Document of The World Bank

Report No: 27064

IMPLEMENTATION COMPLETION REPORT(IDA-25680)

ON A

CREDIT

IN THE AMOUNT OF SDR 27.7 MILLION (US$ 38.5 MILLION equivalent)

TO THE

REPUBLIC OF GHANA

FOR THE

LOCAL GOVERNMENT DEVELOPMENT PROJECT

October 28, 2003

Water & Urban IIAfrica Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective September 9, 2003)

Currency Unit = Cedis 8,690 = US$ 1.00

US$ 1.00 = 8,690

FISCAL YEARJanuary 1 December 31

ABBREVIATIONS AND ACRONYMSADRP Accra District Rehabilitation ProjectAPL Adaptable Program LendingCAGD Controller and Accountant General's DepartmentDA District AssemblyDACF District Assembly Common FundDCE District Chief ExecutiveECOWAS Economic Community of West African StatesEOP End of ProjectGOG Government of GhanaGPRTU Ghana Private Road Transport UnionHIPC Highly Indepted Poor CountriesICR Implementation Completion ReportIDA International Development AssociationKfW Kreditanstalt fur WiederaufbauKVIP Kumasi Ventilated Improved PitLGDP Local Government Development ProjectLGPSU Local Government Project Support UnitLI Legislative InstrumentLVB Land Valuation BoardMA Municipal AssemblyMFEP Ministry of Finance and Economic PlanningMLGRD Ministry of Local Government and Rural DevelopmentMoU Memorandum of UnderstandingMWH Ministry of Works and HousingNDPC National Development Planning CommissionNGO Non-Governmental OrganizationsO&M Operation and MaintenancePNDC Provisional National Defense CouncilPSCS Personal Services Contract StaffPWP Priority Works ProjectQAG Quality Assurance GroupRCC Regional Coordinating CouncilRIAP Revenue Improvement Action PlanSAR Staff Appraisal ReportSD Survey DepartmentTCPD Town and Country Planning DepartmentTSC Technical Services CenterUESP Urban Environmental Sanitation Project

Vice President: Callisto MadavoCountry Director: Mats KarlssonSector Manager: Inger Andersen

Task Team Leader: Charles K. Boakye

GHANALOCAL GOVERNMENT DEVELOPMENT PROJECT

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 45. Major Factors Affecting Implementation and Outcome 126. Sustainability 147. Bank and Borrower Performance 158. Lessons Learned 179. Partner Comments 1910. Additional Information 23Annex 1. Key Performance Indicators/Log Frame Matrix 24Annex 2. Project Costs and Financing 28Annex 3. Economic Costs and Benefits 30Annex 4. Bank Inputs 34Annex 5. Ratings for Achievement of Objectives/Outputs of Components 36Annex 6. Ratings of Bank and Borrower Performance 37Annex 7. List of Supporting Documents 38

Project ID: P000936 Project Name: LOCAL GOVT DEV.Team Leader: Charles K. Boakye TL Unit: AFTU2ICR Type: Core ICR Report Date: October 29, 2003

1. Project Data

Name: LOCAL GOVT DEV. L/C/TF Number: IDA-25680Country/Department: GHANA Region: Africa Regional Office

Sector/subsector: General water/sanitation/flood protection sector (38%); General transportation sector (38%); Sub-national government administration (12%); Central government administration (12%)

Theme: Access to urban services for the poor (P); Municipal finance (P); Municipal governance and institution building (P); Decentralization (P); Pollution management and environmental health (S)

KEY DATESOriginal Revised/Actual

PCD: 12/11/1989 Effective: 12/30/1994 12/30/1994Appraisal: 06/10/1993 MTR: 02/01/1997 06/23/1997Approval: 02/17/1994 Closing: 12/31/2001 03/31/2003

Borrower/Implementing Agency: GOVERNMENT OF GHANA/Local Government Project Support UnitOther Partners: Kreditanstalt fur Wiederaufbau (KfW)

STAFF Current At AppraisalVice President: Callisto Madavo Edward V. K. JaycoxCountry Director: Mats Karlsson Edwin LimSector Manager: Inger Andersen James O. WrightTeam Leader at ICR: Charles K. Boakye Jagdish K. BahalICR Primary Author: Charles K. Boakye and Gerhard

Tschannerl; assisted by Ephrem Asebe

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: M

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: S

Project at Risk at Any Time: No

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:The objectives of the project were to:

a) Improve basic infrastructure and urban services in secondary cities, especially services benefiting lower-income people.

b) Promote the sustainability and expansion of urban services by strengthening the District Assemblies' (DAs) financial, technical and managerial capacities.

c) Support the Government's decentralization program to promote accountability and efficiency in the provision of infrastructure and services.

The project objectives were in accordance with the Government's priorities of infrastructure provision to urban areas with decentralized management of urban services. The project objectives were in line with IDA's Country Assistance Strategy (CAS) for Ghana that supported decentralized development and local ownership of the development process. The Project was preceded by Sector Study: Ghana, Strengthening Local initiative and Building Local Capacity, (Report No. 11369)-GH, Washington, D.C.: February 1993. It addressed the process and scope of devolution of functions, and the local/central fiscal relationships, including revenue sharing, and reviewed the capacity of DAs to plan, finance, manage and maintain local infrastructure and service delivery. A previous urban study - Ghana, Reviving the Urban Sector (July 1988) - had also proposed a comprehensive agenda on decentralization, urban management and institutional development, and key elements were incorporated in the preceding Urban II project, which also remained relevant for the follow-up Local Government Development Project (LGDP).

While Part (a) of the objective was clear, Parts (b) and (c) contained cause and effect statements, which made it difficult to choose a consistent set of Performance Indicators (PI) for impact (see Annex 1). Nevertheless, the intention of the objective was clear. The PIs, developed during the Mid-Term review of July 1997 offered the opportunity for DAs to review their understanding of project objectives and components.

3.2 Revised Objective:The project objectives were not changed.

3.3 Original Components:a) Rehabilitation and Upgrading of Infrastructure and Urban Services Component (US$35.69 million). This included the rehabilitation and upgrading of three types of basic infrastructure and urban services:

i) Roads and Storm Water Drainage consisted of the rehabilitation of 73.9 km of existing key town center roads and links with the trunk road network; associated storm water drains; and basic traffic management measures, including intersection improvements and traffic signs.

ii) Markets and Lorry Parks involved rehabilitation and upgrading of existing markets and lorry parks, including the provision of paving, drainage, water standpipes, sanitation and washing facilities, security lighting, and structures.

iii) Waste Management included a) Solid Waste, covering the establishment of environmentally engineered landfill sites in each of the 11 towns, fencing of refuse collection stations, and provision of containers, tractors, and other equipment; and b) Liquid Waste, involving the establishment of liquid waste disposal sites, renovation of public toilets, construction of new pubic toilets, extension of water and lighting to public toilets, provision of cesspit emptiers, construction of underground holding tanks, and funding of matching grants to households for latrine construction.

b) Institutional Strengthening Component (US$7.74 million):i) Improving the financial, managerial, and technical capacity of District Assemblies to perform

functions consistent with Ghana's overall economic reform program; and ii) Strengthening the capacity of selected central government agencies to support the District

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Assemblies. The central Government agencies involved in this component included the Land Valuation Board (LVB) for the revaluation of properties; Survey Department (SD) for the preparation of maps; Town and Country Planning Department (TCPD) for the preparation of simple land-use plans; and Technical Services Center (TSC) for project management and coordination for Ministry of Local Government and Rural Development (MLGRD) and the DAs.

c) Operation and Maintenance Component (US$5.21 million) included establishing and maintaining a fund for operation and maintenance of the facilities provided under the project, and recurrent cost of DA's key professional staff.

d) Contingencies (physical and price) (US$6.88 million) 3.4 Revised Components:The project objectives were not changed.

3.5 Quality at Entry:The quality at entry is rated satisfactory.

The project was designed in the context of the Government of Ghana's evolving decentralization policy, the basic premise of which was that the DAs would eventually have discretionary responsibility for policy formulation, planning, implementation and maintenance. It focused on improving the living conditions of the population of 11 secondary towns, namely Bawku, Bolgatanga, Wa, Techiman, Sunyani, Ho, Koforidua, Agona-Swedru, Keta/Anloga, Cape Coast and Elmina. Six of the towns are regional capitals while the remaining five are district capitals.

The lessons learned from previous projects were taken into account during project preparation. The project evolved after the success of the IDA-financed Accra District Rehabilitation Project (ADRP) and the Urban II projects first in Accra and Tema, then in the five Metropolitan/Municipal cities. The Government felt the need to replicate the lessons for the development of 11 District headquarters that were next in the order of size and economic importance.

The project objectives were consistent with Government's priority for the sector. The Government’s ambitious decentralization program started in 1988 with the passage of the Local Government Law (PNDCL 207) that gave authority for the establishment of 45 new local Governments bringing the total to 110. This was followed by the 1992 constitution of the Republic of Ghana after 11 years of military rule, and Chapter 20 of the new constitution was devoted entirely to "Decentralization and Local Government." The Local Government Law assigned to the DAs the responsibility for performing the functions previously carried out at the local level by the 22 central government departments, making the DAs directly responsible for health, construction, rehabilitation, maintenance of buildings, roads and drains, markets and lorry parks and community development. The project therefore focused on building capacity in the DAs, while other services were managed by the central government.

The project was consistent with the results of sector work and the CAS objectives. Two World Bank sector studies that were carried out about the same time stressed the need for the Bank to support the sector to deepen the decentralization program (see Section 3.1).

The project had local government ownership from the start, but limited community participation. The subcomponents selected for financing in each district were prepared with the involvement of the Assembly members, and all the draft designs were presented to the General Assembly in the District before the designs were finalized. The consultations took place with the local political establishment, although not directly with the intended beneficiaries.

The potential environmental and social impact was adequately studied. Most of the works were small and had a low potential for negative environmental impact, with the exception of the final waste disposal sites, which were located away from settlements. Environment Impact Assessments (EIAs) were carried

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out on all the sites.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:The overall outcome of the project is rated satisfactory, and the impact on poverty reduction is modest. More than 100,000 low-income people who did not have access to proper sanitation benefited from household toilets in their homes. Traders and other commuters also benefited immensely from public toilets and transport terminals that were renovated or improved under the project. A number of skilled and unskilled laborers got temporary employment from over 60 civil works contracts that were awarded. While a gender objective was not explicitly stated, many of the infrastructure works benefit women more than men, including, markets, lorry parks (used largely for moving goods to and from the market), and urban roads and drains (facilitating trading and making cleaning easier). They also benefit from the improved working environment at lorry parks and health conditions in the markets.

A. The improvement in basic infrastructure and urban services in the project towns is satisfactory. a) Most DAs have met the target of no additional refuse accumulating outside designated areas and at least 90 percent of the refuse collection equipment in operating condition (see Annex 1). Most of the refuse that has accumulated in parts of the cities over several years has been removed and unauthorized dumping of fresh refuse in the town has ceased, which will improve the health status of the people. Some accumulated refuse remains in the towns’ and it is noteworthy that some DAs are gradually removing them on their own. b) There is greater access to sanitation and better maintenance of latrines through the use of more cesspit emptiers, which in some cases have served other towns in the region in addition to project towns.

c) The construction of urban roads and drains has made an impact. Road construction has eased traffic congestion (aided by the introduction of one-way systems), improved accessibility to businesses and residences, improved road safety through the introduction of traffic signals, and reduced dust. d) In most DAs drainage has eliminated flooding on improved or rehabilitated roads adjacent to, as well as in markets and transport terminals (Annex 1). In three towns drainage has helped to reclaim seriously eroded land. e) The improvement of 14 markets combined with transport terminals was successful after long delays. To date, some markets have not yet been put to use. Only three towns erected all the market sheds and two erected a part of them with their own funds as originally planned. f) All the lorry parks are in operation, managed by GPRTU. Some have already encountered major maintenance problems. In Bolgatanga, as a result of substandard work performed by the contractor, the servicing and washing of vehicles, as well as general use of unauthorized heavy duty articulated trucks on the lorry park, the condition of the pavement in the Bolgatanga lorry park deteriorated rapidly. Subsequently, it was rehabilitated again through the project just before the credit came to a close.

