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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 49.7 MILLION (US$ 75 MILLION EQUIVALENT) TO THE REPUBLIC OF GHANA FOR A SUSTAINABLE RURAL WATER & SANITATION PROJECT Urban and Water Unit Sustainable Development Department Country Department AFCW1 Africa Region May 28, 2010 Report No: GH This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective April 30, 2010) Currency Unit = Ghanaian Cedi GH 1.42 = US$1 US$ = SDR 1 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AfDB CAGD CAS CBO CBRDP CIDA COM CWSA CWSP DANIDA DFID DOM DWD DWSP DWST DA DACF DCA DDF DP EHSD EPA ERPFM ESMF EU GAS GFSM GIFMIS GoG GPRS African Development Bank Controller and Accountant General s Department Country Assistance Strategy Community Based Organization Community Based Rural Development Project Canadian International Development Agency Community Ownership & Management Community Water and Sanitation Agency Community Water and Sanitation Project Danish International Development Agency Department for International Development District Ownership & Management District Works Department District Water and Sanitation Plan District Water and Sanitation Team District Assembly District Assemblies Common Fund Development Credit Agreement District Development Fund Development Partner Environmental, Health and Sanitation Directorate (under the MLGRD) Environmental Protection Agency External Review of Public Financial Management Environmental and Social Management Framework European Union Ghana Audit Service Government Finance Statistics Manual Ghana Integrated Financial Management Information System Government of Ghana Growth Poverty Reduction Strategy ii

3 GWCL HES IAA ICB ICR IDA KfW MDAs MMDAs MDBS MDG M&E MLGRD MoFEP MOU MWRWH NCWSP NDPC NGO O&M ODF PAD PEFA PFM PIM PPA PPIAF RPF RCC RWSS RWST SANIMART SPA STWSSP TA WD WSDB WSMP Ghana Water Company Limited Hygiene Education and Sanitation Internal Audit Agency International Competitive Bidding Implementation Completion and Results International Development Association Kreditanstalt für Wiederaufbau (German Cooperation) Ministries Departments and Agencies Metropolitan, Municipal and District Assemblies Multi-Donor Budgetary Support Millennium Development Goals Monitoring and Evaluation Ministry of Local Government and Rural Development Ministry of Finance and Economic Planning Memorandum of Understanding Ministry of Water Resources Works and Housing National Community Water and Sanitation Project National Development Planning Commission Non-Governmental Organization Operations and Maintenance Open Defecation Free Project Appraisal Document Public Expenditure and Financial Accountability Public Financial Management Project Implementation Manual Public Procurement Authority Public Private Infrastructure Advisory Facility Resettlement Policy Framework Regional Coordinating Council Rural Water Supply and Sanitation Regional Water and Sanitation Team Sanitation Market Subproject Agreement Small Towns Water Supply and Sanitation Project Technical Assistance Water Directorate (under the MWRWH) Water and Sanitation Development Board Water and Sanitation Monitoring Platform Vice President: Obiageli Katryn Ezekwesili Country Director: Sector Director Ishac Diwan Inger Andersen Sector Manager: Junaid Kamal Ahmad Task Team Leader: Ventura Bengoechea iii

4 GHANA SUSTAINABLE RURAL WATER AND SANITATION PROJECT CONTENTS Page I. STRATEGIC CONTEXT AND RATIONALE... 1 A. Country and Sector Issues... 1 B. Rationale for Bank Involvement... 3 C. Higher Level Objectives to Which the Project Contributes... 3 II. PROJECT DESCRIPTION... 4 A. Lending instrument... 4 B. Project development objective and key indicators... 4 C. Project Components... 4 D. Lessons Learned and Reflected in the Project Design... 7 E. Alternatives considered and reasons for rejection... 9 III. IMPLEMENTATION A. Partnership arrangements (if applicable) B. Institutional and implementation arrangements C. Monitoring and evaluation of outcomes/results D. Sustainability E. Critical risks and possible controversial aspects F. Loan/credit conditions and covenants IV. APPRAISAL SUMMARY A. Economic and financial analyses B. Technical C. Fiduciary D. Social E. Environment F. Safeguard policies G. Policy Exceptions and Readiness Annex 1: Country and Sector or Program Background iv

5 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies Annex 3: Results Framework and Monitoring Annex 4: Detailed Project Description Annex 5: Project Costs Annex 6: Implementation Arrangements Annex 7: Financial Management and Disbursement Arrangements Annex 8: Procurement Arrangements Annex 9: Economic and Financial Analysis Annex 10: Social and Environmental Safeguards Annex 11: Project Preparation and Supervision Annex 12: Documents in the Project File Annex 13: Statement of Loans and Credits Annex 14: Sector Wide Approach (SWAP) Annex 15: Country at a Glance Annex 16: Map v

6 GHANA SUSTAINABLE RURAL WATER & SANITATION PROJECT Date: May 28, 2010 Country Director: Ishac Diwan Sector Director: Inger Andersen Sector Manager: Junaid Kamal Ahmad PROJECT APPRAISAL DOCUMENT AFRICA AFTUW Project ID: P Lending Instrument: Specific Investment Loan Joint IFC: Joint Level: Project Financing Data [ ] Loan [X] Credit [ ] Grant [ ] Guarantee [ ] Other: Team Leader: Ventura Bengoechea Sectors: Water supply (45%); Sanitation (40%); Sub-national government administration (10%); Central government administration (5%) Themes: Rural services and infrastructure (100%) Environmental category: Partial Assessment For Loans/Credits/Others: Total Bank financing (US$m.): Proposed terms: Standard IDA terms with 35 years maturity, including 10 years grace period Financing Plan (US$m) Source Local Foreign Total BORROWER/RECIPIENT International Development Association (IDA) Total: Borrower: Republic of Ghana Responsible Agency: Community Water and Sanitation Agency (CWSA) Private Mail Bag, KIA Accra, Ghana Tel: Fax: cwsa@ghana.com vi

7 Estimated disbursements (Bank FY/US$m) FY Annual Cumulative Project implementation period: Start: September 1, 2010 End: December 31, 2015 Expected effectiveness date: August 31, 2010 Expected closing date: June 30, 2016 Does the project depart from the CAS in content or other significant respects? Ref. PAD I.C. [ ]Yes [X] No Does the project require any exceptions from Bank policies? Ref. PAD IV.G. Have these been approved by Bank management? [ ]Yes [X] No [ ]Yes [ ] No Is approval for any policy exception sought from the Board? [ ]Yes [ ] No Does the project include any critical risks rated substantial or high? [ ]Yes [ X] Ref. PAD III.E. Does the project meet the Regional criteria for readiness for implementation? Ref. PAD IV.G. vii No [ X]Yes [ ] No Project development objective Ref. PAD II.B., Technical Annex 3 The objective of the Project is to expand access to, and ensure sustainable water supply and sanitation services in rural and small town communities in six regions of Ghana. Project description Ref. PAD II.C., Technical Annex 4 Component A - Rural and Small Town Water Supply (US$47.6 million). This component would support the increase and improvement of access to water supply services through the construction and rehabilitation of onsite and piped water supply systems in several types of context. Component B - Rural and Small Town Integrated Sanitation and Hygiene Promotion (US$18.6 million). This component aims at accelerating the pace for attainment of MDG for sanitation by targeting whole communities and small towns within the project area to reach open-defecation-free status. Component C - Institutional Strengthening and Project Management (US$11.1 million). This component would support orientation, capacity building and technical assistance, as well as logistics to streamline roles and strengthen capacities of key stakeholders in the water and sanitation sector for effective subproject implementation, operation, monitoring and supervision. Which safeguard policies are triggered, if any? Ref. PAD IV.F., Technical Annex 10 Environmental Assessment (OP/BP 4.01) Involuntary Resettlement (OP/BP 4.12) Significant, non-standard conditions, if any, for: Ref. PAD III.F. Board presentation: None. Loan/credit effectiveness:

8 i. Subsidiary Agreement has been executed on behalf of the Recipient and the Project Implementing Entity; ii. CWSA has submitted PIM reflecting the objectives and conditions of the project in a manner satisfactory to IDA. Covenants applicable to project implementation: Standard Financial covenants as stated in the Financing Agreement Schedule 2, Section II (B) on Financial Management, Financial Reports and Audits and Section 4.09 of the General Conditions. viii

9 I. STRATEGIC CONTEXT AND RATIONALE A. Country and Sector Issues 1. The proposed operation will support the continued implementation of the National Community Water and Sanitation Program (NCWSP), which is coordinated and facilitated by the Community Water and Sanitation Agency (CWSA). The project aims at providing safe water, improved sanitation and hygiene services to rural communities and small towns in six regions of Ghana. The District Assemblies (DA) where the rural communities and small towns are located will contribute to the capital cost 1 and will be responsible for ensuring the operational and financial sustainability of these services. The main principles of the program are demand responsiveness, Community Ownership and Management (COM), private sector partnership in the provision of goods and services, and public sector facilitation. 2. Through the implementation of the NCWSP, access to water supply in small towns and rural communities in Ghana rose from as low as 27 percent in 1990 to about 60 percent by the end of The rural population is estimated to be about 12 million people. 3 Although the increase in access to water supply has been remarkable, Ghana needs to continue its current efforts in order to remain on track to achieve the Millennium Development Goals (MDG) target for 2015 of 76 percent of the population with access to improved water supply; a goal to which the Government of Ghana (GoG) is fully committed. Realization of the MDG goal for access to sanitation, however, is significantly off track, with coverage estimated at only 12 percent, compared to the MDG target of 53 percent (WHO/UNICEF JMP, 2010). This is a particular problem in rural areas, where the coverage is estimated at 7 percent. Additionally, there is concern over the long-term operational and financial sustainability of the existing facilities, especially with regard to the renewal and replacement of assets when they reach the end of their useful life. The proposed Sustainable Rural Water and Sanitation Project (SRWSP) would contribute toward covering the financial gap of US$330 million identified by CWSA in its Strategic Investment Plan (SIP). This will be done in coordination and harmony with other donors that are supporting the sector 4. 1 The previous IDA-financed project required a contribution of 10 percent to the capital cost of water facilities: 5 percent to be contributed by the community and another 5 percent by the corresponding DA. However, since the GoG issued a policy statement embedded in the 2009 Budget abrogating the principle of a 5 percent community contribution, only the 5 percent DA contribution will remain in effect. This contribution, which is consistent with the National Water and Decentralization Policies and is considered a good practice in the water sector to promote ownership, will be waived during an initial period, as agreed during negotiations and described in Annex 7. 2 These figures provided by CWSA are more conservative than the 74 percent estimated by the Joint Monitoring Program (JMP) of WHO and UNICEF. 3 Population in Ghana is estimated at 22 million based on the 2000 census, of which about 55 percent live in rural areas. A new census is scheduled for Aside from the World Bank Group, the main Development Partners (DPs) currently involved in Rural Water Supply and Sanitation (RWSS) include: the Canadian International Development Agency (CIDA), the European Union (EU), the African Development Bank (AfDB), and the United Nations Children s Emergency Fund (UNICEF). The Danish International Development Agency (DANIDA), which has been a key supporter of RWSS, is now concentrating in the decentralization agenda, particularly on strengthening the capacity of the DAs which is essential for the sustainability of RWSS. Other active DPs in the past have been Kreditanstalt für Wiederaufbau (KfW) and UK s Department for International Development (DfID). The activities of DPs and government and non-governmental organizations working in the sector are coordinated and harmonized through the GoG-DP Water and Sanitation Sector Group. 1

10 3. The original Growth and Poverty Reduction Strategy (GPRS) and its successor, the GPRS II, have been the backbone of Ghana s development agenda. The development goal has been to realize accelerated and sustainable shared growth with the main purpose of reducing poverty. This goal has been pursued within the framework of democratic and decentralized governance, alongside the aims of promoting gender equity, and protection and empowerment of the vulnerable and excluded. Though the GPRS II is yet to be replaced by a new plan, the current National Medium-Term Development Policy Framework (MTDPF) clearly articulates Ghana s priorities with regard to development planning for sustainable development. The MTDPF identifies seven priority objectives: (i) improvement and sustenance of macroeconomic stability; (ii) expanded development of productive infrastructure; (iii) accelerated agricultural modernization and agro-based industrial development; (iv) sustainable partnerships between government and the private sector; (v) developing human resources for national development; (vi) transparent and accountable governance; and (vii) reducing poverty and income inequalities. 4. The Government of Ghana s 2010 Budget Statement also translates this agenda into five priority objectives: (i) pursuing prudent macroeconomic policies; (ii) modernizing agriculture; (iii) providing infrastructure, including Information and Communication Technologies (ICT); (iv) developing the private sector; and (v) developing the oil and gas industry. Investments in safe drinking water, improved sanitation and good hygiene practices are pre-requisites to good health, increased productivity, and subsequently wealth creation and poverty reduction. 5. Various efforts have been made over the past few years by the GoG to strengthen the institutional framework of the water and sanitation sector. Prominent among these are: (i) issuance of the National Water Policy (NWP) in 2007; (ii) establishment of a Water Directorate (WD) within the civil service structure of the Ministry of Water Resources Works and Housing (MWRWH) in 2008 to assist with policy formulation and sectoral coordination; and (iii) establishment of the Environmental, Health and Sanitation Directorate (EHSD) under the Ministry of Local Governments and Rural Development (MLGRD) in There is no doubt that this, in addition to the development of Strategic Investment Plans for Rural Water and Urban Water, the National Community Water and Sanitation Strategy, the Public Procurement Act, the Internal Audit Agency Act, and several other acts and legislative instruments have ensured operational transparency among players in the sector. The creation of the Water Directorate, the Environmental, Health, and Sanitation Directorate, the Multi-Donor Budgetary Support (MDBS) Mechanism, the GoG-Development Partner (GoG-DP) Water and Sanitation Sector Group, and the GoG-DP Joint Sector Annual Review Conferences 5 have also helped to build cooperation, coordination and harmonization between government and non-governmental organizations, stakeholders and Development Partners (DPs). The establishment of the Water Directorate, in particular, has highlighted for all stakeholders the central place of water in the Ministry s scheme of work and the huge priority given to continuous support for the Directorate to ensure firm rooting in the sector. 5 In 2009, the GoG/DPs Joint Sector Review Conference evolved into the Ghana Water Forum (GWF) with a Ministerial/DPs Round Table Meeting. In addition to the GoG-organized Annual Reviews, to which NGOs are invited, the coalition of NGOs working on water and sanitation in Ghana (CONIWAS) organize an annual conference (MOLE) where civil society, government actors, donors and other stakeholders deliberate on critical issues affecting the sector. 2

11 B. Rationale for Bank Involvement 6. Increasing access to drinking water supply and improved sanitation in rural areas (RWSS) is a priority for the GoG. This is also embedded in the National Water Policy (2007) and is underpinned by the principles enunciated in the Ghana Poverty Reduction Strategy (GPRS and GPRS-II), the National Medium-Term Development Policy Framework ( ), the Millennium Development Goals, and the Africa Water Vision of the New Partnership for Africa s Development. The World Bank Group has been highly committed to contributing to the development of the RWSS sector in Ghana, as reflected in the Country Assistance Strategy (CAS). The FY04-07 CAS included ample support to the reforms and increases in coverage in Ghana s water sector by means of Phases 1 and 2 of the Second Community Water and Sanitation Project 6 and the Community Based Rural Development Project (CBRDP). Though significant progress has been achieved in access to water, the sustainability of facilities and services needs to be improved, and little has been done in regard to access to improved sanitation. 7. In coordination with other donors activities, the GoG has requested that the World Bank Group continue its involvement in RWSS, as it is reflected under the FY08-11 CAS 7. The rationale is to build upon gains achieved thus far under the previous CAS, while improving sustainability by supporting decentralization of responsibilities to the district assemblies and increasing access to improved sanitation. The Sustainable Rural Water and Sanitation Project will therefore support the implementation of the NCWSP by the District Assemblies, under the coordination and facilitation of CWSA and in collaboration with the private sector and development partners. A major focus of this project is enhancement of sustainability of water services through the strengthening of DAs to effectively execute their responsibilities in the sector. The project will also support the promotion of Community Led Total Sanitation (CLTS) to create awareness and generate demand for sanitation. The goal is to help communities achieve an Open Defecation Free (ODF) status and move the people higher on the sanitation ladder. C. Higher Level Objectives to Which the Project Contributes 8. By financing water supply and sanitation facilities for rural communities and small towns, the promotion of Community Integrated Sanitation and Hygiene, Institutional Strengthening, and Project Management assistance, the SRWSP will contribute significantly to the achievement of four of the five pillars of the GPRS II: Macroeconomic Stability, Production and Employment, Human Resource Development, and Programs for the Vulnerable and Excluded. In addition, the project will play a key role in supporting GoG objectives of strengthening local governance and decentralization, and ensuring accelerated provision of water and sanitations services, as spelled out in the MTDPF ( ). The project will ensure sustainability of the provided services through strengthening local capacity to manage rural and small town water and sanitation facilities, particularly at the DA level. This project will also support the GoG strategy towards development of a Sector Wide Approach (SWAp) to facilitate 6 Phase 2 is the ongoing Small Towns Water Supply and Sanitation Project 7 The current CAS has been extended through FY12 and the provision of water and sanitation services remains a top priority as reflected in the Progress Report reviewed by the Executive Board on May 10,

12 coordination and harmonization within the water and sanitation sector (Please see Annex 14 for more details). II. PROJECT DESCRIPTION A. Lending instrument 9. The credit instrument will be a Specific Investment Loan (SIL) to finance investments and technical assistance with the objectives of: (i) expanding access to drinking water and improved sanitation in small towns and rural areas; and (ii) strengthening the DAs and sector institutions to improve subproject implementation and ensure long-term sustainability of the water supply and sanitation services. B. Project development objective and key indicators 10. The objective of the Project is to expand access to, and ensure sustainable water supply and sanitation services in rural and small town communities in six regions of Ghana. The project will focus on six regions of Ghana over the next five and a half years, and is expected to benefit 600,000 people or 5 percent of the rural population. Key outcome indicators to measure achievement of the project development objectives include: i. Number of people with access to improved water supply under the project; ii. Reliability of water supply services under the project area iii. Number of people with access to improved sanitation under the project; iv. Number of communities in project area declared free of open defecation; v. Water systems with ratio of revenues over operation and maintenance costs (including depreciation) equal or greater than 1; and vi. Direct project beneficiaries of which (percent) are females 11. Project supervision will include regular assessment of the above indicators on a district basis to enable close monitoring of progress towards the set targets, and more broadly towards achieving the MDG targets. C. Project Components 12. The proposed project will have three components and will concentrate on six regions selected using criteria developed by CWSA in support of NCWSP implementation: Central, Western, Brong-Ahafo, Northern, Upper East, and Upper West. Within those regions, the investments will prioritize the districts with the lowest water coverage, which would be raised to at least the national average, and those with high incidence of water borne diseases. The selection will also be guided by capacity at the district levels and will be done in coordination and harmony with other partners. Proven capacity by the DAs to implement subprojects and to monitor their operation once they are in service will be a key criterion in prioritizing the order of implementation of the investments while the capacity of other DAs is strengthened. 4

13 Component A Rural and Small Town Water Supply (US$47.6 million) 13. This component would support the increase and improvement of access to water supply through the construction and rehabilitation of point sources and piped water supply systems in several types of context: i. Provision of boreholes fitted with hand pump for rural communities (i.e. communities with population not exceeding 1,200); ii. iii. iv. Provision of medium-sized systems based on mechanized boreholes for mediumsized small towns (i.e. communities with population between 1,200 and 5,000); Provision of large-sized systems based on mechanized borehole for larger sized small towns (i.e. communities with population exceeding 5,000); Connection to transmission lines from Ghana Water Company Ltd. 8 (GWCL) systems for communities or small towns (e.g. coastal communities with saline groundwater located near urban systems); v. Rehabilitation of good yielding, broken down orphan 9 boreholes in rural communities and small towns; and vi. Rehabilitation of non-optimal performing water supply systems in small towns transferred from the GWCL. Component B Rural and Small Town Integrated Sanitation & Hygiene Promotion (US$18.6 million) 14. This component aims at accelerating the pace for attainment of MDG for sanitation by targeting whole communities and small towns within the project area to reach open-defecationfree status. Therefore it will support the development of behavioral change communication strategies, including the use of inter-personal communication and mass media, to bring about change in awareness, skills, and attitude among stakeholders. Parallel to demand creation, the project will facilitate development of local supply markets to respond to project-generated demand for improved sanitation products and services. The project will not finance the construction of household toilets at the community level. However, it may provide limited support to poor households which are unable to afford the costs of constructing a toilet. This 8 National utility responsible for the provision of water to people in urban areas. 9 Common name given in Ghana to old boreholes, usually over 30 years old, which are not claimed by any donor (hence the orphan denomination) and are normally equipped with old non-standard hand pumps for which parts are no longer available. 5

14 support will be limited to core elements of a basic household latrine, such as the slab, with the rest of the costs to be financed by the household itself. This component will also support the construction of institutional latrines for schools and health facilities located within the project area. Component C Institutional Strengthening and Project Management (US$11.1 million) 15. This component will support orientation, capacity building and technical assistance, as well as logistics to streamline roles and strengthen capacities of key stakeholders in the water and sanitation sector for effective subproject implementation, operation, monitoring and supervision. The orientation is considered critical to ensure that the local government hierarchy, consisting of the Ministry of Local Government and Rural Development (with the Local Government Services and the Environmental Health and Sanitation Directorate), the Regional Coordinating Councils (RCCs), and particularly the District Assemblies (with their technical units, District Works Departments (DWDs) and the District Water and Sanitation Teams (DWSTs)), fully assume ownership of the subprojects and improve coordination with CWSA. (a) Technical Assistance (TA) (US$5.8 million) 16. This subcomponent will provide related strengthening of the above institutions plus the Water and Sanitation Development Boards (WSDBs) and Water and Sanitation Committees (WATSANs) at the community level to maximize efficiency and effectiveness. Support will include workshops and clinics in planning, procurement, contracting arrangements, project management, supervision, financial management, environmental and social accountability, operation and management of water and sanitation facilities, monitoring and reporting. The project will finance the establishment and/or strengthening of the Water and Sanitation Unit of the District Works Department in the target regions. Logistics will also be provided to facilitate effective supervision, monitoring and evaluation at the community level by supporting the WATSANs and WSDBs. Support will also be provided to promote public-private partnerships through capacity building clinics to consolidate training programs implemented under the Small Town Water Supply and Sanitation Project (STWSS) for provision of goods and services. (b) Establishment of Sector Information System for Monitoring and Evaluation (US$2.4 million) 17. This subcomponent will support the establishment of a robust Sector Information System to facilitate information sharing, coordination, and to enhance M&E roles among the water and sanitation actors. The system will provide information databases on access to water and sanitation services, performance of water supply and sanitation facilities, sector investments (including those from GoG, Donors, NGOs, and the private sector) and O&M funding requirements vis-à-vis tariff levels within communities. As part of the development of the information system, an assessment will be made of the existing M&E systems, such as the District Monitoring and Evaluation System (DiMES) that has already been rolled out in some districts, and will support their implementation as necessary since they will be a key element of the sector information system. This system will be web-based and accessible to sector 6

15 stakeholders such as MWRWH, MLGRD, MOFEP, CWSA, RCCs, DAs and users, as well as to Donors and the general public. (c) Project Coordination and Management (US$2.9 million) 18. This sub-component will support the operating costs incurred by CWSA to coordinate and facilitate the DAs in project implementation as well as meeting the training and logistic needs of the agency at head and regional offices, including the acquisition of vehicles. In particular, it will support CWSA regional offices in the coordination of DAs and RCCs, and CWSA head office in the coordination of the Ministry of Local Government, to ensure compliance with internal financial and procurement controls, banking arrangements and contract awarding and supervision processes. A reporting system will be established to ensure that CWSA regional offices, which are members of the RCCs, report regularly to the RCCs and in particularly the Regional Minister to facilitate project implementation controls. D. Lessons Learned and Reflected in the Project Design 19. Useful lessons have been generated from projects financed by the World Bank and others that can now be applied in the design of this proposed operation. These include, among others: (a) The concept of Community Ownership and Management (COM), which in the past has been considered essential for long-term sustainability of water and sanitation facilities delivered to communities, needs to be reviewed and fine-tuned to assure a sustainable operation and maintenance of the facilities, including the renewal and replacement of the assets at the end of their life expectancy; (b) Decentralized delivery of water and sanitation facilities has great potential for scaling-up access and helping the country achieve the MDG targets for water and sanitation. CWSA must focus more on technical support, facilitation, coordination and supervision and less on local implementation and resource allocation; (c) District Assemblies (DAs) have legal ownership over local water systems and as such will be responsible for subproject implementation, funds management, and oversight of the operation and maintenance of the small towns and community systems; (d) Enhancement of private sector capacity is crucial if it is expected to provide goods and services and generally serve as an engine of national economic growth; (e) The budget allocated for the hygiene-promotion component is often very small or nonexistent. The current low level of investment in sanitation and hygiene education, as compared to that for water, is a reflection of the above and raises a question about the strategy and commitment to achieve the MDG sanitation target. In view of this, Community Led Total Sanitation (CLTS) and aggressive marketing of sanitation and hygiene has been identified by this project as necessary to move from open defecation to a higher step in the sanitation ladder. Limiting efforts to promotion and marketing alone will not be sufficient if this goal is to be achieved. Hence, the GoG needs to provide some 7

16 subsidy assistance if Ghana is to significantly move towards achieving the MDG target for sanitation; 10 (f) Proper hand washing with soap can break the cycle of disease transmission and subsequent unnecessary death of children from fecal-related and fecal-borne diarrhea; (g) Integration of water supply, improved sanitation, and good hygiene practices maximizes health benefits of beneficiaries of the interventions; (h) Project-based approaches to service delivery lead to ineffective coordination and sector fragmentation, which in turn, yields duplication of efforts and wasted resources. Consistent with the Paris Declaration and the GoG s intention to move from projectbased to program-based development approaches, partners need to harmonize their implementation processes with national guidelines, strategies and norms, in the process of moving from a project to a sector-wide approach (SWAp). This is expected to contribute to a reduction in project transaction costs and time; (i) The establishment of the Water Directorate (WD) within the Ministry Water Resources Works and Housing to lead policy formulation and sector coordination has highlighted for all stakeholders the fact that water now takes center stage in the Ministry s scheme of work. Continuous support to achieve firm rooting of the Directorate in the sector is of utmost importance; (j) Flow of funds to the DAs should be monitored using established GoG systems at national and regional level; (k) Financial allocations for rural water and sanitation should also consider key factors such as high poverty levels, low service coverage or high number of un-served communities, eradication of open defecation, high incidence of water and sanitation-related diseases such as typhoid, diarrhea, dysentery, guinea worm, and high number of cases of underfive mortality and morbidity due to diarrheal diseases; (l) Funds transfers to DAs should provide incentives to reward good performance, to motivate them to excel as project implementers and promote good and sustainable operation of the systems, as well as penalties in case of poor performance; (m) There is a need for a robust Sector Information System for the monitoring and evaluation (M&E) of not only access to water and sanitation, but of the quality of the services provided and the financial sustainability of the decentralized and community-owned systems; (n) To achieve operational sustainability, a chain of support to the community systems needs to be established to address issues that go beyond normal operation and maintenance. 10 Ghana, with a 6 percent access to improved sanitation in rural areas and 11 percent overall (urban and rural) is not on track to meet the MDG for access to improved sanitation and has some of the lowest coverages in Africa. 8

