The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) REPORT NO.: RES41075 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ECUADOR RISK MITIGATION AND EMERGENCY RECOVERY PROJECT APPROVED ON MARCH 15, 2016 TO MINISTRY OF ECONOMY AND FINANCE URBAN, RESILIENCE AND LAND LATIN AMERICA AND CARIBBEAN Regional Vice President: J. Humberto Lopez (Acting) Country Director: Marianne Fay Regional Director: Anna Wellenstein Practice Manager/Manager: Ming Zhang Task Team Leader(s): Diana Marcela Rubiano Vargas, Alexander Agosti The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) ABBREVIATIONS AND ACRONYMS CD Country Director ERL Emergency Recovery Project (ERL) GoE Government of Ecuador MAG Ministerio de Agricultura y Ganadería (Ministry of Agriculture and Livestock) MEF Ministerio de Economía y Finanzas (Ministry of Economy and Finance) MINEDUC Ministerio de Educación (Ministry of Education) PDO Project Development Objective MIES Ministerio de Inclusión Económica y Social (Ministry of Economic and Social Inclusion) VAT Value Added Tax MSP Ministerio de Salud Pública (Ministry of Public Health) UCP Unidad Coordinadora del Proyecto (Project Coordination Unit) The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) BASIC DATA Product Information Project ID Financing Instrument P157324 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 15-Mar-2016 07-Sep-2020 Organizations Borrower Responsible Agency Ministry of Economy and Finance Ministry of Finance Project Development Objective (PDO) Original PDO The Project Development Objective is to reduce the potential effects of the El Niño phenomenon and the Cotopaxi volcano, and support the recovery of basic and production services in affected areas in case of an Eligible Disaster, in selected sectors. Current PDO To support the recovery of basic and productive services in selected sectors in affected areas in case of an Eligible Disaster and strengthen resilience to natural disasters and macroeconomic shocks OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-85910 15-Mar-2016 22-Apr-2016 19-Jul-2016 07-Sep-2020 59.59 6.57 53.01 The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The Ecuador Risk Mitigation and Emergency Recovery Project (ERL, Project) was approved by the Bank on March 15, 2016 and declared effective on July 19, 2016. Its revised Project Development Objective (PDO) is to “support the recovery of basic and productive services in selected sectors in affected areas in case of an Eligible Disaster and strengthen resilience to natural disasters and macroeconomic shocks”. The first restructuring was approved on April 23, 2019 and covered the following changes: (i) PDO change to remove the reference to the mitigation of risks from the El Niño phenomenon and Cotopaxi volcano and add the reference to strengthening resilience to natural disasters and macroeconomic shocks; (ii) revision in description of components and costs; (iii) reallocation of funds between components and disbursement categories to reflect a cancellation of US$58.2 million, as requested by the Government of Ecuador (GoE) on September 27, 2018; (iv) change in the Results Framework; (v) update of disbursement estimates, and (vi) update of implementation arrangements to include the Ministry of Education (MINEDUC) and the Works Contracting Service (SECOB), and exclude the Ministry of Agriculture and Livestock (MAG). The second restructuring was approved on September 9, 2019 and covered the following changes: (i) cancellation of further US$32.2 million requested by the GoE due to delays in Project implementation, the approaching Project closing date, and the desire to reprogram funds to address emerging national priorities; (ii) changes in investments and decrease of funding for Component 2; (iii) changes in Disbursement Categories; (iv) update of Disbursement Estimates, adjusted based on the agreed revised definition of the Project scope. The third restructuring was approved on March 12, 2020 and included the amendment of the Project’s Loan Agreement to finance value-added tax (VAT) fees under Components 2 and 3, as requested by the GoE, and the associated changes in the scope of the Project. 2. The Project´s disbursement rate as of March 27, 2020 is 11 percent (US$6.57 million). The progress towards achievement of the PDO and the Overall Implementation Progress (IP) are both rated Moderately Unsatisfactory (MU) due to the slow implementation. 3. The status of the Project’s components is as follows: Component 1: Disaster Preparedness and Risk Mitigation (US$3.78 million): This component aimed to mitigate the potential impacts of the hazards expected from El Niño. To date, the Project financed and completed successfully the construction of six flood mitigation works totaling US$3.78 million, which protected a total of 173,000 hectares of crops and 203,600 people. In addition, flood control works mitigated the effects of heavy rains during the first half of 2016. No further activities are expected to be financed under Component 1. The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) Component 2: Post-Disaster Recovery and Reconstruction (US$52.53 million): This component aims to provide recovery and reconstruction support to selected sectors, should an Eligible Disaster1 occur. Two disasters hit Ecuador after the