The World Bank Progestão Mato Grosso: Public Sector Management Efficiency (P178339) Project Information Document (PID) Appraisal Stage | Date Prepared/Updated: 07-Mar-2022 | Report No: PIDA33691 Mar 07, 2022 Page 1 of 13 The World Bank Progestão Mato Grosso: Public Sector Management Efficiency (P178339) BASIC INFORMATION OPS_TABLE_BASIC_DATA A. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Brazil P178339 Progestão Mato Grosso: Public Sector Management Efficiency Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) LATIN AMERICA AND CARIBBEAN 29-Mar-2022 24-May-2022 Governance Financing Instrument Borrower(s) Implementing Agency Investment Project Financing State of Mato Grosso Secretariat of Finance - Mato Grosso Proposed Development Objective(s) Improve efficiency in public resource management in selected departments of the State of Mato Grosso. Components Whole-of-Government Management Systems Management Systems in Strategic Sectors Project and Change Management PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 50.00 Total Financing 50.00 of which IBRD/IDA 40.00 Financing Gap 0.00 DETAILS -NewFinEnh1 World Bank Group Financing International Bank for Reconstruction and Development (IBRD) 40.00 Non-World Bank Group Financing Mar 07, 2022 Page 2 of 13 The World Bank Progestão Mato Grosso: Public Sector Management Efficiency (P178339) Counterpart Funding 10.00 Borrower/Recipient 10.00 Environmental and Social Risk Classification Low Decision The review did authorize the team to appraise and negotiate Other Decision (as needed) B. Introduction and Context 1. The proposed project is the second operation in a Series of Projects (SoP) under the Progestão Program designed to assist Brazilian States implement reforms that will improve efficiency in public expenditure. The objective of Progestão Program, as stated in the Memorandum of Understanding between the National Secretariat of Treasury (Secretaria do Tesouro Nacional, STN) and the World Bank, is to develop the fiscal budget and asset management of the Brazilian governments through actions that aim at reducing and rationalizing public spending with long term results to contribute to the fiscal sustainability of subnational entities. The Program, available to all Brazilian States regardless of their fiscal situation, will provide technical assistance to help participating States modernize and improve the following whole-of-government functions through investments in management reforms and information systems: human resource management, pensions, public procurement, public investment, debt management, state-owned enterprises, and asset management. The Program also supports investments in management reforms and information systems in four strategic sectors: health, education, social assistance, and environment. The Progestão Program Framework is presented in Annex 1. This Project Appraisal Document presents the Progestão Project in the State of Mato Grosso. Country Context 2. Brazil’s subnational governments are in a dire fiscal situation. Brazil’s States have extensive service delivery responsibilities in health, education, security, and environment. Prior to the pandemic, 7 out of the 26 Brazilian States and the Federal District had declared a state of fiscal calamity, 17 out of 27 State governments were not eligible to borrow under Federal rules due to limited creditworthiness related to liquidity and solvency concerns, and 20 had delayed payments to public servants and/or providers at some point. In 2019, State public investment was 52.5 percent lower than in 2015. Paradoxically, in 2020, subnational governments States experienced improved fiscal outcomes, despite the negative effects of the health crisis, with just 12 States ineligible to borrow. This was due to the large federal transfers to address the COVID-19 pandemic (R$97 billion, 1.4 percent of GDP), through the federal social protection program – Auxílio Emergencial – that helped maintain a reasonable level of economic activity and contributed to tax revenue increases. As these temporary measures wind down in 2022 and beyond, the States’ fiscal position will deteriorate rapidly if State governments do not implement reforms to reduce expenditures. 3. The Ministry of Economy recently launched programs to support States in fiscal distress and encourage them to implement structural reforms. The Fiscal Recovery Regime Program (Programa do Regime de Recuperação Fiscal, PRRF) instruments CAPAG supports States in serious fiscal distress, providing a fiscal adjustment instrument for all participating subnational governments. PRRF offers debt relief for highly indebted States that: reduce tax exemptions by Mar 07, 2022 Page 3 of 13 The World Bank Progestão Mato Grosso: Public Sector Management Efficiency (P178339) at least 20 percent; approve legislation for the privatization of State Owned Enterprises (SOEs); contain recurrent expenditure growth with an expenditure rule; harmonize the States’ civil servants benefits in line with those of the federal government; adopt a pension reform similar to the federal pension reform of 2019; implement a complementary pension fund; centralize all public resources in a single treasury account managed by the Executive; and renegotiate arrears with private providers and the implementation of fiscal adjustment plan. The Fiscal Sustainability Program (Plano de Equilibrio Fiscal, PEF) will help subnational governments in fiscal distress recover their creditworthiness with the National Treasury achieving a Payment Capacity Assessment B rating (Capacidade de Pagamento, CAPAG1) by improving current savings and fiscal liquidity. Under this program, the Federal Government provides guarantees for new lending against implementation of fiscal adjustment program which must include at least three fiscal measures drawn from the FRR. 4. The Federal Government intends to complement these fiscal measures with reforms to management systems that can deliver efficiency gains in public administration and public expenditure. The Federal Government proposes to devolve additional responsibilities to subnational governments – an initiative the President describes as “More Brazil and Less Brasilia� – while at the same time achieving efficiency improvements so that States can “do more with less.