The World Bank Integrated Public Financial Management Reform Project (P164783) REPORT NO.: RES48466 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF INTEGRATED PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT APPROVED ON JUNE 27, 2018 TO NEPAL GOVERNANCE SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Faris H. Hadad-Zervos Regional Director: Zoubida Kherous Allaoua Practice Manager/Manager: Hoon Sahib Soh Task Team Leader(s): Timila Shrestha, Shambhu Prasad Uprety, Syed Waseem Abbas Kazmi The World Bank Integrated Public Financial Management Reform Project (P164783) I. BASIC DATA Product Information Project ID Financing Instrument P164783 Investment Project Financing Original EA Category Current EA Category Not Required (C) Not Required (C) Approval Date Current Closing Date 27-Jun-2018 15-Jul-2022 Organizations Borrower Responsible Agency Nepal Ministry of Finance Project Development Objective (PDO) Original PDO Strengthening the effectiveness of selected PFM institutions and procurement institutions, systems and procedures at the federal and subnational levels Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A7474 28-Jun-2018 24-Aug-2018 24-Aug-2018 15-Jul-2022 6.12 2.34 3.78 TF-A7475 28-Jun-2018 24-Aug-2018 24-Aug-2018 30-Sep-2021 2.88 1.62 1.26 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Integrated Public Financial Management Reform Project (P164783) II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES 1. Required Extension - A need has arisen to extend TF0A7475 of the Project up to July 15, 2022 aligning with the closing of the other TF0A7474 under the Project. The TF0A7475 could only be extended up to September 30, 2021 through earlier restructuring of July 2021 due to the closing date of its Parent TF of January 2022. As Parent TF has now been extended up to January 2024, the extension of TF0A7475 is proposed to ensure utilization of the remaining balance of USD 838,000, which is net of USD 422,046 currently being processed for reimbursement. The original closing date of TF0A7475 of July 30, 2021 has only been extended once earlier to September 30, 2021. 2. Implementation Progress - While the implementation and disbursement of the Project was initially slow, the disbursement has recently picked up despite the pandemic challenges with the total disbursement of USD 3.96 million (USD 2.34 million for TF0A7474 and USD 1.62 million for TF0A7475) as of September 26, 2021, which is 44% of the net committed amount of USD 9 million (net of USD 5 million cancelled from original commitment of USD 15 million). The approval of currently submitted withdrawal application of USD 422,046 will further increase the disbursement rate to 49% shortly. Given the pandemic situation, the switch to virtual mode for many of the planned activities, e.g. trainings, consultations etc. also resulted in reduction in planned disbursement. Otherwise, those activities would have increased disbursement even further. Such savings are being reallocated to other additional reform activities within the project scope as per the government’s needs as the Project has the flexibility of Just-in-time sub-component and has only one category. 3. The components implemented by PEFA Secretariat, Financial Comptroller General Office, Office of the Auditor General and Ministry of Federal Affairs and General Administration are progressing well. The slow moving procurement activities of National Planning Commission, Public Accounts Committee, Ministry of Finance and Institute of Chartered Accountants of Nepal have also now picked up. The Public Procurement Monitoring Office has also amended the ITC/ILO contract to address the pandemic challenges and the capacity building activities have now been resumed. Based on the progress made, the overall implementation progress and procurement performance was upgraded to “Moderately Satisfactory” in July 2021. The government has also committed to expedite implementation and spend the entire remaining balance of USD 5.04 million by the Project closing of July 15, 2022 to the extent possible given the pandemic situation. 4. There is no outstanding audit or financial management and procurement issues. The audit of FY 2019/20 has been received with unqualified audit opinion. 5. Action Plan - The following action plan has been agreed with the government to complete major activities by December 2021 (subject to pandemic risks): (i) Strengthening public expenditure and revenue management in federal and subnational governments – Finalization of Medium Term Expenditure Framework Guidelines for federal and provincial governments, Internal Controls Guidelines for three tiers of the government, Training Needs Assessment for PFM capacity building of three tiers of the government, IFMIS assessment with roadmap for integrating various fragmented PFM systems of three tiers of the government and Citizen Engagement Strategy in PFM for three tiers of the government (ii) Strengthening the capacity of the Office of the Auditor General – Piloting of the various developed audit guidelines and Nepal Audit Management System based on the international standards (iii) Improving public procurement capacity, monitoring and oversight – Completing around 60% of the total planned capacity building activities on procurement for three tiers of government in partnership with ITC/ILO (iv) Strengthening public financial management reform management and coordination – Ongoing The World Bank Integrated Public Financial Management Reform Project (P164783) 6. The Bank will also enhance and intensify efforts to monitor and support the government to expedite implementation with monthly review meetings and expanded hands-on support. III. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-A7474 Effective 30-Jul-2021 15-Jul-2022 TF-A7475 Effective 30-Jul-2021 30-Sep-2021 15-Jul-2022 15-Nov-2022