The World Bank 1818 H Street N.W. (202) 473-1000 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS CONFORMED COPY November 22, 2011 Mr. Phil Evans Head of Office Department for International Development 5 off Spur Road, Wiberforce Freetown: FTN 8380 4406 Republic of Sierra Leone Trust Fund Administration Arrangement between United Kingdom of Great Britain and Northern Ireland (UK), acting through the Department for International Development (DFID) and the International Development Association concerning the Extractive Industries Technical Assistance Project Single-Donor Trust Fund (TF No. 071661) (Aries code 202725) Dear Mr. Evans: 1. We are pleased to acknowledge on behalf of the International Development Association (“IDA� or the “Bank�) that the UK, acting through the Department of International Development (“DFID�) (the “Donor�) will make available as a grant the sum of two million two hundred thirty thousand pounds sterling (£2,230,000) (the “Contribution�) for the Extractive Industries Technical Assistance Trust Fund (the “Trust Fund�) in accordance with the terms of this Arrangement. 2. Activities and Expenditures Financed by the Contribution The Contribution will be used to finance the activities and the categories of expenditure set forth in the “Description of Activities and Expenditures under the Extractive Industries Technical Assistance Project Trust Fund� attached hereto as Annex 1, and will be administered by the Bank on behalf of the Donor in accordance with the provisions of this Arrangement. -2- 3. Administration of the Contribution 3.1. The Bank will be responsible only for performing those functions specifically set forth in this Arrangement and will not be subject to any other duties or responsibilities to the Donor, including, without limitation, any duties or obligations that might otherwise apply to a fiduciary or trustee under general principles of trust or fiduciary law. Nothing in this Arrangement will be considered a waiver of any privileges or immunities of the IDA under its Articles of Agreement or any applicable law, all of which are expressly reserved. 3.2. The Contribution will be administered in accordance with the Bank’s applicable policies and procedures, as the same may be amended from time to time, including its framework to prevent and combat fraud and corruption and its screening procedures to prevent the use of Bank resources to finance terrorist activity, in line with the Bank’s obligations to give effect to the relevant decisions of the Security Council, taken under Chapter VII of the of Charter of the United Nations. The Donor acknowledges that this provision does not create any obligations of the Bank under the anti-terrorist financing and asset control laws, regulations, rules and executive orders of an individual member country that may apply to the Donor, nor will it be deemed a waiver, express or implied, of any of the privileges and immunities of the Bank. 4. Deposit of the Contribution 4.1. The Donor shall deposit the Contribution into such bank account designated by the Bank in installments in accordance with the following schedule: (a) promptly following countersignature of this Arrangement by the Donor and submission of a payment request by the Bank, one million one hundred fifty thousand pounds sterling (£1,150,000). (b) on or before April 30, 2013, based on financial needs of the Trust Fund, one million eighty thousand pounds sterling (£1,080,000)and submission of a payment request by the Bank. 4.2. When making such deposit, the Donor will instruct its bank to include in its payment details information (remittance advice) field of its SWIFT payment message, information indicating: the amount paid, that the payment is made by the Donor for TF071661 (Extractive Industries Technical Assistance Project Trust Fund), and the date of the deposit (the “Deposit Instruction�). In addition, the Donor will provide a copy of the Donor’s Deposit Instruction to the Bank’s Accounting Trust Funds Division by e-mail sent to tfremitadvice@worldbank.org or by fax sent to (202) 614-1315. -3- 5. Commingling, Exchange and Investment of the Contributions 5.1. The Contributions will be accounted for as a single trust fund and will be kept separate and apart from the funds of the Bank. The Contributions may be commingled with other trust fund assets maintained by the Bank. 5.2. The Contributions may be freely exchanged by the Bank into other currencies as may facilitate their disbursement. 5.3. The Bank will invest and reinvest the Contributions pending their disbursement in accordance with the Bank’s policies and procedures for the investment of trust funds administered by the Bank. The Bank will credit all income from such investment to the Donor Balance Account to be used for the same purposes as the Contributions. 