Document of The World Bank FOR OFFICIAL USE ONLY Report No: RES24902 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ENHANCING QUALITY OF FINANCIAL REPORTING PROJECT SMALL GRANT TF019228 (EUR 1.85 MILLION) GRANT AGREEMENT dated June 11, 2015 TO THE GOVERNMENT OF ALBANIA August 18, 2016 GOVERNANCE GLOBAL PRACTICE EUROPE AND CENTRAL ASIA REGION This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AND ACRONYMS Eq-FinRep Enhancing the Quality of Financial Reporting SECO State Secretariat for Economic Affairs Regional Vice President: Cyril E Muller Country Director: Ellen A. Goldstein Senior Global Practice Director: Samia Msadek Practice Manager/Manager: Soukeyna Kane/Jarett Decker Task Team Leader: Andrei Busuioc 2 ALBANIA Enhancing Quality of Financial Reporting (P152567) CONTENTS A. SUMMARY 5 B. PROJECT STATUS 5 C. PROPOSED CHANGES 6 3 DATA SHEET Albania Albania-Enhancing Quality of Financial Reporting (EQ-FINREP) (P152567) EUROPE AND CENTRAL ASIA Governance Report No: RES24902 Basic Information Investment Project Project ID: P152567 Lending Instrument: Financing Regional Vice President: Cyril E Muller Original EA Category: Not Required (C) Country Director: Ellen A. Goldstein Current EA Category: Not Required (C) Senior Global Practice Samia Msadek Original Approval Date: 17-Mar-2015 Director: Practice Soukeyna Kane/Jarett Current Closing Date: 30-Jun-2017 Manager/Manager: Decker Team Leader(s): Andrei Busuioc Borrower: Responsible Agency: Restructuring Type Decision Authority: RVP Decision Restructuring Level: Level 2 Financing ( as of 06-Jan-2016 ) Key Dates Approval Effectiveness Original Revised Project TF Status Signing Date Date Date Closing Date Closing Date P152567 TF-19228 Effective 11-Jun-2015 17-Aug-2015 29-Sep-2015 30-Jun-2017 30-Jun-2017 Disbursements (in Millions) Disburs Undisburs % Project TF Status Currency Original Revised Cancelled ed ed Disbursed P152567 TF-19228 Effective USD 1.99 1.99 0.00 0.40 1.59 20 4 Policy Waivers Does the project depart from the CPF in content or in other significant Yes [ ] No [ X ] respects? Does the project require any policy waiver(s)? Yes [ ] No [ X ] A. Summary of Proposed Changes The restructuring is proposed to extend the closing date for thirty months, from June 30, 2017 to December 31, 2019. The extension is requested to: (i) bring the closing date to correspond to the originally planned implementation period of four years, as stipulated at Project’s approval (at the time of project approval the parent TR closing date was not extended and it was agreed and documented in the project paper that the closing date will be extended once the parent TF is extended; it was extended till 2021 subsequently to project approval), and (ii) to take into account the delayed project effectiveness date. This extension had been agreed with the Donor. Change in Implementing Agency Yes [ ] No [ X ] Change in Project's Development Objectives Yes [ ] No [ X ] Change in Results Framework Yes [ ] No [ X ] Change in Safeguard Policies Triggered Yes [ ] No [ X ] Change of EA category Yes [ ] No [ X ] Other Changes to Safeguards Yes [ ] No [ X ] Change in Legal Covenants Yes [ ] No [ X ] Change in Loan Closing Date(s) Yes [ X ] No [ ] Cancellations Proposed Yes [ ] No [ X ] Change to Financing Plan Yes [ ] No [ X ] Change in Disbursement Arrangements Yes [ ] No [ X ] Reallocation between Disbursement Categories Yes [ ] No [ X ] Change in Disbursement Estimates Yes [ ] No [ X ] Change to Components and Cost Yes [ ] No [ X ] Change in Institutional Arrangements Yes [ ] No [ X ] Change in Financial Management Yes [ ] No [ X ] Change in Procurement Yes [ ] No [ X ] Change in Implementation Schedule Yes [ ] No [ X ] Other Change(s) Yes [ ] No [ X ] B. Project Status The objectives of the Project continue to be achievable within the extended (i.e. as originally planned) implementation period. The Project’s development objective is to improve the implementation of good quality financial reporting by focusing on capacity building for the accountancy and audit professions, improving public availability of companies’ financial information, and improved monitoring and 5 evaluation by regulators of the quality of financial reporting. The project became effective about six months following approval, on September 16, 2015, and was officially launched on October 15, 2015. Despite a delay with the project start, progress has been made under all four components, in particular: (i) Component 1 focuses on improving accountancy