Abbreviations and Acronyms 4

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2 Introduction The objective of this document is to outline the operations of the Multi Donor Trust Fund (MDTF) for KP, FATA and Balochistan. It describes the governance structure of the Fund, the role of the MDTF stakeholders, and the processes and procedures for funds administration and management. This manual is designed to serve as a guide for the MDTF Secretariat and project teams, and as a point of reference for other MDTF stakeholders. This is a live document and will be updated as required. This Operations Manual is not a legally binding document. Only the legal provisions in the Contribution Agreements, Grant Agreements and FPA Disbursement Agreements are bi nding in the operations of the Fund. 2

3 Contents Abbreviations and Acronyms 4 1. Overview: Aims and Scope Background Aims of MDTF Strategic Focus and Activities Multi-Donor Approach 7 2. Governance Structure MDTF Underlying Principles Governance Principles and Structure 8 3. Project Approval Process Conditions for Eligibility Project Approval Process Internal World Bank project development and approval MDTF Legal Requirements Financing Arrangements Expenditure Categories Fund Flows for Projects and Program Grants Establishment of Action Initiation Summary (AIS)/Activation of Child Trust Funds Monitoring and Evaluation, and Reporting Monitoring and Evaluation Reporting MDTF Communications Financial Management, Procurement and Safeguards Financial Management Procurement Environmental and Social Safeguards Management Framework Trust Fund Closure 24 Annexes Annex I: MDTF Financing Strategy A Proposal 25 Annex II: Flexibility granted under Rapid Response Policy OP List of Figures Fig. 1: MDTF Governance Structure 9 Fig. 2: MDTF Project Approval Process 14 Fig. 3 Internal World Bank project development and approval Fig. 4: MDTF Fund Flows 16 3

4 Abbreviations and Acronyms ADB AIS CD CDD CQS DNA EAD ESSAF EPP FATA FM FPA GFR GOP IDA KP LOA MDTF M&E NGO OP PaRSSA PCNA PDWP RF RRF SAP SC TACT TARUCCI TTL UN VP WA Asian Development Bank Activity Initiation Summary Country Director Community Driven Development Consultant s Qualification Selection Damage and Needs Assessment Economic Affairs Division Environmental and Social Screening and Assessment Framework Emergency Project Paper Federally Administered Tribal Areas Financial Management Fiduciary Principles Accord Grant Funding Request Government of Pakistan International Development Association Khyber Pakhtunkhwa World Bank Loan Department Multi Donor Trust Fund Monitoring and Evaluation Non-Governmental Organization Operational Policy (World Bank) Provincial Reconstruction, Rehabilitation and Settlement Authority Post Crisis Needs Assessment Provincial Development Working Party Results Framework Results and Reporting Framework Systems, Applications and Products Steering Committee Trust Funds Accounting Clearance Team Tribal Areas Rural-to-Urban Centers Conversion Initiative (Program) Task Team Leader United Nations Vice President Withdrawal Application 4

5 1. Overview: Aims and Scope 1.1 Background In response to the crisis in the north-west of Pakistan, the Asian Development Bank and other donors carried out a Post Crisis Needs Assessment (PCNA). This outlines the needs and strategy for a program of recovery, conflict reduction and peace building in the provinces of Khyber Pakhtunkhwa (KP) and Balochistan and the Federally Administered Tribal Areas (FATA). According to the PCNA, the cost of the recovery program is US$ 2.7 billion. The Government of Pakistan requested the World Bank and several donors to establish a multi - donor trust fund to support the recovery program. The KP/FATA/Balochistan Multi Donor Trust Fund was formally established in August 2010 and the first Steering Committee meeting was held on 17 September The role of the MDTF is to provide a coordinated financing mechanism and serve as a platform for dialogue and coordination in the response to the needs outlined in the PCNA. 1.2 Aims of MDTF The purpose of the KP/FATA/Balochistan Multi Donor Trust Fund is to support the implementation of a program of reconstruction and development aimed at facilitating the recovery of affected regions in KP, FATA and Balochistan from the impact of the armed conflict and the floods of 2010, and reducing the potential for escalation or resumption. Specific goals are to: 1. Ensure full government ownership of the MDTF, including in setting the strategic prioritization of allocations; 2. Recommend that the immediate reconstruction and rehabilitation needs of KP, Balochistan and FATA are met; 3. Establish a multi-year financing framework which will ensure predictability of funding and thus enhance effective planning of operations; and 4. Initiate a Results Framework that would enable a review of the results achieved across the whole portfolio of development activities of the MDTF Round I interventions. 1.3 Strategic Focus and Activities Geographic Scope - The MDTF covers Khyber Pakhtunkhwa province, the Federally Administered Tribal Areas, and crisis affected districts of Balochistan. The KP/FATA/Balochistan Trust Fund will finance projects identified by local and provincial governments that are intended to: (i) Promote enhanced, sustainable and accountable delivery of basic services; (ii) Support livelihoods and community-based development of basic infrastructure and services; (iii) Help communities to access assets and market opportunities and create the basis for viable income generating activities; 5

6 (iv) Support peace building and reconstruction activities and promote rapid crisis recovery in KP, FATA and conflict-affected districts of Balochistan; and (v) Promote strengthening, (re)building and/or maintenance of government institutions in order to improve governance, the overall institutional performance and state effectiveness. Activities to be financed by MDTF can be grouped into four pillars, elaborated below: Pillar 1: Restoration of Damaged Infrastructure and Disrupted Services: Estimates from the Damage and Needs Assessment (DNA) of November 2009 indicated the cost of immediate reconstruction at about US$ 1.1 billion for the five Khyber Pakhtunkhwa districts and two FATA agencies. While the 2010 Post Crisis Need Assessment (PCNA) estimated the damage due to the conflict in KP and FATA at US$ 2.7 billion, this figure has mounted considerably as a result of the recent floods that have devastated vast swathes of the country, including parts of KP and Balochistan. The new DNA has been prepared and was shared with the Government. Given the massive losses in terms of lives, capital and infrastructure, this pillar will have the highest priority for immediate action. It will cover: a) The reconstruction of damaged or destroyed public facilities (health, education, government buildings, equipment and supplies, etc.); b) The restoration of damaged infrastructure such as power and transport (including road projects in FATA of key socioeconomic/strategic importance, e.g. those linked to the TARUCCI program mentioned below), water supply and sanitation, and irrigation; c) Cash grants for owner-driven reconstruction and repair of damaged housing; and d) Provision of cash grants targeted at those among the population living in the affected areas/those who have been displaced, who meet objective poverty and vulnerability criteria. Overall, the focus will be on reconstruction rather than on relief and early recovery. Pillar 2: Improving Local and Provincial Service Delivery: This pillar includes local service delivery through community driven development (CDD) interventions as well as through provincial line departments such as for health and education, and local governments. Activities will include delivering basic infrastructure and services to low-income communities by financing through community organizations, and improving provincial governance and service delivery through line departments and local governments. Interventions will improve key aspects of the social protection system, initiate work on the fourteen urban centers identified by the government in FATA (TARUCCI program), and develop a communications program to highlight the objectives and achievements of these activities. Pillar 3: Supporting Livelihoods and Creating Employment Opportunities: Support for livelihoods will be provided through asset building, community credit and microfinance schemes, small enterprise development, development of value chains in critical sectors (decorative stones, horticulture, and livestock), skills development, and transitional workforce programs. Pillar 4: Capacity Building and Institutional Strengthening: To meet the challenge of post-crisis reconstruction and to cope with the longer-term issues of capacity building and governance, the capacity of the ministries and agencies of the Governments of Khyber Pakhtunkhwa and Balochistan and FATA Secretariat will be strengthened, including for conflict and disaster assessment and preparedness. This pillar includes activities to support government to review and 6

