SECOND HEALTH AND SOCIAL PROTECTION PROJECT (IDA GRANT N2H839- KG, IBRD/IDA GRANT N2TF015135, KfW GRANT 201166396/201365469;IDA CREDIT N25235-KG) Special purpose project financial statements for t he year ended 31 December 2018 SECOND HEALTH AND SOCIAL PROTECTION PROJECT TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF TH E SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 1 INDEPENDENT AUDITOR'S REPORT 2-4 SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018: Statement of sources of financing and cash expenses 5 Statement of cash expenses by project components 6 Statement of cash expenses by categories 7 Statement of funds received from donors 8 Statement of designated accounts 9 Not es to the special purpose project financial statements 10-19 SECOND HEALTH AND SOCIAL PROTECTION PROJECT STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 Manag ement of the Second Health and Social Protection Project (the "Project") is responsible for the prepa ra tion of the special purpose project financial statements that present, in all material respects, the statement of sources of financing and cash expenses, the statement of cash expenses by project compo nents, the statement of cash expenses by categories, the statement of funds received from donors and the statement of designated accounts for the year ended 31 December 2018, in accordance wi th t he basis of accounting as described in Note 2 of the special purpose project financial statements. In pre paring the special purpose project financial statements, the Management is responsible for : • Properly selecting and applying accounting policies; • Presenting information, includ ing accounting policies, in a manner that provides relevant, reliable, co mparable and understandable information; • Providing add itional disclosures when compliance with the specific requirements of the basis of account ing as described in Note 2 are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Project's financial position and fi nancial performance; • Ma king an assessment of the Project's ability to continue as a going concern . The Ma nagement is also responsible for : • Designing, implementing and maintaining an effective and sound system of internal controls, t hroughout the Project ; • Mainta ining adequate accounting records that are sufficient to show and explain the Project's t ransactions and disclose w ith reasonable accuracy at any time the financial position of the Proj ect, and which enable them to ensure that the special purpose project financial statements comply with the basis of accounting as described in Note 2; • Maintaining statutory accounting records in compliance with the Kyrgyz Republic legislation and t he basis of accounting as described in Note 2; • Taking such steps that are reasonably available to them to safeguard the assets of the Project and to affirm that funds received were used for the purposes the financing was provided for; and • Preventing and detecting fraud and other irregularities. The spe cial purpose project financial statements for the year ended 31 December 2018 were approved by th e Management on 2019. M. M. Atakulov G. & atova Head of Finance Policy Division Head of Accounting and Reporting Department 1 Deloitte & Touche , LLC Deloitte. Office 906, 9th floor 19 Ra zzakov Street Bish kek, 720040 Kyrgyz Rep ubl ic Tel : +996 (3 12 ) 39 82 88 Fa x: +9 96 (3 12) 39 82 89 deloitte . kg INDEPENDENT AUDITOR'S REPORT To the Management of Second Health and Social Protection Project Opinion We have audited the special purpose project financial statements of the Second Health and Social Protection Project (the " Project" ), which comprise the statement of sources of fi nancing and cash expenses, the statement of cash expenses by project components, the st atement of cash expenses by categories, the statement of funds received from donors and the statement of designated accounts for the year ended 31 December 2018 and notes to the special purpose project financial statements, including a summary of significant accounting policies and other explanatory information (the "special purpose project financial statements" ). I n our opinion , the accompany ing special purpose project financial statements of the Second Health and Social Protection Project for the year ended 31 December 2018 are prepared , in all material respects, in accordance with the basis of accounting described in Note 2 of the special pu rpose project financial statements. Basis for Opinion We conducted our audit in accordance with International Standards of Auditing ("ISAs"). Our responsibil ities under those standards are further described in the Auditor's Responsibilities for the Audit of the Special Purpose Project Financial Statements section of ou r report. We are independent of the Project in accordance with the International Eth ics St andards Boa rd for Accountants' Code of Ethics fo r Professional Accountants (the "I ES BA Code") together with the ethical requ irements