AF AfdB AFR ccc

CQ CQS DAF

DEN DER

EC EPCA EPP ESF ESMF FADC

F A 0 FID

FM FMR FPCR TF FY GDP GFRP HIM0 IBRD IDA IFR IMF I S N KMF LCS MOD

CURRENCY EQUIVALENTS (Exchange Rate Effective on June 12,2009)

Currency Unit - - Comorian Franc (KMF) 35 1 - USD 1 -

FISCAL YEAR January 1 - December 3 1

ABBREVIATIONS AND ACRONYMS

Additional Financing Africa Development Bank Africa Region Comite' Central de Coordination (Central Coordination Committee) Consultant's Qualifications Selection Based on the Consultants' Qualification Directeur Financier et Administratif(Financia1 and Administrative Director) Direction Exe'cutive Nationale (National Executive Directorate) Directions Exe'cutives Re'gionales (Regional Executive Directorates) European Commission Emergency Post-Conflict Assistance Emergency Project Paper Exogenous Shocks Facility Environmental and Social Management Framework Fonds d 'Appui au De'veloppement Communautaire (Community Development Fund) Food and Agriculture Organization Fonds d 'Intervention pour le De'veloppement (Community Development Fund) Financial Management Financial Management Report Food Price Crisis Response Trust Fund Fiscal Year Gross Domestic Product Global Food Crisis Response Program Haute Intensite' de main d 'Oeuvre (highly intensive manual labor: International Bank for Reconstruction and Development International Development Association Interim unaudited Financial Report International Monetary Fund Interim Strategy Note Comorian Francs Least Cost selection Maitrise d 'Ouvrage De'le'gue'e (Delegated Management Contract)

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N G O PDO PEFA QCBS RPF RRC SDR SME SOE SPP SSP sss UNICEF

Non-Governmental Organization Project Development Objective Public Expenditure and Financial Accountability Quality and Cost Based Selection Resettlement Policy Framework Rapid Response Committee Special Drawing Right Small and Medium Enterprises Statement o f Expenditures Simplified Procurement Plan Services Support Project Single Source Selection United Nations Children’s Fund

. Vice President: Country Director: Johannes Zutt

Sector Director: Yaw Ansu Sector Manager: Lynne D. Sherburne-Benz

Obiageli K. Ezekwesili

Task Team Leader: Philippe Auffret

.. 11

UNION OF THE COMOROS SERVICES SUPPORT PROJECT

(CO-FINANCING AND RESTRUCTURING) TABLE OF CONTENTS

EMERGENCY PROJECT PAPER (EPP) DATA SHEET .................................... i v

A . Introduction ......................................................................................................... 1

B . Emergency Challenge: Country Context, Recovery Strategy and Rationale for

the Proposed Co-Financing ..................................................................................... 1

C . Bank Response, Project Implementation Performance Strategy and Description

ofthe Proposed Co-Financing and Restructuring .................................................... 3

D . Implementation o f the Proposed Co-Financing and Financing Arrangements .. 8 E . Appraisal o f Project Activities and Benefits and Risks ................................... -12

F . Project Risks. Mitigating Measures and Supervision ........................................ 15

G . Terms and Conditions for Project Financing .................................................... 17

Annex 1 . Detailed Description o f the Cash-for-Work Program ............................ 19

Annex 2 . Results Framework and Monitoring ...................................................... 22

Annex 3 . Summary o f Estimated Project Costs .................................................... 31

Annex 4 . Financial Management and Disbursement Arrangements .................... -33

Annex 5 . Procurement Arrangements ................................................................... 46

Annex 6 . Implementation and Monitoring Arrangements., ................................... 49

Annex 7 . Project Preparation and Team Members ................................................ 52

... 111

SERVICES SUPPORT PROJECT (CO-FINANCING AND RESTRUCTURING)

Union of the Comoros Africa Region

Date: June 22,2009 Country Director: Johannes Zutt Sector Managerrnirector: Lynne Sherburne- Benz / Yaw Ansu Lending instrument: Emergency Recovery Loan (ERL)

EMERGENCY PROJECT PAPER (EPP) DATA SHEET

Team Leader: Philippe Auffret Sectors: Other social services (70%); General water, sanitation and flood protection (30%). Themes: Global food crisis response (P); Social safety nets (P). Environmental category: B

Project ID: P114740

Proposed terms: Grant from the Food Price Crisis Response Trust Fund (FPCR TF) Expected effectiveness date: Mid-July 2009

Recipient: Union o f the Comoros

(i) Increase access to short-term employment in food-insecure areas (new objective); (ii) Increase access to basic social services for poor communities (reformulated objective); and (iii) Contribute to building the capacity o f communities to plan their development (reformulated objective).

Total Amount: US$1 .O mil l ion

Expected implementation period: 24 months

Current closing date: June 30,20 10 Revised closing date: June 30,201 1 Responsible agency: Fonds d 'Appui au De'veloppement Communautaire (FADC)

Short Description:

The Union o f the Comoros i s particularly affected by the lingering impacts o f the recent international food price crisis, which has substantially increased the livelihood vulnerabilities o f the poorest part o f the population. A recent decline in remittances related to the global economic slowdown i s further worsening the situation. Faced with this emergency situation, the Government o f the Union o f the Comoros has been working with development partners to prepare a coordinated response.

The proposed operation would finance a safety net to provide support to segments o f the population that are particularly affected by the impacts o f the food crisis. More specifically, it would add a cash- for-work component financed from the Food Price Crisis Response (FPCR) Trust Fund to the existing Services Support Project. This safety net would increase access to short-term employment in food- insecure areas. The Services Support Project benefits from an original Credit (IDA Credit 3868) and a f i rst Additional Financing (IDA Grant H 265).

The proposed operation would also revise the Project Development Objectives and related indicators to better reflect the activities supported under the original Credit and the first Additional Financing, and to accommodate the additional funds from the proposed FPCR Trust Fund.

iv

Source Borrower Total IBRD/IDA Trust Funds Others Total

Local Foreign Total 0.00 0.00 0.00 4.00 0.00 4.00 1 .oo 0.00 1 .oo 0.00 0.00 0.00 5.00 0.00 5.00

2008 2009 Total IBRD/IDA -- --

V

2010 201 1 2.50 1.50

Trust Funds -- -- 0.90 0.10 Does the emergency operation require any exceptions from Bank policies? Have these been approved by Bank management?

Yes [ ] No [XI Yes[ 1 N o [ 1

Are there any critical risks rated “substantial” or “high”?

What safeguard policies are triggered, if any? Yes [ x ] No [I Environmental Assessment (OP/BP 4.01)

SERVICES SUPPORT PROJECT (CO-FINANCING AND RESTRUCTURING)

Union of the Comoros

A. Introduction 1. restructure the Services Support Project.

2. Crisis Response (FPCR) Trust Fund to the Services Support Project'. The Services Support Project i s a typical community-driven development project which benefits from an original Credit (IDA Credit 3868 in the amount o f US$13.3 million) and a f irst Additional Financing (IDA Grant H 265 in the amount o f US$5.0 million). The proposed Co-Financing would finance a safety net program to support segments o f the population that are particularly affected by the food crisis. More specifically, it would add a cash-for-work component to the Services Support Project in order to increase access to short-term employment in food-insecure areas. The unit responsible for the implementation o f the Services Support Project (the Fonds d 'Appui au De'veloppement Communautaire, or FADC) would be responsible for the implementation o f the newly-proposed cash-for-work program. Since i ts creation in 1993, FADC has been successfully implementing community-based sub-projects. FADC i s the only institution in the Union o f the Comoros with the management, staffing and administrative capacity and decentralized structure necessary to implement the proposed cash-for-work program on all three islands under emergency conditions. The co-financing operation has been approved according to the GFRP procedures (approval in principle by Management to become effective 5 working days after circulation to the Board for information unless at least three EDs request Board discussion o f the operation).

3. Restructuring: The Project Paper also seeks to revise the development objectives o f the Services Support Project and related indicators to better reflect the activities supported under the original Credit and the first Additional Financing, and to accommodate the additional funds from the FPCR Trust Fund.

B. Emergency Challenge: Country Context, Recovery Strategy and Rationale for the Proposed Co-Financing 4. which consists o f three islands with a challenging political situation. The 200 1 Constitution, known as the Fomboni Accords, was specifically tailored to put an end to the cycles o f violence that Comoros had suffered since it gained independence from France in 1975. In the intervening years, Comoros had experienced more than 20 coups and secession attempts; the most recent secession attempt, by the island government of Anjouan, was only resolved in 2008, through a

This Project Paper seeks the approval o f the Executive Directors only for the proposal to

Co-Financing: The proposed operation would add US$1 .O mil l ion f iom the Food Price

The Union o f the Comoros i s a small post-conflict island country (population 680,000),

The FPCR i s a single donor t rus t fund that provides grants from International Bank o f Reconstruction and Development (IBRD) surplus targeted at the vulnerable International Development Association (IDA) countries with priority to the most fiagile states. The FPCR i s one facility under the World Bank's Global Food Crisis Response Program (GFRP), which provides an overall framework for providing rapid Bank support for a comprehensive response to the food crisis.

1

military action that included troops o f both the country’s Union government and the African Union. The political-military settlement between the Union government and the island o f Anjouan that brought this secession attempt to an end appears to be holding.

5 , Physical isolation, l imited resource endowments, a small domestic market, a narrow export base (its main exports are cloves, vanilla, and ylang-ylang), poor macroeconomic management, and an unduly complex administration present enormous challenges. The 200 1 Constitution provides for the election o f a semi-autonomous government and president for each o f the three islands-Grande Comore, MohCli and Anjouan-as well as a president, for the over- arching Union government, that i s supposed to rotate among the three islands. Following the agreement o f the 200 1 Constitution, each island elected a separate president and parliament, and each also enjoyed many other prerogatives, expanding the size o f the c iv i l service and leaving few resources available for health, education and poverty alleviation. Over time, it became clear that this mode o f government was not sustainable, and in May 2009, the people o f the Union o f the Comoros in a referendum voted for a new constitution that will streamline this top-heavy administration and also bring the various elections required into alignment (inter alia, through extending the tenure o f the current president, who comes from Anjouan, by a further twelve months). These reforms are expected to free up resources for the social sectors and poverty reduction.

6. on food imports and remittances. Imports (mostly rice, meat and cooking oil) cover about hal f o f food consumption, and remittances represent about one-fifth o f GDP.

7. In 2008-09, the combination o f high international food prices and a decline in remittances as a result o f the international economic slowdown substantially increased the vulnerabilities o f the poorest Comorians, who were forced to draw down their very limited resources to cope with the crisis. As the prices o f rice, vegetable o i l and meat increased by over 50 percent in 2008, and the prices o f dairy products (mostly dried milk) doubled, many o f the poor exhausted their coping mechanisms and became even more vulnerable to economic hardship than they had been before. Prices stabilized in 2009, but at higher levels than before the crisis started, and many people, having consumed or otherwise disposed o f their few assets, remain highly vulnerable to future exogenous shocks. This i s particularly the case for those households that rely heavily on remittances to make ends meet, as evidence suggests that these remittances are declining due to the international economic slowdown. A recent assessment by UNICEF shows that about one- third o f children under five years o f age are suffering from chronic malnutrition, and that malnutrition uniformly affects all three islandsS2

8. development partners to prepare a coordinated response. The authorities have established an inter-ministerial committee under the leadership o f the General Directorate o f Planning (Commissariat Ge‘ne‘ral au Plan) to monitor the food crisis and prepare policy responses. This committee has announced a number o f temporary measures (for example, consumption tax exemption and tariff cuts on selected items) which were implemented during the second hal f o f 2008 and since then have been selectively phased out. The Government has also requested support from development partners to address the crisis. Both the European Commission (EC),

For the time being, the economy o f the Union o f the Comoros remains highly dependent

Faced with this emergency, the Government o f the Comoros has been working with

See “Rapport d’Evaluation de I’Etat Nutritionnel des Enfants de Moins de 5 and et de la Mortalite‘ dans I’Union des Comores.” Unicef Comores, December 2008.

2

in the amount o f €2.24 million, and the Africa Development Bank (AfDB), in the amount o f €1.5 million, provided budget support in 2008. In addition, in December 2008, the IMF approved about US$3.4 mi l l ion under i t s Exogenous Shocks Facility (ESF) and US$1.7 mill ion in Emergency Post-Conflict Assistance (EPCA) to alleviate the immediate macroeconomic impacts o f the crises.

C. Bank Response, Project Implementation Performance Strategy and Description of the Proposed Co-Financing and Restructuring 9. Services Support Project will help to mitigate the lingering vulnerabilities created by the 2008-09 food crisis, complementing the responses o f both the Government and other donors to the crisis, including the IMF, the E C and AfDB. More specifically, the proposed operation would finance a safety net (cash-for-work) program to increase access to short-term employment in food-insecure areas.

