SCALING-UP THE PEER-TO-PEER LEARNING IN PUBLIC FINANCE AT THE LOCAL SELF GOVER NMENT LEVEL PROJECT GRANT NUMBER T F 0 1 6021 Project Implemented by STATE AGENCY FOR LOCAL SELF-GO ZERNMENT AND INTER-ETHNIC RELATIONS OF THE KYRGYZ REPUBLIC (“SA LSG IR”) and in part of fiduciary issues, by the PROJECT IAAPL EMENTATION UNIT WITHIN SA LSGIR (“PIU ”) SPECIAL PURPOSE FINANCIAL STATEM ENTS AND INDEPENDENT A U D ITO R’S REPORT For the period from 19 June 2015 to 23 March 2018 BISHKEK March 2018 SCALING-UP THE PEER-TO-PEER LEARNING IN PUBLIC FINANCE AT THE LOCAL SELF GOVERNMENT LEVEL PROJECT G RAN T N U M B E R T F 0 1 6021 TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT’S RESPONSIBI LITIES FOR THE PREPARATION AND PRESENTATION OF THE SPECIAL PURPO SE FINANCIAL STATEMENTS 3 INDEPENDENT AUDITOR’S REPORT 4-5 SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 19 June 2015 to 23 Ma rch 2018: Statement of cash receipts and payrrien ts 6 Statement of expenditures per compon ents 7 Notes to the special purpose financial s tatements 8-13 ANNEX 1. RECONCILIATION BETWEEN THE AMOUNTS SUBMITTED BY THE PIU AND DISBURSED BY THE WORLD BANK 14 2 S T A T E M E N T OF M A N A G E M E N T ’S R E S P O N S IB IL IT IE S FO R THE P R E P A R A T IO N AN D P R E SE N T A T IO N OF THE S P E C IA L P U R P O S E FIN A N C IA L S T A T E M E N T S The Project Implementation Unit (“PIU ) is responsible for the preparation of the special purpose financial statements of “Scaling-Up the Peer-to-Peer Learning in Public Finance at the Local Self Govern ment Level Project” (“Project”) financed by Grant Agreement Grant Number TF01 6021, that present fairly the Project’s cash receipts and payments, expenditures per components for the period from 19 June 2015 to 23 March 2018, in compli ance with the International Public Sector Accounting Standard “Financial Repo rting under the Cash Basis of Accounting" (IPSAS-Cash Basis) issued by the Inter national Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) and the Financial Management Manual for W orld Bank Financed Investment Operations (“WB Guidelines”). In preparing the special purpose financ ial statements, PIU is responsible for: « Properly selecting and applying acc ounting policies; » Presenting information, includin accounting policies, in a manner that provides relevant, reliable, compa rable and understandable information; * Providing additional required disc osures for the period from 19 June 2015 to 23 March 2018. PIU’s Management is also responsible for: • Designing, implementing and ma ntaining an effective and sound system of internal controls, throughout the Project; » Maintaining adequate accounting records that are sufficient to show and explain the Project’s transactions and which enable them to ensure that the special purpose financial statemen ts of the Project comply with IPSAS - Cash Basis and the WB ; • Taking such steps that are reason ably available to them to safeguard the assets of the Project and to affirm that funds received have been used in accordance with the Grant Agreement Grant dumber TF016021 dated 13 March 2015, and World Bank related guidelines, wi h due attention to economy and efficiency, and only for the purposes for whic i the financing was provided; and • Preventing and detecting fraud and other errors. The special purpose financial stateme nts for the period from 19 June 2015 to 23 March 2018 were authorized for issue a n 30 March 2018 by the PIU. On behalf of the PIU: Musakozhoeva Berme Davlesova Mehriban Director of PIU Financial Manager of PIU Tel: +37410 528899 10 V. Sargsyan str.. |BDO E-rpail: bdo@bdoarmenia.am w.bdoarmenia.am Office 114, Yerevan, Armenia INDEPENDENT A U D ITO R’S REPORT To the management of State Agency for Loc al Self-Government and Inter-Ethnic Relations of the Kyrgyz Republic (“SALSGIR”) Opinion We have audited the special purpose financial statements of “Scaling-Up the Peer-to-Peer Learning in Public Finance at the Local Self Governmen t Level Project” (“the Project”), financed by Grant Agreement Grant Number TF016021 dated 13 March 2015 (“Grant Agreem ent”), and implemented by the SALSGIR and in part of fiduciary issues by the Project Implementation Unit (“PIU ”) within the SALSGIR, which comprise the statement of cash receipts and payments and the statement of uses of funds