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1 Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY Report No: RES22380 Public Disclosure Authorized Public Disclosure Authorized RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE RURAL SERVICE DELIVERY AND LOCAL GOVERNANCE PROJECT TF18447 APPROVAL DATE: SEPTEMBER 30, 2013 TO THE INDEPENDENT STATE OF PAPUA NEW GUINEA February 26, 2016 Public Disclosure Authorized SOCIAL, URBAN, RURAL AND RESILIENCE GLOBAL PRACTICE EAST ASIA AND PACIFIC REGION This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
2 ABBREVIATIONS AND ACRONYMS CAS CDD CPF CS GO IOC PDO PMFM PMU PNGSDP SPF TF TR TRNG USD WFAFO WFALN Country Assistance Strategy Community Driven Development Country Partnership Framework Consultants Services Goods Incremental Operational Costs Project Development Objective Practice Manager, Financial Management Project Management Unit Papua New Guinea Sustainable Development Program State- and Peace- Building Multi- Donor Trust Fund Trust Fund Training Training United States Dollar World Bank Group Financial Operations Loan Accounting Regional Vice President: Country Director: Senior Global Practice Director: Practice Manager/Manager: Task Team Leader: Axel van Trotsenburg Franz Drees-Gross Ede Jorge Ijjasz-Vasquez Bassam Ramadan Kosuke Anan 2
3 INDEPENDENT STATE OF PAPUA NEW GUINEA Rural Service Delivery and Local Governance Project CONTENTS A. SUMMARY 8 B. PROJECT STATUS 8 C. PROPOSED CHANGES 9 3
4 DATA SHEET Papua New Guinea Rural Service Delivery and Local Governance Preparation and Pilot (P126157) EAST ASIA AND PACIFIC Social, Urban, Rural and Resilience Global Practice Report No: RES22380 Basic Information Project ID: P Lending Instrument: Specific Investment Loan Regional Vice President: Axel van Trotsenburg Original EA Category: Partial Assessment (B) Country Director: Franz R. Drees-Gross Current EA Category: Partial Assessment (B) Senior Global Practice Director: Practice Manager/Manager: Team Leader(s): Ede Jorge Ijjasz-Vasquez Original Approval : 30-Sep-2013 Bassam Ramadan Current Closing : 31-Aug-2016 Kosuke Anan Borrower: Responsible Agency: Department of Treasury Department of Provincial and Local Government Affairs, Restructuring Type Form Type: Short Form Decision Authority: Country Director Approval Restructuring Level: Level 2 Financing ( as of 10-Feb-2016 ) Key s Project Ln/Cr/TF Status Approval Signing Effectiveness Original Closing Revised Closing P TF Effective 25-Sep Nov Nov Aug Aug-2016 P TF Effective 05-Dec Mar Mar Feb Feb-2016 Disbursements (in Millions) Project Ln/Cr/TF Status Currency Original Revised Cancelle d Disburse d Undisbur sed % Disburse d P TF Effective USD P TF Effective USD
5 Policy Waivers Does the project depart from the CAS/CPF in content or in other significant respects? Yes [ ] No [ X ] Does the project require any policy waiver(s)? Yes [ X ] No [ ] Explanation The Project has two outstanding audits (the 2013 audit due on June 30, 2014 and the 2014 audit due on June 30, 2015) and therefore requires the clearance of the Practice Manager, Financial Management (PMFM) and the World Bank Group Financial Operations (WFAFO) Manager to proceed with a level 2 restructuring. Has the waiver(s) been endorsed or approved by Bank Management? Yes [ X ] No [ ] Explanation The clearance to proceed with level 2 restructuring notwithstanding overdue audits was given by PMFM (GGO20) and WFAFO Manager (WFALN) on February 5, 2016 through an office memorandum. The 2013 audit has been conducted and is expected to be received as soon as the Auditor General signs off on the report, which could be as early as February 29, In order to expedite the 2014 audit, an external independent auditor will be sub-contracted by the Auditor General's Office. The 2014 audit is expected to be completed in approximately six weeks from the tendering of the independent auditor. Based on the discussion with the PMU, the Task Team expects that the 2014 audit will be delivered by May 31, A. Summary of Proposed Changes This restructuring proposes to extend the Project closing date by six months from August 31, 2016 to February 28, 2017 and the Grant closing date of TF18447 (State- and Peace-Building Multi-Donor Trust Fund Grant: SPF Grant) by twelve months from February 29, 2016 to February 28, The extension is needed to complete the remaining activities of the Project, which has experienced some delays due to capacity constraints, extreme weather conditions, and unexpected administrative requirements imposed on beneficiary communities by commercial banks. Most of these constraints, except for extreme weather conditions, have now been resolved, and the project is expected to complete activities by the proposed new Project closing date. The extension of the Project closing date will not require additional financing; however, this restructuring proposes to combine the two disbursement categories of TF18447, in order to increase the Recipient's flexibility to use the remaining funds of the grant toward the completion of the Project. The modifications proposed under this restructuring will not change the Project Development Objective (PDO). No new activities are being proposed. There is no escalation of the safeguard rating, and no additional safeguards policies are triggered. The closing date of TF15507 is expected to remain as August 31, 2016, as the entity that funded the grant (Papua New Guinea Sustainable Development Program, Ltd.) is no longer in operation. B. Project Status The Project was approved on September 30, 2013, signed on November 14, 2013, and also became effective on November 14, The Project Development Objective is to develop a community-driven development model to improve access to, and the quality of, basic services in rural communities, which is scaled-up by government. The Project supports rural communities to identify priority needs and prepare subproject proposals through trainings, and provides grants for the communities to implement their subprojects. Under the project, most of the target communities have (a) participated in project planning and implementation trainings; (b) identified and prioritized community development needs through participatory processes; (c) developed subproject proposals; (d) provided in-kind contribution for the subprojects (such as provision of community land, construction of auxiliary facilities, installation of 5