6. Administrative Cost Recovery 6.1. In order to assist in the defrayment of the costs associated with the establishment of the Trust Fund, the Bank may, following deposit of the Contribution by the Donor to the Trust Fund, deduct and retain for its own account from that Contribution an amount equal to and not greater than thirty-five thousand United States dollars (US$35,000). 6.2. In order to assist in the defrayment of the costs of administration and other expenses incurred by the Bank under this Arrangement, the Bank may, following deposit of the Contribution, deduct and retain for its own account an amount equal to five percent (5%) of each Contribution. If the contributions increase beyond what was originally expected at the time of counter-signature of this Arrangement, and the administrative costs increase as a result, the Donor acknowledges that an additional administrative fee may be applied to such new contributions. 7. Grant to Recipient 7.1. The Bank will, as administrator of the Trust Fund on behalf of the Donor, enter into a grant agreement (the “Grant Agreement�) with the Republic of Sierra Leone (the “Recipient�) consistent with the purposes of this Arrangement and on the terms and conditions set forth in the Grant Agreement. The Grant Agreement may be entered into up to the maximum amount of the Contributions that the Donor has accepted to make available under this Arrangement. Upon request by the Donor, the Bank will furnish a copy of the Grant Agreement to the Donor. 7.2. The Bank will be responsible for the supervision of the activities financed under the Grant Agreement. Subject to the consent of the Recipient, representatives of the Donor may be invited by the Bank to participate in Bank supervision missions related to the Trust Fund. 7.3. The Bank will promptly inform the Donor of any significant modification to the terms of any Grant Agreement and of any contractual remedies that are exercised by the -4- Bank under any Grant Agreement. To the extent practicable, the Bank will afford the Donor the opportunity to exchange views before effecting any such modification or exercising any such remedy. 8. Procurement 8.1. The Grant Agreement will provide that the Contributions will be used by the Recipient to finance expenditures for goods and services, as the case may be, in accordance with the Bank’s Guidelines on “Procurement under IBRD Loans and IDA Credits� and the Bank’s Guidelines on the “Selection and Employment of Consultants by World Bank Borrowers,� as in effect at the date of entry into the respective Grant Agreement. 9. Accounting and Financial Reporting 9.1. The Bank will maintain separate records and ledger accounts in respect of the Contributions deposited in the Trust Fund account and disbursements made therefrom. 9.2. The Bank will furnish to the Donor current financial information relating to receipts, disbursements and fund balance in United States Dollars of the Trust Fund with respect to the Contributions via the World Bank’s Trust Funds Donor Center secure website. Within six (6) months after all commitments and liabilities under the Trust Fund have been satisfied and the Trust Fund has been closed, the final financial information relating to receipts, disbursements and fund balance in United States Dollars of the Trust Fund with respect to the Contributions will be made available to the Donor via the World Bank’s Trust Funds Donor Center secure website. 9.3. The Bank will provide to the Donor, within six (6) months following the end of each Bank fiscal year, an annual single audit report, comprising: (1) a management assertion together with an attestation from the Bank’s external auditors concerning the adequacy of internal control over cash-based financial reporting for all cash-based trust funds as a whole; and (2) a combined financial statement for all cash-based trust funds together with the Bank’s external auditor’s opinion thereon. The cost of the single audit will be borne by the Bank. 9.4. If the Donor wishes to request, on an exceptional basis, a financial statement audit by the Bank’s external auditors of the Trust Fund, the Donor and the Bank will first consult as to whether such an external audit is necessary. The Bank and the Donor will jointly decide on the appropriate scope and terms of reference of such audit. Following a joint decision on the scope and terms of reference, the Bank will arrange for such external audit. The costs of any such audit, including the internal costs of the Bank with respect to such audit, will be paid by the Donor. 9.5. The Bank will provide the Donor with copies of all financial statements and auditors’ reports received by the Bank from the Recipient pursuant to the Grant Agreement. -5- 10. Progress Reporting 10.1. The Bank will provide the Donor with a semi-annual report on the progress of activities financed by the Contributions. Within six (6) months of the final disbursement date specified in paragraph 11.2, the Bank will furnish to the Donor a final report on the activities financed by the Trust Fund. 10.2. The Donor may review or evaluate activities financed by the Trust Fund. The Donor and the Bank will decide on the scope and conduct of such review or evaluation, and the Bank will provide all relevant information within the limits of its policies and procedures. All associated costs will be borne by the Donor. It is understood that any such review or evaluation will not constitute a financial, compliance or other audit of the Trust Fund. 11. Disbursement; Cancellation; Refund 11.1. It is expected that the Contributions will be fully disbursed by the Bank by December 30, 2016. The Bank will only disburse Contributions for the purposes of this Arrangement after such date with the written approval of the Donor. 