DATA SHEET Nepal Poverty Alleviation Fund II (P105860) SOUTH ASIA SASDL Report No: RES11465 Basic Information Project ID: P105860 Lending Instrument: Specific Investment Loan Regional Vice President: Philippe H. Le Houerou Original EA Category: Partial Assessment (B) Country Director: Johannes C.M. Zutt Current EA Category: Partial Assessment (B) Sector Director: John Henry Stein Original Approval Date: 06-Dec-2007 Sector Manager: Shobha Shetty Current Closing Date: 31-Dec-2017 Team Leader: Frauke Jungbluth Borrower: Responsible Poverty Alleviation Fund Agency: Restructuring Type Form Type: Short Form Decision Authority: Country Director Approval Restructuring Level 2 Explanation of Extension of the Project Level: Approval Authority: Closing Date to December 31, 2017. Financing ( as of 05-Mar-2014 ) Key Dates Approval Effectiveness Original Revised Project Ln/Cr/TF Status Signing Date Date Date Closing Date Closing Date P105860 COFN-C1200 Effective 08-May-2008 08-May-2008 31-Jul-2008 31-Mar-2013 31-Dec-2014 P105860 IDA-49220 Closed 21-Apr-2011 30-Jun-2014 30-Jun-2014 P105860 IDA-H3370 Effective 06-Dec-2007 31-Jan-2008 19-Mar-2008 30-Sep-2012 30-Jun-2014 P105860 IDA-H6720 Effective 02-Jun-2011 13-Jul-2011 11-Oct-2011 30-Jun-2014 30-Jun-2014 P105860 IDA-H8570 Effective 05-Jun-2013 08-Jul-2013 04-Oct-2013 31-Dec-2017 31-Dec-2017 Disbursements (in Millions) % Cancelle Disburse Undisbur Project Ln/Cr/TF Status Currency Original Revised Disburse d d sed d Page 1 of 5 P105860 COFN-C1200 Effective XDR 2.50 2.50 0.00 2.42 0.08 97 P105860 IDA-49220 Closed XDR 17.50 17.50 0.00 0.00 17.50 P105860 IDA-H3370 Effective XDR 65.24 65.22 0.02 65.22 0.00 100 P105860 IDA-H6720 Effective XDR 41.40 41.40 0.00 41.33 0.07 100 P105860 IDA-H8570 Effective XDR 53.40 53.40 0.00 0.00 53.40 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 ] A. Summary of Proposed Changes In a letter, dated June 1, 2014, the Government has requested the extension of the closing date of the first additional financing (IDA Grant – H6720) by six months (until December 31, 2014) and a reallocation of grant proceeds of the first additional financing. B. Project Status The project is on track to achieve its objective. PAF has mobilized and made agreements with 21,958 Community Organizations (COs) for implementing various sub-projects. Based on community demand, CO members conduct various income generation and infrastructure sub-projects. The project has directly benefitted 608,483 households and has indirectly benefitted an additional 56,460 households through PAF financed infrastructure sub-projects. Project monitoring data, impact evaluation data and field reports indicate a strong impact of the project on improved living conditions, livelihoods and empowerment (higher income, increased food availability and variety, increased access to assets, better housing, increased school enrollment of children, participation in meetings and local structures). PAF has followed-up on almost all agreed actions since the last mission and, while some delays have occurred – which partially have not been in control of PAF – the project is on a good track to continue improving its implementation performance and rolling out activities in new communities. Despite the delays, the activities planned under the 2nd Additional Financing have commenced with Partner Organizations in the 15 new districts identified and a detailed roll-out plan for the funds finalized. The project has also finalized a guideline for Pocket Area Development and is in the process of identifying the targeted areas to intensify its support to the areas of on-going PAF activities that are producing specific products and show possibilities for scaling-up and market linkages. The project is also intensively discussing with the relevant authorities/departments to provide support for the COs to form higher level institutions, which includes an option of forming cooperatives. There are no outstanding audit reports. The audit report for the FY 12/13 was found acceptable. C. Proposed Changes Financing Change in Loan Closing Date(s): Explanation Page 2 of 5 At negotiations for the second additional financing, it was agreed that the closing dates of the original project (IDA Grant - H3370 NP ) and the first additional financing (IDA Grant - H6720 NP) would be extended to match the closing date of the second additional financing upon the approval of the Bank management. However, subsequently internal bank guidance suggested that this is not to be done and instead an extension of the specific grant is to be sought if and when needed. To date, the project has disbursed fully the original PAF-II funds (and therefore Grant No. H3370 would be closing as scheduled at the end of June 2014), 99.8 percent of PAF-II 1st additional financing and fully on the Food Crisis Response Trust Fund. In February 2014, the project received a US$ 14 million advance from the PAF-II 1st additional financing grant which was based on earlier expenditure projections in the trimester interim financial monitoring report. However, the project was behind schedule for awarding contracts to the Partner Organizations and Community Organizations for the fiscal year 2013/14. The Government’s code of conduct as part of the Constituent Assembly Election in 2013 resulted in the project not being allowed to award any contracts for a period of seven months. Another major constraint to award contract in time was political instability; and delays in and a partial release of the governmental budget, given that the project requires an approval of its total budget by Government before being able to move on contracts, even if fully paid from IDA resources. The project is