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Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: RES21971

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING OF

NATIONAL PROGRAM FOR COMMUNITY EMPOWERMENT IN RURAL AREAS HEALTHY AND BRIGHT GENERATION

(PNPM GENERASI)

TO THE

REPUBLIC OF INDONESIA

March 18, 2016

Social, Urban, Rural and Resilience Global Practice Indonesia Social Development UnitEast Asia and Pacific Region

ABBREVIATIONS AND ACRONYMS

ASF Administrative Service FirmsBAPPENAS Badan Perencanaan dan Pembangunan Nasional (National

Development Planning Agency)Bina Pemdes Bina Pemerintahan Desa (Village Government) BKAD Badan Koordinasi Antar Desa (Inter-Village Cooperation

Board)BLM Bantuan Langsung Masyarakat (Block Grant)BP Bank ProceduresBPD Badan Permusyawaratan Desa (Elected Village

Representative Council)BP-UPK Badan Pengawas – Unit Pengelola Kegiatan (Community-

Appointed Oversight Body of the Sub-district Management Unit)

CAS Country Assistance StrategyCDD Community Driven DevelopmentCHS Complaint Handling SystemCPF Country Partnership FrameworkDFAT Department of Foreign Affairs and TradeDG Directorate GeneralDPR Dewan Perwakilan Rakyat (The People's Representative

Council)EA Environmental AssessmentEIRR Economic Internal Rate of ReturnFM Financial ManagementGoI Government of IndonesiaIBRD International Bank for Reconstruction and DevelopmentIDR Currency Code for the Indonesian RupiahIGSES Implementation Guidelines for Social and Environmental

SafeguardsINT Institutional Integrity Vice PresidencyIP Indigenous PeoplesIRI intermediary results indicatorsIT Information TechnologyKDP Kecamatan Development ProjectKOMPAK DFAT Managing Contractor for Governance for GrowthMAD Musyawarah Antar Desa (Sub-district Inter-village Forum)MCC Millennium Challenge CorporationMD Musyawarah Desa (Village Assembly)MENKO KESRA Kementerian Koordinator Bidang Kesejahteraan Rakyat

(Coordinating Ministry for People‘s Welfare)MIS Management Information SystemMOF Ministry of Finance

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MOHA Ministry of Home Affairs MOV Ministry of Village, Disadvantaged Areas and

TransmigrationMTR Mid Term ReviewMUSDES Musyawarah Desa (Village Assembly Meeting)NMC National Management ConsultantNPL Non-Performing LoansO&M Operations and MaintenanceOM Operations ManualOP Operational PolicyORAF Operational Risk Assessment FrameworkPDO Project Development ObjectivePjOK Penanggung-jawab Operasional Kegiatan (Local

Government Project Officer at the Sub-District Level) PjOKab Penanggung-jawab Operasional Kabupaten (Local

Government Project Officer at the District Level)PjOProv Penanggung-jawab Operasional Provinsi (Local Government

Project Officer at the Provincial Level)PMD Pemberdayaan Masyarakat dan Desa (Directorate for

Community and Village Empowerment)PMK Pembangunan Manusia dan Kebudayaan (Coordinating

Ministry for Human Development and Cultural Affairs)PNPM Program Nasional Pemberdayaan Masyarakat (National

Program for Community Empowerment)PNPM Generasi PNPM focusing on Millennium Development Goals (MDGs)PNPM SPADA PNPM focusing on Support for Poor and Disadvantaged

AreasPokja Pengendali Kelompok Kerja Pengendali (National-level oversight body

of PNPM)PPMD Pembangunan dan Pemberdayaan Masyarakat Desa (Village

Development and Empowerment)PROTAK Laporan progres tahapan kegiatan (Activity Stages Progress

Report)PROTAN Laporan progres kegiatan (Activity Progress Report)PSF PNPM Support FacilityPOT Provincial Oversight Team(s) PTO Operations ManualQPR Quarterly Progress ReportRBM Ruang Belajar Masyarakat (Community Learning Forum)RLF Revolving Loan Fund RMC Regional Management ConsultantSatker Satuan Kerja (Project Management Unit)SOP Standard Operating ProceduresSPP Surat Permintaan Pembayaran (Payment Request)SPP Simpan Pinjam Perempuan (Women Saving and Loan

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Activities)TA Technical AssistanceTGN Technical Guidance NoteTKPKD Tim Koordinasi Penanggulangan Kemiskinan Daerah

(Regional Poverty Alleviation Coordination Team)TNP2K Tim Nasional Percepatan Penanggulangan Kemiskinan

(National Team for the Acceleration of Poverty Reduction) TOR Terms of ReferenceTPK Tim Pengelola Kegiatan (Village Implementation Team)ULP Unit Layanan Pengadaan (Procurement Services Unit)UPK Unit Pengelola Kegiatan (Sub-district Financial Management

Unit)USD Currency Code for the United States Dollar VL Village Law

Regional Vice President: Axel van TrotsenburgCountry Director: Rodrigo A. Chaves

Senior Global Practice Director: Ede Jorge Ijjasz-VasquezPractice Manager/Manager: Kevin Tomlinson

Task Team Leader: Robert Wrobel

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INDONESIANATIONAL PROGRAM FOR COMMUNITY EMPOWERMENT HEALTHY AND

BRIGHT GENERATION (PNPM GENERASI)

CONTENTS

A. SUMMARY....................................................................................................................... 12B. PROJECT STATUS.......................................................................................................... 12C. PROPOSED CHANGES................................................................................................... 13D. APPRAISAL SUMMARY................................................................................................ 14ANNEX 1................................................................................................................................... 19RESULTS FRAMEWORK AND MONITORING..................................................................19ANNEX 2................................................................................................................................... 24OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF).......................................24

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DATA SHEETIndonesia

ID-TF NATIONAL PROGRAM FOR COMMUNITY EMPOWERMENT IN RURAL AREAS HEALTHY AND BRIGHT GENERATION (PNPM GENERASI) (P132585)

EAST ASIA AND PACIFICSocial, Urban, Rural and Resilience Global Practice

.

Report No: RES21971.

