96825 [Archive/ HEALTH RESULTS BASED FINANCING PRE-PILOT PROJECT UNDER THE MINISTRY OF HEALTH OF THE KYRGVZ REPUBLIC INTERNATIONAL DEVELOPMENT ASSOCIATION GRANT NO. TF 099792 FOR DEVELOPMENT PURPOSES Special Purpose Project Financial Statements For the period from 1 September 2013 (date of inception) till20 November 2014 HEALTH RESULTS BASED FINANCING PRE-PILOT PROJECT IDA Grant No. TF 099792 TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT'S RESPONSIDILITIES FOR TilE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS 1 INDEPENDENT AUDITORS' REPORT 2-3 SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM 1 SEPTMBER 2013 (date of inception) TILL 20 NOVEMBER 2014: Balance sheet 4 Statement of sources and uses of funds 5 Statement of withdrawals on IDA grant 6 Statement of IDA special account 7 Notes to the special pwpose project financial statements 8-11 Supplementary information (unaudited) 12 0 STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM 1 SEPTEMBER 2013 (DATE OF INCEPTION) TILL 20 NOVEMBER 2014 Secretariat of Health Results Based Financing Pre-Pilot Project (the "Project") implemented by the Project Secretariat under the Ministry of Health of the Kyrgyz Republic is responsible for the preparation of the special purpose project financial statements that present fairly the balance sheet as at 20 November 2014 and the statement of sources and uses of funds, statement of withdrawals on International Development Association ("IDA") grant, statement of IDA special account for the period from 1 September 2013 (date of inception) till 20 November 2014, in compliance with the International Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting" ("IPSAS - Cash Basis'') and the World Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities" (the "WB Guidelines"). In preparing the special purpose project financial statements, the Project's Secretariat is responsible for: • Properly selecting and applying accounting policies; • Presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • Providing additional disclosures when compliance with the specific requirements in IPSAS - Cash Basis are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Project, its balance sheet as at 20 November 2014 and statement of sources and uses of funds, statement of withdrawals on IDA Grant, IDA Special account statement for the period from 1 September 2013 (date of inception) till20 November 2014; • Making an assessment of the Project's ability to continue as a going concern. The Project's Secretariat is also responsible for: • Designing, implementing and maintaining an effective and sound system of internal controls, throughout the Project; • Maintaining adequate accounting records that are sufficient to show and explain the Project's transactions and disclose with reasonable accuracy at any time the financial position of the Project, and which enable them to ensure that the special purpose project financial statements of the Project comply with IPSAS - Cash Basis and the WB Guidelines; • Maintaining statutory accounting records in compliance with the Kyrgyz Republic legislation; • Taking such steps are reasonably available to them to safeguard the assets of the Project and to affirm that funds received on the basis of Grant Agreement No. TF 099792 were used for the purposes the financing was provided for; and • Preventing and detecting fraud and other irregularities. The special purpose project financial statements for the period from 1 September 2013 till 20 November 2014 were a ro ed by the Management on 19 December 2014. ~/ Oskombaeva K.T Esengulov K.A. Acting Director of the Financial management Health Results Based specialist of the Health Financing Pre-Pilot Project's Results Based Secretariat Financing Pre-Pilot Project's Secretariat 19 December 2014 Bishkek, Kyrgyz Republic Deloitte. Deloitte & Touche, LLC Off. 904-906, Business Centre "Russia" 19, Razzakov Street Bishkek, 720040 Kyrgyz Republic Tel: +996 (312) 39 82 88 Fax: +996 (312) 39 82 89 www.deloitte.kg INDEPENDENT AUDITORS' REPORT To the Project Secretariat under the Ministry of Health of the Kyrgyz Republic ("MHKR"): We have audited the accompanying special purpose project financial statements of the Health Results Based Financing Pre-Pilot Project (''the Project") financed under Grant Agreement No. TF 099792 ("the Grant Agreement"), which comprise the balance sheet as at 20 November 2014 and the statement of sources and uses of funds, statement of withdrawals on IDA grant, statement of IDA special account for the period from 1 September 2013 (date of inception) till 20 November 2014 and a summary of significant accounting policies and other explanatory information (collectively referred to as the "special purpose project financial statements"). The special purpose project financial statements have been prepared by the Project's Secretariat using the International Public Sector Accounting Standard, Financial Reporting