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OPERATIONS MANUAL
CHALLENGE FUND
Prepared By
HSMI AND Project Management Unit
CBUD Project
Contents
1.
Purpose and Overview............................................................................................................................... 3
1.1 Background .............................................................................................................................................. 3
1.2
Objectives of Challenge Fund ............................................................................................................ 3
1.3
Purpose of Operations Manual ......................................................................................................... 4
1.4
Components of Challenge Fund ........................................................................................................ 4
1.5
Scope of Challenge Fund ................................................................................................................... 5
2.0
Management Structures for Challenge Fund ........................................................................................ 6
2.1
Role of MoHUPA ................................................................................................................................ 7
2.2
Role of Steering Committee .............................................................................................................. 7
2.3
Role of Expert Panel .......................................................................................................................... 8
2.4
Role of Core Management Unit at HSMI ........................................................................................... 9
3.0
Financing and Financial Management System for Challenge Fund ..................................................... 13
3.1
Fund Flow Mechanism..................................................................................................................... 14
3.1.1
Payment Mechanism for Challenge Fund (DIFD)......................................................................... 14
3.1.2
Challenge Fund Bank Account Operations (DFID Funding) ......................................................... 14
3.2
Payment Mechanism for Challenge Fund (WB) .............................................................................. 15
3.3
Reimbursement (WB & DFID) .......................................................................................................... 16
3.4
Audit (WB & DFID) ........................................................................................................................... 16
3.5
Sustainability of CF Activities and expenditure on CF set-up ........................................................... 16
4.0
4.1
OPERATIONS OF THE CHALLENGE FUND ............................................................................................. 17
Steps for Challenge Fund ................................................................................................................. 18
Annexure 1 -List of SNPUPR and CBUD cities .............................................................................................. 23
Template-I : Documenting Identified Best Practice .................................................................................... 24
Template II : Template for Preparing Proposal for Replication of Best Practice ....................................... 26
Template III :Draft for Project Sheet ........................................................................................................... 35
Page 2
Operations Manual for Challenge Fund
1. Purpose and Overview
1.1 Background
Capacity Building for Urban Development (CBUD) Project aims to help in addressing the major constraints
to urban development and specifically focuses on the capacity building requirements for successful urban
management and poverty reduction. The main objective of the project is to assist in the following:

Assist selected states and urban local bodies to operationalize institutionalize urban reform
agenda;

Strengthen policy, institutional reform and improve procedures; and

Improve skills in the areas of governance, planning, service delivery and municipal financial
management.
One of the support areas under the project is aimed at fostering knowledge and information exchange and
learning amongst urban local bodies. Establishment of Challenge Fund for Urban Poverty Alleviation is one
of the key tasks to promote the implementation and replication of best practise in the area of urban
poverty reduction. The Challenge Fund is intended to promote the implementation and replication of best
practise in the area of urban poverty reduction.
Challenge fund envisages technical assistance and financial support to ULBs for replicating good practices.
The focus is to encourage ULBs to adopt good practices which have already been recognised elsewhere in
the overall context of reform processes. The idea is to ensure that more ULBs adopt innovative good
practices and make them continuously sustainable.
The Challenge Fund is jointly proposed under the World Bank supported ‘Capacity Building for Urban
Development (CBUD)’ project and the DFID supported ‘Support to National Policies for Urban Poverty
Reduction (SNPUPR)’ project. The Challenge Fund will be operational till June 2016, even though DIFD
funding will be upto June 2014.
1.2
Objectives of Challenge Fund
The aim of Challenge Fund is to support urban local bodies to take up pro-poor development projects
within the thematic areas and create a competitive environment amongst the urban local bodies in
addressing the challenges of urban poverty alleviation in transparent, cost effective and responsive
manner. It is designed to provide urban local bodies the opportunity to innovate and adopt
approaches/practices to respond to urban poverty alleviation.
Page 3
The broad objective of challenge fund is to promote a sense of competition amongst the urban local bodies
in addressing the challenge of urban poverty alleviation in a transparent, cost effective and responsive
manner. It is designed to provide urban local bodies the opportunity to adopt innovative approaches to
respond to urban poverty alleviation. In this context, Challenge Fund has been designed as a new type of
vehicle: it de-emphasises the effort spent on screening and identification of innovative ideas, and places
greater weight on the process and incentives for replication of proven, successful ideas. The idea is to
ensure that more ULBs adopt innovative good practices with the following basic objectives:

To support taking up initiatives to scale up/replicate good practices within the broad area of Urban
poverty alleviation

To encourage and provide incentives for innovations or innovative ideas carried out/proposed by
urban local bodies within the broad thematic areas including exploring options of involving private
sector/NGO for promoting innovations in the areas of urban poverty alleviation

To create a competitive environment for accessing the fund.
In doing so, the programme aims to support ULBs who have limited access to technical and financial
support and incentives to adopt and implement good practices.
1.3
Purpose of Operations Manual
The Operations Manual lays down the institutional framework and the procedures for availing financial and
technical support from the Challenge Fund. Moreover, this Operations Manual focuses on procedures to
access funding support from the challenge fund. The Manual outlines the entire process of the project
development cycle from identification of the good practices to replication of good practices and the role of
various stakeholders at each stage of this development.
1.4
Components of Challenge Fund
Challenge Fund constitutes an important part of an effort that aims to (a) identify good practices that have
demonstrated impact and efficacy, and (b) rapidly transfer them to other cities where they can be
replicated. Besides supporting innovations under Challenge fund, cities that propose credible
implementation plans for replication will be provided technical and financial support under the Challenge
Fund to meet the costs of implementation.

Identification of Good Practices in Urban Poverty Alleviation: A set of good practices/innovations
particularly on urban poverty alleviation, livelihood, service delivery etc. will be selected from
amongst the initiatives that have already been awarded under various award programs of
government of India or any other similar initiative and innovations particularly on urban poverty
alleviation, livelihood, service delivery that justify merit for inclusion under challenge fund. While
choosing good practices/innovations, emphasis will be given to those initiatives that are aligned
with the concepts/themes of Rajiv Awaas Yojana/SJSRY and other MoHUPA programmes. Good
practices/Innovations will be finalized in close consultation and agreement with the Ministry.
Page 4

Replication of Good Practices: Cities will be challenged to replicate the good practices/innovations
that have been identified as mentioned above. Establishing the corpus of Challenge Fund for
Replication will be communicated extensively and given wide publicity. Cities that propose credible
implementation plans for replication will be provided technical and financial support under the
Challenge Fund to meet the costs of implementation.
1.5
Scope of Challenge Fund
It is essential that the Challenge Fund is implemented within a given time frame, within allocated budget
and achieve desired outputs in a qualitative and sustainable way. To begin with, Challenge Fund is to be
used in 20 selected cities that are presently under Component ll of CBUD and another 20 cities that are
within the purview of the on-going DFID supported project known as “Support to National Policies for
Urban Poverty Reduction (SNPUPR)” project. It may be opened up to other ULBs at a later stage. A list of
40 cities from which the Challenge Fund has to be administered is contained in Annex- l.
Page 5
2.0
Management Structures for Challenge Fund
Organisational framework for administration of Challenge Fund gives a flavour of how this fund is to be
administered. Challenge Fund is institutionally positioned as a flagship initiative of the Ministry of Housing
and Urban Poverty Alleviation. The Challenge Fund will be accountable to the Ministry of Housing and
Urban Poverty Alleviation (MoHUPA). The Challenge fund is housed in the Human Settlement Management
Institute (HSMI). Following two additional committees will be established to help guide specific parts of the
Challenge Fund’s operations:

A steering committee chaired by Project Director will provide oversight for implementation, recognizing
best practices as well as for defining the road map for replication. The Steering Committee will meet biannually to review & approve ULB proposals for replication funding & progress of implementation.

