NPPR 2009 Report

NEPAL PORTFOLIO PERFORMANCE REVIEW NPPR 2009
RESULT-BASED MANAGEMENT FOR PORTFOLIO PERFORMANCE AND DEVELOPMENT EFFECTIVENESS
December 3-4, 2009
Ministry of Finance Government of Nepal
CONTENTS
MESSAGE FROM THE FINANCE SECRETARY MAIN REPORT GOVERNMENT OF NEPAL BACKGROUND PAPER
ATTACHMENT 1 ADB BACKGROUND PAPER
ATTACHMENT 2 DFID BACKGROUND PAPER
ATTACHMENT 3 WORLD BANK BACKGROUND PAPER
GOVERNMENT OF NEPAL BACKGROUND PAPER
MAIN REPORT
Nepal Portfolio Performance Review 2009
Result-based Management for Portfolio Performance and Development Effectiveness
A Vision Paper of the Government of Nepal
Ministry of Finance Singh Durbar, Kathmandu
December 3-4, 2009
Table of Contents
1. 2. 3.
Conceptual Outlook Result-based Practice in Nepal Nepals Result-based Initiatives in Key Areas 3.1. 3.2. 3.3. 3.4. 3.5. Reforms in Budgeting System Reforms in Public Financial Management (PFM) Reforms in Procurement System Reforms in Monitoring & Evaluation System Reforms in Human Resources Management
3.6. Quality -at -Projects Entry 4. 5. 6. 7. Nepal on the Path of Aid Harmonization: Enhancing Commitments Future NPPR Mechanism making more Result focused Major Challenges in Key Areas A Way Forward
Nepal Portfolio Performance Review (NPPR) 2009
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Nepal Portfolio Performance Review - 2009 Result-based Management for Portfolio Performance and Development Effectiveness Part - I 1. Conceptual Outlook
The Result based management (RBM) approach has emerged as a centerpiece of global efforts to improve the effectiveness of public management and is widely seen as representing best practice in this field. It is increasingly applied in developing countries. It is also known as Managing for Development Result (MfDR) in many countries. RBM centres on gearing all human, financial, technological, and natural resources domestic and external - to achieve desired development results. It shifts the focus from inputs (how much money will I get, how much money can I spend?) to measurable outputs (what can I achieve with the money?) at all phases of the development process. At the same time, RBM focuses on providing sound information to improve decision-making. This entails tracking progress and managing business on the basis of solid evidence and in a way that will maximize the achievement of results. It implies that goals are specific, measurable, achievable, and concrete, with time bound targets. At the same time, they must be expressed in human terms (i.e., as development outcomes). For this reason, RBM is more than a methodology: it is a way of thinking and acting, built on a practical toolbox for improved public management. The RBM cycle involves five core components or stages: setting goals and agreeing on targets and strategies; allocating the available resources to activities that will contribute to the achievement of the desired results; monitoring and evaluating whether the resources allocated are making the intended difference; reporting on performance to the public; feeding back information into decision-making.
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The development of a performance culture and the full implementation of RBM are not easy. A lot of effort is required to create the internal preconditions for results management through targeted organizational and human resource development. However, capacity development is not enough. Firm leadership and political will - over a prolonged period of time - are also essential if these capacities are to be developed and used in the pursuit of RBM. Though, the role of leadership in setting the course and constantly clarifying the core functions and objectives of an organization is fundamental, but more important, it is vital in providing the model for the behavior and attitude that are needed to support the results orientation. The push for results in International Initiatives In the international arena, numerous initiatives have underpinned this push for results. The Millennium Development Goals (MDGs) are probably the best known and most ambitious global commitment to results-based poverty reduction. The agreed MDG goals, targets, and indicators provide the basis for measuring progress and the effectiveness of aid. The Monterrey Consensus, adopted in 2002, encompasses a commitment by developed countries to increase levels of aid in conjunction with better governance, policy reform, and a greater focus on development effectiveness on the part of the developing countries. A growing number of national poverty reduction strategies (PRSPs) also testify to a strong international commitment to provide more and better aid in parallel with improvements in policymaking in developing countries. Within this framework, all development partners are bound to mutual accountability, transparency, and achievement of measurable results. The Paris Declaration on Aid Effectiveness, adopted in 2005, reflects a broad consensus on how best to reform aid to contribute to these commitments. The most distinguishing feature of the Declaration is the shared nature of the commitments, including an emphasis on the way in which improvements in donor practices go hand-in-hand with the strengthening of country systems and institutions. Several important elements emerge from the lessons to the success of RBM efforts in various parts of the world: Strong support from both the top and lower levels is needed; RBM reforms must be prioritized by the state and must complement existing initiatives, strategies and national development plans;
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It is crucial to build the capacity of RBM practitioners by providing training and access to sufficient operational capacity and suitable business systems, and by empowering organization leaders to test out new approaches that may enhance RBM in their organization; The availability of reliable data and Monitoring and Evaluation (M&E) systems has proved to be a very important and consistently challenging aspect for many of the countries, agencies and individuals.
RBM in the context of Aid Effectiveness The focus on results makes RBM central to the entire aid effectiveness agenda. It means that stakeholders push partner country governments and donor agencies to demonstrate results. It means that development partners and recipients oblige each other to demonstrate that they are meeting their commitments and promises. The accountability of partner country governments and donor agencies to their respective publics is complemented by mutual accountability between donors and recipients and it is RBM that serves as the crucial basis to make this mutual relationship real. With relation to the aid management and effectiveness principles that form the basis for the Paris Declaration, MfDR is closely linked to ownership, alignment, and harmonization. But RBM reaches far beyond aid management. It addresses the entire development process in partner countries and guides the allocation of all development resources in the most effective way. Independent of aid relationships, RBM comes to bear directly on domestic issues of leadership, governance, and accountability, making it a fundamental political axis instead of a simple planning and management tool. There is growing agreement that RBM should form the basis for countryowned systems that donors and partners are jointly committed to support. Country-based monitoring and evaluation, and the underlying statistical capacity, are essential to make these systems strong. Reliable performance monitoring frameworks not only permit greater accountability and more credible feedback on the effectiveness of aid; they also encourage donors to refrain from imposing their own monitoring and reporting requirements, relying instead on sound country defined criteria. The establishment of a stronger performance culture remains a challenge not only for developing country governments, but also for donor organizations. In responding to this challenge, donor agencies are increasingly pushed to establish consistent sets of internal procedures and incentives that will reward their employees for achieving sustainable and long-term return on investments, and not simply for accounting for the use of donor resources.
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2.
Result- based Management Practice in Nepal
Nepal is slowly but steadily moving towards result-based management in a number of areas. Following the reform attempts made in various areas in Nepal in its bid to fulfill the commitment towards achieving Millennium Development Goals (MDGs), Nepal introduced a Poverty Reduction Strategy Paper (PRSP) as a backbone of Tenth Five Year Plan supported by introduction of MTEF, Immediate Action Plan (IAP), introduction of separate Poverty Monitoring and Analysis System (PMAS) and later District Poverty Monitoring and Analysis System (DPMAS). The National Planning Commission (NPC) and other key ministries (finance, education, physical planning and works, local development, Energy, Agriculture) have taken lead role in adopting a results based approach in public sector management. Support from development partners for key components of RBM include assistance by the World Bank, DFID and others in preparing the Medium Term Expenditure Framework, UNDPs support for the Poverty Monitoring and Analysis System, ADBs assistance for the Governance Reform Program, and DANIDAs support for results-based education management. The government is committed to implement this approach in budgeting, monitoring & evaluation and human resources management. Following the establishment of a poverty monitoring and analysis (PMAS) system at the central level, the government has prepared a district poverty monitoring and analysis (DPMAS) for assessing development interventions and their local impact, which is a sound basis for result based M&E. The Three Year Interim Plan (TYIP) has adopted a results-framework for its sector and thematic areas and has emphasized the importance of adopting results approached in the line ministries and of disseminating it down to the district level. The government has taken some encouraging steps to develop core elements of results-based management for planning, budgeting, implementation and monitoring in scattered way. The government has started poverty based resource allocation to local bodies, strengthening M&E units in key ministries. National Planning Commission, with the support of ADB, is implementing a project Strengthening Capacity for MfDR (2008)" to internalize the approach in key agencies such as National Planning Commission(NPC), Ministry of Physical Planning and Works (MOPPW), Ministry of Local Development(MOLD), Ministry of Education(MOE), Ministry of Energy and Ministry of Agriculture and Cooperatives. These agencies have developed MfDR tools and techniques such as, results frameworks and indicators, business plans, guidelines on project prioritization, and a manual on MfDR operationalization. The project will help create a result based management culture in these agencies and the country. Steering Committee formed under the chairmanship of the Vice Chairman,
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National Planning Commission oversights the implementation of the result-based management in Nepal. Recognizing the importance of results-based management (RBM) for improving portfolio performance and development effectiveness, the Government and participating development partners (DPs) agreed to make it as a main theme for Nepal Portfolio Performance Review (NPPR) 2009. Under this theme, four key areas are identified: (i) reforms in budgeting system; (ii) improving human resource management; (iii) improving projects' quality-atentry; and (iv) strengthening monitoring and evaluation system. RBM aims to shift the focus of budgeting from internal control and inputs to outcomes and efficiency. Public expenditure management is an integral part of the RBM and performance based budgeting system. In this context, recommendations made under Public Expenditure and Financial Accountability (PEFA) report and recently approved Public Financial Management Strategy could provide a good guidance for selecting immediate budgetary reform measures. It is also anticipated that a few sectoral agencies will agree on to implement the RBM with a clear linkage to improved portfolio performance and development effectiveness indicators. The mechanism will be discussed during the 2009 NPPR and an action plan will be prepared for adopting RBM approach. The annual NPPRs led by the Government with joint participation of development partners such as ADB, DFID, JICA and the World Bank have been monitoring progress towards results-based management at the sector levels through a bottom-up monitoring process. In this context, Sector Results Profiles have been prepared for the priority sectors under ADB portfolio, which include (i) agriculture and rural development; (ii) energy; (iii) education; (iv) finance (v) governance; (vi) transport and communication; and (vii) water supply, sanitation and urban development. Further, the assessment of cross-cutting issues, including (i) gender and social inclusion; (ii) procurement; and (iii) environment and social safeguard has been carried out. As a part of preparation for 2009 NPPR, ADB has conducted a workshop to discuss sectoral issues, based on its portfolio, and develop action plan with deliverable results for monitoring throughout the year. It is anticipated that such exercise will help facilitate in the overall discussion at NPPR.
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3.
3.1.
Nepals Result based Reform Initiatives in some Key Areas

Reforms in Budgeting System Concept of Result-based Budgeting (RBB) Results-based Budgeting (RBB) is a strategic management tool designed to improve resource management and public sector accountability. The core of the RBB system is the performance management framework, and it focuses primarily on performance measurement and linkages with policy-making and resource management. It targets the results of programs and activities undertaken by government agencies using public monies. The RBB results are classified under various performance components: inputs, processes, outputs, outcomes, and impact. Though traditionally there is overwhelming emphasis on outputs and outcomes measurement, RBB also focuses on purposive input application and activity completion, recognizing the close relationship between input use and output performance. Various dimensions of output performance also affect the desired outcome of the program or activity. Therefore, the RBB measures results achieved at almost every stage of the project from input application, activity completion, outputs delivery and impact achievement. Ongoing performance measurement and periodic evaluation are key tools through which progress is determined. Performance measurement and evaluation present valuable opportunities to learn and adjust so that the desired results may be achieved. Challenges of Budgeting System The Government of Nepal has engaged in planning and budgeting exercise for half a century, a period during which foreign assistance and budgetary outlays have increased significantly. Overall performance has been mixed, however, with major improvements in some areas but disappointing outcomes in others. Some of the causes may be summarized as: dominance of political agenda, over centralization bureaucratic structures with limited implementation capacities, dominance of top-down planning, underdeveloped private sector, inadequate harmonization and coordination among development partners and the government. Further, there are various issues across the budgeting cycle, which pose further challenge in budget administration, as follows:
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In budget planning exercise, sectoral ceiling is, normally, prepared on incremental basis. Normally, projects are included in budget without prior detailed study and with performance indicators Although MOF issues expenditure authorization invariably on the first day of fiscal year, most ministries takes months to send authorization to their spending units. Expenditure tracking is poor. Allocation may not be consistent with national plan goals, targets and priorities. As of present provisions, the virement up to 25% within main heads of recurrent expenditure of a project is authorized to the concerned ministry. In many cases, the appropriated amount in certain sub-heads remains idle being other sub-heads running out of fund. More flexibility and authority at the project level may be needed on the basis of result indicators (to be developed in advance) except a few line items such as salary, rent, utility charges which can be assessed realistically in budget planning. In case of donor funded projects, reimbursement is not sought on time by the project management, which puts pressure on government budget resulting distortion in budget execution. Similarly, re-imbursement is not authorized timely on the part of donors.
Reform Initiatives in RBB As part of its result-based management initiatives, the Ministry of Finance (MOF) has implemented fully developed performance based incentive scheme in its tax and customs offices which is entirely tied to results they achieve. The government is now planning to introduce resultsbased incentive scheme in public sector agencies that are directly responsible for delivery of public goods and services. Based on the learning and experiences of the pilots of these incentive schemes and the sectoral budgeting reforms, MOF intends to implement results-based budgeting on a wider scale. The current year budget presents critical results of some sectors and the budget appropriation is tied to those results. Long term institutional and human capacity development as well as concrete management support will be essential to institutionalize results based budgeting in public sector management.
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Without having a full scale integrated and comprehensive RBB plan, which needs a rigorous efforts and resources, several steps have been taken to improve the project performance in Nepal, amongst them some are: Performance based incentive system planned for some selected big development projects. Medium-term budget framework has been presented to Parliament with a promise that future financing for projects will be ensured and multi-year contracting promoted for all government projects. The bidding of multi-year projects can be done in a single package, The virement up to 25% within the main heads of recurrent expenditure of a project is authorized to its relevant ministry, Additional funding has been committed, if required, for mega projects like Kathmandu- Nijgadh fast track, Upper Seti Hydropower Project. A Government Budget Management and Expenditure Review Commission is to be formed under the chairmanship of member of the Public Accounts Committee of the Legislative- Parliament to examine and recommend measures to improve budget management and expenditure system.
Piloting of Result based Budgeting As a component of the MfDR project, supported by ADB, there will be a technical support to pilot RBB in two government agencies that are directly engaged in public service delivery. Potential agencies include the Transport Management Office and the Traffic Management Office (of Nepal Police). In addition, as an outcome of the NPPR 2009, there may be other agencies, which could show their eagerness, to launch the RBB mechanism. The project will assist the government to develop criteria to assess the readiness of agencies and/or selection of the projects for the implementation of RBB (using MfDR readiness assessment tool) and also facilitate the selection of the pilot agencies, either the two mentioned above or other viable ones. The project, in close collaboration with MOF and pilot agencies, will develop implementation modalities, which will include key results areas and monitor able performance indicators on service delivery that are organization- specific. The project will support the
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implementation of the two pilots, as well as monitor and publicize the results of the pilots. Medium Term Budget Framework (MTBF) Nepal's MTBF, supposed to be revised annually, contains priorities, programs and projects, and sets annual targets at national and sector levels for a three-year period. For each sector and subsector, the MTBF shows expenditures of the previous year, estimates for current year budget allocations for the forthcoming year, and forecasts for two additional years. Implementing agencies prepare detailed work plan/programs with performance indicators. Release of budgeted allocations is contingent on demonstrated performance. For few years, MTBF process has not been followed properly. Current year budget (FY 2009/10) has revived MTBF process again with added values by incorporating resources estimate for three year as a significant departure in this process. The government is now working on to institutionalize the MTBF, enhance the quality of the process, including developing comprehensive manuals and guidelines.
3.2.
Reforms in Public Financial Management (PFM) Various studies by the development partners and the Nepal Public Expenditure and Financial Accountability (PEFA) assessment show that despite the satisfactory fiscal discipline, the overall risk related to public financial management in Nepal is high. The assessment further concludes that the system is generally designed but unevenly implemented and despite advanced set of laws and regulations and processes in place, there are gaps in the control framework and implementation. In 2005, the Government and the World Bank with participation of a number of other development partners carried out a Public Expenditure and Financial Accountability (PEFA) assessment based on the PEFA framework. This assessment covers 31 indicators that were assessed and benchmarked covering six core dimensions. A significant output of the PEFA assessment was a detailed list of approximately 150 actions to be undertaken over the short and medium term to improve PFM performance (the Development Action Plan - DAP). Since the PEFA Report was published in February 2008, there are some delays in the implementation of the
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development action plan (DAP). achievements seen:
However, there are number of key
The Government has shown its full commitment on public service delivery and combating corruption in various policies. Establishment of PEFA Steering Committee and operationalization of PEFA secretariat for implementation of PEFA Action Plan. Approval of PFM strategy document for Phase I by PEFA steering committee and implementation (conduct regular PEFA assessment, update PFM performance ratings, etc) is on schedule, for which support is being sought from WB/DFID. Joint Government/Donor Procurement Review completed to address the current issue of collusion and intimidation of bidders, and Action Plan endorsed; Approval of the government to implement IPSAS Based Cash Accounting Standard The Integrated Financial Management Information System (IFMIS) through the Public Financial Management Project is underway. Continuation of institutional strengthening of Public Procurement Monitoring Office (PPMO) with World Bank and ADB support; Capacity building initiation and signing of Memorandum of Understanding (MOU) between the Office of the Auditor General (OAG) and the Norwegian Supreme Audit Institute (SAI). Establishment of PEFA implementation units in fifteen ministries for the implementation of action plan and strategy. Piloting of Treasury Single Account
To enable better control over government financial resources, better cash management and reduction of idle balances by bringing all government accounts under the control of Treasury and consolidation in a Single Treasury Account (TSA).The Government of Nepal (GON) has taken a decision to establish a TSA regime. The piloting of Treasury System will be in two districts, Lalitpur and Bhaktapur and starting in Bhaktapur from November 16, 2009. The change in the treasury system from the existing one to the TSA regime will have an impact on the rewriting/up- gradation of the computerized financial management software currently being used by the government which is one of the principal components of this reform. The establishment of Treasury Single Account Regime will help to take up few actions indicated in the PEFA Development Action Plan including the reduction of payment centres.
As a gradual and long term program, the Government of Nepal has decided to launch Public Financial Management Reform Program
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(PFMRP) which requires strong political will and commitment which will contribute to reducing fiduciary risks and improve transparency and accountability of public financial management (PFM). Public financial management strategy has been finalized for next three years for Nepals Public Financial Reform Program. This strategy comprises six program outcomes, eighteen outputs, thirty eight activities and performance indicators and targets.
Nepal Public Sector Accounting Standard (NEPSAS)

In the recent past, Nepal has initiated a number of measures to improve/strengthen the financial management system. Certain areas covering some of the functions of FCGO have, however, got little or no attention in these initiatives. Fund Management, Reimbursement/Investment and Appropriation functions of FCGO did not get any priority in these reform initiatives. In the context of establishment of TSA regime and implementation of new financial management systems, strengthening of Information is also crucial. This carries significance in view of GONs commitment to move to IPSAS cash based accounting system and to implement Nepal Public Sector Accounting Standard (NEPSAS). The government has taken a decision to implement public sector cash basis of accounting system in line with international accounting standards (IPSAS).
The government has committed in the PFM agenda with a separate Secretariat for PEFA which is govern by the steering committee chaired by the Finance Secretary. This is a gesture of commitment to implement the PFM reforms. This Secretariat plays a coordinating and facilitating role to monitor the implementation of PEFA actions and to establish a central monitoring system to track the progress against each PEFA indicator. 3.3. Reforms in Procurement System In recent times, wide spread perception amongst the stakeholders and the reports in the media have indicated that malpractices in public procurement, including intimidation and collusion/cartelling amongst the bidders are on the steep rise, both at the central level and in the districts. Cases have not only been reported in the media but also seen when the bidders were prevented from bidding through intimidation and use of physical force by individuals and groups hired by a few unscrupulous bidders. This malfunctioning of the public procurement is of national concern. Given these problems of fraud, cartelling and intimidation, a joint GON/DfID/ADB/WB Procurement Review Team (JRT) was constituted under the convenorship of the Ministry of Finance (MoF) to review the
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current procurement issues, including laws, regulations and procedures in public procurement that are impeding economic and transparent project implementation and recommend the measures to address them. It was expected that the review exercise would provide a common forum where procurement-related issues and problems could be openly discussed between GON line agencies and the development partners and to identify issues and remedial measures that would help enhance transparency and competitiveness in the GON public procurement. The Team submitted its report to the Steering Committee (SC) recently, and also suggested various measures to improve the situation.
Structural Reforms in Procurement System & its Challenges in Nepal
The procurement regulatory framework consists of the Public Procurement Act, Public Procurement Regulations, and General Contract Law and Construction Entrepreneurship Act. The Public Procurement Act, 2007, the supreme law on procurement, broadly based on the UNCITRAL model law, was enacted in January 2007 and Regulations issued in August of the same year. The procurement law is applicable to all entities including the parastatals. The Law covers all areas of procurement including works, goods, consulting and other services and applicable to all government procurement irrespective of contract value. These are generally adequate instruments but for a few minor shortcomings. New law has important provisions such as: review of procurement decisions, creation of regulatory body, PPMO though also involved in decision making on variations referred to the Cabinet, code of conduct for bidders and public officials handling procurement and blacklisting of defaulting contractors. These instruments are being followed as they are mandatory but the effective implementation, in particular of the above mentioned provisions, lacks and may somewhat improve only after the documents, including Public Works Directives and Standard Bidding Documents are revised and developed to be in conformity with the Act and the Regulations and PPMO becomes active as mandated by the Law. As of now, the capacity of the PPMO needs to be strengthened. Technical assistance programs provided by ADB and World Bank are currently in place to support PPMO for implementing the Procurement Law which includes capacity building on procurement in the country. The joint reports recommendations are expected to be implemented to reduce collusion, coercion and intimidation in bidding process. Another issue, a product of the new Procurement Law is "Variation" to contract. The new law requires variation exceeding 15% of the contract price approval of the Cabinet which is being criticized by various development partners as a problem in implementation of large works contracts as no amount of detailed investigations would stop variations particularly against the backdrop of the complex geology of the country. Variations, caused for contractors profitability involvement and his inefficiency in managing in terms finance, equipment do involve prospects for corruption.
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Some of the major recommendations of JRT are as follows: a. Procurement capacity enhancement plan of PPMO and other executing agencies will be introduced. b. Implementation of e-bidding should be explored as an option to avoid the physical obstruction in submitting tenders and thus reduce the chance of collusion c. Multi-placed bid submission could be tried in government funded projects with amendment in the Act. d. User groups should be allowed to bid contract only in the local level works where they are the users. Also, capacity is enhanced of the local bodies to monitor the work of user groups. e. Constructive engagement with local construction industries. f. Detailed criteria for blacklisting the Contractor/supplier/user groups/NGOs should be developed and enforced. g. NGO should not be awarded any work without proper qualification and screening. h. GON to ensure security and get cooperation from all political parties to prevent alleged involvement of their sister organizations in hooliganism and collusion and also persuade district contractors associations to refrain from promoting collusion among its members. The Steering Committee, established to oversight the implementation of the report, has accepted the report and has sent to PPMO for further implementation. PPMO circulated to all related public entities focusing on the issues like development of Contract Agreement Monitoring systems, allocation of budget for procurement training and penalize to the person or groups involved in bidding related criminal activities. Ministries and departments are positive to develop Contract Agreement Monitoring System software and proposing budget for the training.
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Introduction of E- Procurement
The Government of Nepal has announced through its Annual Budget of FY2009/10 for arrangements for e-tendering in big infrastructure projects. The revision in Procurement Act will incorporate the multiple place bid submission until the full fledged e-tendering system in place. As a progress, preparation of e-bidding strategy report has been completed and consultation is undergoing for its implementation. The World Bank carried out a detailed readiness assessment for implementing e-procurement in 2007 and a number of recommendations have been made to implement e-procurement. As a medium to long term solution, review of the recommendations and implementation of such recommendations should be a priority which provides technical solution to possible collusion.
Support from the development partners is instrumental to institutional strengthening of the PPMO in the areas where new ideas, technologies and system development is required, such as e-procurement system, contract management system improvement and contract administration. The World Bank and ADB are helping the Office in identifying the capacity gaps and help in implementing the reforms in this area to attract qualified and competent staff. Transitional Standard Bidding Document are issued and are put in the PPMO website and finalization of this Document, which covers SBD draft for civil works, goods and consulting services, is underway. Preparation of e-procurement proposal and software development is planned during this year. 3.4. Reforms in Monitoring & Evaluation Nepals Monitoring and Evaluation( M&E) is relatively weak and low priority area in terms of reform initiatives resulting slow progress in reforms despite some important milestones have been laid. There is a wide recognition that institutional capacity for monitoring and evaluation is limited across monitoring units. Although, there are M&E units established in most ministries, these are often under-funded and under-staffed and low incentives to work in these units. There is also growing concern to have more localized system of monitoring and evaluation to minimize the general overlook from the centre in these areas. The importance of social accountability tools such as periodic Citizen Performance Score Cards for different service delivery units and Citizen Report Cards enhance community participation is felt. They provide a more realistic assessment of institutional and regulatory weaknesses in monitoring and evaluation that affect implementation. These tools are now being increasingly popular in many governments.
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Nepal is also in line with this reform in medium term as the overall information system is improved.
Result based Monitoring & Evaluation
The Results-Based Monitoring and Evaluation (M&E) System is used for systematic and focused program planning, performance monitoring, performance evaluation, performance reporting and information utilization for program improvements and policy decision-making. This factor helps to ensure systematic and structured performance planning, management, and measurement under the RBM and helps to forge tighter linkages between resource use and policy implementation.
Nepals monitoring and analysis system has historically treated as input monitoring. Also, there is a lack in required expertise with the implementing agencies to verify the report submitted by the consultants. Timely and appropriate assessment of the projects contribution toward attainment of outputs and outcomes is not accomplished. The necessity of establishing result based M&E system, with specific indicators, in each project before start up is vital. Effectiveness of aid and local resources pose a serious challenge in Nepal. Sector programs like Health and Education have relatively good monitoring and evaluation frameworks in place. The rollover of such frameworks to other ministries could be helpful. However, further progress could be made in this area with the use of the poverty monitoring assessment systems (PMAS). At the foremost, separate M&E policy is lacking in Nepal. The use of IT in M& E is certainly important to have better efficiency. Network establishment among executing agencies and National Planning Commission is vital. There is some progress made in this front as Optical fiber link between the ministries within Singh Durbar have been established. Setting up of a Project Performance Information System at National Planning Commission is another area where progress now is picking up. Additional resources are required to operationalization the PMAS/DPMA including disaggregation of data in medium term.
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Result based Monitoring & Evaluation- A Success Story in Niger

In order to revise the Accelerated Development and Poverty Reduction Strategy (SDRP) in Niger, the government formed an Information and Monitoring and Evaluation Thematic Group which is composed primarily of M&E specialists working with the central government, projects, and cooperation institutions. For efficiency, the group was organized into three subgroups: Statistics, Tools and Methodologies, and Support and Advisory Services to Thematic Groups. The thematic groups mandate was to help the other 14 thematic groups to develop sector strategies, including identifying objectives and outcomes. The group was also expected to be responsible for the overall coherence of the strategy and for ensuring that the intervention approach adhered to RBM principles. To carry out its mandate, the Information and Monitoring and Evaluation had to promote the concepts, principles, and tools of RBM and make RBM a reality under the new SDRP. The M&E group worked for six months, including two to three months on the development of methodological tools such as the design of a results-based logical framework, indicator data cards, and the results chain. The groups main achievements were providing support, advisory services, and training to sector groups. Development of the SDRP results chain, which was entrusted to a subgroup, After approximately one years work, the new SDRP document was validated by the Government in September 2007. Its intervention rationale is set out, first, through a hierarchy of objectives comprising a general objective, a specific objective, and seven areas of intervention; and, second, through the results hierarchy, which includes 44 outputs, 7 specific outcomes, 3 general outcomes, and one impact. For the different links of the results chain, the methodological approach helped identify 8 assumptions/risks, including 5 for outputs and specific outcomes and 2 for specific outcomes and general outcomes; and 126 indicators, including 10346 for the outcome level, 15 for the specific outcomes level, 7 for the general outcome level, and one for the impact level. In 2007, the work of the M&E Thematic Group was rewarded when the following significant results were attained: 1) Training in strategic RBM for 60 staff involved in the revision of the PRS. 2) Development of the SDRP results chain, defined as a set of results attained within a time period and linked to each other in a cause-and-effect relationship (outputs, outcomes, and impact). The specificity of this results chain lies in the breakdown of outcomes into specific outcomes and general outcomes. 3) Development of the logical framework of the SDRP based on a matrix integrating the RBM approach, which is achieved by taking into account four different levels of results: outputs, specific outcomes (sector), general outcomes, and long-term impact.4) Development of performance indicator data cards in the form of proof indicating that the desired results were attained at all levels of the chain. The data card for each indicator presents the results in question, the indicative goals targeted, the time limit envisaged for attaining the result, the source of the data, and the entity responsible. 5) A proposed reporting framework for the regional and national levels, which would reflect an RBM approach.
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Further, the government, recently, has announced to create a mechanism under the chairmanship of National Planning Commission to monitor the budget action plan. This mechanism will carry out the site visit of selected big infrastructure projects in every two months and prepare reports. These reports will be submitted in a regular ministerial review meeting and the special committee meeting in every three months under the chairmanship of the Prime Minister. The government has also announced to introduce the Independent evaluation of the programs as prioritize by National Planning Commission. 3.5. Reforms in Human Resources Management Some of the generic issues in human resources management, particularly for the effective portfolio performance, are outlined as timely non-fulfilling of vacant positions, inadequate staffing, frequent transfer of project staff, absence of institutional memory due to the absence of compliance of handover/takeover mechanisms, lacking capacity and incentives mechanism. These are hampering project implementation and portfolio performance and need to be addressed urgently. In regards to the issue of transfer of project staff at the center and district level without the proper hand over of responsibilities is a major concern that has been repeatedly raised in past NPPRs. Although the Ministry of General Administration confirms that the staff transfer has been carried out in accordance with the Civil Service Act, frequent changes of key implementing staff have occurred resulting in further implementation delays, disruption in the project implementation momentum and loss of institutional memory. Likewise, the frequent changes of the local development officers of the districts, chief executive officers at the municipalities, sectoral district chief and district technical officers and associated staff have significantly hampered the implementation of many projects. The situation is equally challenging in accounting human resource management front as well. Hiring Timely fulfillment of vacant positions and deployment of project staff has been raised as a critical issue since long time. The government has time and again expressed its commitment to unbridle the issues particularly for the projects financed by development partners. In order to
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expedite the process (i.e. hiring the personnel for the projects), the government has been developing a procedural guidelines for creating temporary job post. These posts can be filled through transfer from other permanent government agencies, hiring only for the project duration, and contracting out the job or services through agreement. The project that needs the staff, may ask for it with clear statement of the intended supply modalities. The Ministry of General Administration has finalized the guidelines for creating the temporary position and recruitment. In the meantime, the governed has also formed a Task Force, comprised of Joint Secretaries from Public Service Commission, Ministry of General Administration and Ministry of Finance, to develop common selection guidelines. Transfer and Retention At present, there are various authorities at various levels for transferring the staff. The untimely and frequent transfer of the project personnel hampered the projects implementation negatively resulting time and cost overrun. As the issue has been raised in various fora by different stakeholders, the Ministry of General Administration (MOGA) has paid great attention to it. As the organizational reform of MOGA itself is in the process with added duties and authorities as a Central Personnel Agency of the government, the Ministry has developed a proposal to authorize the task of personnel transfer to the concerned ministries with clear common guidelines. With this provision, when implemented, it will improve the situation better. The government has clear rules and regulation for the handover/takeover process to maintain the institutional memories in offices. The compliance is very weak and needs to be improved with strong commitments. Performance-based Incentives As the government is concerned about the performance and incentive of the employees, the government has announced through the current year budget speech that performance based incentive system will be put in place in selected big infrastructure projects. Some of the Ministries have already been implementing it satisfactorily, such as Ministry of Finance. Some ministries are preparing for introducing this scheme to enhance the performance of the projects.
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During this NPPR 2009, there will be a discussion as how to address the human resource management issues and develop a concrete actions such as (i) adherence to two years tenure of all project staff of donor financed projects and possibility of retention of good staff for project period (ii) fulfillment/deputation of required number of project implementation staff at the district level for donor supported project; (iii) review the performance based incentive scheme implemented in Department of Revenue and consider replication to other major line ministries such as the Ministry of Physical Planning and Works and Ministry of Local Development where donor funded projects are high and (iv) capacity enhancement particularly in specialized areas such as procurement, safeguards, M&E and explore the possibility of outsourcing. 3.6. Quality at Entry The assessment done by some of the development partners and other observations show that project start-up period is too long in Nepal partly because of a lack of sufficient implementation readiness at the time of loan approval. Average time taken to achieve 20% disbursement in 2008 is 49 months. This has further carried over into broader implementation delays and ultimately in the extension of projects. As a result, the average age of portfolio in Nepal is 52 months, higher than the ADB wide averages of 41 months (Ref. ADB supported projects). These data indicate that Nepal portfolio suffer from poor quality of entry of projects. A focus on project readiness is critical for quick start-up. To reduce common start up delays and ensure quality at entry, there was a discussion on project readiness filter during the 2005 NPPR with an aim of completing prerequisite actions for a quick start-up after the loan approval. The filter was streamlined to indicate the actions required in the areas of land acquisition; environmental assessment; procurement of goods, works and services; and preparation of detailed design and bidding documents at various stages of project cycle. Despite the use of readiness filter, its effect is very limited. Now, it has become necessary to refocus on this issue during this NPPR 2009, revisited the filters and agreed upon with strong commitments from both government and DPs. While discussing on the readiness filters, it is expected to concentrate the discussion on the following major activities:
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Project implementation units established and project staff assigned/deputed Provision of budget for the first year of implementation Establish financial management system, auditing arrangement, fund flow arrangement, and oversight system Bid invitation for works and goods issued for the first 12 months of project implementation and request for proposals issued for consultants Process/administrative clearance for temporary use of land, e.g, right of the way for the first two years of project implementation completed Compensation determination committees established and at least 20% land acquisition completed All statutory clearances like environment/forest clearances for the first two years of project implementation completed
4.
Nepal on path of Aid Harmonization: Enhancing Commitments
More than ever, citizens and taxpayers of all countries expect to see tangible results of development efforts. Both development partners and the government wish that their actions translate into positive impacts on peoples lives. Reaffirming the commitments for better aid and its utilization, various international commitments have been reflected through many forums such as Paris Declaration, Accra Agenda for Action. Nepal participated in the 2nd HighLevel Forum on Aid effectiveness held in Paris in March 2005 and became signatory to the Paris Declaration. Since then Nepal has moved forward with a number of milestones as its commitment for aid effectiveness. Ministry of Finance conducted a survey on Monitoring the Implementation of Paris Declaration in 2007, which revealed interesting findings. Table -1 summarizes the status of implementation of the Paris Declaration in Nepal.
Table- 1: Nepal Survey on Monitoring the Paris Declaration: Summary of findings Indicators Aid on Budget Technical assistance Coordinated Technical Assistance Results 74 % 34 % 14 %
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Using Procurement system Using country Public Financial Management system Parallel Project Implementation Units- PIUs (number) Predictability Program-based Approach: Budgetary support others Joint Country Analytic Work (CAW) and
59 % 68 % 106 47 % 32 % 37 %
Ministry of Finance disseminated the above findings in various national, regional and international forums, including the 3rd High-Level Forum in Accra itself. In Accra, Nepal was the first presenter in "Marketplace of Ideas" session that showcased the success story in area of aid harmonization - particularly in education and health SWAP, and peace process. In line with the Paris Principles, Nepal is revising Foreign Aid Policy. Currently, it is being floated among the stakeholders. With a view to localizing Paris principles, Nepal has developed a draft National Action Plan on Aid Effectiveness (NAP) and shared with development partners as well as government agencies. The NAP will continue to identify Nepal-specific, doable actions that help to implement Paris principles on ground, which revolve around 5 overarching themes of aid harmonization- ownership, alignment, harmonization, managing for development results (MfDR), and mutual accountability. After Accra, Nepal has been actively participating in various joint ventures, task forces, and initiatives, for example on 'Cluster-B: Public Financial Management', 'Cluster-C: Conditionality, Accountability, and Transparency', 'International Aid Transparency Initiative (IATI)' etc. Finance secretary level participation in the first annual conference of IATI held in the Netherlands in October 2009 further reaffirmed Nepal's commitment towards better and transparent aid. The IATI intends to publish all aid-related information in a consistent format so that the traceability of aid transaction is improved resulting in visible and effective results.
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In line with commitment made in the Paris Declaration, the second round of evaluation of Paris Declaration is being conducted at country level in 2010. Recently, Nepal volunteered to participate in the second round of Paris Declaration Evaluation (PDE-II). We hope this engagement will be another milestone on the way to identify baseline information on effectiveness of Paris Declaration in Nepal. To materialize all the above mentioned initiatives, Nepal realizes the emergent need of local capacity. Capacity existent at individual level needs to be retained in organizations and institutionalized through various incentive systems. Capacity so developed needs strong back up of information and policy. For this, Ministry of Finance is implementing a project, with the support of UNDP, to develop capacity of Ministry of Finance along with five key development Ministries. The project has three major components- developing and operationalizing Aid Information Management System (AIMS), developing and sustaining individual, organizational and institutional capacity for aid management, and supporting implementation of aid effectiveness principles in Nepal through revised policy instruments and action plans. Need assessment exercises for the former two components have just been completed.
5.
Future NPPR mechanism making more Result Focused
Movement to a transparent result based performance framework for the NPPR is felt necessary. A mutually accountable results framework could be developed which focuses on key indicators and be formulated around an annual cycle which is linked to the preparation and execution of the budget. The framework could be based around a manageable number of annual performance indicators which would measure progress towards agreed sectoral level targets and monitor key macro-economic, PFM and governance based indicators. In order to keep the implementation focus of the NPPR, each indicator and annual target will have directly linked actions which are supportive policy or implementation changes that are required to make progress towards annual targets. A good target would be around 20 indicators (covering more than 70% of the budget). This framework would be the focus of all dialogue on government performance.
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Development partners progress towards their Paris and Accra commitments also needs to be measured annually to establish a truly mutually accountable framework. Indicators can be derived from internationally agreed targets and adjusted to the Nepali context. Selection of 10-15 indicators should be sufficient to adequately measure progress. The possibility of merging NAP indicators with the NPPR also needs to be explored. Currently, there are two big challenges in this area, which are- aid information database and agreeing on achievable annual targets. This new approach could be developed by a joint team of development partners and government. Similarly, the progress follow ups of NPPR periodic progress also needs to adopt more participatory approach. Conducting reviews at the concerned lead agencies premises will generate more ownership than asking for the progress and inviting at a place in a formal fashion. This can be discussed while finalizing the implementation and follow up modalities after the NPPR meeting.
6.
Major Challenges in Key Areas
There have been various challenges in enhancing project portfolio performances and achieving the development effectiveness. For the purpose of steadily addressing some of the major challenges through this NPPR mechanism, the followings are outlined as summary: Budgeting Reforms
I. II. III. IV. V.
The sectoral ceiling is normally prepared on incremental basis. Projects are included in the budget without detailed study. Sectoral target/indicators have not been prepared in advance Budget allocation is not linked with the sectoral targets and priorities. Lack of enough flexibility for the project manager to mobilize the fund within allocated budget head (virement). Concentration of capital expenditure at the last trimester of the budget year. Consistently guarantee of fund for a project without hindrances in any budget year.
VI.
VII.
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Human Resources Management I. II. III. IV. V. Inadequate staff for the projects against the required number. Frequent transfer, not fully complied with 2 years tenure, and transfer done at the middle of the projects life. Lack of incentive resulted slow progress of the projects which over run the costs and also undermined the national capacity building. Capacity gaps in various areas, particularly in procurement, monitoring and evaluation, safeguards, etc. Lack of institutional memory in the projects after the movement of the staff due to inadequate technical support (IT systems, data) and noncompliance of handover/takeover mechanism.
Monitoring and Evaluation I. II. III. IV. V. Generally, weak commitment on the monitoring and evaluation aspect of the project. Absence of separate monitoring and evaluation policy. Non-provisioning of budget for M&E activities in each project. Lack of integrated information systems established at the centre and linking it to the line agencies and the districts. Insufficient capacity building efforts.
Projects Quality at Entry I. II. Outdated Projects readiness filter Preparation delays for a quick start-up of the projects resulted demands for project extension. Delays occurred in PIUs establishment and staffing, land compensation committees formation, environmental clearances, preparation of detailed design and bidding documents, etc. Lack of enough budget, in some projects, for the first year of implementation
III.
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IV.
Weak compliance of the Project readiness filter from both side GON and DPs.
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7.
A Way Forward
The Government of Nepal is committed to overcome these challenges through the continuation of the reform, initiated in different times and through the new measures in various areas in order to improve the performance of the projects and achieve the development results. Specifically, to address the above mentioned challenges, following key actions are identified: Budgeting Reforms I. Implementing the result based budgeting (RBM) to further improve the budgeting system, by selecting pilot sectors/projects, where following possibilities will be explored: a. Provide flexible ceilings in selected pilot sector/projects b. Projects are included in the budget with detailed study with measurable sectoral performance indicators c. Provide enough flexibility in mobilizing the fund within the budget head d. Timely approve the annual work plan and ensure the fund authorization on time II. III. IV. Advance the budget approval process to allow more time for early implementation of the projects. Budget allocation is aligned with the sectoral targets and priorities. Continuation of multi-year budgeting initiated in FY 2009/10
Human Resources Management I. II. III. Full compliance of Civil Service Acts 2 years tenure provision for all projects staff. Explore the possibility of deployment through the project period for good performing staff. Launching the performance based incentive system in major spending ministries like Ministry of Physical Planning and Works, Ministry of Local Development, etc.
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IV. V. VI.
Explore the possibility of outsourcing in some of the areas like procurement, M&E, safeguards. Provision of creation of temporary posts to fill up the vacancy on time. Exercise the possibility of transferring the personnel transfer authority from Ministry of General Administration to the line ministries with certain guidelines.
Monitoring and Evaluation I. II. III. IV. Develop a separate monitoring and evaluation policy Rollover the sector wide M &E framework in other ministries Establish the integrated information system for M&E at the NPC and link them with other ministries Make mandatorily the provision of M&E budget in each project.
Quality at Projects Entry I. II. III. IV. V. GON is committed to update and implement Project Readiness Filter along with the development partners. GON is committed to ensure enough budgets at the first year of the projects. GON is committed to minimize the project start up delays. GON is committed to expedite the process for provisions like environment/forest. GON is committed to set up PIUs and assigned the project staff timely.
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Part II Implementation Status of NPPR 2008 Action Plan

