The World Bank Sustainable Low-Carbon Development in Orinoquia Region Project (P160680) REPORT NO.: RES33575 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE SUSTAINABLE LOW-CARBON DEVELOPMENT IN ORINOQUIA REGION PROJECT APPROVED ON FEBRUARY 16, 2018 TO THE REPUBLIC OF COLOMBIA ENVIRONMENT & NATURAL RESOURCES GLOBAL PRACTICE COLOMBIA COUNTRY MANAGEMENT UNIT LATIN AMERICA AND THE CARIBBEAN REGION Regional Vice President: Jorge Familiar Country Director: Ulrich Zachau Senior Global Practice Director: Karin Erika Kemper Practice Manager/Manager: Valerie Hickey Task Team Leader: Franka Braun, Luz Berania Diaz Rios The World Bank Sustainable Low-Carbon Development in Orinoquia Region Project (P160680) ABBREVIATIONS AND ACRONYMS ANT Agencia Nacional de Tierras (National Land Agency) APC Agencia Presidencial de Cooperación de Colombia (Colombian Presidential Agency for Cooperation) BioCF BioCarbon Fund BMUB Bundesministerium für Umwelt, Naturschutz, Bau und Reaktorsicherheit (The German Federal Ministry of the Environment, Nature Conservation and Nuclear Safety) CORMACARENA Corporación para el Desarrollo Sostenible del Área del Manejo Especial la Macarena (Corporation for the Sustainable Development of the Macarena) CORPOICA Corporación Colombiana de Investigación Agropecuaria (Colombian Corporation for Agricultural Research) DNP Departamento Nacional de Planeación (National Planning Department) DL Disbursement Letter ER Emission Reductions FINAGRO Fondo para el Financiamiento del Sector Agropecuario (Fund for Financing the Agricultural Sector) FM Financial Management GA Grant Agreement GHG Greenhouse Gases IDEAM Instituto de Hidrología, Meteorología y Estudios Ambientales (Institute of Hydrology, Meteorology and Environmental Studies) ISFL Initiative for Sustainable Forest Landscapes MADS Ministerio de Ambiente y Desarrollo Sostenible (Ministry of Environment and Sustainable Development) MADR Ministerio de Agricultura y Desarrollo Rural (Ministry of Agriculture and Rural Development) MOU Memorandum of Understanding MHCP Ministerio de Hacienda y Crédito Público (Ministry of Finance and Public Credit) MRV Monitoring, Reporting, and Verification NORECCO Nodo Regional de Cambio Climático para la Orinoquia (Regional Climate Change Platform for Orinoquia) PDO Project Development Objective PIU Project Implementation Unit POM Project Operational Manual REDD+ Reduced Emissions from Deforestation and Degradation SIFI Sistema Financiero Institucional (Institutional Financial System) ISR Implementation Status and Results Report USDOS U.S. Department of State The World Bank Sustainable Low-Carbon Development in Orinoquia Region Project (P160680) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P160680 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 16-Feb-2018 Organizations Borrower Responsible Agency Ministry of Agriculture and Rural Development (MADR),Ministry of Environment and Sustainable Republic of Colombia Development (MADS),National Planning Department (DNP),Instituto de Hidrologia, Meteorologia y Estudios Ambientales (IDEAM) Project Development Objective (PDO) Original PDO To improve enabling conditions for sustainable and low-carbon landscape planning and management in project targeted areas. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Sustainable Low-Carbon Development in Orinoquia Region Project (P160680) Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING BACKGROUND AND IMPLEMENTATION PROGRESS 1. The Colombia Sustainable Low-Carbon Development in Orinoquia Region Project (P160680) provides a US$20.0 million grant to the Ministry of Agriculture and Rural Development (MADR). The Project is financed by a US$18.65 million grant (TF0A6376) from the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMUB), through the World Bank’s BioCarbon Fund, and a US$1.35 million grant (TF0A6377) from the U.S. Department of State (USDOS). The Project was approved by the World Bank on February 16, 2018 and the Grant Agreement between the World Bank and the Republic of Colombia was signed on March 9, 2018. The Project’s implementation will be led by MADR, in close coordination with the Ministry of Environment and Sustainable Development (MADS), the National Planning Department (DNP) and the Institute of Hydrology, Meteorology and Environmental Studies (IDEAM). 