B. The outcome of promoting the sustainability and expansion of urban services by strengthening the DAs’ financial, technical and managerial capacity is satisfactory.

The objective was to implement and sustain project benefits through effective integration of the staff of previously centralized departments assigned to the DA level. The project was to support this objective by assisting the 11 DAs to reduce the number of district-level departments and establish an effective internal structure within departments. The project elements focused on integrating staff of the centralized departments into District administration, adopting efficiently-oriented approaches, where feasible to District Assembly employment (greater use of fixed term or contract employment), and demonstrating effective commitment to adequate recurrent financing of O&M requirements of infrastructure investments financed under the project, including the involvement of the private sector.

The project demonstrated that strong institutional capacity in the fields of planning, management, finance and operational and maintenance are essential to providing adequate services, and assuring the

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sustainability of services. The Zonal Officers and District Contract Staff (see Section 4.2 B) helped to strengthen the District Works and Finance Departments. The personnel assisted in the preparation of annual implementation action plans for all the DAs, assisted DAs in identifying on-the-job training needs for staff of the works department, and created awareness in the reorganization of the districts in conformity with the Local Government Law Act 462. They did not only work on the project, but also several other projects, including education, health and agriculture projects implemented by the DAs and financed by other donors and GoG. The staff also privatized the operation of the public toilets that improved the revenue generated from this source by about 700 percent in some DAs. In addition to the revenues generated, the DAs further saved the costs involved in the running of the toilets, such as disinfectants and the wages of the attendants and conservancy laborers.

However, the additional Legislative Instruments (LI) under Act 462, which were expected to be implemented to enable the decentralized departments work together, were not put in place by the Government. Of the 22 decentralized departments of the district, only the Department of Agriculture was integrated into the DA as envisaged under Local Government Act 462. All other constituent departments acted independently of each other as in PNDC Law 207. As the working arrangement for the decentralized departments was not in place, the Zonal Officers could not achieve the required results. A new Local Government Act was enacted in August 2003 that is designed to place the DA staff under a separate working arrangement from the Civil Service. While the contract staff were effective in producing short-term outputs of the project, they had only a limited long-term impact on the capacity of the DAs to carry out the tasks (see Section 4.2 B).

Performance of DAs Revenue Collection

All 11 DAs exceeded the target of increasing the internal revenue collection by at least 10 percent in real terms (adjusted for inflation) in the period of 1997-2002. However only 7 DAs met the target of increasing market revenue collection by at least 30 percent in real terms (see PIs in Annex 1). The reason for the shortfall on market revenues was that the rehabilitation or upgrading of markets was completed only towards the end of the project and could therefore not have had a significant impact on the market rates collected. The combined internal revenues for all DAs increased by 169 percent (Annex 1, Table 1). The collection of property rates for all DAs combined increased by 887 percent over the period (Annex 1, Table 2) and the collection of market revenues by 107 percent (Annex 1, Table 3). As the property re-valuation was completed around 1999, an increase in the property rates collection could be expected in the period of 2000 to 2002, which was indeed the case: the average annual collection for all DAs combined increased in real terms by 68 percent from the period of 1997-1999 to the period of 2000-2002 (Annex 1, Table 2). In 2003, a pilot computerized budgeting and accounting system was established in four selected DAs that had the capacity to ensure proper management, and there are indications that the system will improve DAs financial management system.

There was considerable variability in the revenue collection performance of the different DAs, which was particularly high for property rates. By and large, the performance followed the same pattern for the different kinds of revenues and in most cases can be ascribed to the prevailing social, economic, and political conditions in the respective DA. Bolgatanga had the biggest overall increase, followed by Koforidua and Cape Coast. Bawku, Keta and Elmina had the lowest and showed a decline in market revenues. Keta has suffered economic decline due to the devastating advance of the sea, and Bawku due to periodic communal strife. Bolgatanga showed an unusual trend, where the property rates increased 63-fold, while the market revenues declined over the period.

As a result of the direct intervention made on property revaluation, property rates now form the major share of locally generated revenues in most DAs. Figures recorded show that average DA revenues from property revaluation have increased from a range of 3 and 20 percent of internal revenues at the time of appraisal to 5 and 58 percent of internal revenues in 2002. (The rates formed 58 percent of revenues from Koforidua, but only 5 percent from Keta). The share of property rates as a proportion of total DA internal revenues collected increased over the period from 7 percent to 27 percent, while that of market revenues rose from 22 percent to 30 percent from 1997 to 2000 and then declined to 17 percent by 2002 (Annex 1, Tables 2 and 3). Projections of total revenues were made at the time of appraisal up

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to the year 2000. The actual performance surpassed the projections for all DAs, which can be attributed more to an underestimation of the inflation rate at appraisal than to a consistent overachievement on revenue collection by the DAs (Annex 1, Table 4).

Most DAs have contracted out the public toilets to private management through a competitive bidding process, and substantial revenue has been collected from these toilets in Agona Swedru, Koforidua and Sunyani District Assemblies. Keta, Bolgatanga, Bawku and Wa have not been able to involve the private sector in the management of these toilets, and it was learned that the DAs actually spend considerable amount of money in maintaining them. Privatization of public toilets was successful in DAs that put in place competitive procedures to the award of contracts, resulting in increased revenue from toilets. A survey was undertaken in 1999 to sample public opinion on the privatization of public toilets in Sunyani and the response was positive. Ninety-three percent of those sampled were satisfied with the privatization exercise and with the level of services provided by the operators.

C. The outcome of the support to the Government's decentralization program for better efficiency and accountability in infrastructure provision is satisfactory.

The project was not intended to support a comprehensive program on decentralization, but to make some specific interventions to advance decentralization. Most of the support was in the form of technical assistance within the confines of the prevailing state of decentralization, in the areas of reform as well as capacity building at the District level. Based on recommendations of the sector study, the project was designed to provide Government with technical assistance to review the revenue mobilization and transfer system, and generate proposals for giving districts more autonomy and flexibility in revenue raising and making transfers more predictable. During implementation, the Government decided to undertake this assignment on its own due to the political issues involved, and actually moved ahead of the project in that respect. Subsequently, based on the provisions in the Local Government law that established the District Assembly Common Fund (DACF) grants, the Government established a formula for allocating grants to the Districts. The allocation is approved by Parliament every year. Since 1995, central government has transferred nearly all of the targeted 5 percent of revenues to the DAs on a quarterly basis. The transfers were irregular in the early years and fell short of the targeted 5 percent, but the situation has improved in the past two years. All the central government agencies, i.e., Survey Department, TCPD and LVB contributed to the satisfactory performance of the institutional strengthening components. As a result of the capacity built, the agencies are carrying out similar assignments for follow-up Bank-financed projects, as well as GoG projects. Prior to the year 2000, the property rates billing and collection system was manual. However, after the preparation of a new valuation roll by the LVB, the system has been computerized, and staff has been trained to operate the system. The new Chief Executives engage LVB staff regularly on contract to resolve valuation-roll updates and other nagging issues that come up from time to time.

4.2 Outputs by components:See Annex 1 for the output indicators.

A. Rehabilitation and Upgrading of Infrastructure and Urban Services Component (US$34.6 million SAR; US$38.0 million ICR). The output of the component is satisfactory.

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Road improvement and stormwater drainage (US$15.5 million SAR; US$16.6 million ICR). The output of this component is satisfactory. A total of 57.6km was constructed out of a targeted 73.9km. The shortfall resulted from increase in cost of implementing road contracts and changes in DAs priorities. Some roads were dropped because they were planned or had in the meantime been constructed by the Ghana Highway Authority. Some savings from the road works were used to finance the construction of more storm drains and street lights. About 4.2km of storm drains were constructed in 4 towns, as against a target of 3.2km, and 1,196 street lights installed, more than twice the original target of 503. The inclusion of major electrical works in some civil work contracts was ill advised as some of the contractors did not have the necessary expertise in electrical works, with the result that some of the lights installed were sub-standard.

Market and lorry park infrastructure (US$6.6 million SAR; US$9.6 million ICR).The output of this component is satisfactory. A total area of 42 hectares compared to appraisal target of 28 hectares was covered. KfW contributed the bulk of the funds for the market and lorry parks infrastructure at the original cost of DM16 million (US$ 8.7 million) while GoG contributed the rest. KfW also financed the construction of 85 market sheds in Wa, Bolgatanga and Bawku, and 16 sheds in Anloga. KfW assistance included the services of a consultant who was the lead supervisor. An additional amount of DM1 million was later transferred to the project from the Promotion of District Capitals project to finance the extra cost of the market sheds in Bolgatanga, Bawku, Wa and Anloga, bringing the total KfW contribution to $9.14 million. IDA also contributed about $0.6 million for the construction of 8 market sheds in Techiman, lockable stores in Elmina and 10 market sheds, loading bay and drive area in Ho.

Waste Management(US$12.5 million SAR; US$11.8 million ICR).The output of the overall component is satisfactory. Ten of the planned 11 final disposal sites, for both liquid (i.e. sludge) and solid waste, were constructed. An additional solid waste disposal site was rehabilitated in Koforidua, which was already in place and well engineered. All final disposal sites are now managed by the DAs and nearly all of them have had problems with their operation due to one or more of the following reasons: poor site selection, poor designs, and inadequate operational management. The liquid waste facilities in some of the towns were constructed as waste stabilization ponds and the rest were open pits. Some of the solid waste disposal sites were open spaces, but most of them were controlled tipping cells in a walled enclosure. Of the targeted 125 refuse collection points that served as transfer sites of solid waste, the project constructed 193. The following waste management equipment was delivered to the DAs: 11 bulldozers, 23 skip loaders, 23 cesspit emptiers, 11 tractors, 15 Roll-on Roll-off trucks, 64 trailers, 241 Open containers, 16 covered containers, 22 night soil containers, and 36 Roll-on Roll-off containers. Some assemblies converted one of the two septic tank emptiers that were supplied to them to a water tanker, and the bulldozer that was provided for the efficient filling of final solid waste disposal sites was frequently hired out to contractors for construction work.

Of the 277 public toilets targeted for rehabilitation or construction, about 206 were completed. Fewer suitable sites could be identified than had been planned, and many of the toilets that were meant for construction only needed rehabilitation. This shortfall was amply made up by the construction of 5,968 household toilets, more than twice the targeted 2,700. They benefited an estimated 135,800 people instead of the originally planned 70,000, and consisted of several popular types: 70 percent were water closets and the rest were KVIPs, Aqua privies, and other types. Based on preliminary estimates, the total cost of a toilet facility was put at $300 to $400 and the project paid up to 50 percent ($200) of the cost into a DA sanitation fund for each household. An audit report carried out in 2002 showed anomalies in the disbursement of funds in some DAs, and recommended that in future, the component should be implemented by NGOs. B. Institutional strengthening (US$7.7 million SAR; US$11.9 million ICR). The overall outcome is satisfactory.