that are relevant to our audit of the special purpose project financial statements in the Kyrgyz Republic, an-:l we have fulfilled our other ethical responsibilities in accordance with these requi~ements and the IESBA Code . We believe that the aud it evidence we have obtained is sufficient and appropriate to provide a basis for our op inion . Emphasis of Matter - Basis of Accounting and Restriction on Distribution and Use We draw attention to Note 2 to the special purpose project financial statements, which describes the basis of accountin g. The special purpose project financial statements are prepared to assist the Project t o comply with the requirements of the International Development Association ("IDA" ) . As a result, the special purpose proj ect financial statements may not be suitable for another purpose. This report is intended solely for the use of the management of the Project, the Ministry of Health of the Kyrgyz Republic, the Mandatory Health Insurance Fund, and the Ministry of Fi nance of the Kyrgyz Republic, in communicating to the IDA. This report is not intended fo r the benefit of any other thi rd parties and we accept no responsibility or liability to any party other than those mentioned above in respect of the report. Should any third party ta ke decisions based on the contents of the report, the responsibility for such decisions shall remain with those third parties. Our opinion is not modified in respect of th is matter. Other Matter As discussed in Note 3 to the special purpose project financ ial statements, the Project's cl osing date was determined as 31 December 2019 . Our op inion is not modified in respect of this matter. Oeloitte refers to one or more of Del oltte Touche Tohmatsu Limited, a UK private compan y limited by guarantee (" DTTL"), its n etwo rk of member firm s, an d thei r related entities. DTTL and ea ch of its member firms are legall y separate and independent entitie s. DTTL (al so referred to as "Deloitte Global ") does not provi de se rvices to clien ts . Please see www. deloitte.com / about fo r a more deta iled descri ption of DTTL and its m emb er firms. © 2019 Oeloi tte & Touche, LLC. Al l rig hts reserve d. Responsibility of Management for the Special Purpose Project Financial Statements Manage ment is responsible for the preparation and fair presentation of these special purpose project financial statements in accordance with the basis of accounting described in Note 2. This includes determining that the IPSAS - Cash Basis and the WB Guidelines are an acceptable basis for the preparation of the special purpose project financial statements in the circumstances, and for such internal control as management determines is necessary to enable the preparation of special purpose project financial statements that are free from material misstatement, whether due to fraud or error. In preparing the special purpose project financial statements, management is respons ible for assessing the Project's ability to continue as a going concern , disclosing, as applicable , matters relating 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 . Auditor's Responsibility for the Audit of the Special Purpose Project Financial Statements Our objectives are to obtain reasonable assurance about whether the special purpose project financial statements as a whole are free from material misstatement, whether due to fra ud 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 detect 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 judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the special purpose project fin ancial 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 int ernal 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. • Eva luate the appropriateness of accounting policies used and the reasonableness of re lated 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 uncerta inty 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 uncerta inty 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. 3 We co m municate with those charged with governance regarding, among other matters, the pl anned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Kanysha i Sadyrbekova Aaron Crouch Qu alified auditor/ Managing Director Engagement Partner Qualification certificate No 0151 of the Kyrgyz Republic dated 1 June 2012 4 SECOND HEALTH AND SOCIAL PROTECTION PROJECT STATEMENT OF SOURCES OF FINANCING AND CASH EXPENSES FOR THE YEAR ENDED 31 DECEMBER 2018 in thousands of Soms (unless otherwise stated) Notes Balance as at 1 January 2018 7 325 368 Funds received: State Budget fund s of the Ministry of Health of the Kyrgyz Republic 2 599 330 Loca l Budget funds of the Ministry of Hea lth of the Kyrgyz Republic 122 904 State Budget funds of the Mandatory Hea lth Insurance Fund 10 466 697 Manda t ory hea lth ins urance funds from the Social Fund 2 379 834 Funds from special accounts 2 350 353 Patient co-payments 550 326 Total funds received 18 469 444 Total e xpenditures 17 527 334 Balan ce as at 31 December 2018 7 1 267 478 M. M. Atakulov Head of Finance Policy Division G.