by project activity for the perio d from 19 June 2015 to 23 March 2018, and notes to the special purpose financial statements, includ ing a summary of significant accounting policies. In our opinion, 1 . the accompanying financial statement? present fairly, in all material resect, the cash flows for the period from 19 June 2015 to 23 March 2018 in accordance with International Public Sector Accounting Standard: Financial Reporting Under the Cash Basis of Accounting, (IPSAS-Cash Basis); 2 . funds have been used in accordance w ith the conditions of the Grant Agreement concluded between the International Bank for Reconstruction and Development/International Development Association and the Kyrgy:z Republic, and World Bank related guidelines, with due attention to economy and efficien cy, and only for the purposes for which the financing was provided; 3. supporting documents, records and a ccounts have been maintained to support claims for reimbursement of expenditures in curred. Expenditures included in the withdrawal applications and reimbursed against a re eligible for financing under the Grant Agreement, Interim Unaudited Financial Statement:s (IFSs) issued by PIU during the reporting period are in agreement with the underlying books of account; 4. The Designated account used has been maintained in accordance with the provision of the Grant Agreement, and World Bank relat ed guidelines. 5. Goods and Services financed have bee:n procured in accordance with the Grant Agreement and World Bank related guidelines. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) as issued by International Auditing and Assurance Standa rds Board (IAASB) of the International Federation of Accountants (IFAC). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Project, of the SALSGIR and of the PIU in accordance with the International Ethics Standards Board for Acca untants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical requirements in accordance with IESBA Code, We believe that the audit evidence we have о btained is sufficient and appropriate to provide a basis for our opinion. Em phasis of Matter- Com pletion of the Project Without qualifying our opinion, we draw your attention to Note 9 of these special purpose financial statements which discloses the completion of the Project as at reporting date. BDO Armenia cjsc, is a member of BDO International Limited, a UK company limited by guarantee, and fornjs part of the international BOO network of independent member firms. Emphasis of Matter- Cash Basis of Accounting We draw attention to Note 2 to the financial st atements, which describes that financial statements are prepared in accordance with cash basis fra mework, as a result, they may not be suitable for another purposes. Our opinion is not modified in respect of this matter. Responsibilities of the M anagem ent for the Financial Statem ents Management of the PIU is responsible for the preparation and fair presentation of the special purpose financial statements in accordance wit h IPSAS-Cash Basis issued by the International Public Sector Accounting Standards Board (IPSASB) of the IFAC and Financial Management Manual for World Bank Financed Investment Operations (“WB Guidelines”), and for such internal control as management determines is necessary to enable the preparation of special purpose financial statements that are free from material misstatement, whether due to fraud or error. Au d itor’s Responsibility for the Audit of the S Dedal Purpose Financial Statem ents Our objectives are to obtain reasonable assu ranсe about whether the special purpose financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is high level of assurance, but is not a guaranty that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements ari se from fraud and error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these special purpose financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the special purpose financial statements, whether due to fraud or етог, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the nternal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disci Dsures made by management. Evaluate the overall presentation, str ucture and content of the special purpose financial statements, including the disclosures, and whether the special purpose financial