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Technical Assistance to DAs (US$2.7 million SAR; US$2.0 million ICR). The overall outcome is satisfactory.Technical assistance was provided through 12 national consultants in three key fields of municipal engineering, financial management and district planning and management over a three-year period. The 11 participating towns were grouped into four zones. Each zone was served by a Zonal Office, and comprised a Civil Engineer, a Finance Officer and a Planning Officer, to advise DAs in their respective fields for three years. The most senior of the three served as Project Coordinator. Adequate resources, including equipment and operational support were provided to enable the professionals provide the needed assistance for capacity building.

Although there were outstanding tasks, the contracts of the zonal officers were not extended after the scheduled three years. Factors that affected their performance included conflicts with DAs personnel, lack of acceptability by DAs staff, the inability of the Assemblies to recruit their requisite chartered accountants as counterpart staff, and the fact that the various departments of the Assemblies had not yet been decentralized. Furthermore, the zonal officers were supposed to assist the DAs in the adaptation and introduction of improved budgeting and accounting systems, as well as software and manuals, which had been developed under the Urban II project. MLGRD apparently was not committed to carrying out these reforms. It never made these studies available to the zonal officers and the DAs and did not procure the necessary computer networking equipment required for their implementation. The major infrastructure works from which revenues could be collected, that is markets, lorry parks and public toilets, were not fully completed when the zonal officers were in place, and billing for property rates could not start since the property revaluation had not been completed. Key outputs are as follows:

The Planning Officers in the zonal offices facilitated the preparation of 5-year medium term development plans, prepared for the Assemblies by consultants, and introduced the costing element to the plan. The limited success was due to the lack of an institutional link between the zonal planning unit and the National Development Planning Commission (NDPC.) The latter body has statutory responsibilities for the administration of planning studies throughout the country, and the support provided by the zonal planning office conformed to the technical requirements of the NDPC. The zonal planning officers could also influence the perceptions of the NDPC through the field experiences submitted to them. The Engineers organized briefing sessions for senior staff of DAs on relevant aspects of civil works contracts. Although the engineers were supposed to be advisors to the DA staff, they played a major role in both LGDP and non-LGDP civil works contracts, especially in towns where DA staff was not available. They helped to put in place arrangements for the maintenance of the waste management equipment and established modalities for the privatization of public toilets. The Finance Officers, who were chartered accountants, helped to introduce activity based budgeting in some DAs, which better reflects reality than incremental budgeting. The existing accounting system in most DAs reported only cash transactions, and the officers helped to record bills according to the accrual system of accounting. As a result of difficulties encountered in the recruitment of chartered accountants as counterpart staff in the DAs, (see below), the zonal Finance Officers not only advised, but also implemented the finance component in the Districts. Their effectiveness was severely constrained by the institutional fragmentation of financial management at the District level. Budgeting is controlled by the Budget section, headed by the Budget Officer who was a staff of Ministry of Finance and Economic Planning (MFEP), whereas accounting is controlled by the District Finance Officer, a staff of the Controller and Accountant General's Department (CAGD), who concentrates on expenditure controls in the assembly, leaving the revenue generation to the revenue section, controlled by Revenue staff who are not under any Ministry, but are staff of the Assembly. This arrangement, which still prevails in the Assemblies, creates a low incentive for revenue generation, and is responsible for a lack of coordination among the different sections.

Strengthening the capacity of selected central government agencies to support the DAs

Town and Country Planning Department (TCPD) for Land-Use Planning (US$0.33 million SAR; US$0.17 million ICR). The outcome of the component is satisfactory.Land-Use Planning was completed in 2003 with the delivery of electronic and hard copies of structural plans for both developed and undeveloped areas of two urban towns. The scheme will guide public and

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private investments in infrastructure, revenue generation and urban planning, ensure efficient urban growth and reduce environmental problems. It was originally meant for 9 towns, but due to insufficient cooperation among the TCPD, the consultants, and the project implementation unit, it was reduced to two towns, Sunyani and Techiman, with the understanding that Planning Officers in the other towns will replicate lessons in their respective towns at the end of the assignment. The replication has not yet materialized. TCPD staff in the head office and regional offices have, however, been trained in various aspects of development planning. All six regional offices were supplied with 6 double cabin pick-ups, 6 motorcycles and computers.

Land Valuation Board (LVB) for Property Revaluation (US$0.66 million SAR; US$1.16 million ICR). The outcome of the component is satisfactory.A total of 125,043 properties were revalued in 12 towns, as against the targeted 74,300. The increase was due to the addition of 40,000 newly constructed properties. LVB staff carried out the revaluation and completed the exercise in 8 towns at the cost of $680,187 while three private sector valuation firms revalued properties in the remaining 3 towns, which amounted to 39 percent of properties at the cost of $481,361. LVB staff also carried out post-valuation exercises, involving outreach with DAs, updating of valuation rolls and a computerization program. Two LVB staff members were exposed to valuation techniques in the United Kingdom's Valuation Office and other staff members were trained in various aspects of valuation. The project also supplied 5 double-cabin pickups, 33 motorcycles and 2 computers, printers and accessories to the Department.

Survey Department (SD) for Mapping (US$1.6 million SAR; US$1.8 million ICR). The outcome of the component is satisfactory.Of the targeted 300 sq. km, about 700 sq. km of large-scale maps of scale 1:2500 were produced for 11 project towns. The additional 400 sq. km covered the undeveloped areas of the urban towns to facilitate future planning. The maps, which are available in both digital and hard copy forms covering the project towns, will also be used for infrastructure programming and revenue mobilization services. The maps are essential to enable land users, planners, engineers, land valuers, and providers of utility services to carry out their work properly. The component was implemented by private sector contractors under the overall supervision of the Survey Department (SD), which is also responsible for the maintenance of the maps. The SD had undertaken a similar assignment under Urban II and other GoG projects. Their staff received overseas training in digital mapping techniques.

Technical Services Center (TSC) for Project management (US$0.7 million SAR; US$1.3 million ICR).

The overall outcome of the component is satisfactory.Under a Memorandum of Understanding between the Ministry of Works and Housing (MWH) and the Ministry of Local Government and Rural development, the TSC provided overall implementation and project management support to the other agencies and DAs. TSC had overall responsibility, on behalf of MLGRD, for accounting, procurement, monitoring, coordinating and reporting functions. The MLGRD was responsible for the institutional strengthening component, especially with respect to technical assistance for improving local revenue collection performance, financial management systems, and DAs organizational structure and staffing. It was resourced and benefited from an accounting system that enables the production of various reports. Both TSC and MLGRD performed satisfactorily under the project and by 1999, the MLGRD wanted to improve project coordination to enhance overall implementation of the follow-up bank financed UESP. The MoU was abrogated and most of the professional staffs were co-opted in the LGPSU that was established in the MLGRD with the responsibility for implementing all Bank-financed projects. The LGPSU carried out the functions previously undertaken by TSC well, but could not adequately handle the technical assistance support to the DAs.

C. Incremental Recurrent costs and Operation and Maintenance (US$5.2 million SAR; US$2.3 million ICR). The overall output of this component is unsatisfactory. Operation and Maintenance (US$3.3 million SAR; US$1.4 million ICR). The output of this component is satisfactory.

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By the end of 1998, all DAs had established an O&M fund, and both IDA and the DAs made contributions to this fund up to December 2001, after which IDA financing stopped according to the declining disbursement percentage for this category. IDA financing into this fund was 50 percent for the first 3 years and 30 percent for subsequent years. The reported cumulative contribution of the DAs is $828,129 equivalent and that of IDA $538,330. These funds were used mainly for the servicing and fueling of waste management trucks, street cleaning, and drain cleaning for the DAs and were not necessarily limited to the infrastructure and equipment provided through the project. A technical and financial audit of the O&M funds, completed in August 2003, revealed irregularities in the disbursement of the funds. Some DA staff did not follow the guidelines for the disbursement of funds and LGPSU did not put in place adequate procedures for monitoring. The report recommended that future funds should target specific maintenance activities, and not all maintenance works. A follow-up on the recommendations contained in the report has been impaired by the fact that most of the DA staff who supervised the component had been transferred at the time of the audit.

Personal Service Contracts Staff (PSCS) (US$1.9 million SAR; US$0.9 million ICR).The output of this component is unsatisfactory.In parallel with the establishment of Zonal Offices, a pilot scheme to test a "labor market approach" in local government employment was initiated to recruit 33 key staff in higher-level positions in the DAs on contract basis, and as counterparts to the Zonal Officers. The aim was to improve the competency of key staff at the District level, which could in general not be maintained due to the unattractive conditions of employment in the civil service, and was to ensure that all DAs had at least one qualified Engineer, one Planning Officer, and one Finance Officer. At the end of the recruitment drive, only 22 positions were filled, including 11 Planners, 10 Engineers and 1 Finance Officer. The Finance Officers were particularly difficult to find, as they were required to be chartered accountants, and they were not satisfied with the $1,000 (equivalent in cedis) remuneration offered for the position. The financing of the District Contract Staff was initially to be shared by the Government and DAs, and was based on the premise that as DAs' self-generated revenues increased as the Revenue Improvement Action Plans (RIAPs) were implemented, the DAs would increase their share of the financing over time. The terms and conditions of their contracts were negotiated with the MLGRD and the District Chief Executives (DCEs), and a uniform rate was agreed on for all the staff. The assignments started in mid-1997, and there was an initial lack of cooperation from DAs, who saw the recruitment as top-down. The wide salary gap between the PSCS and the DA civil servants also made matters worse. PSCS were not fully embraced by the DAs, and they did not involved them in their work. Subsequently, their contracts were not extended after the initial four years. The Government also financed 100 percent of the recurrent cost throughout the entire contract period of 4 years although it was meant to be shared with the DAs. These difficulties notwithstanding, the District staff contributed to improving the technical capacities of the DAs. After their contracts ended, the Government filled these positions with civil service staff.

Other Cross-Sectoral outcomeTraining. A wide range of training activities was undertaken as part of improving capacity of the DAs and central government agencies. More than 50 courses were provided, benefiting professional staff, heads of departments and general Assembly staff. They included computer skills, computerized budget and accounting, monitoring and evaluation, staff development, performance evaluation, engineering, and planning. The training had only a limited impact as few of the senior DA staff trained were still in their posts at End of Project (EOP). They were either transferred to other DAs as part of a routine exercise by the PSC, or left to join the private sector. There was also a widespread duplication in training, as other District-based projects, supported by the Bank or other donors, included a similar training program at the DA level, and often for the same personnel. The widespread duplication has created an attitude towards training as a form of salary supplementation. This calls for better coordination and inter-sectoral harmonization between the departments and agencies promoting urban development.

Private Sector Participation (PSP). Modest gains were made in involving the private sector in the management of infrastructure services. The civil works contracts were executed by private sector contractors, and public toilets and lorry parks have been put under private management. However, the private sector could not be involved in the management of the operation and maintenance of markets

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and waste collection services. After a delay of several years, a pilot study for 4 urban towns was completed for the establishment of a waste management system through PSP. The consultant designed ways of implementing a basic waste management system that takes into account financial, legal, institutional, social, technical and environmental aspects and details of the potential role of the private sector. Technical assistance with the implementation of these recommendations was provided to the four Districts near the end of the project, cutting short the completion of their implementation. The waste management equipment supplied under the project had not been leased to the private sector by EOP and implementation of this is being planned for within the next phase of the ongoing Urban 5 program.

4.3 Net Present Value/Economic rate of return:The economic viability of the project was measured in the SAR by calculating the EIRR of 14 road rehabilitation activities, 3 market interventions and two each of the solid waste and liquid waste management activities. These constituted about 20 percent of the project cost. An ex-post evaluation was carried out for the 14 road rehabilitation activities using actual contract values and updated traffic data. The data used for the analysis, the assumptions made, and the results of the exercise are presented in Annex 3, which shows an average weighted EIRR of the projects of 68 percent, well above the 15 percent required for approval of projects in the sector. These results also compare favorably with the corresponding figures of 84 percent overall weighted EIRR for the roads and drainage component, as given in the SAR.