£.tova Head of Accounting and Reporting Department Notes on pages 10-19 form an integral part of these specia l purpose project financial statements . 5 SECON D HEALTH AND SOCIAL PROTECTION PROJECT STATEM ENT OF CASH EXPENSES BY PROJECT COMPONENTS FO R T H E Y EAR ENDED 31 DECEMBER 2018 in thousands of Soms (unless otherwise stated) Deviation of cash expenses Approved Updated from updated Budget Budget Cash budget Notes (unaudited} (unaudited} ex~enses (unaudited} 1. Government Guarantees Programme 4 14 092 718 14 833 053 13 590 958 -8 % 2. Med ical, Social and Rehabilitation Ass istan ce 5 2 250 105 3 213 443 2 528 407 -21% 3 . Pub lic Health Care 6 844 792 859 87 5 826 019 -4% 4 . Add itional MHI Programme 264 435 276 759 276 759 0% 5. Hig h Technologies Fund 241 500 241 500 225 428 -7% 6. Soc ial protection 94 182 94 182 79 763 -15% Total 17 787 732 19 518 812 17 527 334 -10% e M. M . Atakulov Head of Finance Policy Division .& atova G Head of Accounting and Reporting Department 6 SECO N D HEALTH AND SOCIAL PROTECTION PROJECT STATEMENT OF CASH EXPENSES BY CATEGORIES FOR TH E YEAR ENDED 3 1 DECEMBER 2018 in tho usands of Sams (unless otherwise stated) Deviation of cash expenses Approved Updated from updated Budget Budget Cash budget { unaudited) {unaudited) ex~enses {unaudited) Sa laries 8 533 169 8 943 031 8 814 696 -1 % Expe nses for purchases of medicines 2 554 330 2 565 105 2 412 7 12 -6% Contri butions to the Socia l Fund of th e Kyrgyz Repub lic 1 470 852 1 530 525 1 499 136 -2 % Equip ment 874 133 1 946 385 967 882 -50 % Other goods and services 728 713 797 427 648 233 -19 % Utility 797 482 713 329 691 288 -3 % Socia l pa yment to pub li c 286 980 355 522 310 550 -13% Expen ses for purchase of food 604 616 554 683 530 974 -4% Procurement of goods and materials fo r cu rrent economic purposes 565 351 579 507 523 619 -10% Expen ditures for the cur rent repair of property 495 544 497 109 441 578 -11 % Buildings and constructions 196 635 277 017 228 747 -17 % Trans portation expenses 207 472 200 324 183 967 -8% Travel expenses 113 730 139 718 114 799 -18 % Other ex penses 358 725 419 130 159 153 -62% Tota l 17 787 732 19 518 812 17 527 334 -100/o K. Cl!L/ M. M. Atakulov G. Zh. Mamatova T the Head of Finance Policy Division Head of Accounting and K Reporting Department 7 SECOND HEALTH AND SOCIAL PROTECTION PROJECT STATEMENT OF FUNDS RECEIVED FROM DONORS FOR THE YEAR ENDED 31 DECEMBER 2018 IDA Credit N!!5235- SOC (TF), Special account of KGlUSD USO KfWlEUR Paid by donors to the designated accounts 10 Ma y 2018 1 000 000 10 Ma y 2018 1 500 000 31 May 2018 500 000 31 May 2018 1 500 000 15 Novembe r 2018 7 499 900 20 Nove mber 20 18 940 500 Total 2 940 500 2 500 000 7 499 900 nagement: M. M. Atakulov Head of Finance Policy Division G.&..atova Head of Accounting and Reporting Department 8 SECOND HEALTH AND SOCIAL PROTECTION PROJECT STATEMENT OF DESIGNATED ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2018 in thousands of Sams (unless otherwise stated) Received to the budget of the Kyrgyz IDA Credit Special Republic, N!!5235-KG, SOC (TF}, account of thousands USO USO KfW in EUR Total, CCV Exchange rates of Soms Donors ' funds converted and withdrawn from the designated accounts 17 August 2018 2 500 000 $ 2 500 000 69 .500 0 173 750 17 August 2018 2 000 000 $ 2 000 000 69.5000 139 000 29 November 2018 7 499 900 EUR 7 499 900 78.8152 591 106 29 November 2018 940 500 i 940 500 69.8500 65 694 $ 5 440 500 and Balance of designated accounts at the end of the year 2 940 500 2 500 000 7 499 900 EUR 7 499 900 969 550 K. S. ~ G. Zh. Mamatova Head of Accounting and Reporting Department Notes on pages 10-19 form an integral part of these special purpose project financial statements. 9 SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 in tho usands of Sams (unless otherwise stated) 1. GENERAL INFORMATION The Second Health and Social Protection Project for 2012-2018 (the "Project") is the continuation of the previous national health care reform programmes of the Kyrgyz Republic - "Manas" (1996- 2005) and "Manas Taalimi" ( 2006-2011). The mission of the Project is to create the necessary conditions for the protection and promotion of the population and each individual wellbeing, regardless of social status and gender d ifferences. T he Project includes two parts: 1) The Second Health and Social Protection Project; and 2) Strengthening the administrative capacity of the Ministry of Labour and Social Development of the Kyrgyz Republic. I n order to implement the Project three levels of management were identified for an appropriate system of accountability: • First level. Zhogorku Kenesh (Parliament) and the Government of the Kyrgyz Republic oversee the implementation of the Project; • Second level. The Ministry of Health (the "MOH"), Ministry of Finance, and the Mandatory Health Insurance Fund (the "MHIF") provide strategic guidance and are