The World Bank Development of Public Sector Accounting (P159931) REPORT NO.: RES49719 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF DEVELOPMENT OF PUBLIC SECTOR ACCOUNTING APPROVED ON MAY 11, 2017 TO REPUBLIC OF ALBANIA GOVERNANCE EUROPE AND CENTRAL ASIA Regional Vice President: Anna M. Bjerde Country Director: Linda Van Gelder Regional Director: Lalita M. Moorty Practice Manager/Manager: Roberto Adrian Senderowitsch Task Team Leader(s): Jonida Myftiu The World Bank Development of Public Sector Accounting (P159931) ABBREVIATIONS AND ACRONYMS AFMIS Albanian Financial Management Information System AGFIS Albanian Government Information System BETF Bank-Executed Trust Fund CHU Central Harmonization Unit CPF Country Partnership Framework EPSAS European Public Sector Accounting Standards ESA2010 European System of National and Regional Accounts EU European Union FM Financial Management GDFC General Directorate of GFS Government Fiscal Statistics IPS Integrated Planning System IPSAS International Public Sector Accounting Standards IT Information Technology MDTF Multi Donor Trust Fund MoFE Ministry of Finance and Economy PEFA Public Expenditure and Financial Accountability PFM Public Finance Management PIT Project Implementation Team PSA Public Sector Accounting PSC Project Steering Committee REPF Report on the Enhancement of Public Financial Reporting RETF Recipient-Executed Trust Fund SAFE Strengthening Accountability and Fiduciary Environment SAI Supreme Audit Institution SECO State Secretariat for Economic Affairs, Switzerland Confederation SIGMA Support for Improvement in Governance and Management SOE Statement of Expenditure TOR Terms of Reference ToT Training of Trainers WB World Bank The World Bank Development of Public Sector Accounting (P159931) BASIC DATA Product Information Project ID Financing Instrument P159931 Investment Project Financing Original EA Category Current EA Category Approval Date Current Closing Date 11-May-2017 31-Dec-2021 Organizations Borrower Responsible Agency Government of Albania Ministry of Finance and Economy (Albania) Financing (in USD Million) FIN_SUMM_PUB_TBL SUMMARY Total Project Cost 0 Total Financing 0 Financing Gap 0 DETAILS -NewFin3 Project Development Objective (PDO) Original PDO The proposed development objective of the project is to: develop a road map for public sector accrual accounting implementation and to support the early stages of this reform, including building essential technical skills. OPS_TABLE_PDO_CURRENTPDO The World Bank Development of Public Sector Accounting (P159931) Summary Status of Financing (US$, Millions) Net TF Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A3277 07-Nov-2017 03-Apr-2018 21-Jun-2018 31-Dec-2021 1.07 .61 .46 TF-A5134 07-Nov-2017 03-Apr-2018 21-Jun-2018 31-Dec-2021 .38 0 .38 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This restructuring seeks to extend the current closing date of the Albania Development of Public Sector Accounting Project (Project, P159931/TF0A3277/TF0A5134) from December 31, 2021 to December 31, 2022, for a cumulative extension of more than two years from the original. This the second restructuring for the Project. 2. The Development of Public Sector Accounting Project is providing US$1.45 million financing to the Republic of Albania through two Small Recipient-Executed Trust Funds (RETF). These RETFs are funded by the Multi-Donor Trust Fund for Strengthening Accountability and the Fiduciary Environment (SAFE MDTF) (TF071422 & TF072737)1. The Project’s Development Objective (PDO) is to develop a road map for public sector accrual accounting implementation and to support the early stages of this reform, including building essential technical skills. It has three components: (i) development of Public Sector Accounting and Financial Reporting Consistent with International Public Sector Accounting Standards (IPSAS); (ii) development of Ministry of Finance and Economy (MoFE) capacities and of professional accounting skills for public accounting practitioners; and (iii) project implementation support. 3. The project was approved on May 11, 2017 and became effective on June 21, 2018. It has disbursed US$0.61 million (42%), and the contracted activities to date amount to more than US$1.12 million (77.3%) of the total grant amount. The project was restructured in June 2020 to extend the closing date by 18 months from June 30, 2020 to December 31, 2021 to compensate for delays in signing and consequently effectiveness and the longer timeframe required for the Country Strategy and Action Plan (CSAP) preparation which is the core roadmap for Project activities. 1 The SAFE MDTF was extended on October 13, 2021, with a new end disbursement date of June 30, 2023. The World Bank Development of Public Sector Accounting (P159931) 4. At the time of the June 2020 restructuring, progress towards achievement of the PDO and overall implementation progress were rated Moderately Satisfactory and Satisfactory respectively. However, given the persistent challenges outlined below, the likelihood of achieving the PDO by the current project closing date is low and, as such, was downgraded to Moderately Unsatisfactory in the October 2021 Implementation Status and Results Report (ISR) and the rating was maintained as such in the December 2021 ISR based on the findings of the virtual implementation support mission in November 2021. 