An Expert panel will be constituted to evaluate and short list the best practices and identify cities for
replication including recommending the selected ULB proposals to the steering committee for approval.
For the first year, the panel will meet every quarter to appraise and examine proposals from ULBs.
Subsequently the expert panel will be convened by Coordinator HSMI whenever required. The
proposed structure for Challenge Fund is depicted below for clarifying synergy and interrelationships
amongst them.
MoHUPA
Steering Committee
Core Management
Unit at HSMI
Headed by
Coordinator CF
Expert
Panel
Headed by
Coordinator
The Core Management Unit at HSMI will be responsible for overall management of the fund. This core
Management Unit will consist of one coordinator and two professionals to be provided by HSMI. This core
team will effectively manage and sustain the challenge fund program and implement knowledge
management activities and network between participating cities. The core team would support organizing
workshops including communicating the shortlisted/selected good practices for replication to the identified
ULBs. HSMI in addition to providing dedicated professionals will also procure the services of a Financial
Management Specialist for the project period to support the core unit in realization of CF objectives. HSMI
will also provide support staff, work stations and any other appropriate support required to function and
operationalize the Challenge fund. HSMI would also be responsible for preparing case studies and
dissemination of case studies of good practices including preparing progress reports.
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2.1
Role of MoHUPA
Challenge Fund is a flagship initiative of MoHUPA for identification of existing innovative practices in urban
poverty alleviation and its replication. MoHUPA therefore has an important role in promoting this initiative
and also in its oversight for any midway correction in pursing and promoting the Challenge Fund objectives.
Because of the crucial role of MoHUPA, a high power Steering Committee is located in this Ministry.
Chaired by the Project Director, MoHUPA, the Steering Committee will oversee and guide the use of
Challenge Fund in replication of innovative good practices. Through this Committee MoHUPA will finally
approve identification of good practices, its replication and will monitor and review the progress of
implementation of good practices in the Replication phase of the Challenge Fund.
2.2
Role of Steering Committee
Accomplishment of the Challenge Fund objectives requires a strong leadership and oversight at senior level
in MoHUPA. Challenge Fund is to be positioned as a flagship initiative of this Ministry and therefore, its
promotion, monitoring and review will require sustained support of the Ministry. A steering committee
chaired by Project Director-CBUD/SNPUPR will provide oversight for implementation, recognizing best
practices as well as for defining the road map for replication. This Steering Committee would meet at least
once every quarter and play the following roles:

Oversee all operations, interact with key stakeholders, and ensure coordination among various
stakeholders

Enunciate the vision and key objectives of the Challenge Fund.

Give approval to the recommendations of the Expert Committee for replication funding to selected
ULB

Provide sanction to implementation plans for replication

Review the CF Management core team decisions on a six monthly basis and offer specific guidance
from time to time.

Review the proposed annual and quarterly work plan of the Challenge Fund Core Management
Unit.

Monitor the performance of the Fund and the Core Management Unit on a quarterly basis.

Outline the project identification and support guidelines/parameters from time to time.

Provide oversight for identification of good practices, replication of these in the ULBs and also
ensure that the Challenge Fund is able to meet its objectives.

Define a road map for replication and provide an enabling framework and review progress against
time goals, will pursue sanctions, and will ensure smooth flow of funds for implementation.
The Chairman of project Management Board of CBUD and SNPUPR project will provide final approval of
steering committee’s decision on replication funding. Following is the proposed composition of Steering
Committee. Composition of the Steering Committee is as below:
Page 7
Proposed Composition for Steering Committee for Challenge Fund
1
Project Director CBUD/SNPUPR, MoHUPA
2
Joint Secretary (UPA)
4
Director Finance (MoHUPA)
5
Director Ministry of Urban Development, Nodal officer CBUD
6
Executive Director, HSMI
7
Representative DFID
8
Representative WB
9
Coordinator Challenge Fund (CMU-HSMI)
10
Director (RAY)
2.3
Chairman
Member
Member
Member
Member
Member
Member
Member
Member Secretary
Role of Expert Panel
In addition to the high powered Steering Committee, an Expert Panel will be created for giving expert
advice on identification and replication of good practices. Expert Panel will consist of small team of core
members, and if required, some experts can be included as special invitees for particular round of
evaluation based on nature of proposals received from ULBs. The expenditure towards travel (economic
class), boarding and lodging of non-officials for attending the meetings of the expert panel will be borne by
HSMI from Challenge fund administrative expenses. The non-official members will also be paid honorarium
upto Rs. 5000/ per meeting. The non-official cannot depute any other person on their behalf. Expert Panel
will be supported by the core team at HSMI.
The panel will choose one person as its chairman amongst themselves. Coordinator CF Management Team
at HSMI will be the Member Secretary of the Expert Panel. Beside them, the Expert Committee will have
following Members:

One representative with expertise on Urban Poverty Alleviation and with prior experience of being
a member of committee felicitating awards

One representative from non-governmental organization/institution from within India that is
dedicated to urban poverty Alleviation

Two from amongst individuals with strong knowledge and experience on urban poverty alleviation
programs
The following is the composition of expert panel:
Proposed Composition for Expert Panel for Challenge Fund
1
Chetan Vaidya
Member
2
Ms. Poornima Chikermanee
Member
3
Dr. Amodh Kumar
Member
4
Coordinator Core Team, HSMI
Member Secretary
5
Director (RAY)
Member
6
Director (JNNURM)
Member
7
DS, Urban Poverty Alleviation
Member
Expert Panel will carry out following functions:

Finalize the criteria for selection of Best Practices amongst the existing practices for replication

Finalize broad theme areas for replication
Page 8
2.4

Review the existing good practices and invite presentations from the ULBs, if required.

Select pool of best practices for replication

Review the proposals of cities for replication

Select the cities for replication of best practices

Recommend the best practices for replication to the steering committee
Role of Core Management Unit at HSMI
Human Settlements Management Institute (HSMI) has been recommended as the administrator of the
fund. Initial funding under Challenge Fund has been located in HSMI ( under a dedicated Challenge Fund
Account) that is to be judiciously used for identification of good practices and its replication after selecting
the most appropriate urban local bodies for this purpose.
HSMI will designate one of its senior faculty members as the Coordinator of Challenge Fund and also
provide two full-time staff allocated to the Challenge Fund to serve as (i) Urban Development Specialist and
(ii) Social Development Specialist. One of them will be responsible for developing and disseminating good
practices including preparing progress reports on Challenge Fund. HSMI would be supported in terms of
overhead, flow of funds and other appropriate costs allocated to them through the Challenge Fund budget.
The regional office network of HUDCO may be used where necessary for networking with the ULBs
and monitoring of projects. The proportionate time cost of the designated staff may be booked
under the administrative expenses of the Challenge Fund.
The core Management Unit at HSMI will ensure implementation of Challenge Fund within the allocated
budget and achievement of desired outputs in a qualitative and sustainable manner. HSMI Core Team in
effectively managing and sustaining the Challenge Fund will develop a set of criteria for identification of
good practices and also for selecting eligible ULB for replication of the identified good practices. It will also
implement knowledge management activities in the participating cities. After identifying good practices,
Coordinator of the Core Management Unit will present them to the Expert Panel. Likewise, in the
replication phase, Core Management Unit will disseminate the identified good practices through public
relations and communication campaign for motivating the ULBs for replication. It will identify the ULBs that
have the motivation and the required institutional capacity to replicate. As mentioned earlier, Core
Management Unit will provide technical support in identification of good practices, identification of the
ULBs that qualify for replication of the identified good practices, monitoring of implementation of good
practices in the replication phase, and preparation of technical and other reports relating to Challenge
Fund. Core Management Unit of the Challenge Fund will work closely with the World Bank supported CBUD
Project and the DFID supported SNPUPR project, Project Management Units.
The Core Management Unit of the HSMI will play central role in identification and replication of good
practices. For this it will examine good urban poverty alleviation practices that have been already
documented by reputed organizations such as NIUA, CRISIL, AIILSG, UNCHS, HUDCO and others. Having
Page 9
identified good practices, it will submit them to the Expert Panel for review. The Core Management Unit
would lead the Challenge Fund Program and facilitate ULBs to participate and adopt relevant good
practices. Beside this the core team will:

Collaborate with ULBs to develop implementation plans and structure grant funding;

Regularly monitor the development of each one of the challenge Fund- supported projects. In this
activity, the core team would use their team resources to prepare comprehensive project
monitoring reports.

Share with the Steering Committee and Expert Committee information on plans, proposals,
progress, problems, etc.

Operate the challenge fund bank accounts, including advising MOHUPA and CBUD PMU on
disbursement of funds.

Put together a project specific “Project sheet”, which would not only specify the quantum of
financial and other support from the Challenge Fund, but also the “terms and conditions” of the
support (Draft Project Sheet Template annexed).

Develop a Memorandum of Agreement (MOA) to be entered between the selected ULB and
MOHUPA for replication and ensure signing of the same.

Based on satisfactory compilation of project-specific terms and conditions the core team will
recommend for disbursement against sanctioned Challenge fund support

Assist in audit as per World Bank and DFID’s guidelines to ensure the appropriate utilization of the
challenge Fund.

Support in organizing workshops and conferences on specific issues and the costs of attending
these conferences can be covered under the CF budget.

Design, develop and produce print and web-based collateral and outreach materials
The role of Core Management Unit will be crucial for taking the Challenge Fund forward and for effective
programme management and administration of the Challenge Fund in following aspects:
Program Management

Responsible for the overall management of the project activities in consultation with MOHUPA and
will ensure that all project inputs are organized and delivered on time.