The Government of Nepal has organized its annual Nepal Portfolio Performance Review Meeting (NPPR) in November, 2008 after it took full ownership of the meeting since 2006. The theme of the meeting was selected as Use of Country Systems for Improved Portfolio Performance. Five sub-themes were selected on which several short term and longer term actions identified with measurable indicators. The sub-themes were: (1) result-based management, (2) public financial management (3) public procurement (4) monitoring and evaluation and (5) donor harmonization, coordination and project management. Various actions were developed with role defined to the responsible agencies and timeline as an outcome of the discussion in the review meeting attended by project managers, development partners, government agencies. As an improved implementation strategy, five champions were identified and given job for follow up of implementation for each sub-theme. Trimester progress review meetings were held in February, May and November. Due to the countrys situation at transition, the reforms implementation through this mechanism was affected caused slow progress in many areas. However, the overall progress of NPPR 2008 was mixed. Out of the identified 31 short term indicators, 10 were complied, 18 were work in progress and 3 were due. Ministry of Finance has followed up the implementation progress as stipulated schedule and shared with all Development Partners. Details of the implementation status of the action plans are presented in the attached matrix. Result based management National Planning Commission led this sub-theme supporting by other government agencies and development partners. Seven actions were identified and followed up for its implementation. As the MfDR Technical Assistance was delayed, the progress of this theme was slowed. However, some progress was seen. High level committee has been formed under the chairmanship of Vice Chairman, National Planning Commission to guide and implement the results frameworks such as capacity building framework, revision of reporting formats, program and budgeting framework. The concrete progress is yet to be made.
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Public Financial Management Financial Comptroller Generals Office was given led role for this subtheme. Ten key actions were identified and implemented during a year. Some of the progress made is as follows: the Education and Health sectors are connected with FCGO database; PFM strategy document has been approved by PEFA steering committee; the preparation of implementation plan is underway; PEFA implementation unit has been established in 15 ministries for the implementation of the strategy; the PEFA action plan has been sequenced and prioritized and Phase I of the PFM Strategy has been prepared by the government with the overall government development objectives. Public Procurement Management Public Procurement Monitoring Office (PPMO) was given a lead role on this Sub-theme. There were five key actions were identified. As a progress, GON and Development partners Joint Review Panel prepared a report on collusion, coercion and intimidation practices in bidding process and submitted to the steering committee. The committee has approved the report and sent to PPMO for its implementation. Relevant recommendations of the report will be incorporated in the proposed revision of the Procurement Act. Likewise, some capacity building activities in PPMO has been done. Restructuring and further capacity enhancement of PPMO is felt necessary. Similarly, transitional Standard Bidding Document has been issued and is posted in the website. Final SBD draft is being consulted with Development Partners. Monitoring and Evaluation System Three short term actions were developed and given the implementation role to National Planning Commission. Regarding the progress, in order to incorporate the M& E budget while approving the project/annual work plan, NPC issued the guidelines to all ministries as TYIP focus to allocate 0.5 percent of total budget for M&E. Preparation of M&E action plan is underway. Donor Harmonization, Aid Coordination and Project/Program Management Six actions were identified and implemented. Some of the key actions were related to the holding of National Development Forum (NDF) whereby the plan was to formalize the new Foreign Aid Policy and Aid Effectiveness National Action plan (NAAP). As the NDF postponed, these two major activities were
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delayed. Aid mapping exercise was completed. However, further updating and revision is necessary. To establish Aid Information Management system, need assessment has been completed by Gateway Foundation. Service provider for software has been selected. The issues of staff transfer were discussed in almost all progress review meeting. For the adoption of Standard Operating Procedure in each agency for incorporation of proper mechanism of handover and takeover, MOF has requested to all line agencies. Regarding Longer term action plan matrix, it was not feasible to focus on implementation and follow up as the nature of the issues has longer timeframe. It is also felt that NPPR should focus only on shorter term doable actions to be implemented within a year.
Attachment: Action Plan Matrices with updated progress as of November, 2009
Updated: November 2009
2008 NEPAL PORTFOLIO PERFORMANCE REVIEW (NPPR) ACTION PLAN FOR IMPROVING PORTFOLIO PERFORMANCE (Short-term Action Plan) Progress as of November 2009
Revised
Focus SubTheme Performance Indicators Target date

June 09 NPC, MOF, sectoral line ministries March 2009
Challenges
Agreed Actions
Responsible Agencies
Target Dates
Progress
Due. As the MfDR TA delayed, this action has also been delayed. Capacity building framework is planned to be done under the project. The project has been operationalized from July 22, 2009. NPC is committed to prepare this framework.
1. ResultsBased Management (RBM)

Capacity building framework developed NPC and sectoral line ministries Revised format prepared RBM -informed program and budget. July 2009 May 2009 NPC and sectoral line ministries.
Internalization of RBM by government agencies
Develop a capacity building framework (conceptualization, procedures, resources, logistics)
Expected Outcome:
Review and revise reporting format for result-based reporting
Efficiency and Effectiveness of the Government of Nepal in achieving desired results

NPC Regular minutes of meeting
Prepare result based annual /program and budget framework.
Complied. Existing reporting formats are reviewed and revised by the committee. It is approved by NPC and circulated. Printing is being done for distribution. It will be uploaded in the website. Complied: Guidelines are already issued by NPC to the line Ministries for result based AWP for FY 2066/67. April, 09 Complied. The committee has been formed on 24 June 09 under the chairmanship of VC, NPC represented by some secretaries of line ministries including MOF secretary as Joint Secretary of NPC member secretary.
Need for GONDonor harmonization in planning, programming and monitoring results NPC/MOF/ line ministries/DPs
Champion: Division Chief, Poverty Monitoring Division, NPC
Form a high-level steering committee chaired by NPC Vice Chairman and represented by MOF, relevant line ministries and development partners.
January 2009
Develop a framework and implementation plan for RBM
Framework and implementation plan finalized
June 2009 Due. This action is related to the No.1 action. As the MfDR TA has been delayed, this action is also affected.
NPC and MOLD
Ineffective development impacts/results tracking
Review the system of PMAS/DPMAS at central, district and sectoral level for further strengthening
Review reports (trimester, MDAC, NDAC reports) Share progress and lessons learnt of the current MFDR process
July 2009
Roll out MfDR process to other line agencies
NPC/concerned line agencies/ADB
June 2009
Work in progress. Steering Committee is formed under the Chairmanship of Secretary, NPC and Coordination Committee is formed under the chairmanship of Joint Secretary, NPC to review the system. Work in Progress: Process has been started under ADB TA. Consultants selected. Consultations have been done with line ministries. Inception workshop has been done as planned.
Revised
Focus SubTheme Performance Indicators Target date Progress

MOF, NPC, Line Ministries Timely fund release to P1 projects July 2009
Challenges
Agreed Actions
Target Dates
2.
Public Financial Management (PFM)

Decision on increasing the proportion for advance from 1/3rd to appropriate level for P1 projects Concept Note prepared, disseminated and discussed with the CA members March 2009
Delay in fund release due to delay in program approval
Expected Outcome:
MOF, NPC, Line Ministries
MOF to increase the advance release from 1/3rd to an appropriate level for P1 projects based on performance or funding needs, and priority of the government
Complied: Current advance release system is enough and P1 projects get the funds as they need.
Transparent, Accountable and Robust Financial Management System

MOF/NPC/line ministries Budget management based on performance
Prepare a concept note for advancing the time for work program and budget discussion and ensure that they are approved prior to budgeting of new fiscal year
Not complied: GON has principally agreed to advance the budget speech. Last year, MOF was prepared to announce budget speech in June, 09. However, due to the sudden changes in the government, this was not possible. Aug, 09 Work in Progress: The NPC has made a provision to submit the work plan at the time of approval of programs. Provision has been proposed for reviewing the clause related to the budget surrender in Financial Procedural Act. The Act is under discussion in parliamentary committee.
Champion: Mr. Dev Raj Pathak, Joint FCG, FCGO
April 2009
Lack of submission of Procurement Plan with Budget Submission
For ensuring better financial discipline, GON to issue directives for "budget surrender" in mid-year review of the budget if there is no progress in implementation of program as per procurement plan MOF, FCGO 500 staff recruited Transfer policy reinforced Implementation not affected by transfer of staff
Inadequate Accounts Staff and issue of Accounts Staff transfer
GON to make decision to fill the vacant positions of 500 staff to address the issue of inadequate accounts pool
March 2009
June 09
Work in progress. There are still various positions need to be fulfilled. Out of 85 officers, 31 officers and more than 200 accountants have already joined the service. Non officers and rest of the total personnel will be fulfilled within 2009. Request has been placed to Public Service Commission for fulfilling 50 temporary staff. Transfer policy has been followed.
FCGO
Government accounts smoothly reconciled Project Accounts prepared on time
FCGO to ensure the policy of adhering to Civil Service Act regarding staff transfer including that the account staff will not be transferred in the last trimester of fiscal year and if the project/program is in the final year, due to accountability of closing final accounts
Ongoing
Complied. FCGO has followed the criteria of Civil Service Act.
Revised

June 09 MOF, FCGO Preparation of Training Implementation Plan. Implementation of training program. Capacity of accounts staff enhanced. Timely preparation of financial statements. Continue this every year Implement Sept first round of 09 training by mid-July Implementat ion Plan by Jan 2009
Challenges
Agreed Actions
Target Dates
Weak capacity of accounts staff and capacity building
Work in Progress: Curriculum of induction training has been finalized. Training on Financial Management for new entries officers has been done in September. Induction training for non officers (Accountants) has also been started in November 2009.
Revise the training curriculum based on current needs and prepare a training implementation plan and training package to implement first round of training within FY2008/09, to cover the following schemes: (1) General Administration and Financial Management for new entries for 3 months and (2) Refresher Training for 2 weeks before staff are deputed to project/program. MOF, FCGO, OAG Adoption of IPSASbased accounting standards Harmonization of cash based accounting system with international standards which is transparent and meet IMF benchmarks
July 2009
Outdated Cash Basis Accounting System
Work in Progress. As a commitment to move the PFM Agenda forward, the Budget Speech of FY2009/10 has given priority to Implement public sector cash basis of accounting system in line with international accounting standards (IPSAS).
GON to make decision to adopt cash basis accounting standards as per international standards (IPSAS based), and implement road map submitted by the ASB.
GoN approved to implement the Nepal Public Sector Accounting Standard Board under cash basis accounting system in line with international accounting standards (IPSAS) on September 15, 2009.
MOF, FCGO
Lack of infrastructure and connectivity for prompt reporting
Decision to provide online connectivity to sectors operating on SWAp basis Timely consolidation of financial statements.
At least for sectors operating on SWAp basis, GON to make decision to immediately provide connectivity to FCGO database to enable the line agencies to promptly access the information system.
April 2009
Complied. The current sectors (education and health) implementing SWAp are connected with FCGO database. As the sectors operating in SWAp approach increases, FCGO will provide connectivity.
Also, ensure capacity building action integrated in the decision.
Revised

Single Treasury Account and MOF, FCGO, World Bank, DFID, ADB
Challenges
Agreed Actions
Target Dates

support from the WB. Agreement on implementation plan and development partner support in SWAp approach. Joint mission launched and agreement on prioritized PFM program. Approach Paper by Mid-Jan. 2008
Slow implementation of PEFA Action Plan
Complied. Workshop on Experience sharing of International Accounting Standards in Public Sector has been conducted in February by PEFA secretariat with The PFM Strategy Document Phase I has been prepared. A budget provision has been made in the governments budget for FY2009/10 under a separate budget head of 35-3/4-200 for Public Financial Management Reform and a total budget of Rs.17.5 million has been allocated mainly for recurrent expenses. PEFA Implementation Unit (PIU) has been established in 15 ministries for the implementation of the strategy.
GON to prepare an approach paper for Joint WB/DFID/ADB and GON mission to prepare PFM Strategy Document to sequence and prioritize the PEFA Action Plan linking with overall government development objectives.
PFM Strategy Document Preparation of PFM SWAp program to implement PFM Strategy Document
Based on PFM Strategy Document, prepare a Project/Program Concept Note following SWAp approach through wider donor consultation.
Joint Mission by March 2009 PFM Strategy Document by May 2009
Work in Progress: PFM Strategy Document has been approved by PEFA steering committee on July 6, 2009. Preparation of implementation plan is on the schedule. Support has been sought from WB/DFID for its implementation.
3. MOF, PPMO, DPs
Public Procurement Management (PPM)
Collusion, Coercion and Intimidation in the bidding process
Report by the Study Team Enhance competition (Number of competitors) Complaints reduced
July 2009
Expected Outcome:
Study the causes and effects of the issue and define the collusion and coercion practice, suggest for the necessary amendment in the PPA and PPR through a GONDevelopment Partners Joint Review Panel
Complied. GON- Development Partners Joint Review Panel prepared the report and submitted to the steering committee. SC has approved the report, prepared an action plan and sent to PPMO for implementation. Relevant recommendations will be incorporated in the proposed revision of procurement act. Preparation of e-procurement proposal, arrangement of funding, manpower and software development is planned in this year. OPMCM/MOGA
Efficient and Effective Use of Public Money for Better Service Delivery Champion: Director, PPMO
Weak Capacity of PPMO and Stakeholders in implementing Public
Full operationalization (including staffing) of the Public Procurement Monitoring Office (PPMO)
PPMO fully staffed and operationalized
March 2009
Work in Progress: Restructuring of PPMO is felt and process of strengthening is undergoing.
Revised

PPMO/MOGA Number of workshops, training and awareness campaign and training materials Continue each year in PPMO program First program by March 2009
Challenges
Agreed Actions
Target Dates
Procurement Law
Carry out massive training and awareness campaign to the vigilance agencies, procurement units, high level govt. officials, bidders community and civil society
Familiarity with procurement law, effective procurement procedure
Work in Progress: Awareness workshop for Senior Trainer held, including participants from corporations. TA covers cost of developing training materials and modules. Training for DTCO chiefs has been completed. Massive trainings will be conducted under WB TA. Agreed actions are to be completed under IDF grant within the project period.
PPMO Issue of Standard Bid Documents (Transitional and Final) Final by July 2009 Transitio nal by Decemb er 2008
Issuance of Standard Bidding Documents for works, goods and consultant services (Transitional and Final)
Complied: Transitional SBDs issued and are in the website www.ppmo.gov.np. Work in Progress: Final SBDs draft of civil works, goods and consulting services have been sent to Development Partners for their comments/ suggestions.
Revised

PPMO, Procuring Entities Report of PPMO Smooth contract Administration, saving in cost and time of project July 2009
Challenges
Agreed Actions
Target Dates
Variation Order
Study the problems of Variation order of executing agencies and recommend necessary action for amendment in Public Procurement Law NPCS, MOF Guidelines in place Provision of M&E budget in Red Book (GON Budget) July 2009 M & E action plan developed and implemented July 2009
Work in progress. Consultations with line ministries are underway in order to incorporate this issue in the proposed amendment of Procurement Act/regulation.
4. April 2009
Monitoring and Evaluation System (M&E)
Prepare guidelines for ensuring inclusion of M&E budget while approving project/AWP
Work in Progress: Guidelines have been issued to line ministries by NPC to include M& E budget. However, tracking has to be done to know the exact status. TYIP focuses to allocate 0.5 percent of total budget for M & E.
Expected Outcome:
No specific and adequate budget allocation to M&E and insufficient capacity development to perform effectively
An M&E action plan developed and implemented
Efficient M&E System in Operation

MOF Revised Directives issued
Preparation of action plan is scheduled in FY 2009/10
March 2009
Champion: Division Chief, Poverty Monitoring Division, NPC

MOF (Lead) and NPC in consultation with Line Ministries and Development Partners
Austerity directives hindering monitoring visits
Revise the directives through wider consultation to make it realistic and implementable
Aug 09
Work in Progress: Consultations with line ministries are in progress regarding the speedy implementation of the projects. MOF plans to revise the directives, if necessary.
5.
Donor Harmonization, Aid Coordination and Project/Program Management
Inadequate policy framework for mobilization and management of external resources
Prepare the final draft of Foreign Aid Policy (FAP), consult with stakeholders and submit for the Cabinet approval.
Revised Nepal Foreign Aid Policy & its adoption
Submit to the Cabinet by March 2009 Revised FAP issued by April 2009
Work in progress. MOF has presented the final Issuan draft in the stakeholders consultation meetings in ce by five regions in preparation for NDF 09. The draft June has further been updated following those 09 consultations and circulated to the line ministries for validation. Unexpected postponement of NDF caused delayed in its endorsement and adoption. Sept 09 The draft is continuously under consultation for further refinement. GON will make decision soon for its adoption.
Expected Outcome: Strengthened Country System for Better Aid Coordination and Effectiveness
MOF, NPC, Line Ministries, DPs
Agree a joint GON/DPs Aid Effectiveness Action Plan as committed in the Pairs Declaration, 2005 and the Accra Agenda for Action, 2008
Aid Effectiveness Secretariat established AAA commitments relevant to Nepal implemented
February 2009
June 09
Sept 09
Champion: Joint Secretary, FACD, MOF
Work in progress. The postponement of NDF has delayed the launching of the NAP as well. Task Force formed to finalize the NAP sought further comments particularly from the DPs and incorporated into recent draft. It has been currently circulated to the DPs and line ministries for further comments and validation. GON will make decision soon for its adoption.
Revised

MOF (Lead), NPC, Line Ministries, DPs
Challenges
Agreed Actions
Target Dates
July 2009