7 revise, where appropriate, policies to consolidate peace and reduce the potential for future conflict by addressing its underlying causes, as highlighted in the PCNA. This would include developing a program to initiate governance reforms for FATA. It would also include reform of FATA s legal/judicial infrastructure, and strengthening the capacity of PaRRSA and FATA Disaster Management Authority as needed. 1.4 Multi-Donor Approach Contributions to the MDTF are sourced from bilateral donor countries as well as from multilateral organizations. (See Annex I for Proposed MDTF Financing Strategy.) At the request of the Government of Pakistan, the MDTF will be administered by the International Development Association (IDA) of the World Bank Group. This multi-donor approach has the following advantages: Increases harmonization by pooling resources from various donors to finance activities identified through the PCNA and other strategic documents; Draws on the comparative advantages of proven international and locally active partners that are eligible to implement initiatives, in accordance with the rules and procedures for Partner Entities; Reduces transaction costs for the Government and donors by working through one funding facility; Avoids overlapping initiatives, reduces the risk of duplication of effort, and encourages connectivity between projects and programs; Helps to meet strategic financing needs in the recovery process as identified by the federal government, the Governments of KP and Balochistan and also the FATA authorities; and Facilitates financing of a wide range of investment and recurrent needs for service delivery, capacity building and technical assistance activities through different implementing agencies. 7

8 2. Governance Structure 2.1 MDTF Underlying Principles The principles underlying all MDTF functions are as follows: The Trust Fund will support a comprehensive reconstruction and development strategy designed to restore infrastructure, services and livelihoods while addressing governance and other challenges that contribute to conflict. The MDTF generally will finance government-owned and implemented platforms that can grow rapidly and strengthen the legitimacy of the state using government systems, procedures and institutional arrangements rather than donor executed projects that can dis-empower government, create dependency and contribute to weakening existing capacity. The Trust Fund will support government implementation through technical assistance and capacity building. The Trust Fund will facilitate rapid response; operations prepared under the MDTF will be processed under OP 8.0 (Rapid Response to Crises and Emergencies) with retroactive financing for reconstruction and livelihood recovery activities. Trust Fund activities will be approved by the Government of Pakistan through the Provincial Development Working Party (PDWP) and the Economic Affairs Division (EAD) and will be subject to fiduciary and safeguard standards that apply to World Bank financed projects processed under OP 8.0 (see Annex II). The Trust Fund will not fund expenditures related to the military, civil police, paramilitary, intelligence services, anti-narcotics campaigns, and weapons of all kinds. 2.2 Governance Principles and Structure The governance principles of the MDTF are as follows: Leadership by the Government of Pakistan at federal and provincial levels; Close partnership among key stakeholders and donors; Separation of responsibilities for allocation, fiduciary and administrative functions of the MDTF; Commitment by all stakeholders to expeditious processes; and Full transparency and openness. To achieve this, the MDTF has a governance structure consisting of a Steering Committee (SC), an Administrator, a Secretariat and Implementing Partners. The roles of each are outlined below. 8

9 Fig. 1: MDTF Governance Structure a) Trust Fund Steering Committee The MDTF is governed by a Trust Fund Steering Committee (SC). The Steering Committee consists of representatives of the Government (federal, provincial and FATA), contributing donors, the World Bank (IDA) as Administrator, and an observer group comprising representatives of the Asian Development Bank (ADB), the United Nations (UN) and the Islamic Development Bank. The World Bank, as Administrator, will be represented by its Country Director for Pakistan or his/her designee. The SC serves as a strategic forum for discussion of MDTF policies and outcomes and to approve the MDTF financing strategy. It is co-chaired by the Government of Pakistan Economic Affairs Division (EAD) and the World Bank (as Administrator); it acts collectively and makes decisions by consensus. The SC will meet at least on a semi-annual basis. The Steering Committee is responsible for: Endorsing the overall priorities, and providing policy direction to the Administrator/Trust Fund Secretariat on the Trust Fund s strategic goals; Reviewing the progress and performance of the Multi Donor Fund operations; Providing advocacy support for the Trust Fund; Reviewing and approving the financial strategy for the overall allocation of resources among the various pillars of the recipient-executed interventions; and Approving activities for financing by the MDTF through an FPA Grant. 1 b) Administrator The World Bank acts as Administrator of the Trust Fund, with the following responsibilities: 1 According to the KP, FATA and Balochistan Administrative Agreement the funds can also be channeled through the UN under the UN Fiduciary Principles Accord. 9