� In order to avoid the fragmented impact of past reforms across States, the Federal Government will implement the Progestão Program as a “national� joint federal-state effort that supports a “Brazilian State� vision and a common set of public sector management reforms. STN designed Progestão as a program to help States improve their management capacity, raise the efficiency of public expenditure, and address management challenges in a coordinated country-wide technical assistance program in line with ongoing and upcoming reforms. Sectoral and Institutional Context 5. The State of Mato Grosso has requested the Bank’s assistance to consolidate recent reforms and improve efficiency in whole-of-government public sector management systems and service delivery in sectors under the Progestão Program. Progestão Mato Grosso will help tackle public sector management and public sector inefficiencies through investments in management reforms and information systems in: human resource management; pensions; public procurement; public investment management; and asset management. Progestão Mato Grosso also supports investments in management reforms and information systems in three strategic sectors: health, social assistance, and environment. Whole of Government Management Systems 6. Human Resource Management. The World Bank’s micro-data analysis shows that the main factor behind the wage bill growth of active personnel between 2009 and 2016 was salary increases. In this period, the average salary grew in real terms by approximately 6.5 percent annually while the number of employees increased at an average rate of 2.2 percent annually. In 2018, Mato Gross implemented a freeze on new hires and discontinued automatic wage increases. This helped reduce personnel expenditures, with wage bill dropping to below the Fiscal Responsibility Law threshold of 60 percent of total net current revenue in 2020, as compared with 68.18 percent in 2018. In 2020, the State had 54,972 active and 39,746 retired employees. Wage bill growth resumed in January 2022 with a 7 percent increase based on the Annual General Review (Revisão Geral Anual) for all public officials. Around 15 percent of active employees will retire between 2022 and 2024. While this will put pressure on the pension system, it does provide an opportunity to review HRM practices and align hiring and talent management with future public sector needs. The State has a structured HRM information system that provides secure data, providing a good foundation for developing new technological solutions. However, the State’s HRM practices are largely manual and process-driven, providing limited opportunities for skills development, career advancement, and movement within the public sector. Poor HR planning and career management has led to wage bill growth without a commensurate increase in delivery capacity. Women represent 56 percent of tenured positions but occupy just 34 percent of leadership positions hired from outside the government and 41 percent 1 Tresouro Nacional Transparente, Capacidade de Pagamento (CAPAG), Estados e Municípios (Link) Mar 07, 2022 Page 4 of 13 The World Bank Progestão Mato Grosso: Public Sector Management Efficiency (P178339) of the top 10 percent highest-paid positions. The Secretariat of Planning (SEPLAG) intends to invest in the workforce planning system, use artificial intelligence for automated wage bill audits, conduct a functional review of the public administration careers and positions, and support actions leading to an increase in women’s participation in leadership positions. 7. Pensions. The State of Mato Grosso’s pension expenditures increased 6.1 percent in real terms annually from 2016 to 2019. Revenues from inactive personnel increased only by 3.6 percent over the same period and the pension deficit grew from R$966 million in 2016 to R$1.6 billion in 2019. In 2020, Mato Grosso implemented pension reforms increasing the contribution rate from 11 percent to 14 percent of income, increasing the minimum retirement age from 53 to 60 years, introducing a new benefit calculation rule, and creating the Complementary Fund for all new members and employees of the Executive, Legislative, Judiciary and Public. These measures slowed pension expenditure growth to 1.4 percent in 2020 (the most recent data available), pension revenues increased by 37.9 percent and thereby reduced the deficit to R$580 million. Despite these gains, Mato Grosso’s pension system still faces significant challenges. In 2020, the State had 0.83 retirees and pensioners for each active employee, up from 0.64 in 2017. The pension fund, valued at R$84.2 million in December of 2020, is much smaller than most States. Recurrent pension deficits and lack of complete and accurate information means that Mato Grosso's Pension Agency (Mato Grosso Previdência, MTPREV) cannot generate timely actuarial impact projections for workforce changes. The State is undertaking a census of pension beneficiaries and plans to digitalize analysis and monitoring services to generate more accurate projections and scenario analysis. The State will complement management system reforms with measures to strengthen liability management and returns on its pension fund investments, currently averaging 4.35 percent, below other State pension funds. 