4.4 Financial rate of return:No financial rate of return calculation is shown in the SAR.

4.5 Institutional development impact:The institutional development impact is rated as modest.

1. At the end of the project, few of the senior DA staff trained was still in place. They were transferred to other districts every three or four years, but some of them left for employment in the private sector, depriving the project DAs of the full benefits from the training that had been provided. The project assemblies have also benefited from senior professionals from other DAs.

2. The O&M account that was established in every District was not actually used for the upkeep of the entire municipal infrastructure services as intended. It has nevertheless increased the awareness of most Districts that better O&M of the equipment can be achieved through planning and budgeting (Section 4.2 C).

3. An attempt was made to improve the management, financial and technical capacity of the DAs through the recruitment of key staff on better terms than the civil service conditions. The rationale was that the additional revenue generated and the increased budgeting and accounting efficiency would far exceed the additional salary cost of these employees. This idea was successful insofar as it demonstrated that strong institutional capacity in the fields of planning, management, finance and operational and maintenance can provide improved municipal services. It failed, however, as a long-term measure because not enough chartered accountants could be attracted to these jobs, and the contract staff were largely considered "outsiders" (Section 4.2 B).

4. A pilot system for improved budgeting and financial management was introduced in 4 DAs that had a relatively good management capacity, and there are indications that this will improve financial management and budgeting (Section 4.1 B).

5. The TSC under the Ministry of Works and Housing was virtually dismembered in the course of project implementation and replaced with LGPSU. MLGRD found the cooperation with TSC across institutional lines increasingly difficult and in 2000 abrogated the MoU and moved the core of the TSC project implementation staff to MLGRD to form its own project implementation unit. While this may have improved the implementation of several World Bank-assisted projects, it did not result in a greater role for the regular MLGRD staff.

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6. The project has improved the capacity of the LVB and SD to better carry out their mandate. As a result, the DAs now use a permanent database for property revaluation and a computerized property rates billing and collection system. LVB monitors the use of the system in the DAs and provide them with needed technical assistance. LVB and SD are implementing similar services under the Urban 5 project. The improvement of land use planning in the DAs was less successful.

7. The local construction and consulting industry was strengthened through the awarding of contracts. All civil works construction, including two ICB contracts, was carried out by national contractors, and all design and supervision services were likewise done by national consultants. The absence of any form of performance monitoring in the construction industry affected the quality and efficiency of construction services.

8. Most DAs have contracted out the management of public toilets to private operators through a competitive process and are collecting substantial revenues (Section 4.2 C).

9. The waste management equipment supplied under the project had not been leased to the private sector by EOP, as intended. A study on PSP in waste management was completed only 2 years prior to the end of the project and could be introduced only as a pilot in 4 DAs, none of which showed significant improvements in their waste management by EOP, which would require more time and a systematic follow-up (Section 4.2 B).

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:1. Absence of additional Legislation Instruments (LI) under Act 462, which were expected to be implemented to enable the decentralized departments work together.

2. Inflexibility. Strict interpretation of project covenants often led to reduction in scope of the civil works, so as to keep within budget. However, in almost all contracts, civil works were completed with excess funds available, necessitating going through another round of the bidding procedures, and above all, paying additional supervision fees.

5.2 Factors generally subject to government control:1. High inflation and depreciation of the local currency adversely affected the implementation of the project. The average annual inflation was about 25 percent, and peaked at 75 percent in 1995 . Internal revenue generated under the RIAPs program depreciated as a result of inflation, and contractors and consultants persistently complained of depreciation of the value of the contracts. This compelled the project unit to introduce price adjustment clauses in almost all contracts.

2. The Government lacked the commitment to proceed decisively with decentralization. Issues relating to leadership, accountability and full devolution of power in DAs are almost absent in the local Government administration. This is largely due to the nature of the local Government law that currently exists. Generally, political decentralization has not, so far, been accompanied by a commensurate decentralization of authority: transfer of significant decision-making authority has not accompanied creation of fully locally elected legislative bodies at district level.

3. Nearly all the District Chief Executives were changed in 1996 and 1999 as part of the local government reshuffle administration, and subsequently most of their senior staff was also changed. The new Chief Executives did not understand the project and attempted to change the priorities that had been agreed with the predecessors. This caused considerable disruption to the project. Following the change in government after the elections of December 2000, the Chief Executives were again changed, but by this time nearly all the components were completed. They did, however, give an impetus to the revenue generation components.

4. Counterpart Funds: The Government reneged on their counterpart fund contribution and this

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affected the implementation of civil works components in the first few years. The implementing agency was left with no option but delay the payment of withholding tax deductions due the Internal Revenue Service (IRS), thus creating a kind of vicious cycle, where there was no money for counterpart fund contribution as a result of poor performance in tax collection, contributed in part by the inability of project officers to pay tax deductions promptly. This arrangement, apparently with the approval of MFEP and MLGRD, helped improve the cashflow and eased the counterpart fund crises.

5. More than half the DAs obtained adequate evidence of land rights for the solid waste disposal sites before the project became effective, which allowed a quick start of the project. The other DAs obtained such evidence soon after Effectiveness, with the exception of Ho, where issues arose after the contractor moved onto the site; after 3 years the problem in Ho was resolved.

6. Delays in completing civil works. Out of 60 contracts awarded under the project, none was completed on schedule, with some of them lasting beyond 18 months, instead of the 6 months stipulated in the contract, and 4 were terminated. The quality of work by some contractors was unsatisfactory. The reasons for this are nationwide, but much worse for contracts administered by MLGRD and DAs than the Ministry of Roads and Transport. There is little incentive for contractors--as well as supervising consultants--to complete the construction on time, as the contractual provisions (such as liquidated damages) are not enforced, delays are the norm, and payments to contractors are often seriously delayed. The Government and the industry failed to put an effective monitoring system in place to regulate the performance of contractors and consultants.

5.3 Factors generally subject to implementing agency control:1. Staff turnover in LGPSU was stable throughout, and the experience gained in managing previous projects contributed to the satisfactory civil works implementation performance achieved.

2. Rising inflation compelled LGPSU to introduce price adjustment formulae in civil works contracts, reducing the risks to contractors.

3. The presence of a Financial Management Specialist in LGPSU, even on a short-term basis, could have improved the performance of the RIAPs program. Both MLGRD and LGPSU did not find the need to recruit one.

4. Inadequate outreach to Zonal Officers and District Assembly staff by MLGRD and project unit contributed to the modest gains on the institutional building component. After the abrogation of the MoU (Section 4.2), the unit was mandated to manage the technical assistance component, but it was still preoccupied with civil works, and did not adequately provide the needed advise on institutional issues. 5. Inadequate coordination between the accounting and engineering staff in the project unit, and lack of financial forecast of outstanding project funds and required contingency sums, resulted in identifying excess funds belatedly at the end of each contract. This contributed to the extension of the credit and the cancellation of more than half a million US dollars of uncommitted funds after the closing of the Credit.

6. As two new urban projects (Urban Environmental and Sanitation and Urban V) were under preparation, attention shifted from implementation of LGDP to the preparation of the new projects, and this had adverse effects on some LGDP components.

5.4 Costs and financing:Total project cost, as estimated in the SAR, was US$55.51 million, comprising US$26.02 million (47 percent) in local cost and US$29.49 million in foreign costs (53 percent). Financing was to be provided as follows: IDA: US$38.51 million (69.3 percent of total project cost); KfW: US$8.29 million (15 percent); District Assemblies: US$3.16 million (5.7 percent); and GoG: US$5.55 million (10 percent). Final financing was US$52.28 million, comprising US$26 million in local cost and US$24.63 million in foreign cost. Final disbursement were IDA: US$36.88 million, KfW US$9.14 million, GoG US$3.08, DAs

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US$1.77 million and also beneficiaries contribution of US$1.41 million for household toilet, which was not included at appraisal.

Out of total SAR counterpart forecast of US$5.55 million, US$3.08 million was actually received by the project unit as counterpart fund contribution, representing about 55 percent of forecast. A withholding tax amount of about US$0.8 million that should have been paid to GoG was used to meet a part of the counterpart fund shortfall. An unspecified amount was also waived in taxes and custom duties (import, ECOWAS tax, and destination inspection) during the importation of vehicles, waste management equipment and computers. It was not possible to assess the exact Government contribution associated with the granting of exemptions for taxes and duties, however, this could be substantial. On the whole, Government total financial contribution could be much closer to SAR's forecast.

The total disbursed amount was reduced to US$52.28 million due to the following factors: i) US dollar appreciation against the SDR decreased the total IDA contribution from US$38.5 million to US$37.5 million; ii) undisbursed amounts of about US$0.6 million earmarked for cancellation; and iii) large foreign exchange ratio of payments that were allowed in civil works contracts, which increased IDA proportion for disbursements and reduced GoG proportions.

The District Assemblies and beneficiaries were expected to contribute US$3.16 million being their share of the costs associated with the Personal Service Contracts, and Operation and Maintenance Fund. The total amount contributed was US$1.77 million due to the late start and early completion of the PSCS and O&M assignments. The total counterpart funds from Government stood at US$3.08m, the share from the District Assemblies was US$0.83 million, being their contribution to the Operation and Maintenance Matching Funds, which was what was affordable to them.

Generally, actual cost was in line with SAR forecast, with the exception of consulting services and training. The cost of the former category of expenditures was higher as a result of more than 100 percent increase in the cost of consultant's supervision services. The cost of the latter was much lower than anticipated.

The local currency, the Cedi, depreciated by about 1100 percent during the life of the project at an average annual rate of about 25 percent. The annual high depreciation of the local currency compelled the project unit to introduce price adjustment formulae in civil works contracts and this reduced the risk to contractors and consultants.

6. Sustainability

6.1 Rationale for sustainability rating:The sustainability of the project is rated as likely.

1. Since the project lasted for slightly more than 8 years, many of the activities provided under the project were completed long before the closing date. This has provided an opportunity to observe that most of them have performed satisfactorily. For example, since 2001 DAs have on their own employed the services of LVB to update their valuation rolls for the collection of property rates. Lorry parks are under the management of a private transport body, the Ghana Private Road Transport Union (GPRTU). Some facilities, such as markets, lorry parks, public toilets, generate their own maintenance revenues. Road maintenance is covered by the Road Fund.

2. The capacity of the DAs to prepare investment plans and implement projects has by now been well established. The investment and maintenance funds available to the Assemblies have substantially increased in recent years. Nearly all capital expenditures are financed through grants, which have mainly consisted of the DACF, donor-assisted project funds, and recently, HIPC funds. In 2002, ¢1 billion (US$125,000) was released from the HIPC fund to every Assembly regardless of size, and in 2003, ¢2.3 billion (US$270,000) to every Municipal Assembly and ¢1.4 billion (US$165,000) to every DA. There were 3 MAs and 8 DAs in LGDP. The flow of HIPC funds is expected to increase in coming years as the Government reaches the completion point of the program.

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3. In response to complaints about the disruptions caused by frequent staff transfers, the PSC has recently improved on the posting of qualified professional staff into the DAs. The CAGD also trains and posts Finance officers to vacant positions in the DAs. Attrition to the private sector, however, continues to be a problem, which is due to low remuneration in the civil service. Currently, the DAs do not have authority over their own staff. Since the Local Government Service Act was gazetted (passed by parliament in August 2003), DAs will have a say in hiring, promoting and transferring their staff, which is expected to improve the efficiency in staff management and responsiveness to staffing needs.