10 Management of the Funds: As Administrator, the World Bank is responsible for establishing and maintaining appropriate records and accounts to identify contributions, making commitments to be financed out of the contributions, and documenting receipts and disbursements of funds. Execution of Legal Agreements: As Administrator, the World Bank executes Administration Agreements with each of the donors contributing resources to the Multi Donor Fund. If the government selects the UN as a Partner Agency, the Administrator will conclude a Fiduciary Principles Accord (FPA) Disbursement Agreement for the grant, on receipt of an official statement from the government. The Secretariat: The Administrator manages the Secretariat which is responsible for all operations of the Multi Donor Trust Fund. The roles and responsibilities of the Secretariat are set out below. External Audit: The Administrator will provide to the donor within six months following the end of each World Bank fiscal year, an annual single audit report. Further details are given in Chapter 5 on reporting. c) MDTF Secretariat The Secretariat is responsible for coordinating the overall work program of the MDTF and its daily operations and management. The Secretariat reports to the Steering Committee on overall MDTF operational progress and to the Administrator on all administrative matters. The Secretariat is based in the World Bank offices in Islamabad. The Secretariat is led by the Program Coordinator for the Multi Donor Trust Fund, reporting to the World Bank Country Director. The Program Coordinator will be assisted by a team with capacity in finance, monitoring and evaluation, communications and public outreach, donor coordination and other skills as necessary. Should additional short-term expertise be required, the Secretariat will engage external consultants or bring in support from other partners. The Secretariat is responsible for coordinating the identification, appraisal and implementation support of MDTF-financed projects and for monitoring, evaluating and reporting on all performance aspects of these activities. The Secretariat will ensure that funds are used in accordance with the grant and administration agreements, and will have the ability to deny funding to any activity where it has significant doubts as to whether the funds concerned will be effectively utilized for the intended purpose. The key responsibilities of the Secretariat include: Handling the day-to-day operations of the Trust Fund, including coordination among project teams, development partners and donors; Arranging SC meetings and communications, as well maintenance of records thereof; Reviewing and approving the initiating grant requests submitted by the provincial governments and FATA authorities, including budget allocations. Providing guidance and clarification to World Bank project teams on Trust Fund policies, processes and procedures; Coordinating project-specific activities (for all projects other than those executed under the UN-FPA) such as project appraisals, supervision, monitoring and evaluation; Maintaining the Trust Fund s records and preparing bi-monthly updates and semi-annual progress reports, including financial statements on Trust Fund finances and performance for submission and approval by the SC; 10

11 Ensuring effective communication and dissemination of information on the Trust Fund activities and coordinating the Trust Fund external relations. The Secretariat will serve as focal point for any comments or complaints about the functioning of the Trust Fund, including consistency with the overall guidance provided by the SC, the identification and selection of projects, and monitoring and evaluating project implementation. The Secretariat will report immediately to the members of the SC any serious breach of the rules established for the KP/FATA/Balochistan Trust Fund. In addition it will report on an annual basis any comments or complaints received by the Secretariat, and the actions taken in response. d) Project Teams The World Bank and the UN can provide project teams to support the government in the development of project concepts and supervision of projects. Project Teams are responsible for: Preparing projects based on concepts received from the Governments of FATA, KP and Balochistan, including identification of the implementing partner(s); Coordinating activities with other development partners; Managing projects and program grants; Identifying capacity building opportunities within project designs; Disbursing funds to implementing partners; Generating reports based on implementing partner activities; Providing regular financial and progress reports to the MDTF Secretariat; Monitoring and evaluation of programs and projects by monitoring results, capturing lessons learned and measuring cost effectiveness; Communicating project information to the MDTF Secretariat on a regular basis; Liaising with other organizations with complementary programs in KP, FATA and Balochistan; Developing a communications strategy to engage with project stakeholders; Supporting the supervision of projects. e) Implementing Partners In most cases, projects and programs for which funding is channeled through government systems will be implemented by a government line agency or its designated implementing agency, e.g. an NGO or (where requested by the Government of Pakistan) UN agency. Projects and programs for which funding is not channeled through government systems and agencies may be implemented by entities other than government line agencies such as UN agencies and NGOs. The MDTF s preferred policy is to finance projects through the GOP (in accordance with the Paris and Accra Declarations which call for use of country systems). Hence, additional explanations will be required to justify why funding should be outside of government budget channels. Implementing Partners are responsible for implementing projects on the ground, including: Managing daily operations of the project(s); Liaising with beneficiaries and related stakeholders on the ground; Liaising regularly with the project teams, the Administrator and the MDTF Secretariat; Assisting in monitoring and evaluating activities. 11

12 3. Project Approval Process 3.1 Conditions for Eligibility The MDTF provides grant funding for projects, programs and related activities in support of the priorities identified in the PCNA. Proposals should meet the following criteria: Alignment with one or more of the four pillars of the PCNA; Consistency with the reconstruction and development strategy and the priorities of the Governments of Khyber Pakhtunkhwa, Balochistan and FATA and relevant GOP law; Consistency with the overall financing strategy endorsed by the Trust Fund Steering Committee Should enable the efficient, speedy and sustainable recovery of KP, FATA and Balochistan and be completed within the life of the Fund (2015); Where possible, projects or programs should be channeled through government systems ( on-budget ) and government agencies. If the project/ program submitted seeks offbudget financing, the proponent must provide an explanation and government approval to justify why this is more suitable; Projects must be coordinated with other relevant activities and must not duplicate or overall with other interventions; Projects must adhere to all relevant World Bank procedures, policies and guidelines, except when applying the UN-WB FPA. 3.2 Project Approval Process 1. Projects meeting the eligibility criteria outlined above are to be submitted as concepts to the MDTF Secretariat by the provincial governments and FATA Secretariat, with EAD approval; 2. On receiving EAD approval of the concept in writing, the project design stage will begin; 3. The government teams will then work with the World Bank project teams to develop the project proposal in full in the form of an Emergency Project Paper (EPP). This process of project development will include consultations with all relevant stakeholders and other organizations with activities in the area and will follow World Bank OP 8.0 policy for project development; 4. The government at provincial level will approve the project proposal through the Provincial Development Working Party and submit its approval to the EAD and the Trust Fund Secretariat 2 ; 5. EAD endorses the PDWP approval in writing to the trust fund secretariat. 6. Once approved, EAD will then issue a formal letter to the World Bank accepting the project document. 7. Based on this letter, the project preparation work can be finalized and the project can be submitted for internal processing and approval (see full details and Figure 3 below); 8. Following Bank OP 8.0 approval, negotiations will take place between the government counterparts and the Bank to agree the final grant agreement; 2 The provinces have or are in the process of asking for a waiver to expedite the government approval process for MDTF financed activities. 12