8. Procurement. Mato Grosso recently created a Procurement Unit in SEPLAG, to centralize public procurement for standard purchases. However, Secretariats and entities continue to carry out other items that require a more technical preparation of bidding documents. The State Government spent approximately R$1.25 billion a year on public procurement between 2017 and 2020, peaking at nearly R$1.4 billion in 2020, averaging 7 percent of State expenditure. In 2020 and 2021 the State undertook 1,712 public procurement processes, with the Secretariat of Public Security and the State Health Fund undertaking the largest number (375 and 305, respectively), totaling R$854 million. Actual procurement spending could be much higher. Weak reporting systems fail to capture all of the procurement undertaken by secretariats and entities. The State lacks standard requirements for public bidding processes, with buyers using different modalities, evaluation criteria, bidding formats, often resulting in different prices for equivalent items. Bidding is waived in approximately 45 percent of procurement processes. The COVID-19 pandemic reinforced the need to improve these processes, and highlighted structural challenges, especially in procurement for the health sector. The State Court of Accounts has launched a dashboard (Radar de Controle Público) to increase transparency and controls in public spending. The State intends to streamline public procurement procedures, strengthen the use of data for analysis and strategic management, thereby improving efficiency and value in public spending. Reforms will support the development of sustainable procurement approaches addressing environmental, gender equality, and other social objectives. 9. Public Investment Management. Mato Grosso’s public investment amounted to 4.5 percent of State expenditures in 2020, slightly higher than the average for Brazilian States (4.1 percent) but down from the average of 6 percent achieved in the period 2015-2017. Investments picked up again in 2021 when it was 76 percent higher between January and August than the same period in 2020. The State Government lacks the guidelines, methodologies and institutional governance structures needed to ensure high standards for the preparation, screening, selection, and management of its public investment projects. Weak public investment management practices contribute to frequent adjustments to projects, time and cost overruns. There is no central institution responsible for the review and approval of public investments. MT Participações e Projetos S/A (MT Par) promotes and prepares public-private partnership projects, but this entity also lacks standardized tools and procedures for project preparation, appraisal and approval. Public investment projects are not screened for environmental or climate risks or to assess their alignment with other Mar 07, 2022 Page 5 of 13 The World Bank Progestão Mato Grosso: Public Sector Management Efficiency (P178339) public policy objectives such as gender or promotion of small and medium sized enterprises. The State intends to put in place a management information system for public investment projects and public private partnerships which will allow the State to standardize project preparation and approval procedures and improve the quality of information on projects and resources. The State will also put in place an information system to manage the investment resources transferred to municipalities. 10. Asset Management. In 2020 the State Government rented out 272 buildings, owned 91 unoccupied buildings, and rented 101 buildings from the private sector, with R$18.1 million in revenues from property sales and rent and expenditures of R$3 million on the acquisition of real estate assets and rents. The State Government does not have a complete registry of all its properties, with updated valuations, complete legal documents, and other relevant information. Low quality and incomplete information contribute to inefficient asset management with underutilized, empty, poorly maintained assets, often incurring unnecessary operations and maintenance and rental expenditures or revenue losses. Decentralized management of information technology has led to a proliferation of hardware and software, limited interoperability and information sharing, security concerns, duplication of assets, high acquisition, and operating costs. The State Government intends to strengthen its asset management systems by undertaking systematic inventories, regularizing legal documentation on their real estate portfolio, and acquiring both movable asset and immovable asset management information systems. Strategic Sectors 11. Health. Mato Grosso’s large area (904,000 km2, about the area of France and Germany combined) and low population density (6.9 inhabitants per km2), pose significant challenges to the delivery of health services across the State. Life expectancy at 80.1 years for women and 73.9 years for men is slightly above the national averages of 79.5 and 72.2 years. The top four causes of death are heart disease, stroke, chronic pulmonary disease, and diabetes (interpersonal violence and road accidents are in third and fourth place). As the population ages, the incidence of chronic disease will increase placing additional burdens on the health care system. 