FOR OFFICIAL USE ONLY Report No: PP00004 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT PAPER ON A PROPOSED ADDITIONAL GRANT IN THE AMOUNT OF US$ 17 MILLION FROM THE TRUST FUND FOR GAZA AND THE WEST BANK (TFGWB) WITH CO-FINANCING FROM THE PALESTINIAN UMBRELLA FOR RESILIENCE SUPPORT TO THE ECONOMY MULTI DONOR TRUST FUND (PURSE MDTF) IN THE AMOUNT OF US$ 19.45 MILLION TO THE PALESTINIAN LIBERATION ORGANIZATION (FOR THE BENEFIT OF THE PALESTINIAN AUTHORITY) FOR The Palestinian Emergency Financing Facility June 17, 2024 Governance Middle East And North Africa 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. The World Bank Palestinian Emergency Financing Facility (P504704) CURRENCY EQUIVALENTS (Exchange Rate Effective as of June 1, 2024) CURRENCY UNIT US$ 1.00 = ISRAELI SHEKEL (ILS) 3.675 FISCAL YEAR January 1 - December 31 Regional Vice President: Ousmane Dione Regional Director: Nadir Mohammed Country Director: Stefan W. Emblad Practice Manager: Jens Kromann Kristensen Task Team Leader (s): Riham Hussein, Jiwanka B. Wickramasinghe, Mohammad Jaber The World Bank Palestinian Emergency Financing Facility (P504704) ABBREVIATIONS AND ACRONYMS AM Accountability Mechanism AS Assistance Strategy AUP Agreed Upon Procedures CCDR Country Climate and Development Report DGIRP Directorate General of International Relations and Projects E&S Environmental and Social ESCP Environmental and Social Commitment Plan ESSP Education Sector Strategic Plan EU European Union FCV Fragility, Conflict, and Violence FM Financial Management GDP Gross Domestic Product GPC General Personnel Council GRM Grievance Redress Mechanism IC Internal Control ILS Israeli Shekel IPF Investment Project Financing ISA International Standards on Auditing MENA Middle East and North Africa MoE Ministry of Education MoF Ministry of Finance MoI Ministry of Interior NDC Nationally Determined Contributions NDP National Development Plan NGO Non-Governmental Organization PA Palestinian Authority PDO Project Development Objective PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PIU Project Implementation Unit POM Project Operations Manual PP Procurement Plan PPSD Project Procurement Strategy for Development SAACB State Audit and Administrative Control Bureau STEP Systematic Tracking of Exchanges in Procurement system UN United Nations The World Bank Palestinian Emergency Financing Facility (P504704) TABLE OF CONTENTS I. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING .............................................................................1 II. DESCRIPTION OF ADDITIONAL FINANCING...........................................................................................................3 III. KEY RISKS ...........................................................................................................................................................4 IV. APPRAISAL SUMMARY ........................................................................................................................................6 V. WORLD BANK GRIEVANCE REDRESS ....................................................................................................................9 VI. PROPOSED CHANGES ..........................................................................................................................................9 VII. DETAILED CHANGE(S)........................................................................................................................................ 10 ANNEX 1 .................................................................................................................................................................. 20 The World Bank Palestinian Emergency Financing Facility (P504704) OPERATION INFORMATION BASIC DATA - MAIN Product Information - Palestinian Emergency Financing Facility (P504704) Operation ID Product/Financing Instrument P504704 Investment Project Financing (IPF) Task Team Leaders Riham Hussein, Jiwanka B. Wickramasinghe, Mohammad Ali Mousa Jaber Beneficiary Country/Countries Geographical Identifier West Bank and Gaza West Bank and Gaza Requesting Unit Responsible Unit MNC04 (5562) EMNGU (9752) Approval Date Closing Date 20-Feb-2024 31-Dec-2024 Practice Area (Lead) Approval Fiscal year Governance 2024 Environmental and Social Risk Classification (ESRC) Moderate Is there collaboration between Bank and IFC? No Implementing Agency Palestinian Liberation Organization IMPLEMENTATION MODALITIES – MAIN Situations of Urgent Need of Assistance or Capacity Constraints [✓] Fragile State(s) [ ] Fragile within a non-fragile Country [ ] Small State(s) [✓] Conflict [✓] Responding to Natural or Man-made Disaster i The World Bank Palestinian Emergency Financing Facility (P504704) Other Situations [ ] Financial Intermediaries (FI) [ ] Series of Projects (SOP) [ ] Performance-Based Conditions (PBCs) [ ] Contingent Emergency Response Component (CERC) [ ] Alternative Procurement Arrangements (APA) [ ] Hands-on Expanded Implementation Support (HEIS) OPERATION STATUS Development Objective (DO) (Approved as part of Decision package on 19-Feb-2024) To contribute to service delivery in the West Bank. Key Information from Last ISR Operation Ratings NAME LAST ISR RATINGS 02-May-2024 Overall ESS Performance  Satisfactory Progress towards achievement of PDO  Satisfactory Overall Implementation Progress (IP)  Satisfactory Overall Risk  Substantial Overall ESS Performance  Satisfactory Financial Management  Satisfactory Project Management  Satisfactory Procurement  Satisfactory Monitoring and Evaluation  Satisfactory Disbursement Summary (in USD million) Source of Funds Net Commitment Disbursed Balance % Disbursed IBRD -- -- -- 0 IDA -- -- -- 0 Grants 30.00 29.99 0.01 99.97 ii The World Bank Palestinian Emergency Financing Facility (P504704) BASIC DATA – ADDITIONAL FINANCING Additional Financing No. 1 Additional Financing Type [✓] Activities are being added to expand the scope of the operation, perhaps in geography or in outputs (Scale-up) The operation has incurred increased costs due to inflation, exchange rate changes, and factors that were not [ ] anticipated at appraisal (Cost-overrun) The operation has experienced shortfalls in co-financing, counterpart financing, or cost recovery that were [ ] anticipated at appraisal but did not materialize. (Financing gap) [ ] The design of the operation has changed, and the new designs cost more than the original ones (Restructuring) Expected Approval Date Review Type/Corporate Review Level 01-Jul-2024 Regular Decision Meeting (DM) Will consulting services be required? Is this an Urgent Need or Capacity Constraint request? Yes Yes IMPLEMENTATION MODALITIES – ADDITIONAL FINANCING Situations of Urgent Need of Assistance or Capacity Constraints [✓] Fragile State(s) [ ] Fragile within a non-fragile Country [ ] Small State(s) [✓] Conflict [✓] Responding to Natural or Man-made Disaster Other Situations [ ] Financial Intermediaries (FI) [ ] Series of Projects (SOP) [ ] Performance-Based Conditions (PBCs) [ ] Contingent Emergency Response Component (CERC) [ ] Alternative Procurement Arrangements (APA) [ ] Hands-on Expanded Implementation Support (HEIS) COSTS & FINANCING Summary (Total Financing in US$, Millions) Last Approved Proposed iii The World Bank Palestinian Emergency Financing Facility (P504704) Additional Cancellation Total Total Operation Cost 30.00 36.45 0.00 66.45 Total Financing 30.00 17.00 0.00 47.00 Of which IBRD/IDA 0.00 0.00 0.00 0.00 Financing Gap 0.00 19.45 Financing Details (in US$, Millions) Proposed Source Last Approved Additional Cancellation Total Trust Funds 30.00 17.00 0.00 47.00 Special Financing 30.00 17.00 0.00 47.00 Total Financing 30.00 17.00 0.00 47.00 SYSTEMATIC OPERATIONS RISK- RATING TOOL (SORT) Last Approved Rating Risk Category Proposed Rating (ISR Seq. 01) Package - 02 May 2024 Political and Governance  High  High Macroeconomic  High  High Sector Strategies and Policies  Substantial  Substantial Technical Design of Project or Program  Moderate  Moderate Institutional Capacity for  Substantial  Substantial Implementation and Sustainability Fiduciary  Substantial  Substantial Environment and Social  Moderate  Moderate Stakeholders  Low  Low Overall  Substantial  Substantial CLIMATE Climate Change and Disaster Screening Has this operation been screened for short-term and long-term climate change and disaster risks? iv The World Bank Palestinian Emergency Financing Facility (P504704) POLICY COMPLIANCE Does the operation depart from the CPF in content or in other significant respects? No Does the operation require any waivers from Bank policies? No TEAM Core Team Name Role Specialization ADM Responsible? Riham Hussein Team Leader Yes Jiwanka B. Wickramasinghe Team Leader No Mohammad Ali Mousa Team Leader No Jaber Financial Management Rima Abdul-Amir Koteiche Yes Specialist Basheer Ahmad Fahem Procurement Specialist Yes Sadeq Jaber Ala' Abd Minem Procurement Specialist No Mohammad Turshan Manal M F Taha Environmental Specialist Yes Najm-Ul-Sahr Ata-Ullah Social Specialist Yes Mariana Margarita Montiel Counsel No Donald Herrings Mphande Peer Reviewer No Alma Nurshaikhova Peer Reviewer No Oleksii Balabushko Peer Reviewer No Ma Dessirie Kalinski Team Member No Ali Ali Hassan Salamah Team Member No Nur Nasser Eddin Team Member Senior Economist No Denizhan Duran Team Member No Rana Ishaq Kassis Team Member No v The World Bank Palestinian Emergency Financing Facility (P504704) Farishta Ali Team Member No vi The World Bank Palestinian Emergency Financing Facility (P504704) I. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING 1. This project paper seeks the approval of the Board of Executive Directors for an Additional Financing (AF) grant of US $17 million for the PEFF. The parent project applied paragraph 12 of Section III of the IPF Policy (Projects in Situations of Urgent Need of Assistance or Capacity Constraints), including the application of condensed procedures. In addition to the requested US $17 million from the Trust Fund for Gaza and the West Bank, the proposed AF anticipates receiving approximately US $19.45 million from the Palestinian Umbrella for Resilience Support to the Economy (PURSE) Multi-Donor Trust Fund—supported by expected contributions from the UK and France of GBP 10 million and Euro 8 million, respectively. The AF seeks to respond to the urgent needs of the PA to maintain service delivery. The proposed AF is a scale-up and restructuring of the Parent project. The AF will contribute to the payment of salaries of health and education sector employees to contribute to ensuring a continued provision of public health and education services in the West Bank. 2. The current conflict in the Middle East, centered in Gaza, erupted in early October 2023, with a steep escalation of violence. As a result of the conflict, the Palestinian economy experienced one of the largest shocks recorded in its recent economic history. A pre-existing structural fiscal crisis has been worsened by a reduction in clearance revenue transfers starting in October 2023. This, together with the decrease in domestic revenues (reflecting lower economic activity) forced the Palestinian Authority (PA) to further reduce public salary payments in the last quarter of 2023 and made the 2023 financing gap grow approximately fivefold vis-a-vis the pre-conflict baseline, reaching 3 percent of GDP. In a context of very limited access to traditional economic policy instruments and financing sources, the only alternative sources of financing remain additional accrual of arrears and foreign aid. 3. The Palestinian Emergency Financing Facility Parent Project (P504704) was approved on February 20, 2024 , for an amount of US $30 million, and became effective on February 29, 2024. The project was financed out of the Trust Fund for Gaza and the West Bank. The Project Development Project (PDO) was “to contribute to service delivery in the West Bank”. 4. Implementation progress for the parent operation is Satisfactory. The project has disbursed 99.97 percent of the total funds equivalent to US $29.99 million. The Directorate General of International Relations and Projects (DGIRP) at the Ministry of Finance (MoF) that was the Project Implementation Unit (PIU), performed well. The parent operation has two components. The first funded retroactive salary payments and has been fully disbursed. It covered the costs of 44,840 education employees’ salaries which were paid in December 2023. The funds have been deposited in the Single Treasury Account (STA) of the PA. The second component funds the audit of the payments under component 1. The auditor TORs have been finalized and approved. There are no delays expected in the audit report. The results of the parent project have been achieved. These included funding the salaries of education employees for the month of November 2023 which included approximately 27,000 female employees. This allowed service delivery to be maintained and schools were open 94 percent of the time1. A key lesson from the parent project is the importance of speed, simple design and strong assurance to build trust among stakeholders. Partnerships are important and this AF has been prepared with close collaboration with development partners. 5. The proposed AF grant will provide emergency support to the PA to pay education and health employees’ salaries and will contribute to strategic priorities outlined in the PA’s national development plan. The PA’s National Development Plan (NDP) 2021-20232 centers on building a more resilient economy and developing human capital as 1 This represents results during October 2023, and includes both in-person and virtual learning. 2 Due to the emergency, there is no NDP for 2024. The Cabinet approved an emergency NDP at the end of February 2024 Page 1 The World Bank Palestinian Emergency Financing Facility (P504704) part of its core strategy. The proposed AF is aligned with the WBG vision of creating a world free of poverty on a livable planet, by sustaining education and health services and safeguarding human capital. The proposed AF is also aligned with the Strategy for Fragility, Conflict, and Violence (2020-2025) 3 , particularly Pillar II which emphasizes the importance of “remaining engaged during conflicts and crisis situations” to build resilience, protect essential institutions, and deliver critical services like education and health. The proposed AF is aligned with the West Bank and Gaza Assistance Strategy (AS) for FY22-25 (Report No. 156451-GZ). The operation directly contributes to the first focus area of the AS on achieving better human development outcomes by focusing on investments in education and health to promote human capital, particularly in a context characterized by fragility, conflict and violence and on achieving better human development outcomes and strengthening resilience across the education system 4. It is also aligned with the WBG enlarged Middle East and North Africa (MENA) Regional Strategy (March 2019) which emphasizes human capital development and improving emergency services to the conflict-affected poor. 6. The operation is consistent with the Palestinian Authority’s Nationally Determined Contributions (NDC) (updated October 2021). Even though the operation does not directly contribute to NDC priorities, activities being financed are aimed at improving provision of education and health services in the immediate term, establishing the core foundation (i.e., education and health) for climate empowerment in the future. The operation is also consistent with the recommendations of the West Bank and Gaza Country Climate and Development Report (CCDR) which identifies investing in an effective and resilient education system as a critical pillar for a whole-of-economy approach to climate action in the long term and recognizes a strong health system as a cross cutting pillar necessary to support citizens during and after climate shocks. 7. The impact of climate change varies across the West Bank and Gaza. While both areas are highly vulnerable to flooding and drought, water scarcity will be more prevalent in Gaza, while flooding risk will be highest in the eastern West Bank. The number of days in which temperatures exceed 35°C is expected to increase in all Palestinian cities and heat-related diseases will put a strain on the public health systems. Extreme heat and rising disease rates could also adversely affect school attendance and learning outcomes. The immediate fiscal space created by contributing to the salaries of education and health workers will help improve the ability of the education and health systems to cope with these climate related shocks. 8. The proposed operation will have a particular impact on women. The majority of teachers in lower grades are female. Sixty percent of public-school employees in the West Bank are female as are 52 percent of the students. Similarly, female representation among health workers is significant 5 (approximately 50% on average across all specialties). The gender focus is further deepened by its focus on maintaining Antenatal care (ANC) and Postnatal care (PNC). ANC provides a platform for important health-care functions, including health promotion, screening and diagnosis, and disease prevention of pregnant women. It has been established that by implementing timely and appropriate evidence-based practices, ANC can save lives by reducing the risk of stillbirth, and pregnancy complications. Postnatal care can save the lives of mothers and the lives of neonates. 