Ensure that disclosure of project related documents is fully consistent with Government of India,
World Bank and DFID policies/disclosure requirements. The disclosure requirements have to meet
the minimum standards mentioned in the project Memorandum agreed with the Ministry for
SNPUPR project

Explore all potential opportunities for scaling up the fund and mobilising funds from other donors/
agencies/private sector/individuals with an objective of the enhancing the fund pool.

Provide vision and direction to the fund by suitably advising the core team in making decisions.

Assist in other tasks assigned to it by the core team and MOHUPA within the ambit of the contract.
Page 10

Update the operations manual based on learnings from implementation and as may be required,
on a periodic basis.
Project Management

List good practices/initiatives that has been recognized under various national and international
programs
particularly
that
are
aligned
with
the
concepts/themes
of
Rajiv
Awas
Yojana/SJSRY/NULM/BSUP and other MoHUPA programs

Support the expert panel in developing the criteria for shortlisting innovative /good practices that
have been implemented by ULBs.

Develop a pool of final good practices for ULBs to choose for replication.

Develop criteria for the prioritization of the cities for the replication of good practices.

Develop forms and formats for the application that will be used by ULBs to express their interest in
replication of good practices

Develop communication mechanism/notification inviting applications from ULBs for the replication
of good practices

Carry out desk and field appraisal of proposals and recommend to the expert panel for acceptance
or rejection.

Support ULBs in procuring technical support in replicating good practice.

Undertake periodic visits to selected cities for assessment of their intention, ability and capacity to
access the technical support under challenge fund including documenting/validating (if required)
and monitoring the replication process.

Support in organizing presentation workshops for the evaluation of applications by ULBs.

Publicize and communicate extensively about challenge fund including identification and
replication of good practices through newspapers, websites and newsletters including through
partner institutions.
Fund Management

Assess the cost of implementation of innovative good practices by selected ULBs and suggest
mechanisms for the cost-effective use of resources allocated.

Prepare detailed budget for the fund and its submission for remittance of funds.

Prepare schedules for the project activities and budget allocation, quarterly status analysis of funds
and expenditure reports, and technical reports budget estimates, including ensuring previously
disbursed funds are fully utilized before further funds are released.

Ensure timely and certified UCs along with physical and financial progress from ULBs as per GFR
19A and regulated as per GOI guidelines.
Monitoring and Feedback

Develop criteria for monitoring and evaluation of innovative practices that are being implemented
by ULBs so that mid-term corrections are made, if required.
Page 11

Monitor physical and financial progress including fund flow for the project and its components for
the timely utilization of allocated resources in an effective way.

Prepare half yearly CF evaluation report, assessing the impact of CF and identify difficulties faced
and provide suggestions for further streamlining of the process of implementation of CF.
Capacity Building and Handholding

Educate the ULBs about the Replication Program, share the benefits of participation, and inform
them about the steps they must take to participate

Provide relevant training and workshops to orient urban local bodies on identification and
replication of good practices.

Take on initiatives for capacity building of applicants during preparation of proposals and after
sanction of project

Support ULBs in devising an effective implementation plan to replicate chosen good practice and
provide appropriate skills to cities/ULBs to improve their capability to implement identified
innovative practices including mechanisms to improve institutional capacity.
Page 12
3.0
Financing and Financial Management System for Challenge Fund
The Total budget provided for Challenge Fund is $11.4 Million (INR 57 Crores). It comprises of $5 Million
(Rs.25 crores) credit funding from World Bank The balance of $6.4 Million (Rs.32crores) is by way of funding
from DFID. The Fund will be utilised as follows;
Components
% of budget
Replication/innovation support to cities
85 (75 per cent to replication and 25 per cent for innovation)
Administration
15
Total
100%
As the most important focus area, the replication component accounts for 85% of the total program budget
for Challenge Fund. The remaining 15% of the budget is accounted for by administrative charges, goods and
other expenses. The Fund will be utilised as under:
Components
Replication/Innovation
support
Administration Support
Total
%
of WB component
budget
Administrat TA - Prof. Goodsive
services
other
Expenses
85%
charges
15%
85%
21.25
DFID component
Total
(In Crore)
Administrativ TA- Prof.
e expenses
services
15%
85%
15%
3.75
4.80
3.75
4.80
100%
21.25
27.20
48.45
8.55
27.20
57.00
A separate dedicated account for challenge fund has been opened at HSMI for the purpose. A steering
Committee of Challenge Fund with support from Core Team will supervise and manage the challenge fund.
HSMI would procure services of a separate Financial Management Specialist for the project period for
managing this account. This specialist will work closely with the Finance Department of HSMI to ensure all
financial compliances with regard to the fund. HSMI will use the administrative support funds for providing
all administrative services to manage the Challenge fund. These will be paid through DFID/WB funding
mechanism. HSMI will prepare a draft tentative budget for professional and operational expenses every
year and place it before the steering committee for approval.
Page 13
3.1
Fund Flow Mechanism
3.1.1
Payment Mechanism for Challenge Fund (DIFD)
The DFID funds amounting to INR 32 crores under challenge fund will be transferred by MoHUPA to HSMI in
appropriate tranches limited to its sanctioned budget funding by issuance of cheques from PAO- MoHUPA.
This funding will be for the specific purposes under Challenge Fund. DFID funding envisages release of
Funding from the MoHUPA to HSMI as the Challenge Fund administrator on specified terms and conditions
as indicated in the SNPUPR Project Memorandum and as per standard terms and conditions of GOI for
release of grants. The component will also provide funding for the administration of the Challenge Fund.
The mechanism to be followed is outlined in the diagram given below:
ULB
submits
proposal to Core
Team at HSMI
Committee
ULB submits request for
release of funds to HSMI
core unit at HSMI
3.1.2

Core
Team
scrutinises proposal
and
submits
recommendations to
Steering Committee
Steering
Committee
reviews and
approves the
proposal
Grant released by
HSMI and amount
paid included in UC
sent to MoHUPA
Agreement
entered between
selected ULB and
HSMI.
Next Tranche released by HSMI
on submission of certified UC by
ULB with required supporting
papers and progress report which
is vetted by HSMI core unit
Challenge Fund Bank Account Operations (DFID Funding)
The sanctions for payment from CF under the DFID funding shall be accorded by the Executive Director
HSMI on recommendation by the Coordinator, CF, and concurrence by the Finance Department, HSMI
.The dedicated bank account for CF shall be operated jointly by the Executive Director ,HSMI and
Coordinator, CF and all cheques shall be signed by both.

Payments from HSMI to the ULBs during a year will figure in the Utilization Certificates(UCs) submitted
by HSMI to MoHUPA during that year for further release of required grant but submission of UCs for
the total amount of funds released to HSMI or submission of UCs from ULBs will not be a pre-condition
for release of further instalments by the MoHUPA to HSMI. However the payments made by HSMI to
ULBs must be accounted for by the ULBs by submitting UCs to HSMI within 30 days of the completion of
the assigned task in order to become eligible for release of further funds from HSMI to ULBs. Release of
next tranche to the ULB will be on submission of a UC that is equivalent at least to 60% of funds
released.

No funds other than Challenge Fund shall be kept in the designated CF Bank account.

A set of three signatories will be nominated. Primary signatories will be Executive Director (HMSI),
Coordinator, CF and Chief of Finances and Accounts, HSMI. The third signatory will only act as a link
Page 14
officer and will be authorised to sign the cheques only if any of the other two signatories is on leave
and payment needs to be made urgently.

At the time of issuing cheques it shall be ensured that expenditure for which payment is being made
has been duly sanctioned by the competent authority.