Basic Information

Project ID: P132585 Lending Instrument: Technical Assistance Loan

Regional Vice President: Original EA Category: Partial Assessment (B)

Country Director: Rodrigo A. Chaves Current EA Category: Partial Assessment (B)

Senior Global Practice Director: Maninder S. Gill Original Approval Date: 24-Jun-2013

Practice Manager/Manager: Kevin A Tomlinson Current Closing Date: 31-Dec-2017

Team Leader(s): Robert Wrobel.

Borrower: Fiscal Policy Office, Ministry of Finance

Responsible Agency: Ministry of Village, Disadvantaged Areas and Transmigration.

Restructuring TypeForm Type: Full Restructuring Paper Decision Authority: Country Director Approval

Restructuring Level:

Level 2

.

Financing ( as of 07-Dec-2015 )Key Dates

Project Ln/Cr/TF Status Approval Date Signing Date Effectiveness

DateOriginal Closing Date

Revised Closing Date

P132585 TF-14769 Effective 25-Jun-2013 25-Jun-2013 25-Jun-2013 31-Dec-2013 31-Dec-2017

Disbursements (in Millions)

Project Ln/Cr/TF Status Currency Original Revised Cancelled

Disbursed

Undisbursed

% Disbursed

P132585 TF-14769 Effective USD 119.37 119.37 0.00 72.73 46.64 61.

Policy Waivers

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Does the project depart from the CAS/CPF in content or in other significant respects? Yes [ ] No [ X ]

Does the project require any policy waiver(s)? Yes [ ] No [ X ].

A. Summary of Proposed ChangesThe restructuring proposes to:

1. Change the name of the project to “Generasi Sehat dan Cerdas”; 2. Change the name of Component 1 to “Community Grants”;3. Add $2.4 million approved by the PNPM Support Facility (PSF) Joint Management Committee (JMC) in April, 2015 for ECED-related activities;4. Reallocate funds across components; and5. Revise several intermediate results-level indicators in the project results framework.

Change in Implementing Agency Yes [ ] No [ X ]

Change in Project's Development Objectives Yes [ ] No [ X ]

Change in Results Framework Yes [ X ] No [ ]

Change in Safeguard Policies Triggered Yes [ ] No [ X ]

Change of EA category Yes [ ] No [ X ]

Other Changes to Safeguards Yes [ ] No [ X ]

Change in Legal Covenants Yes [ ] No [ X ]

Change in Loan Closing Date(s) Yes [ ] No [ X ]

Cancellations Proposed Yes [ ] No [ X ]

Change to Financing Plan Yes [ X ] No [ ]

Change in Disbursement Arrangements Yes [ ] No [ X ]

Reallocation between Disbursement Categories Yes [ X ] No [ ]

Change in Disbursement Estimates Yes [ X ] No [ ]

Change to Components and Cost Yes [ X ] No [ ]

Change in Institutional Arrangements Yes [ ] No [ X ]

Change in Financial Management Yes [ ] No [ X ]

Change in Procurement Yes [ ] No [ X ]

Change in Implementation Schedule Yes [ ] No [ X ]

Other Change(s) Yes [ X ] No [ ]

Appraisal Summary Change in Economic and Financial Analysis Yes [ ] No [ X ]

Appraisal Summary Change in Technical Analysis Yes [ X ] No [ ]

Appraisal Summary Change in Social Analysis Yes [ ] No [ X ]

Appraisal Summary Change in Environmental Analysis Yes [ ] No [ X ]

Appraisal Summary Change in Risk Assessment Yes [ ] No [ X ].

B. Project Status

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An October 2015 Implementation Support Mission rated implementation progress as Moderately Satisfactory. The passing of the Village Law resulted in key institutional and sectoral changes, which in turn affected the portfolios of certain ministries and caused delays to the approval of the Project’s budget for 2015. A number of issues, including delays in finalizing facilitators’ contracts; in transacting the payment of salaries and travel resources for the Project Secretariat staff; and in enabling communities to access multi-year sub-project funds disbursed in 2014, all had an impact on both the implementation of the Project and on the application of reporting and fiduciary controls from January to June, 2015. The Mission found that these issues had been resolved, and that the Project is in a position to achieve its targets.

The proposed restructuring would support government to implement its "PNPM Generasi Transition Strategy," necessitated by the enactment of the Village Law in 2015. The strategy envisages the phase out of component 1 of the project over the period 2016 and 2017, thereby allowing for a reorientation of facilitation support to assist village government and community to utilize Village Law transfers for health and education purposes. 448 sub-districts would receive component in 2016, with the number falling in 2017 to 130 sub-districts in the provinces that entered the program in 2014. All 499 sub-districts will receive facilitation support through 2017 in order to ensure the smooth wrap up and handover of project activities and to support Village Law implementation. The potential for a reduction in the number of sub-districts receiving component 1 was anticipated at appraisal of the Additional Financing, which mentions that project coverage would be revisited at mid-term (early 2016)..

C. Proposed Changes.

Development Objectives/ResultsProject Development Objectives

Original PDOThe PDO is to empower local communities in poor, rural sub-districts in the project provinces to increase utilization of healthandeducation services and foster accountability in local service delivery.

Current PDO

The new PDO is to empower local communities in poor, rural sub-districts in the project provinces to increase utilization of healthand education services.

Change in Project's Development Objectives

Change in Results Framework

Explanation:The following changes are proposed:

1. Add the statement “in 3 provinces” to PDO-level indicators 4, 5, and 6 to reflect revisions to the implementation plan for MCA-I financed complementary supply-side activities that are needed to achieve these indicators. Implementation Support Mission findings show that the supply-side activities are only likely to be implemented in West Kalimantan, Central Kalimantan, and South Sumatra. The project MIS will continue to monitor achievement of these indicators in all provinces, however.2. Revise the end target for PDO-level indicator 8 from 75% to 70% to reflect the project's increased focus on involving male caregivers in health and nutrition-related decision-making processes. 3. Revise downwards the estimated number of direct beneficiaries and female beneficiaries for 2017 to reflect the fact that 130 sub-districts will receive grant funding during the 2017 calendar year.4. Add an indicator at the intermediate results level to track results produced through the $2.4 million funds added to support village early childhood education and development (ECED) activities..