3 World Bank. 2020. World Bank Group Strategy for Fragility, Conflict, and Violence 2020–2025. http://documents.worldbank.org/curated/en/844591582815510521/World-Bank-Group-Strategy-for-Fragility-Conflict-and-Violence-2020-2025. Washington, DC: World Bank 4 https://documents1.worldbank.org/curated/en/627701619710823261/pdf/West-Bank-and-Gaza-Country-Assistance-Strategy-for-the-Period- FY22-25.pdf 5 The percentage of females by specialty: General physicians 29%; Specialists 20%; Nurses 63%; Radiologists 66%; Pharmacists 82%; Physiotherapists 79% (Source; Ministry of Health Statistics) Page 2 The World Bank Palestinian Emergency Financing Facility (P504704) II. DESCRIPTION OF ADDITIONAL FINANCING 9. The proposed AF will finance the recurrent wage bill of health sector employees in the West Bank for the months of January 2024 and February 2024 paid in March and April 2024 respectively and the recurrent wage bill of education employees for the month of March 2024, paid in May 2024. The proposed changes will require a level two restructuring and will include two new PDO level indicators in the health sector. The results indicators will be revised to include health sector employees’ salaries and the number of antenatal and postnatal visits conducted at public health facilities in the months covered. The financing provided will cover salary payments for the approximately 8,100 health sector employees for all of February and will partially cover the January salaries for all health sector employees. It will also cover 99 percent of the salary payment in March 2024 for the 41,157 education employees. Since November 2023, and due to the cuts in salaries to civil servants, a government decree was issued that allowed civil servants to work two days a week instead of the regular five until such time as payments become more regular. Public health facilities have, therefore, been open approximately eight days per month. Despite this and due to the high demand, visits to public health facilities have not decreased significantly. Supporting salary payments ensures that public servants will continue to work and helps to maintain service delivery. The intermediate indicator from the parent project remains relevant for the AF. 10. PURSE is expected to provide co-financing of US $19.45 million to the operation. The UK and France financing is expected to be available in the PURSE TF in July 2024, and disbursement to the PA is expected after the Board date in July 2024. There will be a verification agent hired by the World Bank, similar to the parent project to verify that the employees were education and health sector employees based in the West Bank. 11. Component 1: Education and Health Sector Employees’ Salaries (revised allocation US $66.425 million). The title of component 1 will be revised to include health sector employees’ salaries. The AF will scale up this component to US $66.425 million. The financing will cover both health and education employees’ salaries. The additional financing will contribute to maintaining service delivery in the education and health sectors by partially financing eligible education and health staff salaries. Education service delivery continues to be measured by the number of days in which public schools were operational in person or online (Percentage), like the parent project. For health service delivery, ante and postnatal visits are used as indicator as it is a proxy for service continuity, as women have various touchpoints with the system throughout their pregnancy. In addition, in this fragile context, it is one of the few reliably collected indicators. One hundred percent retroactive financing under this project was approved by the World Bank Regional Vice President in line with the Bank Directive on IPF, Section III, para 16 (c): “Retroactive Financing for Bank Loans. 12. The eligible expenditures under this component will be limited to the wage bill of education and health employees as outlined in the Project Operations Manual (POM). Education employees are staff that work in institutions providing basic, secondary, pre-primary, and vocational education as defined in the Education Sector Strategic Plan (ESSP). Education employees include teachers and other staff including school principals, janitors, administrative assistants, counselors, and other support staff. Education services to the military are not covered in this project. Health sector employees are staff working in hospitals, primary health care centers, and other public health institutions located in the West Bank, including doctors, nurses, technical specialists, administrative staff, janitors, counselors, and other support staff eligible for payment of salaries, as further detailed in the POM. The AF only covers Health sector employees, who provide health related services to the public under the Ministry of Health, it does not include military and security health workers. Page 3 The World Bank Palestinian Emergency Financing Facility (P504704) 13. Component 2: Project Audit (revised allocation US $0.025 million). The AF will scale up this component to US $25,000 to expand the coverage of the audit to the health sector employees' salaries as well as the additional education employees covered under the AF. Table 1: Revised Disbursement Categories (US $) Additional Original Additional Total Project Financing - Category Grant Financing Amount Potential Amount (GWBTF) after AF (PURSE) Category 1a – Education 29,990,000 16,995,000 7,870,000 54,855,000 Employees’ Salaries (Component 1) Category 2 – Project Audit 10,000 5,000 10,000 25,000 (Component 2) Category 3 – Health Sector 0 0 11,570,000 11,570,000 Employees’ Salaries (Component 1) Total 30,000,000 17,000,000 19,450,000 66,450,000 Table 2: Summary of new indicators under the AF AF indicators Base line End target End target date PDO indicators Number of health sector employees supported 0 16,421 (new) July 31, 2024 (disaggregated by gender) (new) Number of antenatal and postnatal visits (new) 49,605 49,605 (new) March 31, 2024 14. The proposed AF will rely on the existing implementation arrangements under the parent project . The Directorate General of International Relations and Projects (DGIRP) at the Ministry of Finance (MoF) will be the Project Implementation Unit (PIU) and will be responsible for Monitoring and Evaluation (M&E), Environmental and Social Management (ESM), submitting Withdrawal Applications (WA) to the World Bank, managing the audit of the funds, and submitting progress and financial reports. The PIU performance is Satisfactory, and the project coordination function relies on MoF’s proven capacity in managing and implementing World Bank-financed projects. III. KEY RISKS 15. Given the context of this emergency project and the ongoing conflict, the overall risk to the achievement of the project’s objective is considered “Substantial”. The key risks that may negatively impact the successful implementation of the proposed Project are as follows: political and governance risks; sector strategies and policies risks; technical design risks, institutional capacity for implementation and sustainability risks; stakeholders’ risks, fiduciary risks, environmental and social risks, and other risks due to the complexity and uncertainty associated with the ongoing conflict. Page 4 The World Bank Palestinian Emergency Financing Facility (P504704) 16. Political and governance risks are considered “High”. As the conflict continues, there is a potential impact on the ability of the PA to perform its core functions. The proposed operation should have a positive impact on the governance situation through maintaining service delivery. 17. The macroeconomic risk is “High”. Following a slowdown in economic growth in 2022, the Palestinian economy is expected to have contracted sharply in 2023 and the decline is projected to continue in 2024. Fiscal demands remain very high, especially after the PA lost the bulk of its main income stream and given the longstanding reduction in donor support. This will result in a larger than expected financing gap, and a large drop in public consumption. Given the lack of financing options, the PA may continue the accumulation of arrears to the pension fund and to the private sector, which may result in liquidity shortages in the economy. Disruption in economic activity and the resulting decline in tax revenue on top of the disruption in clearance revenues are all constraining fiscal space at a time when there is spending pressure on the PA to maintain service delivery. The proposed operation sends a signal to donors that the World Bank continues its support to the PA under these difficult circumstances and this may prompt other donors to contribute to addressing the financing needs. 