education, and major procurement of technical assistance is well advanced, (ii) Component 2 focuses on enforcement of financial reporting through enhanced oversight of auditors and financial sector entities and preparation of detailed terms of reference for related capacity building activity is well advanced; (iii) Component 3 focuses on enabling timely access to companies’ financial statements by investors and general public, and the major activity to build institutional capacity and IT infrastructure is contracted and under implementation; and (iv) under Component 4, the project management activities have been well planned and organized and a public awareness activity is being designed. There are no outstanding financial management issues or overdue audits. The first withdrawal from the TF account was executed in January 2016, therefore the first audit report will be due in June 2017. The team is not requesting any budget funds for supervision as the financing provided through the Bank- executed part of the Project (TF019227) is sufficient to cover the related costs during the duration of the project. C. Proposed Changes Development Objectives/Results Project Development Objectives Original PDO The proposed Project Development Objective (PDO) of this project is to improve the implementation of good quality financial reporting by focusing on capacity building for the accountancy and audit professions, improving public availability of companies’ financial information, and improved monitoring and evaluation by regulators of the quality of financial reporting. Change in Project's Development Objectives Financing Change in Loan Closing Date(s) Explanation: The project is designed for a 4 years implementation period. Though, due to the fact that the parent multi- donor trust fund had 2017 Closing Date, the initial project documentation and grant agreement were set to less than 2 years: the initial closing date was formally set at June 30, 2017, which was six months before the then closing date of the parent REPARIS Multi-Donor Trust Fund (TF071151). The parent TF closing date was already in process of being extended when the EQFinRep was approved. Such extension was completed on February 10, 2016, and the new closing date set for June 30, 2021. Consequently, the completion of the extension of the closing date for the parent REPARIS Multi-Donor Trust Fund has enabled the extension of the EQFinRep to secure the 4 years implementation period as originally planned. The expected extension of the Closing Date for the EQFinRep Grant was already included in the Project Paper. This document was prepared in close collaboration with the Ministry of Finance (the main recipient) and other local stakeholders, and the Project Paper was endorsed by the Ministry of Finance of 6 Albania. The expectation of the Ministry of Finance is that the Closing Date of the Project will be extended as envisaged in the Project Paper. Therefore, there is no need to receive a formal request for the extension of the Closing Date. There are no outstanding financial management issues and overdue audits. The first withdrawal from the TF account was executed in January 2016, therefore the first audit report will be due in June 2017. The objectives of the Project continue to be achievable. The original timeline of the project was foreseen to be 4 years and the requested extension will in fact bring the total project lifetime to about 4 years and 2 months. The Grant Agreement because effective on 16 September 2015, and the official launch date of the project was on 15 October, 2015. The new proposed closing date is December 31, 2019. It is also important to proceed with Closing Date extension at this early stage in order to make sure that the Republic of Albania will have ample time to adjust as early as possible in the project the deliverables calendar with the consultants and vendors. Some activities require longer implementation periods that go beyond the current Closing Date of June 30, 2017. Based on the above, it is indispensable that we formally request a no-cost 30 months extension of the Closing Date of the project, from June 30, 2017 to December 31, 2019. Donor has been consulted and is aware of the request for a no-cost extension of the Closing Date for the Project. Proposed Original Current Proposed Previous Closing TF Status Application Closing Date Closing Date Closing Date Date(s) Deadline Date TF- Effective 30-Jun-2017 30-Jun-2017 31-Dec-2019 30-Jun-2017 01-May-2020 19228 7