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Strengthening Governance Management Project (RRP [BAN 39452])

Project Number: 39452-01 August 2010

The People’s Republic of Bangladesh:

Strengthening Governance Management Project

Project Administration Manual

Contents

ABBREVIATIONS

I. PROJECT DESCRIPTION 1

A. Summary of Project Rationale, Location, and Beneficiaries 1 B. Impact and Outcome 3 C. Outputs 3

II. IMPLEMENTATION PLANS 4

A. Project Readiness Activities 4 B. Overall Project Implementation Plan 4

III. PROJECT MANAGEMENT ARRANGEMENTS 8

A. Project Stakeholders—Roles and Responsibilities 8 B. Project Implementaton Organization Chart 10 C. Key Persons Involved in Implementation 11 D. Project Staffing 11

IV. COSTS AND FINANCING 12

A. Detailed Cost Estimates by Expenditure Category 12

B. Allocation and Withdrawal of {Loan/Grant} Proceeds 13

C. Detailed Cost Estimates by Financier 14

D. Detailed Cost Estimates by Outputs 15

E. Detailed Cost Estimates by Year 17

F. Fund Flow Diagram 18

V. FINANCIAL MANAGEMENT 19

A. Financial Management Assessment 19 B. Disbursement 28 C. Accounting 29 D. Auditing 29

VI. PROCUREMENT AND CONSULTING SERVICES 30

A. Procurement of Goods, Works and Consulting Services 30 B. Procurement Plan 30 C. National Competitive Bidding 32 D. Draft Outline Terms of Reference for Consultants 33

VII. SAFEGUARDS 33

VIII. PERFORMANCE MONITORING, EVALUATION, REPORTING AND COMMUNICATION 34

A. Project Design and Monitoring Framework 34 B. Monitoring 37 C. Evaluation 37 D. Reporting 38 E. Stakeholder Communication Strategy 38

IX. ANTICORRUPTION POLICY 39

X. ACCOUNTABILITY MECHANISM 39

XI. RECORD OF PAM CHANGES 39

Project Administration Manual Purpose and Process

The project administration manual (PAM) describes the essential administrative and management requirements to implement the project on time, within budget, and in accordance with Government and Asian Development Bank (ADB) policies and procedures. The PAM should include references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the PAM.

The National Board of Revenue (NBR) and the Ministry of Land are the Executing Agencies (EAs), and are wholly responsible for the implementation of the ADB financed Strengthening Governance Management Project, as agreed jointly between the borrower and ADB, and in accordance with Government and ADB’s policies and procedures. ADB staff is responsible to support implementation including compliance by the EAs of their obligations and responsibilities for project implementation in accordance with ADB’s policies and procedures.

At Loan Negotiations the borrower and ADB shall agree to the PAM and ensure consistency with the Loan Agreement and Project Agreement. Such agreements shall be reflected in the minutes of the Loan Negotiations. In the event of any discrepancy or contradiction between the PAM and the Loan Agreement and Project Agreement, the provisions of the Loan Agreement and Project Agreement shall prevail.

After ADB Board approval of the Project's report and recommendations of the President, changes in implementation arrangements are subject to agreement and approval pursuant to relevant Government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval they will be subsequently incorporated in the PAM.

ABBREVIATIONS ADB – Asian Development Bank AICC – Aviation Industry Computer-Based Training Committee CD – cabinet division CeC – community e-centers COs – circle offices DLRS – Department of Land Records and Survey EA – executing agency GDP – gross domestic product GGP – Good Governance Program IA – implementing agency ICT – information and communication technology IT – information technology LMS – learning management system LCMS – learning content management system NBR – National Board of Revenue NCB – national competitive bidding PMU – project management unit PPMS – project performance management system PSC – project steering committee SCORM – sharable content object reference model SOE – statement of expenditure SGIA – second generation imprest account

I. PROJECT DESCRIPTION A. Summary of Project Rationale, Location, and Beneficiaries 1. Despite persistent poverty,1 Bangladesh is on track to achieve the 2015 millennium development goals target of reducing income poverty by half, and has made progress in other indicators of well-being (such as for infant and child mortality, and has met the target for gender parity in primary and secondary schooling). And while some progress has been made in alleviating poverty (e.g., during 2000–2005, income poverty was reduced from 48.9% to 40%, or 1.8% annually), income inequalities widened especially in the 1990s and poverty reduction has been uneven across regions (with the urban areas not seeing great reduction in poverty). It does not help that the country has a rather limited resource base, especially from direct taxes, to augment public investment on economic and social infrastructure. The direct tax to gross domestic product (GDP) ratio in Bangladesh is currently hovering around 2%, as against 4% in Pakistan, and more than 6% in India. 2. Compounding this problem is the historic lack of good governance in the country. For 5 consecutive years starting 2000, Bangladesh was placed the lowest in the world in corruption in the Transparency International Corruption Perceptions index ranking. Other such universal indices (such as the Global Integrity Report, Doing Business Survey), and relevant national surveys (such as the State of Governance) also consistently show that there are still big gains to be made in governance reforms and in ensuring that the average citizen perceives that the state provides effective, transparent, and accountable public services. 3. It is now universally recognized that good governance can help a country to improve allocative efficiency of limited resources. However, while macro policy-based reforms are necessary conditions for good governance,2 the sufficient condition is for there to be commensurate changes in the delivery mechanism supported by the state-of-the art technologies. Information and communication technology (ICT) applications have the potential to trigger and shape significant changes in the delivery of public services and in the way governments function. The ruling party's own election manifesto and the government's digital Bangladesh strategy acknowledge this. In this regard, like in many other developing countries, the Government has promoted e-governance applications in recent years to foster growth and development given its resource envelope and to enhance the quality of service delivery. 4. The project is consistent with the country programming strategy and in conformity with the recommendations made in the recent country assistance program evaluation in Bangladesh, which found that lack of good governance in many areas is one of the country's binding constraints to growth.3 ADB's country operations and business plan for 2009–2011 for Bangladesh states that ADB will continue to provide assistance in improving governance in Bangladesh by enhancing governance management capacity. Recognizing the need for the application of ICT tools for improved governance, the project identifies three key areas where

1 Bangladesh is primarily an agriculture-dependent country with a narrow base of exports. And although agriculture and allied activities contribute 21% of the gross domestic product (GDP), 48% of the labor force depends on agriculture. Given the rather poor performance of the agriculture sector historically, this has contributed to persistent poverty with an estimated 56 million in poverty in 2005.

2 Steps taken by the previous caretaker government and the present one as part of the support rendered by the Asian Development Bank (ADB) under the Good Governance Program (GGP) has provided a broad measure of policy coverage to such good governance reforms. Two of the most critical ones are the separation of the judiciary from the executive, and promulgation of the Right to Information Act.

3 ADB. 2009. Bangladesh Country Assistance Program Evaluation. Manila.

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the application of ICT tools has the potential for enhancing transparency and accountability in public service delivery.

(i) Tax administration is one of the most promising areas where good governance can lead to significant gains in terms of increasing tax revenues and in enhancing transparency in tax filing. Indeed, a country's tax policy is in many ways only as good as the supporting tax administration. It is widely accepted that filing tax returns online can significantly improve tax compliance, and revenue buoyancy. Electronic tax filing is one example of how automation can assist in facilitating processing of tax files. Other benefits of electronic tax filing include the elimination of the interface between taxpayer and tax officer thereby reducing the incidence of corruption and other alleged fraudulent practices.

(ii) Proper land records management is another area where the application of ICT

tools can enhance the quality of public service delivery to a great extent. Digitization of land records is one of the important prerequisites for improvements in land-related services and good administration that also aim at reducing harassment of the average landowner and small business in registering property. In an agriculture-dependent economy where marginalized land-holding by small farmers is a defining characteristic, maintaining land records is a precondition not only for land reform policies to be successfully implemented but also for social justice. Moreover, Bangladesh is one of the most crowded countries in the world and competition for land is fierce. As such, and because of forged ownership records, disputes over land ownership are the biggest single cause of court cases in Bangladesh. It has been reported that land disputes can take anywhere from 3 years to 45 years to be resolved.4 It has also been reported that almost 80% of legal battles (criminal cases) in Bangladesh are about land (the number is expected to be even higher in civil cases). And given that court cases (both civil and criminal) can be a major source of harassment to the poor, it makes business sense to try to alleviate the primary cause of the case, i.e. inaccurate records of land holdings. The use of ICT in land records management enables quicker storing, processing, and retrieving of information database in land records. Digitization of land records can also help in creating fiscal space since proper land records facilitate the Government in mobilizing significantly higher revenue from land.

(iii) The success of any good governance initiative—based on the principle of a

participatory approach—critically depends on (a) equal access to information, and (b) bi-directional information flows. Good governance alone cannot help in alleviating poverty without equal and easy access to all relevant information to the citizenry.5 Weak and inadequate infrastructure and spread of communication

4 See, e.g., Shahjahan Siraj, Bangladesh: Reduced to Beggars by Land Dispute, 11 May 2009

(http://www.panos.org.uk/?lid=27387), and "Corruption blamed for poor, lengthy land services (http://www.bdnews24.com/details.php?id=150899&cid=2). In 2004, Economics Professor Abul Barkat of Dhaka University calculated that at the current rate of progress in dispensing with court cases, it would take '30 million years for all the cases to be resolved" (http://news.bbc.co.uk/2/hi/south_asia/3533817.stm).

5 Nora Quebral (1971) of the University of the Philippines at Los Baños first emphasized the importance of communication and information in the participatory development process and used the term 'development communication' (Quebral, N. C. [1971] 'Development Communication in the Agricultural Context,' paper presented at the symposium in search of breakthroughs in agricultural development, College of Agriculture, University of the Philippines, Laguna, the Philippines).

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and information systems, as well as limited financial resources to develop or strengthen them could easily derail the good governance initiatives. The advent of ICT tools makes equal access to information possible even in the remote villages through the designated information centers provided these centers are effectively designed and properly managed. Thus, the information centers could benefit the communities and the Government in many ways: (a) saving costs of compliance with the Government rules and procedures, (b) reducing harassments by the middle men, (c) providing additional information to make the good governance initiatives successful, and (d) helping the Government to accomplish the desired outcomes of the proposed good governance initiatives. However, considerable efforts are needed to address the information constraints and difficulties with financial and technical support.6 Research has shown that the benefit on investment (BOI) from a telecenter can be as high as 1:52.92 (i.e., for each taka investment in a telecenter, the benefit can be up to taka52.92). Thus, supporting Government's endeavor to promote information sharing is important to achieve the overall impact of the project.