Aid mapping exercise completed and updated annually Annually Uninterrupted information flow from DPs and LMs to update database Annually Aid Information Management System is launched
Lack of robust aid management database
MOF lead the aid mapping exercise.
Design, agree and operationalize Aid Information Management System
Work in Progress: Aid mapping exercise completed. Need further revision. Capacity Development assessment done. For AIMS, the service provider has been selected.
NPC, MOF, Line Ministries
Absence of Institutional memory in projects/programs May 2009 and update periodic ally Ongoing
Standard Operating Manual (SOP) prepared with monitoring mechanism and adhered to
Develop manual with mandatory and consistent provision for record keeping and handover/takeover of the record MOGA and all concerned agencies
Work in Progress. MOF circulated to all concerned agencies to prepare SOP. MOF will follow up its progress.
Management audit report published by MOGA
Continued frequent staff transfers (program/project directors, technical staff and others)
Continued compliance and enforcement of the civil service act on placement and transfer of staff in projects
Complied: The transfer has been made as per the provision of the Civil Service Act and Regulations. MOGA is fully committed for its compliance. A Task Force has been formed to study the possibility of fulfilling the vacant posts temporarily.
NPC, MOF & line ministries
Lack of Communication Strategy
Develop a framework for project/program specific communication strategy
Local people understand the scope of the program and their expectations are managed better at the outset Communication strategy in place that focus on inputs, outputs and impact/results.
July 2009 also ongoing
Work in Progress. MOF circulated to all concerned agencies to put the provision of communication mechanism while preparing projects.
ADB: Asian Development Bank, BAPD: Budget and Program Division, CPA: Central Personnel Agency, DFID: Department for International Development; FCGO: Financial Comptroller Generals Office, FAP: Foreign Aid Policy, JICA: Japan International Cooperation Agency, MOE: Ministry of Education, MOF: Ministry of Finance, MOGA: Ministry of General Administration, MOLD: Ministry of Local Development, MPPW: Ministry of Physical Planning and Works, NPC: National Planning Commission, OPMCM: Office of the Prime Minister and Council of Ministers, PPMO: Public Procurement Monitoring Office
ASIAN DEVELOPMENT BANK BACKGROUND PAPER
ATTACHMENT 1
2009 Nepal Portfolio Performance Review
Background Paper
December 2009
ABBREVIATIONS
ADB ADBL APA AFS CPS DFID DOR DOLIDAR EA EFA GAD GBB GDP IA IP/IO JICA KVWSNB KUKL MfDR MOE MOF MWSP NBA NBL NGO NPPR NRM NEA NPL NRT NRB O&M PCR PMU PPP PPR PPA PPR PPMO RBB RBM RMDC SFDB SRN SRP SSRP TEVT TYIP VDC WUA Asian Development Bank Agriculture Development bank Limited Audited Project Accounts Agency Financial Statement Country Partnership Strategy Department for International Development of United Kingdom (DFID) Department of Roads Department of Local Infrastructure Development and Agriculture Roads Executing Agency Education for All Gender and Development Grameen Bikash Bank Gross Domestic Product Implementing Agency Implementation Progress /Impact Outcome Japan International Cooperation Agency Kathmandu Valley Water Supply Management Board Kathmandu Upatayaka Khanepani Limited Managing for Development Results Ministry of Environment Ministry of Finance Melamchi Water Supply Project Nepal Banker's Association Nepal Bank Limited Non-Governmental Organizations Nepal Portfolio Performance Review Nepal Resident Mission Nepal Electricity Authority Non Performing Loans Net Resource Transfer Nepal Rastra Bank Operation and Maintenance Project Completion Report Project Management Unit Public Private Partnership Project Performance Report Public Procurement Act Public procurement Regulation Public Procurement Monitoring Office Rastriya Banijya Bank Result Based Management Rural Microfinance Development Centre Small Farmers Development Bank Strategic Road Network Sector Results Profile School Sector Reform Program Technical Education and Vocational Training Three Year Interim Plan Village Development Committee Water Users Association
NOTES
(i) (ii)
The fiscal year (FY) of the Government ends on 15 July. In this report, $ refers to US dollars.
Vice President Director General Director Team leader Team members
X. Zhao, Vice President (Operations 1) K. Senga, Director General, South Asia Department (SARD) B. Hitchcock, Country Director, Nepal Resident Mission (NRM) Y.Shiroichi, Head, Portfolio Management Unit, NRM K. R. Panday, Senior Project Implementation Officer, NRM S. Gyawali, Assistant Project Analyst, NRM
CONTENTS Page EXECUTIVE SUMMARY I. II. INTRODUCTION PORTFOLIO PERORMANCE OVERVIEW A. 2008 Portfolio Performance B. 2008 Technical Assistance Portfolio Performance C. 2009 Portfolio Performance Review KEY PORTFOLIO PERFORMANCE ISSUES A. Quality at Entry B. Human Resources C. Public Financial Management D. Procurement Management E. Monitoring and Evaluation NEPAL PORTFOLIO PERFORMANCE REVIEW A. 2008 NPPR B. 2009 NPPR Annexes Annex 1 Annex 2 Annex 3A Annex 3B Annex 4 Annex 5 Annex 6 Annex 7 Annex 8A Annex 8B Annex 9 Portfolio Management Indicators Average Age for 25 percent Contract Award and 20% Disbursement Financial PerformanceContract Award as of December 2008 Financial Performance Disbursement as of December 2008 Project Performance Ratings as of December 2008 List of Ongoing TAs as of December 2008 Financial Performances TAProcurement and Disbursement List of Ongoing Portfolio as of September 2009 Financial Performance Procurement as of June 2009 Financial Performance Disbursement as of June 2009 Project Performance Ratings as of June 2009 1 2 2 9 10 11 11 12 13 13 14 14 14 15
III.
IV.
EXECUTIVE SUMMARY 1. The 2009 Nepal Country Portfolio Review Mission (CPRM) will be conducted from 1 to 2 December 2009 followed by the Nepal Portfolio Performance Review (NPPR) jointly conducted by the Government through the Ministry of Finance (MOF) together with the Asian Development Bank (ADB), the Department for International Development of United Kingdom (DFID), Japan International Cooperation Agency (JICA) and the World Bank from 3 to 4 December 2009. The Nepal Resident Mission (NRM) of ADB is responsible for both the CPRM and the NPPR. In order to align with the governments' fiscal year, the portfolio performance assessment will be carried for the period from January 2008 to June 2009 with detailed portfolio review for 2008 and only key indicators analysis for the first half of 2009. The CPRM aims to review (i) assess portfolio performance in terms of key portfolio indicators and development achievements; (ii) review progress towards the results framework of the Country Partnership Strategy (CPS) through the Sector Results Profile (SRP); (iii) discuss sector issues to strengthen portfolio performance and enhance development results; (iv) prepare an action plan for each sector for quarterly monitoring; and (v) utilize sector action plan for the discussion of systemic issues at the NPPR. 2. The Government continues to take ownership of the NPPR and the theme for 2009 is Result Based Management for Effective Portfolio Performance and Development Effectiveness. The key areas for discussion in the NPPR will be (i) reforms in budgeting system that will contribute to results; (ii) improving human resource management for effective project implementation and portfolio performance; (iii) strengthening monitoring and evaluation; and (iv) improving quality at entry of projects. The Government will prepare its own thematic paper and each participating development partners will contribute a background paper on the overall portfolio assessment of their assistance. This background paper will be an attachment to the Governments 2009 NPPR thematic paper. 3. ADB began lending to Nepal in 1969. ADBs cumulative assistance to Nepal by the end of 2008 amounted to $2.631 billion comprising, 111 public sector loans amounting to $2.25 billion, 10 grant projects amounting to $332.2 million along with five non-sovereign loans totaling $49.5 million. Nepal portfolio as of 30 June 2009 comprised 17 loans and 11 grant projects for a net amount of $931.9 million. Four loans (Loan 1811: Corporate and Financial Governance, Loan 1755: Small Towns Water Supply Sanitation Sector Project, Loan 1876: Road Network Development Project and Loan 2268: Rural Finance Sector Development Cluster Program) are closed and are at account closing stage. In addition, Loan 2058: Kathmandu Valley Water Services Sector Development Program was closed in the first quarter of 2009. As of 30 June 2009, Nepal portfolio has one new entry, Grant 0150: Emergency Flood Damage Rehabilitation Project. It is expected by the year end there will be four additional new entries making the portfolio of net amount above one billion dollars. 4. In 2008 Nepal portfolio was able to achieve (i)$145.35 million (92%against the projected target) in contract award and $165.18 (77% against the target) in disbursement; (ii) contract award ratio of 24% (compared to 27% in 2007) and disbursement ratio of 17.8% (compared to 18% in 2007); (iii) $64 million in net resource transfer (continuously turning positive since 2009); and (iv) six percent project at risk compared to 14% in 2007. Although the financial indicators are improving gradually, the achievement level of Nepal portfolio continues to fall behind in ADB wide averages. 5. Other indicators such as start up compliance rate and average age of the portfolio did not show much improvement in 2008. There were seven loans in the portfolio that had been
flagged as having implementation delays in project performance rating as of 31 December 2008. Those loans are Loan1811: Corporate and Financial Governance Project, Loan 2102: Community Managed Irrigated Agriculture Sector Project, Loan 1820: Melamchi Water Supply Project Loan 1732: Rural Electrification, Distribution and Transmission Project, Loan 1755: Small Town Water Supply Sanitation Sector Project, Loan 2111: Skills for Implementation Project, and Loan 1966: Urban and Environmental Improvement Project. Although grants have been rated as satisfactory in implementation in the project performance rating, Grant 0093: Rural Reconstruction and Rehabilitation Sector Project, Grant 0059: Rural Finance Sector Development Program and Grant 0106: Information and Communication Technology Development Project are experiencing implementation delays. 6. In 2009, the contract award target for the portfolio is $178.6 million, including grant projects and is approximately 13% higher than the 2008 target. Of these, $35 million includes projections from program loans. Contract awards as of 30 June 2009 amounted to $93.6 million, an achievement of 52% against the annual target. It is expected that the contract award achievement will exceed 100% by the year end. Likewise, the disbursement target for the year is $131.9 million28% higher than the target of 2008. Disbursements as of 30 June 2009 amounted to $62.8 million, an achievement of 48% against the annual target. It is likely that by the year end, the disbursement achievement will exceed 100%. With the late signing and effectiveness, Grant 0099: SASEC Information Highway Project has been categorized "at risk" since December 2008 to the second quarter of 2009. In the fourth quarter of 2009 the Loan 2111: Skills for Employment Project will be rated at risk. 7. The project implementation and portfolio performance in 2008 lagged behind particularly due to (i) Constitution Assembly elections in April; (ii) scarcity of construction materials and substantial price increases in April/May; (iii) fuel shortage for transporting construction materials in the first and second quarters; (iv) delays in the Government's budget release and program approval in the first trimester of FY2008/09; and (v) floods by the Koshi river and in the mid- and far-western regions. Although the project implementation has been gradually improving since the end of the decade-long civil conflict in April 2006, the project implementation environment continues to be affected by reasons related to political unrest and insecurity. NRM's assessment on the impact of the country's overall security situation on the current portfolio at the end of December 2008 and up to second quarter of 2009 revealed relatively conducive project implementation environment. However, the Terai unrest and frequent bandhs called by different political groups have affected the overall pace of project implementation. It is to be noted that Loan 1876: Road Network Development Project suffered contract completion delays due to the Terai situation. After it closed on 30 June 2009 (after1.5 years of extension), the Government is currently utilizing its own funds to complete some of the unfinished works. 8. Besides the unstable political environment the systemic and recurring project implementation and portfolio management issues for Nepal portfolio continue to be (i) quality at entry; (ii) human resources; (iii) public financial management; (iv) public procurement; and (v) monitoring and evaluation. Despite the efforts made by ADB and the Government in the past CPRMs and NPPRs, the issues still continue to plague Nepal's portfolio performance. Since the focus for 2009 NPPR will also be on above issues, both the Government and development partners must seek concrete solutions for the issues so that the portfolio indicators can be improved and the development results are ultimately delivered to people on the ground.
I.
INTRODUCTION
9. The 2009 Nepal Country Portfolio Review Mission (CPRM) will be conducted from 1 to 2 December 2009 to provide feedback to the Nepal Portfolio Performance Review (NPPR) jointly conducted by the Government through the Ministry of Finance (MOF) together with the Asian Development Bank (ADB), the Department for International Development of United Kingdom (DFID), Japan International Cooperation Agency (JICA) and the World Bank 1. 2009 NPPR will be held from 3 to 4 December 2009.The Nepal Resident Mission (NRM) of ADB is responsible for both the CPRM and the NPPR. In order to align with the governments' fiscal year, the portfolio performance assessment will be carried for the period from January 2008 to June 2009 2. The CPRM aims to review (i) assess portfolio performance in terms of key portfolio indicators and development achievements; (ii) review progress towards the results framework of the Country Partnership Strategy (CPS) through the Sector Results Profile (SRP); (iii) discuss sector issues to strengthen portfolio performance and enhance development results; (iv) prepare an action plan for each sector for quarterly monitoring; and (v) utilize sector action plan for the discussion of systemic issues at the NPPR. 10. The Portfolio Management Strategy Paper prepared in 2005 by NRM and every year thereafter continues to be the internal guiding document to address portfolio concerns and develop strategy for effective portfolio management. Although the progress has been made in key portfolio indicators in recent years, the portfolio performance of Nepal still lags behind in ADB wide averages and other comparators. The systemic portfolio issues such as frequent extensions owing to common start-up delays, inefficient and ineffective human resource management, weak public procurement and public financial management system, and weak monitoring and evaluation system continue to constrain project implementation and portfolio performance. A stronger commitment is warranted for improving portfolio performance in a more systematic ways focusing on quality at entry and start-up performance so that the key indicators continue to improve. 11. During the period of 2009, the Government complied in holding NPPR quarterly meetings to update the concerned stakeholders including development partners on the progress made on the 2008 action plan. However, the compliance rate of the action plan from the Government is low. Out of the 31 agreed actions, 10 were fully complied with and the rest were in progress for compliance. Hence, it has been agreed by the Government and the participating development partners that the 2009 NPPR should be focused in delivering results for improving portfolio performance and the action plan that is developed at the end of the 2009 NPPR needs to be very specific with deliverable outputs . 12. The Government continues to take ownership of the NPPR and the theme for 2009 is Result Based Management for Effective Portfolio Performance. The key areas for discussion in the NPPR will be (i) reforms in budgeting process that will contribute to results; (ii) improving human resource management for effective project implementation and portfolio performance; (iii) strengthening monitoring and evaluation; and (iv) improving quality at entry of projects. The Government will prepare its own thematic paper and each participating development partners will contribute a background paper on the overall portfolio assessment of their investments in Nepal. This background paper will be an attachment to the Governments 2009 NPPR thematic paper.
1
The first joint Government/ADB/JBIC/WB NPPR was carried out in August 2001. DFID joined the NPPR in 2007. The Government continues to invite other Development Partners to join the NPPR. 2 While a detailed review will be done for the period January to December 2008 operations, the performance assessment for the period January to June 2009 will be assessed based on key portfolio indicators of loans and grants investments only.
II.
PORTFOLIO PERFORMANCE OVERVIEW
13. ADB began lending to Nepal in 1969. ADBs cumulative assistance to Nepal by the end of 2008 amounted to $2.631 billion comprising 111 public sector loans amounting to $2.25 billion, 10 grant projects amounting to $332.2 million along with five non-sovereign loans totaling $49.5 million. About $1.76 billion (66%) of the approved amount has been disbursed as of 31 December 2008. At the year end, the ongoing portfolio consisted of $967.4 million for 30 investment projects (20 loans and 10 investment grants) with an overall net loan amount of $635.20 million and grant amount of $332.2 million, respectively. Sectoral distribution of the ongoing investment portfolio as of 31 December 2008 is shown in Table 1.
Table 1: Sectoral Distribution of Ongoing Public Sector Portfolio (as of 31 December 2008) Net Loan Amount $ mn % 123.3 12.7 115.9 12.0 38.2 3.9 68.6 7.1 106.3 11.0 162.6 16.8 217.3 22.5 135.1 14.0 967.4 100.0 No. of Loans/Grants 6 6 1 3 1 5 5 3 30 No. of Projects 6 4 1 2 0 5 4 2 24
Sector Agriculture & Natural Resources Education Energy Finance Health, Nutrition & Social Protection Industry & Trade Law, Economic Management & Public Policy Transport & Communications Water Supply, Sanitation & Waste Management Multisector Total
Source: Loan Financial Information System (LFIS) and Grant Financial Information System (GFIS)
A.
2008 Portfolio Performance 3
14. Key indicators of portfolio performance (inclusive of sovereign loans and grants) for the last three years are presented in Table 2 (see details in Annex 1). Comparing the 2007 and 2008 selected key indicators14 show improvement, two unchanged, and the other 6 show deterioration in performance. a. Start-up Compliance
15. There has been improvement in both the average time for projects to sign after approval and signing to effectiveness owing to relatively improved political environment and close followup with the Government on signing and declaring effectiveness. However, start up compliance rate is still high than the ADB wide average due to late signing and effectiveness of G0099:SASEC Information Highway Project and delayed effectiveness faced by projects approved prior to 2005 owing to political situation. The average time for projects to achieve 25% contract award has improved in 2008 compared to 2007 and the average time taken for projects
Inclusive of sovereign loans and grants.
3 to reach 20% disbursement is 4.1 years. The details are in Annex 2. These data indicate that quality at entry of projects needs to be improved significantly.
Table 2: Selected Portfolio Management Indicators
INDICATORS A. Start up Compliance 1. Average Time: Approval to Signing(months) 2. Average Time: Signing to Effectiveness(months) 3. Loans/Grants that Became Effective more than 90 days after signing (%) 4. Average Time: 25% Contract Award Achievement after Approval (years) 5. Average Time: 20% Disbursement Achievement after Approval (years) B. Financial Performance 1. Contract/Commitment Achievement ($mn) 2. Contract/Commitment Achievement (w/o Programs($mn) 3. Contract/Commitment Ratio (%) 4. Contract/Commitment Ratio (w/o Programs) (%) 5. Disbursement Achievement ($mn) 6. Disbursement Achievement (w/o programs) $mn) 7. Disbursement Ratio (%) 8. Disbursement Ratio (w/o programs)(%) 9. Submission of of APA and AFS(%) (a) =< 6 months (b)6=< 12 months (c) > 12 months 10. Net Resource Transfer ($mn) C. Portfolio Performance 1. Projects at Risk (%) 2. Risk Ratio of Major Issues (% of loans and grants) (a) Project Implementation Delays (b) Significant Disbursement Delays (c) Poor Compliance with Covenants D. Portfolio Supervision 1. Proactivity Index (%) 2. Staff Intensity (staff-days/Project) NA: not available; mn= million 71.4 32 25 35 66.7 38 Improved Improved 17.4 30 34.8 8.7 10.7 28.6 17.9 14.3 6.7 23.3 23.3 10.0 Improved Improved Declined Improved 101.6 50.8 22.1 14.6 108.0 57.2 20.0 12.4 0.0 7.7 0.0 62.5 95.7 63.2 26.8 14.5 102.3 69.9 18.3 13.7 0.0 11.1 0.0 49.4 145.4 69.2 24.2 13.2 127.1 66.5 17.8 10.4 0.0 5.3 0.0 63.8 Improved Improved Declined Declined Improved Declined Declined Declined Unchanged Improved Unchanged Improved 4.6 6.5 73 NA NA 4.3 6.0 76 4.6 NA 3.8 5.3 75 3.6 4.1 Improved Improved Improved Improved 2006
4
2007
2008
Remarks
The indicators are inclusive of loan and grant for only 2007 and 2008,
4 b. Financial Performance
16. Contract Awards: Key indicators to assess and monitor procurement performance are (i) the contract awards/commitment ratio 5 and (ii) achievement of contract award/ commitment targets (actual vs. projected). The contract award ratio of the portfolio declined slightly in 2008 with the ratio reaching 24% (compared to 27% in 2007). The contract award ratio (without program loans/grants) is 13.2% in 2008 compared to 14.5% in 2007. Figure 1 presents the trend in the contract award ratio of the portfolio since 2000 in comparison with ADB wide averages.
Figure 1: Contract Award Ratio: 2000-2008
Nepal ADB wide
35 30 27.4 25 29 30 26.8
33.2
Percent
22.6 20 15 10 5 0 2000 2001 2002 2003 2004 2005 19.9 15.6 17.3 14.9 11.2 8.2 3.7 7.0 17.4 15.2
24.2 22
2006
2007
2008
Year
17. The total contract award increased to $145 million from $96 million in 2007. The achievement in 2008 was 92% against the projected target compared to 89 percent against the projected target in 2007. The contribution of the program loans and grants Loan 2277: Education Sector Cluster Program I and Grant 0105: Education Sector Cluster Program II and Grant 0094: Rural Reconstruction and Rehabilitation Sector Development Program was 52% (compared to 34% in 2007). Besides the program grants mentioned above two projects that significantly impacted the contract award achievement are Grant 0051: Road Connectivity Sector I Project ($16.5 million), and Loan 2092: Decentralized Rural Infrastructure and Livelihood Project ($8.1 million).The details of the contract award performance of each project in terms of cumulative and annual achievement is in Annex 3A. Table 3 presents the sectoral contract award achievement against the projected target and Figure 2 shows the yearly achievement in contract award since 2000 against the projected target.
Table 3: Contract Award Achieved by Sector (US $ in millions) As of 30 December 2008
2006 Sector Agriculture & Natural Resources Education Energy
5
2007 % 121.4 185.3 65.5 Projected

a
2008 % 110.9 120.4 75.5 Projected

a
Projected
Actual 19.5 13.7 4.0
Actual 16.1 29.1 1.4
Actual 15.4 34.7 2.1
% 87.7 88.5 109.4
16.1 7.4 6.1
14.5 24.2 1.87
17.5 39.2 1.91
Contract Award/Commitment Ratio is defined as the ratio of contract awarded/actual commitment during the year over the value available for contract awards/commitment at the beginning of the year. The value of the contracts/commitments to be awarded/committed under newly approved loans and grants during the period is/will be added to the opening balance of the value available for contract/commitment awards.
2006 Sector Finance Law, Economic Management & Public Policy Transport & Communications Water Supply, Sanitation & Waste Management Multisector TOTAL
a
2007 % 2061.3 0.0 21.0 42.5 61.5 154.9 Projected

a
2008 % 107.4 104.1 23.2 64.7 89.2 Projected

a
Projected
Actual 40.2 10.6 1.5 9.9 2.2 101.6
Actual 17.4 21.9 5.2 4.6 95.7
Actual 0.01 18.7 14.3 60.2 145.4
% 203.8 87.2 88.5 91.9
2.0 0.0 7.3 23.3 3.6 65.6
16.2 21.0 22.4 7.2 107.4
5.93 9.2 16.4 68.0 158.2
Full year projection. Sources: LFIS, PPR
Projected
Figure2: Contract Award Achievement: 2000-2008

180 160 140 120 100 106.3 73.8 51.8 48.3 36.3 28.5 32.1 13.2 2000 2001 2002 2003 2004 2005 2006 2007 46.9 39.0 38.2 69.6 101.6 65.6 107.3 95.7
Actual
158.2 145.4
$ million
80 60 40 20 0
2008
Year
18. Disbursement: Like contact award, disbursement performance is assessed and monitored by the disbursement ratio and actual vs. projected disbursement. The disbursement ratio of the portfolio was 17.8% in 2008 compared to 18.3% in 2007. The disbursement ratio without program loans and grants is 10.4% in 2008 compared to 13.7% in 2007. Figure 3 shows the trend in the disbursements ratio of the portfolio against the ADB wide averages.
Figure 3: Disbursement Ratio:2000-2008
Nepal ADB wide
37 40 35 30 25 22.2 23.4 20 25.4 18.3 17.8 29.5
Percent
20 15 10 5 0 2000 20.5
20.5 16.6
20.2 17.7
20.7
8.4
7.1 4.4
7.7
2001
2002
2003
2004
2005
2006
2007
2008
Year
19. Although total disbursements have increased to $127.1 in 2008 compared to $102.3 million in 2007, the achievement in 2008 was only 77% of the total projection compared to 112% achievement against the projected target in 2007.The contribution of the program loans and grants was 48% in 2008 (compared to 32% in 2007). The tranche release of Grant 0150: Education Sector Program II ($8.00 million) and Grant 0094: Rural Reconstruction Sector Development Program ($50.00 million) contributed significantly to disbursement achievement. The details of the disbursement performance of each project in terms of cumulative and annual achievement are in Annex 3B. Table 4 presents the sectoral disbursement achievement against the yearly target and Figure 4 shows the annual achievement against the projected targeted in disbursement since 2000.
Table 4: Disbursement Achieved by Sector (Us $ in millions) (as of 31 December 2008)
2006 Sector Agriculture & Natural Resources Education Energy Finance Law, Economic Management & Public Policy Transport & Communications Water Supply, Sanitation & Waste Management Multisector TOTAL
a
2007 % 102.4 148.8 109.5 2084.3 Projected

