NATIONAL PROGRAM SUPPORT FOR ENVIRONMENT AND NATURAL RESOURCES

OPERATIONS MANUAL

PART I: BROADER PROGRAM - LOAN AND GEF FUNDED ACTIVITIES

June 2007

DENR Logo World Bank Logo

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ABBREVIATIONS AND ACRONYMS AO Administrative Order BMS Biodiversity Monitoring System BSWM Bureau of Soil and Water Management of DA CBFMA Community-Based Forest Management Agreement CBRM Community-Based Resource Management CENRO Community Environment and Natural Resources Office of DENR CPPAP Conservation of Priority Protected Areas Project DA Department of Agriculture DAO Department Administrative Order DAR Department of Agrarian Reform DBM Department of Budget and Management DENR Department of Environment and Natural Resources DOF Department of Finance EcoGov Philippine Environmental Governance Project EIA Environmental Impact Assessments EMB Environment Management Bureau EMP Environment Management Plan ENR Environment and Natural Resources ENRM Environment and Natural Resources Management ENRU Environment and Natural Resources Unit of LGUs FASPO Foreign Assisted Special Program Office FMB Forest Management Bureau FMR Financial Monitoring Report FOU Filed Operating Units GEF Global Environment Facility GIS Global Information System GoP Government of the Philippines GPOA General Program of Action of DENR IBRD International Bank for Reconstruction and Development IEC Information and Education Campaign IEE Initial Environmental Evaluation IEM Integrated Ecosystem Management IP Indigenous People IPAF Integrated Protected Area Fund IPDP Indigenous Peoples’ Development Plan IPRA Indigenous Peoples’ Rights Act IRR Implementing Rules and Regulations NMS Integrated Natural Resources, Land-use and Biodiversity Monitoring System IWM Integrated Watershed Management LGU Local Government Unit LSP Local Service Providers MANCOM DENR’S Management Committee M&E Monitoring and Evaluation MDFO Municipal Development Fund Office MENRO Municipal Environment and Natural Resource Office MFO Major Final Outputs

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MGB Mines and Geosciences Bureau MIS Management Information System MLGU Municipal Local Government Units MOA Memorandum of Agreement MOU Memorandum of Understanding MPDO Municipal Planning and Development Office MWSS Metro Manila Water Works and Sewerage System NAPOCOR National Power Cooperation NCIP National Commission on Indigenous People NEDA National Economic Development Agency NGO Non-Governmental Organization NIA National Irrigation Authority NIPAS National Integrated Protected Areas System NPS-ENRM National Program Support for Environment and Natural Resources Management NRM Natural Resource Management ODA Official Development Assistance OGA Other Government Agencies OP Operational Program OPIF Organization Performance Indicator Framework PA Protected Area PAD Project Appraisal Document PAMB Protected Areas Management Board PASU Park Superintendent PAWB Protected Areas and Wildlife Bureau PAG Program Agreements PCU Project Coordination Unit PENRO Provincial Environment and Natural Resources Office of DENR PES Payment for Environmental Services PDO Provincial Development Office PIP Project Implementation Plan RED Regional Executive Director of DENR RM&E Results-oriented Program Monitoring and Evaluation SIL Sector Investment Loan SIM Sector Investment and Adjustment Loan SLM Sustainable Land Management SOE Statement of Expenditures TOR Terms of Reference USAID United States Agency for International Development WB World Bank WMC Watershed Management Council

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Table Of Contents BACKGROUND................................................................................................................................6 PURPOSE OF THE OPERATIONAL MANUAL............................................................................6 PROJECT OBJECTIVES AND COMPONENTS............................................................................7 PART II ............................................................................................................................................12 GEF GRANT FUNDED ACTIVITIES ..........................................................................................12 BACKGROUND..............................................................................................................................13 Project Components .........................................................................................................................14 PART III ...........................................................................................................................................21 PROJECT COSTS, IMPLEMENTATION ARRANGEMENTS, MONITORING AND EVALUATION AND FIDUARIARY ARRANGEMENTS ............................................................21 PROJECT COSTS AND FUNDING SOURCES............................................................................22 INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS ............................................23 Implementation Arrangements at the Field Level..............................................................................24 Implementation Phases.....................................................................................................................34 CRITICAL RISKS AND POSSIBLE CONTROVERSIAL ASPECTS ............................................34 Technical Assistance..........................................................................................................................35 PLANNING PROCESSES AND PROCEDURES USING THE PROGRAM AGREEMENT.....36 MONITORING AND EVALUATION OF OUTCOMES/RESULTS ...........................................37 Institutional Arrangements for Results Monitoring and Analysis.......................................................39 M&E Budget.....................................................................................................................................40 Results Framework and Monitoring...................................................................................................42 Arrangements for results monitoring.................................................................................................46 FIDUCIARY ARRANGEMENTS...................................................................................................52 FINANCIAL MANAGEMENT ......................................................................................................52 Executive Summary...........................................................................................................................52 Financial Management Assessment ...................................................................................................54 Risk Assessment and Mitigation........................................................................................................54 Strengths and Weaknesses.................................................................................................................56 Financial Management Arrangements ...............................................................................................57 FM Organization and Staffing...........................................................................................................57 Budgeting..........................................................................................................................................57 Accounting........................................................................................................................................58 Internal Control ................................................................................................................................58 Funds Flow and Disbursement arrangements....................................................................................58 Financial Reporting ...........................................................................................................................61 Audit Arrangements..........................................................................................................................61 Action Plan.......................................................................................................................................62 Loan Conditions ...............................................................................................................................62 Financial Covenants ..........................................................................................................................63 PROCUREMENT ARRANGEMENTS..........................................................................................63 A. General........................................................................................................................................63 B. Summary Procurement Assessment ..........................................................................................65 C. Anti-corruption Measures .....................................................................................................66

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Project Procurement Implementation ...............................................................................................68 Procurement Plan..............................................................................................................................69 D. Frequency of Procurement Supervision ......................................................................................69 Attachment 1: Procurement Plan......................................................................................................70 ANNEXES.......................................................................................................................................82 Annex 1 ............................................................................................................................................83 Annex 2 ............................................................................................................................................89 Annex 3 ............................................................................................................................................92 Annex 4 ............................................................................................................................................94 PERFORMANCE AGREEMENT (PROFORMA).........................................................................94 ARTICLE I.......................................................................................................................................95 Execution of the Project ...................................................................................................................95 ARTICLE II .....................................................................................................................................96 Financial Obligations ........................................................................................................................96 ARTICLE III....................................................................................................................................98 Other Obligations.............................................................................................................................98 ARTICLE IV ....................................................................................................................................99 Effectivity .........................................................................................................................................99 A C K N O W L E D G E M E N T ..............................................................................................100

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BACKGROUND

1. Sustainable economic growth is at the heart of the Government’s and Bank’s strategic framework1 for attaining economic development with social inclusion, poverty reduction and equity. To complement measures for sound and open investment in the economy to stimulate growth, however, there is need for proper management of natural resources (agriculture, marine, forests and minerals) and the environment. Inadequate regard to implementing requisite NRM measures and safeguarding the economy from excessive environmental costs is rapidly eroding resource inventories (some of which are unique to the Philippines), which could seriously compromise short term economic gains by larger, longer term costs. In addition to direct resource costs (no more forests and fish), environment related economic costs (from pollution, health and congestion) will increase, tourism revenues decline as the earlier comparative advantages (wild life and natural beauty) disappear, and the cost of cleaning up after irresponsible industries falls on the public sector. Consequently, continued Environment and Natural Resources (ENR) mismanagement potentially constitutes a major impediment to long term growth. 2. The cost of past failures has already been high. Forestry is now a marginal sector, as a result of timber depletion and un-sustainable management over a long period, which took the country from being the world’s largest exporter of tropical hardwoods in the 1970s to being a net importer of forest products by the 1990s. In the early 1960s, the timber industry was the largest source of foreign exchange earnings, which declined rapidly and by the 1990s the sector’s contribution to export earnings was less than 0.5%. In addition to export products there was also significant loss of natural bio-diversity with the loss of a wide variety of tropical rain forest, floral species, a diverse range of endemic faunal species and several important marine and coastal ecotypes. Un-regulated illegal logging, moreover, has also increased human and economic cost due to land slide and flood disasters. In fisheries, the problems of over-fishing and fishery stock depletion are attributed to prevalence of an open-access system, the use of destructive techniques and the inability of government enforcement agencies to regulate entry to fishing waters and penalize destructive and depletive activities. The decline in fishery stock is also related to upstream externalities, i.e. pollution, siltation, sedimentation, mine tailings, and the loss or damage of coral reefs, mangroves, and other fish habitats. Collectively, there are worrying signs of extensive ecosystem and environmental degradation with ominous trends. PURPOSE OF THE OPERATIONAL MANUAL

3. This Operational Manual (OM) will provide guidelines and procedures for the proper implementation of projects in accordance with the objectives of the Environment and Natural Resources Management Project (ENRMP). This manual is intended for the use of all involved in the implementation of the ENRMP. The main objective of this manual is to ensure that activities covered under the ENRMP (both loan and GEF funded) are implemented according to agreed designs and conditions, in particular on the legally binding aspects, such as the safeguards; fiduciary arrangements and the monitoring and evaluation. This Manual should be read in conjunction with the ENRMP Project Implementation Plan; the Loan and GEF Grant Agreements to which this Operations Manual will be an Annex.

1 President’s 10 point Agenda for Growth; Medium Term Philippine Development Plan (MTPDP); and the current World Bank CAS.

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PROJECT OBJECTIVES AND COMPONENTS

4. Program objectives: The fully blended IBRD/GEF supported NPS-ENRM would assist DENR to: (1) create and strengthen an enabling institutional environment to mainstream ENRM issues in policy, advocacy and ultimately the direction of economic growth, development and poverty reduction processes in the Philippines and by doing so enhance the sphere of influence of DENR; and (2) assist the GOP in enhancing ecosystem services for additional global and local benefits. Furthermore the planned assistance would contribute to the specific policy and strategic goals of promoting social inclusion by strengthening the participation of communities in natural resource management and decision-making, strengthening devolution in line with the Local Government Code (LGC) by partnering LGUs and engaging the private sector to be more responsible. It would also support the CAS focus on governance by making the system for planning budgeting and delivery of services in DENR and selected LGUs more efficient and transparent. The program’s approach based on targeted expenditure support is also consistent with the CAS strategy for improving fiscal and expenditure discipline, mainstreaming support for the regular programs of Government and developing broader sector based approaches. The GEF will partner the Bank in meeting these higher level objectives, by providing incremental funding for operational GEF priorities with anticipated global benefits. Emphasis will be placed on two main thrusts of OP12, capacity building and on-the-ground investments. 5. The ENRMP overall development objective is to assist the Department of Environment and Natural Resources improve efficiency and effectiveness in its service delivery. More specifically, the project would aim to strengthen the allocative efficiency of DENR’s limited budget resources through better prioritization and partnership arrangements, facilitating scaling-up and better linking of plans and budgets. The project would be implemented within the framework of the Department’s regular programmes, through: (a) reducing the significant disconnect between DENR’s planning and budgeting functions; (b) improving priority setting and assuredness of funding for priorities; (c) improving cost effectiveness and allocative efficiency; (d) strengthening environmental monitoring systems and enforcement; and (e) supporting key organizational reforms to improve functional efficiency. The key organizational reforms to be supported by the project are presented in Annex 2. 6. The global environment objective of the program would be to enhance ecosystem services for global and local benefits. Specific global objectives would be addressed through GEF financing in strategic areas to enhance ecosystem services for global and local benefits. The global environment objective would be achieved by applying an integrated ecosystem management (IEM) approach in priority watershed areas and selected sites of global significance. Site specific technologies would be applied based on technical and scientific suitability, local enabling environment and potential impact, resulting in sustainable land management practices, effective models for ecosystem restoration and conservation of biodiversity. 7. Carbon Finance: The project intends to incorporate carbon finance in the reforestation efforts in order to encourage the sequestration of carbon dioxide, a gas which contributes to global climate change. Traditionally, the widespread adoption and sustainability of forest rehabilitation efforts in the Philippines has been hampered by a lack of financial resources and incentives to maintain and protect the reforested area that would allow for the achievement of climate change benefits. Carbon finance and the associated monitoring and regulatory framework will provide this needed financing and incentives. The financing complements and does not duplicate efforts under the GEF financing. The GEF financing will focus on enhancing integrated ecosystem management through upfront capacity

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building and investment support while the carbon finance will provide the recurrent financing and incentive structure necessary to encourage the adoption and sustainability of carbon stocks. Additionally, the GEF will not fund any costs associated with processing the carbon finance transaction.

Project Components:

8. Project components have been designed to support a time slice of DENR’s core mandate and regular program. This approach constitutes a move away from projectized approaches generally employed by donor assisted projects in the past, which established parallel structures and had problems of transition to regular programs on completion. Project interventions will also be fully consistent with the attainment of Major Final Outputs (MFO) that agencies are adopting in a move toward results based budgeting, and adoption of an Objective Performance Indicator Framework (OPIF). 9. Component/MFO 1: Policy, Planning, Monitoring and Evaluation: Due to the construction of DENR’s MFOs, a wide range of activities are included under MFO1, including those which are more operational in nature, supporting investments in MFO 2 and 3, (e.g., preparation of maps, development of full rehabilitation plans for abandoned mines, surveys and development of detailed watershed management plans). More importantly, however, the design of the project maintains conformity with the MFOs, and therefore the GAA. That said, an important element of Component 1 is the support for DENR’s institutional reform agenda which is based on the institutions Rationalization Plan. In line with the DBCC requirement that DENR “flesh-out” and “implement” its Rationalization Plan under the loan, a Rationalization Plan Framework has been developed (Annex 1) which identifies the specific actions and outcomes expected under the project, and the longer-term steps to be undertaken by DENR to fully implement its Rationalization Plan. Progress in implementing the Rationalization Plan would be reviewed annually as part of the oversight agency review of DENR’s work plan and budget, included as a dated covenant under the loan. 10. Sub-component 1.1: Rationalization of ENR Plans and Policies: a) Strengthening the efficiency of DENR’s organization and operations: Key activities include: i) development of a framework for rationalizing and prioritizing the wide ranging ENR policies and legislation; ii) streamlining the delegation of approving authorities at the different hierarchical levels of the organization; and iii) restructuring EMB to be functionally–based, rather than sub-sectoral. Expenditures would be for technical assistance, facilitation of action plans for planning and budgeting, and some computers and software necessary to support the activities; b) Strengthening the service delivery functions in the provision of data, information and M&E: The project would support a baseline survey which, inter alia, would provide measures of client satisfaction with DENR’s service delivery, and on the level of perceived transparency in the access to data and information. A follow-up survey would be done by June 30, 2011. The Policy and Planning Office would be strengthened to more effectively monitor DENR’s program implementation and to undertake periodic evaluations. Support would also be provided for strengthening key databases, and the establishment of a more effective MIS system. By December 31, 2007, it has been agreed an MIS strategic plan and budget would be approved which inter alia would establish and thereafter implement the action plan for the design of a program to improve the quality, public accessibility and links between the key databases of the DENR. Expenditures would be for the baseline surveys, setting-up and upgrading of the MIS system, and purchase of goods as required, and c) Strengthening DENR’s overall project management processes: The programmatic approach being supported by the

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project would entail expenditures for conducting the internal audit, and for PCU/FASPO for project management and associated costs such as computers, data collection and compilation.

11. Sub-component 1.2: Surveys and Mapping: Survey and maps would be prepared to better demarcate forest lands, watersheds, protected areas, foreshores, geo-hazards (high risk areas for landslides and flood-run-off) and groundwater. To the extent that the project provides for the location of boundary markers/survey pegs, it has been explicitly agreed that, under the project, the placement of such markers shall not support nor encourage in any way, actions which would lead to the displacement of people occupying lands within the demarcated areas. Expenditures will include the costs of maps, surveys, GPS units etc.

12. Sub-component 1.3: Watershed Development Planning. Expenditures would include the preparation of watershed management plans, including the characterization of land-use patterns, delineation of forest and protected areas etc., and their ground truthing. This will be focused on the priority watersheds identified for support and discussed in detail in component 2 below.

13. Sub-component 1.4: Remediation of Risks: Support would be for (i) site investigation and analysis and development of environmental rehabilitation and remediation plans for selected abandoned mines; (ii) implementation of interim mitigation and remediation measures to manage immediate risks posed by the abandoned Bagacay mine site, while the final rehabilitation and remediation plan is being prepared; and, (iii) development of environmental and social policies and guidelines for current and future mining.

14. Sub-component 1.5: Public Awareness and Environmental Education: Support, in particular from the GEF, would be provided for review and assessment of DENR’s IEC strategy and framework, structure, roles and functions, drawing upon the experience from other donor-project supported IEC plans and programs and identifying best practices in ENR for dissemination and replication. Expenditures would be for strategic public awareness and education campaigns, goods, services, some technical capacity, preparation of the campaign materials etc.

15. Component/MFO 2 Integrated Ecosystem Management: This component targets watersheds facing severe risk of further degradation, and particularly those in critical ecological areas. It focuses the support on participatory actions with stakeholders who are directly influenced by the state of the natural resource degradation. 16. Sub-component 2.1 Integrated Ecosystems Management: a) Promoting participatory watershed management. The focus would be on prioritized integrated watershed and wetlands management strategies in priority areas facing severe risk of further degradation or in sensitive ecological areas. Specific activities to be supported would include: community organizing, stakeholder analysis and mobilization, formulation of IEM/IWM guidelines, IEM/IWM plan formulation; conduct of specific and focused IEC (see component 1.3 above), land use zoning planning and boundary delineation. Support would also be provided for strengthening communications systems and strengthening partnership/ collaboration with other sectors in environmental compliance. A specific focus would be on strengthening LGUs to undertake responsibilities in ENR management. The watersheds agreed to be supported under the GEF and the SIM areas follows: i) Angat Watershed Reservation (55,709 ha), Ipo Watershed (6,600 ha), Dona Remedios Trinidad-Gen. Tinio WFR (20,760 ha), Kanan Watershed (39, 160, 83 ha), Bicol River Basin: Libmanan-Pulantuna Watershed (70,924ha), and Ligawasan Marsh (46,798 ha). Additionally, it has been agreed that funding under the SIM would be directed to support integrated watershed protection activities in Abulog (CAR), Matutinao (Region 7), Pola (Region 4-B). For these additional watersheds, before investments are made it will be necessary to follow the up-front work on stakeholder/social and environmental

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assessments, as well as site descriptions. These activities could be included as part of the watershed management plan work to be done under the project in 2007; b) Habitat Rehabilitation and Restoration. This would support: i) restoration and rehabilitation of convergence watersheds (non GEF areas); ii) capacity building (LGU, local communities, DENR); and iii) IEC campaigns. Prioritized degraded ecologically sensitive areas would be rehabilitated primarily through rain-forestation. Biodiversity conservation and management would be supported within priority PAs and other biologically important areas; and the assessment of key conservation areas, including resource-base assessments and mapping of wetlands.

17. Sub-component 2.2 Agro-Forestry and Livelihood Support. Communities would be supported to implement demand driven livelihood activities that achieve sustainable land management and/or biodiversity conservation, identified in micro-catchment plans. Guidelines for project proposals would also emphasize linking sustainable land and natural resources management practices and tenurial instruments with community participation in local ENR monitoring systems and resource protection. Proposals would be financed on a competitive (such as community willingness to provide in-kind contributions) and best practice basis, and would be screened and endorsed by the Watershed Management Councils and or LGUs. Carbon finance activities will be explored as a means of providing recurrent financing in exchange for the establishment and maintenance of forests in eligible areas. Financing for this is envisaged to be provided through Carbon Funds, the details of which would be worked out at a later time. 18. Component/MFO 3 Strengthening Environment and Natural Resources Management: This Component targets the regulatory and oversight functions of DENR. 19. Sub-component 3.1 Monitoring Systems for ENR Laws and Regulations: Support would be for: (i) strengthening of key regulatory functions related to the issuance of tenurial instruments, and encroachment into forest areas; and (ii) strengthening the implementation of regulations, relating to air and water quality, solid waste management, and environmental impact assessment (EIA), which inter alia, would include greater transparency, improved partnerships with both the public and the private sector and the use of market-based and command and control instrument. This component would fund capacity-building for volunteer enforcement and local natural resource monitoring in priority sites. On the compliance of environmental laws and regulations, the Program would finance the following priority activities: (i) air quality management: purchase of air quality monitoring equipment to upgrade DENR’s monitoring tools and capability; monitoring of private emissions testing centers to ensure they perform according to the guidelines and standards set by the DENR; monitoring of firms issued with permit to operate to ensure that they comply with the standards; inventory of firms with hazardous air emissions and stack sampling, among others; (ii) water quality management: establishment of at least three priority water quality management areas that will pave the way for the implementation of the recently enacted Clean Water Act, including the implementation of the environmental user fee/discharge permit system, an economic instrument, to complement water quality regulations; operationalization of the multi-sectoral water quality management boards (WQMBs); implementation of the environmental user fee/discharge permit system; and capacity building activities for EMB Central and Regional Offices and the WQMBs to implement the discharge permit system; (iii) waste management: inventory of firms that manufacture and/or import toxic and hazardous wastes; and technical assistance to LGUs on solid waste management to increase compliance and adoption of the ecological solid waste management act by the LGUs; (iv) EIA: development of guidelines to strengthen the implementation of an EIA system,

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which inter alia would include provisions for bio-diversity and capacity building of Regional Offices and LGUs. 20. Sub-component 3.2 Community-based Participatory IWM Monitoring System: On the basis of the existing DENR Biodiversity Monitoring System (BMS), a local level priority participatory land, water and resource use monitoring system will be developed to be used in IWM. DENR has, with funding from the World Bank, developed a successful BMS for protected areas over the past 10 years. GEF funds would, through the financing of TA, assist DENR in scaling-up this existing monitoring system so that it can be used as a participatory monitoring tool in targeted watersheds and PAs with a critical and urgent need for conservation action, across the Philippines. It will be further developed so that it can be used as a simple monitoring tool for IWM and with added monitoring components such as water quality and soil.

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PART II

GEF GRANT FUNDED ACTIVITIES

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BACKGROUND 21. The Philippines is one of only 17 mega diverse countries around the world, more than 65% of the described species in the country are found nowhere else on Earth. There are more new species described every year in the Philippines than in any other country in the world. The country depends heavily on its rich natural resources for many economic, employment, and biodiversity values and services they provide. 22. Sustainable economic growth is at the heart of the Government of the Philippines (GoP) and Bank’s strategic framework2 for attaining economic development with social inclusion, poverty reduction and equity. To complement measures for sound and open investment in the economy to stimulate growth, however, there is need for proper management of the environment and natural resources including biodiversity. Inadequate regard to implementing requisite NRM measures and safeguarding the economy from excessive environmental costs is rapidly eroding resource inventories (many of which are unique to the Philippines), which could seriously compromise short term economic gains by larger, longer term costs. In addition to direct resource costs (no more forests and fish), environment related economic costs (from pollution, health and congestion) will increase, tourism revenues decline as the earlier comparative advantages (wild life and natural beauty) disappear, and the cost of cleaning up after irresponsible industries falls on the public sector. Consequently, continued Environment and Natural Resources (ENR) mismanagement potentially constitutes a major impediment to long term growth. 23. The cost of past failures has already been high. Forestry is now a marginal sector, as a result of timber depletion and unsustainable management over a long period, which took the country from being the world’s largest exporter of tropical hardwoods in the 1970s to being a net importer of forest products by the 1990s. In the early 1960s, the timber industry was the largest source of foreign exchange earnings, which declined rapidly and by the 1990s the sector’s contribution to export earnings was less than 0.5%. In addition to export products there was also significant loss of natural biodiversity with the loss of a wide variety of tropical rain forest, floral species, a diverse range of endemic faunal species and several important marine and coastal ecotypes. The annual forest loss is around 227,000 hectares, which combined with poor land management and unsustainable farming practices lead to increasing soil erosion. At present, about 21% of agricultural lands and 36% of non-agricultural lands throughout the country have been assessed as moderately or severely eroded. The erosion imposes high costs on infrastructure, settlements, and productivity. Unregulated illegal logging, moreover, has also increased human and economic cost due to land slide and flood disasters. In fisheries, the problems of over-fishing and fishery stock depletion are attributed to prevalence of an open-access system, the use of destructive techniques and the inability of government enforcement agencies to regulate entry to fishing waters and penalize destructive and depletive activities. The decline in fishery stock is also related to upstream externalities, i.e. pollution, siltation, sedimentation, mine tailings, and the loss or damage of coral reefs, mangroves, and other fish habitats. Collectively, there are worrying signs of extensive ecosystem and environmental degradation with ominous trends. More than 800 of plant and animal species in the Philippines are at present threatened with extinction. 24. Reducing poverty requires increasing and/or improving the asset base of the poor in order to generate long-term income flows and well-being. Especially for the poorer part of the Philippine 2 President’s 10 point Agenda for Growth; Medium Term Philippine Development Plan (MTPDP); and the current World Bank CAS.

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population the environmental assets can make up a large proportion of their total asset base. Investing in the environment could therefore be an effective route to achieving the Millennium Development Goals. 25. The global environment objective of the program would be to enhance ecosystem services for global and local benefits. Specific global objectives would be addressed through GEF financing in strategic areas to enhance ecosystem services for global and local benefits. The global environment objective would be achieved by applying an integrated ecosystem management (IEM) approach in priority watershed areas and selected sites of global significance. Site specific technologies would be applied based on technical and scientific suitability, local enabling environment and potential impact, resulting in sustainable land management practices, effective models for ecosystem restoration and conservation of biodiversity. Livelihood models and payment for environmental service approaches would incorporate carbon finance playing a key role in the sustaining the carbon stock. Global benefits would include: 26. biodiversity protection (e.g. habitat protection, natural forest regeneration and reduction of threats to protected areas); 27. improved ecosystem services such as enhanced water flows, reduction in sedimentation loads, and increased capability for carbon storage. 28. Restoration of natural forest and wetland functions would provide habitat protection for biodiversity, increase carbon stocks and strengthen hydrological cycles. 29. Additional global benefits would arise by creating synergies that optimize linkages between focal areas, e.g. fire management and conversion of slash and burn agriculture with more sustainable agricultural practices, which increase land cover and contribute to increasing carbon stock.