83 percent of the population depends on the public health system. In 2020, the health sector accounted for 14.8 percent of State expenditure, significantly more than the average for Brazilian States at 13 percent. Initial estimates point to an increase of 80 percent in the cost of health care provision during the COVID 19 pandemic. Despite the significant investment, health management systems are weak. Patients’ medical records are managed manually. There is limited integration across information systems for services, administrative and financial data, human resources, and health indicators. Health data is rarely used for service delivery planning and decision-making. The State Secretariat of Health (SES) intends to implement a hospital management system in the high complexity facilities under its management (regional and referral hospitals) to improve planning, budgeting, health services management, and support evidence-based decision making. The system is expected to deliver efficiency improvements by, for example, making better use of available hospital capacity and strengthening adherence to clinical guidelines, whilst simultaneously improving transparency and accountability. 12. Social Assistance. The State co-finances the Social Assistance System (Sistema Único de Assistência Social, SUAS) with municipalities and provides technical support to ensure adequate coverage and quality of services. Municipalities’ Social Assistance Reference Centers (Centro de Referência de Assisência Social, CRAS) offer services, programs and benefits to mitigate social risks, including family protection and assistance and services for people with disabilities and the elderly. In recent years, Mato Grosso has expanded activities in this field, reaching R$1 billion in social benefits to households in 2020. The ID-CRAS (Indicador de Desenvolvimento dos Centros de Referência de Assistência Social, CRAS Development Index) measures financial execution and integration across municipalities’ social services and benefits. In 2018, Mato Grosso’s ID-CRAS rating, ranked 7th in Brazil, but 19 percent of municipalities’ CRAS scores were “lower than expected quality,� an increase from 16.2 percent in 2017. The State lacks robust systems for monitoring the quality of SUAS services, transfers to and management of resources by municipalities and NGOs. Administrative systems are manual and fragmented. Weak service management leads to overlaps and gaps in service provision. Resource allocation and Mar 07, 2022 Page 6 of 13 The World Bank Progestão Mato Grosso: Public Sector Management Efficiency (P178339) productivity could be improved with modern financial management and benefits management systems, strengthened monitoring capacity, and data use for decision-making. 13. Environment. Mato Grosso is part of the Legal Amazon region and contains a variety of important biomes: 53 percent of the State lies within the Amazon biome, 40 percent within the Cerrado (tropical savanna) and 7 percent within the Pantanal (tropical wetland). Mato Grosso has 111 protected areas, 23 of which are federally protected, 47 are under State control and the remaining 36 are under municipal control. The extensive environmental capital is threatened by growing deforestation, large forest fires and other phenomena related to climate change – such as more frequent and intense droughts. The climate – high degree of insolation, regularity of rainfall and high rainfall index – and the topographical relief – not very rugged – favor the development of agribusiness. The State has productive regions for cropland agriculture and cattle ranching, contributing 28 percent of Brazil’s grain production in 2020 and 14 percent of livestock production in 2018. Environmental licensing, land use mapping and monitoring activities are essential tools to combat illegal deforestation, mitigate climate change and ensure compliance with environmental regulation. However, environmental management faces significant logistical challenges given the State’s size, low population density, long travel distances and the substantial number of municipalities (141). The State lacks up to date information on deforested and at-risk areas and their location. Inspectors are currently using paper-based tools and spreadsheets to control inspections and deal with administrative matters such as travel and administration of fees. The environment agencies could benefit from digital tools to improve their efficiency and productivity through automation and data-driven management. SEMA has evolved rapidly to better combine environmental and climate change governance with socioeconomic development. Recent achievements include the implementation of the Integrated System Marketing and Transport of Forest Products (Sistema Integrado de Comercializaçao e Transporte, Sisflora), the digital Environmental License (Licença Ambiental por Adesão e Compromisso, SIGA-LAC), the Integrated Environmental Licensing System (Sistema Integrado Licenciamento Ambiental, SIMLAM), the Electronic Citizen Service System (Serviço Eletrônico de Atendimento ao Consumidor, e-SAC), and the Rural Environmental Registry (Sistema Mato-grossense de Cadastro Ambiental Rural, SIMCAR), adopted in 2017, which provides information on landholdings’ environmental regularization in compliance with the Brazilian Forest Code. Further work is needed on the integration of information systems, development of a geospatial database, and information systems for environmental taxes and fees management, and fishery and post-license monitoring. 