Project was approved and based on which the component was activated: (i) a M7.8 earthquake that struck the country’s northwest coast; and (ii) a series of flooding events and landslides induced by the El Niño phenomenon. Following a series of damage assessments2, the GoE decided to use the ERL mainly to finance the recovery and reconstruction efforts. In April 2019, the following were confirmed as the Bank-funded activities for recovery and reconstruction prior to the second Project restructuring: (i) acquisition of 40 ambulances and purchase of various types of medical supplies and equipment by the Ministry of Public Health (MSP), purchase of various types of medical supplies and equipment -including a mobile hospital tent; (ii) rehabilitation of a provincial road between Abdón Calderón-El Quingue and reconstruction of a fishing and cabotage terminal of the Port of Manta by the Ministry of Transport and Public Works (MTOP); and (iii) construction of a school called Plan Masa by the Ministry of Education (MINEDUC) and the Works Contracting Service (SECOB). The construction of the school and the rehabilitation of the road and were canceled through formal letters dated on October 14, 2019 and January 23, 2020, respectively. During the last mission in February 2020, the Bank team was informed that the signing of the contract for the reconstruction of the docking terminal at the Port of Manta would take place in March 2020, after which the works would be initiated, while the procurement process of the ambulances was still ongoing. To date, US$1.97 million have been disbursed from Component 2 for the reimbursement of medical supplies to strengthen 86 health units in response to health needs after the disasters. Component 3: Technical Assistance (TA) to MEF and Project Implementation, Monitoring and Evaluation (US$3.27 million): This component supports TA activities to MEF and operational support to the PCU and the co-executing agencies to implement, monitor and evaluate the Project. These include: (i) hiring a Project Coordinator and specialists in financial management, procurement, and monitoring and evaluation for the PCU; (ii) hiring temporary technical staff as needed during Project implementation (e.g. environmental and social specialists); (iii) carrying out Project audits; (iv) financing goods and equipment as needed for efficient Project implementation, and (v) carrying out TA to build the GoE’s capacity to advance macroeconomic and structural reforms that are critical to increasing Ecuador’s macroeconomic resilience. Since early stages of Project implementation, the PCU has remained fully staffed and Component 3 has disbursed US$0.59 million. 4. The Project’s safeguards performance has been rated Moderately Satisfactory to date. The Project is categorized as B under the Bank Operational Policy 4.01 on Environmental Assessment. It has an Environmental and Social Screening Assessment Framework (ESSAF) that the MEF prepared with Bank support and was originally disclosed on April 22, 2016. The ESSAF includes an Indigenous Peoples’ Planning Framework (IPPF), a Resettlement Framework (RF) and guidelines for communication with stakeholders, including for Grievance Redress Mechanisms (GRM). The Project has no on-going or pending safeguards-related work. 1 As defined in the Loan Agreement 8591-EC: “Eligible disaster means any natural disaster, national or localized in scope, that poses or is likely to imminently pose a threat to life, assets, or productive capacity of the Borrower, which can be originated by: (a) geological hazards, an extreme natural event originated in the crust of the earth such as earthquakes, volcanic eruptions, tsunamis (tidal waves), and landslides (as a secondary event after an earthquake); (b) hydro-meteorological hazards, events produced by the climate variability as heavy rains, flooding, and landslides; and (iii) intensified El Niño phenomenon causing heavy rains, floods, storms surge or landslides. 2 Damage information on the earthquake can be found in: SENPLADES. 2016. “Reconstruction Cost Assessment” Retrieved on May 2018. http://www.planificacion.gob.ec/wp-content/uploads/downloads/2017/04/Evaluacion-de-los-Costos-de-Reconstruccion- Libro-Completo.pdf. Damage information on the 2015-16 El Niño can be found in: CIFEN 2016. “Informe de evaluación de impactos del Fenómeno del Nino 2015-2016 – Contexto Regional” http://www.prasdes-ciifen.org/index.php/publicaciones/doc_download/46- estudio-tecnico-sobre-impactos-del-enso-2015-2016 (Retrieved on May 2018). The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) 5. Procurement of major works is underway but remains in the initial stages. Despite the efforts of the PCU and the Bank to provide support to the co-executing agencies, the procurement of most works/shopping is still in an early stage although the process for the rehabilitation of the Manta Port and the acquisition of 40 ambulances has seen some progress in the past months/early in 2020. The Project has only managed to complete a few processes for small amounts and is yet to sign any contracts for works. 