Document of The World Bank FOR OFFICIAL USE ONLY PROJECT PAPER ON A PROPOSED ADDITIONAL CREDIT

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Human Development 1 Eastern Africa 2 Africa Region Document of The World Bank FOR OFFICIAL USE ONLY PROJECT PAPER ON A PROPOSED ADDITIONAL CREDIT IN THE AMOUNT OF SDR 35 MILLION (US$55.0 MILLION EQUIVALENT) TO THE REPUBLIC OF KENYA FOR A TOTAL WAR AGAINST HIV AND AIDS (TOWA) PROJECT NOVEMBER 18, 2010 Report No: KE 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 October 2010) Currency Unit = Kenya Shilling K.Sh.80 = US$1 US$1.57 = SDR 1 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS ACU AIDS AMREF ARV BCC CACC CBO COBPAR CFP CPS CQS CSO CSW CVA DFID DTC EoI FBO FM FMA FMR GHAP GAC GFATM GLIA HBC HIV ICB ICC ICR ICVA IDA IDU IEG AIDS Control Unit Acquired Immune Deficiency Syndrome African Medical and Research Foundation Anti-retroviral Therapy Behavior Change Communication Constituency AIDS Control Committee Community-Based Organization Community-Based Program Activity Reporting Call-For-Proposal Country Partnership Strategy Consultant Qualifications Civil Society Organizations Commercial Sex Worker Compliance Verification Agency Department for International Development (UK) District Technical Committee Expression of Interest Faith-Based Organization Financial Management Financial Management Agent Financial Monitoring Report Global HIV and AIDS Program Governance and Anti-Corruption Global Fund to Fight HIV and AIDS, TB and Malaria Great Lakes Initiative on HIV and AIDS Home-Based Care Human Immuno-Deficiency Virus International Competitive Bidding Inter-agency Coordinating Committee Implementation Completion Report Independent Compliance Verification Agency International Development Association Intravenous Drug Users Independent Evaluation Group

3 IP ISDS JAPR JFA KDHS KEMSA KENAO KHADREP KNASP LLITN MDG M&E MSM MTEF NACC NASCOP NCB NGO NLI OVC PA PCN PDO PEPFAR PSI PLHIV PMA PMTCT PSI PWC QBS QCBS RBM RfP SBD SIDA SOE SSS STD STI SWAp TB ToR TOWA UNAIDS UNFPA Indigenous People Integrated Safeguards Data Sheet Joint HIV and AIDS Program Review Joint Financing Agreement Kenya Demographic and Health Survey Kenya Medical Supplies Agency Kenya National Audit Office Kenya HIV and AIDS Disaster Response Project Kenya National HIV and AIDS Strategic Plan Long Lasting Insecticide Treated Net Millennium Development Goal Monitoring and Evaluation Men Having Sex With Men Medium-Term Expenditure Framework National AIDS Control Council National AIDS and STD Control Program (Ministry of Health) National Competitive Bidding Non-Governmental Organization National Level Implementer Orphans and Vulnerable Children Performance Auditor Project Concept Note Project Development Objective President s Emergency Plan for AIDS Relief Project Level Implementer People Living With HIV and AIDS Procurement Monitoring Agent Prevention of Mother-to-Child Transmission Project Sub-Implementer Price Waterhouse Coopers Quality-Based Selection Quality and Cost-Based Selection Results Based Management Request for Proposals Standard Bidding Documents Swedish International Development Agency Statement of Expenditure Single-Source Selection Sexually Transmitted Disease Sexually Transmitted Infection Sector Wide Approach Tuberculosis Terms of Reference Total War Against HIV and AIDS Joint United Nations Programme on HIV and AIDS United Nations Fund for Population Activities

4 UNICEF USAID VCT WB WHO United Nations Children s Emergency Fund United States Agency for International Development Voluntary Counselling and Testing World Bank World Health Organization Vice President: Country Director: Sector Manager: Task Team Leader: Obiageli Katryn Ezekwesili Johannes Zutt Eva Jarawan Wacuka Ikua

5 KENYA Total War Against HIV and AIDS Project Additional Financing CONTENTS I. Introduction... 1 II. Background and Rationale... 2 III. Proposed Changes IV. Appraisal Summary Annexes Annex 1: Revised Results Framework and Monitoring Annex 2: Operational Risk Assessment Framework (ORAF) Annex 3: The MDGs, HIV and AIDS Epidemic, Strategy, Service Challenges and Financing. 32 Annex 4: Governance Assessment Annex 5: Detailed Description of Modified or New Project Activities Annex 6: Revised Estimate of Project Costs Annex 7: TOWA Results To date Annex 8: Malaria Technical Note Annex 9: Map Section Tables Table 1: TOWA Project Components and Thematic Areas... 2 Table 2: ISR Performance Ratings... 3 Table 3: Amendments to the TOWA Project... 9 Table 4: Revisions to Objectives and Indicators Table 5: Proposed Additional Financing-Cost Breakdown Table 6: Additional Financing-Costs by Component and IDA Financing (US$m) Table 7: Proposed Additional Financing-Additional Outputs Table 8: Safeguard Policies Triggered by the Project Table 9: Governance Action Plan Table 10: Procurement Thresholds Table 11: Breakdown of the Additional US$55m Requested Table 12: TOWA Total People Benefiting from HIV Services Provided Per Province Table 13: TOWA Total Amount Spent per CFP Area Table 14: TOWA Mainstreaming Progress Made to June Table 15: Pledged Financing for Bed nets for Universal Coverage October Figures Figure 1: TOWA Indicators-National Cumulative Totals for all Indicator Clusters, per Quarter (September 2008 to June 2010) Figure 2: Distribution of Malaria Incidence and use of Bed Nets by Age

6 KENYA TOTAL WAR AGAINST HIV AND AIDS (TOWA) PROJECT - ADDITIONAL Country Director: Johannes Zutt Sector Manager/Director: Eva Jarawan Team Leader: Wacuka Ikua Project ID: P Expected Effectiveness Date: January 31, 2011 Lending Instrument: Specific Investment Loan Additional Financing Type: Financing Gap, Scale-up and Restructuring FINANCING ADDITIONAL FINANCING DATA SHEET Basic Information - Additional Financing (AF) Sectors: Health (100%) Themes: HIV and AIDS (P); Health system performance (S); Decentralization (S); Public expenditure, financial management and procurement (S) Environmental category: B - Partial Assessment Expected Closing Date: June 30, 2013 Basic Information - Original Project Project ID: P Environmental category: B - Partial Assessment Project Name: Total War Against HIV and AIDS Expected Closing Date: June 30, 2013 (TOWA) Lending Instrument: Specific Investment Lending AF Project Financing Data [ ] Loan [X] Credit [ ] Grant [ ] Guarantee [ ] Other: Proposed terms: standard IDA terms, 40 years maturity including a grace period of 10 years. AF Financing Plan (US$m) Total Project Cost: Cofinancing: Borrower: Total Bank Financing: IBRD IDA New Recommitted Recipient: Source Client Information Government of Kenya Office of the Deputy Prime Minister and Ministry of Finance The Treasury P.O. Box Nairobi Kenya Total Amount (US$m) Tel: Fax: ps@treasury.go.ke 55.0 i

7 Responsible Agency: National AIDS Control Council Landmark Plaza Argwings Kodhek Road P.O Box Nairobi Kenya Tel: Fax: AF Estimated Disbursements (Bank FY/US$m) FY FY11 FY12 FY13 Annual Cumulative Project Development Objective and Description Original Project Development Objective: The Project Development Objective is to assist Kenya to expand the coverage of targeted HIV and AIDS prevention and mitigation interventions. This would be done through: (i) sustaining the improved institutional performance of the National AIDS Control Council (NACC); and (ii) supporting the implementation of the Kenya National AIDS Strategic Plan (KNASP). Revised Project Development Objective: The Project Development Objectives are to: (i) expand the coverage of targeted HIV and AIDS prevention and mitigation measures; and (b) expand access to bed nets among targeted People Living with HIV and AIDS and other households in malaria risk areas. Project description: The Project remains very similar to the original design supporting the implementation of the Kenya National HIV and AIDS Strategic Plan (KNASP), with no major changes in the institutional, FM, procurement or disbursement arrangements, but there would be: (i) a change to the PDO to reflect an increased focus on the provision of bed nets for the malaria program; (ii) greater clarity on the definitions of some key indicators (especially for the success of the grants under the CFPs); and (iii) adjustments in some of the targets. The closing date and implementation schedule would also change, with the proposed 18 month Project extension. There are two Components: Component I: Strengthening Governance and Coordination Capacity to support the continued development of the coordinating function of the NACC, the monitoring and evaluation framework of the KNASP, and capacity building of beneficiaries in the use of grant funds. Component II: Support for Program Implementation to make financial resources available to civil society, public sector, private sector, and research institutions, focusing on initiatives in line with the KNASP and responding to priorities identified by the JAPR, and also with provision of some essential commodities. ii

8 Safeguard policies triggered: Safeguard and Exception to Policies Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waters (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60) Does the project require any exceptions from Bank policies? [X]Yes [ ] No [ ]Yes [X] No [ ]Yes [X] No [ ]Yes [X] No [ ]Yes [X] No [X]Yes [ ] No [ ]Yes [X] No [ ]Yes [X] No [ ]Yes [X] No [ ]Yes [X] No [ ]Yes [X] No Conditions and Legal Covenants: Description of Condition/Covenant The Subsidiary Agreement has been executed on behalf of the Recipient and the Project Implementing Entity. The Recipient has updated the Operations Manual including the Subproject Grants component in a manner satisfactory to the Association. Date Due Condition of Effectiveness Condition of Effectiveness iii

9 I. Introduction 1. This Project Paper seeks the approval of the Executive Directors to provide Additional Financing in an amount of US$55 million to the Kenya Total War Against HIV and AIDS (TOWA) Project (P081712). There are three reasons for the proposed additional credit. a) First, the TOWA faces a financing gap caused by less-than-expected co-financing support. When the Project was originally appraised, it had been expected that the UK Department For International Development (DFID) would provide US$33 million of cofinancing. However, DFID s commitment to jointly co-finance the Project was derailed by the post election violence in Kenya in early 2008, the resulting uncertainty of channeling funds via government systems, and subsequently the review of its bilateral aid program by the new UK government. While DFID is not now in a position to approve any co-financing for the TOWA, it is already financing the national facilitating agency for strengthening Community Based Organizations (CBOs) and it supports the current proposal for additional financing by IDA. At the sectoral level, the Kenya National AIDS and HIV Strategic Plan (KNASP) faces a substantial financing gap, and no other external support for the unfunded TOWA activities has been secured. The closing of this US$33 million financing gap of the TOWA would enable the original targets for grants and capacity building for CBOs and Non-Government Organizations (NGOs), which are working successfully on HIV and AIDS prevention and mitigation particularly at the constituency and district levels, to be reinstated and achieved. b) Second, there is need to support the scale-up of the national malaria program by the provision of additional Long Lasting Insecticidal Nets (LLITNs) to help attain universal coverage of bed nets within the high risk areas of the country. Under the original Project, there was a modest budget allocation of US$4 million for the procurement of about 500,000 bed nets for People Living with HIV and AIDS (PLHIV). Since then, the bed net program has had considerable success; the national malaria strategy has been revised and the criteria for the distribution of bed nets have been widened; and there is a strong global endorsement of bed net programs generally, including from the World Bank. Additional funds are needed for the scale-up of the program in Kenya, and it is therefore proposed that the funding for bed nets under the TOWA be increased to about US$24 million to cover a total of about 2.8 million bed nets. c) Third, the Additional Financing would build upon the initial stage of Project restructuring that took place in August 2010 where the project original targets were lowered. In contrast to the present proposal for Additional Financing, the recent restructuring did not include any change in the Project Development Objective (PDO). However, that restructuring did change the Project cost tables, particularly to facilitate the urgent procurement of some supplementary bed nets, at the expense of other commodities and program activities. This proposed Additional Financing would now involve a further restructuring of the Project with a revision of the PDO, an expansion of the beneficiary group for the malaria bed net program and a response to the triggering of the safeguards for Indigenous People (IP). However, there is no change in the safeguards rating of B 1

10 despite triggering the IP policy. It was felt appropriate to trigger the IP safeguard due to enhanced focus on IP issues at the country level. Further, the additional financing would allow for the original targets for supplying TB drugs and condoms to be reinstated, with their distribution being carried out in line with current health sector policy. It would also finance the continuation of Monitoring and Evaluation (M&E), and fiduciary strengthening and risk mitigation measures. Compared to the revised budget figures in the restructuring document, another US$2 million is needed to cover these costs. It is also proposed that the Project be extended by 18 months to facilitate the achievement of the revised targets, including the full implementation of grants under the fourth and fifth Call For Proposals (CFPs), and to enable data on population-level performance indicators to be obtained from the planned AIDS and malaria indicator surveys. II. Background and Rationale 2. The Total War Against AIDS (TOWA) Project was approved in June 2007 to prevent and mitigate HIV and AIDS in Kenya. The original Project s Development Objective was to support the Republic of Kenya to: (a) expand the coverage of targeted HIV and AIDS prevention and mitigation measures through sustaining the improved institutional performance of the National AIDS Control Council (NACC); and (b) support the implementation of the Kenya National AIDS Strategic Plan (KNASP). The Project was designed and appraised for a total value of US$115 million, with 70 percent from IDA (US$80 million), 28 percent co-financing from DFID (US$33 million) and 2 percent (US$2 million) from the Government of Kenya. The Project has two components, as outlined in the following table. Table 1: TOWA Project Components and Thematic Areas Component Component A (US$31 million): Governance and Coordination Capacity Strengthening Component B (US$84 million): Program Implementation Main Thematic Area Strategic Leadership Accountability and Verification Evidence Based Management Capacity Building of Implementing partners Grant Awards Mainstreaming in the Public Sector Essential Commodities 3. The TOWA Project became effective in March 2008, and is now performing satisfactorily. Some delays were experienced at the beginning of the Project, particularly due to (i) the time needed to recruit the necessary fiduciary strengthening consultants, and (ii) the post election violence in early In effect, Project implementation therefore did not start until mid Following the Project s slow start, implementation progress improved; and by the time of the Mid-Term Review in September 2009, the absorption and utilization of funds had increased considerably. In November 2009, the Project had gained a Moderately Satisfactory (MS) rating for Development Objective and Implementation. These ratings were subsequently upgraded to Satisfactory in the Implementation Status Report of April-June, However, the 2

11 rating for Financial Management (FM) was still only moderately satisfactory due to a delay in carrying out the audits of the grants (see below). Since then, the Project has continued to make positive progress in its implementation, and over 50 percent of the IDA credit has now been disbursed. Another 35 percent of the Project funds will be used for the next two rounds of grants, and the IDA credit is expected to be fully utilized by June 2011 (the original completion date for the Project) or soon afterwards. ISR 1 December 20, 2007 Table 2: ISR Performance Ratings Implementation Performance Ratings ISR 2 ISR 3 ISR 4 May 30, August 29, December 23, ISR 5 March 16, 2009 ISR 6 November 4, 2009 ISR 7 June 14, 2010 Summary Development Objective Rating S S S MS MU MS S Overall Implementation Progress (IP) S S S MS MU MS S Project Management Ratings: Financial Management S S S S MS MS MS Project Management S S S S MS MS S Counterpart Funding S S S S S S S Procurement S MS MS MS MU MS S Monitoring and Evaluation S S S S S S S Project Component Ratings: Strengthening Governance and S S S S MS MS S Coordination Capacity Grant Awards MS S S MS MU MS MS Mainstreaming Public Sector Programs MS MS MS MS MU MU MS Essential Commodities S U MS MS MU MS S S: Satisfactory MS: Moderately Satisfactory MU: Moderately Unsatisfactory U: Unsatisfactory 4. The Project is in compliance with its legal covenants, although there was a delay in carrying out the audits of the grants to CBOs made under the TOWA. Three private sector audit firms have completed audits on more than a 30 percent sample of the 2,250 grants so far underway, in line with their terms of reference. These cover FY09 and FY10 1. Of the 656 grants in FY09 alone, about 418 have been audited. A total of 15 of these audits were qualified. The FY09 audits have been reviewed by the Kenya National Audit Office (KENAO), and the World Bank has received the KENAO audit clearance letter for the subproject grant recipients audits for FY09. 1 FY09 is the period from July 1, 2008 to June 30,