17 This chain should start at the DAs and escalate through a system of regional technical units all the way to the national level, if necessary; (o) Lessons learned from the implementation of Environmental and Social Management Frameworks (ESMFs) and Resettlement Policy Frameworks (RPFs) in previous projects indicate that communications and education of stakeholders on procedures and provisions relevant to the project must be considered and budget supported; (p) The project should seek compliance with all relevant requirements such as Environmental Protection Agency (EPA) permits, Water Resources Commission requirements for water abstraction, as per the WRC Act 1996 (Act 522) and LI 2006 (LI 1827) on Drilling License and Groundwater Development Regulations, etc.; and (q) Capacity of the DAs needs to be enhanced to ensure proper documentation of properties/sites donated for the project and that environmental measures are taken during facilities construction, to minimize impacts. E. Alternatives considered and reasons for rejection 20. The initial alternative proposed by CWSA was to implement a third phase of the Small Towns Water Supply and Sanitation Project, as had been initially planned. This alternative was rejected in favor of strengthening the DAs capacity to take full charge of subproject implementation and oversight of the provision of water and sanitation services. This alternative is better aligned with the GoG s decentralization policy and will be essential to attain the objective of sustainable water and sanitation services. Consequently, the project will support the DAs in these two key areas: (i) procurement, supervision, and management of funds for implementation of subprojects; and (ii) monitoring of service delivery of the water supply and sanitation facilities installed in the districts. This will enable CWSA to focus on its mandate of providing overall project coordination while the DAs focus on implementation at the district level, unlike the previous situation where CWSA was often a de-facto implementation agency when the capacity of the DAs was low. In this regard, the project will support the establishment of District Water and Sanitation units within the District Works Departments (DWDs) of the participating DAs. The District Water and Sanitation Teams (DWSTs) will be converted into the water and sanitation units of the DAs responsible for implementation of water and sanitation subprojects. This will reduce the ongoing perception that DWSTs were under the mandate of CWSA Regional Water and Sanitation Teams. Therefore, the establishment of the DWDs and their water and sanitation units within the DAs will significantly enhance the ownership over the subproject implementation by the DAs. In addition, the project will support the District Water & Sanitation Plans (DWSPs) prepared by the District Assemblies to address the water and sanitation needs (refer to Annex 6 for more details). 21. With regard to technical considerations for water systems, the fact that capital costs for systems serving fewer than 5,000 people were exceeding US$100 per capita prompted the need to search for less-costly alternatives. Consequently, CWSA organized a one week participatory workshop that resulted in revised standards for these systems that will lower the unit costs to 9

18 about US$45 per capita, mainly by substituting expensive elevated concrete tanks with smaller ones made of polyethylene that have proven very reliable in Ghana. 22. With regard to sanitation, the project will adopt the concept of Community Led Total Sanitation (CLTS) which aims at behavior change of the entire community. Support for core elements of basic toilet facilities, such as slabs for latrines, may be provided to poor households, subject to the commitment of the community to becoming open defecation free and having dug out the pit. The concept of CLTS has proven to be effective in Bangladesh and India rural Water supply programs as well in pilot projects implemented in Ghana. On the contrary, large upfront subsidies have yielded rather low results not only in Ghana but especially in other countries where very large upfront subsidies were provided for the rural water supply without recourse to the behavior-change concept. III. IMPLEMENTATION A. Partnership arrangements (if applicable) 23. This project supports the implementation of the National Community Water and Sanitation Program, which is coordinated with the activities supported by other Development Partners. In line with the Paris Declaration, the project concept was presented and discussed with the rest of the development partners for harmonization purposes through the DP-GoG Water and Sanitation Sector Work Group. B. Institutional and implementation arrangements 24. The institutional arrangements for implementation of subprojects financed by the SRWSP will fall within the framework of the decentralization program of the GoG. The DAs will play the leading role in subproject implementation, while CWSA will coordinate the overall program and provide technical support and/or advice. The subprojects will take into consideration the District Water and Sanitation Plans (DWSPs) prepared by the DAs to address the water and sanitation needs of rural communities and small towns within their respective districts. Due to the high level of inter-sectoral interest and connection to the water and sanitation sector, there is also the need for effective inter-sectoral coordination. Thus, the SRWSP will foster collaboration among key stakeholder sectoral agencies such as the MWRWH, Ministry of Finance and Economic Planning (MOFEP), the Ministry of Local Government and Rural Development (MLGRD) and its Local Government Service (LGS), the Ministry of Education (under its School Help Education Program-SHEP) and the Ministry of Health (MOH), as well as with Development Partners. This collaboration will also provide an opportunity to review and build on the gains achieved and lessons learned in previous and on-going projects within the sector. 25. Ghana s decentralization policy assigns Central Government Ministries and Departments with policy, planning, monitoring, evaluation and promotion responsibilities; while regions, (through the Regional Coordinating Councils and their respective Regional Planning Coordinating Units) are responsible for coordination. The mandate for implementation of 10

19 development programs lies with the respective DAs. This structure has been endorsed because of its potential to ensure capacity development and participation at the grassroots. 26. However, current trends show that, to a large extent, recognition of the decentralization system does not translate into actual implementation of the outlined framework. This has largely been due to the low capacity of implementing institutions, especially the DAs, which affects their ability to carry out their mandates. The result has been recurrent delays in project implementation, inadequate supervision and monitoring, low post-construction support, and sustainability challenges. 27. The SRWSP aims to address these implementation challenges by clearly defining and strengthening existing institutions (at national, regional, district and community levels) to perform their functions in the provision of community water and sanitation facilities and to ensure sustainability of the installed facilities. It also seeks to strengthen grassroots institutions, such as the Water and Sanitation Development Boards (WSDBs) and the Water and Sanitation Committees (WATSANs) in the supervision and management of water and sanitation facilities. The project also seeks to strengthen the private sector as a crucial partner in achieving a sustainable RWSS sector. 28. The objective is to provide continued technical assistance, particularly post-construction technical training and capacity building of DAs, to help develop their local capacity. This will reinforce the community based O&M and strengthen the potential for sustainability. Full mainstreaming of implementation responsibilities into the appropriate local governmental structures is expected to be achieved by the project s closing date. Subproject Implementation Arrangements 29. The DAs will be supported to assume full responsibility for the implementation of the subprojects at their level. DAs will also monitor the effectiveness and financial sustainability of established water and sanitation facilities, take action to resolve any problems identified and plan strategically towards meeting community needs. 30. At the community level, responsibility for post-construction management of the subprojects will be delegated to the Water and Sanitation Development Boards (WSDBs) and Water and Sanitation Committees (WATSANs). Private Sector firms, Community Based Organizations (CBOs), and Non-Governmental Organizations (NGOs) who will compete for contracts to deliver goods and services to rural communities and support the Department of Community Development in community mobilization. This requires that capacities of contractors, consultants, and NGOs are strengthened and a database is established to provide information that will aid in the effective monitoring of contracts and supervision of compliance to subproject agreements (SPA). 31. The overall project will be coordinated and monitored by the CWSA under the oversight of a Steering Committee that includes representatives from the MWRWH, MLGRD and MOFEP. The CWSA will facilitate and provide support to the local government institutions for project implementation and management, and serve as liaison with the World Bank. 11

20 32. Support will be given to the Regional Coordinating Councils (RCCs) to monitor the performance of DAs to ensure compliance with approved procedures with regard to timely implementation of subprojects and efficient and sustainable operation of water and sanitation facilities. Regional Environmental Health Offices (REHOs) will also be supported to train DAs and other service providers on hygiene and sanitation. 33. The Local Government Service (LGS) will be the national-level institution that will develop and indirectly manage a scheme to reward good performance by the DAs as well as levy possible penalties in cases of poor performance. The RCCs will have direct oversight of this scheme. 34. Financial arrangements for project implementation will involve DAs contributing at least five percent 11 to the capital cost of water facilities demanded by communities. Every DA will also be required to submit a detailed budget to its RCC before the end of the financial year, stating total expected revenue and expenditure of all departments and organizations under the DA for the following year. Reporting on progress will however be carried out monthly by DAs to RCCs. CWSA will be responsible for the overall financial management of the IDA funds and will be required to send quarterly reports on disbursements to the steering committee and the RCCs. 35. CWSA will, in consultation with WD, EHSD, LGS and the DAs, be responsible for coordinating the overall planning and budgeting of the NCWSP, of which this project is a part. CWSA will also provide technical support to DAs in project implementation. Financial Management Aspects of Institutional and Implementation Arrangements 36. Project management and coordination, including financial management, would largely rely on capacities and structures of existing GoG institutions, particularly CWSA, which has in place an effective and functioning financial management system with an adequate mix of technical and non-technical staff to facilitate smooth implementation. 37. For the past ten years CWSA has successfully managed the IDA-funded projects such as the Ghana Small Towns Water Supply and Sanitation Project. Based on periodic supervisions and reviews of the control environment, there are effective internal controls for preventing fraud, waste and mismanagement of its operations. Therefore, this project will rely on the current systems and fund flow mechanisms which have been successfully used for implementation of similar projects. 11 This contribution, which is consistent with the National Water and Decentralization Policies and is considered a good practice in the water sector to promote ownership, will be waived during an initial period, as agreed during negotiations and described in Annex 7. 12

21 C. Monitoring and evaluation of outcomes/results 39. The establishment of an appropriate Sector Information System is very important at this crucial stage, especially given the fact that the Development Partners are expected to eventually change their financing mechanisms into a common pool of funds. The project s monitoring and evaluation (M&E) system is designed to serve as a tool for project stakeholders, enabling them to assess both implementation of the different activities and the performance of the systems once they are operational. Assessment of system performance, which was not done properly in the past, will be achieved by means of a Performance Contract to be signed between the DAs and the service providers/wsdbs. Reports will be prepared on a timely basis so that project objectives and corresponding targets can be evaluated and corrective measures applied, if necessary. The monitoring and evaluation system will be based on a participatory approach, with stakeholder groups trained and responsible for performing their respective roles. The new Sector Information System will be developed taking into consideration the two existing systems: the District Monitoring and Evaluation System (DiMES) and the Water and Sanitation Monitoring Platform (WSMP). The objective is that the information is entered in a timely fashion into a web-based information system accessible to all stakeholders and the general public. Information on the intermediate results, indicators, and arrangements for results monitoring can be found in Annex One of the emerging lessons from previous projects is that, in addition to the need for clear responsibility for project management during the implementation phase, there is a need to monitor the operational and financial performance of the service providers. Data for the proposed project s outcome and results indicators will come from a variety of sources: (i) traditional sources for data gathering, analysis and reporting to monitor implementation progress (i.e. CWSA quarterly reporting on activities and outputs as well as periodic technical audits of districts); and (ii) participatory methods to bring beneficiaries and implementers together on a regular basis to evaluate effectiveness and sustainability of activities undertaken, as well as to provide feedback for improving processes. Given the intensive learning and adaptation process needed for small towns and rural community systems, annual stakeholder meetings will be held at the regional level to share emerging lessons and revise implementation and sustainability on a timely basis. Whenever needed, independent consultants will also make spot checks of works contracts and water and sanitation facilities to provide Bank supervision missions with timely information on the ground. 41. Responsibilities for monitoring and evaluation will be held at various levels. Data will be gathered and entered in the information system at the lowest levels and monitored upwards (from small towns to DAs, to the RWST and RCC, to CWSA Head Office, MWRWH, and MLGRD). Staff at each level will be responsible for M&E, and the project s sector support component will provide needed training. Mechanisms for using the findings of the M&E system will be two-fold: (i) through the regular reporting system; and (ii) through periodic participatory M&E workshops, which will provide the opportunity to discuss results with all stakeholder groups. In line with the GoG s decentralization policy, the project will strengthen the DAs and RCC in the monitoring of activities at the district and regional levels. 13

22 42. A key task of the M&E system will be to report on progress towards meeting the MDG targets as well as identification of any constraints affecting the momentum of implementation. RWST annual work plans will indicate how the annual plan relates to the MDG targets. RWST quarterly reports will indicate if subprojects implementation is on schedule. RWSTs will discuss these reports with the RCCs for information and for correction actions and to CWSA Head Office, which will aggregate the information at the national level. D. Sustainability 43. As indicated, one of the emerging lessons from previous projects is that once the subprojects are completed, there is little oversight of the appropriate operation and maintenance of the facilities by the DAs, which are the asset holders. Therefore, there is a need for the DAs to take ownership of the systems to ensure that they are properly operated, that assets are wellmaintained and that sufficient financial resources are available for the renewal of assets at the end of their useful life. To accomplish this key objective of sustainability, the project will finance technical assistance (TA) for strengthening the oversight capacity of the district institutions and will require as a condition of eligibility for new investments that the DAs execute Performance Contracts with the service providers. These performance contracts will be monitored through the M&E system and will be publicly disseminated through the Sector Information System. In addition, the RCC will be trained to evaluate the performance information from the Districts and to take corrective measures as necessary. E. Critical risks and possible controversial aspects Risk factors Description of risk Rating a of risk Mitigation measures Rating a of residual risk I. Country and/or Sub-National Level Risks Weak capacity for program implementation Substantial Moderate Capacity constraints of DAs structures for implementation such as: the District Water Departments (DWDs) not in place in most of the DAs; lack of qualified and dedicated personnel; inadequate provision of investment and operational funds. Limited capacity of the local private sector to meet Moderate Provision of capacity building programs for DA key staff based on periodic performance assessments and defined benchmarks for sustainable W&S service delivery, and financing of essential goods required for implementation. Continue to encourage DAs to provide funds to DWSTs for field supervision and monitoring of W&S activities. Adequate provision of these funds will be monitored and publicly disseminated. Support to DAs in the prequalification of contractors; strengthening Moderate 14

23 Governance Procurement Risk II. Sector Governance, Policies and Institutions Financial sustainability of the water systems increased demand and to deliver in a timely manner Since a large part of the project (over 80% of funding) is implemented at the community level (District Assemblies) there can be significant fund flow risk due to weak PFM systems at the district levels Inadequate Procurement Experience and Capacity of DAs. Counterpart funds are not available regularly and delay water projects implementation Substantial Substantial Substantial the Implementation Units (DAs) capacity for processing and implementation of contracts; capacity building workshops for private sector actors. Increased supervision by RCCs and CWSA's Regional Offices to ensure compliance with internal controls, banking arrangements and contract award and supervision processes. Complement efforts at improving PFM capacity of Metropolitan, Municipal and District Assemblies (MMDAs). Specialized PFM TA provided to CWSA and MMDAs by Ghana Audit Service and Controller and Accountant General s Department to facilitate rapid disbursement and ensure compliance through performance audits. Technical support from Engineers/Procurement Specialist at the national and regional levels. Further training of District Works Departments and Tender Committees of DAs, Tender Review Boards, RCC and MLGRD officials in the application of procurement procedures. This training will complement the ongoing nationwide training efforts as part of the operationalization of the Public Procurement Act. The training will also be coordinated with procurement training under other Bank-financed operations that are being implemented by DAs. A commitment to provide 5% will be a condition of eligibility for the DAs. This commitment will have to be endorsed by a 2/3 majority Moderate Moderate Moderate 15

24 III. Operationspecific Risks Lack of capacity of DAs to fully take on the leadership role in maintaining W&S systems as well as other actors in carrying out their roles Low demand for improved sanitation facilities Water Safety Concerns: intrusions of salt into ground water sources; high concentrations of fluoride; dangers of arsenic poisoning of water sources especially in mining areas; high iron contents. Substantial Substantial Moderate of the Assembly to allow the GoG to deduct the 5% contribution from the funds going to the DAs, should the latter fail to provide the contribution. (Payment of the contribution will begin on July 1, 2012, as agreed during negotiations and detailed in Annex 7) Continued TA, particularly post-construction technical training and capacity building of DAs and private sector service providers. In addition, a Performance Agreement will need to be signed between the DA and the operator of the water facilities with obligations from both sides for adequate and sustainable operation and maintenance. The project will support Community Led Total Sanitation (CLTS) and aggressive marketing of sanitation and hygiene to move from open defecation to a higher step in the sanitation ladder. In addition to promotion and marketing, the project will provide some basic support to assist households with the construction of improved sanitation facilities. Provision of TA to CWSA to continue with their research efforts to find lasting solutions to the water quality challenges identified, including the use of adequate treatment technologies. Arrangements to obtain bulk water from GWCL in several districts of the Central Region affected by saline intrusion Moderate Moderate and other areas. Overall Risk (including Reputational Risks) Overall Risk Substantial Moderate Rating of risks on a four-point scale High, Substantial, Moderate, Low according to the likelihood of occurrence and magnitude of potential adverse impact. Low F. Loan/credit conditions and covenants 44. Effectiveness conditions 16

25 i. Subsidiary Agreement has been executed on behalf of the Government of Ghana and CWSA. ii. Government of Ghana has submitted revised PIM reflecting the objectives and conditions of the project in a manner satisfactory to IDA. 45. Disbursement condition i. No withdrawal shall be made for payments made prior to the date of the Financing Agreement, except that withdrawals up to an aggregate amount not to exceed $2,000,000 equivalent may be made for payments made prior to this date but on or after April 1, 2010, for Eligible Expenditures under Category (1); or ii. No withdrawal shall be made in respect of the Grants made for subprojects under Category (2), unless the Subproject Agreements for the first three Subprojects for said Grants shall have been executed between the CWSA and the first three District Assemblies, and have been approved by IDA. 46. Legal Covenants - Standard Financial covenants as stated in the Financing Agreement Schedule 2, Section II (B) on Financial Management, Financial Reports and Audits and Section 4.09 of the General Conditions. IV. APPRAISAL SUMMARY A. Economic and financial analyses Economic 47. The total cost of the SRWSP is estimated at US$77.3 million (including contingency reserves). Investments will be allocated as follows: approximately US$48 million for water systems, US$18 million for sanitation, and US$11 million for Institutional Strengthening, Sector Information System and Project Management. These investments are expected to produce direct benefits of increased provision of water to rural communities and small towns, as well as indirect benefits such as time saved in fetching water, health improvements with higher quality water, ability to receive water at home, and improved hygiene as a result of new latrines. Based on a 15- year projection of population and water supply, it is estimated that 806,000 people will be served by the project s water systems in the year 2020 and 935,000 in These people will be provided, in the last year of the project with close to 9 Mm 3 of water, an increment of 6.2 Mm 3 over what they would have received without the project. 48. Current water consumption from improved sources in most small towns in the project areas is estimated at about 10 liters per capita per day (lpcd). The average number of family members in a household in the small towns is estimated at about 8 persons. Once the project is completed, it is expected that consumption at standpipes will reach 20 lpcd and consumption in homes connected to the network will be 60 lpcd. At present, water is sold to consumers between 3 pesewas and 5 pesewas for a # 34 bucket (18 liters) and it is expected that this price will also 17

26 hold for the project s systems. However, to achieve the estimated increase in household water use from 20 lpcd to 60 lpcd, directly-connected households will be required to pay between 5 and 7 pesewas per bucket for the standpipe amount of 20 lpcd instead of between 3 and 6 pesewas for standpipe consumption. This increase will cover the cost of O&M and will enable the communities to accumulate funds for replacement of the capital assets in the future. The cost of a private connection (borne by the household), US$80-160, is small when compared to the estimated improvement in welfare. The benefits accruing to the households with piped connections can be assumed to be about 130 percent of the benefits accruing to those obtaining water from public standpipes. 49. The key cost component to increase with population and water supply is energy. The share of energy costs in O&M is 25 percent. Hence, with population and water growing at the rate of 3 percent per year, O&M cost has to grow at 0.75 percent per year to account for expanding use of energy. Conservatively, O&M cost were increased by 1.5 percent per year. 50. The funds allocated for sanitation will be used in the promotion of good hygiene and sanitation practices, support for the construction of latrines in private homes, and construction of institutional latrines in selected schools and clinics. Hygiene, Education and Sanitation (HES) consultants shall be engaged in each region to promote active sanitation campaigns for behavioral change towards achieving open-defecation-free communities. A total of about 600,000 people are expected to benefit from improved sanitation facilities. 51. The present value of the net benefits is US$43 million without charges for sinking funds and close to US$37 million with charges. The corresponding Internal Rates of Return are 27.5 and 25.5 percent. Financial 52. The financial outflows of the project will be comprised of investments (construction) operations and maintenance (plus contributions to sinking funds) and from 2020 to 2025, repayment of the IDA loan (equal annual repayments of a US$75 million loan, 2 percent interest, 10 year grace period). The financial inflows consist mainly of World Bank finance, and the sale of (incremental) water. For the fifteen years from 2010 to 2025, the present value of the financial inflows (at 12 percent interest) exceeds the outflows by US$22.8 million. B. Technical 53. The project will finance (i) small town water supply systems, which typically consist of mechanized boreholes with a piped reticulation network, and (ii) community systems that typically consist of boreholes with either mechanized or hand pumps. The project may also support the provision of bulk water from GWCL in areas close to urban systems where neither adequate groundwater nor surface water is available. Although the project will principally finance the construction of new systems, it may finance the rehabilitation of some old GWCL systems, which were transferred in flawed condition to DAs, as well as the rehabilitation of orphan boreholes. 18

27 54. Mechanized boreholes are provided with submersible pumps using electricity from the national grid where possible, or diesel in areas without electricity. Groundwater is usually untreated but may occasionally require iron and manganese removal facilities. In certain areas with groundwater problems due to saline intrusion, alternatives such as connection to GWCL networks will be assessed. A wide variability in per capita investment costs is expected, ranging from as low as US$33/capita to as high as US$84/capita, depending on the system characteristics and type of intervention. The average per capita investment cost for the project, based upon the expected number and type of interventions, is estimated at US$ The project will finance the promotion of Community Led Total Sanitation (CLTS) and hygiene education to generate household demand to invest in sanitation facilities. CLTS is based on a proven 12 methodology to change the behavior of entire communities to eradicate open defecation. The project may also support poor households with core elements of a basic latrine, such as the slab. The project will also finance the construction of institutional toilet facilities for selected schools and clinics. 56. To best optimize the use of scarce investment funds, a one week long workshop was organized by CWSA to review and revise the traditional designs. The exercise resulted in a reduction of per capita investment costs of up to fifty percent for some of the water supply systems, while maintaining the required quality standards. As its name indicates, the project emphasizes the need to ensure the sustainability of the investments once they are in use. In this regard the project will require the execution of performance agreements between the DAs and the system operators, stating the obligations of both parties. The O&M performance and compliance with the agreed obligations will be monitored by means of a sector information system to be developed with support from this project. This system will provide the local and regional government authorities and the water sector authorities with the necessary information to monitor and enforce the performance of water and sanitation operations. The project will also finance training and education of local government and sector officials and authorities. This will be done on a continuous basis to reinforce the knowledge and also assure its permanence should officials and authorities change. C. Fiduciary 57. Procurement - Procurement for the project will be carried out in accordance with the Bank s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004 and revised in October 2006 and May 2010 (Procurement Guidelines); and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004 and revised in October 2006 and May 2010 (Consultant Guidelines) and the provisions stipulated in the Financing Agreement. The implementing entities as well as contractors, suppliers and consultants will observe the highest standard of ethics during procurement and execution of contracts financed under this project. Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA and Grants dated October 15, 2006 (the Anti-Corruption Guidelines) shall apply to the project. 12 The CLTS methodology has benefited millions of people in Bangladesh, India, Tanzania and other countries that now enjoy an open-defecation-free environment, and it has been successfully tested in Ghanaian communities. 19

28 58. Procurement activities will be carried out by District Assemblies (DAs) with technical back stopping by Community Water and Sanitation Agency. The DAs have been involved in implementing Bank (and other donor s) financed projects through CWSA for CSWPI and CWSPII, and through the Community-Based Rural Development Project (CBRDP - Credit No under the Ministry of Local Government and Rural Development) and the Village Infrastructure Project ITF (Credit No. N020 GH under Ministry of Agriculture), and have acquired some capacity to carry out procurement under the project. These experiences and capacities at the DA level have been built over time but are not adequate in many cases to independently implement Bank (or other donor) funded projects. In addition, new districts have been created and staffed by new staff with little or no exposure to Bank or other donor procurement procedures. Within four years of the CBRDP alone, the number of districts has increased from 138 to 170. Therefore capacity building of the DAs is a key subcomponent of this project. 59. Capacity assessment of CWSA showed that it has handled Bank funded projects since the year 2000 and has gained extensive experience to handle procurement. Procurement capacity at both the CWSA head office and the RWSTs in the original project areas is found to be adequate. An assessment of the 6 Regions (Central, Western, Brong Ahafo, Northern, Upper East and Upper West) where the RSWSP will be implemented show that the regional CWSA engineers who are also responsible for procurement have sufficient knowledge and experience in Bank s procurement procedures and processes to provide technical assistance to the implementing DAs. These DAs have previously received training from CWSA and thus have knowledge on Bank procurement, but will continue to receive technical support from CWSA. Under the project implementation arrangements, capacity of Water Boards will be enhanced by DAs while that of the DAs will be enhanced by continuous capacity efforts and support by CWSA Regional Teams, as well as by use of procurement and financial procedures specified in the Project Implementation Manual. Under the predecessor projects, CWSA with Regional Offices was charged with facilitating and coordinating project implementation. However due to the perceived lack of capacity by the districts, CWSA mostly played an implementation role. Under this Sustainable Rural Water and Sanitation Project, the Regional CWSA offices, which are currently staffed with qualified engineers familiar with Bank procurement and consultant selection policies and procedures, will support the DAs, who will be directly responsible for procurement under the project. Most of the regional engineers and other staff have attended the Bank-supported regional procurement course at the Ghana Institute for Management and Public Administration (GIMPA). 60. The summary assessment of the procurement risk is substantial for the project and the prior review thresholds have been set to reflect this rating. The substantial procurement risk rating is related to the large number of procuring entities under the project. Procurement postreviews and technical audits will be carried out annually by the Bank Procurement Specialist and or independent auditors and based on the findings of the reviews the prior review thresholds will be reviewed. The main risks identified are the following: (i) limited procurement experience; (ii) inadequate monitoring; (iii) weak contract management; (iv) poor commitment control; (v) inadequate post-qualification requirements in bidding documents; (vi) inadequate capacity/overloading of consultants and contractors; (vii) delays in processing procurement and 20

29 payments; (viii) political interference; (ix) Fraud and Corruption; (x) poor public perception of DAs; and (xi) ignorance of project objectives and concepts. 61. The actions planned to address these deficiencies are included in the project capacity building activities, and include the following: (i) recruitment of Engineers/Procurement Specialists at the National and Regional Levels; (ii) further training of the DAs, Tender Review Boards, RCC and MLGRD officials in the application of the procurement procedures. This training will complement the ongoing nationwide training effort as part of the operationalization of the Public Procurement Act. The training will also be coordinated with procurement training under other Bank-financed operations which are also being implemented by DAs; (iii) setting of standard processing times; (iv) establishment of semi-annual reporting requirements; (v) establishment of a contract performance support system; (vi) institutionalization of annual procurement audits; (vii) annual review of prior thresholds based on findings of the procurement post-reviews; and (viii) enforcement of remedial actions if GOG does not take appropriate sanctions against violators. 62. Financial Management - Ghana s fiduciary environment is considered adequate for supporting Bank lending operations. As reported in the ERPFM 2009 and the Draft PEFA 2009 reports, Ghana is gearing itself to establish a strong foundation for aggregate fiscal discipline, based on positive developments in the following areas: (a) prevalent low levels of unreported extra-budgetary expenditure; (b) good and timely public access to key fiscal information; (c) adherence to a fixed and coherent budget calendar; (d) high average debt collection ratios for tax arrears and regular and timely revenue transfers to the Consolidated Fund; (e) comprehensive recording, reconciliation and reporting of debt service and on the debt portfolio; (f) predictable budget support disbursements; (f) timely in-year budget implementation reports and annual financial reports; and (g) improved effectiveness and timely external audit scrutiny. Building on the PEFA 2006 and the ERPFM 2006 reports, the latest reports (2009) further confirm that Ghana has built a solid legal and regulatory framework and foundation for public financial management that performs at an average level and occasionally above-average standards. 63. However, the overall fiduciary control environment, according to the latest assessments, continue to suffer from failures to: (a) apply the guiding principles of a well structured consolidated cash management system, in a Treasury Single Account mode, for all public expenditures supported under the budget; (b) fully implement commitment accounting and controls and hence document, report, and minimize the potential for expenditure arrears, which add to the distortion of macro-fiscal stability; (c) provide a consolidated fiscal picture of revenues and expenditures against the five separate and distinct government funds; and (d) adopt and implement a Government Finance Statistics Manual (GFSM 2001) chart of classification for budgeting, accounting, and fiscal reporting, that is uniform across all government structures. 64. Under this project, management and coordination, including financial management, would largely rely on existing GoG institutions and structures and capacities of the CWSA, which has been developed and tested under the STWSSP. The financial management responsibilities of the project during implementation will be handled by the CWSA, which has in place an effective and functioning financial management system with an adequate mix of technical and non-technical staff to ensure smooth implementation. The projects financial 21