6 community bulletin boards, etc.); and (e) opened (or are close to opening) community bank accounts. They have just received or are waiting to receive the community development grants from the Project to start implementing subprojects in communities. Results data collected to date indicate a high level of community participation and application of the community-driven development model. The current ratings for the progress towards achievement of the Project Development Objectives and implementation progress are both moderately satisfactory (MS). The Project has two outstanding audits for 2013 and The project has experienced some delays, due to (a) challenges faced in the initial formation of the PMU; (b) difficulties in providing adequate assistance to communities for preparing detailed technical designs of subprojects; (c) extreme weather conditions (associated with the El Niño) affecting outreach and transportation to remote communities; and (d) additional requirements (such as an endorsement letter from the Department of Finance) imposed by commercial banks to open community bank accounts. However, as most of these challenges have been resolved, except for the continued abnormal weather conditions, and the implementation of subprojects is rolling out, the Project is expected to achieve its development objectives, if the Project and Grant closing dates can be extended until February 28, In order to ensure the completion of the Project by the new proposed closing date, the Borrower has agreed to (a) immediately hire additional Provincial Support Unit staff (civil engineers and carpenters) to increase subproject implementation support to communities; (b) provide proactive and extensive support to communities on procurement as planned and summarized in the Annex B of the Aide Memoire from the Implementation Support Mission conducted in November 2015; and (c) submit withdrawal applications on a monthly basis to speed up disbursements. C. Proposed Changes Financing Change in Loan Closing (s): Explanation This restructuring proposes to extend the Project closing date by six months from August 31, 2016 to February 28, 2017 and the Grant closing date of TF18447 (SPF Grant) by twelve months from February 29, 2016 to February 28, The extension is needed to complete the remaining activities of the Project, which has experienced some delays due to capacity constraints, extreme weather conditions, and unexpected administrative requirements imposed on beneficiary communities by commercial banks. Most of these constraints, except for extreme weather conditions, have now been resolved, and the project is expected to require until February 28, 2017 to complete all its activities. If TF18447 becomes unavailable after February 29, 2016, the Project will not have sufficient funding to complete its activities and achieve the Project Development Objectives. Being a community-driven development (CDD) project, the Project has mobilized rural communities, and people have made extensive contributions to its activities. Given that communities have already provided a significant level of effort, time, and contribution toward the Project, failure to complete Project activities would have adverse implications, not only for the participating rural communities, but also for the future of participatory and decentralized governance models in the country in general, as confidence in community driven development would be eroded. Ln/Cr/TF Status Original Closing Current Closing Proposed Closing TF Effective 31-Aug Aug Aug-2016 Previous Closing (s) 6
7 TF Effective 29-Feb Feb Feb Feb-2016 Reallocations Explanation This restructuring proposes to combine the two disbursement categories of TF in order to increase the Recipient's flexibility to use TF for completing Project activities. The closing date of TF is expected to remain as August 31, 2016, as the entity that funded TF (Papua New Guinea Sustainable Development Program, Ltd.) is no longer in operation. Therefore, it is critical that the Recipient be given more flexibility to use TF towards project completion, especially after August 31, Ln/Cr/TF Currency Current Category of Expenditure Allocation Disbursement % (Type Total) Current Proposed Current Proposed TF USD GO, CS, TR, & IOC 1,800, ,800, TF USD SUB-GRANTS 1,400, ,400, Designated Account TF GO CS TRNG IOC TF SUB GRANTS Total: 3,200, ,200, ,500, , Designated Account TF GO, CS, TR, IOC, Subgrants ,800, Total: 1,800, ,800,