The signatories while issuing cheques shall also ensure that activity for which expenditure has been
sanctioned is within the approved activities under Challenge Fund.
3.2
Payment Mechanism for Challenge Fund (WB)
The World Bank Fund Flow mechanism will be the same as provided for in CBUD Financial Management
Manual (FMM). The WB funding for Challenge Fund amounting to USD 5million under CBUD project will be
utilised in accordance with procedure laid down in the F MM following the existing PAO system in
MoHUPA. The component will also provide funding for the administration of the Challenge Fund.
The design of the project under WB funding envisages centralized payments. There would be no fund flows
envisaged to downstream entities like ULBs. The procurement will be of Services and Goods as provided
for in PAD. As the contract would be issued by MOHUPA the payments also would be made by the Ministry
at the central level. The initiation of payment would be done from HSMI. HSMI would send an invoice along
with a certificate from ULBs regarding satisfactory output along with HSMI verification to the Ministry
which will be assessed by the CBUD PMU. Thereafter, the Ministry would process the payments through
PAO. The expenditure would be made by the Ministry centrally using the Central Government Pay and
Accounts Office. This will ensure applicability of budget controls and mainstream project accounting. The
funds would not be transferred by the Ministry to the Administrator (HSMI) or the beneficiary (ULB). Even
though the Ministry can pay the amount of Invoices for procurements, the IDA (WB) would reimburse
based on the actual expenditure incurred by the Ministry which would be reported as part of IUFR.
CF Management Unit at HSMI, as the Challenge Fund Administrator, would submit the quarterly IUFRs on
challenge Fund within 30 days of the end of each quarter to PMU CBUD incorporating the figures relating to
ULB submits proposal through
CFCU to MoHUPA
Procurement finalised by
Ministry with assistance from
CBUD PMU and Contract Issued
Payment by MoHUPA after
review of output through
CBUD PMU
MoHUPA scrutinises proposal
through -CMU at HSMI
Outputs certified by ULBs and
verified by HSMI
PSC approves
proposal
Invoice submitted
by HSMI to
MoHUPA
MoHUPA includes expenditure in IUFR and
submits claims to WB for reimbursement through
CAAA
World Bank Funded procurement of TAs and goods for which separate accounts will be maintained in HSMI
Page 15
The HSMI submitted IUFRs will be consolidated into MoHUPA IUFRs by the CBUD PMU. The process to be
followed by the Ministry is outlined in the diagram given below:
3.3
Reimbursement (WB & DFID)
MOHUPA will submit quarterly expenditure information on Challenge Fund to the Bank through quarterly
IUFRs and send the IUFRs to CAAA for claiming reimbursement for the expenditure/application of Funds.
Similarly MoHUPA will submit quarterly expenditure claims to CAAA on account of funds released to HSMI
for claiming reimbursement from DFID.
3.4
Audit (WB & DFID)
Internal Audit of Challenge Fund would be conducted by the CBUD Internal Auditor on quarterly basis
separately for WB component and DFID component. Statutory Audit by C&AG will take place as per TOR
agreed upon between the C&AG and the Bank for WB component and as per instructions in force for
conduct of statutory audit of Funds with respect to DFID component. Statutory audit of DFID component
will be conducted by C&AG or in case of delays, by an independent auditor along with the audit of other
components of financial aid. The audits will be funded through DFID/CBUD project separately and therefore
will not have any financial implications for HSMI.
3.5
Sustainability of CF Activities and expenditure on CF set-up
The setting up of Challenge Fund and replication of good practices and innovations in ULBs is intended to
be a long term activity to be sustained over a long period of time for durable benefits and not a short term
initiative for the duration of the CBUD project alone. Therefore MoHUPA will consider setting up of an
institutional arrangement either within HSMI or in the proposed Apex Institute or otherwise for continuing
the CF activity beyond the duration of the CBUD project and make suitable arrangement for budgetary
support for the purpose.
3.6
Responsibility for separate accounting of DFID funds and WB funding
HSMI will be responsible for maintaining accounts for the expenditure incurred out of DFID funding and WB
funding separately along with original Invoices and supporting vouchers for DFID funded and WB funded
expenditure reported in IUFRs as the originals thereof will go to the PAO, MoHUPA.
Page 16
4.0
OPERATIONS OF THE CHALLENGE FUND
This chapter outlines the process that Challenge Fund would adopt for identifying and assisting in
implementation of the projects taken up under the Challenge Fund. The following broad approach will be
followed in operationalizing the challenge fund.

A set of innovations both from ULBs and Private Sector can be chosen by the expert panel that
justify merit for support under the Challenge Fund

A set of good practices will be chosen by an expert panel, from amongst the initiatives that have
been awarded and innovations that have already been implemented by various cities. While
choosing good practices, emphasis will be given to those initiatives that are aligned with the
concepts/themes of Rajiv Awas Yojana and other MoHUPA programs, so that the Challenge Fund
supplements other initiatives of the Ministry. One of the tasks of this Challenge Fund Core
Management Unit at HSMI will be to support the expert committee on developing the criteria for
identification of good practices. Final Identification of the practices will be done in close
consultation and agreement of the Ministry under the oversight of the steering committee.

The identification/selection of themes on the good practices may require to be validated through
presentations by the concerned ULBs to the expert committee for their replicability and merit as
good practices.

Cities will be challenged to replicate, scale up or improve the good practices that have been
identified. The opening of the corpus of Challenge Fund for replication will be communicated
extensively and given wide publicity by various methods. It shall be advertised in at least three
daily newspapers, two of which shall be in the local vernacular and notification will also be placed
on the official website of MoHUPA, HSMI and other partnering institutions.

Cities that propose credible implementation plans for replication will be provided financial support
under the Challenge Fund to meet the costs of implementation. A thorough appraisal of the
proposals will be undertaken by the expert committee supported by challenge fund PMU to assess
the costs of implementation. Civil society organizations and Community based organizations may
also be admitted under the Challenge Fund if they associate with the ULBs for implementing the
projects.

In future, an award programme will identify new good practices & innovations that can be
recognised and taken up for replication so that a pipeline of good practices is available for
replication throughout the life of the Challenge Fund. However this can be looked at after the midterm review of the Challenge Fund implementation.
Page 17
4.1
Steps for Challenge Fund
Based on the broad approach, steps for process management of Challenge Fund are mentioned below:
Step I: Identification and Selection of Good Practices

List good practices/initiatives/innovations that has been recognized under various national and
international programs particularly that are aligned with the concepts/themes of Rajiv Awas
Yojana/SJSRY/NULM/BSUP and other MoHUPA programs,

Clearly outline themes and scope of the projects to be supported under Challenge Fund;

Finalize the number of ULBs to be benefited/served under the challenge fund;

Develop the criteria for shortlisting of innovative good/good practices that have been implemented
by ULBs.

Scrutinize the good practices based on the themes and based upon the criteria developed for
shortlisting

Shortlist the good practices for replication based on the above criteria

Validate, if necessary, through a presentation to the Expert Committee by the concerned ULB that
has already implemented good practice.

The practice should clearly demonstrate and provide evidence for labelling it as a good practice.
Projects that demonstrate a capability for magnitude of impact as well as those whose strategic
frameworks can become models for replication should be shortlisted.

Expert Committee to closely look at the merit of calling the initiative as really a good practice that
could be identified for replication.
Finalize good practices in close consultation with and agreement of the Ministry for ULBs to choose for
replication. Selection may take into account the need for some early successes in the Challenge Fund and
therefore take in to account likelihood of selecting good practices that can be easily replicated and also
can provide some early success stories. Identify at least ten to fifteen good practices from the pool of
initiatives already implemented to be chosen for replication. To be considered under the pool of best
practices, the practice should have operational track record of at least 12 months or longer, and be able
to furnish demonstrable and quantifiable results.
Step II: Communicating the Selected Best Practices to ULBs

Educate the ULBs about the Replication Program, share the benefits of participation, and inform
them about the steps they must take to participate

Develop communication mechanism & template for inviting applications from ULBs for the
replication of good practices

Publish case-studies to help publicize the successful transfer of best practices

Publicity Campaign for providing information about the identified good practices; in the print and
electronic media; and

Create an interactive website for dissemination of identified innovative good practices.

National event to “showcase” identified good practices
Page 18
Step III: Inviting Proposals from ULBs

Advertise the Replication programme and request Letter of Interest (LoI) from the participating
ULBs.

Disseminate the template/form for the LoI, including posting it on the Challenge Fund website.

The LOI will ask cities to identify which of the five good practices selected are most appealing to
them.

The LOI must be approved and supported by the Commissioner/Mayor of the ULB.

Support ULBs in devising an effective business plan by matching the right good practice to meet
that city’s needs and capabilities.

Call ULBs to make presentations to the Expert Panel on their implementation Plan; if required.
The implementation plan for replication will be appraised by the Challenge fund core team based on a
defined process. This will involve a desk level exercise; a field appraisal /validation can be undertaken, if
required. If the core committee seeks further information or clarifications on the project, the ULB would
submit the same and the project would come up for review at the meeting subsequent to the submission
of all required information/clarifications.
Step IV: Selection of Proposals for Replication

Develop criteria for the prioritization of the cities for the replication of good practices. This will
include:

The extent of beneficial impact of the project to the citizens of the city/town including the citizens
need for the project expressed in the ULB’s interaction with the public, etc.

The Council’s approval/resolution for not only implementing the project, but also of accepting
terms and timelines of the project;

The ULB’s willingness to implement the good practice under challenge fund;

The quantum of estimated project funds required/sought;

Time frame that would be required to implement the project by ULBs.

Match the right good practice to meet that city’s needs and capabilities.

Identify the number of ULBs from among the submissions.

Enthusiasm for the theme and a commitment to the goals of the project should drive the decisionmaking process.