30 management will be complimented by adhering to the policies, rules, and procedures as stated in the revised PIM, which will provide guidelines on budgeting and financial reporting; funds disbursement procedures, and financial management monitoring and control. D. Social 65. The project follows a demand-driven approach, which seeks specifically to improve sustainability of water and sanitation systems. The principal stakeholders are the rural communities that will benefit from improved systems. The project has a participatory M&E system, and community members will be involved in periodically assessing the progress of the project. Other key stakeholders include local government (DAs), RCC, LGS, CWSA, the private sector (including NGOs) and relevant government ministries (Health, Education, Finance, Science and Environment, and Local Government). A steering committee will be established, consisting of representatives from the WD and LGS to provide the overall leadership to the implementation of the SRWSP. The committee will meet at least quarterly to discuss sector performance and specific priority issues. They are part of the participatory M&E process and have key roles in the project. An Environmental and Social Management Framework (ESMF) has been prepared to provide a general impact identification framework to enable communities to screen subprojects and establish measures to address adverse environmental and social impacts. A Resettlement Policy Framework (RPF) has been developed to provide guidance to project stakeholders on how to address compensation issues related to affected properties/livelihoods, including land and income generation activities during project implementation. These frameworks also provide general guidelines for mitigation, monitoring institutional measures, and compensation principles to be considered during construction and operation of the sub projects. Some observations from CWSP II Phase 2 ESMF Implementation, as well as key recommendations for compliance with ESMF, are also presented. 66. The project requires that sufficient revenues are generated to cover all operation and maintenance costs of water facilities, including depreciation. The project's robust sector information system will facilitate information sharing and coordination, and enhance monitoring and evaluation to ensure project effectiveness and efficiency. Technical assistance to project stakeholders will consider socio-cultural issues such as gender, and will ensure that various community subgroups are involved in decision-making, proposal development, and WATSAN/WSDB formation. This project will promote the active involvement of beneficiaries in project planning and O&M activities. The collective capacity of opinion leaders of beneficiary communities, CWSA, DAs, Consultants/Contractors and other relevant actors will be built upon to understand and fully implement the provisions of the ESMF/RPF. Targeting and demand-based approach 67. The project has both direct and indirect social impacts which are mainly positive. The project is targeting regions and DAs with water coverage below the national average. This is critical if the total national average is to increase and advance Ghana towards achieving the millennium development goal target on water. Achieving the target is one aspect, but more critically, the beneficial effects of the provision of water on whole communities, women and 22

31 children and other vulnerable groups, is expected to be quite evident. Such targeting is crucial to ensure the spread of access to clean water. Even though not every community in beneficiary districts have access to clean water, this is one clear way of getting some regional balance in water provision while other development partners and groups help address other elements of the challenges of total coverage. 68. Another social impact is predicated on the demand-based approach. This approach helps strengthen accountability, ownership, and sustainability of systems. Under the Small Towns Water Supply and Sanitation Project, there has been evidence that the demand-driven approach has helped communities to take systems management quite seriously. Given the sense of community ownership, sustainability has been enhanced. The Sustainable Rural Water and Sanitation Project is likely to demonstrate even more enhanced sustainability, especially since a number of activities (at time of preparation of this project) in social accountability in the water and sanitation sector support the importance of ownership for transparent and accountable systems, which develops community interest for better services and better management and maintenance. Governance, Accountability and Transparency 69. The project will make social accountability an integral part of the implementation process, building relationships between service providers and community beneficiaries. Social accountability helps to ensure that funds for the project implementation are actually expended on designated activities in a transparent, engaging and participatory manner, with all beneficiaries on board including women and other vulnerable groups. The project will support accountability through the use of appropriate mechanisms of engagement and governance dimensions of project implementation. Such mechanisms will be developed as part of the implementation arrangements and will involve all key stakeholders like the Water and Sanitation Development Boards (WSDBs), the Water and Sanitation Committees (WATSANs), District Water and Sanitation Teams (DWSTs) with support from selected NGOs with capacity in this area. As part of this, selected representatives from communities and implementing agencies will be trained in these transparent and accountability mechanisms. This will engender a better understanding of the issues surrounding governance and civic engagement for the effective implementation and appropriate and efficient operation of the facilities necessary for their sustainability. These will be supported by defined roles and responsibilities for the different key stakeholders outlined in Annex 6. The effectiveness of governance activities and their full impact will be evident when there is information dissemination and disclosure. This will engender openness with respect to the status of project implementation at the appropriate level and bring the beneficiaries on-board in addressing the challenges of sustainable operation and maintenance. Gender and Vulnerability Issues and other Impacts 70. The project has the potential to help transform the lives of people and particularly women and children who struggle to get water for their households. Women and children will be relieved of time spent collecting water, now of improved, quality, which may have cascading impacts on other social and economic aspects of people s lives. From a health perspective, access to clean water is known to have numerous impacts, such as reducing water borne or related diseases and improving the health status of beneficiary individuals and communities. The provision of 23

32 sanitation facilities will contribute to curtailing open defecation and with that comes a level of improved and sanitized environment and bring back the dignity of beneficiaries. Consultations 71. In addition to the consultations for preparation of the Resettlement Policy Frameworks (RPF), the appraisal mission undertook more consultations with DAs, RCCs, and communities in the Upper East, Northern and Central regions. The key stakeholders consulted included Regional Ministers, District Chief Executives, Assembly members, members of the Water and Sanitation Boards, and ordinary community members. Such consultation and engagement will be a regular feature during project implementation, monitoring, and evaluation processes. The DAs and RCCs consulted include the Upper Denkyira East District Assemblies, Tolon-Kumgbugu District Assembly, Central Gonja District Assembly and Bongo District Assembly. The communities consulted included Paga, Sirigu, Bongo (Upper East region) and Mokwa and Denkyira Asikuma. Among the issues discussed were participation of, and support from, beneficiaries and community leaders in project implementation and acquisition of proper documents to cover parcels of lands released for subproject activities. E. Environment 72. The environmental and social impacts are expected to be minimal, site-specific and manageable to an accepted level, thus, this project is designated as a Category B project. Potential environmental impacts have been identified with regard to the construction and rehabilitation of water supply systems, such as manual boreholes, mechanized boreholes, and the rehabilitation of water supply systems or sanitation facilities, such as household latrines and institutional latrines. These include, on a minor scale, air and dust emissions, noise and vibration, open pits/trenches, disposal of construction waste and public safety/health concerns. Other, more moderate impacts include interruption of natural drainage/hydrological patterns, water contamination, improper waste water disposal (boreholes), and sludge/fecal matter disposal (latrines). 73. To mitigate these potential environmental impacts of the SRWSP, an Environmental Management Plan (EMP) has been developed as part of the project ESMF. This considers institutional arrangements required to implement the environmental actions, as well as a presentation of some monitoring indicators. The EMP also provides the basis for identifying and costing mitigation measures against adverse impacts of subprojects, such as minimizing ground clearance, proper construction of borehole soakaways for effective drainage in order to prevent accumulation of stagnant water; appropriate siting of boreholes and latrines to avoid both water contamination and undue pressure on the aquifers; and community involvement in borehole, latrine management, and leakage detection. Though community bio-physical and social baseline situations cannot be determined at this time, the subprojects will subsequently go through environmental clearance either by the DAs or the EPA. All subprojects will have to meet environmental standards as described in the Project Implementation Manual, ESMF and RPF. These documents have been disclosed in country and at the World Bank s Infoshop on April 9, 2010 and April 16, 2010, respectively. 24

33 74. Mitigation measures will be enforced through contractor performance monitoring and evaluation as well as the overall implementation of the ESMF with participatory supervision from the CWSA, and in collaboration with the EPA. Environmental Health Officers will help to ensure that proper clearances and approvals are obtained for sanitation subprojects. The SRWSP will also sensitize rural communities on the environmental aspects of their subprojects, and train people in the sustainable use of water and sanitation facilities. The approach is meant to incorporate environmental concerns into the project design and focuses on environmentally sound criteria for water facilities, wastewater disposal techniques, and appropriate on-site location of sanitation facilities. 75. Technical assistance to DAs will build their capacity and enable them to help the communities prepare their proposals. TA will also involve orientation of the DA/Community to environmental issues, particularly environmental screening and registration of subprojects as well as how to evaluate proposals and incorporate mitigation measures to address adverse impacts. WATSANs will be supported to draft bylaws and rules covering issues like access and protection of water and sanitation facilities, inadequate wastewater disposal, and encouraging good hygiene practices. F. Safeguard policies Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [X] [ ] Natural Habitats (OP/BP 4.04) [ ] [X] Pest Management (OP 4.09) [ ] [X] Indigenous Peoples (OP/BP 4.10) [ ] [X] Physical Cultural Resources (OP/BP 4.11) [ ] [X] Involuntary Resettlement (OP/BP 4.12) [X] [ ] Forests (OP/BP 4.36) [ ] [X] Safety of Dams (OP/BP 4.37) [ ] [X] Projects on International Waterways (OP/BP 7.50) [ ] [X] Projects in Disputed Areas (OP/BP 7.60) * [ ] [X] G. Policy Exceptions and Readiness 76. The project complies with all World Bank policies and no exceptions are necessary. A procurement plan has already been prepared for the first 18 months of project implementation, and terms of reference and bidding documents have been drafted for several key activities. * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas 25

34 Annex 1: Country and Sector or Program Background GHANA: Sustainable Rural Water and Sanitation Project Introduction 1. The Government of Ghana s strategy for rural water supply and sanitation is embedded in the National Water Policy of This policy is based upon the principles enunciated in the Ghana Poverty Reduction Strategy (GPRS and GPRS-II), the National Medium-Term Development Policy Framework ( ), the Millennium Development Goals (MDGs), and the Africa Water Vision of the New Partnership for Africa s Development. The Community Water and Sanitation Agency (CWSA) was established by Act 564 of Parliament in December Its purpose is to facilitate the provision of safe drinking water and related sanitation services to rural communities and small towns, which represent more than half of the country s estimated 22 million people. While Ghana is on track to meet the MDG target of 76 percent of the population with access to improved water supply, it is far behind in regard to reaching the target of 53 percent with access to improved sanitation (WHO/UNICEF JMP, 2010). The CWSA has developed the Strategic Investment Plan (SIP) that presents the financing requirements to meet the MDG target for access to improved water supply and to reduce the gap with regard to access to improved sanitation. 2. The National Community Water and Sanitation Program (NCWSP) was adopted to improve the economy, efficiency, effectiveness, and satisfaction of water and sanitation services delivery by providing sustainable safe drinking water, and improved sanitation and hygiene services to rural communities and small towns based on demand driven approach and community ownership concept. Its main components include: a) Water and Sanitation Facilities to Rural Communities 13 b) Water and Sanitation Facilities to Small Towns 14 c) Hygiene Promotion/Education Interventions d) Capacity Building for the Public and Private Sector 3. The NCWSP functions through the main principles of demand responsiveness, community ownership and management, private sector supply of goods and services, and community contribution to capital cost 15 and payment for the full operational and maintenance cost of these services. The demand driven approach of the NCWSP, where communities pay a percentage of the capital costs of systems as well as operational and maintenance costs, is seen as key to promoting sustainability of the systems. 4. Since its launch in 1994, the NCWSP has been instrumental in the acceleration of the delivery of water and sanitation facilities and services to rural communities and small towns by CWSA (Summary of rural water coverage and achievements in sanitation are shown in Figures 1, 2, and 3 respectively). This includes among others, the construction and/or rehabilitation of 13 Category 1: Population of 75 to 1,200; Category 2: Population from 1,200 to 2,000 (CWSA) 14 Settlements with population from 2001 to 50,000 (CWSA) 15 The Government issued a policy statement embedded in the 2009 Budget, eliminating community contribution to capital cost of water and sanitation facilities. 26

35 piped systems and point sources such as boreholes and hand-dug wells, as well as the promotion of hygiene and sanitation, capacity building, and public sector involvement/support. Figure 1: Rural Water Coverage Source: MWRWH/WSMP (2009) Figure 2: Achievements of Sanitation Facility Delivery Source: MWRWH/WSMP (2009) 27

36 5. Despite these successes, CWSA has been confronted with significant challenges that have adversely affected the sustainability of NCWSP initiatives. These include: low government budgetary support, poor capacity of District Assemblies (DAs) to provide the needed logistic and financial support to District Water and Sanitation Teams (DWSTs), poor water quality, bad hydrological conditions, inability of some communities to raise their five percent contributions to capital cost of the facilities, and inadequate involvement of the private sector. Additionally, though DAs are increasingly playing active roles in the implementation of the water and sanitation projects, the rural water and sanitation sub-sector is still heavily dependent on external funding without any significant contribution from DAs budgetary allocations. CWSA has also been overburdened by the project-based approach of donor assistance and their different reporting systems and requirements, which reduces efficiency. These have resulted in a focus on construction of new water systems with very little attention on long-term sustainability and postconstruction support such as training of personnel, availability of spare parts, etc. The focus is often on projects for communities at the village level rather than services for populations within larger units such as the districts. Further, fragmentation of approaches and policies result from a lack of coordination. Harmonization/Coordination 6. A joint Harmonization Action Plan was developed in 2006 between the Government of Ghana and its Development Partners in order to implement the Paris Declaration in a concrete and monitorable manner. Key milestones reached in early 2007 include: (i) the signing by sixteen Development Partners of the Ghana Joint Assistance Strategy which defines joint principles enabling DPs to work in a more harmonized and aligned way, therefore leading to a clear reduction in transaction costs; (ii) the agreement between GoG and DPs on the guiding principles on how Sector Groups could better operate; and (iii) the establishment of the Water and Sanitation Group which has improved the sector dialogue and is working on the coordination and harmonization of the sector activities. 7. In this regard, it is necessary to advance on the harmonization of certain operational aspects such as individual requirements, supervision missions, financial management systems and agency audits, which is critical for ensuring cost effectiveness and efficiency of services as well as the overall sustainability of water and sanitation systems. Therefore the Government of Ghana, in collaboration with Development Partners and other relevant stakeholders in the Sector has initiated a process towards the development of a Sector Wide Approach (SWAp) to facilitate coordination and harmonization within the water and sanitation sector. A roadmap has been agreed to implement the SWAp which will be supported in part by this project (Please see Annex 14 for further details). Sustainability 8. While access to improved water is progressing at good pace, there is significant concern about the ability to sustain the provision of these services, particularly regarding capital replacement of assets that have reached the end of their useful life. One of the reasons is the apparent lack of ownership by the District Assemblies (DAs), which are responsible for the 28

37 services and are the owners of the assets. This may be a result of CWSA s direct involvement in the implementation of the investments. Although this has helped to reach set targets, it has also caused DAs to be over dependent on CWSA. Thus, in line with the decentralization policy of the GoG, this project will support the establishment, strengthening, and integration of the DWSTs into the District Works Department (DWDs). The DWDs will therefore serve as the main department within the DA responsible for coordination, planning, and monitoring of service delivery, hence ensuring its sustainability. This role will be the direct responsibility of the Water and Sanitation Units of the DWDs, which will ultimately replace the DWSTs. Decentralization 9. Decentralization can play a key role in the achievement of equitable and sustainable development, helping to bring development closer to the people, promote participatory approaches, consolidate democracy, and also help ensure a more efficient delivery of services. Recognizing this, the GoG has instituted some decentralization policies which transfer functions, powers, means, and competences from the central government to local government. Prominent among this is enactment of The Local Government Law of 1988 and the Local Government Act of 1993 (Act 462) 16 to empower local governments. This set the stage for efforts to assist local governments with development planning and regulating their dependence on central government for resources. Act 462 designates DAs as the Local Government units in Ghana, with authorities 17 and functions that empower them to provide decentralized and devolved local public services. A Ministry of Local Government and Rural Development (MLGRD) has been established to promote and lead in the development and management of the decentralization system for good governance and balanced rural based development. Although some progress has been achieved in decentralizing authority and resources, there is a huge challenge posed by inadequate capacity (financial, technical and human) at the district level to take up the responsibilities and/or meet increasing demands for services which this devolution of authority places on them, as well as the issue of over-interference of central government in the functioning of local authorities. 10. The implementation of rural water supply and sanitation subprojects and the management of the facilities once in operation are currently based on the concept of Community Ownership and Management (COM) and District Ownership and Management (DOM). Under the DOM, District Assemblies are the drivers of community subprojects and operations and are supposed to be responsible for the planning, procurement, supervision, and monitoring of subprojects and operations. The COM operates at the user end (community level) represented by the Water and Sanitation Development Boards (WSDBs) and the Water and Sanitation (WATSAN) Teams, 16 Other legislative texts pertaining to local government include Civil Service Law 1993 (PNDCL 327); National Development Planning (System) Act 1994 (Act 479); National Development Planning Commission Act 1994 (Act 480); District Assemblies Common Fund Act 1993 (Act 455); Local Government Service Act 2003 (Act 656); Institute of Local Government Studies Act 2003 (Act 647). 17 The highest political and administrative authority in the District; Planning authorities; Development authorities; Budgeting authority; Rating authorities. 29

38 members of whom are elected or nominated by their respective communities under the aegis of the chiefs and other opinion leaders. The WSDBs and the WATSANs supervise and monitor on behalf of the District Assemblies at the community level. Thus DAs have legal ownership and responsibility for local or community systems but rely on WSDBs and WATSANs for the supervision of their development and the operation and management; the District Water and Sanitation Teams provide overall supervision for the whole district. With regard to tariffs, the WSDBs propose the tariff levels for the approval of the District Assemblies. This arrangement is considered best practice for long-term sustainability of water and sanitation facilities delivered to communities. 11. However, the model needs to be fine-tuned to assure long-term sustainable operation and maintenance of the facilities. Lessons learned from the Water Supply and Sanitation Program (WSSP II) revealed some challenges regarding the sustenance of payments after completion of the project, since payment of DWSTs was supplemented from the project and not all members of the DWSTs were employees of the DA. Additionally, care must be taken to ensure that reporting systems do not default into DWSTs reporting to RWSTs, thereby undermining decentralization by perpetuating CWSA in its previous role. It has also become clear that the roles CWSA, as a technical agency, DAs, DWDs/DWSTs, and the other key sector players need to be well-defined and understood. The relatively weak technical capacity of the DWD s water and sanitation units to effectively supervise and monitor the communities, has also led to CWSA virtually assume the role of the DAs, thus directly supervising and monitoring the community projects. 12. There has been substantial investment in the water and sanitation sector by various groups since the launch of the NCWSP in A survey of investments in the rural water and sanitation sub-sector indicated that a total of US$499.1 million was invested between 1990 and These investments have focused on construction of new water and sanitation facilities, operation and maintenance of existing facilities, capacity building and private sector support, with new facilities accounting for almost 60 percent of the total investments. The level of rehabilitation interventions has also been important, considering the significant challenges of O&M management at the regional and district levels. (Refer to Figure 3 and Table 1 below) Figure 3: Rural Water and Sanitation Investments ( ) 30

39 Table 1: Rural Water and Sanitation Investments ( ) Source: MWRWH/WSMP (2009) 13. The World Bank Group has been a key development partner in Ghana s water and sanitation sector through its IDA lending program, with the Bank s Country Assistance Strategy (CAS) serving as an effective mechanism for utilizing IDA s lending systems. The CAS was designed to support the Ghana s Poverty Reduction Strategy (GPRS and GPRS II). It is also in line with Ghana s MTDPF ( ) and national efforts to attain middle-income status. The CAS acknowledges that access to reliable and affordable sources of clean water and sanitation services is essential for ensuring a healthy and vibrant population and also for poverty reduction. The FY04-07 CAS has decentralization of the water and sanitation sector as one of its major priorities and is committed to increasing access to both potable water and sanitation to enable Ghana meet Millennium Development Goals/targets. 14. IDA has supported GoG efforts to scale up access to water supply and sanitation in rural communities with projects such as the First Community Water and Sanitation Project, and Phases 1 and 2 of the Second Community Water and Sanitation Project 18, all managed by the CWSA. In addition, the Bank supports the Community Based Rural Development Project (CBRDP) and the Village Infrastructure Project, both of which have water and sanitation components. The FY08-11 CAS seeks to build upon the gains of the previous CAS. The Sustainable Rural Water and Sanitation Project (SRWSP) will continue this progress by infusing substantial investments in the sub-sector to help the GoG to pursue MDG targets for rural water supply and sanitation. 15. The design and arrangements for the implementation of SRWSP will be integrated within the decentralization program of the Government of Ghana, with the DAs playing a key role. The project will aim to ensure a clear division of roles between the DAs and the CWSA, with the CWSA focusing on facilitation and coordination rather than on implementation, which is the responsibility of the DAs. The DWSTs will provide the direct supervision and monitoring of the community subprojects and operations. This will require building the capacity of the DWDs/DWSTs to enable them carry out their roles. For instance, post-construction technical 18 Phase 2 is the Small Towns Water Supply and Sanitation Project closed on April 30,

40 training of DAs will help develop local capacity and thus reinforce the community-based repair and maintenance model (Bakalian and Wakeman, 2009). Qualified Engineers will be needed on the district assembly team to improve the technical capacity of the districts. The project will also promote Community Led Total Sanitation (CLTS) and other appropriate soft approaches that will complement the hardware component of the systems. This will ensure that not only the physical tools are provided, but also knowledge transfer mechanisms, capacity building and communication methods, as well as social, cultural, and gender implications of technology implementation. 16. The private sector will also play a key role. Capacity building and training will be used to promote local private enterprises and/or individuals operating within the sector, such as area mechanics, hand-dug well contractors, latrine artisans, local consultants, etc. 17. Internal controls need to be improved to ensure transparency, efficiency, effectiveness and easily understood by all stakeholders involved. In addition, the project proposes to provide clinics and workshops on project and operational management for all institutions involved, including the DAs, WSDBs, WATSANs and the CWSA. The RWST of the CWSA will play a more active role in the Regional Coordinating Council activities and facilitate district activities in its capacity as technical agency. 18. In summary, this project will represent a third and final step in the transfer of implementation and oversight responsibilities for the provision of water and sanitation services from CWSA to the local governments. The project will support the development of a Sector Information System to track not only the implementation of the systems but their operational and financially sustainability. The project will also support community involvement in order to create social accountability for the efficient and sustainable provision of services by the DAs. This information will be publicly disseminated and a reward and penalty system will be developed with the Regional Coordinating Council under the Ministry of Local Governments and Rural Development. 32

41 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies GHANA: Sustainable Rural Water and Sanitation Project PROJECT (Bank-Financed) RATINGS SECTOR ISSUE ADDRESSED Completed Projects OED RATINGS Outcome Sustainability ID Impact Water Sector Rehabilitation Project (1998) U Likely Modest Water, sanitation and flood protection (Water supply) First Community Water and S Likely Substantial Water and sanitation Sanitation Project (2000) Local Government Development(2003) S Likely Modest General, Water, sanitation and flood protection Second Community Water and Sanitation, Phase 1 S Likely Substantial Water supply and sanitation; decentralization Urban 5 S Nonevaluable Modest Urban development Urban Environmental Sanitation Project S Unlikely Modest General water, sanitation, and flood protection IP RATING DO RATING On-going Projects and Projects in Preparation Second Urban Environmental Sanitation MS MS Solid waste, sanitation, drainage and community upgrading Small Towns Water Supply and Sanitation (closing April 30, 2010) S MS Increase access to water supply and sanitation for small towns Urban Water U MU Water Supply in urban centers in the 10 regions of Ghana Urban Water and Sanitation Project (in preparation FY12) OTHER DEVELOPMENT AGENCIES AFD: Water and Sanitation Project in Brong Ahafo Region ( ) Netherlands: Expansion and improvements to urban water supply in Accra, Kumasi, Tamale, Sekondi-Takoradi, Winneba, Cape Coast and others. EU/UNICEF: Integrated Approach to Guinea Worm Eradication through Water Supply, Sanitation and Hygiene in Northern Region ( ) EU/DFID: Improvement of Water Sector Performance Management Framework ( ) Expand and improve sanitation and water services in the Greater Accra Metropolitan Area with emphasis on periurban areas Rural, small town and peri-urban water supply, rural and small town sanitation, capacity building Expansion and rehabilitation of urban water supply systems; some of them may provide a safe source of water to nearby small towns and rural communities Rural, Small Town Water Supply and Sanitation with a large hygiene element. Sector performance 33

42 DANIDA: Guinea Worm eradication in several communities. Decentralization Support CIDA (Canada): 1)Local Government Reform Study (ongoing) 2) Northern Region Small Towns Project (NORST) (2009) AfDB: Accra Sewerage Improvement Project (2008) Access to water and sanitation. Support the establishment and training of District Work Departments at DAs 1) Adopting budgeting and expenditure management reforms undertaken at the central level to the local level. 2) Access to water and sanitation and capacity building at the DA level Rehabilitation of existing sewerage and wastewater treatment facilities in parts of Accra 34

43 Annex 3: Results Framework and Monitoring GHANA: Sustainable Rural Water and Sanitation Project Results Framework PDO Project Outcome Indicators Use of Project Outcome Information YR 5: To inform on: (i) increased access of people to water and sanitation; and (ii) increased sustainability of water systems once they are in operation The objective of the Project is to expand access to, and ensure sustainable water supply and sanitation services in rural and small town communities in six regions of Ghana. Intermediate Outcomes Component 1 - Water 1. New piped systems and point sources constructed and operational 2. Orphan boreholes and old (former GWCL) transferred piped systems rehabilitated 1. (a) Access - People in project area with access to improved water supply [Number]; (b) Reliability of water supply services in project area [Average hours of service per day]. 2. Access - People in project area with access to improved sanitation. [Number] 3. Communities in project area declared free of open defecation [Number]. 4. Water systems in project areas with ratio of revenues over O&M costs (including depreciation) >= 1.0 [Percent] 5. Direct project beneficiaries 19 (number), of which are female (%) Intermediate Outcome Indicators 1. New piped systems for small towns operational[number] 2. New medium-sized piped systems- operational [Number] 3. New water systems based on boreholes fitted with hand pumps operational [Number] 4. New community piped systems fed from GWCL [Number] 5. Former GWCL piped systems transferred to communities rehabilitated [Number] 6. Orphan boreholes rehabilitated [Number] YR1-5 Assess progress towards achievement of MGDs in water and sanitation and gauge measure improvement in sustainability of rural water systems YR 3 Determine the need for adjustments to achieve PDO during the mid-term review. Use of Intermediate Outcome Monitoring YR1-5 Assess progress towards achievement of Intermediate indicators YR 3 Determine the need for adjustments to achieve PDO 19 Direct project beneficiaries are those that get access to improved water supply, improved sanitation or both (no double counting). No indirect project beneficiaries are expected. 35

44 Component 2 Sanitation 1. New households, schools and health centers provided with improved toilet facilities 2. Communities being sensitized on Hygiene and sanitation Component 3 Institutional Strengthening 1. Increase subproject implementation capacity of DA, particularly in the areas of procurement and social and environmental safeguards. 2. Increase capacity of RCCs to monitor the implementation of subprojects and the quality and sustainability of water and sanitation services provided 3. Establishment and Training in DiMEs and Sector Information Systems 7. Improved community water points 20 constructed or rehabilitated under the project [Number]. 1. Household toilet facilities with handwashing facilities constructed [Number] 2. New institutional toilet facilities constructed and operational [Number] 3. Communities trained 21 to improve hygiene behaviour4 or sanitation practices under the project[number] 1. Subproject implementation in accordance with timetable in procurement plan [percent for each participating DA] 2. Acceptable implementation (including safeguards) quarterly reports delivered on time [percent for each participating DA] 3. Timely submission of clean (un-qualified) FM internal audit reports [percent of participating DAs] 4. District Assemblies operating DiMES and trained in the operation of sector information system [Number] 5. No. of key institutions trained in the use Sector Information System [Number] YR1-5 Assess progress towards achievement of Intermediate indicators YR 3 Determine the need for adjustments to achieve PDO YR1-5 Assess progress towards achievement of Intermediate indicators YR 3 Determine the need for adjustments to achieve PDO 20 This is the number of stand-pipes in large or medium-piped systems constructed or rehabilitated 21 Training in this context means sensitization and awareness raising on hygiene practices and eradication of open defecation 36

45 Arrangements for results monitoring Project Outcome indicators Number of people in rural areas with access to improved water supply under the project (thousands) Reliability of water supply services in project area [Average hours of service per day 22 ]. Number of people in rural areas with access to improved sanitation under the project (thousands) Communities in project area declared free of open defecation (number) Water systems in project areas with ratio of revenues over O&M costs (including depreciation) >= 1.0 [Percent] Direct project beneficiaries (number) of which are female (percent) Target Values Data Collection and Reporting Baseline YR1 YR2 YR3 YR4 YR5 Frequency and Reports Data Collection Instruments April 2010 Dec Dec Dec Dec Dec Quarterly CWSA progress report TBD TBD TBD TBD TBD Quarterly Quarterly Quarterly TBD 23 TBD TBD TBD TBD 90% Semiannually (first three years) then quarterly 0 50 %TBD 150 %TBD 300 %TBD 450 %TBD 600 %TBD Quarterly CWSA progress report and Sector Information System CWSA progress report CWSA progress report CWSA progress report and Sector Information System CWSA progress report Responsibility for Data Collection DAs to be verified and consolidated by CWSA DAs to be verified and consolidated by CWSA DAs to be verified and consolidated by CWSA DAs to be verified and consolidated by CWSA DAs to be verified and consolidated by CWSA DAs to be verified and consolidated by CWSA 22 Reliability of rural water services is measured in Ghana as days of service per month. Targets for the average hours per day will be determined in consultation with the communities. However, the average of the hours per day may be misleading and is not expected to be greater than 16 hours per day that users would rate as highly reliable. 23 This ratio will be computed for existing water systems rather than the new ones added. This will allow to properly assessing the sustainability of the water systems that tend to deteriorate over time. The baseline value, which will be computed as part of the establishment of the DiMES and sector information system, is expected to be very low; i.e. few existing systems are expected to have ratios >= 1. 37