statements represent the underlying transactic ns and events in a manner that achieves fair presentation. We communicate with management regarding among other matters, the planned scope and timing of the audit and significant audit findings, in eluding any significant deficiencies in internal control that we identify during our audit. “BDO Arm enia” CJSC 30 March 2018 hachatryan, FCCA Engagement Partner | BDO Scaiing-Up the Peer-to-Peer Learning in Public Finance at the Local Self G overnm ent Level Project Grant Num ber TF016021 Statem ent o f cash receipts and payments For the period from 19 June 2015 to 23 March 2018 (Am ounts are show n in U S dollars) Note Actual Budget V ariance C um ulative as C um ulative as C u m u la tive as R eporting at Reporting at Reporting at period 23 .M ar.2 0 1 8 period 23 .M a r.2018 period 2 3 .M a r.2 0 1 8 T O T A L O PENING CASH S o u rc e s of Funds 8 Grant Num ber TF016021 1,099,441 1,099,441 T O T A L FU N DS 1,099,441 1,099,441 Project Expend itures (1) Goods, consultants’ services (including audit), and Training under the Project 1,089,441 1,089,441 1,099,441 1,099,441 10,000 10,000 T O T A L PR O JECT EXPEN D ITU RES 1,089,441 1,089,441 1,099,441 1.099.441 1 П non У* r \ /Ч /Ч Л i u ,u u u T O T A L CLOSING CASH 10,000 10,000 M usakozhoeva Bermet Davlesova Mehriban Director of PIU Financial Manager of PIU 30 March 2018 The notes on pages 8-13 form an integral part of these special purpose financial statements. 6 Scaling-Up the Peer-to-Peer Learning in Public Finance at the Local Self Governm ent Level Project Grant Num ber TF016021 Statement o f expenditures per components For the period from 19 June 2015 to 23 March 2018 (Am ounts are show n in U S dollars) Actual Budget Variance Cum ulative as C om po ne nts Reporting C um ulative as Reporting at Reporting C um u lative as period at 23.M ar.2 0 1 8 period 23 .M a r.2 0 1 8 period at 2 3 .M a r.20 18 Part A: Project Management and Community of Practice Building Activities 312,251 312,251 312,251 312,251 Part B: Organization and Delivery of Resources Persons Learning Events 259,192 259,192 259,192 259,192 Part C: Organization and Delivery of Peer to Peer Learning at Local Level 473,634 473,634 473,634 473,634 30 March 2018 The notes on pages 8-13 form an integral part of these special purpose financial statements. 7 Scaling-lip the Peer-to-Peer Learning in Public Finance at the Local Self Government Level Project Grant Number TF016021 Notes to the special purpose financial statements For the period from 19 June 2015 to 23 March 301 I 1. General inform ation 1.1. The Project The Grant Agreement Grant Number TF01 6021 was concluded on 13 March 2015 between the Kyrgyz Republic and the Internatio nal Bank for Reconstruction and Development/ International Development Association (“I BRD”, “IDA”, “W B”), according to which a grant from the Multi-Donor Programmatic Trust Fund for Europe and Central Asia Public Finance Management (“Trust Fund”) in the amou nt not to exceed 1,099,441 Unites States dollars (“USD”) was provided to the Kyrgyz Repub ic. The Grant Agreement became effective on 19 June 2015. The financing was provided for the lm plementation of “Scaling-Up the Peer-to-Peer Learning in Public Finance at the Local Self Government Level Project” (the Project). The Closing date of Grant Number TF0160 1 is set 31 January 2018 (as updated), The Grace Period for submitting withdra wal application for expenditures incurred before the Closing date is two months following the Closing date. 1.2. The Project objectives The objective of the Project is to support the Kyrgyz Republic in establishing countrywide communities of practice and using these communities of practice to increase the capacity of local budget officers, elected heads of local self-government units and local council members through innovative peer-to-peer learning approach. Project consists of the following parts: Part I - Project Management and Communitу of Practice Building Activities Part II - Organization and Delivery of Resou rce Persons Learning Events Part III - Organization and Delivery of Peer to Peer Learning at Local Level Part IV - Activities Evaluation 1.3. The Project Outcomes 10 training o f trainers and 10 regional meet ngs were conducted during the Project, In total 16 public finance m anagem ent