2. The Project is part of the Orinoquia Sustainable Integrated Landscape Program (OSILP) which is supported by the BioCarbon Fund (BioCF), Initiative for Sustainable Forest Landscapes (ISFL). The OSILP incorporates three phases that will jointly contribute toward Emission Reductions (ER) in the land-use sector of the Orinoquia region: (i) a preparation phase, which is under implementation (US$1.5 million); (ii) a four-year Technical Assistance (TA) phase supporting Sustainable Low-Carbon Development in the Orinoquia Region (US$20 Million), which is supported by this Project and will improve the enabling environment and preparatory activities for the implementation of a results-based ER program; and (iii) the ER Program (expected approval in Q2 FY20) to trigger payments from the BioCF’s third tranche (BioCF T3) based on verified ER (up to US$60 million). 3. The Project’s objective is to improve the enabling conditions for sustainable and low-carbon landscape management through: (i) capacity building to develop, improve, or enforce, as needed, policy and planning instruments (including land tenure instruments) that address the institutional drivers of land-use based Greenhouse Gas (GHG) emissions (Component 1); and (ii) actions aimed at promoting the adoption of sustainable and low- carbon landscape management including the improvement of technical assistance and introducing financial and non-financial incentive mechanisms (Component 2). The Project will also support the development of a results- based payment mechanism for reducing GHG emissions in the Orinoquia region, the ER Program (Component 3). 4. Progress in reaching grant effectiveness has been delayed due to legal complications that arose during incorporation of grant resources into the national budget. The Project involves activities to be undertaken by multiple Government agencies: MADR, DNP, MADS and IDEAM. During preparation, agreement was reached to proceed via direct implementation of grant funds through MADR. This direct implementation modality implied the incorporation of grant funds into the national budget. However, at the moment of the grant incorporation process, DNP’s legal team observed a breach with Colombia’s budgetary law given that a sectoral ministry (in this case, MADR) cannot register nor implement grant funds on behalf of other national agencies. In order to provide time to solve this legal issue, a first extension of the effectiveness deadline was approved on June 5, 2018 and established September 4, 2018 as the new effectiveness deadline. Due to the change in administration on August 7, 2018 and a need for the new Government team at MADR to review the modified implementation modalities, a second The World Bank Sustainable Low-Carbon Development in Orinoquia region Project (P160680) extension of the effectiveness deadline was approved on August 31, 2018. The current project effectiveness deadline is December 18, 2018. The related inability to disburse grant resources led to a Moderately Unsatisfactory (MU) rating in the project’s first Implementation Status and Results Report (ISR) in June 2018. 5. The MADR has made significant progress in meeting the effectiveness conditions: i) the legal opinion on GA execution will be provided by MADR upon signature of the amendment to the GA , ii) the inter-institutional agreement has been prepared and agreed by all parties and will be executed after signature of the amendment to the GA, iii) the effectiveness condition on the Project Operations Manual (POM) is close to being met, as the POM has been finalized, is under review for approval by the implementation partners and will be sent to the World Bank for non-objection by November 27, 2018. RATIONALE FOR THE RESTRUCTURING 6. To overcome the legal issue related to the incorporation of grant resources into the national budget, a modification in the project implementation arrangements has been proposed by the Recipient and agreed by all parties. This modification implies the inclusion of a fiduciary agent (FIDUAGRARIA) that will be responsible for receiving and administrating the grant funds, thereby enabling the flow of funds (disbursements) and thus the activities planned by each agency to commence. In addition, all parties agree that the inclusion of the fiduciary agent will increase efficiency in the management and execution of grant resources for the following reasons: (i) it will guarantee a more expedite execution of grant funds for activities defined by the four co-implementing entities, and (ii) this modality does not require incorporation of grant resources into the national budget and therefore does not fall under the budget annuities, allowing for a longer term planning of activities beyond the 12 month budget period. While MADR remains the lead recipient and implementing agency, this revision will result in changes to the Grant Agreement, requiring a Level-2 Project Restructuring. An official letter by MADR requesting the restructuring, was received by the Bank on July 4, 2018. II. DESCRIPTION OF