10. An original credit from IDA in the amount o f US$13.3 mi l l ion (SDR 9.0 million) for the Services Support Project was approved on March 1 1 , 2004, and became effective on September 29,2004 (IDA Credit 3868). The Project’s original objectives were to: (i) maintain basic social and economic infrastructure for a significant number o f disadvantaged communities and specific vulnerable groups and (ii) contribute to building the basic capacity o f communities and local actors to conduct a local development process. The Project included the following five components: (i) community-based sub-projects; (ii) capacity building; (iii) health services; (iv) urban water supply; and (v) Project monitoring and evaluation, and audit. A first Additional Financing in the amount o f US$5.0 mi l l ion (SDR 3.4 million) was approved on December 21,2006, and became effective on May 22,2007 (IDA Grant H-265). This Additional Financing maintained the original Development Objectives. It aimed at scaling up activities related to the community-based sub-projects and capacity building while providing incremental resources for Project monitoring, evaluation and audit. It also sought to pilot the implementation o f sub-projects by local governments (communes) in order to support the decentralization process initiated by the Government. The Additional Financing did not provide incremental resources to health services and urban water supply, as these components had been successfully completed under the original Credit. The proposed restructuring would take these developments into account.

1 1. The Services Support Project i s broadly reaching i t s development objectives in a challenging economic and political environment. As o f March 16,2009, the Project had implemented 61 community-based sub-projects (compared to a target o f 70) and 136 community development plans (well in excess o f the target o f 90). Implementations o f the health and urban water components have been completed in a satisfactory manner.

12. The Project i s currently in compliance with all legal covenants, but performance ratings are below expectations. The Project i s rated moderately satisfactory in terms ofboth Development Objectives and Implementation Progress, and since June 2008, when evidence o f project mismanagement came to the attention o f the Bank, the Project has been progressively downgraded to highly unsatisfactory for overall project management and moderately satisfactory for procurement, financial management and safeguards. In February 2009, a preliminary review o f project performance suggested that there have been serious failures in overall project management (including for example repeated failures to ensure that project activities were

Prepared in close collaboration with the authorities, the proposed Co-Financing to the

3

consistent with agreed procedures and that critical staff who were absent from the office were appropriately backed-up) and that these failures were the root cause o f weaknesses observed in procurement, financial management, and safeguards performance. Project management was changed in April 2009, and there has been a noticeable improvement in capacity since then. The Project remains under intensive Bank supervision, and Bank staff are working closely with the new management to implement a workplan, with specific actions and timelines, that will bring al l ratings to a fully satisfactory level as quickly as possible.

13. The original financing for the Project (IDA Credit 3868) i s now almost fully disbursed. As o f April 25,2009, approximately US$1 .O mil l ion has been disbursed from the f i rs t Additional Financing (IDA Grant H-265), while US$4.0 mi l l ion remain undisbursed. This implies that, taking into account the incremental resources from the proposed co-financing, FADC would have to disburse US$5.0 mi l l ion within the next 18 months to successfully implement the Project before the closing date. This i s feasible for the following reasons: (i) F A D C disbursed on average US$3.7 mi l l ion per annum from 2005 to 2008, and (ii) the cash-for-work program i s expected to disburse at a faster rate than the basic infrastructure activities implemented so far by the Project, as cash-for-work sub projects do not involve time-consuming infrastructure construction.

14. asked the Bank to restructure the Services Support Project so that i t takes into account the recent changes in country circumstances, including the slow pace o f implementation o f the decentralization process. As outlined below, the proposed operation would reformulate the Project Development Objectives (PDOs) and related indicators to reflect the activities supported under the original Credit and the f i rs t Additional Financing, and to accommodate the additional funds from the proposed Co-Financing. Also, the closing date o f the Project would be extended by twelve months, from June 3 0,20 10, to June 30,20 1 1. Project Development 0 bjectives 15. the Government's response to the food crisis by financing a cash-for-work program in food- insecure areas. The proposed operation would also revise the PDOs and related indicators to reflect the activities supported under the original Credit and the first Additional Financing, and to accommodate the additional funds from the FPCR Trust Fund. 16. The proposed revised PDOs would be as follows: (i) increase access to short-term employment in food-insecure areas (new objective); (ii) increase access to basic social services in poor communities (reformulated objective); and (iii) contribute to building the capacity o f communities to plan their development (reformulated objective; see Table 1).

In parallel to preparing this request for Co-Financing, the Comorian authorities have

As agreed with the authorities, the proposed emergency operation would aim to support

4

Original Project Development Objectives

1

2 Maintain basic social and economic infrastructure for a significant number o f disadvantaged communities and specific vulnerable groups Contribute to building the basic capacity o f communities and local actors to conduct a local development process

3

17. The main difference between the original and revised PDOs i s the introduction o f a new objective corresponding to the new safety net activity financed from the FPCR Trust Fund. The other two objectives have been reformulated to better reflect the activities effectively undertaken by the Project. For example, the second objective has been amended from maintaining basic social services in disadvantaged communities and specific vulnerable groups to increasing basic social services (which reflects what the Project practically does as it finances new sub-projects) inpoor communities (which is the target group o f the Project). The second objective has been reformulated to exclude the capacity building o f local actors (which meant local governments or communes), as these communes have not yet been created.

Summary o f Project Components 18. components o f which only Component 1 and Component 5 would be financed from the proposed Co-Financing (Annex 3 provides detailed Project costs):

After the proposed restructuring, the Project would comprise the following five

0 Component 1: Social safety net (cash-for-work) (US$850,000 from the FPCR Trust Fund). Annex 1 provides a detailed description o f this new activity. This component would finance a cash-for-work program to increase access to short-term employment in food-insecure areas. By providing employment, this component would raise disposable income, and thus improve food consumption o f vulnerable groups, including women. The targeting mechanism would be based on a three-stage process: (i) allocation o f funds across islands using the inter-island formula agreed between FADC and the authorities, and approved by IDA, for Component 2; (ii) identification o f the communities the most affected by the food price crisis through a transparent process o f consultation with local authorities; and (iii) selection by communities themselves o f the households the most affected by the food price crisis. Names o f selected communities and beneficiaries would be disclosed to the public to ensure transparency and to avoid elite capture. The selection process would ensure that at least 50 percent o f beneficiaries are women. The mechanism could also limit the number o f days an individual or a household could work, in order to help spread benefits. This component would finance labor-intensive sub- projects (Projets 2 Haute Intensite‘ de Main d’Oeuvre, or HIMO) selected by communities. FADC would validate the selection o f sub-projects and ensure that they comply with safeguard policies and are not on a negative list o f investments. Sub- projects would include street cleaning, basic road maintenance, activities to prevent soil

Proposed Project Development Objectives

New: Increase access to short-term employment in food-insecure areas

Reformulated: Increase access to basic social services in poor communities

Reformulated: Contribute to building the capacity of communities to plan their development

5

erosion, light rehabilitation o f feeder roads, collection o f garbage, and so on. FADC would contract established NGOs, meeting pre-defined criteria, to implement this activity. This component would also provide training to the agencies involved in i t s implementation.

Component 2: Community-driven basic infrastructure (US$10.4 mi l l ion including: (i) US$6.8 mi l l ion already disbursed from the original Credit; and (ii) US$3.6 mi l l ion from the first Additional Financing, o f which an estimated US$3.1 mi l l ion was s t i l l undisbursed as o f December 3 1 , 2008). Under the proposed restructured Project, this component would include the first two components o f the original Project: the Community-based Subprojects component and the Capacity Building component. The Community-based Subprojects component finances small-scale social and economic sub- projects identified by communities, including classrooms and schools, small-scale water supply and sanitation, and feeder roads, while the Capacity Building component supports capacity building and social capital formation for communities, including information and education campaigns, related strategic capacity building for c iv i l society, and capacity building o f various stakeholders.

Component 3: Health services (Completed - US$0.9 mi l l ion disbursed from the original Credit). The Health Services component financed the training o f selected medical personnel (identified as part o f an IDA-financed Health Project closed in June 2004) and the maintenance o f medical equipment. These activities have been successfully completed under the original Credit. As a consequence, neither the first Additional Financing nor the proposed Co-Financing would finance this component.

Component 4: Urban water supply (Completed - US$2.7 mi l l ion disbursed from the original Credit). The Urban Water Supply component (whose activities had been identified as part o f an IDA-financed Infrastructure Project closed in August 2003) included the rehabilitation and extension o f water supply in the capitals o f Anjouan and MohCli. This component also financed capacity building o f water management committees and information, education and communication campaign on water management, sanitation and hygieneq3 These activities have been successfully completed under the original Credit. As a consequence, neither the first Additional Financing nor the proposed Co-Financing would finance this component.

Component 5: Project management, monitoring and evaluation, and audit (US$4.5 mi l l ion including: (i) US$2.9 mi l l ion f rom the original Credit; (ii) US$1.4 mi l l ion f iom the first Additional Financing o f which an estimated US$1 .O mil l ion was s t i l l undisbursed as o f December 3 1 , 2008; and (iii) US$150,000 from the FPCR Trust Fund to cover the incremental operating costs related to the management, monitoring and evaluation, and audit o f the cash-for-work component.

0

0

Eligibility for Processing under OPBP 8.00 19. The flexible and accelerated procedures provided under OP/BP 8.00 are vital to the rapid and successful implementation o f the cash-for-work program, which itself i s necessary to reduce

See World Bank, Project Paper on a Proposed Additional Financing Grant in the Amount of SDR3.4 million (US$S.O million equivalent) to the Union o f the Comoros for a Services Support Project, Report no. 37721-Kh4, November 9,2006, p.2.

6

the heightened vulnerabilities that segments o f the Comorian population are experiencing as a result o f the lingering effects o f the food crisis. Without the provisions o f OP/BP 8.00, Project resources would not be mobilized quickly enough to address these lingering vulnerabilities, which limit the ability o f these populations to cope with further shocks and so may result in adverse economic and social developments, rapid local increases in poverty, and possible social disturbances o f the social and political environment.

Consistency with Interim Strategy Note 20. The proposed Co-Financing i s consistent with IDA’S Interim Strategy Note (ISN) for the Union o f the Comoros for the period FY07-08. which remains applicable. The objectives o f the I S N are: (i) to provide basic services to the most disadvantaged.communities, with a focus on community and local capacity building and (ii) to consolidate national reconciliation through building state capacity and increasing accountability. By financing a social safety net, the proposed Co-Financing from the FPCR Trust Fund would support segments o f the population that are directly affected by the food crisis, which i s consistent with the first I S N objective. In addition, the ISN noted Comoros’ extreme vulnerability to exogenous shocks, especially to fluctuations in the terms o f trade, and noted that the Bank could help the Government to deal with such risks. A new I S N i s planned for the second hal f o f FY 10. The new I S N i s expected to continue promoting the provision o f basic services in l ine with the country’s development objectives.

Expected Outcomes 21, proposed Co-Financing from the FPCR Trust Fund) are to: (i) increase access to short-term employment in food-insecure areas; (ii) increase access to basic social services in poor communities; and (iii) contribute to building the capacity o f communities to plan their development. Project development objectives, outcome indicators, intermediate results and intermediate result indicators, and arrangements for results monitoring are presented in Annex 2. Annex 2 also provides a detailed comparison o f the indicators included in the Original Project, the f i rs t Additional Financing and the proposed Co-Financing and restructuring.

22. The expected outcomes o f the restructured Project are as follows:

0 Under the social safety net component (cash-for-work):

The expected outcomes o f the restructured Project (Credit 3868, Grant H-265 and

(i) Finance a social safety net program to provide manual labor employment to at least 3,500 beneficiaries among poor segments o f the population in food-insecure areas;

Under the other components:

(i) Increase enrollment in FADC builthehabilitated schools or classrooms;

(ii) Increase the number o f people in project areas with access to an improved water

(iii) Increase the number o f people in project areas benefiting from improved roads;

(iv) Complete community-development plans in at least 156 communities.

source;

and

23. The expected intermediate results o f the restructured Project are as follows:

7

0 Under the social safety net component (cash-for-work):

(i) Provide 90,000 person-days o f manual labor employment;

(ii) Complete 75 sub-projects under the social safety net program; and (iii) Ensure that at least hal f o f beneficiaries under the social safety net program are

women.

0 Under the community-driven basic infrastructure component:

(i) Complete 100 community-based sub-projects; and (ii) Ensure that 90 percent o f sub-projects are properly maintained one year after

completion.

0 Under the health service component:

(i) Ensure that at least 90 percent o f medical specialists who have been trained by the

(ii) Ensure that at least 75 percent o f hospital-related medical equipment supported

Project use the knowledge they acquired during the training; and

under the Project i s operational and maintained in a satisfactory manner.

0 Under the urban water supply component:

(i) Ensure that at least 50 percent o f the population in the Project intervention areas having access to water are knowledgeable about water management, hygiene and sanitation.