46 Intermediate Outcome Indicators Target Values Data Collection and Reporting Baseline YR1 YR2 YR3 YR4 YR5 Frequency and Reports Data Collection Instruments Responsibility for Data Collection Component 1 Water New water systems for small towns operational [Number] New mechanized boreholes operational [Number] Quarterly Quarterly CWSA progress report CWSA progress report DAs to be verified and consolidated by CWSA DAs to be verified and consolidated by CWSA New water systems based on boreholes fitted with hand pumps operational [Number] New community water systems fed from GWCL [Number] Former GWCL systems transferred to communities rehabilitated [Number] Orphan boreholes rehabilitated [Number] , Quarterly Quarterly Quarterly Quarterly CWSA progress report CWSA progress report CWSA progress report CWSA progress report DAs to be verified and consolidated by CWSA DAs to be verified and consolidated by CWSA DAs to be verified and consolidated by CWSA DAs to be verified and consolidated by CWSA Component 2 Sanitation Number of improved latrines constructed under the project [Number x 1,000] New Institutional toilet facilities constructed and operational [Number] Communities sensitized about hygiene practices and eradication of open free defecation [Number] Quarterly Quarterly Quarterly CWSA progress report CWSA progress report CWSA progress report DAs to be verified and consolidated by CWSA DAs to be verified and consolidated by CWSA DAs to be verified and consolidated by CWSA 38

47 Component 3 Institutional Strengthening Subproject implementation in accordance with timetable in procurement plan (percent for each participating DA) Acceptable implementation (including safeguards) quarterly reports delivered on time (percent for each participating DA) Target Values Data Collection and Reporting Baseline YR1 YR2 YR3 YR4 YR5 Frequency and Reports Data Collection Instruments N/A N/A Quarterly Quarterly CWSA progress report CWSA progress report Responsibility for Data Collection DAs to be verified and consolidated by CWSA DAs to be verified and consolidated by CWSA Timely submittal of clean (unqualified) FM audit reports (percent for each participating DA) District Assemblies operating DiMES. [Number] Key institutions (CWSA, MOFEP, MWRWH, MLGRD) trained in the use Sector Information System [Number] N/A Quarterly Quarterly Quarterly CWSA FM report CWSA progress report CWSA progress report DAs to be verified and consolidated by CWSA DAs to be verified and consolidated by CWSA DAs to be verified and consolidated by CWSA 39

48 Annex 4: Detailed Project Description GHANA: Sustainable Rural Water and Sanitation Project 1. Scope of Project Activities: The project will have three components: (i) Rural and Small Town Water Supply, which will support the provision of water supply facilities for rural communities and small towns in the six target regions; (ii) Rural and Small Towns Integrated Sanitation and Hygiene Promotion, which will support the provision of technical assistance to promote and create demand for sanitation facilities and will partially support the implementation of those facilities in the six target regions; and (iii) Institutional Strengthening and Project Management, which will provide capacity building and strengthening of the various institutions within the decentralized structure, as well as support for M&E and project management. The project will utilize revised design standards agreed with CWSA to significantly lower the unit capital cost of facilities and adopt innovations in technology that will simplify the operation, lower maintenance costs, and improve sector performance, particularly as it relates to operational and financial sustainability. 2. Target Areas: The six target regions to be supported by the project are: Central, Western, Brong Ahafo, Northern, Upper East and the Upper West. Whereas all districts within project regions are eligible to benefit from the promotion of integrated sanitation and hygiene education, districts with lower coverage, and good performing District Assemblies will be given priority for financing in regard to construction of water supply facilities. Each beneficiary district will contribute five percent24 of capital investment cost of water subprojects. Small towns will be selected by the DA based on criteria that include: poverty, existing water and sanitation facilities (number of people per facility), district-development plans, and expressed willingness of community members to assume full responsibilities for O&M, including replacement of assets at the end of their useful life, of the selected facilities. DAs will facilitate the establishment of Water & Sanitation Development Boards (WSDBs) in the small towns and Water and Sanitation Teams (WATSANs) in the rural Communities. The WSDBs and the WATSANs will have to be legally recognized by the DA. 3. Rationale for Selection of Target Areas: The Central, Western, Upper East and Brong Ahafo Regions have water supply coverage percentages of 41.27, 44.53, and 53.51, respectively, i.e. below the national average of percent. Even though the Upper West and the Northern Regions have regional aggregated coverage above national average, there are some districts within the regions that have coverage far below the national average (refer to Figure 4). These regions have also a share of the orphan boreholes and systems transferred from Ghana Water Company, Ltd. (GWCL) to communities in disarray and whose rehabilitation is critical. Several districts within each of these regions have demonstrated good capacity in the management of water and sanitation projects and have well established District Works Department (DWD) with requisite personnel assigned to water and sanitation, and will therefore facilitate implementation of the project. With the implementation of Community Led Total Sanitation (CLTS), the relatively lower investments requirement and additional supervision by NGOs/CBOs provide a good opportunity to implement the project over a wider area. 24 This contribution, which is consistent with the National Water and Decentralization Policies and is considered a good practice in the water sector to promote ownership, will be waived during an initial period, as agreed during negotiations and described in Annex 7

49 Figure 4: Regional Analyses of Portable Water Coverage in Rural Communities and Small Towns by Region (Source: CWSA Annual Report 2008) 4. All the project components will respond to demand from the communities through their respective District Assemblies, demonstrated by proven capacities of the DA to supervise such projects, the provision of financial contribution from the DA, and the establishment of WATSANs/WSDBs in the communities to supervise the construction, operation and maintenance of the facilities under the project. Component A - Rural & Small Town Water Supply (US$47.6 million) 5. This component would provide resources for the improvement of access to water supply services through the construction and rehabilitation of onsite and piped water supply systems in several types of context. The range of technical options offered has been adapted to the population range. The size of the current population will determine the number of standpoints to be provided and sizing of the distribution system, with an estimated consumption of 20 liter/cap/day. However, the design would consider a 10-year population growth horizon, and the source designed appropriately. The design should allow for future expansion and service level upgrading. (a) Physical Works: The physical works to be financed include: (i) Construction of boreholes fitted with hand pump for rural communities (i.e. communities with population not exceeding 1,200). (ii) Mechanized boreholes with small-sized elevated tanks, with limited reticulation schemes and communal standpipes for medium-sized small towns (i.e. for communities with populations between 1,200 and 5,000). (iii)mechanized borehole with larger-sized elevated tanks and reticulation schemes for large-sized communities (i.e. for communities with populations exceeding 5,000). In small towns, individuals which demand a higher level of service (i.e., a house connection) will be expected to pay the full incremental costs. 41

50 (iv) Connection to transmission lines from Ghana Water Company Ltd 25 (GWCL) (v) Rehabilitation of good yielding, but broken down, orphan 26 boreholes in rural communities and small towns. (vi) Rehabilitation of non-optimal performing schemes transferred from Ghana Water Company Ltd. (GWCL). (b) Works Supervision: The District Assemblies, with support of RWST of the CWSA, would procure local consulting services for groundwater exploration, design and supervision of the execution of the water supply schemes. The project will also support the selection and orientation of WSDBs and WATSANs for supervision in both construction and operation stages. Component B Rural and Small Town Integrated Sanitation & Hygiene Promotion (US$18.6 million) 6. This component aims at accelerating the pace for attainment of MDG for sanitation by targeting whole communities and small towns within the project area to reach opendefecation-free (ODF) status. Therefore it will support the development of behavioral change communication strategies, including the use of inter-personal communication and of mass media, to bring about change in awareness, skills, and attitude among stakeholders. Parallel to demand creation, the project will facilitate development of local supply markets to respond to project-generated demand for improved sanitation products and services. The project will not finance the construction of household toilets at the community level. However, it may provide limited support to poor households which are unable to afford the costs of constructing a toilet. This support will be limited to core elements of a basic household latrine, such as the slab, with the rest of the costs to be financed by the household itself. The component may also provide incentives to villages reaching ODF status and provide support for the procurement of waste disposal cans once the demand is created. This component will also support the construction of institutional latrines for schools and health facilities located within the project area. 7. The focus of the hygiene and sanitation promotion is to create awareness for sustained behavioral change to ensure the following: Safe confinement and disposal of excreta and other wastes Safe handling and use of water Personal, domestic, and environmental hygiene Regular hand washing with soap, particularly at critical times 8. The following strategies will be adopted to pursue the vision of the hygiene and sanitation promotion: 25 National utility responsible for provision of water in urban areas 26 Common name given in Ghana to old boreholes, usually more than 30 years old, which are not claimed or managed by any authority (hence the orphan designation) 42

51 Community-Led Total Sanitation Aggressive social marketing Establishment of sanitation markets Extensive hygiene promotion Support for appropriate technology development Deepening collaboration with relevant institutions Documentation and promotion of best practices 9. There will be detailed baseline studies for every beneficiary community at the inception stage of the project as the basis for carrying out hygiene and sanitation promotion. The baseline study in the communities will focus on the assessment of water and sanitation situation, socio-economic conditions, and detailed assessment of knowledge, attitude, practices, and beliefs on hygiene and sanitation. This will provide insight into the motivational and constraining factors regarding the adoption of good hygienic practices and latrines. It will also form the basis for information, education, and communication (IEC) materials and communication strategy development for behavioral change. At the end of the project, the baseline will be used to monitor the effectiveness and impact of the hygiene and sanitation interventions. 10. The project will generate demand in households to invest in sanitation facilities through the promotion of the Community Led Total Sanitation (CLTS), and social-marketing techniques which will be complemented with the establishment of sanitation markets (SANIMARTs) depending on the size of the community. SANIMARTs provide an effective way of supporting the supply chain for increasing the acquisition of household latrines. This is done by providing information on cost, materials, and availability of latrine artisans for construction of latrines within the reach of potential latrine owners. The general approach of latrine promotion in small towns will be based on social marketing principles. Source: Eduardo Perez, WSP, There will be no prescribed technology option. However, designs for households and institutional latrines will be provided by CWSA for adaptation based on the SANIMART and the level on the sanitation ladder. Beneficiary households shall select an appropriate technology for a household latrine after promotion activities have been undertaken in the community. The beneficiary shall then demonstrate the capacity to finance the construction of the latrine. Support may be provided on an exceptional basis for financially handicapped beneficiaries for core elements as slabs, and once the beneficiary have dug the pit in 43

52 accordance to the standards. The Hygiene, Education & Sanitation consultant shall facilitate the process in each community. 12. Training will be provided to all key actors at the regional and community level to ensure effective promotional activities. Hygiene and sanitation promotion will be done using participatory approaches and tools, and the resulting promotional materials will be developed and disseminated to all key actors. The hand-washing campaign will consolidate the promotion of sanitation practices as it relates to the construction of latrines and the provision of water supply, and provide a platform for moving up the sanitation ladder. Source: Eduardo Perez, WSP, The promotion of sanitation and hygiene, particularly the implementation of the CLTS, will be accompanied by Technical Assistance (TA) activities. This will include guidance on selecting IEC materials and developing the communication strategy for the CLTS; guidance on selecting appropriate designs for incorporating urinal and hand-washing facilities in latrines; mobilizing communities for the CLTS program; and follow-up to ensure that all target communities are free of open defecation by the close of the project. 14. Support the Construction of institutional latrines. The project will support construction of institutional latrines for schools and health facilities located within the project area. Cubicle-type institutional latrines will be adopted for the schools based on the population of the schools. The DAs and schools would fund the maintenance costs of the latrines. 15. Supervision of works & facilitation of promotion and education campaign: The District Assemblies, through their DWDs/DWSTs, will be responsible for procurement and contract management and for the coordination and supervision of field activities. They will contract local consulting firms to supervise the construction of the sanitation facilities. The District Assemblies will also coordinate with the Ministry of Health, District Health Centers, and the Ghana Education Service /District School Health Education Program for the hygiene promotion in the schools and the Ministry of Education for hygiene education in the communities. NGOs/CBOs and private sector firms will be hired to conduct the promotion, education, and marketing of sanitation and hygiene, the provision of hand-washing facilities, 44

53 and training of WSDBs/WATSANs, and local masons for promotional activities and in building adequate toilet facilities, respectively. 16. In small towns with limited land available for individual household latrines, cubicletype latrines will be supported to replace shared latrines based on one cubicle/per household. The beneficiary households will be required to pool resources towards the construction of the pit and infrastructure. Technical, environmental, and financial guidance will be provided to assist households to make informed choices about preferred service level option of latrines. 17. The financing strategy to be adopted includes significant investments in software for the promotion of the CLTS, hygiene education, and support for community mobilization. Households will be supported to construct their improved household latrines equipped with urinal and hand-washing facilities. Support may be in the form of basic elements, such as prefabricated latrine concrete slabs and ventilation pipes, whereas households would be responsible for the construction of the pit and the superstructure. This support will be provided on an exceptional basis to very poor households and upon completion of the pit. This has been used in Mozambique and Maharashtra in India with significant success 27, and has been satisfactorily piloted in some communities in Ghana. The financing support will be subject to completion of the construction of pits by the households, demand for slabs, and commitment to constructing the facility. Thus, project financing support will not be provided in cases where pit construction has not been completed. This is based upon the experience in some villages where demand was created but actual construction was very slow or did not take place at all because of financial constraints. 18. The provision of basic latrine elements such as slabs is to ensure that poor households are able to complete their basic latrines within the project period. The level of support will be based on the basic unit of latrine at the lowest cost. Households are, however, at liberty to choose higher level latrine with personal financing. Component C Institutional Strengthening and Project Management (US$11.1 million) 19. This component would provide financing and resources under its sub-components to support orientation, capacity building and technical assistance, as well as logistics to streamline roles and strengthen capacities of key stakeholders in the water and sanitation sector for effective subproject implementation, operation, monitoring and supervision. Sub-Components: (a) Technical Assistance (TA) (US$5.8 million) 20. TA support will be provided at national, regional, district, and community levels. The support will include an initial assessment of the relative roles of the different institutions with regard to policy making, planning, implementation, sustainable operation of the facilities and monitoring and evaluation. The institutions will include those under the MWRWH (e.g. WD, CWSA); the institutions under the MLGRD (e.g. LGS, EHSD, RCC, DA); and the community level institutions (e.g. WATSANs, WSDBs) in the implementation of rural and small town water and sanitation projects within the framework of the NCWSP and 27 WSP Financing on-site Sanitation for the Poor 45

54 decentralization policy. In specific terms, TA will assess issues of fund flow, coordination, monitoring, supervision, reporting, and will provide guidance and support to institutional capacity building. 21. At the regional level, the Regional Coordinating Councils (RCCs) have oversight responsibilities over the DAs, and will receive training for the supervision and coordination of DAs in the implementation, operation, and management of water and sanitation projects, including safeguards compliance. Orientation sessions will be implemented at the national (WD, LGS, CWSA), regional (RCC and RWSTs), district (DAs, DWD, DWST), and community (WSDB, RWST) levels. The orientation will cover information on institutional arrangements with regard to the decentralization program, water and sanitation policies, the acts of establishment of the institutions, reporting hierarchy, procurement procedures, safeguards, project management, contracting arrangements, financial management, etc. 22. The Water Directorate in the MWRWH and Local Government Services in the MLGRD will also receive support for capacity building. This will enable them to fulfill their roles in planning and monitoring overall RWSS access in the country, provide back-stop support to DAs through the LGS, and to coordinate with the Ministry of Finance and donors in relation to sector investment. 23. The sub-component will provide support to the District Assemblies in four ways: effective integration of the District Water and Sanitation Team within the District Works Department; orientation of DWDs/DWSTs to assume the key monitoring and evaluation role in water and sanitation development and operations in the districts rural and small town communities; capacity building in monitoring, tariff setting, procurement, environmental and social safeguards, project management and reporting; the establishment of communication networks to link DWDs/DWSTs with the RCCs, LGS, CWSA, and the World Bank; and provision of logistics like pick-ups and motorcycles, including incremental costs related to project implementation. 24. At the community level, support will be provided to Water and Sanitation Committees, Water and Sanitation Development Boards, pump caretakers, technical assistance firms, area mechanics, Community Based Organizations, School Health Coordinators and School Health Committees. WSDBs and WATSANs shall be involved in all stages of the project cycle. 25. The private sector will also be supported in the area of capacity building. Consolidated training programs will be implemented under the STWSS for provision of goods and services by private operators, drillers, civil works, consultancy firms, and suppliers of maintenance items, among others. The output of the private sector in the nearly-completed STWSSP will be evaluated and training programs specifically designed to address shortcomings. The project will also support the creation of a system of recourse and support for community systems to address issues that exceed normal operation and maintenance. This chain of support would start at the DAs and escalate through a system of regional technical and administrative units from the MWRWH and MLGRD. 26. Support will be provided to strengthening institutional arrangements and studies: This subcomponent would support the clear demarcation of responsibilities and coordination, and establish inter-sectoral coordination among the many actors in water, sanitation, and 46

55 hygiene such as MWRWH (and its Water Directorate), MLGRD (and its Local Government Services), the Ministry of Health, the Ministries Departments and Agencies (MDAs), RCC, the CWSA, WSDBs, WATSANs, Ministry of Finance and Economic Planning, NGOs, and the private sector. (b) Establishment of Sector Information System for Monitoring and Evaluation (US$2.4 million) 27. This sub-component will provide support for the establishment of a robust Sector Information System to facilitate information sharing and coordination, and enhance M&E among the water and sanitation actors. The system will provide an information database on access to and quality of services, functionality of water supply and sanitation systems, collective investments (including that from GoG, donors, NGOs, and the private sector) in water and sanitation facilities and O&M funding requirements vis-à-vis tariff levels, and other sources of revenues within communities. The financing will support the review, improvement, and completion of the District Monitoring and Evaluation System (DiMES) for use in the DAs, CWSA, RCC, and the WATSANs/WSDBs. 28. TA support under this component will involve assistance in the review of DiMES; guidance in the development of the sector information system to serve all the institutions involved in the project implementation, provision of services and monitoring, as well as in the development of information coming from the users. (c) Project Coordination and Management (US$2.9 million) 29. This sub-component will support operating costs incurred by CWSA to coordinate and facilitate the DAs in the implementation of the project as well as training and logistic needs of the agency at the Head and Regional offices, including acquisition of vehicles 28. In particular it will support coordination by CWSA's Regional offices of DAs and RCCs, and coordination by CWSA Head Office of Ministry of Local Government to ensure compliance with internal financial and procurement controls, banking arrangements and contract awarding and supervision processes. A reporting system will be established to ensure CWSA regional offices who are members of the RCCs report regularly to the RCCs and in particularly the Regional Minister to facilitate project implementation controls by the RCCs. CWSA will also be supported to organize procurement, tariff setting and M&E clinics for the DAs, RCCs, and the WATSANs/WSDBs. 30. Funds Disbursement: Eligible subprojects will be packaged by the DA, discussed with the RCC, and submitted to the RWST for funding. The RWST will review the subproject costs, using a standard unit cost database, and agree with the DA and RCC on the financing and procurement plan. The RWST will collaborate with the RCC to verify and ensure the DA has committed 29 its five percent 30 capital cost contribution for water facilities. A subproject 28 Vehicles for CWSA will be restricted to a total of eight station wagons and three pick-up trucks. Two station wagons will be assigned for the head office and one for each of the regional offices. Each of the three northern regions will receive one pick-up truck as well due to the additional traveling required and bad road conditions. 29 This will be secured by a letter of commitment endorsed by at least two thirds of the District Assembly that would allow the deduction of the amount(s) committed from the GoG funds sent to the DAs, in case of failing to comply with their obligations. 47

56 agreement will be signed between the DA and CWSA. Funds will be then be transferred from CWSA to the DA project account for project implementation as detailed in Annex Contracting and Community Development: Contracting of goods, works, and services will be carried out by the DAs with support of the CWSA. Contracts will be awarded for technical assistance for orientation & community development activities, works supervision, hygiene education, training of Water Boards, establishment of community operation and maintenance capability, feasibility studies and training. 32. Completion: All completed works shall be inspected by DAs and certified to be satisfactorily completed by the WSDB/WATSANs before the last payment is made. 33. Operation and Maintenance: Operation and maintenance will be the responsibility of the WSDB/WATSAN. A Performance Agreement will be executed between the DAs and the WSDB/operators stating the obligations of the latter with regard to service provision and the obligations of the DAs to provide the necessary resources for sustainable operation and maintenance of the water systems. Compliance with these agreements will be supervised and enforced by the RCCs and monitored by CWSA. 30 This contribution, which is consistent with the National Water and Decentralization Policies and is considered a good practice in the water sector to promote ownership, will be waived during an initial period, as agreed during negotiations and described in Annex 7 48

57 Annex 5: Project Costs GHANA: Sustainable Rural Water and Sanitation Project Project Cost By Component and/or Activity DAs 31 US $million IDA US $million Total US $million A - Rural & Small Town Water Supply Point Sources Small Mechanized Small Towns Rehabilitation of old GWCL Systems Rehabilitation of Orphan Boreholes Engineering (design and supervision) Subtotal Component A* B - Rural & Small Town Sanitation & HES HES and CLTS Promotion Institutional Latrines Support for household latrines Handwashing and dev. of IEC materials Setting of permanent SANIMARTs Training of Artisans and Community Subtotal Component B* C- Institutional Strengthening & Project Mgmt. Technical Assistance Sector Information System Project coordination and management Subtotal Component C* Total Baseline Cost Physical Contingencies Price Contingencies Total Project Costs (*) Note: The estimated costs of Components A, B and C indicated in Annex 4 and other sections of the PAD include the physical and price contingencies and hence become: US$47.6 million, US$18.6 million and US$11.1 million, respectively. 31 The DAs contribution of 5% for investments in rural and small town water supply systems will be waived during an initial period, as agreed during negotiations and described in Annex 7. 49

58 Annex 6: Implementation Arrangements GHANA: Sustainable Rural Water and Sanitation Project 1. The implementation arrangements are guided by the National Community Water and Sanitation Program (NCWSP). The policy of the NCWSP is consistent with the Ghana decentralization policy, which seeks to transfer authority, responsibility and capacity from the Central Government, Ministries and Departments to the District Assemblies. The decentralization policy which came into effect in 1989 with the establishment of the District Assemblies (DAs) is backed by the 1992 Constitution and the Local Government Act, 1993, Act 462. The institutional arrangements for the implementation of the Sustainable Rural Water and Sanitation Project (SRWSP) will thus be within the framework of the NCWSP and the decentralization program of the Government of Ghana. The NCWSP was launched in 1994 to provide solutions to water and sanitation problems in rural communities and small towns after several water supply strategies failed to have a beneficial impact. The CWSA was subsequently established in 1998 by an Act of Parliament to provide an institutional base within the Ministry of Water Resources Works and Housing for the implementation of the NCWSP. The District Assemblies had been established earlier on but could not make any significant contribution to rural and small towns water supply until the launching of the NCWSP and the subsequent establishment of the CWSA. 2. The policy thrust of the NCWSP is the Community Ownership and Management (COM) of the water and sanitation facilities installed in the beneficiary communities and the use of the private sector to support the process. The CWSA Head Office, CWSA Regional Water and Sanitation Teams (RWSTs), and the District Assemblies (DAs)/District Water and Sanitation Teams (DWSTs), manage the program at the national, regional and district levels respectively. The NCWSP has to a large extent accelerated the improvement of water supply in the sector. The highlights of the GoG decentralization policy include: Devolution of central administrative authority to sub-national level government (regional, districts); Transfer of identified functional areas of government to the sub national governments; Fusion of sub-national level government departments and agencies with local government units into an integrated administrative unit Recasting of responsibilities such that local government will assume implementation responsibilities. In this respect central government agencies undertake policy planning, monitoring and evaluation and regional coordinating councils coordinate the activities of districts with a view to achieving consistency and coherence in development. Promotion of popular local participation in all aspects of local governance so that equitable development is achieved. 3. The involvement of two ministries in the sector, the MWRWH that is responsible for the National Water Policy and the NCWSP, and the MLGRD that is responsible for the National Sanitation and the decentralization policies, introduces some institutional challenges and complexities for the planning and implementation of rural water and sanitation projects. 50

59 The link should be the CWSA that was established under the MWRWH to coordinate and facilitate the implementation of the NCWSP in District Assemblies. 4. Planning. The District Water and Sanitation Plans (DWSP) prepared by the DWSTs/DWDs of the DAs form the basis for investments in their respective communities. The DWSP is consistent with the Strategic Investment Plan (SIP) prepared by CWSA to provide information on investment requirement for water supply and sanitation in rural and small towns in Ghana. The Project will provide support to the DAs to improve preparation of the DWSPs. The project will also support the RCCs in providing effective inputs into the preparation of the DWSPs. 5. Project Implementation: Project implementation is even more complex. The DWSTs report to both the DAs and the RWSTs on project implementation. The DWSTs were set up by the DAs purposely for monitoring rural and small town water supply project but are not an organic unit within the administrative structure of the DAs. This arrangement blurs the status of the DWSTs within the DAs. The ongoing integration of the DWSTs in the structure of the DWDs, which will be a direct Department of the DAs, should significantly simplify and improve the institutional arrangements for project implementation. 51

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61 53

62 6. The project identifies the challenges to effective delivery of water supply services as: (i) failure to fully utilize the contributions of the institutions in the supervision, implementation and monitoring of projects, given the lack of clarity of institutional roles and responsibilities among the CWSA, RCC, the DAs, and WSDBs/WATSANs; (ii) the low institutional implementation capacities of the DAs (DWSTs) and WATSANs/WSDBs; (iii) lack of performance contracts to ensure accountability of implementing institutions; (iv) inadequate resources for monitoring and project management at the district and community levels; (v) absence of a good sector information system and reporting format to facilitate supervision and monitoring; (vi) low resource allocation for post-construction support; and (vii) limited participation of the private sector in the provision of services. These shortcomings have resulted in delays in project implementation, inadequate supervision and monitoring, and most importantly, lack of overall sustainability 32 of the systems built. 7. The implementation of the SRWSP will seek to address these challenges. Specifically, the project will: (i) clearly define and strengthen existing statutory bodies to perform their mandated functions under the NCWSP and the decentralization guidelines to ensure optimal delivery and sustainability of services; (ii) support the orientation and/or strengthening of the 32 Overall sustainability means the ability to operate and maintain the facilities in the long term, including the repair, rehabilitation or replacement of the assets when they have reached their useful life. 54

63 key local government institutions in the MLGRD, namely the District Assemblies (DAs), the Regional Coordinating Councils (RCC), the Local Government Service (LGS), and the Environmental Health and Sanitation Directorate (EHSD); (iii) support the key institutions in the MWRWH, namely Community Water and Sanitation Agency (CWSA) and the Water Directorate (WD); (iv) support the WATSANs/WSDBs and NGOs; (v) support capacity building for the relevant institutions; (vi) support the establishment of an information system to allow the WD, EHSD, RCC, DAs, and LGS, and the CWSA and WATSANs/WSDBs to track water and sanitation investments and to monitor their operational and financial performance; (vii) review and improve the reporting format utilizing the District Monitoring and Evaluation System (DiMES); (viii) make provisions for post-construction support at both the community and district levels; and (ix) promote private sector participation. The District Monitoring and Evaluation System (DiMES) was established as a management tool to capture, store and report information on water and sanitation activities as well as to monitor water and sanitation projects for rural and small towns. DiMES evolved because of the need to have a system for direct monitoring and evaluation of water and sanitation projects and their functionality rather than through general and periodic surveys. Components of DiMES a) Data Management: The data management component of the system takes care of vast areas and eclectic range of management concerns. The system provides means of managing the facilities and infrastructure for sustainability and efficiency. Managers are thus put in control of the facilities and infrastructure that are under their responsibility. The data management component includes the following: the functional performance of the facilities and infrastructure, management of the projects that deliver the facilities and infrastructure, facilities and infrastructure construction and rehabilitation processes, and the financial performance of the facilities and infrastructure. b) Planning -DiMES provides a means for planning for investments in facilities and infrastructure for equitable development through a strategic investment planning model incorporated into the system. c) Monitoring Operation and Maintenance The Monitoring Operation and Maintenance (MOM) component of DiMES provides a means of monitoring the functionality of existing facilities as well as the management structures put in place to manage the facilities. d) Reporting: The Reporting component provides various reports to inform management in response to user requests. Reports can be customized to meet the specific needs of the user. 8. The project will provide support for the mainstreaming of implementation responsibilities to existing national, regional and district local governmental structures. The project will review and build on the gains achieved under the Community Based Rural Development Project (CBRDP), the CIDA funded District Capacity Building Project (DISCAP) in the 3 northern regions, and other capacity building projects within the local government structure particularly in the DAs, RCCs and the EHSD. 9. The local government structure is made up of a Regional Coordinating Council and four-tier Metropolitan Assemblies and a three-tier Municipal/District Assemblies. 55