responsible for the results of the Project . The implementation of the Project is a normal process of the MOH and all health care organisations that report to it; and • Third level . The executing institutions provide technical coordination of the various structures, monitoring and reporting on the results of operations and carry out the detailed implementation of annual action plans. The Project selected four areas for which population health care is planned to improve: • Cardiovascular diseases (expected improvement: reduction of mortality rates from cardiovascular diseases to 36 .9 and 276 .0 in a population of 100 000 aged between 30-39 years and 40-59 years respectively); • Protection of mothers and newborn children (expected improvement: target prevalence of anemia among children under 5 years of age - 5 572; the proportion of children under 5 with diarrhea treated with ORS and zinc more than 75%; the proportion of children under 5 years with pneumonia who received the first dose of antibiotic immediately after diagnosis (at primary health care I receiving room I emergency medical care levels) more than 75%; number of children treated with ORS for diarrhea and with antibiotic for pneumonia - 75 000; target infant mortality rate of no more than 16.6; target infant mortality rate among children under 5 years old measured per 1 000 live births - no more than 19 .8); • Tuberculosis (expected improvement: reduction of tuberculosis mortality below 8 cases per 100 000 population by 2018, reduction of incidences below 96 cases per 100 000 population by 2018); and • HIV infection (expected improvement: HIV spread rate of 110 cases per 100 000 population by 2018). The Project is implemented based on the Second Sector-Wide Approach ("SWAp 2") in accordance with financing agreements between the Kyrgyz Republic and the International Development Association dated 16 December 2013 with closing date 31 December 2019, Grant Agreement between the Kyrgyz Republic and the International Bank for Reconstruction and Development and the International Development Association dated 28 May 2014 with closing date 31 December 2019, and Financing Agreement between the Kyrgyz Republic and KfW dated 23 December 2013 with closing date 31 December 2019 (the "Financing agreements"). 10 SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2018 in tho usands of Sams (unless otherwise stated) A distinctive feature of SWAp 2 is to consolidate the efforts of the Government of the Kyrgyz Republic with the donor community : donor funds go to support the state health care budget w ithin standard budget measures, rather than as individual projects. Donor funds involved in co- f inancing of programmes are transferred to the National Bank of the Kyrgyz Republic and then to the Ministry of Finance of the Kyrgyz Republic for the purpose of financing the health care programmes. The Project imposes transfer of 50% of total donor funds to support the Government Guarantees Programme and the other 50% to the investment costs. Sources of financing Starting from 2018 the budget of MHIF is approved by a separate law of the Kyrgyz Republic . This made it possible to optimise the mechanisms for purchasing medical services that are financed by t he funds from the mandatory health insurance (the "MHI"). Starting from 1 January 2018, all sources of funds (state and local budget, the MHI, income from paid services and co-payment) are combined in the healthcare organisations and all regulations for the targeted use of MHI funds and co-payment were abolished. The sources of financing the Project are : • Budget means; • Funds from special accounts; • Mandatory health insurance funds; and • Co-payment funds. Budget means Budget means represent the funds of the state and local budgets. In addition, budget funds include donor financing on the basis of SWAp 2. The International Development Association (" IDA"), Swiss Agency for Development and Cooperation ("SDC"), and Kreditanstalt fUr Wiederaufbau Development Bank ("KfW") act as donors, providing financing in 2018. IDA acts as t he administrator of grant funds. Funds from special accounts For healthcare organisations in the single payer system the procedure of forming special funds is determined by the regulation "On the special funds of the health care organisations in the single payer system", approved by Government Resolution #350 on 1 July 2011. Under this regulation, the health care organisations can render certain types of non-medical and medical chargeable services not included in the Government Guarantees Programme to entities and individuals. In accordance with the regulation on the funds of budgetary institutions accumulated on special accounts in the single treasury account system, approved by the Government of the Kyrgyz Republic N9 626 dated 29 September 2017, special funds are used in accordance with the approved estimates of income and expenditure. The special funds are directed to cover current expenses, including running