4. The private sector has gained experience through implementing components of the project and the opportunity has been created to involve them in maintaining the facilities.

6.2 Transition arrangement to regular operations:1. Ongoing Bank-assisted urban projects that are planned under the APL program through 2011, and other GoG and donor-financed projects will advance the decentralization objective through a greater role for the DAs in decision-making and in the implementation of their infrastructure improvements. These projects will build on the achievements of LGDP in regard to sustaining urban services. A second phase of the Urban V APL, which would include the project towns that participated in LGDP, is under preparation. The proposed project will build on the achievements of LGDP in property revaluation, mapping, waste management systems, and planning for O&M. The introduction of performance agreements and eligibility criteria for accessing funds would provide an incentive for DAs to improve on such management aspects as revenue generation, O&M, and planning. 2. Most infrastructure facilities that were provided are revenue generating, which can cover at least part of the maintenance cost. With rare exceptions, these revenues are deposited in the general budget of the Assembly and are allocated according to the priorities prevailing at the time.

3. Since subsidies for O&M from the credit stopped in December 2001, the DAs have continued to use their own O&M funds to finance the operation of waste management trucks and other sanitation activities. For some equipment. the collected revenue (such as that obtained from the occasional hiring out of bulldozers to contractors) is set aside for maintenance and repair.

4. The management of nearly all public latrines is done by private operators, who collect user fees and remit part of their earnings to the DA. They carry out routine maintenance and, depending on the provisions of their contract, some periodic maintenance. It was the intention to have all project-related maintenance carried out by contractors and establish unit rates for this purpose. While some maintenance is carried out through contractors, others are still done through force accounts. In some DAs private sector operators are starting to carry out solid waste removal.

7. Bank and Borrower Performance

Bank7.1 Lending:The Bank’s performance in lending was satisfactory. 1. The Bank took the experience gained from previous urban projects in Ghana well into account in supporting the creation of zonal implementation support units to aid the DAs.

2. The Bank's team launched two sector studies as part of the preparation of this project, participated in project preparatory missions for almost two years, and arranged a PPF of US$1 million to finance project preparatory activities. Most of the team members who carried out the preparation and implementation of the preceding Accra Districts Rehabilitation Project (ADRP) and the Urban II projects also participated in the preparation of this project.

3. A valuable contribution of the Bank was to maintain a balance between physical infrastructure, institutional capacity building, and financial reform. This stemmed from the recognition that urban infrastructure may not be sustainable without accompanying measures.

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4. Cofinancing with KfW allowed more flexibility in adjusting the project content to the needs of the DAs, helped to attain the project objectives, and brought the experience of another development partner to the project.

5. One area where the Bank did not sufficiently apply its rich experience was in the supply of waste management equipment to the DAs. This project has shown again that such equipment tends to have a short life and may discourage the private sector from providing these services. The risks were correctly identified by the Bank and included inadequate management and financing of infrastructure works and a shortfall in revenue collection due to ineffective implementation of the revenue mobilization components. These risks did in fact materialize in the course of project implementation, limiting the degree to which the project development objectives could be attained.

7.2 Supervision:The Bank's performance on supervision was satisfactory. 1. A Quality of Supervision Assessment was carried out by QAG in 1998, which rated the supervision performance satisfactory in the overall as well as for every one of the main themes of: focus on development impact; supervision of fiduciary aspects; adequacy of supervision inputs and processes; and realism of project performance ratings. Already at that time, inadequate local government commitment to the financing of O&M was identified as a problem.

2. There were only two Task Team leaders in charge of supervision during the life of the project and they were based in the country office; this ensured regular monitoring of project activities. In the first few years the supervision teams tended to be small, limited mostly to a financial analyst and an engineer with the occasional addition of a training specialist. Between them they covered all the supervision topics. Later, more specialists from the country office joined the missions as the decentralization of operational functions progressed, including on procurement and financial management. Had there been more specialists participating in the earlier Bank supervision teams, it may have been possible to avoid the problems that occurred in later years and which required two extensions of the closing date.

3. The performance indicators listed in SAR, Annex 19, proved to be unsuitable for monitoring the progress of project implementation, as they were not quantified and too numerous, containing aspects of process, input, output and impact. The Logframe that was retrofitted in June 1997 during the mid-term review contained a better set of indicators, but it was not until the mission of October 2001 that a satisfactory set of output and impact indicators was developed and used to monitor progress with project implementation (see Annex 1). The reporting through the PSR format was weak in the first half of implementation, with information gaps. The reporting improved considerably over time.

4. The Bank may have been able to better advise the Client about bringing the project to a close. It was extended twice, mainly to buy additional waste management equipment. Due to a change in government in 2001, critical decision about completing the project could not be made in time (see Borrower's performance). In retrospect, it may have been better to either agree on a longer initial extension period to allow enough time for a range of additional activities or to close the project on the original date.

7.3 Overall Bank performance:The overall rating of the Bank's performance is satisfactory.

Borrower7.4 Preparation:The Borrower's performance in preparation is satisfactory. The Borrower's participation is rated satisfactory. The project was high on the government's priority list of providing basic infrastructure and urban services to the less endowed local governments.

7.5 Government implementation performance:

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The Government's performance in implementation is satisfactory. In spite of the serious downturn of the economy in 1995 and subsequent years arising out of high interest rates, high inflation and depreciation of the cedi, the project stayed on course. Counterpart funds contributions from central government improved over time. New DCEs appointed in 2001 contributed to the modest gains made on the revenue generation components. Government, however, lacked the political will to proceed decisively on decentralization.

7.6 Implementing Agency:The overall implementing agency's performance was satisfactory, despite some shortcomings. 1. The agency performed well in managing the civil works components, coordinating and preparing timely and informative progress reports. They had gained experience in undertaking similar assignments under previous Bank-financed projects, and assisted in the preparation of follow-up projects. However, while accounting was carried out in a satisfactory manner, the forward financial planning was inadequate.

2. The project unit acted virtually as a separate entity, manned by consultants, with very few regular staff from the Ministry. This may have been an adequate arrangement for the implementation of the physical components of the project, but lacked the long-term institutional commitment for capacity building in the Ministry as well as in the DAs.

3. The agency performed well in providing technical advice on infrastructure, but was hesitant to commence any arrangement that would involve the private sector in managing completed facilities, especially solid waste and markets.

4. The MLGRD's decision to cede institutional strengthening components to the project unit when the MoU was the reason for the limited achievements made in the institutional strengthening components. The advisory role expected from the ministry was not forthcoming and advise given by the Bank to engage short-term consultants to continue specific aspects of the technical assistance components was not heeded. The unit however, consolidated all the bank-financed urban projects and brought synergy to the portfolio. 5. The competitive process of procuring the additional waste management equipment resulted in the award of the contract to a different supplier from the one who provided the equipment during the first round. After a complaint had been filed, the resulting investigation that was carried out by the Borrower at the Bank's request did not adequately address the matter, and the Bank was compelled to carry out its own investigation. Finally, the Bank decided that the deviation, even though it occurred, was not of sufficient magnitude to declare misprocurement and to cancel the value of these contracts from the credit.

7.7 Overall Borrower performance:The overall rating of the Borrower's performance is satisfactory.

8. Lessons Learned

Project Design

1. Decentralization should form a major part of the project objectives only when the Government has demonstrated its commitment in practice. A project -- or even a series of projects -- cannot advance the decentralization of public sector functions if the Government lacks a firm commitment to decentralization (see Section 5.2).

2. Projects assisted by various donors should be better coordinated and harmonized at the District level. Different donors, and even different projects of the same donor, now contain diverse provisions on the same subject. The need for harmonization is particularly important for training, where duplication and tenuous links of the training programs to the functions of the trainees create a culture of using participation in training as a form of additional remuneration for staff.

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3. Waste management equipment should only be supplied to the public sector under exceptional circumstances. Such equipment is not adequately maintained by the public sector. Mechanisms for leasing the equipment to the private sector to carry out the services should be built into the project design and monitored closely by all parties. The design of the project should also be done in order not to discourage the entry of the private sector into providing services.

4. Property revaluation programs should only be carried out if anticipated increases in revenue exceed the costs. Revaluation is relatively expensive, especially when it involves aerial photography and mapping, and is not justified unless the anticipated increases in revenue from property taxation exceed the costs of the exercise. In towns with a large proportion of low-income residents or in those that for one reason or another experience an economic decline, very little, if any, additional revenue from properties can be expected (see Section 4.1 B and Annex 1, Table 2).

5. IDA subsidies deposited into a District O&M account are unlikely to increase the sustainability of infrastructure services in the long-run. IDA financing for O&M, on a declining-scale basis, was used in this project to operate and maintain waste management equipment and had no discernible influence on the O&M of other infrastructure services, contrary to what was intended. In fact, an audit revealed instances where the funds were misused, that is, expended for purposes unrelated to infrastructure services (Section 4.2 C).

6. In the absence of any form of performance monitoring and evaluation system in Ghana's construction industry, all future urban projects should have built-in mechanisms to ensure quality and efficiency of construction delivery. The procurement process should start with prequalification of contractors in all civil works contracts, to eliminate contractors with any previous record of poor performance (see Sections 4.5 and 5.2). The road agencies, Ghana Highway Authority and Department of Urban Roads, who are in a better position to monitor road contractors should be more involved in the implementation of urban road contracts.

Implementation Arrangements

7. Project implementation support to the Districts should be provided by the Regional Coordinating Councils (RCC). The project established four Zonal offices, staffed by consultants, to provide technical assistance in policy planning, knowledge transfer, and capacity building to District Assembly staff. This was a temporary measure and is not sustainable. The RCCs should participate in project implementation under their mandate to assist and monitor the DAs, on the one hand and coordinate with the sector agencies at the center, on the other.

8. The project management teams should be composed of staff with a variety of skills, to include institutional, financial management and planning, and not only engineering and accounting. This applies especially to projects with a decentralization and local government capacity building orientation. A team that consists mainly of technical specialists is likely to give preference to the implementation of the physical components at the expense of capacity building and reforms. For the same reason, project management should be led by regular staff of the project implementing agency (here the MLGRD), with consultants engaged for specific tasks, when needed (see Sections 5.3 and 7.6).

9. Proposed contracts should be chosen with the participation of the effected population and should be contained in DAs Medium-Term Development plans. This will reduce the risk that a decision made by local officials is questioned, or even changed, by their successors when an all-too-frequent change in the local leadership takes place (see Section 5.2).

10. Project activities involving aerial photography, mapping, land valuation, and other land-related themes should be implemented in collaboration with the Ministry of Lands and Forestry. It was difficult in this and other projects for the MLGRD to coordinate the project activities of the various land-related agencies.

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9. Partner Comments

(a) Borrower/implementing agency:The implementing agency, LGPSU of the Ministry of Local Government and Rural Development prepared the evaluation report, which is shown below, and contributed data for ICR preparation. The agency also gave comments to an earlier draft of this ICR. No comments were received from the Ministry.

1. Introduction

1.1 The local Government Development Project was implemented in 12 medium-sized towns from December 1994 to March 2003. This report provides an assessment of the performance of the project from the point of view of the Ministry of Local Government and Rural Development and its implementing agencies. The assessment covers

a. The degree to which the project achieved its development objectives as set out in the project documents;b. Other significant outcomes and impacts;c. Prospects for the projects sustainability; d. Bank/Borrower performance, including compliance with relevant Bank safeguard and policies; ande. Identified lessons learned from implementation.