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FinancingChange to Financing Plan

Explanation:

Add $2.4 million approved by the PNPM Support Facility (PSF) Joint Management Committee (JMC) in April, 2015 for ECED-related activities.

Source(s) At Approval Current (from AUS) Proposed

BORR 7,000,000.00 114,900,000.00 114,900,000.00

IDPN 31,700,000.00 119,372,086.00 121,772,086.00

Total 38,700,000.00 234,272,086.00 236,672,086.00

Reallocations

Explanation:

As a result of the policy and institutional changes introduced by the Village Law, government is phasing out the Kecamatan Grant component of the project over in 2016 and 2017, except for the 130 sub-districts that were added to the project in 2014, which will continue to receive full Kecamatan Grant allocations through 2017. This change accounts for the reallocation of funds from Component 1.

It was originally planned that grant funding would be used for component 2 activities in the three new provinces only. To facilitate smoother budgeting and procurement processes, it is proposed to finance component two activities in all project locations from grant funds. Additional funds would also be used to finance additional sub-district facilitators in remote sub-districts to improve the quality of facilitation.

Additional funds are proposed to finance additional technical specialists at the national and provincial levels, including dedicated complaints handling specialists in each province. It will also finance facilitator training activities originally to be funded by government, which will allow the Bank to provide a greater degree of technical input into the training design and delivery.

Ln/Cr/TF Currency Current Category of Expenditure Allocation Disbursement % (Type

Total)

Current Proposed Current Proposed

TF-14769 USDTF 14769 KECAMATAN GRANT PT 1

95,517,086.00

89,063,884.00 100.00 100.00

TF 14769 GO CS TRNG&WS IOC PT 2

14,565,000.00

20,818,481.00 100.00 100.00

TF14769 GO,NON-CS,TR&WS IOC PT 3

9,290,000.00

11,889,721.00 100.00 100.00

Designated Account 0.00 0.00 100.00 100.00

Total: 119,372,086.00

121,772,086.00

Disbursement Estimates

Change in Disbursement Estimates

Explanation:

In order to ensure alignment with the policies under the Village Law, government is phasing out the block

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grant component in 48 sub-districts in 2016 and 369 sub-districts in 2017. As such, disbursement estimates for the 2017 and 2018 fiscal years are revised downwards.

Fiscal Year Current (USD) Proposed (USD)

2013 8,450,000.00 0.00

2014 23,250,000.00 29,523,617.00

2015 40,000,000.00 15,204,000.00

2016 40,000,000.00 34,575,432.00

2017 40,000,000.00 28,877,754.00

2018 31,700,000.00 13,591,282.00

2019 0.00 0.00

Total 183,400,000.00 121,772,085.00.

ComponentsChange to Components and Cost

Explanation:The name change to component 1 is proposed to reflect the new institutional framework for village development introduced through the enactment of the Village Law. Changes to the proposed component costs are described in the "Reallocations" section.

Current Component Name

Proposed Component Name

Current Cost (US$M)

Proposed Cost (US$M) Action

Kecamatan Grants Community Grants 95.52 89.06 Revised

Facilitation Support 14.56 20.82 Revised

Implementation Support and Technical Assistance 9.29 11.89 Revised

Total: 119.37 121.77.

Other Change(s)Other Change(s)

Explanation:As described in the Additional Financing Project Paper (Report No. 829, June 23, 2014), project coverage of 499 sub-districts through 2017 was contingent on additional government or PSF donor financing the availability of which could not be confirmed at the time of the appraisal. P. 20 of the Project Paper stipulated that project coverage and the associated results framework would be reviewed at mid-term (quarter 1 CY 2016) at a time when funding availability would be clearer. The enactment of the Village Law has altered government's approach to village development and empowerment by providing an annual transfer to all village governments for development and empowerment purposes. As a result, as articulated in its "PNPM Generasi Transition Strategy," government has decided to phase out component 1 of the project over the period 2016 and 2017 with the objective of reorienting facilitation support to utilization of the Village Law transfer. Therefore, 448 sub-districts will receive component in 2016, with the number falling in 2017 to 130 sub-districts in the provinces that entered the program in 2014. All 499 sub-districts will receive facilitation support through 2017 in order to ensure the smooth wrap up of project activities and to support Village Law implementation.

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.

Appraisal SummaryAppraisal Summary Change in Technical Analysis

Explanation:

The proposed restructuring would support government to implement its "PNPM Generasi Transition Strategy," necessitated by the enactment of the Village Law in 2015. The strategy envisages the phase out of component 1 of the project over the period 2016 and 2017, thereby allowing for a reorientation of facilitation support to assist village government and community to utilize Village Law transfers for health and education purposes. 448 sub-districts would receive component in 2016, with the number falling in 2017 to 130 sub-districts in the provinces that entered the program in 2014. All 499 sub-districts will receive facilitation support through 2017 in order to ensure the smooth wrap up and handover of project activities and to support Village Law implementation. The potential for a reduction in the number of sub-districts receiving component 1 was anticipated at appraisal of the Additional Financing, which mentions that project coverage would be revisited at mid-term (early 2016).

The Transition Strategy was developed with Bank support and inputs from key stakeholders in government and the donor community, and is deemed technically sound. The contents of the strategy were confirmed by government in a meeting chaired by the Coordinating Ministry for Human Development and Culture held in Jakarta on December 23, 2015.

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NATIONAL PROGRAM FOR COMMUNITY EMPOWERMENT HEALTHY AND BRIGHT GENERATION (PNPM GENERASI)

RESTRUCTURING PAPER

A. SUMMARY

The Restructuring Paper seeks the approval of the Country Director for a Level 2 restructuring of the PNPM Generasi Project and amendment of the Grant Agreement (TF014769). The proposed restructuring would support government to implement its "PNPM Generasi Transition Strategy," necessitated by the enactment of the Village Law in 2015. The strategy envisages the phase out of component 1 of the project over the period 2016 and 2017, thereby allowing for a reorientation of facilitation support to assist village government and community to utilize Village Law transfers for health and education purposes. The strategy also includes an emphasis on improving access to quality early childhood education and development (ECED) services in project villages.