14. Climate Change. Mato Grosso is extremely vulnerable to extreme weather events – droughts, floods and storms – which are expected to increase in intensity and frequency with climate change. Interannual climate variability is already impacting crop production patterns. The State Government reported a financial loss of R$321 million in 2019 due to climatological and hydrometeorological events. Agricultural expansion has historically taken place through clearing of forests, including in the Amazon biome. While average deforestation post-2010 has been 75 percent below its 2001-10 average, deforestation continues to be considerable, and its pace has increased since 2015. In 2018, 1,749 km2 of forests were cleared in Mato Grosso’s Amazon biome (130 percent above the 2012 low point). The expansion of agricultural production into previously forested areas has historically been a leading contributor to carbon emissions and has come to the detriment of higher productivity. Mato Grosso contributed 10.3 percent of Brazil’s GHG emissions in 2019, ranking second among Brazilian States. 15. Gender. The State Government has identified two priority gender issues to address through the project: sexual harassment in the public sector and the participation of female-owned businesses in public procurement. While the Brazilian Criminal Code recognized sexual harassment at the workplace as a crime in 2001 and the Mato Grosso Civil Servants Law included sexual harassment as a misconduct in 2009, the legal system provides little protection for sexual harassment in the workplace. The General Comptroller of the State (CGE) is responsible for managing public employee misconduct cases but there is no specific procedure for civil servants to seek protection and redress for sexual harassment, nor is there any organized data about complaints. In 2021, CGE and SEPLAG created a special commission to Mar 07, 2022 Page 7 of 13 The World Bank Progestão Mato Grosso: Public Sector Management Efficiency (P178339) design and implement an anti-harassment campaign, with two core areas: prevention and legal instruments2. A comparison of State procurement data with the federal enterprise database, reveals that female-owned businesses were awarded 20.6 percent of contracts, compared with 42.8 percent going to male owned businesses. Possible barriers to increased participation of female owned businesses in public procurement include limited information about the State procurement process, lack of bidding processes targeting women-owned business, and lack of information about what the State buys and opportunities for suppliers. The new Brazilian Public Procurement Law (n. 14.133/2021) does not promote women owned businesses as a policy objective. Nonetheless, the State Government is committed to promote female entrepreneurship through its public procurement and intends to gather information on the ownership of businesses participating in public procurement and implement policies to promote women’s participation. C. Proposed Development Objective(s) Development Objective(s) (From PAD) 16. Improve efficiency in public resource management in selected departments of the State of Mato Grosso. Key Results 17. PDO level indicators will include: • Workforce replacement rate of non-frontline service delivery staff (Baseline: 0.99; Target: 0.975) • Time between opening and finalizing Electronic Auction procurement processes (Baseline: 195 days; Target: 120 days) • Investment budget execution rate (Baseline: 55%; Target: 70%) • Net fixed property income (Baseline: R$15.1 million; Target R$20.1 million) D. Project Description 18. The operation is structured around three main components: whole-of-government management systems; management systems in strategic sectors; and project management. The project scope and structure are aligned with the Progestão Program. Mato Grosso did not request support in debt management because the PROFISCO II project (financed by the Inter-American Development Bank) is already supporting SEFAZ in this area and did not request support for state-owned enterprises because major privatizations have already taken place. Specific interventions in sectors were selected based on their direct impact on public sector efficiency and implementation readiness. The project will support management systems in health, social protection, and environment – focusing on the highest priority management systems that have an impact on efficiency of resource allocation. The project does not include education because the World Bank is preparing a project for that sector in Mato Grosso. Component 1: Whole-of-Government Management Systems 19. Sub-Component 1.1: Human Resource Management SEPLAG. Activities financed under this subcomponent include: (i) development of a strategic workforce planning system and functional reviews to identify the competencies needed and plan organizations’ staff recruitment and deployment in all State departments and selected agencies, representing about 80.000 public officials; (ii) design and implementation of selection processes for senior management positions, aiming to increase women’s participation; (iii) design and implementation of measures to strengthen SEPLAG’s 2 CGE Noticias, CGE e Seplag finalizam programa contra o assédio moral e sexual no serviço público (Link) Mar 07, 2022 Page 8 of 13 The World Bank Progestão Mato Grosso: Public Sector Management Efficiency (P178339) harassment reporting mechanism using the government’s grievance redress mechanism; (iv) design and implementation of a management analytics system and artificial intelligence for automated wage bill audits; (v) functional review of the public administration careers and positions; (vi) periodic staff surveys to assess reform implementation and support change management; and (vii) communications and capacity building to support the rollout and implementation of new tools. 