a
2008 % 134.5 119.9 111.0 109.0 Projected

a
Projected
Actual 15.2 10.1 13.0 40.6
Actual 14.3 28.8 5.6 18.2
Actual 10.1 19.7 6.2 0.0
% 72.1 53.1 89.6 0.0
14.8 6.8 11.9 2.0
10.6 24.1 5.0 16.7
14.0 37.2 7.0 5.0
0.0 10.3 12.7 1.5 60.0
10.6 10.0 7.0 1.5 108.0
0.0 96.7 55.1 95.8 179.9
16.9 14.8 3.0 91.1
22.1 11.2 2.1 102.3
130.7 75.7 70.5 112.3
17.6 21.5 63.1 165.2
13.1 17.9 60.2 127.1
74.3 83.1 95.4 76.9
Full year projection.
Sources: LFIS, PPR
Projected
Figure 4: Disbursement Achievement: 2000-2008
Actual
180 160 140 120
165.18
127.1 97.7 91.4 72.4 57.2 56 28.3 28.2 33.7 33.6 38.6 22 43.6 60 108 102.3 91.1
$ million
100 80 60 40 20 0
2000
2001
2002
2003
2004 Year
2005
2006
2007
2008
20. Net Resource Transfer (NRT): The NRT including grant investments from ADB to Nepal reached $64 million in 2008 compared to $ 49 million in 2007. The NRT started to turn positive from only 2005 after being negative for three consecutive years. Figure 5 shows the net resource transfer since 2000.
Figure 5: Net Resource Transfer: 2000-2008
70.0 60.0 50.0 40.0 30.0 30.6 64.4 62.0 49.0 64.0
$million
20.0 10.0 0.0 2000 2001 -2.6 2002 -0.4 2003 2.9 2004 -17.3 2005 2006 2007 2008
-10.0 -20.0 -30.0
Year
21. Imprest Account Performance: The imprest account turnover ratio continues to slack at 1.23 in 2008 compared to 1.60 in 2007. Projects that have extremely low turnover ratio are Loan 2111: Skills for Employment Project, Loan 2008: Community Based Water Supply and Sanitation Sector Project, Loan 2097: Sub regional Transport Facilitation Project, Loan 2102: Community Managed Irrigated Agriculture Sector Project, and Loan 2143: Gender Equality and Empowerment of Women Project. 22. Audit Reports: Overall delay in submission of audited project accounts/agency financial statements (APA/AFS) increased from 1.6 months in 2007 to 1.7 months in 2008. There were
8 22 loans and grants that required the submission APA and AFS. For the period of 2008, 18 out of the 22 loans and grants submitted APA/AFS on time and four projects complied late 6. c. Portfolio Performance Rating
23. Project Ratings: The project ratings derive from the ADB Project Performance Report (PPR) system, which assesses project performance against two major parameters: (i) impact and outcome (IO); and (ii) implementation progress (IP). Project performance under each of these parameters is rated as: highly satisfactory (HS), satisfactory (S), partly satisfactory (PS), and unsatisfactory (US). The details of Project Performance Reports (PPRs) ratings for the loans and grants are in Annex 4. As of 31 December 2008, out of 30 projects and programs, two were rated HS, 27 were rated S, one (Loan 1732: Rural Electrification, Distribution and Transmission Project) was PS in IO parameter. Likewise, in IP one (G0051-Road Connectivity Sector I Project) was rated HS, 28 were rated S and one (Grant 0099: SASEC Information Highway Project) was rated US. i. IO Achievement: (1) (2) ii. 2008: 3% HS, 94% S and 3% PS 2007: 89.3% S and 10.7% PS
Implementation Progress: (1) (2) 2008: 7% HS, 90% S and 3% US 2007: 93% S, and 7% PS
24. Projects at Risk: The overall risk ratio for Nepal portfolio has improved in recent years, from 30% in 2005, 17% in 2006, 10.7% in 2007 to 6% in 2008. The two projects rated at risk were Loan 1732: Rural Electrification, Distribution and Transmission Project and Grant 0099: SASEC Information Highway Project. Although Loan 1732: Rural Electrification, Distribution and Transmission Project was financially closed on 19 December 2008, it showed as risk due to reporting done for the whole month of December 2008. Grant 0099: SASEC Information Highway Project was categorized as risk in December 2008 mainly due to late signing and effectiveness. The upgrade of the Loan 2059: Kathmandu Valley Water Services Sector Development Program and Loan 1820: Melamchi Water Supply Project in 2008 resulted in the improvement for the projects "at risk" indicator. The project at risk indicator is crucial for calculating the total allocation of resources Nepal receives from ADB.
Although Loan 2092: Decentralized Rural Infrastructure and Livelihood Project and Loan 1966: Urban Environment Improvement Project submitted the audited account on time (15 April 2008), the same was not properly reflected in the PPR. Two other projects Loan 1811: Corporate and Financial Governance Project and Loan 1732: Rural Electrification Distribution and Transmission Project submitted the audit report late.
Figure 6:Project At Risk 35 30 25 29 26.1 19 18 17 17 10.7 6 30
Percent
20 15 10 5 0
2000
2001
2002
2003
2004 Year
2005
2006
2007
2008
25. Average Age of the Portfolio: The average age of the active portfolio has decreased by 6 months to 4.3 years in 2008 compared to 4.9 in 2007. However, the portfolio age is still high compared to ADB wide averages of 3.8 years. This indicator has become important because the average age of the portfolio is also factored in along with the projects at risk when calculating ADB's resource allocation for Nepal. 26. Implementation Delays: There were seven loans in the portfolio that had been flagged as having implementation delays in project performance rating as of 31 December 2008. Those loans are Loan1811: Corporate and Financial Governance Project, Loan 2102: Community Managed Irrigated Agriculture Sector Project, Loan 1820: Melamchi Water Supply Project, Loan 1732: Rural Electrification, Distribution and Transmission Project, Loan 1755: Small Town Water Supply Sanitation Sector Project, Loan 2111: Skills for Implementation Project, and Loan 1966: Urban and Environmental Improvement Project. Although grants have been rated as satisfactory in implementation in the project performance rating, Grant 0093: Rural Reconstruction and Rehabilitation Sector Project, Grant 0059: Rural Finance Sector Development Program and Grant 0106: Information and Communication Technology Development Project have experienced delays in project implementation. 27. Compliance with Key Covenants: Although the compliance rate of the projects with key covenants has improved in 2008 compared to 2007, Loan 2071: Community Livestock Development Project, Loan 1732: Rural Electrification, Distribution and Transmission Project and Loan 1811: Corporate and Financial Governance Project have been rated as partly satisfactory in the compliance with key covenants. The covenants relating to quality assurance and irregular meeting of implementation coordination committee for Loan 2071: Community Livestock Development Project and lack of action plan for reducing ongoing technical loss and minimizing total system loss by Nepal Electricity Authority for Loan 1732: Rural Electrification, Distribution have been rate as non-compliance as of 31 December 2008.
10 d. Portfolio Supervision
28. Project Supervision: In terms of loan supervision, the proactivity index 7 has increased substantially to 66.7% in 2008 compared to 25% in 2007. The proactivity index increased substantially with the removal of Loan 2059: Kathmandu Valley Water Services Sector Development Program and Loan 1820: Melamchi Water Supply Project from the risk category in 2008. Meanwhile there has been improvement in ADB staff supervision intensity increasing from average of 35 staff-days/projects in 2007 to 38 in 2008. 29. Savings and Cancellations: The spring cleaning mission was not undertaken in 2008. However, the total amount of approximately $4.0 million was cancelled during the final account closing of loans of Loan 1778: Crop Diversification Project and Loan 1732: Rural Electrification, Distribution, and Transmission Project. 30. Project/Program Extensions: As of 31 December 2008, 30% (9 projects) of the active loan and grant portfolio compared to 28% in 2007 (8 projects) had extensions. The average delay has particularly increased in the Agriculture and Natural Resources, Energy Water Supply, Sanitation and Waste Management sectors with overall increase from 22.4 months to 33.4 months. B. 2008 Technical Assistance (TA) Portfolio Performance
31. As of December 2008, there were 33 TAs including two TAs from the Japan Fund for Poverty Fund (JFPR) amounting to $21.3 million (Annex 5) 8.The key indicators of performance for the TA portfolio are in Annex 6.The average time from approval to signing has significantly improved to 2.2 months in 2008 compared to 3.2 months and ADB staff time given to TA supervision has increased in 2008 to 12.3 staff-days/project from 4.2 staff-days/project in 2007 and 8.4 staff-days/project in 2006). However, average time from signing to fielding of consultants has increased to 4.7 months in 2008 compared to 3.9 months. The sectoral distribution based on the cumulative amount of the TA portfolio (excluding JFPRs) as of December 2008 is presented in Table 5.
Proactivity index is the % of problem projects changed through upgrading, restructuring, closure, or cancellation during the last 12 months. 8 Including two TAs from the Japan Fund for Poverty Reduction.
11
Table 5: Sectoral Distribution of Active TA Portfolio (as of 31 December 2008) Revised TA Amount Sector $ mn % Agriculture & Natural Resources 1.050 5.7 Education 0.600 3.3 Energy 1.600 8.8 Finance 1.500 8.2 Health, Nutrition & Social Protection 0.685 3.7 Industry & Trade Law, Economic Management & Public Policy 4.685 25.6 Transport & Communications 2.725 14.9 Water Supply, Sanitation & Waste Management 4.180 22.9 Multisector 1.246 6.8 Total 18.271 100.0
Source: Technical Assistance Information System (TAIS)
No. of TAs 3 1 5 2 1 9 5 3 2 31
C.
2009 P o rtfo lio P erfo rm a n c e Re view
32. Overall Portfolio: Nepal portfolio as of 30 June 2009 comprised 17 loans and 11 grant projects for a net amount of $931.9 million (Annex 7). Four loans (Loan 1811: Corporate and Financial Governance, Loan 1755: Small Towns Water Supply Sanitation Sector Project, Loan 1876: Road Network Development Project and Loan 2268: Rural Finance Sector Development Cluster Program) are closed and are at account closing stage. In addition, Loan 2058: Kathmandu Valley Water Services Sector Development Program has been financially closed in the first quarter of 2009. As of 30 June 2009, Nepal portfolio has one new entry, Grant 0150: Emergency Flood Damage Rehabilitation Project. It is expected by the year end there will be four additional new entries 9 making the portfolio of net amount above one billion dollars. 33. Contract Award: The contract award target for the portfolio is $178.6 million, including grant projects and is approximately 13% higher than the 2008 target. Of these, $35 million includes projections from program loans. Contract awards as of 30 June 2009 amounted to $93.6 million, an achievement of 52% against the annual target. The details of contract award achievement for each project against the annual projection are in Annex 8A. The achievement is at the expected level for the time period. The contract award ratio as of 30 June 2009 is 19.3%. 34. Disbursement: The disbursement target for the year is $131.9 million28% higher than the target of 2008. Disbursements as of 30 June 2009 amounted to $62.8 million, an achievement of 48% against the annual target. The details of disbursement achievement for each project against the annual projection are in Annex 8B. The Disbursement ratio as of 30 June 2009 is 10.3% 35. Net Resource Transfer: The NRT as of 30 June 2009 is $27.5 million with a repayment of $35.3 million, including grant projects. Current estimates show that 100% achievement of 2009 disbursement target results in a net resource transfer of more than $60.0 million.
9
As of 30 September 2009 Education Sector Cluster Program III (loan and grant) and Second Small Towns Water Supply and Sanitation Sector have already been approved by ADB's Board.
12 36. Projects at Risk: With the late signing and effectiveness, Grant 0099: SASEC Information Highway Project has been categorized "at risk" since December 2008 to the second quarter of 2009. For the first quarter 2009 and April 2009, another Grant 0059: Rural Finance Sector Development Project was downgraded to risk category. However, it was upgraded to satisfactory category as of 30 May 2009. Hence, as of 30 June 2009, the number of projects "at risk" in the portfolio is only one (G0099: SASEC Information Highway Project). However, four projects, Loan 2143: Gender Equality and Empowerment of Women Project, Loan 2102: Community Managed Irrigated Agriculture Sector Project, Grant 0106: Information and Communication Technology Project and Loan: 2111: Skills for Employment Project have been considered as laggard projects. Loan 2111: Skills for Employment Project has already been rated at risk as of 31 October 2009. Project performance ratings as of 30 June 2009 is in Annex 9. 37. Submission of APA/AFS: All projects have submitted their APA/AFS for FY2007/08. Of the 22 projects that were due for submission, 18 complied on time, four complied late. III. KEY PORTFOLIO PERFORMANCE ISSUES
38. The project implementation and portfolio performance in 2008 lagged behind particularly due to (i) Constitution Assembly elections in April; (ii) scarcity of construction materials and substantial price increases in April/May; (iii) fuel shortage for transporting construction materials in the first and second quarters; (iv) delays in the Government's budget release and program approval in the first trimester of FY2008/09; and (v) floods by the Koshi river and in the mid- and far-western regions. Although the project implementation has been gradually improving since the end of the decade-long civil conflict in April 2006, the project implementation environment continues to be affected by reasons related to political unrest and insecurity. NRM's assessment on the impact of the country's overall security situation on the current portfolio at the end of December 2008 and up to second quarter of 2009 revealed relatively conducive project implementation environment. However, the Terai unrest and frequent bandhs called by different political groups have affected the overall pace of project implementation. It is to be noted that Loan 1876: Road Network Development Project suffered contract completion delays due to the Terai situation. After it closed on 30 June 2009 (after1.5 years of extension), the Government is currently utilizing its own source of funds to complete some of the unfinished works. 39. The systemic and recurring project implementation and portfolio management issues for Nepal portfolio are (i) quality at entry; (ii) human resources; (iii) public financial management; (iv) public procurement; and (v) monitoring and evaluation. Despite the efforts made by ADB and the Government in the past NPPRs, the issues still continue to plague Nepal's portfolio performance. Hence, it is vital that for 2009 NPPR both ADB and the Government work together to develop concrete action plan with deliverable results. A. Quality at Entry
40. Start-Up Compliance. As noted in this background paper, the Nepal portfolio consistently experiences start-up delays, which carry over into a broader implementation delays. In order to reduce common start-up delays, the project readiness filter to ensure quality at entry was extensively discussed during the 2005 NPPR and agreement with the Government was reached to assess readiness against agreed filters. The filter was streamlined to indicate the actions required (e.g. preparation of detailed design and bidding documents, acquisition of land, selection of consultants, and procurement of civil works) at various stages of project preparation, including project design, fact-finding, appraisal and negotiations and started
13 application since 2007. Despite the use of readiness filter in the case of Grant 0093: Rural Reconstruction Rehabilitation Sector Project, it has taken almost two years after the approval to award the first major civil works contract and the start-up compliance rate continues to decline. Hence, during the NPPR it is necessary to revisit the project readiness filter developed by NRM and seek strong commitment from both the Government and ADB to ensure improvement in quality at entry of projects, specifically on reducing start up delays, and agree upon necessary actions to address related concerns. 41. Average Age of the Portfolio. The average age of the portfolio of 4.3 years continues to be higher than the ADB average of 3.8 years. The extension of projects is seen as necessary to achieve the intended output and outcome. The higher average age of the portfolio is largely due to unfavorable project implementation environment and poor quality of entry of projects. It is vital to decrease the average age of the portfolio in view of the revised method of calculating portfolio performance indicator for country performance assessment to receive ADB's assistance for Nepal. 42. Projects at Risk. The overall risk ratio for Nepal portfolio has improved in recent years, from 30% in 2005, 17% in 2006, 10.7% in 2007 to 6% in 2008. Although Loan 2059: Kathmandu Valley Water Services Sector Development Program and Loan 1820: Melamchi Water Supply Project were upgraded in 2008, it is noted that the decrease in the number of problem projects is due to the closure of such projects. The projects that have been categorized as risk are mainly due to the poor quality of projects at entry resulting in poor compliance of covenants and significant delays in implementation and disbursements. Intensive monitoring of implementation progress of three laggard projects 10, Loan 2143: Gender Equality and Empowerment of Women Project, Loan 2102: Community Managed Irrigated Agriculture Sector Project, and Grant 0106: Information and Communication Technology Project is much required and the concerned Executing Agencies (EAs) must take proactive initiatives in complying the agreed actions with ADB mission to prevent them from falling into at risk category at the end of the year. B. Human Resources
43. Frequent Transfer of Project Staff. The issue of transfer of project implementation staff at the center and district level without the proper hand over of responsibilities is a major concern that has repeatedly been raised in past NPPRs. Although the Government reiterates that the staff transfer has been carried out in accordance with the Civil Service act, frequent changes of key implementing staff have de facto resulted in further implementation delays, disruption in the project implementation momentum and loss of institutional memory. For instance, the project director for Grant 0106: Information and Communication Technology Project has been changed four times since the Project was declared effective in June 2008. Likewise, the changes of project directors and senior divisional engineers for Loan 1876: Road Network Development Project and Loan 2097: Sub Regional Transport Facility Project has affected the project implementation. Moreover, the frequent changes of the local development officers of the districts, chief executive officers at the municipalities, sectoral district chief and district technical officers and associated staff have significantly hampered the implementation of projects such as Loan 2092: Decentralized Rural Infrastructure and Livelihood Project, Grant 0093: Rural Reconstruction and Rehabilitation Sector Development Project, Loan 2111: Skills for Employment Project and Loan 1966: Urban and Environment Improvement Project. Therefore,
10
As of 30 June 2009, Loan 2111: Skills for Employment Project was considered as laggard project. However, as of 30 October 2009, the Project was rated as risk.
14 the issue of frequent staff transfer need to be addressed urgently in 2009 NPPR so that concrete results are obtained 44. Inadequate Staffing. Inadequate staffing is a persistent issue that is adversely impacting on the performance of projects, especially the ones at the district level. As a result, the existing staffs are overloaded and lack motivation to carry out required activities of the projects. Loan 2071: Community Livestock Development Project, Loan 2008: Community Based Water Supply and Sanitation Project, and Loan 2143: Gender Equality and Empowerment of Women Project are experiencing unfulfilled vacant positions affecting the implementation. Grant 0093: Rural Reconstruction and Rehabilitation Sector Development Project, approved in 2007 experienced unfulfilled vacant positions hindering the Project in its take off. Similarly, under Loan 2111: Skills for Employment Project delay in deputation of field level monitoring staff and project specific additional staff of Cottage and Small Industry Development Board and Department of Cottage Industry at district offices is hampering implementation and delivery of quality outputs. Hence, a continuous commitment from the Government is required to fulfill the vacant positions at the district level despite its reassurance of project staffing during loan/grant negotiation. C. Public Financial Management
45. Approval of Programs and Release of Budget. Delayed approval of the budget continues to hurt project implementation and portfolio performance. For example, the budget for FY2008-09 was sanctioned two months after the beginning of the fiscal year, depriving projects, including those funded by donors, of financial resources well into the fiscal year. In some cases, local bodies could access resources only six months after the beginning of the fiscal year. In order to address this problem, a mechanism needs to be developed such that donor-funded projects receive their first trimester funds within the first month of that fiscal year. 46. Public Financial Management Strategy. The Government, ADB, DFID and the World Bank have developed a public financial management strategy in order to prioritize actions prescribed by the Public Expenditure and Financial Accountability (PEFA) Assessment. A steering committee has been set up to monitor implementation of the strategy. However, the reporting mechanism to be adopted by the steering committee needs to be systemized so that risks related to effective financial management can be continuously assessed and better addressed. D. Procurement Management
47. Implementation of Public Procurement Act and Regulation. The need to strengthen procurement management has been one of the key issues in several past portfolio reviews as it influences the quality of performance in all aspects of project implementation. Accordingly, it is vital that effective implementation of the Public Procurement Act (PPA) and Public Procurement Regulations (PPR)through the strengthened capacity of the Public Procurement Monitoring Office (PPMO)takes place (the procurement issues are explained in detail in the cross-cutting sector analysis in paras 84-87). Although the joint support provided by ADB 11 and the World Bank targets capacity enhancement at PPMO, the Government needs to allocate adequate
11
TA7111: Knowledge Transfer for Public Procurement, and Preparing Consulting Services Development Act and Regulations through the TA 4825: Capacity Building in Road Feasibility Study, Construction and Contract Management.
15 resources (including human resources) to the Office for effective and efficient delivery of its mandate. 48. Transparency and Anticorruption. In recent years there has been an indication that risks in public procurement, including intimidation and collusion/cartel amongst the bidders in Nepal are on the rise both at the central and district levels. Cases have not only been reported in the media but also seen when the bidders are prevented from bidding through intimidation and the use of physical force by individuals and groups hired by a few unscrupulous bidders. The malfunctioning of the public procurement system has been a national concern and in this regard a joint procurement review was carried out by the Government, ADB, DFID and the World Bank. The action plan to rectify the procurement issues has been endorsed by the joint review committee and the PPMO has been assigned to take the lead in monitoring the implementation of the action plan. In order to promote transparency and prevent corruption in the procurement process it is crucial that the Government effectively implements the recommendations and the PPMO develops a reporting mechanism at the NPPR. Further, anticorruption measures such as independent spot checking, third party monitoring system at the project level and strengthening of procurement review mechanism at NRM need to be enforced. E. Monitoring and Evaluation
49. Quality Control and Operation and Maintenance (O&M). Insufficient quality control and lack of provision of O&M of civil works in the projects is a matter of increasing concern as it affects projects sustainability. Poor quality leads to rapid deterioration of completed works, in turn leading to ineffective operation and high maintenance cost. Although the Governments Technical Audit Division in the National Vigilance Centre of the Prime Ministers Office has been undertaking technical audits on key sector projects, the systemic mechanism on the number of audits to be carried out and the implementation of the audit observations has not been developed. Further, the delay in adoption of the technical audit regulations has adversely influenced effective implementation of technical audits and compliance of audit findings and recommendations for corrective measures. The Government needs to integrate the O&M plan in all its projects and allocate sufficient fund so that project outputs and outcomes are sustained even after the completion of the projects. IV. A. 2008 NPPR NEPAL PORTFOLIO PERFORMANCE REVIEW
50. NPPR Action Plan. During the NPPR in November 2008, the Government, ADB, DFID, JICA, and the World Bank agreed on key actions aimed at improving portfolio performance. The exhaustive action plan addressed a number of outputs in five core areas; results based management, procurement management, financial management, monitoring and evaluation, and aid effectiveness. Although MOF complied in holding quarterly meetings on the progress review of the action plan, it is to be noted that out of the 31 agreed actions, 10 were fully complied with and the rest were in progress for compliance. It was realized that the concrete actions with realistic outputs need to be developed to address the portfolio issues so that there is an effective outcome of NPPR at the end of every year.
16 B. 2009 NPPR
51. Results Based Management. Nepal has been at the forefront in operationalizing managing for development results (MfDR) as illustrated by the results framework of the Tenth Plan (FY2003-Fy2007)), which charted Nepal's poverty reduction strategy. Building on this framework, ADB developed its first results-based Country Strategy Program for Nepal in 2004. The Government has taken concrete steps in developing some core elements of results-based management by establishing a framework that linked planning, budgeting, project implementation and monitoring. In the three year interim plan (FY2008-FY2010), result frameworks were prepared for the sectors as well to deepen the Government's efforts in adopting the MfDR approaches in order to achieve development effectiveness. The results frameworks of the Interim Plan, Medium Term Expenditure Framework (MTEF) and Sectoral Business Plans are important tools to align resources to expected results. Project prioritization criteria introduced since the Tenth Plan has helped curb the number of development projects and focus resource allocations to priority sectors, which better contribute to the Governments poverty reduction goal. Poverty Monitoring and Analysis System (PMAS) and District Poverty Monitoring and Analysis System (DPMAS) have been developed to facilitate the monitoring of development interventions and their impact at national and local levels. There is a need to give continuity to MTEF, PMAS and DPMAS and refine them in the process to operationalize MfDR in the Government system. 52. As a part of operationalizing MFDR, the Government had earlier introduced this approach in a few sectoral line ministries and the National Planning Commission (NPC). This initiative helped to develop MFDR operational guidelines and business plan, and undertake an institutional assessment of the participating agencies. To further deepen the process of MFDR, the Government expanded this approach in additional line ministries under the overall guidance of a steering committee, chaired by Vice-Chairman of NPC with participation from the Secretaries of the concerned ministries as members. 53. Recognizing the importance of results-based management (RBM) for improving portfolio performance and development effectiveness, the Government and participating development partners agreed to make it as a main theme for NPPR 2009. Under this theme, four key areas: (i) reforms in budgeting system; (ii) improve human resource management; (iii) improve projects' quality-at-entry; and (iv) strengthen monitoring and evaluation system. 54. RBM aims to shift the focus of budgeting from internal control and inputs to outcomes and efficiency. Public expenditure management is an integral part of the RBM and performance based budgeting system. In this context, recommendations made under Public Expenditure and Financial Accountability report and recently approved Public Financial Management Strategy could provide a good guidance for selecting immediate budgetary reform measures. It is also anticipated that a few sectoral agencies will agree on to implement the RBM with a clear linkage to improved portfolio performance and development effectiveness indicators. The mechanism will be discussed during the 2009 NPPR and an action plan will be prepared for adopting RBM approach.
Annex 1
NEPAL: Portfolio Management Indicators g Indicators I. Public Sector Loans and Grants A. Country Portfolio 1. Active Loan and Grant Portfolio (a) Project Loans (b) Program Loans (c) Grant Porjects (d) Grant Programs (c) DFI/Credit Loans (d) Combined Projects and DFI Loans 2. Average Age of Active Loan Portfolio 3. Inactive Loan Portfolio B. Start-Up Compliance 1. Loans and Grants Approved During the Year 4. Average Time from Approval to Signing 5. Average Time from Signing to Effectivity 6. Loans that Became Effective more than 90 Days after Signing C. Financial Performance 1. Contract/Commitment Achievement 2. Contract/Commitment Achievement (w/o Programs 2. Contract/Commitment Ratio a 2. Contract/Commitment Ratio (w/o Prigrams) a 3. Disbursement Achievement 3. Disbursement Achievement (w/o programs) b 4. Disbursement Ratio b 4. Disbursement Ratio (w/o programs) 5. Imprest Fund Turnover Ratio c 6. Submission of APA and AFS (PC & NC) (a) =< 6 months (b) > 6 =< 12 months (c) > 12 months 7. Loan Service Payments 8. Net Resource Transfer D. Portfolio Performance 1. Project Ratings (a) Highly Satisfactory (HS) (b) Satisfactory (S) (c) Partly Satisfactory (PS) (d) U Unsatisfactory ti f t (U) 2. Projects At Risk (no. of loans) (a) Problem Projects (combined IP & IO) (PS & U) (b) Potential Problem Projects (c) Problem Projects (i) Implementation Progress (PS & U) (ii) Impact and Outcome (PS & U) 3. Risk Ratios of Major Issues d (a) Project Implementation Delays (b) Loan Utilization Delays (c) Established, Staffed, and/or Operation of PMU/PIU (d) Fielding of Consultants (e) Environmental or Social Problems (f) Poor Compliance with APA and AFS (g) Poor Compliance with other Covenants (h) Shortage of Counterpart Funds/Cofinancing (i) Unsettled Cost Overrun (j) Significant Disbursement Delays (k) In Risk Sector or Country with History of Past Problems (l) Project Fielded Missions E. Portfolio Supervision 1. 2. 3. 4. 5. 6. 7. Proactivity Index f Average Supervision Intensity (staffdays/project) Loans with Settled Cost Overruns Loans with Changes in Project Scope Loans with Changes in Implementation Arrangements Loans with Extensions Loan Cancellations Unit 2006 2007 2008
No. | $mn No. | $mn No. | $mn No. | $mn No. | $mn No. | $mn No. | $mn Years No. | $mn No. | $mn Months Months No. | % $mn $mn % % $mn $mn % % % No. | % No. | % No. | % $mn $mn
27 19 4 4
| | | |
770.7 561.4 125.4 83.9 4.2 169.9 4.604 6.480 72.7 101.6 50.8 22.1 14.6 108.0 57.2 20.0 12.4 1.6
- | - | - | 4 |
28 18 3 6 1 0 0
| | | | | | |
0 | 3 |
849.0 562.2 93.9 142.9 50.0 0 0 4.9 0 109.0 4.300 6.000 76.2 95.7 63.2 26.8 14.5 102.3 69.9 18.3 13.7 1.6
30 17 3 7 3 0 0
| | | | | | |
0 | 3 |
967.4 541.7 93.4 167.4 164.8 0 0 4.3 0 139.3 3.800 5.300 75.0 145.4 69.2 24.2 13.2 127.1 66.5 17.8 10.4 1.23
16 |
16 |
15 |
- | 1 | - |
7.700 45.556 62.451
- | 2 | - |
11.1 52.868 49.426
0.0 | 1 | 1.0 |
0.0 5.3 5.3 63.262 63.838
No. | % No. | % No. | % No. N |% No. | % No. | % No. | % No. | % No. | % No. | % No. | % No. | % No. | % No. | % No. | % No. | % No. | % No. | % No. | % No. | % No. | % No. | % Days No. No. No. No. $mn
19 4 4 4 -
| | | | | | |
82.6 17.4 17.4 17.4 13.0 4.3 30.4 0.0 0.0 0.0 0.0 0.0 8.7 8.7 0.0 34.8 47.8 8.7 71.4 31.9 0 1 2 8 43.966
0 25 3 0 3 3 0
| | | | | | |
0 89.3 10.7 0 10.7 10.7 0 7.1 10.7 28.6 0.0 0.0 3.6 3.6 3.6 14.3 3.6 0.0 17.9 25.0 7.1 25 34.7 0 4 5 8 11.19
2 26 1 1 2 2 0
| | | | | | |
6.7 86.7 3.3 3.3 33 6.7 6.7 0 3.3 3.3 23.3 0.0 0.0 0.0 6.7 0.0 10.0 3.3 0.0 23.3 13.3 13.3 66.7 38 1 6 5 9 3.994
3 | 1 | 7 0 0 0 0 0 2 2 0 8 11 2 | | | | | | | | | | | |
2 | 3 | 8 0 0 1 1 1 4 1 0 5 7 2 | | | | | | | | | | | |
1 | 1 | 7 0 0 0 2 0 3 1 0 7 4 4 | | | | | | | | | | | |
5 |
1 |
2 |
NA = not available; na = not applicable Contract/Commitment Award Ratio is defined as the ratio of Contract Awarded/Actual Commitment during the year over the value available for contract/commitment awards at the beginning of the year. The value of the contracts/commitments to be awarded/committed under newly approved loans during the period is/will be added to the opening balance of the value available for contract/commitment awards. b Disbursement ratio is the ratio of total disbursement in a given year/period over the net loan amount available at the beginning of the year/period plus the loan amounts of newly approved loans which have become effective during the year/period. Where: (i) "Total disbursement in a given year/period" refers to the confirmed disbursement for a particular year/period covered. (ii) "Net loan amount available at the beginning of the year/period" refers to all loans that were effective at the beginning of the year. (iii) "Loan amounts of newly approved loans which have become effective during the year/period" refers to all loans approved before and after the beginning of the year that have become effective after the beginning of the year. c The annualized turnover rate is computed as the ratio of total liquidation over the time-weighted average fund balance for 12 months. d % of problem-flagged projects (loans) to total no.of loans in various loan portfolio categories. e The weighted average of the 12 risk ratios. f % of problem projects changed through upgrading, restructuring, closure, or cancellation during the last 12 months.
a
Annex 2
NEPAL:TIME ELASPED FOR CONTRACT AWARD AND DISBURSEMENT (LOANS AND GRANTS PROJECTS) (as of 31 December 2008)
Sector/ Loan No.
Project Name
Approval Net Loan Date Amount (1) (2)
Disbursement Achievement 20% Dis. Time Elapsed(Year) Year
Contract Awards 25% C/A Time Year Elapsed (Year)
1. 2. 3. 4. 5. 6.
09 Nov 00 19 Dec 03 24 Sep 04 17 Nov 04 16 Dec 04 16-Nov-06
10.4 21.7 43.0 21.4 10.4 18.0 125.0 19.0 35.0 21.4 2.0 77.4 41.7 41.7 52.3 21.4 55.2 9.0 25.0 163.0 33.6 146.1 24.8 204.5 30-Dec-01 31-Dec-05 30-Dec-06 Not Yet achieved 31-Jan-08 4.3 4.3 1.2 3.2 2.0 2.0 5.1 4.2 4.6 31-Dec-05 Not Yet achieved 30-Dec-08 5.3 5.3 5.3
30-Nov-03 30-Sep-07 31-Dec-08 Not Yet achieved Not Yet achieved Not Yet achieved
3.1 3.8 4.3 3.7
31-Mar-04 31-Dec-07 31-Dec-08 Not Yet achieved Not Yet achieved Not Yet achieved
3.4 4.0 4.3 3.90 31-Dec-05 31-Dec-06 Not Yet achieved 30-Nov-07 4.3 4.3 1.0 3.2 30-Dec-00 1.0 1.0 31-Dec-05 31-Dec-07 31-Dec-08 Not Yet achieved Not Yet achieved 4.1 3.2 2.4 3.20 31-Dec-04 Not Yet achieved 31-Dec-08 4.3 5.3 4.78
7. 8. 9. 10.
24 Sep 01 20 Sep 02 25 Nov 04 1-Dec-06
11.
21 Dec 99
12. 13. 14. 15. 16.
13-Dec-01 04 Nov 04 10-Aug-06 17-Dec-07 28-Jan-08
31-Dec-06 31-Dec-08 Not Yet achieved Not Yet achieved Not Yet achieved
17. 18. 19.
12 Sep 00 21 Dec 00 30 Sep 03
20. 21
Agriculture and Natural Resources 1778(SF) Crop Diversification 2071(SF) Community Livestock Development 2092(SF) Decentralized Rural Infrastructure and Livelihood 2102(SF) Community Managed Irrigated Agriculture Sector 2143(SF) Gender Equality and Empowerment of Women 0063 Commercial Agriculture Development Subtotal/Average Education 1840(SF) Teacher Education 1917(SF) Secondary Education Support 2111(SF) Skills For Employment 0065 Education Sector Cluster Program I Subtotal/Average Energy 1732(SF) Rural Electrification, Distribution and Transmission Subtotal/Average Transport and Communications 1876(SF) Roads Network Development 2097(SF) Subregional Transport Facilitation 0051 Road Connectivity Sector 0099 SASEC Information Highway 0106 ICT Development Subtotal/Average Water Supply, Sanitation and Waste Management 1755(SF) Small Towns Water Supply Sanitation Sector 1820(SF) Melamchi Water Supply 2008(SF) Community-Based Water Supply and Sanitation Sector Subtotal/Average Multisector 1966(SF) Urban & Environmental Improvement 0093 Rural Reconstruction and Rehabilitation Sector Development Subtotal/Average 10 Dec 02 12-Dec-07 35.6 50.0 85.6 697.1 30-Dec-08 Not Yet achieved 6.1 6.1 4.1 NEP Total/Average
30-Dec-07 Not Yet achieved
5.1 5.1 3.6
Annex 3A
NEPAL: FINANCIAL PERFORMANCE (LOANS AND GRANT) CONTRACT AWARD (as of 31 December 2008)
Sector/ and Grant No. Project Name
Approval Date (1)
Net Loan Amount (2)
Cumulative Contract and Commitment % to Net Amount Loan Amt. (3) (3/2)
Annual Contract and Commitment % Projected Actual Achieved (4) (5) (5/4)
1. 2. 3. 4. 5. 6.
26 Feb 98 09 Nov 00 19 Dec 03 24 Sep 04 17 Nov 04 16 Dec 04 16 Dec 06
10.16 10.19 21.55 42.29 21.03 10.27 18.00 133.48 18.91 34.76 21.03 31.21 2.00 8.00 115.91 38.16 38.16 2.74 57.16 8.70 68.60 106.30 106.30 52.27 21.16 55.20 9.00 25.00 162.62 0.00 0.00 47.30 14.09 22.28 0.00 0.00 83.68 2.69 57.23 0.00 59.92 39.80 39.80 104.29 104.29 98.18 100.12 0.00 87.35 0.00 0.00 90.50 66.61 40.36 0.00 0.00 51.45 1.91 1.91 0.00 0.00 5.93 5.93 0.00 0.00 0.00 2.67 6.00 0.50 0.00 9.17 13.64 27.30 1.83 30.98 1.76 8.00 83.51 72.12 78.53 8.70 99.27 88.05 100.00 72.05 1.64 9.00 4.12 15.80 0.65 8.00 39.21 2.23 6.92 1.07 15.59 0.88 8.00 34.69 2.09 2.09 0.01 0.00 0.00 0.01 0.00 0.00 0.00 2.22 16.48 0.00 0.00 18.69 136.16 76.86 25.87 98.65 135.85 100.00 88.46 109.37 109.37 0.00 0.00 0.00 0.13 0.00 0.00 0.00 82.96 274.63 0.00 0.00 203.85
9.92 9.93 10.13 15.09 3.24 0.50 2.82 51.64
97.61 97.45 47.03 35.70 15.40 4.85 15.67 38.68
0.00 0.00 3.65 7.99 2.66 1.63 1.60 17.53
0.00 0.04 3.73 8.07 0.27 0.45 2.82 15.38
0.00 0.00 102.30 100.99 10.19 27.55 175.94 87.73
7. 8. 9. 10. 11. 12.
24 Sep 01 20 Sep 02 25 Nov 04 01 Dec 06 01 Dec 06 24 Jan 08
13.
21 Dec 99
14. 15. 16.
14 Dec 00 26 Oct 06 26 Oct 06
17.
Agriculture and Natural Resources 1609(SF) Community Groundwater Irrigation Sector 1778(SF) Crop Diversification 2071(SF) Community Livestock Development 2092(SF) Decentralized Rural Infrastructure and Livelihood 2102(SF) Community Managed Irrigated Agriculture Sector 2143(SF) Gender Equality and Empowerment of Women 0063 Commercial Agriculture Development Subtotal/Average Education 1840(SF) Teacher Education 1917(SF) Secondary Education Support 2111(SF) Skills For Employment 2277(SF) Education Sector Program I 0065 Education Sector Cluster Program 0105 Education Sector Program II Subtotal/Average Energy 1732(SF) Rural Electrification, Distribution and Transmission Subtotal/Average Finance 1811(SF) Corporate & Financial Governance 2268(SF) Rural Finance Sector Development 0059 Rural Finance Sector Development Subtotal/Average Law, Economic Management and Public Policy 0118 Governance Sector Program 22 Oct 08
18. 19. 20. 21. 22.
