The World Bank Local Government and Decentralization Project (P111577) REPORT NO.: RES31033 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF LOCAL GOVERNMENT AND DECENTRALIZATION PROJECT APPROVED ON JUNE 8, 2010 TO MINISTRY OF FINANCE,MINISTRY OF HOME AFFAIRS SOCIAL, URBAN, RURAL AND RESILIENCE GLOBAL PRACTICE EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Rodrigo A. Chaves Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager/Manager: Abhas Kumar Jha Task Team Leader: Thalyta Ernandya Yuwono, Marcus John Jin Sarn Lee The World Bank Local Government and Decentralization Project (P111577) I. BASIC DATA Product Information Project ID Financing Instrument P111577 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 08-Jun-2010 31-Dec-2018 Organizations Borrower Responsible Agency Ministry of Public Works, Secretariat Ministry of Finance,Ministry of Home Affairs General,BPKP,Ministry of Finance,Bappenas Project Development Objective (PDO) Original PDO The objective of the project is to improve the accountability and reporting of the central government’s Specific Purpose Grants(DAK) for the infrastructure sub-sectors within pilot local governments (LGs). This will be done through improved financial andtechnicalreporting, and verification of outputs delivered by LGs with the DAK grants. Current PDO The objective of the Project is to improve the accountability and reporting of the central government’s Specific Purpose Grants(DAK) for basic infrastructure, consisting of roads, irrigation, water and sanitation, within Selected Local Governments. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-84380 30-Sep-2014 27-Nov-2014 02-Feb-2015 31-Dec-2018 500.00 500.00 0 IBRD-79140 08-Jun-2010 23-Jun-2010 20-Jan-2011 31-Dec-2015 219.77 219.77 0 The World Bank Local Government and Decentralization Project (P111577) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES Beginning in 2001, the Government of Indonesia (GOI) shifted responsibility for delivering nearly all public services to sub-national level, as local governments (LG) were expected to be better able to respond to local service delivery needs. However, LGs spent more DAK on administration than on productive activities. To overcome this problem, greater transparency, accountability and incentives were needed to improve monitoring and verification of use of DAK funds. The project introduced three key features: output verification and institutionalization in the government systems; capacity building to improve monitoring and evaluation; and a web-based reporting system to move from manual to automated recording and reporting. As a result of the project, accountability and reporting on the use of Specific Purpose Grants (DAK) for basic infrastructure has largely improved although the performance slipped somewhat in the last year of the project. In 2011, only 10% of LGs were submitting their reports through web-based reporting, but by 2016 that reached 100%, exceeding the end of project target of 80%. For 2016, physical outputs are being reported, verified and were meeting eligibility criteria for repayment through DAK 77% of the time, compared to the end target of 88%. Performance on this indicator actually declined late in the project because GOI reduced spending on technical assistance and socialization of the project to newly participating LGs. Challenges with late-arriving LGs are also evident from the indicator on “contracts with quality of outputs delivered by December 31”, where the June 2017 actual is only 25% compared to the end target of 45%. Overall the project outcome is considered moderately satisfactory. “ Following the full disbursement of the Loan in July 2017, GOI has requested a 12 months advance closing date from December 31, 2018 to December 31, 2017, through a letter dated December 19, 2017. III. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications 31-Dec-2014, 31-Dec- IBRD-79140 Closed 30-Jun-2014 2015, 11-May-2016 IBRD-84380 Effective 31-Dec-2018 31-Dec-2017 30-Apr-2018 The World Bank Local Government and Decentralization Project (P111577)