20. Sub-Component 1.2: Pensions Management MTPREV. Activities financed under this subcomponent include: (i) development and implementation of an actuarial impact calculation system; (ii) design and implementation of a pension financial asset and liability management system implemented to balance public accounts; (iii) a full financial audit of all pension benefits and payments; (iv) design and implementation of a pension fund investment management strategy to maximize the State’s portfolio and integrate Environmental Social Governance (ESG) factors in the strategy; (v) procurement of energy-efficient hardware to support the deployment of these systems; and (vi) communications and capacity building to support the rollout and implementation of new tools. 21. Sub-Component 1.3: Public Procurement SEPLAG. Activities financed under this subcomponent include: (i) development and implementation of a sustainable procurement strategy, which addresses environmental, climate and gender equality considerations, and an implementation plan to help embed sustainable procurement across the State's purchases; (ii) development and implementation of a centralized e-procurement system, including green and climate sensitive procurement and the redesign and automation of key processes to ensure cost-effective acquisitions; (iii) development and implementation of a stock management system integrated to procurement, including an e-marketplace portal; (iv) design and implementation of a strategic sourcing methodology to help identify demand for goods and services across the government; (v) application of artificial intelligence using electronic invoices and to identify and reduce fraud and corrupt practices; (vi) establish a women-owned business definition (>51 percent ownership/stake by a woman/women; women as CEO/COO; or women-sole-proprietors; (vii) development and implementation of a system that certifies enterprises owned by women and automatize data aggregation by the gender attribute; (viii) capacity building program for officials working in procurement across the State; and (ix) procurement of energy-efficient hardware to support the deployment of these systems. 22. Sub-Component 1.4: Public Investment Management and Budgeting SEPLAG and SEFAZ. Activities financed under this subcomponent include: (i) development and implementation of a public investment system, integrating environmental and climate change considerations in project preparation, screening, and appraisal; (ii) development and implementation of tools to support environmental and climate change risk assessment and project screening; (iii) development and implementation of an electronic tool for the management of the portfolio of technically appraised, implementation-ready projects to support Mato Grosso’s development, environmental and climate change objectives; (iv) design and implementation of a governance strategy to manage the project portfolio execution; (v) development and implementation of a management system for the transfer of resources from the State of Mato Grosso to municipalities, allowing for digital monitoring of project preparation and implementation; (vi) review of budgeting practices to embed green and gender budgeting practices; and (vii) procurement of energy-efficient hardware to support the rollout and implementation of new tools. 23. Sub-Component 1.5: Asset Management SEPLAG. Activities financed under this subcomponent include: (i) contracting of technical support to assess and update information on the State’s real estate properties, including geospatial data, area, occupation rate, valuations and registry status; (ii) development and implementation of a comprehensive public asset management system that includes a climate risk assessment of each real estate asset; (iii) energy audits based on CCB methodology for selected government properties, focused on reducing energy consumption and GHG emissions; (iv) development and implementation of a system for mapping costs of information and communication technologies (ICTs), including identification of synergies between government-to-government systems, interoperability, and a governance strategy for new acquisitions and maintenance; (v) capacity building on asset Mar 07, 2022 Page 9 of 13 The World Bank Progestão Mato Grosso: Public Sector Management Efficiency (P178339) management practices and support the rollout and implementation of new tools; and (vi) procurement of energy-efficient hardware to support the rollout and implementation of new tools. Component 2: Management Systems in Strategic Sectors 24. Sub-Component 2.1: Health SES. Activities financed under this subcomponent include: (i) implementation of an expenditure review to identify cost structure and assess budgeting practices in the State's public health units; (ii) implementation of systems to support budgeting and expenditure management in the State's health units; (iii) communication and capacity-building to support the rollout and implementation of new tools; and (iv) procurement of energy-efficient hardware to support the rollout and implementation of new tools. 