1. Background General information on the initiative... 3

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2 Contents 1. Background General information on the initiative Implementation modalities Project Budget and funds utilization Budget components and utilization Allocation to 5 selected towns (budget lines 1&2) and for Capacity Building (budget line 3) Disbursement and use of Italian funds Attachments Page 2 of 11

3 1. Background This fourth Operational Plan - OP for the initiative WASH in Small & Medium Towns, covering the period January-December 2014, has been conceived as follow up of the 2013 Ops. Therefore, contents and activities proposed herewith are meant to be considered, unless otherwise specified, as the regular continuation of what previously planned and approved. 1.1 General information on the initiative The Agreement of the project Wash in Small and Medium Towns between the Government of the Federal Democratic Republic of Ethiopia (GOE) and the Government of the Republic of Italy (GOI) has been signed on the 7 th of May After ratification by both parties, it entered into force on 5 th of October 2010 with duration of 36 months. The Overall Objective of the Project is to improve health and hygienic conditions of the population by enforcing the National WaSH Programme and by acting through the strategic national plan for the access to water, sanitation and hygiene (Millennium Development Goal - MDG n.7 target n.2), adopted by the Universal Access Plan of the Government of Ethiopia. The Specific Objective of the Project is to improve access to clean water and sanitation services in 5 towns, through increasing water resources, rehabilitating, constructing, expanding water networks, upgrading public sanitation infrastructures, improving capacity of Town Water Utilities (TWUs) in planning, managing, operation and maintenance and of Water Resources Development Fund WRDF) in managing loans. The expected results are: 1. Water supply networks, properly sized to the target populations, functional and sustainable in the 5 selected towns. 2. Public sanitation infrastructures and services upgraded, constructed and management set up in the 5 selected towns. 3. Improved capacity of 5 target TWUs for planning, management, operation and maintenance (O&M) and of WRDF for loans management and delivery of technical assistance to recipients. The 5 towns selected for the Project are located in four regions: Huruta and Limu Genet in Oromya, Durame in SNNPR, Genda Whua in Amhara and Shire Endesilassie in Tigray based on priorities proposed by the Ministry of Water Resources & Energy (MoWE) and by the relevant Regional Water Bureaus (hereinafter referred to as RWB ). Page 3 of 11

4 1.2 Implementation modalities Modalities of implementation, institutions involved and project management are detailed in the Agreement and its Annexes. The main institutions involved in the implementation are the WRDF, the RWBs and the TWUs as summarised in the following chart extracted by the Project Implementation Document (PID), annexed to the Agreement. 2. Project Budget and funds utilization 2.1 Budget components and utilization The total financial contribution of the GOI consists in a Grant up to a ceiling of EURO 6,150,000 (six millions one hundred fifty thousand EURO/00), divided as follows. Component A - EURO 5,500,000 for the physical implementation of the WASH projects for the selected 5 towns. This amount is directly transferred to the Ministry of Finance and Economic Development (MoFED), as representative of the GOE, and then transferred and managed Page 4 of 11

5 Grant Loan WASH in Small & Medium Towns 4 st OPERATIONAL PLAN Jan-Dec 2014 by the WRDF, which is the recipient executing agency. This financing modality is named channel 1b according to the modalities agreed by GOE with Development Partners. Component A is transferred from the MAE/DGCS to MoFED in 3 annual instalments and from MoFED to WRDF. The three installments are used by WRDF for three major activities as shown in the following table. Water Works Description WRDF Use 1st instalment (Euro) 2nd instalment (Euro) 3rd instalment (Euro) Total (Euro) 1,748,000 1,253, ,000 3,875,000 Sanitation Works 325, , ,500 Capacity building to TWUs and WRDF technical assistance 406, , , ,500 Total 2,154,000 1,781,000 1,565,000 5,500,000 The amount of funds for water and sanitation works is allocated to the TWUs as concessional loans for the implementation of the projects. The amount for capacity building and technical assistance is managed directly by WRDF and it also includes contracts for technical consultancies. The instalments transferred so far from GOI to NBE Euro bank account are as per the following table: Instalment Amount Date of transfer to NBE Account 1st instalment (Euro) 2nd instalment (Euro) 3rd instalment (Euro) 2,154,000 November , 781,000 December , 565,000 - The status of Component A funds utilization at the end of February 2014 is shown in the following table 1 : Total Amount transfer to date 3,935,000 72% 1 The figures presented in this table are meant to provide information on the overall status of Component A utilization. A detailed description of expenditures and relevant financial reporting is going to be provided within the 5 th SAR which is due at the end of March 2014 and to be prepared according to pertinent Agreement provisions. Page 5 of 11