5. The beneficiaries of this project will be the taxpayers of Bangladesh who will have access to simplified and easy tax filing system as well as other taxpayer services through the tax system. The staff of the National Board of Revenue (NBR) will also benefit from the implementation as the work processes will get simplified and they will be able to work more efficiently and able to devote time on important activities like tax audits and taxpayer services rather than mundane repetitive manual tasks. The general population of the country will also benefit from this implementation as the revenue augmentation expected from this implementation could be directed to investments in social and physical infrastructure leading to better service delivery levels. The beneficiaries of the implementation of land record management system will include the property buyers, sellers, and holders who will get timely and reliable information on record of rights. The staff in the Ministry of Land will also benefit from the project as they will be able to work more efficiently without getting bogged-down by manual recording and reproduction of records. The Government will benefit from better realization of revenues from the property-related transactions. B. Impact and Outcome 6. The intended impact of the project will be enhanced public trust in central and local governments for service delivery. The project outcome will be improved transparency and accountability in tax and land record administration. Its focus on local government is important as it carries forward the policy-based reforms of the ongoing Good Governance Program (GGP). C. Outputs 7. There will be three outputs in the project:

6 This is especially true because Bangladesh ranks very poorly in terms of internet penetration when compared with other Asian countries (http://www.internetworldstats.com/stats3.htm#asia). Internet penetration is just 0.4% of population as against Asian average of 20.1%.

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(i) Output 1: Online filing of tax returns.7 The areas that will be targeted here are: (i) online filing of tax returns by designing the software, and (ii) strengthening ICT capacity of the income tax circles.8

(ii) Output 2: Digitized land records management system in selected districts. The project will help pilot a digitized land records management system in 45 Upazilas of five districts in phases with necessary changes in project implementation. The activities will include (i) digitizing text data, (ii) digitizing cadastral paper maps, and (iii) linking all spatial and text files.

(iii) Output 3: Improved access to tax and land information in specialized information and service centers. The project will help design, set-up and manage selected (a) tax information and service centers, and (b) land information and service centers. The activities will include (a) creating an effective design of these centers, (b) procuring relevant hardware and consulting services for the information centers; (c) planning and designing the information and service contents of these centers,9 and (d) handholding support for managing these centers for a limited period.

II. IMPLEMENTATION PLANS

8. The project implementation will be completed by 30 September 2013 and the loan closing will be 30 March 2014. A. Project Readiness Activities

Table 1: Indicative Activities and Timeframe 2010

Indicative Activity 5 6 7 8 9 10

Responsible

Advance contracting actions: starting recruiting consultants Loan Negotiations ADB/DLRS/ERD/NBR ADB Board approval ADB Loan signing ADB/ERD Government legal opinion provided ERD Establish project implementation arrangements NBR/DLRS Loan effectiveness ADB/ERD ADB = Asian Development Bank, DLRS = Department of Land Records and Survey, ERD = Economic Relations Division, NBR= National Board of Revenue.

B. Overall Project Implementation Plan10

1. Project Implementation Plan for Output 1 9. The project implementation plan for the online tax filing solution should adhere to the following phases which are further detailed into specific tasks and schedule (Table 2): 10. Planning. The planning phase is considered the most critical of all other phases since it establishes the very foundation of the project and paves ways for future tasks. Hence, it is

7 Several capacity building components have been included in the piggy-back TA.

8 There are currently 303 circles but these are expected to increase to approximately 500 over a period of 5 years.

9 It is envisaged that the taxpayers would file tax returns online from the tax information centers. Similarly, the digitized land records will be available online from the land information and service centers.

10 Based on calendar year, 1 January–31 December.

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important to ensure that a proper implementation/management unit, led by a project implementation officer, is in place prior to the commencement of the project. The project director needs to initiate consultations with stakeholders that include taxpayers and government officers from key departments. Following the formation of the project management unit (PMU), the next key step should be to gather the business requirements for completing a high-level functional specification of the desired system. The final outcome of this stage should be the formation of a project team, its roles and responsibilities, a project plan (with schedule and milestones), and the solution requirements of the system. 11. Procurement. Considering the complexity, customization, and the scope of this project a 'two-stage bidding procedure’ may be applied for selecting the vendor and procuring the software. Furthermore, the bid document should include the pre-post deployment support, knowledge transfer, and training. The vendors’ responses should also be limited to a yes/no, as much as feasible, to minimize the ambiguity which often lead to further clarification requests and ultimately delay the project. 12. Testing, Evaluation, Acceptance, Release. The objective of this phase is to give the solution a stamp of approval for the ultimate launch to all the large taxpayers, circle offices (COs), and other taxpayers. In post-vendor selection, the product should be thoroughly customized (as needed) and tested in a laboratory environment with multiple test criteria (a test plan required) and user scenarios. Once the product has been fully accepted, it should be moved to a production environment for further testing and limited field trial (selective sites/users, test criteria). The technical team must document all stages of this phase and follow through the user feedback.

13. Deployment. A few key dependencies such as internal training, support infrastructure (helpdesk), network monitoring/managing/reporting systems, and a software development unit must be in place prior to releasing the solution to the taxpayers. Following the development of a thorough deployment plan, the solution should be released to a limited number of sites and users. The experience from this trial phase should be shared among various team members for a careful evaluation and final sign-off. Pending other necessary hardware, software, connectivity issues at the COs and readiness of other infrastructure, the solution should finally move to a phased deployment approach and reach all taxpayers. 14. Maintenance, support, and sustainment. Like most other infrastructure projects, this solution also requires a proper maintenance, documentation, support, and sustainment model in place to ensure the continuing success of this project. Organizations should follow the industry based methodologies for maintaining such information technology (IT) systems and continue to train its people, refine the processes, and the technology. This can be achieved by keeping close contacts with the vendor, user community, industry, and by properly aligning the business needs with the investments in IT solutions.

Table 2: Output 1 Tasks and Schedule

2010 2011 2012 2013 Component/Activity Implementation 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

Formation of PMU Finalize solution design and specifications Vendor shortlist Bids evaluation process (software), procurement

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2010 2011 2012 2013 Component/Activity Implementation 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

Application deployment, testing (lab environment )

Test results, evaluation, fixes Application deployment (production, limited users) Results, evaluation, fixes Deployment of computer HW, connectivity in the data center

Full deployment to COs, LTs Documentation, user, and technical training Bids evaluation (HW for COs) and procurement COs = Income tax circle offices, HW = hardware, LT= large taxpayers, PMU = project management unit. Notes: 1. Large taxpayers, circle offices, and citizens with internet access.

2. Such as the software development life cycle (SPLC) which includes planning, analysis, design, implementation, maintenance (http://en.wikipedia.org/wiki/Systems_Development_Life_Cycle)

3. The data center for hosting the solution is beyond the scope of this project but required for delivering the application.

2. Project Implementation Plan for Output 2

15. The project implementation plan for the digital land records management system should adopt the following methodology which are further detailed into specific tasks and schedule (Table 3): 16. Planning. A proper management/implementation unit, led by the project director must be established prior to the commencement of the project. Following the formation of the PMU, the next key step should be to gather the business requirements and complete a high-level functional specification of the desired system. Since a commercial off-the-shelf product is usually not suited for such a complex solution, it is recommended that the requirements are discussed with potential vendors in this vertical through an extensive consultation process. The phase also serves as an opportunity to enhance the organization's knowledge in this area, identify the players in the market, make build vs. buy decisions, open vs. proprietary protocols, and assist in the formulation of the solution design. 17. Procurement. Considering the complexity, customization, and the scope of this project, a ‘two-stage bidding procedure’ is recommended in selecting the vendor and procuring the software. Furthermore, the bid document should include the pre-post deployment support, knowledge transfer, training, and should be tightened to limit the vendors’ responses to a yes/no. 18. Testing, evaluation, acceptance, release. The objective of this phase is to test the solution and plan corrective actions. In the post-vendor selection, the product should be thoroughly customized (as needed) and tested with multiple test criteria (a test plan required) and user scenarios. Once the product has been fully accepted, it should be moved to a production environment for further testing and limited field trial (selective sites/users, test

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criteria). The technical team must document all stages of this phase and follow through the user feedback. 19. Deployment. A few key dependencies such as the connectivity and necessary hardware/software at the districts and upazilas, internal training, support infrastructure (helpdesk), and a network monitoring/managing/reporting systems must be in place prior to releasing the solution for limited implementation. Following the development of a thorough deployment plan and confirmation of connectivity issues, the solution should be released to a few districts and upazilas only. The experience from this trial phase should be shared among various team members for a careful evaluation and final sign-off. Pending other necessary hardware, software, connectivity issues, and the readiness of other infrastructure, the solution should finally move to a phased deployment approach and should be accessible from the five districts and upazilas. 20. Maintenance and support, sustainment. Like most other infrastructure projects, this solution also requires a proper maintenance, documentation, support, and sustainment model in place to ensure the continuing success of this project. Organizations should follow the industry based methodologies for maintaining such IT systems and continue to train its people, refine the processes, and the technology. This can be achieved by keeping close contacts with the vendor, user community, industry, and by properly aligning the business needs with the investments in IT solutions.

Table 3: Output 2 Implementation Tasks and Schedule 2010 2011 2012 2013 Component/Activity

Implementation 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

Formation of PMU Finalize solution design and specifications vendor shortlist Bids evaluation process (software), procurement Application deployment, testing (lab environment)

Test results, evaluation, fixes Application deployment (production, test limited districts, and upazilas) Results, evaluation, fixes Data entry (digitization, database) Data center preparation and establishment

Bids evaluation, procurement (HW for software data center, districts, upazilas, leased lines) Deployment of computer HW/SW, leased lines)

Documentation, user, and technical training COs = circle offices, HW = hardware, LT = large taxpayers, PMU = project management unit, SW = software.

