2 Prostor LLC Audit & Consulting Co. INDEPENDENT AUDITOR'S REPORT To the Ministry of Finance of Ukraine To the International Bank for Reconstruction and Development Opinion Under the Contract # MF-LCS-1-1/13010-05/85 dated 04.06.2019 we, the independent audit firm LLC "Audit company "UHY PROSTIR LTD", have audited the financial statements of the Ministry of Finance of Ukraine (MOF) on Part B "Support to PFM Strategy Implementation" of Strengthening Public Resource Management Project (the Project) for the period from August 28, 2017 till December 31, 2018 (the financial 21 statements), prepared in accordance with Letter Agreement # TF0A5324 between the International Bank for Reconstruction and Development (IBRD), acting as administrator of the grant funds provided by the European Commission on behalf of the European Union under the EC - World Bank Partnership Program for Europe and Central Asia Programmatic Single-Donor Trust Fund (EU Programme for the Reform of Public Administration and Finances (EURoPAF), and the Ministry of Economic Development and Trade of Ukraine (MEDT), signed by IBRD on June 26, 2017 and 2 countersigned by MEDT on June 30, 2017 (the Agreement). In our opinion, the attached financial statements for the period from August 28, 2017 till December 31, 2018 are prepared, in all material respects, in accordance with the requirements of the Agreement and IBRD. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). 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 MOF in accordance with the ethical requirements that are relevant to our audit of the financial statements in Ukraine, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. Emphasis of Matter - Basis of Accounting and Restriction on Distribution and Use We draw attention to the note # 2 < to the financial statements which states that the attached financial statements have been prepared on a «cash basis)> - receipts were registered as they are made on bank accounts; expenses are registered at the date of drawing from accounts. A member of UHY International, a network of independent accounting and consulting firms The UHY network is a member of the Forum of Firms 1 Prostor LLC Audit & Consulting Co. These financial statements were prepared in order to meet MOF' obligations under the Agreement. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for MOF and IBRD and should not be distributed to parties other than MOF or IBRD. Our opinion is not modified in respect of these matters. 3 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation of the financial statements in accordance with requirements of the Agreement and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing MOF' 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 MOF or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing MOF' financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements :1 Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or 2 error, and to issue an auditor's report that includes our opinion. Reasonable assurance a0 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 X 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 skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the 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 MOF' internal control. 2 A member of UHY International, a network of independent accounting and consulting firms The UHY network is a member of the Forum of Firms Prostor LLC Audit & Consulting Co. * 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 MOF' 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 MOF to cease to continue as a going concern. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, I including any significant deficiencies in internal control that we identify during our audit. I I Director of LLC "Audit company "UHY Prostir Ltd" Safinskiy V.L. Office # 315, 14 Vasylkivska Str. Kyiv, Ukraine, 03040 03.07.2019 Register number _ I K A member of UHY Inrtemational, a networkofindependent accounting and consulting firms The UHY network is a member of the Forum of Firms Part B "Support to PFM Strategy Implementation" of Strengthening Public Resource Management Project Summary of Funds Received TF0A5324 for the Period from 28.08.2017 to 31.12.2018 in EUR for the Period Opening cash balance 0,00 DA (EUR) TA (UAH) Total opening cash balance 0,00 Sources of funds International Bank for Reconstruction and Development 128 000,00 Total sources of funds 128 000,00 Less: Uses of funds by Category: Goods, Works, Consulting services, Training, and Operating Cost under Part B of the Project 121 662,46 Total funds used 121 662,46 Closing cash balance DA (EUR) 6 053,26 TA (UAH) 284,28 Total closing cash balance 6337,54 Part B "Support to PFM Strategy Implementation" of Strengthening Public Resource Management