and improving activities, strengthening of the material and technical base, regulation of social and labor relations of employees and other activities in accordance with the legislation. The funds from special accounts also include funds from legal entities and individuals in the form of sponsorship, grants for implementation of certain projects, as well as other funds not prohibited by legislation of the Kyrgyz Republic. Balances of special accounts not used in the current fiscal year by budget institutions, are carried over to the next fiscal year, as balances at the beginning of the next fiscal year. 11 SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2018 in tho usands of Sams (unless otherwise stated) Mandatory health insurance funds In accordance with the legislation, contributors are employers who monthly pay the equivalent of 2% of salary to the fund. Collection of premiums for mandatory health insurance is done by the Social Fund of the Kyrgyz Republic . Insurance premiums for mandatory health insurance are accumulated on account at Central Treasury of the Ministry of Finance of the Kyrgyz Republic and used in accordance with the objectives of MHIF. Co-payment funds Co-payment is prescribed by the Government Guarantees Programme on providing citizens of the Kyrgyz Republic with health care . For therapeutic services single co-payment contributions are w ithin the range of KGS 330 to KGS 2,980. For surgical services co-payment varies from KGS 430 t o KGS 3 870. Expenditures The following sub-programmes were implemented in 2018 under the Project: • Government Guarantees Programme; • Medical, Social and Rehabilitative Assistance; • Public Health Care ; • Additional Mandatory Health Insurance Programme; • High Technologies Fund; and • Social Protection. Government Guarantees Programme The Government Guarantees Programme on providing citizens with health care includes a guaranteed amount, types and conditions of care for citizens of the Kyrgyz Republic including primary health care, emergency medical care, specialised medical care on an outpatient basis, inpatient care, medical assistance provided by the High Technologies Fund, dental care, drug and vaccine security, and prevention of diseases. Medical, Social and Rehabilitation Assistance The programme of medical , social and rehabilitative assistance, medical education and administration is divided into 3 sub-programmes. • Administration: The main purpose of the sub-programme is to increase the capacity of the MOH for policy development, design and implementation of regulatory mechanisms, to strengthen coordination within the health care system and inter-sectoral collaboration. One of the major objectives is to improve the centralised procurement of drugs and medical supplies as part of the priority programmes; • Medical and social, rehabilitative care: The objectives of the sub-programme is the realisation of state policy in the field of mental health, reducing morbidity and mortality from tuberculosis, and provision of reproductive health; and • Medical education. The sub-programme is aimed at improving the medical education system and the implementation of sustainable and effective management of the health workforce. Public Health Care Public health care is represented by two separate services of preventive direction, which are aimed at protecting and promoting the health care of the population: • Sanitary-epidemiological service; and • Health promotion services . 12 SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2018 in thousands of Sams (unless otherwise stated) I mproving the efficiency of public health services is dependent on the three working areas: • Epidemiological supervision including the control of infectious and non-infectious diseases; • Strengthening of state regulation; and • Health promotion, including the promotion of a healthy lifestyle, raising public awareness about the basic aspects of health. Additional Mandatory Health Insurance (MHI) Programme Additional MHI Programme aims to provide preferential drug provision of the population through a network of pharmacies on an outpatient basis. The programme is valid only for the insured population and the mechanism of the programme is to make available certain drugs at pharmacies by prescription . When dispensing from the pharmacy, the patient pays only a fraction of the cost of purchasing the drug, the other part of the cost is reimbursed to the pharmacy by MHI funds . High Technologies Fund Medical care that requires high technological assistance is supported by the MOH, which provides payment to the health care organisations of the cost of expensive and high technological medical services . The main objectives of the programme is to ensure access of the population to ex pensive high technological treatments and to improve the procurement of high technological medical services . Social Protection The main objective is assistance to the Ministry of Labour and Social Development in