12 5. The individual components of the Project are each now performing moderately satisfactorily or satisfactorily. a) The first component is on Governance and Coordination Capacity Strengthening, and the NACC's institutional performance has varied between good and very good, as rated by the Government using its established assessment system. However, the margin between the two scores is very small, and further fluctuations in ratings may be expected. The Government is committed to sustaining the NACC as the key institution responsible for coordination of HIV and AIDS activities in Kenya. While the capacity building of Community-Based Organizations CBOs has been delayed (see below), the other activities have been proceeding broadly on schedule. The overall rating of this component is now judged to be satisfactory. b) Under the second component, there have been three CFPs for grants to civil society and the private sector to date. Details of the results of these grants can be found in Annex 7. The first CFP was launched in 2008 and the second was launched in Sub-project implementation is now well underway and substantially complete in many cases. By June 30, 2009 (the end of FY09), there were 656 grants under implementation. As of August 30, 2010, 2,225 project sub-implementers (PSIs) had been contracted across 210 Constituency AIDS Control Committees (CACCs) and 147 District Technical Committees (DTCs) to deliver a basket of HIV services under CFP Rounds 1 and 2. About three quarters of these grants are now meeting their agreed targets, in line with the results framework for the TOWA. Governance and capacity problems continue to exist, but the proportion of grants experiencing possible fraud has been reduced very substantially (see below for more details). CFP Round 3 has been launched, and implementation is ongoing. The fourth CFP has been advertised, and the fifth CFP is at an advanced preparation. An allocation of about US$28 million is required for these CFPs. Overall the component is rated as moderately satisfactory. The main reason for less than fully satisfactory performance is that the program is behind schedule with grant implementation. c) The mainstreaming of public sector HIV and AIDS programs has been slower than planned, but activities in some sectors are now starting to achieve some results. There have been two CFPs to date by the NACC, requesting public sector line ministries to submit proposals to them for funding. In total, 28 public sector institutions have been successful in securing support in principle, but only 17 have actually received funding so far. So far, K.Sh.18 million (about US$250,000) has been disbursed out of the K.Sh.31 (about US$400,000) million allocated to public sector mainstreaming projects. The mainstreaming activities initially experienced serious delays due to confusion about implementation and accounting procedures, but the constraints have mostly been addressed. Although still behind schedule, overall implementation is accelerating, with some ministries doing better than others. In particular, the support provided for advocacy work relating to the male circumcision program has contributed to the rapid increase in numbers of men coming forward for the procedure 2. Besides the health ministries, the 2 This advocacy work has been funded through both a national CFP and also through the health ministries. 4

13 seven ministries and departments which have carried out activities most successfully include: the Teachers Service Commission, the Commission for Higher Education, the Ministry of Agriculture, the Ministry of Livestock Development, the Administration Police, the Prison Service and the Ministry of Public Service. Overall, this component is now rated as moderately satisfactory, in view of the mixed performance by different ministries. d) The procurement, distribution and utilization of the essential commodities are well underway. About 500,000 bed nets have been procured so far through UNICEF. Half of them have been distributed throughout the country, and the other half will soon be distributed to hospitals and boarding schools, etc. Using the increased allocation from the recent Project restructuring, about another 1.2 million bed nets would soon be bought through UNICEF for nearly US$10 million, (including distribution costs, etc). Condoms costing US$6.9 million have been procured through the United Nations Fund for Population Activities (UNFPA), and are being distributed and utilized. In addition, about US$1.9 million worth of tuberculosis (TB) drugs have been procured through the World Health Organization (WHO), and are now being used in health facilities. The use of UN agencies for the procurement of commodities is seen by the Government as a pragmatic short-term strategy, while the Kenya Medical Supplies Agency (KEMSA) is further strengthened (including through the recently approved support by the World Bank for the health sector). This component is judged to be satisfactory. 6. There is growing evidence of the achievement of results in the HIV and AIDS program in Kenya, with significant progress being made in the key outcome indicators for prevention and mitigation in the TOWA results framework. a) The proportion of youth aged reporting condom use in the last sexual encounter with a non-regular partner has increased in the period 2003 to 2008/09 from 24 percent to 40 percent for females, and from 47 percent to 64 percent for males. b) The number of persons who have undergone HIV testing and counseling in the last 12 months has increased from 750,000 to 2,470,000. c) The number of male and female condoms distributed in the last 12 months has increased from 120 million (10 million monthly) to 180 million (15 million monthly). d) Unfortunately, so far there has been no reduction in the proportion of sexually active youth aged who report having had sex with a non-spousal, non-regular partner in the past 12 months. In the period 2003 to 2008/09, in the case of females, the proportion increased very marginally (from 30 percent to 33 percent); and in the case of males it decreased from 84 percent to 83 percent. These changes are probably insignificant statistically. 7. However, not all of the recent progress can be attributed to the TOWA, as the population-based data predate the effective start of TOWA implementation. This is clearly 5

14 recognized in the recent independent review by the recent Global HIV AND AIDS Program (GHAP) of the results achieved in the TOWA. This report noted the following:. At the heart of the implementation of TOWA is the intended desire to contribute to national level HIV response outcomes and impacts, by supporting and contributing to efforts to (a) reduce higher risk sexual behaviors to put people at risk of new infections; and (b) support and improve the quality of life of those living with HIV and their families and communities. Assessing these trends therefore requires assessing the changes in national level outcomes and impacts. Whereas this is an essential activity and should be undertaken, the necessary data with which to do so is not yet available the Kenya Demographic and Health Survey will provide baseline data for 2008 (when TOWA implementation started), but changes in national level outcomes take time to achieve and are therefore only measured every 2 to 3 years. Once the next Kenya AIDS Indicator Survey results are published in 2011, trend analysis can be performed to assess these changes in the national level behavior patterns and new infections. 8. Despite the attribution issue, it is clear that a large number of Kenyans have already benefitted particularly from the community grants through the TOWA. In particular, the GHAP review estimated that over 4.5 million Kenyans have already benefited from these community grants, including: a) 3 million people who have been mobilized and sensitized on a range of HIV and AIDS issues, particularly on prevention 3. b) 1.3 million people who have been helped to access services 4. c) 61,000 people who have received capacity building support to help deliver services 5. d) 54,000 people who have been provided with direct support, including material support to orphans and vulnerable children (OVC), and people living with HIV and AIDS (PLHIV) and home caregiver visits. 9. Most of the grants provided under the TOWA have met their individual targets, with the overall rate of success higher than the aggregate target originally set for the Project. Over 70 percent of the beneficiaries that received grants have been rated independently by the Performance Auditor as being very good or excellent in terms of meeting specified and agreed targets. This is higher than the aggregate target in the original results framework for 3 This includes Voluntary Counseling and Testing (VCT) for 1.9 million Most at Risk Populations, including 730,000 most at risk youth; 120,000 long distance truck drivers and commercial sex workers; 550,000 (MARP) people in Hard to Reach Areas; 5,000 injecting drug users; plus 470,000 MARPS without specific categorization. 4 These include counseling, testing, referral for care and prevention of mother to child transmission (PMTCT); training on condom use and delay of sexual debut, psychosocial support, palliative care support and income generating activity support. 5 These include counseling and testing, plus training for peer educators, guardians in income generating activities and care givers, as well as support to people living with HIV and AIDS (PLHIV) on home-based care, human rights and public speaking. 6

15 the Project of 65 percent in 2008/09 and 70 percent in 2009/10. The NACC has recently decided to use the same rating system as the Performance Auditor to ensure full consistency of approach in judging the performance of the grant. The key parameters used include: (i) actual targets achieved versus planned targets; (ii) quality of target evidence; (iii) risk of double accounting of targets; and (iv) evidence of outreach activities. 10. The Project s strong governance and fiduciary measures also appear to be mitigating risks quite effectively. a) The technical assistance agencies financed by the TOWA are all fully operational. These include the Financial Management Agency (FMA), Independent Compliance Verification Agency (ICVA), the Performance Auditor (PA) and the Procurement Monitoring Agency (PMA). 6 b) The FM of the NACC itself has been strengthened substantially. The NACC has comprehensively updated its governance action plan and it is now carrying out the agreed actions 7. c) There are currently no large-scale fraud issues facing the Project, although the investigations by the NACC, the Performance Auditor and the private financial auditors indicate possible small-scale governance problems in about 5 per cent of grants. The private sector auditors carrying out the audits of the FY09 grants have qualified only 15 out of the first 418 grants audited. This vastly improved performance is particularly significant in view of the troubled history of the earlier Kenya HIV and AIDS Disaster Response Project (KHADREP). d) The FMA has been diligent in carrying out detailed pre-disbursement capacity assessments for all PSIs, which have all also benefited from mandatory capacity building activities. The staffing of the FMA was increased in early 2010 in order to strengthen its services and monitoring in the field. In addition, the more intensive capacity building activities of regional facilitating agencies are scheduled to start in January However, there is no room for any complacency, and governance strengthening needs to be a continuous process. This is for several reasons: a) As noted above, the required FY09 financial audits of the Beneficiaries have only recently been completed. The delay in conducting the audit of the community grants was partly due to the slower-than-expected implementation of grants initially, and partly due to delays caused by difficulties in procuring the services of the private sector auditors. Work is now well underway for the audits of the FY10 grants. 6 More details of their work and recommendations are given in Annex 4. 7 The NACC has reviewed all the fiduciary reports, and has condensed the queries and recommendations into a single reporting matrix. The recommendations from these various reports were discussed and reviewed in a joint World Bank/NACC intensive capacity development workshop held in July 2010, and a summary governance action plan is now in place to allow continued close monitoring especially of the implementation of the most critical recommendations. 7

16 b) As noted above, about 5 percent of the beneficiaries are being reviewed for possible governance problems (these cases are being tracked by the NACC Audit Committee) 8. c) The capacity of CBOs and NGOs remains weak especially for procurement activities at the local level, as does the capacity of the NACC at the decentralized level (their capacities will be strengthened by the upcoming capacity development program) 9. d) There is need to ensure that the recently augmented staffing of the FMA leads to further improvements in efficiency and communications in managing the grant program (this is being monitored by the NACC and the World Bank). e) There is also need for a simple and comprehensive procurement handbook to be used to train the beneficiaries on proper procurement procedures (this will be incorporated in the TOWA Operations Manual which is now under revision, with its completion being an effectiveness condition). f) The public information systems need to be reviewed and gaps addressed (this is being done as part of the NACC governance action plan). 12. The Project has already benefitted from some amendments to the original design, as part of the implementation support process. A primary reason for the amendments was to adjust the Project to the delayed availability of co-financing, but the latest amendment was also to allow for accelerated procurement of additional bed nets. The four amendments made to the financing agreement since the Project became effective are summarized in Table However, the TOWA Project now has a financing gap, partly caused by the lack of expected co-financing. Since even before the Project started, DFID has been considering providing support to the TOWA as part of its Kenya Harmonized HIV AND AIDS Program 10, but the proposed mechanism for support has not materialized. Three years into the project, this has left a significant project financing gap, which can no longer be covered through adjustments in disbursement proportions by IDA. DFID s commitment to jointly co-finance the TOWA program was derailed by the post election violence in early 2008, and the resulting uncertainty of channeling funds via government systems. Alternative funding routes were considered, but none agreed. This uncertainty, combined with a change of government in the UK and a decision to 8 Of the 2,225 grants under implementation, the NACC is currently investigating 124 (6 percent) for possible fraud. In some cases, the investigations already suggest that fraud was not committed, and so those grants are no longer on the possible fraud list. The recently completed financial audits of the FY09 grants suggest that about 4 percent of them may have had significant governance problems of some kind, in so far as the audits were qualified. The maximum grant amount awarded at the CACC level is US$5,000, and so this would be the outer limit for the extent of any ineligible expenditures or fraud in any single grant. 9 The regional facilitating agencies are now being recruited and will be funded by the Project, with the African Medical and Research Foundation (AMREF) as the National Facilitating Agency (already funded by DFID through a parallel Project). 10 The DFID program consists of three components: TOWA (funds through the World Bank and the Government), AMREF (support to CSOs), and support to the UN joint program on AIDS. 8

17 conduct a review of its bilateral aid program, further delayed a decision on TOWA support. DFID has recently confirmed to the World Bank that it is in support of the Bank s plans for the IDA Additional Financing request, and it continues to engage with the program including through its support for the National Facilitating Agency (AMREF) and the capacity development program. Table 3: Amendments to the TOWA Project Date Amendment Comments August, 2008 To increase the share of expenditures covered by IDA, from 71 percent to 100 percent until June 30, 2009, and reduce the IDA percentage back to 42 percent from July 1, 2009 to June 30, The IDA contribution was increased to cover the original DFID planned allocations in years 1 and 2, with the expectation that the IDA share would drop back when DFID August, 2009 August, 2009 August, 2010 To maintain the disbursement rate at 100 percent until June 30, 2010, with IDA funding then planned to be just 31 percent from July 1, 2010 to June 30, 2011 (and 71 percent thereafter). The co-financing deadline for the DFID financing was also moved to July 31, To effect an increase in the procurement prior review threshold for the TOWA. To: (a) increase the disbursement percentage from 31 percent to 100 percent in FY11; (b) reallocate funds within the Project principally to allow for the urgent procurement of additional bed nets; and (c) remove the dated covenant on the effectiveness of the DFID Co-financing Agreement. funding became available in year3. This amendment was made for the percentage of expenditures covered by IDA to be maintained at 100 percent until June 30, 2010, as DFID support had not been forthcoming in FY09 after all. This amendment was part of a country-wide change in procurement review thresholds and fiduciary parameters. This amendment was to recognize that DFID would not be co-financing the Project, and to make additional funds available for the procurement of urgently needed bed nets for the malaria program. 14. The entire HIV and AIDS sector also faces a financing gap. Within the HIV and AIDS sector as a whole, there is a wide funding gap, despite significant external support. In 2009/10, Kenya had about US$630 million available in donor support to help the fight against HIV and AIDS, including from the World Bank through the TOWA 11. The bulk of external financing (US$510 million) was from the US Government, and was primarily channeled outside of government systems. The second biggest funder for HIV and AIDS is the Global Fund (GFATM), with US$32 million allocated for 2009/10. However, the Round 9 National Strategy Application was unsuccessful for technical and management reasons, but there has recently been a new submission to the GFATM of an HIV proposal for Round 10. There are varying estimates of the overall needs of the sector, and therefore the extent of the sectoral financing gap, but the official figures from the NACC suggest that the gap could be up to US$1.2 billion for the next five years. While recent work done by the Clinton Foundation has indicated lower estimated needs, there is no doubt that there is still a significant financing gap for the sector. Given that (i) other external sources of finance are focusing more on treatment than on prevention; (ii) there is considerable uncertainty about future Global Fund support for the HIV and AIDS Program in 11 Kenya is also part of the Great Lakes Initiative on AIDS (GLIA) and receives funding from this regional program, which recognizes that AIDS knows no borders. 9

18 Kenya; and (iii) the Bank is the only large direct external financier of very small CBOs and NGOs in the sector, it is felt that there is a strong justification for increased IDA support for the TOWA. 15. Further funding is also needed for bed nets. Malaria continues to be a huge problem in Kenya, being a major contributor to outpatient cases, childhood illnesses, poor outcomes in pregnancies and low vitality in the workforce 12. In the past, bed net distribution was limited to vulnerable populations such as children under 5 and pregnant women, with the TOWA Project supporting the provision of bed nets primarily for PLHIV with an allocation of US$4 million for bed nets. However, the early experience of the TOWA suggested that the provision of bed nets only to PLHIV could increase the stigmatization of HIV and AIDS and also possibly undermine the malaria program. The Bank was therefore requested to broaden the definition of beneficiaries, as well as to increase funding for bed nets. There was, therefore, a reallocation of a further US$10 million in the fourth amendment of the Project in August However, a further additional amount of another US$10 million has now been requested by the Government from the Bank to cover a shortfall in the funding of the overall national program, which now aims to achieve universal LLITN coverage for all populations at risk. The Government has a good track record of success in its bed net program and is giving it greater priority. The recent DHS suggests that ownership of treated bed nets went up steeply from 6 percent to 56 percent between 2003 and 2009, but the financing gap needs to be closed if there is to be universal coverage in the high risk areas The Division for Malaria Control, working with the country malaria partnership, has prepared a detailed plan of action and financing plan for the mass distribution of the LLITNs including the support from TOWA for the proposed plan. The plan envisages procurement of about 10 million LLITNs. The services of UNICEF will be used for procuring nets financed by the Global Fund and the Bank, and KEMSA will be responsible for clearance, storage and distribution of nets to division level (about 100,000 population, with each district having around 3 divisions). The plan of action describes a detailed set of activities at the central, district and division levels to ensure effective distribution and promote use. Micro-planning for commodity distribution through fixed delivery points closer to villages and social mobilization will be done. All these activities will be fully integrated with the district health systems and will contribute to improving the delivery of public health services and strengthen health systems. 17. In summary, the TOWA has created an appropriate foundation for Additional Financing to be considered, and improvements will continue to be made in the future in the management of the Project. In particular, a) The TOWA Project has successfully set in place the institutional arrangements and systems for efficiently channeling targeted funding and capacity building support to the local level to support a range of community interventions to combat HIV and ensure 12 Further details on malaria in Kenya and the program to address it are given in Annex In total, about 10.5 million bed nets are needed. With 2.3 million more bed nets funded by the Bank, the gap would almost be closed completely, as the Government has now obtained support from the Global Fund, the Presidents Malaria Initiative and World Vision International for over 7 million bed nets. 10