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3. Project Implementation Plan for Output 3 21. Planning. The goal of this stage is to identify the key project teams, and prepare a project plan with schedule and timelines. 22. Procurement. Two-stage bidding procedure will be followed. The bid document should include the pre-post deployment support, knowledge transfer, training, and should be tightened to limit the vendors’ responses to a yes/no.

23. Testing, evaluation, acceptance, release. This phase should include product installation, customization, test teams/plans, internal evaluation, and finally an acceptance criterion for moving it to a production environment. Pending a successful outcome of the initial evaluation, the solution should be migrated to a production environment and tested for its final evaluation and acceptance. 24. Deployment. The deployment should be carried out in multiple phases with proper feedback mechanism and plan in place. Necessary support infrastructure (helpdesk, hotline) and monitoring system should also be planned prior to its final release. 25. Maintenance and support, sustainment. While this solution can serve as a powerful tool for information dissemination, its very success would depend on its sustainability model—periodic updates, system maintenance plan, documentation, support, and ongoing training. The organization/s should follow the industry-based methodologies for sustaining the infrastructure and continue to refine its people, processes, and the technology for meeting its goals. One of the ways to achieve is to keep close contacts with the vendor, user community, and the industry.

Table 4: Output 3 Implementation Tasks and Schedule 2010 2011 2012 2013 Component/Activity

Implementation 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

Define requirements vendor shortlist Bids evaluation process (hardware), procurement Application deployment, testing (lab environment)

Test results, evaluation, fixes Recruitment of Customer Service Associates Application deployment (production, limited users) Results, evaluation, fixes Full deployment

Documentation, user and technical training

III. PROJECT MANAGEMENT ARRANGEMENTS

A. Project Stakeholders—Roles and Responsibilities 26. There will be two executing agencies of the project. National Board of Revenue (NBR) will be executing agency for outputs 1 and 3a and Department of Land Records and Survey

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(DLRS) will be the executing agency for outputs 2 and 3b. A project steering committee (PSC) will be established to provide overall direction and guidance to—and oversight and monitoring of—the project. The secretary, Ministry of Land will chair the PSC. PSC will include one senior official at the level of a joint secretary of the relevant ministries and agencies including: (i) Cabinet Division, (ii) Prime Minister's Office (PMO), (iii) Ministry of Land, (iv) Department of Land Records and Survey, (v) National Board of Revenue, (vi) Ministry of Science and ICT, (vii) Economic Relations Division, (viii) Finance Division, (ix) Implementation Monitoring and Evaluation Division, and (x) Planning Commission. 27. Two separate project management units (PMU) will be set-up- one at the National Board of Revenue for outputs 1 and 3a,11 and the other at the Department of Land Records and Survey (DLRS) for outputs 2 and 3b. The PMUs will be headed by a senior level government official not below the rank of a joint secretary as the project director (PD), who will report to the PSC. The PMU will be responsible for:

(i) implementing the project, (ii) selecting, engaging, and managing consultants, (iii) carrying out procurement activities, (iv) overall coordination and monitoring of the project, (v) preparing and submitting all required reports to the PSC and ADB, (vi) submitting the audited financial statement to ADB, and (vii) coordinating with the relevant government agencies and members of the PSC.

11 Same PMU will manage both components.

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B. Project Implementation Organization Chart

Project Steering Committee (PSC)

Chair: secretary, Ministry of Land Government officers not below the rank of a joint secretary will represent in the PSC from the following agencies: (i) Cabinet Division, (ii) Prime Minister's Office (PMO), (iii) Directorate of Land Records and Survey, (iv) National Board of Revenue, (v) Ministry of Science and ICT, (vi) Economic Relations Division, (vii) Finance Division, (viii) Implementation Monitoring and Evaluation Division, (ix) Internal Resources Division, and (x) Planning Commission.

Executing Agency

NBR and DLRS

Project Management Units (PMUs). Headed by a senior level Government official as project director (not below the level of a joint secretary), and include deputy project

director, administration, and accounts staff:

Output 1: National Board of Revenue (NBR)

Output 2: Department of Land Records and Surveys

Output 3a: NBR Output 3b: DLRS

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C. Key Persons Involved in Implementation

Executing Agency

Officer's Name Syed Aminul Karim Position Member, Tax, NBR Telephone 880-2-8315876, Fax 880-2-93331880 Email address [email protected]

NBR

Office Address National Board of Revenue, Segunbagicha, Dhaka Officer's Name Dr. M. Aslam Alam Position Director General, DLRS Telephone 880-2-8112380 Fax 880-2-9122849 Email address [email protected]

DLRS

Office Address 26 Shahid Tajuddin Ahmed Sarani, Tejgaon, Dhaka ADB

Staff Name Bruno Carrasco Position Director

South Asia Financial Sector, Public Management and Trade Division (SAFM)

Telephone (632) 632 6755

Division Director

Email address [email protected] Staff Name Hiranya Mukhopadhyay Position Economist, SAFM Telephone (632) 683 1967 Email address [email protected] Staff Name Firoz Ahmed Position Senior Governance Specialist

Bangladesh Resident Mission Telephone 880-2-815 6000 to 6016

Mission Leaders

Email address [email protected]

D. Project Staffing

1. Project Management Unit (PMU) Position No. Responsibilities Project Director (PD) 1 • Overall management, supervision and coordination of the

implementation of project activities; • Management and direction of project staff; • Responsible for the submission of monthly, quarterly, and

annual reports; and • Responsible for supervising/guiding the relevant project

management consultants; • Coordination with the project steering committee, the Asian

Development Bank, and other project participating agencies; and

• Overall coordination of consultants inputs;. Deputy Project Director (DPD)

2 • Assist PD in managing the project outputs; • Assist PD in maintaining various project related deadlines; • Work with the procurement officer in the PMU to finalize the

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Position No. Responsibilities bid documents; and.

• Assist PD in the submission of all types of reports Planning and Accounts Officer (PAO)

1 • Responsible for the preparation of annual budgets, financial control, annual accounts and reports;

• Supervision of monthly management accounts; and • Disbursement of PMU-related activity funds.

Monitoring and Evaluation Officers (MEO)

1 • Collection, compilation, consolidation, and analyses of relevant data from all project activities.

Procurement Officer 1 • Preparing and evaluating bid documents. Office Manager (OM) 1 Responsible for daily administration of the PMU—procurement

of office supplies, and maintenance of office equipment.

IV. COSTS AND FINANCING

28. The project investment cost is estimated at $30.3 million, including taxes and duties of $3.31 million. The total cost includes physical and price contingencies, and interest charges during implementation. 29. The Government has requested a loan of $25 million equivalent from ADB’s Special Funds resources to finance 82% of the project cost. The Government is to provide $5.3 million equivalent to finance 18% of the project cost including 100% of project staff salaries, and 100% of taxes and duties. A. Detailed Cost Estimates by Expenditure Category

(in $ million) Item

Foreign Exchange

Local Currency

Total Cost

% of Total Base Cost

A. Investment Costs 1. Online filing of tax returns (i) application software 1.89 0.00 1.89 7 (ii) customization and implementation 1.27 0.00 1.27 5 (iii) annual technical support (HW&SW) 0.70 0.00 0.70 3 (iv) IT Infrastructure (HW)

a 0.00 2.15 2.15 8

2. Digitized land records management (i) application software 3.50 0.00 3.50 13 (ii) customization and implementation 0.00 0.00 0.00 0 (iii) annual support (HW&SW)

b 2.81 0.00 2.81 11

(iv) IT infrastructure (hardware) 0.00 6.67 6.67 25 3. Improved access to Information

c

(i) tax information and service center •••• IT infrastructure 0.00 1.33 1.33 5

•••• annual support 0.00 0.34 0.34 1 (ii) land information and service center

•••• IT infrastructure 0.00 0.59 0.59 2

•••• annual support 0.00 0.07 0.07 0 4. Consulting services 0.00 0.72 0.72 3 5. Local taxes and duties

d 0.00 3.20 3.20 12

Subtotal (A) 10.17 15.07 25.24 95 B. Recurrent Costs

1. Salaries and per diem of counterpart staff 0.00 1.21 1.21 5

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(in $ million) Item

Foreign Exchange

Local Currency

Total Cost

% of Total Base Cost

2. Govt support for office accommodation 0.00 0.00 0.00 0 3. Operation and maintenance 0.00 0.00 0.00 0

Subtotal (B) 0.00 1.21 1.21 5 Total Base Cost (A+B) 10.17 16.28 26.45 100 C. Contingencies

1. Pricee 0.00 3.33 3.33 13

2. Physicalf 0.00 0.17 0.17 0.6

Subtotal (C) 0.00 3.51 3.51 14 D. Financing Charges During Implementation

1. Interest during implementation 0.00 0.35 0.35 1 2. Commitment charges 0.00 0.00 0.00 0

Subtotal (D) 0.00 0.35 0.35 1 Total Project Cost (A+B+C+D) 30.31 115

HW = hardware, IT = information technology, SW = software. a IT infrastructure for Output 1 includes circle offices only.

b Annual support for land records system includes HW/SW support and leased lines.

c Information and service center IT infrastructure includes furniture. Annual support includes leased lines for tax centers.

d Local taxes are 15% for goods and services.

e Price contingency is 13.6% and was also applied to local taxes to accommodate for future inflation of goods and taxes.

f Physical contingency is applied to physical resources and is based on 9%.

B. Allocation and Withdrawal of {Loan/Grant} Proceeds ($ million)

Reference

Description

Category

Subcategory Basis for Withdrawal

1 Equipment 16.13 1A Software for online tax filing 1.89 100% 1B Software for land records 3.50 100% 1C Software for tax and land information center 0.00 100% 1D Hardware for online tax filing 2.15 100% 1E Hardware for land records 6.67 100% 1F Hardware for tax and land information center 1.92 100% 2 Services 5.91 2A Annual SW/HW support for online tax filing 0.70 100% 2B Customization and Training—online tax filing 1.27 100% 2C Annual SW/HW support for land 2.81 100% 2D Annual SW/HW support for information center 0.41 100% 2G Consulting services for information center 0.72 100% 4 Contingency 2.96 Total 25.00

HW = hardware, SW = software.