13 9. After negotiations, the package can be sent for the approval of the Vice President (see below for more details) 10. Once the grant agreement has been finalized, a legal opinion from the Ministry of Law may be required for the project to begin implementation, depending on the effectiveness conditions of the project. 11. In the case that a legal opinion is not a condition for project effectiveness, the grant agreement can be declared effective (see below). The approval process for MDTF projects is illustrated in Figure 2: Fig. 2: MDTF Project Approval Process 3.3 Internal World Bank Project Development and Project Approval Process The internal process for developing the EPP under OP 8.0 is as follows; 1. Project Package is prepared by sector teams: The project package is prepared as per Op 8.0 for emergency environments. The package is developed in consultation with counterparts and includes the emergency project paper, grant and/or project agreement, Interim Financial Reporting Plan, Integrated Safeguards Datasheet 2. Package is submitted to CMU: After receiving clearance from Sector Manager, the package is submitted for a Decision Meeting. The CMU will issue the invitations on behalf of the Country Director 3. CMU issues invitation to negotiate: Decision Meeting minutes are cleared by CMU. CMU will then issue invitation to negotiate to counterparts, after receipt of the full package, with approvals attached in format from; a. Sector Manager b. Legal c. LOA N.B.: All documents and all relevant clearances should be attached to the project package and should be submitted to the CMU before invitations for negotiations can be issued 4. Negotiations: Negotiations are held with counterparts to produce final legal documents 5. Clearance of Negotiated Package: The package then needs to be cleared by Legal, Sector Manager, LOA department and TACT. For TACT to approve there is a need to fill out a GFR for the value of the project and remit for approval. The GFR needs to be client executed. TACT will clear this GFR and thereafter clear the legal document and will provide the TF number. 6. Package is forwarded to CD for VP clearance: If PC1 approval has been obtained the project can be forwarded through the Country Director to the Vice President for clearance. This should be performed before signing the documents. The negotiated package needs to also include clearances from; a. Sector Manager b. Legal c. TACT d. LOA 13

14 PC1 approval is required before submitting the package for VP approval. 7. Effectiveness conditions are met/grant is declared effective: After signature, teams need to refer to effectiveness conditions- if such conditions refer to the need for a legal opinion then there is a need to have another legal opinion from the Ministry of Law to declare the grant effective, However if no such condition exists, the grant can be declared effective, from the Bank s side. Figure 3 below outlines the internal process for project preparations and approval. Fig. 3 World Bank process for project development and approval All projects receiving MDTF funds will be required to include the following in their project proposal: 1. A supervision plan reflecting how implementation support will be provided in areas not accessible due to security reasons. Also how support and supervision will be applied at the initial stages of project implementation, especially in cases of weak capacity and until full staffing of the project s implementing agencies is achieved. 2. Full consultations with and a mapping of similar and complementary activities being conducted by other agencies, including government and donor partners. 3. A communication plan which should include how the public will be informed about the project, how to apply to receive the project s support and a grievance system for complaints and reporting of corrupt activities. 4. A clear strategy for project handover and sustainability of results after project closure. 5. A results matrix that will provide the project impact and outputs through indicators that can be monitored over the project life. 3.3 MDTF Legal Requirements MDTF financed projects are provided to KP/FATA/Balochistan as grants. The project approval process from the World Bank (IDA) perspective does not require Board presentations and approval. Grant agreements are negotiated and are approved by the Regional Vice President. Grants are declared effective upon signature of the Grant Agreements by the Regional Vice President and Government representatives. MDTF Grant Agreements are co-signed by EAD and the province. Implementation can proceed and funds be transferred to the project designated account(s) upon signature of the Grant Agreements and receipt of approval from Federal Government. 14

15 4. Financing Arrangements 4.1 Expenditure Categories a) Projects and Programs For projects and programs, funds may be used to finance 100% of the costs of: Goods, works, services and capacity building activities; Consultants services; Conditional cash transfers; Training and workshops; Incremental operating costs, if any, as defined in each of the grant agreements. b) Trust Fund Management and Project Preparation In the context of Trust Fund management and project preparation, funds may be used to meet costs associated with the following: (a) staff time and overheads; (b) consultants fees (including extended and short-term consultants); (c) training and workshops; (d) temporary support staff; and (e) travel expenses. Specific activities to be financed in relation to Trust Fund management and project preparation are as follows: Preparation and supervision of projects financed by the MTDF. Managing and maintaining the Trust Fund s Secretariat, and complying with donor coordination, reporting and fiduciary requirements applicable to the Trust Fund. Providing technical advice to and coordinating capacity building activities for agencies and officials of the KP and Balochistan governments and FATA Secretariat, including inter alia: (i) preparing analytical and advisory assistance studies, economic sector work, and sector strategy papers; and (ii) providing training to government officials. Processing project proposals, including inter alia: appraising, monitoring, supervising and evaluating the execution and impact of projects funded by the Trust Fund. Administering the KP/FATA/Balochistan Trust Fund. Cost Recovery: In order to assist in the defrayment of the costs of administration and other expenses incurred by IDA in managing the MDTF, the World Bank will deduct an amount equal to approximately 0.75 percent from the total contribution by donors and retain this for IDA s own account. In addition, program administration and management costs, Secretariat costs, and costs related to project activities are charged to the Trust Fund based on actual costs. These are estimated at US$ 8.5 million, but would be subject to review based on actual expenditures. c) Security Costs The security situation in the north-west of the country remains fluid, varying across different areas and over time. The rapid success of the Swat Valley operation has created hope that GOP s more forceful approach may succeed in creating stability, but it is also clear that FATA represents a bigger challenge and military action will continue there for some time. In this context, operation of 15

16 the MDTF will have to balance security-related constraints on activities with the need to move quickly to strengthen the legitimacy and credibility of the state in order to provide a more solid basis for political stability, security, and an enabling environment for business and civic functioning. While the MDTF is not expected to finance law enforcement and military activities ( this has been left to Government and bilateral donors), security risks and the costs of doing business in se curity affected areas will have an impact on the choice of location for activities as well as their cost. In general, activities will be financed after a permissive security environment has been established, though this may still entail increased security risks. MDTF financed activities will include a strategy for working in higher risk areas that will emphasize working through local partners and may include use of supervision consultants, monitoring agents, and security consultants to mitigate security risks. Allocation of MDTF resources will be adjusted to reflect such expenses as needed. Such plans will have to be defined in the project document and should be agreed upon with the counterparts during project preparation. 4.2 Fund Flows for Projects and Program Grants Funds received from donors are pooled into a single account by the Trust Fund Administrator. Once the grant legal agreement is signed and declared effective funds can be disbursed to the project teams. The project teams then sign a grant agreement with the Implementing Partner which will be the basis of transferring funds to the latter. Figure 4 illustrates this process: Fig. 4: MDTF Fund Flows 16