18. Sector strategies and policies risks are considered “Substantial”. The PA’s commitment to the reform agenda in the PFM area, including wage bill management and controls, is strong, and sector policies are not likely to change during the duration of the Project. The World Bank has been engaged with the PA on PFM reforms since 2014 with technical assistance and has funded a PFM Improvement Project which closed Satisfactorily in June 2023 and is now funding Phase 2 of that Project. Last year, the PA also initiated civil service reforms through the adoption of a 50 percent attrition target. The World Bank’s analytical work has contributed to the ongoing reforms with a PEFA Assessment in 2018 and a Wage Bill analysis in 2022. The PFM operation is an example of the PA’s commitment to preserving the capacity of the PA to fulfill its core functions. However, the ongoing conflict creates substantial risks to further progress on PFM and civil service management as the PA’s fiscal crisis may impact on the functioning of the PA. 19. The technical design risk of the proposed Project is “Moderate”. The operation has a simple design with one main activity which is the payment of salaries. The payroll system is well-functioning, and the MoF can provide lists of health and education sector employees’ salaries to be financed under the proposed Project. 20. Institutional Capacity for Implementation and Sustainability risk are considered “Substantial” due to the uncertainty over the evolution and duration of the conflict. There are indirect risks associated with systems weakening in case the fiscal crises persist and the clearance revenue issue is not resolved. This may affect the implementation of the audit. To mitigate the residual risk, the situation will be monitored closely. The Bank will be ready to provide additional implementation support if required and, in a worst-case scenario, the audit may be carried out virtually. 21. The fiduciary risk is considered “Substantial”. The MoF PIU has extensive experience working with World Bank projects and is currently implementing the parent project. The FM risk initially assessed as High will be mitigated to Substantial through the project-specific mitigating measures and adequate financial management arrangements replicated from the parent project, in addition to the controls and mitigation measures to be introduced as part of the AF. The mitigation measures include the robust internal controls of the civil servant’s payroll process at the MoF and other related PA Ministries, the detailed salary reports that will be produced by the MoF and submitted to support the salary reimbursement, independent verification of these payment reports and the project audit. Page 5 The World Bank Palestinian Emergency Financing Facility (P504704) 22. The overall environmental and social (E&S) risk is considered “Moderate”. Low environmental risk is envisaged. The social risk is moderate and will be managed through measures included in the ESCP. IV. APPRAISAL SUMMARY A. Technical, Economic, and Financial Analysis 23. While economic and financial analyses cannot be carried out for the proposed AF given the emergency nature of the project, benefits are tangible. Firstly, the project will provide continuity in provision of education and healthcare services in the West Bank which will contribute to reduce student learning losses and health benefits respectively. Secondly, payment of salaries will help support livelihoods in households with education and healthcare sector employees. 24. Governance and institutional arrangements are designed to fit the current circumstances by using government processes where possible and ensuring the least additional administrative burden on the PA. As described under implementation arrangements, the payroll payment, reconciliation, and reporting will rely on the existing MoF procedures which are deemed satisfactory in these areas. 25. The Payroll Directorate maintains control over the payment of wages to all PA employees. The Payroll Directorate accepts changes in the payroll only after these changes have been pre-audited and controlled through the network of administrative controllers (who are GPC or Ministry of Interior (MoI)-affiliated) and the financial controllers in each line Ministry (MoF-affiliated) and then cleared by the GPC or MoI. The Payroll Directorate at MoF ensures compliance with the legal basis for changes by control and pre-audit teams (about a dozen staff), and all the related documentation is available for further (post) audit. 26. The operation is Paris Aligned on both mitigation and adaptation. Project activities will not cause any increase in GHG emissions or create any persistent barriers to transition to low-GHG emissions development pathway over existing levels. Financing healthcare employees’ salaries, and in general, supporting public financial management is considered Universally Aligned from a mitigation perspective (provision of education services is universally aligned as per the Education Sector Note and as it falls under activities associated with emergency preparedness and immediate response in the aftermath of a crisis or disaster, that are temporary and timebound). Due to the emergency nature of the operation, i.e. project timeline is less than one year and it will be a one-time payment, and payments are made for services already provided and closely monitored via the results framework, exposure to climate risks is considered low and hence adaptation risk is at a low/acceptable level. 27. Large volumes of personal data, personally identifiable information and sensitive data are likely to be collected and used in connection with the proposed AF. Measures to ensure the legitimate, appropriate and proportionate use and processing of data may not be featured in national law or data governance regulations or be routinely collected and managed in social and health information systems. In order to guard against abuse of that data, the proposed Project will incorporate best international practices and standards for dealing with such data in such circumstances. Measures may include, by way of example, data minimization (collecting only data that is necessary for the purpose); data accuracy (correct or erase data that are not necessary or are inaccurate), use limitations (data are only used for legitimate and related purposes), data retention (retain data only for as long as they are necessary), informing data subjects of use and processing of data, and allowing data subjects the opportunity to correct information about them. Page 6 The World Bank Palestinian Emergency Financing Facility (P504704) B. Financial Management 28. The FM assessment for the MoF PIU that was carried out during the preparation and supervision of the Parent Project will be adequate for the AF. The assessment evaluated the institutional capacity of MoF PIU to implement the FM and Disbursement arrangements under World Bank guidelines and found it to be Satisfactory. 29. The existing FM and Disbursement arrangements for the Parent Project will be duplicated for the AF. This AF includes the following updates and changes: (i) amendment to the PDO indicators, (ii) scaling-up Component One by US $36.435 million and Component Two by US $15,000. The AF will provide an additional US $17 million from TFGWB and US $19.45 million of potential financing from the PURSE MDTF. 30. There are no changes in the other implementation arrangements, disbursement arrangements and implementing agency. As for the Parent Project, the implementing agency for the AF is the MoF PIU. The MoF PIU will be responsible for project implementation, financial recording, and ensuring the arrangements comply with the Bank FM and disbursements guidelines. The proposed AF will finance the recurrent wage bill of health sector employees in the West Bank for the months of January 2024 and February 2024 paid in March and April 2024 respectively and the recurrent wage bill of education employees for the month of March 2024, paid in May 2024. 31. The MoF PIU will ensure that an adequate computerized financial system is in place, that separate cost centers are opened in the Bisan system, and that the MoF PIU employs qualified financial staff, including the Finance Manager. Semi-annual IFRs should continue to be submitted in an excel sheet within 45 days of the end of each period. The financial statements of the Project covering the AF will continue to be audited by a qualified and reputable audit firm acceptable to the World Bank. In addition to the audit engagement, disbursements under the AF of the Project will be subject to an ex-post Agreed Upon Procedures (AUP) engagement to review the accuracy and validity of the healthcare and education workers salary payments and eligibility of the workers. The AUP engagement will be performed by a qualified audit firm once the retroactive payment is made to the MoF. The AUP engagement will also be designed based on the Internal Control procedures implemented over the payroll process at MoH, MoE, GPC and MoF as described in Annex 1. Both Audit and AUP reports will be due within three months from the new closing date of the Project. The Terms of Reference (ToR) will be developed by the MoF PIU and will be submitted to the World Bank for no objection. 