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C. Detailed Cost Estimates by Financier ($ million)

ADB GoB

ADB ADF

% of Cost Category

Government Contribution

% of Cost Category

Total Project Cost

Item (A) (A/D) (B) (B/D) (D) A. Investment Costs

1. Online filing of tax returns (i) application software 1.89 100 0.00 0 1.89 (ii) customization and implementation 1.27 100 0.00 0 1.27 (iii) annual technical support (HW&SW) 0.70 100 0.00 0 0.70 (iv) IT infrastructure

a 2.15 100 0.00 0 2.15

2. Digitized land records management (i) application software 3.50 100 0.00 0 3.50 (ii) customization and implementation 0.00 0.00 0.00 (iii) annual support (HW&SW)

b 2.81 100 0.00 0 2.81

(iv) IT infrastructure 6.67 100 0.00 0 6.67 3. Improved access to Information

c

(i) tax information and service center • IT infrastructure 1.33 100 0.00 0 1.33

• annual support 0.34 100 0.00 0 0.34 (ii) land Information and service center

• IT infrastructure 0.59 100 0.00 0 0.59

• annual support 0.07 100 0.00 0 0.07 4. Consulting services 0.72 100 0.00 0 0.72 5. Local taxes and duties

d 0.00 0.00 3.20 100 3.20

Subtotal (A) 22.04 87 3.20 13 25.24 B. Recurrent Costs

1. Salaries and per diem of counterpart staff 0.00 0 1.21 100 1.21 2. Govt support for office accommodation 0.00 0 0.00 0 0.00 3. Operation and maintenance 0.00 0 0.00 0 0.00

Subtotal (B) 0.00 0 1.21 100 1.22 Total Cost for Section (A+B) 22.04 83 4.41 17 26.45 C. Contingencies

1. Pricee

2.90 87 0.43 13 3.33 2. Physical

f 0.06 37 0.11 63 0.17

Subtotal (C) 2.96 84 0.54 16 3.51 D. Financing Charges During Administration

1. Interest during implementation 0.00 0 0.35 100 0.35 2. Commitment charges 0.00 0 0.00 0 0.00

Subtotal (D) 0.00 0 0.35 100 0.35 Total Project Cost (A+B+C+D) 25.00 82 5.31 18 30.31 GoB = Government of Bangladesh, IT = information technology. a IT infrastructure for Output 1 includes circle offices only.


c Information and service center IT infrastructure includes furniture. Annual support includes leased lines for tax centers. d Local taxes are 15% for goods and services.



15

D.

Detailed Cost Estimates by Outputs

(in $ million)

Output

Output

Output

Component 1

Component 2

Component 3

Item

Total

Project

Cost

Amount

% of

Cost

Category

Amount

% of

Cost

Category

Amount

% of

Cost

Category

A. Investm

ent Costs

1. Online filing of tax returns

(i) application software

1.89

1.89

6

0.00

0

0.00

0

(ii) customization and im

plementation

1.27

1.27

4

0.00

0

0.00

0

(iii) annual technical support (HW&SW)

0.70

0.70

2

0.00

0

0.00

0

(iv) IT Infrastructure

a

2.15

2.15

7

0.00

0

0.00

0

2. Digitized land records m

anagement

(i) application software

3.50

0.00

0

3.50

12

0.00

0

(ii) customization and im

plementation

0.00

0.00

0

0.00

0

0.00

0

(iii) annual support (HW&SW)b

2.81

0.00

0

2.81

9

0.00

0

(iv) IT infrastructure

6.67

0.00

0

6.67

22

0.00

0

3. Im

proved access to Inform

ationc

(i) tax inform

ation and service center

•

IT Infrastructure

1.33

0.00

0

0.00

0

1.33

4

•

annual support

0.34

0.00

0

0.00

0

0.34

1

(ii) land inform

ation and service center

•

IT infrastructure

0.59

0.00

0

0.00

0

0.59

2

•

annual support

0.07

0.00

0

0.00

0

0.07

0

4. Consulting services

0.72

0.00

0

0.00

0

0.72

2

5. Local taxes and dutiesd

3.20

0.90

3

1.95

6

0.35

1

Subtotal (A)

25.24

6.91

23

14.92

49

3.40

11

B. Recurrent Costs

1.

Salaries and per diem of counterpart staff

1.21

0.00

0

1.21

4

0.00

0

2.

Govt support for office accommodation

0.00

0.00

0

0.00

0

0.00

0

3.

Operation and m

aintenance

0.00

0.00

0

0.00

0

0.00

0

Subtotal (B)

1.21

0.00

0

1.22

4

0.00

0

Total C

ost (A+B)

26.45

6.91

23

16.14

53

3.40

11

C. Contingencies

1.

Pricee

3.33

0.68

2

2.06

7

0.47

2

2.

Physicalf

0.17

0.18

1

0.11

0

0.00

0

Subtotal (C)

3.51

0.86

3

2.17

7

0.47

2

D. Financing Charges During Administration

16

(in $ million)

Output

Output

Output

Component 1

Component 2

Component 3

Item

Total

Project

Cost

Amount

% of

Cost

Category

Amount

% of

Cost

Category

Amount

% of

Cost

Category

1.

Interest during im

plementation

0.35

0.09

0

0.21

1

0.05

0

2.

Commitm

ent charges

0.00

0.00

0

0.00

0

0.00

0

Subtotal (D)

0.35

0.09

0

0.21

1

0.05

0

Total P

roject Cost (A+B+C+D)

30.31

7.86

26

18.52

61

3.92

13

HW = hardware, IT = inform

ation technology, SW = software.

a IT infrastructure for Output 1 includes circle offices only.


c Inform

ation and service center IT infrastructure includes furniture. Annual support includes leased lines for tax centers.




17

E. Detailed Cost Estimates by Year ($ million)

Item

Total Project Cost

Year 1

Year 2

Year 3

Year 4 A. Investment Costs

1. Online filing of tax returns (i) application software 1.89 0.00 0.95 0.95 0.00 (ii) customization and implementation 1.27 0.00 0.47 0.80 0.00 (iii) annual technical support (HW&SW) 0.70 0.00 0.00 0.26 0.45 (iv) IT infrastructure

a 2.15 0.00 2.15 0.00 0.00

2. Digitized land records management (i) application software 3.50 0.00 1.05 2.45 0.00 (ii) customization, implementation, and training 0.00 0.00 0.00 0.00 0.00 (iii) annual support (HW&SW)

b 2.81 0.00 0.41 0.81 1.59

(iv) IT infrastructure 6.67 0.00 6.28 0.34 0.06 3. Improved access to information

(i) Tax information and service center • IT infrastructure 1.33 0.00 0.74 0.31 0.28

• annual support 0.34 0.00 0.00 0.06 0.28 (ii) Land information and service center

• IT infrastructure 0.59 0.00 0.00 0.31 0.28

• annual support 0.07 0.00 0.00 0.00 0.07 4. Consulting Services 0.72 0.00 0.00 0.24 0.48

Subtotal (A) 22.04 0.00 12.04 6.52 3.48 B. Contingencies

1. Pricef

2.90 0.00 1.58 0.86 0.46 2. Physical

g 0.06 0.00 0.04 0.02 0.01

Subtotal (B) 2.96 0.00 1.62 0.88 0.46 Total Project Cost (A+B) 25.00 0.00 13.66 7.40 3.94 HW = hardware, IT = information technology, SW = software. a IT infrastructure for Output 1 includes circle offices only.


c Information and service center IT infrastructure includes furniture. Annual support includes leased lines for tax centers.




18

F. Fund Flow Diagram

Asian Development Bank (ADB)

Two separate Imprest Accounts—Project Management

Unit/ NBR and DLRS

Contractors, Suppliers, and Consultants

Contractors, Suppliers, and Consultants above

$100,000 (Other than through Imprest

Accounts)

Flow of Funding Request Forms

Flow of Funds

Funding Request

Review and Endorsement

Project Operating Accounts—Project Management Units

(commercial banks)

19

V. FINANCIAL MANAGEMENT A. Financial Management Assessment 30. A financial management questionnaire was completed for two PMUs (see below). PMUs have implemented numerous donor-assisted projects. There are some concerns about low institutional capacity and, thus, requires capacity building support.

Table 1: Financial Management Assessment Topic Response Remarks

1. Executing Agency(ies) There are two executing agencies (EA). National Board of Revenue (NBR) is the executing agency for Outputs 1 and 3a and Department of Land Records and Survey (DLRS) is the executing agency for outputs 2 and 3b.

1.1 What is the entity’s legal status/registration?

NBR is statutorily mandated, and DLRS (and the Ministry of Land) are created under the Government's administrative order. All of them are serving as central agencies for the Government.

1.2 Has the entity implemented an externally-financed project in the past (if so, please provide details)?

Yes. NBR implemented (i) the World Bank-financed 'Customs Modernization Project' in the mid–nineties, and (ii) the Department for International Development (DFID)-funded 'Reform in Revenue Administration Project' in the late nineties. DLRS implemented ADB-funded technical assistance (TA) for 'Modernization of Land Administration in Bangladesh'' from 1995 to 2001, and the United Nation's Development Programme (UNDP)-funded 'Modernization of Land Records and Maps for Sustainable Environment Management Program.'

1.3 What are the statutory reporting requirements for the entity?

NBR is legally responsible to prepare and provide the Finance Division estimated revenue resources which are incorporated in the national annual budget. It also prepares and submits annual report to the Government and the Parliament. Similarly, DLRS also prepares annual reports and submit them to the Government.

1.4 Is the governing body for the project independent?

At the apex level, the project will be steered by a project steering committees (PSC) to be chaired by the secretary, Ministry of Land and to be represented by relevant key agencies of the Government at the senior level. The project management has been designed as such that its governing body will have full authority to efficiently implement the project.

1.5 Is the organizational structure appropriate for the needs of the project?

Yes. All the PMUs are expected to be fully staffed, and the reporting lines are very clear within the agencies and the organizational structures are fully consistent with the needs of the project.

NBR needs some reorganization for implementing risk-based income tax audit.