17 4.3 Establishment of Activity Initiation Summary (AIS) /Activation of Child Trust Funds Upon finalization of the selection process and agreement on a project by KP/FATA or Balochistan and the MDTF Administrator, the TTL who will be preparing the project will have to apply three administrative steps in order to receive the preparation, supervision and implementation funds from the MDTF account. These steps are: i) Create an Activity Initiation Summary (AIS) in the Systems, Applications and Products (SAP) system; this action will send a request to the Country Director (CD) informing him about the new activity and requesting his approval to include it as part of the country program. The approval of the CD will allow the generation of an IO number for the activity. Important: Under the MDTF activities teams need to prepare a preparation and supervision budget; depending on the availability of such a budget, the AIS will be approved by the CD. ii) iii) Create through the Grant Funding Request (GFR) system a Bank Executed Child Trust Fund (disbursing Account); This activity will need to be performed through the GFR system and should be remitted to the Trust Funds Accounting Clearance Team (TACT) after the required regional clearances are granted. The approval of the request by TACT will allow the transfer of funds from the main TF to the Child TF, from which teams can disburse them for the preparation and supervision of projects. Create through the GFR system a Recipient Executed Child Trust Fund (disbursing Account); this activity will need to be performed through the GFR system and should be remitted to TACT after the required regional clearances are granted. The approval of the request by TACT will allow the transfer of funds from the main TF to the Child TF, from which the implementing entity can disburse them for project activities and finance works, goods and services procured under the project. Important: Such a Child TF is to be opened after negotiation of the Grant Agreement of the MDTF financed project and the project being declared effective. 17

18 5. Monitoring and Evaluation, and Reporting 5.1 The MDTF Round I Results and Reporting Framework (RRF) is being developed as a separate document and will be posted as such. In summary, the approached used to compile the MDTF Round I RRF is bottom to top; results achieved at the project level are listed jointly and where possible, aggregated into MDTF -level results. In order to do this, indicators have been pulled out from project RFs and compiled to formulate the overall RF for activities being implemented by MDTF in Round I. The RRF consists of three sets of indicators: MDTF Output level indicators (summarised in the sheet titled Project Indicators in the Results Framework): These indicators are taken from the project-level RFs and mapped to the PCNA. Reporting against these indicators will be undertaken on a semi-annual basis. MDTF Outcome level indicators (summarised in the sheet titled Outcome Indicators in the Results Framework): These indicators are related to perceptions regarding the longerterm impact of MDTF-supported interventions. These will be reported twice during the life of the project: at baseline and at End Of Project (EOP) Process Indicators (summarised in the sheet titled Process Indicators in the Results Framework): These indicators are used to measure the delivery mechanisms established through MDTF Round I Interventions. These will be reported every quarter. The main advantage of the Round I RRF is that it allows for comprehensive reporting to key stakeholders on the MDTF achievements on a regular basis. It is also a strategic document in that it clearly identifies the contribution of the MDTF towards the PCNA. 5.2 A full Communications Strategy has been developed as a separate document. 18

19 6. Financial Management, Procurement and Safeguards All MDTF projects are required to follow and meet the Bank s policies and standards for procurement, environmental and social safeguards and financial management. However, the Bank recognizes both the inherent risks involved in working in emergency situations, including the risks and lost opportunities associated with a delayed response, and the critical importance of speed, flexibility, and simplicity. As a result, emergency operations are processed under accelerated, consolidated, and simplified procedures and are subject to streamlined ex-ante requirements (including in fiduciary and safeguards areas). 6.1 Financial Management All projects financed through the MDTF will have in place systems and controls that will ensure good governance and reduce the risk of fraud and corruption. a) Responsibilities of the Administrator The World Bank as Administrator is responsible for performing those functions set forth in the Resolution, Administration Agreements with donors, Grant Agreements, relevant World Bank policies and guidelines, and as described in this manual. Bank fiduciary requirements will be applied to all MDTF projects except those governed by the UN FPA. Bank staff will apply the Financial Management Practices in World Bank-Financed Investment Operations as amended from time to time. These practices are reflected in Operational Policy and are defined as the budgeting, accounting, internal control, funds flow, financial reporting and auditing arrangements of the entity or entities responsible for implementing Bank - financed operations. b) Financial Management Control Framework For each operation supported by the MDTF, the Bank requires the recipient to maintain financial management arrangements that are able to provide reasonable assurance that the funds are used for the purposes intended. During project preparation, and based on the World Bank s financial management (FM) principles FM staff will assess the proposed financial management arrangements to identify any weaknesses and to assess the risks these pose. They will then provide advice to the task team on relevant risk mitigating measures, and to the grant recipient on the design of appropriate financial management arrangements. The FM staff will also agree with the recipient on the format and content of the interim reports and audited financial statements to be provided throughout project implementation, including agreement on the scope of the audit and the identity of the auditor or the process for selecting the auditor. During project implementation, FM staff will review the continuing adequacy of financial management arrangements, review the performance of the financial management system, and test-check the application of controls or individual transactions. Furthermore, the interim reports, the audited financial statements and the associated FM risks will be verified and validated throughout the project s life. 19

20 c) Disbursement OP/BP 12.00, which deals with Disbursements, provides the flexibility to provide advances to Designated Accounts based on the needs of a project, with no arbitrary fixed ceiling. The TTL, in consultation with LOA (World Bank Loan Department), will establish the ceiling or limit of the Designated Account taking into consideration planned program expenditures, potential delays or difficulties in banking transfers in emergency situations, communication difficulties in working in remote or inaccessible areas and other factors, in order to ensure that sufficient liquidity is secured at all times to enable smooth project implementation. Withdrawal applications - In order to expedite disbursements under MDTF projects, the Bank usually gives priority to the processing of Withdrawal Applications (WAs) for designated emergency operations. The revised turnaround standards applicable to emergency operations reduce the processing time on WAs from the five working days to one working day. Disbursement methods -The disbursement methods used should be the most appropriate for the implementation arrangements selected. These could include: (a) advances to Designated Accounts, (b) Direct Payments to suppliers or contractors, (c) reimbursement to the government for expenditures made from their own resources, including expenditures allowed for retroactive financing, and (d) Special Commitments. In emergency situations the thresholds for Direct Payments and Special Commitments may be set at lower levels than for regular projects. 6.2 Procurement Under the MDTF, procurement actions for grant recipients will be facilitated through the delegation by RPMs of higher levels of approval authority to Bank Procurement Specialists on task teams to allow for the use of direct contracting, shopping, and simpler procurement methods for the delivery of urgently needed services and goods. Below are some of the procurement arrangements which will be available for MDTF projects to facilitate the Bank s immediate and rapid response to emergency requirements. These will be applied as needed: using rapid procurement methods (direct contracting or simple shopping) for the procurement of services of qualified agencies/programs and/or suppliers (for goods) and civil works contractors already mobilized and working in emergency areas (for works); using single sourcing or Consultant s Qualification Selection (CQS) for contracting firms already working in the area and which have a proven track record for the provision of technical assistance; extending contracts issued under existing projects for similar activities by increasing their corresponding contract amounts; where alternative arrangements are not available, using Force Account for delivery of services directly related to the emergency; using NCB, accelerated bidding and streamlined procedures and applying Bank provisions on elimination, as necessary, of bid securities; embedding consultants with the projects units to assist in capacity building and transfer of knowledge. 6.3 Environmental and Social Safeguards Management Framework 20

