ICRR 13547 Report Number : ICRR13547 IEG ICR Review Independent Evaluation Group 1. Project Data: Date Posted : 05/02/2012 PROJ ID : P055991 Appraisal Actual Project Name : Land Administration US$M ): Project Costs (US$M): 38.9 34.7 Project Country : Honduras Loan/ US$M ): Loan /Credit (US$M): 25.0 24.8 Sector Board : ARD Cofinancing (US$M ): US$M): 7.9 1.6 Sector (s): General agriculture fishing and forestry sector (61%) Central government administration (27%) Sub-national government administration (12%) Theme (s): Other rural development (25% - P) Land administration and management (25% - P) Personal and property rights (24% - P) Municipal governance and institution building (13% - S) Legal institutions for a market economy (13% - S) L/C Number : C3858 Board Approval Date : 02/26/2004 Partners involved : NDF Closing Date : 04/30/2008 04/30/2010 Evaluator : Panel Reviewer : Group Manager : Group : April Connelly Ridley Nelson IEG ICR Review 1 IEGPS1 2. Project Objectives and Components: a. Objectives: The statement of project objectives differed slightly between the credit agreement (DCA) and the project appraisal document (PAD). This review uses the statement of objectives as presented in the DCA as it is more monitorable . DCA page 22: "The objective of the Project is to establish and operate (as part of the broader Program) an integrated and decentralized land administration system, composed of public and private entities, which provides users in the Project Area with accurate information on urban and rural land parcels and effective land administration services (e.g., purchases, mortgages, cadastral and registry certifications ) in a timely and cost-effective manner." PAD page 3: "The project’s development objective is: An integrated and decentralized land administration system (composed of public and private entities) to provide users in the project area with accurate information on urban and rural land parcels and effective land administration services (purchase, mortgages, cadastral and registry certifications, etc .) in a timely and cost-effective manner. The system will help to increase land tenure security, facilitate land market transactions, develop national and municipal territorial plans, and develop management plans for protected areas, forests, and indigenous peoples lands ." The project is an adaptable program loan which was the first phase of a larger program to include four phases in total. The objective of the Honduras Land Administration Program is to establish a national property rights system that will be fully integrated and decentralized . It is anticipated that over the course of the full program the land administration system will increase land tenure security, add greater transparency to land issues, improve governance in key public sector entities, and stimulate the emergence of secondary financial markets such as insured bundled mortgages. b.Were the project objectives/key associated outcome targets revised during implementation? No c. Components (or Key Conditions in the case of DPLs, as appropriate): Component 1: Policy Framework and Institutional Strengthening (Estimated Cost: US$10.9 million; Actual Cost: US$9.7 million). The main objective of this component was to establish the legal, regulatory, and technical platform necessary to streamline the systematic land regularization, titling and registration process to be supported by the Project and improve land-related services at the local level . The component aimed at increasing transparency and improving governance in land administration, and its main output was the establishment of the National Property Administration System (SINAP) through legal, regulatory, and institutional means . SINAP was to include the Unified Registries System (SURE), the National Territorial Information System (SINIT), and the Registry of Norms (RENOT). SINAP was expected to be operated from 60 connection points established in public and private entities and by at least 600 trained technicians. Component 2: Area-Area -based Systematic Land Regularization, Titling, and Registration (Estimated Cost: US$22.7 million; Actual Cost: US$15.1 million). This component was to entail the mapping, regularization, titling, and registration of land through both an area -based systematic approach and a priority -based approach (for selected indigenous and Afro-Honduran communities). It also included activities to delimit macro areas according to administrative divisions and protected areas ’ boundaries. The component’s output indicators were: (i) 745,000 land parcels surveyed and regularized in the project area; (ii) 70 percent of these parcels registered in SINAP under folio real; (iii) 70 percent of land transactions in the project area registered in SINAP under folio real; (iv) 12,000 parcels surveyed in forest areas; (v) 12 protected areas demarcated and incorporated in SINAP; (vi) 40 municipalities demarcated and 2,800 km of inter-municipal boundaries defined; and (vii) the land of 16 ethnic communities surveyed and demarcated and of 12 communities titled and registered. Component 3: Project Management and Monitoring and Evaluation (Estimated Cost: US$5.3 million; Actual Cost: US$8.8 million). Administration costs of the Project Coordination Unit (PCU) and monitoring and evaluation activities . Project components remained constant throughout the life of the project but the output s under component two were revised as part of project restructuring . The project was officially restructured in September 2007 to adapt to the new legal and institutional framework and adjust selected output targets, but the PDO and associated outcome indicators were not revised so approval was obtained by the Regional Vice President rather than the Board . The main modifications introduced through restructuring included: (i) changing implementation arrangements by transferring the Project from the Ministry of the Interior (SGJ) to the Property Institute (IP) following the creation of the IPA as the country ’s new single land agency; (ii) reducing the scope of outputs related to Component 2; (iii) clarifying that no activities requiring resettlement would be financed under the Credit; (iv) eliminating the external procurement agent option, which had been performed by the United Nations Development Program until the PCU had achieved adequate procurement capacity; and (v) extending the Credit closing date . d. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Program Objectives . The Project was the first phase APL of a larger program originally envisaged to be implemented over a three-phased, 12-year period. The overall program objective is to establish a fully integrated and decentralized national property rights system (National System for Property Administration, SINAP ). Project cost and Financing . Total project costs estimated at US$ 38.9 million were expected to be financed through a US$25 million IDA credit, a US$6 million contribution from the Government of Honduras and US$ 7.9 million in co-financing from the Nordic Development Fund (NDF). The actual project costs of US$ 34.7 million were financed by a US$ 24.8 million IDA credit, and a US$8.34 million contribution from the Government of Honduras . By project closure US$1.57 million of the parallel funding from NDF had been disbursed . Work funded by NDF was intended to start in 2005 but could only be contracted in February 2009 due to delays in the preparation of the bidding documents. At the time of the ICR's writing the NDF-financed contract was still under implementation and the ICR notes that most of its outputs will be used for the second phase . Approximately US$750,500 of total credit funds were cancelled in March 2008 due to an investigation conducted by the Department of Institutional Integrity (INT) (see section 11). Dates. Dates The project was officially restructured in September 2007. The project closing date was extended twice, adding a total of two years to the implementation period . The first extension was granted in conjunction with project restructuring, extending the closing date by 16 months from April 30, 2008 to October 30, 2009 to allow the Project sufficient time to complete regularization activities whose implementation could not be accelerated due to technical and logistical reasons. The closing date was extended for a second time (to April 30, 2010) due to a political crisis that occurred five months before the project was scheduled to close . The Bank unilaterally extended the closing date of all projects under implementation in Honduras at the time to compensate for foregone supervision (missions had been stopped since the beginning of the crisis in June 2009) and to allow for adequate project evaluation and reconciling of accounts. The ICR also reports that the NDF extended the closing date of its credit three times, from April 30, 2008 first to December 31, 2009, then to December 31, 2010, and finally December 31, 2011. 3. Relevance of Objectives & Design: Relevance of objectives is high . The PDO is in line with land sector reforms promoted by the government in its National Plan for 2002-2007 and consistent with the PRSP goals of stimulating private investment, sustainable development and improving governance . The PDO is also relevant to the Bank's 2003-06 CAS goals of improving investment opportunities for the poor, and improving governance, and the 2007-2010 CAS goal of improving equity and security in land access and strengthening governance through state modernization and participation . Relevance of Design is substantial . The PDO was clear and the results framework included a logical sequence of intermediate outcome indicators clearly linked to the PDO, with the exception of the indicator on the reduction of conflict in national lands, which was not part of the PDO and was later removed as activities to support it could not be carried out due to delays in the property law, uncertain legal environment and insufficient project resources . 4. Achievement of Objectives (Efficacy): On balance, the objective of establishing an integrated and decentralized land administration system is rated substantial , though with some shortcomings . The project successfully created an integrated land administration system and made progress towards decentralizing the system, though there were some shortfalls in meeting the targets associated with decentralization . However, as the ICR notes (page 19), the project "did not reach the targets expected during implementation and the institutional framework to ensure an integrated and decentralized land administration system still needs to be strengthened ." The project supported the preparation and consultation process that contributed to the passage of the 2004 Property Law, thereby establishing a new regulatory framework for land regularization and creating the Property Institute (IP) as a single registration and cadastre agency . The project successfully developed a computerized National Property Administration System (SINAP) which includes three technology subsystems : the Unified Registries System (SURE), bringing together cadastral and legal information on each land parcel under a parcel -based property registry (folio real); The National Territorial Information System (SINIT), a geographical information system for urban and regional planning; and, The Registry of Norms (RENOT), a regulatory subsystem. 