30. The main indicators to measure the above are outlined in the Results Framework in Attachment Project Components 31. Project components have also been designed around the DENR’s core mandate and regular program with the proposed NPS-ENRM effectively supporting a time slice of these. The GEF grant component will support actions in priority watersheds and wetland areas identified by DENR:

32. Southern Sierra Madre Mountains (Dona Remedio Trinidad – Gen Tinio Watershed Forest Reserve, Angat – Ipo Watersheds and Kanan Watershed).

33. Libmanan-Pulantuna Watershed in Bicol Region including wetlands at Bicol River Estuary.

34. Ligawasan Marshes (targeted municipalities with jurisdiction over some of the most global important and intact wetland ecosystems). 35. Annexes 1 and 2 in the Project Implementation Plan (PIP) provide a detailed description of the components and of the targeted priority areas. A number of implementation and key milestones of relevance for implementation of GEF-supported activities are found in Attachment 4 of this Manual.

Component 1 Policy, Planning, Monitoring and Evaluation: This component largely supports the institutional elements of DENR’s reform agenda under the project; the implementation of which

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is important for supporting the program of investments under components 2 and 3 of the project. The institutional setting and basis for the reform agenda are elaborated upon in Annexes 18 of the PAD.

36. The component would have several sub-components: (i) Rationalization of ENR Plans and Policies: (ii) Surveys and Mapping; (iii) Watershed Development Planning; (iv) Remediation of Risks (aimed at rehabilitation of selected abandoned mines and implementation of interim mitigation and remediation measures; and (v) Public Awareness and Environmental Education. 37. Activities would specifically be aimed at: i) strengthening the linkage between planning and budgeting with a view to reducing the disconnect between the General Program of Action (GPOA ), and the annual budget, ii) as needed, refinement of DENR’s MFOs to better reflect core functions, priorities and outputs. 38. GEF support to this sub-component would focus on national level collection and dissemination of ENR best practices IEC as a tool in the watershed planning process to establish a good understanding among key stakeholders of the linkages between biodiversity, SLM and livelihoods, required conservation and potential new livelihood options. The IEC campaigns will focus on replication of the best practices lessons learned for integrated ecosystem management including the introduction of economic and incentive-driven resource management.

Component 2 Integrated Eco-system Management: Component 2 will specifically target groups and stakeholders that are directly influenced by the state of natural resources in the country. At the national level, project support will be provided to activities such as compiling natural resource inventories, demarcation of forest boundaries and cadastral surveys. At field level, support will be directed at priority watersheds identified by DENR. Component 2 will also be the main focus of GEF activities, which will be fully blended.

Subcomponent 2.1: would promote participatory Micro-catchment, Integrated Watershed Ecosystem Planning, Management and Awareness Raising; including the strengthening of communications systems vital for the transmission and dissemination of critical information; and strengthening of partnership/ collaboration with other sectors in environmental compliance. Subcomponent 2.2 would support restoration and rehabilitation of priority convergence watersheds (Non GEF areas); capacity building (LGU, local communities, DENR); and the conduct of IEC campaigns. In addition, the sub-component would also support biodiversity conservation and management within priority PAs and other biologically important areas; and the assessment of key conservation areas, resource-base inventory cum geohazard assessment and mapping and assessment of wetlands. Subcomponent 2.3 would promote socially sensitive development in watershed sites through its support to livelihood projects for GEF sites, including eco-tourism where feasible. 39. Details of GEF activities under Component 2

40. Table 3 below shows the size of area for the proposed watershed and wetlands sites to be funded under the GEF.

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Table 1

SIZE OF AREA FOR THE PROPOSED WATERSHED AND WETLANDS SITES FOR WB-GEF

Southern Sierra Madre Watershed Cluster

Name of Watershed Area (ha) Angat Watershed Reservation 55.709,10 Ipo Watershed 6.600,00 Dona Remedios Trinidad-Gen. Tinio WFR 20.760,00 Kanan Watershed 39.160,83

Sub-Total 122.229,93 Other Areas: Bicol River Basin: Libmanan-Pulantuna Watershed 70.924,81 Ligawasan Marsh 46.798,77

Sub-Total 117.723,58 Grand Total 239.953,51

The detailed activities for GEF grant financing are outlined in Table 4.

Table 2. Key GEF Activities under Component 2 Sub-components Actions (i) Implement participatory micro-catchment planning and management including training, capacity building and awareness raising to improve overall ecosystem management

a. Undertake participatory assessments to survey community resource use, threats and needs; b. Training and capacity building based on best practices developed by EcoGov; c. Facilitate communities and IPs to propose community management boundaries in collaboration with LGUs and DENR; d. Support community negotiation process to propose zoning schemes and boundaries and rules, rights and responsibilities for targeted resources/areas; e. Undertake broad hearings and focal group reviews in communities and with LGUs and DENR to finalize and approve Management Plans and zoning schemes and establish implementing local level MOAs; f. Integration of management plans into , municipal land use plans and into provincial and regional development plans g. Formalize the community resource use plan through a tenurial agreement with DENR; h. Provide locally best practice multi-media packages on the benefits of IWM and SLM practices; management; i. formation of integrated Watershed Management Councils to strengthen cross-sectoral coordination and management implementation in each watershed

(ii) rehabilitation and protection of degraded ecologically sensitive areas including riverine areas through reforestation with Philippine (rain forestation) species and based on best practices and lessons learned

a. Undertake watershed surveys and validations to determine key areas for rehabilitation including riverbanks and streams; b. Introduce the principle of “rain-forestation” where seeds and seedlings of plant species unique to the local forest habitat and bio-geographic zone are collected, propagated in nurseries and planted in denuded forest areas; c. Establish larger “rain forestation” plant nurseries capable of producing enough stock of a diverse number of species to be used for rehabilitation of core areas d. Primarily in production and multiple-uses zones establishment of vegetative erosion control measures through wattling, terracing, natural vegetation strips, and high value agro-forestry activities; e. Preparation of areas for rehabilitation and actual outplanting; f. Management and maintenance of rehabilitated areas.

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(iii)Iintegrated biodiversity conservation and land and resource use management within critical priority conservation areas including watersheds, PAs and other biologically important areas and rationalization of PA system

a) Preparation and implementation of participatory and local-language management plans in selected watersheds including establishment and capacity-building of WMCs and PAMBs with a greater role of LGUs and other government agencies in day-to-day operations; b. Integration of management plans into, municipal land use plans and into provincial and regional development plans ; c) Support to facilitation of preparation and issuance of relevant tenurial and land use instruments; d.) Support to targeted alternative livelihood interventions linked to conservation and sustainable use strategies; e. Development and implementation of a strategy to speed up disestablishment of protected areas and re-delineation of proclaimed areas to include more habitats in intact conditions representing the Philippine bio-geographical regions; g Development of PES with plowback mechanisms directly financing protection and monitoring and other vital management activities in the targeted watersheds and Pas under GEF –assistance; h. Issuance of enabling policies for replication and scaling-up of successful PES experiences in p riority watershed and wetland sites and PAs and support to implementation

(iv) identification and implementation of sustainable Livelihood Improvements that support IEM.

a. Investigate the potential anchorage at LGU level of livelihood activities, models and best practice; b. Prepare overviews for communities outlining existing and innovative new options for optimizing economic benefits from sustainable natural resources management; c. Support communities/POs in developing and implementing the activities through e.g. technical training, market analysis, business plan development, conditional investment grants, etc.

Component 3 Strengthening Environmental Management: Component 3, will target the regulatory and oversight functions of DENR to ensure that the excessive costs of environmental damage and resource mismanagement are minimized and the private sector (including firms and individuals) develop a more informed and responsible attitude to environmental concerns. In conjunction with the other components this meets sector goals related to reducing ENRM cost in growth. Component 3 will have two sub-components:

Sub-Component 3.1: Monitoring Systems for ENR Laws and Regulations, would specifically contribute to: better management of natural resources through the strengthening of key regulatory functions related to issuance of tenurial instruments, and encroachment into forest areas; as well as the strengthening of the implementation of regulations, relating to air and water quality, solid waste management, and environmental impact assessment (EIA) which inter alia, would include greater transparency, improved partnerships with both the public and the private sector and the use of market-based and command and control instruments. Subcomponent 3.2: Community-based Participatory IWM Monitoring System. On the basis of the existing DENR Biodiversity Monitoring System (BMS), a local level priority participatory land, water and resource use monitoring system will b e developed to b e used in IWM. DENR has, with funding from the World Bank, developed a successful BMS for protected areas over the past 10 years. GEF funds would, through the financing of TA, assist DENR in scaling-up t h i s existing monitoring system so that it can b e used as a participatory monitoring tool in targeted watersheds and PAS with a critical and urgent need for conservation action, across the Philippines. I t will b e further developed so that it can b e used as a simple monitoring tool for IWM and with added monitoring components such as water quality and soil.

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41. Key activities supported by GEF include the following:

• Conduct of an assessment of existing IWM and BMS experiences, management structure, participation, and minimum monitoring needs on basis of reports and field visit;

• Assessment of IWM functions, management structure, stakeholders (including roles and participation), and minimum, qualitative monitoring needs;

• Through IWM stakeholder consultations including communities identification of meaningful indicators for land, water and forests and key diversity under global threats;

• Elaboration of a proposal for community based, simple IWM monitoring system, including attention to: (a) simple and realistic approaches; (b) providing incentives (not necessarily financial) for stakeholder participation; and (c) assessing accountability and representation of poorest resource users;

• Priority testing of participatory IWM monitoring system and feedback exercises with LGUs and other stakeholders, revision of proposal;

• Integration of monitoring system in IWM plans, including provision of simple monitoring protocols linking data to tangible management action;

• Design mechanism for providing monitoring feedback to IWM Councils, LGUs and provinces; and

• Completion of information flow loops to secure that all relevant stakeholders are involved. 42. Once the system is developed, GEF funds will support costs related to its implementation within the priority areas, but with the understanding that DENR will expand the system to other critical conservation areas once local capacity is in place. The system would include monitoring of trends on the wildlife trade, resource extraction and improvement in the enforcement of wildlife and other natural resource related regulations. Furthermore it will be designed to monitor impact trends as a result of the implementation of tenurial instruments and alternative livelihoods linked to IWM. The monitoring component will be simple, replicable and designed to influence and guide adaptive management strategies as well as enhance local ownership and raise awareness to protect habitats and improve ENR management to enhance ecosystem services3. The monitoring system will include indicators for the use of land, water, wildlife and forest resources. The participatory monitoring will provide tangible feedback for ENR management decisions and furthermore also help increase compliance with ENR laws. 43. With respect to sub-component 3.2, incremental GEF assistance would also be provided to the following activities: Community-based Participatory IWM Monitoring: 4 The goal is to replicate and strengthen experiences with volunteer enforcement groups at local level. As part of the strengthening of local capacity in natural resources planning, management, and regulation, there is a need for improving local protection and enforcement. The good experiences on environmental law enforcement that places emphasis on the LGU and line agency levels and local communities should be replicated. Activities carried out under the EcoGov and under the GEF-supported CPPAP project could be used as models.

3 The type of monitoring described here is low-cost and based on community participation. It does not necessarily involve computers, GIS or satellite images. It is kept simple and low-cost in order to enhance long-term sustainability and local ownership. 4 Support PAWB GPOA 3.c, 3.o, 3.p

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44. Awareness-raising will be an important approach while conflict resolution of ENR violations and cases also will be addressed through the Watershed Management Councils (WMC) established under Component 2, consistent with the relevant provisions of the Clean Water Act. Actual compliance issues will be based on the establishment of tenurial areas, watershed areas and PAs with clear demarcation and official recognition and strengthening of forest monitoring through the patrolling by volunteer protection teams and the locally-based ENR&BMS monitoring system. Communication is vital in the transmission and dissemination of information particularly in areas of the watershed that are yet outside the service area of telecommunication networks. This is especially essential in facilitating communication between deputized community forest protection officers and other fieldworkers including informants of illegal operations inside the watersheds. Where there are gaps in the existing systems, and if found to be priority some handheld radio communication systems would be financed. 45. Strengthen partnership/collaboration with other sectors in enforcement: Better coordination and consultation with NGOs and other government agencies conducting training, IEC and other initiatives in better ecosystem management (land, forest and wetlands) will be conducted. Hence, the private sector will be engaged for a while in several ENR related projects and it is conceivable that the willingness and readiness of this sector to participate in forest law enforcement will not be difficult to spur. 46. Many holders of Timber License Agreements (TLAs), Integrated Forest Management Agreements (IFMAs), Socialized Integrated Forest Management Agreements (SIFMAs), Community Based Forest Management Agreement (CBFMAs) and other tenure instruments spend considerable resources to get their tenure and undertake development works in the area. Hence they should be the first to have a long term stake in the well being of the forest they manage. It will be essential to review these different tenure arrangements and identify areas that need to be strengthened to provide more incentives for long term investment in forest protection and other strategies to attain sustainability. At the same time a suitable capacity building program for tenure holders needs to be developed to enhance their ability to undertake sustainable forest management. 47. A priority will be to support the strengthening of provincial law enforcement centers in target sites based on an interagency collaboration among LGUs, DENR, BFAR and enforcement agencies. This would result inter-departmental MOAs on establishment of environment police desk officers in target sites. Another activity will involve the formation of voluntary community-based enforcement groups where experience from upland forest areas and coastal communities is shared. 48. Capability building in ENR law enforcement will be specifically designed to enrich the level of understanding and competence of prosecutors, judges, other stakeholders including DENR in various aspects of ENR law enforcement. It will include the: (i) Training in environmental law for communities and barangay officials, including conflict resolution skills; (ii) Creation of a regional Wildlife Management Committee to coordinate and contribute to the combat of the illegal wildlife trade; (iii) Conduct awareness campaigns under Component 1 to decrease the incidences and impacts of forest fires, pests; illegal logging and other types of illegal resource extraction; and (iv) Increased enforcement of existing laws and local policies and penalization of offenders through paralegal training; and establishment of environment desk officers at local institutions. 49. GEF would fund incremental cost to cover activities targeted to environmental law training of communities and barangay officials participating in IWM, paralegal training to Peoples’ Organizations

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and communities deputized in forest protection, training to voluntary community enforcement groups, training of public prosecutors, judges, and local level DENR and other government officials working on natural resource issues. In particular, formation and training of voluntary enforcement teams in each community, identification and provision of incentives for continued participation will be important. Implementation of a reward system to informers may involve the lifting of the suspension of the reward system to those who provide vital information leading to the apprehension of forest laws and NIPAS Act violators as provided for in EO 277 and DAO No.35, 1988. Review of this system to identify possible areas of improvement will be carried out. 50. In coastal areas institutionalization of the collaboration between DENR, Customs and Coast Guards will include the conduct of dialogues with the Bureau of Customs and Coast Guards on the acceptable institutional arrangements that will strengthen the collaborative efforts with these two offices. Strengthening of the enforcement activities including monitoring of shipment of imported and exported forest and wildlife products through key sea ports will also be undertaken.

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PART III

PROJECT COSTS, IMPLEMENTATION ARRANGEMENTS, MONITORING AND EVALUATION AND FIDUARIARY ARRANGEMENTS

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PROJECT COSTS AND FUNDING SOURCES 51. Project components have been designed to support a time slice of DENR’s core mandate and regular program and budget. This approach constitutes a move away from projectized approaches generally employed by donor assisted projects in the past, which established parallel structures and had problems of transitioning to regular programs on completion. Project interventions will also be fully consistent with the attainment of Major Final Outputs (MFO) that agencies are adopting in a move toward results based budgeting, and adoption of an Objective Performance Indicator Framework (OPIF). 52. Activities to be supported would be a sub-set of the regular work program and budget of DENRs agencies and regional units. A wide range of activities (surveys, mapping, tree planting, community activities etc) and goods (vehicles, equipment, tools etc) would be funded as described above. The following table provides an indicative breakdown of costs, by MFO, across the four year project. Flexibility exists for DENR management to adjust both the pace of loan utilization across years, and between activities and MFOs, provided this is within DENR’s budget line items and consistent with the target outcomes for the project.

Project Cost By Component and/or Activity Local US $million

Foreign US $million

Total US $million

1. Policy, Planning, Monitoring and Evaluation 33.63 2.89 36.52 2. Integrated Ecosystem Management 13.25 0.38 13.63 3. Strengthening Environmental Management 3.43 1.15 4.58 Total Baseline Cost 50.31 4.42 54.73 Physical Contingencies Price Contingencies 2.14 0.11 2.25

Total Project Costs 52.45 4.53 57.00 Interest during construction

Front-end Fee5 0.00 0.00 Total Financing Required 52.45 4.53 57.00

Total Project Cost by Financier6 GEF IBRD Total Cost Project Cost By Component and/or Activity US $million US $million US $million 1. Policy, Planning, Monitoring and Evaluation 1.90 36.24 38.14 2. Integrated Ecosystem Management 4.43 9.66 14.09 3. Strengthening Environmental Management 0.67 4.10 4.77

Total Project Costs 7.00 50.00 57.00

5 It is expected that the project will go to the Bank’s Board in the present fiscal year; that is before June 30, 2007. This being the case, the Front End Fee would be wavered following the ruling in effect for the present fiscal year. 6 Including contingencies

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INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS 53. Implementation of the project would follow normal DENR management and administrative structures and procedures to ensure that project supported activities are consistent with the Department’s regular operations. To facilitate management’s oversight of the project, Special Order 1030, issued December 5, 2006 provides for the following:

i) Policy and Over-all Program Direction: The NPS-ENRMP shall have an Executive Committee headed by the Secretary, as the Project Steering Committee (PSC). The PSC shall have over-all responsibility and supervision over the project. The Senior Undersecretary and Chief of Staff shall provide leadership throughout the project preparation and implementation. Representatives from DBM and NEDA would be included with observer status. The PSC will be the main link for the joint DENR/WB implementation reviews, and would be chaired by the Senior Undersecretary or in his absence the Undersecretary for Policy and Planning. It will have representation from Assistant Secretaries for FASPO, Director for Finance, Planning and Policy and Directors of each Bureau (EMB, PAWB, MGB, and FMB).

ii) Over-all Project Operation and Coordination: Day to day operation of the project would be coordinated through a Project Coordination Unit (PCU) under the Unified Project Management Office/FASPO. The PCU shall act as Secretariat for the project. The Assistant Secretary for FASPO shall directly head the PCU to be supported by at least two (2) staff from the FASPO and the implementing bureaus. The PCU, through the ASEC for FASPO, shall closely coordinate with the Planning Office in the regular planning, monitoring and evaluation. It shall be mainly responsible for the consolidation of the reports for submission to the World Bank and oversight agencies. As the PCU, the FASPO shall handle the preparation of Withdrawal Applications, Statement of Expenditures (SOE) and Management of the Special Account, the consolidation and submission of the financial management and procurement reports.

iii) Regular Operations and Support: The following units/offices shall undertake their regular functions and provide necessary support to the project given that NPS-ENRMP is program/budget support for DENR to undertake its mandates and achieve its major final outputs (MFOs):

a. Planning and Policy Studies Office: The PPSO shall initiate the formulation of the

Annual Program Agreement. It shall closely coordinate with the Budget Division/Financial Management Service in ensuring that Annual Program Agreement is in line with the priority activities identified and with the proposed annual appropriations. The PPSO shall primarily be in-charge of monitoring the regular activities under the SIM. It shall also prepare the regular operations reports as gathered from the Regional Offices and Bureaus.

b. Finance and Management Service: The Project will be mainstreamed into the FM system of DENR. Hence, the financial aspects of the Project would be coordinated from the Financial Management Service. FMS shall be primarily responsible for the preparation of the Financial Monitoring Reports (FMRs) and regulatory accounts.

c. Human Resource Development Service: Capacity Building activities for the DENR personnel will be mainstreamed into the HRDS. Work-plan preparation and conduct of the training activities will be handled by the HRDS.

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d. Management Information Service /ISTMO: The development of an effective MIS system is an important goal of the project, and a critical need for DENR management and efficiency gains for the institution. ISTMO would, therefore, be both proactive in helping to support the MIS system needed for the project, while also incorporating into its design of the DENR-wide MIS system, the feedback and experience from the NPS-ENRMP on the nature and detail of information needed to strengthen DENRs planning, budgeting and management systems.

e. Technical and Policy Support: The line and staff bureaus shall provide technical and policy support including guidelines and standards formulation to ensure effective project implementation.

iv) Special Provisions for GEF: The PCU/FASPO would coordinate GEF funded activities,

with the central and regional offices v) Field Operations: The Regional Offices shall directly undertake the activities at the field or site

level. Regional Operations shall be under the direct supervision of the Regional Executive Director with the concerned Regional Technical Director or Regional Director providing assistance and technical services. RED, through concerned RTD or RD shall coordinate and collaborate properly with the partner LGUs, NGOs/POs (planning, implementation, monitoring and evaluation) and private sector for integration and complementation.

vi) Monitoring and Evaluation: Monitoring and Evaluation of the Project shall be undertaken by the Planning Service for the regular activities; while the PCU/FASPO would undertake M&E functions for the GEF funded activities.

vii) Program Agreement: Authority to sign the Program Agreement (agreement to change the name form Program Contract as in the SO) be that of the Senior Undersecretary/Chief of staff, or if unavailable, the Assistant Secretary FASPO may sign provided the Program Agreement is in accordance with the approved annual project work plan. The Program Agreement for 2007 should be prepared by loan negotiations.

Implementation Arrangements at the Field Level 54. Implementation of the GEF activities will be mainly at the local LGU and community levels, where significant resources will be spent. GEF will not be financing a large part of the central DENR activities; rather the GEF's emphasis will be on building the capacity of the key partners – public; communities; and civil society - that must collaborate at the watershed level in order to achieve effective action on the ground. Modest GEF support for building DENR's capacity is justified to remove the barriers to effective local action that its past policies and behavior have created. Specific roles of government and non-government groups in watershed management are detailed in Annex 3. 55. The Regional Executive Directors responsible for the selected watersheds would have overall responsibility for the NPS-ENRMP including the implementation of environmental management plans, and provide direct supervision of activities to be carried out by DENR, assisted by the concerned Regional Technical Director or Regional Director as appropriate. However, to the extent that the project would seek to ensure that devolved functions relating to watershed, forestry and protected areas management are carried out by the responsible LGUs, , the Provincial LGUs in close collaboration with the PENRO would provide technical support to Municipal ENRO/Development Offices, which would be responsible for implementation of the program activities at local level More specifically, the following arrangements would be followed under the project:

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a. DENR will, as part of the devolution process, establish LGU inter-agency and OGA

cooperation at the local level where GEF grant support is provided. The cooperation will be based on MOAs to be signed during inception between the DENR REDs and the participating provincial Governors and other Government Agencies such as the NAPOCOR, MWSS and NIA (Angat-IPO), and the Armed Forces of the Philippines (Dona Remedios Watershed Forest Reserve and Angat-Ipo). For Ligawasan Marsh, the REDs of DENR ARMM and DENR Region 12 are envisioned to co-sign jointly with the participating LGUs. These arrangements encourage the participation of provincial as well as municipal level local government units based on a demand-driven approach.

b. At the watershed level, Watershed Management Councils (WMC) would be responsible for

overall watershed level planning and coordination. Each WMC would be co-chaired by the provincial Governor and the PENROs on behalf of the RED, who would also provide operation support. The WMC would lead preparation of watershed management plans with technical support provided by the PENRO. The operation of each WMC would be governed by terms of reference with clearly defined performance indicators. FASPO would have responsibility for outsourcing technical service contracts for capacity building and technical assistance in support of watershed management planning. The WMC would become a permanent multi-sectoral body to coordinate at watershed level and oversee implementation of the plan. The WMC could be an existing entity such as an expanded Protected Area Management Board (PAMB) to include all relevant stakeholders in the watershed or a provincial development council that will be modified to suit the local requirements. Membership would comprise stakeholders including agencies (e.g. DENR, NEDA, NIA, DPWH, and DA-BSWM), civil society and the private sector. For initial composition of the individual Watershed Management Councils, see Annex 2.

56. The sites are currently under different management regimes. During pre-appraisal details on

the composition of the management councils were worked out for most of the sites with the remainder (Ligawasan) to be fine-tuned as part of the inception phase. For stakeholder analysis, see Annex 5 of the GEF PIP. It has been confirmed by the main stakeholders that management councils would be created for:

• the Forest Reserve of the Dona Remedios Trinidad – General Tinio Watershed, • the Angat-Ipo Watershed, • the Libmanan-Pulantuna Watershed, and • in the Eastern Ligawasan Marsh a Wetland Management Council may be created;

eventually in form of an interim PAMB. • An existing LGU Forest Management Council with jurisdiction over the Kanan Watershed

may eventually be merged with or reconciled with the PAMB of the PA overlapping with the watershed forest.

57. The Central FMB and PAWB will under the supervision of the FASPO PCU, and in direct collaboration with the Regional DENR, on a transitory basis take the lead and oversee the identification and communication to stakeholders bringing the partners together. The indicative terms of reference for the WMCs/re-designed PAMBs are found in Annex 2.