25. Sub-Component 2.2: Social Assistance SETASC. Activities financed under this subcomponent include: (I) design and implementation of an integrated management system to facilitate the execution of social assistance programs, including financial management, cash transfer programs and management of other benefits, as well as internal registries; (ii) development and implementation of a transparency panel to support decision-making in social assistance; (iii) digitalization and automation of social protection services, providing faster access to services and reducing operational costs; (iv) communication and capacity-building to support the rollout and implementation of new tools; and (v) procurement of energy-efficient hardware to support the rollout and implementation of new tools. 26. Sub-Component 2.3: Environment SEMA. Activities financed under this subcomponent include: (i) design and implementation of an electronic module for filling and payment of environment taxes and fees; (ii) development and implementation of a system module for fishery monitoring; (iii) technical assistance to improve the geospatial database; (iv) communication and capacity building to support the rollout and implementation of the new tool; and (v) procurement of energy-efficient hardware to support the rollout and implementation of new tools. Component 3: Project and Change Management 27. Sub-Component 3.1: Project Management Unit SEFAZ. Activities financed under this sub-component include: (i) project management, including procurement, financial management and environmental and social safeguards (staff, equipment, and operating costs); and (ii) communications and capacity building to support project management functions. 28. Sub-Component 3.2: Change Management SEFAZ. Activities financed under this sub-component include: (i) change management activities to support the design and implementation of management reforms across the various beneficiary agencies, training, auditing services, and monitoring and evaluation capacity; (ii) just-in-time support, as needed and as agreed with the Bank, including problem solving advisory services to technical teams during implementation, including the State General Attorney (Procuradoria Geral do Estado, PGE), State Comptroller General (Controladoria Geral do Estado, CGE) and State Court of Accounts (Tribunal de Contas do Estado, TCE), and knowledge exchange activities; (iii) consulting services, studies and surveys to support project implementation; and (iv) communications and capacity building to support the rollout and implementation of new tools. . . Legal Operational Policies Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Areas OP 7.60 No Mar 07, 2022 Page 10 of 13 The World Bank Progestão Mato Grosso: Public Sector Management Efficiency (P178339) Summary of Assessment of Environmental and Social Risks and Impacts . 29. Based on the results of the environmental and social risks and impacts screening, this project is rated as low risk under the Bank’ Environmental and Social Framework. The following standards were found relevant during project preparation: ESS1—Assessment and Management of Environmental and Social Risks and Impacts; ESS2—Labor and Working Conditions; ESS3—Resource and Efficiency and Pollution Prevention and Management; ESS7—Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Local Communities; ESS8—Cultural Heritage; and ESS10—Stakeholder Engagement and Information Disclosure. A detailed analysis of the relevance of each applicable ESS is presented in the project’s Environmental and Social Risk Summary. The Client will carry out an environmental and social assessment through an environmental and social issues scoping exercise that will be publicly consulted and disclosed within 30 days after project effectiveness. The Client will also prepare an Environmental and Social Commitment Plan (ESCP), including the relevant elements of a Stakeholder Engagement Plan (SEP) to ensure information disclosure as well as stakeholder and citizen feedback and a Labor Management Procedures (LMP) to ensure terms and working conditions in line with the requirements of ESS2, which will be agreed with the Bank prior to Appraisal. 30. Environmental risk. Progestão Mato Grosso does not foresee infrastructure works or other on-the-ground activities with environmental impacts and risks that need to be managed. No future construction of physical infrastructure investments, spatial plans and natural resources management regulations are expected as results of technical assistance activities supported by the project. The project is expected to have a positive impact on the environment through: (i) the systematic environmental screening and assessment of public investment; (ii) the development and implementation of a sustainable public procurement strategy; (iii) undertaking energy audits of selected State properties and identifying investments needed to improve energy efficiency and shift to renewables; (iv) rationalizing the movable assets and identifying opportunities to shift to electrify and improve energy efficiency; (v) reductions in consumables, travel time and energy consumption through the digitalization of public administration services; and (vi) improved monitoring of natural forest cover and the recovery of natural vegetation in the State and thereby strengthening compliance with Forest Code (Law 12.651/2012) and land use planning. 