32. The AF will continue utilizing the same disbursement arrangements and guidelines as stipulated in the Parent Project Disbursement and Financial Information Letter (DFIL). This is in accordance with the World Bank’s disbursements guidelines. The AF will continue using “Transaction Based Disbursements” using SOEs as Withdrawal Applications (WA). The MoF PIU will continue utilizing a specific bank account in US$ for the receipt of funds. Disbursements into the bank account will be requested through WAs, reconciled bank statements, copies of bank statements and other necessary and related supporting documents. Other Financial Management and Disbursement arrangements will be the same as they are under the Parent Project including using proper Withdrawal Applications (WA) and E-disbursement. 33. The project POM will be updated to include changes made to the FM section. Page 7 The World Bank Palestinian Emergency Financing Facility (P504704) C. Procurement 34. Procurement under the proposed Project will continue to be carried out in accordance with the World Bank’s Procurement Regulations for IPF Borrowers, dated September 2023. “The Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by International Bank for Reconstruction and Development Loans and International Development Assistance Credits and Grants", dated October 15, 2006, and revised in January 2011 and as of July 1, 2016, shall apply to the proposed AF. The proposed AF will contribute to maintaining service delivery in the healthcare and education sectors by partially financing eligible staff salaries. The AF will finance part of the healthcare employees’ salaries from the months of January and February 2024 and the education workers' salaries from the month of March 2024, with the audit services being the only procurement envisaged. An amendment to the audit contract of the parent project will be signed to provide the audit services required for the AF. Procurement residual risk will remain Low for the AF. D. Legal Operational Policies 35. The proposed additional financing is being processed under the World Bank Policy for Investment Project Financing (IPF), section III, paragraph 12: Projects in Situations of Urgent Need of Assistance or Capacity Constraints and OP 8.00: Rapid Response to Crises and Emergencies. As the conflict continues, the PA needs to ensure the continuation of core government functions to provide essential services to the citizens, strengthening core state functions, and building institutional resilience and capacity, including social protection, water, education, and health. School employees’ salaries are important to ensure continued delivery of learning to students. Given the severe contraction in revenues, the PA is faced with difficult decisions and tradeoffs for funding critical activities. The PA has requested the Bank’s urgent support to cover payments of school and healthcare employees’ salaries. Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Areas OP 7.60 No E. Environmental & Social 36. The AF project is assessed to be of low environmental and moderate social risk, and the overall E&S risk is moderate. The AF project will not support any kind of physical works or envisage any other kind of activities that may cause direct or indirect environmental impacts. The Environmental and Social Commitment Plan (ESCP) of the parent project is publicly disclosed. Social risk management measures have also been elaborated in the POM. 37. Potential social impacts of the AF remain the same as the parent project and pertain to management of project contracted workers; data privacy of beneficiaries; and information disclosure/beneficiary feedback and grievance redress. Management of social issues related to payment of health sector and the additional education sector salaries (under Components 1 and 2 of the AF) will be examined as part of the social audit that is underway for the parent project. Briefly, an inception report - including scope, methodology, stakeholder identification and engagement plan, and timeline – has been cleared by the Bank. A draft report will be submitted by the end of June 2024 and will also identify corrective actions (if any) which will be implemented. Like the parent project, the AF will rely on well- established and functional mechanisms at MoF for management of social impacts. Page 8 The World Bank Palestinian Emergency Financing Facility (P504704) 38. The parent project ESCP has been updated for the AF and will be reviewed and cleared by the World Bank and disclosed by appraisal. Among other aspects, the ESCP lays out the principles for management of project workers, data privacy of beneficiaries, and information disclosure/beneficiary feedback and grievance redress. Any additional social risk management measures for the AF, if required, will also be elaborated in the POM. 39. Stakeholder consultation for the AF has been conducted during preparation and engagement will also be ensured during implementation. Additional consultations with institutional partners and representative civil society organizations (through bilateral virtual meetings due to security constraints) was conducted on May 25, 2024, and a summary was included in the AF ESCP. MoF has functional mechanisms for information disclosure/beneficiary feedback and grievance redress which are being used for the parent project and these will also be used for the AF. Relevant details of the said mechanisms are included in the ESCP and will also be laid out in the POM. No grievances have been received for the parent project during project implementation. V. WORLD BANK GRIEVANCE REDRESS 40. Grievance Redress: Communities and individuals who believe that they are adversely affected by a project supported by the World Bank may submit complaints to existing project-level grievance mechanisms or the Bank’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the Bank’s independent Accountability Mechanism (AM). The AM houses the Inspection Panel, which determines whether harm occurred, or could occur, as a result of Bank non-compliance with its policies and procedures, and the Dispute Resolution Service, which provides communities and borrowers with the opportunity to address complaints through dispute resolution. Complaints may be submitted to the AM at any time after concerns have been brought directly to the attention of Bank Management and after Management has been given an opportunity to respond. For information on how to submit complaints to the Bank’s Grievance Redress Service (GRS), visit http://www.worldbank.org/GRS. For information on how to submit complaints to the Bank’s Accountability Mechanism, visit https://accountability.worldbank.org. VI. PROPOSED CHANGES Operation Information Proposed Changes Operation Information Proposed Changes Development Objective Yes Implementation Schedule Yes Summary Description Yes Loan Closing Date Extension No (Operation Abstract) Results Yes Loan Cancellations No Disbursements Estimates Yes Reallocations No Components Yes Financial Management No Legal Operational Policies No Procurement No Page 9 The World Bank Palestinian Emergency Financing Facility (P504704) MFD/PCE No Institutional Arrangement No Legal Covenants No Implementation Modalities No Conditions No Implementation Modalities No Disbursements Arrangements No Clients No Beneficiary Countries No VII. DETAILED CHANGE(S) DEVELOPMENT OBJECTIVE (DO) Development Objective Development Objective (Approved as part of Decision Package on 19-Feb-2024) To contribute to service delivery in the West Bank. Proposed New Development Objective To contribute to service delivery in the West Bank Operation Abstract: Summary Description of Proposed Operation Operation Abstract (Approved as part of Decision Package on 19-Feb-2024) Proposed Operation Abstract This operation will provide $30 million to sustain critical service delivery in the Palestinian territories due to the ongoing conflict and its knock-on effects on the West Bank. The situation has resulted in a dire fiscal crisis for the Palestinian Authority, impacting its ability to pay salaries, risking the provision of key public services. The emergency