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58. At the Provincial level, and to be stipulated in the implementing MOA between the Regional DENR and the Provincial LGUs, the Provincial LGUs in close partnership with the participating PENROs will be responsible for implementation of the Program activities at local levels. The participating Provincial LGUs per project watershed area will each create (or strengthen an existing one) an Environment and Natural Resources Unit (ENRU) seconded by the PENRO with its technical staff detailed and/or from the Regional DENR and hired LSPs with needed technical capabilities to augment gaps. The ENRU will provide the required services for all the NRM programs and projects. 59. The PENRO with the LGU Provincial ENRU will be responsible for technical inputs to the overall watershed management plan per project site, and for providing the technical assistance needed for the Municipal ENRO or Municipal Development Office and/or PAMBs to provide the technical inputs to the Plan at the micro-catchments level within the municipalities. 60. There will be created one Project ENRU for:

• DRT-Gen Tinio Forest Reserve and located in the Province of Nueva Ecija. The

PENRO of Bulacan with jurisdiction over the southern portion of the forest reserve will participate actively in assisting the DRT ENRU whenever necessary

• Angat-Ipo Watershed and located in the Province of Bulacan. However during inception the DENR and the LGU of the Province of Rizal with jurisdiction over a section over the watershed may for opt for creation of an additional ENRU to be located in Rizal. The PENROs of Bulacan and of Rizal in close cooperation with the LGU stakeholders will be responsible to work out the most efficient set-up during project inception

• Kanan Watershed and for logistic and efficiency reasons to be located at the MENRO of General Nakar

• Libmanan-Pulantuna and located in the Province of Camarines Sur. The PENROs of Camarines Norte and Camarines Sur in close coordination with the LGU stakeholders will be responsible to work out the most efficient set-up during project inception.

• Ligawasan and to be located within the Marsh proper in the Province of Maguindanao. However, the PENROs of Sultan Kudarat and of Maguindanao in close cooperation with the LGU stakeholders will be responsible to work out the most efficient set-up during project inception.

61. At the municipal level, a MOA under the framework of the Regional MOA entered into between the DENR and the provincial LGU(s), would be signed between the DENR (PENRO)/CENRO) and the Mayors of participating MLGUs which would set out the responsibilities of the MLGU and the DENR for NRM at the municipal level. The MOA would include clear performance indicators for which the MLGU and DENR would be responsible. Project funds would be provided through the MDFO as small grants to MLGUs and could be used to hire service providers who would help strengthen LGU capacity for preparing and implementing Municipal and Community Resource Level Management Plans and for co-financing the implementation of livelihood activities linked to integrated ecosystem management. At each MLGU the Municipal Environment and Natural Resources Office (MENRO) or the Municipal Planning and Development Office (MPDO) with responsibility for implementation and monitoring would be be created or strengthened and assisted by the Provincial ENRUs. In some of the priority areas, NGO-

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led projects supported by the private sector and international donors are under implementation. In such cases, these may become the NPS-ENRM’s co-partners. 62. Development of a suitable framework for collaboration (roles and rules of engagement): Once the institutional stakeholders are finally confirmed and profiled, the framework for participation will be designed through participatory processes involving the stakeholders themselves. Considering the preferences and legal framework, the stakeholders will be assisted in determining the most suitable terms of engagement for all stakeholders. The various boards created by environmental laws such as the PAMB, Provincial Solid Waste Management Board, Air-shed Governing Board, and the Water Management Board will be reviewed by the ENRU and considered to avoid unnecessary duplication, creation of bureaucratic layers, and usurping of powers. 63. Twenty-three municipal LGUs have been identified as having a major stake and role in the management of the targeted watersheds and wetlands. However, those LGUs and barangays whose participation is most critical will be needed to be further identified during program inception and their commitment to support the watershed rehabilitation fully determined. This is also in line with the long-term goal of devolving watershed functions to the LGUs. Whereas indicative implementation activities and tasks to transform inputs into products and services produced to enable sustained outcomes are listed in Annex 1 of the PIP, the actual detailed activity planning and tasking per site will be take place in form of a series of participatory and transparent workshops involving all stakeholders including the communities concerned. The participating PENROs, and Provincial LGUs will take lead in collaboration with the Municipal LGUs other government agencies such as NAPOCOR, among others. The planning workshops including the cost-sharing modalities by the LGUs are part of the early inception phase and will take place after the institutional MOAs have been drafted and signed for each watershed area (four watersheds and one wetland). 64. Watershed Management activities: The Regional Executive Directors responsible for the selected watersheds would have overall responsibility for the NPS-ENRMP, including the implementation of environmental management plans, and provide direct supervision of activities to be carried out by DENR. However, to the extent that the project would seek to ensure that devolved functions relating to watershed, forestry and protected areas management are carried out by the responsible LGUs, the Provincial LGUs in close collaboration with the PENRO would provide technical support to Municipal ENRO/Development Offices, which would be responsible for implementation of the program activities at local level. For the four watersheds selected for initial investment, details on the composition of the management councils and strengthening of provincial or municipal ENROs were worked out during on-site stakeholder consultations, as part of pre-appraisal and are described below, although arrangements in Ligawasan need to be fine-tuned as part of the inception phase.

i) DENR will, as part of the devolution process, establish LGU inter-agency and OGA cooperation at the local level, where GEF grant support is provided. The cooperation will be based on MOAs to be signed during inception between the DENR-REDs and the participating provincial Governors and other Government Agencies such as the NAPOCOR, MWSS and NIA (Angat-IPO), and the Armed Forces of the Philippines (Dona Remedios Watershed Forest Reserve and Angat-Ipo). For Ligawasan Marsh, the REDs of DENR ARMM and DENR Region 12 are envisioned to co-sign jointly with the participating LGUs.

ii) At the watershed level, Watershed Management Councils (WMC) would be responsible for overall watershed level planning and coordination (see Annex 2 for the Council’s TORs). The

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establishment of the WMC would be consistent with the relevant provisions of the Clean Water Act. Each WMC would be co-chaired by the provincial Governor and the PENROs on behalf of the RED, who would also provide operation support. The WMC would lead preparation of watershed management plans with technical support provided by a strengthened Provincial Environment and Natural Resources Unit. The operation of each WMC would be governed by terms of reference with clearly defined performance indicators. The WMC would complement the PAMB and in some cases could be a strengthened PAMB. FASPO would have responsibility for outsourcing technical service contracts for capacity building and technical assistance in support of watershed management planning, and

iii) At the municipal level, an MOA under the framework of the Regional MOA mentioned: (i) above, would be signed between the DENR (PENRO)/CENRO), MDFO and the mayors of participating MLGUs, which would set out the responsibilities of the MLGU and the DENR for NRM at the municipal level. The MOA would include clear performance indicators for which the MLGU and DENR would be responsible. Project funds would be provided through the MDFO as small grants to MLGUs and could be used to hire service providers who would help strengthen LGU capacity for preparation and implementation of Municipal and Community Level Resource Management Plans and for co-financing the implementation of livelihood activities linked to integrated ecosystem management. At each MLGU a Municipal Environment and Natural Resources Unit (MENRU)) or a Municipal Planning and Development Office (MPDO), would be created or strengthened, with responsibility for implementation and monitoring, and assisted by the Provincial ENRU. In some of the priority areas, NGO-led projects supported by the private sector and international donors are under implementation. In such cases, these may become the NPS-ENRM’s co-partners.

Specific roles of government and non-government groups in watershed management

65. The complex nature of implementing in a watershed area calls for clear description of roles and responsibilities. Formal and practical partnership implementation arrangements will be worked in detail during project start-up with the provincial and municipal local government units, and where applicable with private sector entities. In special cases such as AngIPO Watersheds, the inception phase will be used to negotiate the role and participation of NAPOCOR and MWSS in specific activities. The partnership arrangements will be based on MOAs.

A. Department of Environment and Natural Resources:

• Coordinate with relevant national institutions on management and policy formulation and national strategic framework for integrated watershed management;

• Enter into implementation MOAs with other government agencies, and Provincial and Municipal LGUs on implementation of watershed management and establishment of WMCs;

• Participation of PENRO or the RTD for Forestry or PAWS on behalf of the RED in WMC meetings;

• Jointly with the Provincial LGU(s) establish technical assistance and project management ENRUs per watershed project area as the basis for NPS-ENRM implementation at the micro-catchment (barangay and municipal level);

• Assist with management of resources and areas under the mandate of DENR (e.g. forest management and protected areas);

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• Provide financial resources and technical assistance to capacity development of local level DENR staff and of LGU staff, among others;

• Participate in the detailed activity planning exercises of the site-based ENRM program activities;

• Provide baseline financial assistance in specific project activities under DENR’s mandate; • Provide technical guidance to local government units in integrated watershed management

planning and implementation; • Conduct ENR topic-based training of LGUs and community stakeholders; • Assist the LGUs in identification of alternative or supplemental livelihood for communities in

critical watershed areas; • Provide tenurial instruments for qualified communities in buffer and user zones; • Provide technical assistance in rehabilitation and reforestation activities under the program; • Provide legal assistance to LGUs, and OGAs and community members/stakeholders for

environmental law enforcement; • Support multi-sectoral law enforcement and deputize volunteer community protection and

NMS Monitoring members as required ; • Monitor field activities and selected biophysical, socioeconomic and environment safeguard

compliance indicators

B. Provincial LGUs • Enter into implementation MOAs with DENR and other government agencies, on

implementation of watershed management and establishment of WMCs ; • Enter into implementation MOAs with DENR and other government agencies; • Through the Governor, co-chair the Watershed Management Council; • Jointly with the DENR (PENROs) establish technical assistance and project management

ENRUs per watershed project area as the basis for NPS-ENRM implementation at the micro-catchment (barangay and municipal level);

• Develop and implement policy and planning framework for IWM in the Province; • Provide technical assistance to municipalities for integrated watershed management planning

and implementation; • Monitor watershed management activities and results; • Establish, maintain and update a management information system and database; • Assist each municipality to establish and maintain a municipal database • Provide financial incentives for integrated watershed management based on results of

monitoring and protection/enforcement needs; • Assist the national government in developing and implementing a policy and planning

framework for IWM in the country. C. Municipal LGUs and other government agencies (NAPOCOR and MWSS) with jurisdiction over watershed areas (NAPOCOR and MWSS):

• Enter into implementation MOAs with DENR and other government agencies, on implementation of watershed management and establishment of WMCs ;

• Establish Municipal ENROs as the basis for NPS-ENRM implementation at the micro-catchment (barangay and municipal level;

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• Develop ENR capability of staff through training and practice; • Participate in the detailed activity planning exercises of the site-based ENRM program

activities; • Participation in Watershed Management Council to secure overall facilitation and coordination

for planning and implementation; • Develop a watershed environmental profile with maps for planning; • Conduct information, education and communication and training activities for local

communities and organizations; • Provide inputs to the development and adoption of a multi-year and strategic integrated

watershed management plan; • Support IWM plan implementation through appropriate ordinances and integration of the

plan into the Comprehensive Land Use Plan and the Provincial Development Plan; • Incorporate appropriate watershed management best practices in IWM plan; • Implement IWM plans through yearly operational plans and budget; • Maintain a municipal GIS database to facilitate planning and implementation; • Support participatory watershed natural resource assessments for each barangay; • Provide budget and dedicated personnel for planning and implementation; • Identify and implement alternative or supplemental livelihood for communities in critical

sections of watershed and wetland areas; • Support multi-sectoral law enforcement units and volunteer community protection teams

through deputization and incentive packages as required; • Contract assistance through qualified local consultants, NGOs and POs; • Monitor field activities and selected biophysical and socioeconomic indicators; • Implement revenue generation mechanisms through PES (licenses, fees and taxes); • Network and collaborate with local and international funding institutions for IWM

implementation; • Develop a local research program on IWM; and • Share IWM practices with constituents and other LGU learners.

D. Barangay LGUs

• Participation in Watershed Management Council; • Data gathering and watershed profiling; • Collaborative planning, implementation and monitoring; • Endorsement of micro-catchment plans; • Participation in WMC and other organizations such as volunteer protection, enforcement and

NMS monitoring units; and • Formulation of resolutions on IWM and enterprises for submission to municipality.

E. Community stakeholders and people's organizations

• Participation in Watershed Management Council; • Participate in all IWM and SLM planning sessions in all levels of local government

(barangay/municipality/city/province);

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• Participate in training and capacity building in IWM and SLM, protection end enforcement and NMS monitoring system;

• Participate in information and data collection and provide data; • Participate in stakeholder management organizations; • Volunteer for watershed management implementation activities (i.e., law enforcement, natural

resources monitoring, and protected areas management); • Provide local and traditional knowledge and experience in resource management; and • Initiate IEC activities in the community.

F. Non-governmental organizations (as applicable)

• Participation as observers in Watershed Management Council; • Provide assistance at the community and barangay level to organize natural resource

monitoring teams and other resource management organizations; • Provide technical services to LGUs for implementing community level interventions; • Provide information and education services at the community and municipal level; • Assist with monitoring biophysical and socioeconomic indicators; • Provide a conduit for financial assistance to LGUs for watershed management.

G. Academic institutions (where applicable)

• Participation as observers in Watershed Management Council; • Assist to analyze information for watershed environmental profiles; • Assist to design and implement a monitoring program for biophysical, socioeconomic and

legal-institutional indicators in IWM for LGUs; • Assist to integrate existing data and information into IWM plans; • Assist in formulating IWM plans and packaging of project proposals; • Provide assistance in designing and maintaining a management information system and

database for watershed management; • Assist to design watershed management projects for multi-municipal management areas; • Assist in training of LGUs and communities; and • Assist in designing IEC and community development programs and strategies for LGUs,

NGOs and POs.

The table below shows some of the initial composition of the watershed management councils in GEF-supported priority sites.

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Initial composition of the Watershed Management Councils in GEF-supported priority sites

Entities/Sites

DRT – Gen. Tinio WFR

Angat-Ipo Watershed

Kanan Watershed

Libmanan-Pulantuna Watershed

Ligawasan Marsh

Provincial LGU Nueva Ecija and Bulacan

Bulacan and Rizal Quezon Camarines Sur and Camarines Norte

Maguindanao, North Cotabatu, and Sultan Kudarat

Municipal LGU One Representative of General Tinio and of Dona Remedios Trinidad

One Representative of Dona Remedios Trinidad, San Jose del Monte, Norzagaray, Angat, and of E. Rodriguez

One Representative of General Nakar, Infanta and of Real

One Representative of Del Gallego, Ragay, Cabusao, Libmanan, Lupi, Slibmanan-Pulantunacot (Sipocot), Pamplona, Basud and of San Lorenzo Ruiz

One Representative of SK Pendatun, Sultan sa Barongis, Pikit, Pagalungan, Datu Montawal, Kabacan, M’Lang, Tulunan and of Paglat

Barangay Representation

One Barangay Representative per municipality chosen among the barangays from within the watershed

One Barangay Representative per municipality chosen among the barangays from within the watershed

One Barangay Representative per municipality chosen among the barangays from within the watershed area

One Barangay Representative per municipality chosen among the barangays along the Bicol river and wetlands

One Barangay Representative per municipality chosen among the barangays from within or at the wetland.

Government Agencies

Two DENR PENROs, and one Representative of DA- BSWM, NIA, AFP, Fort Magsasay Military Reservation, the Provincial Water Mgt. Boards under RA 9257; and of the Local Water Utility Authority

Two DENR PENRO, and one Representative of DA - BSWM, NIA, NAPOCOR, MWWS, the Provincial Water Mgt. Boards under RA 9257;and of AFP

DENR PENRO, and one Representative of DA- BSWM, NIA, AFP, the Provincial Water Mgt. Boards under RA 9257; and of the Local Water Utility Authority

Two DENR PENRO, and one Representative of DA - BSWM, NIA, and of the Local Water Utility Authority

Three DENR PENROs, and one Representative of DA - BSWM, NIA, and of the Local Water Utility Authority

Private Sector One Representative for each of the Local Water Utility Concessionaries

One Representative for each of the two Water concessionaries

One Representative for each of the Local Water Utility Concessionaries

One Representative for each of the Local Water Utility Concessionaries. One Representative of the major private landowners along the Bicol River per municipality, and chosen among them

One Representative for each of the Local Water Utility Concessionaries

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Communities and POs

One representative of each tenurial instrument holders of the watershed One representative of Farmers Associations chosen among the associations per Municipality

One representative of each tenurial instrument holders of the watershed One representative of Farmers Associations next to the watershed and chosen among the associations per Municipality

One representative of each tenurial instrument holders of the watershed One representative of Farmers Associations next to the watershed, and chosen among the associations per Municipality

One representative of each tenurial instrument holders of the watershed One representative of Farmers Associations next to the watershed and chosen among the associations per Municipality

One representative of Fishers Associations chosen among the associations per Municipality One representative of Farmers Associations next to the wetland and chosen among the associations per Municipality

Indigenous and Cultural Communities

One Representative per issued IP Instrument and/or one representative per IP Clan residing within the watershed

One Representative per issued IP Instrument and/or one representative per IP Clan residing within the watershed

One Representative per issued IP Instrument and/or one representative per IP Clan residing within the watershed

One Representative per issued IP Instrument and/or one representative per IP Clan residing within the watershed

One Representative per issued IP Instrument and/or one representative per Datu Clan residing within the wetland

NGOs To be determined To be determined. For example CAMBASI Veterans Association,

To be determined. For example YAKAP, Inc.

To be determined. For example Green Field Development, Inc.

To be determined. For example Ligawasan Marsh Research Council (NGO)

Women and Youth One Representative of women and of the youth chosen among the area associations

One Representative of women and of the youth chosen among the area associations

One Representative of women and of the youth chosen among the area associations

One Representative of women and of the youth chosen among the area associations

One Representative of women and of the youth chosen among the area associations

Observers Line agency representatives of: DENR CENROs with jurisdiction of the watershed, DAR, PNP,

Line agency representatives of: DENR CENROs with jurisdiction of the watershed, DAR, PNP,

Line agen cy representatives of: DENR CENROs with jurisdiction of the watershed, PASu of Proclamation 1636, DAR, PNP, SAC – Bishop Tirona

Line agency representatives of: DENR CENROs with jurisdiction of the watershed, PASu of Bicol National Park, PASu of Libmanan Caves, PNP

Line agency representatives of: DENR and ARMM CENROs, PASU with jurisdiction of the wetlands, Ligawasan Marsh Alliance MILF, PNP

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Implementation Phases 66. The preparation of the NSP-ENRM revealed that there is a need for capacity development of some DENR personnel before they are ready to assist and train LGUs and communities. Thus the implementation will have several steps:

a. Training of DENR and LGU staff in key concepts and tools including ecosystem-based integrated watershed approach, CBRM planning and mapping, biodiversity conservation and natural resources monitoring, sustainable land management, and good governance principles (transparency, accountability and participatory decision-making);

b. Formation of WMC, community organization, capacity building, baseline-setting and planning;

c. Database and profile development; d. Implementation of targeted watershed management projects and livelihood investments;

and a e. Monitoring and evaluation phase including permanent ENR monitoring

67. The capacity-building of DENR will primarily focus on a core group of Central DENR Trainers that has undertaken a TA Trainers Training. The DENR training core group, assisted by external TA, will be responsible for local level capacity-building of DENR, LGUs, OGAs etc in devolved functions, IWM, wildlife protection, natural resource management, among others.

68. In addition to the results that would be monitored and evaluated some specific milestones to be included as part of the M&E process have been included in Annex 3.

CRITICAL RISKS AND POSSIBLE CONTROVERSIAL ASPECTS

Risk Mitigation Measure Risk Rating

Project Development Objectives The overriding political priorities emphasizing the need for rapid economic growth, employment creation and general poverty reduct ion within a constrained public expenditure program, clearly entail trade-offs that negatively impact on the resources and follow-through on commitments for better environment and natural resource management.

The reform agenda agreed for the project specifically addresses issues of institutional strengthening, allocative efficiency, improved service delivery, prioritization and partnership arrangements designed to build DENR’s credibility and effectiveness. These are critical mitigating measures for enhancing public expenditure for ENR management .and building awareness of natural resources as a scarce economic good. That said, the difficulties in changing the “ways of doing business” and perceptions for such a large organization remain substantial and will take time and sustained effort to achieve.

S

Devolution of ENR functions to LGUs, which are essential to improve implementation effectiveness and scaling-up over the longer term, will be difficult, given the many social and economic demands on LGUs, their limited budgets and institutional capacity.

The criteria established for the selection of watershed under the project were designed so as to ensure that solid support already exists at the LGU level in the selected watersheds. The scaling –up of activities to other watersheds will require buy-in from other LGUs both to ENR management priorities, and to the benefits perceived to come from a partnership with DENR. Under the project, the risks have been mitigated by concentrating activities initially on 5 watersheds where there is already solid LGU interest. The scaling-up (eg., to the three other watersheds potentially identified for support under the project) would depend on progress and experience gained in implementing activities in the initial 5 watersheds.

S

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Risk Mitigation Measure Risk Rating

Program and institutional goals Budget constraints, evolving political and economic priorities that are often at odds with sound ENR management, along with frequent changes in senior management of DENR, have impeded the implementation of consistent policies and operations. The resulting lack of transparency and operational effectiveness has diminished the credibility of the institution in spite of its pivotal role in protecting and conserving the country’s very significant natural resource assets. The difficulties in reversing this situation are substantial and a significant risk for the project

Key mitigating measure include i) the close link between the institutional reform agenda being pursued under the project, and the overall Rationalization Plan for the DENR being monitored by the Government oversight agencies (DBM & NEDA). This would help keep the focus on the goals and expected outcomes of the project., and ii) the project focus on strengthening core DENR functions centered on agreed MFOs, within the regular budget of the DENR would also contribute to ensuring operational continuity, and be less sensitive to management changes and outside pressures. Nevertheless, the pace of reform and improved service delivery in DENR can only be expected to be modest at best. The pace of change in public perception of DENR and compliance with regulations will likely be even slower.

S

The project has strong support from the oversight agencies (DBM and NEDA), and is fully consistent with the broader public sector reforms being introduced government-wide. The outcome will, however, be at risk if the pace of the expected government–wide reform program is reduced.

The chronic disconnect between DENR’s planning and budget would be specifically addressed by the project through the implementation of guidelines to be issued by DBM in support of GOP’s Expenditure Rationalization and Service Delivery Program (ERSDP) and its push for Sector Efficiency and Effectiveness, ii) the mechanism of establishing a Program Agreement as a basis for disbursement under the project, and iii) the mechanisms to be used under the project for the flow and specific tagging of funds by DBM, would collectively help to ensure better linkage of expenditures with plans. If implemented as planned, these measures should substantially reduce the fiduciary risks.

M

The pace of policy, legal and regulatory reforms & amendments to overcome discrepancies & deficiencies in environmental and natural resource related laws has been slow. Even for existing ENR laws, they remain largely under-funded and hence under-implemented. This, coupled with lack of transparency in some areas, and perceived inconsistencies in enforcement, contribute to the issues of credibility and effectiveness discussed above and add significantly to the risks confronting the project

The project, while clearly having limitations in regard to needed legislative and enforcement actions, would facilitate the process of reform through analysis, preparation of codes of conduct and standards, preparation of legal and administrative orders and procedural manuals and support for advocacy actions.

S

Trade-offs will be required in the program’s pursuit of conservation goals, such as expanding the area under forest cover and transitioning farmer to more sustainable agricultural practices

GEF resources would be used to help identify these trade-offs, to propose mitigation measures, and to provide direct support to LGUs by way of a Livelihood Development Fund.

M

Technical Assistance 59. The WMC would lead preparation of watershed management plans with technical support provided by the PENRO with technical staff detailed from the Regional DENR. The services provided by the joint Provincial DENR-LGU ENRU would include, for example, land and resource use planning, GIS-mapping, documentation of land claims, CBFM processing of agreements, training, information and public education campaigns, resource and biodiversity monitoring. Because of the critical role of the regional DENR in overseeing project implementation at provincial level, it is important that DENR assesses the capability of senior staff in each targeted project site, and if necessary reassign appropriately qualified individuals with

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leadership and facilitation skills from other areas. Capabilities would include substantial practical familiarity with best practices on participatory and interdisciplinary approaches to ENR, and especially with integrated ecosystem management. 60. The PENRO together with the LGU Provincial ENRU will be responsible for technical inputs to the overall watershed management plan in each project site, and for providing the technical assistance needed for the Municipal ENRO or Municipal Development Office and/or PAMBs to provide the technical inputs to the Plan at the micro-catchments level within the municipalities. 61. Local implementation will be supported by a mix of technical assistance to augment gaps in local technical capabilities and to insure the introduction and scaling-up of best practices. Thematic assistance in form of capacity-training related for example to devolved IWM functions will be carried out by a core group of central DENR trainers. However, the mix of skills to manage watershed ecosystems and protected areas are technically demanding. There are in general significant shortages of qualified expertise that can undertake key natural resource management functions. Hence, local implementation, where needed will be supported by technical assistance from Local Service Providers (LSP), who would be specialized local agencies, NGOs, consulting firms, or individual consultants with the necessary skills. The LSP would be contracted through TA contracts and selected on a competitive basis. FASPO would have responsibility for outsourcing national technical service contracts for capacity building and technical assistance in support of watershed management planning. Project funds would also be provided through the MDFO as small grants to MLGUs and could be used to hire service providers who would help strengthen LGU implementation of the Municipal and Community Resource Level Management Plans and for co-financing the implementation of livelihood activities linked to integrated ecosystem management.

62. The TA required aims specifically to augment the DENR’s capability to effectively undertake the different capacity-building required for effective activity implementation. Hence, supplementary TA together with the DENR PENRO and Provincial LGU ENRO staff (Provincial ENRU) will provide technical supervision and guidance in the priority actions as needed. This will further provide the opportunity for enriching the expertise and competence of LGU and local DENR personnel through their active involvement in fieldwork with the TA.