20

Topic Response Remarks

2. Funds Flow Arrangements

2.1 Describe (proposed) project funds flow arrangements, including a chart and explanation of the flow of funds from ADB, government, and other financiers.

Funds will flow from ADB to imprest accounts of the PMUs at the Bangladesh Bank (central bank). Resources will then be routed to the separate project operating accounts of the two PMUs in the commercial bank for project-related work. Payments will be made on statement of expenditure (SOE) procedure, with some funds released as advances.

2.2 Are the (proposed) arrangements to transfer the proceeds of the loan (from the Government/Finance Ministry) to the entity satisfactory?

Yes. There is only a minimum possibility of delays of funds release from the central bank to the project accounts.

2.3 What have been the major problems in the past in receipt of funds by the entity?

There were no problems in the past. The delays in funds flow from the central bank to the project accounts are minimal in Bangladesh.

2.4 In which bank will the imprest account be opened?

Bangladesh Bank (central bank of Bangladesh) (First Generation Imprest).

2.5 Does the (proposed) PMUs have experience in the management of disbursements from ADB?

Yes. The PMUs will be led by project directors (PDs) who are senior officers of the government at the level of a joint secretary. All the agencies have had experience in project management and financial management matters.

2.6 Do the entities have/need a capacity to manage foreign exchange risks?

Yes. As central agencies of the Government, there are adequate provisions in place to manage foreign exchange risks.

2.7 How are the counterpart funds accessed?

Counterpart funds will be budgeted and will be provided to the PMUs as part of the annual budgetary process.

2.8 How are payments made from the counterpart funds?

See above There are reported delays in releasing the counterpart funds in some projects.

2.9 If part of the project is implemented by communities or nongovernmental organizations (NGOs), do PMUs have the necessary reporting and monitoring features built into its systems to track the use of project proceeds by such agencies?

A small part of the project activities may have some involvement of local community participation at the information centers and that there are built-in reporting and monitoring features as the PMUs have to report to ADB on a quarterly basis on these activities.

2.10 Are the beneficiaries required to contribute to project costs? If beneficiaries have an option to contribute in kind (in the form of labor), are proper guidelines formulated to record and value the labor contribution?

Not applicable.

3. Staffing

3.1 What is the (proposed) organizational structure of the accounting department? Attach an organization chart.

Information on the organization chart of the departments is in the files of the EAs. They are available on request.

21


3.2 Identify the (proposed) accounts staff, including job title, responsibilities, educational background, and professional experience. Attach job descriptions and curriculum vitas (CVs) of key accounting staff.

These are on file with the Government, and are available upon request.

DLRS, and NBR could review the job descriptions in the near future to update the skills competencies required for these positions.

3.3 Is the project finance and accounting function staffed adequately?

Yes.

3.4 Is the finance and accounts staff adequately qualified and experienced?

Yes. Most of them are graduates/post-graduates and have considerable experience in accounting in the government system. Their skills are updated through training at local and international institutions.

Project-specific hands-on training will be required to many of these staff members to ensure international reporting standard.

3.5 Are the project accounts and finance staff trained in ADB procedures?

Yes. These agencies worked with ADB before and many of the staff members are familiar with ADB procedures.

Despite this, there could be skill gaps. This will be addressed under the capacity-building program.

3.6 What is the duration of the contract with the finance and accounts staff?

Staff members in the departments are on long-term tenure. Counterpart staff members are, thus, expected to be in their positions for the foreseeable future, subject to the rotation policies of the government for civil servants.

3.7 Indicate key positions not contracted yet, and the estimated date of appointment.

As of the time of project fact-finding (May 2010), the official posts meant for the PMU are identified and will be filled up after development project proforma (DPP) approved by the Government. The Government has already committed to staffing the PMU for the project adequately.

3.10 Does the project have written position descriptions that clearly define duties, responsibilities, lines of supervision, and limits of authority for all of the officers, managers, and staff?

Yes. It is possible that there could be a review in the future regarding the specifics in the position descriptions.

3.11 At what frequency are personnel transferred?

Services of personnel belonging to the central civil service cadres are transferable. Normally, there is an administrative order that requires a minimum of 3 years service at a particular position. Transfers of technical and support staff is less frequent and, in some cases, staff positions are nontransferable.

At times, however, some staff members are transferred on short notice.

3.12 What is training policy for the finance and accounting staff?

All the institutions have their departmental training institutes and almost each staff member is entitled to a number of days of training in a year and also receives hands-on training from time to time.

Capacity building training is necessary to strengthen the institutional capacity for improved financial management. The staff members will also have opportunities for training under the proposed project.

22


4. Accounting Policies and Procedures

4.1 Does the entity have an accounting system that allows proper recording of project financial transactions, including the allocation of expenditures in accordance with the respective components, disbursement categories, and sources of funds? Will the project use the entity accounting system?

The entity's accounting system is considered adequate for purposes of this proposed project.

Hands-on training may be necessary to ensure adherence to international best practices.

4.2 Are controls in place concerning the preparation and approval of transactions, ensuring that all transactions are correctly made and adequately explained?

Yes.

4.3 Is the chart of accounts adequate to properly account for and report on project activities and disbursement categories?

Yes.

4.4 Are cost allocations to the various funding sources made accurately and in accordance with established agreements?

Yes.

4.5 Are the general ledger and subsidiary ledgers reconciled and in balance?

Yes. Although, this is generally done in a lengthier time lag.

4.6 Are all accounting and supporting documents retained on a permanent basis in a defined system that allows authorized users easy access?

Yes. Access is controlled by powers granted in the Government's Rules of Procedures.

a. Segregation of Duties

4.7 Are the following functional responsibilities performed by different units or persons: (i) authorization to execute a transaction, (ii) recording of the transaction, and (iii) custody of assets involved in the transaction?

Yes.

4.8 Are the functions of ordering, receiving, accounting for, and paying for goods and services appropriately segregated?

Yes.

4.9 Are bank reconciliations prepared by someone other than those who make or approve payments?

Accountants are responsible to prepare bank reconciliations, but all reconciliations are personally reviewed and approved by the project directors (PDs) or head of the finance unit of the entities.

23


b. Budgeting System

4.10 Do budgets include physical and financial targets?

Largely, budgets include both physical and financial targets.

There is, however, enormous scope for improving and implementing an effective outcome based budgeting.

4.11 Are budgets prepared for all significant activities in sufficient detail to provide a meaningful tool with which to monitor subsequent performance?

Yes. There are scopes for improvements.

4.12 Are actual expenditures compared to the budget with reasonable frequency, and explanations required for significant variations from the budget?

Yes. This is also carried out with respect to the original, revised, and actual figures.

4.13 Are approvals for variations from the budget required in advance or after the fact?

They are required in advance.

4.14 Who is responsible in the preparation and approval of budgets?

EAs prepare preliminary budget estimates based on guideline sent by the Finance Ministry who is responsible to scrutinize the estimates in discussion with the EAs. The budget is also placed before the Parliament for approval. Supplementary budgeting also is approved by Parliament.

For the project, the PMUs review the indicative budget prepared in advance, and submits the same for the PSC to approve.

4.15 Are procedures in place to plan project activities, collect information from the units in charge of the different components, and prepare the budgets?

Yes. The relevant units in the departments have been briefed of this requirement and the process.

4.16 Are the project plans and budgets of project activities realistic, based on valid assumptions, and developed by knowledgeable individuals?

For the proposed project, this was based on valid assumptions, and shared–and discussed–with the Government several times during (pre)fact-finding and fact-finding missions.

c. Payments

4.17 Do invoice-processing procedures provide (i) copies of purchase orders and receiving reports to be obtained directly from issuing departments?; (ii) comparison of invoice quantities, prices, and terms, with those indicated on the purchase order and with records of goods actually received?; (iii) comparison of invoice quantities with those indicated on the receiving reports?; and (iv) checking the accuracy of calculations?

Yes, as per standard procedures.

Payments for works are made by the PMUs.

24


4.18 Are all invoices stamped PAID, dated, reviewed, and approved, and clearly marked for account code assignment?

Yes.

4.19 Do controls exist in the preparation of the payroll and are changes to the payroll properly authorized?

Yes.

d. Policies and Procedures

4.20 What is the basis of accounting (e.g., cash, accrual)?

Cash-based accounting system.

4.21 What accounting standards are followed?

Standards are based on accounts code similar to International Public Sector Accounting Standards (IPSAS).

4.22 Does the project have an adequate policies and procedures manual to guide activities and ensure staff accountability?

Existing Government policies and procedures will be used for the project.

These are considered adequate for purposes of this proposed project.

4.23 Is the accounting policy and procedure manual updated for the project activities?

Public Money and Budget Management Act of 2009 ensures Finance Ministry's accountability and periodic reporting to the Parliament on the progress in fiscal management (Accounts Code and General Financial Rules updated in 1998).

4.24 Do procedures exist to ensure that only authorized persons can alter or establish a new accounting principle, policy, or procedure to be used by the entity?

Yes. Only authorized personnel can do so.

4.25 Are there written policies and procedures covering all routine financial management and related administrative activities?

As per standard of the Government's Rules of Procedures.

4.26 Do policies and procedures clearly define conflict of interest and related party transactions (real and apparent) and provide safeguards to protect the organization from them?

EAs/PMUs are safeguarded from these conflicts, although there have not been many such cases made public.

All applicable ADB guidelines will be followed as far as the project is concerned.

4.27 Are manuals distributed to appropriate personnel?

Yes.

e. Cash and Bank

4.28 Indicate names and positions of authorized signatories in the bank accounts.

The signatories for the imprest accounts and the project operating accounts will be the Heads of the EAs, and the PDs, respectively, so as to ensure some checks and balance.

4.29 Does the organization maintain an adequate, up-to-date cashbook, recording receipts and payments?

Accounts are up-to-date using computerized software.

4.30 Do controls exist for the collection, timely deposit, and recording of receipts at each collection location?

Yes.

25


4.31 Are bank and cash reconciled on a monthly basis?

Yes.

4.32 Are all unusual items on the bank reconciliation reviewed and approved by a responsible official?

These are done as per standard government rules and guidelines.