64 STRUCTURE OF THE LOCAL GOVERNMENT SYSTEM Regional Co-ordinating Councils Metropolitan Assemblies Municipal Assemblies District Assemblies Sub-Metropolitan District Assemblies Town Councils Zonal Councils Urban/Town/Area Councils Unit Committee District Assemblies (DAs) are the legal owners of communal water supply infrastructures in rural communities and small towns. The functions of the DA are deliberative, legislative and executive. The District Assembly (DA) is headed by the District Chief Executive (DCE) nominated by the President. Two-thirds of Assembly members are elected by universal adult suffrage while onethird is appointed by the President. The DAs, which consists of 11 decentralized civil service departments, are responsible for the overall development of the district, including: (a) preparation and submittal of development plans and budgets through the RCC to the National Development Planning Commission (NDPC) and the Ministry of Finance and Economic Planning (MOFEP) respectively for approval; (b) preparation of District Water and Sanitation Plans (DWSP) that are consistent with the Strategic Investment Plans prepared by CWSA for the overall Rural and Small Town subsector and submittal to the RWST/CWSA; (c) identification and prioritization of interested communities for water supply and sanitation services based on established criteria; (d) execution of subproject agreements on Water and Sanitation programs with CWSA; (e) promotion and dissemination of information on community water and sanitation through NGOs/CBOs to generate demand in the communities; (f) audit, reporting and monitoring of subproject activities including physical progress of work; (g) transfer of funds to participating communities & contractors; (h) approval of tariffs that will support the operation and maintenance of the installed facilities, including the replacement of assets at the end of their useful life; (i) through DWDs/DWSTs, monitoring and supervision of physical progress of water works in communities, including borehole drilling, and civil works in general, and direct supervision of on-site sanitation programs, including institutional latrines; 56

65 (j) through DWDs/DWSTs, monitoring and supervision of WATSANs/WSDBs and/or a private operators to ensure that facilities remain sustainable operationally and financially; (k) before the end of the fiscal year, submittal to RCC a detailed budget for the district, stating the revenue and expenditure for the following year. This includes the aggregate revenue and expenditure of all departments and organizations under the DA and the District Coordinating Council, including annual developmental plans and programs of the departments and organizations under the DA. 11. The project will support the DAs in assuming full responsibility for subproject implementation at the district level. This will complement the Danish International Development Agency s (DANIDA) support to establish District Works Departments (DWDs) in the DAs, including providing resources to DWD sanitation units for the promotion, monitoring, and evaluation of district water and sanitation programs in eligible communities. The DWDs will be responsible for implementing development programs within the DAs, including water supply and sanitation programs. When established, the Departments will include a Water and Sanitation Unit (replacing or integrating the DWSTs) to implement water and sanitation subprojects at the district level. Implementation challenges faced by District Assemblies: (a) The DAs are not fully autonomous and decentralized in terms of resource and capacity building, which involves technical expertise, and do not have the facilities to adequately monitor reliable water service delivery. (b) Sustainable community water service delivery under Ghana s decentralization policy due to: i Unclear and conflicting roles; ii Lack of DWD technical unit to oversee its development agenda, and DWST s lack of integration into the DAs organizational structure; and iii Lack of understanding of operation and maintenance costs and corresponding revenue needs for financial sustainability 12. The project will support the District Water & Sanitation Plans (DWSPs) prepared by the District Assemblies to address the water and sanitation 33 needs of all segments of the population within the rural communities and small towns within the respective Districts. 13. Regional Coordinating Councils (RCCs) are responsible for coordinating all regional development programs, providing technical support to the districts, and monitoring implementation. They will be supported by the project to monitor DAs performance and to ensure compliance with approved procedures and formats Regional-level public institutions which are represented on the RCCs provide information on their development programs to assist the RCC in its coordination role. The institutions policies and strategies are presented and discussed at this level to assist in the RCC s oversight responsibilities of DA programs. The RWST (of CWSA) represents the MWRWH on the RCC to provide guidance on strategies regarding the National Water Policy 33 Water related sanitation 57

66 and the NCWSP implementation in small town and rural communities. This arrangement allows the RWSTs (like other public institutions at the regional level) to help the RCCs provide the necessary leadership and controls for rural water and sanitation, and at the same time enables the RWSTs to provide technical support to the DAs in the implementation of water and sanitation programs in accordance with their mandate. The RCC s leadership and monitoring role will be critical in mitigating delays in procurement and payment of contractors certificates by the districts. Strong leadership orientation by the RCCs and the presence of RWSTs on the RCCs will combine to create a platform for more effective supervision and coordination of the DAs in project implementation. The legal provisions charge the RCCs with the following functions: Monitor, coordinate and evaluate projects and the performance of all District Assemblies in each region, ensuring accountability of the results agreed upon with the DAs. Monitor the use of all monies allocated to the District Assemblies by any agency of the central government; Review and coordinate public services generally in the region and; Perform such other functions as may be assigned to it by, or under any enactment. 15. The Environmental Health and Sanitation Directorate (EHSD) and the Local Government Services (LGS) are key institutions for implementing development programs under the MLGRD at the national level. They will be assessed in the light of their implementation role under the newly decentralized structure and supported in their regulation of project implementation by the DAs. This will include the institution of a scheme to reward good performance by the DAs as well as possible penalties in case of poor performance (to be directly handled by RCCs). The project will also support Regional Environmental Health Offices (REHOs) to effectively provide technical assistance on Hygiene and Sanitation education to DAs and other service providers. 16. The Community Water and Sanitation Agency (CWSA) was established in 1998 (Act 564) to coordinate and facilitate the implementation of the NCWSP by the DAs. CWSA will receive support to strengthen its key roles of providing overall project coordination, supporting DAs supervision of district subprojects, and monitoring service delivery of installed water supply and sanitation facilities. The overall project will be coordinated and monitored by the CWSA, under the oversight of a Steering Committee that includes representatives from the MWRWH, MLGRD and MOFEP. The CWSA consists of a Head Office in Accra and ten Regional Offices where the Regional Water and Sanitation Teams (RWST) are located. The CWSA reports to the MWRWH, which is responsible for overall water policy formulation, planning, coordination, and monitoring and evaluation of programs for water supply and water resources management. CWSA Head Office The CWSA H/O is staffed with water supply and sanitation specialists and management experts. These professionals are responsible for training and community development services and overall technical assistance which includes promoting, coordinating, facilitating, supervising, monitoring, evaluating, researching and reporting on project activities. 58

67 The CWSA H/O will, in consultation with the WD, EHSD, LGS and the DAs, and on the basis of the District Water and Sanitation Plans (DWSPs), be responsible for the overall planning and budgeting of the NCWSP of which this project is a part. Regional Water and Sanitation Teams The Regional Offices of the CWSA provide technical assistance (TA) to DAs. Each office is staffed with a team of multi-disciplinary specialists in water and sanitation engineering and management, community development, training, hygiene education, finance and administration. They play a key role in providing technical assistance in the implementation of subprojects by the DAs. The RWST appraise funding requests and in consultation with RCCs, authorize disbursement of funds for approved subprojects. Specific functions in support of subprojects implementation include: i monitoring, verifying, and endorsing work for the subprojects executed by DAs, TAs and contractors within the respective regions; ii supporting DAs to supervise works and service delivery; iii recommending transfer of funds from CWSA to DAs. RWSTs in consultation with RCCs will manage all investments by coordinating and integrating the annual work-plans and budget of all participating districts, and submitting such reports to the CWSA H/O, who will then disseminate information to the WD and LGS. Specific responsibilities of CWSA that will be supported by the project include: (a) monitor and support DAs, WSDBs and WATSANs in the implementation of rural water supply and sanitation activities (b) develop standards and guidelines for monitoring of subproject implementation and water supply and sanitation operations by the DAs (c) coordinate sector activities by NGOs (d) provide training for small scale private sector for the operation and maintenance of installed systems (e) strengthen capacity of DAs, WSDBs and WATSANs in subproject implementation (f) provide information to stakeholders on project implementation (g) monitor environmental impacts and safeguards compliance in general (h) facilitate prompt payment of suppliers, contractors, and service providers by the DAs (i) facilitate resolution of conflicts that may arise during the course of the project (j) provide technical assistance to DAs to procure and implement the subprojects (k) promote the development of capacity of suppliers of goods and services (l) In consultation with RCCs, promote and ensure the financial contribution to capital costs by DAs and the generation of adequate revenue for the sustainable operation and maintenance of the water supply systems (m) Assist DAs with the support of NGOs in the promotion of hygiene and sanitation, and in mobilizing communities to construct own latrines (n) monitor that water tariffs approved by DAs are affordable and at the same time provide sufficient revenues for the O&M of the systems, including depreciation of assets. On the contrary ensure that revenues are provided by DAs in accordance with Performance Agreements. 59

68 17. CWSA Budget. The salaries and core operating costs of CWSA will be covered by annual allocation to the sector by the Government of Ghana. In addition, for purposes of program management, this project will support incremental costs incurred by CWSA to coordinate and facilitate the DAs in project implementation as well as meeting the training and logistic needs of the agency at head and regional offices, including the acquisition of vehicles. In particular, it will support CWSA regional offices in the coordination of DAs and RCCs, and CWSA head office in the coordination of the MLGRD, to ensure compliance with internal financial and procurement controls, financial management arrangements and contract awarding and supervision processes. 18. The WSDBs and WATSANs, which are service providers for small towns and rural communities, respectively, will be supported to maximize efficiency and effectiveness of subproject implementation and management at the community level. The current facility management plan for service delivery by the WATSANs/WSDBs will be replaced with a more accountable Performance Agreement between the DAs and the WATSANs/WSDBs WSDBs and WATSANs in the participating rural communities and small towns shall be gender-balanced and will be responsible for: (a) promoting and disseminating project information within the community; (b) identifying needs, planning, designing, and implementing rural communities and small towns subproject proposals; (c) ensuring that all members of the community, especially women, actively participate in decision-making; (d) developing community by-laws under authorization of the DA (e) ensuring proper financial management (f) procurement of specific goods, works, and services on behalf of communities (g) supervision of TA and construction (with the help of a check-list provided by the DA) (h) suspend construction or activities that are not satisfactory, after consulting with DAs and CWSA; (i) managing the installed facilities under a facility management plan or performance agreement (j) providing hygiene education and sanitation promotion 19. The involvement of consultants, contractors, suppliers, and CBO/NGOs in rural and small town water supply sanitation programs will be reviewed to enhance their partnership with WATSANs and WSDBs in the delivery of services at the community level. The project will support the contracting of the private sector with relevant skills and experience by the DAs to provide works, goods and services required by the subprojects. The private sector and relevant stakeholders will also participate in project evaluation and sector capacity building. NGOs/private sector entities will be contracted for activities such as: (i) promotion of the CLTS concept and hygiene education; (ii) mobilization of communities for the construction of latrines and other sanitation facilities; (iii) marketing of sanitation facilities; (iv) management of installed water supply facilities; and (v) supervision of the construction of the water and sanitation facilities under the guidance of DAs and the CWSA. The private sector shall operate within policies, regulations, supervisory and licensing arrangements set up by the public sector to promote efficiency and competitiveness. 20. The cost of basic latrine infrastructure such as slabs and hand-washing basins may be borne by the project. Households will cover the cost of the superstructure (thatched, sheet 60

69 metal, or brick wall, roof, and door). This will ensure that there is no gap between attitudinal change and actual construction of latrines. 21. Coordination of Water and Sanitation Programs with other GoG Institutions. The project will support effective coordination with other GOG Institutions including: (a) The Ministry of Health (MoH) and the Ghana Health Service (GHS), which are responsible for managing and providing health data, supporting health education activities and contributing to regulation and standard-setting for health services. They use environmental sanitation information to contribute to disease prevention and control. They will be consulted with regard to hygiene education. (b) The Ministry of Environment, Science and Technology (MEST) responsible for environmental impact assessment related to water quality (through the Environmental Protection Agency, head and regional offices) (c) The Ministry of Education (National School Health Education Program Secretariat and tertiary educational institutions), which is responsible for School hygiene education. (d) The Ministry of Finance and Economic Planning (MOFEP), which is responsible for all public investments in water supply and environmental sanitation including negotiating for grants and loans. 22. Project Oversight and Coordination: The MWRWH and the MLGRD will provide overall oversight of the SRWSP implementation under a Steering Committee that will meet at least quarterly. The project will support training on overall project oversight. The RCC, with the assistance of CWSA, will prepare a Project Implementation Plan using the DiMES framework to facilitate monitoring of project implementation by the DAs, WSDBs and WATSANs. 23. Subproject Implementation: The DAs will be responsible for the selection of consultants and the procurement of works and goods following the guidelines established in the Financing Agreement procurement process under the oversight of RCC. The DA is a procurement entity as identified in the Public Procurement Law (Act 663 of 2003) and has a District Tender Committee and a District Tender Review Board. The law requires three heads of departments (one of whom represents the user agency) to serve on the District Tender Committee and also on the Regional Tender Review Board. In addition, the District Planning Officer who is the focal person for DWST is the secretary to the District Tender Review Board. This means that CWSA s Water and Sanitation Teams are adequately represented in the structures for procurement at both the district and regional levels. The law also requires the evaluation panel to have the required expertise to evaluate tenders. In the past, due to perceived capacity challenges at the district level, CWSA has stepped in and done the procurement on behalf of the DAs. This will not be allowed in this project in order to strengthen the capacity of the DAs which will be assisted with the necessary training and TA. Tender evaluation will be done at the district with representation of RWST, and then forwarded to relevant approval authority (which may be the DCE, District Tender review Board or the Regional Review Board based on the tender value vis-a-vis the threshold amounts). Upon approval, the District will formally submit the evaluation report to CWSA, which will forwards it to the World Bank for No Objection if prior review is required. The Bank s response, either in the form of no objection or comments on the evaluation report, will be given to CWSA, which will forward it to the DAs for subsequent actions. Problems encountered in the past include delays by the District Chief Executive to sign contracts and to 61

70 pay to consultants and contractors. To minimize the delays, the project will organize a series of procurement and financial management clinics to improve and shorten the processes. Tasks/Activities Procurement Financial Management Operations & Management Current Arrangement Leading role by CWSA Mostly done by CWSA WSDBs/WATSANs with supervision by DWSTs and RWST(CWSA) Proposed Arrangement Leading role by DAs, with CWSA technical support and RCC oversight. Subproject financial management by DAs (DWSTs), with CWSA providing overall financial management in consultation with RCCs; Compliance supervision by RCC with MLGRD and MWRWH providing overall oversight. DAs have regulatory oversight of the facilities that may be operated by WSDBs, WATSANs or private operators. DWSTs (or Water and Sanitation Unit of DWD) and RWSTs will provide overall supervision at the district and regional levels Monitoring & Evaluation Undertaken by CWSA and DAs with CWSA in leadership role. DAs will report to RCC, RWST and steering committee CWSA will provide technical advice/support when needed, and will compile the reports that will be submitted quarterly to the World Bank 24. Sustainability of Works: The DAs will take ownership of the subprojects by participating in the planning and financing of the investments and by executing, once the subproject facilities are completed, a performance agreement with the operators by means of which the DAs will commit to provide the necessary resources for a sustainable O&M of the facilities. CWSA will establish the performance targets for the operators and the revenues required to cover the O&M costs plus the contribution to a fund for the replacement of assets at the end of their useful life. CWSA will also review the operation and maintenance manuals and provide training to DAs, WSDBs, and WATSANs in the O&M and management of the water facilities and institutional sanitation facilities. 25. Monitoring and Evaluation Reporting: The DAs with the support of CWSA and under the guidance of the Steering Committee would be assigned the responsibility for monitoring and evaluation of the subproject at the district levels. Information related to performance and results indicators will be obtained from: (i) progress reports compiled by individual DAs and submitted to RCCs and RWSTs; (ii) the databases of central and regional 62

71 CWSA agencies; and (iii) periodic surveys among the users to be established as part of the sector information system. The DWST (or the Water and Sanitation Units of the DWDs) would compile the data and prepare quarterly and annual reports on the progress of project implementation and quality and sustainability of existing services. A mid-term review will be carried out after the second year of execution and an Implementation Completion Report would be prepared not later than six months after project close. 26. Sector Reporting/Information System: The project will support establishment of a reporting system which will link the DAs to the RCCs and other institutions within the Ministry of Local Government. CWSA as overall project coordinator will continue to facilitate the dissemination of reports to the Bank and other institutions outside local government decentralized units. The reports will include project management and monitoring, progress of works, revenue collection and accounts. A communication link will be established between the Bank the DAs, LGS and the RCCs to enable the Bank and the local government bodies to directly monitor project implementation at the district level. The CWSA will also coordinate with the Ghana Health Service and the Ghana Education Service/School Health Education Program with regard to hygiene education and with the Water Directorate with regard to Water Supply and Water Resources Management activities. The project will support CWSA to consult with the local government institutions to finalize the District Monitoring and Evaluation System (DiMES), and to establish a communication link between the LGS, RCC, WD, EHSD, the CWSA (and the RWSTs), the DAs and the WSDBs and WATSANs to facilitate good institutional coordination. This will lead to the development of a comprehensive Water and Sanitation Sector Information System (WSSIS) to monitor and evaluate the access of the population to water supply and sanitation services and the quality and sustainability of these services. The establishment of the WSSIS will be supported by technical assistance funded by this project. 63

72 Introduction Annex 7: Financial Management and Disbursement Arrangements GHANA: Sustainable Rural Water and Sanitation Project 1. In line with the guidelines as stated in the Financial Management Manual issued by the Financial Management Sector Board on March 1, 2010, a financial management assessment was conducted of the Community Water and Sanitation Agency (CWSA). The objective of the assessment was to determine: (a) whether the agencies have adequate financial management arrangements to ensure project funds will be used for purposes intended in an efficient and economical way; (b) the project s financial reports will be prepared in an accurate, reliable and timely manner; and (c) the entities assets will be safeguarded. 2. Overall, the assessment of the financial management arrangements at the implementing agency concludes that there are systems in place that satisfy the Bank s minimum requirements under OP/BP10.02, and overall financial management risk is rated as moderate taking into consideration mitigation measures. Country Issues 3. Ghana s fiduciary environment is considered adequate for supporting Bank lending operations. As reported in the ERPFM 2009 and the Draft PEFA 2009 reports, Ghana is gearing itself to establish a strong foundation for achieving aggregate fiscal discipline, based on positive developments in the following areas: (a) prevalent low levels of unreported extra-budgetary expenditure; (b) good and timely public access to key fiscal information; (c) adherence to a fixed and coherent budget calendar; (d) high average debt collection ratios for tax arrears and regular and timely revenue transfers to the Consolidated Fund; (e) comprehensive recording, reconciliation and reporting of debt service and on the debt portfolio; (f) predictable budget support disbursements; (f) timely in-year budget implementation reports and annual financial reports; and (g) improved effectiveness and timely external audit scrutiny. Building on the PEFA 2006 and the ERPFM 2006 reports, the latest reports (2009) further confirm that Ghana has built a solid legal and regulatory framework and foundation for public financial management that performs at an average level and occasionally above-average standards. 4. However, the overall fiduciary control environment, according to the latest assessments, continue to suffer from failures to: (a) apply the guiding principles of a wellstructured consolidated cash management system, in a Treasury Single Account mode, for all public expenditures supported under the budget; (b) fully implement commitment accounting and controls and hence document, report on, and minimize the potential for, expenditure arrears arrears that add to the distortion of macro-fiscal stability; (c) provide a consolidated fiscal picture with respect to revenues and expenditures against the five separate and distinct funds of the government; and (d) adopt and implement a Government Finance Statistics (GFSM2001) chart of classification for budgeting, accounting and fiscal reporting, that is uniform across all government formations. 64

73 5. As the trend towards a more widespread use of country systems looks increasingly promising, upgrading, stabilizing, and rolling-out a fully integrated financial management information system for government budget management is critical to sustaining success in both the maintenance of fiscal discipline and the effective and timely monitoring of overall government finances. To this end, GoG has initiated and approved a new Public Financial Management (PFM) improvement Charter called the Ghana Integrated Financial Management Information System (GIFMIS) Charter that outlines the framework that the government has adopted, and seeks to implement on priority basis, aimed at reversing the key inherent weaknesses in its fiduciary control environment. The Charter, which has the full government ownership and unflinching commitment at the highest level, will address the key challenges involved in the budgeting, accounting, and reporting systems, processes, and practices across government. In addition, to support improved cash management, the Controller and Accountant General s Department (CAGD) has implemented a form of treasury realignment that provides for integrating the treasuries as part of the administrative control of MDAs and Metropolitan, Municipal and District Assemblies (MMDAs), while retaining the recruitment and positing powers of the accounting staff. Project Risk Assessment and Mitigation 6. This section presents the results of the risk assessment and identifies the key risks project management may face in achieving project objectives together with risk mitigating recommendations on how the project management intends to address these risks. Table 1: Risk Rating Summary Table Risk INHERENT RISK Country Level Weaknesses in the effective use of public funds, weak oversight particularly at the sub national levels regarding transparency and accountability. Poor linkages between strategic planning and long-term budgeting at the national and sectoral levels. Entity Level Legal and regulatory framework exists but the challenge is in ensuring compliance with PFM systems particularly at the subnational level / DAs. Project Level Challenges in coordinating the activities of the various Districts Assemblies and spending units. Potential weaknesses in effective monitoring and tracking of activities and expenditure due to the wide dispersion and the small Risk Rating Risk Mitigating Measures/Remarks M Strengthening the role of the MMDAs in capacity building through ongoing reforms and technical assistance in the public financial management. This has resulted in a set of new legislation to guide public financial management practices. S S As part of its mandate the MLGRD continuously works through the DAs to address the institutional challenges at the sub national level. In addition the DPs are working with the MLGRD to strengthening fiscal decentralization, and improving the legal framework and capacity of institutions at the sub national level. The project builds on the existing institutional arrangement of CWSA. The Unit has gained much experience through the STWSSP and this will be leveraged upon to mitigate this risk. The WD and the LGS amongst others would provide guidance on strategic 65 Residual Risk Rating L S M Conditions for Effectiveness/ Negotiations NA NA No

74 Risk Risk Rating Risk Mitigating Measures/Remarks value of transactions. policy and implementation issues and Since a large part of the project assess progress towards achieving the (over 80% of funding) would be project s objectives and take implemented at the DA level, corrective action if necessary. there exist inherent risks due to weak financial management systems. Overall Inherent Risk S M CONTROL RISK Budgeting Delays in preparing adequate and comprehensive budgets and annual work plans by the DAs. This may impact adversely on implementation period and timelines. Accounting Accounting and reporting challenges (delays) due to the different levels of accounting, i.e. CWSA, Regional Offices and DAs. M M The processes for budgeting will be documented in the revised PIM and timelines will be monitored by the Project Coordinator and the Financial Controller. It is envisaged that the initial budget will be developed from the 2010 Development Budgets of the districts. Consolidation and final reporting will be done at CWSA Head Office which is adequately staffed. In addition regional accountants will be regularly trained to become more effective. Residual Risk Rating L L Conditions for Effectiveness/ Negotiations No No Funds transferred by CWSA Head Office to subprojects may not be completely and accurately accounted for due to weak technical capacity at district level. Frequent transfers of trained District Finance Officers (DFOs) affects the technical capacity of participating districts. Internal Controls Risk of non-compliance with internal control processes (in the preparation and approval of transactions, payments, cash and bank transactions) are particularly within the DAs S Monitoring of district finance function by the regional accountants to ensure compliance. Continuous training by CWSA Regional Accountants of existing and new DFOs to build their capacity in financial management. M S Internal controls will be in line with GoG approval and authorization processes and reinforced by guidelines as per the PIM. Monitoring of district finance function by the regional accountants to ensure compliance. Periodic internal control review and oversight by the internal control department of the MLGRD. M No Funds Flow There is the risk that beneficiary contributions towards project implementation may not be paid (or delayed) and that there is a lack of effective systems to monitor and track nonpayment. (DAs are expected to contribute 5% after June 30, 2012) Delays in releases of funds due to late submission of expenditure returns S Simple procedures and tracking mechanisms have been designed to monitor such contributions. These include submission of bank statements as part of the quarterly returns to verify payments. In addition DAs will sign commitments as part of the Subproject Agreement and be allowed to pay in installments rather than upfront. M No CWSA Regional Officers will be 66

75 Risk Risk Rating Risk Mitigating Measures/Remarks tasked with ensuring that deadlines for submission are followed and where necessary sanctions are applied including withholding further transfers. Residual Risk Rating Conditions for Effectiveness/ Negotiations Financial Reporting Delays in processing and submitting IFRs and other progress reports to ensure compliance with reporting deadlines. Challenges in completeness and comprehensiveness of reports. S DAs will be required to submit quarterly reports to CWSA Regional Offices for consolidation and subsequent submission to Head Office. Any delays in submission will affect the deadlines for summarizing and reporting to IDA. The timelines for submission will be agreed upon and reflected in the PIM and the FA. Bank FMS to ensure compliance. Form and contents of IFR and other status reports to be agreed upon. S No Auditing The risk that audits will not be submitted on time to ensure compliance with covenants. S The TOR for engagement will be reviewed and cleared by the fiduciary team of the Bank to guarantee that the scope of works is satisfactory and includes all beneficiary units under the project. In addition prior to the end of each year the Bank will agree to the audit program timelines to ensure compliance with submission deadline date. M No Overall Risk Rating S M H High S Substantial M Moderate L Low 7. The assessed control risk for the project is rated as substantial since most of implementation and the fiduciary responsibilities including contract awards, payments, accounting and reporting is carried out by the District Assemblies. However to mitigate this risk, the proposed financial management arrangements relies on the centralized approach at CWSA, which has better technical capacity and effective systems for providing financial management functions at both the headquarters, regional and sub-regional levels and ensuring compliance. This results in a residual risk of moderate. Project Financial Management Arrangements 8. The overall project will be coordinated and monitored by the Community Water and Sanitation Agency (CWSA) under the oversight of a Steering Committee. The CWSA is the lead facilitator for water supply and water-related sanitation in rural communities and small towns and is responsible for external liaison and coordination of the NCWSP. The CWSA reports to the Ministry of Water Resources Works and Housing (MWRWH), which is responsible for overall water policy formulation, planning, coordination, collaboration, monitoring and evaluation of programs for water supply and water resources management. 67

76 9. Project management and coordination including financial management would largely rely on existing GoG institutions and structures and capacities of the CWSA, which has been developed and tested under the STWSSP. The financial management responsibilities of the project during implementation will be handled by CWSA which has in place an effective and functioning financial management system with an adequate mix of technical and non technical staff to ensure smooth implementation. 10. The CWSA consists of a Head Office in Accra and ten regional offices where the RWSTs are located and work closely with the DAs. CWSA has over the past years been successfully managing similar IDA funded projects, including the Ghana Small Towns Water Supply and Sanitation Project. Based on periodic supervisions and reviews of the control environment, the conclusion is that there are effective internal controls that seek to prevent fraud, waste and mismanagement of its operations. The current systems and funds flow mechanism which have been used for implementation of existing projects will be relied upon for implementing of the new project. Strengths and weaknesses of the Financial Management System 11. The project s financial management arrangement is strengthened by the adoption and reliance of the arrangements under the just closed IDA-funded Small Town Water Supply and Sanitation Project. This project has performed satisfactorily over the years and it is expected that there will be no significant changes in the current arrangements. Key strengths of the financial management arrangement include: i. Financial management staff have been trained in IDA processes and been involved in implementation of similar projects for the past five years. ii. The existence of a team of technically qualified accounts staff at the Head and Regional Offices of CWSA. iii. Adequate fiduciary oversight of District Assemblies by the CWSA Regional Offices iv. The arrangements are complimented by the adherence to the IDA-approved Project Implementation Manual (PIM). 12. Aside from the unique strengths of the project, it should be emphasized that it will have challenges which derive from the systemic PFM weakness at the sub national level. These include lack of technically competent accounts staff in some districts, poor record keeping and accounting, weak internal controls and enforcement of compliance to processes and procedures. However the design seeks to mitigate and address these issues through the CWSA which has a presence in all implementing districts. Time Bound Action Plan 13. The action plan below indicates the actions to be taken for the project to address the weaknesses that have been identified to ensure the FM system is robust and strengthened. Some of these activities and actions are to be completed prior to credit effectiveness and these will be monitored on an ongoing basis during implementation. 68

