GAAP Matrix

Governance and Accountability Action Plan (GAAP)The GAAP explicitly specifies a set of specific measures to ensure good governance and accountability, by improving the effectiveness of theproject activities, increasing transparency and managing risks of fraud and corruption. It includes measures to:• Ensure effective implementation of project elements directly relevant to improving governance and accountability,• Guard against and reduce fiduciary risks, especially those of fraud and corruption,• Enable beneficiary and general citizen to receive and provide information about the project transactions and performance,• Safeguard the credibility of implementing agencies.Issue Risk and Rating Mitigating Actions AlreadyTaken or Included(and Estimated Cost*)A. Will andCapacity forImplementation1. Commitment forreform and capacitybuilding can waver(Moderate)Agreement reached withsenior government officialson development objectivesNecessary TA built in theproject ($17 million)ULB eligibility designed toreinforce performanceGAAP MatrixAdditional Mitigation ActionsProposed, Responsible Agency (andEstimated Cost*)Explicit covenants on critical actionsContinuous dialogue with andsupport for state and local officialsSchedule and Milestonesof GAAP Actions*On-going.The first policy workshopto be held on reformmonitoring and design inprogress in 2009.Continuing series of policyworkshops; officialresolutions and legislationexpected from Yr 32. Inadequate staffingand training (Moderate)Key professional staff,including a capacity buildingspecialist in placeAdditional positions with competitiveterms have been authorizedTraining plans are in placeAdvertisement of keypositions within a monthof Board approval($200,000)

Issue Risk and Rating Mitigating Actions AlreadyTaken or Included(and Estimated Cost*)B. Sub-projectidentificationand Design1. ULBs that do not fitproject approaches aregiven subloans andgrants for politicalreasons (Moderate)Clear selection criteria havebeen agreed, includingreform commitment,existing financial capacity,audit complianceAdditional Mitigation ActionsProposed, Responsible Agency (andEstimated Cost*)CDMA to apply the criteria and Bankteam to review all selectionsSchedule and Milestonesof GAAP Actions*The criteria clearly agreedand documented bynegotiations2. Design specificationstailored to benefitparticular constituentsor contractorsHire competentindependent consultants,supervised by MSU, toprepare Detailed ProjectReports (DPRs)Consultants hired for independentreview($1.2 million)Public disclosure of DPRsThe consultants andpublic disclosure to be inplace from the projectstart($7.8 million)Detailed technical appraisalof specifications by theEngineer-in-ChiefThe Bank will review at least 50% ofDPRs at least for the first two yearsC. Procurement 1. Collusion amongbidders to seek higherprices, e.g. bidssignificantly higher thanthe ECE; similar namesand addresses ofdifferent bidders; bidsreceived from ‘shell’companies which thenoutsource work to localWide publicity is given innewspapersTender notices published indifferent officesInitially hire consultants to helpmanage the procurement process($450,000);Train ULB, PHED, and MSU staff tomanage procurement, detectevidence of collusion and coercionby bidders as part of the CapacityEnhancement componentPackage contracts to attract national(higher) level bidders;Training of key MSU staffby effectiveness;Broad ULB, PHED, andMSU staff training to beimplemented from year 1

Issue Risk and Rating Mitigating Actions AlreadyTaken or Included(and Estimated Cost*)contractors (Moderate)Additional Mitigation ActionsProposed, Responsible Agency (andEstimated Cost*)Provide oversight by reputabletechnical panel ;Publish bid awards and trends;Use of debarment provisionsSchedule and Milestonesof GAAP Actions*2. Lack of competition;coercion to preventpotential bidderspurchasing biddingdocuments (High)Advertising in broadlycirculated newspapersAdditional bidderworkshops to publicize theopportunities andproceduresModify qualification criteria in biddoc; Establish register of potentialbidders and send bid notices;($90,000)Make bidding documents availableon the website;Study the contracting industry($120,000)The procedures to beestablished and providedto design consultantsfrom year 1Make bid documentsavailable on websitesfrom the starte-Procurement as soon as the Bankrecommendedmodifications aremade; Enhance use of ComplaintslineContracting IndustryStudy Yr 1-23. Framing ofspecifications andselection criteria tofavor particularsuppliers (Moderate)Designers alerted to suchrisks;Review by MSU, PHED, andBankTrain designers in minimizing risksReview by third party specialists($1.2 M incl. in #1)Starting from Yr 1

Issue Risk and Rating Mitigating Actions AlreadyTaken or Included(and Estimated Cost*)Additional Mitigation ActionsProposed, Responsible Agency (andEstimated Cost*)Schedule and Milestonesof GAAP Actions*4. Delayed, inadequateor improper bidevaluation to favorparticular suppliers(Moderate)Detailed evaluationprocedures are in placeBid records are maintained,including evaluation recordsInclude consultants and reputableCSO representatives as evaluators;Training of ULB and PHED engineersto help in evaluation;Use of consultants to help evaluation($200,000)Training started using thenational-level traininginstitute in Hyderabad aswell as Bank specialistsIn Yr 1 and 2 consultantswill be utilized heavilyDetailed bid records will be requiredfor CDMA clearance and projectfinancing5. Delay or refusal ofULBs to awardcontracts tosuccessful bidders(Low)Procedures specify timelimits for contract awardEnforce performance standards ontimeliness of contract processing, atthe penalty of refusal to financeThe procedures will bearticulated as part ofsubloan contracts fromproject startD. Supervisionandmanagementof contracts1. Deliberate delays inpayments tocontractors, leadingto corruption and/orinadequate contractperformance(Moderate)ULBs authorized to processpartial payments whenportions of the work isdone; MSU scrutinizes andmatch monthly physical andfinancial progress reportsIndependent inspectors matchprogress and payments ($1.2 M);Implement a transparent disputeresolution system at CDMA upongrievances filed by contractorsIndependent inspectorsstart work from the startof first subproject;Grievance Redressalmechanism to beoperational in Yr 1.

