Report on the Republika Srpska part of the Project Financial Statements of the THE WEST BALKANS DRINA RIVER BASIN MANAGEMENT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Financed by: - GEF Trust Fund Grant No. TF0A2317 - GEF SCC Grant No. TF0A2320 For the year ended 31 December 2018 THE WEST BALKANS DRINA RIVER BASIN MANAGEMENT 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 - GEF Grant 8 THE WEST BALKANS DRINA RIVER BASIN MANAGEMENT of the Ministry of Finance and Treasury of Bosnia and Herzegovina 1. Introduction 1.1 Objectives of the Project The objective of the Project is to improve mechanisms and capacity of the Project Countries to plan and manage the transboundary Drina River basin, incorporating climate change adaption. 1.2 Parts and activities of the Project The Project is comprised of the following parts: Part 1: Multi-state Cooperation in Transboundary Drina River Basin Management A Development of a Strategic Action Program ("SAP") agreed among the Project Countries, including both Entities in BH, for mainstreaming transboundary integrated water resource management in the DRB and climate change adaptation planning at state and Entity levels through inter alia: (i) Preparation of a DRB SAP, based on an in-depth transboundary diagnostic and analysis. (ii) Preparation of hydraulic and hydrological models for the DRB with multi - purpose reservoir operation optimization. (iii) Preparation of a DRB water resources study. (iv) Preparation of a DRB pollution analysis B Institutional development and capacity building to support cooperative transboundary management of the DRB by the Project Countries through, inter alia: (i) Provision of support to the Drina Task Force and stakeholders to coordinate DRB activities. (ii) Provision of support for the preparation of national, Entity and local policies and regulatory reforms to facilitate international DRB management. (iii) Participation in GEF: TW-LEARN activities. Part 2: Pilot Investments for Integrated ORB Management Including Flood and Drought Management and Climate Change Resilience A. Strengthening capacity for climate change resilience in order to better prepare for threats resulting from floods and droughts while making optimal use of the environmental DRB assets and engaging local communities, through inter alia: (i) Strengthening of hydro-meteorological services through equipment modernization, including of the hydro-meteorological observing system. (ii) Development of protocols to improve hydro-meteorological data exchange among the Project Countries including, identifying and resolving issues on data harmonization during Project implementation and development of protocols for data exchange. 3 THE WEST BALKANS DRINA RIVER BASIN MANAGEMENT of the Ministry of Finance and Treasury of Bosnia and Herzegovina 1. Introduction (continued) 1.2 Parts and activities of the Project (continued) (iii) Carrying out of a broad public awareness program in DRB to: increase public awareness about the objectives of, and activities under, the Project; and engage the basin communities in more active partnership. (iv) Carrying out a Small Grant Program under which Small Grants, financed out of the proceeds of the Grant, will be provided to Beneficiaries to carry out investment sub- projects that demonstrate innovative and low cost approaches to economic development and which contribute, inter alia, to water pollution control and conservation, all in accordance with the Project Operations Manual. (v) Provision of support for flood and drought preparedness measures and enhanced early warning systems. B. Supporting pilot investments that reduce negative climate change impacts in all three riparian Project Countries, including investments for: improved flood protection measures along the Drina River and its tributaries; improved ground water resources monitoring; improved hydro-meteorological forecasting; improved soil condition monitoring; establishment of reliable discharge rating curves; and improved water quality. Part 3: Project Management and Monitoring and Evaluation Provision of support for Project management, monitoring, evaluation and auditing, including financing Operating Costs. 4 THE WEST BALKANS DRINA RIVER BASIN MANAGEMENT of the Ministry of Finance and Treasury of Bosnia and Herzegovina 1. Introduction (continued) 1.3 Financing of the Project: The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Grant ("Category"), the allocations of the amounts of the Grant to each Category and the percentage of expenditures to be financed for Eligible Expenditures in each Category: Amount of the GEF Amount of the Percentage of Portion of the Grant SCCF Portion of the Expenditures Allocated (expressed Grant Allocated to be Financed Category in USD) (expressed in USD) (inclusive of Taxes) (4) Goods, works, non- consulting services, consultants' service (including for audits under the Project), Training and Operating Costs under the RS Respective Parts of the Project except for Small Grants. 