currently expediting the process of disbursement on sub-projects to Community Organizations to complete 2,662 sub-projects. Among these, 1,384 sub projects are expected to be completed by December 2014 only and would be planned to be still funded out of the 1st AF funding. An additional 1,278 ongoing sub projects are planned to be partially paid from PAF-II 1st additional financing and partially from PAF-II 2nd additional financing. Detailed tables for these sub-projects and contracts with partner organizations and consultants and their funding source have been prepared and have been agreed with the Bank. The project faced further delays in spending funds under the above referenced grant as a result of a cautious approach to attempt to segregate contracts to be spent under the 1st and 2nd Additional Financing, given that the project had experience difficulties in the past of paying for services out of two different funds. As a result, not all activities that could have been started in the current period were started out of concern of not being able to finalize them within the above reference grant envelope. This issue could only recently be fully clarified to PAF by the Bank team and the project is now moving ahead on that basis. All of these aspects led to a slower than anticipated performance for the FY 2013/14 with the result of the project not expecting to be able to fully utilize the first additional financing funds by the current closing date (June 30 2014). The project has estimated that it would disburse around US$ 8 million until end June 2014 and the balance (around US$ 6 million) until December 2014. In the meantime, the project has made good progress in planning out the activities and actions to be advanced under the 2nd Additional Financing. Partner Organizations have been selected in the new districts and a detailed roll-out plan on the numbers and locations of the proposed new community organizations completed. The project has also started to work on the proposed additional activities under the 2nd Additional Financing like the support to higher level institution formation and pocket area development. The project is also intensively discussing with the relevant authorities/departments to provide support for the COs to form higher level institutions, which includes an option of forming cooperatives. The issues faced in the current fiscal years are considered to have been a set of unique combination of circumstances and it is not expected that such issue would reoccur in the next fiscal year. All project funds have been fully budgeted for specific communities and their agreed activities and it is therefore requested that the project be allowed to fulfill these commitments. Page 3 of 5 Original Closing Current Closing Proposed Closing Previous Closing Ln/Cr/TF Status Date Date Date Date(s) 31-Mar-2013, COFN-C120 Effective 31-Mar-2013 31-Dec-2014 31-Dec-2014 0 IDA-49220 Closed 30-Jun-2014 30-Jun-2014 IDA-H3370 Effective 30-Sep-2012 30-Jun-2014 30-Jun-2014 IDA-H6720 Effective 30-Jun-2014 30-Jun-2014 30-Jun-2014 IDA-H8570 Effective 31-Dec-2017 31-Dec-2017 31-Dec-2017 Reallocations Explanation The Government has further requested a reallocation of grant proceeds. It is proposed to add an additional SDR 4.86 million to disbursement category 1 (block grants and consultant services from partner organizations) to be taken from category 2 (goods and other consultant services) and category 3 (incremental operating costs). This reallocation will allow the project to use additional funds for community activities and serve additional communities that have completed sub-project proposals. Funds originally estimated for goods, consultants’ services and operating costs were not needed as anticipated at the design of the AF. The Bank team agrees with the proposed reallocation as it will allow the project to serve more communities and to ensure a full utilization of the remaining fund by the proposed closing date (December 31, 2014). The proposed reallocation is as follows: Category Amount of Financing Proposed Proposed revised Allocated as per FA Reallocation (in Allocation (in SDR) (in SDR) SDR) (1) Block grants and 33,900,000 + 4,860,000 38,760,000 consultants’ services provided by POs (2) Goods and consultants’ 5,600,000 - 4,225,000 1,375,000 services (other than those provided by POs) and training for PAF (3) Incremental Operating 1,900,000 - 635,000 1,265,000 Costs for PAF Total 41,400,000 41,400,000 Cur- Current Category of Disbursement % Ln/Cr/TF Allocation rency Expenditure (Type Total) Current Proposed Current Proposed COFN-C12 XDR BG , CS by Part Org 1,700,000.00 1,700,000.00 100.00 100.00 00 GS,CS other than PO,TR 800,000.00 800,000.00 100.00 100.00 Designated Account 0.00 0.00 0.00 0.00 Page 4 of 5 Total: 2,500,000.00 2,500,000.00 IDA-H3370 XDR Block Grants and con 61,070,000.00 61,070,000.00 100.00 100.00 Goods Consultants Services 1,540,121.72 1,540,121.72 100.00 100.00 Tr DISB - OPERATING 2,610,000.00 2,610,000.00 80.00 80.00 COSTS UNALLOCATED 0.00 0.00 0.00 0.00 Designated Account 0.00 0.00 0.00 0.00 Total: 65,220,121.72 65,220,121.72 Block Grants and Con Serv IDA-H6720 XDR 33,900,000.00 38,760,000.00 100.00 100.00 by POs Goods Con Serv (other than 5,600,000.00 1,375,000.00 100.00 100.00 POs) Operating Costs 1,900,000.00 1,265,000.00 80.00 80.00 Designated Account 0.00 0.00 0.00 0.00 Total: 41,400,000.00 41,400,000.00 IDA-H8570 XDR BG , CS by Part Org 45,900,000.00 45,900,000.00 100.00 100.00 GS,Wks,CS other than 5,350,000.00 5,350,000.00 100.00 100.00 PO,TR Incremental Operating costs 2,150,000.00 2,150,000.00 80.00 80.00 Designated Account 0.00 0.00 0.00 0.00 Total: 53,400,000.00 53,400,000.00 Page 5 of 5