19 that there is a continued focus on prevention efforts. The NACC has been strengthened, although further capacity building is still needed especially at the decentralized levels. b) The strong fiduciary strengthening mechanisms and increased focus on results appear to have had substantial impact. The risks identified in the original TOWA documentation are still relevant, but the degree of risk is now reduced due to the broadly successful governance experience of the Project so far. With strong technical assistance support, it appears that roughly 95 percent of grants do not have any significant financial irregularities, and further investigations are being carried out into those subproject grants where fraud may have occurred. The NACC will take remedial actions where necessary, including black-listing of NGOs and CBOs found to have committed fraud, recovery of funds and ineligible expenditures, and prosecution where appropriate. In addition to these risk mitigation measures, the success rate of the grants so far is above the original Project target, and over 4.5 million Kenyans are estimated to have benefited from the TOWA already. Work will continue to improve the quality of the CFPs to ensure that they are even more evidence-based, strategic and results-focused, and also to strengthen the capacity of the CBOs. The Additional Financing would allow for the original targets for grants to be met. c) The public sector mainstreaming activities have had a mixed performance, and there is need for even greater selectivity and prioritization as the program moves forward. d) Commodity procurement through the UN agencies is now leading to enhanced supplies, particularly of bed nets and condoms. The experience of the malaria program has shown the need for a widening of beneficiary groups and for additional funding of bed nets supporting an ongoing successful program. 18. This request for Additional Financing is consistent with the Bank s Strategy for Kenya. a) Through the Country Partnership Strategy (CPS) for , the World Bank Group is aiming to achieve more inclusive growth by supporting activities aiming to: (i) unleash Kenya s growth potential; (ii) reduce inequality and social exclusion; and (iii) address resource constraints and environmental challenges. The CPS identifies investing in human development as one of its basic priorities. b) The Bank s strategy across the Kenya HD sector focuses on: (i) supporting the country-led development strategy expressed in the Government s Vision 2030 and Medium-Term Plan, and agreed upon in the CPS, to improve social well-being and achieve the MDGs; (ii) collaborating more effectively with all stakeholders, and using experiences from elsewhere in the Region; (iii) focusing more on outcomes; (iv) maintaining a high degree of flexibility to make adjustments and provide additional support as needed; and (v) understanding and providing support to address the impact of the global financial crisis, and positioning the Bank to respond quickly and effectively to the evolving needs. 11

20 c) The Additional Financing for the TOWA would also contribute to efforts to improve governance. Kenya currently has a mixed record on governance. While the Country Portfolio and Institutional Assessment (CPIA) rating improved from 3.6 to 3.7 in FY10, and while Kenya has an independent and vocal media and a strong civil society, much remains to be done by the Government in taking decisive action to prosecute any cases of high-level corruption. The TOWA Project is already helping to address governance risks at the sectoral level, and this would be continued and extended with the Additional Financing. III. Proposed Changes 19. This request for Additional Financing follows on from the fourth amendment and restructuring of the TOWA Project, approved in August That restructuring provided primarily for: (i) a reallocation of funds to continue with the increased disbursement percentage from IDA, and (ii) the urgent purchase of additional bed nets (amounting to US$10 million) for the malaria program. This proposed Additional Financing request for US$55 million is to: (i) make up for the US$33 million funds from DFID, which will not be available as co-financing through the TOWA so that the fourth and fifth CFPs are fully funded and can go ahead; (ii) allocate another US$10 million to scale up the malaria bed net program (bringing the total provision under the TOWA to US$24 million); (iii) support the project restructuring and restore some of the funding, especially for commodities, that was reallocated (mainly to bed nets) in August 2010; and (iv) provide for the extended operations of the Project for another 18 months, including particularly for continued fiduciary and M&E strengthening. Table 4: Revisions to Objectives and Indicators Revised PDO Revised definition of success of grants under the CFPs Specific Project Outcome Indicator New Project Outcome Indicator Impact Evaluation The revised Project Development Objectives are to: (i) expand the coverage of targeted HIV and AIDS prevention and mitigation measures; and (b) expand access to bed nets among targeted People Living with HIV and AIDS and other households in malaria risk areas. Success will be measured as the proportion of beneficiaries scoring Very Good or Excellent for target achievement. The need to change the definition of success arose from confusion with the initial grants under the TOWA as to whether the focus should be on the performance of individual grants or the achievement of aggregate targets. The new indicator will measure success at the level of the individual subproject grant beneficiary However, the end-of-project target for the subproject beneficiaries will still be for at least 80 percent of the grants to be rated as successful, using the new definition. The target for the total number of grants would be restored from about 4,000 (the target in the recently restructured Project) to 8,400. The original target for the TOWA was 8,400, but the target was reduced as part of the restructuring of the Project, with funding then being reallocated away from grants and commodities to additional bed nets. The new indicator will be a percentage of households that have more than one insecticidetreated bed net (ITN) in malaria endemic areas. A new intermediate outcome indicator is also introduced to reflect the purchase of the additional bed nets 14. The focus of the impact evaluation will be on determining the effect of Behavior Change Interventions on the prevention of HIV amongst the youth, in Nyanza Province. 14 While the actual use of bed nets would normally be a better indicator, a more modest indictor reflecting household access to bed net is proposed, in view of the limited role of TOWA in supplying the nets to the national malaria program. 12

21 20. The Project Development Objective, some key indicators and selected targets have been slightly revised for the Additional Financing. While the fundamental design of the Project remains very similar to the original design, with no major changes in the institutional, FM, procurement or disbursement arrangements, there would be: (i) a change to the PDO to reflect an increased focus on the provision of bed nets for the malaria program; (ii) greater clarity on the definitions of some key indicators (especially for the success of the grants under the CFPs); and (iii) adjustments in some of the targets. The closing date and implementation schedule would also change, with the proposed 18 month Project extension. The revisions to the Results Framework are highlighted in Annex 1, with the primary changes indicated in the table above. 21. The original bed net procurement under TOWA was for people infected and affected by HIV and AIDS living in the high malaria epidemic areas. The new bed nets to be procured (with the restructuring and Additional Financing) will not specifically be restricted for this HIV target group, but would rather be for the whole population in highrisk areas. About 10 million nets are required to meet this goal, with the TOWA restructuring and Additional Financing supporting about one quarter of them. The Government is expecting to mobilize the remaining bed nets from other sources. Under the TOWA, funding would be provided for: (i) the procurement of bed nets by UNICEF; (ii) the distribution of bed nets by KEMSA to the district level; (iii) the local-level distribution of bed nets and social mobilization by the Department of Malaria Control in FY11, and in conjunction with the Health Sector Services Fund (HSSF) in FY12. The HSSF is already being supported by the Bank through the recently approved Health Sector Support Project. 22. The additional US$55m requested is broken down as follows: Table 5: Proposed Additional Financing-Cost Breakdown Activity Extra Financing (US$ million) Additional Call for Proposals - Grants 23.2 Malaria Program (Bed nets, Distribution and Other 9.5 Activities Other Commodities including Clearing and 6.7 Distribution Costs (Condoms and TB drugs) Strategic Leadership 6.5 Fiduciary Accountability 4.8 Other Programmatic Expenditure and M&E 4.3 TOTAL The above costs include US$2.6 million for the clearance, storage, and distribution of all commodities (to be supported through operating costs for KEMSA), and US$2 million to support the mass distribution of bed nets. 13

22 Table 6: Additional Financing-Costs by Component and IDA Financing (US$m) Component 1. Governance and Coordination capacity strengthening 2. Program Implementation Original Cost (after restructuring) US$M Changes with Additional Financing US$M Revised Cost US$M The main additional outputs, compared to the restructured Project, would be as follows: Table 7: Proposed Additional Financing-Additional Outputs Indicator Original Target Restructured Project Target (August 2010) Number of grants carried out through CBOs/NGOs. Number of bed nets procured Incremental Output with Additional Financing 8,400 4,000 4,400 8,400 Revised Target 500,000 1,700,000 1,100,000 2,800,000 IV. Appraisal Summary 25. There are no substantially new technical aspects to the design of the Project for the Additional Financing, although the IP safeguard has now been triggered (see below). Some significant lessons have been learned in the implementation of the TOWA so far, especially in the drafting and implementation of the grants through the CFPs. The TOWA Project already takes into account Kenya s specific socio-economic circumstances, and the most reliable and detailed epidemiological data that is now available. However, the recent independent review has recommended some modest improvements in the management of the CFPs. The recommendations include the following: (i) there is need to verify the data provided to and managed by the FMA, (this will be done by the FMA); (ii) there needs to be more clarity about the respective roles of the constituency AIDS council committees (CACCs) and FMA for effective implementation (this will also be addressed by the FMA under its recently approved contract extension); (iii) the prioritization of HIV services could be improved even further (this will be done through improved conceptualization and drafting of CFPs); (iv) there should be enhanced incentives to improve grant effectiveness and improve quality of implementation (this will be done through the capacity building program and revised Operations Manual); (v) standard operating practices should be developed to improve the focus on the quality of implementation (this will also be done through the capacity building program); and (viii) the 14

23 mainstreaming component should be reduced substantially (this is already happening, with tighter prioritization of mainstreaming activities). The main conclusions from the appraisal of the fiduciary aspects for the Additional Financing are that: (i) the original fiduciary strengthening arrangements appear to have been broadly adequate so far; (ii) there are some specific measures where attention is now needed by the NACC; and (iii) there is need for continued vigilance generally to ensure that agreed procedures are given adequate priority attention in Project implementation. More specifically, regarding the FM and disbursement arrangements of the Project, the positive aspects of the appraisal are that: (i) the FM arrangements are deemed adequate, with the Project managed by qualified accounting staff under the NACC Deputy Director, Finance and Administration; (ii) the FM weaknesses identified in Project supervision and the Fiduciary Review of the Government Internal Audit Department have already been reviewed in detail and accepted by the NACC; (iii) the KENAO submitted the annual audit report in December 2009, as required and the Project has been submitting timely quarterly IFRs; (iv) there has been very intensive capacity development and hands-on FM support as part of a comprehensive action plan to address all fiduciary issues; and (v) the staffing of the FMA has been enhanced following a review of Project implementation constraints and risks by the NACC and the World Bank in early CY It is proposed that the funds flow arrangements for the Additional Financing would use the existing FM arrangements for the current credit, as per the original project appraisal document. Although there would be a new disbursement letter. IDA funds for the additional funds would be deposited into the existing Designated Account and transferred to the Project Account in NACC, from which payments would be made. For micro-projects, NACC would transfer the funds to subproject grant beneficiaries (NGO s, CBO s etc) through the FMA, whose contract has already been renewed. The Project would continue to account for the funds using the report-based IFR disbursement method and the format of the IFR remains the same. Audit reports will continue to be received within 6 months after the end of the financial year 27. A procurement capacity assessment has been carried out and concludes that capacity is still weak in the NACC and in the subproject grant beneficiaries, both at the national and local levels respectively. The NACC is currently managing four large consultancy contracts with limited contract management capacity, while the subproject grant beneficiaries have limited procurement capacity and working knowledge on Bank funded projects and insufficient internal controls. As a result, procurement risk is assessed as high. Risk mitigation measures have been discussed with NACC and agreed upon. Procurement risks will essentially be addressed by: (i) the enhanced capacity building program for the NACC and the beneficiaries that will soon be underway through the TOWA (after the current round of facilitating agency selection has been completed); (ii) the major program of reform and technical assistance support being provided by the World Bank and other development partners, especially DANIDA and USAID, to the KEMSA; (iii) the preparation of a simplified procurement handbook for use in the implementation of subprojects by community based organizations which is currently under review by IDA, and which will use simple and standardized documentation, balancing risk and control management with efficiency considerations; and (iv) increasing oversight through the use of a procurement monitoring agency. The services of UN agencies would continue to be used 15

24 for supplying the commodities required for the national priority programs. More details of the procurement arrangements are included in Annex There are no major departures from the original economic analysis for the TOWA and the Project remains economically justified. As summarized in the original Project Appraisal Document for the TOWA, there is plenty of evidence in the Region that HIV and AIDS is a serious impediment to economic growth and development in low-income countries. There is also substantial knowledge regarding the economic impact of HIV and AIDS specifically in Kenya. This includes a country study conducted by the World Bank, and also a study of HIV and AIDS, ARVs, and socio-economic status in Western Kenya. These studies show that the productivity of the agriculture sector is being undermined by negative impacts through reduced household and community food security, and a decline in the nutritional and health status of families. Commercial agriculture is being detrimentally affected by increasing health costs, and protracted morbidity and mortality of key workers. Education is also suffering as teachers are lost to AIDS, and as children drop out of school due to the illness or death of parents and reductions in household incomes. The health service is losing trained staff, and there are also huge costs associated with caring for increasing numbers of orphans. This demonstrates the impact of the epidemic on economic development and poverty, as well as the costeffectiveness of key HIV and AIDS-related interventions. More specifically, regarding the impact of the TOWA so far, the recent GHAP analysis of the grants under the Project has concluded that:. it is clear and can be verified that TOWA has funded HIV service delivery in some prioritized service delivery areas, and that it has reached (those) for whom some of the HIV services provided would be useful for those who received it. In addition, the review has concluded that there are some signs that TOWA governance has supported the improvement of funding to community based organizations. Despite some of the anomalies with the data auditing (it is good that the data auditing are bringing some problems to the fore), the additional governance arrangements work (and can still be improved).." 29. There is no change proposed in the environmental category for the Project as a result of the Additional Financing. The ongoing Project is classified as Category B for environmental screening purposes. As a repeater project, the TOWA Project has made use of the existing arrangements for safeguard issues, which had been successfully implemented under the KHADREP. In addition, a national medical waste management action plan was developed and disclosed by the Borrower, and later further updated. Both the updated Medical Waste Management plan and the ISDS for the additional funds have been disclosed at the Bank s Info Shop. The Medical Waste Management Plan is now being implemented (including with support from the Health Sector Support Project, which was recently declared effective). 30. However, in view of the increased focus on issues affecting Indigenous Peoples (IPs) and the development of thinking on the issue in Kenya, it has been decided that the IP safeguard should now be triggered. In the original TOWA project, OP 4.10 safeguard was not triggered, but it has been triggered for the Additional Financing due to generally enhanced 16

25 concerns about IPs in Kenya. An IP Planning Framework (IPPF) has been prepared by the Borrower. It will take a pro-active approach to ensure IPs are included in the program, through targeted assistance in local sub-projects. The IPPF has been disclosed on the Borrower s website and in the Bank s Info Shop. It includes a Public Consultation and Disclosure Plan. The IP Plan will be prepared and implemented as specified in the framework by the NACC. Table 8: Safeguard Policies Triggered by the Project Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [x] [ ] Natural Habitats (OP/BP 4.04) [ ] [x] Pest Management (OP 4.09) [ ] [x] Cultural Property (OPN 11.03, being revised as OP 4.11) [ ] [x] Involuntary Resettlement (OP/BP 4.12) [ ] [x] Indigenous Peoples (OD 4.20, being revised as OP 4.10) [x] [] Forests (OP/BP 4.36) [ ] [x] Safety of Dams (OP/BP 4.37) [ ] [x] Projects in Disputed Areas (OP/BP/GP 7.60) [ ] [x] Projects on International Waterways (OP/BP/GP 7.50) [ ] [x] 31. Policy Exceptions: The Project does not require exceptions from Bank policies. 17

26 Annex 1: Revised Results Framework and Monitoring KENYA: Total War Against HIV and AIDS (TOWA) - Additional Financing PDO Revisions to the Results Framework Current (PAD) To assist Kenya to expand the coverage of targeted HIV and AIDS prevention and mitigation interventions. This would be done through (i) sustaining the improved institutional performance of the National AIDS Control Council (NACC): and ((ii) supporting the implementation of Kenya National AIDS Strategic Plan (KNASP). PDO indicators Current (PAD) POI# 1. NACC composite score on the annual independent performance evaluation. POI# 2. Proportion of overall targets met for NACC-funded programs in: Civil society/private sector (beneficiaries); and Public sector (beneficiaries). Proposed (a) expand the coverage of targeted HIV and AIDS prevention and mitigation measures; and (b) expand access to bed nets among targeted people living with HIV and AIDS and other households in malaria risk areas. Proposed change* Dropped. Revised: POI#1. Proportion of recipients of subproject grants scoring Very Good or Excellent for target achievement in the annual performance audit. Comments/ Rationale for Change To reflect the project s contribution to scale-up of insecticidal bed net supply in support of the new National Malaria Control Strategy. Because (i) this is an intermediate outcome under the re-stated PDO; and (ii) NACC performance is captured under other intermediate outcome indicators (e.g., the new IOI#1 and IOI#2). The proposed indicator measures the performance of individual beneficiaries based on the four parameters used by the Independent Performance Auditor 15 instead of aggregate performance. These parameters include: actual targets achieved versus the planned targets, quality of target evidence, risk of double accounting of targets, validity of variances observed and evidence of outreach activities. The performance audit assigns each subproject grant beneficiaries an overall score which helps grading them in to excellent, very good, fair, bad and very bad Categories. The public sector component of the original indicator has been dropped to reflect the significant reduction in funding allocated to public sector interventions in the Additional Financing. 15 The revision in this indicator is motivated by the imprecision of the earlier definition. A more explicit definition, as provided here, allows for consistency in reporting. 18