Issue Risk and Rating Mitigating Actions AlreadyTaken or Included(and Estimated Cost*)2. Unjustified paymentsmade for incompleteand/or sub-standardwork, or substandardquality ofgoods delivered(Moderate)Qualified and experiencedengineers will be providedand held to strict rules thatthey ensure that paymentsmatch quality of work done,or products purchasedAdditional Mitigation ActionsProposed, Responsible Agency (andEstimated Cost*)Responsibilities of PHED (engineerson deputation) and consultants (forinspection) will be tightly definedand enforced;Third party consultants will beengaged for quality assurance ($1.2M)Schedule and Milestonesof GAAP Actions*Consultants and thirdpartyinspectors will behired as a pool at MSUfrom the project startE. FinancialManagement Systemand InternalControls1. Delayed andincomplete reportingof expenditures bymultipleimplementingagencies, leading topoor planning andcontrol (High)Monthly reporting system ismandated at the ULB levelCloser follow-up and monitoringfrom CDMA (principal implementingagency); Supervision consultants tohelp report;suspension of disbursement whenreports overdueThis procedure will bemade a part of subloancontracts from projectstart2. External auditors(CAG) provide an auditcertificate but do notprovide independentaudit opinion noridentify internalcontrol issues as partof the certificationexercise (High)This is a systematic issue forthe country as a whole andits resolution will continuebe sought at the nationallevelPrivate auditors will be hired for ULBaudits (approx. $500,000);management consultants hiredunder the Capacity Enhancementcomponents will be asked to provideobservations and recommendationson control issues ($3 M)Private auditors alreadybeing hired.The TA to start in year 1

Issue Risk and Rating Mitigating Actions AlreadyTaken or Included(and Estimated Cost*)3. Delayed ULB auditsand the neglect ofkey auditobservations (High)4. Failure of projectprogress reports tomatch financialdisbursements withphysical progress(Moderate)Only those ULBs that haveup-to-date audits with keyaudit observationsaddressed will be eligible toparticipate in the projectand receive subloans andgrantsAdditional Mitigation ActionsProposed, Responsible Agency (andEstimated Cost*)CDMA to help hiring andmanagement of CA firms ($500,00)Internal auditors or third partyinspectors will certify concurrentlythe expenditure incurred by the ULBsand verify physical progress. (part of$1.2 M). ULBs will address auditfindings promptly, or risk suspension.Schedule and Milestonesof GAAP Actions*This has been agreed andis being applied.Third party inspectors willbe hired upon start ofproject.F. CompliancewithEnvironmental andSocialSafeguardsNon-compliance withenvironmental andsocial frameworksafeguards, causingadverse impacts andnon-sustainability ofthe sub-projects(Moderate)Social and environmentalsafeguard framework to bedistributed toimplementation agenciesand design consultantsSafeguard specialists at MSU.Capacity building for the ULB / MSUstaff on environmental and socialsafeguards;Environmental and social audits toidentify remedial measures;Strict monitoring by MSU andindependent inspectors;Invite citizen participation in publicconsultation and GrievanceRedressal SystemSafeguard specialists to beon board by negotiations;GRMS system to becomeoperational in Yr 1.Broad capacity building tobe part of CapacityEnhancement TA

Issue Risk and Rating Mitigating Actions AlreadyTaken or Included(and Estimated Cost*)G.Communication,Participation,and FeedbackMechanisms1. Lack of relevantinformation or theirlimited accessibilitylimits citizensengagement and henceproject benefits,safeguards, anddeterrence against noncomplianceandcorruption (Substantial)Rights to Information Act,Community ParticipationLaw, and Public DisclosurePolicies are activelyenforced in APEnvironmental and socialsafeguards framework hasbeen disclosedImplementation of thepublic disclosure andparticipation will bemonitored as part ofprogress reportsAdditional Mitigation ActionsProposed, Responsible Agency (andEstimated Cost*)A proactive public disclosure systemand communications strategy will beimplemented to make informationavailable in accessible languages, onwebsites and ULB offices or citizencenters, and to conduct effectivepublic hearings ($350,000)Schedule and Milestonesof GAAP Actions*An initial version of thecommunication strategywill be put into effect atstart of project and refinedduring project.2. Inaccessible andineffective complaintsand grievance systemlimiting the broad inputfor better projectmanagement(Moderate)Grievance Redressal andMonitoring System (GRMS)available on lineGRMS will also be available at officesof ULB, PHED, and DMA ($$1.2 M)The GRMS and dispute resolutionsystem will be overseen by MAUDOn-line GRMS nowoperational.Off-line GRMS to beestablished by end of Yr 1.