DOCUMENS The World Bank .818..1-reeLN.W. (202) 477-1234 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS November 15, 2012 H.E. Vache Gabrielyan Minister of Finance Ministry of Finance 1 Melik-Adamyan Street Yerevan 0010 Republic of Armenia Re: Multi-Donor Programmatic Trust Fund Grant No. TFO 12529 Strengthening Public Financial Management Project Dear Sir: In response to the request for financial assistance made on behalf of the Republic of Armenia ("Recipient"), I am pleased to inform you that the International Bank for Reconstruction and Development ("World Bank"), acting as administrator of grant funds provided by the Multi Donor Programmatic Trust Fund (MDPTF), proposes to extend to the Recipient ("Member Country"), a grant in an amount not to exceed eight hundred sixty seven thousand United States Dollars (U.S.$ 867,000) ("Grant") on the terms and conditions set forth or referred to in this letter agreement ("Agreement"), which includes the attached Annex, to assist in the financing of the project described in the Annex ("Project"). This Grant is funded out of the abovementioned trust fund for which the World Bank receives periodic contributions from the donors. In accordance with Section 3.02 of the Standard Conditions (as defined in the Annex to this Agreement), the World Bank's payment obligations in connection with this Agreement are limited to the amount of funds made available to it by the donors under the abovementioned trust fund, and the Recipient's right to withdraw the Grant proceeds is subject to the availability of such funds. The Recipient represents, by confirming its agreement below, that it is authorized to enter into this Agreement and to carry out the Project in accordance with the terms and conditions set forth or referred to in this Agreement. Please confirm the Recipient's agreement to the foregoing by having an authorized official of the Recipient sign and date the enclosed copy of this Agreement, and returning it to the World Bank. Upon receipt by the World Bank of this countersigned copy, this Agreement shall become effective as of the date on which the World Bank receives notice of completion of internal approval procedures under the laws of the Recipient. Very truly yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT/INTERNATIONAL DEVELOPMENT ASSOCIATION Henry Kerali Regional Director Europe and Central Asia Region AGREED: REPUBLIC OF ARMENIA By A r epres ntat've Name < Title ff'"" Date: Enclosures: (1) Standard Conditions for Grants Made by the World Bank Out of Various Funds, dated February 15, 2012 (2) Disbursement Letter of the same date as this Agreement, together with World Bank Disbursement Guidelines for Projects, dated May 1, 2006 For the Republic of Armenia this Agreement will become effective on the date upon which the Bank receives a notice on completion of necessary internal procedures required for its entry into force under the Law of the Republic of Armenia. 2 IDPTF Grant No. TF012529 ANNEX Article I Standard Conditions; Definitions 1.01. Standard Conditions. The Standard Conditions for Grants Made by the World Bank out of Various Funds dated February 15, 2012 ("Standard Conditions") constitute an integral part of this Agreement. 1.02. Definitions. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the Standard Conditions or in this Agreement. Article II Project Execution 2.01. Project Objectives and Description. The objective of the Project is to support improved management of public expenditures of the Recipient. The Project consists of the following parts: Part A: Deepening policy based budgeting Provision of technical assistance to further advance the procedural framework for program budgeting, including, inter alia, the development of guidelines for program evaluation and appraisal. Part B: Strengthening public investment management Provision of: (a) technical assistance to strengthen public investment management including inter alia, design and institutionalization of an efficient process to plan, prepare, appraise and prioritize capital projects; and (b) selected training aimed at the technical level line ministry staff to raise capacity of line ministries and eventually improve effectiveness of project preparation and implementation. Part C: Improved information technology and governance Provision of technical assistance to: (a) support the Ministry of Finance to formulate an information communication technology strategy which will set the foundation for strengthening its internal capacity for information and technology management; and (b) support the implementation of the strategy, including on-the job training to develop comprehensive architectural, organizational, human resources and policy frameworks. Part D: Business process review Provision of technical assistance to carry out a detailed business process review of core expenditure management processes, including budget formulation and execution. Based on the business process review, development of functional requirements, and Government Financial Management Information System ("GFMIS') implementation architecture and technical functional specifications for the procurement of GFMIS. Part E: Development of technical specification for GFMIS 3 Development of functional requirements for a GFMIS implementation, based on the business process review. 