8 Independent State of Papua New Guinea: Rural Service Delivery and Local Governance Project (P126157) Restructuring Paper A. SUMMARY 1. This restructuring proposes to extend the Project closing date of the Rural Service Delivery and Local Governance Project (P126157) by six months from August 31, 2016 to February 28, 2017 and the Grant closing date of TF18447 (State- and Peace-Building Multi-Donor Trust Fund Grant: SPF Grant) by twelve months from February 29, 2016 to February 28, The extension is needed to complete the remaining activities of the Project, which has experienced some delays due to capacity constraints, extreme weather conditions, and unexpected administrative requirements (such as an endorsement letter by the Department of Finance) imposed on beneficiary communities by commercial banks. Most of these constraints, except for extreme weather conditions, have now been resolved, and the project is expected to complete activities by the proposed new Project closing date. The extension of the Project closing date will not require additional financing; however, this restructuring proposes to combine the two disbursement categories of TF18447, in order to increase the Recipient's flexibility to use the remaining funds of the grant toward the completion of the Project. The modifications proposed under this restructuring will not change the Project Development Objective (PDO). No new activities are being proposed. There is no escalation of the safeguard rating, and no additional safeguards policies are triggered. The closing date of TF15507 is expected to remain at August 31, 2016, as the entity that funded the grant (Papua New Guinea Sustainable Development Program, Ltd.) is no longer in operation. B. PROJECT STATUS 2. The Project was approved on September 30, 2013, signed on November 14, 2013, and also became effective on November 14, The Project Development Objective is to develop a community-driven development model to improve access to, and the quality of, basic services in rural communities, which is scaled-up by government. The Project supports rural communities to identify priority needs and prepare subproject proposals through trainings, and provides grants for the communities to implement their subprojects. Under the project, most of the target communities have (a) participated in project planning and implementation trainings; (b) identified and prioritized community development needs through participatory processes; (c) developed subproject proposals; (d) provided in-kind contribution for the subprojects (such as provision of community land, construction of auxiliary facilities, installation of community bulletin boards, etc.); and (e) opened (or are close to opening) community bank accounts. They have just received or are waiting to receive the community development grants from the Project to start implementing subprojects in communities. Results data collected to date indicate a high level of community participation and application of the community-driven development model. The current ratings for the progress towards achievement of the Project Development Objectives and implementation progress are both moderately satisfactory (MS). The Project has two outstanding audits for 2013 and The project has experienced some delays, due to (a) challenges faced in the initial formation of the PMU; (b) difficulties in providing adequate assistance to communities for preparing detailed technical designs of subprojects; (c) extreme weather conditions (associated with the El Niño) affecting outreach and transportation to remote communities; and (d) additional requirements (such as an endorsement letter from the Department of Finance) imposed by commercial banks to open community bank accounts. However, as most of these challenges have been resolved, except for the continued abnormal weather conditions, and the implementation of subprojects is rolling out, the Project is expected to achieve its development objectives, if the Project and Grant closing dates can be extended until February 28,
9 4. In order to ensure the completion of the Project by the new proposed closing date, the Borrower has agreed to (a) immediately hire additional Provincial Support Unit staff (civil engineers and carpenters) to increase subproject implementation support to communities; (b) provide proactive and extensive support to communities on procurement as planned and summarized in the Annex B of the Aide Memoire from the Implementation Support Mission conducted in November 2015; and (c) submit withdrawal applications on a monthly basis to speed up disbursements. C. PROPOSED CHANGES 5. This restructuring proposes to extend the Project closing date by six months from August 31, 2016 to February 28, 2017 and the Grant closing date of TF18447 (SPF Grant) by twelve months from February 29, 2016 to February 28, The extension is needed to complete the remaining activities of the Project, which has experienced some delays due to capacity constraints, extreme weather conditions, and unexpected administrative requirements imposed on beneficiary communities by commercial banks. Most of these constraints, except for extreme weather conditions, have now been resolved, and the project is expected to require until February 28, 2017 to complete all its activities. If TF18447 becomes unavailable after February 29, 2016, the Project will not have sufficient funding to complete its activities and achieve the Project Development Objectives. 6. Being a community-driven development (CDD) project, the Project has mobilized rural communities, and people have made extensive contributions to its activities. Given that communities have already provided a significant level of effort, time, and contribution toward the Project, failure to complete Project activities would have adverse implications, not only for the participating rural communities, but also for the future of participatory and decentralized governance models in the country in general, as confidence in community driven development would be eroded. 7. This restructuring also proposes to combine the two disbursement categories of TF-18447, in order to increase the Recipient's flexibility to use TF for completing Project activities. The closing date of TF is expected to remain at August 31, 2016, as the entity that funded TF (Papua New Guinea Sustainable Development Program, Ltd.) is no longer in operation. Therefore, it is critical that the Recipient be given more flexibility to use TF towards project completion, especially after August 31,
FOR OFFICIAL USE ONLY RESTRUCTURING PAPER ON A
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