27 Revisions to the Results Framework POI# 3. Proportion of sexually active youth who report having had sex with a nonspousal, non-regular partner in the past 12 months. POI# 4. Proportion of youth aged reporting condom use in the last sexual encounter with a non-regular partner (of those reporting sexual intercourse with a non-regular partner in the last 12 months). Revised: POI#2. Number (cumulative) of civil society/ private sector grants supported by the end of the year. Continued: POI# 4. Proportion of sexually active youth who report having had sex with a nonspousal, non-regular partner in the past 12 months. 16 Continued: POI# 3. Proportion of youth aged reporting condom use in the last sexual encounter with a non-regular partner (of those reporting sexual intercourse with a non-regular partner in the last 12 months). 17 New: POI# 5. Percentage of households in malaria endemic areas in Malaria endemic areas in districts supported by the TOWA Project that have at least one ITN. New: POI# 6. Number of persons Comments/ Rationale for Change Indicator promoted (from IOI) to POI level to reflect the renewed focus on scale-up. Though this is not perfect outcome indicator, it was decided (WB/Kenya team on October 21, 2010) to retain it at POI level since an increased capacity to perform by beneficiaries is a critical pre-requisite to the attainments of outcomes. It was also highlighted that a similar indicator existed (at POI level) in the original and approved PAD. The indicator matches the scope of the project (emergency procurement of bed nets). Furthermore, TOWA remains primarily an HIV AND AIDS project as the funding for malaria constitutes 18% of total project funds (US$24 million out of US$135 million) and 18% of the Additional Financing operation (US$10 million out of US$55 million). In due recognition that bed net utilization is the ultimate aim, the project will track bed net utilization as a complementary indicator during the project implementation. Both indicators are available in the Malaria Indicator Surveys (MIS) planned once every three years. Since TOWA nets will only be distributed in the Coastal Counties only, the appropriate disaggregated value from the MIS will be used. An alternative, and more regular, data source is the postdistribution evaluation that is carried out three months after nets are distributed. Number of persons undergoing CT is an 16 Ibid. 17 The HIV AND AIDS literature suggests that self-reported behavioral data tends to overstate true behavior and needs to be validated with STI incidence data. During implementation of the project, trends in STI incidence (e.g., syphilis incidence) will be used to validate the trends in self-reported behavioral data. 19

28 Revisions to the Results Framework POI# 5. Number of persons who undergo testing and counseling in the past 12 months (National figure, from NASCOP). POI# 6. OVC receiving care/support in the past 12 months. POI#7. Number of male and female condoms distributed in the past 12 months. Intermediate Results indicators Current (PAD) IOI#1. Level of stakeholder satisfaction with NACC. IOI#2. The proportion of CACCs and DTCs which function according to performance indicators (see OM for definition). [Similar to KNASP 4.4.3]. IOI#3Annual audit report for NACC demonstrating transparent and accountable financial management. [KNASP 4.3.5]. IOI#4. Proportion of funds received by the NACC that are expended annually. [KNASP 4.3.6]. IOI#5. The proportion of KNASP M&E indicators included in the annual M&E report, disseminated and available on time for the JAPR [KNASP and 4.5.7]. IOI#8. Proportion of registered CBOs reporting through the COBPAR at the time of the JAPR. [TOWA specific similar to KNASP 4.1.4]. who undergo testing and counseling in the past 12 months (under the TOWA project). Dropped as POI. Dropped. Dropped as POI. Proposed change* Continued: IOI# 1. Level of stakeholder satisfaction with NACC. Dropped. Revised: IOI# 2. Issues in NACC s qualified report to be addressed by the end of March of the following year (yes/no). Dropped. Continued: IOI#3. The proportion of KNASP M&E indicators included in the annual M&E report, disseminated and available on time for the JAPR. Continued: IOI#4. Proportion of registered CBOs reporting through COBPAR at the time of the JAPR. Revised: IOI#5. Number of persons who undergo testing and counseling in the last 12 months. (national, from NASCOP). Comments/ Rationale for Change appropriate measure of service coverage. When the trend of this indicator is analyzed in the context of IOI#5 (National number counseled and tested in the last 12 months-from NASCOP), it provides a measure of TOWA contribution to the national CT output. Indicator demoted to IOI level. OVC interventions are no longer being included in the Call for Proposals from round 3 as they are being supported through a separate World bank funded project. Indicator was demoted to IOI level. Complete data for all four elements of the indicator not consistently available each year. Indicator dropped by NACC and by WB project management. The revision removes any ambiguity regarding timing. NACC may however continue to track the indicator for operational purposes. Demoted from the POI level. 20

29 Revisions to the Results Framework New: IOI#6. Number of couples counseled and tested in the past 12 months under the TOWA project. Comments/ Rationale for Change Replaces POI#5 in the PAD and captures the current major cause of new infections as a significant part of new infections (44%) in Kenya occur in couples who engage in heterosexual activity within a union or regular partnership. IOI#6 is currently being tracked by NACC. Although there may be substantial overlap between IOI#5 and IOI#6, it was agreed (by WB/Kenya Team) to keep both indicators since IOI#5 can serve as a useful denominator for the new POI#6) IOI#17. Number of male and female condoms distributed [M&E 42, SC 10]; and IOI#6. Number and proportion of proposals received by the CACCs, DTCs and the NACC that are rated as meeting CFP criteria for approval each year. [Not in KNASP---TOWAspecific]. IOI#7. Proportion of overall targets met for NACC-funded programs in civil society and private sector. [Not in KNASP TOWA specific]. IOI#9. Number and proportion of priority sector entities (ministries, divisions, etc.) that have identified their needs in HIV and AIDS programs, have costed them, have engaged the MTEF process to fund them and are able to monitor and report on expenditures. [Similar to KNASP 4.5.8]. IOI#10. Coordination meetings held with participation from key New: IOI# 7. Number of youth reached with BCE messages in the past 12 months New: IOI# 8. Number of HIV+ individuals provided with Home- Based Care (Palliative care) through the TOWA interventions in the past 12 months Revised: IOI#9. Number of male and female condoms distributed in the last 12 months (national, from NASCOP). New: IOI# 10. Number of long lasting insecticide treated malaria nets purchased and/or distributed. Dropped. Replaced. Dropped. Dropped. Measures the reach of HIV prevention services to the youth. New: Measures the contribution of the project to HIV AND AIDS mitigation. This indicator could also move to POI level but there are already 6 (many) indicators at POI level Demoted from the POI level. Majority of condoms procured/distributed by NASCOP come from the TOWA project (for the next two years, all are TOWA condoms). Measures the supply of bed nets for malaria prevention supported by the TOWA. Will be tracked by NACC for project monitoring Replaced with POI#2. Will be tracked by NACC for project monitoring. Will be tracked by NACC for project monitoring. 21

30 Revisions to the Results Framework stakeholders (ICC meetings and MCG meetings). [Similar to KNASP 4.5.5]. IOI#11. JAPR with participation from principal development partners, implementing partners from civil society, private sector and public sector. [KNASP 4.5.7]. IOI#12. Annual external audit report [KNASP 4.3.5]; IOI#14. Number of costed annual work-plans developed (by division); IOI#15. Number of civil society and private sector organizations supported [SC 11]; IOI#16. Number of grant proposals received from private sector and civil society per year; IOI#18. Number of public sector organizations supported in mainstreaming. Dropped. Dropped. Dropped. Replaced. Dropped. Dropped. Comments/ Rationale for Change Will be tracked by NACC for project monitoring. Will be tracked by NACC for project monitoring. Will be tracked by NACC for project monitoring. Replaced with POI#2. Will be tracked by NACC for project monitoring. No consistent data flow on all elements. * Indicate if the indicator is Dropped, Continued, New, Revised, or if there is a change in the end of project target value 22

31 REVISED PROJECT RESULTS FRAMEWORK Project Development Objective (PDO): (a) expand the coverage of targeted HIV and AIDS prevention and mitigation measures; and (b) expand access to bed nets among targeted people living with HIV and AIDS and other households in malaria risk areas. Baseline Cumulative Target Values 20 Unit of Original Progress PDO Level Results Indicators 18 Measur Project To Date Frequency ement Start (2010) 19 (2007) POI# 1. Proportion of recipients of subproject grants scoring Very Good or Excellent for target achievement in Percent N/A Annual the annual performance audit. during the year. POI# 2. Number (cumulative) of civil society/private sector grants supported Number 3,637 5,637 7,137 8,400 Annual 0 by the end of the year. POI# 3. Proportion of sexually active youth who report having had sex with a non-spousal, non-regular partner in the past 12 months. POI# 4. Proportion of youth aged reporting condom use in the last sexual encounter with a non-regular partner (of those reporting sexual intercourse with a non-regular partner in the last 12 months). POI# 5. Percentage of households in malaria endemic areas in the districts supported by the TOWA Project that have at least one ITN. Core Percent Percent F=30%, M=84% (DHS 2003) F=24% M=47% (DHS 2003) Percent 27.6% F=33%, M=83% (DHS 2008) F=39.5%, M=64.6% (DHS 2008) Data available January 2011 Not applicable Not applicable F=25% M=80% F=55% M=75% F=20% M=70% F=55% M=75% 60% 80% N/A Data Source/ Methodology TOWA Performance Audit NACC Program Reports Responsibility for Data Collection NACC/ Performance Management Agent NACC Five years KDHS NACC Three/Five years Three years or Three months after net KAIS/ KDHS Malaria Indicator Survey (MIS) or Post- Distribution NACC Malaria Division Comments Computed from quarters for which an audit was conducted in the year Targets based on about 10% reduction every three years and apply if a KAIS or DHS will be done in 2012 or 2013 Targets based on 10% and 15% planned increase for female and male respectively, every three years. These KNASP III projections are for the same indicator but covering yrs. (Targets apply if a KAIS or DHS will be done in 2012 or 2013) Malaria Control Division plans that by 2013, there should be universal coverage (100% net ownership and a use rate 18 Please indicate whether the indicator is a Core Sector Indicator (for additional guidance please see 19 For new indicators introduced as part of the Additional Financing, the progress to date column is used to reflect the baseline value. 20 Target values should be entered for the years data will be available, not necessarily annually. Target values should normally be cumulative. If targets refer to annual values, please indicate this in the indicator name and in the Comments column. 23

32 distribution Evaluation of 80%) POI# 6. Number of individuals provided with counseling and testing services (through TOWA) in the past 12 months. Beneficiaries 21 Project beneficiaries, 1. Number of individuals with access to an ITN. 2. Number of youth reached with HIV prevention messages. 3. Number of HIV+ clients provided with palliative care. Number 0 320, , , ,045 Annual Number N/A 250,000 4,100,000 5,100,000 Annual Number See IOI#7 Annual Number See IOI#8 Annual NACC Reports Malaria Div NACC Reports NACC Reports NACC Malaria Div NACC NACC The first 500,000 nets distributed to PLHIV while the subsequent 2.3 million nets are used for achieving universal coverage of one net for two people (i.e. 2.3 million nets x 2= 4.6million). See IOI#7 See IOI#8 Intermediate Results and Indicators Intermediate Results Indicators Core Unit of Measur ement Baseline Original Project Start (2007) Progress To Date (2010) Target Values Frequency Data Source/ Methodology Responsibility for Data Collection Comments Intermediate Result 1: NACC effectively coordinating program implementation IOI# 1. Level of stakeholder satisfaction with NACC. Percent Annual Based on the biannual Stakeholder Satisfaction Survey NACC 21 All projects are encouraged to identify and measure the number of project beneficiaries. The adoption and reporting on this indicator is required for investment projects which have an approval date of July 1, 2009 or later (for additional guidance please see 24

33 Intermediate Results and Indicators Intermediate Results Indicators Core Unit of Measur ement Baseline Original Project Start (2007) Progress To Date (2010) Target Values Frequency Data Source/ Methodology Responsibility for Data Collection Comments Intermediate Result 2: Strengthened NACC accountability and financial management IOI# 2. Issues in NACC s qualified report to be addressed by end of March of following year Yes/No N/A Yes Yes Yes Yes Annual Standard Financial Audit NACC Audit conducted by December. Issues then to be addressed within three months. Intermediate Result 3: Operational M&E system in use for planning, project design and implementation IOI# 3. The proportion o f KNASP M&E indicators included in the annual M&E report, disseminated and available on time for the JAPR. Percent Annual NACC program reports NACC Intermediate Result 4: Capacity of implementing partners to respond effectively to report through the normal M&E tools IOI# 4. Proportion of registered CBOs reporting through COBPAR at the time of the JAPR. Percent Annual NACC program reports NACC Intermediate Result 5: Strategic and targeted programs implemented effectively through civil society and the private sector IOI#5. Number of persons who undergo testing and counseling in the last 12 months. (national, from NASCOP). IOI#6. Number of couples counseled and tested under the TOWA projectup to the end of the reporting year. Number 949,250 3,471,567 4,060,000 4,236,000 4,500,000 Annual Number NA 11,759 8,827 6,305 6,305 Annual NASCOP program reports NACC program reports NACC NACC The target for 2012 is based on KNASP III. Since targets can only be known after grant award, these targets are arrived at by blowing up the current (2010) achievement using the same rate of increase in number of grants awarded over time (i.e. 25

34 Intermediate Results and Indicators Intermediate Results Indicators IOI# 7. Number of youth reached with BCE messages in the past 12 months. IOI# 8. Number of HIV+ individuals provided with Home-Based Care (Palliative care) through the TOWA interventions in the past 12 months. Core Unit of Measur ement Baseline Original Project Start (2007) Progress To Date (2010) Target Values Frequency Number NA 649, , , ,232 Annual Number NA 6,496 4,876 3,483 3,483 Annual Data Source/ Methodology NACC program reports NACC program reports Responsibility for Data Collection NACC NACC Comments targets set proportional to the number of grants where CfP3 grants=2730, CfP4 grants=1950, and CfP5 grants=1950 whose results will be realized in 2011, 2012, and 2013 respectively) Same as under beneficiaries section Same as above Intermediate Result 6: Improved supply of essential commodities IOI# 9. Number of male and female condoms distributed in the last 12 months (national, from NASCOP). IOI# 10. Number of long lasting insecticide treated malaria nets purchased and/or distributed. Number 144,000, ,400, ,000, ,000, ,000,00 0 Annual Number 0 500,000 2,300,000 2,800,000 N/A Annual NASCOP program reports Malaria program reports NASCOP Division of Malaria Control Cumulative 26

35 Annex 2: Operational Risk Assessment Framework (ORAF) KENYA: Total War Against HIV and AIDS (TOWA) - Additional Financing Project Development Objective(s) The Project Development Objectives are to: (i) expand the coverage of targeted HIV and AIDS prevention and mitigation measures; (b) expand access to Bed nets among targeted people living with HIV and AIDS and other households in malaria risk areas. Key Results Indicators: POI# 1. Proportion of recipients of subproject grants scoring Very Good or Excellent for target achievement in the annual performance audit. during the year. POI# 2. Number (cumulative) of civil society/private sector grants supported by the end of the year. POI# 3. Proportion of youth aged reporting condom use in the last sexual encounter with a non-regular partner (of those reporting sexual intercourse with a non-regular partner in the last 12 months). POI# 4. Proportion of sexually active youth who report having had sex with a non-spousal, non-regular partner in the past 12 months. POI# 5. Percentage of households in malaria endemic areas that have at least one ITN. POI# 6. Number of individuals provided with counseling and testing services (through TOWA) in the past 12 months. Risk Category Risk Rating Risk Description Proposed Mitigation Measures Project Stakeholder Risks Medium- I The risks are failure of partners and government to effectively coordinate their support for the KNASP and the National Malaria Strategy ( ). This may stretch NACC Division of Malaria Control and the Government in different directions and potentially disrupt TOWA project implementation. The Project will continue to support ongoing stakeholder coordination through the ICC for HIV AND AIDS and annual Joint HIV AND AIDS program reviews which will provide strategic directions through a consultative process. The other partners supporting KNASP will be invited to participate in the monthly NACC/WB TOWA review meetings. The malaria ICC, which has membership of key stakeholders, will provide stewardship for the implementation of malaria strategy A National Steering committee chaired by Head of Department of Disease Prevention and Control consisting of provincial administration, Ministry of Education and partners 27