enabling the Government to enhance effectiveness and targeting performance of social assistance and social services aimed at supporting poor and vulnerable populations. The Ministry of Labour and Social Development of the Kyrgyz Republic implements the given component for the following objectives: • Increase of social care system efficiency in providing care to the needy protecting them from poverty; • Continue undertakings of the previous project, in particular further implement and improve the registry of social assistance beneficiaries under the information system of social care; and • Support to strengthening the national policy towards vulnerable groups, including people with special needs; diagnostic review of the disability certification service with the objective of streamlining disability certification in accordance with modern approaches focusing on abilities and opportunities for rehabilitation. The Ministry of Health of the Kyrgyz Republic Management System The Board consisting of 9 people, the personal composition of which is approved by the Prime Minister of the Kyrgyz Republic, operates for a discussion of policy documents on health care, the most important issues of health care reform, medical education and science, as well as reports of officials of the health care system. Total operational management is realised by the MOH. Funding issues are decided by the MOH, the MHIF and regional offices of MHIF. Financing of the health care facilities of the local budget of the city of Bishkek is carried out by the Department of Health Care System of Bishkek City Hall. The MOH has two subordinate departments: the Department of Disease Prevention and State Sanitary and Epidemiological Supervision, and the Department of Drug Supply and Medical Equipment . For managing purposes all other health care organisations are divided into organisations directly subordinate to the MOH and territorial (regional, city, district) health care organisations. 13 SECO N D HEALTH AND SOCIAL PROTECTION PROJECT N OTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS (CONTINUED) FOR T HE YEAR ENDED 31 DECEMBER 2018 in thousands of Sams (unless otherwise stated) Health care facilities are presente d as fo ll ows: NQ Type of medica l institution Quantity Main functions of institutions 1 Fami ly Practice Centers 46 - Provision of medical care at the outpatient level ; and - Coordination of activ ities of Family Physicians Groups and services dedicate to specia lised type of primary health care . 2 Territoria l hospitals 40 - Prov ision of qualified consulta t ive and di agnostic care to population. 3 National and scien tific centers, 8 - Prov ision of specialised medical care in various f ields applying advanced sc ientific-research institutions equipment and scientific achievements attracting highly qualified medical staff; and - Conducting medical, preventive, educational act ivities, and scientific resea h in fundamental and applied medicine . 4 Obla st united hospital s 7 - Provision of specialised consultative and diagnostic care to population . 5 General practice centers 29 - Provision of primary medical, consu ltative, diagnostic, dental, emergency, nd extended care; and - Conducting of activities on promotion of healthy lifestyle . 6 Anti -tuberculosis facilit ies 18 - Provision of consultative, diagnostic, and extended care to patients diagno ed with tuberculosis. 7 The Department of Di seases 52 - Coordination of activities of state bodies and businesses on issues of sanit ry Pre ventio n and State Sanitary and and epidemiological welfare of citizens; Epidemiological Supervision - Research and assessment of adverse factors influencing on health of employed and other citizens; and - Defining priorities in scientific research related to sanitary and epidemiolo ical welfare of citizens . 8 National Hospital - Diverse organisation of tertiary level of medical ca re ; and - Provision of qualified, specialised, exten ded, consultative, and diagnostic c re to population . 9 Kyrgyz State Medical Aca demy, 3 - Meeting the need of the health care sector in receiving secondary, tertiary Medical institutes additional and post-graduate professiona l and medical education based on inseparable process of education, scien t if ic research, clinical work; and - Conducting fundamental and applied scientific research in medicine and ot er related sciences . 10 De ntal Care 35 - Prevention of dental diseases; - Timely detection and treatment of patients having diseases in facia l area; nd - Provision of specialised, consu ltative, and diagnostic care on the ambulate y level. 11 Mental health facilities 6 - Extended and ambulatory examination, treatment, and social rehabilitatio of individuals having mental disorders . 