under the Cash Basis of Accounting ("IPSAS - Cash Basis"), and the Guidelines on Annual Financial Reporting I and Auditing for World Bank - Financed Activities issued by the World Bank's Financial Management Sector Board (''the WB Guidelines"). Management's responsibility for the sp~ial purpose proj~t financial statements I Management is responsible for the preparation and fair presentation of these special purpose project fmancial statements in accordance with the basis of accounting described in Note 2. This includes ~ determining that the IPSAS - Cash Basis of accounting is 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 the special purpose project fmancial statements that are free from material misstatement, whether due to fraud or error. Auditors' responsibility Our responsibility is to express an opinion on these special purpose project financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the special purpose project financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the special purpose project financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the special purpose project fmancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Project's preparation and of the special purpose project financial statements 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the special purpose project financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Deloitte refers to one or more ofDeloitte Touche Tohmatsu Limited, a UK private company limited by gu.vantee, and its network of member ftnns. each of which is a legally separate and independent entity. Please see www .deloitte.comfabout for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member ftnns. Please see www.deloitte.comfrulabout for a detailed description of the legal structure of Deloatte CIS. Member of Deloitte Touche Tohmatsu Limited Opinion In our opinion, the special purpose project financial statements present fairly, in all material respects, the balance sheet as at 20 November 2014 and the statement of sources and uses of funds, statement of withdrawals on IDA grant, statement of IDA special account for the period from 1 September 2013 (date of inception) ti1120 November 2014, in accordance with IPSAS- Cash Basis and the WB Guidelines. Basis of accounting and restriction on distribution and use Without modifying our opinion, we draw attention to Note 2 to the special purpose financial statements which describes the basis of accounting. The special purpose project financial statements are prepared to assist the Project to comply with the requirements of IDA. As a result, the special purpose project financial statements may not be suitable for another purpose. 3 HEALTH RESULTS BASED FINANCING PRE-PILOT PROJECT IDA Grant No. TF 099792 BALANCE SHEET AS AT 20 NOVEMBER 2014 (in US Dollars) Notes 20November 2014 ASSETS Cash 4 20,557 Project accumulated expenditures 6 344,966 TOTAL ASSETS AND EXPENDITURES 365.523 FINANCING IDA Grant 5 (365,523} TOTAL FINANCING '3651523l Oskombaeva K. T Esengulov K.A. Acting Director of the Financial management Health Results Based specialist of the Health Financing Pre-Pilot Project's Results Based Secretariat Financing Pre-Pilot Project's Secretariat 19 December 2014 Bishkek, Kyrgyz Republic Notes on pages 8-11 form an integral part of these special purpose project financial statements. 4 HEALTH RESULTS BASED FINANCING PRE-PILOT PROJECT IDA Grant No. TF 099792 STATEMENT OF SOURCES AND USES OF FUNDS FOR THE PERIOD FROM 1 SEPTEMBER 2013 (DATE OF INCEPTION) TILL 20 NOVEMBER 2014 (in US Dollars) Notes Opening balance at 1 September Z013 Source of funds IDA Grant 5 365,523 Total sources of funds 365,513 Useoffunds Project expenditures, including: Goods and Operating expenses 6 157,639 Consulting services, including trainings 6 147,881 Incentive payment for Chui Hospital 6 39,446 Total use of funds 3442966 Closing balance at ZO November Z014 4 10&557 Oskombaeva K. T Acting Director of the Eseu!f.w K.A. Financial management Health Results Based specialist of the Health Financing Pre-Pllot Project's Results Based Secretariat Financing Pre-Pllot Project's Secretariat 19 December 2014 Bishkek, Kyrgyz Republic Notes on pages 8-11 form an integral part of these special putpose project financial statement 5 HEALTH RESULTS BASED FINANCING PRE-PILOT PROJECT IDA Grant No. TF 099792 STATEMENT OF WITHDRAWALS ON IDA GRANT FOR THE PERIOD FROM 1 SEPTEMBER 2013 (DATE OF INCEPTION) TILL 20 NOVEMBER 2014 (in US Dollars) Withdrawal Date Type of Notes Amount of number of withdrawal withdrawal advance 29 September 2013 Advance 200,000 2 7May2014 Advance 103,692 3 24 October 2014 Advance 61,831 Total funds withdrawals during the period 5 365,523 Oskombaeva K. T Esengulov K.A. Acting Director of the Financial management Health Results Based specialist of the Health Financing Pre-Pilot Project's Results Based Secretariat Financing Pre-Pilot Project's Secretariat 19 December 2014 Bishkek, Kyrgyz