6 Budget allocated and utilized by component Budget line 1st tranche 2nd tranche 1st & 2nd tranches spent % spent Balance Committed - 1. Water Supply 1,748,000 1,253,000 3,001,000 3,154, , ,185, Sanitation 325, ,000 83, , , Capacity Building 406, , , , , , Total 2,154,000 1,781,000 3,935,000 3,741, , ,181, Account payable (retention) 111, Overall outlay 3,852, Available fund for the project 82, As it appears from the previous table, the amount committed through the existing construction contracts for budget line 2 "Sanitation Works" is about 51% of the total availability on that budget line (Euro 812,500). This is a consequence of the need assessment performed during the preparation of the feasibility studies in each utility that verified lower needs expressed by the beneficiaries in terms of sanitation facilities than the initial expectations. In addition, the actual costs of such facilities in the construction contracts resulted lower than the estimation made by the consultants, while water works resulted more expensive than estimated and were also subject to subsequent cost increases. In fact, as of now total commitments for Water Works currently exceed the amount available on the budget line (Euro 3,875,000) from IDC funds and the GoE contribution. Should there be some leftovers at the end of the construction works, the possibility of allocating such resources to additional sanitation facilities will be considered, in accordance with the requests from the beneficiary Towns. Should the variations with respect to the original budget allocation exceed the thresholds set in the Agreement, the WRDF will proceed with a request for no-cost variation of the budget lines. Component B - EURO 650,000 for technical assistance activities related to the execution of the Project. This amount is to be directly managed by Italian Ministry of Foreign Affairs General Direction of Development Cooperation (MAE/DGCS) according to its internal procedures. 2 Euro 128, was spent for purchase of vehicle drawn from WRDF Euro account. Page 6 of 11

7 This financing modality is named channel 3 according to the modalities agreed by GOE with Development Partners. Component B is used by MAE/DGCS with its own procedures to provide Italian experts for assistance to WRDF and to pay locally for their equipment and running costs. Contribution of GOE The GOE shall ensure that Regional Governments, Town Administrations and, wherever appropriate, Town Water Utilities share the costs of construction works implementation as well as taxes no bearable by the GoI. The updated contributions of GoE for each town are summarized in the table of the next paragraph. 2.2 Allocation to 5 selected towns (budget lines 1&2) and for Capacity Building (budget line 3) Final allocations to the 5 selected towns for budget line 1 and 2 have been calculated as per signed contracts. Contractual amounts are shared by GOI through Component A funds and the matching funds from the GOE. As per Agreement, Component A funds has been equally distributed over the selected towns while matching funds are disbursed by Regional Governments so as to cover the required budgets for infrastructure works (including VAT). The constructions companies were selected through a tender procedure followed by relevant TWUs with the assistance of WRDF and IDC. Relevant information to construction activities (budget lines 1+2), including regional matching funds are presented in the table below. Page 7 of 11

8 Region Tigray Amhar a SNNP R Oromy a Oromy a Sub total Town Shire- Endaselassi e Ghenda Wuha Durame Huruta Limu Genet Sub Total Net Budget for construction % VAT Total Cost of construction Italian contribution in (exch.rate Euro/ = Actual IDC contribution Expected Town TOTAL contribution (including at least VAT) Town contributi on Already credited VAT for feasibility VAT for Supervision Consultancy VAT for Capacity Building Remaining Town contribution* Savings from Italian contribution ( ) ( ) *The negative results correspond to savings from Town contribution. Page 8 of 11