36 Risk Category Risk Rating Risk Description Proposed Mitigation Measures Implementing Agency Risks Capacity Governance Medium-I Weak institutional capacities of implementing agencies, especially at the district, constituency and community levels, may adversely impact achievement of PDO NACC may lose its focus on the priorities in the Governance and Anti-Corruption Plan and is slow in following through the implementation of agreed actions especially those related to citizen s voice and actions against entities involved in wrong doing. will provide oversight for implementation of the Plan of action for mass distribution of Bed nets. The ongoing support for local institutional capacity building will be further strengthened through the Additional Financing to ensure: Enhanced staffing of FMAs to improve efficiency of and communication with the CBOs Putting in place Regional Facilitating agencies to provide hands on support to CBOs Leveraging support provided by DFID through the National Facilitating Agency Hands on FM training by WB for NACC and KENAO auditors. The TOWA design included major governance strengthening measures such as Results oriented and performance based award mechanism for grants; Limiting participation in the grant mechanism to CBOs with established track records; Introduction of transparent grant award decision making process The implementation of the GAAP will be closely monitored with focus on key governance indicators such as Effectiveness of social accountability mechanisms including hotlines and local disclosure of information on grants provided to CBOs Timeliness and adequacy of response to audit reports and recommendations Timely submission of IFRs and compliance with disbursement procedures Administrative and legal actions taken against agencies involved in wrong doing. 28

37 Risk Category Risk Rating Risk Description Proposed Mitigation Measures Financial Management - The Bank will continue to hold monthly joint review meetings, plus periodic reviews of the FMA and provides ongoing financial management and procurement training when necessary. Entity Level Risk Funds are not used for the purposes intended and not accounted in time thereby reducing the funds available for eligible beneficiaries and activities causing reputational risk for the project. NACC has hired 3 institutions to strengthen its oversight arrangements over the CDD. They include the Financial Management Agent, Procurement Monitoring Agent and the Performance (Value for Money) Auditor. Project Level Complex project design Weak FM arrangements and Accountability concerns at community level NACC had developed a comprehensive FM action plan and they are in the process of implementation. IAD Treasury and Bank FM reviews have unearthed significant fiduciary control and accountability lapses that have potentially resulted in the misapplication of project funds. Fraud and Corruption High The sector is vulnerable to fraud and corruption. Particular risk areas include contract award and management and decentralized procurement. A large part of this additional finance request will be to continue with the grant awards to CSOs with capacity limitations. Strong fiduciary risk mitigation mechanisms have been established under the project are working well. These include: Independent FMA for the grant-making element of the project ICVA to check the compliance of proposals with the terms and conditions of the grants Performance Auditor to undertake a combined financial and technical audit to assess use of money for intended purposes and value for money Independent PMA to monitor procurement at different levels, and 29

38 Risk Category Risk Rating Risk Description Proposed Mitigation Measures Independent external financial auditors Using services of UN agencies for procurement of commodities Project Risks Design Medium-L The risks in implementation of the KNASP (III) include: Getting endorsement and active engagement of all program stakeholders in the fight against HIV and AIDS Strengthening of the NACC and its decentralized agencies at provincial, district and constituency levels Putting in place effective systems to supply Bed nets and implementing social marketing strategies to promote the use of supplied nets. Social and Environmental Medium-I HIV and AIDS continues to have a significant social impact on communities and households and the development of the country as a whole. In particular, the Indigenous populations may be left out. Poor implementation of Health care Waste Management Practices may enhance HIV risks to With most of the fiduciary agencies now in place, there are regular checks and compliance verification including systematic procurement reviews. Increased attention will be given to address the risk of corruption at decentralized levels amongst the project sub implementers through enhancing demand side governance by promoting transparency and community oversight. For example, all CACC offices display a list of the grants approved and released to CBOs and a transparent grant award process and Operations Manual are in place. A Joint AIDS Program Review takes place each year (at national, provincial and district levels) which reviews progress and sets priority interventions which in turn guide the areas of focus for the CFP which are funded by the project. Regional facilitating agencies, additional staffing for FMAs and enhancing the demand side accountability are expected to improve institutional capacities and reduce any disruptions or delays in implementation. The Division of Malaria Control has prepared a detailed plan of action for mass distribution of Bed nets supported by a comprehensive logistics plan and a National Steering Committee will provide oversight for its implementation. The project will have strong emphasis on community based initiatives to sensitize communities to minimize social exclusion. An Indigenous People s plan has been prepared to ensure consultations and improve access to preventive services. 30

39 Risk Category Risk Rating Risk Description Proposed Mitigation Measures healthcare workers and even general population Program and Donor Low As no co-funding is considered for activities planned, there is no risks associated with other donor contributions. Also, the project will support distribution of the insecticidal bed nets in malaria endemic areas A well established government managed TOWA mechanism is expected to attract new funding and achieve greater harmonization in future. Delivery Quality Low The project has successfully set in place the institutional arrangements, management procedures and systems for channeling funding and providing capacity building support. As the project moves beyond its third year of implementation a growing emphasis should be given to issues around quality and cost effectiveness of outcomes and results and less so on inputs, outputs and coverage of the services supported by the project. There are no new components for the Additional Financing work which will affect the delivery quality. The next phase should keep to original TOWA design and will give greater importance to as the quality and cost effectiveness of services supported by the project. By helping NACC to demonstrate strong results from this project we hope that they will be successful in mobilizing other funding to be channeled via the same mechanism. This will ensure a continuity of the project interventions once the WB funding comes to an end. Overall Risk Rating at Preparation Medium-I Overall Risk Rating During Implementation Medium-I Comments 31

40 Annex 3: The MDGs, HIV and AIDS Epidemic, Strategy, Service Challenges and Financing KENYA: Total War Against HIV and AIDS (TOWA) - Additional Financing 1. Kenya is on track to achieve some MDGs, but greater efforts are needed to achieve them all, especially those related to health. On the basis of recent trends, it appears that Kenya is likely to achieve: (i) MDG6 (combat HIV/AIDS), as Kenya has been able to sharply reduce its adult HIV prevalence rate, due in part to successful awareness-raising efforts that have lead to less risky behavior (ii) MDG 2 (achieve universal primary education); and (iii) one target of MDG 3 (promote gender equality). However, MDG 1, MDG 4 and MDG 5 are still off track and are unlikely to be met, one of the major challenges is the weak health systems and service delivery. HIV and AIDS Epidemic. 2. The HIV and AIDS epidemic continues to be a disaster in Kenya. It is threatening the socio-economic development of individuals, communities and the country at large; it is a destabilizing force in all sectors of the economy; and it is affecting a wide cross-section of the community (children, youth, men and women). The Kenya AIDS Indicators Survey (KAIS, 2007) estimates the average HIV prevalence among the general population aged at 7.4 percent and the number of people living with HIV between 1.3 million to 1.6 million. The KAIS findings together with the Kenya Demographic and Health Survey (KDHS ), have generated a wealth of evidence on the mixed and somewhat complex nature of the HIV epidemic in Kenya. The surveys confirmed that women still have a higher prevalence compared to men: women 8.4 percent against 5.4 percent for men. New infections are estimated at 130,000 in 2009 for adults (15+). The HIV Prevention Response and Modes of Transmission Analysis (2009) found out that the largest proportion of new infections (44 percent) occur among men and women who are in a union or in regular partnerships. 20 percent occur arise between men and women through casual sex. Men having sex with men (MSM), and prisoners contribute about 15 percent of new infections; sex workers and their clients account for 14 percent; injecting drug use accounts for 3.8 percent; and facility related infections are 2.5 percent. 3. Kenya has 2.4 million orphans, which makes up 12 percent of all children. Of the total orphans it is estimated that HIV has killed either one or both parents of 700,000 children. An OVC policy has been developed and a national plan is also in place. A national OVC cash transfer program has been scaled up to cover 47 districts. To date 100,000 households receive support through this program, which is jointly funded by the World Bank, UNICEF and the Government. The World Bank contribution is US$ 50 million over a 4 year period, running from There are currently 380,000 people on ARV treatment in Kenya. There has been a rapid expansion from 20,000 in 2005 to 380,000 today. The target for 2009/10 was to have 640,000 adults and 79,000 children on treatment. So treatment is still only accessible to about 40 percent of people who need it. The bulk of this expansion has been supported by PEPFAR, the Government and the Global Fund. 32

41 5. Malaria also continues to be a huge problem in Kenya. It is a major contributor to outpatient cases, child hood illnesses, poor outcomes in pregnancies and low vitality in the workface. The Government, through the Ministry of Public Health and Sanitation, is committed to controlling this disease. In the past LLITN distribution was concentrated on Children under 5 and pregnant women. In the new Malaria Strategy , emphasis is on Universal Coverage (defined as 1 net for every 2 persons). The Government has a good track record of success in its bed net program and is giving it greater priority, although further funding is needed to help it reach the ambitious targets. HIV and AIDS Strategy 6. The Kenyan National AIDS Strategic Plan (III) for 2009/ outlines the Government s plan for the delivery of universal access to HIV AND AIDS services. The main KNASP targets are to: (i) reduce the number of HIV infections by 50 percent by 2013, (ii) reduce AIDS related mortality by 25 percent by 2013, (iii) reduce HIV morbidity, and (iv) reduce the socio-economic impact of HIV at household and community level. The KNASP III has the following five outcome targets: (i) reduce risky behavior among the general infected, most at risk and vulnerable populations; (ii) increased and sustain the proportion of eligible PLHIV on care and treatment; (iii) strengthen health systems to deliver comprehensive HIV services; (iv) mainstream HIV in sector specific policies and sector strategies; (v) help communities respond to HIV within their local context; and (vi) aligned and hold accountable KNASP stakeholders. 7. In the area of prevention, the KNASP III identifies the following as key challenges in addressing HIV/AIDS: (i) the high levels of HIV in marriage and stable partnerships; (ii) the feminization of HIV; (iii) the low level of knowledge of HIV status (80 percent of those infected do not know); (iv) low condom use (condom use during high risk sex is 35 percent for women and 52 percent for men); and (v) uncertainty in targeting Most at Risk Populations, due to an absence of a clear legal framework (particularly for commercial sex workers, MSM, and intravenous drug users). Overall, the KNASP is technically sound and responds to the latest evidence on AIDS in Kenya. The challenges now are to implement the strategy, to mobilize financing, and coordinate the large number of stakeholders to deliver the agreed targets. HIV and AIDS Financing 8. The sustainability of HIV and AIDS financing is a major concern for Kenya. In 2009/10, Kenya has about US$630 million available in donor support to help the fight against HIV/AIDS, including from the World Bank through the TOWA. The bulk of external financing (US$510 million) is from the US Government, and it is primarily channeled outside of government systems. The second biggest funder for HIV and AIDS is the Global Fund (GFATM), with US$32 million allocated for 2009/10. However, Kenya has generally not been successful at mobilizing large resources from the GFATM. The Round 9 National Strategy Application for HIV and AIDS was unsuccessful. Efforts are now underway to submit an 33

42 HIV proposal for Round 10; but there are presently no new GFATM funds for HIV or Malaria in the next two years. DFID s has been considering support to TOWA as part of its Kenya Harmonized HIV and AIDS Program 22 since it started, but the proposed mechanism for support has never been approved by the ministers. The commitment to jointly co-finance the TOWA program (at 28 percent of the total) was derailed by the post election violence in 2007 and the resulting uncertainty of channeling funds via government systems. DFID s initial reaction was to watch and wait as the World Bank and NACC launched the TOWA and set in place the fiduciary strengthening measures. More recently DFID has been in discussion with the World Bank and NACC about possible alternative channels, while maintaining the same TOWA objective. In the meantime DFID continues to fund HIV work outside Government (including through the UN and AMREF). The uncertainty about how to proceed on the TOWA component has now been combined with a change of government in the UK and a process to review of the bilateral aid program, which will run until November Despite this ongoing uncertainty regarding the financing, there is a shared opinion by DFID and the World Bank of the NACC governance issues, and successes and challenges of TOWA to date. DFID has been consulted and is in support of the Bank s Additional Finance request. 9. All development partners are committed in principle to a harmonized approach to support the KNASP III, but progress has been slow in operationalizing it. In part, this is due to broader country level concerns, especially on governance, which delayed the initial cofinancing plans for the TOWA. At present, while some development partners appropriately exploiting and utilizing their respective comparative advantages in providing assistance, there is continued risk aversion to using Government systems to channel funding. In particular, the plan to establish a pooled funding mechanism to help coordinate donor support on HIV and AIDS has not moved ahead as originally anticipated, and more time is needed for development partners to be encouraged to make this shift. There is, indeed, a huge opportunity now to use the established government-managed TOWA mechanism to attract other funders to achieve greater harmonization in future. 22 This program consists of three components: TOWA (funds through WB/GoK), AMREF (support to CSOs) and support to the UN joint program on AIDS. 34

43 Annex 4: Governance Assessment KENYA: Total War Against HIV and AIDS (TOWA) - Additional Financing I. Background to the Risk Assessment of the TOWA. 1. The NACC was established in 1999 with the mandate to coordinate and manage the multi-sectoral approach to the national HIV and AIDS Program, providing policy direction, and mobilizing resources in support of implementation. The NACC was one of the first two recipients of the first IDA-supported Multi-Country AIDS Program for Africa (MAP), with the approval of US$50 million under the Kenya HIV and AIDS Disaster Response Project (KHADREP). In its early years, the NACC made progress in a number of areas: (i) it promoted greater inter-sectoral coordination of the HIV and AIDS response; (ii) it oversaw the development of policies in key areas, including OVC and mainstreaming gender issues; and (iii) it played an instrumental role in attracting new sources of funding and in distributing grants to a variety of community and other organizations. 2. However, the NACC soon faced significant criticism. In the early 2000s, various challenges soon became evident. These included various weaknesses in the operational structure of NACC (especially with the dissolution of the Provincial AIDS Control Committees and District AIDS Control Committees) which affected its ability to review and supervise the actual allocation of grants and their use. In 2002 and 2003, other serious problems emerged, including: (i) corruption charges leveled against senior officials; (ii) political interference in the grantmaking procedures; (iii) a general failure by the NACC management to address fiduciary risks in the organization; and (iv) a perceived unwillingness to allow and enable the Constituency AIDS Control Committees (CACCs) to function effectively at the peripheral level. 3. In response to the initial wave of criticism, the Government started to recognize and address the governance issues in the NACC. First, the Government commissioned a Joint Institutional Review (JIR) of the NACC structure and organization. Second, the Efficiency Monitoring Unit (EMU) of the Office of the President conducted an investigative review of the NACC. The EMU report noted serious irregularities in the implementation of the KHADREP, including instances of both negligence and clearly fraudulent practices in FM, procurement, payment of allowances to staff and consultants, and in the award and management of grants, to both CBOs and to public sector ministries. 4. Nevertheless, the governance concerns continued, and the Government itself commissioned an independent Forensic Audit of the KHADREP in April 2005 to verify the situation. The report of this Forensic Audit identified evidence of serious shortcomings in the governance and control environment in the KHADREP. From the middle of 2005, the NACC developed and progressively started to implement an Action Plan, based upon the findings of the Forensic Audit. The Action Plan includes: (i) full recovery of inappropriate payments to staff, and legal action against staff found to have committed fraudulent activities; (ii) suspension of the second NACC Director; (iii) investigation of 128 NGOs suspected of possible fraudulent activities; (iv) the establishment of anti-corruption hotlines; (v) improving the effectiveness of the Council in oversight matters; (vi) introducing fraud risk management for both the Council 35

44 and the senior staff of NACC; (vii) re-defining responsibilities and establishing clear mandates for the Audit Committee and the Finance and Administration Committee of the Council; (viii) development of codes of conduct for NACC and the Council, and declaration of assets; (ix) competitive recruitment of staff; (x) the signing, public disclosure, monitoring and satisfactory implementation of performance contracts; (xi) strengthened FM expertise in the NACC; (xii) the development of a communications strategy to ensure increased social accountability (xiii) the institution of independent and effective internal audit capacity; (xiv) strengthened governance mechanisms for CACCs and AIDS Control Units (ACUs); and (xv) a strengthened M&E system, with emphasis on results-based performance. 5. In early 2006, the Government requested the World Bank INT Department to conduct a DIR of the KHADREP, the report of which was delivered to the Government in September The DIR confirmed the earlier findings of the Government s own investigations and the Forensic Audit, concluding that the KHADREP had strong indicators. that were consistent with potential fraud, corruption and collusion. The review of the NACC s internal procurement found indicators of collusive practices, biased bid evaluation and fraud. The DIR Team s FM review also found severe weaknesses in the NACC s internal control environment, accounting procedures, staff capacity and record keeping. In addition, the DIR Team found strong indicators of irregularities within the small number of KHADREP s grantfinanced activities that it reviewed. The pace of implementation of the Action Plan picked up significantly throughout 2006, with a new management team appointed in the NACC. With the stimulus of the DIR work, a new NACC Director and senior managers were appointed, with a clear mandate from the Government and NACC Board to intensify and accelerate the implementation of the Action Plan. II. Governance and Risk Mitigation Strategy of the TOWA 6. The planning for the TOWA was based on a clear assessment of the governance risks in the sector, as experienced in the KHADREP. In summary, these risks included: (i) the existence of syndicated and organized fraud in some community-based organizations; (ii) a lack of FM capacity within the NACC and CBOs, and hence the difficulty of differentiating between fraud and inefficiency or poor accounting standards; (iii) the involvement of some local Constituency AIDS Control Council staff in fraud; (iv) the probable involvement of NACC at senior levels; and (v) ineffective oversight committees and arrangements. 7. However, there was clear evidence that the NACC was committed to carrying out governance reforms. The indications of this commitment included the suspension of the previous NACC Director, the investigation of officials and grant recipients suspected of fraud, the GAC action plan and adoption of risk management policy, the introduction of performance contracts and wealth declarations, the capacity building program in the NACC, the creation of the Internal Audit Division, M&E strengthening and CACC training. 8. The TOWA design also included some major governance strengthening measures. These additional measures included: (i) a results-oriented and performance-based award mechanism for grants; (ii) limitation on the participation of community-based organizations to those with established track records of performance; (iii) the introduction of transparent decision- 36