77 Table 2: Action Plan Action Date due by Responsible 1. Submittal of PIM satisfactory to IDA Prior to effectiveness CWSA 2. Engagement of acceptable external auditors Six months after effectiveness MLGRD/GAS Summary Financial Management Assessment 14. Key objectives in the assessment of the project s financial management system are to: i. ensure that funds are used only for their intended purposes in an efficient and economical way; ii. ensure that funds are properly managed and flow smoothly, adequately, regularly and predictably in order to meet project objectives. iii. enable the preparation of accurate and timely financial reports; iv. enable project management to monitor the efficient implementation of the project; v. safeguard the project assets and resources. 15. The projects financial management will be complemented by adhering to the policies, rules and procedures as stated in the revised PIM which will provide guidelines on; budgeting, financial reporting, funds disbursement procedures and financial management monitoring and control. A summary of the key finding of the financial management assessment is presented below: Budgeting 16. The budgeting arrangements at CWSA are satisfactory and derive from the IDA allocations which serve as a basis for determining the district allocations and preparing the Annual Work Plan (AWP) incorporating the activities to be undertaken under the subprojects (district and community water projects). Individual work plans, procurement plans and budgets are collated and consolidated at the headquarters and reviewed jointly by key project staff. At head office, CWSA will coordinate a yearly work-plan and budget that will provide a back-up support to District assemblies in project implementation. 17. At the regional level, RWSTs will assist by coordinating and integrating all the AWPs and budget of all participating districts, and submitting such reports to the CWSA Head Office. The budgeting process will be documented in a revised IDA approved Project Implementation Manual (PIM). The major challenge has been in contract management and project implementation which leads to delays, contract variations, and extensions a clear pointer that project management remains a critical link in achieving the PDOs. Accounting 18. The finance department of CWSA is headed by the financial controller who is a qualified chartered accountant with relevant years of experience in the financial management practices of IDA and other donors and is supported by a team of four accounting staff of varying qualifications and competence. Each of the Regional Offices of CWSA is adequately staffed with accounting and budget officers who report to the financial controller and are familiar with IDA financial management arrangements and reporting requirements. 69

78 19. In terms of accounting systems, CWSA uses Navision Accounting and a combination of spread sheets and manual systems and follows a Bank approved Accounting Manual which documents the processes for initiating, recording and reporting transactions. In line with government policy, financial management of government funds is vested in the district finance officers (DFOs) and as such the role of the CWSA Regional Office accountants will be to coordinate the work of DFOs, ensure that they meet reporting requirements, offer technical advice and monitor compliance. The assessment notes that at the Head Office and Regional Offices, the accounting function is adequate and can be relied upon to satisfactorily support implementation though there are observable weaknesses in technical capacity at the district levels. Internal Auditing 20. There is a functioning internal audit department within the CWSA which is mandated with ensuring that the control environment is adequate and procedures for transaction processing authorization and approvals are adhered to at all levels of implementation. The processes for internal controls are documented in an internal Auditing Manual. As part of its mandate the Internal Audit Department is required to visit District Assemblies and other beneficiaries to periodically review the control environment and proposed recommendations. Recently the Internal Audit Agency has mandated all DAs to form an Audit Review and Implementation Committee to ensure compliance and also to follow up on the report of both the internal auditor and external auditors. 21. A key challenge will be to ensure that internal control environment at the district level is satisfactory and being complied with. To address this risk it is expected that the regional accountants will periodically undertake reviews of the activities district finance office. In addition the internal audit unit of the MLGRD will be required to periodically undertake an internal audit assessment of beneficiary districts. Financial Reporting 22. As part of the financial covenants, the project is required to prepare and submit on a quarterly basis interim financial management reports in content and format satisfactory to the Bank. The accounting and information management systems at the CWSA Head Office are robust and reliable in generating such reports. The assessment indicates that though at the headquarters there will be minimal challenges in financial reporting, there may be delays from the District Assemblies in meeting deadlines for submitting returns. The delays are because the Head Office has to rely on expenditure returns from the regional and district offices to consolidate for reporting purposes. To address this weakness, standard reporting templates have been designed and these reports are adequate and have the necessary supporting schedules and attachments. In addition, transfers to districts will be based on adequate submission of returns and accounting for the use of funds, which will be an incentive for preparation of returns. Funds Flow Arrangements 23. Funds for implementing the project will all be channeled initially to a designated account operated and maintained by the CWSA for subsequent transfer to the beneficiary District Assemblies and area councils involved in the project through their individual bank 70

79 accounts. The proposed arrangement is to use a single Designated Account (denominated in US dollars) managed and operated by the Chief Financial Controller (CWSA). Transfers will then be made to the respective District Development Accounts in line with their approved activities, work plans and budgets under the various components. Initial releases to the designated accounts will be an aggregate of the various district work plans and forecast project management expenditure. At the district level, the annual budgets, derived from the District Water and Sanitation Plans (DWSPs), will indicate the activities and estimated cost. This data will form part of the basis for determining the annual district allocations. 24. Project activities and expenditures are mostly at the subproject and district levels and as such the funds flow mechanism has been designed to support implementation at those levels. Although implementation is at the district levels, the designated account is maintained and managed at the Head Office, from where further transfers are made directly to the District Offices with the Regional Offices being notified to help in monitoring. 25. The processes of transfer as documented in the revised PIM can be summarized as follows; once the procurement process for award of contract is completed at the district, the District Assemblies sign a Subproject Agreement (SPA) with CWSA. Upon signing of the SPA, the CWSA transfers 40 percent (advance) of the total contract value to the District Water and Sanitation Accounts maintained by the District Assemblies. District Assemblies then undertake the project and once they have spent at least 70 percent of the initial advance, they submit a claim with adequate supporting documentation the Regional Office of CWSA. 26. The documents and returns are reviewed and verified by the Regional Offices and subsequently submitted to the national CWSA office for further processing and replenishment to the District Water and Sanitation Accounts. 27. A major challenge that can be foreseen is with the payment of the district contributions which must be paid up front prior to any transfers. To address this challenge it has been proposed that Districts will instead undertake a commitment as part of the Subproject Agreement and agree to make installment payments over the period. These commitment will be monitored by the Regional and national offices of CWSA and reported upon in the district returns and quarterly IFRs. 28. Initial Waiver of DAs Contribution. The GoG requested during negotiations a temporary waiver of the 5 percent contribution for water subprojects while the capacity of districts to plan and budget for investments is improved. As a result it was agreed to finance 100 percent of eligible expenditures incurred for water subprojects (Part A.1 of the Project as described in the Financing Agreement) for all withdrawal applications that are received up to June 30, The waiver of the 5 percent contribution, for a limited initial period, will allow the DAs to properly plan their investments and budget their contributions for the year 2012 and subsequent years until the completion of the Project. The participation of the DAs in the development of plans and their financing is consistent with the National Water Policy and with the shift towards a decentralized framework for service delivery, as set out in the Local Government (Department of District Assemblies) (Commencement) Instrument, 2009 (L.I. 1961) and the Decentralization Policy Framework which is scheduled for submission to the Cabinet during May The project will support DAs in preparing for this shift by providing technical assistance, including the organization of workshops and clinics in 71

80 planning procurement, contracting arrangements, project management, supervision, financial management, environmental and social accountability, operation and management of water and sanitation facilities, monitoring and reporting. This arrangement will be included in the Project Implementation Manual. Diagrammatic fund flow arrangement: Notes i. There will be only one designated account and will be maintained by the Community Water and Sanitation Agency on behalf of the Ministry of Water Resources, Works and Housing. ii. Funds will be transferred to two other Subproject Accounts: (a) to CWSA Regional Accounts for meeting incremental operating cost; and (b) to District Assemblies for actual implementation of project activities. iii. Transfers to these sub-accounts at the District Level will be based on an imprest system and as a percentage of the approved annual work plans iv. Funds shall be transferred directly from the CWSA Designated Account to the Districts. The regional office will only be notified on the allocations and fund releases. v. Districts will report on fund use to the regional offices that will consolidate and forward to CWSA headquarters Disbursement Arrangements 29. This operation is an IDA Credit of SDR 49.7 million (US$ 75 million equivalent) that would be made available upon Credit effectiveness. The project will use report based disbursement for reporting on the uses of project funds and also for requesting subsequent 72

81 funds. The initial disbursement will be based on the aggregate expenditure forecast for the first six months of the Annual Work Plan of the Districts plus budgeted estimates for project management support. Subsequent withdrawals will be made on submission of satisfactory IFRs plus a forecast of expenditure and cash flow needs for the next six months plus a schedule of payment and reconciliation of transfers made to beneficiary districts. Additional instructions for disbursements will be provided in a Disbursement Letter issued for this project. 30. Supporting documentation will be requested along with withdrawal applications as specified in the disbursement letter. This will comprise summary reports Interim Financial Reports for payments made by Borrower from the Designated Account and requests for reimbursements for eligible expenditure. Copies of original documents or records shall be requested only for certain categories of expenditures above financial thresholds specified in the Disbursement Letter. 31. Retroactive financing. Withdrawals up to a total of US$2,000,000 may be made for payments made on or after April 1, 2010, until the date of the Financing Agreement for Eligible Expenditures under Category (1). 32. Specific details of the funds flow and transfer arrangements will be documented in the revised Project Implementation Manual. Table 3. Categories of Eligible Expenditures that may be financed by the Credit Category Amount of the Financing Allocated (USD) Percentage of Expenditures to be Financed (inclusive of Taxes) (1) Goods, Consultants services, Training and Operating Costs under Parts A.2 and C of the Project (2) Goods and works for Subprojects under Part A.1 of the Project (3) Goods, works and services for Subprojects under Part B of the Project TOTAL AMOUNT 15,400, % 41,000, % of Subproject expenditure up to and including June 30, 2012, and thereafter 95% of Subproject expenditure 18,600, % 75,000,000 73

82 External Auditing 33. The Auditor General (Ghana Audit Services) is primarily responsible for the auditing of all government projects. However due to capacity constraints it is usual for the Auditor General to subcontract the audit of donor funded project to private firms. Under the project this arrangement will be followed subject to the Bank s necessary procurement and technical clearance of the TOR for the engagement of the audit firm. It is important that the TOR of the auditors include a visit to a sample of district/area councils to monitor level of compliance with controls. Conclusion 34. In summary, based on supervision missions of an existing project being implemented by CWSA, review of financial statements and audit reports the conclusion is that financial management arrangements at CWSA are adequate and satisfactory and meet the minimum requirement as per Bank policy. Generally at the country level the inherent risk are rated as moderate, at the project level risk are rated as substantial primarily because of the implementation by DAs. However based on the mitigation measures adopted in the project design, the overall the project control risk is rated as moderate. Supervision Plan 35. Based on the risk rating of the project and the current financial management (FM) arrangement, it is expected that in the first year of implementation there will be two on-site visits to the CWSA head office and a sample of the Regional/District CWSA offices to ascertain continued adequacy of arrangements, supplemented by desk reviews of IFRs and audit reports. The FM supervision mission s objectives will include ensuring that strong financial management systems are maintained for the project throughout project tenure. In adopting a risk-based approach to FM supervision, the key risk areas of focus will include assessing the accuracy and reasonableness of budgets, their predictability and budget execution, compliance with payment and fund disbursement arrangements particularly transfers to districts and the ability of the district and regional/zonal offices to generate reliable financial reports. 74

83 Annex 8: Procurement Arrangements GHANA: Sustainable Rural Water and Sanitation Project A. General 1. Procurement for the proposed project, including any retroactive financing, would be carried out in accordance with the World Bank s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, revised October 2006 and May 2010; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, revised October 2006 and May 2010, and the provisions stipulated in the Legal Agreement. The implementing entities as well as contractors, suppliers and consultants will observe the highest standard of ethics during procurement and execution of contracts financed under this project. Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA and Grants dated October 15, 2006 (the Anti- Corruption Guidelines) shall apply to the project. The various items under different expenditure categories are described in detail below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually, or as required to reflect the actual project implementation needs and improvements in institutional capacity. 2. Procurement of Works: A total of about US$44.8 million of works would be procured under the project. The procurement will be done using the Bank s Standard Bidding Documents (SBD) for all International Competitive Bidding (ICB) and National SBD agreed with or satisfactory to the Bank. Contracts below US$5,000,000 but equal to or above US$100,000 equivalent per contract will be procured under National Competitive Bidding (NCB). However, relevant NCB works contracts, which are deemed complex and/or have significant risk levels, will be prior-reviewed. Such contracts will be identified in the tables and also in the procurement plans. While using NCB, the project must ensure that: (i) foreign bidders shall be allowed to participate in NCB procedures without any restrictions; (ii) bidders shall be given at least one month to submit bids from the date of the invitation to bid or from the date of availability of bidding documents, whichever is later; (iii) no domestic preference shall be given to domestic bidders; and (iv) in accordance with paragraph 1.14(e) of the Procurement Guidelines, each bidding document and contract financed out of the proceeds of the Financing shall provide that: (a) the bidders, suppliers, contractors and subcontractors shall permit IDA, at its request, to inspect their accounts and records relating to the bid submission and performance of the contract, and to have said accounts and records audited by auditors appointed by the Association; and (b) the deliberate and material violation by the bidder, supplier, contractor or subcontractor of such provision may account to an obstructive practice as defined in paragraph 1.14(a)(v) of the Procurement Guidelines. Contracts estimated to cost less than US$100,000 equivalent per contract would be procured using shopping procedures based on a model request for quotations satisfactory to the Bank. Direct contracting may be used where necessary, but it will be subject to Bank s no objection. 3. Procurement of Goods: A total of about US$8.5 million of goods would be procured under the project. These would include equipment and vehicles. The procurement will be done using the Bank s SBD for all ICB and National SBD agreed with or satisfactory to the Bank. Contracts below US$500,000 equivalent but equal to or above US$50,000 75

84 equivalent per contract may be procured under NCB. However, relevant NCB goods contracts, which are deemed complex and/or have significant risk levels, will be priorreviewed. Such contracts will be identified in the tables and also in the procurement plans. Again, under the NCB, the project must ensure that: (i) foreign bidders shall be allowed to participate in the NCB procedures without restriction of any kind; (ii) bidders shall be given at least one month to submit bids from the date of the invitation to bid, or from the date of availability of bidding documents, whichever is later; (iii) no domestic preference shall be given to domestic bidders and for domestically manufactured goods; and (iv) in accordance with paragraph 1.14(e) of the Procurement Guidelines, each bidding document and contract financed out of the proceeds of the Financing shall provide that: (a) the bidders, suppliers, contractors and subcontractors shall permit the Association, at its request, to inspect their accounts and records relating to the bid submission and performance of the contract, and to have said accounts and records audited by auditors appointed by the Association; and (b) the deliberate and material violation by the bidder, supplier, contractor or subcontractor of such provision may account to an obstructive practice as defined in paragraph 1.14(a)(v) of the Procurement Guidelines. Contracts estimated to cost less than US$50,000 equivalent per contract would be procured using shopping procedures based on a model request for quotations satisfactory to the Bank. Direct contracting may be used where necessary, subject to Bank s no objection. 4. Procurement of Non-Consulting Services: Procurement of non-consulting services will follow procurement procedures similar to those stipulated for the procurement of goods, depending on their nature. 5. Selection of Consultants: Consultancy services valued at about US$21 million would be provided under the project and includes the following categories: financial, technical and procurement audits, economic and technical feasibility and design studies, technical assistance for community mobilization and training on facility management and maintenance, hydrological studies, supervision of construction works, institutional studies, monitoring and evaluation studies and technical assistance to the implementing ministries. This will involve the hiring of firms, individual consultants and nongovernmental organizations (NGOs) or Community Based Organizations (CBOs). In this regard, the short list should preferably comprise consultants of the same category, similar capacity, and business objectives. Consequently, the short list should normally be composed of firms of similar experience or of not-for-profit organizations (NGOs, Universities, UN Agencies, etc.) acting in the same field of expertise. If mixing is used, the selection should be made using Quality-Based Selection (QBS) or Selection Based on the Consultants Qualifications (CQS) (for small assignments). Contracts for consulting services, each estimated to cost US$100,000 equivalent or more, will be awarded following the procedure of Quality and Cost-Based Selection (QCBS). Consulting services estimated to cost less than US$100,000 equivalent per contract under the project would be procured following the procedures of Selection Based on Consultants Qualifications (CQS) (for small assignments). Selections under Fixed Budget Selection (FBS) and Least Cost Selection (LCS) methods will be applied in the circumstances as respectively described under paragraphs 3.5 and 3.6 of the Consultants Guidelines. For all contracts to be awarded following QCBS, LCS and FBS the Bank s Standard Request for Proposals will be used. Procedures of Selection of Individual Consultants (IC) would be followed for assignments that meet the requirements of paragraph 5.1 and 5.3 of the Consultant Guidelines. LCS procedures would be used for assignments for selecting the auditors. Single-Source Selection (SSS) procedures would be followed for assignments that 76

85 meet the requirements of paragraphs of the Consultant Guidelines and will always require the Bank s prior review regardless of the amount. 6. Assignments estimated to cost the equivalent of US$200,000 or more would be advertised for expressions of interest (EOI) in Development Business (UNDB), in DgMarket and in at least one newspaper of wide national circulation. In addition, EOI for specialized assignments may be advertised in an international newspaper or magazine. In the case of assignments estimated to cost less than US$200,000 equivalent, but more than US$100,000 equivalent the assignment would be advertised nationally. The shortlist of firms for assignments estimated to cost less than US$200,000 equivalent may be made up entirely of national consultants, if at least three qualified firms are available at competitive costs in Ghana. However, foreign consultants who wish to participate should not be excluded from consideration. Consultancy services estimated to cost above US$200,000 equivalent per contract for firms, and contracts for individuals for assignments estimated to cost above US$100,000 equivalent and single source selection of consultants (firms and individuals) will be subject to prior review by the Bank. 7. Capacity Building and Training Programs, Conferences, Workshops, etc: A total amount of US$3 million would be provided for these activities, which will be geared towards building capacity and improving management and staff skills within the implementing agencies, as well as for qualified private engineering consultants and contractors. All training and workshops will be carried out on the basis of the project s Annual Work Plans and Budget which will have been approved by the Bank on a yearly basis, and which will inter alia, identify: (i) the envisaged training and workshops; (ii) the personnel to be trained; (iii) the institutions which will conduct the training; and (iv) duration of the proposed training. 8. Operating Costs: Project operating costs would be procured using the implementing agency s administrative procedures, which have been reviewed and found acceptable to the Bank. Operating Costs means the incremental operating costs incurred by the CWSA on account of the management and implementation of the Project, on the basis of approved work plans and budgets for the Project, including hire of venues for Training; purchase of materials for approved Training; operation and maintenance costs for Project vehicles, office supplies, consumables, travel costs and per diems, and accommodation, but excluding salaries of the Recipient s civil servants. 9. The procurement procedures and SBDs to be used for each procurement method, as well as model contracts for works and goods procured will be presented in the Project Implementation Manual (PIM). B. Assessment of the Agency s Capacity to Implement Procurement 10. Procurement activities will be carried out by District Assemblies (DAs) with technical support by Community Water and Sanitation Agency (CWSA). The DAs have been involved in implementing Bank- and other donor-financed projects through CWSA for CSWPI and CWSPII and through the Community-Based Rural Development Project (CBRDP Credit No ) under the MLGRD and the Village Infrastructure Project (ITF Credit No. N020 GH) under Ministry of Agriculture. As a result they have acquired some limited capacity to carry out procurement under the project. These experiences and capacities 77

86 have been built over time but are, however, not adequate for the districts to independently implement Bank- or other donor-funded projects. In addition, new districts have been created and staffed by new staff with little or no exposure to Bank or other donor procurement procedures. Within four years of the CBRDP alone, the number of districts has increased from 138 to Capacity assessment of CWSA showed that they have handled Bank funded projects since the year 2000 and have gained extensive experience in procurement. Procurement capacity at both the CWSA Head Office and the RWST s in the original project areas is found to be adequate. An assessment of the six regions (Central, Western, Brong Ahafo, Northern, Upper East and Upper West) where the RSWSP will be implemented show that the regional CWSA engineers who are also responsible for procurement have sufficient knowledge and experience in Bank s procurement procedures and processes to provide technical assistance to the implementing DAs. These DAs have previously received training from CWSA and thus have knowledge on Bank procurement, but will continue receiving technical support from CWSA. Under the project implementation arrangements, capacity of the Water Boards will be enhanced by DAs while that of the DAs will be enhanced by continuous capacity efforts and support by CWSA Regional Teams, as well as by use of procurement and financial procedures specified in the Project Implementation Manual. Under the predecessor projects, CWSA with the Regional Offices was charged with facilitating and coordinating project implementation. However due to the perceived lack of capacity of the districts, CWSA mostly played an implementation role. Under the Sustainable Rural Water and Sanitation Project, the CWSA will work under the supervision of the RCCs. Regional CWSA offices are currently staffed with qualified engineers who are familiar with Bank procurement and consultant selection policies and procedures and can provide adequate support to the DAs and MLGRD that will be directly responsible for procurement under the project. Most of the regional engineers and other staff have attended the Bank-supported regional procurement course at the Ghana Institute for Management and Public Administration (GIMPA). 12. The summary assessment of the procurement risk is substantial for the project and the prior review thresholds have been set to reflect this rating. The substantial procurement risk rating is related to the large number of procuring entities under the project. Procurement post-reviews and technical audits will be carried out annually by the Bank Procurement Specialist and or independent auditors and based on the findings of the reviews the prior review thresholds will be reviewed. The main risks identified are the following: (i) limited procurement experience; (ii) inadequate monitoring; (iii) weak contract management; (iv) poor commitment control; (v) inadequate post-qualification requirements in bidding documents; (vi) inadequate capacity/overloading of consultants and contractors; (vii) delays in processing procurement and payments; (viii) political interference; (ix) fraud and corruption (x) poor public perception of DAs; and (xi) ignorance of project objectives and concepts. 13. The actions planned to address these deficiencies are included in the project capacity building activities, and include the following: (i) recruitment of Engineers/Procurement Specialists at the national and regional Levels; and (ii) further training of the DAs, Tender Review Boards, RCC and MLGRD officials in the application of the procurement procedures. This training will complement the ongoing nationwide training effort as part of the operationalization of the Public Procurement Act. The training will also be coordinated with procurement training under other Bank-financed operations which are 78

87 being implemented by DAs; Further, (iii) setting of standard processing times; (iv) establishment of semi-annual reporting requirements; (v) establishment of a contract performance support system; (vi) institutionalization of annual procurement audits; (vii) annual review of prior thresholds based on findings of the procurement post-reviews; and (viii) enforcement of remedial actions if the GoG does not take appropriate sanctions against violators. The overall project risk for procurement is Substantial. No Key risks Mitigation Actions By Whom By When 1 Inadequate procurement experience and capacity of DAs. 2 Lack of oversight 3 Weak contract management. 4 Poor commitment control. 5 Inadequate postqualification requirements in bidding documents. 6 Inadequate capacity/ overloading of consultants and contractors. 7 Delays in processing procurement and payments. 8 Political interference Maintaining Engineers/Procurement Specialist at the national and regional levels. Further training of District Works Departments and tender Committees of DAs, Tender Review Boards, RCC and MLGRD officials in the application of the procurement procedures. This training will complement the ongoing nationwide training efforts as part of the operationalization of the Public Procurement Act. The training will also be coordinated with procurement training under other Bank-financed operations that are being implemented by DAs. Monitoring reports to be presented at Assembly sessions. Identifying key contract management activities and setting of standard processing times in the project implementation manual. Establishment of semi-annual reporting requirements. Establishment of a contract performance support system. Prepare a step-by-step procedure for bidding and award of contracts. MLGRD/ MWRWH RPCU MLGRD MLGRD/D As MLGRD/ PPA/IDA From onset of project Ongoing Before effectiveness to be outlined in the PIM Before effectiveness, to be outlined in the PIM Before effectiveness, to be identified in the PIM. Institutionalization of annual procurement audits. PPA/IDA Yearly starting from October 2010 Annual review of prior review thresholds based on findings of the procurement post-reviews and technical audits and financial audits. These audits will be in addition to compliance audit by Internal Audit Agency. Enforcement of remedies if GOG does not take appropriate sanctions against officials who violate procedures. Sensitization of beneficiaries on PDO. Public dissemination of issues Sale of bidding documents by Regional SRWSP office and district. Institute external joint evaluation of bids. PPA/IAA/ GAS/IDA PPA/IDA RPCU Yearly starting from October 2010 Yearly starting from October 2010 ongoing 79

88 No Key risks Mitigation Actions By Whom By When Fraud and Corruption (Kick-backs) 9 Poor public perception of DAs. Observed cases to be referred to Auditor General for further investigations. Enforce provisions of World Bank Guidelines, the Public Procurement Act, the Financial Administration Act and Internal Audit Agency Act DAs to organize annual public social accountability fora or town hall meetings with public to review project activities and implementation progress. PPA/GAS/I DA DAs/Civil Society/ RPCU DAs/PPA ongoing Ongoing beginning from last week of October 2010 Ongoing Carry out Social Audits annually. Publication of procurement plans, advertisements for procurement opportunities, and contract awards at DA notice boards and in the PPA Bulletin. Continuous sensitization, strong M&E. MLGRD/I DA DAs/PPA MLGRD/ RPCU Yearly starting from October 2010 Ongoing Ongoing 14. The District Engineer will coordinate the activities of the Procurement Unit and receive procurement-processed documents from implementing agencies and departments procurement focal persons. He/she will be also the contact person for all Bank-related procurement issues, and will ensure that all contracts are awarded and signed by District officials unless this responsibility is delegated. The Terms of Reference of the District Engineer will be detailed in the PIM. 15. The assessment also reviewed the key procurement processing areas that have been subject to delays on both the Bank and the Borrower side, by comparing the standard time frame for the conduct of procurement for consultant services, goods and works, as identified in the procurement plans, with the corresponding estimated time frames that arise from the required internal processes that have become necessary in order to respond to the Public Procurement Law. The procurement processing experience of the CWSA was used as the benchmark in identifying the areas of delays and bottlenecks, with a view to recommending mitigation measures. 16. For Consultant Services, it was found that delays most often occurred in the following areas: (i) preparation of request for proposals (RFPs); (ii) advertising and evaluating/assessing expression of interests (EOIs) for shortlists; (iii) evaluating technical proposals; (iv) awarding contracts; and (v) poor contract management. For Goods and Works, the delays occurred in: (i) preparation of bidding documents, (ii) bid evaluations, (iii) awarding contracts, and (iv) poor contract management. Other areas that contributed to delays were lack of relevant procurement delivery capacity and the assumption that implementation of the procurement plans would follow the logic of the sequential steps, whereas it is significantly affected by the competing demands for time by the implementation of other activities. The key delays identified in the critical areas and mitigation measures and/or actions are identified below: 80

89 Assessment of Critical Delay Sources, Index of Delay Time and Mitigation Measures Delay Risk No. Areas in Procurement Processing Steps Major Sources of the Delays Mitigation Actions By Whom By When Consultant Services 1 Preparation of RFPs. Preparation and approval of TORs and estimation of cost of services. The National Project Engineer /Procurement Specialist will facilitate and coordinate procurement activities, including finalization of RFPs based on inputs from relevant technical agencies. CWSAs By effectiveness, documented in PIM Advertising and evaluating/ assessing EOIs for shortlists. Evaluation of Technical Proposals. Awarding Contracts Evaluating EOIs for shortlists and getting internal approvals. Getting internal approvals at the level of Entity Committee, or Central, Ministerial and Regional Review Boards as applicable, and also at the Bank. Interactions with Entity Committees and Review Boards, Bank review of No- Objection request, and possible interference from higher authorities. Focused training on shortlist evaluation process will be organized. Efforts will be made to reduce approval times. The critical approval time will be reflected in the timelines of the procurement plans. Close monitoring of procurement plans on a monthly basis both by the CWSA and the Bank. Develop plans based on an understanding of: (i) estimated cost of the services and, therefore, appropriate level to direct approval requests, and (ii) the meetings schedules of the appropriate authorities. The plans will reflect the actual time it takes to prepare and evaluate proposals based on country specific systems. CWSA to closely monitor and exercise quality control on all aspects of the procurement process, including evaluation, selection and award. On the Bank side, the team to monitor progress of activities on a regular basis and maintain a monthly evaluation framework. All delays and irregularities will be documented by the PPA for discussions at a higher level. PPA/CWSA/IDA PPA/CWSA/DA/ IDA Internal Audit Agency, Ghana Audit Service, PPA, IDA Ongoing. Ongoing. Ongoing. 81