PLANNING PROCESSES AND PROCEDURES USING THE PROGRAM AGREEMENT

63. Disbursements under the World Bank loan and the GEF grant would be on the basis of a Program Agreement to be prepared annually by DENR, based on the approved, re-enacted or pending budget submission for the department. In the latter case, the Program Agreement would be considered tentative until the budget for the subsequent year is approved. The Performance Agreement (proforma attached as Annex 4) would detail the planned expenditures utilizing World Bank loan and GEF grant funds for the coming year; by MFO, activity, nature of expenditure (CO, MOOE) and implementing agency under the project. Annual, (interim), outcomes would be identified for each implementing agency in the Program Agreement, along with pending key milestones and reform agenda actions as detailed in the Results Framework (Table 1). These outcome indicators would be monitored and linked to fund utilization, as a basis for determining disbursements from the World Bank and GEF.

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64. The PPSO shall initiate the formulation of the Annual Program Agreement. It shall closely coordinate with the Budget Division/Financial Management Service in ensuring that Annual Program Agreement is in line with the priority activities identified and with the proposed annual appropriations. It would subsequently be endorsed by the Project Steering Committee and signed by the Secretary of DENR, or his authorized representative. 65. The Program Agreement would identify all eligible activities under NPS-ENRMP included in the regular budgets, by entity. It would be prepared after entity work programs and budgets are approved at the DENR level, and would be submitted to the Bank for review by November 30, preceding each fiscal year. 66. The Program Agreement would identify all eligible activities under NPS-ENRMP included in the regular budgets, by entity. It would be prepared after entity work programs and budgets are approved at the DENR level, and would be submitted to the Bank for review by November 30, preceding each fiscal year.

MONITORING AND EVALUATION OF OUTCOMES/RESULTS 67. Monitoring and evaluation would be aimed at strengthening DENR’s capability for assessing the performance and outcomes of the ENRMP as well as its own efficiency and effectiveness in the implementation of its core mandate. The focus would be on: a) capacity building to manage results; (b) strengthening institutional M&E practices/mechanisms, facilities, tools and techniques, in managing results, including linkages with different databases; c) building on lessons learned to improve project design policies, programs and delivery systems; c) promoting accountability, and (d) achieving sustainability of the system.

68. For results monitoring, the indicators listed in the Results Framework (see Attachment 1) would be measured at the stated intervals, reported to program management and reviewed at key project milestones, such as at mid-term. A reporting schedule is included in the arrangements for monitoring, together with the types and frequency of surveys for data collection. Reporting would also be aligned with DENR’s annual planning cycle, annual work plans and budgets. In addition to annual reports, and reports on specific surveys, key M&E products would include an independent mid-term evaluation and a project completion evaluation at the end. The outcomes at completion would be clearly benchmarked to facilitate future impact evaluations. 69. M&E for budget support activities: In collaboration with regional offices and the bureaus, the Foreign Assisted Projects Office (FASPO) will have overall responsibility for contracting and collecting data for the monitoring of results. The arrangements for results monitoring together with a more detailed explanation of reporting instruments and responsibilities are outlined in Attachment 1. 70. A common deficiency in monitoring outcomes is the lack of robust with and without data and the recourse to inferring this using before and after data. Hence, the indicators listed in the Results Framework would be measured at baseline and at stated intervals and reviewed at key project milestones, such as at mid-term evaluation. At the level of PDOs, where possible, data will be derived from published information on policies and practices and may involve restricted baseline surveys and periodic random surveys which will be designed to measure changes over time (before and after) and space (with and without). For the intermediate results, the data will be form periodic surveys of RFUs, LGUs and communities. As part of the overall program for

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strengthening institutional capacity training will be provided to key personnel in M &E, data collection, collation and analysis. To retain transparency and objectivity the project will finance independent consultants/institutions to undertake the evaluations. The results monitoring will be incorporated as part of the overall system for management and financial information systems which are established. 71. M&E for decentralized GEF-funded activities: Specific functions and responsibilities would be decentralized to DENR’s field offices and to participating LGUs who would be responsible for monitoring the sub-components and activities they are implementing. Performance monitoring would be geared towards providing regular feedback to program managers to facilitate adaptive management. At community level, the existing experiences with participatory natural resource monitoring will be scaled up and harmonized and other innovative approaches prioritized. This would provide information that would feed into LGU level M&E that would be further aggregated into provincial reports. At the national level quarterly monitoring reports, building on the provincial inputs would provide the basis for overall program review. 72. GEF Tracking Tool: The community-based participatory natural resources and resource use monitoring system and the GEF management effectiveness tracking tools that will be implemented in each of the priority sites will provide parameters for monitoring of human-nature interactions. Annual and periodic evaluation surveys to measure changes in ecological indicators, as well as perception surveys, for example to measure changes in awareness and response to program services, would be contracted to research institutes/universities. Baseline studies are already underway to collect data that would provide benchmarks against which targets would be measured, and would be completed by the beginning of project implementation. 73. Monitoring of environmental compliances: Environmental monitoring with regular reporting is an integrated part of program implementation under the Program M&E; and would be the responsibility of the EMB. It will include feed-back on compliance to the Program environmental guidelines, and the mitigating measures that will be required by the EIAs of specific project activities that may be designed during implementation. The monitoring reports will contribute to give the implementers and stakeholders the appropriate guidance for corrective actions and improved performance of the Program with respect to environmental sustainability. The environmental monitoring system to be designed by EMB will include indicators that will be used on a periodic basis as required by the laws and the World Bank’s and GEF’s M&E systems. 74. The Regional Executive Directors of the EMB and MGB bureaus under the responsibility of the DENR Regional Executive Directors, will oversee the implementation of environmental management plans, and see to it that the requirement of the Program’s environmental guidelines and of environmental standards are met. The EMB regional offices shall organize field monitoring with the involvement of concerned PENROs and CENROs, and make appropriate decisions for those activities not in accordance with the environmental compliance requirements for the Program, and report to EMB central office those needing action at Central Office level. 75. At field level, multi-sectoral monitoring groups would be created, with representatives from the concerned LGUs, communities, civil society, and other government agencies (DA, DOH, among others). During Program inception operational rules for the monitoring groups will be formulated by the EMB, in consultation with the DENR regional offices, the LGUs and other the stakeholders.

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76. For GEF-funded sites LGUs will have the lead in the implementation of watershed activities under the NPS-ENRM. The Mayors of the LGU sector will, in these sites, jointly with DENR monitor that required environmental standards are met. The Protected Area Management Board, where present, and the Watershed Management Council in priority watersheds shall be invited to participate in the monitoring. 77. The EA for year 1 priorities has also formulated environmental guidelines, which are a combination of negative list of activities/subprojects and measures to address potential impacts. These guidelines will be made part of the NPS- ENRM Project’s Operations Manual for the DENR and the LGUs to strictly adhere to during the planning, design and implementation of future priorities. 78. For the project years 2-5 activities, DENR is to improve the environmental guidelines further by clarifying the institutional arrangements for implementing the guidelines (i.e., who does the screening of activities for environmental impacts, assessment, review and monitoring). Details are presented in the relevant section below. Institutional Arrangements for Results Monitoring and Analysis 79. Special Order 1030 provides for the NPS-ENRMP program M&E to be undertaken by the Policy and Planning Service (PPSO) for the regular activities of DENR, while the PCU/FASPO would undertake M&E functions for the GEF funded activities. However, as specific functions and responsibilities of the various Bureaus/Units of DENR are decentralized to field offices and to participating LGUs, they would be responsible for monitoring the sub-components and activities they are implementing, but the data would be collected and analyzed by the PPSO and FASPO. The PCU/FASPO would be responsible for submitting progress reports to the Bank and for preparing and presenting the results of M&E analyses to DENR management and the oversight agencies. The Results Framework presented in Table 1 sets the primary parameters against which the outcome of the project would be evaluated. This would be complemented by progress achieved during the project period in achieving the goals of DENR’s Rationalization Plan, the framework for which is provided in Table 2, and which is part of DENR’s ongoing discussions with the oversight agencies. 80. Feed-back Mechanisms and Key Users of M&E Information. Disbursements under both the SIM and the GEF grant for the NPS-ENRMP are very much output focused and, as such, M & E information would be used both to substantiate the financial reporting requirements through the report on Statement of Sources and Uses of Funds, as well as in preparing annual progress reports on the project. To ensure that key baseline information is collected on DENR’s performance, and subsequently evaluated, the following dated covenants have been included in the project design:

i) By December 31, 2007, DENR should undertake a baseline study which inter alia would provide measures of client satisfaction with DENR’s service delivery in the areas of information and regulatory processes and procedures.

ii) By June 30, 2012, DENR should undertake a follow-up study to the baseline study which,

inter alia, would provide data and compare the effectiveness of measures undertaken by DENR during the project period to improve client satisfaction in regard to service delivery in the areas of information and regulatory processes and procedures.

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81. Key users of the information, apart from DENR’s own management and the Bank, would be the oversight agencies; NEDA and DBM. Several mechanisms for ensuring that M &E information is collected, evaluated and reviewed are provided for in the project design, viz:

i) M& E reports would be reviewed by NEDA as part of its annual ODA Portfolio Review. Copies of this report would be provided to the Bank and reviewed as part of the Bank and GEF supervision of the project.

ii) By June 30, 20010, a mid-term review of DENR’s performance and achievements under the project would be undertaken and the findings of that study discussed with DENR, DBM, NEDA and the Bank by October 31, 2010, and

iii) By September 31, 2012 a completion report of DENR’s performance and achievements under the project would be undertaken under the direction of NEDA, and the findings of that study discussed with DENR, DBM and the Bank by November 30, 2012.

iv) By March 31 of each year, DENR would submit its proposed plan and budget for the following fiscal year, along with a report on the progress of the project and on DENR’s Rationalization Plan, for review by the Bank, DBM and NEDA, for the purpose of facilitating alignment of the budget with the NPS-ENRMP and priorities of Government; however this review would in no way substitute for the normal review processes of government.

82. Strengthening of the Management Information Service /ISTMO: As an adjunct to the M & E to be undertaken under the project, an important project component would be the development of an effective MIS system. Thus is a critical need for DENR management and efficiency gains for the institution. During project preparation a separate MIS unit (ISTMO), led by an Assistant Secretary, was established and staffed. The project would support the development of the MIS system, and feedback from M &E functions under the project, would contribute to the design and development of the DENR-wide MIS system. Details of the step-wise approach being taken under the project to support development of the MIS system are described in Annex 4 of the PAD. Capacity Building for enhanced M&E 83. Training needs for M&E were identified during project preparation and detailed proposals presented in the M&E Plan of the PIP. Key training programs include re-orientation of staff towards Results –based Monitoring and evaluation; data collection and analytical methods; and social impact analysis. Initially, training would be for staff at DENR headquarters and those in the priority watershed areas as well as staff of participating LGUs, and then it would expand nationwide to strengthen DENR’s system wide capacity for M&E. M&E Budget 84. The costs of strengthening the M&E system and of its operation are included in the overall project budget. 85. World Bank: Regular implementation review missions will monitor compliance of the DENR, LGUs and communities on the environmental and social guidelines and the mitigating measures. The Bank will conduct ex-post reviews of how the screening would be done by the

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DENR and the LGUs and whether EMPs or IEEs or full EIAs and IPDPs have been prepared and whether mitigating measures are implemented. 86. Mid-term Evaluation: At the mid-point of the NPS-ENRM, an external evaluation would be carried out by the recipient to assess the efficiency of support provided through the NPS-ENRM mechanism, and a report furnished to the Bank by about June 30, 2010. This evaluation will analyze the efficiency of political and technical dialogue; program monitoring and follow-up; the advances in strategic planning, operational, and administrative procedures; the impact on the targeted watersheds/ wetlands and Pas, community participation, devolution and coordination processes in the sector; and the transaction costs involved.

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Results Framework and Monitoring

PDO Outcome Indicators Use of Outcome Information 1. The objective of the Project is to assist the Borrower’s Department of Environment and Natural Resources (DENR) in improving its efficiency and effectiveness in its service delivery.

i) Implementation of DENR’s reform agenda, which includes timely actions on the dated covenants, achievement of the key milestones and continued progress in implementing the Rationalization Plan.

ii) 30% improvement in overall client satisfaction with DENR service delivery by type of client e.g. LGU/communities.

iii) 80% of the Project’s investment targets in rehabilitation, ecosystem development and assessments being met.

iv) 15% reduction of total suspended particulate matter levels in Metro Manila over the 2007 baseline levels.

i) The pace of implementing the Reform Agenda and the alignment of these reforms with the broader Rationalization Plan for DENR (described in Annex 18), would provide a direct measure of DENR’s ability to push through with the fundamental changes needed to strengthen the institution. The outcome information would, in particular, be of value to DENR and the oversight agencies in their on-going efforts to promote the rationalization.

ii) Information from client surveys would provide feedback to DENR which hitherto has been limited, & help motivate change by flagging specific deficiencies.

iii) Achievement of investment targets would provide a measure of allocative efficiency and improvements

2. Global Environmental Objective Ecosystem services are enhanced for global and additional local benefits.

i) 106,000 hectares of protected areas, protection forest and wetlands in GEF supported sites under effective management by end of the Project.

ii) 35% of ecologically sensitive forests (outside protected areas) under effective protection.

iii) 25% decline in the area under kaingin (as measured by no. of plots) as a result of project interventions.

i) Yr 4 assess appropriateness of effectiveness of PA management tool. ii) Yr 4-5 consolidate results to better guide adjustments in the institutional strategy and improve replication of successful models in new areas.

Intermediate Results from Each Component

Results Indicators for Each Subcomponent

Use of Outcome Monitoring

Component 1: Environment and natural resources management policies plans and practices streamlined and supported by enhanced service delivery in terms of data and information access.

i) Framework developed for the rationalization of environment and natural resources management policies and legislation which inter alia identifies overlaps and inconsistencies as a basis for clarifying and guiding the operations and core functions of DENR.

i) Significant delays in finalizing and implementing policy and legal framework would have affect the project meeting its PDO.

ii) Improvements in stakeholder access to information, and clarified procedures in regard to regulations, fee schedules etc.,

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Intermediate Results from Each Component

Results Indicators for Each Subcomponent

Use of Outcome Monitoring

ii) Key databases relating to: a) industrial use, b) forests, and c) protected areas available on-line for public access, including links to forms, procedures and fee schedules relating to regulatory processes and service contracts.

iii) Procedures and responsibilities for issuance of tenure instruments standardized and streamlined.

iv) National integrated protected areas system/implementation rules and regulations updated and, streamlined and revised policy issued.

v) Mapping of priority geo-hazard areas completed.

vi) Comprehensive rehabilitation and remediation plans for 5 abandoned mines completed.

vii) Forward planning and budgeting strategy started to be implemented which inter alia provides a vision and benchmarks for key reforms in DENRs operations.

viii) Interim measures for the rehabilitation of Bagacay mine site fully implemented.

will provide a direct measure of the improvements in DENR’s service delivery.

iii) Clarification of procedures and the streamlined issuance of CBRMA/CBFMAs and issuance of updated NIPAS-IRR will provide a direct measure of DENR’s willingness to resolve regulatory bottlenecks.

iv) Finalization of maps will provide a measure of the efficiency of DENR in utilizing resources under the project.

Component 2: Effective management systems in place to conserve critical ecosystems and natural resources in the Project areas, degraded areas rehabilitated, and sustainable use regimes initiated and implemented by communities and LGUs based on integrated ecosystem management principles.

i) 30% of degraded forest in GEF supported sites rehabilitated with native species representing the bio-geographic region as identified in the WMP.

ii) At least 30% of degraded forestlands in non-convergence watersheds rehabilitated with native species by the end of the Project –

iii) 100% of GEF supported protected areas (PA) mainstreamed PA management effectiveness tool.

iv) Use of PA management effectiveness tool replicated in 60 % of proclaimed PAs nationally.

v) 60% of targeted communities in GEF supported sites implementing micro-catchment plans by the end of the Project.

vi) 30% of households in

Yr1-Yr2 Verify that the selection of areas for rehabilitation follows agreed social, environmental and ecosystem integrity criteria Yr1-Yr2. Verify that approved livelihood activities are financially viable and follow agreed environmental and SLM norms Yr3-Yr5. Concentrate on consolidation of results, improvement of the strategy and replication of successful models in new areas within the program area Yr 5 assess effectiveness of outreach or stalling of the decentralization of NRM Yr 2-3 assess required changes in

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Intermediate Results from Each Component

Results Indicators for Each Subcomponent

Use of Outcome Monitoring

communities in GEF supported sites adopted livelihood practices promoted by the fourth year of Project implementation.

vii) 75 % of funded activities (by $ value) in GEF supported sites implemented by the LGUs and/or other stakeholders

viii) Watershed Management Councils, MOAs between DENR and Participating LGUs and MOAs between Participating LGUs and NGOs in place for all watersheds selected which, inter alia, clarifies the devolution of functions related to: a) watershed & ecosystem management, b) management of communal forests, and protected areas.

ix) Best practices of integrated ecosystem management being replicated through information education campaigns in at least 2 non GEF supported watershed areas.

x) Payment for ecosystem services schemes operational in at least two watershed areas and generating ENR related service fees and royalties.

livelihood aspects to respond to changes in community needs The extent of LGU, other government agency and NGO participation in the project through MOAs, would be a measure of opportunities for scaling up DENR’s impact Improvements of fee collection with local plough-back mechanisms provide a measure of DENRs effectiveness in improving ENR management implementation.

Component 3: Appropriate and comprehensive environment and natural resources regulations and standards, implemented, monitored and enforced.

i) 10% per annum increase in companies complying with environmental standards compared to baseline.

ii) Designation and operationalization of at least 3 water quality management areas.

iii) 128 LGUs are implementing three aspects of ecological solid waste management.

iv) Monitor 179 PETCs. v) Monitor 4,700 industries

issued with permit to operate.

vi) Monitor 1,600 companies along waterbodies.

vii) Monitor 101 priority bathing beaches.

viii) 4,216 ECP projects issued ECC.

YR1-YR3 determines IEC message effectiveness and outreach. Adjust strategy, delivery mechanism, etc. as needed Yr3 indicates effectiveness of EMB in implementing environmental laws YR4-5 gauge replicability into broader programs and replication elsewhere

45

Intermediate Results from Each Component

Results Indicators for Each Subcomponent

Use of Outcome Monitoring

ix) 4,216 ECP projects issued ECC.

46

Arrangements for results monitoring Target Values Data Collection and Reporting

Project Outcome Indicators

Baseline YR1 YR2 YR3 YR4 YR5 Frequency and Reports

Data Collection

Instruments

Responsibility for Data

Collection PDO i) Implementation of the Reform Agenda, which includes timely actions on the dated covenants, achievement of the key milestones and continued progress in implementing the Rationalization Framework (Table 2)

Rationalization Plan Prepared and submitted to DBM for review Reform Agenda agreed for NPS-ENRMP in line with Rat. Plan Dated Covenants provided in the loan for key actions

. Dated loan covenants complied with and under implementation

Annual review by March 31 Key Milestones (Table 2) have been met Dated loan covenants complied with and under implementation

Annual review by March 31 Key Milestones (Table 2) have been met Dated loan covenants complied with and under implementation

Annual review by March 31 Key Milestones (Table 2) have been met Dated loan covenants complied with and under implementation

Annual review by March 31 Key Milestones (Annex 18) have been met Dated loan covenants complied with and under implementation

Annual Regular Management processes

FASPO

ii) WMCs, and MOA with LGUs, NGOs in place for all watersheds selected

LGUs in the selected areas have confirmed their willingness to participate in the project

-WMCs, and MOA with LGUs, other Gov agencies, NGOs etc in place for all watersheds selected

Effective implementation of WMCs and LGU/NGO partnerships for watershed management

Semi-Annual M &E reports should regularly review effectiveness of these arrangements

Regular reporting mechanisms Supplementary information through the Civil society report: The Assessment Initiative

Regional directorates in coordination wit FASPO and the PPSO The Assessment Initiative - Philippines

iii) Forward Planning and Budgeting strategy being implemented.

DBM instruction has been issued requiring OPIFs to be prepared by all departments

3-year Forward Planning and Budgeting strategy

Close linkage between Plans and Budget

Close linkage between Plans and Budget

Close linkage between Plans and Budget

Semi-Annual M&E reports

Regular reporting mechanisms

PPSO in coordination with FMS and FASPO

47

Target Values Data Collection and Reporting Project Outcome

Indicators Baseline YR1 YR2 YR3 YR4 YR5 Frequency

and Reports Data

Collection Instruments

Responsibility for Data

Collection iv) % improvement in overall client satisfaction with DENR Service Delivery

Baseline Client survey to be undertaken

30% improvement in rating of client satisfaction

Baseline and ex post client survey reports.

Purposeful surveys

Independent consultants under contract to FASPO

v) % of NPS-ENRMP investment targets in rehabilitation , ecosystem being met

80% of investment target met

Semi-Annual M&E reports

Regular reporting mechanisms

PPSO in coordination with FMS and FASPO

PDO Global Environment Facility i) hectares of protected areas, protection forest and wetlands in GEF supported sites under effective management by PY5

Baseline data to be determined during inception phase

40,000ha 106,000ha M&E reports Yr 3 and 5

SP1 MET

PAWB, Regional directorates FASPO

ii) % of ecologically sensitive forests (outside protected areas) under effective protection as identified in each WMP

Baseline data to be determined during inception phase

15% 30% M&E reports Year 3 and 5

SP2 MET

Local monitoring PAWB, Regional directorates FASPO

iii) % decline in the area under kaingin (as measured by no. of plots) as a result of project interventions

Baseline data to be determined during inception phase

10% 25% M&E reports Year 3 and 5

Purposeful surveys

PAWB, Regional directorates FASPO

Component 1: Policy Planning, M &E (MFO 1)

48

Target Values Data Collection and Reporting Project Outcome

Indicators Baseline YR1 YR2 YR3 YR4 YR5 Frequency

and Reports Data

Collection Instruments

Responsibility for Data

Collection Framework/Plan for rationalization of ENR policies and legislation

Various studies available highlighting inconsistencies in legislation, policy & implementation

Framework adopted and for the rationalization of ENR policies % Legislation

Action Plan being implemented to rationalize the ENR policies and legislation

Semi-Annual M&E reports

Regular reporting mechanisms

PPSO in coordination with FASPO

Integrated MIS

Existing databases are of variable quality, not regularly maintained & not readily available for public access. No integrated MIS exists

MIS strategic plan and budget should be approved and thereafter implemented

Improved databases for i) industrial use, ii) forests and iii) protected areas available on-line

Improved MIS system should be operational

Semi-Annual M&E reports should regularly review the status of work

Regular reporting mechanisms

PPSO in coordination with FASPO

Issuance of CBRMA/CBFMAs and NIPAS IRR

Lack of clarity in procedures for CBRMA/CBFMA and NIPAS has virtually resulted in a cessation of this instrument.

NIPAS-IRR updated and, streamlined and revised policy issued

Procedures for issuance of NIPAS-IRR streamlined

Increases in issuance of CBRMA/CBFMAs and NIPAS-IRR

Semi-Annual M&E reports should regularly review the status of work

Regular reporting mechanisms

PPSO in coordination with FASPO

PES schemes generating revenue

Fee collection for all regulatory services are low, an indicator of the low priority and other difficulties associated with this

PES scheme operational in one project site and generating annual revenues and royalties.

PES scheme operational in two project sites and generating annual revenues and royalties.