Transport and Communications 1876(SF) Roads Network Development 2097(SF) Subregional Transport Facilitation 0051 Road Connectivity Sector 0099 SASEC Information Highway 0106 ICT Development 13 Dec 01 04 Nov 04 10 Aug 06 17 Dec 07 28 Jan 08
23. 24. 25. 26. 27.
12 Sep 00 21 Dec 00 30 Sep 03 18 Dec 03 18 Dec 03
33.50 143.54 24.49 5.07 10.74 217.34 10 Dec 02 12 Dec 07 12 Dec 07 35.10 50.00 50.00 135.10 NEP Total/Average 977.51
33.39 25.49 8.27 5.07 0.00 72.22 16.51 2.69 50.00 69.20 459.96
99.67 17.76 33.77 100.00 0.00 33.23 47.03 5.38 100.00 51.22 47.05
0.91 8.00 5.00 2.50 0.00 16.41 10.60 7.42 50.00 68.02 158.18
1.24 6.40 4.08 2.59 0.00 14.32 7.49 2.69 50.00 60.18 145.35
136.70 80.01 81.62 103.60 0.00 87.24 70.66 36.29 100.00 88.48 91.89
28. 29. 30.
Subtotal/Average Water Supply, Sanitation and Waste Management 1755(SF) Small Towns Water Supply Sanitation Sector 1820(SF) Melamchi Water Supply 2008(SF) Community-Based Water Supply and Sanitation Sector 2058(SF) Kathmandu Valley Water Services Sector Development Program 2059(SF) Kathmandu Valley Water Services Sector Development Subtotal/Average Multisector 1966(SF) Urban & Environmental Improvement 0093 Rural Reconstruction and Rehabilitation Sectot Dev. (PJT) 0094 Rural Reconstruction and Rehabilitation Sectot Dev. Program Subtotal/Average
The value available for contract awards excludes amount of interest during construction, unallocated amount and contingencies. Negative ratios which are excluded in the totals were due to the following: (a) the overall cumulative contract/commitment at the end of the period is higher than the total value of contracts/commitment to be awarded/committed thus resulting to negative balance at the beginning of the year; and (b) such excess in contract/commitment values indicates the need for reallocation from the "Unallocated" category ti of contract f th l awarded during ll ti the year over the value of available for contract awards at the beginning of the year. The value of the contracts to be awarded under newly approved and signed loans during Ratio
the period is/will be added to the opening balance of the value available for contract.
Annex 3B
NEPAL : FINANCIAL PERFORMANCE (LOANS) - DISBURSEMENT (as of 31 December 2008) Cumulative Disbursement Annual Disbursement
Sector/ Loan No. Project Name
Approval Net Loan Date Amount (1) (2) Projected (4) Actual (5)
% to Net Amount Loan Amt. (3) (3/2)
% Achieved (5/4)
Disbursement a Ratio % (6)
1. 2. 3. 4. 5. 6. Subtotal/Average Teacher Education Secondary Education Support Skills For Employment Education Sector Program I Education Sector Cluster Program Education Sector Program II Subtotal/Average Rural Electrification, Distribution and Transmission 21-Dec-99 Subtotal/Average Corporate & Financial Governance Rural Finance Sector Development Rural Finance Sector Development Subtotal/Average 22 Oct 08 Subtotal/Average 13-Dec-01 4-Nov-04 10 Aug 06 17 Dec 07 28 Jan 08 52.27 21.16 55.20 9.00 25.00 162.62 33.50 143.54 24.49 5.07 10.74 217.34 10-Dec-02 12 Dec 07 12 Dec 07 35.10 50.00 50.00 135.10 NEP Total/Average 977.51 106.30 106.30 0.00 0.00 43.26 7.23 4.85 0.00 0.00 55.34 29.75 13.66 6.67 5.07 0.52 55.66 10.13 5.37 50.00 65.50 388.14 14-Dec-00 26-Oct-06 26 Oct 06 2.75 57.16 8.70 68.60 0.00 0.00 82.76 34.15 8.79 0.00 0.00 34.03 88.82 9.51 27.24 100.00 4.82 25.61 28.87 10.73 100.00 48.48 39.71 2.70 57.16 0.50 60.35 98.18 100.00 5.75 87.97 38.16 38.16 38.16 38.16 100.00 100.00 6.95 6.95 0.00 0.00 4.96 4.96 0.00 0.00 12.00 4.00 1.53 0.05 0.00 17.58 10.00 4.00 5.00 2.50 0.00 21.50 5.67 7.42 50.00 63.09 165.184 24-Sep-01 20-Sep-02 25-Nov-04 1-Dec-06 01 Dec 06 24 Jan 08 18.91 34.76 21.03 31.21 2.00 8.00 115.91 6.22 6.22 0.01 0.00 0.00 0.01 0.00 0.00 8.66 2.89 1.51 0.00 0.00 13.06 8.79 3.46 3.02 2.59 0.01 17.87 4.79 5.37 50.00 60.16 127.104 14.25 27.94 1.81 15.40 0.59 8.00 67.99 75.36 80.39 8.59 49.34 29.50 100.00 58.66 2.14 9.00 1.41 15.80 0.80 8.00 37.15 2.40 8.34 0.59 0.00 0.40 8.00 19.72 112.10 92.67 41.49 0.00 49.63 100.00 53.08 89.55 89.55 0.00 0.00 0.00 0.00 0.00 0.00 72.20 72.30 98.69 0.00 74.32 87.91 86.60 60.42 103.60 0.00 83.12 84.51 72.33 100.00 95.35 76.95
Agriculture and Natural Resources 1609(SF) Community Groundwater Irrigation Sector 1778(SF) Crop Diversification 2071(SF) Community Livestock Development 2092(SF) Decentralized Rural Infrastructure and Livelihood 2102(SF) Community Managed Irrigated Agriculture Sector 2143(SF) Gender Equality and Empowerment of Women 0063 Commercial Agriculture Development 26-Feb-98 9-Nov-00 19-Dec-03 24-Sep-04 17-Nov-04 16-Dec-04 16 Dec 06 10.16 10.19 21.55 42.29 21.03 10.27 18.00 133.48 33.55 54.31 2.90 0.00 21.97 100.00 10.16 10.19 10.78 8.52 2.08 1.02 2.38 45.14 100.00 100.00 50.02 20.15 9.88 9.94 13.24 33.81 0.00 0.00 4.00 6.46 1.67 1.17 0.66 13.96 0.09 0.22 4.07 3.68 0.64 0.38 0.98 10.06 0.00 0.00 101.85 57.00 38.38 32.56 147.73 72.08 103.61 97.81 27.08 9.65 3.21 3.88 5.88
7. 8. 9. 10. 11. 12.
Education 1840(SF) 1917(SF) 2111(SF) 2277(SF) 0065 0105
Energy 13. 1732(SF)
96.80
Finance 14. 1811(SF) 15. 2268(SF) 16. 0059
10.53 0.00
Law, Economic Management and Public Policy 17. 0118 Governance Sector Program
0.00
18. 19. 20. 21. 22.
Transport and Communications 1876(SF) Roads Network Development 2097(SF) Subregional Transport Facilitation 0051 Road Connectivity Sector 0099 SASEC Information Highway 0106 ICT Development
48.82 16.91 2.90 0.00
23. 24. 25. 26. 27.
12-Sep-00 21-Dec-00 30-Sep-03 18-Dec-03 18-Dec-03
69.78 2.55 14.27 94.46 0.05
28. 29. 30.
Subtotal/Average Water Supply, Sanitation and Waste Management 1755(SF) Small Towns Water Supply Sanitation Sector 1820(SF) Melamchi Water Supply 2008(SF) Community-Based Water Supply and Sanitation Sector 2058(SF) Kathmandu Valley Water Services Sector Development Program 2059(SF) Kathmandu Valley Water Services Sector Development Subtotal/Average Multisector 1966(SF) Urban & Environmental Improvement 0093 Rural Reconstruction and Rehabilitation Sectot Dev. (PJT) 0094 Rural Reconstruction and Rehabilitation Sectot Dev. Program Subtotal/Average
15.85 10.73 100.00
17.79
Disbursement ratio is defined as the ratio of total disbursement in a given year over the net loan available at the beginning of the year plus the loan amounts of newly approved loans which have become effective. "Net loan amount at the beginning of the year" includes all effective loans at the beginning of the year. "Loan amounts of newly approved loans which have become effective" includes loans approved before and after the beginning of the year that have become effective after the beginning of the year. Disbursement ratio for individual project as a performance indicator is less meaningful than average ratios of sector and country. Includes active and closed loans in previous years with fund balances/transactions during the past 12-month period.
Turnover ratio = The annualized imprest turnover rate is computed as the ratio of total liquidation over the time-weighted average fund balance (TWAFB) for 12 months.
Annex 4 NEPAL: PROJECT PERFORMANCE RATING OF ONGOING LOANS and GRANTS (as of 31 December 2008) Risk Factors Detail
Sector/ No. Types
Project Name
Project Ratings Impact & Impl. Potential At Risk Outcome Progress Problem (U+PS in IP (IO) (IP) (PP) or IO)+PP ImplemenCompliance tation Tranche Utilization with Delays Delays Delays Covenants PMU & Staffing Consultant's Counterpart Cost Fielding Funds Overrun
Submission History Mission of Environmental/ Disbursement of In Risk Days APA/AFS Social Achievement Sector Fielded
Total Flags
1. 2. 3. 4. 5. 6.
Agriculture and Natural Resources 1778(SF) Crop Diversification Project 2071(SF) Community Livestock Development Project 2092(SF) Decentralized Rural Infrastructure and Livelihood Project 2102(SF) Community Managed Irrigated Agriculture Sector Project 2143(SF) Gender Equality and Empowerment of Women Project 0063 Commercial Agriculture Development S S S S S S S S S S S S No No No No No No No No No No No No Project Project Project Project Project Project S S S Flag(PS) S S ----------------------------------------S Flag(PS) S S S S S S HS S S S S S HS S S S HS HS S HS HS S HS HS HS HS HS S HS HS S HS HS S S S S S S S No Projection 101.8 Flag(57) Flag(38.4) Flag(32.6)
Flag(0) 18 78 74 17
1 1 1 2 1 0
7. 8. 9. 10. 11. 12.
Education 1840(SF) Teacher Education Project 1917(SF) Secondary Education Support Project 2111(SF) Skills for Employment Project 2277(SF) Education Sector Program I 0065 Education Sector Program I 0105 Education Sector Program II S S S S S S S S S S S S No No No No No No No No No No No No Project Project Project Program Project Program S S Flag(PS) ------------------------S ----------------S S S S S HS S ----S S Not Yet Due Not Applicable HS HS HS HS HS HS HS ----HS HS HS ----S S Flag(PS) -----
112.1 92.7 Flag(41.5) Flag(0)
28 Flag(4) 77 Flag(0)
0 1 3 2
Energy 13. 1732(SF) Rural Electrification, Distribution and Transmission Project PS S No Yes Project Flag(PS) --------Flag(PS) S S HS HS
89.6
15
Finance 14. 1811(SF) Corporate & Financial Governance Project 15. 2268(SF) Rural Finance Sector Development Cluster Program 16. 0059 Rural Finance Sector Development Cluster Program S HS S S S S No No No No No No Project Program Project Flag(PS) ------------HS --------Flag(PS) S S ----S S HS HS
HS -----
S -----
No Covenant -----
No Projection No Projection
Flag(0) 6
3 0
Law, Economic and Public Policy 17. 0118 Governance Support Program (Subprogram1) HS S No No Program
18. 19. 20. 21. 22.
Transport and Communications 1876(SF) Roads Network Development Project 2097(SF) Subregional Transport Facilitation Project 0051 Road Connectivity Sector I Project 0106 ICT Development Project 0099 SASEC Information Highway S S HS S S S S HS S U No No No No No No No No No Yes Project Project Project Project Project S S S S S ----------------S S S HS S S
HS HS
HS HS
HS HS
S S
72.2 72.3
34 54
0 0
23. 24. 25. 26. 27.
Water Supply, Sanitation and Waste Management 1755(SF) Small Towns Water Supply Sanitation Sector Project 1820(SF) Melamchi Water Supply Project 2008(SF) Community-Based Water Supply and Sanitation Sector Proj 2058(SF) Kathmandu Valley Water Services Sector Development Pro 2059(SF) Kathmandu Valley Water Services Sector Development Pro S S S S S S S S S S No No No No No No No No No No Project Project Project Program Project Flag(PS) Flag(U) S ----S ------------Flag(U) ------------------------S S S S S
S S HS ----S
S S S Not Yet Due Not Yet Due
HS Flag(PS) HS HS HS
HS S HS ----HS
HS HS HS ----HS
S S S ----S
87.9 86.6 Flag(60.4) 103.6 No Projection
Flag Flag Flag Flag
53 20 28 9 9
2 3 2 1 1
Multisector 28. 1966(SF) Urban & Environmental Improvement Project 29. 0093 Rural Reconstruction Rehabilitation Sector Development 30. 0094 Rural Reconstruction Rehabilitation Sector Development m S S S S S S No No No No No No Project Program Project Flag(PS) ---------
HS
HS
HS
HS
Flag(PS)
84.5
60
Problem Projects are those PS and U projects in either IP or IO; Potential Problem project (PP) are those projects with four or more flags in IP; Projects At Risk is the total of Problem projects (PS+U) and Potential Problem (PP). Risk Ratio is the percentage of risky or problem-flagged projects (loans) to total no. of loans in applicable categories of project, program, DFI, and combined loans. The greater the percentage is, the higher the riskiness of the issues to adversely impact overall quality of portfolio.
Overall Risk Ratio of the Portfolio is the weighted average of the riskiness ratios of the individual issues that are weighted by the number of the loans applicable categories to sum of all applicable loans in all major issues.
If overall rating for IP or IO is PS or U, project is automatically "at risk" and flags are not counted in determining PP but will be flagged to indicate the If IP rating was override to upgrade the project rating to HS or S, project will not also be classified as a potential problem project.
Flag-in criteria: 1 Project Implementation Delays Flag-in when rated PS or U for project implemetation in current rating 2 Program Implementation Delays Flag-in when rated PS or U for tranche delays in current rating 3 Delay in Loan Utilization Flag-in when rated PS or U for loan utilization in current rating 4 Poor Compliance with Covenants Flag-in when rated PS or U for covenants in current rating 5 Established, Staffed, and Operating PMU/Flag-in when rated PS or U 6 Fielding of Consultants Flag-in when rated PS or U 7 Shortage of Counterpart Funds/CofinancinFlag-in when rated PS or U for counterpart funds/cofinancing in current rating 8 Cost Overrun Flag-in when rated PS or U for project cost in current rating 9 Poor Compliance with APA/AFS Flag-in when rated PS orU for APA/AFS compliance in current rating 10 Environmental and/or Social Problems Flag-in when rated PS or U in current rating 11 Significant Disbursement Delays Flag-in when the actual disbursement is <70% of the projection as of the cut-off date. If the cut-off date is within the quarter, the projected amount of the quarter will be prorate 12 In Risk Sector in a Country with History Flag-in when 50% of sector portfolio in a country was previously rated as PS or U in IP o of Past Problems Loans closed in the last 2 years will assume rating at the time of closing. 13 Project Field Missions Flag-in when number of mission days is less than 10 person-days in the last 12 months f projects with PS or U in overall rating of IP or DO, or less than 5 person-days for projects HS or S ratings. Projects completed (with 100% project progress) require PCR missions within 2 years after completion, hence, no flag.
Annex 5
NEPAL: FINANCIAL PERFORMANCE (TAs) PROCUREMENT AND DISBURSEMENT (as of 31 December 2008) Uncommitted Balance % % Undisbursed Balance
TA No.
Project Name
Approval Date (1) Net TA Amount (2) Amount (2 - 3) Amount (2-4)
Cumulative Contract/ Commitment % to Net Amount TA Amount (3) (3/2)
Cumulative Disbursement % to Net Amount TA Amt. (4) (4/2)
1. 2. 3. 4. 13 Dec 06 10 Oct 07 1.000 2.000 4.050 0.600 0.600 0.400 0.300 0.600 0.150 0.150 1.600 1.100 0.400 1.500 0.493 0.000 0.493 44.8 0.0 32.9 0.607 0.400 1.007 55.2 100.0 67.1 0.338 0.179 0.570 0.127 0.000 1.213 84.4 59.8 95.0 84.3 0.0 75.8 0.063 0.121 0.030 0.024 0.150 0.387 15.6 40.2 5.0 15.7 100.0 24.2 0.146 0.114 0.073 0.000 0.000 0.333 0.269 0.000 0.269 0.193 0.193 32.2 32.2 0.407 0.407 67.8 67.8 0.051 0.051 8.4 8.4 36.5 38.0 12.2 0.0 0.0 20.8 24.5 0.0 18.0 0.462 0.637 1.846 46.2 31.9 45.6 0.538 1.363 0.303 53.8 68.2 7.5 0.209 0.056 0.737 20.9 2.8 18.2
24 Sep 04 28 Feb 06 26 Sep 07
0.400 0.300 0.350
0.144 0.292 0.311
35.9 97.3 88.9
0.256 0.008 0.039
64.1 2.7 11.1
0.127 0.216 0.129
31.7 72.1 36.8
0.273 0.084 0.221
68.3 27.9 63.2
5.
0.791 1.944 3.313 0.549 0.549 0.254 0.186 0.527 0.150 0.150 1.267 0.831 0.400 1.231
79.1 97.2 81.8 91.6 91.6 63.5 62.0 87.8 100.0 100.0 79.2 75.5 100.0 82.0
6.
12 Dec 07
7. 8. 9. 10. 11.
18 Dec 04 05 Nov 07 03 Dec 07 21 Apr 08 19 Nov 08
12. 13.
26 Oct 06 10 Dec 08
14. 22 Dec 05 0.685 0.685 0.350 0.760 0.500 0.400 0.500 0.500 0.500 0.675 0.500 4.685 0.289 0.724 0.407 0.385 0.486 0.421 0.000 0.000 0.000 2.711 0.615 0.615
89.8 89.8 82.5 95.2 81.4 96.3 97.2 84.2 0.0 0.0 0.0 57.9
0.070 0.070 0.061 0.036 0.093 0.015 0.014 0.079 0.500 0.675 0.500 1.974
10.2 10.2 17.5 4.8 18.6 3.8 2.9 15.8 100.0 100.0 100.0 42.1
0.593 0.593 0.162 0.638 0.297 0.019 0.038 0.036 0.000 0.000 0.000 1.189
86.6 86.6 46.4 83.9 59.3 4.7 7.6 7.1 0.0 0.0 0.0 25.4
0.092 0.092 0.188 0.122 0.203 0.381 0.462 0.464 0.500 0.675 0.500 3.496
13.4 13.4 53.6 16.1 40.7 95.3 92.4 92.9 100.0 100.0 100.0 74.6
15. 16. 17. 18. 19. 20. 21. 22. 23.
03 Dec 04 21 Dec 05 31 Aug 06 30 Aug 07 14 Dec 07 31 Jul 08 22 Oct 08 04 Nov 08 18 Nov 08
24.
25. 26. 27. 28.
10 Aug 06 30 Aug 06 15 Sep 06 14 Dec 07 26 Sep 08
0.300 0.600 0.850 0.750 0.225 2.725 13 Dec 06 28 Sep 07 10 Dec 07 0.960 0.720 2.500 4.180 13 Feb 06 02 Dec 08 0.400 0.846 1.246 21.271
0.041 0.573 0.846 0.681 0.000 2.141 0.025 0.633 1.682 2.340 0.371 0.000 0.371 11.924
13.7 95.5 99.6 90.8 0.0 78.6 2.6 87.9 67.3 56.0 92.8 0.0 29.8 56.1
0.259 0.027 0.004 0.069 0.225 0.584 0.935 0.087 0.818 1.840 0.029 0.846 0.875 9.347
86.3 4.5 0.4 9.2 100.0 21.4 97.4 12.1 32.7 44.0 7.2 100.0 70.2 43.9
0.032 0.512 0.776 0.101 0.000 1.421 0.002 0.344 0.449 0.794 0.328 0.000 0.328 5.716
10.8 85.4 91.3 13.5 0.0 52.2 0.2 47.7 18.0 19.0 82.0 0.0 26.3 26.9
0.268 0.088 0.074 0.649 0.225 1.304 0.958 0.376 2.051 3.386 0.072 0.846 0.918 15.555
89.2 14.6 8.7 86.5 100.0 47.8 99.8 52.3 82.0 81.0 18.0 100.0 73.7 73.1
29. 30.
31.
32. 33.
Agriculture and Natural Resources Capacity Building in Rural Infrastructure Institutions 4397 Capacity Building for Gender Equality and Empowerment of Women 4767 Strengthening Land Administration Services 4969 9101 Improving the livelihoods of Poor Farmers and Disadvantages Groups in EDR1/ Strengthening Decentralized Support for Vulnerable & Conflict Affected 9110 Subtotal/Average Education Education Sector Program (Subprogram III) 7025 Subtotal/Average Energy Restructuring of Nepal Electricity Authority 4492 Preparing the West Seti Hydroelectric Project 4985 Promoting Private Sector Participation in the Power Sector 4997 Nepal for Transmission and Distribution Project (SSTA) 7076 Electricity Connectivity and Energy Efficiency Project 7176 Subtotal/Average Finance Capacity Building in Rural Finance 4857 Rural Finance Sector Development Cluster Program (Subprogram II) 7196 Subtotal/Average Health, Nutrition, and Social Protection 4759 Reaching the Most Disadvantaged Groups in Mainstream Rural Development Subtotal/Average Law, Economic Management and Public Policy Strengthening National Accounts System 4460 Regional Development Strategy 4752 Governance Reforms and Decentralization Cluster Program 4834 Support To Anticorruption Institutions 4962 Economic Policy Network II 7042 Knowledge Transfer for Public Procurement 7111 Strengthening Capacity for Managing for Development Results 7158 Strengthening Capacity for Macroeconomic Analysis 7165 Strengthening Capacity for Managing Climate Change and the Environment 7173 Subtotal/Average Transport and Communications 4825 Capacity Building in Road Feasibility and Construction and Contract Management Information and Communications Technology Developmen 4833 North-South Fast Track Road 4842 Civil Aviation Airport Project 7031 Enhancing Project Readiness for North-South Fast Track Road Connectivity 7135 (SSTA) Subtotal/Average Water Supply, Sanitation and Waste Management Kathmandu Valley Water Distribution, Sewerage and Urban Dev 4893 Improved Water Quality, Sanitation, and Service Delivery in Emerging Towns 4972 Sector Development Program Supporting Capacity Development for Water Services Operation and Public 7007 Private Partnership in the Kathmandu Valley Subtotal/Average Multisector Operationalization of Managing for Development Results 4765 Secondary Towns Integrated Urban Environmental Improvement Projec 7182 Subtotal/Average Total/Average
Annex 6
NEPAL: TECHNICAL ASSISTANCE PORTFOLIO MANAGEMENT INDICATORS
Indicators A. Country Portfolio 1. Active TA Portfolio (i) Advisory & Operational Technical Assistance (ADTA) (ii) Project Preparatory Technical Assistance (PPTA) (iii) Regional Technical Assistance (RETA) 2. Average Age of Active TA Portfolio 3. Physically Completed but not Financially Closed B. Start-Up Compliance 1. Average Time from Approval to Signing of TA Letter/Agreement 2. Average Time from Signing to Fielding of Consultants C. Financial Performance 1. Total Disbursement 2. Total Undisbursed Balance a 3. Potential TA Savings 4. Cancellations of TA Funds D. Portfolio Supervision 1. Supervision Intensity (staff-days/project) E. TA Completion Reports (TCR) 1. TCR Programmed 2. TCR Circulated 3. % Achieved
NA = not available; na = not applicable. Undisbursed TA amount of physically completed TA but not financially closed.
Unit
2006
2007
2008
No. | $mn No. | $mn No. | $mn No. | $mn Months No. | $mn
34 24 10 0
| 20.470 | 13.040 | 7.430 | 0.000 24.8 0 | 0.0
30 19 11 0
| 18.045 | 11.065 | 6.980 | 0.000 18.3 0 | 0.0
31 19 12 0
| 18.271 | 11.445 | 6.826 | 0.000 19.4 2 | 1.035
Months Months
3.1 4.0
3.2 3.9
2.2 4.7
$mn $mn $mn $mn
10.293 10.177 0.000 0.253
5.355 12.690 0.000 0.806
5.451 12.820 0.279 0.360
Days
8.4
4.2
12.3
No. No. %
2 2 100.0
4 4 100.0
7 7 100.0
Annex - 7 NEPAL: LIST OF ONGOING LOANS AND GRANTS BY SECTOR (as of 30 June 2009) Milestone Dates Loan No. Project Name Approval Signing Effectivity Orig/Revised Closing Net Amount
Sector/Ministry/EA
1. 2. 3. 4. 0063 Commercial Agriculture Development Subtotal/Average Teacher Education Secondary Education Support Skills For Employment Education Sector Program I Education Sector Cluster Program I Education Sector Program II Subtotal/Average 14 Dec 00 24 Jan 01 26 Oct 06 01 Nov 06 26 Oct 06 01 Nov 06 24 Sep 01 20 Sep 02 25 Nov 04 01 Dec 06 01 Dec 06 24 Jan 08 28 Jan 02 09 May 02 17 Jan 03 05 Aug 03 02 Feb 05 28 Feb 06 28 Dec 06 06 Feb 07 28 Dec 06 06 Feb 07 31 Mar 08 14 Jul 08 16 Dec 04 09 Jun 06 16 Nov 06 23 Feb 07 28 Nov 06 06 Aug 07 30 Jun 10 30 Jun 13
Agriculture and Natural Resources Department of Livestock Services Department of Local Infrastructure Devt & Agri. Roads Ministry of Water Resources Dept. of Women Devt, Min. of Women, Children & Social Welfare 2071(SF) 2092(SF) 2102(SF) 2143(SF) Community Livestock Development Decentralized Rural Infrastructure and Livelihood Community Managed Irrigated Agriculture Sector Gender Equality and Empowerment of Women 19 Dec 03 08 Apr 04 24 Sep 04 23 Dec 04 17 Nov 04 23 Dec 05 02 Dec 05 31 Oct 05 13 Jan 06 30 Jun 10 31 Oct 11 30 Sep 12
21.5 41.1 20.9
5. Ministry of Agriculture and Cooperatives
10.2 18.0 111.7 30 Jun 08 30 Sep 09 31 Mar 11 31 Jan 10 30 Jun 10 30 Jun 12 18.6 34.7 20.9 31.3 2.0 8.0 115.5
6. 7. 8. 9. 10. 11.
Education Ministry of Education and Sports Department of Education Ministry of Education and Sports Ministry of Education and Sports Ministry of Education and Sports Ministry of Education and Sports 1840(SF) 1917(SF) 2111(SF) 2277(SF) 0065 0105
Finance 12. Ministry of Finance 13. Ministry of Finance 14. Minstry of Fiinance 1811(SF) Corporate and Financial Governance 0059 Rural Finance Sector Development 2268 Rural Finance Sector Development Subtotal/Average 0118 Governance Sector Program Subtotal/Average Roads Network Development Subregional Transport Facilitation Road Connectivity Sector SASEC Information Highway ICT Development Subtotal/Average Small Towns Water Supply Sanitation Sector Melamchi Water Supply Community-Based Water Supply and Sanitation Sector Kathmandu Valley Water Services Sector Development Subtotal/Average
28 Nov 01 21 Nov 06 21 Nov 06
30 Nov 07 30 Jun 10 30 Jun 09
2.7 8.7 57.2 68.6 22 Oct 08 15 Dec 08 19 Dec 08 30 Jun 13 106.3 106.3 13 Dec 01 04 Nov 04 10 Aug 06 17 Dec 07 28 Jan 08 10 Dec 02 11 Mar 03 19 Jan 05 10 May 05 11 Sep 06 20 Nov 06 09 Feb 09 02 Jul 09 23 May 08 25 Jul 08 31 Dec 08 01 Jul 10 30 Jun 13 30 Jun 10 31 Dec 14 50.2 21.1 55.2 9.0 25.0 160.4 12 Sep 00 18 Dec 00 21 Dec 00 24 Jan 01 30 Sep 03 09 Dec 03 18 Dec 03 08 Apr 04 16 Mar 01 28 Nov 01 01 Apr 04 07 Dec 04 30 Sep 08 31 Mar 08 31 Dec 10 30 Jun 11 33.4 142.7 24.3 10.7 211.2 10 Dec 02 20 Jun 03 12 Dec 07 14 Jan 08 12 Dec 07 14 Jan 08 21 Apr 09 03 Aug 09 02 Oct 03 01 Feb 08 01 Feb 08 25 Aug 09 31 Mar 10 30 Jun 12 31 Dec 11 31 Dec 12 32.6 50.0
Law Economic Management and Public Policy 15. Ministry of Local Development
16. 17. 18. 19. 20.
Transport and Communications Ministry of Physical Planning and Works Ministry of Physical Planning and Works Ministry of Physical Planning and Works Ministry of Information and Communication Office of Prime Minister and council of Ministers 1876(SF) 2097(SF) 0051 0099 0106
21. 22. 23. 24.
Water Supply, Sanitation and Waste Management Ministry of Physical Planning and Works Ministry of Physical Planning and Works Ministry of Physical Planning and Works Ministry of Physical Planning and Works 1755(SF) 1820(SF) 2008(SF) 2059(SF)
Multisector 25. Ministry of Physical Planning and Works 26. Ministry of Local Development 27. Ministry of Local Development 0150
1966(SF) Urban & Environmental Improvement 0093 Rural Reconstruction and Rehabilitation Sectot Dev. (PJT) 0094 Rural Reconstruction and Rehabilitation Sectot Dev. Program Emergency Flood Damage Rehabilitaeion Subtotal/Average Total/Average
28. Ministry of Physical Planning and Works
50.0 25.6 158.2 931.9
MS/
Annex - 8A NEPAL: FINANCIAL PERFORMANCE (LOANS AND GRANT) PROCUREMENT (as of 30 June 2009)
Contract/ Commit. Ratio b % (7)
Sector/ Loan No.
Project Name
Approval Date (1)
Net Loan Amount (2)
Cumulative Contract and Commitment % to Net Amount Loan Amt. (3) (3/2)
Annual Contract and Commitment % Projected Actual Achieved (4) (5) (5/4)
Remaining to be Awarded/ Committed as of 1 Jan 2009 a (6)
1. 2. 3. 4. 5. Subtotal/Average 24 Sep 01 20 Sep 02 25 Nov 04 01 Dec 06 01 Dec 06 24 Jan 08 Subtotal/Average 14 Dec 00 26 Oct 06 14 Dec 00 2.70 57.20 8.70 68.60 106.30 106.30 50.20 21.10 55.20 9.00 25.00 160.50 33.40 142.70 24.30 10.70 211.10 10 Dec 02 12 Dec 07 12 Dec 07 21 Apr 09 32.60 50.00 50.00 25.60 158.20 931.90 NEP Total/Average 47.29 14.11 33.17 0.00 0.00 94.57 32.85 66.57 10.50 0.00 109.92 18.64 5.78 50.00 0.00 74.42 482.47 20.00 20.00 18.8 18.8 94.2 66.9 60.1 0.0 0.0 58.9 98.4 46.6 43.2 0.0 52.1 57.2 11.6 100.0 0.0 47.0 51.8 2.70 57.23 0.10 60.02 100.0 100.0 1.1 87.5 115.50 86.68 75.0 18.60 34.70 20.90 31.30 2.00 8.00 14.62 28.02 2.99 31.30 1.76 8.00 78.6 80.7 14.3 100.0 88.1 100.0 2.00 5.55 5.00 0.32 0.15 0.00 15.00 28.02 0.00 0.00 0.80 0.80 20.00 20.00 0.00 1.00 21.90 0.30 10.70 33.90 0.00 57.00 6.50 0.35 63.85 5.00 7.55 0.00 0.00 12.55 178.635 0.01 0.00 0.10 0.10 20.00 20.00 0.00 0.00 11.19 0.00 0.00 11.19 0.08 46.07 2.29 0.00 48.44 1.94 3.23 0.00 0.00 5.17 93.55 0.96 0.71 1.16 0.32 0.00 0.00 0.00 3.15 48.1 12.9 23.1 100.0 0.0 0.0 11.2 11.9 11.9 100.0 100.0 0.0 51.1 0.0 0.0 33.0 80.8 35.3 0.0 75.9 38.8 42.8 41.2 52.4
Agriculture and Natural Resources 2071(SF) Community Livestock Development 2092(SF) Decentralized Rural Infrastructure and Livelihood 2102(SF) Community Managed Irrigated Agriculture Sector 2143(SF) Gender Equality and Empowerment of Women 0063 Commercial Agriculture Development 19 Dec 03 24 Sep 04 17 Nov 04 16 Dec 04 16 Dec 06 21.50 41.10 20.90 10.20 18.00 111.70 11.81 17.56 3.44 0.89 3.17 36.87 54.9 42.7 16.4 8.7 17.6 33.0 5.40 8.02 2.66 0.47 2.98 19.52 1.68 2.87 0.19 0.39 0.37 5.50 31.1 35.8 7.1 82.7 12.5 28.2 10.26 24.01 16.74 8.27 15.19 74.47 3.11 2.08 15.12 0.32 0.24 0.00 20.87 0.05 -0.07 8.70 8.68 106.30 106.30 1.09 4.24 32.92 9.00 25.00 72.25 -0.11 97.67 15.38 10.17 123.11 14.52 47.31 0.00 25.60 87.42 493.09
16.38 11.96 1.12 4.68 2.44 7.38 30.86 34.39 7.64 99.68 0.00 15.08
6. 7. 8. 9. 10. 11.
Teacher Education Secondary Education Support Skills For Employment Education Sector Program I Education Sector Cluster Program Education Sector Program II Education Sector Program III
Finance 12. 1811(SF) 13. 2268(SF) 14. 0059
Corporate and Financial Governance Rural Finance Sector Development Cluster Program Rural Finance Sector Development Subtotal/Average Law, Economic Management and Public Policy 15. 0118 Governance Sector Program 22 Oct 08
1.09 1.09 0.00 0.00 34.00 0.00 0.00 15.49 100.00 47.17 14.92 39.35 13.37 6.83 0.00 20.20 18.97
Transport and Communications 16. 1876(SF) Roads Network Development 17. 2097(SF) Subregional Transport Facilitation 18. 0051 Road Connectivity Sector 19. 0099 SASEC Information Highway 20. 0106 ICT Development 13 Dec 01 04 Nov 04 10 Aug 06 17 Dec 07 28 Jan 08
21. 22. 23. 24.
12 Sep 00 21 Dec 00 30 Sep 03 18 Dec 03
25. 26. 27. 28.
Subtotal/Average Water Supply, Sanitation and Waste Management 1755(SF) Small Towns Water Supply Sanitation Sector 1820(SF) Melamchi Water Supply 2008(SF) Community-Based Water Supply and Sanitation Sector 2059(SF) Kathmandu Valley Water Services Sector Development Subtotal/Average Multisector 1966(SF) Urban & Environmental Improvement 0093 Rural Reconstruction and Rehabilitation Sectot Dev. (PJT) 0094 Rural Reconstruction and Rehabilitation Sectot Dev. Program 0150 Emergency Flood Damage Rehabilitation Subtotal/Average
of interest during construction, unallocated amount and contingencies. Negative ratios which are excluded in the totals were due to the following: (a) the overall cumulative contract/commitment at the end of the period is higher than the total value of contracts/commitment to be awarded/committed thus resulting to negative b Ratio of contract awarded during the year over the value of available for contract awards at the beginning of the year. The value of the contracts to be awarded under newly approved and signed loans during the period is/will be added to the opening balanc
MS/
Annex - 8B
NEPAL : FINANCIAL PERFORMANCE (LOANS) - DISBURSEMENT (as of 30 June 2009) Cumulative Disbursement Annual Disbursement
Sector/ Loan No. Project Name
Approval Net Loan Date Amount (1) (2) Projected (4) Actual (5)
% to Net Amount Loan Amt. (3) (3/2)
% Achieved (5/4)
Disbursement Ratio a % (6)
1. 2. 3. 4. 5. Subtotal/Average Teacher Education Secondary Education Support Skills For Employment Education Sector Program I Education Sector Cluster Program Education Sector Program II Education Sector Program III Subtotal/Average Corporate & Financial Governance Rural Finance Sector Development Rural Finance Sector Development Subtotal/Average 22 Oct 08 Subtotal/Average 13-Dec-01 4-Nov-04 10 Aug 06 17 Dec 07 28 Jan 08 50.20 21.10 55.20 9.00 25.00 160.50 33.40 142.70 24.30 10.70 211.10 32.60 50.00 50.00 25.60 158.20 931.90 31.23 23.25 10.35 0.52 65.34 12.19 5.94 50.00 0.00 68.13 387.36 43.79 8.92 6.57 0.00 0.00 59.28 87.2 42.3 11.9 0.0 0.0 36.9 93.5 16.3 42.6 4.9 31.0 37.4 11.9 100.0 0.0 43.1 41.6 106.30 106.30 20.00 20.00 18.8 18.8 14-Dec-00 26-Oct-06 26 Oct 06 2.70 57.20 8.70 68.60 20.00 20.00 5.00 6.50 4.60 0.00 0.90 17.00 0.00 11.50 6.50 0.20 18.20 7.00 6.80 0.00 0.00 13.80 131.94 2.69 57.16 0.55 60.40 99.8 99.9 6.3 88.0 0.00 0.00 0.90 0.90 0.00 0.00 0.05 0.05 20.00 20.00 0.53 1.70 1.72 0.00 0.00 3.95 1.47 9.59 3.68 0.00 14.74 2.06 0.57 0.00 0.00 2.63 62.81 115.50 84.97 73.6 16.98 24-Sep-01 20-Sep-02 25-Nov-04 1-Dec-06 01 Dec 06 24 Jan 08 18.60 34.70 20.90 31.30 2.00 8.00 14.69 28.07 2.21 31.30 0.70 8.00 79.0 80.9 10.6 100.0 34.8 100.0 2.00 6.00 2.75 15.90 1.05 0.00 15.00 42.70 5.11 5.00 100.00 100.00 10.56 26.09 37.41 0.00 23.21 83.43 56.55 1.50 81.01 29.41 8.41 19.07 47.61 0.43 0.13 0.41 15.90 0.11 0.00 21.65 2.22 14.80 100.00 10.00 39.77 9.93 1.95 2.12 100.00 7.45 -
Agriculture and Natural Resources 2071(SF) Community Livestock Development 2092(SF) Decentralized Rural Infrastructure and Livelihood 2102(SF) Community Managed Irrigated Agriculture Sector 2143(SF) Gender Equality and Empowerment of Women 0063 Commercial Agriculture Development 19-Dec-03 24-Sep-04 17-Nov-04 16-Dec-04 16 Dec 06 21.50 41.10 20.90 10.20 18.00 111.70 12.47 10.32 2.46 1.38 2.62 29.24 58.0 25.1 11.8 13.5 14.5 26.2 5.00 6.00 4.57 0.45 3.31 19.34 1.69 1.80 0.39 0.36 0.23 4.47 33.80 29.98 8.44 78.59 7.07 23.09 15.69 5.49 2.04 3.85 1.50
6. 7. 8. 9. 10. 11.
Finance 12. 1811(SF) 13. 2268(SF) 14. 0059
0.56
15.
Law, Economic Management and Public Policy 0118 Governance Sector Program
18.81
Transport and Communications 16. 1876(SF) Roads Network Development 17. 2097(SF) Subregional Transport Facilitation 18. 0051 Road Connectivity Sector 19. 0099 SASEC Information Highway 20. 0106 ICT Development
7.53 12.17 3.42 -
21. 22. 23. 24.
12-Sep-00 21-Dec-00 30-Sep-03 18-Dec-03
39.36 7.39 20.63 0.03
25. 26. 27. 28.
Subtotal/Average Water Supply, Sanitation and Waste Management 1755(SF) Small Towns Water Supply Sanitation Sector 1820(SF) Melamchi Water Supply 2008(SF) Community-Based Water Supply and Sanitation Sector 2059(SF) Kathmandu Valley Water Services Sector Development Subtotal/Average Multisector 1966(SF) Urban & Environmental Improvement 0093 Rural Reconstruction and Rehabilitation Sectot Dev. (PJT) 0094 Rural Reconstruction and Rehabilitation Sectot Dev. Program 0150 Emergency Flood Damage Rehabilitation Subtotal/Average 10-Dec-02 12 Dec 07 12 Dec 07 NEP Total/Average
9.09 1.50 -
10.93
Disbursement ratio is defined as the ratio of total disbursement in a given year over the net loan available at the beginning of the year plus the loan amounts of newly approved loans which have become effective. "Net loan amount at the beginning of the y
with fund balances/transactions during the past 12-month period.
o of total liquidation over the time-weighted average fund balance (TWAFB) for 12 months.
MS/
Annex 9 NEPAL: PROJECT PERFORMANCE RATING OF ONGOING LOANS and GRANTS (as of 30 June 2009)
Sector/ No. Project Name Types
Project Ratings Impact & Impl. Potential At Risk Outcome Progress Problem (U+PS in IP (IO) (IP) (PP) or IO)+PP
1. 2. 3. 4. 5.
Agriculture and Natural Resources 2071(SF) Community Livestock Development Project 2092(SF) Decentralized Rural Infrastructure and Livelihood Project 2102(SF) Community Managed Irrigated Agriculture Sector Project 2143(SF) Gender Equality and Empowerment of Women Project 0063 Commercial Agriculture Development S S S S S S S S S S No No No No No No No No No No Project Project Project Project Project
6. 7. 8. 9. 10. 11.
Education 1840(SF) Teacher Education Project 1917(SF) Secondary Education Support Project 2111(SF) Skills for Employment Project 2277(SF) Education Sector Program I 0065 Education Sector Program I 0105 Education Sector Program II S S S S S S S S S S S S No No No No No No
No No No No No No
Project Project Project Program Project Program
Finance 12. 1811(SF) Corporate & Financial Governance Project 13. 2268(SF) Rural Finance Sector Development Cluster Program 14. 0059 Rural Finance Sector Development Cluster Program S HS S
S S S
No No No
No No No
Project Program Project
Law, Economic and Public Policy 15. 0118 Governance Support Program (Subprogram1)
HS
No
No
Program
16. 17. 18. 19. 20.
Transport and Communications 1876(SF) Roads Network Development Project 2097(SF) Subregional Transport Facilitation Project 0051 Road Connectivity Sector I Project 0106 ICT Development Project 0099 SASEC Information Highway
S S S S S
S S S S U
No No No No No
No No No No Yes
Project Project Project Project Project
21. 22. 23. 24.
Water Supply, Sanitation and Waste Management 1755(SF) Small Towns Water Supply Sanitation Sector Project 1820(SF) Melamchi Water Supply Project 2008(SF) Community-Based Water Supply and Sanitation Sector Proje 2059(SF) Kathmandu Valley Water Services Sector Development Proje
S S S S
S S S S
No No No No
No No No No
Project Project Project Project
25. 26. 27. 28.
Multisector 1966(SF) Urban & Environmental Improvement Project 0093 Rural Reconstruction Rehabilitation Sector Development 0094 Rural Reconstruction Rehabilitation Sector Development m 0150 Emergency Flood Damage Rehabiliation Project
S S S S
S S S S
No No No No
No No No No
Project Program Project Project
ATTACHMENT 2
BACKGROUND PAPER DFID
Leading the British Governments fight against world poverty
NEPAL
Portfolio Performance Review (NPPR) 3 and 4 December 2009
Background Paper November 2009 from Department for International Development (DFID) Nepal
Page 1
Nepal portfolio performance review (NPPR 2009) Introduction 1. This background document for the Nepal Portfolio Performance Review (NPPR) 2009 is an attachment to the Government of Nepals (GON) main document on RESULT-BASED MANAGEMENT FOR PORTFOLIO PERFORMANCE AND DEVELOPMENT EFFECTIVENESS. It focuses on three key areas for the British Government: (1) the future development of the NPPR; (2) the performance of our portfolio during 2008/9; (3) implementation issues and supportive actions. 2. DFID and the UK government would like to see a greater strategic and results focus to the NPPR. This needs to be realised without losing the current focus of this forum which generates important portfolio performance information and identifies key implementation and policy issues. The challenge will be to effectively link policy and implementation issues/actions to progress on key development outcomes in one framework. Any framework needs to be mutually accountable so development partners progress towards their Paris and Accra commitments can be tracked. 3. The DFID Nepal programme has demonstrated its ability to deliver and stayed engaged even in times of conflict in the past and in the current context. DFID disbursed 52 million as bilateral assistance, 2.57 million as debt relief and 0.78 million from the Conflict Prevention Pool in 2008/09. Food security remained a serious challenge in the west, following price rises in 2008 and where food prices have remained 70% higher than elsewhere. DFID provided 5.4m to WFP as humanitarian aid to support Food crises in 2008. 4. The mixed aid instruments have enabled DFID Nepal to work effectively with government and various partners. The UK is committed to providing 172m over the next three years. However, DFID is worried about high levels of corruption due to experience of a number of incidents. Staff transfers are another area which causes difficulties in programme implementation. Currently approx. 30% of our funding is through the government system and we are prepared to streamline and increase the use of sector based approaches if further reforms are progressed.
DFID Nepals strategy 5. A new Country Business Plan (CBP) was launched in April 2009 for 20092012. The approach the UK government is taking in Nepal has a close fit with commitments in the new UK government White Paper, Eliminating World Poverty: Building Our Common Future and the Nepal Governments priorities. These include programmes that address the economy, climate change, peace building, basic services, working with the international system, and transforming impact and ensuring value for money.
Page 2 The plan is managed through a country results framework which has 4 key goals: To support a sustainable and inclusive political settlement: DFID will continue to support the Governments Nepal Peace Trust fund and the UN Peace fund. We will provide support to implementing outstanding areas of peace agreements, including compensating victims of violence, internally displaced people, investigating disappearances, a truth and reconciliation process, support to future of the armies and improving democratic control of security forces. To help build a more capable, accountable and responsive state at local and national levels: We will support the Constituent Assembly, support government to improve public financial management, strengthen the financial sector, support more accountable and inclusive state institutions, including local government (through Local Government and Community Development Programme), improve state capacity for monitoring poverty. To promote inclusive, low carbon, economic growth and better jobs for the poor: We will scale up support to job creation and expansion of economic opportunities. This will involve putting resources into an expansion of existing and very successful skills training and job placement schemes, and developing a new private sector programme to address obstacles in the market and help create job. To reduce the vulnerability of the poor and improve resilience to climatic shocks: DFID helped the government design and implement its climate change National Adaptation Plan of Action, including flood risk reduction and agricultural adaptation in vulnerable areas. We will engage with regional water resource development through the South Asia Water Initiative with the World Bank and others. We will explore expanding our forestry work into a national programme with other donors.
DFID NEPAL: Programme Overview (1999 to 2009)
6. DFID provides the most bilateral overseas development assistance (ODA) to Nepal. In all, we supported 25 programmes and projects from the bilateral framework 2008/09 including 8 projects and programmes in Peace and Governance, 1 in Education, 3 in Health, 3 Community Support Projects, 2 Water and Sanitation, 5 in Growth, Roads and Rural Infrastructure, 3 in Forestry Agriculture and Climate Change and 1 in Humanitarian Assistance. From the graph in Figure 2 the highest spending has been in the Health Sector (36%).
Page 3
DFID Disbursements, 1999 - 2009 (GBP millions)