PROPOSED CHANGES 7. The changes introduced by the proposed restructuring include: A. Changes in Project Implementation Arrangements 8. The Restructuring introduces changes in the project implementation arrangements consisting in the inclusion of FIDUAGRARIA as fiduciary agent. MADR remains the implementing agency and as such will lead the overall Project coordination and implementation. MADR will sign a Fiduciary Agent Agreement with FIDUAGRARIA. This fiduciary agent will have the responsibility of managing the flow of funds, budgeting, accounting, and reporting. It will also have the responsibility of handling the contracting processes needed to carry out the activities to be financed under the Project. The Project Implementation Unit (PIU) will be established within MADR, as initially foreseen, but the hiring of an accountant will no longer be needed. As originally foreseen, the PIU will liaise with the three collaborating entities, MADS, DNP and IDEAM, to manage the implementation of the four Project’s components. The PIU will also continue to oversee the financial arrangements related to external audit, financial reports, disbursement instructions, and in general, the maintenance of the financial management system of the Project. The World Bank Sustainable Low-Carbon Development in Orinoquia region Project (P160680) 9. The fiduciary agent (FIDUAGRARIA) will support MADR in project implementation as follows: FIDUAGRARIA will i) sign the contracts for works, goods, and services based on the selection process conducted by the PIU/MADR, ii) facilitate the software for budget and accounting of the Project, iii) record budget and accounting transactions according to acceptable accounting standards, iv) make payments to vendors according to MADR instructions, and v) other obligations that will be included in the Fiduciary Agent Agreement, under terms and conditions acceptable to the Bank. Detailed procedures will be included in the POM. 10. Figure 1. illustrates the amended institutional arrangement: Figure 1. Institutional Arrangement B. Proposed Changes in Financial Management 11. As a result of the inclusion of FIDUAGRARIA as part of the project’s institutional arrangements, and in accordance with the World Bank Group’s OP/BP 10.00, the Project’s Financial Management (FM) assessment was updated. The assessment maintained the Project’s FM rating as Substantial and concluded that both MADR and FIDUAGRARIA (i) have sound internal risk control procedures, (ii) have financial policies and procedures in place, and (iii) are audited by the Office of the Comptroller General of Colombia. The FM expanded the range of measures to address FM-risk identified, aimed at clarifying roles and responsibilities of MADR and FIDUAGRARIA and improving coordination. The need to strengthen staff FM capacity at MADR was identified in the earlier assessment and agreed measures were already incorporated in the Project documents. The updated assessment concluded that with the inclusion of the fiduciary agent, the need for hiring an accountant at the PIU, as previously The World Bank Sustainable Low-Carbon Development in Orinoquia region Project (P160680) agreed, was not longer needed. Additional measures identified in the updated FM assessment include: (i) the establishment of a Fiduciary Agent Agreement between MADR and FIDUAGRARIA; ii) a fiduciary team has been hired at FIDUAGRARIA, (iii) a POM has been approved with clear roles and responsibilities of participating entities in the program, including of the fiduciary agent, and (iv) unaudited interim financial reports have been agreed and incorporated in the POM. Additionally, the assessment highlights that close supervision and coordination is required during implementation of project activities. 12. The updated assessment also clarifies the FM responsibilities of MADR and FIDUAGRARIA, as follows: MADR, as implementing agency, will have overall Project coordination responsibility, establishing a PIU which shall ensure the financial arrangements related to external audit, financial reports, disbursement arrangements, and in general, the maintenance of the financial management system of the Project. FIDUAGRARIA, through the Fiduciary Agent Agreement, will have the responsibility of managing the flow of funds, budgeting, accounting, and reporting, through its Financial Information System (SIFI), which is FIDUAGRARIA’s FM information system. 