Semi-Annual M&E reports should regularly report on collection rates

Regular reporting mechanisms

PPSO in coordination with FASPO

Component 2: Integrated Ecosystem Management (MFO 2)

49

Target Values Data Collection and Reporting Project Outcome

Indicators Baseline YR1 YR2 YR3 YR4 YR5 Frequency

and Reports Data

Collection Instruments

Responsibility for Data

Collection 5 WMC’s in targeted watersheds and wetlands established and functioning by PY2-3

None 1WMC established and functioning

2 WMC established and functioning

4 WMC established and functioning

5 WMC established and functioning

5 WMC established and functioning

PY 2-3 Mid-Term Review

Regular reporting mechanisms WB/DENR MTR and project end review

Regional directorates in coordination with LGUs, FMB and PAWB , FASPO

% of degraded forest in GEF supported sites rehabilitated with native species representing the biogeographic region

Very limited if any rainforestation occurring in GEF supported area. Precise baseline to be established during inception

12% 30% Mid-term and end of project surveys

DENR surveys

Regional directorates to FASPO

% of degraded forestlands in program area rehabilitated with native species by PY 5

Very limited if any rainforestation occurring in non-convergence watersheds. Baseline to be established during inception

12% 30% Mid-term and end of project surveys

DENR surveys

Regional directorates to FASPO

% of GEF sites where PA management effectiveness tool mainstreamed

Tool not in use at any sites

40% 100% Yr 3 and 5 SP1 MET Regional directorates to FASPO

% of PAs nationally replicating METT

Tool not in use at any sites

25% 60% Yr3 and 5 SP1 MET PAWB, Regional directorates FASPO

50

Target Values Data Collection and Reporting Project Outcome

Indicators Baseline YR1 YR2 YR3 YR4 YR5 Frequency

and Reports Data

Collection Instruments

Responsibility for Data

Collection % of targeted communities in GEF-supported sites implementing micro-catchment plans

None

10%

25%

35%

50%

75%

Annual M&E reports

Participatory monitoring consultations

LGUs Regional directorates to FASPO

% of households adopting livelihood practices promoted by the program

None

5% 15% 25%

30% 35%

Annual surveys

Participatory monitoring consultations Regular reporting mechanisms

LGUs Regional directorates to FASPO

% of funded activities implemented by the LGUs and/or other stakeholders

Zero No monitoring

30%

75%

Yr3 and 5

Annual program report Regular reporting mechanisms

DENR M&E Regional directorates to FASPO

Component 3: Strengthen Environmental Management (MFO 3) 10% p.a. increase in companies complying with env. standards compared to baseline

Yr1 Level Yr1 +2% Yr1 + 5% Yr1 + 8% Yr1 + 10% Yr3 and 5 EMB Reports DENR M&E, EMB

10 % p.a. increase in number of companies regularly monitored

Yr1 Level

Yr1 +2% Yr1 + 5% Yr1 + 8% Yr1 + 10% Yr3 and 5 EMB Reports DENR M&E, EMB

15% reduction of total suspended particulate levels in Metro Manila over the 2006 baseline

ppm TSP (2006) Yr1 + 3% Yr2 + 3% Yr3 + 4%

Yr4 + 5%

Yr2-5

Bureau reports

EMB

51

Target Values Data Collection and Reporting Project Outcome

Indicators Baseline YR1 YR2 YR3 YR4 YR5 Frequency

and Reports Data

Collection Instruments

Responsibility for Data

Collection At least three water quality management areas (WQMAs) established and operationalized

Zero

Yr1 + 0%

Yr2 + 0%

Yr3 + 1%

Yr4 + 2%

Bureau reports

EMB

Environmental user/wastewater discharge fee system implemented in 3 WQMAs

128 LGUs implementing three aspects of ecological solid waste mgt.

number of LGUs (2006)

Yr1 + 10%

Yr2 + 10%

Yr3 + 10%

Yr4 + 10%

Yr2-5

Bureau reports

EMB

52

FIDUCIARY ARRANGEMENTS

FINANCIAL MANAGEMENT Executive Summary

87. A Financial Management Assessment Review of the Department of Environment and Natural Resources (DENR) was undertaken with the objective of ensuring that there is in place an adequate financial management system that satisfies the Bank’s OP/BP10.02 in connection with the Agency’s proposed loan for the National Program Support for Environment and Natural Resources Management Project (NPS-ENRMP) and the Proposed Grant from the Global Environment Facility (GEF) Trust Fund. Under OP/BP 10.02, the borrower and the project implementing entities should maintain financial management systems--including accounting, financial reporting, and auditing systems--adequate to ensure that they can provide to the Bank accurate and timely information regarding project resources and expenditures. The review was carried out in accordance with the Bank’s guidelines under Financial Management Practices in World Bank-Financed Investment Operations dated November 3, 2005. It focused on the assessment of the Agency’s FM system including those for Foreign Assisted Projects and considered the country and the sector’s FM situation. 88. The DENR FM system consists of: 1) a Mainstream FM system under the Financial Management Service (FMS) that handle its regulatory accounts for both the Agency and its Projects; and 2) a special FM system under the Foreign Assisted and Special Projects Office (FASPO) to handle the special FM requirements of Projects such as special recording, reporting and disbursement requirements. The proposed National Program Support project is intended to finance a part of DENR’s regular budget, thus, in principle, should be using DENR’s Mainstream FM system. 89. However, the review indicated that the Mainstream FM system of DENR is not adequate to satisfy the minimum requirements of the Bank. While it has adequate FM Staffing, its Internal Control needs improvement as reflected in the Auditor’s adverse opinion on its 2005 audit report. These exceptions pertain to un-reconciled bank accounts, un-liquidated cash advances, un-reconciled Inventory and Property accounts and payables with no claimants and long outstanding payables. Consolidation of accounts are delayed and prepared on a yearly basis only. Its Internal Audit function also needs improvement as it does not function as it should be under International Standards for the practice of Internal Audit. 90. On the other hand, the FASPO FM system for foreign assisted projects have acceptable Internal Control as reflected in general in the Auditors’ reports on financials of FASPO projects where they expressed an Unqualified or clean opinion. The FM system of the FASPO meets the minimum requirements of the Bank. 91. On the overall, due to the pervasive effect of the main FM system at DENR, the FM risk is rated High. 92. The DENR proposed the following mitigating measures in the FM arrangement for the project:

53

a. Strengthen the Internal Control for the Project – The Project will be handled by both the Mainstream and the FASPO FM staff such that there is counterchecking and reconciliation controls of key accounts of the Project. The Mainstream FM shall handle the second screening of transactions and the keeping of the separate regulatory books of accounts and preparation of financial reports for the Project. It will also handle Bank Reconciliation and the keeping of the Property or inventory ledgers for the Project and the conduct of periodic physical inventory taking and reporting of results The Mainstream FM staff involved shall be specifically designated to be responsible for the Project’s regulatory books of accounts through a Special Order (SO). On the other hand, the FASPO FM system shall handle the initial screening of transactions, management of the Designated Account (DA), preparation of Withdrawal Applications (WAs) and Statement of Expenditures (SOE), preparation of Interim un-audited Financial Reports, Consolidation of Financial Reports and the reconciliation of the Property and Inventory records with the Property and Inventory ledgers and Annual Physical Inventory results. The Staff of FASPO shall be reorganized by functions rather than by their current set up of assigning FM staff by Project to maximize efficiency and effectiveness. The NGAS, including the Internal Control that in it, shall strictly be complied with especially on Cash, Accounts Receivable, Inventories, Properties and Payables. The Bank’s FM and Disbursements policies and procedures shall also be used.

b. Strengthening of the Internal Audit function - DENR has agreed to strengthen its Internal Audit initially by having it report directly to the Secretary. DENR issued Administrative Order (AO) no. 15 in November, 2006 organizing and staffing the Internal Audit function into a higher level organization with the stature of the highest organization level in the Agency to an Internal Audit Service (IAS) and headed by an Undersecretary (Usec). A Director would manage the IAS. The IAS shall have two divisions, the Financial Audit and Operations Audit Divisions. In addition to the foregoing organizational and staffing requirements to be addressed during Project implementation, the IA strengthening would entail a phased approach in shifting to a level in accordance with International Standards of IA. The Internal Audit shall also be given training and hands-on and twinning training through the hiring of an Internal Audit firm. In the Process of its strengthening, the IAS shall subject the project to a semi annual IA review with corresponding report submitted to the Bank.

93. The project would use SOE based disbursement and would plan for a report based disbursement when they are able; and the documentation quality is acceptable to the Bank A Designated Account (DA) shall be maintained at the DENR- FASPO and at MDFO (for the GEF Grant) to be used to pay eligible expenditures pertaining to DENR and those pertaining to LGUs, respectively. 94. The Project would be required to submit quarterly Interim un-audited Financial Reports (IFRs) and annual audited financial reports, including the Management Letter of the Auditor. LGUs will be reporting to the MDFO on the liquidation of their funds. 95. The FM risk of the Project would be mitigated to an acceptable level when the foregoing measures are implemented and have shown effective impact. 96. The GEF Grant component for LGUs of about US$5M shall be channelled through the Municipal Development Fund Office (MDFO) of the Department of Finance. The MDFO acts as a conduit for Loan and Grant funds for LGUs and has a separate FM system for Projects. Currently,

54

the funds for LGU led activities (except capacity building) pass through the MDFO. The MDFO FM system for Projects satisfies the minimum requirement of the Bank for the Grant with Moderate FM risk.

Financial Management Assessment 97. The Country issues identified are as follows: 98. Perceived corruption in the country – The country’s corruption rating by an international institution that monitors corruption is high. While the rating is a perception, the fiduciary overall risk is rated high. 99. Weak Internal Audit capacity– Internal auditing in government agencies is not well developed mainly due to budget constraints. This weakens the Internal Controls in the said agencies. 100. Weak LGU FM capacity – FM capacity of LGUs of the 4th to 6th class category are generally weak. This is basically brought about by their lack of funding resources and the consequent lack of qualified FM staff who could accept low level salary rates. Projects that have close supervision, good coordination with LGUs, and clear and adequate FM guidelines could better cope with this issue. Risk Assessment and Mitigation 101. The FM risk for loan for the Project is rated high. The Risk assessment table below gives the details and its mitigating measures. Risk Category / Main FM Risk

Risk Rating

Risk mitigating Measures Condition of Nego/Board or Effectiveness

(Y/N?) Inherent Risk H N

1.Country : a. Perceived corruption

b. Weak Internal Audit function. c. Weak LGU FM Capacity

2. Sector Issue The flat budget of DENR 3. Entity (DENR):

Perception of corruption and Weak Internal Control in the Agency.

4. Project Level

a. The Project is medium in size.

H

H

H

H

H

H

The Bank is currently working with government on Integrity Development Action Plans under its anti corruption efforts. This is yet on its early stages. The Bank has initiated addressing this through its Grant on Strengthening the Internal Audit (IA) with the Philippine Anti Graft Commission as its implementing entity. This is still in its early stages. Please see IA arrangement for the Project below. Program Agreement (PAG) shall be used to transact with the LGUs with validated milestones as basis of tranche payments. The Project finances a program with adequate budget cover. The FM staffing of DENR is adequate except fo r IA. The Project includes a phased strengthening of the IA function. Project includes strengthening of the Agency’s IA function and Project Governance Measures. See Internal Control mitigation measures below. The participation of DENR’s Field Operating Units (FOUs) and the Program Agreement Arrangement with

N

N

N

N

N

55

Risk Category / Main FM Risk

Risk Rating

Risk mitigating Measures Condition of Nego/Board or Effectiveness

(Y/N?) The loan involves US$50M and in different geographical locations.

LGUs will ensure that there is control in the geographical areas.

Control Risk H N 1. Budget 2. Accounting a. Use of NGAS and eNGAS b. FASPO staff is organized on a by project basis. That is, each staff have been assigned a project to handle all the Project related FM requirements. 3. Internal Control a) The 2005 Audit Report on the Agency expressed an Adverse audit opinion mainly on un-reconciled bank accounts, long outstanding cash advances, and un-reconciled Inventory and Property accounts and non existing claimants of long outstanding Accounts Payable reflecting weaknesses in Internal Control. b) Weak Internal Audit 4. Funds Flow Weaknesses in Internal Control affects funds flow 5. Financial Reporting Breakdown of controls in the accounts affected the fairness of presentation of financial reports.

M

M

M

H

H

H

H

Remarks: Agency has an acceptable formal budgeting process consistent with the Government’s requirements. Remarks: Use of NGAS and eNGAS has improved the accounting of the Agen cy significantly. While this structure has worked well, an improvement could be achieved by assigning the staff by process such as one group would do the initial screening of transactions, DA management, preparation of WAs and SOEs and another would be handling reconciliation and tracking controls and reporting, and consolidation and preparation of financial reports for all projects. This would make rotation and back up system possible making the process more efficient. The Project shall use the Mainstream FM staff as well as those of the FASPO FM to countercheck the Project’s key accounts such as Cash, Inventories, and Properties and Accounts Payable. Screening of transactions shall be done at both FASPO and Mainstream FM. The Mainstream FM shall maintain the Inventory and Property ledgers while the FASPO FM will prepare the reconciliation of their books with that of the Inventory and Property ledgers as well as the Annual physical inventory results. The mainstream FM shall prepare bank reconciliation of the DA managed by the FASPO FM. Cash Advances will not be allowed for World Bank funds and government funds will be strictly controlled under NGAS cash advance liquidation policy. FASPO FM shall be required to track payment of contractors/consultants or suppliers such to ensure undue delays in the payment of bills and a corresponding report are submitted to Project Management including corrective steps taken. Strengthening of IA will be included in the Project. This would entail training on the latest International IA standards and practices and a twinning and hands on arrangement with a reputable firm. The TOR of the Consultant shall be reviewed and endorsed by the Bank. See item 3 above. See item 3 above. Remarks: FASPO submits timely Audit reports. Continue the use of COA. For improved controls, copies of IFRs

N

N

N

N

N

N

N

56

Risk Category / Main FM Risk

Risk Rating

Risk mitigating Measures Condition of Nego/Board or Effectiveness

(Y/N?) 6. Auditing

M

will be submitted quarterly to COA so they could do progressive audit of the accounts.

N

H – High M – Moderate N – Negligible or Low Strengths and Weaknesses 102. The strengths of the Agency’s Financial Management system are:

i) The NGAS is more than an accounting system as it also contains relevant accounting standards. NGAS prescribes standards on Accounting Policies and procedures including Internal Controls, presentation of financial statements, accounting for government transactions, property and inventory accounting, methods of accounting for income, budgeting standards, required books of accounts, budget registries, records, forms and reports including instructions on its preparation or maintenance. It also defines its Chart of Accounts and provides pro forma entries and other more. This provides the foundation for good Internal Control, Accounting and financial reporting. eNGAS on the other hand is a bookkeeping software that is consistent with the bookkeeping part of the NGAS. The Agency uses the NGAS for its accounting policies and procedures and eNGAS for its computerized bookkeeping. DENR is in the process of installing the eNGAS in its Central Office.

ii) The Agency has adequate budget process with adequate coordination with the Department

of Budget and Management. iii) The FASPO of the Agency is able to satisfactorily handle the FM of its Projects resulting to

unqualified audit reports. 90. The weaknesses of the Agency’s Financial Management system as rated High in the risk tables are summarized as follows:

i) A weak internal control and its effect on funds flow and financial reporting – Internal Controls on Reconciliation of bank accounts, Inventory and Properties; liquidation of cash advances; and controls on the validity and tracking of Accounts payables are weak causing the issuance of an Adverse audit opinion on DENR’s Financial Statements.

57

ii) Weak Internal Audit function - Internal Audit used to be a part of the financial management Service of the DENR and has very few staff. The head of the Unit is below Director Level. While there has been upgrading on its status to a Service, the staffing and top management required is not yet in place. The IA unit does not cover foreign assisted projects. Their audit is a compliance audit and does not reflect the international practice standards for IA.

Financial Management Arrangements 103. Following are the FM arrangements for the Project: FM Organization and Staffing 104. The FM organization for the project shall be composed of the FM staff at the Mainstream FM and those at the FASPO FM. At the Mainstream FM system, the Director of the FMS shall be the ultimate responsible person for the Project’s FM as well as the FASPO Head. The Chief Accountant at the FMS and an Accounting staff at an Accountant level shall be specifically designated through a Special Order to handle the Project at the FMS side. The FASPO FM shall be reorganized on per function basis such that its staff of about 8 is divided into two functional groups. 105. Thus, the Project will be handled by both the Mainstream and the FASPO FM staff such that there is counterchecking and reconciliation controls of key accounts of the Project. The Mainstream FM shall handle the second screening of transactions and the keeping of the separate regulatory books of accounts and preparation of financial reports for the Project. It will also handle Bank Reconciliation and the keeping of the Property or inventory ledges for the Project and the conduct of periodic physical inventory taking and reporting of results The Mainstream FM staff involved (Director, supervisor and accountant level staff) shall be specifically designated to be responsible for the Project’s regulatory books of accounts through a Special Order (SO). On the other hand, the FASPO FM system shall handle the initial screening of transactions, management of the Designated Account (DA), preparation of Withdrawal Applications (WAs) and Statement of Expenditures (SOE), preparation of Interim un-audited Financial Reports, Consolidation of Financial Reports and the reconciliation of the Property and Inventory records with the Property and Inventory ledgers and Annual Physical Inventory results. Budgeting 106. The Project will be using the Agency’s budgeting system which is being used government wide. Under this system, Budgets are prepared based on the budget call of the DBM with indicative ceilings. Regions, Services, Bureaus and PMOs are required to submit their detailed plans for the year. A work and Financial Plan is required to support budget submissions with corresponding computations or assumptions .These are then reviewed by the respective Directors for discussion and adjustment by Management. Such budgets are checked as to their relevance with the mandate, programs and priorities of the Agency. The Secretary would then have the final say on the Budget and this is endorsed to the DBM for further screening. After DBM approves of the Budget, it transmits this to the office of the president who in turn would transmit it to Congress for its deliberation. After the budget is approved by Congress, this is sent to the President for final approval and becomes the General Appropriations Act (GAA). The GAA then becomes the basis of the release of funds (through the issuance and use of the Agency Budget Matrix, the SARO and the NCA) to the Agency or Projects. Adequate budget registers to control budget implementation and reporting is maintained through the NGAS.

58

Accounting 107. The NGAS shall be used for both the regulatory and Project accounting system. The Chart of Accounts for Project reporting shall be using the components and categories of the Project while the regulatory accounts shall be using the required Chart of Accounts for Government. During the Project implementation, the Project will endeavor to use the eNGAS for its accounts. Internal Control

108. The Project shall be governed by the Agency’s Internal Control in addition to the mitigating measures indicated under Internal Control. The key Agency Internal Controls includes proper segregation of functions (such as custodial and recording functions; and preparation, review and approval functions) and the approval of transactions and signing authorities are adequately and properly designated and documented in a manual. Adequate supporting documents are required and are checked prior to approval of transactions. Goods and services received are required to be properly inspected or accepted. Documents are stamped paid when disbursed and are to be properly filed. Funds Flow and Disbursement arrangements

109. The funds of the Project come from loan proceeds, Grant funds and Government counterpart funds. The expenditure centers of the Project would be at the DENR for DENR related expenses plus LGU capacity building expenses and at the MDFO for LGU small infrastructures and related expenses. Estimated amount of Loan and Grant funds to be channeled into each expenditure center is as follows:

Loan Funds: DENR-----US$ 50 M GEF Grant: DENR US$ 3 M MDFO 4 M

Total US$ 57M 110. Following is the graphical flow of funds for the loan and GEF grant:

59

111. The fund flows are further described as follows:

a) Loan and Grant funds flow from the Bank to the DAs of DENR and MDFO - Funds flow from the World Bank to the Philippine Treasury’s account at the Central Bank of the Philippines, then to the Designated Account (DA) of the Project maintained by the DENR/MDFO after issuance of a Notice of Cash Allotment (NCA) issued by DBM. Payments of eligible expenditures shall be taken out of the DA.

b) Funds flow from the DENR DAs to payee Bureaus and FOUs: Funding requirements of the payee staff bureaus and Field Operating Units (FOUs) will be covered by a Program Agreement (PAG) where milestones and corresponding tranche payments are indicated. Milestones shall be validated by the FASPO or the FOUs as the case may be. For Line Bureaus who currently receive their budget funding directly from the Government, and where a transfer of fund from DENR is not allowed by budget rules, their Program Agreement shall be paid on a Direct Payment basis through the DA of DENR.

c) Grant funds flow from MDFO DA to LGUs: Funding requirements of the LGUs will be covered by a Program Agreement (PAG) between the MDFO and LGUs where milestones and corresponding tranche payments are indicated. The PAs shall be reviewed and endorsed by DENR prior to the subsequent signature on the activities between MDFO and concerned LGUs.

NPS ENRMP FUNDS FLOW

WB

BTr

DENR - DA

LOAN GEF

WB

LGUs

POs

DENR-DA MDFO-DA

PAg

RFUs

PAg PAg

PAg

BUREAUS AND FOUs

BTr DBM NCA NCA

60

d) Government counterpart funds flow: Counterpart funds flow shall be through the normal government channel which is through its common fund maintained at the Government Commercial bank. This account is funded by the Bureau of Treasury as checks are issued after the issuance by the DBM of the Notice of Cash Allocation (NCA) based on its monthly releases on the budget.

112. The proposed Project shall be disbursed over a period of 5 years in the amount of $50 million with a GEF Grant of US$7 million. The disbursements of the loan shall be in accordance with the Financial Plan for the Project for the following categories as follows (in US$ millions):

Loan

(in US$ ,000)

Categories

Total Project

Loan eligibility %

IBRD loan

Works 14,776 100 14,001 Goods 6,970 100 6,769 Services 12,835 100 12,283 Routine Operating Expenses

15,420 100 14,670

Total 50,000 50,000 113. Note on Operating Costs Category. This category covers DENR’s Maintenance and other Operating Expenses which would be carried out by the DENR. Such costs relate to, for example, costs of DENR validating the maps in the field, operating costs related to the field preparation for rehabilitation of watersheds to be implemented by the bureaus, per diem for the staff to carry out their regular duties, maintenance of the MIS systems etc. The funding would not be for incremental costs. 114. Note on Services Category. Services category refers to costs associated with Component 1, with respect to the policy work, IEC campaigns, training for DENR personnel, setting up the MIS, work on the eNGAS system, map analysis, preparation of watershed management plans, training provided to DENR’s partners in the field, some national consultancies and workshops.

GEF Grant

(in US$ ,000)

Categories

Total Project

Grant eligibility

%

GEF Grant

LGU Counterpart

Works 3,268 95 3,121 147 Goods 1,348 95 1,281 67 Services 1,959 95 1,861 98 Livelihood Grants 776 95 737 39 Total 7,351 7,000 351

115. The Loan Designated Account (DA) shall be maintained at the DENR with the Land Bank of the Philippines (LBP). The DA ceiling shall be US$4 million. Should the DA become insufficient

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for the operations of the Project, a request for an increase with justification or supports may be done. The threshold for Direct Payment shall be 20% of the outstanding DA. 116. The Grant DA shall be maintained at the DENR and MDFO with the LBP. The DA ceilings shall be US$300,000 for DENR and US$500,000 for MDFO. Should the DA become insufficient for the operations of the Project, a request for an increase with justification or supports may be done. 117. The threshold for Direct Payment shall be 20% of the outstanding DA. 118. Disbursement for the Project shall be through the use of a summary report in the form of a Statement of Expenditure (SOE) with option to convert to a summary report in the form of an interim un-audited financial report (IFR) with concurrence of the Bank. In any case, IFRs shall be required to be submitted by the Project, the format for which shall be agreed with the Bank. Financial Reporting

119. The Project shall be required to submit separately for the Loan and Grant a quarterly Financial Monitoring Report (FMR) as follows:

• Balance Sheet - A statement of resources of the project. • Statement of Sources and Uses of Funds - A report on the receipt and uses of funds by

project components by activities. • Semi Annual Financial Plan – Based on the implementation and procurement plans of the

project as well as what is available in the budget. This should also include the financing plan as well as the level of Special accounts or of funds to be maintained.

Audit Arrangements 120. Internal Audit (IA): The strengthening of the IA function shall be part of the Project activities. This would entail the hiring of an IA firm to train and provide hands-on experience through a twinning arrangement with the DENR IA staff. The arrangement would specifically include training of the IA staff, including hands-on activities, orientation of the Audit Committee, preparation of the IA Charter and IA Manual and purchase of computers/laptops. The IA activity would be led by the IA firm with the IA staff of DENR being guided in the process. The IA firm should be in place within 6 months from effectiveness. 121. The project shall be covered by a semi annual IA review with a corresponding IA report being issued. The first IA report shall be due one year from date of effectiveness and every 6 months thereafter. The report should be covered under Internal Audit review notwithstanding their limited scope and authority. An annual Internal Audit report on the Project would be required semi annually. The IA activity will be done in coordination with the External Audit activity. The IA findings and reports shall be made available to the External Audit and vice versa. The scheduling of their activities should be such that they do not duplicate what has been covered by the other and that they consider in their review each other’s findings as applicable. 122. External Audit: The external Auditor for the Bank’s Projects would be the Commission of Audit (COA). Audited Financial Statements shall be required to be submitted no later than 6 months after the Fiscal Year including a Management Letter which would contain the auditors’

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comments on the Project’s Financial Management including its Internal Control. The audited Financial Statements shall consist of: (i) Balance Sheet; and (ii) Sources and Uses of Funds. Action Plan:

123. Following are the mitigating FM action plans: a. Issuance of an SO to designate the persons Accountable for the Project at FMS and at

FASPO and their corresponding general duties and responsibilities attached to be issued prior to effectiveness by the DENR Secretary.

b. Maintenance of separate books of accounts and reports for the loan and Grant funds of the Project at the Accounting Division including reconciliation and other management reports with report formats to be ready prior to effectiveness under the responsibility of the Director of FMS.

c. Strict implementation of the policy on Cash Advances/ transfers. A monthly Report of Cash Advances or Transfers shall be submitted to FASPO for action. This will be implemented immediately upon effectiveness under the responsibility of FASPO.

d. Implementation of the policy of periodic Physical count of Property and Inventory items and the reconciliation of the results with the books of accounts reported to be undertaken during Project implementation under the joint responsibility of the FMS Director and FASPO Head.

e. FASPO shall ensure that the Inventory and Property accounts per their records reconcile with that of the Mainstream FM system and those of the Annual Physical Inventory results.

f. FASPO shall track the payment of Payables and submit quarterly report to Project Management on the tracking results including corrective steps to be taken.

g. FASPO will submit quarterly Interim un-audited Financial Reports (IFRs) to the World Bank. The Agency should hasten its installation of the electronic New Government Accounting System (eNGAS) during Project implementation under the responsibility of the FMS Director and FASPO head.

h. FASPO to ensure that FOU periodic financial reports are timely and that these are properly reviewed with test checking of transaction documents. Visits to the FOUs by FASPO Finance staff should be made to ensure that what is being reported are properly supported and validated on the FM area.

i. FASPO FM staff to be reorganized by functional areas such as one group for Initial screening of transactions, DA management, and preparation of WAs and SOEs, and another group for the Reconciliation works, reporting on Cash Advances and Accounts Payable no. of days bills are paid, and preparation of quarterly Interim un-audited Financial Reports.

j. Inclusion in the project components the strengthening of the Internal Audit function. This would require the hiring of an Internal Audit firm to strengthen the IA capacity in terms of training and hands on experience through a twinning arrangement. Semi Annual Internal Audit Review of the Project with corresponding IA report shall be done. The first Internal Audit report shall be due within one year from effectiveness and every 6 months thereafter.

k. Satisfactory implementation of audit recommendations arising from 2005 audit by the effectiveness date.

Loan Conditions 124. Effectiveness condition: the Borrower through DENR has designated staff in adequate numbers, with qualifications and experience, and under terms of reference acceptable to the Bank, to be responsible for the financial management matters under the Project at its Financial

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Management Service Office and its Foreign Assisted Projects Office. 125. Dated covenant: Selection of an IA firm to strengthen the IA function of DENR. The firm should be in place within 6 months from effectiveness. The Project will be covered by an IA review with the first IA report to be submitted within a year after effectiveness and every 6 months thereafter.

