The World Bank 18 H S (202) 473-1000 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEV ELO DMEN W C. Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U. Cable Address: INDEVAS February 15, 2013 His Excellency Wilfredo Cerrato Ministry of Finance Avenida Cervantes, Barrio El Ja :min, E Jificio SEFIN Tegucigalpa, M.D.C. Honduras Excellency: Re: IDA Fii ancing 4774- HN (Social Protection Project) Additional Intrui tions: Revised Disbursement Letter I refer to the Financing Agreen ent between the International Development Association (the "Association") and the Republic Af Honduras (-he "Recipient") for the above-referenced project, dated August 2, 2010. The Agri.ement provides that the Assocation may issue additional instructions regarding the withdrawal of the proceeds of IDA Credit 4774- HN ("Financing"). This letter ("Disbursement Leter"), as revised from time to time, constitutes the additional instructions. This letter is the First R ,statemnt of the Disbursement Letter dated August 2, 2010, for the above referenced project, rcstating Section II (vi) to transfer administration of DA-A from MOP to PRAF and Section IV to adju ;t related disbursement instructions. These changes are uonsis:ent with the official conimuniction receive from the Recipient dated October 24, 2012. All other provisions and attachraerts o:'the Disbursement Letter dated August 2, 2010, except as amended, shall remain in force and effi ct. The World Bank DiEbursenent Guidelines for Projects, dated May 1, 2006, ("Disbursement Guidelines") ai-e in iitegral part of the Disbursement Letter. The manner in which the provisions in the Di, burserr ent Guidelines apply to the Financing is specified below. Sections and subsections in pa :en.;hes,!s below refer to the relevant sections and subsections in the Disbursement Guidelines and, unl,-ss otherwise defined in this letter, the capitalized terms used have the meanings ascribedl to the rn in the Disbursement Guidelines. I. Disbursement Arrangemetits (i) Diibursement Methods (section 2). The following Disbursement Methods may be used under :he Financing: * Reimbursement * Advance * Direct Payment (iv) Terms and Conditions of Uie of T ikens to Process Applications. By designating officials to accept Tokens and by choo sin.; to deliver the Applications electronically, the Recipient confirms through the authorized si gnat ry letter its agreement to: (a) abide by the Terms and Conditions of Use of Sec!ire Ide 2tif icati on Devices in connection with Use of Electronic Means to Process Applications and Sipporti,zg Documentation ("Terms and Conditions of Use of Tokens") ; and (b) to deliver the T,-rm:. and Conditions of Use of Tokens to each such official and to cause such official to abid - by those terms and conditions. Minimum Value of Applicatio is (sul section 3.5). The Minimum Value of Applications is US$500,000. (vi) Advances (sections 5 and 6) to PRF for Category 1. (DA-A) * Type of DesignatedAc count[ J (subsection 5.3): Segregated * Currency of DesignatediAcco rint[s] (subsection 5.4): US Dollars * Financial Institution vt whicl the Designated Account[s] Will Be Opened (subsection 5.5): Banco Central d -I)nduras * Ceiling (subsection 6.1): Based on forecast submitted with each customized SOE. (vii) Advances (sections 5 and 61) to MOP for Category 2 & 3. (DA-B) * Type of DesignatedAccountl] (subsection 5.3). Segregated * Currency of Designat?dAcct,unt[sj (subsection 5.4): US Dollars * Financial Institution 7t whic 4 the Designated Account[s] Will Be Opened (subsection 5.5): Banco Central de F ond iras * Ceiling (subsection 6.1): US $1,000,000 III. Reporting on Use (if Finaici ig Proceeds (i) Supporting Documentation (sectic n 4). Supporting documentation should be provided with each application for withdrawa as set )ut below: * For requests jr Reiribursem sent: 0 Summary Sta tement in the form attached with records evidencing eligible expenditures e.g., c pies of receipts, supplier invoices) for payments made under contrac s for: Goods and Consultant Firms costing US$100,000.00 equivalent per contract or more; > Individual Consultants and Non-consultants services costing US$40,000 equivalent or ino-e; > Operaling Co As md Fraining costing US$20,000 or more; o Customized Stziterent; of Expenditures in the form attached for Category 1 - Part B of the pi rje-t w ith the documentation detailed in Section V of this letter; and, o Stateme at of E, :pe ndit ire in the form attached for payments, that do not exceed the thresholds e sta lisl ed above. * For reporting eligible exp,end!tures paidftom the Designated Account (DA-A): o See add itional disburs ment instructions in Section IV of this letter. * For reporting eligible exjena itures paid from the Designated Account: o Summary Stat ,m.-nt in the form attached with records evidencing eligible expenditures (.g., copies of receipts, supplier invoices) for payments made under contract, fo -: > Goods and (on3ults nt Firms costing US$100,000.00 equivalent per contract or more; > Individual Consult, nts and Non-consultants services costing US$40,000 equivalent oi more; > Operating Costs and Training costing US$20,000 or more; o Statement of Expl-ndi:ure in the form attached for payments, that do not exceed the thresholds est;ablis lhed above; and, O Designated Account jctivity Statement in the form attached with a copy of the Designated Account Bank Statement. * For requests for Dire ct jayt ient: records evidencing eligible expenditures, e.g., copies of receipts, supplier in voices (ii,) Frequency of Reporting Fligihle Expenditures Paid from the Designated Account (subsection 6.3): Quarlerly IV. Other Disbursement Inst ructioins Category 1 Grants - Conditi)n C Osh Transfers Category 1 will financ. condi tional (ash transfers provided to eligible beneficiaries on a grant basis. Credit proceeds under Cate gor3 1 will be disbursed to a Designated Account (DA-A) used exclLsively for this category a:, follow s: First Disbursement - Advan,.e I.equest