As outlined in a request letter from the Ministry of Finance (MoF) to the World bank dated March 17, 2016, the Restructuring would: (a) change the name of the project to “Generasi Sehat dan Cerdas”; (b) change the name of Component 1 to “Community Grants”; (c) add $2.4 million in funding approved by the PNPM Support Facility (PSF) Joint Management Committee (JMC) on April, 2015 for village level early childhood education and development (ECED) activities; (d) reallocate funds across components; and (e) revise the results framework to account for the proposed changes.

B. PROJECT STATUS

The Project has been supported by PNPM Support Facility (PSF) grant co-financing since 2007. The Bank is co-financing the latest phase of the Project through a Grant in the amount up to US$151.7 million. The Project was approved on June 23, 2013, and Additional Financing was approved on June 25, 2014. The Project is scheduled to close on December 31, 2017. PNPM Generasi is included in GOI’s Medium-term Development Plan for 2015-2019 as a priority program for improving basic services for the poor and vulnerable. The Project will continue to support GOI efforts to reduce maternal and child mortality, childhood stunting, and achieve universal, inclusive primary education.

Until December 2014, PNPM Generasi was implemented by the Directorate of Community Traditional and Cultural Institutions (Direktorat Pemberdayaan Adat dan Sosial Budaya Masyarakat, PMD Sosbud) at the Directorate-General of Community and Village Empowerment (Direktorat Jenderal Pembangunan Masyarakat Desa, PMD) under the Ministry of Home Affairs (MoHA). The passing of the Village Law resulted in key institutional and sectoral changes relevant to village development and empowerment. The Ministry of Villages, Disadvantaged Areas, and Transmigration (MoV) was established in late 2014, and in March 2015 the Government decided to transfer responsibility for the implementation of the Project to the Directorate of Basic Social Services (Direktorat Pelayanan Sosial Dasar, PSD) at the Directorate-General of Village Community Empowerment and Development (Direktorat Jenderal Pembangunan dan Pemberdayaan Masyarakat Desa, PPMD) under MoV. This process disrupted Project implementation from January to July, 2015

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An October 2015 Implementation Support Mission found that implementation delays and challenges, including delays in finalizing facilitators’ contracts; transacting the payment of salaries and travel resources for the Project Secretariat staff; and allowing communities to access multi-year sub-project funds disbursed in 2014, had been resolved and that the Project is now in a position to achieve its targets. On the basis of these findings, Implementation Progress was upgraded from Moderately Unsatisfactory to Moderately Satisfactory. By the end of 2015, 98 percent of Kecamatan Grants allocated for 2015 had been disbursed to community collective bank accounts and the sub-district level. As of December 3, 2015, 746 or 779 (96%) of the Specialist and facilitator positions had been filled. As a result the project is making Satisfactory progress towards PDO achievement. The Project has demonstrated consistent performance in all fiduciary aspects. While some challenges persist, Financial Management and Procurement are rated as Moderately Satisfactory, while Safeguards is rated as Satisfactory.

C. PROPOSED CHANGES

Changing the Project Name and the Name of Component 1

Changing the project name from the “National Program for Community Empowerment Healthy and Bright Generasi” (Program Nasional Pemberdayaan Masyarakat Generasi Sehat dan Cerdas—PNPM Generasi) to Generasi Sehat dan Cerdas (Generasi) reflects the institutional and policy changes for village development introduced through the enactment of the Village Law, which includes the closing of the PNPM Mandiri program in December 31, 2014.

In addition, Village Law enactment in principle precludes transfers to the sub-district (kecamatan) level, hence the request to change the name of Category 1 to “Community Grants.” The transfers to community collective bank accounts at the sub-district level remain legal and permissible under MoF regulations.

Amending Grant Amount to $121,772,086

On April 29, 2015, the PSF Joint Management Committee (JMC) approved US$ 5.4 million in support for “ECED Frontline Service Delivery”. Of this, US$2.4 million would be channeled through Generasi for use by communities to fund training and capacity development of at least 15,000 community ECED teachers by 2017. In parallel, the Ministry of Education and Culture (MoEC) and district education departments in 25 Generasi districts will implement activities aimed at increasing and improving the quality of training and professional development support available to community ECED teachers. The table below specifies the current and revised allocation of Grant proceeds under the Grant Agreement:

Category

Category Description

Amount of Grant Allocated

Expressed in USD

Revised Amount of the Loan Allocated Expressed in USD

Percentage of Expenditures to

be Financed (inclusive of

taxes)

1 Kecamatan Grants

(Community Grants)

95,517,086 89,063,884 100%

2 Consultant services, 14,565,000 20,818,481 100%

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goods, training and workshops, and incremental operating costs for facilitation support under Part 2 of the Project

3 Consultant services, goods, training and workshops, and incremental operating costs for implementation support and technical assistance under Part 3 of the Project

9,290,000 11,889,721 100%

119,372,086 121,772,086

Reallocation of Funds across Components and Changing the Name of Category 1

The decrease in the allocation for Component 1 and the increased allocations for Components 2 and 3 would support government to implement its "PNPM Generasi Transition Strategy," necessitated by the enactment of the Village Law in 2015. The strategy envisages the phase out of component 1 of the project over the period 2016 and 2017, thereby allowing for a reorientation of facilitation support to assist village governments and communities to utilize Village Law transfers for health and education purposes. 448 sub-districts would receive component in 2016, with the number falling in 2017 to 130 sub-districts in the provinces that entered the program in 2014. All 499 sub-districts will receive facilitation support through 2017 in order to ensure the smooth wrap up and handover of project activities and to support Village Law implementation. The potential for a reduction in the number of sub-districts receiving Component 1 was described in the Additional Financing Project Paper (Report No. 829, June 23, 2014), which mentions that project coverage would be revisited at mid-term (early 2016).

Changes to the Results Framework

The following changes are required:

(a) Add the statement “in 3 provinces” to PDO-level indicators 4, 5, and 6 to reflect revisions to the implementation plan for MCA-I financed complementary supply-side activities that are needed to achieve these indicators. Implementation Support Mission findings show that the supply-side activities are only likely to be implemented in West Kalimantan, Central Kalimantan, and South Sumatra. The project MIS will continue to monitor achievement of these indicators in all provinces, however.

(b) Revise the end target for PDO-level indicator 8 from 75% to 70% to reflect the project's increased focus on involving male caregivers in health and nutrition-related decision-making processes.

