Handbook for Appraisal of Environmental Projects Financed from Public Funds

1. EAP Task Force Handbook for Appraisal of Environmental Projects Financed from Public Funds Nelly Petkova Paris, 22 February 2007

2. Structure of the Presentation • Objectives of the Handbook • Scope of the Handbook • Target audience • Structure of the Handbook • Golden rule for providing public support for investments • Major principles identified in the Handbook • Essential management tools identified in the Handbook • Training on the Handbook

3. Objectives of the Handbook • To show how to implement the Good Practices for Public Environmental Expenditure Management (PEEM) in programming and project cycle management by public institutions • To show what, why, and how it should be done • The Handbook does not intend to deliver a complete, "ready-to-use" toolkit that could be directly applied by any environmental financing institution • A practical, step-by-step approach to different challenges and a menu of options • Based on available tools and practices from some of the most successful and internationally-recognised government authorities and public financial agencies

4. Scope of the Handbook • Good practices in appraising, selecting and financing of projects supported by domestic public agencies • NOT project preparation/development • Good practices in setting expenditure programmes and priority-setting • Focused on investment projects in the wastewater collection and treatment sector

5. Target Audience • Agencies implementing public environmental investment expenditure programmes • Governments (MoE) designing public environmental expenditure programmes and supervising implementing agencies • Managers of technical assistance programmes, consultants • NOT project developers, private financiers, IFIs • Focus on the needs of transition economies of CEE and EECCA but relevant for countries from other regions

6. Structure of the Handbook • Programming and setting the rules of the expenditure programme • Main elements of the programme • Priority-setting • Preparing financial plans and budgets • Institutional issues • Project identification and appraisal • Project identification • Processing of applications • Eligibility screening (pre-appraisal) • Full appraisal and ranking • Selection • After-project selection • Contracting and financial transfers • Project implementation and post-implementation monitoring and evaluation • Cash-flow and loan-portfolio management

7. Golden Rule for Providing Public Support to Investments

8. Core principles to set up an environmental expenditureprogramme • Set few and unambiguous priorities • environmental media, economic sector, or region • clear, time-bound, measurable objectives • Define eligibility criteria • types of projects • projects owners • eligible types of costs which will be supported • Assign revenue sources for the programme • disbursement mechanisms • the assistance rate per type of project or beneficiary • Define the application cycle (time-bound versus on-going) • Consult with stakeholders • THEN, consider the most appropriate institutional set-up for the implementing agency

9. Core principles for sound project appraisal • Programming vs Appraisal • A political process, focused on defining goals, objectives and priorities and setting the rules for the project cycle • A technical process, conducted by professional staff, held accountable for their decisions • Transparency • Information should be disseminated widely • All potential applicants have equal access to information • Use simple assessment techniques (cost-effectiveness vs cost-benefit, multi-criteria analysis) • Decisions are explained on time • Active project identification

10. Core principles for sound project appraisal • A two-step appraisal process is preferable • it saves time and resources to both applicants and the agency • The financial sustainability of the project should be checked • bankable projects do not need public support • not sustainable projects should be rejected as well • data provided by applicants should be carefully checked • Applicants, not only projects, should be evaluated • The process does not stop once a decision is made • contracting • monitoring project implementation • assessing project outcomes • learn from experience • Attracting qualified and experienced staff is key • to challenge project owners • to facilitate project preparation • to manage project cycle

11. Essential management tools • An information package for applicants • the agency’s mission, priorities, and eligibility criteria • A questionnaire for eligibility screening • along with instructions to applicants and a checklist for staff • A full application form, along with • instructions to applicants on how to fill it in • instructions to staff on how to use the information and data provided in the project proposals • Methodological guidelines for staff for conducting a cost-effectiveness analysis • A project fiche, to synthesise information and to report to the decision-making body • A manual of operational rules and procedures for staff • A database for project cycle management (modular)

12. Training on the Handbook • First training delivered to Moldovan experts • a 4-day workshop, January 2007 • support by the Moldovan Ministry of Environment, REC Moldova and the UK DEFRA • Objectives • to provide Moldovan managers with practical knowledge and tools • to test the tools and approaches in the Handbook • to identify room for improvement • Training support • a mix of lectures and practical exercises • Toolkit and a computer model for calculating cost-effectiveness • training by practitioners with hands-on experience • Additional on-the-job training needed • Will there be demand for these tools in EECCA? • Will there be interest by donors to support additional work in this area?