operation will support service delivery by partially financing eligible staff salaries in the education sector, through 100 percent retroactive financing. The project will provide partial reimbursement for the payment of the salaries of approximately 45,000 education employees in the West Bank. COMPONENTS Last Approved Proposed Component Name Cost (USD) Action Component Name Cost (USD) Page 10 The World Bank Palestinian Emergency Financing Facility (P504704) Education Employees' Education and Health Sector 29,990,000.00 Revised 66,425,000.00 Salaries Employees’ Salaries Project Audit 10,000.00 Revised Project Audit 25,000.00 TOTAL 30,000,000.00 66,450,000.00 COSTS & FINANCING Private Capital Facilitation Is this an MFD-Enabling Project (MFD-EP)? No Last approved as part of PAD Data Sheet (Approval) on 19-Feb-2024 Is this project Private Capital Enabling (PCE)? No Last approved as part of PAD Data Sheet (Approval) on 19-Feb-2024 DISBURSEMENTS Operation Dates & Projection Details Reasons to change the full Disbursement date and/or the projection Restructuring, Additional Financing Implementation Start Date Operation Closing Date 20-Feb-2024 30-Jun-2024 Projected Date for Full Disbursement 29-Oct-2024 Expected Disbursements (in US $) (Absolute) Original Estimation at Preparation Actual Year Revised Estimation (Approval Package – 20 Feb 2024) FY2024 30,000,000.00 10,000.00 29,990,000.00 FY2025 0.00 0.00 0.00 ENVIRONMENTAL & SOCIAL Overview Corporate Oversight is provided by the Regional Environmental and Social Standards Advisor (RSA) Oversight is provided by the Environmental and/or Social Practice Manager Page 11 The World Bank Palestinian Emergency Financing Facility (P504704) Operation Location Operation location and salient physical characteristics relevant to the ESS Assessment (geographic, environmental, social) (if known) This operation won't have any physical activities and its main scope focuses on salary reimbursement for education employees in the West Bank Detailed operation location(s) and salient physical characteristics relevant to the ESS Assessment (geographic, environmental, social) Like the parent project, the AF will continue to be implemented exclusively within the West Bank and does not involve any physical works or other activities that might result in physical environmental impacts. The situation in the West Bank has been particularly strained since the conflict in the Middle East beginning in October 2023, which exacerbated the already critical security and economic conditions. The PA has faced escalating difficulties in disbursing salaries to public sector employees which has directly impacted the delivery of essential public services in both education and healthcare sectors. For instance, salary disbursements have been irregular, with significant shortfalls that began in October 2023, where salaries were only partially covered through loans from commercial banks. In subsequent months, this precarious fiscal situation persisted, leading to partial payments or no payments in certain instances. In the education sector, the ongoing financial instability has forced schools to intermittently shift to distance learning modalities and later, to a partial resumption of physical classes. Due to similar challenges within the health sector the delivery of medical services is also increasingly compromised due to financial constraints. Since November 2023, and due to the cuts in salaries to civil servants, a government decree was issued which allowed civil servants to work two days a week instead of the regular five until such time as payments become more regular. Public health facilities have, therefore, been open approximately eight days per month. In spite of this and due to the high demand, visits to public health facilities have not decreased significantly. The AF seeks to mitigate these disruptions by extending its financial support to include the health sector, reflecting the broadened necessity for stability in essential public services. The project will now support the salaries of approximately 8,000 healthcare workers in addition to around 45,000 education sector employees. This is particularly crucial as it aims to prevent further deterioration in public health and education services, which are pivotal during times of conflict and economic instability. The AF comprises of two components; component 1 - Education and Health Sector Employees’ Salaries, will support a 100% retroactive financing for partial payment of the salaries of healthcare and education sector employees. Project beneficiaries include briefly; (i) education employees in the West Bank, including staff that work in institutions providing basic, secondary, pre-primary, and vocational education. Employees include teachers and other staff including school principals, janitors, administrative assistants, counselors and other support staff, and (ii) health sector employees who are staff working in hospitals, primary health care centers and other public health institutions located in the West Bank, including doctors, nurses, technical specialists, administrative staff, janitors, counselors, and other support staff. Component 2 – Project audit, will expand the coverage of the audit under the parent project to include health sector employees’ salaries as well the additional education employees covered under the AF. The AF will rely on the existing implementation arrangements in MoF under the parent project. Borrower’s Institutional Capacity Like the parent project, the AF will also be implemented by the MoF. The Directorate General of International Relations and Projects (DGIRP) at MoF will be the Project Implementation Unit (PIU) and will oversee project implementation, monitor progress, and ensure prompt delivery and reporting. The environmental and social (E&S) performance of the parent project is “satisfactory” across all relevant standards and ESCP commitments are on track. Briefly, MoF has assigned an E&S specialist already engaged with the ministry for Environmental and Social Framework (ESF) implementation. The Term of Reference (ToR) for the social audit was cleared, the consultant is onboard, and an inception report was submitted and cleared in May. The social audit report will be shared by June 30, 2024. As agreed, details about the eligibility criteria, grievance redress and information disclosure/beneficiary feedback mechanisms, Page 12 The World Bank Palestinian Emergency Financing Facility (P504704) and applicable requirements of ESS2 (also including code of conduct, workers' grievance mechanism) have also been included in the POM which was cleared by the Bank at the end of February 2024. Finally, the project is using the grievance and information dissemination/beneficiary feedback mechanisms already established and functioning at MoF, and no project related complaints have been received thus far. Overall, MoF has developed satisfactory capacity for management of E&S risks and impacts in accordance with the ESF over the last few years. In addition to PEFF, MoF is also currently implementing the World Bank-funded West Bank Emergency Social Protection Covid-19 Response Project (P174078, parent project) and it’s two AFs (P176199 and P181573) under ESF. These projects are being implemented through a Project Coordination Unit (PCU) established at the MoF. The PCU has developed adequate and dedicated capacity for E&S risk management. An Environmental and Social Officer (ESO) and Health and Safety Specialist (HSS) were engaged in December 2020 and continue to support the PCU for E&S planning, preparation, implementation, and monitoring. In addition to the Covid-19 project, MoF is also overseeing the management of the World Bank financed Real Estate Registration Project (P168576) which is under the Bank’s old safeguards policies. A dedicated social safeguards specialist is in place for this project. The E&S specialists at MoF have participated in and benefitted from multiple World Bank provided trainings (in-person and virtual) to strengthen ESF capacity and implementation in the Palestinian Territories. These include both ESF overview trainings (e.g. 5-day ESF in Practice) as well as deep dive sessions on specific topics such as labor management, occupational health and safety (OHS), and management of sexual exploitation and sexual abuse/sexual harassment risks (SEA/SH). According to the ISRs of January 2024, the overall E&S progress of MoF implemented projects is assessed as satisfactory. The PEFF parent project also requires a project audit which will be extended to cover the AF. This project audit also includes a social audit activity which was initiated in May 2024. (see ESS1 for details) For the parent project/PEFF, MoF has assigned one of the PCU E&S