(c) Revise downwards the estimated number of direct beneficiaries and female beneficiaries for 2017 from 4.9 million to 850,000 and from 2.7 million to 467,500, respectively, to reflect the fact that 130 sub-districts will receive grant funding during the 2017 calendar year.

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(d) Add Number of community Early Childhood Education and Development teachers trained at the intermediate results level with a baseline value of 0 in 2015 and a target value of 15,000 in 2017.

D. APPRAISAL SUMMARY

Institutional Analysis

The Project will continue to be implemented by the Directorate for Basic Social Services (Layanan Sosial Dasar) in the DG for Village Development and Empowerment at MoV. There are no proposed changes to the institutional arrangements for the Project.

Technical Analysis

The technical assistance structure for Generasi at the national, provincial, district, sub-district and village levels is described below. Several change to the structure are proposed through this Restructuring are needed in order to implement the Generasi Transition Strategy with a focus on supporting Village Law Implementation. The task team confirms that the minor changes proposed to the technical assistance structure are sound and will enable the Project to achieve its Development Objective.

(i) National Satker: The National Satker for Generasi serves as the national program management unit and functions under the DG for Village Community Empowerment. The National Satker’s responsibilities are unchanged, and include: (a) overall management and general administration of basic social service delivery, including services delivered through Generasi; (b) developing regulations and implementing policies; (c) managing the budget for basic social service programs, including contracting consultants and Administrative Services Firms (ASFs); and (d) instructing provincial governments to establish Provincial Satkers and manage facilitators, and District Satkers to assist and coordinate project activities.

(ii) Program Secretariat: The Program Secretariat provides administrative and fiduciary support to the National Satker, and is comprised of Government Officers from MoV, Consultants, and supporting staff. The terms of reference for the Program Secretariat will remain the largely unchanged. The Program secretariat is led by a Coordinator and assisted by five specialists responsible for budgeting, invoicing and procurement, and supported by 15 supporting staffs. However, to improve efficiency of division of labor between the Program Secretariat and the National Management Specialist team, the Disbursement Specialist and Human Resource Development Specialist will be transferred to the National Management Specialist team.

(iii) National Management Specialists. The National Management Specialists, which are hired as professional staffs through an Administrative Services Firm (ASF) contract are responsible for the following: (a) assisting with day-to-day implementation and oversight of technical assistance provided to consultants and facilitators at the provincial, district, and sub-district level; (b) providing support and assistance to the National Satker and Program Secretariat on the development of operational guidelines and standard operating procedures. The number and terms of reference for the National Management Specialists will be agreed upon between MoV and the Bank, but are expected to remain largely unchanged. However, a new position will be added to support implementation of the Generasi transition strategy. The National Management Specialists team is led by a Team

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Leader and assisted by a Deputy Team Leader for Program Development and a Deputy Team Leader for Program Oversight. The total number of National Management specialists will increase from 14 to 22 people.1

(iv) Provincial Specialists: The Provincial Management Specialist teams, who are hired as professional staffs through an Administrative Services Firm (ASF) contract, consist of one Provincial Coordinator, one MIS Specialist, one Financial Management Specialist and one Training and Capacity Improvement Specialist. The Training and Capacity Improvement Specialist is added as a result of this Restructuring. The Provincial Management Specialist teams assist with day-to-day implementation and oversight of technical assistance provided to facilitators at the district, and sub-district level The Provincial Specialists are responsible on (a) making provincial work plans; (b) supervising and monitoring overall program implementation, (c) supervising and monitoring the District and Sub-District facilitators; (d) managing information and project data; (e) conducting internal audits and capacity building; and (f) coordinating with Provincial Government and relevant stakeholders at the provincial level.

(v) District facilitators: The District Facilitators are selected and hired by Provincial Satker. District facilitator teams consist of one Community Empowerment Facilitator and one Financial Management Facilitator. The main responsibilities of the district team are to facilitate, support, supervise and monitor the implementation of the program in sub-districts and villages; conduct the internal audit; manage sub-district data and information; monitor the financial management and administration functions carried out by sub-district Activity Management Units (UPK) and the Sub-District Facilitators; and provide reports to the Provincial Program Specialist; developing and delivering pre-service and refresher training for Sub-District facilitators. District Facilitator teams maintain a close relationship and coordination with the District Satker as well as relevant stakeholders in District level. Terms of reference for Facilitators in the six sub-districts in NTB province will be revised to focus on planning and utilization of Village Funds for health and education purposes. Terms of reference for the Facilitators in the other 60 districts remain unchanged.

(vi) Sub-district facilitators: Sub-District Facilitators are selected and hired by provincial Satkers. The main responsibility of Sub-District Facilitators is to facilitate and oversee program implementation at the sub-district and village levels at all stages of the program cycles. Sub-District Facilitators are also responsible for providing guidance and capacity building to the Village Facilitators, Village and Hamlets Cadres and other program actors. This includes establishing the coordination with the supply side institutions and local community organizations in their area. Terms of reference for Facilitators in the 51 sub-districts in NTB province will be revised to focus on planning and utilization of Village Funds for health and education purposes. Terms of reference for the Facilitators in the other 448 sub-districts remain unchanged.

Fiduciary Analysis

1 The new Specialists are: Deputy Team Leader for Program Development; Deputy Team Leader for Program Oversigth; Disbursement Specialist; Human Resource Development (HRD) Specialist; Public Policy Specialist; Junior HRD Specialist; Junior Complaint Handling Specialist; Junior Disbursement Specialist

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The most recent FM implementation review, conducted in October 2015, rated FM as Moderately Satisfactory. The Mission noted that the Kecamatan Grant funds were safe and no leakage was found during the transition resulting from the transfer of responsibility from MoHA to MoV; that the BPKP audit opinion was Unqualified; that the issue of the legal basis for payment of facilitators working from January to June 2015 has been resolved; and the new provincial-level financial management specialists have been mobilized. However, the Mission found FM-related challenges, including delays in disbursements in the first quarter IFR due to the transfer of responsibility from MoHA to MoV, with no available definitive officers at MoV during the first semester; large balances in the Pokja accounts and need close monitoring by the facilitators and financial management specialists; delays in salary payment for facilitators in East Java and for consultants under the ASF have occurred; and some weaknesses in financial administration were identified at the UPK level due to poor facilitation and the poor supervision of facilitators both at the district and sub-district levels.