0 Under Project management, monitoring and evaluation, and audits:

(i) Maintain the operating ratio below 18 percent;

(ii) Complete a technical audit o f sub-projects implemented under the community-

(iiii) Complete assessments o f the cash-for-work program in 2009 and in 2010. driven basic infrastructure component in 2009; and

D. Implementation of the Proposed Co-Financing and Financing Arrangements 24. Project implementation. Implementation arrangements for the Services Support Project would remain unchanged. The agency responsible for the implementation o f the Services Support Project, the Fonds d 'Appui au De'veloppement Communautaire (FADC), would continue to implement the activities financed from the original Credit and the f i rs t Additional Financing. The FADC would also implement the new cash-for-work component financed from the proposed Co-Financing. The FADC was created by Presidential Ordinance on January 6, 1993, as a non- profit association for public services (Association prive'e 2r but non-lucratifreconnue d 'utilite' publique) with administrative and financial autonomy. A National Executive Director (Directeur ExecutifNational) i s responsible for day-to-day Project implementation. H e i s assisted at the natiohal level by a director in charge o f financial management and a person responsible for

The operating ratio i s defined as the ratio o f the sum o f the cumulative operating costs (travel expenditures and other travel-related allowances, equipment rental and maintenance, vehicle operation, maintenance and repair, office rental and maintenance, materials and supplies, and utilities) and the consultant fees o f FADC's employees since the beginning of the Project divided by cumulative disbursements since the beginning o f the Project. Salaries or allowances o f c iv i l servants are not covered under this Project.

monitoring and evaluation. The FADC has offices on al l three islands, each headed by a Regional Executive Director (Directeur Exe'cutifRe'gional). Policy guidance and overall project oversight are provided by a Board o f Directors, namely the Central Coordination Committee (Comite' Central de Coordination, or CCC).

25. Administrative and Financial Manual (Manuel Administratifet Financier) (March 2007); (ii) Operational Manual (September 2004) with six chapters: Institutional Framework, Community Development, Health Services, Water Systems, Monitoring and Evaluation and Direct Financing o f Communities; and (iii) Environmental Manual (Manuel de Gestion Environnernentale). FADC will prepare a Social Protection Manual (Manuel Protection Sociale) to complete the existing Operational Manual. The Social Protection Manual would describe the procedures to be used for the implementation o f the cash-for-work program. Submission to and approval by IDA o f the Social Protection Manual would be a Condition for Effectiveness o f the proposed Co- Financing (see Section G below).

26. Activities. The cost o f activities financed under the proposed Co-Financing from the FPCR Trust Fund i s US$1 .O million, including taxes and duties. Table 2 provides a breakdown o f estimated costs. Further details are provided in Annex 3.

Manuals o f Procedures. The Manuals o f Procedures o f FADC are as follows: (i)

3. Project management, monitoring and evaluation, and audit

Total Cost

nt

150 1,000

I 2. Community-driven basic infrastructure I o I

27. Administrative et FinanciBre, or DAF) at the central level would be responsible for the financial management o f the proposed Co-Financing from the FPCR Trust Fund, including budgeting, maintenance o f records and accounts o f all transactions, consolidation and production o f quarterly unaudited Interim Financial Reports (IFRs), and administration o f the Designated Account. The existing Administrative and Financial Manual would be updated by effectiveness to include the revised chart o f accounts and revised models o f IFRs that incorporate the proposed cash-for-work component. The computerized system would be reconfigured to produce the financial information required for managing and monitoring Project activities, including the cash-for-work program. The FADC would maintain i t s current accounting staff, both at the national and at the regional levels. The internal auditor would continue to ensure efficient use o f funds for intended purposes and consistent application o f policies and procedures, including those related to procurement and the implementation o f the cash-for-work component. Independent auditors acceptable to IDA would continue auditing the accounts o f the FADC in accordance with International Standards o f Auditing, including the activities financed under the proposed Co-Financing. Annex 4 provides details o f the financial management arrangements.

28. Disbursement. For the implementation o f the proposed Co-Financing f iom the FPCR Trust Fund, the FADC would use a separate Designated Account segregated from the Designated Account used for the original Credit and the first Additional Financing. As such, a new Designated Account would be opened in a local commercial bank under conditions satisfactory

Financial management. The Directorate o f Administration and Finance (Direction

9

to IDA. The Designated Account would be denominated in Comorian Francs (KMF). Disbursements would be deposited into this account to finance 100 percent o f all expenditures eligible under the proposed Co-Financing. Further deposits by the Bank into the Designated Account would be made against withdrawal applications prepared by the DAF and supported by appropriate documents.

29. some delays related to: (i) difficulties in the transfer o f information from the three regional Directorates to the central level and (ii) issues o f collaboration between technicians and accounting staff. As a result, the disbursement arrangements and methods used for the Co- Financing would follow transaction-based disbursements (SOEs). Disbursement methods would include advances, direct payments or special commitments for large payments, if necessary. For the proposed Co-Financing, the DAF would administer payments from the Designated Account. Disbursements would be certified by the DAF for contracts and other expenditures not requiring the Bank’s prior review.

30. Additional Financing (IDA Grant H-265) would be reduced from seven to one (See Annex 3). The proposed Co-Financing from the FPCR Trust Fund would also include one single category o f disbursement.

3 1. All SOE-related documentation would be kept by the DAF. This documentation would be available for review by the supervision missions o f the Bank, as well as internal and external auditors. Annex 4 provides details o f the disbursement arrangements.

32. original Credit (IDA Credit 3868) and the f irst Additional Financing (IDA Grant H-265) would remain unchanged, with the exception that the revised versions o f the Procurement and Consultant Guidelines, dated October 2006, will apply to all contracts signed after the Co- Financing and the restructuring are approved. More specifically, procurement will be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” published by the Bank in May 2004 and revised in October 2006; “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers,” dated May 2004 and revised October 15,2006; and the provisions stipulated in the Financing Agreement. In addition, future activities will be subject to the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants”, dated October 15, 2006.

33, A Procurement Plan with procurement methods or consultant selection methods, estimated costs, review requirements, and a time-frame for contract implementation would be agreed between the Borrower and the World Bank. Regarding the cash-for-work activities, the Procurement Plan would include: (i) a detailed list o f contracts, (ii) the names o f the NGOs selected to implement each sub-contract; and (iii) a summary o f the cash-for-work activities. In preparation for the proposed Co-Financing, the FADC has prepared a simplified Procurement Plan which has been submitted to and approved by IDA. The procurement arrangements are described below and further detailed in Annex 5. 34. program. Main consultant services required under the Project include technical and financial audits, and training. All consulting services contracts (other than those with NGOs recruited to

During past supervision o f the Project, the submission o f quarterly IFRs experienced

As part o f the restructuring, the number o f categories o f disbursement under the first

Procurement. The procurement arrangements for the activities financed through the

Selection of Consultants other than NGOs recruited under the cash-for-work

10

implement cash-for-work sub-projects) estimated to cost US$50,000 equivalent or more would be awarded through Quality and Cost Based Selection (QCBS). Contracts estimated to cost less than US$50,000 equivalent may be contracted through Consultant's Qualifications (CQ) method. Least Cost selection (LCS) may be used for the recruitment o f financial auditors. Single Source Selection (SSS) may be employed in accordance with paragraphs 3.9 to 3-12 o f the Consultant Guidelines with prior approval o f the Bank. All services o f individual consultants will be procured under individual contracts in accordance with the provisions o f paragraphs 5.1 to 5.4 o f the Consultant Guidelines. Short l is ts o f consultants for services estimated to cost less than US$50,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.

3 5 , Contracts with NGOs for cash-for-work sub-projects. This component would require the use o f NGOs selected under Paragraph 3.16 o f the Consultant Guidelines, using the Selection Based on the Consultants' Qualification (CQS) method outlined in Paragraph 3.7 o f the Consultant Guidelines. Selection would be essentially based on their qualification and experience in managing similar assignments, in particular with regard to the payment mechanism. Under the Delegated Management Contract (Contrat de Maitrise d 'Ouvrage De'le'gue'e), cash payments and the acquisition o f tools, materials and transport would be managed by the above-mentioned NGOs using a pass-through financing. The procurement procedures to be used in the implementation o f the contracts with NGOs would be specified in the Social Protection Manual, and reflected in the Delegated Management Contract. Since the value o f individuals contracts i s estimated to be less than US$lOO,OOO, only the f irst two contracts would be subject to prior review by IDA, while the remaining contracts would be subject to post-review. Whenever possible, NGOs would use national Shopping Procedures, requiring at least three price quotations for the procurement o f tools, materials and transport.

36. Operating costs. The Project would cover the operating costs related to the administration o f the cash-for-work program, including work-related expenditures, equipment rental and maintenance, vehicle operation, maintenance and repair, office rental and maintenance, materials and supplies, and utilities. For these expenditures, procurement would follow FADC's administrative procedures, which were reviewed and found acceptable to the Bank. 3 7. cash-for-work program financed by the proposed Co-Financing would be identical to those currently used by FADC for the implementation o f the Services Support Project, with the important exception that cash-for-work sub-projects would be selected in such a way that cannot trigger any resettlement, so that the Resettlement Policy Framework (RPF) o f the original Project would not apply to the cash-for-work program. FADC would screen the cash-for-work sub- projects to determine whether they trigger any safeguard policies. Cash-for-work sub-projects which trigger any safeguard policy other than Environmental Assessment (OP/BP 4.01) would not be eligible for financing under the Project. Cash-for-work sub-projects which trigger OPBP 4.01 would need to comply with the Environmental and Social Management Framework (ESMF) prepared and disclosed in December 2003 as part o f the original Credit. The ESMF was redisclosed in the Infoshop May 2009 as part o f the preparation o f the proposed Co-Financing, and will be redisclosed in Comoros as well, before Effectiveness. The Environmental Manual has been updated to take into account the proposed cash-for-work component. During Project implementation, FADC will ensure that appropriate remedial measures are taken to mitigate any

Safeguard arrangements. The safeguard arrangements for the implementation o f the

11

negative social and environment impacts o f sub-projects. The safeguard arrangements for the cash-for-work program will be outlined in the Social Protection Manual, which would refer to the ESMF and the Environmental Manual. Importantly, FADC would replace the environmental and social specialist who has recently been promoted to director o f the FADC’s office in Anjouan and would extend her responsibilities to cover the cash-for-work program.

3 8. Monitoring and evaluation. Monitoring and evaluation arrangements for implementation o f the cash-for-work program would be identical to those used by FADC to monitor and evaluate the Services Support Project. FADC’s monitoring and evaluation system would be upgraded to incorporate the cash-for-work program. The proposed Co-Financing would also finance an assessment o f the cash-for-work program.

39. extended by twelve months, from June 30,2010, to June 30,201 1. Annex 6 provides an implementation schedule for the implementation period.

E. Appraisal o f Project Activities and Benefits and R i s k s 40. fiduciary, environment and social aspects o f the proposed cash-for-work program.

41, cost-benefit analysis. Although the costs o f sub-projects are known (they consist mostly o f cash payments to beneficiaries), the benefits o f alleviating immediate hardships (and possibly starvation) are not readily quantifiable. As the program would target poor segments o f the population, these benefits are likely to be substantial and the economic rate o f return from the proposed cash-for-work program i s likely to be extremely high (see Annex 1).

42. be very high. Indeed, the targeting mechanism (in which the poor communities are selected first, and then within these communities, the individuals the most in need are identified through a community-based selection mechanism) i s likely to reach very vulnerable segments o f the population. The names o f the communities selected to benefit from the cash-for-work program and o f the beneficiaries among these communities would be publicly disclosed to ensure transparency and to avoid elite capture. The targeting mechanism would also ensure that at least half o f beneficiaries are women (see Annex 1).

43, would benefit from FADC’s 15 years o f accumulated experience in the technical design o f sub- projects. The Social Protection Manual would ensure that construction works would conform to the use o f simple, appropriate, and environmentally sound technologies, as i s currently the case for the sub-projects financed from the original Credit and the f irst Additional Financing. As already mentioned, submission to and approval by IDA o f the Social Protection Manual would be a Condition for Effectiveness o f the proposed Co-Financing (see Section G below).

44. Institutional assessment. The Board o f the FADC, the Central Coordination Committee, i s in place and meets regularly. Since i t s creation in 1993, the FADC has consistently demonstrated a strong capacity to implement community-based sub-projects. In fact, the FADC i s the only institution in the Comoros with the management, staffing and administrative capacity, and decentralized structure necessary to implement the proposed cash- for-work program on all three islands under emergency conditions. Although the management o f

Closing date and implementation schedule. The closing date o f the Project would be

This Section provides summary assessments o f the economic, technical, institutional,

Economic assessment. The cash-for-work program does not lend itself to traditional

Social assessment. The social benefits from the cash-for-work program are expected to

Technical assessment. Sub-projects implemented under the cash-for-work program

12

the Services Support Project i s currently rated unsatisfactory, the team i s confident that the recent promotion o f the Regional Executive Director o f the FADC office in Anjouan to the position o f Project Director will lead to a substantial improvement in Project management. Also, by providing training and short-term assistance to Project staff, the proposed Co-Financing i s expected to lead to improved Project management.