6. Financial Management has been rated Moderately Satisfactory. The Project has faced weaknesses on planning Project activities (POA and budget), high fiduciary staff turnover in co-implementing entities (which demands close follow-up by the UCP team) and the audit contracting process for CY2019 is ongoing. The audit report for CY2018 arrived in a timely manner and was considered acceptable to the Bank. The report issued an unqualified audit opinion. The auditor recommended to improve frequency of inventories of fixed assets at the Ministry of Public Health (MSP) and the recommendation is being implemented. Currently, there are no overdue audits. Other aspects related to funds flow, internal controls and financial reporting are working well. 7. Rationale for Restructuring. This Restructuring Paper seeks Country Director (CD) approval to Project support for response and recovery during the health emergency related to COVID-19, as requested by the GoE in two letters: one dated March 23, 2020 and the other one dated March 25, 2020. The inclusion of new eligible expenditures and the extension of the closing date from September 7, 2020 to September 7, 2021 will allow for the full use of the total remaining loan amount of US$59,585,551.59, no additional financing is anticipated. 8. An outbreak of COVID-19 caused by the 2019 novel coronavirus (SARS-CoV-2) has been spreading rapidly across the world since December 2019, following the diagnosis of the initial cases in Wuhan, Hubei Province, China. Since the beginning of March 2020, the number of cases outside China has increased rapidly and the number of affected countries and people continues to grow. On March 11, 2020, the World Health Organization (WHO) declared COVID-19 a global pandemic. As of March 27, WHO data showed that the outbreak has resulted in an estimated 595,800 confirmed cases and 27,324 deaths in 176 countries/regions3. Current pandemic trends indicate that some population sub-groups are at higher risk of increased COVID-19 related morbidity and mortality, including older adults, and people who have serious chronic medical conditions like heart disease, diabetes, and lung disease. The actual prevalence of COVID-19 infection remains unknown in most countries. Therefore, it poses an unparalleled challenge with respect to global containment and mitigation. The virus and response interventions will behave differently in higher-resource than in lower-resource countries, depending on crowding, capacity for diagnosis and treatment, and ability to reduce spread. 9. The GoE declared a national emergency due to the rapid spread of COVID-19 on March 16, 2020. On March 11, MSP declared a health emergency (Ministerial Resolution N. 00126-2020), and on March 16, President Moreno signed Presidential Decree N. 1017 declaring a national emergency to contain the spread of the disease. On March 20, President Moreno announced two payments of a US$60 emergency cash transfer (one in April and other in May) for 400,027 vulnerable families affected by the COVID-19 quarantine, which will be administered by the Ministry of Economic and Social Inclusion (MIES). As of March 28, 2020, there were 1,823 confirmed cases, 2,503 suspected cases and 48 deaths related to of COVID-19 in Ecuador. Around 74 percent of all cases were confirmed in the state of Guayas.4 3https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6 4https://www.salud.gob.ec/el-ministerio-de-salud-publica-del-ecuador-msp-informa-situacion-coronavirus/. Daily updates on the COVID-19 situation globally is available for example at the following website of the Johns Hopkins University: The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) 10. The World Bank Group (WBG) is taking urgent action to support countries in responding to the global health crisis generated by COVID-19. WBG senior management has supported the establishment of a US$14 billion WBG Fast Track COVID-19 Facility (FTCF) to assist International Bank for Reconstruction and Development (IBRD) and International Bank for Reconstruction and Development (IDA) eligible countries in their efforts to prevent, detect and respond to the threat posed by COVID-19 and strengthen national systems for public health preparedness. The WBG is committed to supporting its clients through this platform and the existing lending operations. 11. The COVID-19 response must support the imperative of healthy populations. Available evidence now shows that COVID-19 is causing mild and self-limiting disease in most people who are infected, with severe disease among individuals from higher risk groups. Governments have an obligation to protect their population’s wellbeing by adopting population-based disease prevention measures as fiscal and regulatory measures, in addition to providing medical care to those who fall ill. This can result in major gains for public health and countries’ social and economic development. A reduced ratio of healthy to sick workers or older dependents would increase the odds of future economic slowdowns and pose a significant social challenge to countries. Keeping people healthy is vital for the future development of countries in an aging world where skills shortages are a growing challenge. 