The ULBs that have been selected for replication should be informed and alerted that they will
enter into a several months of intensive collaboration with the core team and challenge fund SU.
Based on this, shortlist of cities for replication will be prepared. The maximum support per entity/ULB
would be limited to US$500,000.00 (2.5 crore). The project duration shall be for maximum of eighteen
months from the day of approval of proposal by the steering committee. In case the proposed concept is
of a longer duration, it should be broken into phases with specific milestones to be achieved under each
phase should be clearly laid down. The initial phase or pilot, to be carried out within the maximum timePage 19
period of 18 months, shall be funded through the CF and, based on the performance in this initial phase,
further funding can be provided. However further funding is not guaranteed and if made available, will
be in the form of a new project and shall go through the same project selection cycle. Core Management
Unit will also help the selected ULBs to construct detail implementation plans that will serve as the basis
for agreements for funding. The initial rounds of Challenge Fund replication will be restricted to selected
40 ULBs. However, the projects selected for replication should not result in loss of assets and livelihood
and comply with the environmental and resettlement safeguards guidelines. In case enough proposals
from identified ULBs are not received during first two rounds, the steering committee may take a decision
to open challenge fund facility to include other ULBs.
Step V: Signing of an MOA

Once a particular ULB has been selected for replication of good practice, the ULB will sign a
Memorandum of Agreement (MoA) with HSMI. Draft template of MoA along with generic terms and
conditions are at template IV.

MoA will contain the type of support provided through challenge fund including required timeline for
completion of the good practice preferred by the ULB concerned.

The agreement will contain stipulations with respect to responsibilities of the ULBs concerned for
ensuring timely implementation of the identified initiative preferred by the ULB for replication.

MoA will also specify responsibilities of the Core Management Unit of Challenge fund.

MoA will have to be approved by the ULB concerned.

This approval will be expedited by the ULB concerned for its timely signing and implementation.

It needs to be noted that the required timelines will vary for different initiatives; the nature and
complexities involved in the good practices will be the prime factor that will determine the required
timeline for its implementation and completion. In view of this, the actual time within which a
particular initiative will have to be implemented and completed will be decided once the ULB has opted
for a particular good practice. The time period for its implementation and completion will be included
in the MoA that will be signed between the ULB concerned and the HSMI.

The disbursement schedule with specific deliverables and conditionality, if any, will be included in the
MOA.
Step VI: Replication of Good Practices

Identify and provide appropriate technical and financial assistance to replicate good practice. The
assistance could be in terms of :

Building an implementation team, including area experts, project manager,

Purchase of goods and services relevant to the project including hardware/software,

Funding to ULBs that want to collaborate with an external party (NGOs, Institutions, Pvt. co.),

Organize relevant workshops, including training activities for implementing team

Augmenting of staffing during the implementation period
Page 20

The grant may not be used, however, as general budget support to cover existing ULB operations
that are unrelated to implementing the Replication Program. This investment should not be used to
finance part of any trunk infrastructure but should be site/practice specific. Site specific
construction cost can be covered under DFID component of CF funding.

Any support to be procured by ULB under DFID funding can be done with freedom to the ULBs as
per their respective state government procurement norms. However, technical assistance
procured under World Bank funding have to follow WB procurement guidelines and will be
procured centrally by MoHUPA through CBUD-PMU mechanism. No portion of the grant funding
will be released without prior verification of the achievement of the agreed upon milestones, and
will be subject to the approval of Core Team and CF SMU.

Procurement of any goods or services will follow standard DFID/World Bank processes and
guidelines/rules.

Challenge Fund will continue to support the ULB replicators with technical assistance throughout
the implementation process.
After the exact package is outlined in the approved implementation plan, it can also be amended overtime
by CMU based on the ULBs/requirements need during the implementation process. However, any
amendments with financial implication should be approved by the steering committee.
Step VII: Monitoring Progress

Develop criteria for monitoring and evaluation of practices that are being implemented by ULBs so
that mid-term corrections are made, if required. However, each replication grant recipient will be
monitored with respect to grant agreements outlined in MOA between HSMI and relevant ULB.

The core management unit will also prepare quarterly work plans on the proposed activities for the
upcoming quarter, and reporting on the status of all activities executed during the quarter including
physical and financial reports for the quarter that is ending and also compile the annual report
summarizing the progress for entire year.

CF Core Unit will prepare annual reports on the actual use of funds within 90 days after the fiscal
year in which the payments were received. The Annual Report should contain detailed information
on how the CF has met the goals and objectives as stated in CF concept note. The Report should
provide information on beneficiaries, amount disbursed and similar details on other forms of
assistance.

Develop and monitor fund flow and physical progress of the project and its components for the
timely utilization of allocated resources in an effective way.

Prepare yearly CF Evaluation Report, assessing the impact of CF and identify difficulties faced and
provide suggestions for further streamlining of the process of implementation of CF.
Page 21

Publicize and communicate extensively about
challenge
fund
including
identification
replication of good practices through newspapers,
websites
and
newsletters
including
through
partner institutions.

Provide relevant training and workshops to orient
of good practices.
3. Inviting proposals from ULBs including
detailed implementation plan
4. Selection of proposals for replication
Step VIII: Feedback and Evaluation

1. Identification and selection of good practices
for replication/innovation
2. Communicating the selected best practices
to ULBs
urban local bodies on identification and replication

Summarising the Steps for CF
and
5. Signing of an MOA
Carry out sample-based impact assessment studies
6. Replication/implementation of good
once every two years; this will enable core team
practices (Release of payments as per
and the Ministry to measure improvements;
agreed milestones in MOA)
External
evaluation
studies
(selective
or
comprehensive) commissioned to measure impact
7. Monitoring progress
8. Feedback and evaluation
of the CF on urban poverty reduction in ULBs.
Page 22
Annexure 1 -List of SNPUPR and CBUD cities
Sl No
1. 1
2. 2
3. 3
State
Andhra Pradesh
Assam
Bihar
CBUD
Repalli (Guntur)
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Chhattisgarh
Himachal Pradesh
Goa
Gujarat
Jharkhand
J&K
Haryana
Karnataka
Kerala
Madhya Pradesh
Raipur
14. 14
Maharashtra
Sholapur
15.
16.
17.
18.
19.
20.
21.
Meghalaya
Mizoram
Orissa
Punjab
Rajasthan
Sikkim
Uttar Pradesh
Shilong
Aizwal
Bhawani Patna
4
5
6
7
8
9
10
11
12
13
15
16
17
18
19
20
21
22. 22
23. 23
24. 24
Uttaranchal
Tamil Nadu
West Bengal
Total
SNPUPR
Hyderabad
Guwahati
Patna
Gaya-Bodh Gaya
Shimla
Panaji
Bharuch
Ranchi
Jammu
Yamuna nagar
Gulbarga
Kollam
Dewas, Chindwara
Udaipur
Varanasi
Farukhabad
Haridwar
Silliguri
20
Leh
Mysore
Ujjain
Bhopal
Nagpur
Nanded-Waghala
Thane
Bhubaneshwar
Amritsar
Jaipur, Ajmer-Pushkar
Gangtok
Rae Bareli
Madurai
Murshidabad
20
Page 23
Template-I: Documenting Identified Best Practice
Best Practices:
Format for Uploading
Title of the Practice: This title should capture the keywords that describe the Practice.
Goal: Describe the aims of the practice which are followed. What are the underlying principles or concepts
in about 100 words.
The Context: Describe any particular contextual features or challenging issues that have had to be
addressed in designing and implementing the Practice in about 150 words.
Target Group: Describe the beneficiaries in about 100 words.
The Practice: Describe the Practice and its implementation. Include anything about this practice that may
be unique in the Housing and Urban Poverty Alleviation. Please also identify any constraints or limitations
in about 400 words.
History and Evidence of Success: Provide evidence of success such as performance against targets and
benchmarks, review results. What do these results indicate? Describe in about 200 words.
Resources: Please identify the resources required to implement the practice in about 100 words.
Problems Encountered: Please identify the problems encountered and to implement the practice in about
50 words.
Impact: Describe the impact of using the best practice in 100 words
Outcome: Describe the outcome of using the best practice in 100 words
Pictures: Please add one or two pictures associated with the practice and its implementation.
Notes: Optional. Please add any other information that you deem important to the reader such as changes
that may have been introduced after the practices has been introduced in about 150 words.
Contact Details
Name of the Director:
Name of the Organisation:
Address:
City:
Pin Code:
State:
Work Phone with STD Code:
Fax:
Website:
E-mail:
Name of the person for contact:
Designation:
Tel:
Mobile:
Email:
Page 24
Best Practices may be sent to us at [email protected] and [email protected]
Page 25
Template II : Template for Preparing Proposal for Replication of Best Practice
under Challenge Fund (CF)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Name of the Project
Thematic area under CF
Amount of assistance requested under CF
Name of agency applying for assistance and its
details e.g. type, constitution, existence in
years, address and experience in habitat
development etc.
Name of partner agency, if any.
(Its details e.g. type, constitution, address and
experience in executing similar projects or
project development)
Beneficiaries’ profile and number of
beneficiaries
Justification of the project
Commitment by ULB for undertaking the Yes / No
project (Copy of resolution to be enclosed)
Project Details
a) Location (give details)
b) Components of project:
c) Project cost
i) Item-wise cost of various components
ii) O&M cost
iii) Operational Cost
d) Details of land (area, status of possession
and ownership or other rights of the agency
over the land
e) Access to site and current status of
infrastructure facilities
f) Status of approvals
 Technical
 Administrative
 Financial
g) Project implementation period
h) Phasing of expenditure
Means of the project cost
Challenge Fund assistance
Own contribution, if any
Other funds, if any
Project implementation methodology
System proposed for operation &
maintenance and availability of funds for
sustainability.
It is declared that we have read and understood the Challenge Fund guidelines and are agreeable to
follow/undertake various provisions of guidelines if the above project is considered and approved by the
Ministry of HUPA. It is also certified that necessary technical approvals to execute the proposal is
available. The assets so created shall not be sold/alienated.
It is certified that necessary basic technical capability to execute the proposal is available and in case any
specialized requirement of technical and oversight inputs are required; these will be included as a part
of overall proposal.
It is also certified that all the information provided in the proposal is correct to the best of my
knowledge.
Authorised signatory
Name : …………………………………
Designation:………………………….
Date :
Place :
Encl. : Documents to be enclosed along with the grant form:
1. Duly filled Institutional profile format.
2. Documents evidencing agency’s byelaws etc. In case of partner agency, similar documents of the
partner agency may also be provided.
3. Resolution/order (as applicable) for taking up proposed project and for obtaining financial assistance
under CF for the proposed activity and also for executing necessary documents like MOA etc. by
authorizing its Chief Executive etc. including affixation of common seal.
4. Details of revenue stream and details of projects undertaken in the past 3 years.
5. Detailed Project Report as per format.
Page 27
GUIDELINES FOR PREPARING PROJECT PROPOSAL
The aim of the funding is to encourage and support ULB’s to implement and innovate in the identified
best practices by the Ministry of Housing and Poverty Alleviation (MoHUPA). Support under Challenge
Fund is available for projects located in one of the 40 urban local bodies identified under CBUD and
SNPUPR project of MoHUPA. The Fund also specifies activity areas that are eligible for funding. The
duration of the project is required to be between 6 months to 18 months.
Format for the Detailed Project Report