280,000 725,000 100,00% (5) Small Grants provided by RS 100% of Small under Part 2.A (iv) of the Project. 62,254 62,621 Grants disbursed Subtotal 342,254 787,621 GEF Grant became effective on 11 May 2017. Planned closing date is 31 October 2020. NOTE: During 2018 years there was no withdrawal of funds on this project, since there were no activities. 1 bakertilly Baker Tilly Re Opinion d.o.o. 2. Independent Auditor's Report Grbavidka 4 71000 Sarajevo Bosna i Hercegovina To the State of Bosnia and Herzegovina, T: +387 (0) 33 552 150 Ministry of Finance and Treasury F: +387 (0) 33 552 152 Attn. of Minister of Finance and Treasury H.E. Mr. Vjekoslav Bevanda info@bakertilly.ba www.bakertilly.ba Report on the Project Financial Statements Opinion We have audited the accompanying project financial statements of the Republika Srpska part of the West Balkans Drina River Basin Management Project (the "Project"), which comprise of Summary of sources and uses of funds, Balance sheet, Designated 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 GEF Trust Fund Grant No. TF0A2317 and GEF SCC Grant No. TF0A2320. 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. 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 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. 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 on half of Baker Tilly Re Opinion R T iLYa'~~Crtfe Nihad Fe z, ire r and Certified audit ' OPN ON Ezita Imam vi6, Certified Auditor Sarajevo, Bosnia and Herzegovina j R 17 May 2019 THE WEST BALKANS DRINA RIVER BASIN MANAGEMENT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2018 (all amounts in USD, unless otherwise stated) 3. Project financial statements for the year 2018 3.1 Summary of sources and uses of funds under the GEF Grant Agreement TF 016646 Actual Cumulative Cumulative Cumulative Cumulative Ref. 2018 2018 2017 budget variance FINANCING GEF Trust Fund Grant TF0A2317 - - - 342,254 GEF SCC Grant TF0A2320 - - - 787,621 Initial deposit - - - Direct payments - - - SoE replenishments - - - TOTAL FINANCING 3.1 - - - 1,129,875 1,129,875 PROJECT EXPENDITURE By Category Goods, works, non- consulting services, consultants' service (including for audits under the Project), Training and Operating Costs under the RS Respective Parts of the Project except for Small Grants. - - - 1,005,000 1,005,000 Small Grants provided by RS under Part 2.A (iv) of the Project. - - - 124,875 124,875 TOTAL EXPENDITURE 3.2 - - - 1,129,875 1,129,875 PROJECT EXPENDITURE By Component Multi-state Cooperation in Trans boundary Drina River Basin Management Pilot Investments for Integrated ORB Management Including Flood and Drought Management and Climate Change Resilience - - - 925,000 925,000 Project Management and Monitoring and Evaluation - - - 204,875 204,875 TOTAL EXPENDITURE 3.2 - - - 1,129,875 1,129,875 NOTE: During 2018 years there was no withdrawal of funds on this project, since there were no activities. 5 THE WEST BALKANS DRINA RIVER BASIN MANAGEMENT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2018 (all amounts in USD, 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 31 December 31 December Ref. 2018 2017 ASSETS Project expenditure under Grant 3-1.1 - Designated account A. 1 Total assets LIABILITIES GEF Grant C Total liabilities NOTE: During 2018 years there was no withdrawal of funds on this project, since there were no activities. Signed and authorised by: Mr Stefan Mitrovid Andelka Kova6evi6 APCU Director Accountant Banja Luka, 17 May 2019 6 THE WEST BALKANS DRINA RIVER BASIN MANAGEMENT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2018 (all amounts in USD, 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 GEF Grant 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 Grant account of the World Bank. Statement of Expenditure (SoE) Statements of Expenditure are used to state the expenditure under GEF Grant during a certain period. These statements are sent to the World Bank's disbursement specialist who authorises the payment of the expenditure through the Designated account. Currency conversions The reporting currency is USD. Sources and use of funds (payments to suppliers and contractors) in currencies other than USD have been converted to USD 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 Grant account for the Project. The Grant account is in USD. Interest on Designated account Interest earned on the Designated account belongs to the Borrower. 7 THE WEST BALKANS DRINA RIVER BASIN MANAGEMENT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2018 (all amounts in USD, unless otherwise stated) APPENDIX A.1 DESIGNATED ACCOUNT STATEMENT Account owned by: Ministry of Finance and Treasury of Bosnia and Herzegovina Account No.: 5672410000729885 Depository Bank: Sberbank a.d. Banja Luka Address: Jevrejska 71, Banja Luka Related Credit: GEF TF0A2317 and SCCF TF0A2320 Currency: USD Ref. USD Opening balance 1 January 2018 3.2 Add: World Bank replenishments B - Deduct: Payments to suppliers - Expenditure under GEF Grant - Ending balance 31 December 2018 3.2 - 8