12. Negative impact of COVID-19 on poverty reduction and vulnerable groups. The COVID-19 outbreak can further set back the fight against poverty. The potential tightening of credit conditions, weaker growth and the diversion of expenditures to fight the outbreak are likely to cut into government revenues and governments’ ability to invest in infrastructure, education and health, and meet gender goals. The poor will be hit particularly hard. In countries without universal health coverage, the financial impact of COVID-19 on the population, particularly low-income groups, could be significant or even catastrophic due to increased out-of-pocket payments needed to access medical care. Current estimates suggest that a one percent decline in developing country growth rates traps an additional 20 million people into poverty. Regarding food security, the impacts of COVID-19 will likely be felt through multiple impacts (the income effects of economic slowdown, the impact on incomes of farmers and rural laborers, the latter through supply chain/trade disruptions) and will particularly affect vulnerable populations including children, women, the elderly, and the poor. 13. In an effort to provide immediate relief to those families that will be most affected by the COVID-19, the GoE will implement cash transfers. A total estimated of 854,000 households live in poverty and most of these families do not have formal employment and neither receive a salary, thus they need to live with the income they make from their daily activities. 14. On March 20, the President announced the first economic measures to attend households vulnerable to COVID- 19 pandemic that include temporary two-time emergency bonus of US$60. To finance this monetary transfer, MEF has conducted an analysis aimed at optimizing resources and prioritizing assistance to those most affected by the crisis. Some of the households that will receive a total of US$120 cash transfers in April and May 2020 have been identified by the Social Registry (RS). The 400,027 households that will receive the Family Protection Bonus for the Emergency will be targeted to informal sector workers that depend on daily work to support their households (street vendors, construction workers, farm workers, among others). 15. The eligibility criteria to receive the cash transfers are the following5: (i) Household registered in the Social Registry in a situation of economic vulnerability, below the revised moderate poverty line with an index value of 38/100; (ii) https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6 The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) Household does not receive cash transfer(s) from other social programs, such as Human Development Bonus; and (iii) Household generates less than US$400 of monthly income (a reference to filter households if in the official social security database, a household appears with contributions above a salary level of US$ 400). 16. In letters on March 23 and 25, 2020, MEF formally requested the Bank to restructure the Project to redirect its efforts to respond to the COVID-19-related crisis. The MEF had identified the possibility of (i) using US$50 million from the ERL to finance an emergency cash transfer under Component 2 for the first group of 400,027 households, and (ii) leaving some funds in Component 3 to cover costs related to the TA provided for MEF and Project management by the PCU. To accomplish this, activities considered under Component 2 since the last restructuring request, will be cancelled in favor of urgent assistance in response to the COVID-19 crisis. The cash transfers for the second group (of about 454,000 households) will not be financed with the ERL. 17. The proposed restructuring will allocate Project funds for a response activity to the national health emergency, which is closely aligned with the Project’s PDO. The GoE has requested the reallocation of US$50 million to finance critical means so that most vulnerable groups can better cope during the national health emergency. The current health emergency in Ecuador qualifies as an “Eligible Disaster” under the Project’s PDO, in accordance with the definition provided in the Loan Agreement. This interpretation has been endorsed by the World Bank’s Legal Vice Presidency. With the proposed restructuring, the Project will support the GoE through contingency bonus to minimize the impact of the social, health and economic crisis provoked by the COVID-19 among the most vulnerable groups in Ecuador. This will complement the ongoing efforts of a Bank-financed Social Safety Net (SSN) Project (P167416) approved in April 2019, which is showing solid implementation and performance, and has provided critical support to the implementation of the Bono de Desarrollo Humano, Pension del Adulto Mayor and programs for the elderly in Ecuador.6 It will also complement the Health Emergency Response Project (P173773) financed through the first round of COVID-19 (FTCF). The reallocation of this funds implies the cancellation of the current procurement processes related to the construction and supervision of the reconstruction of a fishing and cabotage terminal of the Port of Manta and the acquisition of 40 ambulances. II. DESCRIPTION OF PROPOSED CHANGES 1. Summary of changes. The proposed changes are to: (i) revise the Project description and the necessary social risk management arrangements and instruments to allow using the ERL to respond to COVID-19 (Component 2, post- disaster recovery and reconstruction) and cancel other investments planned under Component 2, except the purchase of a mobile hospital tent ; (ii) reallocate funds between components and Disbursement Categories; (iii) update the institutional and implementation arrangements to include the Ministry of Economic and Social Inclusion (MIES); (iv) extend the closing date by a year to September 7, 2021; and (v) update the Results Framework. 