Financial Covenants:

126. The following financial covenants should be included in the loan agreement:

a) The project should maintain an adequate financial management system with appropriate books of accounts and in accordance with generally accepted accounting principles.

b) The IFRs shall be submitted to the Bank on a quarterly basis as well as to COA to facilitate their audit and timely submission of audit reports as required below.

c) The Auditor will be COA and their TOR will be the same as those they do with the Bank’s current projects. The following shall be the required audit submissions:

Type of Financial Statements

Description Deadline Audit Opinion coverage

1. Project Financial Statements 2. Audit Management Letter

Composed of : 1. Consolidated Project Balance Sheet 2. Consolidated Project Sources and Uses of Funds with audit certificate using Bank’s pro forma adapted to their audit findings. Detailed audit findings and recommendations

June 30 of the following calendar year. June 30 of the following calendar year.

To cover the whole Project on a consolidated basis. To cover the whole Project on a consolidated basis

PROCUREMENT ARRANGEMENTS A. General 127. Guidelines: Procurement for the proposed project would be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004, revised August 2006; and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, revised August 2006, and the provisions stipulated in the Legal Agreement. While the new Philippine procurement law (RA 9184) is reasonably in harmony with the Guidelines at the NCB level, the Procurement Schedule of the Loan Agreement will include an annex detailing the procedures under the national law that are not acceptable to the Bank. The general description of various items under different expenditure categories for the first 18 months are described below and summarized in attached Procurement Plan. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank project team in the Procurement Plan. The Procurement Plan will be a rolling plan that will be updated at least semi-annually or as required to reflect the actual project implementation needs and improvements in the institutional capacity of DENR.

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128. Procurement of Works: Works to be procured under this project would include: cadastral surveys, mapping, aerial photography and orthophoto mapping, survey and mapping, geo-hazard mapping, groundwater mapping, rehabilitation of forest lands/ mines, and agro-forestry. No ICB is expected under the project due to the small size and disperse nature of the sub-activities. NCB level procurement estimated in excess of US$ 50,000 up to US$ 500,000 per contract will be done using the Philippine Bidding Documents for Works, agreed with the Bank. Small works costing less than US$ 50,000 will be awarded based on shopping procedures, by comparing priced quotations obtained from at least three qualified contractors, as defined in Para.3.5 of the Guidelines. Works contracts meeting the requirements of paragraph 3.8 of the Guidelines, may, with the Bank’s prior agreement, be carried out by Force Account in accordance with the provisions of said paragraph of the Guidelines. Community participation in procurement will be used for pre-identified works under the watershed management and development component in accordance with the procedures included in the Operations Manual and /or CDD Manual, acceptable to the Bank. 129. Procurement of Goods: Goods to be procured under this project would include Air and air quality equipment, IT equipment, software, aerial photo, satellite imagery, digitizers, survey equipment, boats and vehicles. Procurement of goods estimated to cost more than $250,000 per contract will be procured under ICB method, goods estimated to cost less than $250,000 and more than $50,000 per contract will be procured under NCB method, and goods estimated to cost less than $50,000 will be procured under Shopping method. For ICB method, the Bank’s SBD will be used and for NCB, the Philippine Bidding Documents (PBD) as harmonized with the Asian Development Bank, Japan Bank for International Cooperation and the World Bank will be used subject to the identified rules that are not acceptable to the Bank as specified in the PBD. Shopping will be done following comparison of price quotations obtained from several suppliers in accordance with Para. 3.5 of the Guidelines. 130. Selection of Consultants: Consultant services will include the provision of Technical Services for water and air quality, surveys on industrial pollutants, solid waste management, environmental compliance, development of plans and policies, assessment of protected areas, groundwater mapping, geohazard mapping, design and development of remote MIS system and establishment of mine baseline conditions. Short lists of consultants for services estimated to cost less than $ 200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

131. Advance Procurement Action and Retroactive Financing. The Loan is expected to be approved by the World Bank Board by June 19, 2007, and declared effective by October 1, 2007. In accordance with Section 1.9 of the Procurement Guidelines and 1.12 of the Consultants Guidelines, some activities under the program have commenced before loan effectiveness which are intended to accelerate project implementation. The DENR had immediately proceeded with the initial steps of procurement before signing the related Bank loan. In such cases the procurement procedures, including advertising, are in accordance with the Bank procurement guidelines in order for the eventual contracts to be eligible for Bank financing, and the prior review process by the Bank are followed. Retroactive financing is estimated at US$ 5 million.

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B. Summary Procurement Assessment 132. The World Bank team7 has reviewed the procurement environment in the DENR (Central Office, Bureau’s, representative field offices) and a few sample LGUs. The review included the related system in place, organizational structure and the capacity of the DENR to implement procurement actions for the proposed program. Also considered was the capacity of the LGUs for the related GEF component; given their current weak capacity to implement procurement following Bank procurement guidelines or R.A. 9184. On the background to this assessment were the earlier Procurement Capacity Assessments (PCAs) for LAMP2 and MTSP-GEF, including the CPPAP experience.

133. Since the passing of the new procurement law, RA 9184, there has been significant improvement in the country’s public sector procurement regime which mandated the use of a single procurement law in all levels of the government. The achievements in procurement harmonization and alignment of efforts under the law were substantial as the use of the country procurement systems, at the NCB level, is now supported by the World Bank. Accordingly, agreement was reached by the Government with ADB, JBIC and the Bank on procurement harmonization and on the use of the Philippine Bidding Documents prescribed by RA 9184 for NCB level procurement.

134. At the DENR, agency level procurement reform was recently initiated along with the reform requirements of RA 9184, and it is intended that the reform will cover the field offices including the regional and provincial. As part of the national agenda for the strengthening of implementation of the procurement reform the Government Policy Procurement Board (GPPB) agreed with DENR its addition to the earlier nine (9) agencies, out of the many agencies, on the pilot testing and customization of the Generic Procurement Manual. To enhance transparency in procurement as well as monitoring compliance the DENR also agreed with the GPPB the pilot-testing of the Agency Performance Indicators (API) within the agency.

135. Overall procurement risk assessment category is high.

136. The following are the key issues that would need to be addressed:

a. Inadequate capacity at the various levels within DENR to handle procurement, in terms of staff availability and competency necessary for the mainstream implementation of the procurement for the program, and no procurement Manual in place yet to direct DENR staff handling procurement. Weak capacity of the LGUs to implement procurement, and expressed resistance of the Leagues8 on the use of RA 9184;

b. Lack of a Procurement Unit and redundancy of procurement functions between foreign-assisted and regularly funded projects at the DENR central level, and multiplicity of BACs at the bureau level down to the field offices;

c. Inefficiencies in the DENR and LGU procurement process as the Annual Procurement Plan (APP) which should have been a planning and monitoring instrument were never followed;

d. Transparency issues as: (i) big DENR contract awards not posted as required by the Philgeps (Philippine Government Electronic Procurement System), (ii) absence of

7 Cecille Vales for the central DENR for purposes of MTSP-GEF, and subsequently updated by Noel Sta Ines (assisted by Alice Tiongson) for the other units of DENR including the LGUs. 8 Collectively the separate Leagues for Provinces, Cities, Municipalities and Barangays

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civil society representative in the procurement process, and (iii) use of shopping as preferred option of procurement; and,

e. Inadequate internal control as evidenced by (i) record keeping not systematic in all cases, (ii) internal audit has not been established, and (iii) absence of formal system to hear and document administrative cases on procurement.

137. The following are part of the Action Plan to address the above identified issues and risk:

a. Prior to initiating the program for DENR carryout a procurement capacity training program required under RA 9184 to cover the agency’s central and field office staff handling procurement, and a targeted training for LGUs in the GEF area;

b. Rationalization of procurement functions by way of establishment of a Procurement Unit, and reducing the number of BACs at the Central Office and at various level, in accordance with the requirements of RA 9184;

c. LGUs confirmation by way of Municipal /City or Provincial Board Resolution affirming the mandatory use of the PBDs and the GPM issued under RA 9184 for use in the conduct of procurement;

d. Completion, GPPB approval and agency adoption of the DENR Procurement Manual. The Manual will provide specific instructions on (i) procurement at all level of DENR including threshold of approvals, (ii) mandatory compliance to the APP and updates, (iii) posting of awards in the eGPS, (iv) civil society participation in the procurement processes, (v) use of the PBDs {Philippine Bidding Documents};

e. Adoption of the anti-corruption measures, as outlined in Annex 13 of the PAD, including strengthen internal control, community-based approach and independent monitoring.

f. Use and update of DENR agency procurement indicator, developed with the GPPB. Establishment of procurement monitoring which will be a mainstream function as required by RA 9184;

g. Procurement supervision and post reviews by DENR-CO over the field offices and the LGUs, and link with the Internal Audit as described under Annex 7.

C. Anti-corruption Measures

138. Based on the results of the agency’s capacity assessments the following measures will be carried out: 139. Anchored in the five-pronged strategy of improving political accountability, civil society participation, private sector involvement, public sector management, and limit on institutional power, and in complementing the broader effort at country program level, the following steps will be undertaken to help mitigate corruption in the project:

i) Civil Society Participation: To increase transparency, the DENR’s Bids and Awards Committee will comply with the procurement law and invite civil society observers in procurement biddings;

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ii) Public Sector Management: Steps will be taken in the program to enhance transparency and accountability in procurement and financial management. Strict adherence to the Procurement Reform Act and measures to ensure that bid notices and contracts are published in the eGPS and UNDB/dgMarket will be implemented, where appropriate. Further, there will be a full enforcement of delayed penalty provision of contracts;

iii) Strengthen Internal Control: DENR will institutionalize its internal audit unit to take the lead in determining the adequacy of internal control, monitor and enforce policies, rules and regulations on procurement and financial management. Further, DENR will operationalize the New Government Accounting System in all its offices and will convert to eNGAS agency-wide within a period of two years; and

iv) Procurement Reviews:

a) Using the Agency Procurement Performance Indicator System, evaluate the performance of the agency based the data being monitored by the Government Procurement Policy Board – Technical Support Office (GPPB-TSO);

b) A procurement review team comprising of the DENR’s Internal and External Audit and the Bank’s joint fiduciary team will conduct an extensive review of project expenditures and procurement processes;

c) To detect fraud and collusion in procurement contracts, Picalo software will be utilized under the supervision of the Government Procurement Policy Board Technical Support Office (GPPB-TSO) and, if needed, appropriate guidance from the Department Integrity Unit of the Bank, will be requested;

d) Checking the integrity of contract implementation by reviewing variation orders and inspecting the quality of completed works, delivered goods and submitted outputs;

e) Findings of anomalies uncovered in the review will be referred to and investigated by the Commission on Audit, the Office of the Ombudsman and the National Bureau of Investigation. The Integrity Unit of the Bank will collaborate with the investigators;

f) Complaint of anomalies in procurement resulting from the review will be referred to the Internal/External Auditor and the GPPB-TSO, for initial investigation. If there is prima facie evidence or sufficient proof, the auditor will refer the case to the Office of the Ombudsman and/or the National Bureau of Investigation for formal investigation. Filing of charges will be the responsibility of the NBI or the Ombudsman;

g) Blacklisting or suspension and administrative processes against erring parties will be pursued by the GPPB-TSO based on the reports of the investigators while debarment process will be handled by the Bank internally;

h) Filing of appropriate criminal charges to the court will be handled by the NBI and/or the Office of the Ombudsman.

139. In addition to the above four steps the following policies will be adopted to mitigate corruption under the Project:

a) Communication and Advocacy. – In an open society like the Philippines, the most effective deterrent to corruption is a well-informed citizenry. The project will promote good environmental citizenship that should not tolerate corruption of any kind, based on a clear understanding about the close link between and among corrupt practices, natural resources degradation, pollution, establishment of industries/business outside the correct land use plan and environmental disasters. As a result, public opinion will be more strongly brought to bear for the concerned offices to more efficiently deliver mandated services and therefore contribute to achieving desired biophysical results. Ordinary citizens have shown willingness

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to cooperate with well-publicized programs such as “clean-and-green”, waste segregation, smoke-belching and the industrial eco-watch program. Transparency-enhancing measures will include providing the public with on-demand electronic access to sector plans, programs, budgets and accomplishments and regular public disclosure of performance and/or compliance among the regulated community;

b) Community-Based Approach – The threat of being exposed by an aggrieved and agitated local community is a powerful deterrent to any thought of wrongdoing. Communications and advocacy directed at the general public will be complemented at the local level with activities to enlighten and enable communities to actively participate in the campaign to fight corrupt practices. Initially, citizen participation can be in the form of enhanced civic mindedness, for example, avoiding any involvement in corruption. Later on, they can adopt a watchdog perspective and more actively campaign against corrupt practices in their own communities, e.g., possible abuses in the operation of checkpoints to check on illegal logging, discharges of water pollutants, emission of air pollutants, proper land zoning, etc. The project will promote “responsible fiscalizing” to prevent abuse of anti-corruption measures for instance through anonymous complaints motivated by political differences or personal conflict.

c) Multi-sector Partnerships – Effective management of the environment and natural resources requires close and continuing interaction between and among the DENR, LGUs, local communities and the private sector. This partnership will not only lead to more effective decentralized management but will also strengthen the system of checks and balances at the local level especially in terms of disclosing possible abuse or abdication of functions. These same stakeholders can be the source of, or remedy to, corruption. Multi-sector partnerships should be based not only on gradually building trust, confidence and capacity, but also on a legal and institutional framework that more clearly defines the roles and relationships among the parties involved especially in forest and environmental management.

d) Independent Monitoring – The objective is to maintain a database on key institutional performance indicators, to include institutional reform and corruption indicators. Independent, impartial and credible monitoring, assessment, and reporting will exert continuous pressure on whoever intends to deviate from professional standards of performance at any level. Community and public perception on the incidence of and trends in corruption will particularly be effective deterrents. Monitoring results will be fed into multi-level communications, advocacy campaigns and public disclosure of information and performance using a variety of mass media. This will complement citizens’ satisfaction surveys and ranking of government agencies currently being undertaken by private groups.

Project Procurement Implementation 140. The DENR is the lead implementing and coordinating agency, and will be mainly responsible for overall leadership in procurement and project implementation, including those by the LGUs for the GEF component. In the interim the project procurement will be managed and supervised by the FASPO until the DENR Procurement Unit is established and become operational.

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Procurement Plan 141. The Borrower, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between the Borrower and the Project Team on April 24, 2007 and is available at the FASPO in DENR. It will also be available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated based on the guidelines for updating the procurement plan which should be agreed during Negotiations. D. Frequency of Procurement Supervision 142. In addition to the prior review supervision to be carried out from Bank office, the capacity assessment of the Implementing Agency has recommended one in six months supervision missions to visit the field to carry out post review of procurement actions. In addition, field visits between missions will be undertaken in various field locations. With respect to each contract not subject to prior review, the procedures set forth in paragraph 4 of Appendix 1 to the Procurement and Consultant Guidelines will apply at an initial ratio not less than one (1) in five (5) contracts. This ratio maybe be adjusted based on the satisfactory performance of the executing agencies.

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Attachment 1: Procurement Plan Details of the Procurement Arrangement (This procurement plan agreed between DENR and the Bank covers the first 18 months of the activities that will be financed under the Project). I. General Project information: Country: Philippines Borrower: Republic of the Philippines Project Name: National Program-Support to Environment and Natural Resources Management Project Implementing Agency (PIA) - Department of Environment and Natural Resources (DENR) Bank’s approval Date of the procurement Plan: April 24, 2007 Date of General Procurement Notice: April 16, 2007 (to be confirmed and updated as the GPN is published) Period covered by this procurement plan: First 18 months of the project (May 1, 2007 to Nov 1, 2008)

143. The DENR shall update this Procurement Plan in accordance with the Agreement guidelines, and furnish such update to the Bank for approval. DENR, and the LGUs for the GEF component, shall implement the Procurement Plan in the manner in which it has been approved by the Bank; hence only activities mutually agreed by the Bank will be included in the “Procurement Plan”. Activities for goods, works and services not covered by the Procurement Plan may not be financed from the Loan or Grant. 144. With respect to each contract not subject to prior review, as in the agreed procurement Plan, the procedures set forth in paragraph 4 of Appendix 1 to the Procurement and Consultant Guidelines (i.e. Ex-post review) will apply. The ratio during the first year shall be 1:5. This post review ratio maybe be adjusted, based on the procurement performance of the executing agencies. II. Goods And Works And Non-Consulting Services. Goods 145. Prior Review Threshold: Procurement Decisions subject to Prior Review by the Bank as stated in Appendix 1 to the Guidelines for Procurement which was determined by the Procurement Specialist based on the on the assessment of the implementing agency’s capacities, are as follows:

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Procurement Method Procurement

Method Threshold Prior Review Threshold

Comment

1. ICB Goods More than $250,000 All contracts 2. NCB Works Less than $500,000

3 NCB Goods Less than $250,000

The first NCB per Bureau and Field office per year, regardless of cost, are subject to Bank’s prior review.

Use of the Philippine Bidding Documents (PBD) for Goods and Works, as elaborated in the Procurement Manual including the exceptions required for Bank assisted projects;

4 Shopping for Works Less than $50,000

5 Shopping for Goods Less than $50,000

The first shopping per Bureau and Field office per year, regardless of cost are subject to Bank’s prior review.

Use of the forms prescribed under GPPB’s the Procurement Manual;

6 Direct Contracting for Goods and Works

All contracts

7 Force Account All contracts 8 CDD None CDD is subject to the requirements as

detailed in the CDD Manual, and will be subjected to post review.

146. Prequalification and domestic preference. No pre-qualification or ICB is expected for this project / program.

147. Proposed Procedures for CDD Components (as per paragraph. 3.17 of the Guidelines: CDD procedures as defined, and cleared by the Bank, for the separate CBRMP project will be adopted and customized for this program, and will be included in the Operational Manual.

148. Reference to Procurement Manual: Procurement for the project / program will be carried in accordance with the DENR Procurement Manual, issued under RA 9184 and cleared with the Bank. The Manual prescribed the administrative procedures for the bidding process and the steps to be followed by all Bureaus and field offices of DENR. For NCB procurement, the rules that are not acceptable are enumerated in the NCB Procurement Annex of the Loan Agreement. For other methods, the rules specified in the Bank Guidelines govern and the Procurement Manual applies suppletorily. ICB level contract are not expected, however, in any case the Bank’s standard bidding documents, and the Bank’s Guidelines will be used for ICB.

149. Any Other Special Procurement Arrangements: Being a budgetary support program a number of activities, estimated at US$ 5 million are foreseen to commence before loan effectiveness. Hence to accelerate project implementation, the DENR can immediately proceed with the initial steps of procurement before signing the related Bank loan. In such a case the procurement procedures, including advertising, shall be in accordance with the Bank procurement guidelines in order for the eventual contracts to be eligible for Bank financing, and the normal review process by the Bank shall be followed;

150. Procurement Packages with Methods and Time Schedule for the first 18 months. [Columns for pre-qualification and domestic preference are excluded in the hereunder table]

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2 3 4 5 6 7Contract Description Est. Cost

(US$) Proc

MethodBank's Review

(Prior /post)Expected

bid opening Comments

ENR MGB 1 G 2007 IT Equipment & Accessories 0.162 NCB Prior 30-Jul-07 First NCB Goods for MGB

ENR MGB 2 G 2007 Eqmt & Instrument Package 0.131 NCB Prior 13-Aug-07 2nd NCB Goods for MGB

ENR MGB 3 G 2007 Vehicle package 0.114 NCB post 10-Sep-07

ENR MGB 4 G 2007 X-ray Diffactometer 0.214 NCB Prior 10-Sep-07

ENR MGB 1 W 2007 Rehab of Bagacay Mines 0.710 NCB Prior 10-Sep-07 First NCB Works for MGB

ENR FMB 1 G 2007 Geodetic grade package 0.214 NCB Prior 30-Jul-07 First NCB Goods for FMB

ENR FMB 2 G 2007 Total Station (2007) 0.236 NCB Prior 30-Jul-07 2nd NCB Goods for FMB

ENR FMB 3 G 2007 IT Equipment & Accessories 0.076 NCB Post 30-Jul-07ENR FMB 4 G 2007 Total Station (2008) 0.214 NCB Prior 26-Nov-07 specialized equipmentENR EMB 1 G 2007 Air Quality Equipment 0.165 NCB Prior 30-Jul-07 First NCB Goods for EMB

ENR EMB 2 G 2007 Water Quality Equipment 0.076 NCB Prior 30-Jul-07 2nd NCB Goods for EMBENR EMB 3 G 2007 IEC Materials 0.031 Shopping Prior 13-Aug-07 1st Shopping Goods for EMBENR EMB 4 G 2007 IT Equipment 0.004 Shopping Prior 13-Aug-07 2nd Shopping Goods for EMBENR GEN 1 G 2007 Vehicles (1CO +2 RO) 0.150 NCB Prior 10-Sep-07 1st NCB Goods for GEN

ENR GEN 2 G 2007 Motorcycles (5 sites) 0.012 Shopping Prior 10-Sep-07 1st Shopping Goods for GENENR GEN 3 G 2007 motorboat 0.024 Shopping Prior 24-Sep-07 2nd Shopping Goods for GENENR GEN 4 G 2007 horses 0.008 Shopping post 24-Sep-07ENR RO3 1 W 2007 Nursery Estab (angat/Ipo) 0.002 Shopping prior 18-Jun-07 First shopping Works at RO3

ENR RO3 2 W 2007 Nursery Estab (DRT) 0.002 Shopping prior 18-Jun-07 2nd shopping Works at RO3ENR RO5 3 W 2007 Nursery Estab (Libmanan) 0.002 Shopping prior 18-Jun-07 First shopping Works at RO5ENR RO4 4 W 2007 Nursery Estab (Kanan) 0.002 Shopping prior 18-Jun-07 First shopping Works at RO4ENR RO12 5 W 2007 Nursery Estab (Liguasan) 0.002 Shopping prior 18-Jun-07 First shopping Works at RO12

ENR RO3 6 W 2007 Comm-based agro- for (Angat/ipo) 0.001 CDD post 10-Sep-07ENR RO3 7 W 2007 Comm-based agro- for (DRT) 0.001 CDD post 10-Sep-07ENR RO5 8 W 2007 Comm-based agro- for (Libmanan) 0.001 CDD post 10-Sep-07ENR RO4 9 W 2007 Comm-based agro- for (Kanan) 0.001 CDD post 10-Sep-07

ENR RO12 10 W 2007 Comm-based agro- for (Liguasan) 0.001 CDD post 10-Sep-07ENR RO3 1 W 2008 For.mapping/ grnd truthing (angat /ipo) 0.001 Shopping Prior 10-Jan-08 First shopping Works at RO3ENR RO3 2 W 2008 For.mapping/ grnd truthing (DRT) 0.002 Shopping Prior 10-Jan-08 2nd shopping Works at RO3ENR RO5 3 W 2008 For.mapping/ grnd truthing (Libmanan) 0.002 Shopping Prior 10-Jan-08 First shopping Works at RO5

ENR RO4 4 W 2008 For.mapping/ grnd truthing (Kanan) 0.002 Shopping Prior 10-Jan-08 First shopping Works at RO4ENR RO12 5 W 2008 For.mapping/ grnd truthing (Liguasan) 0.002 Shopping Prior 10-Jan-08 First shopping Works at RO12ENR RO3 6 W 2008 Nursery Estab (angat/Ipo) 0.024 Shopping post 10-Feb-08ENR RO3 7 W 2008 Nursery Estab (DRT) 0.024 Shopping post 10-Feb-08ENR RO5 8 W 2008 Nursery Estab (Libmanan) 0.024 Shopping Prior 10-Feb-08 2nd shopping Works at RO5ENR RO4 9 W 2008 Nursery Estab (Kanan) 0.024 Shopping Prior 10-Feb-08 2nd shopping Works at RO4ENR RO12 10 W 2008 Nursery Estab (Liguasan) 0.024 Shopping Prior 10-Feb-08 2nd shopping Works at RO12ENR RO 11 W 2008 Comm-based agro-for (Angat/ipo) 0.024 Shopping post 10-Feb-08ENR RO3 12 W 2008 Rehab -planting (angat/Ipo) 0.600 CDD post 15-Mar-08ENR RO3 13 W 2008 Rehab -planting (DRT) 0.600 CDD post 15-Mar-08ENR RO5 14 W 2008 Rehab -planting (Libmanan) 0.600 CDD post 15-Mar-08ENR RO4 15 W 2008 Rehab -planting (Kanan) 0.600 CDD post 15-Mar-08ENR RO12 16 W 2008 Rehab -planting (Liguasan) 0.600 CDD post 15-Mar-08ENR RO3 17 W 2008 Comm-based agro- for (Angat/ipo) 0.009 CDD post 15-May-08ENR RO3 18 W 2008 Comm-based agro- for (DRT) 0.105 CDD post 15-May-08ENR RO5 19 W 2008 Comm-based agro- for (Libmanan) 0.105 CDD post 15-May-08ENR RO4 20 W 2008 Comm-based agro- for (Kanan) 0.105 CDD post 15-May-08ENR RO12 21 W 2008 Comm-based agro- for (Liguasan) 0.070 CDD post 15-May-08

1

Ref. No.

III. Selection of Consultants.

151. Prior Review Threshold: Selection decisions subject to Prior Review by Bank as stated in Appendix 1 to the Guidelines Selection and Employment of Consultants:

Selection Method Prior Review Threshold Comment

1. QCBS, CQ and QBS for firms US$100,000.00 2. Individual Consultants US$50,000.00

3. Single source selection (SSS) for firms and sole source selection for individuals

All contracts

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152. Short comprising entirely of national consultants: Short list of consultants for services, estimated to cost less than $ 200,000 equivalent per contract, may comprise entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

153. Selection Plan - Consultancy Assignments with Selection Methods and Time Schedule. Being a budgetary support the program activities are to be undertaken by the organic staff of the DENR hence no consultants are expected to be selected, at least during the first 18 months of project implementation.