2. Project Objectives and Components

2.1 The project was formulated to achieve three main objectives, namely:a. Improve basic infrastructure and urban services in 12 towns, especially services benefiting lower income people.b. Strengthen the district assemblies financial, technical and managerial capacities as a means of promoting sustainability of urban servicesc. Support government’s decentralization programme and thereby promote efficiency in service delivery.

2.2 These objectives were to be attained through the implementation of two main components, namely (i) rehabilitation and upgrading of infrastructure and urban services, including markets, lorry parks, roads, storm drains, solid and liquid waste disposal, provision of waste collection equipment, and matching grants for household latrine construction; and (ii) strengthening the capacity of 11 participating DAs to plan, finance and manage urban services through technical assistance, training, equipment, vehicles and operational support.

3. Extent of Achievement of Project Objectives

3.1 Rehabilitation and upgrading of InfrastructureThe rehabilitation and upgrading of infrastructure was generally successfully implemented,

despite the longer than expected completion periods. Specific achievements and constraints are summarised below:

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Component & Objective Outcomes Achievement

(i) Rehabilitation of roads and Storm water drainage to improve key road segments, traffic management and circulation

A total of 57.6 km of town roads were reconstructed in 10 towns, against an original target of 77.8 km in 12 towns. Proposed works in Keta was cancelled. About 4.2km of storm drains were also reconstructed in 4 towns to alleviate flooding, against a target of 3.2km. Scope of works was increased in Wa and Techiman.

The objective of the component was satisfactorily achieved. However the impact was often limited because of limited budget. Road works tend to be much more expensive than other municipal services, therefore the impact of road works tend to be limited if substantial funding is not provided.. In some towns, the impact of the road works on the total road network in the town was quite marginal.

(ii) Rehabilitation and expansion of basic infrastructure in Markets and transport terminals to support economic activity and improve the financial position of the beneficiary district assemblies.

11 existing markets were provided with drains, paving of open areas, toilet facilities and some security lighting. Two new Markets and lorry parks were constructed in Anloga and Elmina. A late decision was taken to allow the provision of a limited number of market sheds in 4 towns.

The objective of the component was satisfactorily achieved. However, the original “project concept” - where basic infrastructure alone was to be provided whilst the beneficiary district were to provide market sheds- did not give the desired impact. In several cases, the beneficiaries were unable to provide all the sheds as expected, thus significantly reducing the impact of the investment made. There were also delays on the part of contractors in completing the works on schedule worsened the situation for nearly 3 years.

(iii) Improve solid and liquid waste collection and disposal systems to enhance the urban environment and promote health and productivity of residents

12 towns have acquired disposal sites which have been fenced off and provided with ditches for liquid waste disposal. The plan to provide engineered sanitary landfill sites did not materialise due to budgetary constraints. Instead, simple control dump sites were provided for solid waste disposal, whilst open ditches were constructed for liquid waste disposal. 193 skip pads, skip trucks, waste containers and other equipment supplied to all 11 DAs

This component was the most satisfactory of all the infrastructure subcomponents, despite problems encountered with siting and management of the completed facilities. Solid and liquid waste collection and disposal has improved significantly in 10 out of 12 towns.

3.2 Strengthening District Financial and Technical Capacity

The four subcomponents designed to achieve this objective were only marginally successful. This may not be surprising as institutional reforms are generally more difficult to accomplish than infrastructure rehabilitation.

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Component & Objective Outcomes Achievement

(i) Improving the management capacity of 11 district assemblies through (a) district reorganization (b) improved local policy and legislative oversight (c) management team building (d) pilot use of personal services contracts

Modest progress was made, with the assistance of Zonal Officers, in assisting with the promotion of management team building. The pilot use of personal services contract got off to a late start, with one planning officer and one engineer for each of 11 DAs from April 1998 to Dec. 2001. Finance officers turned down the offer of monthly remuneration of US$1,000. The only finance officer who accepted the offer resigned after one year.

The objective of this component was only marginally achieved. The component faced serious challenges both at the national and local levels which limited its impact. Not much was achieved in the area of district reorganisation and improved local policy and legislative oversight The 1996 general elections and frequent changes in political leadership at the districts affected the ownership and commitment of new officials to the project concept. In fairness to the DAs however, some of the concepts themselves did not take account of local situation and were difficult to implement. For example the pilot use of personal services contracts created institutional problems in most districts.

(ii) Strengthening the capacity of central government agencies - LVB, T&CP, SD, TSC, MLGRD to support the appropriate activities of those district assemblies. This was to be achieved through the provision of equipment, vehicles, training, technical assistance and operational support.

Equipment, vehicles, training and operational support were provided for these institutions to enhance their institutional capacity.

The provision of equipment and appropriate training for central government agency staff (where there are trainable staff) should be pursued as a means of building the capacity of such agencies. Technical assistance support however had mixed results. Whilst some budgets were not utilised at all – e.g, TSC for MIS, MLGRD for Policy Review, and LVB for property revaluation, others were utilised quite late in the project period, thus minimising their impact.

(iii) Improved availability of information for urban planning, infrastructure programming and revenue mobilization through aerial photography and digital mapping.

700sq km of land area in 12 towns mapped.

The use of the maps for the intended purpose has been limited. In relation to the objective of improving availability of information, the objectives were met. However a lot of concern has been raised about the adequacy of the maps for Urban planning and infrastructure programming since only built up areas of the towns were covered by the exercise, making them useful for revenue mobilization but inadequate for Urban planning.

(iv) Provision of a comprehensive register of rateable properties in each of the 11 towns to enhance existing revenue sources

About 125,043 rateable properties revalued by LVB and valuation rolls submitted to DAs.

The assumption that revalued properties would result in increased revenues turned out to be an oversimplification of the issues. A better appreciation of all other factors affecting property rating at the District level would help improve the impact of the component

4. Significant Outcomes and Impacts

4.1 The most significant outcomes and Impacts made under the infrastructure upgrading component include the following

a. Provision of final disposal sites acceptable to the community for both solid and liquid waste managementb. Provision of about 5,968 household sanitation facilities benefiting an estimated 135,807 peoplec. Provision of waste management and waste collection equipment for DAs in support of waste collection services.d. Construction of new markets at Elmina and Anloga

4.2 With regard to the institutional strengthening component, the following outcomes were significanta. Training provided to DA staff b. Vehicles and equipment to support DAs and Other agencies. c. Provision of digital maps for 12 towns.

5. Prospects for Project Sustain ability

5.1 The probability of maintaining the achievements generated from the project in relation to its objectives vary from component to component. It is highest for the waste management component, and lowest for the institutional strengthening/capacity building component.

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5.2 One of the major problems phasing emerging Urban Towns in Ghana is the difficulty encountered with land acquisition for waste disposal. The project has enabled the 12 town acquire designated sites for waste disposal, thus enabling them plan future development appropriately.

5.3 It is unlikely that the achievements generated by the three most significant outcomes of the institutional strengthening component can be maintained in view of budgetary constraints within most sectors.

6. Bank/Borrower performance

The Bank provided useful support through regular supervision missions. The Bank should however take note of the concerns raised under section 7 below. The Ministry and its implementing agencies also performed satisfactorily in meeting compliance with reporting and audits.

7. Lessons Learned from implementation7.1 A number of issues directly or indirectly affected the outcome of the project. These can be

classified under the following headings:

(a) Project Preparation: Several of the problems encountered during implementation, particularly in relation to the infrastructure development, could be attributed to inadequate time and resources spent on project preparation activities. Detail engineering was rushed to meet tight credit processing schedules. This should be avoided in future.

(b) Limited Institutional capacity: Most staff within implementing agencies tend to be preoccupied with their normal day to day activities, and do not have the motivation and incentives to adequately focus on project preparation and implementation. Consequently, several important decisions have had to be taken without the involvement of these agencies. Incentives must be created for staff to show commitment to programmes.

(c) Ownership: Although DAs and agencies are encouraged to comment and/or confirm agreement with proposed interventions, the funding agencies decisions tend to override those of the DAs and agencies. This creates the wrong notion right at the outset that the project is owned by the funding agency, and not the beneficiary. For example, the Ministry had raised issues likely to affect the proposed pilot recruitment of Personal Services Contract Staff, but this was overlooked until its implementation faced difficulty.

(d) Procurement Processes: The time taken for bid documents to be prepared, and bids to be evaluated are the main causes of delays, and not the procurement process per se. Therefore, advanced planning needs to be encouraged while approval processes are expedited.

(e) Consultant and Contractor’s Performance: This is by far the most important factor that affected the infrastructure development component. Contracts for rehabilitation of basic facilities such as public toilets in some towns, took more than three times the original contract period to be completed. The poor performance of contractors created problems for supervision consultancy services, whose fees had been fixed.

(b) Cofinanciers:KfW participated in the project through the construction and rehabilitation of markets and lorry parks, including market sheds. The principal lessons learned during the implementation of the KfW-assisted Second Towns Project are as follows:

1. Provision of Market Superstructures. In many cases the beneficiaries' failure to provide market superstructures, as required by the project, proved to be an obstacle to the prompt re-opening of the rehabilitated markets and subsequent revenue collection. In future projects, the provision of market superstructures should form part of the rehabilitation or upgrading of markets. This would not only be

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advantageous from a technical point of view (coordinated design of market infrastructure and superstructures, clear contractual responsibilities, no-limit-of-contract problems, erection of superstructures before paving and drainage works, etc.,) but would also result in the handing over of a completed market within a contractually stipulated time.

2. Relocation of Market Traders. The large-scale relocation of market traders followed by the demolition of the existing market superstructure should be avoided wherever possible. Since location is of great importance to traders, they usually agree only to return to a completed market after relocation, either renovated or new. Failure to construct the required market superstructures in time puts the achievement of the project objective into jeopardy.

3. Rehabilitation of Markets and Lorry Parks While in Use. The rehabilitation of existing markets and lorry parks while trading and lorry park activities continue causes considerable inconvenience to the public, traders and drivers, as well as to contractors, and leads to increased construction costs and longer contract periods. But these disadvantages pale in comparison with the provision of a better public service and of creating revenues for the assemblies, and the rehabilitation works should therefore be carried out while the respective facilities are in use wherever possible.

4. Market Stalls Allocation Plans. Allocation plans for the market superstructures to be used by the various traders should be prepared by the Assemblies during the design phase and in close cooperation with the design consultant. This would help the collection of subscription fees of interested traders and would avoid the construction of unsuitable superstructures. The subscription fees and monthly dues should be used to finance part of the construction of the superstructures and should be considered part of the GoG financial contribution to the project.

5. Paving of Lorry Parks. Lorry parks should be paved with concrete blocks. Only under exceptional circumstances should small lorry parks with a light traffic load be sealed with a bituminous double-surface dressing.

6. Project Implementation. The pooling of two to three project towns into one geographically defined zone, served by one design consultant, proved to be adequate for some zones. For others, where there were great distances between the project towns, it was difficult for one consultant to cover all the towns in the area, especially in the North. For future projects, it is recommended to assign one supervision consultant for each project town.

7. Project Design. All markets and lorry parks should have well-defined entries and exists. This is best achieved by the provision of lockable stores along the periphery of these facilities and the installation of gates. Bathhouses are generally not much utilized. They should only be provided where there is an explicit demand from market users. Refuse collection facilities provided by the Project are also used inadequately. It is recommended that they be placed centrally within the markets, equipped with containers and provide clearly defined access roads be provided for easy refuse removal.