2. A Financial Management (FM) assessment was conducted to the MIES with the objective of identifying the main risks and associated mitigating measures. The FM Risk of the restructured Project is assessed as Moderate. MIES has considerable experience in the implementation of cash transfer processes, including under the on-going Bank-financed SSN Project. Further, it has an adequate normative framework and robust systems and controls, 5As March 27, 2020 6Programs for the elderly include: Pensión Para Adultos Mayores, a monthly transfer for seniors over 65 years old who lack access to the social security system; and Pensión Para Adultos Mayores en Extrema Pobreza - Mis Mejores Años (PMMA), which provides non- conditional income support targeted to low-income households with seniors over 65 years old. The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) including the daily reconciliations of transfers to eligible beneficiaries. MIES will implement the Project using country systems for budgeting, transfer of payments to beneficiaries and financial reporting. However, in order to maintain a consistency with the original Project design, the MEF’s UCP in coordination with MIES will keep the overall responsibility for requesting Project disbursements to the Bank, and preparing the consolidated financial reports and coordinating the Project audit. The specific FM arrangements designed for Component 2 are described in Annex 2 . 3. Operations Manual (OM) will be revised to include the new cash transfer activity, covering the: (i) eligibility criteria for the selection of beneficiaries; (ii) amount and temporality of the cash transfers; (iii) improvements needed in the existing payment system to mitigate potential risks of further spread of COVID-19; (iv) technical verification procedure of the payments provided to eligible population; (v) adoption and adaptation of the social management instruments of the SSN Project, which will be disclosed for the purposes of the present Project restructuring; (vi) institutional arrangements related to inclusion of MIES as a new co-implementing entity; and (viii) additional processes related to the funds flow, disbursement and auditing arrangements for Component 2. The Project’s overall fiduciary arrangements will remain the same. 4. Change in Components and Cost. With the shift of priorities to respond to COVID-19, the GoE has chosen to focus Component 2 on the emergency cash transfer instrument to minimize the impact of the social, health and economic crisis provoked by the COVID-19 among the most vulnerable groups in Ecuador. The proposed changes in the Project components and their costs are presented in Table 1. TABLE 1. PROPOSED CHANGES IN COMPONENT COSTS Proposed Cost Component Current Cost (US$) Action (US$) Component 1. Disaster Preparedness and Risk Mitigation 3,776,367.31 3,776,367.31 Component 2. Post-Disaster Recovery and Reconstruction 50,034,314.39 52,534,576.96 Revised Component 3. Technical Assistance to MEF and Project 5,774,869.89 3,274,607.32 Revised Monitoring and Evaluation Total 59,585,551.59 59,585,551.59 TABLE 2. PROPOSED GOVERNMENT COUNTERPART FUNDING Component Bank Local Contribution The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) Component 1. Disaster Preparedness and Risk Mitigation 3,776,367.31 481,093.27 Disaster Preparedness and Risk Mitigation Emergency Measures in the Water and Flood Protection Sector under EPA Component 2. Post-Disaster Recovery and Reconstruction 52,534,576.96 260,093.37 (a) Emergency Expenditures for Emergency Recovery, 50,000,000.00 - including Cash Transfers (c) Recovery and reconstruction in the health sector 2,534,576.96 260,093.37 under MSP Component 3. Technical Assistance to MEF and Project Implementation, Monitoring and Evaluation Hiring project coordinator and specialists in financial 3,274,607.32 183,683.60 management, procurement, monitoring and evaluation and other technical temporary staff. The carrying out of project audits. The financing of the necessary goods and equipment Subtotal 59,585,551.59 924,870.24 TOTAL 59,585,551.59 924,870.24 5. Reallocation between Disbursement Categories. The proposed reallocation reflects the changes to Component 2 (associated with Category 2), (i) increasing the amount from US$50.03 million to US$52.53 million to cover the projected first group cash transfers under Component 2, and (ii) decreasing the amount from US$5.77 million to US$3.27 million to Component 3 (associated with Category 3). TABLE 3. PROPOSED CHANGE BY CATEGORY Category Amount of the Loan Allocated (expressed in USD) (1) Goods, works, non-consulting services, consultants’ services and 3,776,367.31 Training for Part 1 of the Project The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) Category Amount of the Loan Allocated (expressed in USD) (2) Emergency Expenditures including Cash Transfers, for Part 2 of the 52,534,576.96 Project (3) Goods, non-consulting services, Training, and consultants’ services 3,274,607.32 (including audits) for Part 3 of the Project TOTAL AMOUNT 59,585,551.59 6. Update of Disbursement Estimates. The proposed restructuring will adjust the disbursement estimates based on the agreed Project changes. 