MINISTRY OF CONSTRUCTION AND HOUSING - KURDisTAN REGION - GENERAL DIRECTORATE OF ROADS AND BRIDGES DUHOK - TRANSPORT CORRIDORs PROJECT CONSTRUCTION SUPERvIsION AND RELATED SERvicEs ON THE CONSTRUCTION OF THE ROAD BETWEEN GIRSHEEN-SUHEILA STATEMENT OF CASH RECEIFS AND PAYMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 GENERAL DIRECTORATE OF ROADS AND BRIDGES DUHOK TRANSPORT CORRIDORS PROJECT STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31 DECEMBER 2o18 PAGES INDEPENDENT AUDITORS' REPORT STATEMENT OF CASH RECEIPTS AND PAYMENTS 1 NOTES TO THE STATEMENT OF CASH RECEIPTS AND PAYMENTS 2-6 INDEPENDENT AUDITOR'S REPORT TO THE PROJECT MANAGEMENT TEAM (PMT) oF THE TRANSPORT CORRIDORS PROJECT GENERAL DIRECTORATE OF ROADS AND BRIDGES DUHOK THE MINISTRY OF CONSTRUCTION AND HOUSING KURDISTAN REGION Report on the audit of the Statement of Cash Receipts and Payments Our opinion In our opinion, the statement presents fairly, in all material respects, the cash receipts and payments for the year ended 31 December 2018 in accordance with International Public Sector Accounting Standards (IPSAS) under the basis of preparation described in Note 2.1 to the accompanying statement. What we have audited We have audited the accompanying Statement of Cash Receipts and Payments (the "Statement") of the "Transport Corridors Project" (the "Project") implemented by the "General Directorate of Roads and Bridges Dubok" (the "Entity") for the year ended 31 December 2018 and notes to the Statement, including a summary of significant accounting policies and other explanatory information. 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 Statement of Cash Receipts and Payments section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Entity in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) and the other ethical requirements that are relevant to our audit of the statement. We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. Basis of accounting and restriction on distribution We draw attention to Note 21 to the Statement, which describes the basis of preparation. The Statement is prepared to assist the Entity to comply with the laws, regulations and provisions under the Loan Agreement (the "Agreement") signed between the International Bank for Reconstruction and Development World Bank (the "World Bank") and the Republic of Iraq. As a result, the Statement may not be suitable: for another purpose. Our report is intended solely for the Entity and the World Bank and should not be distributed to or used by parties other than the Entity and the World Bank. Our opinion is not modified in respect of this matter. Responsibilities of management and those charged with governance for the Statement of Cash Receipts and Payments Management is responsible for the preparation and fair presentation of the Statement in accordance with IPSAS under the basis of preparation described in Note 2.1 to the accompanying Statement, and for such internal control as management determines is necessary to enable the preparation of the Statement that are free from material misstatement, whether due to fraud or error. In preparing the statement, management is responsible for assessing the Entity'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 Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity's financial reporting process. Auditor's responsibilities for the audit of the Statement of Cash Receipts and Payments Our objectives are to obtain reasonable assurance about whether the financial statement as a whole is 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 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 this financial statement. 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 financial statement, 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 Entity's internal control. * 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 Entity'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 statement 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 Entity to cease to continue as a going concern. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates, if any, and related disclosures made by management. * Evaluate the overall presentation, structure and content of the financial statement, including the disclosures, and whether the financial statement represents 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. PricewaterhouseCoopers "Jordan" L.L.C. - Erbil Branch Erbil, Iraq 31 July 2019 GENERAL DiREcToRATE OF ROADS AND BRIDGES DUHOK TRANSPORT CoRIDoRs PROJECT STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 Cumulative from inception to 31 Notes 2018 2017 December 2018 USD USD USD Bank balance at 1 January 5 4283 -4,64583 4,642,583 - 4t642,583 CASH RECEIFS Direct payments to contractors 3 25,230,877 9,889,o68 35,119,945 Transfers from the World Bank 4 1,279,689 5,178,676 6,458,365 26,510,566 15,067,744 41,578L310 CASH PAYMENTS 6 Direct payments to contractors - construction of the road 3 (25,230,877) (9,889,068) (35,119,945) Engineering and construction supervision (927,120) (336,575) (1,263,695) Individual technical expert - Procurement (11,070) (79,580) (90,650) Operational costs (36,187) (101,827) (138,014) Professional services (21,200) 18,111) (39,3u) (26,226,454) (10,425,161) (36,651,6t5) Net (decrease)/increase in bank balance 284,112 ,6 834,926,695 Bank balance at 31 December 5 4,92g6,695 4,642,583 4,926,695 N asoon rahim Saeed Khadeej oham med PMT- anager /7 The attached notes from I to 7 are an interal part of these financial Statement 1 GENERAL DIRECTORATE OF ROADS AND BRIDGES DUHOK TRANSPORT CORRIDORS PROJECT NOTES To THE STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (I) GENERAL INFORMATION 1.1 General information The Republic of Iraq has been granted a loan for the amount of USD 355 million from the World Bank - international Bank for Reconstruction and