Report on the Republika Srpska part of the Project Financial Statements of the REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Financed by: IDA Credit No. 5188 - BA For the year ended 31 December 2018 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina CONTENTS 1 Introduction 1 2 Independent Auditor's Report 3 3 Project financial statements for the year 2018 5 4 Notes to the project financial statements 7 APPENDICES A.1 Designated account statement - IDA Credit No. 5188 - BA 8 A.2 VAT refund account statement 9 B SoE Withdrawal Schedule of IDA Credit No. 5188 - BA 10 C Reconciliation between World Bank's disbursement statements in XDR and IDA Credit account in EUR according to the balance sheet; SoE Withdrawal Schedule of IDA Credit No. 5188 - BA 11 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina 1. Introduction 1.1 Description of the Project Development Objective The development objectives of the Real Estate Registration Project is to support development of a sustainable real estate registration system with harmonized land register and cadastre records in urban areas of both the Federation of Bosnia and Herzegovina ("FB&H") and Republika Srpska ("RS"). Real estate registers (land registers and cadastres) provide base information layers for land administration and for the establishment of a National Spatial Data Infrastructure. They are considered harmonized when their contents are interlinked and verified. Sustainability is measured by the degree an institution generates revenue to match its costs, charges affordable fees, delivers quality services without discrimination and within a reasonable time. A key driving force for the real estate registration system will be the registration of real estate rights and mortgages, and the availability of reliable information to facilitate investments, real estate taxation and spatial planning, and to enable social monitoring of real estate transactions. The Project consists of the following components: Component A: Real Estate Reqistration Data Development Real estate registration data development will support land register and cadastre data harmonization on land, buildings and rights based on the actual situation in the field. The objective is to establish up-to-date and interlinked land register and cadastre databases, or integrated databases of real estate cadastre. The project will encourage and support the registration of legal rights in the land register (in FB&H) or the real estate cadastre (in the RS) using project produced data. The component will ensure equal treatment of all citizens regardless of their gender, ethnicity or social status by accompanying technical field work with raising public awareness, vulnerability mapping and social monitoring functions. Component B: Real Estate Reqistration Infrastructure Development Real estate registration infrastructure development will continue Land Registration Project work in improving working conditions and infrastructure in the cadastre offices across the country and in those few land registration offices in FB&H that were not targeted by LRP through: office renovations and purchases; creation of digital archives; and provision of furniture and equipment. The office purchases planned in RS have to be approved by the Land Committee of the World Bank. The objective is to improve working conditions, which will help to improve the quality of customer services, the adherence to service standards developed during LRP, and staff morale. Access to basic surveying technologies will be provided to areas and offices that still rely on conventional methodologies, and sustainability of the recently installed Global Navigation Satellite Systems (GNSS) network will be assured. Information technology investments will lead to further interlinking between real estate registers and other public datasets making the data accessible online to a wide audience and in support of multiple uses. This will lead to the incremental provision of electronic online services and eventually to electronic conveyancing. 1 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina 1. Introduction (continued) 1.1 Description of the Project Development Objective (continued) Component C: Policy and Institutional Development, and Project Management Policy and institutional development, and project management will support policy and legal development in support of reaching the project development objective. The objective is to enhance sustainability of the real estate registration. The component will have a strong focus on institutional development and capacity building, addressing the long term challenges of sustainability and governance of real estate registers and emphasizing financial sustainability, quality of service and client orientation and social vulnerabilities. Training for the judiciary and land registration personnel on the new real estate legislation, regulations and procedures will be systematized in RS and on other related subjects in both RS and FB&H. In FB&H, the LRP supported training and education program that target the land administration employees across the sector, i.e. in land registries, cadastre offices, planning authorities, etc., and this will continue. The program will ensure the continuity of the training through seminars and workshops in the fields of law, management, ICT, cadastral science, physical planning, etc. The component also includes necessary project management and monitoring support. An impact evaluation (IE) technique will be used to assess how citizens will benefit from the real estate registration programs. The intention is not only to demonstrate the impacts but also to use the evaluation results for improving land registration services, and making urban planning and local property taxation more effective and sustainable. 