4.33 Are all receipts deposited on a timely basis?

Yes, albeit every now and then, this may not be the case.

f. Safeguard over Assets

4.34 Is there a system of adequate safeguards to protect assets from fraud, waste, and abuse?

Yes. There have been no specific issues that have been raised on this count.

4.35 Are subsidiary records of fixed assets and stocks kept up-to-date and reconciled with control accounts?

Yes. For fixed assets, there is a subsidiary ledger.

4.36 Are there periodic physical inventories of fixed assets and stocks?

Yes, as per standard government rules and guidelines.

4.37 Are assets sufficiently covered by insurance policies?

Only vehicles are insured. The management information system (MIS) will have insurance coverage from the vendor.

g. Other Offices and Implementing Entities

4.38 Are there any other regional offices or executing entities participating in implementation?

No. For this project, there are no regional offices participating in implementation.

4.39 Has the project established controls and procedures for flow of funds, financial information, accountability, and audits in relation to the other offices or entities?

Yes.

4.40 Does information among the different offices/implementing agencies flow in an accurate and timely fashion?

Generally yes, although information asymmetry (i.e., gaps in flow of information) have led to the government seeking the integrated systems.

4.41 Are periodic reconciliations performed among the different offices/IAs?

The EAs will be under the supervision of the PSC, who has oversight role over EAs. So, coordination and reconciliation among different agencies will be done smoothly.

h. Other

4.42 Has the project advised employees, beneficiaries, and other recipients to whom to report if they suspect fraud, waste, or misuse of project resources or property?

The relevant provisions on this, as well as on compliance review, have been incorporated in the PAM, which will be discussed with the Government during loan negotiations.

Standard government procedure of reporting to the next higher authority.

26


5. Internal Audit

5.1 Is there an internal audit department in the entity?

One of the EAs, NBR has a tax inspection directorate who conducts regular inspection on tax assessment of the tax units and reports directly to the chairman. Other EA, DLRS has no internal audit units.

Internal audit requires significant improvements.

5.2 What are the qualifications and experience of audit department staff?

The qualifications and experience of the staff are considered to be adequate for the proper implementation of project.

Indeed, the project will enhance opportunities for these staff members to further develop their skills.

5.3 To whom does the internal auditor report?

The chairman of the NBR.

5.4 Will the internal audit department include the project in its work program?

The project will support capacity development of the inspection department of the NBR.

5.5 Are actions taken on the internal audit findings?

If they are identified, yes.

6. External Audit

6.1 Is the entity financial statement audited regularly by an independent auditor? Who is the auditor?

The financial statement of the entities is regularly audited by the auditors of the government audit office called Office of the Comptroller and Auditor General (CAG) created under the constitutional provisions.

Time lags need to be reduced.

6.2 Are there any delays in the audit of the entity? When were the audit reports issued?

Yes. CAG submits annual audit reports with a considerable time lag, from 12 to 24 months from the end of the fiscal year.

6.3 Is the audit of the entity conducted according to the international standards on auditing?

Yes.

6.4 Were there any major accountability issues brought out in the audit report of the past 3 years?

None.

6.5 Will the entity auditor audit the project accounts or will another auditor be appointed to audit the project financial statements?

There is provision for an independent audit by the Supreme Audit Institution of the project financial statement.

6.6 Are there any recommendations made by the auditors in prior audit reports or management letters that have not yet been implemented?

No.

6.7 Is the project subject to any kind of audit from an independent governmental entity (e.g., the supreme audit institution) in addition to the external audit?

In Bangladesh, all ADB-funded projects are audited by the supreme audit institution (Office of the CAG), which is fully independent in the conduct of audit. In addition, if necessary, audit by external audit firm could be arranged.

6.8 Has the project prepared acceptable terms of reference for an annual project audit?

The specific auditing arrangements, as it applies to the project, have been specified in the project document, and agreed upon with the Government.

27


7. Reporting and Monitoring

7.1 Are financial statements prepared for the entity? In accordance with which accounting standards?

Yes. IPSAS are used.

7.2 Are financial statements prepared for the implementing unit?

Yes. The financial statement will be prepared for all the PMUs separately and for the project as a whole.

7.3 What is the frequency of preparation of financial statements? Are the reports prepared in a timely fashion useful to management for decision-making?

Quarterly financial progress reports and annual financial statement will be prepared.

7.4 Does the reporting system need to be adapted to report on the project components?

Yes. The reporting system will be reporting on all the three outputs.

7.5 Does the reporting system have the capacity to link the financial information with the project's physical progress? If separate systems are used to gather and compile physical data, what controls are in place to reduce the risk that the physical data may not synchronize with the financial data?

This link has been designed in the project. Capacity-building component in the TA is expected to address this.

7.6 Does the project have established financial management reporting responsibilities that specify what reports are to be prepared, what they are to contain, and how they are to be used?

Yes.

7.7 Are financial management reports used by management?

Yes. They are used to assess, e.g. the degree of variance, if any, between proposed and actual expenditure levels.

7.8 Do the financial reports compare actual expenditures with budgeted and programmed allocations?

Yes.

7.9 Are financial reports prepared directly by the automated accounting system or are they prepared by spreadsheets or some other means?

The agencies prepare accounts using spreadsheets. Treasury accounts are automated and computerized, and reconciled with departmental accounts.

8. Information Systems

8.1 Is the financial management system computerized?

Yes. There could be improvements particularly in integrating the systems.

28


8.2 Can the system produce the necessary project financial reports?

Yes. The system will produce quarterly project financial reports.

8.3 Is the staff adequately trained to maintain the system?

Yes. Only trained staff will be engaged for the project.

There will be further capacity-building opportunities for the PMU staff for this purpose.

8.4 Does the management organization and processing system safeguard the confidentiality, integrity, and availability of the data?

Yes.

B. Disbursement 31. Pursuant to ADB's Safeguard Policy Statement 2009,12 ADB funds may not be applied to the activities described on the ADB Prohibited Investment Activities List set forth at Appendix 5 of the Safeguard Policy Statement. All financial institutions will ensure that their investments are in compliance with applicable national laws and regulations and will apply the prohibited investment activities list to projects financed by ADB. 32. To expedite implementation of the project through the timely release of funds, ADB will channel project funds for two EAs- NBR and DLRS through two separate imprest accounts opened at the Bangladesh Bank. EAs will open two separate project operating accounts in the commercial banks. The funds in the imprest accounts will be transferred by the EAs to their respective project operating accounts with the commercial banks to facilitate payments for project expenditures. PMU will spend ADB funds based on the ADP allocation, and annual procurement and financial plan. The EAs will process all withdrawal applications and send them to ADB for disbursement. The imprest accounts will be operated, replenished, and liquidated according to ADB's Loan Disbursement Handbook (2007, as amended from time to time). The EAs will be responsible for monitoring all imprest accounts, accounts reconciliation, and ensuring timely submission of withdrawal applications to ADB with the required documentation for replenishment and liquidation. 33. The aggregate ceiling for the imprest accounts should not exceed the estimated eligible expenditure for 6 months to be financed through the imprest account or 10% of the loan amounts allocated for the respective component (loan amount for each component will be the amount allocated for executing agencies [EAs] under the respective component), whichever is lower. The request for initial advance to the imprest account should be accompanied by an estimate of expenditure sheet13 setting out the estimated expenditures for the first 6 months of project implementation, and submission of evidence satisfactory to ADB that the imprest account has been duly opened. For every liquidation and replenishment request of the imprest account, the borrower will furnish to ADB (i) statement of account (bank statement) where the imprest account is maintained, and (ii) the imprest account reconciliation statement reconciling the abovementioned bank statement against the EA’s records.14

12 Available at http://www.adb.org/Documents/Policies/Safeguards/Safeguard-Policy-Statement-June2009.pdf

13 Available in Appendix 29 of the Loan Disbursement Handbook.

14 Follow the format provided in Appendix 30 of the Loan Disbursement Handbook.

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34. ADB’s direct payment procedure will be used for individual payments and withdrawal applications will be authorized and sent by the respective EAs to ADB. For other payments, the EAs will prepare and submit reimbursement or imprest liquidation and replenishment withdrawal applications to ADB. ADB's statement of expenditure (SOE) procedures will be adopted for reimbursement, liquidation and replenishment of the imprest accounts with SOE ceiling of $100,000 for each individual payment. SOE records should be maintained and made readily available for review by ADB's disbursement and review mission or upon ADB's request for submission of supporting documents, and for independent audit.15 35. The EAs will be responsible in (i) preparing disbursement projections, (ii) collecting supporting documents, and (iii) preparing and sending withdrawal applications to ADB in consultations with the PMUs. 36. Before the submission of the first withdrawal application, the borrower should submit to ADB sufficient evidence of authorized person/s who will sign the withdrawal applications on behalf of the borrower, together with the authenticated specimen signatures of each authorized person. The minimum value per withdrawal application is $100,000, unless otherwise approved by ADB. The borrower will consolidate claims to meet this limit for reimbursement and imprest account claims. Withdrawal applications and supporting documents will demonstrate, among other things, that the goods and/or services were produced in or from ADB members and are eligible for ADB financing. Government counterpart funds will be used to finance taxes and duties which are not financed by ADB. C. Accounting 37. Each PMU will maintain separate project accounts and records by funding source for all expenditures incurred on the project managed by them and the PMU will consolidate and submit project component accounts for audit. Project accounts will follow international accounting principles and practices or those prescribed by the Government's accounting laws and regulations. PMUs will be assigned with sufficient and qualified accounting staff. D. Auditing 38. Each EA will cause the relevant project component accounts to be separately audited in accordance with sound auditing standards acceptable to ADB by an auditor acceptable to ADB. The audited accounts will be submitted in the English language to ADB within 6 months at the end of the fiscal year by the EA. The annual audit report will include a separate audit opinion on the (i) use of the imprest accounts including project operating accounts, (ii) SOE procedures, and (iii) compliance with financial covenants. The Government and the EA have been made aware of ADB’s policy on delayed submission, and the requirements for satisfactory and acceptable quality of the audited accounts. ADB reserves the right to verify the project's financial accounts to confirm that the share of ADB’s financing is used in accordance with ADB’s policies and procedures.