top cs were presented for beneficiaries o f the project, including leadership and oratory, involving 23 expert trainers from 7 government agencies, All materials and presentations for 1,359 project participants were sum m aries and issued in the amount o f more than 10 thousand cooics The recipients o f the project beneficiaries y/ere contacted via the w ebsite w w w .suppl.kg, the members o f the practicing com munities hav e been contacted by the state authorities via letters with questions answered were issued ir the hard copies and on the project website. w w w .supple.kg. 8 Scaling-Up the Peer-to-Peer Learning in Pu blic Finance at the Local Self Government Level Project Grant Number TF016021 Notes to the special purpose financial statements For the period from 19 June 2015 to 23 March 2018 1A . The Project Budget and Financing The Project is wholly financed by Grant Number TF016021, inclusive of taxes. Grant Expenditure Financing Category G rant Num ber (inclusive of T F 0 1 6 0 21 Total taxes) USD USD % (1) Goods, consultants’ services (including audit), and Training under the Project 1,099,441 1,099,441 100% Total 1,099,441 1,099,441 (*) Updated budget was conformed on the W В letter dated 2 March 2017. 1.5. Project Im plem entation The Project Implementation Unit (“PIU”) w ithin State Agency for Local Self-Government and Inter-Ethnic Relations of the Kyrgyz Republic (“SALSGIR”) is responsible for the fiduciary part of the Project’s implementatio n. The PIU address is: office N302, Erkindik Blvd . 58A, Bishkek, Kyrgyz Republic, 720040. 9 Scaling-Up the Peer-to-Peer Learning in Pu blic Finance at the Local Self Government Level Project Grant Number TF016021 Notes to the special purpose financial statements For the period from 19 June 2015 to 23 March 2018 2. Summary of significant accounting po icies 2.1. Preparation and presentation of financial statem ents The special purpose financial statements are prepared in accordance with the International Public Sector Accounting Stan dard: Financial Reporting Under the Cash Basis of Accounting (IPSAS-Cash Basis), issued by the International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC), and presented in accordance with Financial Management Manual for World Bank Financed Investment Operations. [The principal accounting policies applied in the preparation of these special purpose financial statements are set out below. T h e i e policies have been consistently applied to all the periods presented. 2.2 Cash ba sis of accounting Project financing is recognised as a source of project funds when the cash is received, Project expenditures are recognised as a use of project funds when the payments are made. 2.3 Reporting currency The reporting currency of these special purpose financial statements is United States dollar (USD). The expenditures made in local currency, Ky rgyz Som (KGS), are translated into USD based at the exchange rate prevailing at the date о the transaction. The exchange rate defined by the National Bank of the Kyrgyz Republic is as follows: 23 March 2018: USD 1 = 68.1968 KGS. 4. Taxes he taxes are paid in accordance with the tax regulation of the Kyrgyz Republic. 10 Scaling-Up the Peer-to-Peer Learning in Pu blic Finance at the Local Self Government Level Project Grant Number TF016021 Notes to the special purpose financial staterr ents For the period from 19 June 2015 to 23 March 2018 3. Summary of Summary Reports and SOEs Payment categories Total W ithdrawal W ithdraw al application application (1) Goods, consultants’ No value date services (in ck iding audit), and Training uncler the Project SUPPL-2 23.Dec.2015 108,234.14 108,234.14 SUPPL-3 04. Apr.2016 117,214.99 117,214.99 SUPPL-4 26.May.2016 114,862.49 114,862.49 SUPPL-5 25.Aug.2016 115,681.32 115,681.32 SUPPL-6 27.Jan.2017 125,733.08 125,733.08 7 28.Apr.2017 109,115.16 109,115.16 SUPPL-8 21.Aug.2017 114,784.15 114,784.15 SUPPL-9 10.Nov.2017 112,791.16 112,791.16 SUPPL-10 07.M ar.2018 139,074.34 139,074.34 11 16.Mar.2018 41,950.17 41,950.17 ......... ' ‘ Total 1,099,441.00 1,0 99 ,44 1.00 Statement of Designated Account Bank account number 1030120800006522 Sank OJSC “COMMERCIAL BANK KYRGYZSTAN” 3ank location 54 Togolok Moldo Street, Bishkek, Kyrgyz Republic Currency USD Grant No. TF016021 19 Juno 2.015-“ 23.Mar.2018 Opening balance as