45 making processes with full dissemination of information; and (iv) the recruitment of: (a) a new Financial Management Agency (FMA), with revised Terms of Reference (ToRs); (b) an independent compliance verification agency (ICVA) to check compliance at all levels with the laid down rules in the approval of proposals; (c) an independent Performance Auditor (PA) to assess and compare the results verifiably achieved with the results claimed; and (d) an independent Procurement Monitoring Agency (PMA) to verify that procurement is carried out in accordance with agreed regulations and procedures. III. Independent Reviews and Technical Assistance under the TOWA 9. The FMA oversees all aspects of grant management, including managing the grant award process, making financial payments to beneficiaries/subproject grant recipients and collecting and verifying financial and program monitoring data. Beneficiaries, as part of the grant application process, are required to submit quarterly targets per indicator. Funding flows according to a detailed work plans and budgets, linked to the indicator quarterly targets. The FMA has provincial field officers, who are required to build the capacity of the beneficiaries in the initial application process. Further, they collect the progress data and generally are available to help the beneficiaries in project delivery. The main M&E deliverables of the FMA are: (i) a monthly financial report to NACC and (ii) a quarterly progress report, in which all project indicators (and the extent to which project targets have been achieved) are reported on (in the form of tabulated results tables, summarized per CFP priority area). The challenge is the sheer number of CACCs and subprojects involved, which are growing exponentially with every CFP. The main conclusions by the FMA of the work done so far are the following. a. Call for proposal templates- workplan, budgets and performance framework NACC has streamlined the call for proposal process and improvements on the formats for proposal developed have been noted. The NACC decentralized structures (CACCs and DTCs) have been responsible for processing and award of proposals at their respective levels. The Proposal Coordination Office has worked effectively in checking that the requirements outlined in the administrative checklist in the Operations Manual are met before submitting the proposal to the FMA for funding. The initial scope anticipated complete proposals, fully supported with adequate workplans and budget and performance framework. Due to the unanticipated lower capacity of the PSIs, the FMA staff have spent additional time assisting the Beneficiaries to improve the workplans and budgets. This was not initially budgeted for, but it is important to synchronize reporting (both financial and technical) with the workplan and budget. b. Provision of adequate supporting documents to effect the signing Sub-Project Financing Agreements (SFAs). Although clear guidelines have been provided by NACC during the proposal development process, beneficiaries still struggle to get the necessary documents to effect the signing of the SFAs. 37

46 The initial scope did not envisage the FMA spending extra time and cost in collecting and assisting the implementers complete the SFA and supporting certified documents. Follow up on the opening of TOWA designated bank accounts, and submission of valid registration certificates and officials IDs takes considerable amount of time. Left on their own beneficiaries take longer than necessary to get these documents, and this would delay the funding of the sub projects. This was not initially envisaged, given the limited capacity of the PSIs. c. Submission of accountability reports on time, in the right format and with the right supporting documents. As mentioned above, the capacity of the beneficiaries to correctly prepare accountability reports was lower than anticipated. In the initial scope and understanding of the ToRs, it was expected that would submit monthly financial accountability reports to the FMA. However, the capacity of the Beneficiaries to effectively provide accountability reports has been so low that the FMA officers have had to visit the Beneficiaries on a monthly basis to assist in preparation of their accountability reports and ensure they are submitted promptly. This takes time and puts pressure on the anticipated number of FMA officers on the ground. d. Accelerated disbursement within a shortened period. In the initial scope, it was anticipated that the proposals would be evenly distributed over the initial four year period. This has not been the case, and the FMA is now required to handle double the number of sub projects per call for proposal within a reduced time period. However, due to the initial delay in starting the project, the concentration of the disbursements and accountability now is higher. At the same time, the expected compliance with workplans and budgets, SFA supporting documentation and accountability will not change. About 5,000 new sub-projects have to be managed within a shortened duration of the contract and the ongoing sub- projects also have to be managed effectively. This requires more resources to ensure higher disbursement rate and adequate accountability and capacity building of the PSIs. 10. The ICVA reviews the selection of organizations for each round of Call for Proposals and whether there has been compliance with the agreed procedures. In particular, it reviews the quality of CSO proposals received, and CACC compliance with guidelines and review and evaluation criteria. The main M&E deliverable of the ICVA is a report, after each CFP round has been adjudicated and proposals received, that details the extent to which the organizations which were awarded the grants under that CFP round, were objectively selected and whether they implement the priorities in line with the CFP. To date, three reports have been submitted (as there have been three rounds of Calls for Proposals). The findings of the compliance verification of the Round 3 call for proposals are summarized below: 38

47 a. Compliance with the call for proposals guidelines and process has improved. Compliance with the CFP guidelines on communication improved in Round 3 compared to Round 2 CFP. Compliance with proposal receipt guidelines is also improving. Compliance with the proposal review process was high. There was also marginal increase in the number of CACCs and DTCs with minutes of meetings that approved proposals. The number of approved proposals submitted to the FMA during the first pass improved, in contrast to Round 2 which had very many proposals referred back to CACCs and DTCs for additional information. The percentage of proposals forwarded to FMA (without being referred back to CACC and DTCs for revision) increased from 30% in Round 2 CFP to 73% in Round 3 CFP. b. There was a remarkable improvement in compliance regarding eligibility criteria. The number of non-compliant applicants has reduced significantly. There was a significant improvement in the number of applicants who developed and attached their proposals, work plans, targets, application forms, procurement plans and capacity assessment as needed. However, a significant proportion of the approved proposals still did not comply with the eligibility and the evaluation guidelines. For example, proposals that had no supporting bank statements or bank accounts that had been operational for more than 12 months were approved. Also, a large proportion of the approved proposals were not supported by a list of the organization s senior officials and their duties clearly stated. In addition, a significant proportion of the approved proposals did not articulate a clear project methodology, and monitoring and reporting mechanisms. c. There have been changes in procedures over the three calls for proposals. The design of CFP changed from Round 1 to Rounds 2 and 3. New formats and requirements were introduced. The number of priority areas increased over the CFP Rounds implemented so far. The number of proposals to be approved per CFP has also increased from Round 1 to Round 3. Organizations still implementing previous rounds are not eligible to apply. Consequently, there may be a limited number of CSOs in some constituencies available to apply for new rounds announced, because most have been contracted in earlier rounds and still implementing their grants. The guidelines for the CFP have largely remained the same across the three rounds. The review and evaluation criteria have remained the same over the three calls for proposals and were applied at all levels, irrespective of the differing capacities of the CSOs to respond to the CFPs at the three levels. 39

48 d. Recommendations. There is a need for NACC to start linking the performance of funded organizations to the CFP evaluation results, with a view to assessing whether applicants rated highly during the proposal evaluation exercise also had better performance during project implementation. The framework for developing the CFP should be evaluated to assess its effectiveness and change strategy as appropriate. 11. The verification and evaluation of project performance is done by the PA, which evaluates the overall project performance on a quarterly basis. The audit scope focuses on financial accountability and value for money, PSI capacity and compliance assessments. The main M&E deliverable of the PA is a quarterly performance audit report, based on detailed audits drawn from random sampling of PSIs, and a ranking of Beneficiaries as being gold, green, amber or red. The most recent report of the PA assessed 313 PSIs, more than half the total pool. Together with AMREF and NACC, the PA developed a tool to classify each PSI as gold, green, amber or red. The PA annual report also includes a risk assessment, and has identified 10 major risk areas for TOWA program implementation. The main conclusions and recommendations by the PA of the work done so far are the following. Beneficiaries with capacity deficiency in technical, management and financial skills should have their capacity built. Beneficiaries that are ranked red, suggesting financial misappropriation, should be subject to legal action being undertaken. There should be bad-listing of the Beneficiaries that are found to be performing poorly. Supportive supervision should be intensified to minimize non-compliance. Beneficiaries that have completed implementation and been cleared through the performance audit report should be issued with a letter of completion. Beneficiaries that have performed excellently (Gold) should be considered for funding at a higher level. 12. The verification and auditing of the procurement processes is done by the PMA, which reviews procurement at the NACC, PSI and national level implementation levels. Its function is to ensure that all procurement regulations, as per World Bank specifications, are followed, with no declarations of mis-procurement. The main M&E deliverable for the PMA is an annual Procurement Review Report (the first one was produced in 2010, for the period 2008/09. The main conclusions by the PMA on the areas where strengthening is needed include the following. a. Assessment of Quality, Transparency and Efficiency of Procurement Procurement Planning At the NACC level, the Procurement Plan is prepared in a consolidated manner for funds of TOWA, GOK and other sources of funding, and is in line with the format of the World Bank. 40

49 The procurement plan is prepared on the basis of the annual work plans, but does not take into account any outstanding procurements and backlogs of previous years. For the NLIs and Beneficiaries a budget for 12 months is prepared, with a quarterly disbursement limit, along with the procurement methods prescribed. However time frames for important procurement activities like the submission of quotations, evaluation, award of contract/lpo/lso and delivery etc are not reflected. Preparation of Bidding Documents Bidding documents, at the NACC, for consultancy services are modelled on the World Bank formats. For local shopping, the formats of QCL are based on the Procurement Act and Regulations. At the NLI/PSI level for local shopping, the formats of QCL are based on the accounting, procurement and reporting manual. However, the delivery period is not specified in the RFQ issued to the bidders. Instead the bidders are required to specify the delivery period. The format for RFQ by local shopping mode at the Beneficiaries does not have a deadline for submission of quotes since it was informed that quotations were to be obtained by hand. Most Beneficiaries do not send out the RFQs. Bidding Process (Advert - Bid Opening) Advertisements as per regulations are appropriately published in local newspapers for QCBS consultancy contracts by NACC. All other procurement at NACC and at the PSI and NLI level are through local shopping. Bid evaluation/ Contract award At NACC level, barring a few procurements for design and supply items the LPO/LSO are issued to the lowest bidder. For QCBS consultancy contracts, shortlist, evaluation and contract award have been prior reviewed. Over 50% of the Beneficiaries surveyed do not make comparative statements as prescribed in their procurement regulations. A few Beneficiaries are resorting to Direct Contract (DC) without proper justification and on the basis of inadequate number of suppliers. Besides, DC items are procured against cash. Contract preparation and signing Over 15% of the Beneficiaries surveyed do not issue LPO/LSOs as prescribed in their procurement regulations. All procurements are normally awarded on issuance of proper LPO/LSOs. For consultancy contracts through QCBS at NACC the Contracts are generally prepared in the formats provided in the bidding documents and RFPs. Management of Contract Executions NACC and the NLIs/Beneficiaries were generally noted to make contractual payments promptly on receipt of invoice after ensuring the acceptance of the item 41

50 or services. b. General Observations on Procurement by Beneficiaries and NLIs Procurement by Beneficiaries and NLIs In many contracts, the Beneficiaries did not follow the minimum process for procurement under Shopping such as detailed enquiry, preparation of bid analysis report and recommendation, issue of Purchase Order etc. Instead direct contracts have been placed without adequate justification. Many contracts reviewed in the Beneficiaries seem authentic but the omission of the relevant supportive documents gives an indication of compromising with the procurement process that was followed. Some groups have spent well below the planned budget and the left-over balances have not been explained. Delayed funding has forced some groups to repackage the procurement activities. During almost all the physical inspections, it was verified that the items bought as per the work plan were matching with the specifications and were properly tagged. c. Assessment of the Appropriateness of Organization and Institutional Capacities Organization of Procurement Unit The NACC procurement unit comprises of a Senior Procurement Officer assisted by a Procurement Officer and Procurement Assistants. No major deviations in the procurement process in contracts sampled have been observed. Most NLIs do not have dedicated procurement units. Use of a procurement handbook At the NACC, procurement is regulated by the following: the Public Procurement and Disposal Act 2005 and the Public Procurement and Disposal Regulations 2006, along with - The Guidelines for Procurement under IBRD loans and IDA Credits- May 2004-revised October 2006, and the thresholds specified in TOWA financing agreement dated July 18, The procurements are guided by the TOWA implementation manual where the applicable regulations are explained. At the NLI / PSI levels the procurement methods are regulated by the simplified accounting; procurement and reporting manual for the project sub-implementers receiving grant awards through the TOWA FMA. Record- keeping Overall the documentation and record keeping at the NACC level is adequate and the retrieval of records and data is efficient and systematic. However, at the PSI level, the record preparation is grossly inadequate. In spite of the procurement recording formats being simple, some of the Beneficiaries have not prepared essential reports like comparative statements and minutes of evaluation. Internal Technical and Administrative Controls 42

51 The NACC Tender Committee is the final approval authority for all procurements that are not subject to prior review. At the NLI/PSI level the Directors of the units are responsible for procurement decisions and issue of LPO/LSO. Appeal Mechanism for bidders Exists at the NACC level. The same is described in the Public Procurement and Disposal Regulations As per the records made available, only 2 complaints were noted to have been received for the 3 QCBS contracts reviewed. Does not exist at the PSI level. 13. The Government of Kenya (through the Internal Audit Department) also undertook a risk-based fiduciary review in January 2009 and subsequently an in-depth fiduciary audit review in July The compilation of the draft report was seriously delayed, and it was officially made available to the NACC in July 2010 (although it was informally available to the NACC in September This report looked in detail at both the management of TOWA funds and NACC operations at headquarters level, as well as sub-project implementation in all the provinces. It listed various anomalies and concerns, to which NACC subsequently responded in detail. The main points raised in the risk-based fiduciary internal audit report were reviewed during the Mid-Term Review of the TOWA in September The Bank FM team conducted a further FM assessment of the TOWA project in June 2010, on the basis of which it was noted that the NACC FM arrangements at the headquarters were generally effective. Nevertheless, FM capacity constraints were noted, especially in the staffing of the accounting and internal audit functions. The position of Head of Internal Audit had remained vacant for several months, and some key accounts office positions (including Head of Accounting Department) were not substantively filled and the holders were in an acting capacity only. The FM report also revealed that the internal control systems at the decentralized level (PSIs at constituency level) were rather weak, which had resulted in possible fraud and corruption risks for some of the PSIs. The findings of the Bank s FM team were integrated into the updated GAC Action Plan produced by the NACC in July 2010 (see below). IV. Recent Assessments of Progress in Governance 14. Mid-Term Review Report (September 2009) conclusions. During the MTR, there was a verification of the response of the NACC on the fiduciary issues identified by IAD. It was concluded that most of the issues had been resolved, except for the following which remained outstanding: There were significant delays in accounting of some per diem allowances. Although explanations were provided for most of the ineligible expenditures, where it was noted that the procurement process had led to actual invoices exceeding the Local Service Order (LSO) amounts, it was felt that that further investigations were required to ascertain the eligibility of the expenditures to bring closure to this matter. Petty cash controls remained weak. Huge transactions were still being passed through petty cash, despite having a policy of petty cash not exceeding K.Sh.500,000. It was agreed that petty cash management controls would be enhanced to ensure adherence to policy. 43