13. Section IV, Annex 1 presents the detailed description of the project updated FM aspects. C. Proposed Changes in Disbursements Arrangements 14. The restructuring proposes a change to the Disbursement Letter related to the Financial Institution where the Designated Account will be opened. Under the current disbursement arrangements, the account would have been opened at the “Banco de la República” which is the Central Bank of Colombia. Under the new arrangement, introduced by the project restructuring, FIDUAGRARIA will open a Designated Account at a commercial bank (Banco de Occidente), acceptable to the Bank, and according to the instructions of MADR. D. Change in Effectiveness Conditions and Covenants. 15. As a result of the changes introduced above, the restructuring adds an effectiveness condition, under Paragraph 4.01, Article IV of the Grant Agreement and a legal covenant under Paragraph 8, Section I.A. of Schedule 2 of the Grant Agreement. The Fiduciary Agency Agreement has been prepared and agreed by both parties (MADR and FIDUAGRARIA) and will be executed upon signing of the Grant Agreement. MADR has specifically requested for this effectiveness condition to be included in the amended GA, since it provides them with the necessary legal basis to enter into such Fiduciary Agent Agreement with FIDUAGRARIA. These changes are as follows: “4.01. (d) MADR has entered into an agreement (Fiduciary Agent Agreement) with FIDUAGRARIA, under terms and conditions acceptable to the World Bank, and as further detailed in the Project Operational Manual, which shall include, inter alia, FIDUAGRARIA’s obligation to act as a financial agent of the Recipient with respect to the Grant in compliance with the relevant provisions of this Agreement, the Operational Manual and the Anti-Corruption Guidelines.” “8. The Recipient, through MADR, shall (a) enter into an agreement (Fiduciary Agent Agreement) with FIDUAGRARIA, under terms and conditions acceptable to the World Bank, and as further detailed in the Project Operational Manual, which shall include, inter alia, FIDUAGRARIA’s obligation to act as a financial agent of the Recipient with respect to the Grant in compliance with the relevant provisions of this Agreement, the Operational Manual and the Anti-Corruption Guidelines.” The World Bank Sustainable Low-Carbon Development in Orinoquia region Project (P160680) E. Change in Disbursement Estimates 16. The proposed restructuring also implies a change in the disbursement schedule. Due to the delays in the Project’s effectiveness, caused by the changes in institutional arrangements, disbursements have not begun for FY19. The disbursement schedule has been revised accordingly (see section IV). Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. III. SUMMARY OF CHANGES Changed Not Changed Disbursements Arrangements ✔ Disbursement Estimates ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ The World Bank Sustainable Low-Carbon Development in Orinoquia region Project (P160680) Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2018 1,000,000.00 0.00 2019 7,000,000.00 7,000,000.00 2020 5,000,000.00 5,500,000.00 2021 4,000,000.00 4,500,000.00 2022 3,000,000.00 3,000,000.00 2023 0.00 0.00 OPS_DETAILEDCHANGES_LEGCOV_TABLE LEGAL COVENANTS Loan/Credit/TF Description Status Action Section I. A. 2. of Schedule 2 to the Grant Agreement The Recipient, through MADR, shall: (a) no later than ninety (90) days after the Effective Date, or such other date as shall be agreed with the World Bank, establish, operate and maintain, throughout Project implementation, a Project Implementing Unit (PIU), within MADR, with staffing, - Not yet due Revised functions and responsibilities satisfactory to the World Bank and set forth in the Project Operational Manual, including, inter alia: (i) staff responsible for all fiduciary aspects of the Project; and (ii) staff responsible for overall planning, coordination and monitoring of Project activities, including technical supervision of Project implementation; provided, however, that the Project The World Bank Sustainable Low-Carbon Development in Orinoquia region Project (P160680) coordinator, a procurement specialist, a financial management specialist, and an accountant for the PIU shall be hired no later than sixty (60) days after the Effective Date; (ii) staff responsible for overall planning, coordination and monitoring of Project activities, including technical supervision of Project implementation; provided, Proposed however, that the Project coordinator, a procurement NYD specialist, and a financial management specialist for the PIU shall be hired no later than sixty (60) days after the Effective Date; Section I. A. 2. of Schedule 2 to the Grant Agreement The Recipient, through MADR, shall: (b) no later than ninety (90) days after the Effective Date, or such later date as shall be agreed by the World Bank, select and hire a regional support team at the - Regional