IV. Implementing Agency Capacity Building Activities with Time Schedule 154. In this section the agreed Capacity Building Activities are listed with time schedule

No.

Expected outcome / Activity Description

Estimated Cost Estimated Duration

Start Date Comments

1 Establishment of the interim DENR Procurement Unit

Asap and By negotiations

On-going This is among the actions agreed to established project’s readiness, and will ensure that the procurement procedures are mainstreamed into DENR

2. Approval and issuance of the DENR Customized Procurement Manual

Asap and By negotiations

On-going The manual will prescribed the mandatory requirements of the law required of all DENR units

3. Establishment of the permanent DENR Procurement Unit

On-going The creation of the permanent unit is in line with the Rationalization Plan, and will ensure long term enforcement of RA 9184 for all units of DENR.

SOCIAL, ENVIRONMENTAL SAFEGUARDS AND GENDER MAINSTREAMING 155. The Project addresses the Country Assistance Strategy’s objective of improving people’s standards of living through sustaina ble economic growth and greater social inclusion by supporting the development and implementation of appropriate policies and priority activities on environment and natural resources management. It would provide a structure for improved multi-stakeholder partnerships in addressing ENRM issues. Individual Social Assessment Reports for each of the five priority sites for Integrated Ecosystem Watershed Management and a separate one to guide actions related for the Bagacay interim measures discuss the different multi stakeholders, their interests and their influence on the management of the project interventions. With the Working Paper on the Description of the Priority Sites, they give guidance on the stakeholder mobilization detailing the challenges for the implementation of the Participatory approach in watershed management. An IP Policy Framework has been submitted and reviewed by the Bank as acceptable. It details the principles and operational guidelines for the preparation of the IP Development Plan that will form

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part of the Integrated Ecosystem Watershed Management Plan for the Southern Sierra Madre Cluster where a considerable number of indigenous groups are present and the Libmanan-Pulantuna Watershed where Agtas are stakeholders. Disclosure was done by posting the reports in the DENR website, in concerned LGUs public bulletin boards. 156. The Project envisages having positive impacts on communities with the introduction and implementation of sustainable livelihood activities and sound integrated watershed management program. Involuntary resettlement, land acquisition and restriction on access to sensitive areas is not expected to happen. Indigenous peoples/indigenous cultural communities are present in the Southern Sierra Cluster, composed of the Angat, Ipo, DRT-Gen Tinio and Kanan Watersheds and Libmanan-Pulantuna Watershed but the project is not expected to negatively impact them. To enhance the inclusion of their interests in the program, an Indigenous Peoples Policy Framework has been submitted by the proponent and has been found in compliance with the Bank’s OP 4.10. This shall guide the formulation of watershed specific IP Development Plan or the institutionalization of their integrated ecosystem ADSDPP when such has already been done. 157. The project design provides for complementary strategies for the development of alternative environmentally sustainable livelihood activities. There is no intention of restricting access by settlers/resource users in selected Project sites, particularly in relation to management of protected areas. This is likely to be an issue for indigenous peoples who are generally more depended on natural resources. This is an issue that needs careful examination when enforcing ENRM policies, laws and standards on stakeholders. To address the concerns on indigenous people’s rights, as well as of general access to resources during project intervention the ENRMP IP Policy Framework submitted to and accepted by the Bank as acceptable ensures that IPs’ interests are well considered and that the IP communities are meaningfully engaged, following the provisions of IPRA and the Bank’s Indigenous Policy (IP) policy. Consultations will be conducted to ensure that IPs’ views are included in the project development cycle and that they also share project benefits resulting from implementation. The Project is also designed to address general issues of access to natural resources by other groups in the target areas, ensure social acceptability; and contribute to ENR conflict resolution among the different stakeholders through the participatory planning process to be followed. In addition, civil society groups will be involved in activities to pursue project objectives. The Project would support opportunities for NGOs to be contracted by DENR or LGUs to undertake specific activities in sub-project implementation such as awareness campaigns, community training, third party monitoring, development of alternative livelihoods, etc. The periodical forum to monitor project impact would give equal attention to both environmental and social outcome indicators. 158. The Integrated Ecosystem Watershed Management approach shall heavily utilize participatory mechanisms in program development and management. The watershed-specific social assessment reports defined and analyzed the respective key internal and external stakeholders of each watershed detailing their capacities and assets, constraints and liabilities and degree of influence. This will guide the watershed-specific implementers in the formulation and implementation of their respective consultation, participation and institution building plans meant to enhance project ownership, accountability and equitable distribution of benefits. It also presents respective demographic and socio economic baseline data of affected communities and framework for micro enterprise development that will be used in the development of sustainable livelihood activities even in sensitive areas where no restriction of access is envisaged.

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159. A separate social assessment report has also been prepared for the measures that are going to be implemented in the interim period that the full scale Plan for the Closure and Rehabilitation of the Bagacay abandoned mine is formulated. It provides recommended arrangements to ensure meaningful participation of the stakeholders and accountability of implementers in the implementation of the interim measure and factors to consider in the preparation of the full scale rehabilitation plan which emphasizes on the need for a an effective conflict resolution mechanism given divergent and sometimes opposing interests. Environment Category B (Partial Assessment)

160. The Program will finance a slice of the DENR’s core priority activities to meet its mandates and strategic goals in managing, conserving and protecting the country’s environment and natural resources. It will not finance any activities related to mining of mineral resources, but will instead assist Government address the legacy of the past by supporting the preparation of a comprehensive mine rehabilitation and remediation plan, implementation of interim measures to contain immediate risks posed by the abandoned mines to the environment and the community and strengthening enforcement of environmental and social policies for current and future mining. 161. Year 1 of the Program has a well-defined set of priority activities, which are mostly “soft” activities, with the exception of the interim measures for the Bagacay mine site. These activities include stakeholder mobilization and consultations, surveys and mappings, trainings and capacity building, seedling collection and establishments of nurseries for indigenous tree species, formation of Water Management Councils in priority watersheds, formulation of watershed management plans, advocacy and IEC works, review of programs and policies, among others. The interim measures for the Bagacay mine site include construction of diversion and limestone channels to prevent and neutralize acidic water from flowing into Taft river; construction of drainage canals, fences and berms, slope stabilization measures and installation of signage. 162. Two separate environmental assessment (EA) studies were conducted by the DENR as part of the Program preparation. One assesses the impacts of year 1 activities and the other assesses in great detail the impacts of the interim measures. The two EAs confirm the negligible negative environmental impacts of the year 1 activities due their “soft” nature and the manageable impacts of the interim measures. Environmental issues related to the interim measures include siltation of waterways due to civil works and the potential increase in acid mine drainage during construction. Siltation will be addressed by constructing silt traps/ponds within the drainage channels and downstream of the limestone channels and other strategic areas and by doing the construction during summer/dry months. The construction of proper drainage canals as well as stabilization of the tailings dam will prevent any movement of tailings materials downstream. Also, most of the tailings materials are already compact thus eliminating movements downstream. Possible tailings materials that will be moved by the flow of surface water during rainy days will be contained along the silt traps/ponds, thus preventing them from flowing to Taft River. Regular monitoring, de-silting and maintenance activities will be conducted to ensure efficiency of the silt traps. Silt materials collected from de-siltation and maintenance activities will be deposited in the interim at the tailings ponds until full measures and disposal options are identified. 163. The increase of acid mine drainage (AMD) volume is considered remote, particularly during the dry season. However, it can be different during the rainy season. As such, any excavation required in the construction of diversion channels, limestone channels and slope stabilization activities will be done during the dry season/summer period. Upon completion of the interim

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measures, the volume of acidic water will be reduced since all neutral water from the different tributaries will flow directly to Taft River and only the rainwater which falls into the surfaces of the mining areas will form acidic water. Any acidic water generated from the rainwater that gets in contact with the areas will, however, be subjected to neutralization process through the constructed limestone channels before this flows into the Taft River. 164. The possibility of tailings ponds (TPs) failure is highly unlikely due to the already compacted tailings materials, the absence of water impounded along the TP structures which reduces the pore pressure in the dam, the lower height (3 - 8m) and gentle slopes of pond embankments and the construction of proper drainage canals within the tailings ponds which strengthen its stability. This is confirmed by a separate geotechnical assessment report of the TPs conducted by the Mines and Geosciences Bureau. In a remote event that the dam failure will occur, there is no receptor community that will be immediately and severely affected. 165. The EAs also formulated environmental guidelines, including a negative list of activities/subprojects, that will be followed for priority activities for years 2-5 and these guidelines are made part of the Operations Manual. The Environmental Management Bureau (EMB) of the DENR, with the mandate of implementing the Philippine EIA, will ensure that these guidelines are followed by the other Bureaus and LGUs, who will be implementing their respective priority activities. The other Bureaus of the DENR (MGB, FMB, PAWB) have the capacity to prepare and/or review EAs based on their involvement in reviewing EAs as part of the EIA Review Committee convened by EMB to review EAs of projects. LGUs, on one hand, will be capacitated by the Program to screen activities for environmental impacts and to prepare their respective EAs or EMPs for their priority activities assessed to have environmental impacts. Finally, EMB’s capacity will be further strengthened under Component 3 of the Program. Safeguard Policies Triggered The following safeguard policies apply to the Project:

166. Environmental Assessment Policy (OP/BP 4.01): While the Program is envisaged to have significant environmental benefits, there may be some priority activities that, if not planned and managed properly, would cause some negative environmental impacts. These may include but not be limited to livelihood activities in critical watersheds as part of the NRM interventions and the interim measures to be implemented at the abandoned Bagacay mine site to contain the immediate risks posed to the environment and the communities. 167. Natural Habitats (OP/BP 4.04): While the impacts on natural habitats would be positive due to habitats rehabilitation and restoration activities, among others, there may be some activities that may affect natural habitats such as the type of species selected and planted for restoration, perverse reforestation activities such as introduction of exotic of and/or monoculture of species, among others.

168. Forest Policy (OP/BP 4.36): Activities under the integrated ecosystem management, in particular the livelihood activities and support facilities, may impose added pressure on the forest resources.

167. Safety of Dams Policy (OP 4.37): The project will not finance construction of any dams. However, the interim measures for the Bagacay mine site include works to support the stabilization

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of the tailing impoundments including maintenance/cleaning of drainage canals and construction of drainage canals. Most tailing impoundments are small at a height of 3m to a maximum of 8m high. 168. Indigenous Peoples Policy (OP/BP 4.10): Indigenous communities are known to inhabit some of the priority watersheds to be covered by the Project. 169. The Program is not expected to cause involuntary resettlement nor land acquisition nor will it restrict access of forest settlers and indigenous peoples to forest resources. Environmental Guidelines for Years 2-5 Priorities 170. Environmental Guidelines: The EA for year 1 priorities has also formulated environmental guidelines, which are a combination of negative list of activities/subprojects and measures to address potential impacts. These guidelines will be made part of the Project’s Operations Manual for the DENR and the LGUs to strictly adhere to during the planning, design and implementation of future priorities. In general, the Program will have the following guidelines:

a) Livelihood activities: These will have to be consistent and/or identified in the multi-stakeholder watershed management plan, sustainable and compatible with the land use. They should not impose additional pressure on the watershed and natural resource base. Livelihoods that will cause adverse negative impacts will not be financed;

b) Negative list of activities and/or subprojects: These are the types of activities/subprojects that will cause adverse environmental impacts and these include, among others, purchase of pesticides from the Program funds; introduction/planting of exotic species in conservation areas; monoculture of species; use/adoption of destructive and unsustainable farming practices in agro-forestry sites; clearing of vegetated areas for reforestation; perverse reforestation activities within existing natural forests and wetlands; livelihood activities and any activities that a re not identified or not part of the watershed management plans, etc.;

c) Priority activities/subprojects should not affect protected areas and other sensitive areas: Any activity that will negatively affect environmentally-, culturally- and socially-sensitive areas will not be supported by the Project;

d) Activities with adverse environmental impacts will not be funded: The Program will not support any activity that would adversely affect the environment;

e) Environmental assessment will be required for any activity/subproject that will be assessed to have environmental impacts;

f) Screening of activities/subprojects for any adverse impacts and/or their eligibility under the Program shall be done during the annual programming discussions with the DENR Bureaus and the LGUs. Activities/subprojects with environmental impacts but are eligible shall be required to do an environmental assessment either in a form of EMP, IEE or full EIA.

Social Development and Management Measures

171. Indigenous Peoples Policy Framework (IPPF): An indigenous peoples policy framework has been developed to ensure that IPs/ICCs are informed, meaningfully consulted and mobilized to participate in the identification, planning, implementation, monitoring and evaluation of the projects be supported by the by the ENRMP. Their participation can provide them with benefits of more certainty. The indigenous peoples in the ENRMP priority areas are the Dumagats of the Southern

78

Sierra Madre Cluster composed of the Angat, Ipo, Dona remedios Trinidad-General Tinio and the Kanan Watersheds and the Agta of Libamanan-Pulantuna Watershed. 172. The Policy Framework is anchored on the provisions of the Philippine Constitution which recognizes the rights of indigenous communities to their ancestral domains and their power of dominion over their land and resources. It is drawn from the rights of the indigenous peoples on development projects affecting them embodied in the Indigenous Peoples Rights Act (IPRA) or Republic Act 8371. These are their right to an informed participation in the formulation and implementation of any government or private project that will affect them or impact upon their ancestral domain and to receive just compensation for any damage they may sustain as a result of the project and their right to participate fully, if they so desire, at all levels of decision making in matters that affect their lives, rights and destinies through procedures determined by them to ensure that their own political structures are developed and maintained. The Policy Framework was prepared in the context of the World Bank’s Operational Policy 4.10 on Indigenous Peoples which specifies that Bank -supported projects must give protection to indigenous people from being marginalized and other negative impacts and the development of Indigenous Peoples Development Plan (IPDP) that will detail protections from potential adverse impacts and enhancement of their benefits in time with the planning of site specific Integrated Ecosystem Watershed Management Program in the priority watershed where they are present. 173. The engagement of the IPs in the ENRMP shall, with absolute certainty, assure that they do not suffer adverse effects during and after the program implementation and that they receive culturally compatible social and economic benefits. It is also premised on the full respect for the dignity, human rights and cultural uniqueness in accordance with their customary laws and practices, free from external manipulation, interference and coercion with complete disclosure of the intent and scope of the project in the local language. 174. Consistent with these principles, the following operational strategies are specified:

a) Provision of technical assistance for the indigenous communities so that they may participate meaningfully in the planning process. Among others, this includes the deployment of competent and committed Program partners who can work with them in ensuring that their prioritized plans and project as reflected in the Ancestral Domain Sustainable Development Protection Plan (ADSDPP) are incorporated into the Watershed Plan.

b) Participation in peace building efforts by empowering them with necessary negotiation and conflict management skills to assert their own development priorities and preserving their cultural identity;

c) Use of culturally appropriate communication, media strategies and tactics for social mobilization,

d) Strong adherence for documentation and compliance to agreements made specially those pertaining to the acquisition of Free and prior Informed Consent; and

e) Participation in the development, monitoring and evaluation of mitigation measures. In the event that there are adverse impacts on them.

175. To ensure compliance to the above guidelines, representatives of the IPs shall participate in all levels of decision making in the site specific Multi-sectoral Watershed Management Councils including supervisory meetings and visits undertaken by DENR. The project proposal format will include screening for IP safeguard issues. Regular monitoring shall include the verification of the

79

implementation of guiding principles stated above, monitoring of commitments to them including the timeliness and adequacy of disbursement of funds intended for them, and their inclusion in the implementation review of subprojects/activities. 176. To resolve complaints and grievance, a community assembly/public hearing in the presence of an outside arbiter (preferably from NCIP) shall be called. IP traditional leaders in communities with IPs as majority population shall facilitate the community assembly while Barangay Officer shall facilitate it in communities where indigenous peoples are the minority. The concerned CENRO shall serve as observer and documenter of proceedings. If unresolved at the community level, the case shall be elevated to the Provincial office of NCIP consistent with the provisions of IPRA. 177. The program design and budget provides for technical assistance for the IP capability building to include the formulation, implementation and evaluation of the IP Development Plan. 178. Livelihood Development: The program has opted to use OP12 (GEF) ecosystem management as opposed to OP2–biodiversity management as the focus; the underlying argument being on management by creating the right incentive structures to reduce threat to the resources. Through the implementation of demand driven alternative livelihoods activities, communities would be encouraged to participate in activities that also benefit NRM and biodiversity management – a processes to increase buy-in. The program does not envisage demarcation of protected areas into strict biodiversity – no go areas – with a surrounding buffer area which would result in some restriction. Rather, by offering communities a menu of feasible alternative livelihood activities the assumption would be that in the medium term the pressure would be reduced through a voluntary change in the communities’ use of resources. This more “relaxed” approach is guided by previous lessons learnt – restriction results in animosity and limited benefits to the threatened areas. 179. The program design for livelihood development is guided by the use of the following complementary strategies:

a) Increasing the income from a given unit of source which will include soil conservation , development of agro-forestry initiatives, establishment of local processing enterprises, provision of small scale financing and improvement in linkages between the markets and the producer farmer and fishers,

b) Reducing pressures on the resources by generating non resource based livelihood with corresponding funds fro reforestation and rehabilitation jobs in exchange for participation in reduced resource use, building awareness of human patterns of resource depletion, and lowland job creation encouraging emigration from the critical areas. • Some of the non resource based livelihood options are: high value products

development such as cut flowers and ornamental plant, coffee and cocoa, fruits, bamboo plantations, aqua fish cage cultured production, rattan enrichment in production and communal forest and butterfly farming and beekeeping;

• Support to preferred and existing income augmentation activities such as hog and poultry raising, goat keeping, medicinal plant home gardening, nipa palm production, collection of fish seed to stock ponds and basket and mat weaving may also be pursued; and

• Tapping of private business sector (plantations and processing plants) dependent on upland water resources by LGUs to come into agreement with them in hiring upland poor dwellers for their manpower needs in production

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c) Creating incentives for management and conservation of resource through the provision of land tenure for forest lands that shall link land use rights with participatory conservation management and monitoring tools with future benefits; plow back mechanisms for payment of environmental services such as being protection guards and volunteer monitors of the rehabilitation projects, Livelihood generation through ecotourism has already been seen as profitable ventures in other areas.

180. Institution Building: To promote greater social inclusion and stronger project ownership, local multi Sectoral Councils shall be developed (or enhanced, if it already exists) so that they may direct the development and implementation of the Integrated Ecosystem Watershed Management Program. For them to be able to function well, the present problems from lack of integrated ecosystem databases and political will to enforce policies and regulations listed above is addressed in the project design with a demand driven menu of interventions. 181. Bagacay Rehabilitation: Interim Measure Social Guidelines:

a) Disclose the implementation and their projected impact to the stakeholders; b) Use materials indigenous to areas and avoid those with scavenge value;. c) Adopt labor intensive techniques; d) Implement incentive–led or performance–based schemes for the maintenance of mitigating

measure particularly on the re-vegetation scheme; e) Introduce accountability measures to avoid elite capture of benefits; and f) MGB monitoring with the participation of the local communities and other stakeholders.

For Full scale Rehabilitation Planning Social Guidelines a) Effective conflict management mechanisms must be established. This is to respond to a

possible volatile situation that may arise due the divergence of interests of the upstream and downstream local population of Hinabangan LGU on one hand and the LGU of Taft including barangays along the Taft River on the permanent closure of or making the mine attractive for another operation, coupled with very strong negative mining sentiments of the Samar civil society.

b) Effective, timely information, education and communication program should be established with all stakeholders. This will help build trust as well.

182. Implementation Arrangements on Environmental and Social Safeguards 183. Screening: Screening of activities/subprojects for environmental impacts and environmental requirements will be done during the annual programming discussions between the Foreign Assisted and Special Projects Office (FASPO) of the DENR and the DENR Bureaus and the LGUs who will implement their priority activities/subprojects. The screening will be led by FASPO and the EMB using the Program’s environmental guidelines and the environmental screening checklist of the DENR for covered and non-covered subprojects. Proposed activities/subprojects assessed to have negative impacts shall be required to undertake the assessment and prepare their respective EMPs and/or IEEs before these activities/subprojects could be implemented. Activities/subprojects covered by the Philippine EIA shall be reviewed and cleared by EMB, who will then issue the environmental compliance certificate (ECC) for the activity/subproject.

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184. Impact assessment and mitigation measures: This will be the responsibility of the activity/subproject proponent (Bureaus and LGUs), which will be done either in-house or with the help of consultants. But since most of the activities/subprojects are simple with minor impacts, assessment could be done in-house by the Bureaus. LGUs may need to hire consultant, if capacity does not exist yet. 185. Review and clearance will be the responsibility of EMB, who has the mandate under the law. EMB will be assisted by FASPO. 186. Compliance monitoring will also be the responsibility of the EMB. The Protected Area Management Board, where present, and the Watershed Management Council in priority watersheds shall be invited to participate in the monitoring. 187. World Bank supervision missions will monitor compliance of the DENR, LGUs and communities on the environmental and social guidelines and the mitigating measures. The Bank will conduct ex-post reviews of how the screening is done by the DENR and the LGUs and whether EMPs or IEEs or full EIAs and IPDPs have been prepared and whether mitigating measures are implemented.

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ANNEXES

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Annex 1 Table 2. DENR Rationalization Plan and Action Framework

Rationalization Plan Goals

Actions and Outcomes planned under NPS-ENRMP

Actions taken and Pending Issues

I. Organization Rationalization a. Organize along functional rather than

sub-sectoral lines Specific directions;

i. Centralized legal service ii. Staff bureaus to perform purely

staff functions and line functions being performed, to be transferred to the field offices

iii. Provision of positions for the NAECTF, NSWMC Secretariat, RBCO, IAS

iv. Separate sections for HRD and Personnel at the regional offices

v. Strengthened PENRO functions instead of mere financial and administrative conduit of CENRO

vi. Provision of PASu positions under the PENRO

vii. Deactivation of CENR Offices that are co -located with PENRO; PENRO to assume CENRO functions

§ By December 31, 2007, an Administrative Order would be issued establishing the Procurement Unit consistent with RA9184.

§ By December 31, 2007, an Administrative Order would

be issued providing for the Internal Audit functions to report directly to the Secretary of DENR, in line with broader Government anti-corruption initiatives.

§ By December 31, 2009, an Administrative Order would

be issued restructuring EMB into function-based divisions.

-Proposal to create procurement and property division in the CO and section level in the regional office and line bureaus -Done Issues & Actions Pending: i. Training of proposed staff in the CO, Bureaus and Regional Offices in compliance with RA 9184

ii. Complete staffing of EMB in the Regional Offices

b. Strengthen unity of command in the field

Specific directions;

i. Creation of a Water Resources Management Bureau

ii. Shift from sectoral to functional set up in the regional offices

Actions Taken: Issues & Actions Pending:

1. Legislation needed for the creation of WRMB 2. Identification of functions of WRMB remain

unresolved

Overall Direction 1. improve credibility and transparency 2. rationalize structures, functions and expenditures 3. improve ENRM standards

General Strategies 1. cut some operations where the DENR has less comparative advantage and prioritize

those that have greatest impact and value-added 2. promote environmental protection and ecosystem conservation (distinguish between

production- and conservation-related services)

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Rationalization Plan Goals

Actions and Outcomes planned under NPS-ENRMP

Actions taken and Pending Issues

iii. Reduction in the number of RTDs from four (4) to two (2) AREDs

c. Strengthen budget and planning processes

Specific directions;

i. Centralized ENR database administrator (ISTMO)

ii. Centralized administrative and finance functions of staff bureaus under the Central Office

§ By December 31, 2007, an MIS strategic plan and budget would approved and thereafter implemented which inter alia would establish the action plan for improving the quality, public accessibility and links between the key databases of the DENR.

§ By December 31, 2008, a 3-year Forward Planning and Budgeting strategy would be developed which, inter alia provides a vision and benchmarks for key reforms in DENRs operations.

§ By September 30 and April 30 of each year of the project commencing in 2007, M&E reports on progress under the NPS-ENRMP would be provided to the Executive Project Steering Committee (PSC) and to the Bank.

§ By March 31 of each year, DENR would submit its proposed plan and budget for the following fiscal year for review by the Bank, DBM and NEDA for the purpose of facilitating alignment of the budget with the NPS-ENRMP, the rationalization of DENR and priorities of Government; however this review would in no way substitute for the normal review processes of government.

Actions Taken: DAO issues Issues & Actions Pending: i. Competency requirements ii. IT Infrastructure

d. Strengthen career path and career development of DENR officials and employees

Actions Taken: Competency=-based system or CBS pilot tested in the CO and in the ff. regions 1. CALABARZON, CEBU, CARAGA Issues & Actions Pending:

e. Enhanced coordination with other line agencies

§ By December 31, 2008, WMCs, and MOA with LGUs, NGOs etc would be in place for all watersheds selected for priority action under the NPS-ENRMP which, inter alia, would clarify the devolution of functions related to a) watershed & ecosystem management, b) management of communal forests, and protected areas. .

Actions Taken: Committee on devolution organized. It is now conducting study on the issues. Issues & Actions Pending: Phased devolution subject to LGU preparedness or capacity to accept devolved functions

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Rationalization Plan Goals

Actions and Outcomes planned under NPS-ENRMP

Actions taken and Pending Issues

f. Support to government corporations dealing with natural resources utilization

Actions Taken: Proposed strengthening of their organizational structure is being considered Issues & Actions Pending:

II. Rationalization of Priority Programs, Thrusts and Policies a. Protection of the environment and

conservation of natural resources Specific Directions;

i. restore air quality within standards, especially in Metro Manila

ii. manage the major river basins to generate water resources that are free from contamination

iii. improve the management of solid waste

iv. pursue vigorously forest development in watersheds, protected areas, upland & coastal areas

§ By December 31, 2009, a framework would developed for the rationalization of ENR policies and legislation which inter alia would identify overlaps and inconsistencies as a basis for clarifying and guiding the operations and core functions of DENR.