(c) Other partners (NGOs/private sector):Not applicable

10. Additional Information

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

1. Number of DAs without additional refuse accumulation outside designated areas

11 9

2. Number of DAs in which at least 90% of refuse collection equipment is functional

11 11

3. Number of DAs without flooding on improved or rehabilitated roads adjacent to markets and lorry parks

11 11

4. Number of DAs without flooding in markets and lorry parks

11 11

5. Number of DAs in which market revenues increased by at least 30% in 3 years.

11 7

6. Number of DAs in which internal revenue generation increased by at least 10% in real terms

11 11

Output Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

1. Number of final waste disposal sites rehabilitated or constructed (solid combined with liquid)

11 11

2. Number of public toilets rehabilitated or constructed

277 206

3. Number of domestic toilets constructed 2,700 5,968

4. Kilometers of roads with drains improved or rehabilitated

73.8 57.6

5. Number of markets combined with lorry parks improved and provided with public toilets and security lights

12 14

6. Number of properties re-evaluated 74,300 125,043

7. Number of DAs in which a billing and collection system based on the new rolls for property tax was introduced

11 11

8. Digital maps produced for number of square km at 1:2,500 scale

300 700

9. Number of DAs in which training was provided according to their annual training plan

11 11

1 End of project

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Target Actual Target Actual Target Actual Target Actual Target Actual Target Actual Target Actual

Sunyani 10.6 14.1 4 4.5 20 19 72 75 20 11 185 763 14,250 20,868

Ho 6.4 4.1 1.55 2.5 0 25 14 260 9 11 410 549 7,700 6,832

Keta/Anloga 4.1 7.2 0.2 5.6 10 10 27 176 30 24 410 317 6,600 10,651

Koforidua 4.8 2.5 1.75 2.5 25 25 50 105 27 18 307 1,520 8,700 11,845

Agona Swedru 6.08 6.1 0.63 1 0 10 20 60 9 9 83 651 3,350 10,600

Wa 3.5 1.7 1.36 3.2 25 15 28 40 34 23 122 129 3,150 5,971

Cape Coast 3.5 3.3 2.5 2.1 25 24 38 125 42 24 410 451 12,650 13,711

Elmina 4 4.3 1 2.2 0 10 15 80 17 16 205 385 4,000 10,320

Bolgatanga 9.2 2.4 2.2 2.8 20 25 36 135 35 26 245 344 5,200 10,555

Bawku 13.7 5.7 3 6.1 0 10 70 45 35 30 122 236 4,400 5,340

Techiman 8 6.2 9.6 10 0 20 133 95 19 14 201 623 4,300 18,350

Total 73.88 57.6 27.79 42.5 125 193 503 1196 277 206 2,700 5,968 74,300 125,043

STATUS OF CIVIL WORKS IN THE PROJECT TOWNS

Public Toilets (No.) Household Toilets (No.) Property Revaluation (No.)

Roads(km) Markets & Lorry Parks (ha.)

Refuse Collection Points (No.)

Street Lights (No.)

Target Actual Target Actual Target Actual Target Actual Target Actual Target Actual Target Actual

Sunyani 1 1 2 3 2 2 0 0 0 0 0 0 21 31

Ho 1 1 2 3 2 2 0 0 0 0 0 0 21 31

Keta/Anloga 1 1 0 0 2 2 3 3 2 2 18 18 10 10

Koforidua 1 1 2 3 3 3 0 0 2 2 0 0 45 73

Agona Swedru 1 1 0 2 1 2 3 3 0 0 18 18 0 20

Wa 1 1 1 3 1 2 0 0 0 0 0 0 18 38

Cape Coast 1 1 1 2 1 1 0 0 0 0 0 0 29 39

Elmina 1 1 0 2 1 2 2 2 0 0 10 10 0 20

Bolgatanga 1 1 2 3 2 4 0 0 0 0 0 0 26 23

Bawku 1 1 0 1 1 2 3 3 0 0 18 18 0 10

Techiman 1 1 0 1 1 2 3 0 0 2 18 0 0 20

Total 11 11 10 23 17 24 14 11 4 6 82 64 170 315

Roll-on/Roll-off containers (36)

Total containers delivered include: Open containers (241); Covered containers (8); Night soil containers (30) and

Containers (No.)

DISTRIBUTION OF WASTE MANAGEMENT EQUIPMENT IN THE DAs

Bulldozer (No.)

Skip Loaders (No.)

Cesspit Emptiers (No.) Tractors (No.) Roll-on/Roll-off Trucks (No.)

Trailers (No.)

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District Assembly

1997 1998 1999 2000 2001 2002Total

1997-2002Change

1997-2002

Annual Average 1997-99

Annual Average 2000-02

Change in Annual Average

Sunyani 730 913 1,094 831 952 1,328 5,848 82% 912 1,037 14%Ho 518 847 1,070 995 1,592 1,356 6,378 162% 812 1,314 62%

Keta/ Anloga 378 506 455 292 435 494 2,560 31% 446 407 -9%

Koforidua 844 1,210 1,254 1,470 843 3,176 8,798 276% 1,103 1,830 66%Agona Swedru

396 704 860 645 937 964 4,507 143% 654 849 30%

Wa 482 418 423 575 569 990 3,458 105% 441 711 61%

Cape Coast 500 561 680 685 1,341 1,763 5,530 253% 580 1,263 118%

Elmina 267 524 390 528 504 375 2,588 41% 393 469 19%

Bolgatanga 479 440 443 1,066 3,204 3,709 9,341 674% 454 2,660 486%

Bawku 746 1,045 1,084 818 778 966 5,436 30% 958 854 -11%

Techiman 1,077 1,298 1,744 1,759 1,806 2,110 9,796 96% 1,373 1,892 38% Total 6,418 8,466 9,498 9,666 12,962 17,231 64,240 168% 8,127 13,286 63%

CPI 38.7 45.6 50.9 71.6 86.8 100.0

CPI = Consumer Price Index (December 2002 = 100)Note: The annual average is calculated over 3 years at a time, one average for 1997-1999 and another for 2000-2002, to show the difference between the revenue improvement implementation phase of the project and the period, when the revenue collection was expected to improve. The last column contains the % change in these two values.

Table 1. TOTAL INTERNAL REVENUES, 1997 - 2002 In constant prices (December 2002), million Cedis

District Assembly

1997 1998 1999 2000 2001 2002Total

1997-2002Change

1997-2002

Annual Average 1997-99

Annual Average 2000-02

Change in Annual Average

Sunyani 171 156 145 106 107 384 1,069 125% 157 199 27%Ho 8 11 20 571 328 289 1,227 3614% 13 396 2948%

Keta/ Anloga 4 4 5 2 2 69 86 1563% 4 24 446%

Koforidua 18 22 33 202 170 1,860 2,305 10161% 24 744 2972%Agona Swedru

23 60 84 111 110 229 617 906% 56 150 170%

Wa 88 93 32 25 80 464 781 428% 71 190 168%

Cape Coast 26 38 75 98 289 304 831 1075% 46 231 396%

Elmina 104 121 64 110 61 129 589 25% 96 100 4%

Bolgatanga 11 11 9 59 56 740 886 6390% 10 285 2642%

Bawku 13 15 18 15 6 17 84 30% 15 13 -18%

Techiman n/a n/a n/a 89 78 107 n/a n/a n/a 91 n/a Total 465 531 484 1,389 1,287 4,592 8,748 887% 493 2,331 372%

Share 7% 6% 5% 14% 10% 27% 14% 6% 18%

Share = Property Rates as a proportion of Total Internal Revenues for all DAs combinedn/a Data not available

Table 2. PROPERTY RATES , 1997 - 2002 In constant prices (December 2002), million Cedis

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District Assembly

1997 1998 1999 2000 2001 2002Total

1997-2002Change

1997-2002

Annual Average 1997-99

Annual Average 2000-02

Change in Annual Average

Sunyani 107 171 232 214 221 206 1,150 92% 170 213 26%Ho 109 140 146 169 216 197 976 82% 131 194 48%

Keta/ Anloga 124 135 144 98 108 121 730 -2% 134 109 -19%

Koforidua 109 140 146 627 228 171 1,420 58% 131 342 160%Agona Swedru

88 203 165 118 149 172 893 96% 152 146 -4%

Wa 41 122 36 45 44 72 360 76% 66 54 -19%

Cape Coast 29 61 68 67 114 176 516 503% 53 119 126%

Elmina 53 39 46 44 37 51 270 -3% 46 44 -4%

Bolgatanga 83 88 237 73 77 56 614 -32% 136 69 -49%

Bawku 109 139 146 120 93 91 698 -16% 131 101 -23%

Techiman 564 805 1,293 1,314 1,131 1,608 4,774 639% 414 1,177 184%

Total 1,413 2,044 2,658 2,889 2,417 2,922 14,343 107% 2,038 2,743 35%Share 22% 24% 28% 30% 19% 17% 22% 25% 21%

Share = Property Rates as a proportion of Total Internal Revenues for all DAs combined

Table 3. MARKET REVENUES, 1997 - 2002 In constant prices (December 2002), million Cedis

District Assembly

P A P A P A P A P A DSunyani 276 730 270 913 277 1,094 229 831 822 2,737 233%Ho 231 518 227 847 235 1,070 195 995 693 2,435 252%Keta/ Anloga

302 378 332 506 384 455 357 292 1,018 1,339 32%

Koforidua 764 844 833 1,210 955 1,254 882 1,470 2,552 3,309 30%Agona Swedru

370 396 402 704 462 860 429 645 1,234 1,961 59%

Wa 146 482 145 418 152 423 128 575 443 1,323 199%

Cape Coast 281 332 282 561 298 680 255 685 861 1,573 83%

Elmina 180 267 189 524 208 390 185 528 577 1,180 105%

Bolgatanga 264 479 249 440 249 443 200 1,066 762 1,362 79%

Bawku 482 746 215 1,045 220 1,084 184 818 917 2,875 214%

Techiman 546 1,077 547 1,298 578 1,744 492 1,759 1,671 4,120 147%Total 3,844 6,250 5,309 8,466 4,016 9,498 3,534 9,666 13,169 24,213 84%P Projected, A Actual, D DifferenceNote: The assumed inflation rate for the projections was 10% per year. The actual inflation rate was much higher, about 30% per year from 1993 (the base year) to 2000, causing the forecasts to be underestimated.

Total

In constant prices (December 2002), million CedisTable 4. TOTAL INTERNAL REVENUES - PROJECTED vs. ACTUAL

1997 1998 1999 2000

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)AppraisalEstimate

Actual/Latest Estimate

Percentage of Appraisal

Component US$ million US$ millionRehabilitation and upgrading of urban infrastructure and services

35.69 38.00 64

Institutional strengthening 7.74 11.98 14Incremental recurrent costs 5.21 2.30 9

Total Baseline Cost 48.64 52.28 Physical Contingencies 3.48 6 Price Contingencies 3.40 6

Total Project Costs 55.52 52.28Total Financing Required 55.52 52.28

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 10.79 15.82 0.00 7.94 34.55(10.12) (12.22) (0.00) (0.00) (22.34)

2. Goods 6.60 0.43 0.35 0.00 7.38(6.50) (0.42) (0.34) (0.00) (7.26)

3. Services 0.00 0.00 9.41 0.64 10.05(0.00) (0.00) (7.45) (0.00) (7.45)

4. Operating and Maintenance

0.00 0.00 3.53 0.00 3.53

(0.00) (0.00) (1.46) (0.00) (1.46) Total 17.39 16.25 13.29 8.58 55.51

(16.62) (12.64) (9.25) (0.00) (38.51)

Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 9.02 14.98 0.00 9.14 33.14(8.07) (12.23) (0.00) (0.00) (20.30)

2. Goods 6.19 0.40 0.35 0.00 6.94(5.92) (0.20) (0.20) (0.00) (6.32)

3. Services 0.00 0.00 9.41 1.02 10.43(0.00) (0.00) (9.40) (0.00) (9.40)

4. Operating and Maintenance

0.00 0.00 1.77 0.00 1.77

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(0.00) (0.00) (0.84) (0.00) (0.84) Total 15.21 15.38 11.53 10.16 52.28

(13.99) (12.43) (10.44) (0.00) (36.86)NBF- KfW financed $9.14 million on market and lorry parks; and Works (NCB) beneficiary household financed $1.41 million of the Household Toilet scheme.