Project Summary
Project - objective/scope, need & justification
Targeted/intended beneficiaries of project, identification, base line surveys
Project details in term of project cost, details & availability of land e.g. land area, land owing
agency and status of possession etc. its location ,approach, available infrastructural facilities, area
suitability
for
development,
status
of
various
approvals,
detailed
drawings/plans/elevations/sections etc.(copies of approved drawings)wherever applicable
Cost estimates, time for completion of project, investment schedule/capital phasing /bar chart
Fund requirement & its availability
Methodology for execution and monitoring of project.
In case partner agency is involved then the roles and responsibilities of the agency and the
monitoring mechanism to be detailed out.
Details regarding operation & maintenance and upkeep of assets created and fund requirements/
availability for O&M etc.
Credible implementation and sustainability plan.
Page 28
Challenge Fund Application Format
Organisational Details:
Name of the Organisation
(If your organisation is known by
any other name, please put this
in brackets after the legal name
of your organisation)
Address
Postcode
Phone number
Email address
Web address
Contact details (the key person implementing the project).
Contact name
Phone number
Mobile
Email address
Organisational Capacities:
Suggested contents are :
Organizational Vision and Objectives
Organizational Profile
(Staff strength) – technical/non-technical/contractual staff
Pro poor initiatives taken by ULB.
Institutional capacity to implement:
(1) Networking of RWAs/SHGs and NGOs enlisted with ULBs
(2) Number of development projects handled during the last 3 years.
(3) Major Govt. schemes being implemented by the ULB in the past 3 years.
Annual Receipts and Expenditure for Last 3 Years - Please give details of Annual receipts and
expenditure for the last 3 years duly audited by local authority.
Year
Total Gross Receipts
Total Gross Expenditure
Total
Year 1
Year 2
Year 3
Page 29
Project Details:
Name of Project
Funding Required
Proposed project start date
About the project
Suggested contents are :
Thematic Area under Challenge Fund/ Relevance to the broad agenda of MoHUPA
Justification of the project
Target Group of intended beneficiaries: While specifying the target group, please indicate number of
beneficiaries to be covered under the project. In case the number of beneficiaries to be covered differ
from activity to activity, please indicate the number of beneficiaries to be covered under each activity
separately
Commitment by ULB for undertaking the project (e.g. Copy of resolution from council/standing
committee
Project implementation methodology
Project implementation period
Outputs: Outputs must be indicated in measurable terms. Outputs relate to the end result of the
activities that you propose to undertake.
Project Area (in detail) Provide specific geographical details of the area to be covered and not merely
the name of the ULB.
Activities & Sub-Activities: Provide a list of activities and sub activities for each component of the
project
Sl.No.
Activity
Sub-Activity
Responsibility
Start
End
FINANCIALS (Please follow the formats given. Make sure that all details are provided so that based on
specific details provided economic and financial appraisal of the proposal can be done )
Expenditure
This has 3 components:
i) Capital expenditure (Civil Construction/Equipment/Implements/Ancillary costs)
ii) Activity/Sub Activity Costs
iii) Other Operational Costs
Page 30
I. Capital Costs (Civil Construction/Equipment / Implements / Ancillary Costs ): Please list here any
civil work to be done or equipment or implements that you propose to buy. Please also include all
costs related to execution of the project, procurement and installation of the equipment and
manpower requirement etc.
Description
Cost (Rs)
Comments
I. TOTAL:
II. Activity / Sub-Activity / Costs:
Please provide costs for carrying out Activities / Sub Activities mentioned in the proposal. (If the activity
involves procurement of capital goods-, but the cost of the same has already been mentioned in item (i)
above, then do not mention it here again as it will amount to double counting.)
Activity
Sub Activity
Cost (Rs)
Basis
III. Other operational Costs including the following (This should be calculated as percentage of project
costs and will be subject to maximum ceiling of 15 percent):
The Operational costs mean running expenses of the project office and may include manpower cost,
communication expenses, local conveyance, and stationery & postage etc
Page 31
IV. SUMMARY OF TOTAL EXPENDITURE (Here please sum up all the expenses from i) to iii) and provide
the total expenditure of the project.
Rs.
I.
Capital Costs
II.
Activity Cost
III.
Other Operational Costs
A. TOTAL EXPENDITURE:
FUND FLOW BY QUARTER In this chart please provide six-monthly funds flow. The chart- will show
expenses indicated in items (i) to (iii) broken up into –six-monthly expenses spanning the life of the
project
st
1 Six Months
OUTFLOW
Q1
I.
EXP. ITEMS:
Capital Costs
II.
Activity Cost
III.
Other operational Costs
Q2
nd
2
Six Months
Q3
Q4
rd
3 Six
Months
Q5
Q6
Total
A. TOTAL EXPENDITURE:
TOTAL OUTFLOW (A):
Innovative / Challenging elements in the project (as applicable):
Sustainability, Replicability & Withdrawal Strategy:
It is also important to prove that the Programme can be sustained even after withdrawal of funding
from Challenge Fund. Moreover, the proposed project must be replicable in other areas/cities so that
benefits accruing from the project can be extended to other similarly placed people
Any partnerships to make the project more effective. If yes provide details:
In case it is proposed to partner with any other agency/NGO/CBO etc. for any component of the project,
detailed work plan and costing may be provided.
Page 32
Involvement of Community / Other Stakeholders:
Please indicate who the other stakeholders in the community are and how you propose to involve them.
A brief plan may be given.
Limitations & Risks:
All projects have limitations and risks. Limitations and risks will not lead to automatic disqualification
for funding under CF as the fund is also given for experiments. Each proposal will be considered by the
Expert Committee on merits.
Therefore, clearly spell out the limitations and risks.
Project Merits
In this paragraph, briefly mention the overall merits of the project justifying its qualification for funding
under Challenge Fund.
Explanatory Note – : Financials
Based on the -six-monthly fund flow requirements, following procedure will regulate the inflow of
funding to the ULBs under Challenge Fund:
A) On acceptance of the proposal, ULB will raise an invoice to HSMI for mobilization advance
equivalent to 50% of the amount required for the – project if the duration of the project is upto 12
months. If the duration of the project is more than 12 months the release will be as per the
requirement as envisaged under activity plan. HSMI will release the amount to ULBs after due
diligence and inspection if necessary.
B) ULB will submit a provisional utilization certificate after incurring at least 70% of the expenditure
out of the released advance and submit progress report and request for release of next instalment
by raising an invoice for the balance 50% amount.
C) If the duration of the project is upto 12 months ULB will submit final UC supported by documents
within one month of the end of the project. Completion of the project certification along with duly
audited accounts is required to substantiate expenditure incurred on the project.
After completion of the project the ULB will furnish the completion certificate and final UC along with
all the supporting documents and duly audited accounts within one month thereof. The project
utilization will be subject to statutory audits and final inspection for assessing the impacts of the
project.
Page 33
General Instructions
1. The project proposal(s) shall be prepared in English language.
2. Please strictly follow the instructions and ensure that proposal is prepared as per prescribed formats
provided and all the supporting documents are enclosed
3. Please submit two hard copies of the proposal along with all the supporting documents.
4. Please ensure that all pages of the proposal as well as the supporting documents are signed &
stamped by the authorized signatory.
5. The proposal as well as the documents should be put in one single envelope and marked “Proposal
for Innovative Challenge Fund”.
6. The proposal is also open to further discussions. Modifications if any suggested by the Expert
Committee during discussions will need to be incorporated.
7. In addition to the hard copies please also submit soft copy of the proposal either in CD/DVD or sent
through email at:
The Coordinator
Core Management Unit,
Challenge Fund
HSMI, HUDCO House
Lodi Road
New Delhi: 110 003
Phone: 011-24308623
Fax: 011-24365292
Email: [email protected]
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Template III: Draft Project Sheet
Title of the Practice for Replication
Brief background of Practice
Name of ULB where it is being Replicated
Address of ULB
Nodal Person from ULB (contact details)
Name of person handling the practice at HSMI (contact details)
Date of Approval of proposal by Steering Committee
Date of commencing Replication
Date of completion
Broad Activities for Replication
Project Deliverables as per agreed proposal
Beneficiaries of the project
Total cost of the Project (Component wise)
Total committed funding for the project (From CF and From
ULB)
Milestones for the payment and progress of the project
Broad Roles and Responsibilities
Broad Reporting Requirements
Key Conditions of the Grant
Duration of Project:
Activities not eligible for funding under project grant:
Reporting and submission of certificates to HSMI
Timelines for next tranche
Accounting and Auditing processes
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Template IV: Memorandum of Understanding
MEMORANDUM OF UNDERSTANDING
(To be drawn on Non-Judicial stamp paper of required value for agreement)
Whereas Ministry of Housing and Urban Poverty Alleviation in order to encourage, revitalize and
strengthen governance and to stimulate efforts to improve service delivery of urban local bodies has
established an innovative fund named as “Challenge Fund. The fund is designed to provide urban local
bodies the opportunity to innovate and adopt approaches/practices to responding to urban poverty
alleviation.
Whereas the aim is to support urban local bodies to take up pro-poor development projects within the
thematic areas and create a competitive environment amongst the urban local bodies in addressing the
challenges of urban poverty alleviation in transparent, cost effective and responsive manner. The idea is
not only to generate innovations but also to support urban local bodies in replicating and sustaining best
practices on a continuous basis.
Whereas the Challenge Fund has been jointly proposed under the World Bank supported Capacity
Building for Urban Development (CBUD) project and the DFID, Dept. for International Development, UK
supported Support to National Policies for Urban Poverty Reduction (SNPUPR) project.
Whereas, the Human Settlement Management Institute, a research and training wing of Housing &
Urban Development Corporation Ltd. is designated an administrator by Ministry to ensure
implementation of Challenge Fund within the allocated budget and achievement of desired outputs in a
qualitative and sustainable manner.
Whereas the project is expected to contribute to GOI’s overarching objective of supporting city
personnel who have limited access to externally developed ideas with both financial and technical
support and incentives to adopt and implement good practices. Once successful, it will help to lower the
barriers in adopting proven methods, and support cities to better manage commonly faced urban
poverty challenges.
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Whereas this MOU is entered into for clarifying and defining roles and responsibilities of each of the
parties to this MOU to enable and facilitate smooth implementation of the Challenge Fund.
Whereas ------------------- Corporation/Council’s proposal has been approved for receiving technical and
financial support for replication/innovation of----------------------------------------------------- --------------------practices in their city under the Challenge fund supported jointly by DFID and World Bank.
The roles and responsibilities of each of parties to this MOU are as follows:
Human Settlement Management Institute, Research & Training Wing
of HUDCO being Administrator of ‘Challenge Fund’ (Part I)