9 As a result the planned contribution of GOE is of ,09 and it includes the share on construction costs and VAT (related for both budget line 1&2 and 3). Due to variations of the infrastructural works done and due to some delays in the completion of the related construction contracts, there were some additional costs incurred. As for the construction, such additional costs are to be borne by the GoE through increased Towns/Regional Governments contributions. Supervision contracts were extended as well, and these additional costs fall on the budget line 3 "capacity building". The actual figures of the Italian contribution and GoE contribution will be clear once the last installment will be transferred (so that the EUR/ exchange rate of the final transfer will be known) and the construction and supervision contracts will be completed. On this regard, all the water supply and sanitation infrastructures (budget line 1&2) in the selected cities are about to be completed or completed (i.e. Limugenet, Shire Endaselassie). According to the latest update, it is reasonable to consider the deadline for the end of the works in the remaining three Towns between the end of April and the beginning of May Regarding the Capacity Building activities (budget line 3) at the end of 2013 a consulting company (Eyob Defere Consultancy Company) was selected to strengthen the technical and financial skills of the five Water Utilities. The capacity building for the improvement of management, financial, and technical skills of TWUs staff will take place during the entire 2014 and will continue the following year, for a total of 18 months. Currently, the consultant staff is deepening the preliminary assessment of the needs of each TWUs (previously undertaken by the WRDF) and will submit the inception report end of March WRDF and IDC staff will be monitoring and supporting the consultancy work throughout the year, in particular in terms of coordination with Regional Bureaus, Municipalities and TWUs, in order to facilitate the reforms needed in each utility and ensure the achievement of the objectives. During the year, the WRDF is expected to migrate financial data of this project from the old to the new accounting/financial software developed by a local consulting company that was selected as a result of the Italian technical assistance provided through "Component B" funds. The new software, launched on February 2014, is expected to facilitate accounting, financial reporting and planning procedures for the WRDF. The financial data of this project will be used as a pilot case to experiment and improve the system. In this phase, both system will continue to be used simultaneously. IDC will provide assistance on this. Page 9 of 11

10 Capacity Building Sanitation Works Water Works WASH in Small & Medium Towns 4 st OPERATIONAL PLAN Jan-Dec Disbursement and use of Italian funds Italian funds shall be disbursed according to relevant provisions of the Project Agreement, as detailed in this OP. Similarly and unless differently specified through amendments to this OP, such funds shall be accounted for according to allocations defined in the Project Agreement and, particularly for construction activities, according to the share dedicated to each town within this document. Only the relevant percentage of disbursement will be accounted as committed and spent. Regarding disbursement for daily allowances for attendants to training courses, seminars, field visits, etc., the Project shall follow the existing parameters set by World Bank and MoFED for channel 1 funds. Regarding the disbursement of the 2 nd and 3 rd installment of Component A funds, a forecast is presented in the table below: 2014 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Huruta Limugenet Shire Endaselassie Durame Genda Wuha Huruta Limugenet Shire Endaselassie Durame Genda Wuha Supervision CB to TWUs Purchase of equipment for TWUs Spent 100% 90% 2nd installment 3rd installment The above forecast is mainly related to the progress of construction works, which are in the last phase, to the starting of the capacity building activities for TWUs and WRDF, and to the timely transfer of the third installment. Attachments - Annex A - GAANT Page 10 of 11

11 2014 Operational Plan Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Items/Months Remarks Implementers Assistants 1 Work implementation Monitoring and supervision of civil works and of capacity building: activities and field missions Technical Assistance to WRDF water + sanitation works Italian TA is already implemented and continuous TWU, Contractor Consultants, TWU Procurement of equipment to TWUs as part of CB WRDF IE, TA Use of the new 5 CB for WDRF software Consultant TA 6 CB for TWUs Consultant WRDF, TA RWB, WRDF RWB, WRDF Duration of activities: IE Italian Expert TA Technical Assistant RWB Regional Water Bureau TWU Town Water Utilities Page 11 of 11