690 connection points were established to SINAP, surpassing the of 60 connection points, thereby allowing for updated registry and cadastral information . The general public can access property information through the System ’s webpage. Six property registries were modernized (just shy of the of 8 registries) and cadastral information was provided for 365,000 parcels, falling short of the of 521,500 parcels. The Project certified 1,260 people to operate SURE systems, exceeding its of 600 people. However, SINAP is only available in 11 of the 15 municipalities. The ICR notes that integration of the system was furthered by the development of norms, procedures, guidelines and the standardization of regularization methodologies . The National Agrarian Institute (INA), the IP, and municipalities in the project area have been trained in the use of SINAP . The ICR notes that no agency can operate the system in an integrated manner (vs. of 5) and there is still some overlap in land administration functions among national and administration institutions and municipalities, which could hamper the inter-institutional coordination required to ensure system integration . The project took ad hoc measures to address this by facilitating co -execution and municipal agreements but a protocol for inter -institutional coordination to manage data base access and maintenance is called for as a next step . The objective of providing users in project areas with accurate information on urban and rural land parcels and effective land administration services is rated substantial . 300,000 parcels were incorporated into SURE, which by project closure was maintaining a 94 percent rate of accurately registered properties (vs. of 96 percent). The accuracy rate reflects consistency between the field and information in SINAP for deeds registered under folio real and between the registry books and information in SINAP for deeds registered under deed -based registration.The volume of transactions registered in SURE under the parcel based registry reached the 40% rate by project closure. The ICR views the increase in demand for property registry services as an indication of the project ’s positive impact on the public perception of system accuracy . User opinion survey’s carried out at the end of the project provide additional indication of the systems effectiveness . At project closure, 85 percent of the property users rated SINAP as satisfactory (vs. the of 70%), based on sample of 840 respondents in 6 registries. All of the participants in a 2010 focus group of expert users rated SURE as extremely functional . The objective of providing timely delivery of services is rated substantial . The time to register a real estate transaction in project areas was reduced from 90 to 23 days. Although 23 days is below the project's original of 7 days or less, it represents a significant reduction over the baseline and compares favorably to international trends . The ICR notes that the average for OECD countries is 25 days, for the Latin America and Caribbean region as a whole 70.4 days, and for El Salvador, a comparable country, 31 days. The objective of providing cost effective delivery of services is rated substantial . The ICR discusses two aspects of cost-effectiveness: the extent to which the land administration system is financially self sufficient and the cost of registering a property or land transaction . The project aimed to have 100 percent of the operating costs of the Registry covered by registration fees . An independent evaluation of financial self sufficiency concluded that registration fees can cover 167 percent of the systems operational cost . Self-sufficiency varied across regional registry offices with offices in two medium sized cities exhibiting self -sufficiency rates of 60 percent and 91 percent and the office in the larger city of San Pedro Sula generating revenue that was twice its operational costs . The ICR notes that because the IP manages the whole public registry system, it can cross -subsidize lower performing offices to ensure efficiency and equity in service provision . With respect to the cost of registering a property, the ICR states that project -enabled legal reforms and new technology have streamlined land administration procedures . But it was unable to obtain a precise estimate on reduction of administrative costs to register land transactions because baseline data was unreliable and the IP's accounting system did not allow isolating the direct cost of registering land transactions . The ICR also notes that a proxy measure of the cost of registering a property expressed as a percentage of the property value was included in the 2010 Doing Business indicators. In this respect, with a cost of 5.5 percent, Honduras compares well with the Latin American average of 5.9 percent, although still behind El Salvador (3.8 percent), which started a similar land program. However, no information is provided to validate that this measure of cost effectiveness is a result of project interventions and it is not clear if the 5.5 percent averages the cost of registering a property throughout Honduras or only in project areas. The project team explained that Doing Business based this indicator largely on the main commercial cities in the country which are part of the project areas . Important steps have been taken towards the overall program goal . Nonetheless, the implementation of the Property Law involves complicated and difficult negotiation processes due to the magnitude of political, institutional and personal interests involved, and will still take further years to be completed . In addition, IP will continue to require substantial institutional support during the future phases of the program . 