Shall provide enabling framework, funds for implementation of the projects sanctioned and review
progress against time goals for implementation of projects under Challenge Fund with active
support of the State Governments.

Shall oversee implementation of the replication of selected best practice in the ULB through Core
Management Unit of Challenge Fund

Will suggest mechanisms for the cost-effective use of resources allocated including support in
procuring necessary technical skills in identified areas including support in improving their capacity
to implement identified innovative practices including mechanisms to improve institutional capacity.

Will recommend disbursement against sanctioned Challenge fund support based on appropriate
utilization of funds.

Will undertake periodic visits to selected cities for assessment of their ability and capacity to
implement projects under challenge fund including documenting and monitoring the replication
process.

Shall prepare schedules for the project activities and budget allocation, quarterly status analysis of
funds and expenditure reports, and technical reports budget estimates, including ensuring
previously disbursed funds are fully utilized before further funds are released.

Shall ensure timely and certified UCs along with physical and financial progress from ULBs as per
GFR 19A and regulated as per GOI guidelines.

Shall monitor physical and financial progress including fund flow for the project and its components
for the timely utilization of allocated resources in an effective way.
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
Will provide relevant training and workshops to orient urban local bodies on identification and
replication of good practices.

Monitor the performance of the Fund and the projects and inform Steering Committee.
Municipal Corporation/Council (Part II)


Shall appoint nodal officer to facilitate regular interaction with HSMI and Ministry
The Urban Local Body will ensure that the project is implemented in a technically sound manner
using the state of the art practices for sustainability of the project in a transparent and accountable
framework following the state government rules and regulations. Whenever a specialist agency is
appointed as implementing agency by the agency (i.e. when the agency is not taking up the work on
its own), the same shall be appointed as per the criteria stipulated in the GOI regulations/State
Government rules.

The Urban Local Body will ensure all necessary statutory approvals as required/applicable as per
prevailing bye-laws. The Urban Local Body shall confirm that it has passed/obtained all the
necessary Resolutions/Approvals under the Law and the State Government approval

Prepare detailed imp0lementaion and disbursement schedule of the approved project fund and
timely submission to core Management Unit for remittance of funds.

Ensure timely and certified UCs along with physical and financial progress from ULBs as per GFR 19A
and regulated as per GOI guidelines including submission of income and expenditure accounts.

Shall prepare quarterly status analysis of funds and expenditure reports, and technical reports
budget estimates, including ensuring previously disbursed funds are fully utilized before further
funds are released.

Shall utilize the financial support only for the purpose for which it has been sanctioned and strictly
as per the details given in the approved proposal (Annex1: Sanction Letter).

Shall submit utilization certificate in the prescribed form (Annexure-II) duly supported with the
details of expenditure in the form of Income and Expenditure Accounts etc.

