|1. Project Data:
ICR Review Date Posted:
|Local Government Support Project
Project Costs(US $M)
Loan/Credit (US $M)
Cofinancing (US $M)
Board Approval Date
|Sub-national government administration (85%), General water sanitation and flood protection sector (10%), Roads and highways (5%)|
|Decentralization (23% - P)
Municipal governance and institution building (22% - P)
Municipal finance (22% - P)
Urban services and housing for the poor (22% - P)
Rural services and infrastructure (11% - S)|
||ICR Review Coordinator:
|Maha J. Armaly
||Robert Mark Lacey
||Christopher David Nelson
|2. Project Objectives and Components:|
a. Objectives:The project development objective in the Development Credit Agreement (DCA) is identical to that in the Project Appraisal Document (PAD): "to: (a) strengthen fiscal decentralization and improve accountability in the use of local government resources and in the management of inter-governmental transfer systems; and (b) increase access to infrastructure and services in the Unplanned Areas of Dar es Salaam and improve revenue performance for sustainable operation and maintenance."
On August 30, 2006, the Board approved Additional Financing of US$98 million in order to extend the scope of the project to all 132 Local Government Authorities (LGAs) in the country rather than the 41 LGAs originally supported. The project’s development objectives were not changed.
In a restructuring approved on June 24, 2009, the objectives were revised to allow for preparation of a future project. The revised objectives were "to: (a) strengthen fiscal decentralization and improve accountability in the use of local government resources and in the management of inter-governmental transfers and demand-driven urban investments; and (b) increase access to infrastructure and services in the Unplanned Areas of Dar es Salaam and improve revenue performance for sustainable operation and maintenance.”
The objectives were not substantially changed as a result of restructuring. Therefore this review will not conduct a split evaluation.
b. Were the project objectives/key associated outcome targets revised during implementation?
If yes, did the Board approve the revised objectives/key associated outcome targets?
Date of Board Approval: 06/21/2009
c. Components:Original Components
(A): Support for Local Government Capital Development Grant System (LGCDGS) (appraisal cost: US$35.0m, additional financing revised cost: US$131.0m, restructuring revised cost: US$93.17m, actual cost US$113.28m):
(1) Strengthening the delivery of infrastructure and services by Participating Local Government Authorities (LGAs), through the provision of Capital Development Grants (CDGs) to finance sub-projects.
(2) Strengthening the capacity of Participating LGAs, through the provision of capacity building grants targeted at the implementation of capacity building plans.
(B) Dar es Salaam Upgrading and Institutional Strengthening (appraisal cost and additional financing cost US$18.8m, restructuring revised cost: US$39.45m, actual cost US$17.3m) includes:
(1) Strengthening access to infrastructure and services to approximately 16 local communities living within the jurisdiction of the DLAs, through:
(a) the financing of investments in infrastructure including roads, footpaths, drains, street lighting, public toilets, roads, drains, bridges and culverts;
(b) implementation of a household sanitation program; and
(c) enhancing the capacity of DLA staff in the areas of infrastructure upgrading and service delivery by providing technical advisory services to assist in inter alia carrying out studies and monitoring and evaluation, training and equipment.
(2)Strengthening the capacity of the DLAs to increase own- source revenues through:
(a) the design of a revenue enhancement program and provision of support to implement the said program;
(b) carrying out tax base data collection and verification, and registration of taxpayers;
(c) design and implementation of property tax reforms and administration systems;
(d) implementation of an appropriate tax administration system for taxes other than property tax;
(e) provision of training to build local capacity in revenue enhancement mechanisms;
(f) monitoring and evaluation;
(g) dissemination of lessons learnt;
(h) preparation of the preliminary design of a demand driven revenue enhancement program for roll out to other urban local government authorities;
(i) provision of support to DLAs in upgrading their planning and budgeting functions, and implementing operations and maintenance systems; and
(j) provision of operational support to the Dar Support Team in the coordination, implementation and monitoring and evaluation of its part of the Project, including contract management, monitoring of performance indicators and carrying out of impact assessments.