15 Checklist for SOE procedures and formats are available at:

http://www.adb.org/documents/handbooks/loan_disbursement/chap-09.pdf http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Contracts-100-Below.xls http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Contracts-Over-100.xls http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Operating-Costs.xls http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Free-Format.xls

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VI. PROCUREMENT AND CONSULTING SERVICES A. Procurement of Goods, Works, and Consulting Services 39. Procurement of works, goods, and services will be carried out in accordance with ADB's Procurement Guidelines (2010, as amended from time to time). Retroactive financing and/or advance contracting is not expected. Both the PMUs have already been exposed to the procurement standards of the multilateral and the bilateral donors. Moreover, training courses on procurement are regularly organized in the departmental training institutes, and in addition ADB also provides regular training on procurement. 40. Consulting services will be procured using the ADB’s Guidelines on the Use of Consultants (2010, as amended from time to time). No advance contracting or retroactive financing is expected to be considered for consulting services. 1440 person-months of consultancy services will be required. B. Procurement Plan

Table 1: Basic Data

Project Name: Strengthening Governance Management Project Country: Bangladesh Executing Agencies: NBR, DLRS Loan Amount: $25 Loan (Grant) Number: 39452 Date of First Procurement Plan: May 2010 Date of this Procurement Plan: 22 August

2010

1. Project Procurement Thresholds

41. Except as ADB may otherwise agree, the following process thresholds shall apply to procurement of goods and works. Method Threshold International competitive bidding (ICB) for goods $500,000 or above National competitive bidding (NCB) for goods Beneath that stated for ICB, goods Shopping for goods Below $100,000

2. ADB Prior or Post Review

42. Except as ADB may otherwise agree, the following prior or post review requirements apply to the various procurement and consultant recruitment methods used for the project. Procurement Method Prior or Post Comments A. Procurement of Goods and Works

(i) International competitive bidding (ICB) goods Prior (ii) National competitive bidding (NCB) goods

B. Recruitment of Consulting Firms 1. Quality- and cost-based selection (QCBS) Prior

C. Recruitment of Individual Consultants 1. Individual Consultants Prior

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3. Goods and Works Contracts Estimated to Cost More Than $0.5 Million

43. The following table lists goods and works contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

General Description

Contract Value

Procurement Method

Prequalification of Bidders (y/n)

Advertisement Date

(quarter/year) Comments Online tax filing solution (software)

3.4 ICB n Q1 2011 Financed by ADB

Land records digitization solution


Hardware for income tax circles


Hardware for land records


Hardware for information centers


ICB = international competitive bidding.

4. Consulting Services Contracts Estimated to Cost More Than $100,000

44. The following table lists consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

General Description Contract Value

Recruitment Method

Advertisement Date

(quarter/year)

International or National Assignment Comments

Customer service associates for the information centers

0.7 million Firm-QCBS (quality to cost ratio is 80:20)

Q1 2011 National Financed by ADB

QCBS = quality- and cost-based selection.

5. Goods and Works Contracts Estimated to Cost Less than $1 Million and

Consulting Services Contracts Less than $100,000

45. The following table groups smaller-value goods, works and consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 12 months.

General Description

Value of Contracts (cumulative)

Number of Contracts

Procurement/ Recruitment Method Comments

Furniture for land records data center and information centers

0.24 million multiple NCB/shopping Financed by ADB

6. Indicative List of Packages Required Under the Project

46. The following table provides an indicative list of all procurement (goods, works, and consulting services) over the life of the project. Contracts financed by the borrower and others should also be indicated, with an appropriate notation in the comments section.

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General Description

Estimated Value

(cumulative)

Estimated Number of Contracts

Procurement Method

Domestic Preference Applicable Comments

$19.0 million multiple ICB yes Financed by ADB

Goods

$0.24 million multiple NCB No Financed by ADB

Consulting Services

$0.7 million one Firm Simplified technical proposal

Financed by ADB

C. National Competitive Bidding16 47. General. The procedures to be followed for national competitive bidding shall be those set forth for the national open tendering method in the Government’s Public Procurement Rules, 2008 (as updated and issued pursuant to the Bangladesh Public Procurement Act, 2006) with the clarifications and modifications described in the following paragraphs required for compliance with the provisions of the procurement guidelines. 48. Advertising. Bidding of national competitive bidding contracts estimated at $500,000 or more for goods and related services or $1,000,000 or more for civil works shall be advertised on ADB’s website via posting of the procurement plan.17 49. Anticorruption. Definitions of corrupt, fraudulent, collusive, and coercive practices shall reflect the latest ADB Board-approved anticorruption policy definitions of these terms and related additional provisions (such as conflict of interest, etc.). 50. Location of bid submission. Submission of bids to ‘primary’ and ‘secondary’ locations, or ‘multiple droppings’ of bids shall not be required or allowed. Advertisements and bidding documents shall specify only one location for delivery of bids. 51. Rejection of all bids and rebidding. Bids shall not be rejected and new bids solicited without ADB’s prior concurrence. 52. Member country restrictions. Bidders must be nationals of member countries of ADB, and offered goods must be produced in member countries of ADB. 53. Lottery. A lottery system shall not be used to determine a successful bidder, including for the purpose of resolving deadlocks. 54. Qualification requirements. A successful bidder must be determined by an assessment process that shall include the application of qualification requirements to all bids. 55. Rejection of bids. A bid shall not be rejected on the grounds that its bid price is not within a percentage range above or below the contract estimate.

16 Updated NCB Annex to follow once finalized. A detailed assessment of procurement rules and guidelines is available upon request..

17 This does not preclude domestic advertisement clause under the Public Procurement Rules 2008.

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D. Draft Outline Terms of Reference for Consultants

1. Customer Service Associate (Domestic, 1440 person-months [PM])

56. Specific requirements for the post are: (i) a bachelor of science/arts degree; (ii) 2-3 years of work experience in Linux, Windows; (iii) highly developed communication skills in English and Bangla; (iv) strong analytical capacity and interpersonal competence and ability to work in a team or independently; (v) ability to learn and implement new technologies rapidly and effectively; and (vi) knowledge on Government policies, exposure in a public sector environment, and experience in knowledge dissemination would be a plus. 57. The Customer Service Associates' responsibilities will include, but not be limited to, the following.

(i) Manage the information and service centers; (ii) Work with the concerned government officials to develop a help/service manual; (iii) Provide support for the computers/servers, including installing upgrades, patches

as required and keep the system tuned for its optimal performance; (iv) Develop documentation where needed to assist the users; (v) Work with other system administrators and IT staff to develop a business

continuity plan to ensure uninterrupted service for users; (vi) Help to continually improve 24x7x365 monitoring and support strategy; (vii) Provide training to the concerned Government staff; (viii) Prepare needs assessment reports; and (ix) Prepare evaluation/performance report including possible areas of

improvements; and (x) Prepare a dissemination strategy in consultation with the local users.

VII. SAFEGUARDS

58. Resettlement. The project is category C on involuntary resettlement. The envisioned interventions will not entail adverse social or resettlement impacts. 59. Indigenous Peoples. The project is category C on indigenous peoples. The project requires (i) no commercial development of the cultural resources and knowledge of people; (ii) no physical displacement from traditional or customary lands; and (iii) no commercial development of natural resources, hence, has no potential negative impact on indigenous people. 60. Environment. The project is category C on environment, no adverse impact on environment is expected.

34

VIII. PERFORMANCE MONITORING, EVALUATION, REPORTING, AND COMMUNICATION

A. Project Design and Monitoring Framework Design Summary

Performance Targets and/or

Indicators18

Data Sources and/or Reporting Mechanisms

Assumptions and Risks

Impact Greater public trust in central and local governments for service delivery

Percentile rank of Government effectiveness improves by 10 percentage points (2008 baseline: 22.7) No more than 50% of national survey respondents are unaware of sources of information for government services (2008-end baseline: 71%)

Governance Matters 2009, The World Bank. Annual "State of Governance in Bangladesh" Report (by Institute of Governance Studies)

Assumption Government commitment to improved service delivery, especially at the local level will be sustainable Risk Capacity to deliver services will not be adequately emphasized by the Government thus leading to weak implementation of all reforms

Outcome Improved transparency and accountability in tax and land record administration

A system of risk-based audit for income tax is in place (mid-2010 baseline: no risk-based audits) The score in global integrity report on the effectiveness of the tax collection authority improves by 2 points (end-2008 baseline: 88) The score in global integrity report on 'Public Access to Information' improves from very weak to weak (2008-end baseline: very weak)

NBR Annual Report Global integrity report Global integrity report

Assumption Supporting policies, plans, infrastructure, and human resource capacity are in place Risks NBR and DLRS may not manage information centers properly Delays in setting up information centers

Outputs 1. Online filing of tax returns

Facility for online submission of tax returns for all taxpayers in all the income tax circle offices (mid-2010 baseline: available only for large taxpayers) At least 75% of all large taxpayers

19 file online returns

(mid-2010 baseline: 25%)

NBR Annual Reports NBR Annual Reports

Assumptions Necessary hardware and software infrastructure at NBR in place for the tax system application Risks Weak implementation capacity hampers tax administration

18 All baseline indicators are derived from published sources or are estimates of government.

19 These are the taxpayers, identified by the Government, who have taxable income beyond a threshold level.

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Design Summary

Performance Targets and/or

Indicators18

Data Sources and/or Reporting Mechanisms

Assumptions and Risks

Gender disaggregated online taxpayers data are available in the public domain (2010 baseline: no database)

NBR Annual Reports

Delays in procurement by vendors Unwillingness of tax filers to use the online system

2. Digitized land records management system in selected Districts

Complete digitized database on land records in all the five pilot districts (45 upazilas (mid-2010 baseline: only in one upazila) 75% reduction in maximum number of days taken to verify the records of rights (ROR) in the districts covered under the project (2009 baseline: 60 days) 50% increase in land development tax collection in the pilot upazilas (mid-2010 baseline: average collection Tk 4 million) Gender disaggregated online land ownership data are available in the pilot districts (2010 baseline: no database)

DLRS Annual Reports World Bank Doing Business Survey DLRS Annual Reports DLRS Annual Reports