1.2 Financing of the Project 1.1.1 IDA Credit No. 5188 BA The State of Bosnia and Herzegovina ("B&H") is the borrower of the International Development Association (IDA) Credit No. 5188 - BA, dated 21 August 2013 amounting XDR 22,700,000. Under the terms of a Subsidiary Finance Agreement between B&H and RS, total funds amounting XDR 11,100,000 have been lent to RS. Categories of items to be finance out of the proceeds of the Credit, the allocation of the amounts of the Credit to each category and the percentage of expenditures for items so to be financed in each category originally are as follows: Amount of the % of expenditure Item financing to be financed allocated (in XDR) (2) Goods, works, consultants' service, non- consultants services, training and operating costs for Part 2 of the Project 10,300,000 100% (3) Purchase of new premises/ branch offices costs for Part 2 of the Project 800,000 100% Subtotal 11,100,000 IDA Credit No. 5188 - BA became effective on 23 September 2013. Planned closing date is 31 January 2020. 2 bakertilly Baker Tilly Re Opinion d.o.o. Grbavi6ka 4 71000 Sarajevo Bosna i Hercegovina T: +387 (0) 33 552 150 2. Independent Auditor's Report F: +387 (0) 33 552 152 info@bakertilly.ba www.bakertilly.ba To the State of Bosnia and Herzegovina, Ministry of Finance and Treasury Attn. of Minister of Finance and Treasury H.E. Mr. Vjekoslav Bevanda Report on the Project Financial Statements Opinion We have audited the accompanying project financial statements of the Republika Srpska part of the Real Estate Registration Project (the "Project"), which comprise of Summary of sources and uses of funds, Balance sheet, Designated account, VAT Refund account, Statement of loan and grant withdrawals as of and for the year ended 31 December 2018, and a summary of significant accounting policies and other explanatory notes for the year then ended, financed under IDA Credit No. 5188 - BA. In our opinion, the accompanying project financial statements present fairly, in all material aspects, the financial position of the Project as of 31 December 2018, and of the funds received and disbursed during the year then ended, in accordance with the cash basis of accounting based on International Public Sector Accounting Standard ("IPSAS"), as described in Note 4.1. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and "Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities" issued by FMSB. 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 Ministry of Finance and Treasury in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Project Financial Statements The management of project coordination unit is responsible for the preparation of these project financial statements in accordance with the cash basis of accounting based on IPSAS, as described in Note 4.1., and for such internal control as management determines is necessary to enable the preparation of project financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Project or to cease operations or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the financial reporting process. JIB: 4200960550009 - PDV: 200960550009 - Raiffeisen Bank d.d. BiH: 1610000045270008 Baker Tilly Re Opinion d.o.o. trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Responsibilities for the Audit of Financial Statements Our objectives are to obtain reasonable assurance about whether the project 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 a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detected a material misstatement when it exists. Misstatements can arise from fraud or 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 financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the project financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a 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 Project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Project to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the project financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Report on other requirements In addition, with respect to the Statement of Expenditure, adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditure incurred; and all expenditure included in withdrawal applications and reimbursed against are eligible for financing under the project. Signed n alf Baker Tilly Re Opinion ?. 1KER TILLY Nihad Fejzid, Direct r and Certified Audit Ezita Imam vid, Certified Auditor Sarajevo, Bosnia and Herzegovina 27 May 2019 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) 3. Project financial statements for the year 2018 3.1 Summary of sources and uses of funds under the IDA Credit agreement No. 5188-BA Ref. Actual Cumulative Cumulative Cumulative Cumulative 2018 2018 2017 budget variance FINANCING IDA Credit No. 5188 BOS 12,585,391 Initial deposit - 2,000,000 2,000,000 - SoE replenishments 890,969 9,510,500 8,619,531 - TOTAL FINANCING 3.1 890,969 11,510,500 10,619,531 12,585,391 1,074,891 PROJECT EXPENDITURE By Category Goods, works, consultants' service, non-consultant's services, training and operating costs for Part 2 of the Project 1,199,805 9,359,550 8,159,745 10,431,135 1,071,585 Purchase of new premises/ branch offices costs for Part 2 of the Project - 953,450 953,450 2,154,256 1,200,806 TOTAL EXPENDITURE 3.2 1,199,805 10,313,000 9,113,195 12,585,391 2,272,391 PROJECT EXPENDITURE By Component Real Estate Registration Data Development 755,410 6,619,595 5,864,185 5,488,956 (1,130,639) Real Estate Registration Infrastructure Development 241,261 2,535,143 2,293,882 3,332,580 797,437 Policy and Institutional Development, and