12 Emergency stat ions and units 2 - Twenty-four-hour free emergency care for patients and injured individua l 13 Gyne co logica l hosp ital s, maternity 4 - Treatment of patients having gynecological diseases, pregnant women hospita l, perinatal centers experiencing complications , assistance in child delivery; - Providing emergency obstetric and neonatal services; and - Perinatal centers provide medical care to pregnant women experiencing complications, when birth of prematu re children is expected, who need fu her treatment . 14 Medical co ll eges 11 - Meeting the needs of the health care sector in qualified specialists with medical and pharmaceutical secondary education . 15 Children ho spi tal s 3 - Provision of medical, consultative, and diagnostic care to children . 16 Infectious diseases hospital - Provision of medical, consultative , diagnostic, and extended care to patie ts having infectious diseases. 17 Blood centers 6 - Transfusiology ; - Production of blood components and products; and - Cross-field coordination in provision of blood components and prod ucts . 18 Center of quarantine and extremely 5 - Provision of consultative and other assistance to the health care facilitie s dangerous disea ses , Republican regarding quarantine and extremely dangerous diseases; Center of Im munoprophylaxis - Monitoring of plague hot spots; - Ep idemiological supervision over quarantine and extremely dangerous diseases, - Laboratory research ; and - Immunisation . 14 SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS {CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2018 in thousands of Sams (unless otherwise stated) N9 Type of medical institution Quantity Main functions of institutions 19 Forensic medica l exa m ination 7 - Post- mortem examination ; - Exam ination of victims and accused individuals; and - Processing of materials and criminal cases initiated by law enforcement authorities and prosecutor's office. 20 Dr ug abuse centers 2 - Provision of medical, con sultative, diagnostic , and extended care to drug addicts . 21 AIDS centers 9 - Provi sion of consu ltative , diagnostic, medical, and preventive care to HIV positive individuals; - Ep idemiological superv ision over HIV ; and - Collect ion and analysis of data related to HIV . 22 Groups of fami ly physicians 71 8* - Structural unit s of Centers of Family Medicine and General Practice Cente rs which operate in the MOH system and employ therapists , pediatricians, obstetrician-g ynecologi sts, family physicians, nurses and junior medica l st for provision of primary care to all family members . 23 Ad ult rehabili t atio n ce nters 2 - Provi sion of specialised medical care in a field of rehabilitation med icine, ba lneolog y, ph y siotherap y, and sports medicine . 24 Child rehabilitation ce nte rs 4 - Provisi on of special ised med ical care for children in a fie ld of rehabilitation medicine, balneology, physiotherapy, and sports medicine. 25 Medical information cent ers 8 - Management of united health care sector databa se by organisation of eras - f ield system of data collect ion , processing, storing and provision (based on up- to-date computer technolog ies) , which enables to dynamically assess the ate of health and prov ide information support for decision-making; - Anal ys is of medical statistical data on health care facilities network, staff, act ivities, citi zens state of health ; and - Management of medical statistical reporting system. 26 Oblast centers of reproducti ve health 3 - Provi sion of speciali sed medical care in a f ield of reproductive health . 27 Pre ve nt ive Medici ne NGO - Pro v ision of scientific and other assistance rega rding env ironmental protec ion, nutrition hygiene, infectious control, medical services quality control, conducting research and research findings implementation . 28 Morbid anatom y bu rea us 1 - Improvement of medical and prophylactic care by : clarificat ion of the cau ses of death ; en suring reliable data for government statistics of the causes of death ; and ana lysis of diagnostics and medical care deficiencies. 29 Health streng th en in g centers 2 - Health strengthening activities; - Development of information and educational materials and manual s, learn ng models ; and - Conducting training sessions on health strengthening. 30 Feldsher-Ob stet rica l Am bulatory 1 038 - Provis ion of ca re and treatment for women during pregnancy, childbirth a d Points postnatal per iod. 31 Onco log ica l faci lities - Provision of high quality and efficient preventive , ad v isory, medical and diagnostic care in sphere of oncology and radiation therapy. 32 Other 14 Total 2 087 * Number of groups of fam ily doctors who are independent legal entities - 1 7. The Project management The cooperation of the Government of the Kyrgyz Republic with the donor community is coordinated through regular discussions twice a year, annual joint revisions of implementation of the SWAp 2, and summits on health care, which are held with the participation of the Government of the Kyrgyz Republic, as well as of ministries and agencies implementing the Project . 