1/ Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies.2/ Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff

of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

Project Financing by Component (in US$ million equivalent)

Component Appraisal Estimate Actual/Latest EstimatePercentage of Appraisal

IDA Govt. CoF. IDA Govt. CoF. IDA Govt. CoF.Rehabilitation and Upgrading

18.07 2.70 7.70 19.19 1.95 7.71 106.2 72.2 100.1

Institutional Strengthening 15.68 0.78 0.60 15.40 0.08 1.34 98.2 10.3 223.3Operating and Maintenance

1.46 2.07 0.54 0.83 37.0 40.1

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Annex 3. Economic Costs and Benefits

The SAR estimated the economic viability of the project by calculating the EIRR of 14 Road Rehabilitation Activities, 3 Market Interventions, and two each of the Solid Waste and Liquid Waste Management Activities. The ex-post economic evaluation of the project covers the roads and drains investments. A total of 56km was constructed compared to the SAR estimate of 73.9km. The economic analysis is based on re-evaluation of the data on traffic, costs and benefits of sample project components.

The Model used is RTIM2. The methodology used in the re-evaluation is similar to the SAR.

The capital investment and maintenance costs were revised to reflect January 2003 and are included in the cost stream. The benefits consist of Vehicle Operating Cost (VOC) savings. The project economic life of 25 years is assumed and the capital investment period for all projects ranged from June 1996 to December 2002.

Economic Evaluation of Roads

Sample Roads used in pre- and post-construction EIRR estimatesRoad sections Length in km

ExistingReconstructed km

LIBRARY ROAD 0.79 0.79DARPORTIDONGO ROAD 0.82 0.82STADIUM ROAD 0.69 0.69TANO ROAD 1.43 1.43BAMIRI ROAD 1.78 1.78GYARKO ROAD 0.89 0.89MARKET STREET 1.20 1.20AHMADIYA ROAD 0.89 0.89LITTLE WOOD ROAD 4.20 4.20CMB JUNCTION 1.90 1.90SHELL ROAD 1.03 1.03MANKESIM ROAD 0.94 0.94NSAWAM ROAD 1.86 1.86

Economic Cost

Economic costs were mainly discounted capital cost of the intervention, routine and periodic maintenance costs, appropriately shadow priced (factor: 0.93) to remove distortions introduced by such impositions as custom duties and taxes.

Traffic Projection

Traffic data was collected for each road. Traffic is assumed to grow at an average rate of 2%. For each road, the traffic for year of completion is summarized below.

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SARRoad Section Traffic Year of Completion

(YC)LIBRARY ROAD 3220DARPORTIDONGO ROAD 2320STADIUM ROAD 5888TANO ROAD 16,128BAMIRI ROAD 2,576GYARKO ROAD 8768MARKET STREET 13648AHMADIYA ROAD 8080LITTLE WOOD ROAD 18480CMB JUNCTION 1376SHELL ROAD 6688MANKESIM ROAD 9792NSAWAM ROAD 5072

Economic benefitsEconomic benefits were expressed in terms of the monetary value of the annual road user savings resulting from VOC savings due to improved surface and traffic flows. Benefits accruing from saving in peak traffic volumes were included in the analysis, which was run using a VOC sub model of the RTIM2. Vehicles Car (1) Pickup (2) Mammy/Wago

nBuses Light Axle Medium

AxleHeavy Axle

WITHOUT CONGESTIONGOOD 0.14 0.14 0.21 0.35 0.37 0.53 0.89FAIR 0.17 0.17 0.26 0.37 0.44 0.65 1.02POOR 0.35 0.40 0.47 0.71 0.96 1.16 2.05WITH CONGESTIONFAIR 0.32 0.33 0.39 0.60 0.80 0.96 1.71POOR 0.46 0.53 0.62 0.95 1.27 1.54 2.73

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Economic EvaluationThe weighted EIRR of the sample roads is estimated to be 68% well above the 15% requirement stipulated for the projects in the sector. The result also compare favorably with the corresponding figures of 84% overall weighted EIRR for the roads and drainage component as given in the SAR. The main reason for the variation was due to significant cost increase as is evidenced below.

ERR AT PROJECT APPRAISAL

ERR AT PROJECT COMPLETION

ROAD NAME COST ERR AADT COST ERR %

000'US$ % 000'US$ %

LIBRARY ROAD 240 78.91 3200 642.2 20%

DARPORTIDONGO ROAD 200 77.01 2320 667.0 15%

STADIUM ROAD 230 50.8 5888 561.0 33%

TANO ROAD 552 49.62 16128 336.0 177%

BAMIRI ROAD 690 49.08 2576 418.3 47%

GYARKO ROAD 345 78.2 8768 209.0 112%

MARKET STREET 460 162.42 13648 282.0 107%

AHMADIYA ROAD 345 62.17 8080 209.0 105%

LITTLE WOOD ROAD 690 67.57 18480 1985.0 79%

CMB JUNCTION 253 39.11 1376 447.0 47%

SHELL ROAD 230 93.77 6688 242.0 93%

MANKESIM ROAD 460 163.52 9792 221 111%

NSAWAM ROAD 455 105.41 5072 437 68%

TOTAL & WEIGHTED AVG 5150 84 6657 68

Sensitivity Analysis

A sensitivity analysis was carried out using changing assumptions about the benefits and costs. With 50% decrease in benefits and 50% increase in costs, the EIRR estimates indicate the EIRR estimates are greater than the minimum requirement of 15% for such projects. The results shown below, give an indication of a very robust program with considerable benefits of the economy in terms of reduced vehicle operating costs, representing some 80% savings in cost of items for which the country is a net importer.

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ERR AT PROJECT APPRAISAL ERR AT PROJECT COMPLETION

ROAD NAME EIRR %

ZERO TRAFFIC

(Base) 50% DECREASE

50% INCREASE

% GROWTH IN BENEFITS IN COSTS

EIRR % ALONE ALONE

EIRR % EIRR %

LIBRARY ROAD 20% 19% 10% 13%

DARPORTIDONGO ROAD 15% 14% 7% 10%

STADIUM ROAD 33% 32% 18% 23%

TANO ROAD 177% 176% 111% 134%

BAMIRI ROAD 47% 45% 27% 33%

GYARKO ROAD 112% 110% 69% 83%

MARKET STREET 107% 88% 69% 82%

AHMADIYA ROAD 105% 103% 65% 78%

LITTLE WOOD ROAD 79% 75% 46% 57%

CMB JUNCTION 47% 61% 22% 30%

SHELL ROAD 93% 91% 56% 68%

MANKESIM ROAD 111% 106% 69% 83%

NSAWAM ROAD 68% 62% 41% 50%

TOTAL & WEIGHTED AVG 68 65 40 49

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Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle Performance Rating No. of Persons and Specialty

(e.g. 2 Economists, 1 FMS, etc.)Month/Year Count Specialty

ImplementationProgress

DevelopmentObjective

Identification/PreparationFebruary 1992 2 TL (1); Financial Analyst (1)December 1992 4 Fin. Analyst (1); Engineer (2);

Valuation Specialist (1)March/April 1993 10 Sr. Urban Fin. Spec. (1); Urban

Planner (1); Pr. Institutional Dev Spec. (1); Proc. Spec. (1); Engineer (1); Mun Engineer (1); Mun. Fin. Spec. (1); Fin. Analyst (1); Sr. Training Spec. (1); Econ. (1)

Appraisal/NegotiationJune/July 1993 8 Sr. Urb. Fin. Spec. (1); Urb.

Planner (1); Pr. Inst. Dev. Spec. (1); Proc. Spec. (1); Eng. (1); Mun. Eng. (1); Mun. Fin. Spec. (1); Fin. Anal. (1)

11/29/1993 Negotiations

Supervision05/14/1995 2 Civil Eng. (1); Sr. Urb Fin.

Spec. (1)S S

09/27/1995 3 Civil Eng. (1); Sr. Urban Fin. Spec. (1); Rating Valuation (1)

S S

01/31/1996 2 Civil Eng. (1); Sr. Urban Fin. Spec. (1)

S S

06/27/1996 4 TL (1); Rating Expert (1); Training Con (1); Civil Eng. (1)

S S

6/27/1997 5 TL (1); Infra. Eng. (1); KfW Cons. (1); Rating Valuation Cons. (1); Training Cons. (1)

S S

03/01/1998 3 TL (1); Civil Eng. (1); Training Spec. (1)

S S

11/11/1998 2 TL (1); Municipal Engineer (1) S S04/06/1999 4 TL (1); Public Sector Mgmnt (1);

Mun. Eng. (1); Training Con. (1)S S

10/13/1999 2 Team Leader (1); Engineer (1) S S05/31/2000 8 Sr. Urban Fin. Spec. (1); TL (1);

Pr. Mun Eng. (1); Fin. Analyst (1); Transp. Spec (1); Consultant (2); Team Assist (1)

S S

1/19/2001 5 TL (1); Urban Fin. (1); Mun. Eng. (1); San. Eng. (1);Trng Cons. (1)

S S

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10/19/2001 7 TL (1); Urban Fin. (1); Mun. Eng. (1); San. Eng. (1); Rating Cons. (1); Trng Cons. (1); Team Asst. (1)

S S

04/17/2002 8 TL (1); Urban Fin. (1); Mun. Eng. (1); Transport (1); Proc (1); Trng (1); Fin. Man (1); Team Assist. (1)

S S

09/13/2002 6 TL (1); Mun. Eng. (1); Urban Fin. Spec. (1); Proc. Spec. (1); Fin. Mgmnt. Spec. (1); Team Assist (1)

S S

ICR08/04/2003 4 TL (1); Sr. Urban Dev.

Spec. (1); Mun. Engineering - Consultant (1); Team Assistant (1)

(b) Staff:

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)

Identification/Preparation 384,474.83Appraisal/NegotiationSupervision 407,305.28ICR 21,800.82Total 806,235.45

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingMacro policies H SU M N NASector Policies H SU M N NAPhysical H SU M N NAFinancial H SU M N NAInstitutional Development H SU M N NAEnvironmental H SU M N NA

SocialPoverty Reduction H SU M N NAGender H SU M N NAOther (Please specify) H SU M N NA

Private sector development H SU M N NAPublic sector management H SU M N NAOther (Please specify) H SU M N NA

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Lending HS S U HUSupervision HS S U HUOverall HS S U HU

6.2 Borrower performance Rating

Preparation HS S U HUGovernment implementation performance HS S U HUImplementation agency performance HS S U HUOverall HS S U HU

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Annex 7. List of Supporting Documents

1. LGDP ICR Aide Memoire - August 20032. Private sector participation in the Management of solid waste systems in 4 DAs (2003)3. Technical and Financial Audit of Operation and Maintenance (O&M) fund (2003)4. Computerization of Budgeting and Accounting system in 4 pilot DAs (2003)5. Technical and Financial Audit of Domestic (Household) toilet scheme (2002)6. Land Use Planning and Development Guidance (2003)7. Consultancy Services for 25 urban towns under the proposed Urban V project (1999)8. Digital Mapping of 11 LGDP urban towns (1999)9. Revenue Improvement Action plan (RIAP) (General and Specific for 12 towns) (1995)10. Training needs and Training Institutions Assessment report (1995)

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