at 19.June.2015 Add: opening discrepancy }. WB advance/replenishment 1,099,441 Less: Refund to WB from DA j. Present outstanding amount advanced to )A 1,099,441 . DA closing balance as at 23.Mar.2018 . Add: Amount of eligible expenditures paid 1,089,441 . Less: interest earned (if credited to DA) . Total advance accounted for 1,089,441 10. Closing discrepancy (5)-(9)* 10,000 (*) Balance at escrow account for the final audit service (Note 6). Scaling-Up the Peer-to-Peer Learning in P ib lic Finance at the Local Self Government Level Project Grant Number TF016021 Notes to the special purpose financial statements For the period from 19 June 2015 to 23 March 2018 5. Statement of Financial Position The Statement of Financial Position disared in accrual basis that is transactions are recognized when they occur (and not only when cash is received or paid). Note As at 2:3 March 2018 USD ASSETS Cash 6 10,000 Prepayments Total assets 10,000 LIABILITIES Payables 9 10,000 Total liabilities 10,000 NET ASSETS Cumulative income Grant No.TF016021 8 1,099,441 1,099,441 1 Cumulative expenses Project expenses 1,099,441 1,099,441 1 Total net assets - 6. Cash Underlying 23 Marcl1 2018 Currency USI0 Escrow account* USD 10,000 110,000 (*) Escrow account is opened at OJSC “Commer cial Bank Kyrgyzstan” for paying the final audit fee. 7. Project Expenditures Cum ulative Expenditures as at 23 March 2018 Total budget Execution Category USD USD % (1) Goods, consultants’ services (including audit), and Training under the Project 1,089,441 1,099,441 99% Total 1,089,441 1,099,441 99% 12 Scaling-Up the Peer-to-Peer Learning in Public Finance at the Local Self Government Level Project Grant Number TF016021 Notes to the special purpose financial statements For the period from 19 June 2015 to 23 March 2018 8. Financing Grant Number TF016021 Cum ulative as Reporting at 23 March period 2018 USD USD Advances/ (advance recovery) Direct Payments SOE and Summary Report Total 1,099,441 1,099,441 1.099 4 .4 1,099,441 1 Total financing budget 1.099.441 Percentage of finance provided as at 23 March 2018 100% Project completion he Project was completed as at 31 January 2018 (“Closing Date”), and the Grace period is ?t 30 March 2018 (“Grace Period”), owever, all transactions were completed as at 23 March 2018 (“Reporting Date”), at the date of signing these special purpos financial statements: No expenditures related to the Project were incurred after the Closing Date; the payments made during the Grace period related to expenditures incurred before the Closing Date; No withdrawals from grant account were made after Reporting date; No expenditures related to the Project were submitted to the WB after the Reporting date; There were no uncovered prepayments or payables outstanding to contractors related to the Project as at the Reporting Date, except for final auditl service with contract amount of USD 10,000; The outstanding cash balance at escrow account as at Reporting Date, USD 10,000, will be paid for final audit service, including the related non-resident income tax (Note 6); We are not aware about any pending or existing litigations against the Project. Scaling-Up the Peer-to-Peer Learning in Pu blic Finance at the Local Self Government Level Project Grant Number TF016021 A NNEX 1. R E C O N C I L I A T I O N B E T W E E N THE AMOUNTS SUBMITTED BY T H E PIU AND D I S BU RS ED BY T H E W O R L D BANK For the period from 19 June 2015 to 23 March 2018 (Amounts are shown in U S dollars) Grant Number TF016021 Expenditure Category Appl. PIU T WB Difference SU PPL-1 150,000.00 .. ! 150,000.00 ' - Advance (recovery) SUPPL-10 (108,049.83) (108,049.83) - 11 (41,950.17) (41,950.17) - - - SUPPL.-2 117,552.04 108,234.14 (9,317.90)* ' SUPPL.-3 117,214.99 117,214.99 - SUPPL-4 114,862.49 114,862.49 - SUPPL-5 115,681.32 n 15,681.32 - (1) Goods, consultants’ services SUPPL-6 125,733.08 (l 25,733.08 - "... 1 (including audit), and Training 7 109,115.16 09,115.16 - under the Project SUPPL-8 114,784.15 114,784.15 - SUPPL-9 112,791.16 12,791.16 - SUPPL-10 139,074.34 39,074.34 - 11 41,950.17 41,950.17 - 1,108,758.90 1,0 99 ,44 1.00 Total 1,108,758.90 1,0'?9 ,4 4 1 .00 (*) A consultant contract had not been entered in WB Client Connection system at the time of application. It was resubmitted and approved in next SOE application.