21 An Environmental and Social Screening and Assessment Framework (ESSAF) has been developed to provide a mechanism to carry out appropriate assessment of environmental and social impacts and implement necessary safeguard measures under these emergency operations. The Framework has been developed in line with the Bank s safeguard policies and OP 8.0 for emergency operations. ESSAF provides environmental and social safeguards procedures to be integrated into the implementation of Trust Fund supported activities in KP, FATA and Balochistan. The objective of ESSAF is to ensure that MDTF activities address relevant environmental and social issues. The Framework can be found in Annex V. 21

22 7. Trust Fund Closure At the closing date of the Multi Donor Trust Fund, the functions of IDA as Administrator will terminate in an expeditious and orderly manner except for any actions necessary for winding up activities of the Fund. These include the following: a) Reporting Final report from Partner Agencies: All partner agencies managing projects funded by MDTF will ensure that final reports are submitted to the Secretariat at least eight months before TF closure. This means that all projects and programs funded by MDTF must close in time for their final reports to be submitted by this deadline. Final report from the Administrator to the Steering Committee: On closure, the Administrator will submit to the Secretariat a final financial report and a report showing the outcomes of the MDTF portfolio of projects. b) Impact assessment An impact assessment will be conducted two years after the project has closed, based on independent evaluation as well as drawing on impact assessments of projects funded by MDTF. 22

23 Annex I: MDTF Financing Strategy MDTF Financing Strategy and Portfolio Update The MDTF Financing Strategy (FS) is the framework that defines the MDTF portfolio that will best allow it to achieve its strategic objectives. The FS was endorsed by the MDTF Steering Committee (SC) in its meeting on 17 September The pipeline of activities that has so far been agreed to be financed in Round 1 responds to the four MDTF pillars. The latter emerged from the PCNA findings, as well as the government s strategy for peace building in KP, FATA and Balochistan. The selected portfolio of projects meets the immediate and critical needs of the population in the crisis affected areas. It also includes the initiation of longer-term governance support, capacity building and institutional strengthening as well as focusing on a peace building strategy that addresses the main drivers of the crisis. However, with the request of the Government of KP to cancel the Emergency Recovery project, the sum of US$ 35 million needs to be reallocated. The Financing Strategy that follows includes the allocations which have been proposed by the Government of KP and the FATA Secretariat. These are based on identified priorities, and feed into the MDTF engagement strategy for the next five years as they support improving local services and the community support stream. 1.1 Financing Strategy The objective of the MDTF Financing Strategy is to further strengthen government leadership over the direction of the Trust Fund and ensure that it serves as a platform for donor coordination and aid effectiveness. Specifically, the Financing Strategy has been built on the following principles: 1. Ensuring full government ownership of the MDTF, including in setting the strategic priorities for allocations; 2. Recommending that the immediate reconstruction and rehabilitation priorities of Khyber Pakhtunkhwa, Balochistan and FATA are met; 3. Establishing, in the future, a multi-year financing framework which will ensure predictability of funding and thus enhance effective planning of operations; 4. Allowing donors to claim credit for the results achieved across the whole portfolio of development financed through the MDTF; and 23

24 5. Initiating a Results Framework that will enable a review of the results achieved across the whole portfolio of development activities of the MDTF. Criteria for Project Selection Based on the objectives of the MDTF Financing Strategy, projects and activities were selected for funding if they met one or more of the following criteria: The project reflects the government s priorities as expressed in federal and provincial development plans, the PRSP, the DNA or the PCNA; The project supports one or more of the pillars of the MDTF (see below); The project encourages the engagement of communities and civil society in its preparation and/or implementation; The project takes/contributes to a programmatic approach, under which specific interventions are part of a medium- to long-term strategy to build capacity, help in fostering reconciliation, and enhance citizens trust in the state. The project does not needlessly duplicate - and where relevant complements - the interventions of bilateral or multilateral development partners. 1.2 Projects Identified for Round 1 Funding Table 1 gives a summary of the projects that the Governments of KP and Balochistan, and the FATA Secretariat, have identified as priority and reflects the current allocation of available funds (amounts shown in US$). Brief descriptions of the projects and the proposed reallocations are given below, categorized by Financing Strategy Pillars: 24

25 Pillar 1: Projects to Restore Damaged Infrastructure and Disrupted Services 1. KP Roads Project (US$ 8 million, under implementation): This project will finance rehabilitation of the main portion of the Chakdara Shamozai road. The road is 42 km long, but due to funding constraints, only 10.5 km of the road will be rehabilitated from Sharifabad to Kanju. Future funding may allow rehabilitation of the full length. The project has been approved and the grant agreement signed. The main contract under the project has been signed and the contractor has taken over the project location. 2. FATA Rural Roads (US$ 16 million, under preparation): FATA development plans include a rural road project costing US$ 140 M, about 10 per cent of which the MDTF will finance. This will be for rural roads that are urgently needed to connect communities with urban centers where services such as schools are available. They will also facilitate the transportation of goods and agricultural products by the communities to markets. MDTF will undertake to construct an estimated 75 km of rural roads in FATA for an estimated amount of US$ 16 million. Pillar II: Projects to Improve Local and Provincial Service Delivery 1. FATA s Urban Centers (TARUCCI) Program (US$ 7 million; Grant agreements negotiated): The objective of the Tribal Areas Rural-to-Urban Centers Conversion Initiative (TARUCCI) is to initiate a social transformation of FATA from a scattered rural/tribal society to a more urbanized society with socioeconomic and security services more in line with developed parts of the country. This will entail planning and establishing urban centers in select high-density areas in each of the Tribal Agencies, thereby ensuring the provision of increased access to planned housing, quality education and health care, municipal services, economic opportunities for employment and commerce, social recreation and security. The present phase of the project will fund the urban centre upgradation of Khar in Bajaur agency. Capacity building of TARUCCI will be ensured through the development of an urban management framework, which can subsequently be replicated to other urban centers. This will also ensure the development of a program in which multiple funding sources are aligned, replacing the need for each financier to develop different and separate programs/projects. In addition urgently needed municipal services and goods, such as street lighting and water schemes, will be financed within the existing urban centers in Bajaur. 25