7. Integrated Safeguards Data Sheet (ISDS). The proposed restructuring does not require triggering of any new safeguard policy. In fact, only OP 4.01 and OP 4.10 will apply to the new cash transfer activities. The other policies remain triggered as they apply to the previously planned or executed activities. The cash transfers imply lower safeguards risks, and fewer required measures than the previously planned civil works. The new activities will have no environmental or resettlement-related risks or impacts. The ISDS was updated to revise (i) the description of the components and co-executing agencies; (ii) update the Project’s environmental and social risks and impacts; (iii) present the related safeguards implications, including description of the corresponding updates necessary to the social management measures and instruments. The cash transfers under Component 2 under the current restructuring will apply to eligible beneficiaries across the country, including Indigenous Peoples and other ethnic minorities. As MIES is already implementing the SSN Project, it has prepared and published social safeguards instruments that comply with the World Bank Environmental and Social Framework (ESF). The cash transfers under the restructured ERL will rely on the SSN Project’s social management instruments: Social Assessment (SA), IPPF and Stakeholder Engagement Plan (SEP), disclosed in-country and at the Bank external website on February 27, 2019, to ensure compliance with the applicable safeguards under the Bank Operational Policies. These instruments will be immediately adopted as part of the restructured ERL OM. Latest by two weeks after the restructuring effectiveness, the instruments will be updated as pertinent in terms of the COVID-19 cash transfers and disclosed as the restructured ERL Project’s final safeguards instruments. The updates will address any needed improvements in culturally appropiate dissemination of information (use of clear messages and native languages when needed, and the channels to share information, etc.), as well as how to access and use the GRM to provide, receive and handle complaints relating to exclusion and inclusion errors during beneficiary targeting, and the overall delivery of Project benefits. 8. The updated draft ISDS was cleared by the Regional Safeguards Advisor (RSA) on March 29, 2020. 9. Change in Results Framework. Following the changes in the Project scope, some indicators will be adjusted (added, deleted or modified), and the target values will be updated accordingly. PDO indicators will be adjusted to reflect the Project activities associated with the COVID-19 health emergency. Intermediate indicators will be revised as well to reflect the activities related to the health, social protection and macroeconomic TA subprojects. Annex 1 presents the table with the changes proposed to the Results Framework. If the agreed action plan and timeline are followed, the Project will likely achieve the PDO and intermediate outcome indicators by the extended Project closing date. The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Institutional Arrangements ✔ Financial Management ✔ Implementation Schedule ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ DLIs ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Procurement ✔ Other Change(s) ✔ Environmental Analysis ✔ The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component 1: Disaster Component 1: Disaster 4.23 No Change Preparedness and Risk 4.23 Preparedness and Risk Mitigation Mitigation Component 2: Post-Disaster Component 2: Post-Disaster 56.04 Revised 52.80 Recovery and Reconstruction Recovery and Reconstruction Component 3: Technical Component 3: Technical Assistance to MEF and Project Assistance to MEF and Project 6.47 Revised 3.46 Implementation, Monitoring and Implementation, Monitoring Evaluation and Evaluation TOTAL 66.74 60.49 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-85910 Effective 07-Sep-2020 07-Sep-2021 07-Jan-2022 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IBRD-85910-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: GO, CW, NCS, CS and TR - Part 1 3,776,367.31 3,776,367.31 3,776,367.31 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: Emergency Expenditures - Part 2 The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) 50,034,314.39 1,974,576.96 52,534,576.96 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: GO,NCS,TR & CS (inc audit) - Part 3 5,774,869.89 594,929.05 3,274,607.32 100.00 100.00 Total 59,585,551.59 6,345,873.32 59,585,551.59 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2016 0.00 29,000.00 2017 994,465.00 5,511,231.00 2018 5,052,141.00 627,474.00 2019 455,800.00 405,700.00 2020 28,130,000.00 50,000,000.00 2021 24,953,145.59 3,012,145.94 . The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) . Results framework COUNTRY: Ecuador Ecuador Risk Mitigation and Emergency Recovery Project Project Development Objectives(s) To support the recovery of basic and productive services in selected sectors in affected areas in case of an Eligible Disaster and strengthen resilience