Mitigation measures, including: (i) addition of a minimum of two FM consultants in the Project Secretariat to oversee intensive monitoring of Pokja account balances; (ii) re-engaging the Project’s consultants and facilitators as soon as possible after the transition to MoV; (iii) MoV issuance of a letter to enable facilitators who have worked more than three months and have taken part in IST/Pelatihan Mandiri to sign Kecamatan Grant withdrawal documentation; and (iv) intensive implementation support and technical assistance from the Bank to the National Satker during and after the transition period continue to address FM risks. In addition, the revised Project Operations Manual (PTO) will eliminate multi-year activities as a means to minimize further Pokja account balances.

The Bank conducted a follow-up assessment of MoV’s FM capacity in light of a Ministry of Finance Decree (PMK) No. 168 issued in 2015, which eliminates the Social Assistance (Bansos) budget allocation category, and replaces it with the “Government Assistance” (Bantuan Pemerintah) category. Component 1 of the Project will operate under the Bantuan Pemerintah category. As a result, the PTO must include detailed implementation guidelines defining how Component 1 will be executed that are consistent with PMK 168. The Bank’s NoL for the revised PTO is required prior to Component 1 disbursement in 2016. Should MoV choose to provide the details through a Petunjuk Teknis (Operational Guidance) rather than through the PTO, the Bank would be provided the opportunity to review the Petunjuk Teknis prior to issuing its non-objection to the PTO.

A similar assessment of MoV’s procurement capacity was carried out to update the procurement institutional arrangements and procedures. No major changes in procurement arrangements are foreseen from the current additional financing grant. The assessment concluded that procurement under the Project will continue to be carried out under the Bank’s Procurement and Consultant Guidelines in accordance with the Grant Agreement. Procurement at the community level shall continue to be carried out in accordance with the latest version of the Project Operational Manual (PTO) of PNPM-Rural. The Procurement Services Unit (ULP) is already established in MoV, and procurement under the Project is continued to be carried out by the Procurement Committee (Pokja) under the same ULP. It was also observed some of the current Procurement Committee (Pokja) members were also responsible for procurement under the previous PNPM-Rural and PNPM Generasi Projects managed by the MOHA’s ULP. Hands-on implementation support have been continuously provided by the Bank after the transfer of project from MOHA to MoV.

The current (second) Administrative Services Firm (ASF-2) contract will be ended on January 31, 2016 and the Bank has provided its no objection on January 18, 2016 for the issuance of Bidding Documents for the new procurement of the third Administrative Services Firms (ASF-3) contract

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(package) for continuation of the same services until end of the current Grant period. This new ASF-3 package consists of two contracts i.e. (i) ASF-3A for Providing Support Services to the Professional Staffs/Specialists Serving as the National Management Consultants Team, and (ii) ASF-3B for Providing Support Services to the Professional Staffs/Specialists Serving as the Provincial Management Consultants Team. Since these new contracts are expected to be awarded by end of March 2016, the Bank has also suggested PPMD to extend the current ASF-2 contract for further three months (from January 31, 2016 to April 30, 2016) for continuation of the ASF services in supporting the Project’s ongoing programs.

It was also agreed that the same scheme for selection and hiring of facilitators and project secretariat staffs (as individual consultants) on the basis of single-source selection with the previous facilitators/staffs may be applied and these contracts will be subject to the Bank’s expost review.

Environmental and Social Analysis

Safeguards categorization and policies triggered remain the same, and the risk rating of Moderate is therefore unchanged. The existing Implementation Guidelines of Environmental and Social Safeguards (IGSES) included in the PTO will continue to guide facilitators and communities during the preparation and implementation of sub-project activities. The primary safeguard concern remains social inclusion. Namely, technical assistance and oversight is needed to ensure that marginalized groups, including indigenous peoples (IPs), are included in PNPM Generasi problem diagnosis, planning, and that sub-project activities suit their needs. The restructuring will continue to support additional training for facilitators and community members.

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ANNEX 1

Results Framework and Monitoring

INDONESIA: PNPM GENERASI (P132585)

Project Name:

ID-TF NATIONAL PROGRAM FOR COMMUNITY EMPOWERMENT IN RURAL AREAS HEALTHY AND BRIGHT GENERATION (PNPM GENERASI) (P132585)

Project Stage: Restructuring Status: DRAFT

Team Leader(s):

Robert Wrobel Requesting Unit: EACIF Created by: Robert Wrobel on 09-Dec-2015

Product Line: Recipient Executed Activities Responsible

Unit: GSUID Modified by: Robert Wrobel on 17-Mar-2016

Country: Indonesia Approval FY: 2013

Region: EAST ASIA AND PACIFIC Lending Instrument: Technical Assistance Loan

.

Project Development ObjectivesOriginal Project Development Objective:The PDO is to empower local communities in poor, rural sub-districts in the project provinces to increase utilization ofhealthandeducation services and foster accountability in local service delivery.

Current Project Development Objective:The new PDO is to empower local communities in poor, rural sub-districts in the project provinces to increase utilization ofhealthand education services.

Results

Core sector indicators are considered: Yes Results reporting level: Project Level.