Climate Change Platform for Orinoquia Not yet due No Change (NORECCO) and a liaison staff in each of the departments of the Recipient within the Project Areas, all with functions, responsibilities, qualifications and in numbers acceptable to the World Bank and described in the Project Operational Manual. Section I. A. 3. of Schedule 2 to the Grant Agreement No later than fort-five (45) days after the Effective Date, or such later date as shall be agreed by the World Bank, the Recipient, through MADR, shall establish and thereafter operate and maintain, throughout Project implementation, a National Project Steering Committee - (“NPSC”), which shall include high level representatives Not yet due No Change of MADR, MADS, IDEAM, DNP and NORECCO, to provide guidance, facilitate decision-making, and oversee Project implementation, with detailed functions, responsibilities, and composition acceptable to the World Bank and described in the Project Operational Manual. - Section I. A.5. of Schedule 2 to the Grant Agreement Not yet due No Change No later than ninety (90) days after the Effective Date, the Recipient, through MADR, shall The World Bank Sustainable Low-Carbon Development in Orinoquia region Project (P160680) (a) enter into a separate Technical Collaboration Agreement with each other stakeholder responsible for providing technical inputs for the Project, including but not limited to, FINAGRO, CORPOICA, ANT, and CORMACARENA, under terms and conditions acceptable to the World Bank and as further detailed in the Project Operational Manual; and (b) exercise its rights and carry out its obligations under the Technical Collaboration Agreements in such manner as to protect the interests of the Recipient and the World Bank and to accomplish the purposes of the Grant. Except as the World Bank shall otherwise agree, the Recipient shall not assign, amend, abrogate, terminate, waive or fail to enforce the Technical Collaboration Agreements, or any of their respective provisions. In case of any conflict between the provisions of this Agreement and the provisions of the Technical Cooperation Agreements, the provisions of this Agreement shall prevail. Section I. A. 7. of Schedule 2 to the Grant Agreement The Recipient, through MADR, shall: Not later than ninety (90) days after the Effective Date, or such later date as the World Bank shall agree, develop, in form and substance acceptable to the World - Bank and following the guidelines set forth inthe Project Not yet due No Change Operational Manual, a grievance redress mechanism that encompasses transparent, timely and fair procedures, for the purposes of ensuring that all complaints received related to any activity under the Project are properly and timely addressed. - Section I.B. of Schedule 2 to the Grant Agreement Not yet due No Change The Recipient, through MADR, in coordination with MADS, shall ensure that: (a) the Project activities are carried out in accordance with the ESMF; and (b) the terms of reference for any consultancies related to the technical assistance provided underthe Project, shall be acceptable to the World Bank following its review thereof, and, to that end, such terms of reference shall duly incorporate the requirement of the World Bank’s Safeguards Policies then in force, as applied to the advice conveyed through such technical assistance. The World Bank Sustainable Low-Carbon Development in Orinoquia region Project (P160680) Section I.A. of Schedule 2(a). The Recipient, through MADR, shall enter into an agreement (Fiduciary Agent - Agreement) with FIDUAGRARIA, under terms and Not complied with New conditions acceptable to the World Bank, and as further . detailed in the POM. Annex 1: Updated Financial Management Section Financial Management 1. An FM Assessment of MADR and FIDUAGRARIA was carried out in accordance with the World Bank Group’s OP/BP 10.00 for the implementation of the sustainable Low-Carbon Development in Orinoquia Region Project. MADR, as implementing agency, has experience in executing Bank projects, such as the Productive Partnership Project financed by a Loan from the International Bank for Reconstruction and Development (IBRD) (Loan No. 7484). MADR will have overall Project coordination responsibility, establishing a Project The World Bank Sustainable Low-Carbon Development in Orinoquia region Project (P160680) Implementation Unit (PIU) which shall ensure the financial arrangements related to external audit, financial reports, disbursement arrangements, and in general, the maintenance of the financial management system of the Project. Moreover, FIDUAGRARIA, through the Fiduciary Agent Agreement, will have the responsibility of managing