Document of The World Bank Report No: 76191 v1 RESTRUCTURING PAPER ON A PROPOSED RESTRUCTURING OF THE RECIPIENT-EXECUTED GRANT COMPONENT OF THE DANUBE REGION WATER AND WASTEWATER SECTOR CAPACITY BUILDING PROGRAM (P128416) COMPONENT II: CAPACITY BUILDING FOR WATER SUPPLY AND WASTEWATER UTILITIES IN THE DANUBE REGION GRANT NO. TF012722 JUNE 27, 2012 TO THE INTERNATIONAL ASSOCIATION OF WATER SUPPLY COMPANIES IN THE DANUBE RIVER CATCHMENT AREA (IAWD) MARCH 11, 2013 ABBREVIATIONS AND ACRONYMS AA Administrative Agreement GA Grant Agreement IAWD International Association of Water Companies in the Danube River Catchment Area Regional Vice President: Philippe H. Le Houerou Country Director: Laura Tuck Sector Director: Laszlo Lovei Sector Manager: Sumila Gulyani Task Team Leader: Bjorn Philipp 2 DANUBE REGION WATER AND WASTE WATER SECTOR CAPACITY BUILDING PROGRAM (P128416) GRANT NO. TF012722 P000755 CONTENTS Page A. SUMMARY ........................................................................................................................... 4 B. PROJECT STATUS .............................................................................................................. 4 C. PROPOSED CHANGES ...................................................................................................... 4 3 DANUBE REGION WATER AND WASTE WATER SECTOR CAPACITY BUILDING PROGRAM (P128416) GRANT NO. TF012722 A. SUMMARY 1. This restructuring proposes revision of the expenditure categories in the Grant Agreement with Grant No. TF012722 under the Danube Region Water Supply and Wastewater Utility Capacity Building Program. The Program is financed through a hybrid Multi-Donor Trust Fund (MDTF) with an initial contribution from the Government of Austria. The proposed revision of expenditure categories in the Grant Agreement for the Recipient-executed component is necessary to ensure consistency between the Administrative Agreement (TF071876) and the Grant Agreement (TF012722). No changes to the development objective, scope of activities, and implementation arrangements are required. B. PROJECT STATUS 2. The Administrative Agreement between the World Bank and the Austria Federal Ministry of Finance (MoF) was signed by the Bank on April 23, 2012, and countersigned by the MoF on May 16, 2012. The Grant Agreement (GA) between the Bank and the International Association of Water Companies in the Danube River Catchment Area (IAWD) was approved by the Bank in June 2012; endorsed by IAWD’s management board in October 2012; and signed by IAWD's President on November 13, 2012. 3. Significant implementation progress has been made since then. The Bank team based in Vienna has mobilized in November 2012 and started implementation of activities under the Bank-executed Component 1. However, progress has been slower under the Recipient-executed Component 2. A Stakeholder Consultation Workshop was held in Vienna on January 24-25, 2013; and the formal program launch is expected to take place in Vienna in May 2013. 4. IAWD is currently in the process of establishing the Technical Secretariat (TS) to be responsible for implementation of activities under Component 2, including technical and fiduciary responsibility. Hiring of a Program Coordinator and a consultant company to handle financial management and accounting are underway and expected to be completed by April 15, 2013. The Project Operational Manual (POM) is currently being drafted. Full functionality of the TS and adoption of the POM are disbursement conditions. C. PROPOSED CHANGES 5. The proposed revision of expenditure categories is necessary to ensure consistency between the Administrative Agreement (TF071876) and the Grant Agreement (TF012722), prior to effectiveness of the Recipient-executed grant. No changes to the development objective, scope of activities, and implementation arrangements are required. The proposed changes would require an amendment to the 4 Grant Agreement, to revise (i) Article III, 3.01 Eligible Expenditures; and (ii) Article II, 2.06 Procurement. 6. Procurement. Revisions under 2.06 Procurement would remove procurement of ‘non-consulting services’. No procurement of non-consulting services is foreseen under the Grant. No further revisions would be required. 7. Disbursement arrangements. Eligible expenditures and expenditure categories under Article III, 3.01 would be revised as follows: Category Amount of the Grant Percentage of Allocated Expenditures to be (expressed in EUR) Financed (inclusive of Taxes) Current Revised Current Revised Current Revised (1) Goods, (1) 2,739,499 No revision 100% No revision non- Consultant’s consulting Services; services and Goods; consultants’ Operating services, Costs; and Incremental Training Operating under Part 2 Costs, of the Training and Project. audit under Part 2 of the Project. 8. The Restructuring would not require further revisions to the disbursement arrangements. Audits, as a consulting service, are eligible for financing under Part 2 (c) of the Recipient-executed Grant. 9. No withdrawal applications have been submitted yet. The Recipient is making progress in establishing the Technical Secretariat responsible for implementation of the Grant. Procurement of consulting services to assist the Technical Secretariat in the performance of the technical, coordination, and fiduciary functions is underway. A Project Operations Manual, including financial management manual, is currently being drafted. Full functionality of the Technical Secretariat and adoption of the POM are conditions for withdrawal. 5