45. Assessment of Financial Management. The Financial Management (FM) risk associated with the activities financed from the proposed Co-Financing from the FPCR Trust Fund i s rated substantial, mostly due to the FM risks associated with implementing NGOs. In accordance with the Bank's policies and procedures, the FM arrangements o f the FADC have been reviewed to determine whether they are acceptable to the Bank. This review i s an update, since the FM system o f the FADC has already been assessed in the context o f the ongoing Services Support Project (IDA Credit 3868 and IDA Grant H-265). The overall conclusion from this review i s that FADC, composed o f the National Executive Directorate (Direction Exe'cutive Nationale) and the three Regional Executive Directorates (Directions Exe'cutives Re'gionales), maintains a sound FM system in l ine with the requirements o f OPBP 10.02. The financial and accounting staff currently in place are satisfactory and can process the additional activities corresponding to the implementation o f the cash-for-work program. The internal auditor who would cover the proposed cash-for-work program i s competent as well.

46. by: (i) reviewing the Chart o f Accounts (Plan Cornptable) so that it incorporates all activities included in the cash-for-work program and complies with reporting requirements; (ii) updating the existing Administrative and Financial Manual to include the revised Chart o f Accounts and updated models o f quarterly Interim unaudited Financial Reports (IFRs); (iii) preparing and adopting a Social Protection Manual for the implementation o f the cash-for-work program; and (iv) reconfiguring the computerized accounting and reporting system for timely production o f the financial information required for managing and monitoring all Project activities, including those related to the proposed cash-for-work component. The existing Administrative and Financial Manual would be updated to incorporate the revised Chart o f Accounts and new model o f IFRs. Submission to and approval by IDA o f the updated Administrative and Financial Manual and o f the new Social Protection Manual would be Conditions for Effectiveness. The reconfigured computerized system i s expected to be fully functional within one month after the Effectiveness Date.

47. An audit o f the project accounts would be carried out annually by an international auditing firm acceptable to IDA. This audit would be conducted in accordance with International Standards o f Auditing. The auditors would be recruited within three months after the Effectiveness Date. The terms o f reference o f the audit would be reviewed by the FM specialist o f the Bank to ensure the adequacy o f the audit scope. The auditors would be required to: (i) express an opinion on the project financial statements and (ii) carry out a comprehensive review o f the internal control procedures and provide a management report outlining recommendations for their improvement. The audit report would be submitted to IDA, together with the management letter and management's response to the letter, no later than six months after the end o f each financial year. The Services Support Project has complied with all audit covenants in the past, and all audit reports have been received on time.

48. FADC i tse l f as a risk related to the FM capacity o f the NGOs which would implement the cash-

To implement the cash-for-work program, FADC's FM system would need to be updated

The FM risk o f the proposed cash-for-work program i s not so much a risk related to

13

for-work sub-projects. These risks include: (i) the risk that NGOs lack the capacity to implement cash-for-work sub-projects, (ii) the risk that NGOs do not pay beneficiaries as per the Delegated Management Contract; and (iii) the risk that NGOs do not keep records and account for funds. These risks are further described in Table 4 along with the corresponding mitigating measures. The succession o f these Moderate risks during the implementation o f sub-projects leads the overall FM rating to be Substantial.

49. from the proposed second additional financing i s rated Substantial. A recent procurement review identified shortcomings in the procurement system, procurement processes and the administration o f contracts. For example, procurement staff who were absent from the office were not appropriately backed-up and the internal auditor was not involved in procurement. Also, while the staff o f FADC i s knowledgeable o f international procurement and Bank procurement rules and procedures, their overall level remains weak and training i s required to increase their overall qualification. A recent review documented that procurement processes have not been systematically implemented, including those related to awards o f contracts. In addition, adherence to contract criteria and payment schedules has not been systematic. With the recent appointment of an experienced manager, FADC now has the capacity to address these shortcomings quickly and to ensure strong procurement implementation going forward. The procurement specialist who conducted the procurement review worked closely with FADC staff to establish a procurement workplan with specific actions and a timeline. The new management o f FADC has committed i t se l f to implementing the action plan and using it as an opportunity to improve FADC procurement management and systems. FADC has already submitted to IDA a revised Procurement Plan, which incorporates the recommendations o f the review, and this updated Procurement Plan has been reviewed and approved by IDA. F A D C has also submitted to IDA a simplified Procurement Plan, which includes the activities to be financed from the proposed cash-for-work program, and IDA has approved this simplified Procurement Plan. Before the implementation o f cash-for-work sub-projects, FADC will also submit to IDA for review a more detailed Procurement Plan which includes: (i) a detailed l i s t o f contracts, (ii) the names o f the NGOs selected to implement each sub-contract; and (iii) a summary o f the cash- for-work activities.

50. Project i s Category B. 5 1.

52. implemented under the original Credit and Additional Financing. Therefore, they are expected to have less impact on the environment. In fact, cash-for-work sub-projects are not expected to have any significant or irreversible impacts on the environment, while some sub-projects like stabilization o f road embankments are expected to have a positive environmental impact.

53. The Environmental and Social Management Framework (ESMF) has already been re- disclosed in the Infoshop o f the World Bank and will be re-disclosed in the Union o f the Comoros before effectiveness o f the proposed Co-Financing.

54. FADC has the institutional capacity to manage the incremental safeguard aspects brought about by the cash-for-work program, including specialists on each island trained in the environmental and social aspects o f sub-project. FADC will also hire a dedicated environmental

Procurement assessment: The overall procurement risk o f the activities to be financed

Environmental Category and Safeguards: The environmental classification o f the

Compliance with safeguards i s satisfactory for the existing Social Services Project.

The cash-for-work sub-projects are smaller and involve less construction than those

14

and social specialist to manage the safeguard aspects o f the Project-in replacement to the former. environmental and social specialist who has recently been promoted to another function.

Safety of Dams (OPiBP 4.37) Projects on International Waterways (OPBP 7.50) Projects in Disputed Areas (OPBP 7.60)

I Cash-for-work sub-projects would not trigger any resettlement. X X X

55. Lessons Learned f rom Previous Experiences 56. following lessons learned from previous country experience and Bank-wide experience with emergency response operations. First, to the extent possible, it i s important to use existing institutional structures instead o f creating new ones, especially in fragile states with limited implementation capacity. Implementation capacity i s particularly limited in the Union o f the Comoros. In 2003, the Bank was implementing four different projects, which overwhelmed the country’s implementation capacity. In 2004, these projects were consolidated into the Services Support Project (which helps explain why the components o f this Project are so diverse, ranging from community-driven development activities to urban water supply and health). Drawing on this lesson, the proposed operation will continue to use FADC as the implementing agency for the cash-for-work program. Second, the design o f the cash-for-work program benefits from years o f experience with the implementation o f a similar program in Madagascar. The Development Investment Fund (Fonds d’htervention pour le De‘veloppement, or FID), the entity responsible for the implementation o f the cash-for-work program in Madagascar, has been highly involved in the preparation o f the proposed cash-for-work program and will continue to provide technical assistance during implementation.

F. Project Risks, Mitigating Measures and Supervision 57. successful implementation o f the cash-for-work program are summarized in the following table, along with mitigation measures.

The proposed Project does not involve any exceptions to Bank policies.

The design and planned implementation o f the proposed emergency operation applies the

The overall risk o f the Project i s Substantial. The specific risks that could jeopardize a

15

Table 4: Risk and mitigating measures Risk Factors

Political instability

Delays in the implementation of the cash- for-work program

Absence o f national expertise to design the cash-for-work program

NGOs lack the capacity to implement the cash-for-work program

Beneficiaries are not the intended ones

Replenishment of the Designated Account i s not timely

Payments from FADC to NGOs are not timely

Beneficiaries are not paid by NGOs

NGOs do not keep records and account for funds

Risk Mitigation Measure

The Project i s implemented by the FADC, which benefits from administrative and financial autonomy Closing date o f Project has been extended for one year so that FADC has 18 months to implement the cash-for-work component, which i s well within i t s capacity The FID, an IDA-financed Project in Madagascar, with extensive experience in the design and implementation of cash-for-work programs, i s providing technical assistance NGOs will be pre-selected, based on past experience with similar activities; The Social Protection Manual will provide a detailed description o f implementation procedures to NGO staff; Training will be provided to NGOs prior to program implementation; and FADC will maintain a database o f qualified NGOs. Targeting mechanism involves a transparent multi- stage process with participation o f authorities and community representatives; and Names of beneficiaries are posted on public billboards (See Annex 1). The Designated Account i s expected to be replenished every two weeks, Training on disbursement will be provided to project staff, and Disbursements from FPCR Trust Fund to FADC do not depend on country’s status with IDA. There will be scheduled payments to NGOs as specified in the Service Management Contract, and FADC will add financial staff if necessary. FADC will explain the payment process to beneficiaries before sub-project implementation, There will be peer control of use o f funds and systems will be developed to immediately report suspected fraud to FADC, The FADC internal auditor will be part o f internal control system, and Scheduled payments to NGOs will be contingent on satisfactory implementation of previous payments. Al l transactions (cash and bank) would be recorded in simple formats outlined in the Social Protection Manual, Payments from FADC to NGOs will require documents to support use o f past disbursements, and The FADC internal auditor will be part o f the internal control system.

Residual Risk Rating

M

M

M

M

M

M

M

M

M

16

Risk Factors

Shortcomings in procurement systems and I A procurement action plan was established with

Risk Mitigation Measure

management o f FADC Comoros’ public financial management has I Financial management o f the Project would be

I FADC, which agreed to implement it.

major fiduciary risks: weak PFM, weak capacity o f the control organ and absence o f an accounting profession in Comoros.

implemented by the FADC, an independent association with extensive experience in managing IDA Funds within the context o f the current Service Support Project; and Project accounts are audited by an international accounting fm acceptable to IDA.

Overall risk

Lisk Rating: H-High; S-Substantial; M-Moderate; N-Negligible or low risk I

Residual Risk Rating

S

M

S

58. closely, including at least two supervisions per annum. Each supervision mission would include a procurement specialist and a financial management specialist, while a safeguard specialist would jo in at least once a year. Other specialists, including in the area o f water management and disbursement, would also j o in selected missions.

G. Terms and Conditions for Project Financing 59. country financing parameters allow for 100 percent Project financing, including taxes. The financing parameters also allow for recurrent cost financing when required.

60.

Based on the risk assessment associated to this Project, the Project would be supervised

The proposed Co-Financing would consist o f a grant from the FPCR Trust Fund. The

The terms and conditions are as follows:

(i) Conditions for Effectiveness a. The Subsidiary Agreement has been executed on behalf o f the Recipient and

FADC;

b. The Project Agreement has been executed on behalf o f FADC;

c. FADC has updated the Administrative and Financial Manual and the Environmental Manual in a manner satisfactory to the World Bank;

d. FADC has adopted a Social Protection Manual for the cash-for-work program in form and substance satisfactory to the World Bank;

e. The ESMF has been redisclosed in the Union o f the Comoros, in compliance with the World Bank social and environmental policies.

(ii) Conditions for Disbursement a. FADC has signed a Service Agreement with an N G O before disbursing any amount

to finance the cash-for work sub-project implemented by that NGO.

(iii) Covenants a. Recruitment, within three months after effectiveness date, o f an international

auditing firm with qualifications satisfactory to the World Bank that audits FADC’s

17

financial statements including activities to be financed under the proposed Co- Financing, in accordance with consistently applied auditing standards;

b. Production, no later than 45 days after the end o f each calendar quarter, o f quarterly unaudited Interim Financial Reports (IFRs) which include the activities financed under the proposed Co-Financing; and

c. Submission to the World Bank no later than six months after the end o f each calendar year o f audited financial statements, which includes the activities financed under the proposed Co-Financing. Each audit will cover one calendar year (which corresponds to the.Comorian fiscal year) and will be conducted by an independent auditor acceptable to the World Bank.

18

Union o f the Comoros

Services Support Project (Co-Financing and Restructuring)

Annex 1. Detailed Description of the Cash-for-Work Program 1. Support Project. After inclusion o f this new component and after Project restructuring, the Project would include 5 components:

The proposed operation would add a new component (cash-for-work) to the Services

Component 1 : Social safety net (cash-for-work),

Component 2: Community-driven basic infrastructure,

Component 3: Health services,

Component 4: Urban water supply,

Component 5: Project management, monitoring and evaluation, and audit.

More specifically, the proposed operation would finance the following two components 2. o f the proposed restructured Project:

Component 1: Cash-for-work program (US$850,000) 3. employment in food-insecure areas. This component would also provide training to the NGOs who are selected to implement cash-for-work sub-projects.

4. Targeting mechanism. The cash-for-work program would use the following targeting mechanism which would be further described in the Social Protection Manual:

First, the funds dedicated to finance cash-for-work sub-projects would be allocated across islands following the same inter-island formula which was agreed between the FADC and the authorities, and approved by IDA, for the allocation o f funds to finance Component 2 (community-driven basic infrastructure). The justification to maintain this formula i s as follows: (i) this formula i s politically accepted by all four governments (that o f the Union and those o f the three islands) as it parallels the inter-island fiscal formula included in the Fomboni Accords; and (ii) a recent assessment by the UNICEF shows that al l islands have been equally affected by the food crisis (about one third o f children under 5 years o f age are suffering from chronic malnutrition).’