the flow of funds, budgeting, accounting, and reporting, through ‘SIFI’ which is the FM information system of the FIDUAGRARIA. Both entities (i) have sound internal risk control procedures, (ii) have financial policies and procedures in place, and (iii) are audited by the Office of the Comptroller General of Colombia. However, in the assessment, some FM-related risks were identified: (i) requirement of a legal agreement authorized or ratified between MADR and FIDUAGRARIA, as the fiduciary agent, with clear responsibilities to act as a financial agent, (ii) MADR does not have the staff required to support the financial aspects, and (iii) the complexity of implementation arrangements that require important interactions with different government institutions (local, regional, and national levels) as well as with the Fiduciary Agent. As a result, at entry, the overall FM-assessed risks for the Project are rated Substantial. 2. The following measures have been agreed with MADR and FIDUAGRARIA to strengthen FM capacities for project implementation and to mitigate the identified FM related risks, including: (i) the Fiduciary Agent Agreement has been executed by the parties thereto, (ii) a fiduciary team has been hired at MADR and FIDUAGRARIA, (iii) a POM has been approved with clear roles and responsibilities of participating entities in the program, including of the Fiduciary Agent, and (iv) unaudited interim financial reports have been agreed and incorporated in the POM. Additionally, close supervision and coordination is required during implementation of project activities. TABLE 2.1. FM ACTION PLAN Description of Action/Condition By When The Fiduciary Agent Agreement has been executed by the By effectiveness parties thereto The POM has been adopted by the MADR in a manner By effectiveness satisfactory to the World Bank, including detailed information related to the obligations of the Fiduciary Agent and unaudited interim financial reports arrangements. Fiduciary team has been hired/appointed at the MADR. A core team has been hired and appointed. Not later than 60 days after the effectiveness date, the MADR shall ensure that all the PIU is fully staffed with the fiduciary professionals set forth in the POM. 3. FM action plan and FM-related conditions. The action plan agreed upon as a result of the assessment is described in table 2.1. 4. Fiduciary Agent. FIDUAGRARIA, as the fiduciary agent, will: i) sign the contracts for works, goods, and services based on the selection process conducted by MADR, ii) facilitate the software for budget and accounting of the Project, iii) record budget and accounting transactions according with acceptable accounting standards, iv) make payments for vendors with the instruction of MADR, and v) other obligations that will include in the Fiduciary Agent Agreement, under terms and conditions acceptable to the Bank. Detailed procedures will be included in the POM. The World Bank Sustainable Low-Carbon Development in Orinoquia region Project (P160680) 5. The Project will finance Operating Costs of FIDUAGRARIA, acceptable to the Bank, for the incremental expenses incurred by FIDUAGRARIA for project administration, implementation and monitoring. The amount to pay to FIDUAGRARIA has been approved by the MADR and incorporated in the Fiduciary Agent Agreement. The project will finance operating costs incurred by the PIU. The definition of the Project Operating Cost to be financed has been expanded in the Grant Agreement. 6. Staffing arrangements. FIDUAGRARIA, as Fiduciary Agent, throughout the Project execution, shall ensure to maintain qualified financial staff to support fiduciary responsibilities, established in the Fiduciary Agent Arrangement. The project will finance reasonable Operating Costs FIDUAGRARIA, including staff costs. In addition, MADR will hire a financial management specialist to ensure compliance with the Project’s financial management and disbursement arrangements. MADR will guarantee to keep qualified financial staff at all times. 7. Budgeting arrangements. MADR, as the executing entity, will be responsible for preparing and monitoring the annual operating plan and the respective budget. FIDUAGRARIA will monitor the project budget through SIFI information system. The procurement processes will be the responsibility of MADR, and project payments will be processed and recorded by FIDUAGRARIA through the SIFI information systems. 