15 SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2018 in tho usands of Sams (unless otherwise stated) The overall coordination of the Second Health and Social Protection Project is realised by the MOH in partnership with the Ministry of Finance, the Ministry of Labour and Social Development, and t he MHIF under the Government of the Kyrgyz Republic. Questions of inter-sectoral collaboration, joint policies, coordination and synchronisation of the activities of the ministries and agencies that are involved in the Project, are reviewed semi-annually at the meetings of Coordination Council on Public Health Care under the Government of the Kyrgyz Republic headed by the Deputy Prime Minister. I mplementation of the Project within the health care sector is coordinated by the Health Care Policy Council of the MOH, headed by the Minister of Health. The functions of the secretariat of t he Council on Health Policy are assigned to the Department of Strategic Planning and I mplementation of Health Programs of MOH . The monitoring of the Second Health and Social Protection Project implementation is conducted by inspection teams of the MOH, which prepare internal quarterly reports. 2. ACCOUNTING POLICY Financial Statements Presentation Principles Basis of accounting These special purpose project financial statements are prepared on the cash basis of accounting based on International Public Sector Accounting Standard" Financial Reporting under the Cash Basis of Accounting " ("IPSAS-Cash Basis") issued by the International Public Sector Accounting Standards Board and incorporate the following principal accounting policies, which have been consistently followed in all material respects and comply with the Guidelines on Annual Financial Reporting and Auditing for World Bank - Financed Activities issued by the World Bank's Financial Management Sector Board . The Project financing is recognised as a source of the Project funds when the cash is received . The Project expenditures are recognised as a use of the Project funds when the payments are made. Preparation and presentation of the financial statements Special purpose project financial statements have been prepared based on the cash accounting basis in accordance with the requirements of the Operational Manual of Second Health and Social Protection Project and include the following components: • Statement of sources of financing and cash expenses; • Statement of cash expenses by project components; • Statement of cash expenses by categories; • Statement of funds received from donors; • Statement of designated accounts; and • Notes to the special purpose project financial statements. The summary of significant accounting policies used in the preparation of the special purpose project financial statements is stated below . These policies were used consistently during the whole reporting period . Accounting method These special purpose project financial statements were prepared on the cash-basis accounting method that implies that expenses are the funds used for payment for works, goods and services and which are disclosed in statements when paid. 16 SECO N D HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS (CONTINUED) FOR T HE Y EAR ENDED 31 DECEMBER 2018 in tho usands of Sams (unless otherwise stated) Presen t ation currency and transactions in foreign currency These special purpose project fin anci al st atem ents are denom inat ed in So ms. Do nated fi nancing obtain ed by the Project is converte d int o nat iona l cu rre ncy at the rate of the National Ban k of t he Kyrgyz Republic at the date of conve rsi o n. 3. GOING CONCERN AND PROJECT CLOSURE I n accordance with the Decree of th e Govern m ent of the Kyrgyz Republ ic N9 26 7 dated 11 May 2017 and amendm ent to the Fin ancin g ag reements t hat have been li st ed in Not e 1 dated 27 November 2017, closing da te of t he Proj ect was extended until 3 1 December 20 18 . On 20 November 2018 the Kyrgyz Re publ ic has received last tranche of financi ng from donors in accordance with the Financing agree ment s. However, due to the need for add itional t ime t o complete the al ready launched agree d act iv ities that cannot be complet ed before the end of 20 18, t he Kyrgyz Republic applied on 24 August 201 8 to th e World Ban k t o extend t he proj ect's closin g date . On 19 Septem ber 2018 the World Ban k extended cl os ing date of t he Proj ect until 31 Decemb er 2019 . 4. GOVERNM ENT GUARANTEES PROGRAMME BY CATEGORIES OF CASH EXPENSES Deviation of cash expenses Approved Updated from updated Budget Budget Cash budget (unaudited) (unaudited) ex~enses (unaudited ) Salaries 7 184 682 7 360 768 7 326 940 OOfc Expe nses fo r purchases of medicines 1 610 049 1 577 734 1 488 263 -6 ° 0 Contri bu t io ns to th e Soci al Fund of the Kyrgyz Rep ubl ic 1 23 1 811 1 257 140 1 243 968 -1 c!to Equipment 595 571 1 234 707 616 623 -50<'10 Utility 693 484 594 069 586 018 -1 c 'o Expe nses fo r purchase of food 539 925 495 470 480 140 -3 <10 Proc ure ment of goods and mate ri als for curren t eco nom ic purposes 512 309 501 224 457 579 -9