2.02. Project Execution Generally. The Recipient declares its commitment to the objectives of the Project. To this end, the Recipient shall carry out the Project through the Ministry of Finance in accordance with the provisions of: (a) Article II of the Standard Conditions; (b) the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised in January 2011 ("Anti- Corruption Guidelines"); and (c) this Article II. 2.03. Project Monitoring, Reporting and Evaluation. (a) The Recipient shall monitor and evaluate the progress of the Project and prepare Project Reports in accordance with the provisions of Section 2.06 of the Standard Conditions and on the basis of indicators set forth below in paragraph (b) of this Section. Each Project Report shall cover the period of one, calendar semester, and shall be furnished to the World Bank not later than one month after the end of the period covered by such report. (b) The performance indicators referred to above in paragraph (a) consist of the following: * Reallocation from low to high priority programs * Public Investment Management Index (WB/IMF PMI Index), Aggregate Score 1. * IT Strategy Adopted, including clear IT governance arrangements. * Reengineered Business Processes and GFMIS specifications developed. (c) The Recipient shall prepare the Completion Report in accordance with the provisions of Section 2.06 of the Standard Conditions. The Completion Report shall be furnished to the World Bank not later than six months after the Closing Date. 2.04. Financial Management. (a) The Recipient shall ensure that a financial management system is maintained in accordance with the provisions of Section 2.07 of the Standard Conditions. (b) The Recipient shall ensure that interim unaudited financial reports for the Project are prepared and furnished to the World Bank not later than forty five days after the end of each calendar semester, covering the semester, in form and substance satisfactory to the World Bank. (c) The Recipient shall have the Project Financial Statements audited in accordance with the provisions of Section 2.07 (b) of the Standard Conditions. Each such audit of the Financial Statements shall cover the period of one fiscal year of the Recipient. The audited Financial Statements for each such period shall be furnished to the World Bank not later than six months after the end of such period. 2.05. Procurement 4 (a) General. All goods and consultants' services required for the Project and to be financed out of the proceeds of the Grant shall be procured in accordance with the requirements set forth or referred to in: (i) Section I of the "Guidelines: Procurement of Goods under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011 ("Procurement Guidelines"), in the case of goods and non-consulting services; (ii) Sections I and IV of the "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011 ("Consultant Guidelines") in the case of consultants' services; and (iii) the provisions of this Section, as the same shall be elaborated in the procurement plan prepared and updated from time to time by the Recipient for the Project in accordance with paragraph 1.25 of the Consultant Guidelines ("Procurement Plan"). (b) Definitions. The capitalized terms used in the following paragraphs of this Section to describe particular procurement methods or methods of review by the World Bank of particular contracts, refer to the corresponding method described in Sections II and III of the Procurement Guidelines, or Sections II, III, IV and V of the Consultant Guidelines, as the case may be. (c) Particular Methods of Procurement of Goods (i) The following methods may be used for procurement of goods for those contracts which are specified in the Procurement Plan: (A) Shopping; and (B) Direct Contracting. (d) Particular Methods of Procurement of Consultants' Services (i) Except as otherwise provided in item (ii) below, consultants' services shall be procured under contracts awarded on the basis of Quality- and Cost-based Selection. (ii) The following methods, other than Quality- and Cost-based Selection, may be used for the procurement of consultants' services for those assignments which are specified in the Procurement Plan: (A) Least Cost Selection; (B) Selection based on Consultants' Qualifications; (E) Single-source Selection of consulting firms; (C) Selection of Individual Consultants; and (D) Single-source procedures for the Selection of Individual Consultants. (e) Review by the World Bank of Procurement Decisions. The Procurement Plan shall set forth those contracts which shall be subject to the World Bank's Prior Review. All other contracts shall be subject to Post Review by the World Bank. Article III Withdrawal of Grant Proceeds 3.01. Eligible Expenditures. The Recipient may withdraw the proceeds of the Grant in accordance with the provisions of: (a) the Standard Conditions; (b) this Section; and (c) such additional instructions as the World Bank may specify by notice to the Recipient (including the "World Bank Disbursement Guidelines for Projects" dated May 2006, as revised from time to time by the World Bank and as made applicable to this Agreement pursuant to such instructions), 5 to finance Eligible Expenditures as set forth in the following table. The table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Grant ("Category"), the allocations of the amounts of the Grant to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category: Category Amount of the Grant Percentage of Allocated Expenditures to be (expressed in USD) Financed (Exclusive of Taxes) (1) Consultants' services 867,000 100% under the Project TOTAL AMOUNT 867,000 3.02. Withdrawal Conditions. Notwithstanding the provisions of Section 3.01 of this Agreement, no withdrawal shall be made: (a) for payments made prior to the date of countersignature of this Agreement by the Recipient. 3.03. Withdrawal Period. The Closing Date referred to in Section 3.06 (c) of the Standard Conditions is October 10, 2014. Article IV Recipient's Representative; Addresses 4.01. Recipient's Representative. The Recipient's Representative referred to in Section 7.02 of the Standard Conditions is its Minister of Finance. 4.02. Recipient's Address. The Recipient's Address referred to in Section 7.01 of the Standard Conditions is: Ministry of Finance of the Republic of Armenia 1 Melik-Adamyan Street Yerevan 0010 Republic of Armenia Facsimile: +374-10-524282 4.03. World Bank's Address. The World Bank's Address referred to in Section 7.01 of the Standard Conditions is: International Bank for Reconstruction and Development] [International Development Association 1818 H Street, N.W. 6 Washington, D.C. 20433 United States of America Cable: Telex: Facsimile: INTBAFRAD INDEVAS 248423 (MCI) or 1-202-477-6391 Washington, D.C. 64145 (MCI) 7