5. The overall implementation progress remains satisfactory. The Ministry of Finance and Economy (MoFE) has been and continues to be dedicated to accelerating the pace of the project implementation and achieving its objectives. As such, following the extension, the implementation has improved significantly and there has been very good progress on the two project components. In particular, procurement and contracting of the two key technical assistance activities: (i) IPSAS implementation and (ii) Development of Professional Accounting Skills and Sustainable Public Sector Accounting Training Mechanism, were finalized in December 2020. Under the first contract, the consultants have advanced with an in-depth analysis, including update for public sector accounting gap analysis and related business process review, and started drafting of national guideline on public sector accounting. Under the second contract, consultants have completed the training needs assessment and trained 28 trainers for the public sector accounting (PSA) training program; and initiated the pilot public sector training program. In addition, there have been advances in the official IPSAS translation into the local language. Moreover, 19 MOFE staff received international certification on Public Financial Management from Association of Chartered Certified Accountants (ACCA). 6. The finalization of the procurement procedures for the key contracts took longer than envisioned. This is mainly attributable to the COVID-19 pandemic starting in late 2020. Traveling restrictions, widespread illness and competing priorities related to the pandemic slowed down implementation of tasks under both contracts compared to their intended delivery schedule. The Government of Albania has thus requested the extension of the closing date of the two small RETF grants until December 31, 2022 to allow for full disbursement of the resources, completion of the remaining activities, and achievement of the development objective. The requested closing date aligns with the current closing date of the MDTF that finances the RETFs. II. DESCRIPTION OF PROPOSED CHANGES 7. The restructuring entails an extension of project closing date by 12 months until December 31, 2022 to complete the implementation of the remaining activities and fully achieve the PDO. 8. During the proposed extension period, the focus will be on the implementation of the remaining tasks under the two technical assistance activities, notably the” Technical Assistance for IPSAS implementation” and The World Bank Development of Public Sector Accounting (P159931) “Development of Professional Accounting Skills and Sustainable Public Sector Accounting training mechanism”. The Technical Assistance for IPSAS implementation includes the following remaining tasks, in a sequential order: (i) drafting of the legal and regulatory framework, including review of institutional arrangements and business processes, and (ii) assistance to selected government entities to implement the selected new standards and prepare the first set of IPSAS based annual financial statements. The technical assistance for the “Development of Professional Accounting Skills and Sustainable Public Sector Accounting training mechanism”, includes the following remaining tasks, in a sequential order, (i) pilot PSA training and continuing professional development program, (ii) PSA educational framework and (iii) development certification program in public sector accounting. The MoFE has put in place a detailed action plan to complete the above tasks and achieve the PDO within the next 12 months. In addition, the remaining uncommitted balance of approx. US$ 250,000 will be utilized to finance the following activities to further enhance achievement and sustainability of expected outcomes: (i) delivery of a third phase training program in local language, and (ii) ICT system adjustments, through the existing project contracts. 9. The team is not requesting any funds for supervision as the financing provided through the Bank executed part of the Project (TF0A3293 & TF0A4821) is sufficient to cover the related costs during the proposed extension period. The Donor has been consulted and is aware of the request for a no-cost extension of the Closing Date for the Project. 10. The audited project financial statements for the year ended December 31, 2020 are overdue. The hiring of the audit firm was outside the project’s control as the MoFE contracts one audit firm for all Bank financed projects, financed by government funds. This process was delayed for fiscal year 2020 due to the pandemic and general elections at the end of the April 2021, which affected the staffing and management of the units responsible for procurement in the ministry. The audit is under implementation, and the audit report is expected to be issued in February 2022. No notable issues have been observed in previous audits. There are no other outstanding procurement and financial management issues. The waivers to proceed with an extension for a project that has an overdue audit have been received by the team and are available in project records. 11. The restructuring will neither revise the PDO nor the results framework. The project implementation schedule and disbursement estimates will be revised to reflect the extension of the closing date. The World Bank Development of Public Sector Accounting (P159931) III. SUMMARY OF CHANGES Changed Not Changed Loan Closing Date(s) ✔ Disbursement Estimates ✔ Implementation Schedule ✔ Implementing Agency ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Cancellations Proposed ✔ Additional Financing Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Change in Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE The World Bank Development of Public Sector Accounting (P159931) LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline TF Status Closing Closing(s) Closing for Withdrawal Applications TF-A3277 Effective 30-Jun-2020 31-Dec-2021 31-Dec-2022 30-Apr-2023 TF-A5134 Effective 30-Jun-2020 31-Dec-2021 31-Dec-2022 30-Apr-2023 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Expected Disbursements (In US$) Fiscal Year Annual Cumulative 2017 0.00 0.00 2018 0.00 0.00 2019 0.00 0.00 2020 0.00 0.00 2021 0.00 0.00 2022 0.00 0.00 2023 0.00 0.00 Note to Task Teams: End of system generated content, document is editable from here.