Document of The World Bank FOR OFFICIAL USE ONLY Report No: RES10379 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE WEST BANK AND GAZA CASH TRANSFER PROJECT GRANT NUMBER TF099665 APPROVED MAY 10, 2011 TO THE PALESTINE LIBERATION ORGANIZATION (FOR THE BENEFIT OF THE PALESTINIAN AUTHORITY) {DATE OF RESTRUCTURING} HUMAN DEVELOPMENT SECTOR MIDDLE EAST AND NORTH AFRICA 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. ABBREVIATIONS AND ACRONYMS AF Additional Financing CTP Cash Transfer Program EU European Union IDA International Development Association IFR Interim Financial Report ISR Implementation Status Report IT Information Technology M&E Monitoring and Evaluation MENA Middle East and North Africa Region MIS Management Information System MOF Ministry of Finance MOSA Ministry of Social Affairs OM Operations Manual ORAF Operational Risk Assessment Framework PA Palestinian Authority PMT Proxy Means Test PMU Project Management Unit PP Procurement Plan TA Technical Assistance TFGA Trust Fund Grant Agreement TGWB Trust Fund for Gaza and West Bank WBG West Bank and Gaza WBGCTP West Bank and Gaza Cash Transfer Project Regional Vice President: Inger Andersen Country Director: Mariam J. Sherman Sector Manager: Yasser El-Gammal Task Team Leader: Samira Ahmed Hillis 2 WEST BANK AND GAZA WEST BANK AND GAZA CASH TRANSFER PROJECT CONTENTS A. SUMMARY 6 B. PROJECT STATUS 6 C. PROPOSED CHANGES 7 3 DATA SHEET West Bank and Gaza Cash Transfer Project (P119307) MIDDLE EAST AND NORTH AFRICA MNSSP Basic Information Project ID: P119307 Lending Instrument: Specific Investment Loan Regional Vice President: Inger Andersen Original EA Category: Not Required (C) Country Director: Mariam J. Sherman Current EA Category: Not Required (C) Sector Director: Steen Lau Jorgensen Original Approval Date: 10-May-2011 Sector Manager: Yasser El-Gammal Current Closing Date: 31-Dec-2013 Team Leader: Samira Ahmed Hillis Report No: RES10379 Palestine Liberation Organization (for the Benefit of the Palestinian Borrower: Authority) Responsible Ministry of Social Affairs (MOSA) and Ministry of Finance (MOF) Agency: Restructuring Type Form Type: Short Form Approval Authority: Country Director Approval Restructuring Level 2 Level: Financing ( as of 21-May-2013 ) Key Dates Approval Effectiveness Original Revised Project Ln/Cr/TF Status Signing Date Date Date Closing Date Closing Date P119307 TF-99665 Effective 10-May-2011 10-May-2011 23-May-2011 31-Dec-2013 31-Dec-2013 Disbursements (in Millions) % Cancelle Disburse Undisbur Project Ln/Cr/TF Status Currency Original Revised Disburse d d sed d P119307 TF-99665 Effective USD 10.00 10.00 0.00 8.87 1.13 89 Policy Waivers Does the project depart from the CAS in content or in other significant Yes [ ] No [ X ] respects? Does the project require any policy waiver(s)? Yes [ ] No [ X ] 4 A. Summary of Proposed Changes. Extension of the closing date by one year and reallocation of grant proceeds B. Project Status The WBGCTP has been implemented according to schedule and is on track to achieve its development objectives. C. Proposed Changes Extension of the closing date by one year from December 31, 2013 to December 31, 2014, and reallocation of grant proceeds by a transfer of US$330,000 from Category 3 (Project Operating Costs) to Category 1 (Cash Transfers). Financing Change in Loan Closing Date(s): A one year extension from December 31, 2013 to December 31, 2014. Explanation. Part A “Cash Transfers� will be fully disbursed by end of June 2013, six months ahead of schedule, but more time is required for expenditures for Part B “CTP Reforms.� This will be the first extension of the closing date. Original Closing Current Closing Proposed Closing Previous Closing Ln/Cr/TF Status Date Date Date Date(s) TF-99665 Effective 31-Dec-2013 31-Dec-2013 31-Dec-2014 Reallocations Explanation. Expenditures for project operating costs have been less than estimated; on the other hand, there is a shortage of funds for the June 2013 quarterly payment to beneficiary households financed by the Bank Grant. Current Category of Disbursement % (Type Ln/Cr/TF Currency Allocation Expenditure Total) Current Proposed Current Proposed CASH TRANSFERS 9,000,000.0 9,330,000.0 TF-99665 USD UNDER PART A OF 50.00 50.00 0 0 PROJ GDS,CONS SER INC AUDIT UNDER PART 350,000.00 350,000.00 100.00 100.00 B PROJECT OPERATING 650,000.00 320,000.00 100.00 100.00 COSTS Designated Account 0.00 0.00 0.00 0.00 10,000,000. 10,000,000. Total: 00 00 5 A. SUMMARY A Level II restructuring of the West Bank and Gaza Cash Transfer Project (WBGCTP, TF099665) is proposed and includes the following changes: (i) reallocation of grant proceeds; and (ii) extension of the closing date. B. PROJECT STATUS The Project, in the amount of US$10 million from the Trust Fund for Gaza and the West Bank (TFGWB), became effective on May 23, 2011 and is scheduled to close on December 31, 2013. The Project is part of a much larger cash transfer program (CTP) financed by the Palestinian Authority (PA) and the European Union (EU). The Project Development Objective (PDO) is to: (i) mitigate the impact of the continued socio-economic crisis on a subset of the extremely poor and most vulnerable households; and (ii) support the Palestinian Authority’s (PA) efforts to continue reforms of the CTP. The project has two components: Component 1 – Cash benefits. This component aims at distributing quarterly cash payments to about 5,500 households living below the extreme poverty line, in accordance with the 2007 Palestinian Central Bureau of Statistics poverty distribution. The CTP extremely poor beneficiary