5. Efficiency (not applicable to DPLs): Efficiency is rated modest . An economic analysis carried out at appraisal, calculated a net present value of US$105.9 million with an ERR of 44 percent. At completion the calculation of NPV of net benefits was US$ 1.2 million with an ERR of 12.4 percent. The difference in returns between the ex ante and the ex post analysis is largely due to an assumption at appraisal that all properties that were regularized and surveyed would gain value regardless of whether they already had a title, while the ex -post analysis only considered value increase for properties that were issued new titles. According to the ICR, the ex-post approach was considered to be more realistic . The difference in returns was also due to the fact that higher than projected unit costs were incurred because the project's regularization and titling outputs were lower than expected but costs did not decrease proportionally with the decrease in achievements. Sensitivity analysis of the ERR at completion showed that although economic efficiency indicators were positive they are not robust enough to withstand a reduction in economic benefits : a reduction in benefits of 50 percent yielded a negative NPV of US$ 8.3 million and an ERR of 3.93 percent. An alternative scenario was also calculated at project completion that took into account the incremental economic benefits from income generating investments accruing during the period of the analysis, the NPV of net benefits was estimated at US$ 8.5 million with an ERR of 15.6 percent. The ex post estimate of the increase in property values as a result of the Project was inferred from the regression coefficient of land title on property value using 2004 household survey data because data on direct property values was not available . The task team acknowledged that this methodology has shortcomings and qualified the results as "likely". Finally, there are some operational efficiency concerns such as the delay in the procurement of technical services under the NDF credit which postponed critical surveying work, planned to begin in 2005, until 2009. ERR )/Financial Rate of Return (FRR) a. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal Yes 44% 64% ICR estimate Yes 12.4% 51% * Refers to percent of total project cost for which ERR/FRR was calculated. 6. Outcome: The project's objectives are highly relevant and its design substantially relevant . An integrated and decentralized land administrative system was established . However, as the ICR notes (page 19), the project "did not reach the targets expected during implementation and the institutional framework to ensure an integrated and decentralized land administration system still needs to be strengthened ." Together with modest efficiency, this amounts to moderate shortcomings. a. Outcome Rating : Moderately Satisfactory 7. Rationale for Risk to Development Outcome Rating: Risk to Development Outcome is rated modest on balance . The ICR mentions several risks but notes mitigation measures were put in place to address them . The ICR points to two main factors that will contribute to the overall sustainability of SINAP: (1) The SINAP system is functional, its platforms are well -developed and it is supported by operational and technical manuals and has institutional support; and, (2) The second phase of the program is ongoing and the ICR argues that any upgrades or corrective measures needed to maintain development outcomes are likely to be addressed. There is a risk of cadastral information becoming outdated if maintenance activities are not conducted regularly. The ICR notes that cadastral maintenance is still required in the municipalities and technical capacity and interest in cadastre remains weak in many municipalities . However, the ICR also points out that municipalities have an incentive to maintain the cadastre and utilize SINAP in order to improve tax collection and management. In addition, cooperative agreements are in place for the IP to provide municipalities with data and technical assistance. However, to ensure that these measures are effective, the Government needs to either modify the existing fiscal policy to allow the IP to retain more of its revenue or ensure that the institution receives enough budget allocation. In the long term the IP will also need to address the high staff turnover in municipal cadastral units . Another critical element to ensure that cadastral information remains up to date is to ensure that a culture of registry takes hold, particularly in rural areas, so that new transactions are recorded in the property registry . This risk is mitigated by continued support for accessible registry offices, affordable registry transaction fees, and information campaigns under the second phase of the program . Finally, the second phase of the project is expected to complete the collective titling process for Miskito land delimited under the project . a. Risk to Development Outcome Rating : Moderate 8. Assessment of Bank Performance: Quality at Entry is rated moderately unsatisfactory . Project preparation was supported by a Bank team with an adequate technical expertise . The project design built on a successful land administration pilot under a previous IDA funded operation in Honduras and also drew on lessons from the Bank's global and regional experience with land administration programs. Appropriate transitory legal and institutional arrangements were identified to ensure early start of