Second, on each island, the FADC would identify the communities the most affected by the food price crisis through a transparent process o f consultation with local authorities. The choice o f communities would be further validated by FADC’s Regional Coordination Committees (there i s one such Committee on each island) and FADC’s Central Coordination Committee (FADC’s Board o f Directors) before being disclosed to the public at the level o f each island to ensure transparency and to avoid elite capture.

This component would finance a cash-for-work program to increase access to short-term

0

0

See : “Rapport d’Evaluation de 1 ’Etat Nutritionnel des Enfants de Moins de 5 and et de la Mortalite‘ dans 1’Union des Cornores.” Unicef Comores, December 2008.

19

0 Third, in each community, a community-based Social Protection unit would select the households the most affected by the food price crisis. Each Social Protection unit would be constituted o f members o f the Community Development Unit (a structure which already exists in each community and i s responsible for community development), to which would be added selected community representatives including teachers, police and social protection workers. To ensure transparency and avoid capture, names o f beneficiaries would be disclosed on a billboard in a public place within the community. The selection process would ensure that at least 50 percent o f beneficiaries are women. The mechanism could also limit the number o f days an individual or a household could work, in order to help spread benefits.

5. projects (Projets b Haute Intensite' de Main d'Oeuvre, or HIMO) selected by the Social Protection un i ts created in each beneficiary community for the implementation o f the cash-for- work program. The FADC would screen proposed sub-projects to ensure that they are not on a negative l i s t o f investments and comply with safeguard policies. Sub-projects would need to be labor intensive with payments o f beneficiaries representing at least 75 percent o f the total cost o f sub-projects (Table 1). Table 1: Breakdown of cash-for-work sub-project costs

Selection o f sub-projects. This component would finance highly labor intensive sub-

6. comparable to the wages o f unskilled labor in rural areas. As beneficiaries are expected to be among the unemployed, the wage rate is not expected to distort the labor market.

7. Implementing agency. The FADC would be responsible for the overall coordination, management, and financing o f this component in accordance with i t s frameworks and procedures. It would work with several stakeholders including beneficiaries and participating NGOs. During implementation, the FADC would create and maintain: (i) a database with the unit costs o f transport and o f the most commonly used tools and materials; and (ii) a database with the l is t o f qualified NGOs and providers o f tools, materials and transport. This database would also include a black l i s t o f NGOs and providers who are barred from participating to the Project due to malpractice.

8. Implementation arrangements. In order to implement a cash-for-work sub-project, the National Directorate (Direction Nationale) o f the FADC would sign with NGOs a Delegated Management Contract (Contrat de Maitrise d 'Ouvrage Dde'gue'e, or Contrat MOD) in the form annexed to the Social Protection Manual. The FADC would select NGOs based on qualification and experience with similar activities (Annex 5). The Delegated Management Contract would be a consulting contract. The Delegated Management Contract would specify the cash-for-work sub-project implementation arrangements. The FADC would be responsible for the financial and technical audits including safeguards o f completed sub-projects.

The cash-for-work daily labor wage would be set at KMF2,300 per day which i s

20

9. sub-projects in conformity with the clauses o f the Delegated Management Contracts. Limits on. the amount o f cash-for-work sub-projects and number o f sub-projects implemented by a single NGO at any given time could be specified in the Social Protection Manual, and revised from time to time. Payments to NGOs would specify: (i) the amount paid as service fees to NGOs, and (ii) the “pass through” amount which NGOs would use to finance: (a) tools, transport and materials; and (b) payments to beneficiaries. Proofs o f payments would be maintained at the lowest appropriate level. Copies o f proofs o f all payments from the “pass-through” amount would be sent by NGOs to the regional offices o f the FADC. The Social Protection Manual would outline the payment modalities.

10. Control. There would be several levels o f controls. First, beneficiaries themselves would be able to report to the FADC if they fail to be paid - in which case the FADC would hold any further payment to the NGO until the matter i s resolved. Second, the internal auditor o f the FADC would visit sub-projects on a random basis and control whether the workers are present on site with the tools acquired from the proceeds o f the sub-project and whether they have been paid. Third, the external audit o f the Project would include the activities financed under the proposed Co-Financing.

Component 5: Project management, monitoring and evaluation, and audit (US$150.000) 1 1. This component provides support in the form o f technical advisory services and other material assistance for the benefit o f the FADC to facilitate Project management, monitoring and evaluation, and audit. More specifically, the component finances: (i) consultant fees and allowances o f FADC’s employees, travel expenditures and other travel-related allowances, equipment rental and maintenance, vehicle operation, maintenance and repair, office rental and maintenance, materials and supplies, and utilities; (ii) financial and technical audits, assessments o f the cash-for-work program, training o f FADC staff, systems improvement; and (iii) equipment and vehicles. The implementation o f the cash-for-work program would generate incremental costs in Project management, monitoring and evaluation, and audit. The proposed Co-Financing would contribute the equivalent o f US$150,000 to this component.

Financial arrangements. The Project would finance the total cost o f cash-for-work

21

Union of the Comoros

Original Project

Services Support Project (Co-Financing and Restructuring)

First Additional Financing

Annex 2. Results Framework and Monitoring

COMPARISON OF OUTCOME AND RESULT INDICATORS The results framework of the first Additional Financing was different from that presented in the Original Project. The table below compares the outcomes and results indicators of the Original Project with those of the Additional Financing and those included in the proposed Co-Fin an cing and Restructuring.

1. Number of students in FADC builthehabilitated schools or classrooms

2. Number o f persons benefiting from a reduction in transport time and cost

3. Number of communities with development plans meeting participatory criteria

(not included)

(not included)

(not included)

2.1 Number of students enrolled in FADC builthehabilitated schools or classrooms (Slightly revised wording from Outcome indicator 1 in Original Project)

2.2 People in project areas with access to an improved water source (number) (Revised from original intermediate outcome indicator 4.1 to be in line with IDA core indicator wording)

2.3 People in project areas benefiting f?om improved roads (number) (Slight revision o f wording to improve ease of measurement)

3. Community-development plans completed (number) (similar to Outcome indicator 3 in Original Project)

22

Intermediate Result Indicators Component 1: Social safety net (cash-for iork)

1.1 Person-days o f employment created (number) (new)

1.2 Social protection sub-projects completed (number) (new)

1.3 Percentage o f women among beneficiaries (new)

~ ~ ~ p ~ ~ e n t 2: C o m ~ ~ n ~ t y - ~ ~ i v e n basic 2.1 Number o f cornpletedrehabilitated small-scale infrastructure projects

2.2 Number o f communities benefiting from at least one subproject

2.3 Number o f communities who have never benefited from Social Fund financing reduced

2.4 Percentage o f population indicating knowledge oflsatisfaction wi th their participation in subproject plans

2.5 Number o f sub-projects operational and maintained two years after completion

frastructure Number o f sub-projects that have been completed (similar to Result 2.1 in Original Project)

Number o f communities that have benefited f i o m at least one Grant (similar to result 2.2 in Original Project)

Percentage o f beneficiary communities and communes that have a development plan that has been validated by the community/commune (new)

Percentage o f the population o f the community that has participated in developing a community or local development plan (new)

Percentage o f beneficiary communities and communes which have maintained their sub- project after implementation (new)

Percentage o f beneficiary communities that have respected the deadline related to mobilizing their financial andor in-kind contribution for their sub-project (new)

2.1 Community-based sub-projects completed (number) (similar to Result 2.1 in Original Project)

(Information available but indicator dropped from results framework to simplify the table)

(Indicator dropped in the f i r s t additional financing)

Indicator dropped since all development plans are systematically validated by the community

Indicator dropped since the percentage of the population i s not an appropriate measure of the level o f participation given that the communities vary significant in size. 2.2 Community-based sub-projects properly maintained one year after completion (percentage o f sub- projects completed) (slightly revised from Result 2.5 in Original Project)

Indicator dropped because it doesn’t ref lect the willingness of community to participate.

23

fntermediate Result indicators

Component 3: WeaIth services 3.1 Medical specialists who have been trained are using knowledge acquired

3.2 Equipment that was acquired i s operational and maintained in a satisfactory manner

CGmponent 4: Urban water supply 4.1 Percentage o f population w i th access to drinking water within lkm

Percentage o f beneficiary communities and communes which have applied the environmental mitigation measures defined in the sub- project document (new) Number o f communities that have executed activities not supported by the Project in their development plan (new)

Percentage o f health personnel who have benefited f rom scholarships under the Project who are using the knowledge gained f i om such training (similar to Result 3.1 in Original Project)

3.2 Hospital-related medical equipment supported under the Project that i s operational and operational and maintained in a satisfactory manner (similar to Result 3.1 in Original Project)

Percentage o f the population in the Project intervention areas with access to drinking water within less than 100 meters (similar to Result 4.1 in Original Project but change in distance from l k m to 100 meters)

Indicator dropped since the application of environmental mitigation measure i s mandatory and systematically implemented by the community

Indicator dropped to simplify results framework.

Indicators added to ref lect IDA reporting requirements:

2.3 Classrooms built and/or rehabilitated (number) (new IDA 15 indicator)

2.4 Community water points constructed or rehabilitated (number) (new I D A 15 indicator)

2.5 Roads rehabilitated, rural (km) (new IDA 15 indicator)

3.1 Medical specialists who have been trained and use knowledge acquired (percentage of) (similar to Result 3.1 in Original Project)

3.2 Hospital-related medical equipment supported under the Project that are operational and maintained in a satisfactory manner (percentage of) (similar to Result 3.2 in Original Project)

Indicator slightly revised and moved to PDO level

24

Intermediate Result Xndicatars 4.2 Percentage o f population having access to water who are knowledgeable about water use and management

Component 5: Project management, mor 5.1 Base-line and annual surveys completed and data entered into the information management system

5.2 Participatory community-based M&E system created and operational

5.3 Annual technical and financial audits undertaken and demonstrate success o f project

5.4 Operating cost o f project do not exceed 15 percent o f total project

Percentage o f those people in the Project intervention areas that have access to drinking water who are knowledgeable about water management, hygiene and sanitation (related to Result 4.2 in Original Project) Percentage o f those households in the Project intervention pay for the water within the agreeddefined deadline (this indicator i s included in the PAD but not in the Legal Documents) (new)

oring and evaluation and audit 5.1 The monitoring and evaluation system allows for an annual review o f the activities o f the project and progress on achieving development objectives (new)

5.2 By the end o f each Project Year, financial audit reports demonstrate satisfactory management o f credit funds (to compare to Result 5.3 in Original Project)

5.3 By the end o f the Project, the Incremental operating costs have not exceeded 15 percent o f the amount o f the Credit (to compare to Result 5.4 in Original Project)

4.1 Population having access to water who are knowledgeable about water management, hygiene and sanitation (percentage of) (related to Result 4.2 in Original Project)

Indicator dropped as not in Project Agreement.

The following more specific indicators proposed to ensure an easier monitoring:

5.1 Operating ratio (to compare to Result 5.4 in Original Project)

5.2 Technical audit (of component 2) completed (to compare to Result 5.3 in Original Project)

5.3 Assessment o f cash-for-work program completed (new)

25

RESULTS FRAMEWORK The Project Development Objectives are to: (i) increase access to short-term employment in

food-insecure areas; (io increase access to basic social services in poor communities; and (iii) contribute to building the capacity of communities to plan their development.

2.1 Community-based sub-projects completed (number)

Project Development Objectives (PDO) 1. Increased access to short- term employment in food- insecure areas

Monitor provision o f social and economic services

2. Increased access to basic social services in poor communities

Improved health services 3.1 Medical specialists who have been trained and use knowledge acquired (percentage of)

3.2 Hospital-related medical equipment supported under the Project that are operational and maintained in a satisfactory manner (percentage of)

3. Contribute to building the capacity o f communities to plan their development

lnterm edie te Result Component 1: Social safety 1

Cash-for work program implemented

Monitor provision o f health services

Component 2: Community-( Increased provision o f basic social services in poorest communities

Use of Project Outcome Information Monitor assistance to

Outcome Indicator

1. Beneficiaries o f cash-for-work program (cumulative number o f individuals) (a) population affected by hunger

including women

2.1 Students enrolled in FADC builthehabilitated schools or classrooms (number) (')

2.2 People in project areas with access to improved water source (number) (b)(c)

2.3 People in pro'ect areas benefiting from improved

3. Community-development plans completed (number)

Monitor Project capacity to increase access to services in poorest communities

roads (number) (4 Monitor capacity building o f communities

I

fntermediate Result Indicator I Use of Results Monitoring mt (cash-for-work) 1.1 Person-days o f employment created (number) (a)

1.2 Social protection sub-projects completed (number)

1.3 Percentage o f women among beneficiaries

Monitor impact o f efforts to improve food security

2.2 Community-based sub-projects properly maintained one year after completion (percentage o f sub-projects completed)

2.3 Classrooms built andor rehabilitated (number) @) ('I

2.4 Community water oints constructed or rehabilitated (number) 1) ('1 2.5 Roads rehabilitated, rural (km) @) ('I

26

I Intermediate Result 1 Intermediate Result Indicator 1 Use of Results Monitoring

Improved urban water supply

4.1 Population having access to water who are knowledgeable about water management, hygiene and sanitation (percentage of)

Monitor provision o f health services

implementation 5.2 Technical audit (of component 2) completed

implementation

I 5.3 Assessment o f cash-for-work program completed I Notes: (a) Global Food Crisis Response Program indicator, (b) IDA- 15 indicator,

result from the demand o f communities, (d) The operating ratio i s defined as the ratio o f the sum o f cumulative operating costs (travel expenditures and other travel-related allowances, equipment rental and maintenance, vehicle operation, maintenance and repair, office rental and maintenance, materials and supplies, and utilities) and cumulative consultant fees o f FADC’s employees since the beginning o f the Project, divided by cumulative disbursements since the beginning o f the Project. Salaries or allowances o f civil servantq are not covered under this Proiect.