C) Support to the President's Office - Regional Administration and Local Government (PO-RALG) (appraisal cost US$7.0m, additional financing revised cost US$9.0 million, restructuring revised cost US$15.5m, actual cost US$8.4m): Strengthening the operational capacity of the PO-RALG Support Team to support the carrying out of the coordination, implementation and monitoring and evaluation of the Project including inter alia:
(a) annual performance assessments of the Participating LGAs;
(b) the administration and monitoring of CDGs and CBGs;
(c) operations and maintenance budgeting for purposes of local revenue generation;
(d) monitoring of service delivery and maintenance by Participating LGAs;
(e) local government capacity building and management programs;
(f) project monitoring and evaluation, and progress reporting; and
(g) information dissemination.
In June 2009, project costs by component were revised to (a) decrease funding in component A due to higher donor and government support to activities under this component (b) address increased costs due to inflation and rising construction costs in component B, and (c) include preparatory studies for a new project in component C. The project financed many small investments across the country based on demand. Detailed costs of these small sub-projects, of studies, training and technical assistance are not provided in the ICR.
During restructuring, a change was made to reflect "administrative change in name of the President's Office to the 'Prime Minister's Office'" (ICR footnote page 4), referred to as PMO-RALG.
d. Comments on Project Cost, Financing, Borrower Contribution, and Dates
Project cost. The ICR (Annex 1, Table a) inappropriately incudes physical and price contingencies of US$0.80 million and US$1.3 million respectively in the actual project cost of US$158.8 million. The actual cost was US$92 million over the appraisal estimate of US$60.8 million, almost entirely due to the geographic extension of the project to all 132 municipalities in the country.
Financing. According to the project team, the project was initially designed as two separate operations: one at the national level, and the second for Dar es Salaam . However, due to limited IDA funds at the time of appraisal, the two projects were merged and original project scope was reduced. IDA funding at appraisal was US$52 million equivalent. When new IDA funds became available, Additional Financing of US$98 million was approved. The total Credit of US$150 million equivalent was fully disbursed. Overall, the Bank financed 92% of total project costs. There was no other external financing.
Borrower contribution. The Government’s contribution increased from the original US$6.5m to US$8.8m. Contributions from Dar es Salaam local government authorities and from other local communities increased from US$2.3m at appraisal to US$4.1m actual.
Dates. At the time of the approval of the Additional Financing (August, 2006), the closing date was extended by 3 years from June 30, 2008, to June 30, 2011, to accommodate the increased number of municipalities and sub-projects. A further one year extension was granted at the restructuring of June 2009. The project closed on June 30, 2012.
|3. Relevance of Objectives & Design:|
a. Relevance of Objectives:High.
The objectives of the project are highly relevant to the Country Assistance Strategy (CAS) for Tanzania (Fiscal Years 2012-2015) which emphasizes the need to continue support to local governments responsible for service delivery. This support is considered essential to achieve the CAS's second objective to improve management and delivery of urban services. The CAS indicates that future Bank operations and Government investments are planned to improve urban services through a grant window within the Local Government Capital Grant System established under the project.
The objectives are also relevant to the Government's Development Vision to 2025 which aims to achieve the Millennium Development Goals and is the basis for the updated 2011-2015 five year plan.
b. Relevance of Design:Substantial.
Design included both infrastructure work leading to service delivery, and design and testing of the Local Government Development Grant (LGDG) transfer system, thus addressing both the objectives outlined in the CAS and the project’s development objectives. Technical assistance was to be provided in the form of studies in revenue enhancement and training for national and local government agencies. There is a clear causal chain between these activities and the intended achievement of the project’s development objective. The demand driven physical investments under components A and B would be expected to improve service delivery and demonstrate to citizens and local governments that participation improves access to needed infrastructure. Transfers made through the LGDGS based on transparent performance criteria (including participation, audits), and as reviewed by the national government would be expected to improve and encourage accountability at the local government level. Training and technical assistance to LGAs and the national government would lead to improved performance and provide support for further strengthening of the transfer system.
|4. Achievement of Objectives (Efficacy) :|
The project development objectives are to: (a) strengthen fiscal decentralization and improve accountability in the use of local government resources and in the management of the intergovernmental transfer systems; and (b) increase access to infrastructure and services in the Unplanned Areas of Dar es Salaam and (c) improve revenue performance for sustainable operation and maintenance. Each objective is assessed separately below.