to natural disasters and macroeconomic shocks Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target Support the recovery in affected areas and in selected sectors in case of an Eligible Disaster Direct project beneficiaries (Number) 0.00 2,442,215.00 Action: This indicator has been Revised Female beneficiaries (Percentage) 0.00 50.00 Number of people benefiting from new equipment in the health 0.00 1,838,615.00 sector after an Eligible Disaster occurs (Number) Action: This indicator has been Revised Number of tons of fish discharged through the Fishing and 43,254.00 70,000.00 Cabotage Terminal (Metric tons/year) Action: This indicator has been Marked for Deletion Number of households receiving emergency cash transfers 0.00 400,027.00 through the GoE payment delivery mechanisms (Number) Action: This indicator is New Strengthen resilience to natural disasters and macroeconomic shocks The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target Number of people protected through flood mitigation works 0.00 203,600.00 (Number) Drafting of a program of fiscal and structural reforms to improve No Program Program designed macroeconomic resilience (Text) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Component 1: Disaster Preparedness and Risk Mitigation Number of hectares of crops protected against flooding 0.00 173,500.00 (Number) Number of preventive works (Number) 0.00 6.00 Component 2: Post-Disaster Recovery and Reconstruction Roads rehabilitated, Rural (Kilometers) 0.00 34.00 Action: This indicator has been Marked for Deletion Health facilities equipped (number) (Number) 0.00 289.00 Action: This indicator has been Revised Number of students with improved school infrastructure 0.00 1,806.00 (Number) Action: This indicator has been Marked for Deletion Fishing vessel dock reconstructed (Meter(m)) 0.00 900.00 Action: This indicator has been Marked for Deletion The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Number of schools constructed (Number) 0.00 1.00 Action: This indicator has been Marked for Deletion Component 3: Technical Assistance to MEF and Project Monitoring and Evaluation Grievances registered related to delivery of project benefits 0.00 80.00 addressed (%) (Percentage) Grievances related to delivery of project benefits that are 0.00 10.00 addressed-(number) (Number) Preparation of a strategy to strengthen public financial management: including improvements to budget preparation, No strategy Final strategy document completed execution and control. (Text) IO Table SPACE The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) Annex 1 – Detail of Changes to the Results Framework and Theory of Change New Comments Baseline Original Proposed Indicator End Target Objective (Justification of (Final Indicators Change (if New or (Final value) Proposed Change) value) Revised) PDO Indicators Support the 1. Direct Project Targets adjusted to reflect recovery in beneficiaries Revised the new activities to be 0.00 2,442,215 selected sectors (Number) - financed. and in affected (Core) areas in case of Female an Eligible beneficiaries Targets adjusted to reflect Disaster (Percentage - Revised the new activities to be 0.00 51.00 Sub-Type: financed. Supplemental) - (Core) 3. Number of people benefiting from new equipment Name adjusted to reflect in the health Revised new estimates for the 0.00 1,838,615 sector, after an number of beneficiaries. Eligible Disaster occurs. (Number) 4. Number of households receiving emergency cash transfers through the GoE New New activity 400,027 payment delivery mechanisms already in place and improved 4. Number of tons of fish discharged through the Deleted Activity canceled Fishing and Cabotage Terminal (metric tons/year) The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) New Comments Baseline Original Proposed Indicator End Target Objective (Justification of (Final Indicators Change (if New or (Final value) Proposed Change) value) Revised) Strengthen 2. Number of resilience to people protected natural disasters through flood Continued 203,600.00 and mitigation macroeconomic works. (Number) shocks 5. Drafting of a program of fiscal and structural Program reforms to Continued designed improve macroeconomic resilience Intermediate Results Indicators 1. Number of hectares of crops protected against Continued 0.00 173,500.00 flooding (Number) 2. Number of preventive Continued 0.00 6.00 works. (Number) Component 2: 5. Roads Post-Disaster rehabilitated, Recovery and Rural Deleted Activity canceled 0.00 Reconstruction (Kilometers) - (Core) Indicator adjusted to reflect the health facilities equipped for disaster 6. Health recovery. End target facilities Revised modified to reflect the 0.00 289 equipped change in activities (Number) financed under Component 2. Fishing vessel dock Deleted Activity canceled 0.00 reconstructed. (Meters) Number of students with Deleted Activity canceled 0.00 improved school The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) New Comments Baseline Original Proposed Indicator End Target Objective (Justification of (Final Indicators Change (if New or (Final value) Proposed Change) value) Revised) infrastructure (Number) Number of schools Deleted Activity canceled 0.00 constructed (Number) Component 3: 10. Grievances Project registered related Implementation, to delivery