested expenditure recording procedures for the HBI program (Annex 10). 2.22 Implementation Process. Implementation plans for the policy and institutionel d.-velopment components of the project are summarized in the plan of action for these items (Annex 7). Investments under the service support components of the program would conform with annual plans agreed between the regions and the ICBF, based on updated needs assessments, local implementation capacity and resources available. Overall program targets are provided in Annex 6. 2.23 In the ces' of home-upgrading credits, the funds would be managed under an agreement ,etween the ICBF and the Fiduciaria la Previsora. The ICBF would authorize the Fiduciary to provide home-upgrading credits to approved community mothers. Payments would be grouped and transferred in the form of bank drafts against promissory notes signed by the community mothers to accounts held by the local parents' associations on behalf of the community mothers. Under instructions from the ICBF, the associations would transfer credit payments to the community mothers in two installments on the basis of a schedule of works. Credit repayments would be drawn by the ICBF from the monthly stipends of the community mothers and transferred automatically to the trust account. The signing and authorization of the contract between the ICBF and the Fiduciary would be a condition for loan effectiveness (para. 3.2 (b)). 2.24 The HBI parents' associations would recommend for ICBF approval each credit for home upgrading based on a description of the works to be carried out. The credit agreement would be signed by the community mothers and the ICBF. It would describe obligations for use of the funds. The upgrading works vary little and commonly include extensions to floors and roofs and the provision of sanitary facilities. Particular needs would be determined or confirmed by the parents' associations, ICBF staff or other qualified individuals or agencies represented in the community. The purchase of labor and materials would be the responsibility of the community mothers, assisted by the parents' associations. Community contributions, especially in the form of labor, would continue to form a significant input for the simple upgrading activities. The parents' associations would confirm the completion of works, which would be supervised and certified by the ICBF. These and related procedures already in practice for excercising technical and financial control over the use of the credits, and to establish price guidelines, would be formalized in a procedural manual to be adopted by resolution of the ICBF and approved by the Bank. The issuing of the ICBF resolution adopting the manual would be a condition of loan effectiveness (para. 3.2 (c)).  - 19 - 2.25 Iwplementation Schedule, Monitoring and Review. The HBI expansion program would be completed by December 31, 1995. A satisfactory expenditure and implementation plan for the first year of the project implementation period has been completed by the ICBF. Bid documents for items to be procured under the project during 1990 have also been prepared and reviewed by the Bank. The practice of completing and updating annual plans would continue throughout program implementation and would be scheduled tc coincide with the local budget cycle. 2.26 The program would incorporate, as a key monitoring tool, an annual progress review to be conducted jointly by the ICBF and the Bank. Decisions on investments for the coming year would be based on: availability of resources and demand for HBIs; progress towards achieving objectives and expenditures scheduled for the previous year; and advances towards policy targets and institutional improvements. An assessment of the subsidy on the HBI home upgrading credits would form a focus of the annual review and the security of regions receiving project investment funds would also be considered, in view of Bank requirements for supervision. During negotiations, the ICBF agreed to carry out, jointly with the Bank, an annual review of program effectiveness prior to September 30; and to prepare, for Bank review, the detailed expenditure plan for the following year by November 30. The Government also agreed to ensure that the HBI program be efficiently executed and appropriately funded (para. 3.1 (e)). Project Costs and Financing 2.27 The Government's six-year expansion program for the HBIs has a total cost of about US$675 million equivalent (Annex 6). The project is designed to finance key investment inputs for program support with a view to ensuring continued program effectiveness, economy and quality. It thus incorporates costs associated with ICBF policy and management development, and with service support (training and home upgrading). The ICBF would provide financing for direct service delivery (i.e., for HBI equipment, furniture, children's learning materials, foodstuffs, utilities, or community mothers' stipends). Base costs of the project amount to US$32.6 million equivalent (April 1990 prices). Total project costs amount to US$40.2 million, including contingencies (Annex 11 and Tables 2.1 and 2.2, below). Of the total, about 23 percent represents foreign exchange costs. Physical contingencies are estimated at 5 percent of base costs, for all items except civil works and training, which are considered to be programmatic in nature, and price contingencies at 22 percent of base costs plus physical contingencies. The rates used for the price contingencies were 4.9 percent for 1990-95 for foreign costs, based on estimated international price increases, and a range of 12.1 percent for 1990 to 6.5 percent for 1994/95 for local costs, based on purchasing power parity of the Colombian currency. The loan amount of US$24.0 million would finance 60 percent of total project costs (or the equivalent of 100 percent of the foreign exchange costs and 47 percent of local costs).  - 20 - Table 2.1: SUMMARY OF PROJECTS COSTS BY COMPONENT (US$ millions) Local Foreign Total X Foreign X Base Exchange Costs A. Policy Development Bienestarina Study 0.2 0.0 0.2 0 0 CAIPs Study 0.1 0.0 0.1 0 0 Subtotal 0.3 0.0 0.3 0 1 B. Management Development Institutional Assessment 0.1 0.0 0.1 0 0 MIS 0.2 0.8 1.0 80 3 Evaluation 0.5 0.0 0.5 0 1 Program Coordination 0.3 0.0 0.3 0 1 Other Studies 0.3 0.0 0.3 0 1 Subtotal 1.4 0.8 2.2 36 6 C. HBI Service Support T