households are identified by the Proxy Means Test Formula (PMTF), which is the main targeting modality for the CTP. The method used to determine the level of cash benefits is called “bridging of the poverty gap,� which sets the benefit level at an agreed upon percentage of the poverty gap (currently it is set at 50%). In accordance with the “Withdrawal of Grant Proceeds� in the Trust Fund Grant Agreement (TFGA), this component is being co-financed by the PA, which has agreed to contribute 30% of the cash benefits for the first twelve months and 50% thereafter. Component 2 - Support to the PA’s efforts to continue reforms of the Cash Transfer Program. This component supports MOSA in its efforts to adhere to its reform agenda by continuing outreach for CTP targeting, working to ensure that all households living below the extreme poverty line are included in the CTP, enhancing the security of the Management Information System (MIS), and engaging in a constant monitoring and re-certification process to determine a household’s eligibility to remain in the program. The WBGCTP has been implemented according to schedule and is on track to achieve its development objectives. By bridging the poverty gap for all beneficiary households, the overall cash transfer program, of which the WBGCTP is a part, contributes to mitigate the impact of the socio-economic crisis on extremely poor and most vulnerable households. The US$10 million grant is 89 percent disbursed (as of May 21, 2013), and the amount allocated to the cash benefits component is to be fully disbursed by June 30, 2013 - six months ahead of schedule. 6 C. PROPOSED CHANGES The proposed changes include a one-year extension of the closing date from December 31, 2013 to December 31, 2014, and a reallocation of grant proceeds. The PA requested these changes in two letters dated May 16, 2013, including the implementation plan for the period up to the proposed new closing date of December 31, 2014. The following table shows the proposed reallocation of grant proceeds. Category Original Changes Revised Allocation (US$) Allocation (US$) (US$) (1) Cash Transfer under Part A of the Project 9,000,000 + 330,000 9,330,000 (2) Goods, consultants’ services, including audit, under Part B of the Project 350,000 - 350,000 (3) Project Operating Costs 650,000 - 330,000 320,000 Total 10,000,000 - 10,000,000 Rationale for the proposed changes A reallocation of grant proceeds for the project is appropriate at this stage of project implementation. Actual expenditures under expenditure Category 3 (Project Operating Costs) have been less than originally estimated; on the other hand, the Cash Transfer component has been disbursing ahead of schedule and actually there are not enough funds left in expenditure Category 1 (Cash Transfers) for the June 2013 quarterly benefit payment by the Bank. The reallocation of US$330,000 from Category 3 to Category 1 is justified since it will enable the Bank to continue to contribute to the payment of cash benefits to the poorest households; in a social protection project, priority has to be given to the needs of the poor and vulnerable rather than to operating costs. After the proposed reallocation of grant proceeds, there will be a balance of US$ 901,734 for Category 1 (Cash Transfers) to be fully disbursed for the June 2013 payment of cash benefits to eligible households. There will be an undisbursed balance of US$ 310,000 for Category 2 (Goods and Consultants’ Services) and an undisbursed balance of US$ 319,500 for Category 3 (Project Operating Costs). The undisbursed balance of US$ 310,000 in expenditure Category 2 (Goods and Consultants’ Services) will be spent by MOSA to secure its MIS system and to pay consultants and the cost of the external financial audit. Consistent with its disaster recovery plan, MOSA will procure database security hardware and IT equipment for upgrading the infrastructure of its data center. Consultants include the staff of MOSA’ Project Management Unit (PMU). The undisbursed balance of US$ 319,500 in expenditure Category 3 (Project Operating Costs) will be spent by MOSA to cover eligible operating costs, particularly expenditures for training of 7 social workers, transportation, communication, etc. necessary to carry out the campaign to update MOSA database. The one-year extension of the closing date is necessary to allow the use of the undisbursed balances to secure MOSA’s MIS system and to update MOSA database. In 2014, MOSA will revise the proxy means test (PMT) formula based on the most recent data from the Palestinian Central Bureau of Statistics (PCBS) and the Palestinian Household Expenditure and Consumption Survey (PECS), as well as the findings and recommendations of the Targeting Assessment. In addition, in its efforts to ensure that all extremely poor households are included in the cash transfer program, MOSA intends to increase the number of beneficiary households receiving cash benefits under the whole program. The project is on track to achieve its development objective and the latest ISR rates progress in achieving the development objective as satisfactory; (ii) project implementation is rated satisfactory in the last ISR; (iii) the project is in full compliance with the provisions of the Trust Fund Grant Agreement and is current on all reports including the audit reports; (iv) there are no unresolved fiduciary, environmental, social, or other safeguard problems; and (v) the proposed extension of closing date and reallocation are justified in supporting the project to reduce the vulnerability of the poor in West Bank and Gaza. 8