of US$6,000,000 sufficient to cover the first conditional cash transfer pa yment. Subsequent Disbursements - i) c istomized SOE attached to this letter, (ii) results of the concurrent audit required inder Section V, of Schedule 2 of the legal agreement, (iii) a forecast of the amount needed to nake the next conditional cash transfer, and (iv) the DA- A activity statement with a copy o:'the corresponding bank statement. In the case that the concurrent audit :dentifies instances of ineligible expenditures paid, the PRAF will be responsible foi identifying those ineligible expenditures submitted in the customized SOE. These amouni s will hen appear in the DA-A activity statement as amounts questioned with the detailed amount ar d Justification of Expenditures number where the audit report identifies the ineligibles ex)enc itures. If the activity statement of the DA-A includes ineligibles expenditures from more tha i one concurrent audit report, those amounts should be segregated by Withdrawal Appl' cation rumber. The PRAF will be responsible for resolving the ineligible expenditures by either (i) der ionstrating the eligibility of the questioned amounts, (ii) presenting other cash transfers rmiade w th counterparts funds in lieu of ineligible expenditures , or (iii) refunding the amount lo the 1)A-A. Any questioned amounts appearing in the DA- Activity statement will need to be res )lved no later than the second Withdrawal Application submit.ed after the questioned a noints were first reported. In the case of ineligible expenditures are reporting in the last and secc nd to ; tst Withdrawal Applications, the amounts will need to be resolved no later than by the clo:,ing dat- of the project. In that case the amounts transfe -red frc n the DA-A to the pay agent are not fully disbursed (ie. beneficiary doesn't collect payrr enl) the n the amounts remaining unpaid will be refunded back to the DA.-A by the pay agent prioi to recciving the next transfer. Note that these refunds should be documented in the DA-A activit y sl ater lent submitted with each withdrawal application. V. Oth er Important In format ion For additional inform itic n on disbursement arrangements, please refer to the Disbursement Handbook ivai1abl on the Association's public website at https://www.worldbank.org and ts secure website "Client Connection" at https://clientconnection.worldbe nk.org. Print copies are available upon request. From the Cliert Con iection website, you will be able to prepare and deliver Applications, monitor the near real-tine status of the Financing, and retrieve related policy, financ 1il, and procureme nt info: rn tion. If you have not already done so, the Association recommends that you register as a user of the Client Connection webs,ite (htt )s://clientconnection.worldbank.org). From this website you wAill be able to prepare and celiv.-r Applications, monitor the near real-time status of the Financing, and retrieve related pclicy financial, and procurement information. All Recipient officikls authorized to sign and de ivei Applications by electronic means are required to register with Client Connection before ele -troi ic delivery can be effected. Fol more information about (ii) Disbursement Deadline Dite (sunisection 3.7). The Disbursement Deadline Date is 4 months after the Closing Date s)ecifie in the Financing Agreement. Any changes to this date will be notified by the Associaticin. (iii) Disbursement Conditions (s ub-ecti n 3.8). Please refer to the Disbursement Condition(s) in the Financing Agreement. II. Withdrawal of Financing P roc -eds (i) Authorized Signatures (subsectin .1). An authorized signatory letter in the Foi m attached ;hould be furnished to the Association at the address indicated below providing tae n ime(s) and specimen signature(s) of the official(s) authorized to sign Applications: The Worl, Bank 1818 H Sireet, N W. Washington, DC 20433 Attention: C. Fe'ipe Jaramillo, Country Director (ii) Applications (subsections 3.2 - 3.3) Please provide completed and signed (a) applications for withdrawal, together with supportin; documents to the address indicated below: Banco Mi indial Setor Corierzial '4orte Quadra o:, Lote 4 Ecificio Cor)ora:e Financial Center 70 andar 7C712-90D, Bras lia, D.F. Brazil Attention: I oan Department (ii) Electronic Delivery (suisectior, 3.4) The Association may permit the Recipient to electronically deliver to the As soc iati(n Applications (with supporting documents) through the Association's Client Connectic n, web -based portal. The option to deliver Applications to the Association by electronic mean s may 'e effected if: (a) the Recipient has designated in writing, pursuant to the terms of subparagraph (i) of this Section, its officials who are authorized to sign and deliver Applications and to rec,-ive secure identification devices ("Tokens") from the Association for the purpose of deliveri ig such Applications by electronic means; and (b) all such officia.s designated by the R-.cipieni have registered as users of Client Connection. If the Association agrees, the Association m ill provide the Recipient with Tokens for the designated officials. Following which, thc desigiated officials may deliver Applications electronically by completing Form 2380, which is accessible through Client Connection (https-:/clientconnection.worldlh'ancor ). The Recipient may continue to exercise the option of prepa:ng and delivering Applicalion! in paper form. The Association reserves the right and may, n its sole discretion, t ,m )ora:ily or permanently disallow the electronic delivery of Applications by the Recipient. the website and registiation Lrrznge nents, please contact the Association by email at . If you have any queries i. relaticn to the above, please contact the World Bank Loan Departirent by sending an email to loa-lor@worldbank.org and naming the project and loan numbei in the subject line. Yours sincerely, Patricia Hoyes Se riior Finance. Officer )X orc Bank Loan Department