31. Social risk. Progestão Mato Grosso is not expected to have adverse social impacts. Project activities do not require land acquisition, do not lead to restrictions on land use or involuntary resettlement. They are not expected to have adverse impacts on Indigenous Peoples and other vulnerable and disadvantaged social groups. Increased efficiency of public services in the different sectors is expected to mostly benefit vulnerable and disadvantaged social groups who heavily rely on public health and social protection networks. Progestão Mato Grosso will improve the transparency of human resource management, procurement, public investment, and asset management processes. It will create opportunities for public consultation around public investment projects and the administrative reform agenda. The project will strengthen the State Government’s grievance redress mechanisms. E. Implementation Institutional and Implementation Arrangements 32. Mato Grosso’s Secretariat of Finance (SEFAZ) will lead project implementation. Specific implementing arrangements include: a Steering Committee; a Project Management Unit (PMU); interagency agreements for implementation; and inter-state thematic working groups for the learning agenda. See Annex 2 for details. 33. SEFAZ. The Secretariat will lead project implementation and host the Project Management Unit. The project will leverage SEFAZ’s experience in managing externally financed operations, including two recent projects with the Inter - American Development Bank (IADB) and other the World Bank's DPL (P164588). The State Government has selected SEFAZ as the implementing agency because it has the qualified and tenured staff, greater continuity of staffing across Mar 07, 2022 Page 11 of 13 The World Bank Progestão Mato Grosso: Public Sector Management Efficiency (P178339) changes in administration, a mandate to coordinate reform programs across government and experience in working with agencies through the planning and budget process, as well as experience with large technical assistance projects. 34. Steering Committee (SC). The Steering Committee is a deliberative body comprising representatives of each agency participating in the Program. The representatives are the Secretaries or Deputy Secretaries appointed to the Committee by the State Governor. The Committee will be chaired by SEFAZ. The committee may temporarily invite agencies with direct or indirect involvement in the program to participate. The SC will provide strategic guidance and oversight of the reforms and project implementation. It will be responsible for the overall policy coordination and policy guidelines, strategic guidance, set priorities, resolve conflicts, and ensure inter-agency collaboration where needed and monitor progress of the project. 35. PMU. The PMU will support project implementation and coordination with the participating secretariats. SEFAZ will create the PMU by decree. The Project Manager will report to the Secretary of Finance. The primary responsibility of the PMU will be to oversee and ensure operational compliance with project regulations and World Bank policies, including the environmental and social policy, as defined in the financing agreement, the Project Operation Manual, the Disbursement and Financial Information Letter. 36. Interagency agreements. SEPLAG will implement activities under Component 1 directly or through its subordinate agencies such as MTPREV. The State Secretariats of Environment, Health, and Social Assistance will implement sub- components under Component 2. SEFAZ will implement Component 3 which supports the PMU. SEFAZ will sign interagency agreements for cooperation with the sectoral secretariats, establishing the specific objectives, responsibilities, and timeframe for implementation of project activities. Participating agencies will designate a focal point responsible for project implementation and monitoring of progress. 37. Thematic working groups. At the national level, thematic working groups established through CONSAD will bring together technical teams and high-level officials from across the country. These working groups will be a key mechanism for exchanging views on both technical challenges and implementation issues among the Brazilian States and with the Federal Government. In addition to a permanent high-level agenda (meetings at least once a year), States will be able to request ad hoc workshops to discuss specific project-related issues presented by the network of specialists and practitioners. Thematic groups on Human Resources, Digital Government, Procurement, and Asset Management have already been formed during the Program’s preparation in partnership with the CONSAD. The National Council o f State Secretaries of Planning (CONSEPLAN) and the National Council of Secretaries of Finance (CONFAZ) are expected to join. The thematic groups will serve as a sounding board to continuously improve processes and procedures to make interventions more effective. . CONTACT POINT World Bank Kjetil Hansen Senior Public Sector Specialist Daniel Ortega Nieto Senior Governance Specialist Mar 07, 2022 Page 12 of 13 The World Bank Progestão Mato Grosso: Public Sector Management Efficiency (P178339) Borrower/Client/Recipient State of Mato Grosso Implementing Agencies Secretariat of Finance - Mato Grosso Rogeiro Gallo Secretary of Finance rogeriogallo@sefaz2.mt.gov.br FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects APPROVAL Kjetil Hansen Task Team Leader(s): Daniel Ortega Nieto Approved By Practice Manager/Manager: Country Director: Sophie Naudeau 29-Mar-2022 Mar 07, 2022 Page 13 of 13