project activities while the property law was in process of being approved . These positive aspects of quality at entry are outweighed, however, by a number of shortcomings which the ICR notes had a significant effect on project implementation : (1) The results framework included unrealistic s that were out of step with international trends and were set without a proper assessment of modernization requirements and without taking into account contingencies due to the uncertainty in the legal framework . In addition, a methodology to measure some of the PDO indicators and other anticipated impacts was not established as part of the M&E system. (2) The costs required for large scale system modernization and the additional costs related to changes in requirements introduced by the Property Law were underestimated . (3) A number of risks were underestimated. These included: potential delays in consolidating a new legal framework and in restructuring the Project to reflect the new legal and institutional framework following approval of the Property Law; the risk of changes in the draft law during the approval process; and, financial management and procurement risks due to weak internal controls within the PCU . (4) The economic and financial assessment carried out at appraisal overestimated the benefits of new titling, resulting in an inflated internal rate of return . (5) There was an insufficient assessment of the consultative mechanisms and organizational dynamics of ethnic federations to ensure an appropriate consultation framework during implementation . Supervision is rated moderately satisfactory . During the initial implementation period, supervision suffered from the following shortcomings: (1) The Bank was not pro-active in assessing the impact of the Property Law and updating the Project documents accordingly; (2) There was limited supervision from social specialists for activities related to indigenous peoples; and, (3) Bank staff did not follow-up in a timely manner to address M&E deficiencies. However, the ICR reports that there was a marked improvement in supervision during the second half of implementation. The Bank team is credited with helping the Project recover from its crisis in 2006 and moving project restructuring forward . Implementation challenges were addressed as they arose . Following the Inspection Panel Investigation, the Bank, with Government support, satisfactorily implemented the Management Action Plan. The Bank reviewed the new legal and institutional framework and facilitated updating of the IPDP and regularization manuals. Supervision missions were carried out regularly and included communication, environmental and social specialists, and the missions regularly met with participating communities and actively engaged leading indigenous organizations including OFRANEH, the Garifuna federation which issued the request for the inspection panel investigation of the project (see section 11). The Bank took a number of measures to ensure that implementation issues were adequately addressed, including considering suspension of disbursements, strengthening of the PCU ’s fiduciary capacity, and closely supervising follow -up on fiduciary issues until the last issues were resolved, shortly after the grace period . at -Entry :Moderately Unsatisfactory a. Ensuring Quality -at- b. Quality of Supervision :Moderately Satisfactory c. Overall Bank Performance :Moderately Satisfactory 9. Assessment of Borrower Performance: Government Performance is rated moderately unsatisfactory . The ICR reports that the government was supportive of project supported reforms throughout the life of the project . The Government provided its own resources to carry out Project activities prior to credit effectiveness under retroactive financing provisions . In the period following credit effectiveness, however sufficient counterpart funds were not provided due to budgetary shortcomings that also affected other projects under implementation at the time . The ICR notes that strong government support during the years of implementation contributed to an enabling environment that facilitated implementation and led to disbursement of 60 percent of credit funds by the end of 2005. The government is also credited with having spent political capital to ensure the approval of the Property Law and Establishment of the Property Institute and with the fast progress towards achieving the PDO in the initial years of implementation . However, a significant shortfall in government performance was its insufficient oversight of the PCU . Moreover, the ICR notes that during a critical point in the project, the government could have done more to mitigate political pressure on staffing issues, including the selection of the permanent Project Coordinator, and to facilitate an agreement on transferring the Project from the Ministry of the Interior to the Property Institute . As noted below, the failure to address political interference of the project aversely affected project implementation . Implementing agency performance is rated moderately unsatisfactory . The project had two implementing agencies, initially the Ministry of the Interior and then the Property Institute (IP). Responsibility was transferred to IP in 2006, to comply with the new legal and institutional framework established by the Property Law . The ICR notes that the role of both implementing agencies in day to day project management was somewhat limited because implementation arrangements depended on a relatively autonomous PCU. Nonetheless, the following shortcomings in both the implementing agencies' performance adversely impacted project implementation : (1) internal turf wars over the selection of PCU coordinator left the PCU without leadership for several months and both agencies allowed political interference of the project to go unmitigated; (2) project restructuring was delayed because neither agency took steps to move the process forward; (3) the IP did not respond effectively to regularization activities related to the project which fall under its direct responsibility and did not give adequate attention to completion of the Property Law's regulations; (4) there were multiple changes in the IP's Board of Directors, its Executive Director and high staff turnover that hampered implementation of the plan to transfer staff and selected Project responsibilities from the PCU to relevant units of the IP. The PCU was initially established as a multi -project PCU that was also charged with monitoring the World Bank-financed Natural Disaster Mitigation Project and the Forest and Rural Productivity Project . The “super� PCU model was intended to improve administrative efficiency and coordination effectiveness across these related, cross-sectoral, projects. The Government administration that took office in January 2006 disbanded the “super� PCU, and the Project was placed under a dedicated PCU . The PCU was staffed by a strong technical team that developed the technical platforms for SINAP and played a key role in project implementation . The ICR notes the PCU successfully maintained its technical capacity despite political pressure on staffing .The PCU also worked closely with the Bank in the preparation and implementation of the action plan in response to the Inspection Panel investigation. Financial management and procurement were weak in the first few years of implementation, prompting an INT investigation which found evidence of collusion and contract steering (see section 11). Subsequently, "(t)he Bank and Government agreed on an action plan to improve fiduciary capacity and accountability within the PCU, which was implemented satisfactorily ." (ICR pg. 8) a. Government Performance :Moderately Unsatisfactory b. Implementing Agency Performance :Moderately Unsatisfactory c. Overall Borrower Performance :Moderately Unsatisfactory 10. M&E Design, Implementation, & Utilization: Design . At appraisal appropriate PDO indicators were identified, with the exception of an indicator for institutional strengthening, and s were established but many of the s were unrealistic . In addition, a baseline and control group was not established to provide the basis for assessing some of the key economic, environmental and social impacts identified in the PAD. Implementation and Use . A methodology for data collection was not defined until 2007 when an M&E specialist was brought in to assist with the preparation of the MTR . As a result adequate data on the PDO indicators was not collected until 2007. Two additional rounds of data were collected in 2009 and 2010. The ICR reports that the data collected helped provide a realistic assessment of project results that was used in the design of Phase II . The PCU also carried out three rounds of performance evaluations with surveys and stakeholder workshops to measure satisfaction with the project and identify ways to improve it . The ICR notes, however, that the lack of a baseline and counterfactual hampered the ICR's assessment of Project effects on land tenure security and associated social and economic benefits. Moreover, because the effect of titling on land prices was not measured ex post economic analysis was conducted with data that may not capture project benefits . a. M&E Quality Rating : Modest 11. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): Safeguards . The Project was classified as Category B . An Environmental Analysis and Environmental Management Plan were prepared and successfully implemented . The project triggered the following safeguards : OP 4.01(Environmental Assessment), OP 4.04 (Natural Habitats), OPN 11.03 (Cultural Property), OP 4.12 (Involuntary Resettlement), and OD 4.20 (Indigenous Peoples). According to the ICR, the project satisfactorily complied with the first four safeguards. With respect to the Indigenous Peoples policy, although a Social Assessment and an Indigenous Peoples Development Plan (IPDP) were prepared at the design stage, an Inspection Panel case was brought against the project during its implementation which found instances of noncompliance with the Indigenous Peoples and Supervision safeguards policies . Specifically: (1) the IPDP had not been updated since the enactment of the Property Law; (2) The project established consultation mechanism, the Mesa Regional Gar ífuna, was not supported by the leading representative organizations of the Garifuna people; and (3) the Bank had not adequately supervised the Project consultation mechanisms . These issues were addressed through a Management Action Plan, which was implemented satisfactorily with Government support and monitored by Bank safeguard and communication specialists. The ICR (pg. 12) rated compliance on indigenous people as moderately unsatisfactory because "although corrective actions were applied to minimize and mitigate adverse effects, Project design and implementation had shortcomings that ultimately constrained the Project ’s ability to deliver additional culturally compatible benefits to the indigenous and Afro -Honduran peoples involved" (ICR page 13). Fiduciary . A number of financial management issues were identified in the first half of implementation . A 2004 audit report noted that the PCU had pre -financed counterpart expenditures from the Special Account (SA) due to delays in the allocation of