Targets regarding these results indicators are not established since the sub-projects are not known a priori, but instead

27

r r 0 a 2

x 2 0 a

2

5 a 2

E!

Y 0 W .? R

j i V

I

I

3

s vl o\ 00

3

W z s = cd > cd Y

3 b

N

0 m

Union of the Comoros

Category

(1) Grants for Sub-projects (2) Works (3) Goods and vehicles (4) Consultant’s services including audits

Services Support Project (Co-Financing and Restructuring)

Financing Allocated

600,000 100% o f amounts disbursed 950,000 100% 250,000 100% 1.900.000 100%

Percentage of Expenditures to be Financed

Annex 3. Summary of Estimated Project Costs

(5) Training (6) Incremental Operating Costs

ESTIMATED AMOUNTS BEFORE PROPOSED RESTRUCTURING

BY CATEGORY OF EXPENDITURES (US$ equivalent)

FOR THE FIRST ADDITIONAL FINANCING (IDA GRANT H-265)

250,000 100% 900.000 100%

Category Financing Allocated Percentage of Expenditures to be Financed

l(7) Unallocated 1150,000 1100%

(1) Works, goods, consultants’ services, including audits, training and operating costs

Total Amount

~~

Total Amount 15,000,000 15.0

4,100,000 (’) 100%

4,100,000 5.0

31

ESTIMATED AMOUNTS FOR THE CO-FINANCING (GRANT FROM FPCR TRUST FUND) BY CATEGORY OF EXPENDITURES

lategory

1) Goods, minor works, consultants’

)perating costs i) Goods, minor works, services, training, )perating costs and audits (ii) Expenditures for cash-for-work sub- projects Total Amount

ervices, including audits, training and

Financing Allocated (US$) Percentage of Expenditures to be Financed

100%

200,000

800,000

1,000,000 5.0

FINANCING PLAN FOR THE CO-FINANCING (GRANT FROM FPCR TRUST FUND) (by Project Component)

COMPONENT 1, Social safety net (cash-for-work) 5. Proiect management. monitoring and evaluation. and audit

FPCR Trust Fund (US$ equivalent) 850,000 150.000

I Total I 1.000.000 I

Original Credit Component (IDA Credit 3868)

Disbursed Allocation (Dec. 3 1, 08) (1) (2)

1. Social Protection (cash-for-work) 2. Community-driven basic infrastructure 6,8 15 6,805 3. Health 882 882 4. Urban water 2,734 2,734 5. Project management, M&E and audit 2,869 2,859 Total 13,300 13,280

Co-Financing Project f?om the (IDA Credit 3868, IDA

First Add. Fin. FPCR Trust Grant H-265 and Co- (IDA Grant H-265) Fund Financing)

Disbursed Undisbursed (Dec. 3 1, Allocation (Dec. 3 1,08)

Allocation 08) Allocation (6)= (7)= (3) (4) (5) (1>+(3>+(5>(6>-(2>-(4)

850 850 850

3,580 475 0 10,395 3,115 0 0 0 882 0 0 0 0 2,374 0

1,420 415 150 4,439 1,165 5,000 890 1,000 19,300 5,130

32

Union o f the Comoros

Services Support Project (Co-Financing and Restructuring)

Annex 4. Financial Management and Disbursement Arrangements

FINANCIAL MANAGEMENT ASSESSMENT REPORT

I. Introduction 1. Based on the institutional arrangement described in the main text, the FM arrangements o f the FADC have been reviewed to determine whether they are acceptable to the Bank for the implementation o f the proposed cash-for-work program. In fact, th is review i s an update since the FM systems o f the National Executive Directorate (Direction Exe'cutive Nationale, or DEN) and the three Regional Executive Directorates (Directions Exe'cutives Re'gionales, or DER) have already been assessed in the context o f the ongoing Services Support Project. Given that the Project i s implemented on the three islands in both rural and urban areas, the coordination and reporting FM mechanisms between the DEN and the DERs have also been reviewed to ensure that the arrangements in place are adequate to ensure smooth Project implementation and to provide confidence that that the proceeds from the proposed Co-Financing from the FPCR Trust Fund are used only for intended purposes, with due regard to economy, efficiency, and the sustainable achievement o f the PDOs. The content o f this review has been discussed with FADC's National Executive Director and Administrative and Financial Director. The overall conclusion o f this review described in the main text o f the Project Paper i s that the FADC continues to maintain an adequate financial management system in l ine with OP/BP 10.02. For a timely production o f the financial information required to monitor the implementation o f the proposed Grant, the FADC would: (i) update the Administrative and Financial Manual to include a revised chart o f accounts and a new model o f IFRs which encompass the activities financed under the proposed Co-Financing; and (ii) reconfigure the existing accounting software to ensure timely production o f financial reports. Updating the Administrative and Financial Manual i s an effectiveness condition while the reconfigured computerized system should be fully functional within one month after the effectiveness date. The auditing firm in charge o f the audit o f the cash-for-work program would be recruited within three months after Grant effectiveness.

2. The FM capacities o f the NGOs in charge o f the implementation o f the cash-for-work program have not been assessed, as these NGOs have not been identified yet. However, several features o f the cash-for-work program would ensure that NGOs have the FM capacity to implement cash-for-work sub-projects. First, NGOs would be selected based on qualification including FM experience in the implementation o f similar activities. Second, the Social Protection Manual would outline key features in the implementation o f the cash-for-work program, including: (i) the configuration o f the NGOs' simplified accounting system; (ii) the internal control procedures; (iii) the f low o f funds and the content and format o f financial reports; and (iv) the organization o f users training to strengthen NGOs capacity in FM area. The Delegated Management Contracts between the FADC and NGOs would require NGOs to implement the procedures outlined in the Social Protection Manual. Submission to and approval by IDA o f this Social Protection Manual i s an effectiveness condition.

33

11. Country issues

3. With a population o f about 700,000, the Union o f the Comoros has a federal structure with four governments: the Government o f the Union and the Governments o f the three islands that form the Union o f the Comoros. The Union and the island’s Governments have separate administrative structures (ministries and departments). This institutional complexity i s compounded by the fact that cooperation and collaboration between the various Governments are not clearly specified.

4. and implementation o f the consolidated budget, budgetary and financial management remains extremely weak. With the support o f the international community, the authorities conducted a Public Expenditure and Financial Accountability (PEFA) review in October 2007, which led to a prioritized reform strategy and ensured congruency o f donor interventions. Preliminary results o f the PEFA exercise confirm the weakness o f Comoros Public Finance Management systems, with 22 out 28 performance indicators rated D, five rated C and only one rated A.

5. Significant efforts have been made since late 2004 to improve budget preparation. A Budgetary Committee was set up in late 2004 to coordinate the preparation o f a consolidated budget for 2005. Wh i le the Directorate o f Budget o f each entity (Union and three islands) remains responsible for preparing the respective annual budgets, the Budgetary Committee provides a mechanism for discussing revenue and expenditure estimates o f each entity and for agreeing on a consolidated budget which i s submitted to the Union Assembly. The accounting and budgetary practices have being revised and harmonized across al l entities to facilitate reporting and monitoring o f budget execution, and some training has been provided to core staff. However, the Budget i s mostly established on the basis o f economic and financial constraints, and i s largely disconnected from Government’s policy priorities. With revenues barely covering wages and recurrent expenditures, there i s limited scope for using the budget as a tool for resource allocations.

6. Public financial management systems are extremely weak. The cash management plan established in 2005 has been abandoned because it required constant adjustments and was not followed upon. Allocations o f authority to spend are released quarterly, though they do not take into account availability o f funds. Agencies commit resources without knowing the actual availability o f funds. In-year adjustments are relatively frequent. Adjustments within budget sections must be approved through Ministerial Order, adjustments between sections require Presidential Decree. Two or three Orders and Decrees are issued every year. A supplemental Budget Law was adopted by the Parliament in 2006 and 2007.

7. The sharing revenue mechanism establishes that the Union Treasury maintains six different accounts at the Central Bank, while Island Treasuries have two accounts each. The cash balances o f these accounts are not consolidated. Accounts for development projects are not managed by the Treasury and their balances are not shared on a regular basis with the Treasury. These problems are compounded by the decentralization o f budgetary authority.

8. budget (deviations for the last three completed budget cycles ranged from 2.1 percent to 3.8 percent), I t terms o f composition o f expenditures, though, the budget is less credible as actual out-turns diverge significantly from the original budget (ranging between 5.6 percent and 13.8 percent).

Notwithstanding the progress made since 2005 with respect to the preparation, adoption

The overall aggregate expenditure out-turn i s largely in l ine with the original approved

34

9. revenue and expenditure out-turns can be assessed are the government financial operations table produced by the IMF and the annual report o f the Central Bank. There i s no reconciliation o f cash accounts with fiscal records. Similarly, suspense and advances accounts are not reconciled.

10. N o consolidated year-end financial statements are produced. Subsidiary accounts for each entity are transmitted to the Audit Commission within six months o f the year-end. The Audit Commission submits the reports to Parliament within eight months: 2005 accounts were submitted to the Audit Commission in March 2006, and the audit reports were submitted to Parliament in November 2006. Accounts for 2006 were submitted to the Audit Commission in May 2007.

1 1. The use o f country systems remains risky in the Union o f the Comoros. As such, it was agreed to entrust the financial management o f this Project to the FADC which has extensive experience in managing Bank funds.

111. Financial Management Risk Assessment and Mitigation

12. provides the measures to be taken to mitigate them.

N o regular fiscal documents are produced. The only “official” documents on which

The following table identifies the key risks that the Project management may face, and

Risk Rating Risks

Condition of Residual

Effectiveness rating Risk Mitigation Measures Negotiations, Board or Risk

1. Inherent Risk

While the sector fiduciary N O systems are being strengthened, the financial management (FM) aspects o f this project would be entrusted to FADC which has extensive experience in managing Bank Funds within

Country Level. Very weak PFM system and audit may not be conducted in compliance with international auditing standards due to the absence of an accounting profession in Comoros.

L Entitv Level The use o f the national system remains risky due to some fiduciary weaknesses that require much more time for their improvement. However, the FADC financial management system i s working well and its nerformance in FM area i s

S

M

These issues are being addressed through the PFM reforms supported by IDA (the planned Economic Governance TA Project) and other development partners. In the meantime, the F M aspect o f this Project would be entrusted to FADC, an independent association which has extensive experience from previous IDA projects, in implementing project o f this nature.

accounts would be carried out by an international accounting firm acceptable to IDA.

The audit o f the Project

NO: the external auditors in charge o f the audit o f the cash-for-work program should be recruited and its contract finalized within three months after Grant Effectiveness.

M

35

Weak F M capacity o f NGOs to manage cash-for-work sub-

Risk Rating

Risk Mitigation Measures

S

M

M

I Overall Inherent Risk

Update the Administrative and Financial Manual to include the revised Chart o f Accounts and the templates of IFRs to reflect new activities and components to be implemented under the Project. Update the Administrative and Financial Manual to provide guidance to Project staff, facilitate adequate record keeping of transactions, and satisfy reporting requirements.

S

YES: Updating the Manuals i s a condition for

2. Control Risk

Budget preparation i s clearly defined in the accounting procedures manual and variances are monitored closely

L

~~

Accounting Components/activities to be implemented under this Project may not be properly accounted for since they are not reflected yet in the current Chart o f accounts.

Internal Controls Procedures may not be properly applied since the manual i s not updated yet to reflect the revised Chart of accounts and the new IFR format and agreed changes in flow o f funds.

the context o f the ongoing SSP-AF. The TORS o f the internal auditor would be amended to include procurement review and his contract would be extended until the revised closing date of the Project to ensure efficient use of funds for intended purposes and consistent application of policies and procedures, including for procurement and the implementation of the cash-for-work component.

statements would be audited annually by an international accounting firm acceptable to IDA.

The Project financial

Elaboration of an operational Manual o f Proceduress for Social Protection (Manuel Protection Sociale) which will be used for the implementation o f the cash- for-work program, and organization o f users training before the transfer of funds to strengthen their capacity in F M area and ensure proper application of procedures described in the manual.

