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The SAPI team was dispatched in 2001 to strengthen project formulation capability by means of providing design manuals for local government engineers and project appraisal guidelines for ONEPP staff. Based on the former SAPI, this SAPI is pursuing the enhancement of further capability development of local government (LAO) by promoting the use of manuals and guidelines, as well as the improvement of the management capability of LAOs of the sub-project granted with the Environmental Fund (EF). Another objective of this study was to suggest and propose an institutional and financial framework of the EF with a full understanding of the ongoing government reform, the commencement of the second phase of the work under consideration, and restructuring of the EF into a Public Organization (PO).