11.2. The Donor or the Bank may, upon three (3) months’ prior written notice, cancel all or part of any remaining balance of the Contributions that are not committed pursuant to any agreements entered into between the Bank and any consultants and/or other third parties for the purposes of this Arrangement prior to the receipt of such notice, including the Grant Agreement. 11.3. Following the final disbursement date specified in paragraph 11.2, the Bank will return any remaining balance of the Contributions to the Donor or to the Donor Balance Account based on the Donor’s paid Contributions. In the event of a cancellation the Bank will promptly return to the Donor or to the Donor Balance Account the uncommitted Contributions in accordance with paragraph 11.3. 12. Communication and Addresses Except as provided for in paragraph 4.2 above, any notice, request or other communication to be given or made under this Arrangement will be in writing and delivered by mail, facsimile or e-mail to the respective party’s address specified below or at such other address as such party notifies in writing to the other party from time to time: -6- For the Bank: Mr. Mamadou Barry Task Team Leader SEGOM The World Bank 1818 H Street, NW Washington, DC 20433 U.S.A. Tel: (202 473-3561 Fax: (202) 522-0396 E-mail: mbarry2@worldbank.org For the Donor: Mr. Martin Waslshe Senior Regional Infrastructure Advisor Department for International Development 5 off Spur Road, Wiberforce Freetown: FTN 8380 4406 Republic of Sierra Leone E-mail: m-walshe@dfid.gov.uk 13. Amendment All annexes hereto constitute an integral part of this Arrangement. This Arrangement may be amended only in writing between the Bank and the Donor. 14. Disclosure The Bank will disclose this Arrangement and related information on this Trust Fund in accordance with the World Bank Policy on Access to Information. By entering into this Arrangement, the Donor consents to disclosure of this Arrangement and related information on this Trust Fund. The Donor will not be responsible for the activities of any person employed by the World Bank as a result of this Administration Arrangement, nor will the Donor be liable for any costs incurred by the World Bank in terminating the engagement of such person, except as a sole and direct result of a failure by the Donor to provide the funds committed under the Administration Arrangement. Please confirm your acceptance with the foregoing, on behalf of the Donor, by signing, dating, and returning to us the enclosed copy of this Arrangement. Upon receipt by the Bank of the copy of this Arrangement countersigned by you, this Arrangement -7- will become effective as of the date of the countersignature. Sincerely, INTERNATIONAL DEVELOPMENT ASSOCIATION By: /s/ Sergiy Kyluk Sergiy Kyluk Acting Country Director for Sierra Leone Africa Region ACCEPTED: THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND acting through its Department for International Development By: /s/ Mr. Phil Evans Name: Phil Evans Title: Head of Office, Sierra Leone Date: 5/12/2011 -8- ANNEX 1 Description of Activities and Expenditures under the Extractive Industries Technical Assistance Trust Fund This Annex will be applicable to and form an integral part of the Arrangement entered into between the Bank and the Donor that provides contributions (the aggregate of all contributions from the Donor, the “Contributions�) to be administered by the Bank for the Trust Fund. I. DESCRIPTION OF ACTIVITIES The objective of the Project is to support the Recipient’s efforts to build its capacity to manage and regulate the extractive industries sector. The Project consists of the following parts: Part A: Overarching Regulatory Framework for Extractive Industries Sector 1. Provision of capacity building support to the Recipient to improve the regulation of the mining sector through the preparation of, and the carrying out of related consultations on, new or revised mining regulatory instruments including inter alia: (i) legislation, regulations and model terms of reference for the preparation, disclosure, consultation and enforcement of environmental and social impact assessments, resettlement action plans, environmental and social management plans and mine closure plans for large-scale and mechanized small-scale mines, as well as mechanisms and procedures for community information dissemination, consultation, dispute resolution and benefit-sharing including improved linkages between large-scale mining and broader economic planning; (ii) a mining sector code of practice; (iii) underground mining regulations; (iv) mineral trading licenses regulations; and (v) the Mines and Minerals Act and supporting regulations. 