Republic Notes on pages 8-11 form an integral part of these special purpose project fmancial statement 6 HEALTH RESULTS BASED FINANCING PRE-PILOT PROJECT IDA Grant No. TF 099792 STATEMENT OF IDA SPECIAL ACCOUNT FOR THE PERIOD FROM 1 SEPTEMBER 2013 TILL 20 NOVEMBER 2014 (in US Dollars) Bank account# Notes 1010100033502788 National Bank of the Kyrgyz Bank Republic Bank location Umetallev str. Bldg 101, Blshkek Kyrgyz Republic Financing agreement IDA Grant No. TF099792 Currency US Dollars Part 1. Summary Opening balance at 1 September 2013 Add: World Bank replenishments 5 365,523 Less: Payments from the Special Account 6 (344,966) Closing balance at 20 November 2014 4 20,557 Oskombaeva K. T Esenli.fv K.A. Acting Director of the Financial management Health Results Based specialist of the Health Financing Pre-Pilot Project's Results Based Secretariat Financing Pre-Pllot Project's Secretariat 19 December 2014 Bishkek, Kyrgyz Republic Notes on pages 8-11 form an integral part of these special purpose project fmancia1 statement 7 HEALTH RESULTS BASED FINANCING PRE-PILOT PROJECT IDA Grant No. TF 099792 NOTES TO SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE PERIOD FROM 1 SEPTEMBER 2013 (DATE OF INCEPTION) TILL 20 NOVEMBER 2014 (in US Dollars) 1. PROJECT DESCRIPTION Health Results Based Financing ("RBF") Pre-Pilot Project is under implementation in accordance with the Development Grant Agreement No. TF 099792 signed on 28 July 2012 between the International Development Association and the Government of Kyrgyz Republic. The objectives of the Project are to: (a) introduce alternative provider payment mechanisms through RBF and enhanced supervision, in randomly selected region hospitals, to pilot and test alternatives for improving the quality of health services, and (b) strengthen the Government's and providers' capacity for collecting, monitoring and evaluating information regarding the quality of health services. The RBF Pre-Pilot Project does not include any components. The activities of pre-pilot stage included preparation for the main project (including purchases of the goods to be used for the main project), training of doctors for new assessment and monitoring methods; work with the selected Chui Territorial Hospital. The total financing of the Pre-Pilot Project as per agreement is USD 500 thousand. The following categories of expenses were paid by the International Development Association's funds exclusively for the purpose of implementation of the listed activities: Grant amount % off"manced allocated, expenses (US Dollars) (I) Goods, works, non-consulting services, consultants' services and Operating Costs 500,000 100% TOTAL 500,000 100% As per the Grant Agreement, the Project implementation period was set as 11 months with the closing date on 30 June 2013. Later the Project implementation period was extended ti1130 June 2014. On 23 June 2014 project closing date was extended till 30 September 2014 with the grace period of four months. The financing of the Project started in September 2013. The management of the Project was carried out by the executing agency as represented by the Ministry of Health of the Kyrgyz Republic and by the Project Secretariat. The Project Secretariat was not an independent legal entity and carried out its activities under the control of the Ministry of Health of the Kyrgyz Republic. J 8 HEALTH RESULTS BASED FINANCING PRE-PILOT PROJECT IDA Grant No. TF 099792 NOTES TO SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE PERIOD FROM 1 SEPTEMBER 2013 (DATE OF INCEPTION) TILL 20 NOVEMBER 2014 (CONTINUED) (In US Dollars) 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 "WB Guidelines"). Project financing is recognised as a source of project funds when the cash is received. Project expenditures are recognised as a use of project funds when the payments are made. Accounting method These special purpose project financial statements were prepared on the cash-basis accounting method that implies that: • All funds deposited at the special account in US Dollars or funds deposited at the settlement account in the national currency and which are disclosed in the statements when received should be recorded as income regardless of the nature and sources; • Expenses are the funds used for payment for works, goods and services and which are disclosed in statements when paid. Presentation currency and transactions in foreign currency These special purpose project financial statements are denominated in US Dollars, which allows carrying out verification between the Grant accounts and the International Development Association's records. The primary accounting records on the Project were made in the national currency - Kyrgyz Som. Incomes not denominated in US Dollars were translated at the exchange rate of the National Bank of Kyrgyz Republic effective on the day of the operation.. Projects expenditures For the purpose of expending the Projects funds, a