Will provide all necessary support, information and cooperation to HSMI core unit during
implementation and for monitoring of project activities agreed under Challenge Fund support.
Now all the parties to the MoU have carefully gone through the contents of Memorandum of
Understanding and have signed and put their seals of approval on the aforesaid of MoU and agreed to
abide by the roles and responsibilities as laid down herein in totality.
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In witness hereof all the parties have put their hands on these present of Memorandum of
Understanding on ----- this day of------ this month of ------------ this year.
Signatories
For Urban Local Body
Commission/Executive Officer
For
HUDCO / Human Settlement Management Institute
Executive Director (Training)
Witness
1)-----------------------------------2)--------------------------------------
Part A
(To be drawn on Non-Judicial stamp paper of required value for agreement)
HOUSING AND URBAN DEVELOPMENT CORPORATION LIMITED
HUDCO HOUSE, LODHI ROAD, NEW DELHI – 110 003
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SANCTION LETTER-CUM- AGREEMENT FOR FINANCIAL ASSISTANCE UNDER CHALLENGE FUND
No. HUDCO/
Dated:
To
………………………..
………………………..
………………………..
………………………..
Sub : Financial Assistance under HSMI-HUDCO-MoHUPA Challenge Fund Activities for …………
(Amount sanctioned …………….)
Dear Sir,
In response to your application dated………………….(Application), Housing and Urban
Development Corporation Limited (HUDCO) having its registered office at HUDCO Bhawan,
India Habitat Centre, Lodhi Road, New Delhi-110 003 through its Research & Training Wing
namely Human Settlement Management Institute (HSMI), HUDCO House, Lodhi Road, New
Dlehi-110 003, hereinafter referred to as HUDCO/HSMI agrees to sanction
to……………………………………………………………………………………
(Name and address of applicant)
………………………………………………………………………………………………….. constituted under ,,,,,,,,,,…..
hereinafter referred to as the Agency,
a financial assistance of an amount of Rs………………
(Rs.………………………………………………….only) for meeting the expenditure on items under project
proposal of Challenge Fund stated in the proposal which is annexed hereto as Annexure-I. It
may clearly be understood that this financial assistance/support is made by the HUDCO/HSMI
in the capacity of Administrator (as appointed by Ministry of Housing and Urban Poverty
Alleviation (MoHUPA) vide its Office Memorandum dated 30th March, 2012 of the “Challenge
Fund” set up by MoHUPA in collaboration with World Bank and Dept. for International
Development (DFID), UK, under the following terms and conditions as agreed upon:
1.
2.
2.
The release of financial assistance is subject to the following conditions :a) The Financial Assistance shall be utilized only for the purpose for which it has been
sanctioned and strictly as per the details given in the proposal as per the Operational Manual
of Challenge Fund (Annexure I).
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b)
Financial Assistance shall be released in instalments except as HUDCO may otherwise agree.
The first instalment of the project cost, shall be released after compliance of conditions of
sanction, if any, and upon the execution of this Agreement. The subsequent instalment/s
shall be released after agency has utilized 70% of earlier released instalment/s to satisfaction
of HUDCO/HSMI and MoHUPA that the funds already released have been fully utilized for the
purpose for which it has been sanctioned and released and submitted utilization certificate in
the prescribed form (Annexure-III) duly supported with the details of expenditure in the form
of Income and Expenditure Accounts etc. Utilisation Certificate shall be duly certified by the
CA Firm or chartered Accountant of the agency.
c)
The financial assistance/installment released shall be utilized within a period of 6 months
from the date of release and in case the same is not utilized within stipulated period then the
agency shall inform the same to HUDCO/HSMI and MoHUPA along with reasons for the same
along with the likely period during which the utilization will be made. Based on the approvals
of MoHUPA, HUDCO/HSMI will take a decision which will be binding on the agency. However,
in case even within the extended period the amount released is not utilized, the agency shall
refund the same to HUDCO/HSMI.
d) If the agency is found to have misutilized the funds for the purpose other than for which it has
been sanctioned, the agency will immediately refund/repay to HUDCO/HSMI the funds equal
to unauthorized expenditure or mis-application of the fund. The decision of HUDCO/HSMI and
MoHUPA as to what constitutes the misutilisation/improper utilization of expenditure will be
final and binding on agency.
e) In the event the total funds advanced under this agreement are not utilized for the authorized
purposes, then the difference between the total funds advanced and the funds so expended
will be immediately refunded by the agency to HUDCO/HSMI.
f)
Financial assistance released by HUDCO/HSMI shall be kept in a separate designated account
for utilization toward the implementation of project and shall not form part of their general
financial operations.
g) The agency will submit to HUDCO/HSMI and MoHUPA progress reports regularly in the form
and substance satisfactory to HUDCO. The progress reports, inter alia, containing physical,
technical and financial progress indicating the details of expenditure as per approved project
etc. will have to be furnished quarterly within 15 days of expiry of a particular calendar
quarter.
h) HUDCO/HSMI and MoHUPA and/or their nominees/representatives shall have right to (i)
inspect the activity/site/works under implementation with financial assistance of
HUDCO/HSMI and MoHUPA to ensure that the desired progress as & when felt necessary and
(ii) inspect the books of accounts and other related documents concerning the utilization of
the financial assistance. The agency shall provide all necessary facilities for conducting such
inspections and render such explanations and elucidation as may be required by
HUDCO/HSMI and MoHUPA and allow taking of any copies or extracts therefrom.
i)
HUDCO/HSMI may revoke this agreement upon a written notice to the agency if in the
judgment of HUDCO/HSMI and MoHUPA, the agency is utilizing the financial assistance/funds
in violation of the terms and conditions of the agreement. On receipt of such notice the
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agency shall immediately refund to HUDCO/HSMI all the financial assistance/funds provided
by HUDCO
j)
In the event agency fails to refund the amount/s as stipulated at (c), (d), (e) and (i) above,
HUDCO/HSMI and MoHUPA would be entitled to recover the same by taking legal recourse as
available to it under the applicable laws of the land.
k) Whenever a specialist agency is appointed as implementing agency by the agency (i.e. when
the agency is not taking up the work on its own), the same shall be appointed as per the
criteria stipulated in the GOI regulation/ State Government rules.
l)
The agency undertakes that it has already obtained/shall obtain all necessary statutory
approvals as required/applicable as per prevailing bye-laws
m) The agency declares and confirms that it has passed/obtained all the necessary
Resolutions/Approvals under the Law.
n) The agency will acknowledge the financial assistance by placing a prominent sign board or
plaque at a conspicuous place indicating that this activity has been set up with the financial
assistance under Challenge Fund project being administered by HUDCO/HSMI.
o) The agency will maintain the account of assets acquired out of the financial assistance from
HUDCO and undertake that the assets created shall not be alienated or sold in any way
without the written permission of HUDCO/HSMI and MoHUPA.
p) The agency shall make the land for the project available, wherever required, and take all
necessary actions for completion of project. It shall be ensured that the land is in physical
possession of the agency and free from any encumbrance and encroachment etc.
q) The agency shall put in place the mandatory facilities for barrier free access by Physically
Disabled Persons and ensure that due representation is given to the socially disadvantaged
communities, poors, slum-dwellers, women etc.
r) The agency hereby undertakes the responsibility for operation and maintenance of facilities
for which financial assistance has been provided and shall submit report regularly to
HUDCO/HSMI and MoHUPA.
s) HUDCO/HSMI and MoHUPA shall have right to review/restrict the financial assistance at any
stage and HUDCO’s decision in this regard shall be final and binding on the agency.
t) The agency shall submit a certificate from a structural engineer that all structural designs were
carried out based on the soil test report, local conditions etc., based on relevant IS codes so as
to take care of structural stability, earthquake resistance, wind velocity and other loads etc.
and to ensure that proposed building is structurally safe for the intended purposes.
u)
The agency shall provide all trunk infrastructure facilities required for the project.
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v) The agency hereby undertakes to bear any cost overrun due to any reason from its own
sources.
w) The agency shall also carry out impact assessment and statutory audits after completion of
the project and submit a report to HUDCO/HSMI in suitable timeframe and wherever
HUDCO/HSMI desires render all assistance to HUDCO/HSMI or external agency nominated by
HUDCO/HSMI to carry out impact assessment/evaluation studies to critically assess the
fulfilment of project objectives as well as to carry out the social audit of implementation
process.
3)
Additional conditions of sanction to be complied with by the applicant agency are given
below :
…………………………………………………………………………………………………………………………………………
……
4)
This Agreement is sent to you in duplicate. You may sign this agreement in the space
provided below duly indicating the date on which it is executed and return the original.
The duplicate copy may, however, after execution, be retained by you for your record.
Yours faithfully,
For and on behalf of HUDCO/HSMI
Signature
Authorised Officer of HUDCO/HSMI/ Executive Director (Training)
Encl: Annexures – I (Proposal), II (Operational Guidelines) & III (Utilisation Certificate)
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ACCEPTED
Signed and sealed by Shri__________,
Designation___________ & Shri_________,
Designation___________
for and on behalf of M/s_______________
and the common seal of the Agency is affixed in the
presence of Shri____________
Designation_________ and Shri____________
who have also signed these presents in token
thereof
(to be filled up as per resolution of agency)
(Signature)
Dated
Common Seal
(Signature) (Signature)
Dated
(Affixation of common seal should be
in
accordance with the Provisions of
the concerned
Statute/Articles/Bye-Laws, etc. of the Borrower.)
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Part B
UTILIZATION CERTIFICATE
This is to certify that the _____________________(Name of the Agency) has incurred an
expenditure of Rs. ___________________ lakhs during the period from ____________
to_______________ out of the financial assistance given by HUDCO/HSMI under
Challenge Fund for the purpose for which it was released
towards
________________________(name of proposal) as contained in the proposal and as per
the guidelines enclosed with the sanction letter cum agreement signed between
_____________________(Name of the Agency) and HUDCO/HSMI. It is also certified
that for the said assistance a designated account has been also maintained and the
details of the account are also enclosed herewith.
To be signed by:
Chief Executive of the Agency
And
Statutory Auditors/Chartered Accountant of agency
Date
Encl. :
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