Eugene Armor 25-Sep-2020 Secretary Department of Finance and Administration P.O. Box PS 158 Palikir, Pohnpei State Federated States of Micronesia Federated States of Micronesia: Grant Number D014-FM The Pacific Islands Regional Oceanscape Program Project Amendment to the Financing Agreement and Revision to the Results Framework for the Project Dear Secretary: We refer to the Financing Agreement between the Federated States of Micronesia (“Recipient”) and the International Development Association (“Association”) for The Pacific Islands Regional Oceanscape Program Project (“Project”), dated March 20, 2015 (“Financing Agreement”). We also refer to the Recipient’s letter dated December 12, 2019 and the aide-memoire for the supervision of the Project carried out on February 3-7, 2020, requesting certain amendments to the Financing Agreement and changes to the results framework for the Project. All capitalized terms used in this letter shall have the same meanings assigned to them in the Financing Agreement unless the context requires otherwise. We are pleased to inform you that the Association concurs with your request, and: (i) proposes to amend the Financing Agreement by way of this letter; and (ii) agrees to revise the results framework for the Project, all as set out below: I. Amendments to the Financing Agreement 1. Section I.A.1 (Forum Fisheries Agency) of Schedule 2 to the Financing Agreement is deleted in its entirety and replaced by the following: “1. Forum Fisheries Agency To ensure proper regional coordination, the Recipient shall, in collaboration with FFA and the other Participating Countries, take all necessary measures on its part to ensure that the Program Support Unit (PSU), established within FFA, is maintained until the closing date specified in the FFA PROP Financing Agreement, with mandate and adequate resources, to be responsible for, inter alia, carrying out independent verification of achievement of DLIs under Part l(a) of the Project; assisting the Recipient with processing of international procurement activities; preparing, in collaboration with NORMA, documentation required for national level Project procurement processing; as well as collaborating on day-to-day implementation and financial reporting as required for the Project.” 2. Section I.A.5(a) of Schedule 2 to the Financing Agreement is deleted in its entirety and replaced by the following: “(a) To facilitate proper and efficient implementation of the Project, the Recipient shall, by not later than six (6) months after the Effective Date, enter into and maintain, until the Federated States of Micronesia 2 closing date specified in the FFA PROP Financing Agreement, a Service Agreement with FFA, under terms and conditions acceptable to the Association pursuant to which the FFA, through the PSU, shall provide technical, fiduciary, monitoring and implementation support to the Recipient, including, inter alia, carrying out verification of achievement of DLIs under Part 1(a) of the Project, and procurement services as detailed in Section I.A.l of this Schedule 2.” 3. A new paragraph 4 is added to Section I.B (Program Operations Manual) of Schedule 2 to the Financing Agreement to read as follows: “4. The Recipient shall, by not later than October 30, 2020, prepare and adopt an updated POM, in form and substance acceptable to the Association, to reflect the revised indicators for monitoring and evaluation of the Project.” 4. Section I.E (DLI Monitoring and Reporting) of Schedule 2 to the Financing Agreement is deleted in its entirety and replaced by the following: “E. DLI Monitoring and Reporting 1. The Recipient shall: (a) in accordance with the Service Agreement, make all necessary arrangements for the independent verification agent appointed by FFA, to carry out independent verifications of the status of achievement of all DLI Targets for the periods specified in the Annex to Schedule 2 to this Agreement as 2015 to 2018/2019, all in accordance with the verification protocol and procedures set out in the Program Operations Manual; and (b) appoint an independent verification agent, with terms of reference and qualifications satisfactory to the Association, to carry out independent verification of the status of achievement of all DLI Targets for the period specified in the Annex to Schedule 2 to this Agreement as 2019/2020, all in accordance with the verification protocol and procedures set out in the Program Operations Manual. 2. Without limitation on its other reporting obligations under this Agreement, the Recipient shall: (a) by not later than January 31 of each year during the implementation of the Project, furnish reports to the FFA or the independent verification agent appointed pursuant to Section I.E.1(b) above, as the case may be, on the status of achievement of the relevant DLI Targets; (b) take all necessary measures on its part to ensure that the FFA furnishes to the Association the reports of the independent verification agent referred to in Section I.E.1(a) above, by not later than March 31 of each relevant year during the implementation of the Project, all in accordance with the verification protocol set out in the Program Operations Manual; and Federated States of Micronesia 3 (c) ensure that the report of independent verification agent appointed pursuant to Section I.E.1(b) above is furnished to the Association by not later than May 31, 2021, all in accordance with the verification protocol set out in the Program Operations Manual.” 