70 60
GBP millions
50 40 30 20 10 0
/0 2
/0 3
/0 4
/0 5
/0 6
/0 7
/0 8 07 20 20
/2 0
/2 0
01
02
03
04
05
06
20
20
20
20
20
99
19
Note: Includes the UKs GCPP and MDRI aid
20
00
Sectoral Distribution of DFID's Funding from the Bilateral Aid Framework

Forest Agriculture & Clim ate Change 4.1m 8% Road & Infrastructure 11.1m 21% Hum anitarian Assitance 5.4m 10% Peace & Governance 5.5m 11%
Water & Sanitation, 0.9m 2%
Education 2m 4% Com m unity Support 4m 8%
What is our approach? Mix of Aid Instruments 7. DFID Nepal has an excellent record of delivery through conflict and the current post conflict environment. Achieving this has required a sound approach to risk management that ensures DFID Nepal is able to maintain the strategic focus of our goals, while being flexible enough to adapt our instruments and approach to a changing political context. 8. Development assistance is provided through a variety of channels ranging from directly managed programmes to technical assistance, financial aid, sector budget support and trust funds. Sector budget support for health and education began in 2004. The experience with these sector support programmes has paved the way to introduce the approach in the Roads and Local Governance and Community Support programmes. DFID also introduced a joint donor instrument to support the peace process that is managed and led by Government.
20
Health 19.3m 36%
08
/0 9
00
01
Page 4 9. The mixed aid instruments have enabled DFID Nepal to work effectively with government and various partners. The UK is committed to providing 172m over the next three years. Currently approx. 30% of our funding is through the government system and we are prepared to streamline and increase the use of sector based approaches if further reforms are progressed. 10. However, DFID is worried about high levels of corruption due to experience of a number of incidents. The joint procurement review led by the Government and donors report and action plan has been endorsed by the Government. Action is now required from Government to implement the action plan. DFID Nepal remains keen to help government and build systems. State Building Approach 11. Nepal is emerging from a decade of civil war, going through an historic process of transition. DFID recognises that International support is vital if Nepal is to build peace and avoid a reversal into further conflict, and if it is to tackle serious poverty and inequality. DFID must therefore do more than focus on the MDGs. A capable, accountable and responsive state is key to a sustainable peace and to development in Nepal. For this reason DFID Nepals new strategy has taken a peace and state-building approach in Nepal focusing on three core areas: a. The political settlement; b. Core state functions; c. Meeting expectations of the people. DFID Nepal is working closely with government and development partners on these priorities. DFID Nepal Portfolio: Performance and Risk 12. Project performance are scored against two parameters:
(Annex C describes DFIDs performance scoring and risk rating system)
1. the likelihood that the outputs and purpose of the project will succeed; 2. the level of risk, which threatens the achievement of this success. In 2008/09 16 projects were reviewed and scored (Detail information on Annex B), out of theses 4 are likely to completely achieve its purpose, 8 are likely to largely achieve the purpose and 4 are likely to partly achieve the purpose
Page 5
Risk distribution across DFID portfolio (by number of projects)
2 8
High Risk Medium Risk Low Risk
12
Risk distribution across DFID portfolio (by value of commitment in million GBP)
20.5 86.8
High Risk Medium Risk Low Risk
136.6
Evidence of DFID impact in Nepal The UK is the largest contributor to the governments Nepal Peace Trust Fund - 7.3 million which established cantonments for Maoist cadres, supported Internally Displaced People and helped prepare, and pay for, the successful CA elections. DFIDs investment in the health sector over the past decade has been 97.1 million of 71 million has been spent in the last 6 years ( 33m for NHSP, 15m HIV and 23m SSMP). Few key contribution have included: help government eradicate polio, infant and under five mortality rates have dropped by a quarter in the last five years, and halved over the last 15 years, such that in 2006, only one in sixteen children died before their fifth birthday compared to one in eleven in 2001. The UNICEF 2008 report on State of the Worlds Children, ranked Nepal as one of top four countries on progress on child mortality. Maternal mortality has substantially reduced between 1996 and 2006; halved according to last Demographic and Health Survey, but other estimates are between 30-48%.
Page 6 Between 2000 and 2008 DFID spent 47m on rural infrastructure programmes, connecting over 1.4 million people in remote districts to the national road network, to markets and services, through the construction of 800km of rural roads and 180 pedestrian bridges. In doing so, it provided 10 million days of employment for poor and disadvantaged people. DFID has increased the incomes of 550,000 people, and lifted 130,000 out of poverty, through agriculture and forestry programmes. DFID has helped Nepal prepare its National Plan for Adaptation and hold a South Asia regional conference on Climate Change. Moreover, DFIDs Forestry Programme sequesters over 7 million tonnes of CO 2 each year. This could have an annual value of 82.4 million in carbon markets. Targeted interventions for girls, Dalits, and children with disabilities, have boosted overall enrolment in primary school. Almost 90 percent of children are in school, almost 50 percent are girls, so girls and boys enrol in equal numbers.
Linking Development Outcomes to Key Portfolio and Implementation Issues 13. In its effort to improve aid effectiveness and service delivery, the Government of Nepal under its leadership initiated the Nepal Portfolio Performance Review (NPPR). The NPPR is an excellent tool to address key portfolio implementation issues as well as tackling weaknesses in the systems to achieve optimum programme delivery to the poor. However to date it has not tried to link these important issues to broader development progress in Nepal and the UK government now feels it is time to try and link these. In order to achieve a greater link there is a need to identify a manageable number of high level indicators which can be measured each year with annual targets based on sector targets and baselines. Sector level targets could be supplemented with indicators and targets around macroeconomic stability, PFM, and political governance. Progress towards each of the annual targets needs to directly link to supportive, and required, policy and implementation actions. Full development of this approach could be tied into the development of the 2009/10 budget and form part of the basis of the future NPPR. 14. It is not possible to provide this link before the completion of a framework. However it is possible to identify several key implementation issues (and progress to date) which could be linked to development outcomes in the future. These key areas are outlined below. a. Public Financial Management 15. Public financial management is being compromised by poor public security (e.g. public procurement affected by threats of violence). As a result, there has been an increase in risk associated with procurement. Another major setback is that the Maoist party continues to block the national budget in parliament over wider political differences.
Page 7 16. Overall some progress in PFM technical aspects have been made since 2007, despite the wider context of an increasingly fragile political environment and macro political context. The government is also in the final stages of making preparations to embark on a PFM reform program with DFID/World Bank support. DFID/World Bank support would be utilised to implement three main actions of the GONs Public Financial Management Strategy for Phase I that relate to (i) supporting the implementation of governments plan of rolling out the Treasury Single Account (TSA) initially piloting in two districts (Lalitpur and Bhaktapur) and later gradually rolling out to other districts, (ii) supporting the implementation of Nepal Public Sector Accounting Standards (NPSAS) on cash basis in line with the International Public Sector Accounting Standards (IPSAS), and (iii) supporting the capacity building of the PEFA Secretariat. b. Procurement management 17. Cartels have long been a feature of life in Nepal, but recently their operation has become backed up by the threat of force provided by criminal gangs, and possibly political youth wings. Due to its very nature, threat of violence is beyond the scope of technical improvements in, for example, procurement laws, to fix. 18. A new Procurement Law was promulgated in 2007 with the potential to improve significant weaknesses in the present procurement regime. However, the current problems facing public procurement are directly linked to the worsening public security situation. A particular issue has been the growing political/criminal links which has escalated the level of risk. c. Human Resources 19. The Government made good progress in terms of transfer. However, timing of transfer which takes place some time in March/April does not match with the working season. If necessary, ideally government should transfer the district staff sometime in September/October considering the fiscal year ensuring detailed handover to the successor. 20. As huge amount of budget is transferred through the local government, the human resources with District Development Committees (DDCs) and Village Development Committees (VDCs) should be increased proportionately. For example to enhance implementation in the infrastructure sector, at least each district should have 1 Senior Divisional Engineer and 2 Engineers. Similarly each VDC should have one Junior Engineer. 21. The Minimum Assurance Arrangement (Annex D) proposed jointly by ADB, WB and DFID and agreed by the NPC and MoF could be also a useful tool to address this issue. d. Result based management 22. The third quarterly meeting highlighted that the NPC has revised the resultsbased reporting for line ministries. But the capacity building framework is
Page 8 stalled. The results based culture needs to be embedded in the government and donors systems including support to line ministries to implement it. 23. DFID has made substantial internal progress in developing and embedding results based management system. Our business plan (see summary in para 5) has a linked Country Results Framework which is used to manage and monitor our own progress towards our high level outputs. This has been further embedded into team delivery plans which are monitored regularly. We would like to see greater alignment of our internal framework to a national results framework over time. e. Aid Effectiveness 24. DFID is the largest OECD bilateral and supports improved aid effectiveness and peace-building in a number of ways: (1) firstly through support to the Ministry of Finance, who lead on aid coordination and delivery of the Paris Declaration and the Accra Agenda for Action; (2) through sustained efforts towards various kinds of sector approaches including on peace-building; (3) through support to improved delivery across the UN system, and (4) through sustained collaboration with other donors, including joint planning with the Asian Development Bank and the World Bank. 25. The Ministry of Finance leads government efforts to coordinate aid, and is developing new foreign aid policy framework. DFID is actively engaged in all donor forums and is seen by the government as an important and supportive donor. DFID and UNDP were requested by Government to lead on the donor side for the assessment of Nepals progress against the Paris Principles, and to support its preparations for the Accra High Level Conference in 2008. As a result of these engagements GoN is taking a stronger leadership to manage aid better particularly through localisation of the Paris Principles and the Accra commitments. DFID with other donors is also supporting the Foreign Aid Coordination Division at the MoF to develop and implement a new National Action Plan for Aid Effectiveness (localising the Accra commitments). This process has been slow and DFID encourages the government to seek agreement and implement this as soon as possible. The challenge for all is to ensure that the plan recognises the post conflict context that Nepal faces and that it is owned by all. 26. DFID is also co-funding a Government/UNDP led project to help the Ministry of Finance and some sector ministries to develop a national aid management systems. DFID hopes that the project will also assess the capacity of three selected line ministries to manage aid better. Namely, i) the Ministry of Health ii) Ministry of Education and iii) Ministry of Local Development. This will strengthen mechanisms for co-ordinating a) crossministry collaboration to implement the National Action Plan on Aid Effectiveness and b) promote better GoN/donor forums at national and sector levels. 27. Working closely with the multilaterals is central to our approach. We work closely with all multilateral partners to strengthen their presence and effectiveness in Nepal. DFID works closely with the UN agencies in Nepal,
Page 9 both in support of the peace process and in improving the effectiveness of UN efforts. Nepal is not a formal delivering as One pilot country, but DFID has supported a number of approaches to building greater UN effectiveness in Nepal e.g. establishment of the UN Peace Fund in 2007 and UNs Early Recovery initiative intended to improve the multilateral response in postconflict countries. UN is also leading a donor initiative to bring greater transparency to donor spending at the district level and DFID is part of the task force piloting this in Achham district. DFID would like to see all development partners held to account for their performance in Nepal with annual monitoring and reporting of progress towards our Paris and Accra Commitments. Conclusion 28. There has been several discussions with the government and core development partners to raise the profile of the NPPR to have a more strategic focus in order to measure effective progress whilst retaining the core focus of the NPPR in this strategic re-orientation. As we move forward DFID wants to move to a clearer and mutually accountable performance framework for the NPPR. This framework needs to be based around an annual cycle which measures progress towards agreed targets. The number of indicators needs to be manageable and measurement robust; a suggested target would be 20 with the intention of covering more than 70% of the budget. Development partners should similarly be held accountable to the internationally agreed targets through the selection of 10-15 indicators which are monitored annually. 29. The Government of Nepal under its leadership initiated the Nepal Portfolio Performance Review (NPPR) which is an excellent tool to address key portfolio implementation issues as well as tackling weaknesses in the systems to achieve optimum programme delivery to the poor. Whilst some good progress has been made to improve the portfolio implementation much more needs to be done. DFID recommends that the 2009/10 policy actions quickly address the issues in public financial management, procurement and human resources (including a need for concrete data and indicators to track compliance of the Civil Service Act). Looking forward, NPPR needs to link these important issues to broader development progress in Nepal and any new interim plans including the proposed mutually accountable framework in the future.
Annex A Page 1 of 3
Annex A: DFID Nepal Projects and Programmes, 2008/09

DFID Commitment s Total UK expenditure for Apr 08 - Mar 09 s Disbursed through GoN Latest Review Scoring
Programmes/projects
Recipient
Risk
Comment
A. Peace and Governance

1 2 3 4 5 Nepal Peace Trust Fund (NPTF) UN Peace Trust Fund Peace Building Initiatives Peace and Development Risk Management (RMO) Enabling State Programme (ESP 1) Phase 1 Support to GoN's Poverty Reduction Agenda (PRSP) Social Inclusion Action Plan (SIAP) GoN UNDP Various Various RMO Office 13,000,000 2,750,000 686,370 950,000 882,000 2,000,000 217,399 85,807 95,143 3 High Low Operational Operational Operational Operational Operational
ESP office GoN and Various WB
27,500,000
2,995,529
Medium
Operational
2,071,500
47,873
Low
Operational
2,700,000 50,539,870
119,219 5,560,970
Low
Operational
B. Education
9 Education for All Programme (EFA) GoN 20,000,000 20,000,000 2,018,337 2,018,337 2,018,337 2 Medium Operational
C. Health
10 Nepal Health Sector Programme (NHSP) National HIV/AIDS Programme (DFID contribution) Support to the Safe Motherhood Programme (SSMP) GoN and DFID appointed Consultant UNDP GoN and DFID appointed Consultant 33,500,000 8,200,000 7,000,000 2 Medium Operational
11
15,000,000
3,500,000
Low
Operational
12
23,000,000
7,600,000
6,000,000
Medium
Operational
71,500,000
19,300,000
D. Community Support and Finance

13 Community Support Programme -Phase 2 (CSP) Financial Sector Technical Assistance Project (FSTAP) CSP east and West Office, Care and RRN WB 17,561,525 4,000,000 2 Medium Operational
14
7,500,000 25,061,525 4,000,000
High
Operational
Annex A Page 2 of 3
E. Water and Sanitation
Gurkha Welfare Scheme Rural Water Supply & Sanitation Programme - Phase 3 (GWS RWSP) Gurkha Welfare Scheme Rural Water Supply & Sanitation Programme - Phase 4 (GWS RWSP)
15
GWS
10,230,000
140,130
Medium
Closed
16
GWS
1,500,000
750,000
Medium
Operational
11,730,000
890,130
F. Growth, Roads and Infrastructure

17 Strategic Partnership with Helvetas Nepal (SPA Helvetas) Rural Access Programme (RAP) Phase 1 Helvetas DFID appointed Consultant DFID appointed Consultant 9,400,000 5,000,000 1 Low Operational
16
36,615,000
4,000,000
Medium
Closed
19
RAP Phase II
Rural Reconstruction and Rehabilitation Rehabilitation Sector Development Programme (RRRSDP) Supporting Inclusive Growth
22,000,000
1,000,000
Operational
20
GoN/ADB
10,080,000
580,000
580,000
Medium
Operational
21
DFID appointed Consultant
750,000 78,845,000
540,000 11,120,000
Operational
G. Forest, Agriculture and Climate Change

22 Livelihoods and Forestry Programme (LFP) Agriculture Perspective Plan Support Programme (APPSP) National Adaptation Plan LFP office 18,672,400 3,000,000 2 Medium Operational
23
GoN
10,323,500
900,000
360,632
Medium
Closed
24
UNDP
660,000 29,655,900
173,996 4,073,996 5,400,000 5,400,000 52,363,433
Operational
H. Humanitarian Assistance
25 Food Assistance WFP 5,400,000 5,400,000
Annex A Page 3 of 3
E. Conflict Prevention Pool

1 Support to the International Crisis Group (ICG) Support to Monitoring the Constituent Assembly Elections Public Security Scoping Project ICG 110,000 100,000
The Asia Foundation Consultants
872,209
611,000
250,000 1,232,209
76,000 787,000
F. Multilateral Debt
1 UK Multilateral Debt Relief Initiative (So far only assigned to NPTF for 2007/08) GoN 21,000,000 2,579,065
21,000,000
2,579,065
Bilateral Framework Conflict Pool Debt Relief Total Aid
52,363,433 787,000 2,579,065 55,729,498
Annex B Page 1 of 1
Annex B DFIDs Funding Framework DFIDs fund disbursement is done through three frameworks namely the Bilateral Programme Aid Framework, the Conflict Prevention Pool and the Multilateral Debt Relief Fund. Portfolio summary during the period April 2008 to March 2009 based on the UK Fiscal Year, in pound sterling.
(A conversation rate of 1 to 1.656 $ is used for an approximate dollar value)
a.
Bilateral Programme Aid Framework
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b. Multilateral Debt Relief Fund c. Conflict Prevention Pool Total Aid to Nepal a+b+c Funds disbursed Projects and Programmes Operational under bilateral framework Projects and Programmes closed during the year under bilateral framework New Projects and Programmes implemented during the year under bilateral framework Programmes implemented with GoN under bilateral framework Programmes Implemented with Multilaterals under bilateral framework Programme directly implemented by DFID and INGOs and NGOs Under bilateral framework Programmes rated as High Risk Number of Annual Reviews conducted to score Programme Performance, including Project Completion report.
(approx 30% of the Bilateral Aid Framework) 22
5 5
11
2 16
Annex C Page 1 of 1
Annex C
The Scoring System Projects are scored annually for their likelihood of success by examining progress against the outputs and purpose. The review team should take into account external factors that affect the intrinsic difficulty of achieving the purpose and outputs, and reflect on how the project responded to these in terms of design and management. This would include considering: Issues around the country, policy, sector and institutional context that affect the projects likelihood of success;
DFID Description Likely to be completely achieved Likely to be largely achieved Likely to be partly achieved Achievement of Outputs The outputs/purpose are well on the way to completion (or completed) There is good progress towards purpose completion and most outputs have been achieved, particularly the most important. Only partial achievement of the purpose is likely and/or achievement of some outputs.
Score 1 2
3 4 5 X
Only likely to be achieved to Purpose unlikely to be achieved but a few a very limited extent outputs likely to be achieved. Unlikely to be achieved Too early to judge No progress on outputs or purpose It is impossible to say whether there has been any progress towards the final achievement of outputs or purpose. This score should not be used unless at least one of the following criteria are met: Project is postponed
Risk Rating
Low Risk factor may lead to tolerable delay in the achievement of objectives or minor reduction in Quality/Quantity and/or an increase in cost. Risk factor may lead to some delay and/or loss of quality/quantity and/or an increase in cost. Risk factor may cause some or all aspects of objectives in relation to Time, Quality/Quantity
Medium
High
Annex D Page 1 of 3
Annex D
Proposed Minimum Assurance Arrangements Rural Roads

Implementation Arrangement
Establishment of a dedicated Procurement Unit within the MOLD and DOLIDAR with decision making authority Modified PPA procedures (ICB: IDA, NCB: with qualifications)
Function/Current Assessment Procurement
Minimum Assurance Actions

TA to strengthen MOLD and DOLIDAR including district procurement function. Third party monitoring of the procurement process Establish an effective complaints handling mechanism and adopt whistle blower policy Implement e-bidding with proper regulatory framework Investigate potential collusion cases and take legal actions Develop practical and implementable guidelines for debarring firms Performance benchmarks to be defined
All procurement takes place at the district level. Vulnerability to corruption is assessed as high. Key procurement constraints for rural roads include: - Weak procurement capacity at district level
- Frequent cost variations, contract extensions, and/or substantial variation orders - Contracts awarded to a user group on the basis of value of work - Politically motivated formation of a user group without proper system of accountability - Lack of efficient oversight mechanism to ensure transparent procurement and quality performance - Weak capacity of contractors leading to poor quality of works - Lack of action against non performing contractors/officials
Annex D Page 2 of 3
Financial Management
MOLD permanent working committee to follow up on FM issues, audit irregularities, audit recommendations Third party monitoring of financial and programme performance Performance audits Periodic detailed fiduciary review by DPs
Financial management risk within MOLD is GON financial management system will be assessed as substantial. adopted subject to implementation of additional assurance actions Key FM constraints for rural roads include:
- Delays in obtaining counterpart funds at the local level followed by low budget outturn - Inadequate number of accounts staff deployed at DDCs weak capacity and skills - Weak internal controls and internal audits due to weak capacity of DDCs - Reconciliation of accounts not timely and delays in financial reporting - Delay in submission of audits and poor quality of audits
Internal review mechanism of the MOLD management system (including FM) instituted Performance benchmarks to be defined
- Auditors comments and recommendations not addressed including regularization and settlement of unsettled accounts
Annex D Page 3 of 3
Quality Assurance (including M&E)

Incorporate time bound performance criteria in MOLD standard bidding documents
Quality Assurance for rural roads is assessed MOLD monitoring, evaluation and internal as weak. Key quality assurance constraints audit systems will be used, subject to for RR include: implementation of additional assurance actions - Lack of local level elected committees to provide oversight and monitor effectively - Poor quality of works in both rural and strategic roads due to lack of effective supervision and monitoring - Lack of complaints handling mechanism at local level - Frequent transfers of key staff
Terminate contracts or levy penalties against non-performing contractors Carry out technical audits of construction
Develop and implement contract monitoring system Carry out awareness campaign to sensitize the general public about construction standards Establish an effective complaints mechanism, whistle blower mechanism Carry out user surveys, impact evaluations Performance benchmarks to be defined
ATTACHMENT 3
WORLD BANK BACKGROUND PAPER
NEPAL
PORTFOLIO PERFORMANCE REVIEW (NPPR) 2009
ATTACHMENT TO GON MAIN REPORT (December 3-4, 2009)
Nepal Country Office The World Bank South Asia Region
ABBREVIATIONS
ADB APP CAE CIAA COP DFID DTCO FCGO FMIS GON ICRR IDA IDF IEG IFMIS IPR IPSAS ISN M&E MOF MOGA MTEF NVC NPPR NPTF OAG PAC PAF PEFA PFM PPA PPMO PSC SAI SOE SWAp TA TF UNCITRAL Asian Development Bank Annual Procurement Plan Country Assistance Evaluation Commission for the Investigation of Abuse of Authority Conference of the Parties (to the Climate Change Convention) Department for International Development District Treasury Controller Office Financial Comptroller General Office Financial Management Information System Government of Nepal Implementation Completion and Results Report International Development Association Institutional Development Fund Independent Evaluation Group Integrated Financial Management Information System Implementation Progress Report International Public Sector Accounting Standard Interim Strategy Note Monitoring and Evaluation Ministry of Finance Ministry of General Administration Medium Term Expenditure Framework National Vigilance Center Nepal Portfolio Performance Review Nepal Peace Trust Fund Office of the Auditor General Public Accounts Committee Poverty Alleviation Fund Public Expenditure and Financial Accountability Public Financial Management Public Procurement Act Public Procurement Monitoring Office Public Service Commission Supreme Audit Institution Statement of Expenditure Sector-wide Approach Technical Assistance Trust Fund United Nations Commission for International Trade and Law
TABLE OF CONTENTS
1. World Bank Country Program 2. World Bank Portfolio Overview A. B. C. D. E. F. G. Portfolio Size and Composition New Entries Extensions Completions Age Profile Disbursements Net Resource Transfer 1 3 3 3 3 3 4 4 5 6 6 6 7 7 8 8 8 8 9 9 9 9 10 10 11 11 11 12 13 13 13 15 15 15 15 15 16 16 18
3. Implementation Performance (Selected Aspects) A. B. Overview - Implementation Progress Reports Financial Management - Country Financial Systems - Portfolio Alignment with Country Systems - Internal Audit - External Audit - Financial Management and Statement of Expenditure Reviews Procurement - Procurement Country Context - Procurement Capacity - Ex-post Reviews - Misprocurement Safeguards
C.
D.
4. Portfolio Results A. B. C. D. Summary of Country Assistance Evaluation Findings FY2008/09 Implementation Completion Results Findings Current Status of Active Portfolio Results Monitoring Arrangements - Monitoring Systems - Third Party Monitoring
5. Constraints to Achieving Results A. B. C. D. E. F. The Peace Process and Security Weak Accountability Intimidation and Collusion Skills Gaps Staffing Rotations Budget-Results Links
6. A Way Forward
NPPR 2009 World Bank
Annexes Annex 1 Annex 2 Annex 3 Annex 4 Annex 5 IDA/TF Project Disbursements and Portfolio Breakdown by ISN Pillar Ex-post Procurement Review Findings Project Level IDA/TF Project Results IDA/TF Project Monitoring Arrangements Experience with Third Party Monitoring
ii
1. WORLD BANK COUNTRY PROGRAM

1.1 The World Bank Group approved an Interim Strategy Note (ISN) for Nepal in June 2009 which sets out a proposed country assistance program covering fiscal years 2010 and 2011. Supporting the overarching goal of promoting peace and development, the strategy is organized around three themes that emerged during consultations within the Bank Group and with the Government, donor partners and civil society. The first theme addresses the cluster of challenges facing the State in adapting and constructing the systems, institutions, and capacities needed for the new Nepal. The second focuses on overcoming constraints and bottlenecks faced by the productive sector, especially in terms of productivity, connectivity and sustainability. The third theme concentrates on expanding and honing service delivery programs that can increase opportunities and well-being, especially for the poor and excluded. Social inclusion and promoting peace cut across all of these themes as a necessary foundation for the new Nepal. Within each of these themes, the strategy identifies specific areas where the Bank Group can make a difference, ranging from concessional IDA lending to the Government, engagement with the private sector through the IFC, advisory services, and support for regional initiatives. 1.2 As the ISN supports the overarching goal of promoting peace and development, the program incorporates an important focus on governance, social accountability, anti-corruption, and social inclusion. This focus includes a structured effort to make the portfolio more conflict sensitive by using a peace filter and by mainstreaming support for demand-side social accountability mechanisms in on-going and new operations (e.g., citizen scorecards, social audits, right to information procedures, and user-friendly grievance mechanisms). In collaboration with DFID and the ADB, analysis of exclusion in key sectors (such as health, education, infrastructure, and water) has been initiated in order to identify operational entry points for increasing access of disadvantaged and marginalized groups to benefits. Joint work on governance and anti-corruption measures is also being supported by the education and health SWAp donors (including the World Bank), and development of harmonized governance and anti-corruption approaches in the road sector is also underway. Analytic work focused on skills development needs and employment opportunities is underway, and a pilot program to increase adolescent girls and young womens access to jobs is about to be launched. 1.3 In addition to the joint lending program from IDA and IFC (estimated at around USD400 million in new commitments during this fiscal year and the next), the World Bank Group is also engaged in supporting a wide range of analytic work to deepen knowledge and underpin future policy decisions and to prepare an informed basis for project-based assistance. For example, the Bank team, with support from bilateral partners DFID and Denmark, is working closely with the Central Bureau of Statistics to carry out the next Living Standards Survey (NLSS 3) which will produce core data on poverty trends and access to services. Analysis of migration and remittances is also on-going, and study findings are expected to inform policy choices relating to job skills development, macro-economic management, and targeting of infrastructure and services. Support for medium-term expenditure management and for assessing risks and opportunities for improving financial sector management and services has been provided in the past year, and analysis of international experience on specialized topics (such as fiscal decentralization) is being carried out at the request of Constituent Assembly committees. Advice has been provided on ways to improve existing social protection systems, including targeting, and on the design of a national social protection framework. 1.4 A cluster of analytic exercises are underway related to adaptation to water resource management and river hydrology, climate change, and risk reduction related to earthquakes, floods, and glacial lake outbursts (the disaster risk work is being carried out jointly with other development partners). In the field of water resource management, the Bank water team has
supported the establishment of a geographic information system (GIS) for WECS, development of river basin modeling, and capacity building for modeling within the GON, and the next analytic step is to update the master plans for the three major river basins in Nepal, taking an integrated basin management view. The climate change team, in collaboration with ADB, DFID, and the governments of Denmark and Norway, among others, has supported important national and regional collaboration this year in preparation for the Copenhagen Climate Change Conference. Such activities include supporting the first meeting of regional governments on climate change (hosted by Nepal) which produced an Agreed Vision, as well as the upcoming Mountain Day in December, which is a COP15 side event to raise awareness about climate change in the Himalayas. These activities combined with on-going work on climate change are expected to lead to financial support from the Pilot Program for Climate Resilience (PPCR) and other climate investment funds, such as the Community Development Carbon Fund (CDCF) (which is already supporting the AEPC biogas program and exploring opportunities related to micro-hydro). The joint work on disaster management is expected to inform future program support from the Global Fund for Disaster Risk Reduction (GFDRR). 1.5 Lastly, the World Bank is also supporting several regional programs that involve and will benefit Nepal. The regional water initiative is working towards building the information base and national and regional coalitions that will be needed to take concerted action over the medium to long term to address the regions river management issues. The Global Tiger Initiative is bringing together the tiger range countries to protect the habitat of this severely endangered species, and at an October conference in Kathmandu attended by participants from 13 of the 14 tiger range countries, Nepal agreed to host the regional secretariat which will focus on the illegal trade in tiger parts. Follow-up conferences in Thailand (January 2010) and Russia (Fall 2010) will take the technical recommendations from the Kathmandu meeting to higher political levels, and pave the way for operational support for habitat and livelihood protection in the affected countries. The cross-border energy program comprises advisory services to assist Nepal in its efforts to create a framework for mutually beneficial energy trade between countries, as well as financial assistance for hydropower and transmission line investments that could lay the basis for such trade (allowing Nepal to import energy from India during the load-shedding winter months, and to export excess energy during the high flow, monsoon period). Work is now starting to operationalize assistance in this area.
2. WORLD BANK PORTFOLIO OVERVIEW

A. Portfolio Size and Composition 2.1 As of September 30, 2009, the World Banks concessional lending and grant program to Nepal consisted of 24 active projects. The Nepal IDA portfolio consisted of 16 active projects with net commitments of about USD1 billion, of which USD356 million has been disbursed (about 35 percent at current exchange rates). The Nepal Trust Fund (TF) portfolio includes 8 active projects with net commitments of about USD32 million, of which USD14.8 million has been disbursed (about 46 percent). The breakdown of this portfolio according to the ISN pillars shows that about seven percent of net commitments are concentrated in state- and peace building activities; one third is targeted to productive/growth enhancing investments; and 60 percent is contributing to enhanced access to services and opportunities. Details on the portfolio IDA and TF commitments, disbursements, project age, performance, and ISN pillar breakdown are provided in Annex 1. B. New Entries 2.2 Four new IDA projects were approved in FY2008/09 for a total of USD140.14 million (total IDA Grant USD38.79 million, total IDA Credit USD101.35 million): Social Safety Nets Project (USD16.70 million) Additional Finance for Irrigation and Water Resource Management (USD14.24 million) Project for Agriculture Commercialization & Trade (USD20 million) Additional Finance for Power Sector Development (USD89.20 million)
In addition, one grant for USD5.0 million from the Global Food Crisis Response Fund was approved in FY2008/09 to support the Social Safety Nets Project. 2.3 In FY2009/10, the School Sector Reform Project was approved during the first quarter for USD130 million (IDA grant USD58.5 million and IDA Credit USD71.5 million). In addition, two TF grants - a readiness grant from the Forest Carbon Partnership Facility (USD0.2 million) and a PPIAF grant for Setting the Baseline of Kathmandu Valley Water Services (USD0.25 million) - were approved during the first quarter of FY2009/10. C. Extensions 2.4 Starting in FY2010/11, the policy of the Banks South Asia Region will be to close projects on their closing date. Extensions of the closing date will be granted only in conjunction with a project restructuring or a scale-up in project scope through additional financing. In FY2008/09, five extensions were approved: Economic Reform Technical Assistance Project Telecommunications Sector Reform Project Financial Sector Technical Assistance Project Rural Water Supply and Sanitation Project (in conjunction with additional financing) Power Sector Development Project (in conjunction with additional financing) D. Completions 2.5 Two projects were completed in FY2008/09: the Community Schools Support Project and the Poverty Alleviation Fund Project including Additional Financing (PAF I). Four projects are scheduled to close during FY2009/10:
Telecommunications Sector Reform Project (August 31, 2009) A (Actual) Financial Sector Restructuring Project (September 30, 2009) - A Economic Reform Technical Assistance Project (December 31, 2009) Education for All Project (January 31, 2010) E. Age Profile
2.6 The current portfolio is relatively well distributed, with a number of new entrants (7 projects with less than 2 years) balancing the more mature projects that are reaching the end of their funding cycle (7 projects between 4 7 years). Two projects are approaching 3 years of implementation. This distribution should contribute to stability in resource transfers as older projects begin to close. F. Disbursements 2.7 Disbursements during FY2008/09 totaled USD176.3 million. For the first quarter of FY2009/10, USD18.8 million was disbursed. Figure 1 below shows annual disbursement amounts from FY2004/05 through FY2008/09, while Figure 2 (on the next page) shows the annual disbursement ratio 1 for the same period; both Figures 1 and 2 make a conservative projection for FY2009/10.
200.0 180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 -
176.3 152.1
80.7
67.0
74.9
80.6
FY05
FY06
FY07
FY08
FY09
FY10
The disbursement ratio is the ratio of funds disbursed from investment projects during a fiscal year compared to the funds that were available for disbursement at the beginning of the fiscal year.
35 30
Figure 2: Trend in Disbursement Ratio (FY2005 - FY2010+)

29.8 20.7 29.5 27.5 29.2 28.8
Percentage
25 20 15 10 5 0 FY05
Fiscal Years + Projected disbursement ratio for FY10.
FY06
FY07
FY08
FY09
FY10
G. Net Resource Transfer 2.8 IDA net resource transfers to Nepal since FY2004/05 are provided in Table 1.
Table 1 Disbursements, Loan Service Payments, and Net Resource Transfer Disbursements (USD million) 80.7 67.0 75.0 80.6 176.3 18.7 a/ + Repayments (USD million)a/ 41.6 41.1 43.0 48.9 49.5 4.6 Net Resource Transfer (USD million) 39.1 25.9 32.0 31.7 126.8 14.1
FY 2005 2006 2007 2008 2009 2010+
Includes principal, interest and fees As of September 30, 2009
3. IMPLEMENTATION PERFORMANCE (SELECTED ASPECTS)