Project Management 203,134 1,158,262 955,128 3,763,855 2,605,593 TOTAL EXPENDITURE 3.2 1,199,805 10,313,000 9,113,195 12,585,391 2,272,391 5 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) 3. Project financial statements for the year 2018 (continued) 3.2 Balance sheet as of 31 December 2018 showing accumulated funds of the project and bank balances concerning World Bank funding Ref. 31 December 31 December 2018 2017 ASSETS Project expenditure under IDA Credit No. 5188 3.1 - BA 10,313,000 9,113,195 10,313,000 9,113,195 Designated account - IDA Credit No. 5188 - A.1 BA 1,197,500 1,506,336 Local account - VAT Return A.2 417,827 385,220 1,615,327 1,891,556 Total assets 11,928,327 11,372,955 LIABILITIES IDA Credit No. 5188 - BA C 11,510,500 10,619,531 Other income - VAT 417,827 385,220 Total liabilities 11,928,327 11,004,750 Signed and authorised by: Jasenk 1e dni Dij a Sr i PIU Director Financial Manager Banja Luka, 27 May 2019 6 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) 4. Notes to the project financial statements 4.1 Basis of preparation and accounting records These project financial statements have been prepared in accordance with the International Public Sector Accounting Standard: "Financial Reporting under the Cash Basis of Accounting" issued by the Public Sector Committee of the International Federation of Accountants, and incorporate the accounting policies below, which have been consistently followed in all material respects and comply with the "Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities", issued by the Financial Management Sector Board. 4.2 Accounting policies The Project's fiscal year is 1 January to 31 December for the recording of all transactions. Cash basis of accounting All receipts and expenses under IDA Credit are recorded on actual receipt and payment basis of accounting as per approved categories. Project expenditure is stated at original cost on the Balance sheet. Direct payments Direct payments concern the amounts paid directly from the Credit account of the World Bank. Statement of Expenditure (SoE) Statements of Expenditure are used to state the expenditure under IDA Credit during a certain period. These statements are sent to the World Bank's disbursement department who authorises the payment of the expenditure through the Designated account. Currency conversions The reporting currency is Euro (EUR). Sources and use of funds (payments to suppliers and contractors) in currencies other than EUR have been converted to EUR using the currency rate at the moment of the transaction. Bank balances, recorded on the Balance sheet at year-end, have been converted at year-end rate. Designated account This is the total amount of the withdrawals from the Credit account for the Project. The Credit account is in XDR. 7 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX A.1 DESIGNATED ACCOUNT STATEMENT Account owned by: Ministry of Finance and Treasury of Bosnia and Herzegovina Account No: 5672140000415605 Depository Bank: Sberbank d.d. Address: Jevrejska br.71, Banja Luka Related Credit: IDA Credit No. 5188 - BA Currency: EUR Ref. EUR Opening balance 1 January 2018 1,506,336 Add: World Bank replenishments B 890,969 890,969 Deduct: Payments to suppliers - Expenditure under IDA Credit 1,199,805 1,199,805 Ending balance 31 December 2018 3.2 1,197,500 8 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX A.2 VAT REFUND ACCOUNT STATEMENT Account owned by: Ministry of Finance Republic of Srpska Account No: 5672418200000884 Depository Bank: Sberbank a.d. Address: Jevrejska br.71, Banja Luka Related Credit: VAT refund Currency: BAM Ref. BAM EUR Opening balance 1 January 2018 753,424 385,220 Add: VAT returns 63,775 32,607 63,775 32,607 Deduct: Payments to suppliers -- Ending balance 31 December 2018 3.2 817,199 417,827 9 а г и v � а� rn о ° ° м и о и и о z и и м rn т и и oi м � о о о = 1D � М Оо0 ОиD и С1 „ Q О г о г г ь. t0 О Н ° и � v е- и и о ° и о о о о о г М и 00 00 О � м � с� о� и м v г � о 01 О) г - г м о0 г г м а- oi � .= о � г � � С �+ О � ~ �о cv у s о � � � � � о �� ос'С� v � _� т� а о й цм�; ~'� c�i �� `оа` " °' Uc� r�w д Ш �вра ь.и и� О•`-°�� а "�.- с м � ш � о д р -� � р- ° ш гт с�� и � v � и и о � О Ш� � аиi о� ш � °м й о°о о°о й ��, � о � �.� � oi � пi oi oi oi � N и гл '- �` р г м а°о т � м � ар Н У � О `- и_ ��� � й у Q N�,, 00 г г 01 (у О � � Ф ��� �а•о � .с С� L �� а ;� о� °' = N Ш� о] ,.ас�°�� 'а ш � с и ш о°0о о`�° и��° °' ro а ш � ��� й С�й°'�и � Ё � � � ° +� ш � с� о г со� о,.и�, со� 3 ш с� � .«.. � ., = и 3 Ш � � � � й и JLL и � о � � � � � о � й а О•�� V = °о о а- ш ��, с Q о о о � о. р о о й� � у о о � ш •� � о •о н с� •о � � Ф Ф iE ао � `_ д OL � � (�1 О а=+ � t � N .� о й ш а � й °' � � й с � � � w_ и � � и г и � � о с°� о .и � 3 о а � и � � _� � о ги`о Г со i °' о z т °' � га д с .о Х � � � о о ш ._ �, р о т т т t� н м т.v Ш > ,U с� _U _ � о .U С1 С2 � ++ � Q � а` ¢ Q Q� 1°- ¢ Q в REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX C Reconciliation between World Bank's disbursement statements in XDR and IDA Credit account in EUR according to the balance sheet; SoE Withdrawal Schedule of IDA Credit No. 5188-BA Changes Changes in Exchange rate in IDA Credit used IDA Credit (in XDR) (in EUR)_ Original amount 11,100,000 1.133819 12,585,391 Disbursed in previous years 8,718,228 10,619,531 Withdrawal 15 418,786 1.178798 493,665 Withdrawal 16 329,938 1.204180 397,304 Total disbursed in 2018 748,724 890,969 Cumulative disbursements 9,466,952 11,510,500 Calculated undisbursed balance as of 31 December 2018 1,633,048 1,074,891 Undisbursed balance as per World Bank Summary for December 2018 1,633,048 1.218820 1,990,392 Potential exchange rate gain 915,501 11