5. The withdrawal table detailed in Section IV.A.2 of Schedule 2 to the Financing Agreement is amended to read as set forth in Attachment 1 to this letter. 6. Section IV.B.6 of Schedule 2 to the Financing Agreement is deleted in its entirety and replaced by the following: “6. The Closing Date is September 30, 2021.” 7. The Annex to Schedule 2 to the Financing Agreement is amended to read as set forth in Attachment 2 to this letter. 8. A new definition of “FFA PROP Financing Agreement” is added as paragraph 18 of Section I of the Appendix to the Financing Agreement to read as follows, and the subsequent paragraphs are renumbered accordingly: “18. “FFA PROP Financing Agreement” means the financing agreement for The Pacific Islands Regional Oceanscape Program Project between FFA and the Association, dated January 29, 2015, as such agreement may be amended from time to time (Grant Number D023-4P).” 9. Renumbered paragraph 21 (originally paragraph 20) of Section I of the Appendix to the Financing Agreement is amended to read as follows: “21. “Incremental Operating Costs” means reasonable expenditures directly related to the Project (which expenditures would not have been incurred absent the Project), based on an annual budget for such costs approved ex-ante in writing by the Association, including expenditures for consumable materials, office supplies, communications services (including postage handling, telephone and internet costs), publication services, translation services, office space rental and utilities, maintenance of office equipment and operation, freight and insurance costs, meeting expenses, membership fees and dues, advertising and printing costs, bank charges, administrative staff, Project implementation support personnel and travel-related expenses for Project staff but excluding salaries, bonuses, fees and honoraria of members of the Recipient’s civil service.” II. Revisions to the Results Framework 1. The agreed revised results framework for the Project will be reflected in the Program Operations Manual, which will be updated and adopted by the Recipient by not later than October 30, 2020 in accordance with the provisions of the Financing Agreement. Except as specifically amended by this letter, all other provisions of the Financing Agreement shall remain in full force and effect. Federated States of Micronesia 4 Please confirm the Recipient’s agreement to the amendments set out above by countersigning, dating and returning to us one original of this letter. Upon receipt by the Association of a duly countersigned original of this letter, such amendments shall become effective as of the date of the countersignature, except that the amendments set out in paragraphs I.5 and I.9 above shall become effective retroactively as of March 20, 2015. Sincerely, Michel Kerf Country Director Papua New Guinea & Pacific Islands East Asia and Pacific Region AGREED: FEDERATED STATES OF MICRONESIA By _________________________________ Authorized Representative Eugene Amor Name: _________________________________ Secretary of Finance & Administration Title: _________________________________ 27-Sep-2020 Date: _________________________________ Federated States of Micronesia 5 ATTACHMENT 1 Amended table under Section IV.A.2 of Schedule 2 to the Financing Agreement Amount of the Grant Percentage of Allocated Expenditures to be Category (expressed in SDR) Financed (inclusive of Taxes) (1) Goods, works, non-consulting 2,117,607 100% services, consultants’ services and Incremental Operating Costs for the Project (except under Part 1(a) of the Project) (2) DLI Expenditures under Part 1(a) 1,682,393 100% of the Project TOTAL AMOUNT 3,800,000 Federated States of Micronesia 6 ATTACHMENT 2 Amended Annex to SCHEDULE 2 to the Financing Agreement Disbursement Linked Indicators with DLI Targets and DLI Values DLIs 2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 (formerly, (formerly, (formerly, (formerly, (formerly, (formerly, FY2015/20 FY2016/20 FY2017/20 FY2018/20 FY2019/20 FY2020/20 16) 17) 18) 19) 20) 21) DLI 1: DLI DLI DLI DLI DLI DLI Number of Target: Target: Target: Target: Target: Target: purse seine 100% or 100% or 100% or 100% or 100% or 100% or tuna less of its less of its less of its less of its less of its less of its fishing agreed agreed agreed agreed agreed agreed days fished annual annual annual annual annual annual in the allocation allocation allocation allocation allocation allocation Recipient’s waters DLI DLI DLI DLI DLI DLI Value: Value: Value: Value: Value: Value: SDR SDR SDR SDR SDR SDR 34,139 73,000 73,000 73,000 73,000 89,000 DLI 2: DLI DLI DLI DLI DLI DLI (i) Number Target: Target: Target: Target: Target: Target: of purse 100% 100% 100% 100% 100% 100% seine fishing DLI DLI DLI DLI DLI DLI vessel days Value: Value: Value: Value: Value: Value: used in the SDR SDR SDR SDR SDR SDR Recipient’s 106,115 146,000 146,000 146,000 146,000 162,000 waters recorded annually according to agreed criteria (ii) Number of purse seine fishing days used and sold in the Recipient’s waters disclosed Federated States of Micronesia 7 annually to the PNAO FIMS and other Parties to the Nauru Agreement as part of a comprehen sive verification system for the VDS DLI 3: DLI DLI DLI DLI DLI DLI Proportion Target: Target: Target: Target: Target: Target: of purse 89% 100% 100% 100% 100% 100% seine tuna catch within the DLI DLI DLI DLI DLI DLI Recipient’s Value: Value: Value: Value: Value: Value: waters that SDR SDR SDR SDR SDR SDR is 34,139 73,000 73,000 73,000 73,000 89,000 encompass ed within the VDS or a compatible system