2. Improve the regulatory framework governing the extractive industries sector, through support for the preparation, and carrying out, of related consultations on new or revised draft regulatory and other instruments, in view of: (i) developing a regulatory and administrative framework for the National Mineral Agency (NMA); and (ii) reviewing and updating the Petroleum Exploration and Production Act and preparing supporting petroleum and gas regulations. 3. Establishing and managing policy level dialogue to support formulation of a strategy for future regulatory requirements and arrangements for environmental and social management of the oil and gas sector. -9- Part B. Institutional Strengthening Strengthening oversight and governance of the extractive industries sector, in particular: 1. Provision of capacity building support to the Recipient to improve the management of the mining sector through: (i) support to the Ministry of Mineral Resources (MMR) to carry out its functions and operations including, inter alia, collection and management of geological and geochemical data for selected sites, carrying out targeted geochemical surveying, mineral resource assessment, and mapping of selected sites; (ii) carrying out investment promotion activities including setting up and operating a secure geodata management and information system and developing promotion materials; (iii) carrying out mine inspections and regulatory enforcement; (iv) provision of transitional salary support for selected civil servants in the MMR, for the carrying out of geological, data management, monitoring, evaluation, and environmental functions; (v) development of a post-mining rehabilitation program for selected sites; (vi) support to MMR to manage donor-financed projects including the building of skills for procurement, financial management and project management and monitoring; and (vii) support to MMR to develop a monitoring and evaluation system and benchmark progress towards the achievement of key governance- related indicators for the mining sector. 2. Strengthening the technical and institutional capacities of MMR, Petroleum Resource Unit (PRU), the Ministry of Land Country Planning and Environment, Sierra Leone Environment Protection Agency, and civil society organizations for implementing environmental and social regulations for the extractive industries sector including monitoring, evaluation, reporting and carrying out consultations. 3. Strengthening the technical, institutional, and management capacity of MMR, the Strategy and Policy Unit, and the Negotiations Committee, for carrying out extractive industries’ contracts negotiations, including financial and economic modeling, review of technical and feasibility reports, updating model agreements for specific commodities, and developing negotiations strategies. 4. Strengthening the technical, institutional and management capacity of the PRU for managing and analyzing geological and geophysical data. 5. Strengthening the capacity of the Government Gold Diamond Office. 6. Developing and strengthening the monitoring, evaluation, and reporting systems for the extractive industries sector. - 10 - Part C. Project Management Provision of technical and financial support to the MMR for the management, procurement, financial management, monitoring, evaluation and audit of the Project. II. CATEGORIES OF EXPENDITURE The Contributions may be used to finance (a) Goods; (b) Consultants’ Services; (c) Training, Workshops and Study Tours; (d) Operating Costs; and (e) Salary. For purposes of this paragraph 2, the following provisions have the meanings ascribed to them: (i) “Training, Workshops and Study Tours� means the costs associated with the training, workshop and study tour participation of personnel involved in Project activities for reasonable expenditures (other than expenditures for consultants’ services), including travel and subsistence costs for training, workshop and study tour participants, costs associated with securing the services of trainers, rental of training and workshop facilities, preparation and reproduction of training and workshop materials, and other costs directly related to training course, workshop or study tour preparation and implementation. (ii) “Operating Costs� means the incremental expenses incurred on account of implementation of the Activities, consisting of reasonable expenditures, for, inter alia, office equipment and supplies, vehicle operation and maintenance, maintenance of equipment, communication and insurance costs, office administration costs, utilities, rental, consumables, accommodation, banking charges, advertising expenses, travel and per diem, but excluding the salaries of the Recipient’s civil service.