26 2. Promoting Girls Education in Balochistan (US$ 10 million; under preparation): The main objective of the proposed US$ 10 million project will be to increase girls' access to quality education in Balochistan. Lessons learnt from the ongoing Balochistan Education Support Project will form an integral part of the project design. The proposed project will support several areas in education under the Community Schools Program model, which focuses on addressing the governance and management challenges faced by the education sector in the province. It will include rigorous assessments of how successful the model is in achieving its objectives, and will be designed in a way that allows for easy scale-up or replication. 3. Strengthening Health Services in Crisis affected Districts of KP (US$ 25 million;: Health indicators for Khyber Pakhtunkhwa have been improving but remain poor in comparison to the national average. Health facilities in the province suffer from lack of equipment, medicines and other essential supplies; further issues are lack of qualified personnel, vacant posts and high levels of absenteeism. Post-conflict disruption of healthcare services in many areas necessitates immediate revitalization and strengthening of these at district level. Based on the successful experience of revitalizing and improving healthcare services under a public-private-partnership model in Batagram, an improved version is to be replicated in five conflict affected districts. The project will improve these services through rationalization of health management functions and a public-private partnership arrangement. It will also help establish a robust monitoring and evaluation system for this model in each district as well as at provincial level to measure the impact of management improvements on services. Pillar III: Projects to Support Livelihoods 1. Emergency Recovery Project (US$ 35 million); Based on the request of the Government of KP, the project has been cancelled. 2. Economic Revitalization of KP and FATA (US$ 20 million; Grant agreement signed on October 11, 2011): The PCNA stresses the need to build a sustainable economy and provide additional disincentives to militant recruitment. Small and medium enterprises (SME) and the private sector are playing a bigger role in the country s economic growth and becoming an important element in the job creation process. 26

27 Providing immediate livelihood opportunities in KP and FATA one of the strategic objectives of the PCNA - will also contribute to the process of stabilization. The proposed project aims to support the economic revitalization of KP and FATA through: rehabilitation of small and medium businesses affected by the crisis; attracting and promoting investment; and developing long-term growth opportunities through providing matching grants. The project includes three broad areas of support: 1) Job creation and SME development by revitalizing and rehabilitating existing enterprises; 2) Investment Mobilization through Diaspora and Public Private Partnerships (PPPs); and 3) Investment and Regulatory Capacity Building. 3. FATA Rural Livelihood and Community Infrastructure (US$ 12 million; under Preparation): The project will support the establishment of a department within the FATA Secretariat and build its capacity to manage and implement demand-driven community-based activities. The entity will also be involved in identifying community needs and providing financing to improve employment opportunities and income generation with an emphasis on gender. It will also entail capacity building of local councils/line departments in the preparation and implementation of small infrastructure schemes through participatory development. 4. KP Southern Area Development Project (US$ 18 million) The Government of KP has requested that a new community-based project be prepared using funds from the cancelled project. This project will be designed based on the MDTF five-year engagement strategy, and will feed into the revised MDTF result framework. This project has been prepared and will be negotiated soon. Pillar IV: Project support for PCNA program delivery through key governance interventions 1. Governance Support (US$ 8.75 million; Grant Agreement Signed on October 11, 2011): The objective of this project is to help the Governments of KP, Balochistan and the FATA Secretariat design and implement the Governance Program and facilitate sectoral reforms through key governance interventions. The project aims to improve the efficiency of delivery of the PCNA program by supporting capacity in key units and by implementing urgent interventions that will have an impact across the PCNA programs. The latter will focus in particular on key institutions of accountability. Of 27

28 the total amount, US$ 2 million is used for governance support and reform in Balochistan. 2. Development of Disaster Risk Management & Response Capacity in Balochistan (US$ 5 million) The project aims to support the Provincial Disaster Management Authority (PDMA) Balochistan in improving disaster management and response capacity, thereby leading to increased disaster resilience in the province. The project consists of the following components: i) Institutional and Systems Development; ii) Risk Identification and Assessment; iii) Pilot Community Based DRM (CBDRM) Program; iv) Education and Awareness Building; v) Project Implementation Support. 1.3 Strategic Impact of Round 1 MDTF Financed Projects a) Round 1 projects contribute to PCNA objectives: All projects in one way or another contribute to the PCNA strategic objectives. However, within this context, the Governance Support Project (GSP) aims at providing urgently needed technical assistance (consultants, training, goods and services) to support the Governments of Khyber Pakhtunkhwa, Balochistan and the FATA Secretariat to put in place implementation mechanisms to enhance coordination and implementation of projects, and effectively deliver the PCNA program. The Rural Livelihoods and Community Infrastructure Project (RCLIP) aims to improve the well-being of un-served and underserved low income communities, starting with Bajaur Agency in FATA region, thus aligning its activities with those of the FATA Secretariat, the PCNA and other donor interventions. The militancy crisis of 2009 badly damaged transport networks and disrupted economic growth for the region. In this context, the KP Rural Roads Project which aims to rehabilitate priority damaged roads and bridges in the conflict hit areas of Swat District in KP, will also help improve access of residents to markets to sell their produce, enhance trade, and increase economic activity in the project area. objectives. All these outputs are fully consistent with PCNA 28