Project Summary of Expenditures TF0A5324 for the Period from 28.08.2017 to 31.12.2018 in EUR Project Component/Sub-borrower Status Period Category: Goods, Works, Consulting services, Training, and Operating Cost under Part B of the Project Consulting services for Change Management - Private entrepreneur Alina Chernomaz Active 51 507,30 Consulting services of Procurement Specialist - Private entrepreneur Natalia Khimich Active 16 689,46 Consulting services for ICT Audit - Deloitte & 2 Touche, LLC, Ukraine Active 43 357,01 EViews software licenses - IHS Global Inc., US Closed 7 521,74 Bank charges for currency exchange at DA 204,25 Operational costs (translation services) - Pereklad Pro, LLC, Ukraine Active 2 382,70 Total Category 121 662,46 Including payments from DA 7 725,99 Incuding payments from TA 113 936,47 Including Direct Payments&LC 0,00 Total Project Expenditures 121 662,46 Part B "Support to PFM Strategy implementation" of Strengthening Public Resource 3 Management Project Summary of Statements of Expenditures TFOA5324 X for the Period from 28.08.2017 to 31.12.2018 in EUR No. Ref. Date Amount, Amount, Equivalent in EUR 31 number UAH USD 5 1 2-MF 24.04.2018 714 412,99 21 826,07 2 3-MF 21.08.2018 548 989,51 17 758,52 3 4-MF 16.11.2018 1 575 673,67 8 650,00 56 072,15 4 6-MF 04.02.2019 820917,48 26005,72 TOTAL 3 659 993,65 8 650,00 121 662,46 3 3 31 U1 U1 31 31 31 E1 31 3 Part B "Support to PFM Strategy Implementation" of Strengthening Public Resource Management Project Statement for Designated Accounts TF0A5324 for the Period from 28.08.2017 to 31.12.2018 in EUR Period 1 Opening designated accounts balance at 28.08.2017 0,00 DA(EUR) 0,00 TA(UAH) 0,00 2 Add: cumulative unexplained difference 0,00 3 IBRD advance payment during the period 128 000,00 DA(EUR) 128 000,00 TA (UAH) 0,00 4 Deduct: Refund to IBRD from DAs during the period 0,00 Amount of eligible expenditures during the reporting 5 period 121 662,46 DA(EUR) 204,25 DA (USD)* 7521,74 TA(UAH) 113936,47 6 Closing designated accounts cash balance 6 337,54 DA(EUR) 6 053,26 TA(UAH) 284,28 7 Difference (1+2+3-4-5-6) to be explained 0,00 Explanation of difference: *The amount converted in USD (8 650,00 USD) 3I Notes regarding Financial Statements of the Ministry of Finance of Ukraine prepared within the Framework of Part B "Support to PFM Strategy Implementation" of Strengthening Public Resource Management Project (Letter Agreement # TF0A5324) for the Period from 28.08.2017 to 31.12.2018 1. Background The Ministry of Finance of Ukraine is an executive body that ensures performing state functions on the basis of balanced budget policy, creating conditions for stable development of economy through management of state finance on the principles of balance, efficiency, impartiality, integrity, stability and transparency. Ukraine has received financial assistance from the International Bank for Reconstruction and Development, acting as administrator of the grant funds provided by the European Commission on behalf of the European Union under the EC - World Bank Partnership Program for Europe and Central Asia Programmatic Single-Donor Trust Fund (EU Programme for the Reform of Public Administration and Finances (EURoPAF), in an amount of EUR 3,030,661 ("Grant") toward the cost of Strengthening Public Resource Management Project. The Project consists of two parts: Part A "Strengthening Human Resource Management in Public Administration Institutions" and Part B "Support to PFM Strategy Implementation". Part B "Support to PFM Strategy Implementation" ("Project"), implemented by the Ministry of Finance of Ukraine (MOF) and totaling EUR 1,110,618, is aimed at supporting the MF in implementing 2017-2020 PFM Strategy approved by the Cabinet of Ministers of Ukraine's Resolution #142-p dated February 8, 2017. Implementation of PFM Strategy, prepared with support from the European Union (EU) and other development partners, shall result in modern and efficient PFM system. The Project will: (i) support the implementation of the Public Financial Management Reform Strategy for 2017-2020 and identify future investments in Information and Communication Technology (ICT) for Public Financial Management, throug carrying out an ICT audit, including: (a) an inventory of all ICT applications, hardware and infrastructure; (b) an assessment of the ICT systems' maintenance and service arrangements; (c) an assessment of alignment of ICT capability with current and planned business requirements; and (d) an assessment of data integrity and data protection arrangements; (ii) support to carry out: (a) an analysis of current IT solution for budget planning from functional and information technology aspects and recommendations on improvements; and (b) develop functinal requirements for upgrading the current or developing a new budget planning module with web access for budget executing entities that would enable automated consolidation of budget submission and support medium-term budgeting; (iii) support to upgrading current ICT equipment for business continuity at MOF; iv) strengthening ICT systems' capabilities to ensure timely information exchange needed for cash management and forecasting, provided that MOF has determined information flow requirements in collaboration with the United States Treasury technical assistatce team. 2 Total Project Budget in 2017-2018 is EUR 128 000,00. The financial statements under Letter Agreement No. TF0A5324 cover the period from 28.08.2017 to 31,12.2018. 