procedure of submission of the statements of expenditures was used with indication of expenditures by categories. Statements of expenditures were developed on the basis of source documents supporting expenditures of funds and kept in the Project. In accordance with the method of statement of expenditures, the Project submitted a withdrawal application (WIA) of an established format to the World Bank. 9 HEALTH RESULTS BASED FINANCING PRE-PILOT PROJECT IDA Grant No. TF 099792 NOTES TO SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE PERIOD FROM 1 SEPTEMBER 2013 (DATE OF INCEPTION) TILL 20 NOVEMBER 2014 (CONTINUED) (in US Dollars) Procurement of goods, works and consulting services Procurement of goods, consulting and non-consulting services was implemented in accordance with "Guidelines: Procurement under ffiRD Loans and IDA Credits and Grants by World Banks Borrowers" dated January 2011, and requirements specified in IDA Grant Agreement No. TF 099792 For procurement of consulting services the Project applied the standard requests for proposals and standard contract forms for consultants. Property, Plant and Equipment The assets used for the Project implementation with the useful life more than one year and with the value exceed the threshold of 4,500 Kyrgyz Soms are recognised in the accounting records as property, plant and equipment. Assets purchased by the Project, are recorded at the purchase cost in the expense Category "Goods, equipment and materials". Property, plant and equipment are recorded on the off-balance sheet accounts. Taking into consideration the Project's non-commercial status, depreciation on off-balance sheet account was not accrued for the property, plant and equipment. Procurement of property, plant and equipment is carried out on the tender basis. Evaluation of commercial bids are carried out by the tender committee and approved by the International Development Association. 3. GOING CONCERN Initially in accordance with IDA Agreement No. TF 099792 dated 28 July 2012 between the Kyrgyz Republic and International Development Association, the expected date of the grants' accounts closing is determined as 30 June 2013. Later the Project implementation period was extended till 30 June 2014. On the basis of the letter from International Development Association dated 23 June 2014 the implementation period for the Project is extended to 30 September 2014 with the grace period of four months. 4. CASH Account description 20November 2014 US Dollars (equivalent) IDA Special account 1,557 Escrow account in Treasury 19,000 Total 20,557 The cash balance in the amount of 19,000 US Dollars was transferred to the escrow account by the RBF Secretariat for the audit service payment in accordance with the agreement dated 30 September 2014. 10 HEALTH RESULTS BASED FINANCING PRE-PILOT PROJECT IDA Grant No. TF 099792 NOTES TO SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE PERIOD FROM 1 SEPTEMBER 2013 (DATE OF INCEPTION) TILL 20 NOVEMBER 2014 (CONTINUED) (in US Dollars) S. FINANCING Date of receipt Amount Source of use IDA: Initial advance 29 September 2013 200,000 Replenishment of account 7 May2014 103,692 Replenishment of account 24 October 2014 61,831 Total 365,523 6. EXPENSES BY CATEGORIES For the period from 1 September 2013 til120 November 2014 and accumulated for all periods goods, training and other operating expenses were the following: Description 1 September 2013- 20 November 2014 Goods and operating expenses: Automobiles 68,336 Computer equipment 59,071 Furniture 6,528 Operating expenses 23,704 157,639 Consultancy services, including trainings: Trainings for doctors 59,568 Local consultants 88,313 147,881 Incentive payment for Chui Hospital 39,446 Total 344,966 7. SUBSEQUENT EVENTS On 8 December 2014 RBF Secretariat returned cash balance in amount of 1,557 US Dollars to the IDA's account. On 12 December 2014 RBF Secretariat make primary advance payment in amount of 1,900 US Dollars for the audit service. 8. APPROVAL OF SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS These special purpose project financial statements were authorised for issue by the Management of the Project on 19 December 2014. 11 HEALTH RESULTS BASED FINANCING PRE-PILOT PROJECT IDA Grant No. TF 099792 SUPPLEMENTARY INFORMATION (UNADITED) FOR THE PERIOD FROM 1 SEPTEMBER 2013 TILL 20 NOVEMBER 2014 (in US Dollars) BUDGET EXECUTION (UNAUDITED) The cumulative total Budget execution of the International Development Association as at 20 November 2014 was the following: Variance Budget Actual use of funds from the (unaudited) beginning of the Project (budget - actual) {unaudited} In US In US %from In US %from Dollars Dollars budget Dollars budget Goods and operating expenses 257,820 157,639 61.14% 100,181 38.86% Consultancy services, including trainings 202,680 147,881 72.96% 54,799 27.04% Incentive Payment to Chui Hospital 39,500 39,446 99.86% 54 0.14% Total 500,000 344,966 69% 155,034 31% 12