Condition o f Negotiations, Board or Effectiveness

NO: the amendment was completed

YES (see above)

YES: The operational Manual o f Procedures would be finalized and adopted before expenditure begins: this i s a condition for effectiveness.

Users training should be provided prior to transfer of funds to NGOs.

Residual Risk rating

M

M

Manuals i s a condition for effectiveness

36

Risks

Funds may not be used by the NGO (NGOs) for the purposes intend e d

Funds flow Replenishment of the Designated Account i s not timely.

Risk of disbursement suspension and therefore delays in project execution due to: i) no timely repayment o f the government debt to IDA; ii) no justificatiodrefund of the balance o f the two special accounts used within the context of the 3thrd Education Project closed in 2004.

Risk Rating

Risk Mitigation Measures

Elaboration of an operational Manual of Procedures for Social Protection and organization of users training.

Regular audit carried out by the Internal Auditor and complemented by the annual audit conducted by qualified external auditors. The TORS of the internal auditor wi l l be amended to include procurement review.

Organization o f a specific training in procurement for the internal auditor to allow him to undertake efficiently procurement review.

Transfer to SEN of all procurement documentation prepared at the regional level

The replenishment o f the Designated account will be done every two weeks and specific training in disbursement will be provided to project staff.

Disbursements from FPCR h s t Fund to FADC do not depend on country’s status with [DA

Condition of Negotiations, Board or Effectiveness YES: The Manual of Procedures for Social Protection would be finalized and adopted before expenditure begins (condition for effectiveness), and users training should be provided prior to transfer o f funds to NGOs.

N O : The internal audit wi l l cover the cash-for- work program.

NO: This action has been completed.

NO: This training in procurement will be provided by the Bank PS within three months after grant effectiveness.

NO: This action i s underway and expected to be completed by June 15, 2009

NO: The training id disbursement wil l be provided in June 09 to 16 by the Finance Analyst from LOADM.

The Finance Analyst from LOADM wil l be in Comoros from June 09 to 16, 2009 to address this issue with the Comorian authorities to avoid iisbursement suspension.

Residual Risk rating

M

37

Risks

Financial reporting Risk o f delays in the preparation and submission of IFRs

Auditing The audit may not be conducted in compliance with international auditing standards due to the weak capacity o f the CVC and absence of accounting profession in Comoros Overall Control Risk

Overall Risk Rating

Risk Rating

M

S

M

S

Risk Mitigation Measures

Content and format o f IFRs to be agreed upon at negotiations

Organization o f a training session especially for the technical staff to ensure timely preparation o f IFRs

Reconfiguration o f the existing computerized accounting and reporting system for timely production o f financial reports including IFRs

Recruitment o f an accounting firm acceptable to IDA to carry out the audit o f the financial statements under the grant. Review o f the TORS by IDA

Condition of Negotiations, Board or Effectiveness NO: The models of IFRs have been defined with the Project and wil l be agreed upon at negotiations. A training session on preparation of IFRs for technical staff will be provided upon finalization o f the revised accounting manual o f procedures.

NO: The reconfiguration o f the computerized system wil l be completed within one month after Grant Effectiveness and the system will be fully functional after this date. NO: The auditor should be recruited within three months after Grant effectiveness.

Residual Risk rating L

M

IV. Strengths and Weaknesses

13. responsible for the implementation o f the Services Support Project. FADC’s accounting and budgeting system i s adequate and the internal control procedures are appropriate. FADC has also a qualified and trained accounting staff that is very knowledgeable with Bank procedures. FADC has already ( i) an Administrative and Financial Manual which would be updated to include the revised chart o f accounts and models o f IFRs required for the proposed Grant; (ii) an operational Manual o f Procedures for the implementation o f Component 2 (Community-driven basic infrastructure). The following Table describes the measures to be adopted in preparation for new cash-for-work program, as well as a schedule for implementation.

The FADC has a strong experience in managing World Bank funds. I t i s currently

38

Update the accounting Manual o f Procedures to provide clear guidance to project staff, facilitate adequate record keeping of transactions, and satisfy reporting requirements.

Elaboration and adoption o f an operational Manual o f Procedures for Social Protection

Organization of user training to ensure proper application o f procedures described in the manual. Reconfiguration o f the existing computerized accounting and reporting system for timely production o f the financial information required for managing and monitoring all Project activities, including the proposed cash-for-work component.

Organization o f a specific training in procurement for the internal auditor to allow him to undertake efficiently procurement review.

Transfer to SEN of all procurement documentation prepared at the regional level

Recruitment o f the external auditors of FADC in charge of the audit of the financial statements under the grant.

Prior to Grant Effectiveness

Prior to Grant Effectiveness

Prior to Grant Effectiveness

Within one month after Grant Effectiveness.

Within three months after the effectiveness Date.

By June 15,2009.

Three months after Effectiveness Date

DAF (FADC)

DAF (FADC)

WB Procurement specialist.

FADC (Regional Manager and DAF)

FADC

V. Institutional and Implementation Arrangements

14. responsible for the day-to-day implementation o f the FADC. The DEN i s assisted by an Administration and Finance Director (Directeur Administratifet Financier, or DAF) at the central level. The DAF i s in charge o f the overall aspects o f the financial management o f the Project, including budgeting, maintenance o f records and accounts for all transactions related to National Executive Directorate, consolidation and production o f Project’s financial statements and quarterly IFRs, and administration o f the Designated Account. The Regional Executive Directorates manage disbursements from the regional bank accounts, maintain records and accounts for all transactions under their jurisdiction send bank’s balance sheet to the General Directorate for consolidation on a monthly basis, and prepare financial and other basic information related to Project management and monitoring as required by the General Directorate.

15.

FADC’s National Executive Director (Directeur ExecutifNationaZ or DEN) i s

Annex 1 describes the two components to be financed under the proposed Co-Financing.

VI. Staffing 16. successful in carrying out their functions. Their number i s deemed adequate.

FADC’s accounting staff i s qualified and have relevant experience to be completely

39

VII. Budgeting 17. Manual. Once updated, the accounting software in place can adequately process Project budgeting arrangements.

VIII. Accounting 18. accounting standards and IDA requirements, and capable o f recording and producing in a timely manner al l financial reports required for managing and monitoring Project activities. It operates on a decentralized basis with three Regional Executive Directorates and uses standard book accounts (journals, ledgers and trial balances) to enter and summarize transactions. The Chart o f Accounts would be reviewed to reflect the activities to be financed under the proposed Grant. The computerized system would also be adjusted to satisfy reporting requirements.

IX. Internal Control and Internal Auditing 19. FADC’s internal control system i s satisfactory with a proper authorization to initiate and execute transactions, an accounting and budgeting system ensuring timely preparation o f reliable information, and adequate measures for safeguarding assets. The Administrative and Financial Manual describes the accounting procedures. This manual would be updated to include the new Chart o f Accounts and the content and format o f the new IFR to be used for the restructured Project. The FADC would also prepare a Social Protection Manual to implement the cash-for- work program.

20. To ensure consistent application o f the procedures and efficient use o f funds the contract o f the current internal auditor has been extended until the revised closing date o f the Project. The internal auditor would carry out regular audits which would be complemented by the annual audit conducted by qualified external auditors.

21. Governance and Accountability: To efficiently address the challenges o f the proposed project and to ensure high level o f transparency and accountability, measures have been taken to strengthen the FM arrangements o f this project at both Project, NGO, and community-level including recommendations from the Anti-Corruption Guidelines.6

22. Successful internal control and financial management o f the cash-for-work program would require that beneficiaries and other stakeholders be kept well informed at a l l times and at al l levels about their entitlements, rights, obligations, and the Project’s costs and benefits. This information would be provided in a manner understandable to all interested parties. Before the release o f each tranche, summaries o f Subproject expenditures combined with simplified physical progress report and the complete l i s t o f beneficiaries and payments made to each o f them would be posted on a public board. Internal audits by trained members o f the community would be also encouraged as an integral part o f the internal control system. There would also be simple, inexpensive internal (by FADC) and external (by a trained member o f the community) ex-post audit o f payments to beneficiaries to confirm that funds have reached intended beneficiaries. These ex-post audits could be linked to the overall monitoring and evaluation o f sub-proj ects.

X. Funds Flow and Disbursements Arrangements

Project budgeting arrangements are described clearly in the Administrative and Financial

The computerized accounting system in place i s in compliance with generally accepted

World Bank. October 2006. “Anti-Comption Guidelines.”

40

23. The flow o f funds would be as follows:

w

World Bank IDA Grant H-265 I FPCR Trust Fund

FADC National Directorate Designated Account B

W

FADC Regional Directorate Regional bank account B

1

I Contractors, suppliers o f goods and services I

FADC National Directorate Designated Account C

FADC Regional Directorate Regional bank Account C

I

I

Contractors, suppliers o f goods and services

’ The Designated Account A has received funds from the Project Preparation Facility (PPF).

41

For the implementation o f this Project the following designated accounts will be used:

0 The existing Designated Account (Designated Account B) opened in a local commercial bank and managed by the National Executive Directorate in the context o f the on-going Services Support Project. Denominated in KMF (Comorian Franc), disbursements from the First Additional Grant (H-265) will be deposited on this account to finance 100 percent o f all eligible expenditures indicated in the Annual Work Programs, Budgets, and Procurement Plans for IDA H-265-funded activities; and to replenish regional bank Account B managed by Regional Directorates;

A Designated Account C to be opened in a local commercial bank under conditions satisfactory to the World Bank and managed by the National Executive Directorate. Denominated in KMF, disbursements from the FPCR Trust Fund will be deposited on this account to finance 100 percent o f all eligible expenditures indicated in the Annual Work Programs, Budgets, and Procurement Plans for FPCR Trust Fund-funded activities; and to replenish regional bank Account C managed by Regional Directorates.

While disbursing proceeds from the Grant account, the following methods may be used:

0

24. (i) advance grant proceeds into the Designated Account opened in a commercial bank acceptable to IDA; (ii) reimburse the recipient for expenditures paid from the recipient’s resources. The Administrative and Financial Manual describes in details the application steps and requirements for requesting an advance or replenishment, or applying for reimbursement.

25. recipient may use the following regional bank accounts opened (or to be opened) in a local commercial bank and managed (or to be managed) by each Regional Directorate. Denominated in local currency, disbursements from the Designated Account would be deposited on this account to finance 100 percent o f all expenditures agreed with IDA and eligible under the proposed Grant.

To ensure prompt payment o f contractors and suppliers operating in each island, the

0 The existing Regional bank account (Regional bank account B): Denominated in local currency, disbursements from the Designated Account B (AF - H 265) will be deposited on this account to finance 100 percent o f all expenditures agreed with IDA and eligible under the Additional Financing H 265,

Regional bank account C: Denominated in local currency, disbursements from the Designated Account C (FPCR Trust Fund) will be deposited on this account to finance 100 percent o f a l l expenditures agreed with IDA and eligible under the proposed FPCR TF Additional Grant.

The initial advance paid to each regional bank account would represent funds covering no

0

26. more than 60 days estimated expenditures based upon submission o f satisfactory budgeted work plans. Subsequent payments would be based on SOEs submitted by the Regional Directorate after appropriate authorization and approval by FADC’ s Financial Directorate. The Regional Directorate would submit monthly expenditure reports indicating sources and uses o f funds and justifying the use o f funds, and accompanied by reconciled bank statements. The Financial Directorate would put in place an adequate monitoring system to ensure that advances from the Designated Account to the accounts o f the Regional Directorates are accounted for and are properly documented in a timely manner. According to this system, all expenditures made at the regional level for a given month would be presented for replenishment to the national Directorate

42

within the next month. T h i s replenishment application would be supported by an appropriate bank conciliation and monthly bank statement. The Administrative and Financial Manual would be updated to include this control procedure. There i s no unaccounted amount under the ongoing Services Support Project.

27. 265) remain unchanged.

28. funds would be transferred from the regional bank accounts C as follows:

The financial arrangements to finance subprojects under the First Additional Grant (H-

To implement eligible subprojects under Component 1 “Cash-for-work program”, IDA

(i) Payment o f NGO fees: Payment o f fees to NGOs will follow the modalities outlined in the Social Protection Manual;

(ii) Payments to an N G O bank account to pay for (a) tools, materials and transport; and (b) wages to beneficiaries. Modalities for these payments will also be outlined in the Social Protection Manual.

29. Disbursement procedures: Based on experience within the context o f the on-going SSP, some delays have been encountered in the preparationhubmission o f quarterly IFRs by FADC. As a result, the use o f the transaction based disbursement procedures would be appropriate during Project implementation. Under this procedure, the required supporting documentation would include summary reports, records and statements o f expenditures (see below).

30. Expenditure (SOEs) certified by FADC (National Directorate) for contracts and other expenditures not requiring the Bank’s prior review. All SOE supporting documentation would be kept by FADC and made available for review by Bank supervision missions and internal and external auditors.