counterpart funding . The Bank temporarily withheld replenishments to the SA until the Government complied with three conditions: (i) full reconciliation of the SA; (ii) refund of SA funds used to finance counterpart funds; and (iii) submission of a satisfactory financial audit report for 2005. The full reconciliation of the SA identified an amount of US$1,090,790.52 that was refunded by GOH in four installments between 2006 and 2009. Fiduciary reviews triggered an INT investigation, in 2006, which found evidence of collusion, contract steering and misrepresentation in award and implementation of contracts financed under the project . The Bank took several measures to address these issues in the second half of implementation . The INT investigation led to cancellation of approximately three percent of total credit funds . An action plan to improve the PCU's fiduciary capacity and accountability was subsequently agreed upon and implemented satisfactorily and as part of project restructuring, in 2007, the Fiduciary Unit of the PCU was reorganized to improve its functioning and new financial management personnel were contracted. The final supervision mission downgraded financial management to Moderately Unsatifactory because several of the fiduciary management issues were still pending resolution despite efforts of the reformed PCU to address them. These included: (i) payable accounts from 2005 and 2006, and the unresolved issue of withheld taxes that were not sent to the tax authority; (ii) reconciliation of differences between final estimates and Project accounts; (iii) final reconciliation of the SA, including identification of the differences found by the auditors; and (iv) resolution of the weaknesses related to internal controls pointed out by the auditors . The ICR notes (pg. 13) that "(m)ost of these issues, which were reflected in the qualified audits, were resolved soon after the end of the Grace Period. Specifically, to deal with the first issue, the National Congress approved a Decree on September 2, 2010 condoning the Project’s pending payable accounts to other Government agencies and the owed taxes and related fines, as well as providing budget to settle accounts with private parties ." Procurement . According to the ICR pages 13-14 “Findings of a procurement post review carried out in 2006 brought to the Bank’s attention irregularities that led to the INT investigation, and resulted in a downgrading of the procurement rating to Unsatisfactory . The results of an Independent Procurement Review (IPR) dated November 2006 also identified some minor observations . In addition to portfolio-level actions, a Project-specific action plan was agreed with the Government in January 2007. Such plan was implemented and the procurement rating upgraded to Moderately Satisfactory. A new IPR carried out in May-June 2008 did not uncover any major issues . The PCU showed an enhanced performance in procurement management during the last two years of project implementation and procurement rating was maintained at moderately satisfactory level until closing .� 12. Ratings : 12. ICR IEG Review Reason for Disagreement /Comments Outcome : Moderately Moderately Satisfactory Satisfactory Risk to Development Moderate Moderate Outcome : Bank Performance : Moderately Moderately Satisfactory Satisfactory Borrower Performance : Moderately Moderately Both the government and the Satisfactory Unsatisfactory implementing agencies share responsibility for insufficiently addressing political interference with the project. Financial management was also weak and although ultimately addressed (soon after the end of the Grace period), it did detract from implementing agency performance (see Sections 9 and 11 above). Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate . 13. Lessons: The ICR identified a number of lessons from the project experience that are adapted below: Adding regularization functions into a single cadaster-registry agency may decrease its efficacy and efficiency. The project experience showed that land regularization programs are politically sensitive and subject to policy changes. Institutions charged with guarding cadastral and registry information need a certain degree of autonomy to protect property rights from political interference. Regularization programs also demand additional resources, which can come at the detriment of cadastral and registry functions if they are financed from the same general budget. When legal reforms are supported it is important to acknowledge the Bank’s limitations in influencing the legal process and recognize inherent risks associated with the negotiation process that makes the final outcome difficult to foresee. Project design should anticipate changes to the legal framework and address questions about how to deal with potentially adverse changes. In this case there was a need for greater engagement with communities who felt threatened by some aspects of the new legislation, resulting in an inspection panel investigation. Broad community support for a project can be jeopardized by insufficient attention to the representativeness and legitimacy of consultation mechanisms. The sustainability of investments in cadastre and registry modernization depends upon adequate attention to developing municipalities into active and capable partners in the implementation of cadastral system. 14. Assessment Recommended? Yes No 15. Comments on Quality of ICR: The quality of the ICR is satisfactory . It provides a candid account of the project achievements as well as a thorough yet concise account of a complex project implementation experience . a.Quality of ICR Rating : Satisfactory