90 No. 5 Delay Risk Areas in Procurement Processing Steps Contract Management. Goods and Works Preparation of Bidding Documents. Bid Evaluations. Awarding Contracts Major Sources of the Delays Poor monitoring, delays in payment, nonadherence to work program and completion schedule. Getting required technical inputs into bidding documents and getting approvals. Meetings and internal approvals at the level of Entity Committee and Central, Ministerial and Regional Review Boards, as applicable. Interactions with Entity Committees and Review Boards. Mitigation Actions By Whom By When Annual review of prior review thresholds based on findings of the procurement post-reviews and technical audits. These audits will be in addition to compliance audit by Internal Audit Agency. DAs to organize annual public social accountability or Town Hall meetings with public to review program. The CWSA Focal Person/Project Engineer will facilitate and coordinate procurement activities, including finalization of bidding documents based on inputs from relevant technical agencies. Close monitoring of procurement plans on a monthly basis both by the CWSA and the Bank. Develop plans based on an understanding of: (i) estimated cost of the goods and works and, therefore, determine appropriate level to direct approval requests, and (ii) the meetings schedules of the appropriate authorities. The plans will reflect the actual time it takes to prepare and evaluate proposals based on country specific systems. Efforts will be put in place to reduce approval times. CWSA to closely monitor and exercise quality control on all aspects of the procurement process, including evaluation, selection and award. On the Bank side, the team to monitor progress of activities on a regular basis and maintain a monthly evaluation framework. All PPA/IAA/GAS/I DA DAs/Civil Society CWSA PT and IDA Relevant Agencies Public Procurement Authority/ IDA Yearly starting from October Ongoing beginning from last week of October By effectiveness, documented in PIM. Ongoing. Ongoing. 82

91 No. 4 Delay Risk Areas in Procurement Processing Steps Contract Management Other Factors 1 2 Lack of Adequate Procurement Capacity Competing Demands on Staff Resulting in Delays Major Sources of the Delays Poor monitoring, delays in payment, nonadherence to work program and completion schedule. Inability to respond in a timely manner. Limited staff with specialized knowledge in Bank procurement procedures. Mitigation Actions By Whom By When delays and irregularities will be documented by the PPA for discussions at higher level. Annual review of prior review thresholds based on findings of the procurement post-reviews and technical audits. These audits will be in addition to compliance audit by Internal Audit Agency. DAs to organize annual public social accountability fora or town hall meetings with public to review program. (i)maintain a Procurement Specialists at national and regional Levels (ii) Focused training specific to the areas of weakness - Training program will be developed to respond to specific gaps identified in needs assessment. Better and more efficient scheduling of workload deliverables. Strengthening the procurement team through training and mentoring. PPA/IAA/GAS/I DA DAs/Civil Society CWSA, relevant agencies All implementing and beneficiary agencies Yearly starting from October Ongoing beginning from last week of October After project effectiveness and to be maintained on a regular basis. Ongoing. C. Procurement Plan 17. Each DA, RCC, and CWSA will prepare an annual work plan that contains a procurement plan. The CWSA will consolidate the procurement plans and submit it to IDA for review. The procurement plan will cover the first 18 months of the project and will present individual contract packages, each with its estimated cost, procurement method, and processing times for key activities until completion. Three months prior to the start of each subsequent fiscal year, the CWSA will submit updated versions of the procurement plans for the following 18 months to IDA review. The Tender Committees of the procurement entities shall ensure that the procurement plans are published in the Procurement Bulletin in accordance with the Public Procurement Act. 83

92 18. Any revisions to the formally agreed procurement plan shall require the concurrence of entity tender committee. Project implementing agencies shall apply the most competitive method of procurement that is appropriate to the circumstances of the specific procurement activity as described in the Project Implementation Manual and in the table below. Implementing agencies may select a more competitive method for a particular procurement activity if they wish to do so. However, IDA concurrence will be required to use a less competitive method other than the one set out in the table below and in the agreed Procurement Plan. Absence of this concurrence may result in misprocurement. 19. Training, workshops, conference attendance, and study tours will be carried out on the basis of approved annual work programs. The programs will identify the general framework of training and similar activities for the year, including the nature of training/study tours/workshops, the number of participants and cost estimates. Thresholds for Procurement Methods and Prior Review No Expenditure Category 1 Works 2 Goods and Services (other than Consulting Services Consulting Services Contract Value Threshold* (US$) Procurement Method >=5,000,000 ICB All contracts. Contracts Subject to Prior Review (US$) 100,000 =<C=<5,000,000 NCB Specified contracts as would be indicated in the Procurement Plans. C<100,000 Shopping None. All values Direct Contracting All contracts. C>=500,000 ICB All contracts. 50,000= <C < 500,000 C=<200,000 NCB UN Agencies (UNOPS) C<50,000 Shopping None. All values C>= 200,000 firms Direct Contracting QCBS (International) Specified contracts as would be indicated in the Procurement Plans. All contracts. All contracts. 3 4 Training, Workshops, Study Tours 100,000 =<C<200,000 firms QCBS All contracts. (National) C<100,000 CQS Only TORs. C>=50,000 individuals IC All contracts. C < 50,000 individuals IC TORs. All Values All Values Single Source Selection. To be based on Annual Work Plan and Budgets All contracts. *These thresholds are for the purposes of the initial Procurement Plan. The thresholds will be revised periodically based on reassessment of the project procurement risks. 84

93 20. As a rule, procurement implementation will be decentralized; however, for reasons of economy and efficiency, one or more implementing entities may delegate authority to one lead agency with adequate capacity to be the procuring entity for a particular tender package. D. Role of Different Government Departments 21. CWSA will provide DAs technical support services through the District Works Department (DWD) and the District Water and Sanitation Teams (DWSTs) by providing design, estimate, specification and other services, before the start of the subproject. CWSA will also inspect the works during implementation to ensure the quality of materials and work-standard, among other factors. Roles and responsibilities are spelled out in the Project Implementation Manual. E. Frequency of Procurement Supervision 22. In addition to the prior review supervision which will be carried out by the Bank, the procurement capacity assessment has recommended two supervision missions each year in the field to carry out post-review of procurement actions and technical review. The procurement post-reviews and technical reviews should cover at least 20 percent of contracts subject to post-review. In addition, post-reviews of in-country training will be conducted from time-to-time to review the selection of institutions, facilitators, training course contents, and justifications thereof and costs incurred. F. Details of the Procurement Arrangements Involving International Competition (a) Goods, Works, and Non Consulting Services 23. No ICB contracts for works are expected under this project. 85

94 Table 1: Works No. Contract (Description) Estimated Cost (US$ million) Procurement Method P-Q Domestic Preference (Yes/No) Review by Bank (Prior/Post) Expected Bid Opening Date Point sources (various packages) 11.0 NCB No No Post TBD Small Mechanized Water systems (various packages) 5.5 NCB No No Post TBD Small Towns Water Systems (various packages) Rehabilitation of Old GWCL Systems (various packages) Rehabilitation of Orphan Boreholes (various packages) 14.6 NCB No No Post* TBD 7.3 NCB No No Prior TBD 2.4 NCB No No Post* TBD Institutional Latrines (various packages) 1.5 NCB No No Post TBD House hold latrine slabs (various packages) 3.0 Shopping No No Post TBD (*) Specific contracts may be subject to prior review, as it would be indicated in the Procurement Plan 24. ICB contracts estimated to cost above US$5.0 million per contract and all direct contracting will be subject to prior review by the Bank. Table 2: Goods No. Contract (Description) Estimated Cost (US$ million) Procurement Method P-Q Domestic Preference (Yes/No) Review by Bank (Prior/Post) Expected Bid Opening Date Sector Information systems 2.7 ICB No No Prior TBD 86

95 25. ICB contracts estimated to cost above US$500,000 for goods per contract and all direct contracting will be subject to prior review by the Bank. (b) Consulting Services 26. List of consulting assignments with short-list of international firms. Table 3: Consulting Services No. 1 2 Description of Services Engineering Design and Supervision (Various packages) Technical Assistance (TA) (various packages) Estimated Cost (US$ million) Selection Method Review by Bank (Prior/Post) Expected Proposals Submission Date 4.1 QCBS Prior TBD 5.5 QCBS Post TBD 27. All contracts not subject to prior review will be post reviewed. 87

96 Annex 9: Economic and Financial Analysis GHANA: Sustainable Rural Water and Sanitation Project Introduction 1. The proposed project will support the continued implementation of the National Community Water and Sanitation Program (NCWSP) which is coordinated and facilitated by the Community Water and Sanitation Agency (CWSA). The project aims to provide safe water, improved sanitation, and hygiene services to rural communities and small towns in six regions of Ghana. 2. The economic analysis examines the investment program and the efficient resource allocation of project funds in the water and sanitation sector of small towns in Ghana. The analysis simulates with and without scenarios in which the cost and the benefits of both cases are compared. The project will be carried out in parallel with institutional reforms creating capability in the small town communities and District Assemblies (DAs) and transfer of the initiatives to the communities under a demand driven approach. 3. The investments for increasing access to improved water and sanitation are estimated at US$50 million. When completed, the project will increase water supply capacity by around 4.3 Mm3 per year, provide standpipes and private connections, rehabilitate nonperforming water distribution networks that have been transferred to communities from the Ghana Water Company Ltd. (GWCL), and improve hygiene and increase access to improved sanitation in beneficiary communities. The number of direct project beneficiaries living in the rural communities and small towns is estimated at 600,000. This population is expected to grow by three percent per year, to 869,000 people by The project will enable an expansion in the water supply to accommodate the needs of this growing population. The project will also support increased access to improved sanitation facilities, and Total Sanitation Campaigns will help beneficiary communities to realize open-defecation-free status. Water Demand and Prices 4. Communities to benefit from the project will be selected via a demand driven policy, by which communities express interest to the District Assemblies, which then prioritize the communities in their District Water and Sanitation Plans (DWSPs). The DAs will become owners of the community water supply system boreholes, pumps, tanks, pipelines and will enter into an agreement with the communities for the sustainable operation and maintenance (O&M) of the facilities. Revenue from the sale of water is expected to cover O&M costs, including rehabilitation or replacement of assets at the end of their useful life. 5. Current water consumption from improved sources in most small towns in the project areas is estimated at around 10 liters per capita per day (lpcd). Other sources of water are used for purposes other than for drinking and cooking. It is expected that with the improved systems, once the project is completed, consumption at standpipes will reach 20 lpcd and consumption in homes connected to the network will be 60 lpcd. Depending on the category in which a community falls, about twenty percent of the homes are expected to connect directly to the network. At present, water is sold to consumers at a cost of between 3 88

97 pesewas and 5 pesewas for a # 34 bucket (18 liters); it is expected that this price will also hold for the project s systems. The price of water for households with direct connection is expected to be 25 percent higher than the standpipe price. These prices will cover O&M costs and will enable the communities to accumulate funds for replacement of the capital assets in the future. Estimation of Cost of Project Interventions 6. The selection of beneficiary communities for the project is yet to be undertaken. However, the characteristics of the potential beneficiary communities are known. This is based on experience gathered by the facilitating agency, CWSA, and interaction with the Regional Coordinating Councils (RCCs) and District Assemblies. Districts in each of the beneficiary regions have prepared District Water and Sanitation Plans (DWSPs) which give the priority of the District Assembly with respect to water and sanitation. 7. The water supply systems will be based on the design guidelines 34 prepared by the CWSA. Communities have been grouped into various categories and per capita consumption is presented in the Table 1 below: Table 1: Categories, Population and Per Capita Consumption Category Small Small Towns Communities Category I Category II Category III Category IV Population 75 2,000 2,001 5,000 5,001 15,000 15,001 30,000 30,001 50,000 % SP 1 % PC 2 100% N/A stand pipes (consumption of 20lcd). 2. private connections (consumption of 60lcd) 8. Demand for small-scale industrial and commercial concerns is estimated at between 10 and 15 percent. There will be one standpipe with two outlets for a maximum number of 600 people, and the maximum distance to the standpipe shall not exceed 500 meters. One borehole fitted with a hand pump will serve 300 people. Where there are existing boreholes fitted with stand pipes in a community benefitting from a piped system, the existing boreholes will be integrated into the system design. The system will be planned for the current population, and will have the potential to expand supply to accommodate expected population growth over the next 15 years. The guidelines suggest population growth of percent per year (the rate adopted for the analysis is 3 percent per year). Investment in Water Systems 9. Information available from implementation of the Small Towns Water Supply and Sanitation Project (STWSSP) indicates that construction costs differ for water supply systems for various population ranges. Previous projects have largely focused on the needs of communities with populations of 10,000 or more in the beneficiary regions. For this project, it is expected that about 90 percent of the beneficiary communities will have populations less than 10,000. It is therefore expected that about 90 percent of the beneficiary communities will have a population less than 10,000. For communities with population less than 4,000, the 34 CWSA Design Guidelines, Updated January, 2010 (yet to be published). 89

98 project will fund simple piped systems with limited reticulation, based on decentralized raised polyethylene tanks, with each tank serving one or two standpipes. These are expected to have per capita costs of about half that of the traditional systems. 10. Relying on available information and reasonable assumptions, a water system in a town of 5,000 inhabitants will cost US$448,000 and, in general, the cost (investment) of a system is characterized by economies of scale. To embody these features, the following cost function was adopted for communities with population 5,000 and above: I = 492 x Pop 0.8 where I is investment and Pop is population of the community. and I = 246 x Pop 0.8 for communities with populations less than 5,000 based on the limited reticulation concept. Investment for communities with 2,000 to 15,000 inhabitants is reported in Table 2. The economies of scale are reflected in average investment per person decreasing from US$90 in a town of 5,000 to US$70 in a town of 15,000. For populations less than 5,000, the revised formula is for simpler mechanized systems, which reduces the per capita costs as compared to the traditional systems by 50 percent. 11. The estimates include 15 percent of the total costs for each community for consultancy services. Table 2 also reports supply of water with and without the project. 12. The estimate for point sources (boreholes fitted with hand pumps) is US$10,000 per borehole, including software, hydrogeological and geophysical investigations, drilling and drilling supervision, as shown in Table It was assumed that the population distribution among the project s towns will be approximately: 48 percent point sources with populations less than 1,200 inhabitants; 20 percent with populations between 1,200 and 5,000 inhabitants; and 32 percent with populations between 5,000 and 15,000 inhabitants. Small town piped schemes are expected to benefit 69 towns, of which 58 percent will have populations between 1,200 and 5,000 inhabitants, and 42 percent with populations between 5,000 and 15,000 inhabitants. 14. Given the project budget and the assumed distribution of communities, a total of 600,000 people are expected to be served, of which: 288,000 will be served by 1,200 boreholes fitted with hand pumps; 40 communities with a combined population of 122,000 will be served by water supply systems based on the limited reticulation concept; and 29 towns with a combined population of 190,000 will be served by traditional small towns systems (Table 5). Investment in water systems will be approximately US$47.6 million and US$18.6 million will be allocated to support improved sanitation (see Table 6 below). US$ 11.1 million shall be for Technical Assistance. 90

99 Table 2: Investment and Water Supply by Size of Community Population Investment Supply without Project Supply with Project Increment per town Project Per capita Households Total Households Total US$ US$ m3/year m3/year m3/year m3/year m3/year 2, , ,125 10,038 25,550 28,105 18,068 3, , ,775 14,053 35,770 39,347 25,295 5, , ,250 20,075 51,100 56,210 36,135 7, , ,375 30,113 76,650 84,315 54,203 10, , ,500 40, , ,420 72,270 15,000 1,078, ,750 60, , , ,405 Notes: 1. Investment in project is calculated according to the formula presented in the text. 2. Estimated demand without the project is 10 lpcd; with the project 20 lpcd at standpipes and 60 lpcd in households with direct connections (20 percent of the households in town). 3. Following CWSA Guidelines, water use in manufacturing, commercial establishments, and institutions was set at 10 percent of the consumption in households ( Total includes non-household use). Table 3: Distribution of Project Funds and Water Supply by Size of Community Population per town Investment in towns (US$) Without Water (m3) With Water (m3) Increment Number of Towns Total Population 2, ,315,046 45, , , ,215 3, ,703,499 77, , , ,479 5, ,509,317 95, ,425 1,067, ,565 7, ,716,767 45, , , ,215 10, ,559,535 20,000 80, , ,540 15, ,157,089 30, , , ,810 Total 69 21,961, ,000 1,252,680 3,507,504 2,254,824 Table 4: Investment in Point Sources Population Number Cost per Investment Population Per Capita per of borehole served (US$) borehole boreholes (US$) 300 1,200 10,000 12,000, , Table 5: Total Investment Requirements for Water Supply by Categories Water Supply Category Total Number Population Total Costs (US$) Point Sources 1, ,000 12,000,000 Limited Mechanization ,000 6,018,545 Small Towns ,000 15,942, ,000 33,961,253 Notes: 1. Civil work in water only, sanitation is not included. 2. See notes to Table 2. 91

100 15. Estimated water consumption in the project s towns, with and without the project, is presented in Table 2. It is expected that project interventions and population growth will further increase water use in the beneficiary communities. It is also expected that 10 percent of the water will be unaccounted for losses. 16. With a yearly growth of 3 percent, the population will expand by 35 percent over the next ten years, and by 56 percent over 15 years. The water systems built under the present project will accommodate this expansion. In the near future, the system will operate in conditions of under-capacity; particularly, the pumps will be activated for only 8-10 hours a day. As population expands, pumping hours will increase to a maximum of 16 hours a day. Safe yield of the boreholes, pipelines, and storage tanks will be defined in terms of potential future population, over 50 percent larger than the present number of inhabitants. 17. The direct benefit of the project is the increased provision of water to the families living in rural communities and small towns. The project s expected indirect benefits include time saved in fetching water, health improvement with higher quality water, the ability to receive water at home, and the convenient and improved hygiene of new latrines. Explicit information on the indirect benefits is not available. However, the benefits expected to accrue to households that will be connected privately to the water system may be reasonably assessed. It is expected that, once connected, these households will increase their water use from 20 lpcd to 60 lpcd. The implication is that directly connected households are willing to pay between 5 and 7 pesewas per bucket for the standpipe amount of 20 lpcd, instead of between 3 and 6 pesewas for stand pipe consumption. On average, there are about eight family members in a household in the small towns. The cost of a private connection (borne by the household), US$80-160, is small when compared to the estimated improvement in welfare. The health, social and economic benefits accruing to the households with piped connections can be assumed to be about 130 percent the benefits accruing to those obtaining water from public standpipes. Operation, Maintenance, and Cost Recovery 18. Based on the CWSA O&M guidelines, and on experience from the first set of systems under the STWSSP, annual O&M costs are expected to be between 5 and 7 percent of the construction cost (investment) of the designed water systems. It is estimated that this will increase to between 7 and 10 percent of the investment cost over the design life of a typical system. Conservatively estimated, it is assumed that annual O&M cost is 10 percent of construction cost. Table 6 reports O&M annual cost by size of town. Converted into the regular measurement unit (#34 bucket of 18 liters) and at the exchange rate of 1.45 cedis per US dollar, the O&M cost amounts to 5-7 pesewas per bucket, depending on the size of the town. 92

101 Population in town (number) Table 6: Operation, Maintenance, and Capital Cost O&M costs, per year (US$) O&M costs, per bucket (pesewas) 93 Depreciation per year (US$) Sinking Fund, per year (US$) O&M+SF, per bucket (pesewas) 2,500 21, ,221 5, ,500 37, ,541 6, ,000 51, ,968 18, ,500 64, ,946 25, ,000 77, ,411 32, ,000 89, ,417 44, Notes: 1. Exchange rate 1.45 Ghana cedis per US$. 2. Sinking fund, 20 years and 2% real interest. Yearly payment is 4.12% of asset. 19. Water systems are generally capital intensive. The small town water systems are financed by project funds provided as an IDA credit to the Government of Ghana and transferred to the DAs as grants. The prudent policy for the communities, which will be responsible for their sustainable operation and maintenance, will therefore be to establish a sinking fund in a bank or in the form of government bonds. Funds needed for the replacement of the capital items will be accumulated in the sinking fund and in line with the CWSA tariff setting guidelines. Assuming replacement after 20 years and 2 percent real rate of interest (this time saving rate), the annual charge for a sinking fund is 4.12 percent of the cost of construction. Calculated economic depreciation and sinking fund charges by town size are reported in Table 6. (The depreciation figures are given in Table 6 only for illustration and are not further referred to in the analysis.) 20. Adding sinking fund charges to O&M increases the annual cost of water by some 40 percent. As reported in Table 6, total cost will be 2 and 3 pesewas per bucket. 21. As indicated, the present price of water in most small towns for which information is available is between 3 and 5 pesewas per bucket fetched from a standpipe. It is envisaged that the price of water for households with direct connections will be 25 percent higher than for water at standpipes. Privately connected households will also pay a monthly meter charge. The CWSA has tariff setting guidelines in place which, when used, enable beneficiary communities to undertake all operation and maintenance activities as well as expansion of the systems. The components of the tariff are as follows: (i) All water production expenses (ii) All distribution expenses (iii) Routine maintenance and other contracts (iv) Repair work (by staff and private maintenance contracts) (v) Water quality monitoring at plant level (vi) Tariff collection expenses (vendors) (up to 20% of total tariff) (vii) Replacement cost (20% of i-vi total) (viii) Rehabilitation and Expansion (5% of i-vi total ) (ix) Sanitation Fund (8% of i-vi total) (x) Contingency (2% of i-vi total). 22. The portion of the tariff for major rehabilitation, expansion, and replacement shall be invested to add value and safeguard against depreciation.

102 23. Individual Water and Sanitation Development Boards (WSDBs) (for small towns with a population above 2,000) and Water and Sanitation (WATSAN) Committees (for small communities with a population less than 2,000) are given training on tariff setting in accordance with national guidelines prepared by the CWSA. The above method when applied to water supply systems that operate on electricity from the national grid gives the range of 3 to 5 pesewas per 18 liter bucket. Systems operating on diesel generator and systems with treatment units have a higher cost per bucket of between 6 and 10 pesewas depending on the treatment systems in place and the cost of diesel. 24. With these price paid for water, costs including transfers to sinking funds are easily covered in all town sizes considered. 25. Many small town communities, including those that do not have as yet improved water systems, are collecting fees for water at standpipes and hand-pumps. The amounts collected are generally between 2 and 5 pesewas. The allocation of the accumulated funds is not well documented, but some communities are using the surplus revenue from water (after covering current cost and vendor pay) for expansion of the system and to undertake activities that promote community hygiene. In the past, the accumulated funds were used for public projects such as schools or communal events. In other words, the communities saw water as a tax base. 26. With an average price of 5 pesewas per bucket, the communities will have adequate revenue which should be placed in the rehabilitation and expansion fund, as well as the sanitation fund, to be used for the required purposes. 27. DAs and communities foregoing water revenue or using it for other public projects risk the long-term sustainability of their water supply. These issues will be explained to the District Assembly Councils and to Water and Sanitation Boards of the small towns, and DAs made accountable for covering the necessary O&M costs not recovered through water revenues. 28. Three qualifications have been used in making the estimates for the analysis: (i) the information used to support the cost assumptions for construction and operation of the water systems in this analysis was based on towns connected to the electric grid. Towns in remote areas will have to rely on energy provided by diesel engines. Cost data for diesel energy is not, however, readily available; (ii) a few of the towns may already have modern water supply systems and the task of project in these places will be limited to rehabilitation. In some instances, rehabilitation costs are about the same as that for new systems. This is because of the need to locate and change existing pipes (e.g. AC pipes) which are in most cases not compatible with the new system. System leakages on rehabilitated schemes are also relatively high leading to high O&M costs; (iii) inflation may erode the real value of the revenue collected for water in the towns. The Water and Sanitation Development Boards will have to be aware of this danger and guided in the adjustment of prices to inflation in the components of their cost. Sanitation 29. The sanitation component of the project will look at new and innovative measures to increase sanitation coverage in the beneficiary districts. Where necessary, district wide 94

103 sanitation campaigns will be undertaken with the aim of getting communities to be free of open defecation. Software support will be provided for community mobilization and hygiene promotion for Total Sanitation Campaigns. The project will provide the following: (i) Support for software activities for community mobilization and hygiene promotion for total sanitation campaigns. (ii) Support for the construction of sanitation markets (SANIMART) in project communities. (iii) Support for the development of information, education, and communication (IEC) tools and for hand washing campaigns. (iv) Support to relatively poor households for household latrine construction. (v) Construction of institutional latrines. (vi) Training of latrine artisans, communities and DAs on integrated hygiene and sanitation practices, and social marketing strategies. 30. Beneficiary households shall select latrines of their choice based on their level of current sanitation facilities and choices from the sanitation ladder. All sanitation facilities shall be designed and constructed to ensure that they are relatively free from flies and odors, they safely dispose of human excreta, and are designed and constructed to ensure structural stability during the life of the latrine to prevent collapse. Up to 3 institutional latrines shall be provided per small town. Table 7: Sanitation and HES Investments Category Total Costs HES and CLTS Promotion 8,400,000 Institutional Latrines 1,300,000 Support for Household Latrines 2,900,000 Hand Washing & Development of IEC Materials 1,100,000 Setting up of Permanent SANIMARTs 1,300,000 Training of Artisans and Community 1,600,000 Total Cost 16,600, The funds allocated for sanitation, US$16.6 million, are to be used in the promotion of good hygiene and sanitation practices, support for the construction of latrines in private homes, and the construction of institutional latrines in selected schools and clinics. Hygiene Education and Sanitation (HES) consultants shall be engaged in each region to promote active sanitation campaigns aimed at behavioral change and to bring about Open Defecation Free (ODF) status in the communities. The HES consultants shall advise on the need to support needy individuals with core components of a household latrine (mainly slabs). The hygiene and sanitation campaigns and support in selected communities will be aimed at providing adequate and appropriate sanitation facilities for up to 600,000 people. Summary of Cost and Net Benefit 32. Table 8 reports the distribution of the project budget over the coming five years (only two quarters are presented for 2010) and 15-year projections of population and water supply. The assumptions underlying the construction of the table are detailed in its Notes. By these predictions, 806,000 people will be served by the project s water systems in the year 95

104 2020 and 935,000 in These people will be provided, in the last year in the table, with close to 9 Mm3 of water, an increment of 6.2 Mm3 over what they would have received without the project. 33. The cost-benefit analysis for the 15-year period is reported in Table 9. Ten percent for physical and price contingency was added to the cost of investment. 34. As indicated earlier, the systems constructed under the project will have the capacity to supply the growing population for the 15 coming years. The only cost component to increase with population and water supply is energy. The share of energy in O&M costs is 25 percent. Hence with population and water growing at the rate of 3 percent per year, O&M cost has to grow at 0.75 percent per year to account for expanding use of energy. Conservatively, O&M was increased by 1.5 percent per year. 35. Recurrent costs were introduced in Table 9 under two alternatives, only O&M or O&M plus charges for sinking funds (O&M+SF). 36. The benefits presented in Table 9 represent the direct benefits and the assessed indirect benefits of the project; that is, sale of water (incremental, due to the project) and the consumer surplus (about 130 percent, for households with private connections, over that which is paid at the standpipe) as calculated above. And here again, to adopt a conservative approach, only a half of the calculated value of the consumer surplus was included among the benefits in the table. It is important to reiterate that indirect benefits in time saved and improved health are not represented among the monetary benefits in the table. 37. The present value of the net benefits is US$31.6 million without charges for sinking funds and US$26.5 million with charges. The corresponding Internal Rates of Return are 22.2 and 20.6 percent. 38. A sensitivity analysis is presented in Table 10. The baseline column is taken from Table 9. The changes examined in the table are a reduction by 15 percent, or an increase of 15 percent, in the following cost and benefit items: O&M and SF, water sales, consumer surplus, and total investment cost. The internal rate of return remained above 17 percent in all the alternatives considered in Table 10 and the present value (calculated at 12 percent) is positive for all the above-mentioned alternatives. These findings thus augment the economic robustness of the project under the analyzed conditions. Financial Summary 39. The financial flows of the project are presented in Table 11. Outflows are investment and O&M (plus contributions to sinking funds) and, in the last five years of period in the table (from 2020 to 2025), repayment of the IDA loan (equal annual repayments of a US$75 million loan, at 2 percent interest, with a 10-year grace period). The inflows consist mainly of World Bank finance and the sale of (incremental) water. For the fifteen years in the table, the present value of the financial inflow (at 12 percent interest) exceeds the outflow by US$23.3 million. 96