Assumptions Proper alignment of government policies for online data protection and privacy with the release of the land record system Hard copies of the land records are available Risk Weak implementation capacity, including staff not willing to learn how to use the technology

3. Improved access to tax and land information in specialized information and service centers

Operationalize 40 information and service centers (2010 baseline: no information center). No more than 45% of survey respondents agree that they have to pay bribe to access information on their own land records (2004-end baseline: 85%)

Perception survey report. Annual "State of Governance in Bangladesh" Report Transparency International Bangladesh, April 2005

Assumption Necessary infrastructure is in place Risks Poor interdepartmental coordination leading to ineffective implementation Users' unwillingness to regularly utilize the information centers

Activities with Milestones

1. Online filing of tax returns 1.1. Recruit income tax expert (by November 2010) 1.2. Review existing tax administration protocols

related to online filing (by December 2010) 1.3. Assess potential for online tax reporting (by

March 2011) 1.4. Finalize a blueprint for implementing online filing

including software and hardware requirements (by April 2011)

1.5. Procure necessary hardware/software and complete customizing the software (December 2011)

Inputs A. Project Total: $30.3 million ADB: Asian Development Fund loan: $25.0 million Outputs

Amount ($ million)

1. Online filing of tax returns 6.0 2. Digitized land records

management system 13.0

3. Improved access to information 3.0 4. Contingency 3.0 Total 25.0

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Activities with Milestones 1.6. Conduct relevant training of staff (by May

2012) 1.7. Complete public awareness campaign (by July

2012) 2. Digitized land records management system

in selected districts 2.1. Identify possible pilot districts (by November

2010) 2.2. Assess potential for digitization of records

(by January 2011) 2.3. Recruit project implementation and ICT

experts (by February 2011) 2.4. Finalize an action plan including (i)

hardware/software requirements (by April 2011), and (ii) mid-term evaluation and corrections

2.5. Procure necessary hardware and software (by December 2011)

3. Improved access to information (by

September 2013) 3.1. Finalize an action plan (by January 2011) 3.2. Identify the location of the land information

centers (by December 2011) and tax information centers (by November 2011)

3.3. Prepare the hardware bid documents (by March 2011)

3.4. Complete the perception survey (by December 2013)

4. Project supervision and management

(continuous during project) 4.1. Establish project steering committee (by

September 2010) 4.2. Engage consultants for project activities

(starting November 2010 and as needed) 4.3. Conduct reviews: (i) steering committee

review (once every 3 months), and (ii) ADB review missions (once every six months, or as needed)

4.4. Prepare and submit: (i) project inception report (January 2011), (ii) interim reports (every 6 months after inception report), (iii) draft project final report (3 months before project end), and (iv) project tripartite and final report (within one month of end of project)

Inputs Consultancy (PMs) National: 1,440 (Customer Service Associates for the 40 information centers). Government of Bangladesh: $5.3 million (includes taxes and duties: $3.2 million) Outputs

Amount ($ million)

1. Online filing of tax returns 0.3 2. Digitized land records

management system 0.7

3. Improved access to information 0.2 4. Financing charges 0.4 5. Taxes and duties 3.2 6. Contingency 0.5 Total 5.3

B. TA Total: $0.98 million ADB: $0.80 million (TASF) Item

Amount ($ 000)

1. Consultants 524.3 2. Equipment 50.0 3. Workshops, stakeholder

consultations, etc. 140.0

4. Miscellaneous 10.0 5. Contingency 75.7 Total 800.0

Consultancy (PMs) National: 133 PMs International: 6 PMs Government: $0.18 million Item

Amount ($ 000)

1. Office accommodation 36.0 2. Renumeration and per diem of

counterpart staff 72.0

3. Administrative support 36.0 4. Others (including

communications), etc. 24.0

5. Contingency 12.0 Total 180.0

ADB = Asian Development Bank, DLRS = Department of Land Records and Survey, ICT = information and communication technology, NBR = National Board of Revenue, PM = person-months. Source: Asian Development Bank.

37

B. Monitoring

1. Project Performance Monitoring

61. PMUs shall establish and maintain a systematic project performance management system (PPMS), satisfactory to ADB, as part of its MIS, within 4 months of project effectiveness. Key performance indicators in the design and monitoring framework, disaggregated by stakeholders/regions/institutions/service providers, will be the basis for the PPMS. Yearly indicator values will be monitored during the project life. 62. The PPMS will (i) provide clear assessment of project efficiency (planned outputs against allocated inputs) and effectiveness (achievements of outcomes and impacts resulting from planned interventions), and (ii) identify deviations between project plan and execution. The PMU shall, on the basis of PPMS, recognize deviations on a timely basis and undertake prompt corrective action. A monitoring team will be established within the PMUs to ensure operation of the PPMS for all project component activities. The progress and performance of the project shall be monitored, reviewed, and reported to ADB through annual benefit monitoring reports based upon the PPMS. 63. Disaggregated baseline data for output and outcome indicators gathered during project processing will be updated and reported quarterly through the quarterly progress reports and after each ADB review mission. These quarterly reports will provide information necessary to update ADB's project performance reporting system.20 To support midterm and project final review missions, independent impact evaluation surveys and studies will be accomplished and the reports will be transmitted to ADB at least 4 weeks before the respective missions. The surveys should complement the benchmark data and measure the degree to which the project has attained outputs, outcomes, and impacts; closely reflecting the indicators of the design and monitoring framework.

2. Compliance Monitoring 64. The status of compliance, including actions taken to comply, with the loan covenants will be monitored and updated in the ADB's project performance reporting system. The monitoring mechanism will include (i) regular review and verification by the ADB project officer, (ii) field level monitoring and evaluation, (iii) monitoring and reviewing of relevant indicators in PPMS, (iv) reviewing annual audited financial statements, (v) project review missions and the midterm review, and (vi) receipt and/or approval by ADB of required documents. C. Evaluation 65. ADB and the Government will review the project at least twice a year covering (i) performance of EAs; (ii) progress of implementation; and (iii) compliance with loan assurances. ADB and the Government will undertake a comprehensive midterm review of the project to identify problems and constraints encountered and suggest corrective measures. Within 3 months of the project’s physical completion, the PMU will submit to ADB a project completion report covering project implementation, cost, outputs, and benefits, and other information requested by ADB.21

20 ADB's project performance reporting system is available at

http://www.adb.org/Documents/Slideshows/PPMS/default.asp?p=evaltool 21 Project completion report format available at http://www.adb.org/Consulting/consultants-toolkits/PCR-Public-Sector-Landscape.rar.

38

D. Reporting 66. The EAs will submit quarterly and annual project progress reports to ADB, in a format consistent with ADB's project performance reporting system. The reports will include information on the project’s physical progress and component status. The annual reports need to detail (i) progress achieved by output as measured through the indicator's performance targets, (ii) key implementation issues and solutions, (iii) updated procurement plan, and (iv) updated implementation plan for next 12 months. Within 3 months of the project’s physical completion, the PMU will submit to ADB a project completion report covering project implementation, cost, outputs, and benefits, and other information requested by ADB. To ensure projects continue to be both viable and sustainable, project accounts and the EA-audited financial statements, together with the associated auditor's report, should be adequately reviewed. 67. Copies of all studies and surveys conducted through PMUs will also be provided to ADB. E. Stakeholder Communication Strategy 68. The stakeholder communications strategy is described clearly in the attached table. The PMUs will have regular postings of the relevant information in their respective websites. The websites will include, at a minimum, the following information: (i) bidding procedures, bidders, and contract awards; (ii) use of the funds disbursed under the project; and (iii) physical progress.

Table 1: Stakeholder Communication Strategy

Project information to be communicated

Means of

communication

Responsible for Communication

Audience

Frequency Report and Recommendation to the President (RRP) with appendices

ADB website ADB ADB, Government, development partners, nongovernmental organizations (NGOs), civil society, individuals

Once

Project information while planning/designing

Discussions and stakeholders consultation

ADB/Government Project beneficiaries

Regular intervals during planning and design

Project information during implementation

Website of the executing agency (EA)/field level consultations with the stakeholders

ADB/project monitoring units (PMU)

beneficiaries Continuous

Project performance reports and project information document

ADB website ADB ADB, Government, development partners, NGOs, civil society, individuals

Every quarter

Quarterly progress reports

Website of the EAs/sharing report at the regular steering committee

NBR, DLRS ADB, government, development partners, NGOs, civil society, individuals

Quarterly

39

Project information to be communicated

Means of

communication

Responsible for Communication

Audience

Frequency meetings

Project Completion Report

ADB website ADB ADB, Government, development partners, NGOs, civil society, individuals

Once

IX. ANTICORRUPTION POLICY

69. The Government shall cause its auditor-general's department to conduct annual performance audits during project implementation to determine the utilization of the project funds and also the extent to which project objectives have been achieved. The Government shall also ensure that a special post-completion performance audit is conducted to evaluate governance, transparency, and financial accountability under the project. 70. The Government, and the EAs shall (i) acknowledge that ADB, consistent with its commitment to good governance, accountability, and transparency, reserves the right to investigate directly, or through its agents, any alleged corrupt, fraudulent, collusive or coercive practice relating to the project; (ii) shall comply with ADB’s Anticorruption Policy (1998, as amended to date); and (iii) shall cooperate with any such investigation and extend all necessary assistance for satisfactory completion of such investigation. 71. The EAs shall ensure that the anticorruption provisions acceptable to ADB are included in all bidding documents and contracts, including provisions specifying the right of ADB to audit and examine the records and accounts of the EAs, and all contractors, suppliers, consultants, and other service providers as they relate to the project. 72. The Government shall allow and facilitate ADB’s representatives to conduct spot and random checks on (i) flow of funds through all the imprest accounts and their use for the project in accordance with the loan agreement; (ii) work-in-progress; and (iii) project implementation.

X. ACCOUNTABILITY MECHANISM 73. People who are, or may in the future be, adversely affected by the project may address complaints to ADB, or request the review of ADB's compliance under the accountability mechanism.22

XI. RECORD OF PAM CHANGES 74. All revisions/updates during the course of implementation should be retained in this Section to provide a chronological history of changes to implemented arrangements recorded in the PAM.

22 For further information, see http://compliance.adb.org/.

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