52 It was observed that there was inadequate staffing in the Finance Division. NACC management agreed to hire a consultant to do a work load analysis. 15. The action points agreed at the MRT included the following: There is need for an action plan to enhance: (a) the procurement capacity of the procurement unit of NACC for procurement planning, and (b) the oversight arrangement of NACC Secretariat management for monitoring and taking corrective measures against delinquency in procurement implementation. The activities of the PMA and the PA should be expedited. There is need to speed up the signing and payment of the contracts for commodities. There is need to resolve the constraints hampering flow of funds to ACU activities. The recommendations of the ICVA on the CFPs should be implemented urgently. 16. Restructuring paper (August 2010). The overall assessment of the governance situation at the NACC and for the implementation of the TOWA in July 2010, when a restructuring proposal was considered by senior management, was as follows: The general conclusion is that: (i) the fiduciary management arrangements have been successful, and (ii) capacity has been enhanced at national level, although (iii) there are still capacity weaknesses at the decentralized levels. The capacity of the NACC at the decentralized level continues to be weak, especially in the Constituency Agency Coordinating Committees (CACCs), but they will be strengthened by the upcoming capacity development program being supported by the TOWA. Regional Facilitating Agencies (RFA) are now being recruited and will be funded by the Project (with AMREF as the National Facilitating Agency funded by DFID through a parallel project). There will be continued close monitoring of the implementation of the fiduciary strengthening arrangements and the capacity development measures. 17. Additional Financing Concept Memorandum. One month later, when the concept memorandum for the Additional Financing was reviewed, the judgment of the Task Team was as follows: In common with other sectors, the HIV and AIDS sector faces serious challenges of governance, but these are now being addressed with the help of the TOWA Project. It is general felt that the fiduciary management arrangements introduced by the Project have been largely successful, and that capacity has been strengthened and is in place at the national level, even though concerns still exist over weaker capacity at the decentralized levels. The capacity of NACC at the decentralized level continues to be weak, but will be strengthened by the upcoming capacity development program. Regional Facilitating Agencies (RFA) are now being recruited and will be funded by the Project, with AMREF as the National Facilitating Agency (funded by DFID through a parallel Project Currently there are no major governance issues facing the Project, though there are still concerns about capacity and there is need for continual vigilance. The Project has set up strong measures to manage fiduciary risk and strengthen FM of the NACC at national level and also of its implementing partners at the decentralized levels. The fiduciary agencies are fully in 44

53 operation; these include the Financial Management Agency (FMA), Compliance Verification Agency (CVA), the Performance Auditor (PA) and the Procurement Monitoring Agency (PMA). The FMA produces regular reports. Added to this the PMA has recently submitted its first report, along with the Government s Internal Audit Department (IAD) risk-based fiduciary review and in-depth audit review, plus the World Bank s FM supervision review report of June The recommendations from these various reports have been discussed and reviewed in a joint World Bank/NACC intensive capacity development workshop in July 2010 and a summary governance action plan is now in place to allow continued close monitoring of the implementation of the most critical recommendations. The general conclusion is that the fiduciary management arrangements have been quite successful, capacity has been strengthened and is in place at national levels. However, there are still concerns over weak capacity at decentralized levels, delays in moving funds from the designated account at Treasury to the project account at NACC, accountability concerns for some of the CBO s and NGO s at constituency level, some delays in hiring the private audit firms to conduct the audit of the community grants and the need to ensure that the recently augmented staffing of the FMA leads to improved efficiency and communications. V. Going Forward. 18. Revised Governance Action Plan (July 2010). As noted above, the NACC has recently updated its GAC Action Plan, and the following are the main elements. 45

54 Table 9: Governance Action Plan Issue Action Plan July 2010 (i) Capacity Enhancement There is an urgent need to select the capacity building agencies in all the nine regions in the country to conduct capacity building at the grass root level for all the implementers of HIV/ AIDS programs. AMREF has already been selected as the national capacity building agency. (ii) Procurement Procedures There is need to develop a simple and comprehensive procurement handbook that will be incorporated in the Grant s Manual and be used to train Beneficiaries on proper procurement procedures. (iii) Enhancing Social Accountability Public information systems need to be reviewed and gaps identified in how to make this information public, for example, through providing information to the CACC on Beneficiaries funding in advance to enable them follow up on activities being implemented. The CACCs should also publicize information on the funded Beneficiaries and the activities that they are expected to carry out. The toll free NACC hotline number should be publicized to the general public to enable them report on any instances of misappropriation of funds. (iv) Updating Grants Manual The draft grants manual needs to be presented to senior management for approval. (v) Audit Reporting KENAO should be invited to come and discuss the issues raised in the management letter to ensure proper accountability and documentation of funds disbursed to the Special account which KENAO had queried There is need to reconcile the data in Client Connection with that in ERD. (vi) IFR Reporting and Disbursement procedures KENAO needs to review the documents resubmitted to ERD by NACC to rectify the questioned balance of USD of 19,250,000 and issue a clearance letter. Update November 2010 The NACC has appointed one M&E officer per province (with 2 at head office) to support the FMA and improve monitoring of subproject implementation. The selection of the regional facilitating agencies is now underway. A simplified procurement guideline for Beneficiaries has been developed and under review by the Bank. It will be incorporated in the operations manual which is now also under review, and which will be finalized prior to the effectiveness of the additional financing. The training of Beneficiaries on procurement issues is ongoing. Notice boards at CACC and DTC levels have lists of approved projects. The NACC headquarters passes information through its field offices to the CACCs and DTCs on updates on funded projects. The NACC website and newsletters list funding projects. The NACC will review the functionality of its hotline to ensure an efficient complaints handling system. The draft Grants Manual has been distributed to the senior management for their technical input. The NACC has already provided documents and reconciliation for the special account, and KENAO has issued a clearance letter. The reconciliation of the data in the client connection and ERD has been done. The unclaimed balance of US$19,250,000 has been rectified and a clearance letter has been issued by KENAO. An action plan has been agreed upon among all the stakeholders involved in the fund flow process. 46

55 Issue Action Plan July 2010 Audit of the PSI s to be done in line with the Financing Agreement. (vii) FMA Capacity Logistical support offered to FMA field officers has been inadequate The training of Beneficiaries should include procurement procedures Financial reports submitted have been shallow, and more details need to be included in the monthly financial reports to enable NACC to act on such issues as Beneficiaries with accountability issues and unmet targets on time. 100 percent physical verification of reports received by the FMA should be done. There is need to develop a quality assurance checklist that FMA RFOs will use on a monthly basis to verify expenses. Quality Assurance Representatives should be sent to the regions on a monthly basis to provide a second check on reports collected before they are reported as monthly expenses. Update November 2010 NACC has received all the requisitions made. IFRs were re-worked taking into consideration, historical exchange rates as agreed with ERD. Client connection figures have been reconciled with ERD figures KENAO has issued the audit clearance letter in respect of the previously undocumented US$19.25 million. The audits of FY09 PSI grants has been done and KENAO has issued an audit certificate, in line with the provisions of the Financing Agreement. The FMA has increased the number of field officers as agreed during the contract re-negotiation to enhance their logistical capability. The PSIs training has now been enhanced to include the procurement module. The FMA financial reports are now detailed to include Beneficiaries with performance and/or accountability issues. Physical verification of reports received from FMA to ensure quality assurance is undertaken regularly by the NACC finance division. 47

56 VI. Remedies by the NACC for Breach of Contract by PSIs. 19. In addition to the measures in its GAC Action Plan, the NACC has put in place various specific mechanisms to address the risks of project funds being mis-used. The following outlines the procedures that are followed by the NACC in addressing cases where there is suspicion of such misuse, misappropriation or fraud. 20. The initial agreement between the NACC and Beneficiaries contains the following clauses. (a) (b) (c) (d) The PSI agrees to refund disbursements that are unaccounted for, not substantiated, or not expended in conformity with the project budget, which is as annexed to the approved proposal, to the FMA following an official demand by the FMA s authorized official. Payment must be made within 30 days of the date of the letter of demand; provided that in the event the PSI fails, refuses or neglects to refund the disbursements aforesaid, the same shall be recoverable summarily, by the FMA, the NACC or IDA as a civil debt, at the cost of the PSI, without prejudice to any other remedies that the FMA, the NACC or the IDA may have. In the event of misuse of funds or lack of progress in project implementation, the disbursements shall be suspended and investigations carried out by the FMA and/or the NACC. The disbursements may only resume if complete clearance is given for all expenditures made, and if the conclusions are endorsed by the authorized representative of the FMA and the NACC. The NACC may also direct the termination or suspension of disbursement to the PSI if there is reason to believe that the grant funds are not being utilized for the purposes for which they were intended. If after suspension and investigations, the PSI is found to have violated any of the terms of the Agreement and defaulted or is non-performing, the following shall occur: (i) further funding to the PSI shall discontinue; (ii) the PSI and its officials shall be referred to law enforcement organs to assist the NACC or the Government to recover the advanced funds using standard legal mechanisms of similar public funds; (iii) the NACC shall also request the relevant authority to deregister the PSI; (iv) the NACC or the Government may take any other legal action against the PSI, or its officials, as they may deem necessary; and (v) the NACC or the Government may recommend to the Funding Agencies, the bad listing of the PSI and its officials from all future funding 21. Potentially adverse reports with regard to a PSI could originate from several possible sources. These include any of the following: (i) the NACC Project Management and M&E staff at all levels; (ii) the TOWA FMA; (iii) the TOWA PA; (iv) the TOWA Procurement Monitoring Agency; or (v) complaints through the NACC hotline, toll free line and . Complaints through the hotlines and toll free line get to the NACC through the Internal Audit and/or Legal Divisions, whereas complaints through come through the NACC system and are received by the communications team. These complaints are forwarded to the 48

57 Director for appropriate action or to the Audit Committee of Board depending on the nature of the complaint. 22. On receipt of an adverse report, the Director immediately assesses the level of suspicion and the reliability of the source of the complaint or the validity of the report. Once the assessment of the validity of the report/complaint has been made, the Director initiates an audit and communicates with the FMA instructing them to suspend financing until the case is settled. The Director then refers the matter to the Head, Internal Audit, who constitutes an audit team to investigate and provide a report to the Director and the Audit Committee. The team collects all documents that may contain information relevant to the special assignment, which may include: specific payment vouchers, summaries of transactions pertaining to the assignment etc. The team also conducts necessary interviews with beneficiaries and the PSI targeted by the special audit assignment. The audit team then collects data and facts, and performs the necessary tests pertaining to the assignment from relevant documents, files, records of accounting transactions, registers and through interviews and direct observation. The data and facts so collected are logically recorded and analyzed in audit worksheets to enable the auditors form an opinion in form of an observation or finding. The audit team then compiles and discusses their audit findings with a view to determining the materiality of any non-conformance. 23. The next stage of the process is the reporting of the findings. The audit findings are presented and discussed with the PSI under audit, with a view to obtaining appropriate explanations and comments. The audit findings, explanations and comments are recorded in writing and form part of the audit working papers. The audit team leader consolidates all of the audit findings, together with the relevant management responses, and compiles an audit report. The team then hands over the audit report to the Director NACC for discussion and further action. The highlights of the special audit report are also included in the quarterly Audit Highlights Report submitted to the Audit Committee. 24. In the case where the Audit report suggests misuse, misappropriation or fraud with regard to the project funds, the NACC management may take the following actions, considering the auditees response on the issues raised: (i) further funding to the PSI is discontinued; (ii) the PSI and its officials are referred to law enforcement organs to assist the NACC to recover the advanced funds using standard legal mechanisms of similar public funds; (iii) the NACC requests the relevant authority to deregister the PSI; (iv) the NACC takes any other legal action against the PSI, or its officials, as they may deem necessary; and (v) the NACC may recommend to Funding Agencies, the bad-listing of the PSI and its officials from all future funding. Source of Information/Investigation Rated Number of PSIs Financial Management Agency- Risk Manager Suspected Fraud 2 TOWA Performance Auditor/NACC Amber 63 Red 59 Total As of October 31, 2010 the NACC had a list of 124 Beneficiaries with suspected serious project implementation, accountability, governance and/or fraud issues So far, two audits of the 49

58 suspected Beneficiaries have been completed and all of the others are ongoing. For the two completed audits, the NACC management has shared the audit findings with the affected implementers for their comments, which are still awaited. The funding of all of the 124 Beneficiaries has, in the meantime, been suspended, pending the determination of the cases. VII. Revised Procurement Strategy: Procurement of Goods, Works and Consultant Services 26. Procurement under the proposed additional financing would be carried out in accordance with the World Bank s Guidelines: Procurement under IBRD Loans and IDA Credits dated May 2004, revised in October 2006 and May 2010, and Guidelines: Selection and Employment of Consultants by World Bank Borrowers dated May 2004, revised in October 2006 and May 2010; and the provisions stipulated in the Legal Agreement. 27. The additional financing applies to an ongoing project, and the procurement arrangements described in the original project documents would apply in the use of the additional funds. Part of the funds under the additional financing will be used for the procurement of additional bed nets, condoms and TB drugs, through UN Agencies. Although the procurement of commodities using UN Agencies was considered a temporary approach in the initial program, procurement capacity within NACC and KEMSA is still considered weak for specialized procurement, and the possibility of a stock-out in the supply of these commodities would have serious consequences given the HIV prevalence in the country. UNICEF will be directly contracted to supply LLITN owing to its programmatic experience and country presence in the supply of bed nets; in addition, it has recently secured the exclusive rights to supply LLITN worldwide from the manufacturers and has therefore the leverage in terms of pricing and availability. UNFPA and WHO will be contracted to supply condoms and TB drugs respectively by virtue of their competitive advantage being the largest procurers of these commodities globally. KEMSA, a state corporation with the mandate for procurement, warehousing and distribution of medical supplies and commodities in the country will be responsible for the warehousing and distribution of the commodities. The Bank s review and approval process will apply in the procurement of these commodities. 28. The additional financing will also support the operations of the fiduciary oversight institutions which includes the FMA, ICVA, PA and PMA. Additional consultancy services, (strategic reviews, M&E, technical assistance, etc) will also be financed from the fund. 29. Operating Costs. In addition to other incremental operating costs described in the original project documents, the additional financing will support KEMSA s administrative costs for customs clearance and forwarding, warehousing and distribution of commodities procured through UN Agencies to the recipient districts at the rate of up to eight (8) percent 23 of the cost of goods and commodities distributed through it. 23 KEMSA s billing strategy was reviewed and discussed with a view to determining the average transaction costs of customs clearance and forwarding, warehousing and distribution to be financed from the Project s operating cost budget for commodities procured through the UN Agencies. On the basis of comparative costs for similar services levied by the international procurement agencies and KEMSA s supply chain cost analysis, it was agreed that KEMSA be reimbursed at the rate of eight (8) percent of the cost of goods and commodities distributed through it. 50

59 30. Prior-Review Thresholds. Prior-review and procurement method thresholds for the project are indicated in Table 10. Table 10: Procurement Thresholds Prior Review Thresholds Proposed (USD million) Procurement Method Thresholds Proposed (USD million) ICB NCB Shopping QCBS QBS CQS Goods <0.5 <0.05 Works <5 <0.05 Consulting < All Services (firms) Consulting Services (Individual Consultants) 0.1 All 31. Procurement Plan and Procurement Arrangements. Procurement Plan for the project, prepared by NACC, has been reviewed by the Bank and accepted. This plan will be updated annually to reflect the latest circumstances. The World Bank Standard Bidding Document will be used for all ICB contracts and large value consultancy contracts. 32. Risks and Mitigation Measures. The overall risk for procurement is assessed as High. The proposed mitigation measures are summarized below. After the measures have been implemented, the residual risk rating would be Substantial. A simplified Procurement Handbook for use by community based organizations will be prepared. Use of simplified and standardized documentation. Increased oversight through the use of procurement monitoring agency (PMA). Integration of fiduciary management supervision at the National and Beneficiaries levels, with monitoring and evaluation to ensure technical / progress and financial reporting validates project expenditure. Enhance accountability mechanisms at Beneficiaries level. Procurement capacity building at national and Beneficiaries levels. Least Cost SSS 51

60 Annex 5: Detailed Description of Modified or New Project Activities KENYA: Total War Against HIV & AIDS (TOWA) - Additional Financing 1. There are no new project activities which are being designed as part of this Additional Financing and project extension request. The only change is to boost key existing intervention areas, like that of the malaria bed nets, and to ensure continuity of the other program interventions until June The original design of the TOWA project included the procurement of a limited number of bed nets, and there has recently been a reallocation of Project funding to increase the number, but still more bed nets are needed. The plan is also to extend the Project implementation period by 18 months, with associated funding for continued fiduciary strengthening and risk mitigation measures, as well as enhanced Monitoring and Evaluation (M&E) activities. 2. There are no changes in the basic project design: the institutional, FM, procurement or disbursement arrangements for the project. However, there are changes in the increased procurement of bed nets, which are reflected in the financing plan and in the revised results framework. The closing date and implementation schedule have also changed, with an 18 month extension. 3. Approximately US$16 million of the Additional Financing will go to Component A for Governance and Coordination Capacity Strengthening. Approximately US$5 million of this will be to ensure the continuity of the work of the independent fiduciary agents over the 18 month extension period. During this next phase of support, priority will be given to capacity building of the implementing partners. The strategic leadership work of the NACC will also continue to receive support, including the promotion of evidence based management. 4. The bulk of the additional finance requested will be allocated to Component B, which is to support program implementation (US$39 million). US$23.2 million will be allocated to grants to NGOs, CBOs, and private sector based on the CFP s. An additional US$9.5 million will go to the purchase of malaria bed nets and a further US$6.7 million will go TB and condoms (to restore this budget to the original level as was cut during the restructuring). The plans for the mainstreaming work are not to expand any further and only maintain support where there is evidence of clear results having been achieved. Table 11: Breakdown of the Additional US$55m Requested Activity Extra Financing (US$ million) Additional Call for Proposals - Grants 23.2 Malaria Program (Bed nets, Distribution and Other Activities 9.5 Other Commodities including Clearing and Distribution Costs (Condoms and TB drugs) 6.7 Strategic Leadership 6.5 Fiduciary Accountability 4.8 Other Programmatic Expenditure and M&E 4.3 TOTAL