A. Overview 3.1 Based on project reporting (see below) and implementation support visits with project teams, portfolio implementation is considered moderately satisfactory overall, with most projects expected to complete their intended activities. However, delays are widespread, and many projects are behind schedule. Delays are caused by a variety of factors ranging from staffing and leadership changes to weak procurement planning and management. In some cases, implementation schedules and delivery targets may also have been unrealistic and inconsistent with institutional capacities. Three projects (Irrigation and Water Resource Management, Emergency Peace Support, and Judicial Reforms to Strengthen Creditor Rights) are sufficiently delayed for their implementation performance to be considered moderately unsatisfactory. Progress in implementing the Grant to Strengthen the Institutional Capacity of the PPMO is considered unsatisfactory. Delays in implementing the Economic Reform Technical Assistance Project will result in about USD800,000 being cancelled when the project closes in December. Two projects are in the process of restructuring (Emergency Peace Support and Avian Influenza Control), with the goal of focusing funding on revised priorities and updating implementation plans consistent with the updated goals. In keeping with recently approved Bank operational policies, IDA funds canceled as a result of project restructuring may now be reprogrammed to other projects within Nepal. Implementation Progress Reports 3.2 Implementation Progress Reports (IPRs) are submitted on a trimestrial basis that is aligned with the governments reporting cycle. They provide GON and Bank teams with a tool to monitor whether the project is on track with the planned implementation schedule. The report combines information on physical, financial, and procurement progress compared to agreed milestones, and complements data collected through implementation support missions and other monitoring mechanisms. The provision of data on these three dimensions enables project teams to check for consistency, identify the extent to which there are deviations, and if so, take corrective measures. All Financing Agreements with the Bank now include legal covenants requiring submission of IPRs, therefore, non-performance in this area can have legal repercussions and affect portfolio ratings. 3.3 Experience in Nepal in terms of timeliness of IPR submission varies from project to project. IPRs are supposed to be submitted to the Bank within 45 days after trimester-end. In FY2008/09, five percent of the IPRs were submitted by the due date, with about 50 percent taking an additional month to arrive, and about 15 percent taking an additional 4 months. Preparation of IPRs requires a concerted team effort from the technical expert, financial specialist and procurement specialist, working together to verify the consistency of information and data, and to establish linkages between procurement, output and financial reports. Experience shows that it takes some time during the first year of implementation for project teams to become familiar with the right balance of information and analysis that produces a good quality IPR. 3.4 Some of the best examples of good quality IPRs are those produced by the Road Sector Development Project, Rural Water Supply, Second Higher Education, Education for All, Health Sector Reform, and Poverty Alleviation Fund. What sets these IPRs apart is that they are well balanced with a focus on outputs and results. Other IPRs are overly detailed (e.g., RAIDP), while others lack meaningful information or analysis (e.g., PPMO IDF Grant). Frequent areas of weakness in the IPRs are: missing reports (e.g., output monitoring reports, procurement
management reports, updated procurement plan), missing supporting documents (e.g., approved work program and budget, bank statements), inadequate analysis of information against intended results, lack of linkage between physical progress and financial progress, and reconciliation issues with regard to financial information and calculation errors. Attention to these areas would greatly speed up the review process and reduce delays in IPR approval. 3.5 Six projects are disbursing on the basis of the information contained in the IPRs (Education and Health SWAps, Poverty Alleviation Fund Project, Rural Water Supply and Sanitation Project, Road Sector Development Project and Irrigation and Water Resources Management Project). Where disbursements are report-based (i.e., based on the IPRs), advances are deposited into the designated accounts equivalent, on average, to two trimesters of work program financing. A good financial management information system is a pre-requisite for preparing timely and reliable IPRs which can be relied upon for making disbursements. B. Financial Management Country Financial Systems 3.6 A Public Expenditure and Financial Accountability Assessment (PEFA) Assessment, based on FY2005/06 data, was completed in 2008. It concluded that Nepals Public Financial Management (PFM) systems were well-designed but unevenly implemented. The budget was found to be a credible policy tool, with solid control of aggregate outturns and a reasonable control framework at the transaction level (notably for payroll). However, there were many gaps in the control framework as well as significant implementation constraints, and large fiscal activities remained outside the scope of the central budget. With respect to the six core dimensions of an open and orderly PFM system, Nepal was found to be relatively strong in the areas of aggregate revenue outturn compared to original approved budget (PI-3: A), aggregate expenditure outturn compared to original approved budget (PI-1: B), comprehensive information included in budget documentation (PI-6: B), and public access to key fiscal information (PI-10: B). On the other hand, strengthening was found to be required in the dimensions related to Policy-based Budgeting, Predictability and Control in Budget Execution, Accounting, Recording and Reporting, External Scrutiny and Audit, Credibility of the Budget, Comprehensiveness and Transparency, and Donor Practices. 3.7 Since the Assessment was completed, progress has been made in developing the Integrated Financial Management Information System (IFMIS), and finalizing the Nepal Cash Accounting Standards (NPSAS). A Memorandum of Understanding between the Office of the Auditor General (OAG) and the Norwegian Supreme Audit Institute (SAI) has been signed, and a draft Strategy for OAG capacity building has been prepared. The current budget (FY2009/10) introduced a medium term expenditure framework, and the budget speech emphasized the importance of improving public financial management as a means to strengthen governance and accountability. 3.8 Moving forward from this platform of analysis and action, the GON has prepared a first phase PFM Strategy covering the period FY2009/10 to FY2011/12. The goals of the Strategy are to achieve: (1) improved tax collection, (2) improved policy-based budget formulation, (3) improved budget execution, (4) improved accounting and financial reporting, (5) improved external scrutiny and audit, and (6) sustained reform efforts to improving PFM. The GON has recently requested the World Bank and DFID to support implementation of two key reforms introduction of Treasury Single Accounts (TSA) and cash-based International Public Sector Accounting Standards (IPSAS) - and to build the capacity of the PEFA Secretariat to monitor
PFM system performance according to the PEFA Guidelines. Work is underway to put such assistance in place as quickly as possible. Portfolio Alignment with Country Systems 3.9 In line with the Paris Declaration for Aid Effectiveness and the Accra Agenda for Action, the Banks strategy is to align with the country financial management systems in all its operations. At present, Bank funded projects and programs are fully aligned with Nepals budgetary, accounting and reporting systems, but additional assurance arrangements are built into project design to address deficiencies related to weak internal controls and the internal audit system. Examples of these additional assurance arrangements include third party monitoring, special surveys, social audits, technical audits and performance audits. Internal Audit 3.10 As required by the Financial Administration Regulations, internal audits are carried out by the District Treasury Controller Offices (DTCOs) for all government executed projects. In case of projects implemented by Boards or autonomous bodies or Authorities, internal auditors are appointed from the market as per the financial regulations of the concerned authorities. Such autonomous bodies include the Nepal Electricity Authority, Nepal Rastra Bank, Rural Water Supply and Sanitation Fund Board, the PAF Board, Alternate Energy Promotion Center, and the Nepal Telecommunications Authority. The quality of internal audits is generally good in the case of those carried out by the private sector for the authorities or boards. Internal audits carried out by the DTCOs need improvement, as they often do not address systemic issues and are not submitted on a timely basis. External Audit 3.11 External audits of all projects are carried out by the Office of the Auditor General. Audit timeliness deteriorated in FY2009, as only nine percent of audits were received by the due date (January 15) compared to 24 percent in FY2008. The percentage of audit reports still outstanding at the end of the fiscal year doubled from four percent in FY2008 to nine percent in FY2009. Currently there are no outstanding audit reports. Generally, audit reports have qualified observations that relate to deficiencies in the internal control system, procurement weaknesses, slow implementation, and non-compliance with financial regulations and procedures. Only one case of ineligible expenses amounting to NRs.175,000 was reported by the Auditors (in the closed Community Schools Support Project), and the Bank has requested a refund of these ineligible expenses from the Government. The Bank reviews the audit observations as reflected in the audit management letter, and then follows up with the project authorities for clarification or for improvements in the areas identified by the Auditors. In many cases, the Bank requests the implementing agency to reflect such improvements in their Financial Management Improvement Action Plan. Financial Management and Statement of Expenditure Reviews 3.12 Continuous support in reviewing the financial management (FM) system, including statements of expenditure (SOEs), forms the heart of our strategy for improving financial management of all projects. Reviews take place on a regular basis through field visits, interaction with the beneficiaries, and desk reviews of financial monitoring reports and audit reports. The main focus of such reviews is to help build the capacity as well as strengthen the financial management system through agreement on an Action Plan for financial management
NPPR 2009 World Bank 8
improvement. Frequently made observations in the course of such reviews include: weak capacity, frequent turnover of staff impacting on timely reporting, weak internal control system, weak monitoring, and delays in reporting. As a result, five projects are currently rated at the Moderately Unsatisfactory to Unsatisfactory level (Peace Support, Irrigation and Water Resource Management, Power Development, Avian Influenza, and Secondary and Higher Education), and agreement has been reached with the affected implementing agencies on a core set of actions to improve their financial management system. C. Procurement Procurement Country Context 3.13 Public sector procurement is governed by a modern procurement law with provisions generally in line with the UNCITRAL model law; roll-out of the Act is underway through issuance of operating procedures and manuals, and finalization of standard bidding documents for goods, works, and services. Anti-corruption legislation is in place that allows for bidders to report acts of corruption by other bidders or government officials and enables serious penalties to be imposed (such as blacklisting for acts of fraud and corruption). A Public Procurement Monitoring Office (PPMO) is responsible for setting procurement policy, monitoring implementation practice, and reporting on overall system performance. A High Level Steering Committee formed by the MOF endorsed an Action Plan in July 2009 that aims to address issues (including laws, regulations and procedures) that are impeding economic and transparent project implementation. A strategy for rolling out e-procurement has been prepared with support from the ADB. 3.14 While these constitute important steps, a great deal of work remains to translate them into concrete improvements in procurement outcomes. Moreover, at the same time that improvements are being made to the legal and policy framework, there is a widespread perception amongst stakeholders and the media that malpractices in public procurement are on a steep rise, including intimidation and collusion by cartels, both at the central level and in the districts. Cases have been reported in the media, and by project staff, of bidders being prevented from submitting their bids through intimidation and use of physical force by individuals and groups hired by competing bidders. These trends are of widespread concern. Procurement Capacity 3.15 Procurement capacity across the Nepal portfolio remains weak. Though the Public Procurement Act (PPA) mandates that all procuring entities have a designated procurement officer with adequate knowledge and experience, this is yet to be fully put into practice, and procurement is still carried out by persons with limited or no experience of public procurement. Added to this is the unfamiliarity with the procedures prescribed by the procurement laws and lack of national guidelines, manuals, etc., on correct procedures. One of the challenges faced by projects is the availability of qualified procurement personnel both in the civil service and in the market. The number of civil service staff with qualifications and skills in this field is limited, as is the number of qualified consultants, who are usually fully employed. Ex-post Reviews 3.16 An ex-post review of contracts awarded between July 2007 and December 2008 that fell below the prior review threshold was carried out recently. A sample of 58 contracts was selected
for detailed review out of a total of 374 contracts from 9 projects. Some of the key findings across the portfolio are summarized below (observations for each project are provided in Annex 2). Inadequate competition and transparency: For almost all contracts procured through shopping, the files did not have copies of written requests for quotations, indicating that these requests are made verbally. The number of quotations almost never exceeded three, and the similarity in the way the three are presented indicates that these are organized by a single firm. Similarly, for individual consultant contracts, the norm is three CVs, and sometimes just one CV, without satisfactory justifications for the single source approach. Procurement planning and contract monitoring: While most projects prepare reasonable procurement plans, they are not updated regularly, and the culture of using the plan as a tool for monitoring overall status of planned procurement and making corrections has yet to be established. In addition, once a contract has been awarded, contract management appears limited, as records of acceptance, completion certificates, and payments are generally lacking. Poor or incomplete documentation: Files often do not contain sufficient documentation, and a search reveals that some of the documents are with the accounts section or the person/unit initiating the procurement or administering the contract. A system of maintaining a comprehensive and complete and comprehensive procurement file with documents for each stage through contract closure needs to be instituted in all Bank funded projects.
Misprocurement 3.17 A single case of misprocurement was declared during FY2008/09 related to a USD400,000 contract for capacity building for the Nepal Telecommunications Authority (NTA) under the Telecommunications Sector Reform Project. Misprocurement was declared due to the NTAs decision to exclude a responsive bid from the technical evaluation process, contrary to para 1.18 of the Guidelines for Selection and Employment of Consultants by World Bank Borrowers dated January 1997 (revised in September 1997 and January 1999) and to the provisions of the Request for Proposal. As a result, an amount of USD400,000 equivalent of the IDA Credit was cancelled. D. Safeguards 3.18 The IDA portfolio currently includes 11 projects with Category A and B environmental and social impacts, meaning that the environmental and social impacts are expected to be relatively moderate (there is only one Category A project, Power Development). Required safeguard instruments have been developed and agreed in line with domestic laws and World Bank safeguard policies. These instruments include environmental assessment, environmental management plans, land acquisition and resettlement action plans, vulnerable communities development plans (including indigenous peoples), and environmental and social management frameworks. Regular Bank supervision finds that these action plans and frameworks are generally followed during implementation, although the performance varies. Some projects faced noncompliance cases, such as delay in land compensation payments and in implementing environmental protection measures. This is largely due to insufficient understanding and weak capacity at implementation level. However, the project agencies were able to address these noncompliance issues once they were identified.
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4. PORTFOLIO RESULTS
A. Summary of Country Assistance Evaluation Findings 4.1 In 2008/09, a Country Assistance Evaluation (CAE) was carried out by the Banks Independent Evaluation Group (IEG) to assess whether the Banks Nepal Country Program (2003-2008) had achieved planned results related to broad based growth, social development, social inclusion, and good governance. The CAE found that significant progress was made in improving access to education, health and rural water and in reducing social disparities in access to these same services. Good progress was also achieved in increasing rural access to mobile telephone services and to electricity from micro-hydropower. However, objectives related to relaxing labor laws, improving the business environment, and restructuring the financial sector were not achieved, nor were goals related to institutionalizing results based budgeting, strengthening monitoring systems, improving accountability of the civil service, and decentralizing government. In many cases this was related to over-ambitious targets. For the future, the CAE recommended that more decisive support be provided for agriculture and rural development, efforts be scaled up to increase poor and marginalized peoples access to basic services, a mechanism be established to track the extent to which PAFs activities are effectively addressing poverty and social exclusion, strengthening of public expenditure and public finance management be continued, and the SWAp model be extended where feasible. The current IDA program is addressing these recommendations through increased support for irrigation and agricultural commercialization, scaling up of health, education, water, and rural energy programs, and continued analytic and advisory support in the area of PFM. PAF monitoring and impact evaluation work is being strengthened, and work is on-going with Government and development partners on a rural roads SWAp. B. FY2008/09 Implementation Completion Results Findings 4.2 Community Schools Support Project (CSSP): The CSSP closed in September 2008, and the project objective was to test whether community management of schools could better contribute to enhance: (a) participation rates; (b) quality and efficiency; and (c) accountability of schools. The Implementation Completion and Results Report (ICRR) prepared at project end concluded that the project demonstrated positive performance by community managed schools in all these dimensions and thus had achieved its development objective. With respect to participation rates, a household survey (covering 10,000 households) carried out in the service areas of 30 community managed schools showed significant reduction in out-of-school children between 5-15 years old in these service areas, particularly among out-of-school girls, dalit and janajati children (the reduction fell, on average, from 41 percent to 10 percent). While the project period was too short to demonstrate causal linkages to quality changes, the project did contribute to improvement in the learning environment, including sufficient desks and benches for all students, textbooks on all subjects, availability of other instructional materials, and reduced teacher absenteeism. Accountability also improved through the introduction of social audits of schools by parents: ninety two percent of Community Managed Schools (CMS) were benefiting from social audits by the end of the project and were using this feedback for improving school management. Despite these positive achievements, the IEG review of the ICRR considered the analytical base for evaluating the impact of the CMS model and for comparing it against a control group to be inadequate. Consequently, IEG found that it was not possible to conclude that the CSSP had achieved its objective of testing the effectiveness of the CSSP community management model as a means to improve the access, efficiency, quality, or accountability of education in Nepal.
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4.3 Poverty Alleviation Fund (PAF) I: The first phase of support to the PAF was completed in February 2009, and the project goal was to assist the GON in implementing a targeted instrument for reaching poor and excluded communities. It aimed to improve access to incomegeneration projects and community infrastructure for groups that had tended to be excluded by reasons of gender, ethnicity and caste, as well as for the poorest groups in rural communities. The ICRR prepared after completion of phase one found that the PAF was successful in reaching poor communities with high quality targeting and efficient delivery of services, despite a turbulent political economy. Quantitatively, the ICRR found that: Overall, 194,560 households benefited from implementation of 6,596 sub-projects, which included both income-generating activities and community infrastructure investments. This greatly exceeded the targets. Of the total beneficiary households, 37 percent were Dalit and 44 percent were all indigenous groups. Women represented 67 percent of total members of the Community Organizations established, 30 percent of total chairpersons, 43 percent of total secretaries, and 60 percent of total treasurers. With regard to consumption, analysis by the ICR mission indicated a 47 percent greater improvement among beneficiaries of the PAF project compared with non-participants. This is especially significant given that the majority of PAF beneficiaries were the poorest and traditionally most marginalized and excluded people within their communities. With regard to food security, evaluation data show that gains in food security have been made for project beneficiaries, with a reduction of 16 percent in those suffering from food security of less than 3 months and a rise of 9 percent in those who have food security of 10-12 months or more.
Overall, the ICRR concluded that the PAF was successful in implementing a new instrument to address the related problems of rural poverty and social exclusion, reaching intended beneficiaries, both in terms of overall numbers and participation by traditionally excluded indigenous groups, the poor and women. The ICRR findings have not yet been reviewed by IEG. C. Current Status of Active Portfolio Results 4.4 Based on project reporting and consultations during implementation support visits, most projects are expected to achieve their development objectives. However, in light of implementation delays and the decision not to extend project closing dates in future, this situation will need to be closely monitored if expected results are to be delivered on time. At present, three projects are not expected to achieve their intended results (Emergency Peace Support, Judicial Reforms to Strengthen Creditor Rights, and Strengthening the Institutional Capacity of the PPMO). In the case of the Peace Support project, it is being restructured to ensure that the expected outcomes and implementation plans are achievable and remain priorities for the Government of Nepal. Consultations during the restructuring process are also on-going with development partners supporting the Nepal Peace Trust Fund and the United Nations Peace Trust Fund to ensure close coordination in the effective use of external assistance. It will be essential to strengthen the Peace Support project management team, as it is inadequately staffed to manage the three major peace support mechanisms mentioned above. With respect to the two IDF grants (Judicial Reform and PPMO Strengthening), activities either need to be accelerated or consideration given to early closing and cancellation of remaining funds. Additional information on end-of-project targeted results, current status, constraints to achieving results, and corrective actions underway for the on-going portfolio is summarized in Annex 3. 4.5 During the past year, consultations with project teams revealed that some results frameworks included project objectives and outcome indicators that were not consistent with the scope of project activities. Therefore, these results frameworks are in the process of being
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amended to ensure that outcome indicators are specific, measurable, and attributable to IDA support. The project development objectives and outcome indicators/targets for two projects have already been updated in the context of Additional Financing requests (Power Development, Rural Access Improvement and Decentralization). Other projects are also in the process of refining the results framework that will be used to measure end-project success and ensuring that monitoring arrangements are designed to collect data needed to document project outcomes (PAF II, Avian Influenza, and Emergency Peace Support). Workshops and seminars are planned for the coming year to continue the review of results frameworks and ensure that they are fit to purpose. D. Monitoring Arrangements Monitoring Systems 4.6 A review of the IDA/TF portfolio reveals that out of the 20 active projects (two trust funds are for preparatory activities), three use country M&E systems for reporting on project progress (these are SWAps: EFA, SSRP, and HSSP1). The remaining 17 projects use projectspecific M&E arrangements, of which eight feed their data into the higher level sector monitoring system. In addition, three projects (Rural Water Supply and Sanitation, Peace Support, and RAIDP) include support for building sector-wide results and monitoring systems. With respect to the project-specific systems, in many cases the monitoring arrangements include outcome-level evaluation instruments as part of project design, but in practice the focus during implementation is very much on monitoring implementation progress and output delivery, and less attention is focused on outcome level monitoring. This imbalance in attention, if not corrected, could mean that at project end, it will not be possible to document results. More information on the types of M&E systems used at the project level is presented in Annex 4. Third Party Monitoring 4.7 Given the difficulties in collecting information on project implementation at the local level resulting from Nepals topography, limited local government representation, and insecurity in some areas, a number of projects are using a variety of third party monitoring arrangements to complement the project or sector systems that may be in use. These include performance audits carried out by the Office of the Auditor General; technical audits carried out by independent specialists (through the National Vigilance Center) and technical surveys; and social audits carried out by the communities themselves. Experience with these third party monitoring arrangements is relatively new, and improvements are being introduced as more audit cycles are completed and areas for clarification and strengthening are identified. Summary information on these complementary monitoring techniques is presented below, and additional information is presented in Annex 5. 4.8 Performance Audits: Performance audits have been introduced in a few projects to provide additional information than may be available through regular monitoring arrangements. Current experience to date is limited to the education and health SWAps, and the Poverty Alleviation Fund Project, but a number of new projects are including this as a standard feature. Performance Audits are carried out by the Office of the Auditor General, and are generally scheduled at a frequency of every two years. So far three such audits have been carried out, and the methodology followed was for implementing agencies and development partners to jointly agree on Terms of Reference and for development partners to also participate in field visits. In the case of the two sector-wide programs, draft findings were presented in the annual joint reviews, comments were solicited, and action plans were developed to help improve program performance. Both implementing agencies and development partners have valued the findings of
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the performance audits, and the observations/ recommendations made are now being integrated into the respective Governance and Accountability Action Plans. 4.9 Technical Audits: Technical audits are used predominantly in the infrastructure sectors (e.g. transport, irrigation) to verify that construction quality complies with the technical parameters established in the contract documents, and if it deviates, to identify what corrective measures need to be taken. Technical audits for the road sector development project and the rural access improvement and decentralization project are carried out by the National Vigilance Center (NVC). While the NVC reports to the Prime Ministers Office, there is not yet an established system to share technical audit findings with the Office of the Auditor General or to have reports discussed at the Public Accounts Committee (PAC), which would be desirable. Planning is underway for a technical audit for the Irrigation and Water Resource Management Project. Technical surveys have been carried out to evaluate the extent to which drug and equipment procurement have been achieving value for money; a technical survey of health facilities is about to begin with the goal of looking not just at construction quality issues, but also beneficiary involvement in site location and service provision. 4.10 Social Audits: Social audits are a third-party monitoring tool that relies on community organizations to monitor selected practices related to project implementation. Such arrangements are currently being used in the education sector, rural water project, and the poverty alleviation project, but they are being expanded to other operations as well to increase transparency and accountability of funds used at the community level (e.g. Health SWAp). As this is a new tool, the first experiences have identified ways in which to improve the social auditing process itself to make it more meaningful and effective. For example, in the education sector, a Social Audit Manual has been prepared to guide the next round of social audits.
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5. CONSTRAINTS TO ACHIEVING RESULTS

A. The Peace Process and Security 5.1 The inability to reach consensus on some key outstanding governance questions has allowed a situation to develop where the operational arena for implementation programs has become highly politicized, including staffing, contracting, and decision-making. If the situation does not improve, we could see a deterioration in security and greater difficulty in reaching poor and vulnerable communities. 5.2 For example, eighteen months after the constitutional elections, the government is not in full control due to weakness of the State and lack of elected local governance bodies. Armed groups and gangs are active in some areas of the country, which can limit the operational space available for development programs. As the situation changes rapidly, regular monitoring and updating of information is needed, as a high risk district one month may be calm several months later. Special protection arrangements may be needed to allow contractors and implementers to operate in conflict-prone areas. B. Weak accountability 5.3 Making decisions on implementation choices is time- and transaction-intensive for a number of projects. Delays in decision-making appear to be linked to weak accountability for delivering project results in other words, there are insufficient negative consequences to slow action or even inaction. In some sectors, incentives/disincentives for timely implementation performance appear weak. On the Bank side, processing government requests can also be timeand transaction intensive, which may be linked to the Banks matrix management structure and to the fact that staff and managers work in widely separated time zones. Delays in receiving responses from the Bank to requests for no-objection are also a problem for timely implementation. C. Intimidation and Collusion 5.4 As mentioned earlier, cases of intimidation of bidders by hired thugs have been reported in the press and by project staff, undermining competition in the bidding process. Collusion among bidders to ensure a sharing of the spoils may also be occurring, likewise jeopardizing the credibility of public contracting. In some cases, government officials are fearful of awarding contracts because they, too, are subject to threats and intimidation. Moreover, some officials fear applying IDA procurement procedures if they conflict with the PPA provisions, as this could potentially lead to being charged with corruption by the CIAA (there is not a widespread awareness that the PPA permits application of donor rules in cases of conflict). D. Skills Gaps 5.5 Delivering quality results on time is difficult to achieve if project management and implementation teams are missing key skills. The Nepal Civil Service is well endowed with administrators, but cannot call upon the full range of professional cadres that development programs require today. For example, there is no cadre for procurement specialists, safeguard specialists, and monitoring and evaluation specialists. Therefore ministries and projects manage by assigning untrained staff, seeking support from other ministries or specialized units, hiring consultants, or doing without. A review of IDA supported projects reveals that a number of projects do not have safeguards or communications staff, and experience periodic vacancies in
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the procurement and financial area. Even in technical skills that are recognized as core to civil service functions (e.g., agricultural technicians and engineers), there is concern that skills gaps in these posts will widen in future as experienced staff reach retirement age. 5.6 On the Bank side, a review of staffing at the project level (from preparation to date) reveals that core skills (team leader, financial management, procurement, and safeguards) are regularly included in task teams, but other skills such as social development, monitoring and evaluation, governance, and communications are not routinely covered, if at all. For example, only six out of 20 task teams have included a person responsible for monitoring and evaluation (Second Higher Education, PAF II, PACT, Rural Water Supply and Sanitation, Irrigation and Water Resource Management, and the Biogas Support Program), and the PAF and Avian Influenza task teams have not included social development and communications specialists, despite the important behavior change element in these projects. F. Staffing Rotations 5.7 Effective performance not only requires the necessary skills, but the time in post to learn what the job requires, to build networks, and to acquire lessons from experience. However, the practice in the Nepali Civil Service is for staff to be rotated frequently, thus depriving them (and their clients) of the time to master their learning curve. Although the Civil Service Act indicates that individuals are not to be moved more frequently than every two years, this is often not observed in practice. This is particularly harmful in highly specialized fields where there are few candidates who can perform the job in question. A review of IDA-supported projects reveals more frequent rotations than allowed by the regulations (sometimes after as little as 3 months in post); unfilled vacancies are also an issue for a number of projects. 5.8 On the Bank side, a review of rotation practices within task teams reveals considerable stability in core skills such as financial management and procurement, with safeguards assignments having stabilized over the last year. With respect to the Task Team Leader (TTL) slot, three projects have had only one TTL, while at the other extreme, two projects have had four (Financial Sector Technical Assistance, Power Development); these two projects are also the oldest in the portfolio, with preparation/implementation periods spanning more than ten years. Where there has been turnover in the international TTL position (e.g., Avian Influenza, Financial Sector TA), the practice of twinning international and national staff as co-TTLs has lessened the impact by ensuring continuity over time. Over the past year, a concerted effort has been made to decentralize more sector specialists to the Kathmandu office to facilitate day to day interactions with project teams. Currently, twelve out of 16 IDA projects and three out of eight TFs are task managed from the field. G. Budget-Results Links 5.9 This years efforts to include a medium term expenditure framework and annual indicators represent a step forward in making the budget a tool for achieving results. In the coming year, it would be desirable to tackle related weaknesses so that the planning-budgetingmonitoring cycle works as intended. For example, at present, there is a failure to link discussion of the budget allocation to an Annual Procurement Plan (prepared only after budget discussion), resulting in unrealistic budget targets targets not anchored by budget. Similarly, there is weak monitoring and enforcement of the budget agreement (form two), and no monitoring system in place to verify whether plans are implemented as prepared, with an eye to maximizing value for money. Lastly, the profile of budget releases in the course of the year is not conducive to effective program implementation and achievement of results. Over the past 5 years, between 60 percent and 70 percent of the capital budget is released in the last trimester, which means that
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programs cannot be implemented as intended. For infrastructure programs, releasing funds just prior to the monsoon is counterproductive.
Third Trimester Expenditure as percent of Total Expenditure

65.10 43.80 65.53 40.96 71.24 59.02 41.91 41.49 73.75 54.34
2005
2006
2007
2008
2009
Capital expenditure
Recurrent expenditure
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6. A WAY FORWARD
6.1 Security Threats: For IDA-supported projects, contracts to be carried out in highsecurity risk districts (as identified by OCHA and UN security maps) will be preceded by an active consultation process with local communities and leaders, in order to confirm the priority of the activity and local support for its implementation. Where contractors are threatened by unprovoked violence or extortion, the situation will be investigated and other security measures adopted. This will be done in active consultation with Government and other donor partners with activities in the same operational space. Funds may be shifted from those areas of the country deemed too unsafe for positive development impact to be achieved. Experience to date has shown that community-managed initiatives are more resilient in such fragile situations. 6.2 Weak Accountability: Pending the restructuring of the State and local government elections after passage of the new Constitution, alternative methods of building accountability into development programs should be expanded, such as third party monitoring mechanisms, including community-based models such as social auditing, scorecards, etc. In addition, program managers should explore how contract provisions can be strengthened to hold contractors accountable for completing contracts on time (as is being done in the roads sector, by setting payment milestones that link physical progress to elapsed time, including penalty provisions for shortfalls). 6.3 At a higher level (beyond individual projects), it is critical that key vacant positions in constitutional oversight bodies be filled such as the CIAA, OAG and PSC as these institutions are not functioning to their full potential due to the leadership vacuum. Promoting effective public debate on financial accountability, by ensuring that the Public Accounts Committee (PAC) reviews and discusses the Auditor Generals reports and NVC technical audits in a timely manner, should also be encouraged. Transparency mechanisms, such as websites and exercising right to information provisions, should also be strengthened. Financial irregularities as reported by the Auditor General should be settled. 6.4 Intimidation and Collusion: Follow through on implementation of agreed actions in the Action Plan endorsed by the High-Level Steering Committee in July 2009 is critical if we are to begin tackling the inter-related issues of capacity, collusion, and corruption. In this regard, for the PPMO to play its intended role, it requires additional resources, staff, and leadership from its oversight office. Secondly, roll-out of the e-procurement implementation strategy prepared by the PPMO should proceed with support from the development partners, as this could help mitigate intimidation threats. Lastly, donor partners should work together to develop harmonized approaches to procurement risks, customizing arrangements to the needs and specific circumstances in each sector. After piloting this approach in education, health, and rural roads, it could be expanded to other sectors as experience with these tools grows. 6.5 Skills Gaps and Continuity: In the short term, it would be desirable to discuss with the MOGA and the FCGO how greater stability in staffing appointments for priority development programs can be achieved, and whether a different approach is needed during the preparatory period to ensure staffing continuity during implementation. It would also be desirable to explore whether creation of specialized cadres in disciplines that are currently not represented in the Civil Service (such as procurement, safeguards, and monitoring/evaluation specialists) would be desirable as a medium-term measure, or whether the preferred approach should be to outsource these functions and rely on contractors and consultants to provide these skills to Government.
18
6.6 With respect to skills gaps in the field of procurement, a comprehensive training program for civil servants in procurement procedures is needed at all levels. Development of manuals, guidelines, and generic specifications for most commonly procured items would facilitate procurement while the civil service is scaling up in this important skill area. While funding support for an initial procurement training program is being provided through an IDF grant managed by the PPMO, implementation is stalled and thus an available tool for capacity development is not being used. 6.7 With respect to environmental and social safeguards, the Bank will continue its support for implementation of safeguard work, assisting project agencies to strengthen safeguard management capacity at the implementation level and improve implementation monitoring as required. Meanwhile, the Bank will seek to strengthen sector dialogue with the Government in the environmental protection and social safeguard field, with the goal of improving policies and implementation performance. The Bank will work with other development partners for a coordinated assistance strategy and program in this regard. 6.8 Budget-Results Linkages: To help strengthen the planning-budgeting-monitoring cycle, it would be desirable for MOF, NPC and a few selected ministries/sectors to reach agreement on what indicators will be used to track progress for budgetary and MTEF purposes (form 2) and then to follow this through a full budget cycle. Based on experience with this pilot, it could be expanded to other sectors in subsequent years. It would also be desirable for the annual budget review process to require submission of annual procurement plans, as per the provisions of the PPA and the budget guidelines, so that the MOF and NPC can determine whether expenditure and implementation targets are realistic. Compliance with this requirement could be reinforced by establishing a national budget implementation and procurement website that not only provides information on budget implementation progress (cash expenditure), but also provides information on annual procurement plans submitted by each procuring entity, including procurement notices and execution progress. Lastly, the imbalance in timing of the capital budget release needs to be tackled by adhering to the rule that no budget will be approved without an APP, releasing the second trimester budget only upon demonstrated progress as stated in form two, and freezing the capital expenditure budget release at the end of eleventh month of the fiscal year. 6.9 It would be desirable if a joint GON-Development Partner forum for discussing budgetresults linkages could be created so that we can work together towards improving results-based resource allocation and results monitoring. This would also enable development partners whose assistance is not yet on-budget to contribute information so that the GON can have the big picture in terms of on-going development activities in Nepal. It would also be interesting to select one or two sectors (such as roads or rural water) to carry out a joint stock-taking exercise of infrastructure quality to see what exists from earlier investments, what is still functioning/in good shape, and what needs to be repaired. Similarly, it would be interesting to carry out a joint stock-taking exercise of donor and government supported interventions, this time on a geographic rather than a sectoral basis, to identify where synergies can be captured.
19
NepalIDA/TFProjectDisbursements(US$m) (asofSeptember30,2009)
Annex1
Cr/Gr Total Disb'd % Disb'd
ProjectName
Approval Date
Closing Date
Age Net Amount (yrs) Amount $mn $mn (ERA)
Disb'd Devt inFY10 Obj(DO)
Imp Perf(IP)
NPFinancialSectorTA PowerDevelopmentProject RuralWaterSupply&SanitationII EducationforAllProject 9/9/2004 6/21/2005 6/28/2005 1/19/2007 2/22/2007 12/6/2007 12/6/2007 12/6/2007 5/6/2008 9/30/2008 6/4/2009 9/22/2009 3.3 973.9 1,007.9 12/31/2010 12/31/2009 7/31/2011 1/15/2014 9/30/2012 6/30/2013 6/30/2012 6/30/2011 9/30/2010 6/30/2015 12/15/2014 4.4 4.3 2.8 2.7 1.9 1.9 1.9 1.5 1.1 0.4 0.1 32.0 3.0 18.2 60.0 100.0 64.3 42.6 50.0 16.7 20.0 130.0 33.0 3.0 19.0 65.8 101.0 65.4 43.1 49.3 16.5 21.4 132.8 20.1 1.9 6.3 11.1 32.8 5.8 21.4 9.7 11.7 356.1 7/15/2010 5.1 100.0 101.3 65.4
12/19/2002 5/22/2003 6/1/2004 7/8/2004
12/31/2011 12/31/2012 12/31/2010 1/31/2010
6.9 6.4 5.4 5.3
10.8 164.0 52.3 110.0
12.4 180.6 51.6 112.0
10.6 33.1 23.5 102.6
85.4% 18.3% 45.5% 91.6%
0.04 4.9 64.6% 0.7 61.0% 63.3% 33.2% 16.9% 32.5% 8.9% 49.8% 19.6% 70.9% 0.0% 0.0% 2.6 3.5 5.9 1.1 35.3% 18.8
MS S MS S S S S S MS S S S MU S # #
MS S MS S MS MS MS MS MS S MU S MU MS # #
CR3727 CR3766,HRH039 CR3911,GRH369 CR3956,GRH340 CR3980,GRH3680 GRH125 GRH171 GRH173 GRH268 GRH274 GRH337 CR4515,GRH338 GRH339 GRH367 CR4510,GRH424 CR4603,GRH486 4652NEP,H5180
NepalHealthSectorProgram
RuralAccessImprovement&Decentralization NPEconomicReformTA AvianInfluenzaControlProject SecondHigherEducationProject PAFII Irrigation&WaterResourceMgmtProject RoadSectorDevelopmentProject PeaceSupportProject NPSocialSafetyNetFoodCrisis AgricultureCommercializationandTrade SchoolSectorReformProgram
TotalIDA
MS S MU U S MS 1.8 32.1 14.8 46.2% 0.92
MS S MU U MS MS
TF050593 TF056440 TF058031 TF090254 TF092561 TF093058 TF093397 TF094388 TF094724
FinancialSectorTA(FSTA)Project(DFID) NepalBiogasSupportProgram(CDCF) NepalBiogasSupportProgram(DFID) JudicialReformstoStrengthenCreditorRights(IDF) StrengtheningInstitutionalCapacityofPPMO(IDF) SocialSafetyNetFoodCrisis(GFCRP) TargetedSecondarySchoolStipend(JSDF) EstablishingWSSBaselineandCapacityBuilding ForestCarbonReadinessGrant(FCPFR)
4/30/2003 5/3/2006 10/4/2007 8/22/2007 10/1/2008 11/2/2008 12/16/2008 6/29/2009 8/26/2009
12/31/2011 7/30/2015 6/30/2010 8/22/2010 10/1/2011 9/30/2010 1/2/2013 9/30/2010 3/31/2011
6.5 3.5 2.1 2.2 1.1 1.0 0.9 0.3 0.2
11.9 7.0 5.0 0.4 0.5 5.0 1.9 0.3 0.2
7.51 0.85 0.59 0.22 0.12 5.00 0.30 0.25
63.3% 12.1% 11.8% 54.5% 24.3% 100.0% 15.8% 91.6% 0.0%
0.01 0.59 0.06 0.02 0.25
TotalTF
Note:AsIDAfundingisdenominatedinSDRs,US$reflectedistheamountafterExchangeRateAdjustmentasofSeptember30,2009.
NPPR2009WorldBank
Annex1
NepalIDA/TFPortfolioBreakdownbyISNPillar(US$m) (asofSeptember30,2009)
Annex1
Cr/Gr Total Disb'd % Disb'd
ProjectName
Approval Date
Closing Date
Age Net Amount (yrs) Amount $mn $mn (ERA)
Disb'd Devt inFY10 Obj(DO)
Imp Perf(IP)
CR3727 GRH173 TF050593 GRH367 TF090254 TF092561 5/22/2003 6/21/2005 12/6/2007 12/6/2007 6/4/2009 6/1/2004 7/8/2004 9/9/2004 7/15/2010 5.1 12/31/2010 1/31/2010 5.4 5.3 12/31/2012 12/31/2010 6/30/2013 6/30/2012 6/30/2015 6.4 4.4 1.9 1.9 0.4 164.0 32.0 64.3 42.6 20.0 33.0% 180.6 33.0 65.4 43.1 21.4 343.4 33.1 20.1 5.8 21.4 18.3% 61.0% 8.9% 49.8% 0.0%
NPFinancialSectorTA 12/19/2002 NPEconomicReformTA 6/28/2005 FinancialSectorTA(FSTA)Project(DFID) 4/30/2003 PeaceSupportProject 5/6/2008 JudicialReformstoStrengthenCreditorRights(IDF) 8/22/2007 StrengtheningInstitutionalCapacityofPPMO(IDF) 10/1/2008 Statebuilding/CountrySystems
12/31/2011 12/31/2009 12/31/2011 6/30/2011 8/22/2010 10/1/2011
6.9 4.3 6.5 1.5 2.2 1.1
10.8 12.4 3.0 3.0 11.9 50.0 49.3 0.4 0.5 7.4% 77.4
10.6 1.9 7.51 9.7 0.22 0.12
85.4% 63.3% 63.3% 19.6% 54.5% 24.3%
0.04 0.01 5.9 0.06 0.02 4.9 2.6 45.5% 91.6%
MS S MS MU MU U S S S S # MS S
MS MS MS MU MU U S MS MU S # MS S
CR3766,HRH039 GRH171 CR4515,GRH338 GRH339 CR4603,GRH486
PowerDevelopmentProject RuralAccessImprovement&Decentralization Irrigation&WaterResourceMgmtProject RoadSectorDevelopmentProject AgricultureCommercializationandTrade ProductiveSector/SustainableGrowth
RuralWaterSupply&SanitationII EducationforAllProject
52.3 51.6 23.5 110.0 112.0 102.6 100.0 101.3 65.4 18.2 60.0 100.0 130.0
NepalHealthSectorProgram
64.6% 0.7
S S MS S # MS S S S 4.3 974.9 1,039.6 370.7 35.7% 19.4
MS MS MS S # MS S MS MS 2.8 2.7 1.9 0.1 0.9 3.5 2.1 1.1 1.0 19.0 65.8 101.0 132.8 1.9 7.0 5.0 16.7 16.5 5.0 59.5% 618.7 6.3 11.1 32.8 0.30 0.85 0.59 11.7 5.00 33.2% 16.9% 32.5% 0.0% 15.8% 12.1% 11.8% 70.9% 100.0% 3.5 0.59 1.1
CR3911,GRH369 CR3956,GRH340 CR3980,GRH3680 GRH125 GRH268 GRH274 GRH337 4652NEP,H5180 TF093397 TF056440 TF058031 CR4510,GRH424 TF093058 7/31/2011 1/15/2014 9/30/2012 12/15/2014 1/2/2013 7/30/2015 6/30/2010 9/30/2010 9/30/2010
AvianInfluenzaControlProject 1/19/2007 SecondHigherEducationProject 2/22/2007 PAFII 12/6/2007 SchoolSectorReformProgram 9/22/2009 TargetedSecondarySchoolStipend(JSDF) 12/16/2008 NepalBiogasSupportProgram(CDCF) 5/3/2006 NepalBiogasSupportProgram(DFID) 10/4/2007 NPSocialSafetyNetFoodCrisis 9/30/2008 SocialSafetyNetFoodCrisis(GFCRP) 11/2/2008 ServiceDelivery/Socialprotection
TotalIDA/TF
Note:AsIDAfundingisdenominatedinSDRs,US$reflectedistheamountafterExchangeRateAdjustmentasofSeptember30,2009.
NPPR2009WorldBank
Annex1
Annex 2 Ex Post Procurement Review Findings Project Level