29 b) Round 1 projects seek to create opportunities with development partners: The KP Health Project, for example, is complementing a USAID supported project (value US$ 7.8 million) focused on reconstruction in Malakand Division; while a partnership is being discussed for a results-based management project for district health systems with DFID, and a broader nutrition engagement through AusAID has been finalized for USD 40 million for KP. c) Round 1 projects are scalable and build capacity at all levels: The Governance and Support Project (GSP) includes establishment of systems and procedures for participatory planning, implementation and performance monitoring; a technical training program for the extension and management staff of the involved line directorates; and exposure to similar CDD models through in-country and international experience exchange. The Fata Urban Centers Project (FUPC) demonstrates how capacity can be built in local governments systems while contributing towards the implementation of the Tribal Areas Rural-to-Urban Centers Conversion Initiative (TARUCCI) program for the 14 urban centers in FATA. The Education Project in Balochistan aims to improve access of girls to quality education in Balochistan and will support several areas in education under the Community Schools Program model, which focuses on addressing the governance and management challenges faced by the education sector in the province. It has been designed in a way that allows for rigorous assessments of its success, and easy scale-up or replication d) Round 1 projects pay attention to job creation and private sector development: The Economic Revitalization for KP and FATA (ERKF) builds on the Pillar 2 of the PCNA that recommends creation of employment generating opportunities in farm and non-farm sectors, development of marketable skills, rehabilitation of enterprises and improving the investment and business climate for medium to long term economic growth and peace building in these areas. It will also promote economic empowerment of women by assigning priority to eligible enterprises owned and managed by women and mobilize private investment to jumpstart the rehabilitation of businesses and reconstruction of infrastructure, thereby creating employment. 29

30 e) Round 1 projects are conducive to long term policy dialogue The GSP is aimed at helping translate policy direction into setting sectoral peace building priorities, monitoring results and addressing bottlenecks. The Khyber Pakhtunkhwa and FATA Secretariats have decided on the development of two respective Steering Committees for this purpose. The ERKF will support capacity building of both KP and FATA governments to improve the business climate and attract investment to the region. This will be accomplished through the following activities (i) Capacity building of governments of KP and FATA (ii) Development of a Public Private Dialogue (PPD) mechanism to promote reforms; (iii) Institutionalizing investment promotion. 30

31 Snapshot of Current MDTF Portfolio MDTF Allocations and Projects Status as of 30 September 2011 MDTF Pillars Restoring damaged infrastructure and disrupted services Projects FATA Urban Centers (TARUCCI) Project KPK FATA Balochistan Total % US $ Million US $ Million US $ Million US $ Million 7 7 5% Project Status Project Under Implementation FATA Rural Roads % Project under preparation KP Emergency Road Project 8 8 6% Project Under Implementation Improving provincial governance and service delivery Strengthening Health services in crisisaffected area % Project under Implementation (Additional Financing 9 M not processed yet) Promoting Girls Education in % Balochistan Project Negotiated Maintaining and/or reinforcing livelihoods of local communities Strengthening the technical capacity and institutional arrangements Balochistan Disaster Management Project KP and FATA Economic Revitalization KP Southern area Development Project FATA Rural Livelihood and Community Infrastructure Project Governance Support Project TA Support (Bank executed) 5 5 4% % Project under Implementation Project under Implementation % Project to be Negotiated % % % Unallocated 0% Project under Implementation Project under Implementation KP PER is under Implementation, & Balochistan Need Assessment under Implementation Total Adjusted % 53% 35% 12% 100 % 31

32 Annex II: Flexibility granted under Rapid Response Policy OP 8.0 Speed, simplicity, and flexibility are key guiding principles for Bank engagement in emergencyrelated activities. Greater speed requires the Bank to apply higher levels of delegation and risk tolerance in the processing and initiation of emergency assistance operations as compared to standard Bank operations. To mitigate such risks, the Bank will need to intensify its supervision efforts through frequent mission and ex-post reviews and to address any performance issues identified. This should be accompanied by a systematic effort to assess and support the capacity of counterpart agencies. The Bank recognizes both the inherent risks involved in working in emergency situations, including the risks and lost opportunities associated with a delayed response and the critical importance of speed, flexibility, and simplicity in emergency operations. Therefore such operations: a) are processed under accelerated, consolidated, and simplified procedures and are subject to streamlined ex-ante requirements (including in fiduciary and safeguard areas); b) involve a different balance between ex-ante and ex-post control and risk mitigation measures compared to regular operations, including on issues of fraud and corruption, and requiring intensified supervision support to address such risks. Emergency Operation Projects: The Emergency Project Paper (EPP) will need to be used when preparing projects under OP 8.0. The EPP Template can be downloaded from the Rapid Response website. FM and PR specialists are required to complete rapid assessments of the counterpart agency s procurement and financial management capacity. The results of the appraisal are summarized in the EPP, which includes an ORAF, and a Simplified six-month Procurement Plan (SPP). Internal Review of Emergency Operations: Emergency operations undergo a single Decision Review Meeting that confirms completion of appraisal and authorizes negotiations. The Decision Review Meeting is held following a combined identification-preparation-appraisal mission and is based on a review of a complete negotiations package, eliminating the need for sequential clearances from the Bank's various safeguards and fiduciary departments. The minutes of the Decision Review Meeting include a record of clearances and, as appropriate, conditions for concluding negotiations. Draft Negotiations Package: Based on the EPP, the legal agreement is drafted. This is shared with PM, PR, and LOA for their respective inputs and a draft negotiations package is put together consisting of the following documentation: (a) a draft EPP (b) a draft grant legal agreement (c) a draft disbursement letter (d) an SPP, and (e) an updated ISDS. 32

33 Negotiations and Borrower Readiness for Signature: At negotiations, agreement is reached with the borrower on all key aspects of the project and on the terms and conditions of the grant as set out in the legal agreement(s). To the maximum extent practicable, at negotiations task teams obtain all legal documentation necessary to facilitate the borrower's timely signature of grant legal documents. Effectiveness: MDTF financed projects do not require board approval; legal grant agreements are signed and projects thereafter are declared effective. Project Implementation: The rapid delivery of emergency assistance is facilitated through streamlined financial management, procurement, and disbursement procedures. For procurement the following may be applied: application of higher prior review thresholds; increased flexibility on the use of simplified procurement methods; ability to draw on pre-qualified procurement and project management agents through sole-source or qualification-based selection. Other Provisions OP/BP 12.00, Disbursement, provides the flexibility to provide advances to Designated Accounts based on the needs of a project, with no arbitrary fixed ceiling (in the past advances were normally limited to a maximum of 10 percent of the Bank s financing). Emergency operations could finance up to 100 percent of the expenditures needed to meet the development objectives of such operations, including recurrent expenditures, local costs, and taxes. Emergency operations could finance retroactive expenditures of up to 40 percent of the grant amount for payments made by the borrower not more than 12 months prior to the expected dates of signing the legal documents. Bank supervision could be supported with the hiring of consultants or Monitoring Agents using simplified procurement methods. Bank staff should take into account the importance of having in place arrangements for transferring knowledge and expertise to local counterpart agencies. Appropriate oversight arrangements, including corporate governance and fiduciary oversight, need to be in place to ensure appropriate scope, design, speed, and monitoring and supervision of emergency operations. 33

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