Project Development Objective IndicatorsStatus Indicator Name Core Unit of Measure Baseline Actual(Current) End TargetNo Change Improved access to and

utilization of health services in the targeted areas: % of pregnant women receiving four prenatal care visits

Percentage Value 70.00 68.00 80.00

Date 31-Dec-2012 31-Dec-2014 31-Dec-2017

Comment

No Change % of deliveries assisted by trained professionals


Sub Type Date 31-Dec-2012 31-Dec-2014 31-Dec-2017

Breakdown CommentNo Change % of children under three

weighed monthlyPercentage Value 75.00 81.00 85.00


Breakdown CommentRevised % of pregnant women

participating in pregnancy and nutrition class monthly in 3 provinces



Breakdown Comment% of pregnant women participating in pregnancy and nutrition class monthly



Breakdown CommentRevised % of male caregivers

participating in pregnancy and nutrition class monthly in 3 provinces



Breakdown Comment

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% of male caregivers participating in pregnancy and nutrition class monthly



Breakdown CommentRevised % of parents of 0-2 year olds

participate in parenting and nutrition class monthly in 3 provinces



Breakdown Comment% of parents of 0-2 year olds participate in parenting and nutrition class monthly



Breakdown CommentNo Change Improved access to and

utilization of education services in the targeted areas: junior secondary enrollment rate


Date 31-Dec-2012 31-Dec-2014 31-Dec-2017

CommentRevised % community members

involved in planning and decision-making meetings: women


Date 31-Dec-2012 20-Sep-2015 31-Dec-2017

Comment% community members involved in planning and decision-making meetings: women


Date 31-Dec-2012 20-Sep-2015 31-Dec-2017

CommentNo Change poorest community members Percentage Value 58.00 47.00 60.00

Sub TypeSupplemental

Revised Direct project beneficiaries Number Value 3600000.00 2483735.00 850000.00

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Date 31-Dec-2012 20-Sep-2015 31-Dec-2017

Comment Estimate number of people benefiting directly from the 2017 round of Community Grants.

Direct project beneficiaries Number Value 3600000.00 2483735.00 4900000.00

Date 31-Dec-2012 20-Sep-2015 31-Dec-2017

CommentRevised Female beneficiaries Percentage Value 1980000.00 1291542.00 467500.00


Female beneficiaries Percentage Value 1980000.00 1291542.00 2695000.00


No Change Direct project beneficiaries in 130 sub-districts in three expansion provinces

Number Value 0.00 390024.00 850000.00

Sub Type Date 31-Dec-2012 19-Mar-2015 31-Dec-2017

Breakdown Comment

Intermediate Results Indicators

Status Indicator Name Core Unit of Measure Baseline Actual(Current) End TargetNo Change % of subdistricts with 100% Percentage Value 85.00 8.00 90.00

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disbursement rate at the end of program cycle

Date 31-Dec-2012 20-Sep-2015 31-Dec-2017

CommentNo Change % of previous non-users as

beneficiaries of sub-projectsPercentage Value 25.00 0.00 50.00

Date 31-Dec-2012 20-Sep-2015 31-Dec-2017

CommentNo Change % of sub-districts in which

service providers attended MAD (Musyawarah Antar Desa) to discuss the status of health and education services


Date 31-Dec-2012 31-Dec-2014 31-Dec-2017

Comment

No Change % of district government conducted supervision to communities as planned


Date 31-Dec-2012 20-Sep-2015 31-Dec-2017

CommentNo Change % districts conducted planning

and coordination workshop with district-level health and education office to discuss Generasi activities


Date 31-Dec-2012 20-Sep-2015 31-Dec-2017

Comment

No Change % of district-level MIS data completed (verified, entered and submitted)


Date 31-Dec-2012 20-Sep-2015 31-Dec-2017

CommentNo Change % of sub-districts in which

50% of villages conducted cross-village audits as planned


Date 31-Dec-2012 20-Sep-2015 31-Dec-2017

CommentNo Change % of planned facilitators at all Percentage Value 80.00 0.00 90.00

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levels were recruited and trained according to the agreed training plan

Date 31-Dec-2012 20-Sep-2015 31-Dec-2017

Comment

No Change % of sub-districts audited each year and for which the results are published


Date 31-Dec-2012 20-Sep-2015 31-Dec-2017

CommentNew Number of community Early

Childhood Education and Development teachers trained

Number Value 0.00 15000.00

Date 01-Jan-2015 31-Dec-2017

Comment.

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ANNEX 2

Operational Risk Assessment Framework (ORAF)INDONESIA: PNPM GENERASI (P132585)

Stage: Restructuring.

Risks

.

1. Project Stakeholder Risks

1.1 Stakeholder Risk Rating Moderate

Risk Description: Risk Management:

The Ministry of Village, Disadvantaged Areas and Transmigration (MoV) and other partner agencies, including the Ministry of Home Affairs (MoHA), Ministry of Finance (MoF) and Bappenas have demonstrated a strong commitment to the Project. However, past experience indicates that inter-agency coordination at the national levels can at times be challenging; and overall implementation and disbursement progress has slowed due to uncertainty around the transition arrangements from the Project to the implementation of the Village Law.

MoF to submit restructuring request to amend the project’s Grant Agreement, and clarify the institutional arrangements.

Resp: Client Status: In Progress

Stage: Implementation

Recurrent: Due Date:

30-Apr-2015 Frequency:

2. Operating Environment Risks

2.1 Country Rating Moderate


Delays and inefficiency due to weaknesses in Implementing the Country Partnership Strategy with focus on mainstreaming the governance agenda across all

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public procurement, especially in selection of consulting services and applicability of Bank Guidelines on public procurement due to issuance of the new Presidential Decree on public procurement, weak internal control in public financial management, and inefficient planning and execution of the budget.

aspects of the Bank program, with special attention to strengthening country institutions and greater use of country systems, where existing programs are found to have robust implementation and monitoring, e.g., in community driven development and school-based management.




31-Dec-2017 Frequency:

2.2 Sector and Multi-Sector Rating Substantial


While MoV is primarily responsible for implementation of the Village Law program, MoHA remains responsible for village administration and governance and there is also some competition among various agencies with regard to who should take the lead in policy formulation.

The Sector risk has been upgraded because of the transition to the Village Law and delays in project implementation.

Ministries and implementing agency do not share a consensus around project objectives and approaches.

Lack of sustained commitment and collaboration of MoH to: (a) change policy and standards for nutrition interventions to promote stunting reduction, (b) ensure coordination among national MoH units, (c) influence and motivate decentralized service delivery units to change practices.

Low commitment to and participation in PNPM Generasi of local government and district health

Kemenko PMK is responsible for coordination policies and activities of MoV, MoH, and MoEC, whereas MoHA fell uder a sepearte Coordinating Ministry. Coordination across health and education sectors should therefore be easier with MoV as the PNPM Generasi implementing agency. Additional oversight will be provided by two Coordinating Committees chaired by PMK: (i) Acceleration of Completion of PNPM and Implementation of Village Law; and (ii) Oversight Committee for Village and Rural Development. PNPM Generasi falls under the latter, which include officials from PMK, Bappenas, MoF, MoHA, MoV, MoH, and MoEC.