specialists as a focal person for E&S management and this specialist will also be responsible for the AF. The Bank team will also continue to provide support (as required) during project implementation. Assessment Environmental & Social Risk Classification Environmental Risk Rating Social Risk Rating Low Moderate Original Environmental and Social Risk Rating (ESRC) Revised Environmental and Social Risk Rating (ESRC) Moderate Moderate Environmental & Social Standards E & S Standards Relevance ESS 1: Assessment and Management of Environmental and Social Risks and Relevant Impacts ESS 10: Stakeholder Engagement and Information Disclosure Relevant ESS 2: Labor and Working Conditions Relevant ESS 3: Resource Efficiency and Pollution Prevention and Management Not Currently Relevant ESS 4: Community Health and Safety Relevant ESS 5: Land Acquisition, Restrictions on Land Use and Involuntary Resettlement Not Currently Relevant Page 13 The World Bank Palestinian Emergency Financing Facility (P504704) ESS 6: Biodiversity Conservation and Sustainable Management of Living Natural Not Currently Relevant Resources ESS 7: Indigenous Peoples/Sub-Saharan African Historically Underserved Not Currently Relevant Traditional Local Communities ESS 8: Cultural Heritage Not Currently Relevant ESS 9: Financial Intermediaries Not Currently Relevant Summary of Assessment of Environmental and Social Risks and Impacts The AF project is assessed to be of low environmental and moderate social risk; the overall E&S risk is moderate. The AF will not support any kind of physical works or envisage any other kind of activities that may cause direct or indirect environmental impacts. The Environmental and Social Commitment Plan (ESCP) of the parent project is publicly disclosed, and social risk management measures have also been elaborated in the POM. Potential social impacts of the AF remain the same as the parent project and pertain to potential exclusion of eligible beneficiaries; management of project contracted workers; project related beneficiary safety risks; and information disclosure/beneficiary feedback and grievance redress. Management of social issues related to payment of health sector and the additional education sector salaries (Component 1 of AF) will be examined in the social audit that is underway for the parent project. Briefly, an inception report - including scope, methodology, stakeholder identification and engagement plan, and timeline – has been cleared and a draft report will be submitted by June 30, 2024. The report will also identify corrective actions (if any) which will be implemented. Like the parent project, the AF will rely on well-established and functional mechanisms at MoF for management of social impacts. The parent project ESCP has been updated for the AF and will be reviewed and cleared by the Bank and disclosed by appraisal. Among other aspects, the ESCP lays out the principles for mitigation of exclusion and management of project workers, project related beneficiary safety, and information disclosure/beneficiary feedback and grievance redress. Any additional social risk management measures for the AF, if required, will also be elaborated in the POM. Stakeholder consultation (including with civil society representatives) has been conducted during AF preparation (May 26 and 27, 2024) and engagement will also be ensured during implementation. A summary of the consultations is also included in the Stakeholder Engagement Plan (SEP) which was disclosed on June 04, 2024. MoF has functional mechanisms for information disclosure/beneficiary feedback and grievance redress which are being used for the parent project and these will also be used for the AF. Relevant details of the said mechanisms are included in the SEP and the POM. No grievances have been received for the parent project during project implementation. Last Finalized Date Is a common approach being considered? 06-Jun-2024 No Page 14 The World Bank Palestinian Emergency Financing Facility (P504704) RESULTS COUNTRY: West Bank and Gaza Palestinian Emergency Financing Facility Project Development Objective(s) To contribute to service delivery in the West Bank For Official Use Only PDO Indicators by PDO Outcomes Baseline Period 1 Completion Period Service delivery maintained ReviseNumber of education employees supported (Number) Nov/2023 Mar/2024 Dec/2024 0 41157 85997 Rationale for Change to add the March 2024 payment cycle  ReviseNumber of female education employees supported (Number) Nov/2023 Mar/2024 Dec/2024 0 24504 51676 Rationale for Change to add the March 2024 payment cycle ReviseNumber of days in which public schools were operational (in person or online) (Percentage) Nov/2023 Mar/2024 Dec/2024 95 95 95 Rationale for Change to add the days in which public schools were operational in March Page 15 The World Bank Palestinian Emergency Financing Facility (P504704) NewNumber of health sector employees supported (Number) Dec/2023 Feb/2024 Dec/2024 0 16421 16421  NewNumber of female health sector employees supported (Number) (Number) Dec/2023 Feb/2024 Dec/2024 0 8135 8135 NewNumber of Antenatal and postnatal visits (Number) Mar/2024 Mar/2024 Dec/2024 49605 49605 49605 Intermediate Results Indicators by Components For Official Use Only Baseline Completion Period RevisedEducation and Health Sector Employees’ Salaries RevisePercentage of grievances addressed (Percentage) Dec/2023 Dec/2024 0 90 Page 16 The World Bank Palestinian Emergency Financing Facility(P504704) Monitoring & Evaluation Plan: PDO Indicators by PDO Outcomes PDO Outcome Service delivery maintained Indicator Name Number of education employees supported (Number) Description The number of education employees paid in the West Bank. This includes all teachers and support staff as well as administrative staff. Frequency Once Data source MoF Methodology for Data Based on the information provided by the MoF and subject to further verification by an independent monitoring agent hired by the Bank Collection Responsibility for Data MoF Collection Indicator Name Number of female education employees supported (Number) Description The number of female education employees paid in the West Bank. This includes all teachers and support staff as well as administrative staff. Frequency Once Data source MoF Methodology for Data Based on the information provided by the MoF and subject to further verification by an independent monitoring agent hired by the Bank Collection Responsibility for Data MoF Collection Page 17 The World Bank Palestinian Emergency Financing Facility(P504704) Indicator Name Number of days in which public schools were operational (in person or online) (Percentage) Number of schools days in November 2023 was 21 (November 15, 2023 was a holiday). This indicator will measure how many days public schools were Description open whether in-person or online as schools are considered operational even when distance learning is provided. Frequency Once Data source MoF/MoE Methodology for Data Based on the information provided by the MoF/MoE Collection Responsibility for Data MoF/MoE Collection PDO Outcome Number of health sector employees supported PDO Outcome Number of days in which public health facilities were operational Page 18 The World Bank Palestinian Emergency Financing Facility(P504704) Monitoring & Evaluation Plan: Intermediate Results Indicators by Components Component Education and Health Sector Employees’ Salaries Indicator Name Percentage of grievances addressed (Percentage) Description % of feedback cases (complaints and inquiries) addressed by the MOF from the time of payment Frequency Once Data source MoF Methodology for Data Based on information provided by the MoF Collection Responsibility for Data MoF Collection Component Project Audit The World Bank Palestinian Emergency Financing Facility(P504704) ANNEX 1 Internal controls over the payroll process of the health workers (MoH) and education workers (MoE) General note 40. The payroll records/database at the MoH, MoE, GPC and MoF is a living database which is updated regularly. On a monthly basis, all payroll related changes and updates (i.e., hiring of new general doctors, specialized doctors, teachers, medical support service professionals, scarcity specialists, nursing staff, administrative employees, retirement, change in marital status and others) are updated in the payroll database of MoH, MoE and GPC and eventually reflected in the monthly staff payroll bill at MoF. If no changes occur, the payroll bill is paid regularly, the same as the month before. Internal controls (IC) at the line Ministry of Health, Ministry of Education, and the General Personnel Council (GPC) 41. MoH and MoE workers in the Palestinian territories are divided geographically according