Objective (a): Strengthen Fiscal Decentralization, improve accountability and management of the intergovernmental transfer systems. Modest
- The project helped to replace the pre-existing governmental finance system with the Local Government Development Grant (LDGD). The pre-existing system is described by the ICR (page 14) as “ad-hoc, fragmented, and unpredictable.” The LDGD system is “more transparent, results-based, and equitable.”
- By project completion, the performance based fiscal transfer had become a “permanent feature of Tanzania’s fiscal architecture” (ICR, pages 11-12).
- The Government’s share of the LGDG core disbursement in FY2005/06 was 7% (US$ 1.5 million out of US$ 22.4 million disbursed). It had increased to 22% in FY2010/11 (US$ 15 million out of US$ 68.4 million disbursed) and to 40% in FY2011/12.
- The number of participating Local Government Authorities (LGAs) was 132, increased from an appraisal estimate of 41 thanks to the support provided by the Additional Financing.
- The indicator for improved accountability in the use of local resources was the percentage of participating LGAs receiving unqualified audit opinions. Although this increased from a base of 20% to 54% by closure, it fell short of the target (revised at restructuring) of 80%.
- The indicator for strengthened fiscal decentralization was the percentage of participating LGAs meeting the minimum conditions (financial management, planning and budgeting, LGA Council’s functional process, auditing, reporting and accountability). This percentage increased from a base of 53% in 2004/05 to 97% in 2010/11, exceeding the target of 80%.
- Improved management of the intergovernmental transfer process was measured by the time taken to affect the transfers from Central Government to the LGAs. The percentage of transfers made within the first 30 days of each quarter had reached 44% from a baseline of zero by project closure, as against the revised target of 100%. However, the ICR (page 16) states that the predictability of transfers improved, that there was less bunching in the fourth quarter, which was a feature of the system prior to the project, and that the local government performance assessments, which determined the amounts to be transferred to each authority, were generally completed on time.
Objective (b): Increase access to infrastructure and services in the Unplanned Areas of Dar es Salaam. Substantial.
Through the Community Infrastructure Upgrading Program, infrastructure was upgraded in three pilot municipalities in Dar es Salaam. Outputs included 40 kilometers (km) of two-way roads, 58 km of one-way roads, 26 km of footpaths, 548 culverts, 8.6 km of trunk drains, 3,153 pedestrian crossings, 83 solid waste containers, and 2,780 streetlights. Approximately 300,000 people in priority unplanned settlements benefited. The investments were demand driven and selected using a participatory approach.
Assessment of outcomes relied on the results of an Impact Evaluation which was conducted first in 2006 to establish a base line, and again in 2012, The ICR reports (footnote, page 15) that the baseline survey covered 1,860 households in 31 sub-wards benefiting from the project and in a control group of 12 sub-wards not benefiting from the project. In most cases, there were no targets against which to measure the achievements. The results were as follows:
- Streets in the surveyed area reachable by paved access roads rose from a base of 32% to 97%, exceeding the revised target of 80%.
- The probability that a household would be connected to a gravel or paved road increased from 4.7% to 27.9%.
- The probability that a household would have been flooded during the previous 12 months was reduced slightly from 24.5% to 21.6% (a 1 in 100 year flood occurred during the period measured by the survey).
- The Impact Evaluation showed no improvement in employment creation or business entrepreneurship.
- The average time required to reach facilities in areas where project investments had taken place compared to the control group time (in parentheses) were as follows: (a) water supply 1.5 minutes (3 minutes); (b) toilets 4 minutes (13 minutes); and (c) lighted streets 3 minutes (15.5 minutes).
- Children in the beneficiary areas demonstrated better health and education indicators than those in the control areas: (a) Incidence of diarrhea was 12% (22% in control areas); (b) incidence of acute respiratory disease was 18% (27% in control areas); and (c) girls over the age of 13 had a school enrollment of 93% (79% in the control areas).
Objective (c): Improve revenue performance for sustainable operation and maintenance [in Dar es Salaam]. Substantial
The Project facilitated the identification and valuation of all taxable properties across the three participating Dar es Salaam Local Authorities (DLAs).