29-May-2015 Frequency:

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departments.

3. Implementing Agency (IA) Risks (including Fiduciary Risks)

3.1 Capacity Rating Substantial


The Project will be implemented by the DG for Village Development and Empowerment at MoV. While the DG is new, it is presently staffed with civil servants from the MoV, some of whom worked on the Bank-funded PNPM-SPADA (Support for Poor and Disadvantaged Areas) between 2007 and 2012. Apart from key staff that have transferred over from MoHA’s PMD to MoV, MoV is currently limited in available personnel to manage the technical functions and day-to-day responsibilities of the Project.

The MoV will adopt the existing institutional structure at the national, provincial, district, sub-district and village levels. It will also re-contract staff working in the existing PNPM Generasi Project Secretariat from MoHA. This will help to ensure continuity and coordination in programming as well as provide additional management and technical capacity to support MoV in the planning and implementation of PNPM Generasi. The key is for GoI to make MoV’s 2015 DIPA effective.

Resp: Both Status: In Progress



30-Apr-2015 Frequency:

3.2 Governance Rating Substantial

Risk Description:

MoV is committed to the objectives of the Project, but has weak capacity needed to implement multiple systems aimed at strengthening governance and anti-corruption in the Project.

Risk Management:

The MoV will adopt the existing institutional structure at the national, provincial, district, sub-district and village levels and staff. In addition, MoV is hiring Specialists at the Provincial level responsible for internal audit and complaints handling oversight, which will strengthen the quality of the Project’s complaints handling system.

The Bank will provide enhanced implementation support to MoV and other government stakeholders through the Coordinating Committee on facilitation and other project implementation issues.





Fraud and Corruption Rating Substantial


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Fiduciary and monitoring systems are under strain due to the transition from MoHA to MoV.

FM capacity of the national staff is weak given that MoV has limited experience in managing the Project.

Difficulties in maintaining internal controls through supervision and monitoring of sub-project implementation given that consultants and facilitators are working without a legal contract.

Delay in finalizing the new procurement for ASF- 3A and 3B beyond April 2016 may affect smooth continuity of services.

Risk Management:

The Project Secretariat will: (i) include a minimum of two FM consultants, and (ii) re-engage the Project’s consultants and facilitators as soon as the DIPA is approved. In addition, the Bank will provide technical assistance and enhanced implementation support to the National Satker during the transition period.

Another FM assessment will be completed after the establishment of the National Satker and reconstitution of the full Project Secretariat.

A semi-annual Governance Report is prepared by the PSF and is used to highlight key governance as well as fraud and corruption cases. The former PMD, with the support of the PSF, carried out a diagnostic and prepared a Technical Guidance Note (TGN) on the number and types of complaints officially registered; status and trends of outstanding cases; and classification of the types of mediation that are required. The TGN was used to update the SOPs and aimed to (i) streamline the investigation process; (ii) develop a comprehensive diagnostic for understanding, differentiating and resolving outstanding cases; and (iii) develop new measures to address recurring or systemic issues to stem the proliferation of new cases.

The Bank’s Task Team will work closely with PPMD to complete the procurement process for new ASF 3A and 3B before the expiry of existing ASF-2 contract.


Stage: Both Recurrent: Due Date:


4. Project Risks

4.1 Design Rating Moderate


Overall the project’s design is proven and has shown very good results. However, several of PNPM Generasi’s PDO-level indicators depend on the timely implementation of supply-side activities by MoH.

MoV will utilize the PNPM Generasi PTO effective in 2014. Delays in implementation of supply-side activities will be escalated through the PMK Oversight Committee.




4.2 Social and Environmental Rating Low


Implementation Guidelines for Social and Implementation of the IGSES will be carefully monitored by PMD and the Bank. Any issues identified would be

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Environmental Safeguards (IGSES) were issued for PNPM-Rural IV and have been revised for greater effectiveness.

After a decade of KDP/PNPM implementation there have been no serious cases of safeguards problems.

addressed promptly discussions including proper documentation of land donations.





4.3 Program and Donor Rating Moderate


There has been strong support for PNPM from the donor community, including the DFAT financed KOMPAK facility, and the MCA-I.

A consortium of donors supports PNPM through the PNPM Support Facility (PSF) and the Joint Management Committee coordinates all donors supporting PNPM.

PSF will continue to review and improve its engagement with partners to ensure that it supports the transition of the project. Membership of the Joint Management Committee will need to be revised to include MoV.

Resp: Bank Status: In Progress



4.4 Delivery Monitoring and Sustainability Rating Substantial

Risk Description:

Monitoring: PNPM Generasi’s MIS provides program managers with data on key processes and outputs, but does not satisfy the data needs of all stakeholders.

Counterpart funding: An estimated US$115.7 million in APBN (national government budget) funding will be necessary to achieve the expansion target into 499 kecamatans in 2014 and sustain program operations through 2017.

Sustainability: PNPM Generasi currently uses institutions and mechanisms that parallel local government planning and funds transfer

Risk Management:

PNPM Generasi is included in the Government’s RPJMN 2015-2019 through 2019.

Counterpart funding commitments will be guaranteed through the Pedum and corresponding joint work plans involving MoH, MoEC and PMD, under the auspices of Bappenas. With the public disclosure of the workplan, any unilateral reductions in counterpart funding by MoHA will receive resistance.

Should counterpart funding not materialize, expansion to the relevant number of new locations will not take place. This will ensure that activities are not only partially implemented. Expansion will only occur where sufficient annual funding is confirmed.

PNPM Generasi operates through existing local health and education institutions, such as village health posts and school committees, rather than creating parallel implementation structures.

The Bank will provide TA to MoV to incorporate systems and tools developed under PNPM Generasi into mainstream village law implementation systems.

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mechanisms. Government has declared its intention to reform these mechanisms, including accountability processes, drawing lessons from PNPM, through the implementation of the Village Law.




4.5 Other (Optional) Rating Moderate


Resp: Status: Stage: Recurrent: Due Date:

Frequency:

5. Overall Risk

5.1 Overall Implementation Risk Rating Substantial

Risk Description:

The overall risk rating is Substantial.

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