An ex-post review of contracts awarded between July 2007 and December 2008 that fell below the prior review threshold was carried out in August/September 2009. A sample of 58 contracts was selected for detailed review out of a total of 374 contracts from 9 projects. Key findings for each project are provided below. 1. Poverty Alleviation Fund I
The Review noted that no established mechanism for procurement supervision and oversight was in place, resulting in instances of deviations from agreed procedures. These include lack of Banks prior clearance for single-source contract exceeding $5,000, lack of adequate justifications for hiring individual consultants on a sole source basis, and limited or no competition for local shopping/consultant selection. Documentation is often incomplete, and files do not contain documents recording key procurement steps including those applicable during contract administration. 2. Second Higher Education Project
The Review found generally acceptable quality of procurement procedures and documentation. 3. Economic Reform Technical Assistance
The Review revealed inadequate coordination with and supervision of agencies implementing sub-projects by EASU. This was evidenced by the fact that of the five cases selected for review, documents for only three cases could be obtained. The Review also found poor or incomplete documentation to be a problem: files were incomplete and did not contain many important documents such as completion reports, payment details, consultant applications, CVs of the individual consultants, and evaluation reports listing their capabilities and the basis for selection of the successful candidate. In one case (contract for selection of individual consultant for MOH Stewardship study) some major deficiencies were noted in the contract e.g. contract duration was not stated, contract termination provision was unilateral (termination by client only), and payment terms were not described. 4. Avian Influenza Control Project
The Review found poor filing and incomplete documentation to be a problem. The files provided were incomplete, and many critical documents necessary to review the appropriateness of the procurement procedures were not available e.g. no copy of Bid Invitation notice, no bid opening minutes, no details of manufacturer name, no item-wise rates etc. 5. Second Rural Water Supply and Sanitation Project
The Review found that the quality of procedures used for procurement of consultants was poor. In one case (procurement of Water Quality Testing firms) the procurement procedure used did not follow any of the Banks standard procedures. In another (Procurement of consultants for Web-centric IMIS), the Sub-criteria developed for adequacy of the proposed methodology and work plan in responding to TOR were not in accordance with the sub-criteria prescribed in the
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RFP. The quality of procurement documentation was also not of expected standards (e.g., contract file for Printing of SARAR Tools). 6. Power Development Project (MHVEP Component)
The quality of procurement was generally satisfactory. However, in the case of procurement of motorcycles, it was not clear if the recommended product was technically compliant. Another matter of concern is the fact that the date of the award decision (seen as 2064/2/28) precedes date of quotation from selected firm (2064/2/30). This indicates possible manipulation of the procurement process and needs to be explained. 7. Telecommunications Sector Reform Project
Overall, the quality of post review contracts reviewed was satisfactory. However, it was noted that the designated Procurement official was not involved in the procurement process and that the bid evaluation reports were prepared by the Accountant and approved by the Director. This may explain the observation that in all the four cases reviewed, the bid evaluation was incomplete in that it only compared the prices and did not contain any details on the technical compliance of the items offered by the different bidders. 8. Rural Access Improvement and Decentralization Project
Deliberate disaggregation was noted for the purchase of three computers that should have been procured under one package. Furthermore, though quotations for the computers were requested at different times, it was noted that the contract was consistently awarded to the same firm (M/s Khanal Enterprises). Similarly, in the procurement of 16 individual consultants (PDEs), the criteria/sub-criteria developed for the evaluation did not strictly match those disclosed in the EOI. This unilateral change would not provide a level playing field to all applicants, as the basis of their application would be the EOI and may thus have screened out some individuals who would otherwise have been eligible. 9. Road Sector Development Project
The Review found procurement quality to be generally acceptable. However, out of the cases reviewed, deficiencies/deviations were noted in two contracts. In a bid for computers, the specifications did not appear to have been developed taking into account market conditions. As a result, none of the four bidders could offer equipment with the required specifications, necessitating a re-invitation with changed specifications. Subsequently, bids were received from only two bidders out of the four that participated in the initial bidding. Additionally, in one case of hiring an individual consultant, the lowest quoted remuneration was adopted as the basis for selection rather than capability and experience, which resulted in selection of a lesser qualified candidate. Performance of the selected candidate proved to be poor, as evidenced from the report and writing of the consultant.
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Nepal - IDA/TF Project Results (as of September 30, 2009)
Annex 3
Project
11/28/2005 12/31/2009
Economic Reform TA
Current Rating DO IP S MS
Effective Date
Closing Date
End-Project Key Results
Due Date
Net Commitmt $ mn: 3.0 Disbursements $mn: 1.9 (62%)
1. Successful implementation and completion 12/31/2009 of all 13 sub-projects that meet individual targeted outcomes under governance and public sector management. 2. Successful implementation and completion 12/31/2009 of all 11 sub-projects that meet individual targeted outcomes under improved servi ce delivery. 3. Successful implementation and completion 12/31/2009 of sub-project that lead to forming of privatization cell and privatization action plan. 4. Successful implementation and completion 12/31/2009 of 2 sub-projects that meet targeted outcome of impproved strategic communication . End-Project Key Results 1. A national strategy and action plan for implementing procurement laws is ready. 2. Curriculum for basic procurement training and pool of trainers made available. 3. Awareness among stakeholders on the benefits of successful implementation of the Act and their role in ensuring the same. Due Date 3/31/2009
Current Progress towards Key Results (September 2009) 1. Eight sub-projects completed & achieved outcomes. One sub-project completed with partial achievement of outcomes. Three subprojects dropped. 2. Six sub-projects completed & achieved outcomes. One sub-project completed with partial achievement. One sub-project dropped. 3. One sub-project completed without achieving outcomes.
4. One sub-project completed & achieved outcomes. One sub-project underway.
Project
PPMO
Current Rating DO IP U U Effective Closing Date Date 10/1/2008 10/1/2011
Current Progress towards Key Results (September 2009) 1. Development of strategy and action plan delayed. Consultants under recruitment 6/30/2009
Net Commitmt $ mn: 0.48
Disbursements $ mn: 0.12
4/30/2010
2. The process of selecting consultants for needs assessment and curricula development has not been started. 3. Not yet due .
NPPR 2009 - World Bank
Annex 3
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Annex 3
Project 1. Close monitoring & review of sub-projects in order to accelerate disbursements and reallocate resources accordingly 2. Implement and update Action Plan to address outstanding issues. EASU
Key Risks to Achieving Results
Key Actions to Address Risks
Economic Reform TA
Agency / Unit Responsible EASU
Due Date on-going
1. Implementation of some sub-projects remains slow due to political instability, changes in government personnel, some delays on the Bank's side in granting no-objection 2. Disbursement is lagging and running behind the original schedule
ongoing
3. Funds will be cancelled at project closing on Dec 31, 2009.
EASU
done
4. Up-to-date information on achieving project outcomes may not be available.
3. Reallocate expected savings to successful subprojects where scaling up is possible, provided that activities can be completed before December 31, 2009 4. Enhance the projects monitoring framework to report on completion/outcome status at the subproject level, as well as at the project level. Key Actions to Address Risks
EASU/ Steering Committee
underway
Project
Due Date ??
PPMO
Agency / Unit Responsible GoN/PPMO
PPMO
9/30/2009
1. Full complement of key staff is not on board, which is delaying project implementation progress and achievement of expected outcomes. 2. Rotations and retirements mean team is losing its in-house expertise. Current team is not familiar with the PPA and its implementation. 3. Weak leadership from the Prime Minister's Office (to which the PPMO reports).
WB and DPs
on-going
4. Lack of incentives for the difficult work undertaken by key staff is sapping their interest in working at PPMO.
GON to select appropriate replacements or hire GON retirees who have been champions of procurement reform during their career. PPMO to expedite the hiring of individual experts (long and short term) to provide required support for expediting project activities. Bank and other Development Partners (DPs) to communicate importance of implementing the PPA and supporting PPMO in this work. In collaboration with DPs, explore non-salary incentives that could be provided, as well as manpower support that could be considered.
WB
12/1/2009
Annex 3
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Annex 3
Project
7/1/2003 12/31/2011
Effective Date 1. Timely, effective, and independent implementation of central banking policies. 2. Timely and effective intervention by NRB to 12/31/2011 enforce prudential regulations and relevant banking legislation. 3. Increased share of financial system owned 12/31/2011 and operated by private sector players. 4. Increase in range and sophistication of 12/31/2011 financial instruments and services available at competitive prices. Effective Date
3/25/2004 12/31/2012
Closing Date 12/31/2011
Financial Sector TA
Current Rating DO IP MS MS
Due Date
Net Commitmt $ mn: IDA: 9.5 DFID: 11.5 Disbursements $ mn: IDA: 10.6 DFID: 7.5 (86% overall)
Current Progress towards Key Results (September 2009) 1. NRB has been implementing its policies in a timely, effective, and independent manner most of the time. 2. NRB implementing Prompt Correction Action in a timely and effective manner. 3. Share of privately owned banks is still low as the three large banks remain statecontrolled. 4. Modern banking services introduced, such as online banking, SMS banking and ATM services. Interest rate spread still high.
Project 1. 74,000 additional rural households with access to electricity from MH schemes 2. 65,000 additional rural households with access to grid-connected electricity. 3. 1,500 MW increased transmission capacity.
Power Dev. Project
Current Rating DO IP S S Closing Date End-Project Key Results Due Date
12/31/2012
12/31/2012
Current Progress towards Key Results (September 2009) 1. As of October 2009, 23,744 households have gained access to electricity provided through the MHVEP. 2. info not available
Disbursements $ mn: 33.8 21%
12/31/2012
4. 22.4 MW increased generation capacity
12/31/2012
3. Khimti-Dhalkebar under construction; Hetauda-Bharatpur construction launched; Bharatpur-Bardaghat tender under preparation. 4. Procurement underway
5. 170 GWh increased energy generation
12/31/2012
5. Procurement of consultants underway
12/31/2012 12/31/2012
6. not yet due 7. not yet due
6. 1.6% reduction in transmission & distribution losses outside KTM valley 7. 6% reduction in distribution losses within KTM valley
Annex 3
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Annex 3
Project 1. NRB to continue implementing its policies in a timely, effective and independent manner. NRB NRB
Agency / Unit Responsible
Due Date 12/31/2011
Financial Sector TA
1. NRB unable to implement policies effectively and on time due to intervention by vested interest groups. 2. Same as above.
12/31/2011
3. Inability to implement privatization due to reluctance on the part of Government. NRB
Government
12/31/2011
4. Private banks are not motivated to introduce new products and services. Lending rates kept high. Key Risks to Achieving Results Key Actions to Address Risks 1. NEA to appoint a senior procurement expert.
2. NRB to continue implementing its prudential regulations and relevant banking legislation in a timely and effective manner. 3. Government to propose a new strategy to increase private sector ownership share in the banking sector. 4. NRB to continue facilitating the introduction of new products and services through directives, such as for branchless banking.
12/31/2011
Project
Due Date done
Power Dev. Project
1. Procurement capacity of NEA implementing unit
Agency / Unit Responsible NEA
2. Civil disturbances, bandhs, etc. delaying contractors' works
NEA
on-going
3. Protracted acquisition of Rights-of-Way for transmission lines and distribution rehabilitation in Kathmandu Valley
2. NEA to meet with local leaders of political parties, groups with grievances, and community leaders in vicinity of planned works. 3. Micro-planning of transmission lines to minimize land acquisition/ROW issues. Bharatpur-Bhardgat line under assessment
NEA
on-going
AEPC
10/15/2009
4. Rising costs of MH systems undermine AEPC's ability to meet agreed targets, increase access to electricity in rural Nepal 5. Challenge of long-term sustainability of villagelevel microhydro systems
4. AEPC to carry out study to identify scope of costsaving measures and introduce revisions in program design, as appropriate. 5. AEPC to carry out study to evalute sustainability of MH systems 5+ years old. TOR to be submitted to Bank.
AEPC
10/15/2009
Annex 3
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Annex 3
Project
8/16/2005 12/31/2010
Rural Access Project 2. 20% reduction in travel time by beneficiaries by EOP
Current Rating DO IP S MS 1. 20% increase in motorized & non-motorized 12/31/2010 trips by beneficiaries by EOP
Effective Date
Closing Date
Due Date
Current Progress towards Key Results (September 2009) 1. More than 20% increase in vehicle trips on completed roads 2. More than 20% reduction in travel time on completed roads 3. periodic surveys will be carried out to collect this data 4. periodic surveys will be carried out to collect this data
Disbursements $ mn: 20.1 63%
Project 6/30/2012
Road Sector Dev. Project
Current Rating DO IP S S
Effective Closing Date Date 2/21/2008 6/30/2012
3. 15% increase in the number of people in participating hill districts that live within 4 hour walk of all-season road. 4. 10% increase in the number of people in participating Terai districts that live within 2 hour walk of all-season road. End-Project Key Results Due Date
63% 1. periodic surveys will be carried out to collect this data
Net Commitmt $ mn: 42.0 Disbursements $ mn: 22.1 (53%)
1. 6% increase in number of people with all season access to economic centers & social services 2. 35% reduction in journey times to key economic centers in project areas. 3. Reduce the percentage of black top Strategic Road in poor condition to 10% 4. Upgrading of 297 km of Strategic Roads
Project
Irrigation & Water Resources
Current Rating DO IP S MU
5. 450 km of strategic roads receive periodic maintenance End-Project Key Results 1. percent increase in productivity of selected crops, Paddy: 3.5 MT/ha 2. 205% increase in cropping intensity 3. 85% of WUAs in transferred irrigation schemes whose O&M expenditures is as per agreed Asset Management Plans
Due Date 6/30/2013
2. periodic surveys will be carried out to collect this data 3. data results for FY2008/09 will be available by end-December 2009. 4. Contract awarded for upgrading of 280 km of Strategic Roads 5. Contract awarded for periodic maintenance of 130 km of SRN Current Progress towards Key Results (September 2009) 1. Progress to be measured in year 3
2. Progress to be measured in year 3 3. Progress to be measured in year 3
Net Commitmt $ mn: 64.3 Disbursements $ mn: 5.8 9%
Annex 3
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Annex 3
Project
Due Date on-going
Rural Access Project
1. Slow progress in some Terai districts
2. Quality of works to be improved
on-going
3. Delays in the progress of CBAS component
Agency / Unit Responsible 1. Central level monitoring (DOLIDAR/PCU/PSC) to be DOLIDAR/PCU/PSC efficient and effective. DOLIDAR/PCU/PSC closely monitoring contractors works 2. Cause contractors to comply with quality DOLIDAR/PCU/PSC assurance requirements and take action against poor performing contractors as per PPA. 3. Expedite CBAS activities as per Agreed Plan. DOLIDAR/PCU Remaining activities of CBAS will be attended soon.
on-going
Project
Road Sector Dev. Project
1. Delay in work progress in few upgrading works contract.
Agency / Unit Responsible DOR/consultant
Due Date
2. Delay in hiring consultant for the supervision of remaining periodic maintenance works 3. Delay in some of institutional activities
1. DOR is closely monitoring contractors and is confident that all the works will be completed before credit closing date. 2. Expedite hiring process. EOI submitted and shortlisting in process. 3. DOR is expediting remaining institutional activities.
DOR DOR
Project
Irrigation & Water Resources Mgmt
1. Poor security situation impedes project implementation in various districts
Agency / Unit Responsible MoI/DoI
Due Date
DoI/WUA DoA, DoI
2. Lack of DoI and WUA capacity to manage/implement the IMT process 3. Coordination between DoI and DoA with regard to ICWM (Component D) is weak or ineffective, adversely impacting implementation
1. Project design is flexible in order to allow project works to move between Districts or project areas depending on the situation 2.Capacity building will strengthen the capacity of DoI and WUAs 3. Joint structures/platforms for ICWM planning and implementation are provided at regional and central levels
Annex 3
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Annex 3
Project
11/13/2009 6/30/2015
Current Rating DO IP
Effective Date
Closing Date
Due Date
Agriculture Commer. & Trade
Current Progress towards Key Results (September 2009) project just declared effective
Project 1. Net Enrollment Rate: 96% 2. Survival Rate to Grade 5: 85% 1/31/2010
Education for All
1. Productivity of selected commodity value chains supported by the project increase by 25% 2. Volume of marketable agricultural products passing through the selected value chain increase by at least 30% 3. By EOP agribusiness registered and active in the food industry have improved quality standards (measured by percentage of rejected samples) End-Project Key Results Due Date
Current Progress towards Key Results (September 2009) 1. 91.8% (2008) 2. 81.1% (2008) 3. 53% (2008)
Project Effective Closing Date Date 7/27/2007 1/15/2014 1. Number of higher education institutes tracking employability of graduates: 15
Second Higher Education Project
Current Rating DO IP S S Net Commitmt $ mn: 110.0 Disbursements $ mn: 102.6 (93%) Current Rating DO IP MS MS 3. Learning Achievement Outcome (Grade 5): 60% End-Project Key Results Due Date 1/15/2014
Current Progress towards Key Results (September 2009) 1. not yet
2. Cost sharing rate of autonomous campuses / universities receiving support: 15%
2. N/A
Disbursements $ mn: 11.1 18.5%
3. N/A
4. 0 5. HE: 228; SHE: 176 6. 1
3. Share of graduates from underprivileged groups in the total number of graduates (girls, dalits, janajatis) 4. Number of TU campuses becoming autonomous: 6 5. Number of students receiving financial assistance: HE: 3,500; SHE: 4,300 6. Number of campuses completing a quality assurance cycle: 50
Annex 3
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Annex 3
Project
Due Date
Agriculture Commer. & Trade
Project
Education for All
1. No key risks to achieve results
Due Date
Project
Key Actions to Address Risks 1. i) UGC will recruit: senior level staff (1), Program Officer (1) and Assistant (1), ii) TU Senate will amend TU Autonomous Institute/Campus Rule, 2062 2. SFAFDB will hire: i) Deputy Executive Director (1); ii) Monitoring Officer (1) and Assistant (1) 3. UGC will split the current QAA cum Research Division headed by one Director into two separate Divisions - QAA and Research by hiring a Research
Second Higher Education Project
1. i) Weak implementation capacity of UGC on Reform Grant sub-component, ii) Delay in TU Autonomous Institute/Campus Rule, 2062 amendment 2. Weak implementation capacity of SFAFDB
Agency / Unit Responsible i) UGC, ii) TU
Due Date i) 10/20/09 ii) 10/30/09
SFAFDB
12/31/2009 11/30/2009 UGC 10/20/2009
3. Weak implementation capacity of UGC, QAA Division
Annex 3
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Annex 3
Project
Current Rating DO IP S MS 2. SA at birth: 31.7% (June 2009)
Health Sector Project
Due Date
Current Progress towards Key Results (September 2009) 1.CPR : 44% (June 2009)
Net Commitmt $ mn: 100.0 Disbursements $ mn: 65.4 (65%)
3. DPT3 immunization coverage : 82% (Dec 2008) 4. Women: 65% Men: 81% DHS 2006
Project 1. HPAI Absent 7/31/2011
1 .Contraceptive prevalence rate increased 7/15/2010 from 35% to 48% 2. Skilled Aattendance at birth increased from 11% to 35% 3. Percentage of children immunized against DPT3 increased from 72% to 90% 4. Percentage of women and men who can correctly identify method of preventing HIV infection increases from 37.6% of women and 50.8% of men (DHS 2001) to 75% and 85% respectively. End-Project Key Results Due Date
Avian Flu
Current Rating DO IP MS MS
Current Progress towards Key Results (September 2009) 2. The first two outbreaks in Jan and March 2009 were successfully contained . As of July 2009: Poultry Farmers: 75.6 % Health Workers: 71.6 % General Population: 67.6 % Due Date Jun-10
Project
2. Positive behavioral change related to AI increases among poultry farmers (80%), health workers (80%), and general population (80%) in terms of key aspects of knowledge, attitudes, and practices End-Project Key Results 1. Commissioning of ~37,000 plants in designated districts
Biogas
Net Commitmt $ mn: 18.2 Disbursements $ mn: 6.4 18% Current Rating DO IP S S Effective Date 12/1/2007 Closing Date 6/1/2010
Current Progress towards Key Results (September 2009) 1. 4,772 plants constructed in 2008
Disbursements $ mn: .590
Annex 3
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Annex 3
Project
Due Date November Dec JAR Dec JAR NDHS 2010
Health Sector Project
Agency / Unit Responsible LMD, KFW,USAID,WB and FPAN FHD-DOHS CHD-DoHS NCASC
1. Timely procurement and supply of FP Commodities 2. Retaintion of skilled HR at the health facilites, and maintenace of supplies at the faclity 3. Issue of target children to be immunized following reduction in TFR not yet settled 4. HMIS does not regulary monitor this indicator
1. Periodic monitoring of stockpiles of FP commodities and supply status by the task team 2. Regular monitoring of HR and commodity supply status of health facilities 3. New study to look at target denominator for Immunization 4. next DHS IN 2010
Project 1. Restructure the project to focus on BSL2 labs.
Due Date Nov/Dec 2009
Avian Flu
1. Increased investment and operating costs make investment in BSL3 labs uneconomical 2. Slow progress in quarantine posts establishment 3. Health Coordinator post vacant.
Agency / Unit Responsible DOLS/DOHS
2. Expedite the establishment of functional quarantine posts. Health Help desks established at key land crossings and International Airport.
Project
Due Date Ongoing BSP-Nepal/AEPC Ongoing
Biogas
1. Lower than projected demand for new plants in remote districts. 2. Lower level of private sector activity by biogas construction companies in more remote districts
Agency / Unit Responsible BSP-Nepal/AEPC
1. Increased Marketing to increase awareness and demand for Biogas 2. Increased partnership efforts with rural development initiatives/Increased promotion through AEPC district energy offices 3. Increased financial support and incentives to biogas companies to expand efforts into lowpenetration districts
AEPC
Ongoing
Annex 3
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Annex 3
Project
11/19/2008 12/31/2010
Rural Water Supply & Sanitation 12/31/2010
Current Rating DO IP MS MS 1. Operationalization of RWSS sector M&E unit at the Ministry of Physical Planning and Works
Effective Date
Closing Date
Due Date
Current Progress towards Key Results (September 2009) 1. Procurement of hardware and software for the M7E/MIS at MPPW has been completed. MIS module has been designed and is in users' test phase. Stakeholder training for field testing of software and data collection is planned for second half of Nov 2009. The assignment will be completed Dec 31, 2009
Net Commitmt $ mn: 52.3 Disbursements $ mn: 15.7 30% 3. 100 % of population in the project area with access to hygienic sanitation facilities within 30 meters of their residence. 4. 1463 WSUCs with more than 3 women members. End-Project Key Results Due Date
2. 100% of population in the project area with access to water supply points that can be reached within a 15 minute round trip walk from their residence (1463 schemes covering a base year population of 1.038 million)
2. 50% of the target population have access to water supply points within a 15 minute round trip walk (746 schemes have been completed serving population of about 522,200 and another 832 schemes are in various stages of development.) 3. 40% of the target population have access to hygienic sanitation facilities within 30m of their residence.
Project
PAF II
Current Rating DO IP S S
4. Minimum requirement of 3 women members achived in all schemes- this target surpassed in 488 schemes Current Progress towards Key Results (30 Oct 2009) 1. 65,195 households (overall)
2. 164,936 households (engaged in IG SubProjects) 3. WOMEN: 61% DALIT: 25% JANAJATI: 29%
1. Increased # of households (both poor & non- 9/30/2012 poor) with access to improved infrastructure facilities 2 At least 25% of poor households have minimum of 15% increased incomes by End-ofProject (EOP). 3 At least 30% of key positions in Project Community Organizations are filled by persons from the targeted households.
Annex 3
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Annex 3
Project 1. RWSSFDB is providing support to the MPPW and M&E/MIS steering committee to complete the assignment on time.
Rural Water Supply & Sanitation
1. Delay in the operationalization of the RWSS Sector M&E system
Agency / Unit Responsible GoN/ MPPW
Due Date Dec. 30, 09
2.Slow implementation / delays in project implementation on part of the Fund Board
2. Recruitment of M&E Officer and Office Assistant will be completed by 30 Nov, 2009. CM&E position to be re-advertized.
The Board
Oct. 15, 09
3. Political unrest and security situation in the country leading to delays in the movement of construction materials and M&E consultants
3. Board's website has been updated with postings of third IPR/FMR 2009/10, Audit Report of FY 2008/09, & batchwise scheme information at www.rwss.org
The Board
Recurrent
Project
Key Actions to Address Risks 1. Appoint PAF Vice Chair
Due Date
PAF II
1. Board meetings need to take place regularly so that policy guidance and decisions can be provided to PAF Secretariat.
2. Two board meetings were chaired by the Prime Minister in August and October 2009. He assured that board meetings will be held regularly.
Annex 3
12 of 14
Annex 3
Project 1. Number of acute food insecure population in the most critical areas is less than 100,000 2. 75% of targeted households reporting increased ability to meet their food and basic needs 3. At least 60 days of food/cash for work per acute food-insecure household per annum Effective Closing Date Date 9/19/2008 6/30/2011 1. Cash payments to Maoists completed 2. Cash to families of killed provided 3. Reintegration support developed/ piloted 4. PMT strengthened 5. Support to peace institutions provided 12/31/2011 End-Project Key Results Due Date 9/30/2010
Social Safety Net
Current Rating DO IP S MS
Due Date
Current Progress towards Key Results (September 2009) 1. ??
Net Commitmt $ mn: IDA: 16.7 TF: 5.0
Project
Peace Support Project
Disbursements $ mn: IDA: 11.7 TF: 5.0 77 % Current Rating DO IP MU MU
Net Commitmt $ mn: 50.0 Disbursements $ mn: 9.7
2. 94 percent of targeted households reported an increase in food security and an average of 5.5 months of food sufficiency. 52 percent of respondents reported eating more meals a day 3. On average targeted households worked for 28.3 days between November 2008 and June 2009 Current Progress towards Key Results (September 2009) 1. Will be restructured and funds moved to other peace activities 2. 10, 294 families out of 15,193 eligible had been compensated as of July 15, 2009 3. Support directives drafted, however no strategy or activity request to date 4. Progress on MIS, however PMT capacity remains weak 5. Project involvement with peace institutions limited to date
Annex 3
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Annex 3
Project 1. Implement agreed monitoring methodology and provide documentation. Within 1-3 months depending on district.
Due Date 9/1/2009
Social Safety Net
1. Monitoring arrangements for fertilizer and seeds do not appear to have been implemented, preventing reimbursement by IDA.
Project
Due Date 2/1/2010 WB/MOPR MOPR/PMT WB/MOPR GON/MOPR/PMT/WB 2/1/2010 3/1/2010 12/1/2009 ongoing
Peace Support Project
1. Potential improprieties in end-use of payments.
Agency / Unit Responsible WB/MOPR
2. Potential improprities in beneficiary determination, payments 3. Lack of GON leadership on reintegration issues
4. Low GON priority, limited available staff skills
5. Low GON priority, peace institutions not established or not functioning
1. Project supervision, independent evaluation of payment mechanisms 2. Project supervision, independent evaluation of payment mechanisms 3. GON to agree on strategy and role of project in reintegration, plus TA to develop options 4. Supervision and identification of skill needs, project funds for consultant support 5. Identification of training and capacity building activities in timely fashion
Annex 3
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NEPAL - IDA/TF Project Monitoring Arrangements

Annex 4
Cr/Gr
Project Name
Uses Sector M&E System
Uses Project Specific M&E
Data feeds to Sector M&E
Is building Sector M&E
CR 3727 TF050593 GR H173 TF090254 TF092561 x x x x x x x x x x x x x x x x x x x x na na 3 Totals 19 8 x x x x x x x x Power Development Project Nepal Biogas Support Program (CDCF) Nepal Biogas Support Program (DFID) Education for All Project Second Higher Education Project Targeted 2ndary School Stipend (JSDF) School Sector Reform Program Nepal Health Sector Program Avian Flu Rural Water Supply & Sanitation Rural Access Improvement & Decentralization Road Sector Development Project Irrigation & Water Resource Mgmt Proj Agr Commercialization and Trade Peace Support Project Social Safety Net - Food Crisis Social Safety Net - Food Crisis (GFCRP) PAF II Establishing WSS Baseline (PPIAF) Forest Carbon Readiness Grant (FCPFR)
NP Financial Sector TA Financial Sector TA (FSTA) Project (DFID) NP Economic Reform TA Judicial Reforms to Strengthen Creditor Rights (IDF) Strengthening Inst. Capacity of the PPMO (IDF)
CR 3766, HR H039 TF056440 TF058031
CR 3956, GR H340 GR H274 TF093397 4652-NEP, H5180 CR 3980, GR H3680 GR H125 GR H268 CR 3911, GR H369
x x
GR H171 GR H339 CR 4515, GR H338 CR 4603, GR H486
GR H367 CR 4510, GR H424 TF093058 GR H337
TF094388 TF094724
Annex 5
Experience with Third Party Monitoring

Dates of Performance Audits 2008 Office of the Auditor General - PAF program has improved income and savings status of the community people - 80% of PAF beneficiaries belong to marginalized communities - transparency is good and there is no misuse of revolving funds - some COs lacked adequate representation by women, and some CO leadership posts were not filled by a disadvantaged group member (dalit, woman or member of an ethnic group) 15 districts and 71 schools were sampled, and anomalies were found with respect to: - management of the scholarship program - implementation of the School Improvement Programs (SIPs) - school record-keeping Name of Performance Auditor Key Findings Use of Findings / Impact on Project Implementation Action Plan prepared to address OAG findings and recommendations
Project Name
PAF I
EFA
2008
Office of the Auditor General
Performance auditing will continue on 2 year intervals for SSRP To address these issues DOE/ DEO/ RC and DPs will carry out joint monitoring visits; improved social audit procedures and school score cards are being introduced. To help schools record keeping, DOE completed a School Auditing Manual that spells out how records are to be kept
2009 NPPR - World Bank
Annex 5
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Annex 5

Dates of Performance Audits 2009 Office of the Auditor General - Staff absenteeism - Inadequate supplies of medicines - Poor maintenance of health facilities Name of Performance Auditor Key Findings Use of Findings / Impact on Project Implementation Actions to address these issues will be included in the governance and accountability action plan (GAAP)
Project Name
HSSP 1
Annex 5
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Annex 5

Dates of Technical Audits April - July 2009 Private consultants outsourced by National Vigilance Centre (NVC) 5 road segments were audited and some cases of non conformance were found: - some contract outputs did not meet specifications at a few sites (four contracts). - improper disposal of excavated materials (four contracts) - some tests not carried out as per Quality Assurance Plan (two contracts) 3 road segments were audited and some cases of non conformance were found: - some required tests not carried out (two contracts) - some contracted outputs did not meet specifications at a few sites (three contracts) - poor quality of pavement due to inadequate compaction of embankment (case referred to CIAA) Name of Technical Auditor Key Findings Use of Findings / Impact on Project Implementation Contractors have corrected the faults after Technical Audit findings
Project Name
Road Sector Devt (RSDP)
Rural Access (RAIDP)
April - July 2009
Private consultants outsourced by NVC
One case is pending CIAA investigation Corrections are pending with DOLIDAR for two road segments
Annex 5
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Annex 5

Dates of Technical Audits Name of Technical Auditor Key Findings Use of Findings / Impact on Project Implementation
Project Name
Annex 5
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Annex 5

Dates of Social Audits Name of Social Auditor Key Findings Use of Findings / Impact on Project Implementation Social audit process in schools has enhanced transparency and school accountability. Changes include: - enhanced stakeholder/parent participation in school management - improved class occurrence - improved student performance
Project Name
Community Schools (CSSP) and Education for All (EFA)
2003 onwards (annual)
social audit committee (SAC)
Social Audit (SA) reports are endorsed by parent/stakeholder meeting SA reports cover the following topics:
Second Rural Water Supply and Sanitation Project (RWSSP II)
May 2008 to August 2009 (phase 1)
social accountability committees ("jagaran samities")
i) school governance - meeting frequencies of SMC, PTA, etc. ii) school physical facilities, iii) finance, iv) academic aspects - class occurrence, teacher manage-ment, student performance In some schools, a report card system has also been endorsed to collect feedback from guardians Jagaran Samities (SACs): - assess scheme activities through score cards and participatory processes - share information on rules, rights, and expenditures with Water User Group members - prepare an Action Plan to rectify any deficiencies
Jagaran Samities are improving quality, transparency, and accountability of scheme operations the phase 1 pilot has helped to develop training materials to train all Support Organizations establishment of Jagaran Samities is now planned for all new schemes
Annex 5
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Annex 5

Dates of Social Audits Name of Social Auditor Key Findings Use of Findings / Impact on Project Implementation commitment to raise awareness and monitor implementation manual is needed for the conduct of social audits
Project Name
Health Sector Support (HSSP1) - AAMA pilot - Financial misappropriation - Lack of awareness of AAMA program on-going community organizations public notice boards state income and expenses for PAF sub-projects
2009
- Lack of transparency
Poverty Alleviation Fund (PAF)
- information promotes transparency and accountability - social audit guidelines in PAF manual are not being used and could have greater impact if better disseminated at local level
Annex 5
6 of 6
Ministry of Finance Singha Durbar Kathmandu, Nepal Tel : 4259387 Fax : 4211164 Web : www.mof.gov.np

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NEPAL PORTFOLIO PERFORMANCE REVIEW NPPR 2009

RESULT-BASED MANAGEMENT FOR PORTFOLIO PERFORMANCE AND DEVELOPMENT EFFECTIVENESS

December 3-4, 2009

Ministry of Finance Government of Nepal

ATTACHMENT 1 ADB BACKGROUND PAPER

ATTACHMENT 2 DFID BACKGROUND PAPER

ATTACHMENT 3 WORLD BANK BACKGROUND PAPER

GOVERNMENT OF NEPAL BACKGROUND PAPER

Nepal Portfolio Performance Review 2009

Result-based Management for Portfolio Performance and Development Effectiveness

A Vision Paper of the Government of Nepal

Ministry of Finance Singh Durbar, Kathmandu

December 3-4, 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Result- based Management Practice in Nepal

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepals Result based Reform Initiatives in some Key Areas

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

development action plan (DAP). achievements seen:

However, there are number of key

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Public Sector Accounting Standard (NEPSAS)

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Result based Monitoring & Evaluation- A Success Story in Niger

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepal on path of Aid Harmonization: Enhancing Commitments

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Future NPPR mechanism making more Result Focused

Nepal Portfolio Performance Review (NPPR) 2009

Major Challenges in Key Areas

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Part II Implementation Status of NPPR 2008 Action Plan

Nepal Portfolio Performance Review (NPPR) 2009

Nepal Portfolio Performance Review (NPPR) 2009

Attachment: Action Plan Matrices with updated progress as of November, 2009

Updated: November 2009

Focus SubTheme Performance Indicators Target date

1. ResultsBased Management (RBM)

Internalization of RBM by government agencies

Develop a capacity building framework (conceptualization, procedures, resources, logistics)

Review and revise reporting format for result-based reporting

Efficiency and Effectiveness of the Government of Nepal in achieving desired results

Prepare result based annual /program and budget framework.

Champion: Division Chief, Poverty Monitoring Division, NPC

Develop a framework and implementation plan for RBM