2. Basis for preparation and submission The financial statements have been prepared by the MOF in order to meet requirements of Letter 31 Agreement No. TF0A5324. The financial statements have been made out based on a cash method, which does not guarantee the compliance with the International Financial Reporting Standards and National Accounting Standards. In accordance with this method incoming receivables are shown at the date they are credited to bank accounts; the expenditures are registered at the date they are debited from accounts. The currency used by the MOF is UAH. The financial statements of the Project are presented in EUR. I The funds that were actually paid in UAH and the cash balance at the UAH account have been converted into EUR in financial statements by using a commercial rate for selling currency. The funds paid in USD ahave X been converted into EUR in financial statements by using a cross-rate EUR/USD using which the bank authority conducted respective currency conversion transaction - 1,15. V I -1r The currency exchange rates EUR/UAH are provided below: Amount in UAH Amount Rate of received as a result Date of Currency Sale sold in EUR exchange of selling the currency 27.12.2017 6 515,00 33,17 216 102,55 13.02.2018 5 122,00 32,85 168 257,70 05.03.2018 5 142,00 32,59 167 577,78 04.04.2018 5 142,00 32,21 165 623,82 07.05.2018 5 222,00 31,323 163 568,71 22.05.2018 2 472,00 30,75 76 014,00 08.06.2018 5 222,00 30,73 160 472,06 04,07.2018 5 222,00 30,76 160 628,72 17.08.2018 5 222,00 31,74 165 746,28 10.09.2018 44 200,00 32,54 1438 268,00 01.11.2018 10 444,00 32 334 208,00 10.12.2018 4 000,00 31,64 126 560,00 26.12.2018 10500,00 31,04 325920,00 Total: 114 425,00 3 668 947,62 3. Disclosing some details of financial statements The rows 'Consulting services for Change Management - Private entrepreneur Alina Chernomaz' and 'Consulting services of Procurement Specialist - Private entrepreneur Nataliia Khimich' include MOF's expenditures resulting from payment for consultants' services. The cost of consultants' services in the Procurement Plan, Contracts and Handover Acts is stated in EUR. These services have been paid in UAH using an official rate of NBU at the date of signing Handover Acts. In the financial statements the amount, which was actually paid in UAH, has been converted in EUR using a currency selling rate (please see note 2). Such conversion results in a difference between the cost of consultants' services stated in rows 'Consulting services for Change Management - Private entrepreneur Alina Chernomaz' and 'Consulting services of Procurement Specialist - Private entrepreneur Natalijia Khimich' of financial statements and the cost of these services in Handover Acts (Contracts with consultants and the Procurement Plan), which is shown in the table below: Cost of services in EUR Consultant In financial In statements Handover Acts Consulting services for Change Management - Private entrepreneur 51 507,30 51176,32 Alna Chernomaz Consulting services of Procurement Specialist - Private entrepreneur 16689,46 16602,25 Nataliia Khimich Total 68 196,76 67 778,57 The row 'Consulting services for ICT Audit - Deloitte & Touche, LLC, Ukraine' includes the value of the first stage of services of ICT-audit, the total amount of which was 49 948,00 USD. In the next reporting period purchase and payment for the second stage of services of ICT-audit is planned the total amount of which is expected at the level of 121 817,00 USD. The row 'Operational costs (translation services) - Pereklad Pro, LLC, Ukraine' includes the value of services of written translation of tender documentation of the World Bank for procurement of goods and services. As agreed with the Project TTL from the World Bank, when selecting the supplier of such services no tender selective procedures were applied. 4. Other matters In December of 2018 within the framework of implementation of Project MOF purchased computer equipment from LLC "Business continuity solutions" for the total amount of 4 623 177,60 UAH. 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