61 Annex 6: Revised Estimate of Project Costs Kenya: Total War Against HIV & AIDS (TOWA) - Additional Financing Costs per Component (US$ 000) ORIGINAL (DFID+WB+GOK) CURRENT (WB) PROPOSED (WB) Expenditure Categories Activity Headings Activity Details TOTALS GoK World Bank DFID World Bank World Bank Component A: Governance and Coordination Capacity Strengthening 29,758 2,000 19,655 8,103 21,805 38,350 Strategic Leadership Sub-total Strategic reviews Sustaining program operations Institutional capacity building Program targeting Strategic Communicatio ns Accountability and verification Financial Management Agent Mid-Term Review JAPR Process 2,000 1, ,000 CACCs Operational Costs 5, ,329 1,373 3,329 3,500 DTCs Operational Costs 1, ,000 FO Operational Costs Minor Works 1, ,000 Council Members Training Training of NACC HQ Staff Training of Field Staff Training of 210 CACCs and 71 DTCs ,500 Training of 4 Pillars and KNASA ,000 Technical support for targeting particular population subgroups (women, adolescents, youth, and other vulnerable groups) ,000 IEC materials, WAD, Advocacy 1, ,500 Contracting of the FMA 13,402 2,000 8,076 3,326 8,077 14,580 3,656-2,588 1,068 3,500 4,850 53

62 ORIGINAL (DFID+WB+GOK) CURRENT (WB) PROPOSED (WB) Expenditure Categories Sub-total Evidence-Based Management Sub-total Activity Headings Activity Details TOTALS GoK Performance Contracting of the Auditors Audit Agent for the External Auditor Procurement monitoring Compliance verification Strengthening regional operations Management information system Monitoring and evaluation Operational research Capacity building of implementing partners Sub-total Needs assessments Technical support World Bank DFID World Bank World Bank Performance Audit 1, ,780 Contracting of the External Auditor to conduct NACC accounts Audit 1,600-1, ,133 1,500 Contracting of an agent for monitoring procurement TA for checking compliance of CACCs, DTCs and National Proposals to CFPs 1,500-1, ,707 3,000 Contracting regional junior consultants ,400 8,506-6,022 2,484 8,172 13,030 Setting-up on a comprehensive MIS for the program ,500 2,478 1,022 2,478 3,500 1, ,000 4,900-3,469 1,431 3,469 5,125 Undertake needs assessment of NGOs/CBOs on national response Strengthening grant performance by provision of technical support for grantees (capacity building and facilitation) 2,800 1, ,982 5,465 2,950-2, ,088 5,615 Component B: Program Implementation Grant Awards Grants to NGOs, CBOs private sector based on CFPs 81,000 57,345 23,655 58,195 96,650 53,000 37,522 15,478 29,752 53,000 54

63 ORIGINAL (DFID+WB+GOK) CURRENT (WB) PROPOSED (WB) Expenditure Categories Mainstreaming Public Sector Programs Activity Headings Activity Details TOTALS GoK Support to mainstreaming in public sector institutions World Bank DFID World Bank World Bank Essential Commodities CFP to Support to the Malaria Program 8,000 5,664 2,336 4,664 3,650 2,000 Condoms 12,000 8,496 3,504 7,400 10,900 TB drugs 4,000 2,832 1,168 1,900 3,630 Malaria Bed nets 4,000 2,832 1,168 14,480 20,900 Clearing and distribution of Essential Commodities (KEMSA Operating Costs) Condoms 1,095 TB Drugs 368 Malaria bed nets 1,107 81,000-57,345 23,655 58,195 96,650 Unallocated ,242 3,000 1,242 GRAND TOTAL 115,000 2,000 80,000 33,000 80, ,000 55

64 Budget per category of expenditure (US$ '000) ORIGINAL (DFID+WB+GOK) CURRENT (WB) PROPOSED (WB) Category Component I Component II TOTALS Component I Component II TOTALS Component I & II 1. Goods 4,550 20,000 24,550 1,168 23,780 24,948 38,310 Setting-up on a comprehensive MIS for the program Monitoring and evaluation 2,000 2, Mid-Term Review JAPR Process 1,000 1, IEC materials, WAD, Advocacy 1,000 1, ,500 Condoms 12,000 12,000-7,400 7,400 10,900 TB drugs 4,000 4,000-1,900 1,900 3,630 Malaria Bed nets 4,000 4,000-14,480 14,480 20, Works 1,464 1, ,000 Minor works 1,464 1, , Services 9,156-9,156 8,632-8,632 14,180 Contracting of the FMA 3,656 3,656 3,500-3,500 4,850 Contracting of the Audit Agent for the Performance/Value for Money Audit Contracting of the External Auditor to conduct NACC accounts Audit Contracting of an agent for monitoring procurement. 1,250 1, ,780 1,600 1,600 1,133-1,133 1,

65 ORIGINAL (DFID+WB+GOK) CURRENT (WB) PROPOSED (WB) Category Component I Component II TOTALS Component I Component II TOTALS Component I & II TA for checking compliance of CACCs, DTCs and National Proposals to CFPs 1,500 1,500 1,707-1,707 3,000 Strengthening regional operations ,400 Technical support for targeting particular population sub-groups (women, adolescents, youth, and other vulnerable groups) ,000 Undertake needs assessment of NGOs/CBOs on national response Training 1,155-1, ,425 Council members training Training of NACC HQ Staff Training of Field Staff Training of 210 CACCs and 71 DTCs ,500 Training of 4 MCGs , Grants 3,900 61,000 64,900 2,690 34,416 37,106 66,115 Mid-Term Review JAPR Process 1,000 1, ,000 57

66 ORIGINAL (DFID+WB+GOK) CURRENT (WB) PROPOSED (WB) Category Component I Component II TOTALS Component I Component II TOTALS Component I & II Strengthening grant performance by provision of technical support for grantees (capacity building and facilitation) 2,800 2,800 1,982-1,982 5,465 Grants to NGOs, CBOs private sector based on CFPs Support to mainstreaming in public sector institutions 53,000 53,000-29,752 29,752 53,000 8,000 8,000-4,664 4,664 3,650 Malaria Program (CFP) PS Mainstream 2, Operating costs 9,533-9,533 7,561-7,561 9,400 CACCs Operational Costs 5,129 5,129 3,329-3,329 3,500 DTCs Operational Costs 1,622 1, ,000 FO Operational Costs Monitoring and evaluation 1,500 1,500 2,478-2,478 3,500 Operational research 1,000 1, , Clearing and Distribution of Essential Commodities (KEMSA Operating Costs) 2, Unallocated 4, Total 29,758 81, ,000 21,805 58,196 80, ,000 58

67 Budget per Category of Expenditure (SDR) Category Existing Financing (Expressed in SDR) Original Amended and Restated Original Financing (Expressed in SDR) After Restructuring, Aug 2010 Additional Financing (Expressed in SDR) Percentages of Expenditure to be Financed 1. Goods 11,500,000 17,900,000 8,500, % 2. Works (except as covered by category 3) 3. Goods, works or services financed by Subproject Grants 4. Consultants services and audits 600, , % 30,400,000 24,600,000 18,600, % 4,300,000 7,400,000 3,500, % 5. Training and Workshops 500, ,000 1,600, % 6. Incremental Operating Costs 3,600,000 1,800,000 1,200, % 7. KEMSA Operating Costs 1,600, % Unallocated 2,000,000 TOTAL AMOUNT 52,900,000 52,900,000 35,000,000 59

68 Annex 7: TOWA Results To date Kenya: Total War Against HIV & AIDS (TOWA) - Additional Financing 1. The section A below presents the results achieved so far through the community grants. Section B presents the preliminary findings of the Evaluation of the Community Response in Kenya, and Section C the results achieved through public sector mainstreaming. A. Summary of Community Grant Results from TOWA so far The largest budget line of the TOWA project is the grant awards to NGOs, CBOs and the private sector based on the Call for Proposals (Component B). A total of US$53 million was allocated in the original budget, but this was later revised down to US$29.7 million with the July 2010 restructuring. The plan, with the additional finance request, is to return back to the US$53 million total allocation for these grant awards to the community level. a. Results of Grant Awards 3. Over 4.5 million Kenyans have benefited from the CBO grants support through TOWA million people have been mobilized and sensitized on a range of HIV and AIDS issues, particularly on prevention 1.3 million people have been helped to access services, including counseling; testing; referrals; PMTCT services; PHWHA services, training on condom use/delay of sexual debut, psychosocial support, palliative care support and IGA support. 61,000 people have received capacity building support to help deliver services. These include Counseling and Testing, plus Training for peer educators, guardians in IGA and care givers, as well as support to PLHIV on HBC, human rights and public speaking. 54,300 people have been provided with direct support, including material support to OVC s and PLHIV and home caregiver visits million people have been counseled and tested for HIV for a total cost of US$ 3,172,987 (42% of funds). This includes VCT for 1,875,496 Most at Risk Populations (67.5%) and VCT for a further 901,785 people (32.5%) who are part of the general population. 24 TOWA s Development Objective is to assist Kenya to expand the coverage of targeted HIV and AIDS prevention and mitigation interventions, as documented in KNASP II 25 Extracts from the review of the TOWA results achieved by GHAP (Sept 2010). This data comes from the reports from first two Calls for Proposals (totaling 585,647,324 Ksh, approximately USD 7.5m 25 ), for which sub project implementation is underway and substantially completed in many cases. The progress data comes from 2225 Beneficiaries (189 are at DTC level the remaining 2036 are at CACC level) which were contracted across 210 CACCs and 71 DTCs. 60

69 The MARPS covered include 726,813 most at risk youth, 119,647 long distance truck drivers and Commercial sex workers, 555,665 people in Hard to Reach Areas, 5035 Injecting drug Users, plus 468,066 MARPS without specific categorization million people have been targeted with behavior change communication and HIV education for a total cost of USD$ 1,793,771 (24% of funds). This includes specific BBC interventions targeting 776,322 youth, 201,337 couples and 146,854 Most at Risk Population. 6. A further 663,522 people have benefited from other specialized HIV services for a total cost of US$ 2,541,541 (44% of funds). This includes: 120,459 PLHIV that received support 425,960 mothers that received PMTCT services 65,640 OVC that received the minimum package of care 46,080 people that received home and community based care 5,383 people that received Voluntary Medical Male Circumcision services b. Effectiveness of Grant Awards million people have benefited from TOWA, 61% have received counseling and testing, 25% have received targeted behavior change communications and 14% received specialized HIV services. 8. With 2.7 million people counseled and tested through the community grants mechanism, TOWA has made a major contribution to increasing the number of people, particularly higher risk populations, who know their HIV status. This is important as currently only 21% of PLHIV in Kenya know they are HIV positive. While VCT is no longer considered as the most effective prevention measure it does have a clear role in helping people make informed decisions about their future and is critical as an entry point to accessing care and treatment, if positive. The most effective prevention interventions have been not been defined for Kenya but are likely to include Male Circumcision, PMTCT, the reduction of number of partners and promotion of condom use 26. Related to this 11% of the total funding through these grants was used to provide access to PMTCT services for 425,960 mothers. Also through TOWA 5,383 men were provided with access to Voluntary Medical Male Circumcision. c. Expansion and Coverage of Grant Awards 9. The table below, taken from the GHAP report 27, presents a summary of numbers of people who benefited from the TOWA subprogram implementation, per province and by 26 Kenya has a particular challenge of 44% of new infections occurring amongst discordant couples in stable relationships. 27 Review of the results achieved in the Kenya Total War on HIV AND AIDS (TOWA project for the period March 2008 to June Draft report prepared for the WB Country Team in Kenya by the WB GHAP. 61

70 intervention area. Sub projects in rounds 1 and 2 focused on 14 priority areas which have been organized into four indicator clusters 28. Table 12: TOWA Total People Benefiting from HIV Services Provided Per Province Province Population 29 (S) People Supported (R)Training & Capacity Building (P)Services Provided (T)People Reached/ Sensitized Total reached % of PSI grants % of Total Central 4,383,743 9,914 12, , , ,055 14% 12% 12% Coastal 3,325,307 5,813 1,514 97, , ,912 9% 8% 11% Nairobi 3,138,369 2,109 1, , , ,217 4% 6% 8% North Rift 5,003,402 5,321 6, , , ,675 11% 13% 12% Nyanza 5,442,711 11,826 4, , , ,417 16% 20% 17% Eastern 5,668,123 8,289 4, , , ,697 16% 14% 12% North Eastern 2,310, ,508 18,554 44,718 4% 1% 2% Western 4,334,282 6,816 20, , , ,023 13% 15% 16% South Rift 5,003,401 3,186 8, , , ,602 12% 11% 10% Grand Total 38,610,095 54,273 60,967 1,315,231 3,134,845 4,565, % 100% n/a Data source: compiled from PSI reports for 7 quarters of reporting, from Oct 2008 to June Note. The 5 population reached by province does not take into account the large various of population by Provinces. 10. As Figure 1 below shows, service delivery in TOWA has rapidly increased over the 7 quarters of implementation. This clearly reveals an acceleration of delivery in the final two quarters, after the launch of Round 2. With approximately 1,850 more Beneficiaries currently in the process of being contracted for Round 3, this lends weight to the assertion that program implementation has been accelerated and will be accelerated even further in future. 11. When TOWA service delivery coverage is analyzed and compared with that of other CBO/NGO managed programmes which also reported through the national reporting system COPBAR, (for period January 2009 March 2010) it is possible to identify the additional results that TOWA has made to the national response. The findings are that TOWA has contributed approximately 10% towards the effort to sensitize and mobilize Kenyans to change their behaviors. TOWA also made a significant contribution to the provision of services nationally including counseling and testing, referrals; PMTCT services; PLHIV services; training on condom use, sexual debut etc; psychosocial support; palliative care support; and IGA support. On the other hand the findings also reveal that TOWA has made only a small contribution to the overall support to OVC and PLHIV, and to the training and capacity building of peers, CHWs, guardians etc. This is not surprising given that these intervention areas were not the focus of the CFP s to date. % Pop Reached 28 S PEOPLE ACCESSING SERVICES, including counseling; testing; referrals; PMTCT services; PLHIV services; training on condom use, sexual debut etc; psychosocial support, palliative care support, IGA support. R PEOPLE REACHED: mobilization and sensitization. P PEOPLE SUPPORTED: OVC and PLHIV material support; home caregiver visits. T PEOPLE TRAINED: support in and provision of CT; peer educators; guardians in IGA; caregivers; PLHIV home based care; human rights; public speaking. 29 Data from 2009 Kenya Population Census 62

71 Figure 1: TOWA Indicators-National Cumulative Totals for all Indicator Clusters, per Quarter (September 2008 to June 2010) Data source: compiled from PSI reports for 7 quarters of reporting, from Oct 2008 to June A further expansion of coverage is expected as Round 3 grants (1850), which are being contracted are financed and implementation goes ahead. Round 4 and 5 CFP have already been prepared and are soon to be launched. These are likely to involve contracting a further 2000 and 1500 grants. So with an additional 5400 grants planned this could potentially triple the total people benefiting from HIV services by the end of the project and increase the total number of people benefiting to around 18 million Kenyans. d. Unit Costs of Interventions 13. Based on the expenditures and the results reported by the Beneficiaries it has been possible to calculate the unit costs by priority area and by geographical region. These are shown in the tables 2, 3 and 4 below. What these tables point out, is that the unit costs per beneficiary per intervention ranged from motivating youth to go for counseling and testing, which has been the least costly intervention, at US$0.86 per beneficiary, whereas OVC is the most costly at US$13.29 per beneficiary, followed by HCBC at US$9.97 per beneficiary. 14. Nairobi has been the least costly region for interventions, at US$1.03 per beneficiary. Further, the tables show that North Eastern has been the most costly region, at US$6.19 per beneficiary, and that the average cost per beneficiary for TOWA to June 2010 is US$ In interpreting these unit costs, please keep in mind that: (i) grants may not be used for overhead or salary costs, most of the human resources for service delivery is on a volunteer basis (ii) grants may not be used for actual delivery of health sector HIV services. for example, counseling and testing would refer to the process of motivating persons to go for testing, rather than the costs of the counselors time or the test kits. 63