of Monitoring and project benefits Continued 0.00 80.00 Evaluation addressed (%) (Percentage) - (Core) Grievances related to delivery of Project benefits that are addressed- Continued 0.00 10.00 (number) (Number - Sub- Type: Supplemental) - (Core) Preparation of a strategy to strengthen public financial management: Final strategy including Continued No strategy document improvements to completed budget preparation, execution and control. The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) Annex 2 – Financial Mangement (FM) This annex describes the FM arrangements for the restructuring of the Ecuador Risk Mitigation and Emergency Recovery Project. The assessment following measures will apply for Component 2, as the arrangements for Components 1 and 3 will keep their original design. Organization and staffing. From the point of view of FM institutional arrangements under component 2, the main counterpart within MIES will be the Undersecretary for Non-Contributory Insurance, Contingencies and Operations (Subsecretaria de Aseguramiento no Contributivo, Contingencias y Operaciones) in coordination with Transfer Directorate (Dirección de Transferencias), Database Administration Directorate (Dirección de Administración de Bases de Datos) and Insurance Directorate (Dirección de Aseguramiento no Contributivo), thus it will be important to maintain adequate coordination during the implementation stage. Budgeting. The budget allocation for the temporary emergency bonus COVID will be subject to the approval of the Ministry of Economy and Finance (MEF) through a decree that is expected to be submitted before the signature of loan agreement. Nevertheless, the most recent Public Financial Management assessments on Ecuador (most notably the PEFA report 2019) pointed out various deficiencies in the budgeting area, including the need to strengthen the budget management and control framework, and the associated internal control mechanisms. Such deficiencies may impact this project (as it is the case of other projects in Ecuador) and reflect in delays in getting the budget approved in time, and the process of payments, with an overall impact in project implementation. Considering such problems, the Bank and ERL in coordination with MIES should keep continuous monitoring and follow-up, flagging any potential budget delays to the corresponding authorities. Accounting and financial reporting. With regards to the interim financial reports (IFRs), the format of the IFRs will be adjusted in order to reflect the transactions related to the implementation of the temporary emergency bonus COVID-19. Moreover, the report will include a section with key information on the program performance from the FM point of view, including the consolidated amount of transfers made during the period, descriptions of the conciliatory measures taken and the exceptions found as a result of such exercise. The IFR will continue covering calendar semester and submitted to the Bank not later than 45 calendar days after the end of each reported period. The IFR content will be amended to reflect restructuring needs. The revised forms will be reflected in the POM (project operational manual). Internal Controls. MIES has an important experience implementing cash transfer operations and has established processes and systems that allows for an orderly implementation of such transfers. The project operational manual will be amended to reflect financial management arrangements designed for component 2 including funds flow and disbursement arrangements; the revised content of the IFR and customized report to document expenditures under this component and revised version of audit TORS. Flow of funds and disbursements. The temporary emergency bonus COVID-19 will use the disbursement method of advance to the Designated Account (DA). Under the advance method, the DA has a variable ceiling, consequently disbursement of loan proceeds will be made on the basis of monthly forecast prepared by MEF’s UGP and MIES and send for Bank’s approval. Withdrawal from the DA will be done exclusively to reimburse payments of COVID monetary bonus pre-financed by Concentradores and its financial institutions and cooperatives associated. These reimbursements will be processed through the Interbank Payment System (SPI). Expenditures will be documented using a customized report designed for this purpose and additional supporting documentation reconciled on a daily basis by MIES “Reporte de Pagos a las Transferencias Monetarias” will be annexed to the customized report. Expenditures will be documented through the The World Bank Ecuador Risk Mitigation and Emergency Recovery Project (P157324) disbursement category 2 (which will cover bank fees including VAT7). The customized report will be included in the Disbursement and Financial Information Letter (DFIL). External Audit. Audit of annual financial statements of the ERL project will continue to be conducted by an external audit firm acceptable to the Bank and under terms of reference, which scope will include the review of the temporary emergency bonus COVID-19 and to confirm the existence of adequate controls and audit tracking in the information system managed by MIES under the reconciliation process of databases of planned beneficiaries and payees. 7 Value Added Tax