- Compared to an original target of 100,000 properties, 425,610 properties were inspected and valued. This led to a considerable expansion of the tax base. The tax rate was not raised: “this was a political issue outside the direct influence of the project” (ICR page 19). Increasing the tax rate was not intended to be an explicit output of this component.
- The primary tool to ensure adequate operation and maintenance (O&M) of Development Grant-funded infrastructure at the local level was the LGAs’ integrated planning and budgeting process (ICR, page 42). This process among others was strengthened through the Capacity Building Grant (CBG). The project supported the establishment of the overall framework for CBG delivery. This included the development of ten standardized training modules for LGAs, which included three directly relevant to this objective – budgeting and budget management, revenue mobilization and O&M budgeting, and development planning and strategic management.
- Own-source revenue in Dar es Salaam increased by 154% between 2005 and 2011, well above the target of 50%.
- Unrestricted transfers of revenues as a percentage of total revenues in Dar es Salaam increased from 6.6% to 11.9% during the project period – above the target of 8%.
- According to the ICR (page 17), the unrestricted transfers of own source revenues are allocated for O&M. This would indicate that O&M expenditures are higher than targeted. Nevertheless, the ICR indicates that the project relied on existing O&M procedures in Dar es Salaam, rather than putting in place specific O&M arrangements for the project-supported program. The ICR also states as one of the risks to development outcome that O&M is not adequately funded, though the basis for this statement is not specified. There are some signs of O&M inadequacy: 29% of households flagged poorly functioning drainage; 48% reported streetlights were not working. On the other hand, 94% reported improvements in garbage collection, and 98% were satisfied with community roads (ICR page 15).
The economic analysis in the ICR uses an approach similar to that at appraisal. The efficiency of components A (the Capital Development Grant system) and B (upgrading of infrastructure in Dar-es Salaam) are evaluated separately.
There are no quantitative estimates of the efficiency of the Capital Development Grant system, which accounted for about 60% of actual project cost. Potential benefits were considered at appraisal to be threefold: (i) reduced transaction costs -- transaction costs of central government agencies and development partners involved in the administration of sector-specific or area-specific grants would be eliminated; (ii) improved allocation of scarce resources by individual LGAs; and (iii) improved allocation of resources across LGAs. The ICR (page 27) considers that (i) is not likely to materialize significantly since the system's management and administration requires more involvement from LGA officers, and because the transaction costs at central government level are not eliminated entirely. (iii) would be much more limited than thought at appraisal since over 90% of LGAs qualified for the performance-based grants, thereby virtually eradicating the distinction between poor-performing and well-performing LGAs. The weight of any efficiency gain from the Capital Development Grant system, therefore, rests on (ii). As the ICR acknowledges, "to estimate the net economic benefits of improved allocation of capital grants at the LGA level, it would be necessary to estimate the net economic benefits of investments projects financed before and after the introduction of the LGCDG system" (page 27). This was not done due to time and resource constraints. The Grant system is, however, assumed to be more efficient because (a) LGAs are better suited to more effectively allocate and use resources across sectors than directives from the central government; and (b) performance-based grants shifted the sectoral composition of LGA capital budgets to sectors with higher benefit/cost ratios.
For component B, benefits from investments in Dar es Salaam -- which accounted for 20% of actual project costs -- were based on a 2013 impact evaluation study, and include (a) reduction of cleaning costs per household after a flood; (b) reduction of income loss per household due to waterborne disease; and (c) increased economic growth based on assumed number of businesses and the incremental income they generate. Overall, the ICR finds that benefits from reduced flood damage and increased economic growth were lower than those estimated at appraisal, while benefits from reduced health costs were higher. The economic rate of return (ERR) was estimated to be 15% compared to 20% at appraisal.
The project closed four years later than scheduled. This was mainly to accommodate the larger number of sub-projects financed than originally planned. However, there were also implementation issues caused by operational and administrative inefficiencies. The Ministry of Finance was often slow in releasing the funds to the LGAs; the civil works were frequently held up by lack of counterpart funding; and, as noted in Section 4, the Revenue Enhancement Program was delayed by about a year.
Efficiency is rated Modest.
a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:
* Refers to percent of total project cost for which ERR/FRR was calculated