3 1. Minimum of application size: The minimum application size for direct payments to be withdrawn directly from the Grant Account, and special commitments i s 20 percent o f the amount advanced as specified in the disbursement letter issued by the Bank. 32. Grant H-265) and the proposed second additional grant from FPCR Trust Fund would be administered by the FADC Finance Directorate (DAF) from two separate Designated Accounts opened in a commercial bank on terms and conditions acceptable to IDA. The FADC Finance Directorate would be responsible for preparing disbursement requests. The init ial deposit in the designated account would be indicated in the Disbursement Letter. Further deposits by IDA into the Designated Account would be made against withdrawal applications submitted at least monthly and supported by appropriate documents.

XI. Financial Reporting 33. To monitor Project implementation, the FADC would produce an Annual Financial Statements that covers all the activities financed from the proceeds o f the original Credit, the Additional Financing and the proposed Co-Financing. These documents would comply with international accounting standards, and would include:

Use o f Statements o f Expenditures: Disbursements will be made against Statements o f

Designated Account: Payments from the proceeds o f the first Additional Grant (IDA

o Balance Sheet;

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o Summary o f sources and uses o f funds (by componentsProject activitiedcredit category, showing year-to-date and cumulative Project funds inflow, expenditures by disbursement category and by component, and closing cash and bank balances;

o The accounting policies adopted and explanatory notes;

o A management assertion.

34. Quarterly IFR: Quarterly Interim unaudited Financial Reports (IFRs) would be produced to facilitate Project monitoring. IFRs and submitted to IDA within 45 days from the end o f the reporting period. The form and content o f quarterly IFRs and annual financial statements have been agreed during negotiations. Format o f these reports would be annexed to the Administrative and Financial Manual. To facilitate the consolidation o f IFRs at the FADC National Directorate level, the expenditure report to be produced by the Regional Directorates would be submitted to the FADC National Directorate by the 25' o f the month following the end o f the quarter.

XII. Auditing 35. The entity and Project financial statements would continue to be audited annually by an international private auditing firm acceptable to IDA. This audit would be conducted in accordance with International Standards o f Auditing. The external auditors are responsible for the audit o f the project financial statements which cover the activities financed under the first Credit (IDA Credit 3868), the Additional Financing (IDA Grant H-265) and the proposed Co- Financing from the FPCR Trust Fund. This recruitment would be finalized within three months after the effectiveness date o f the Co-Financing. The terms o f reference o f the audit would be reviewed by the financial management specialist o f the World Bank to ensure that the scope o f the audit i s adequate and that special attention i s paid to particular risk areas identified during Project preparation or implementation. The auditors would be required to: (i) express an opinion on the project financial statements; (ii) carry out a comprehensive review o f the internal control procedures and provide a management report outlining significant deficiencies in the design or operation o f internal control, the proposed recommendations for strengthening the internal control system, and the management response to the auditors. The audit reports would be submitted to IDA not later than six months after the end o f each fiscal year.

36. Regarding the transfer o f funds to beneficiaries, payments to the N G O would be made by tranches and would therefore already be included in the Project accounts which are subject to an annual audit. However, the service portion o f the contracts with the NGOs (remuneration and reimbursable expenditures) would remain outside the scope o f the audit. As such, it would be useful to have an internal ex-post audit o f the cash-for-work sub-projects to confirm that funds are spent on intended purposes and payments to beneficiaries represent at least 75 percent o f the total cost o f sub-projects. Following this internal ex-post audit, an external audit o f a random sample o f sub-projects would be conducted. The auditor would be required to report on compliance with the internal control mechanisms described in the project implementation manual. The modalities, including timing, objectives, audit approach and selection o f subprojects for such audit would be described in detail in the Terms o f Reference to be reviewed by IDA.

44

XIII. Supervision Plan 37. Based on the risk assessment associated to this Project, the Project would be supervised closely, including at least two supervisions per annum. Supervision missions would ensure that strong financial management systems are maintained for the Project. If needed, a review would be carried out to ensure that expenditures incurred by the Project remain eligible for IDA funding. The Implementation Status Report (ISR) would include a financial management rating for the component. The financial management specialist would also review quarterly IFRs, the audit reports and follow-up on timely implementation o f recommendations from auditors.

45

Union of the Comoros

Services Support Project (Co-Financing and Restructuring)

Annex 5. Procurement Arrangements

1. Credit (IDA Credit 3868) and the first Additional Financing (IDA Grant H-265) remain unchanged, with the exception that the "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, revised October 2006; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004, revised October 2006, and the provisions stipulated in the Financing Agreement would apply to all contracts signed after the Co-Financing and the restructuring i s approved.

2. below. For each contract to be financed by the proposed Grant, the procurement methods or consultant selection methods, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the World Bank project team in the Procurement plan.

3. Selection of Consultants other than NGOs recruited under the cash-for-work program: Main consultant services required under the project include technical and financial audits, and training. All consulting services contracts other than those with the NGOs recruited under the cash-for-work program estimated to cost US$50,000 equivalent or more would be awarded through Quality and Cost Based Selection (QCBS). Contracts estimated to cost less than US$50,000 equivalent may be contracted through Consultant's Qualifications (CQ) method. Least Cost selection (LCS) may be used for the recruitment o f financial auditors. Single Source Selection (SSS) may be employed in accordance with paragraphs 3.9 to 3.12 o f the Consultant Guidelines with prior approval o f the Bank. All services o f individual consultants will be procured under individual contracts in accordance with the provisions o f paragraphs 5.1 to 5.4 o f the Consultant Guidelines. Short l is ts o f consultants for services estimated to cost less than US$50,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.

4. Contracts with NGOs for cash-for-work sub-projects: This component would require the use o f NGOs selected under Paragraph 3.16 o f the Consultant Guidelines, using the Selection Based on the Consultants' Qualification (CQS) method outlined in Paragraph 3.7 o f the Consultant Guidelines. Selection would be essentially based on their qualification and experience in managing similar assignments, in particular with regard to the payment certification, Under the delegated management contract, cash payments and the acquisition o f tools, materials and transport would be managed by the above-mentioned NGOs using a pass- through financing. The procurement procedures to be used in the implementation o f the contracts with NGOs would be specified in the Social Protection Manual (Manuel Protection Sociale), and reflected in the Grant Agreement. Since the value o f individuals contracts i s estimated to be less than US$lOO,OOO, only the first two contracts would be subject to prior review by IDA while the remaining contracts would be subject to post-review. Whenever

General: The procurement arrangements for the activities financed through the original

The procurement arrangements under the different expenditure categories are described

46

possible, NGOs would use national Shopping Procedures requiring at least three price quotations for the procurement o f tools, materials and transport.

5. Operating Costs: The Project would cover the operating costs related to the administration o f the cash-for-work program, including work-related expenditures, equipment rental and maintenance, vehicle operation, maintenance and repair, office rental and maintenance, materials and supplies, and utilities. For these expenditures, procurement will follow FADC’s administrative procedures which were reviewed and found acceptable to the Bank. Table: Prior Review Thresholds

Contract Value

(Threshold)

Expenditure Category Procurement Review Requirement Method

1. Consulting contracts with NGOs

CQ

2. Works

Prior review o f f i r s t 2 contracts and post review afterwards

3. Goods

>US$75,000

<US$75,000 and

>US$50,000

4. Consulting services except financial audit

ICB Prior review

NCB Post review

5. Financial audit

6. Consulting services by individuals

<uS$50,000 I .Post review SP

>US$50,000

<US$50,000 and

>US$30,000

<US$30,000

ICB Prior review

NCB Post review

SP Post review

<US$50,000 CQ Post review except: (i) TORS of generic nature, and (ii) short-list for assignments for longer than 2 months and assignments related to fmancial management and procurement

sss Prior review

>US$50,000

>us$20,000

<us$20,000

I QCBS I Priorreview

LCS Prior review

IC Prior review

IC Post review

sss Prior review

Notes: CQ: Consultants’ Qualifications; IC: Individual Consultant LCS: Least Cost Selection ICB: International Competitive Bidding NCB: National Competitive Bidding SP: Shopping Procedures requiring at least three price quotations

47

QCBS: Quality and Cost Based Selection SSS: Single Source Selection

48

Union of the Comoros

Services Support Project (Co-Financing and Restructuring)

Annex 6. Implementation and Monitoring Arrangements

Implementation Arrangements 1. implementing agency. The FADC was established in 1993 as a non- profit association for public service (association 2 but non lucratifreconnue d 'inte'rgt public). The Board o f Directors o f the FADC i s the Central Coordination Committee (CCC) who i s responsible for overseeing the FADC and for liaising with the Bank and other donors.

2. A National Executive Director (Directeur Exe'cutifNational) who i s responsible for the overall implementation o f the Project heads the FADC. A director in charge o f administration and financial management, an accountant, an internal auditor, an environmental and social specialist and other staff in charge o f monitoring and evaluation, and procurement as well as three Regional Executive Directors (Directeur Exe'cutifRe'gional) in charge o f FADC offices located on each island assist him. Regional Executive Directors are responsible for Project implementation on the island where they are located. Each o f them i s assisted by managers in charge o f capacity building, operations, monitoring and evaluation, and procurement as well as by an accountant.

3. (March 2007); (ii) an Operational Manual (September 2004) with six chapters: Institutional Framework, Community Development, Health Services, Water Systems, Monitoring and Evaluation and Direct Financing o f Communities; and (iii) an Environmental Manual. In preparation for the proposed Co-Financing, the Administrative and Financial Manual and the Environmental Manual would be reviewed and updated to incorporate the activities under the cash-for-work program. The FADC would also prepare a Social Protection Manual which would define the procedures for the implementation o f the cash-for-work program.

4. During Project implementation, the FADC would ensure that it maintains the staff necessary to implement the scheduled activities, including the environmental and social specialist.

Implementation Schedule 5. would need to be implemented by December 3 1 , 20 10. The agreed implementation schedule for the duration o f the Project implementation i s summarized in Table 1 below.

The Fonds d 'Appui au De'veloppement Communautaire (FADC) i s the Project

The FADC has three Manuals o f Procedures: (i) an Administrative and Financial Manual

The Project i s expected to close on June 30,201 1 , which implies that most activities

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Supervision, Monitoring and Evaluation Arrangements

6. The FADC has an adequate monitoring and evaluation system, which has been progressively upgraded during the implementation o f the Services Support Project. The system includes modules on: (i) management o f beneficiary request f rom the time o f receipt until the completion o f works; (ii) management o f follow-up documents related to sub-projects described in the Manual o f Procedures; (iii) management o f the annual work program; (iv) management o f contracts with local consulting f i rms, small and medium enterprises (SMEs), and NGOs; (v) preparation o f monthly reports; (vi) preparation o f semi-annual reports; and (vii) monitoring performance o f outcome and intermediate results indicators. The FADC’s Management Information System i s linked to i t s accounting system.

7. infrastructure sub-projects) in 2009, and (ii) assessments o f the cash-for-work program. Together with the financial audits, these would provide inputs for the Implementation Completion Report (ICR) to be completed by December 3 1,20 1 1.

The Project would finance (i) a technical audit o f Component 2 (community-driven basic

51

Union of the Comoros

Services Support Project (Co-Financing and Restructuring)

Annex 7. Project Preparation and Team Members

TENTATIVE TIMETABLE OF KEY PROJECT PROCESSING EVENTS

Milestone Date

Time taken to prepare

Prepared by

PreparatiodAppraisal Mission

RRC Decision meeting May 26,2009

Negotiations June 5,2009

Estimated RVP Approval* June 15,2009

8 months

Government and FADC with assistance o f WB Staff

November 14 - 28,2008

Submission to the Board* June 22,2009

Estimated Board Approval o f Co-Financing" June 30,2009

Estimated Board Approval o f Restructuring* July 7,2009

Planned Date o f Effectiveness Mid-July 2009

Revised Project Closing Date June 30,201 1

* As part o f the Global Food Crisis Response Program, the Co-Financing component o f this operation would be approved in principle by Management. The EPP would then be distributed to the Executive Directors in accordance with the procedures for the Global Food Price Response Program. In the absence o f written objections by three or more EDs by c.0.b June 30,2009 (five working days from the distribution date), Management approval would become effective as o f said date. Both MOP and EPP are scheduled to be distributed to the Executive Directors on June 22,2009 for consideration o f the restructuring aspect o f this operation in accordance with the emergency procedures outlined in OP8.0. In the absence o f writ ten objections by three or more EDs by c.0.b July 7,2009 (ten working days from the distribution date), the restructuration o f the Project would become effective as o f said date.

52

Bank staff and consultants who worked on the proposed operation include:

Name Philime Auffret

Title UnitKonsultant Task Team Leader AFTH3

Norosoa Andrianaivo Paul-Jean Fen0

Program Assistant AFTH3 Environmental SDecialist AFTEN

The preparation team greatly benefited from guidance from Lourdes Pagaran, Sr. Operations Officer (AFTRL); Victoria Gyllerup, Operations Officer (AFTRL); Cecile Ramsay, Operations Advisor (AFTQK); Norbert Mugwagwa, Operations Advisor (AFTHD) and Surendra Agarwal, Consultant (AFTQK).

Gerhard Tschannerl John van Dyck

53

Procurement Consultant Sr. Operations Officer AFCET