to districts (including West Bank Gaza). MoH workers are divided into 19 districts (14 in the West Bank and 5 in Gaza). MoH staff are also divided based on Hospitals. There are 31 Hospitals (18 in the West Bank and 13 in Gaza) that report to MoH and operate within the jurisdiction and regulations of the MoH. MoE workers are divided into 25 districts (18 in the West Bank and 7 in Gaza) that report to MoE and operate within its jurisdiction and regulations. The proposed AF will cover Education and Health workers working in the West Bank only. Hiring Process IC 42. Workers are hired by MoE and MoH based on the rules and guidelines of the public servants’ laws in the Palestinian territories. As such, the selection and hiring of MoE and MoH workers are done through the Palestinian General Personnel Council (GPC). Rules and guidelines include among other procedures, performing a comprehensive needs assessment by the MoE and MoH through its district offices and MOH hospitals requirements and needs. When the hiring process is completed, the worker is hired by MoE and MoH after signing an employment contract. This is updated in the system, with the related supporting documents shared with GPC and MoF. GPC updates its database of civil servants (i.e., MoH and MoE workers) for new hires. As for all other civil servants in the Palestinian territories, an IT system/database called “Mawared” is used to capture all the information and details of civil servants in the Palestinian territories. Database and records credibility and authenticity 43. As an IC at the MoE and MoH itself, the MoE and MoH uses an IT system called “Mena-Itech” which is a comprehensive database that includes all the records and details of all the civil servant employees at the MoH and MoE. Data in the system is reviewed and verified regularly by the Ministry (the Directorate General of Human Resources). In addition, the MoE and MoH district offices and MoH hospitals update the database regularly for any changes or updates in civil servants (i.e., retirement, change in marital status). This is especially important because those updates and changes are also reviewed and shared with the GPC in order to be reflected in their system and records and later in communications with the MoF Payroll Directorate. The review process includes verifying the changes and updates and the related supporting documents before they are reflected in the MoE and MoH and GPC records. The World Bank Palestinian Emergency Financing Facility(P504704) 44. The databases and IT systems used by the MoE and MoH, its districts and MoH hospitals or by the GPC are credible and reliable. They undergo maintenance and supervision on a regular basis, they are mainly controlled by one centralized unit or team, access is granted to relevant employees only, and ex-post checks and reviews are regularly performed by independent employees (other than those keeping records). For example, the database (Mena-Itech) at MoE and MoH and its district offices and MoH hospitals is regularly reviewed and cross checked by the Directorate General of Human Resources-DGHR at the MoE and MoH, and any discrepancies are reported immediately. The IT department also reviews and engages regularly with the HR department on any irregularities in the attendance system and in the MoE and MoH Staff database and records. 45. In addition to the regular reviews and checks by the MoE and MoH and its district offices and MoH hospitals, the GPC also performs internal reviews and reconciliation at least monthl y. The purpose of this is to cross-check and reconcile their records with the information and records at the MoE and MoH and other Ministries as well, and regularly requests explanations and supporting documents for any incomplete transactions. IC over the attendance process at MoE and MoH 46. Supervising the attendance process is completely IT-dependent . Each staff records his/her attendance through the fingerprint system at the school, place of work, hospitals, primary health care clinics, district clinics and MoE and MoH premises (i.e., MENAME App). The system collects daily attendance and absentee information. Teachers, doctors, nursing staff, administrative staff and other civil servants’ attendance is monitored by the DGHR at the Ministry on a daily basis based on system generated reports showing all related details. When an employee is absent, this update and change is reflected in the MoE or MoH Mena-Itech and regularly shared with GPC along with other changes and updates, so that the necessary detail is later shared with the MoF Payroll Directorate to reflect the changes in the monthly pay slip of the MoH and MoE employee. In all cases, updates and changes are reflected in the systems along with all the necessary supporting documents required (i.e., as per the Palestinian Civil Servants Law). Payroll updates process 47. Through monthly reconciliations and reviews, all the updates and changes that occur at the MoE and MoH level and its districts are captured on a real-time basis through the IT systems and manual reconciliation procedures and processes. They are shared with the GPC regularly to reflect those changes and updates and ensure accuracy of payroll data. This is especially important since this data will serve as the key original information that is shared with the MoF and used for processing the monthly salary payments. Direct correspondence with MoF is done electronically, in addition to paper format for evidence and supporting documents that are regular reviewed and verified by GPC and the DGHR at MoH and MoE. There is also an internal audit department within the payroll department in the MoF which reviews and audit all the payroll process for MoE and MoH worker salaries and other ministries as well. MoE and MoH workers’ salary payment process at MoF 48. Several business performance reviews (BPF) and reconciliations are performed when calculating and verifying the monthly salaries before the payment instructions are shared with the designated commercial banks. Prior to September 2023, MoF used an oracle-based system for managing payroll, after September 2023, the MoF introduced a new payroll IT system which provides better integration with other systems at the Ministries. The World Bank Palestinian Emergency Financing Facility(P504704) 49. The new payroll IT system at MoF is integrated and linked with the IT system used by GPC. On a monthly basis, all verified changes and updates related to civil servants, including MoE and MoH staff and employees that are reviewed and verified by MoE, MoH and GPC, are collectively sent to the MoF Payroll Directorate including all the necessary supporting documents. After September 2023, this sharing of information and scanned copies of supporting documents, and any other data entry requirements, is done automatically through the new payroll IT system at MoF which is integrated with the GPC IT system. 50. The MoF Payroll Directorate then collects, processes, and reflect the updates in the system to calculate the monthly salaries of the civil servants. These calculations/payroll bills are subject to review by two designated employees within the department. Another review procedure is performed by the designated internal auditor seconded to the Payroll Directorate, and another review and approval is performed by the Director General of the Payroll Directorate. This is then reviewed and signed by the Accountant General at MoF, and finally the Minister of Finance. The monthly payroll voucher and payment instructions including payroll details/CD are sent to each commercial bank in the Palestinian territories to process the civil servant’s monthly salary payment and make the transfer to the employee’s designated bank accounts as per his/her record. Any civil servant can request his/her pay slip from the MoF Payroll Directorate any time. MoE and MoH staff payroll audit 51. There is an internal audit department at MoF that performs regular audits and ex-post review procedures of the monthly payroll calculation performed by the MoF Payroll Directorate . This is in addition to the ex-post review of the payroll transaction by the financial controller at MoF. On a quarterly basis, the MoF Payroll Directorate performs an ad-hoc “ghost-employee review”, whereby they perform reconciliation procedures against records at the GPC to identify any discrepancies or missing details especially those related to fictitious or ghost employees. So far, no such cases have been identified. In addition to the internal audit, the MoF and the PA financial statements are audited by the State Audit and Administrative Control Bureau (SAACB). The most recent 2022 audited consolidated financial statements of the PA have been issued.