§ By June 30, 2009, watershed Management Plans would be agreed and thereafter implemented for each of the selected priority watersheds.

§ By June 30, 2008, a review and revision of the NIPAS Act would be completed and a proposal for amendment to the Act put forward for Congressional deliberation backed-up by targeted advocacy by the DENR

§ By December 31, 2008, the update and streamlining of the NIPAS-IRR would be completed and the revised IRR issued by the Secretary of DENR.

§ By June 30, 2008, submission of a Congressional proposal for re-delineation of critical Protected Areas and disestablishment of obsolete PAs by the DENR

§ By year 5 of the NPS-ENRMP, the goal would be to achieve the following outcomes: Watersheds and protected areas supported under the project:

i) 15% reduction in average soil erosion as measured by reduced sediment loads in linked water courses

ii) 20% increase in the area of ecologically sensitive forests under effective protection

iii) 5 WMCs operational iv) At least 20 percent of degraded forestlands in

program area rehabilitated with native species representing the biogeographic region

v) 193,000 hectares of protected areas, protection

Actions Taken: Issues & Actions Pending:

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Rationalization Plan Goals

Actions and Outcomes planned under NPS-ENRMP

Actions taken and Pending Issues

forest and wetlands in GEF supported sites under vi) effective management in place as measured by the

PA management effectiveness tool vii) 50% decrease in fire encroachment over base line viii) 35% decrease in illegal wildlife collection and

hunting cases reported

Air Quality in Metro Manila i) 10% per annum increase in companies complying

with environmental standards compared to baseline

ii) 10% increase in number of companies monitored on a regular basis

iii) 15% reduction of total suspended particulate levels in Metro Manila over the 2006 baseline levels

Water Resource Management

i) At least 10% reduction in BOD levels in three water quality management areas over the baseline levels

Solid Waste management

i) 128 LGUs implementing three aspects of ecological solid waste management.

ii) EIA implementation devolved to at least 1 LGU

b. Sustainable exploration and development of the country’s natural wealth

Specific Directions: i. promote industrial tree

plantations in degraded and idle areas and pursue agro-forestry development

ii. promote responsible mining to revitalize the mining industry

iii. complete the development and publication of topographic maps nationwide

i) By year 5 of the NPS-ENRMP, number of important water bodies in program areas have been classified and protected in coordination with LGUs, industries and other stakeholders.

ii) By year 5 of the NPS-ENRMP, interim measures for the rehabilitation of Bagacay mine site would be fully implemented

iii) By year 5 of the NPS-ENRMP, number of comprehensive rehabilitation plans of abandoned mines completed

iv) By year 5 of the NPS-ENRMP, number of groundwater maps of areas completed

Actions Taken: Issues & Actions Pending:

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Rationalization Plan Goals

Actions and Outcomes planned under NPS-ENRMP

Actions taken and Pending Issues

c. Promotion of social equity and

protection of communities Specific Directions:

i. distribute the remaining 960,000 hectares of alienable and disposable lands to the poor households over the next five years

ii. restore the integrity of land titles through the computerization of land records

i) By year 5 of the NPS-ENRMP, 60% of targeted communities in GEF supported sites would be implementing micro-catchment plans

ii) By year 5 of the NPS-ENRMP, 30% of household communities in GEF supported sites would have adopted livelihood practices promoted under the project

iii) By year 5 of the NPS-ENRMP, 75 % of funded activities in GEF supported sites would be under implementation by LGUs and/or other stakeholders

iv) By year 5 of the NPS-ENRMP, number of completed geo-hazard maps produced for areas considered risky

d. Promote good and green governance Specific Directions;

i. Promote transparency, efficiency, accountability and consistency in the conduct of our work

i) By June 30, 2007, a baseline survey would be undertaken which, inter alia, would provide measures of client satisfaction with DENR’s service delivery and transparency in the access to data and information, and in regard to regulatory processes and fees. By June 30, 2012, a follow-up survey would be done to provide a measure of how client satisfaction has changed.

ii) By December 31, 2009, procedures and responsibilities for issuance of CBFMAs and CBRMAs would be standardized and streamlined.

iii) By December 31, 2009, a management plan would be agreed and thereafter implemented which inter alia would include improvements leading to better collection of ENR related service fees and retention of higher proportions of such fees and royalties in the sector including local plough-back mechanisms to finance management implementation of critical PAs and watersheds.

iv) By December 31, 2010, the key databases relating to i) industrial use, ii) forests and iii) protected areas would be available on-line for public access, including links to forms, procedures and fee schedules relating to regulatory processes and

Actions Taken: Propose performance indicators in relation to MFOS OVIs have been discussed with DBM. Clients satisfaction surveys shall be measured based on this Issues & Actions Pending:

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Rationalization Plan Goals

Actions and Outcomes planned under NPS-ENRMP

Actions taken and Pending Issues

service contracts.

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Annex 2

TERMS OF REFERENCE

WATERSHED MANAGEMENT COUNCIL (WMC)

1. A Watershed Management Council shall be established to ultimately establish a sustainable and multi-sectoral institution capable of addressing natural resources, land management and biodiversity issues in the watershed, in accordance with DENR DAO 23, Series of 2005. 2. The objectives of the WMC are to): a) ensure the sustainable use of watershed resources; b) protect and manage the lands, natural resources and the biodiversity of the watershed; and c) encourage and facilitate meaningful and active management participation of stakeholders within the watershed. 3. The DENR shall on a transitory basis be the primary agency in establishing the WMC. This shall be done in collaboration with the concerned Local Government Units (LGUs), relevant agencies other than DENR and local lands and natural resource users of the watershed. 4. The WMC shall consist of the following representatives:

a. The Governor(s) of X Province(s) (or his/her duly authorized Representative), Co-Chair Person

b. The PENRO(s) of X Province(s) or the RTD of Forestry Sector or PAWS of X Region, Co-Chair Person

c. Dept. of Agriculture: BSWM and/or BFAR d. National Irrigation Authority e. Armed Forces of the Philippines, where applicable f. NAPOCOR (in the case of Angat) g. One LGU representative of each Municipality with jurisdiction of the watershed h. One representative from among the Barangay Chairs chosen among themselves for each

municipality with jurisdiction of the watershed i. One Representative of the Farmers Association and/or Fishers Association per watershed j. One representative of CADC holders and/or of each clan of Indigenous People, where

applicable k. One representative of the local water utility authority for each watershed l. One representative of the local water concessionaries for each watershed m. One representative of each watershed community with tenurial instruments within the

watershed n. One Representative each of Women and Youth Associations

5. Observers: a) the Congressman of the district(s) where the watershed is located; b) the DENR Regional PAW Sector, Forest Service Sector and the Environmental Management Sector, the National Commission for Indigenous People (where applicable), the Department of Agrarian Reform (where applicable), the Department of Tourism (where applicable), the Department of Social Welfare, and the Philippine National Police; c) the Protected Area Superintendent, where a PA is included in the watershed, one Officer of the Provincial Development Council, and one representative of the local academe with record in ENRM research and monitoring, and d)

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representatives of Non-Government Organizations with out-standing local assistance record within the watershed and chosen by the WMC. 6. The Provincial Governor and the DENR PENRO will co-chair the meetings and the LGU Provincial ENRO act as the Secretariat. In watersheds covering more than one province, the chairmanship shall be on a rotating basis. 7. After the confirmation of participation and agreement to organize the WMC, the stakeholders shall among themselves enter into a Memorandum of Agreement or Understanding (MOA/MOU) that will be endorsed by the Secretary of DENR. In case there are already existing structures or organizations, i.e., Forest Management Councils or Protected Area Management Boards and similar institutions, these structures or organizations shall be tapped to implement the collaborative endeavour. 8. Prior to establishment of the WMC, a Manual of Procedures shall be prepared, and the necessary orientation to the DENR and the Provincial LGU and other stakeholders to mainstream this approach in the regular watershed management programs shall be conducted. The Forest Management Bureau (FMB) and the Protected Areas and Wildlife Bureau (PAWB) shall on a transitory basis take the lead in facilitating the mainstreaming process with the support of the NPS-ENRM being tapped to provide technical assistance. The FMB/PAW shall prepare a plan of action for the performance of these preparatory activities and coordinate with the NPS-ENRM, local DENR units and line agencies to ensure timely establishment and functionality of the WMC. 9. Systems, procedures and guidelines shall be identified, established and made operational to implement designed specific interventions. This shall include well-defined roles, responsibilities and accountabilities of the established WMC. Further expansion, for collaborative actions with other appropriate organizations, shall be made whenever needed; 10. The WMC will prepare and agree its own internal regulations (on matters such as quorum, final representation, decision-making etc.) based on IWM Guidelines to be developed by the NPS-ENRM. 11. The WMC will act as a mechanism for discussion, coordination and management between agencies and organizations and the communities involved with the watershed. In particular the WMC shall undertake the following tasks:

a. Secure a multi-sectoral approach and framework to the management of the watershed; b. Outline a participatory management action plan based on identified priority issues including

but not limited to a) prioritization of water use management issues that may affect the quality and /or the quantity of groundwater or surface water or riparian zones, and b) recommendation for improved water management procedures and performance measures. Intervention programs shall be outlined on-a-per issue-based component of the management plan. Multi-stakeholder group’s' roles and functions, in relation to the plan, shall also be identified;

c. Encourage, facilitate and advice on the implementation of integrated water and resource management strategies and action plans and adjust this plan with regular intervals;

d. Discuss results derived out of the IWM monitoring system; and take mitigating actions for actual implementation;

e. Assess and discuss the progress of the implementation of the plan, and help solve problems and conflicts that may occur during implementation

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f. Provide guidance to the institutions and organizations and individuals implementing the Plan; g. Participate in activities that promote and demonstrate increased awareness of water resource

management issues to its members and the public; h. Discuss and agree on policies, environmental codes of conduct and principles of relevance to

the watershed management; i. Ensure that sufficient technical capacity and capability are built through local participation,

training, replication of best practices through active development and implementation of the management plan to develop an appreciation and ownership of the plan;

j. Ensure that the implementation activities are carried out in accordance with norms and regulations of the GoP and where applicable in accordance with sustainable, indigenous practices characteristic for the watershed and the indigenous people residing in the area.

10. A Natural Resources and Resource use Monitoring System (NMS) to monitor the sustainable use and management of lands, natural resources and biodiversity shall be established, institutionalized and made operational from the start of this process. This system shall be a pro-active and local participatory monitoring system for the watershed and be based on an expansion of the DENR DAO 13, 2001: Biodiversity Monitoring System (BMS). The system shall be an integrated part of the Watershed Management Plan. 11. A project Monitoring, Evaluation and Adjustment System shall be established following D’NR's ENRM Program to ensure appropriate tracking of progress and feedback mechanism in integrated ecosystem management and in implementing the management plan and the multi-sectoral collaborative process. This system shall continue to be enhanced, while being utilized, to keep it more relevant and responsive to the need for documentation, adjustments and forecasting. 12. The WMC shall be established at the beginning of the Inception Phase of the DENR NPS- ENRM, and meet regularly and as needed during the Program implementation. Hereinafter, it shall meet at the least every six months (en banc) and its Executive Committee every quarter; or when a quorum of its regular members request for a meeting to be held. 13. The draft agenda for the WMC will be forwarded 4 weeks before the meetings. Proposals and documents for discussion on the WMC meeting will be forwarded 2 weeks before the meeting, and minutes will be forwarded to the WMC members no later than 2 weeks after a meeting. 14. The WMC may decide to established thematic and specialized technical committees to advice the Council on technical matters.

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Annex 3 GEF-related Implementation and Key Milestones

Implementation and Key Milestones of relevance for GEF-supported activities Date of completion/

Responsibility 1. Environmental Safeguards: DENR will improve the environmental guidelines for

years 2-5 activities by clarifying the institutional arrangements for implementing the guidelines (i.e., who does the screening of activities for environmental impacts, assessment, review and monitoring).

December 2007 Responsibility: EMB and REDs

2. Social Safeguards: Strengthen networking with involved agencies and NGOs, particularly in developing feasible alternative livelihood activities to reduce dependence on fragile ecosystems using the Working Paper on Alternative Livelihoods Link to IEM.

Project Year 2 Responsibility: PENRO and LGUs in priority sites

3. Local Management: Because of the critical role to be played by the regional DENR staff in leading project implementation at provincial level, it is important that DENR assesses the capability of senior staff in each targeted project site, and if necessary reassign appropriately qualified individuals with leadership and facilitation skills from other areas. Capabilities would include substantial practical familiarity with best practices on participatory and interdisciplinary approaches to ENR, and especially with integrated ecosystem management.

August 2007 Responsibility:: FASPO PCU and REDs

4. ENR Policies: A framework would developed for the rationalization of ENR policies and legislation which inter alia would identify overlaps and inconsistencies as a basis for clarifying and guiding the operations and core functions of DENR.

December 31, 2009 Responsibility: Policy and Planning Service Office of Central DENR

5. ENR Databases: The key databases relating to i) industrial use, ii) forests and iii) protected areas would be available on-line for public access, including links to forms, procedures and fee schedules relating to regulatory processes and service contracts.

December 31, 2010 Responsibility: Systems and Technology Unit in collaboration with EMB, FMS & PAOB

6. Watershed Management Councils (or strengthened PAMBs) would be in place for all watersheds selected for priority action under the NPS-ENRMP, with an MOA signed between the provincial governors who would co - chair the WMC with the PENRO or the RTDs on behalf of the RED. The MOA would clarify the functions of the WMC according to DAO No 23, 2005, and the role of the corresponding PENRO and LGU Provincial ENRO, who through a Project ENRU would provide logistical support to the WMC for coordination of watershed management planning and implementation.

December 31, 2007 Responsibility: REDs for the selected watersheds.

7. Local Government Units: Municipal LGUs in all watersheds selected for priority action would have designated either ENROs or MPDOs as the unit responsible for municipal/microcatchment level implementation of project activities to be financed under the GEF grant, and MOAs with MLGU in place, which would specify their roles and responsibilities under the project.

June 30, 2008 Responsibility: REDs and Provincial Governors for the selected watersheds.

8. Tenurial instruments: Reform of the system for issuance of CBFMAs and CBRMAs would be completed and new streamlined procedures, service standards and responsibilities would be in place.

December 31, 2008 Responsibility: FMB and PAWB

9. NIPAS Act: Adoption of the revised IRR to NIPAS, and implementation of the revised policies would be underway.

December 31, 2007 Responsibility: PAWB and Policy and Planning Office

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10. Payment for Environmental Services: A comprehensive framework would be agreed for the optimization and standardization of payment, collection and disbursement of fees for environmental services, which inter alia would include revisions to IPAF to allow greater retention of fees and a user fee policy for all other environment services.

December 31, 2009 Responsibility: EMB, FMB, PAWB and PENROs in their respective areas

11. Program Monitoring & Evaluation: M&E reports on progress under the NPS-ENRMP would be provided to the Executive Project Steering Committee (PSC) and to the Bank.

Commencing in 2007, by September 30 and April 30 of each project year Responsibility: Policy and Planning Service through FASPO and the implementing bureaus and REDs

12. Program Agreements: The annual Program Agreement encompassing the work plan and budget for all units responsible for implementing activities in the following year of the NPS-ENRMP, should have been submitted to the Bank.

November 30 of each project year Responsibility: FASPO-PCU

13. Mid-term Review: A mid-term review of DENR’s performance and achievements under the project would be undertaken and the findings of the study discussed with DENR, DBM, NEDA and the Bank.

Jan 30, 2009 Responsibility: Policy and Planning Office

14. Completion Report: A completion report of DENR’s performance and achievements under the project would be undertaken, and the findings of that study discussed with DENR, DBM and the Bank.

End of project Responsibility: Policy and Planning Office

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Annex 4 Republic of the Philippines

DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES Office of the Secretary

Visayas Avenue, Diliman, Quezon City

PERFORMANCE AGREEMENT (PROFORMA)

KNOW ALL MEN BY THESE PRESENTS: This Agreement is executed and entered into by and between the following parties:

The Department of Environment and Natural Resources, hereinafter referred to as the “DENR”, a

duly existing agency under the laws of the Republic of the Philippines with principal office address at the Department of Environment and Natural Resources, Visayas Avenue, Diliman, Quezon City, represented by its Secretary, Honorable ________________________; the lead agency for the implementation of the National Program-Support to Environment and Natural Resources Management Project (NPS-ENRMP),

- AND - The (name and acronym of the responsible units), hereinafter referred to as the (acronym of the

responsible units), duly existing agencie under DENR by the virtue of the laws of the Republic of the Philippines with principal office address at ___________________________________________, represented by its (designation of the head of the unit), (name); an implementing agency of the National Program-Support to Environment and Natural Resources Management Project (NPS-ENRMP).

- WITNESSETH -

WHEREAS, the DENR is implementing the NPS-ENRMP Project with program support from the World Bank and the GEF, to strengthen DENR’s policies, procedures and key investments to enable it to more proactively mainstream environment and natural resource management issues, including ecosystem services for global and local benefits,

WHEREAS, the NPS-ENRMP Project would provide support for strengthening DENR’s functions in regard to: (a) policy, planning and advocacy; (b) conservation and rehabilitation; (c) environmental management, enforcement and monitoring; and (d) results based planning and budgeting, which are expected to lead to outcomes that would include: (i) ENR plans, policies, laws and regulations rationalized and more effectively implemented; (ii) the process of devolution of ENRM furthered and made more effective in keeping with the LGC through LGU capacity building and institutional reforms; (iii) critical ecosystems services restored leading to significant environment, development and global benefits; and (iv) improved monitoring to better understand results and impacts and more effective dissemination of good practices,

WHEREAS, the DENR has authorized (acronym of responsible units) to implement a program of

activities under NPS-ENRMP for FY(year) covering the period of (date) to (date),

NOW, THEREFORE, and in consideration of the foregoing premises and consideration, the parties hereto agree as follows:

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ARTICLE I Execution of the Project

1.1 The DENR shall:

a) Assume responsibility for the overall planning, management and coordination of activities and operations pertaining to the implementation of the Project in accordance with the NPS-ENRMP Loan Agreement with the World Bank and with the GEF Grant Agreement.

b) Through the Project Steering Committee (PSC), with day–to-day assistance by the Project Coordination Unit (PCU) acting as the technical secretariat of the project, and located within the Foreign Assisted Program Office (FASPO), provide policy guidelines for the efficient and smooth implementation of the Project.

c) Supervise and ensure the satisfactory execution of the program of activities, based on the terms and

conditions set forth in the Loan Agreement with the World Bank and the Grant Agreement with the GEF.

1.2 The (acronym of responsible unit) shall:

a) Submit and implement an Annual Project Implementation Plan (PIP) in accordance with the objectives of NPS-ENRMP, which would contain the following:

§ Detailed implementation program and timetable § Detailed cost table § Procurement plan § Financial Plan § Terms of Reference for studies, etc.

b) Submit quarterly Program Accomplishments Reports to the PSC describing progress in

implementing the PIP.

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ARTICLE II Financial Obligations

2.1 The DENR shall :

a) Secure the release of WB Loan and GEF Grant Proceeds based on the following schedule and documentation of milestones as follows and as described in Annex 2;

Table 1. Summary of Annual Fund Releases and Milestones Fund Releases NPS-ENRMP Milestones and Key

Outcomes GEF Specific Milestones and Key

Outcomes Monthly

% WB Loan Proceeds

GEF Grant Proceeds

List only key milestones/activities List only key milestones/activities 1st Month (50%)

List only key milestones/activities List only key milestones/activities

6th Month (or as

required based on

the utilization of funds)

(50%)

NOTE: Quarterly reports are required viz: I. Financial Monitoring Reports (FMR) which should include: i) a Balance Sheet of resources of the project., ii) Statement of Sources and Uses of by project activity, iii) a semi Annual Financial Plan covering implementation and procurement plans as well as Special Account requirements. II. Progress Report which should link physical accomplishments with the FMR. III. Procurement Management Report on the status of the procurement pipeline and on the status of ongoing contracts.

The same detail is require for GEF funded activities

TOTAL (100%)

b) Ensure funding for the program of activities as follows:

Table 2. Summary of Annual Program Funding Requirement

MFO/Result/Activity (by implementing agency)

Program Budget Requirements

WB Loan Proceeds

GEF Grant Proceeds

Implementing agency Outcome indicator

MFO1: Plans and policies developed, promoted, implemented, monitored and evaluated

MFO 2: Ecosystems and natural resources developed, protected, conserved, enhanced and degraded ones rehabilitated

MFO 3: Appropriate and comprehensive regulations and standards, implemented, monitored and co mpliance

TOTAL

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c) Identify expenditure of WB loan proceeds and GEF grant proceeds for SOE disbursement purposes, as follows:

Table 3. Annual Requirements for WB Loan Proceeds by Disbursement Category

MFO/Result/Activity (by implementing agency)

WB Loan Proceeds

Goods

Works

Consulting Services

Training & Workshops

Operating Costs

MFO1: Plans and policies developed, promoted, implemented, monitored and evaluated

MFO 2: Ecosystems and natural resources developed, protected, conserved, enhanced and degraded ones rehabilitated

MFO 3: Appropriate and comprehensive regulations and standards, implemented, monitored and compliance

TOTAL

Table 4. Annual Requirements for GEF Grant Proceeds by Disbursement Category

MFO/Result/Activity (by implementing agency)

GEF Proceeds

Goods

Works

Consulting Services

Training & Workshops

Operating Costs

MFO1: Plans and policies developed, promoted, implemented, monitored and evaluated

MFO 2: Ecosystems and natural resources developed, protected, conserved, enhanced and degraded ones rehabilitated

MFO 3: Appropriate and comprehensive regulations and standards, implemented, monitored and compliance

TOTAL 2.2 The (acronym of responsible unit) shall:

a) Submit to DENR monthly Financial Monitoring Reports, Balance Sheet & Sources and Uses of Funds), no later than the 15th day of the following month.

b) Submit to DENR audited financial statements (Balance Sheet & Sources & Uses of Funds) no later than April 30, (year).

c) Maintain an adequate financial management system for the program of activities such that failure to do so will result in stoppage of funding and recovery of funds.

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ARTICLE III Other Obligations

3.1 CONTRACT DOCUMENTS

The following pertinent documents attached to this Contract or on file are hereby incorporated and made integral parts of this contract as set forth herein: 1. Detailed Annual Implementation Program, Timetable and Terms of Reference (Annex 1) 2. Detailed Program of Activities Financial Plan (Annex 2 – Tables 1, 2 & 3) 3. Procurement and Contract Implementation Plan (Annex 3) 4. Financial Monitoring Report (Annex 4)

3.2 MUTUAL OBLIGATION

DENR and (acronym of responsible unit) agree to perform, fulfill, abide by and submit to any and all of the provisions, and requirements and all matters and things contained or expressed in, or reasonably to be inferred from the Contract documents.

3.3 CONTRACT PERIOD

The parties agree that the program described under this contract shall be completed by December 31, Year).

3.4 PERFORMANCE ASSESSMENT

In case of failure of (acronym of responsible unit) to complete the program in accordance with the provision of this Contract, the DENR shall have the option to stop funding or reallocate funds.

3.5 NOTICES

All notices called for by the terms of this Contract shall become effective only at the time of receipt thereof and only when received by parties to whom they are addressed:

For the: DENR The Secretary Department of Environment and Natural Resources Visayas Avenue, Diliman, Quezon City

For the: Implementing Unit (head of the unit) Office/Unit

Address

3.6 INTEGRATION

DENR and (name and acronym of responsible unit) agree that this Contract Document expresses and integrates all of the agreements, promises and covenants of the parties and superseded all prior and cotemporaneous negotiations, understanding and agreements, whether written or oral and that no modification or alteration of this Contract shall be valid or binding on either party unless expressed in writing and executed with the same formality as this Contract except as may otherwise be specifically provided in this contract.

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ARTICLE IV Effectivity

This Agreement shall take effect on the date of the signing hereof by the parties concerned and shall be terminated upon the satisfactory fulfillment of all the terms and conditions embodied herein. Any modification or amendments to this Agreement, as proposed by either party shall mutually be agreed upon in writing by all the parties hereto.

IN WITNESS WHEREOF, the parties have hereunto set their signatures at the place and date indicated as follows:

DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES Name of responsible Unit By: By:

________________________________ ____________________________ Secretary Designation

SIGNED IN THE PRESENCE OF:

_____________________________ ________________________________ Chairperson, Project Steering Committee Chairperson, Secretariat to the Project Steering Committee

________________________________________

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A C K N O W L E D G E M E N T REPUBLIC OF THE PHILIPPINES ) SS CITY OF _________________ ) BEFORE ME, this ____ day of ______________, 2004 in the City of _____________, Philippines, personally appeared the following persons, all known to me to be the same persons who executed the foregoing instrument, and signed their respective signatures above, acknowledging to me that the due execution hereof is their own free and voluntary act and deed. Name Res. Cert. No. Date and Place of Issue _____________________________ _____________ _____________________ _____________________________ _____________ _____________________ _____________________________ _____________ _____________________ This instrument consisting of _______ (__) pages including the page on which this acknowledgment is written, has been signed on the left hand margin of each and every page thereof by the parties and their instrumental witnesses and sealed with my notarial seal. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal, this _____ day of _______________, 2004, in the City of ____________________, Philippines.

NOTARY PUBLIC

Doc. No. ____________ Page No. ____________ Book No. ____________ Series of 2004.