8. Accounting and financial reporting. Budget and project accounting will be integrated within the SIFI, housed in FIDUAGRARIA, an information system where budgeting, accounting, and treasury modules are interfaced. The project will be recorded with a specific cost center and will capture and report budget and accounting information by component and subcomponent according to the project needs. MADR, as the executing entity, will be responsible for preparing project financial reports and disbursement requests, submitted to the World Bank Group based on Statements of Expenditures. 9. FIDUAGRARIA shall retain all records (contracts, orders, invoices, bills, receipts, and other documents), evidencing expenditures under their respective parts of the Project until at least the later of (i) one year after the World Bank Group has received the audited financial statements covering the period during which the last withdrawal from the loan account was made; and (ii) two years after the closing date. MADR shall enable the World Bank Group’s representatives to examine such records. 10. External audit arrangements. The project’s annual financial statements will be audited by a private firm under ToRs, both acceptable to the Bank, with an interim review to conduct onsite visits to the Project. Each audit of the financial statements shall cover the period of one fiscal year of the recipient or other period the Bank may agree. The Project’s annual audited financial statements will be submitted to the World Bank no later than six months after the end of each audited period. 11. Access to information and anti-corruption policy. According to the access to information policy for the World Bank Group-financed operations, the Recipient will disclose the audited project financial statements on MADR’s website. Following the World Bank Group’s formal receipt of these statements from the Recipient, the World Bank Group will make them available to the public. The anti-corruption policy requirements were included in the Fiduciary Agent Agreement. 12. Implementation support and supervision strategy. The World Bank Group Financial Management (FM) team will monitor all the FM action plans to ensure successful implementation and that the deadlines are met; and it could update the FM-assessed risk for the Project. Additionally, during project implementation, semi-annual The World Bank Sustainable Low-Carbon Development in Orinoquia region Project (P160680) FM supervisions will be conducted, and periodic unaudited interim financial reports and the annual external audit reports will be reviewed. Disbursements 13. Disbursement arrangements. The disbursement of proposed project funds will be processed in accordance with World Bank’s procedures as stipulated in the GA and DL. Withdrawal applications and necessary supporting documentation will be submitted to the World Bank electronically through the Client Connection website. The proposed disbursement arrangements are summarized in tables 2.2 and 2.3: TABLE 2.2. DISBURSEMENT ARRANGEMENTS Disbursement Method Advance and Reimbursement Type of Designated Account Pooled, for both WB Grants, using the sequencing of funds described in the Disbursement Letter, section - Other Disbursement Instructions Frequency of documentation Quarterly Currency of Designated Account US$ Financial Institution where the Banco de Occidente Designated Account will be opened Supporting documentation Statements of Expenditures Minimum value of applications For reimbursement is US$500,000 Designated Account ceiling US$4,000,000 TABLE 2.3. DISBURSEMENT CATEGORIES Percentage of Expendi Amount of Portion A of Amount of Portion B of tures to Category the Grant-TF0A6377 the Grant-TF0A6376 be Allocated (US$) Allocated (US$) Finance d (inclusive of Taxes) (1) Goods, consulting services, training and 1,350,000 18,650,000 100% operating costs under the project TOTAL AMOUNT 1,350,000 18,650,000 20,000,000 The World Bank Sustainable Low-Carbon Development in Orinoquia region Project (P160680) 14. Special Account. The funds will be transferred from the Designated Account in USD to the exclusive Project Operating account (special account) in local currency – Colombian Peso (COP). According to the instruction of MADR, FIDUAGRARIA will open the special account, acceptable to the Bank. The Project shall not transfer resources for investment purposes. Both accounts will be managed and held by FIDUAGRARIA, and monthly reconciliations will be provided to MADR. Detailed procedures will be included in the POM. 15. Other disbursement instructions. The use of a pooled Designated Account (for both WB Grants) requires the sequencing in the use of funds of the ‘BioCFplus Initiative’. Therefore, the following order shall apply to disbursements out of the pooled Designated Account: (1) Grant No. TF0A6377, funded by the United States of America, and (2) Grant No. TF0A6376, funded by the Federal Republic of Germany.