105 Table 8: Fifteen-Year Projection of Investment, Population and Water Project year Calendar year Investmen t cost (US$ 000) Civil work (water) 3,00 0 6,50 0 9, ,0 00 9,00 0 9,10 0 Integrated 2,50 HES 0 Inst. Strengthen ing 500 3,50 0 1,20 0 4,50 0 2,30 0 4,00 0 2,60 0 2,60 0 2,50 0 1,50 0 2,00 0 6, , , , ,5 50 5,80 0 Total Percent of project Accumulat ed 6, , , , , ,3 00 Accumulat ed percent of project Population and water Population ( 000) Water supply ( 000 m3) Without project 2,40 9 2,43 3 2,45 7 2,48 2 2,50 7 2,53 2 2,55 7 2,58 3 2,60 9 2,63 5 2,66 1 2,68 8 2,71 5 2,74 2 2,76 9 2,79 7 With project Increment 2,40 9 3, ,14 3 1,68 6 5,01 1 2,52 9 5,87 8 3,37 1 6,74 5 4,21 3 6,94 7 4,39 0 Notes: 1. The work on the project is expected to commence in the second quarter of 2010, with heavy investment in Population increase is at 3 percent per year. 3. Reflecting supply constraints, it is assumed that without project water provision will increase by 1 percent per year (water shortage will intensify). 4. It is assumed that the project potential will be fully realized in 2015, supply in this year will be 20 lpcd to 80 percent of the population and 60 lpcd for 20 percent (and additional 10 percent for non-household consumption). With-project supply between 2010 and 2015 was interpolated linearly. 5. Due to unaccounted water losses, production is expected to exceed supply by 10 percent. 7,15 6 4,57 3 7,37 0 4,76 2 7,59 2 4,95 7 7,81 9 5,15 8 8,05 4 5,36 6 8,29 5 5,58 1 8,54 4 5,80 3 8,80 1 6,03 2 9,06 5 6,

106 Table 9: Cost-Benefit Analysis (US$ 000) Project year Calendar year COST Total Investment cost 6,000 11,200 15,800 17,600 14,100 12,600 77,300 Physical contingencies (10%) ,730 Total investment cost 6,600 12,320 17,380 19,360 15,510 13,860 85,030 Operation and maintenance O&M ,400 1,820 2,275 2,730 2,757 2,785 2,813 2,841 2,869 2,898 2,927 2,956 2,986 O&M+SF ,928 2,506 3,133 3,759 3,797 3,835 3,873 3,912 3,951 3,990 4,030 4,071 4,111 Total cost (O&M) 6,600 12,787 18,313 20,760 17,330 16,135 2,730 2,757 2,785 2,813 2,841 2,869 2,898 2,927 2,956 2,986 Total cost (O&M+SF) 6,600 12,963 18,665 21,288 18,016 16,993 3,759 3,797 3,835 3,873 3,912 3,951 3,990 4,030 4,071 4,111 BENEFITS Incremental water sale 0 1,602 3,203 4,804 6,405 8,005 8,341 8,689 9,047 9,418 9,801 10,196 10,604 11,025 11,460 11,909 Consumer surplus 0 2,082 4,164 6,246 8,326 10,406 10,844 11,295 11,762 12,243 12,741 13,255 13,785 14,333 14,898 15,482 Total benefits 0 3,684 7,368 11,050 14,731 18,411 19,185 19,984 20,809 21,662 22,542 23,450 24,389 25,358 26,358 27,391 B - C (O&M) -6,600-9,102 B - C (O&M+SF) -6,600-9,278-10,946-9,710-2,599 2,276 16,455 17,227 18,024 18,849 19,701 20,581 21,491 22,431 23,402 24, ,297 10,238-3,285 1,419 15,426 16,187 16,974 17,788 18,630 19,499 20,398 21,327 22,287 23,280 IRR (O&M) 22.20% IRR (O&M+SF) 20.58% PV net B (O&M) 12% 31, PV net B (O&M+SF) 12% 26, Table 10: Sensitivity Analysis Baseline O&M -15% O&M+15% W Sale - 15% W Sale + 15% CS - 15% CS + 15% Cost - 15% Cost + 15% IRR O&M 27.49% 33.12% 21.29% 19.95% 34.81% 24.33% 30.60% 32.70% 23.24% O&M + SF 25.56% 28.55% 28.76% 17.91% 32.91% 22.38% 28.69% 30.88% 21.20% PV(US$'000) O&M 42,855 61,622 17,906 21,199 64,511 33,675 52,036 51,621 34,089 O&M + SF 37,284 46,379 46,666 15,594 58,940 28,104 46,464 46,886 27,682 98

107 Table 11: Financial Analysis (15 years, US$ 000) Project year Calendar year Cost Investment 6,000 11,200 15,800 17,600 14,100 12,600 O&M+SF ,285 1,928 2,506 3,133 3,759 3,797 3,835 3,873 3,912 3,951 3,990 4,030 4,071 4,111 Total cost 6,000 11,843 17,085 19,528 16,606 15,733 3,759 3,797 3,835 3,873 3,912 3,951 3,990 4,030 4,071 4,111 Finance Total Communities and DAs Government of Ghana World Bank 6,000 11,200 15,800 17,600 14,100 12,600 77,300 Total finance 6,000 11,200 15,800 17,600 14,100 12,600 77,300 Water Without project ( 000 m3) 2,409 2,433 2,457 2,482 2,507 2,532 2,557 2,583 2,609 2,635 2,661 2,688 2,715 2,742 2,769 2,797 With project ( 000) 2,409 3,276 4,143 5,011 5,878 6,745 6,947 7,156 7,370 7,592 7,819 8,054 8,295 8,544 8,801 9,065 Increment ( 000 m3) ,686 2,529 3,371 4,213 4,390 4,573 4,762 4,957 5,158 5,366 5,581 5,803 6,032 6,268 Incremental water sales 0 1,602 3,203 4,804 6,405 8,005 8,341 8,689 9,047 9,418 9,801 10,196 10,604 11,025 11,460 11,909 IDA loan payment 3,349 3,349 3,349 3,349 3,349 3,349 Net financial flow ,918 2,877 3,899 4,872 4,582 4,892 5,213 5,545 5,889 6,245 6,613 6,995 7,389 7,798 PV of outlays 12% 81,034 PV of inflow 12% 104,312 99

108 Annex 10: Social and Environmental Safeguards GHANA: Sustainable Rural Water and Sanitation Services Introduction 1. From an environmental and social safeguards point of view, this project is a Category B project. This is because the environmental and social impacts are expected to be minimal, site-specific and manageable to an accepted level. There are two World Bank safeguards policies applicable to the project: Environmental Assessment (OP 4.01) and Involuntary Resettlement (OP 4.12). For these triggered policies, the Government of Ghana has prepared a resettlement policy framework (RPF) and environmental and social management framework (ESMF). These documents have been disclosed in country and at the World Bank s Infoshop on April 9, 2010 and April 16, 2010, respectively. Social Safeguards Issues and Impact 2. The impacts from the project are expected to be minimal and manageable to an acceptable level. Nonetheless, since the project triggers the OP.4.12, an RPF has been developed by the GOG. The RPF sets out the legal and administrative framework which includes the system of land ownership and tenures system and the socio-economic characteristics of beneficiary districts. It also details the consultation processes, the eligibility criteria and the methodology for valuation of assets and a clear entitlement policy and compensation payment processes. The consultations held as part of the data collection for the development of the RPF set the stage for opening up the project preparation activities to potential beneficiaries and have their input into the design. This process of consultation and participation will be an integral part of the project s implementation strategy beyond its demand-driven approach which strengthens the case for sustainability and ownership. The RPF has sections on organizational arrangements for implementation and monitoring and a template for the design of a resettlement action plan (RAP) should this become necessary prior to specific subproject implementation. Such an RAP or abbreviated RAP (dependent on the number of project affected people) will clearly spell out the key resettlement issues, impacts and beneficiaries of different resettlement packages appropriate for the different categories of affectations. In addition, the RPF outlines measures for building the capacity of officials required for implementing the RPF or a possible RAP. A RAP will be based on the principles and guidelines set in the RPF and will only be required when potential impacts become actualized prior to or during implementation. 3. The ESMF on its part addresses the national legal, policy, and administrative framework and the World Bank s requirements on safeguards and description of environmental and social baseline conditions. The ESMF also discusses the potential social and environmental impact and the screening processes for identifying these impacts. It outlines mitigation and safeguard measures and principles, implementation and management arrangements to ensure an aversion of impacts or minimization before, during and after subproject implementation. 100

109 Negative Impact 4. On the few negative impacts, because it is demand driven, some communities may not be able to cope with the required processes and may not benefit. Also at the community level, those who may be temporary relocated to allow for construction work may miss out, whilst others may have permanent resettlement. Given these and other impacts identified in the Resettlement Policy Framework (RPF), there are outlined mitigation measures to address such possible negative impacts and maximize the positive impact of the project. There is also the likelihood for political interference in the selection of the communities. However, the selection and approval processes and the transparency mechanisms should be able to mitigate or avoid such possibilities. The possibility for suspicion from a group of people regarding funds accruing to the systems from the management of the facilities is real. The establishment of accountable and transparent mechanisms will help address such possibilities. Capacity Building and Safeguards Responsibility 5. Beneficiaries and project staff will be able to acquire new sets of skills that could be applied to other areas of their work and community development beyond the project. Other capacity building activities will centre on the social safeguards particularly the RPF and where applicable the RAP. The RPF clearly marks these out with costing which has been factored into the project estimates. As part of the revision for the PIM, there will be a clear outline of safeguards responsibilities from the Community (through the Water Boards) to the DAs and the RCC levels) who will be working with the contractors and consultants. In addition, the principle, entitlement matrix and grievance redress mechanism on one hand, and the specific roles and responsibilities of the respective safeguards focal persons will be included in the PIM. Environmental Issues and Impact 6. There are two types of possible impacts of the project: (a) possible impacts from Component A, which finances the construction and rehabilitation of water supply systems such as manual boreholes, mechanized boreholes, and the rehabilitation of water supply systems; and (b) possible impacts from Component B, which finances sanitation facilities such as household latrines and institutional latrines. Possible Negative Environmental Impacts from Components A and B: 7. The ESMF identified the negative impacts associated with the implementation of the Rural Water and Sanitation Services project. Overall, there are a few negative impacts associated with borehole construction. Minor impacts include air and dust emissions, noise and vibration, open pits/trenches, disposal of construction waste and public safety/health concerns. Other, more moderate impacts include interruption of natural drainage/hydrological patterns, particularly if several boreholes are built without understanding groundwater flows and storage patterns; water contamination; improper waste water disposal (boreholes) and sludge/fecal matter disposal (latrines). 8. Mitigation measures include provisions for minimizing ground clearance, proper construction of borehole soakaways for effective drainage in order to prevent accumulation of stagnant water; appropriate siting of boreholes and latrines to avoid both water contamination 101

110 and undue pressure on the aquifers; and community involvement in borehole and latrine management and in leak detection (see ESMF for fuller details). Mitigation measures are enforced through contractor performance monitoring and evaluation with participatory supervision from the CWSA who will appoint environmental and social coordinators at its headquarters and regional offices to monitor the overall implementation of the ESMF. The regional CWSA officers will liaise with the EPA for submission of the screening forms, inspection and other processes to ensure that safeguards are properly implemented. The District Water and Sanitation teams have Environmental Health Officers whose responsibility it is to ensure that proper clearances and approvals are obtained for sanitation subprojects and to ensure that mitigation measures for the subprojects are implemented adequately. 9. In order to ensure that the contractor is fully aware and prepared for the sustainable management of health, safety, and environmental aspects of the contract, the Contractor will be required to fill out a screening checklist and, if necessary, a management plan for the specific works to be executed under his/her contract. This will be covered under his cost of compliance with safeguards in the Bill of Quantities. The Environment and Social coordinators will also receive monitoring information from the contractor and regular monitoring and reporting will be carried out by them on a consistent basis. Capacity Building 10. The contractor may provide, under the terms of his contract, sufficient training to his personnel to ensure that they are all aware of the general conditions and safeguard issues in the ESMF. The contractor is responsible for having sufficient capacity in terms of the number of staff trained in natural habitat protection, forestry/agro-forestry, water pollution and contamination and environment. They will have general knowledge on environmental assessment and management and will be able to undertake regular self-monitoring and evaluation of the project. The contractors would however need to be trained on how to implement the screening checklist, on the permit processes and conditions, on how to fulfill mitigation commitments and permit conditions, reporting requirements, and compliance checklists. In addition, training would be necessary for the DAs, particularly the Environment Health Officers to enable them to implement the screening checklist and to do the requisite monitoring and reporting. The cost of this training, securing of environmental permits, mitigation, and monitoring are included in the overall project costs. 102

111 Annex 11: Project Preparation and Supervision GHANA: Sustainable Rural Water and Sanitation Project Planned Actual PCN review 12/15/09 Initial PID to PIC 3/29/10 Initial ISDS to PIC 3/29/10 Appraisal 4/12/10 Negotiations 5/20/10 Board/RVP approval 6/22/10 Planned date of effectiveness 8/31/10 Planned date of mid-term review 12/1/12 Planned closing date 6/30/16 Key institutions responsible for preparation of the project: Community Water and Sanitation Agency and International Development Association Bank staff and consultants who worked on the project included: Name Title Unit Ventura Bengoechea TTL AFTUW Emmanuel Nkrumah Water and Sanitation Spec. AFTUW C. Ajith Kumar Sanitation Specialist ETWSA Robert DeGraft-Hansen Financial Management Spec. AFTFM Baba Imoru Abdulai Procurement Specialist AFTPC Edith Ruguru Mwenda Senior Counsel LEGAF Rajiv Sondhi Senior Finance Officer CTRFC Beatrix Allah-Mensah Social Development Spec. AFTCS Nyaneba Nkrumah Sr. Nat. Resourc. Mgmt Spec AFTEN Anders Jenssen M&E Specialist AFTRL Geraldine Wilson Team Assistant AFCW1 Ernestina Attafuah Senior Program Assistant AFTUW Saadia Bobtoya Consultant AFCW1 Harold Esseku Consultant AFCW1 Christophe Prevost Peer Reviewer ETWSA Oscar Alvarado Peer Reviewer SASDU Elizabeth Kleemeier Peer Reviewer ETWWA Miguel Vargas-Ramirez Peer Reviewer LCSUW Bank funds expended through May 15, 2010 on project preparation: 1. Bank resources: US$90, Trust funds: N/A 3. Total: US$90,200 Estimated Approval and Supervision costs: Remaining costs to approval: US$10,000 Estimated annual supervision costs: US$75,

112 Annex 12: Documents in the Project File GHANA: Sustainable Rural Water and Sanitation Project 1. Ayee, J. R. A. (2003) Towards Effective and Accountable Local Government in Ghana, Critical Perspectives No.13, Ghana Centre for Democratic Development, March Bakalian, A and Wakeman, W (eds.) (2009) Post-Construction Support and Sustainability in Community-Managed Rural Water Supply; Case Studies in Peru, Bolivia, and Ghana, Water Sector Board Discussion Paper Series, Paper No. 4, June World Bank-Netherlands Water Partnership. 3. Community Water and Sanitation Agency (2010) Environmental and Social Management Framework (ESMF) for the Sustainable Rural Water and Sanitation Project (Draft Report) 4. Community Water and Sanitation Agency (2010) Resettlement Policy Framework (RPF) for the Sustainable Rural Water and Sanitation Project (Draft Report) 5. Community Water and Sanitation Agency CWSA (2009) 6. European Union-EU (2009) Making it Work: Sector Wide Approach Briefing Note. 2 nd Africa Water Week 9-13 November 2009-EU Water initiative Africa Working Group (EUWI-AWG) Session on SWAps 7. Ghana Local Government Act 1993 (Act 462) 8. International Water and Sanitation Centre-IRC (2009) Sustainable Service at Scale; A Multi-Country Learning Project to Improve Rural Water Service Delivery-Project Summary 9. Murphy, H. M., McBean, E. A, and Farahbakhsh, K. (2009) Appropriate Technology A Comprehensive Approach for Water and Sanitation in the Developing World. Technology in Society 31: MWRWH Draft Concept Paper for SWAp Action-Oriented Workshops ( MWRWH/WSMP (2009) The Compilation of Information on Water And Sanitation Sector Investments In Ghana 12. National Development Planning Commission-NDPC (2009) National Medium-Term Development Policy Framework (Draft) 13. The National Water Policy (2007) WHO/UNICEF JMP (2010) Can Ghana Meet The MDG Targets in Water Supply and Sanitation? A Country Status Overview (Zero Draft) 104

113 15. World Bank (2004) Memorandum of the President of the International Development Association and The International Finance Corporation to the Executive Directors on a Country Assistance Strategy of the World Bank Group for the Republic of Ghana, February World Bank (2006) International Development Association and International Finance Corporation Country Assistance Strategy Progress Report for the Republic of Ghana for the Period of FY04-FY-07, March /Rendered/PDF/36127.pdf 17. World Bank (2007) International Development Association Country Assistance Strategy for Ghana CAS. 18. World Bank (2010) Project Concept Note: Sustainable Rural Water and Sanitation Project (SRWSP) 105

114 Annex 13: Statement of Loans and Credits Ghana: Sustainable Rural Water and Sanitation Project Original Amount in US$ Millions Difference between expected and actual disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev d P GH-EGPRC (fast-track) P GH-Transport Project SIL (FY09) P GH-Energy Dev & Access SIL (FY08) P GH-Nut. & Malaria Ctrl Child Surv (FY08) P GH-Health Insurance Project (FY08) P YGH-eGhana SIL (FY07) P GH-Urban Transport Project SIL (FY07) P GH-Economic Management CB P GH-Multi-Sect HIV/AIDS - M-SHAP (FY06) P MSME Initiative P GH-Com Based Rural Dev (FY05) P GH-Small Towns Water Sply & Sanit (FY05) P GH-Urban Water SIL (FY05) P GH Land Administration (FY04) P GH-Urban Env Sanitation 2 ( FY04) P GH-Edu Sec SIL (FY04) Total: ,

115 GHANA STATEMENT OF IFC s Held and Disbursed Portfolio In Millions of US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic AAIL AEF NCS AEF PTS AEF Shangri-la AEF Tacks Farms Barclays Bnk GHA CAL Bank Ltd Diamond Cement ELAC GHANAL Newmont Ghana Scancom School Fin Facil Total portfolio: Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic Scancom Takoradi II Total pending commitment:

116 Annex 14: Sector Wide Approach (SWAP) Ghana: Sustainable Rural Water and Sanitation Project Rationale 1. The Water and Sanitation Sector of Ghana has achieved key milestones over the last few years. Prominent amongst these are the enactment of the National Water Policy (NWP) in 2007; the establishment of a Water Directorate (WD) within the civil service structure of the Ministry of Water Resources Works and Housing (MWRWH) in 2008, the development of Strategic Investment Plans (SIPs) for Rural Water and Sanitation and Urban Water, respectively, and the development of District Environmental Sanitation Strategy and Action Plans (DESSAPs). Despite these achievements, the sector is still facing significant institutional challenges due to its inherent complexity. 2. The water and sanitation sector has three distinct institutional sub-divisions under the MWRWH s WD: Urban Water Supply (Ghana Water Company Limited-GWCL); Water Resources Management (Water Resources Commission-WRC) and Rural Water and Related Sanitation (Community Water and Sanitation Agency-CWSA). In regards to decentralization and management, WRC s approach has been the establishment of River Basins, and the set up of Boards of stakeholders, comprising representatives from all the District Assemblies (DAs), within the catchment area of the basin. On the urban supply side, decentralization is basically at the regional level by means of GWCL s regional offices. CWSA, on the other hand, is set up under the principles of decentralized water management embedded in the framework of the National Community Water and Sanitation Program (NCWSP). This Program was adopted to improve the delivery of water and sanitation services at the community grassroots. In addition to its regional offices, CWSA s decentralization model includes a link with District Water and Sanitation Teams (DWSTs now being incorporated into the District Works Departments) as the technical arm of each DA, as well as the establishment of Water and Sanitation Committees (WATSAN Committees) and Water and Sanitation Development Boards (WSDBs) at the community and district level. 3. The Ministry of Health (MoH) and Ministry of Local Government and Rural Development (MLGRD) are also key stakeholders in the rural water and sanitation sector due to their involvement in the promotion and management of sanitation and environmental health services. The MLGRD has an Environmental Health and Sanitation Directorate (EHSD), which provides leadership in the establishment of Environmental Health and Sanitation (EHS) policies and programs, and the Local Government Services Unit which oversees the provision of services. 4. Amidst the myriad of interests and institutional mechanisms in the water and sanitation sector there is a lack of clear demarcation and/or the existence of overlaps/conflicts in regards to the responsibilities of the different ministries and agencies within the sector. This has led to fragmentation and duplication of efforts, high transaction costs, poor monitoring and evaluation, low effectiveness, and overall, 108

117 unsatisfactory performance in the efficient and sustainable operation and maintenance of water and sanitation services. This problem is further exacerbated by the administrative burden of multiple donor systems and requirements. 5. It is in this light that the Government of Ghana, in collaboration with Development Partners and other relevant stakeholders in the Sector has endorsed a Sector Wide Approach (SWAp) in the water and sanitation sector as a needed step to ensuring a more holistic, coordinated, harmonized and results-oriented approach to the management of the sector and for the attraction of the much needed financial and human resources. Uganda, Malawi and Mozambique offer good examples of countries that have taken the lead in the implementation of SWAp in their water and sanitation sectors. 6. The SWAp Model 7. The SWAp model is based on the need for a strategic institutional framework that will harmonize operations by providing a common vision and priorities for the sector. It is based on a National Water Sector Policy and the vision of a shared sector expenditure program through which all funding to the sector would be eventually channeled. An objective of the SWAp would be the harmonization of certain operational aspects such as individual requirements, supervision missions, financial management systems and agency audits in order to achieve cost effectiveness and efficiency of services as well as the sustainability of interventions. 8. A key feature of SWAp is government ownership and leadership in partnership with, private sector, development partners and other key stakeholders within the sector. Thus, to move this agenda forward, the MWRWH (through the Water Directorate) is currently spearheading the institution of a sector-wide coordination framework (SWAp Road Map) covering the three major components of the sector, in collaboration with relevant stakeholders. The SWAp Roadmap/Work plan outlines critical next steps to be taken in order to move SWAp into action. A series of action-oriented workshops have therefore been planned to bring key stakeholders in the water and sanitation sector together to work towards the design, implementation and institutionalization of SWAp in Ghana. The first SWAp introductory workshop and a subsequent meeting to draft a Code of Conduct have already been held in Accra in February 2010 and April 2010, respectively. Plans are underway towards the organization of other follow-up activities to carry the SWAp agenda forward. SWAp Road Map (Major Milestones) 1. Strengthening the capacity (human and financial) of the Water Directorate in order for it to effectively lead the institutionalization and implementation of a SWAp; 2. Agreement on a Code of Conduct (and eventual MOU) for all those working in the Water and Sanitation Sector in Ghana; 109

118 3. Development of a sector coordination mechanism at the national, regional and district levels; 4. Development of Terms of Reference (TORs) and execution of a comprehensive assessment of the sector 5. The development of a comprehensive sector development plan with a budget which is annually linked to the government budget process; 6. Agreement on Possible Financing Options for the SWAp; 7. Development of a sustainable common Monitoring and Evaluation (M&E) System for the Water and Sanitation Sector as a whole. 8. Development/revision of harmonized sector operational guidelines Workshop Themes i. SWAp Road Map Introductory Workshop ii. Workshop to Agree on a Code of Conduct (and eventual MOU) of the SWAp; iii. Workshop to Agree on a Comprehensive Sector Wide Development Action Plan iv. Workshop to Discuss the Implementation of a Comprehensive Monitoring and Evaluation System for the SWAp v. Workshop to Discuss and Agree on Procurement Principles and Guidelines under the SWAp vi. Workshop to Discuss Ways to Support Decentralization under the SWAp; vii. Workshop to Agree on Various Financing Options for the SWAp; and viii. Any Other Workshops Required for Successful SWAp Road Map Implementation. 110

119 Annex 15: Country at a Glance Ghana: Sustainable Rural Water and Sanitation Project Ghana at a glance 12/9/09 Sub- POVERTY and SOCIAL Saharan Low- Ghana Africa income 2008 Population, mid-year (millions) GNI per capita (Atlas method, US$) 630 1, GNI (Atlas method, US$ billions) Development diamond* Life expectancy Average annual growth, Population (%) Labor force (%) M ost recent estimate (latest year available, ) Poverty (% of population below national poverty line) Urban population (% of total population) Life expectancy at birth (years) Infant mortality (per 1,000 live births) Child malnutrition (% of children under 5) Access to an improved water source (% of population) Literacy (% of population age 15+) Gross primary enrollment (% of school-age population) M ale Female KEY ECONOMIC RATIOS and LONG-TERM TRENDS GDP (US$ billions) Gross capital formation/gdp Exports of goods and services/gdp Gross domestic savings/gdp Gross national savings/gdp Current account balance/gdp Interest payments/gdp Total debt/gdp Total debt service/exports Present value of debt/gdp Present value of debt/exports (average annual growth) GDP GDP per capita Exports of goods and services GNI per capita Access to improved water source Ghana Economic ratios* Domestic savings Ghana Trade Indebtedness Gross primary enrollment Low-income group Capital formation Low-income group STRUCTURE of the ECONOM Y (% of GDP) Agriculture Industry M anufacturing Services Household final consumption expenditure General gov't final consumption expenditure Imports of goods and services Growth of capital and GDP (%) GCF GDP (average annual growth) A griculture Industry M anufacturing Services Household final consumption expenditure General gov't final consumption expenditure Gross capital formation Imports of goods and services Growth of exports and imports (%) Exports Imports Note: 2008 data are preliminary estimates. This table was produced from the Development Economics LDB database. * The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete. 111

120 Ghana PRICES and GOVERNMENT FINANCE Domestic prices (% change) Consumer prices Implicit GDP deflator Government finance (% of GDP, includes current grants) Current revenue Current budget balance Overall surplus/deficit Inflation (%) GDP deflator CPI TRADE (US$ millions) Total exports (fob) 881 2,091 4,172 5,270 Cocoa , Timber M anufactures Total imports (cif) 1,089 3,207 8,066 10,269 Food Fuel and energy Capital goods 489 1,665 1,648 1,791 Export price index (2000=100) Import price index (2000=100) Terms of trade (2000=100) Export and import levels (US$ mill.) 12,000 9,000 6,000 3, Exports Imports BALANCE of PAYMENTS (US$ millions) Exports of goods and services 944 2,559 6,004 7,071 Imports of goods and services 1,250 3,519 10,065 12,569 Resource balance ,061-5,498 Net income Net current transfers ,833 2,900 Current account balance ,366-2,856 Financing items (net) ,671 3,273 Changes in net reserves Memo: Reserves including gold (US$ millions).. 0 2,396 2,753 Conversion rate (DEC, local/us$) 2.02E Current account balance to GDP (%) EXTERNAL DEBT and RESOURCE FLOWS (US$ millions) Total debt outstanding and disbursed 3,056 6,311 4,463 4,970 IB RD IDA 876 2,962 1,087 1,330 Total debt service IB RD IDA Composition of net resource flows Official grants Official creditors Private creditors Foreign direct investment (net inflows) ,112 Portfolio equity (net inflows) World Bank program Commitments Disbursements Principal repayments Net flows Interest payments Net transfers Composition of 2008 debt (US$ mill.) A - IBRD B - IDA C - IMF G: 1,356 F: 1,352 D - Other multilateral E: 238 B: 1,330 C: 162 D: 532 E - Bilateral F - Private G - Short-term Note: This table was produced from the Development Economics LDB database. 12/9/09 112

121 Annex 16: Map Ghana: Sustainable Rural Water and Sanitation Project 113