Development (the "World Bank") to support the implementation of Transport Corridors Project (TCP) in Iraq and Kurdistan. The loan agreement number 8322-IQ (the "Agreement") for the TCP project was signed between the Republic of Iraq and the World Bank on 2 March 2014 to implement the TCP with a project ending date of 31 December 2019. The Agreement was accompanied by a "Declaration of Effectiveness" letter dated 30 March 2015 in which the loan agreement became effective 30 March 2015. The loan is repayable by the Republic of Iraq between 1 March 2019 and i September 2028 in the form of 20 semi-annual repayments. The goal of the project is to improve the quality and delivery of road infrastructure services through a combination of road rehabilitation investment and institutional development for State Commission for Roads and Bridges, Baghdad ("SCRB Baghdad") and General Directorate for Roads and Bridges, Dohuk ("GDRB Duhok"). GDRB Duhok is mandated to deliver road infrastructure services in Kurdistan, working under the Ministry of Construction and Housing - Kurdistan. GDRB Duhok's share of the loan from the World Bank for the TCP project is USD 60.354 million, for the development of the Girsheen-Suheila roads in Duhok province. 1.2 Project Information The primary objectives of the GDRB Dohuk TCP project are to: * design and help achieve economic diversification for broadly shared prosperity through improved road sector governance, * improved accessibility, and * reduction in travel time, transport and trade costs and road fatalities. The TCP consists of three components: strategic infrastructure investments, institutional capacity building and strengthening, and project implementation and monitoring. The GDRB Duhok will implement sub-components for the above components under the umbrella of Project Coordination Unit (PCU) based in the Ministry of Construction and Housing - Kurdistan. A Project Management Team (PMT) in Dohuk has been established to manage the TCP over a period of 5 years which is the expected duration of the construction project. The PMT is responsible for management of proJect activities including procurement and contract management, design, supervision, studies, quality control, administration of project funds and reporting as well to make payments to suppliers and account for funds disbursed according to the World Bank guidelines and procedures in coordination with the PCU. GENERAL DIRECoRATE OF ROADS AND BRIDGES DUHOK TRANSPORT CORRIDORS PROJECT NOTES To THE STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (2) SUMMARYQOFSIGNIFICANTAccouNTNG POUCIES The accounting policies have been applied consistently throughout the years. 2.1 Basis of preparation The Statement of Cash Receipts and Payments was prepared under the cash basis of accounting as defined in International Public Sector Accounting Standards (IPSAS), which is issued by the International Federation of Accountants (IFAC). Under the cash basis of accounting, cash receipts are recognized when cash is received and cash payments are recognized when payments are made. 2.2 Foreign currency transactions The United States Dollar (USD) is the project reporting and functional currency. The books of accounts are maintained in USD. Transactions denominated in other currencies are translated to USD using the exchange rate prevailing at the date of transactions. 2.3 Receipts Cash receipts represents balances transferred from the World Bank and deposited into the project's designated bank account with Trade Bank of Iraq. Cash receipts are recognized when cash is received. 2.4 Payments Disbursements represents cash payments incurred in the normal course of the Project operations. Payments are recognized when the disbursement is made. 2.9 Capital expenditures Capital expenditures incurred to acquire fixed and other assets are recognized in the Statement of Cash Receipts and Payments when the payment is made for these assets. 2.6 Provisions Provisions are not recognized when there is an existing legal or contractual obligation as results of the Project operations. Provisions are recognized in the Statement of Cash Receipts and Payments when the provision payment is made. 2.7 Contingent liabilities Contingent liabilities are not disclosed in the Statement of Cash Receipts and Payments. Liabilities are recognized when the payment is made. 3 GENERAL DIRECTORATE OF ROADS AND BRIDGES DUHOK TRANSPORT CORRIDORS PROJECT NOTES TO THE STATEMENT OF CASH RECEIFS AND PAYMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (3) DIRECT PAYMENTS TO CONTRACTORS The World Bank makes payments directly to third parties (suppliers, contractors, or consultants) for eligible expenditures. The entity only controls the amounts paid to the project's designated bank account; other amounts paid directly by the World Bank to contractors are under the control of the World Bank. The following direct payments were paid by the World Bank to a contractor: From 2018 inception date Total Date USD USD USD 19 June 2017 - 5,364,866 5,364,866 18 October 2017 - 1,051,88o 1,051,880 26 November 2017 - 1,813,477 1,813,477 19 December 2017 1,658,845 1,658,845 i February 2018 859,574 - 859,574 10 February 2018 8,965 - 8,965 2 March 2018 1,543,284 - 1,543,284 23 April 2018 2,497,633 - 2,497,633 6 June 2018 1,293,320 - 1,293,320 15 June 2018 3,009,035 - 3,009,035 26 July 2018 2,421,683 - 2,421,683 16 August 2018 2,547,306 - 2,547,306 21 September 2018 2,029,979 - 2,029,979 17 October 2018 2,585,950 - 2,585,950 8 November 2018 4,297,675 - 4,297,675 12 December 2018 2,136473 2,i26,463 25,230,877 - ,889,o68 35,119,945 There were no direct payments made by World Bank to contractors in 2015 and 2016. 4 GENERAL DIRECTORATE OF ROADS AND BRIDGES DUHOK TRANSPORT CORRIDORS PROJECT NOTES To THE STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (4) TRANSFERS FROM THE WORLD BANK Funds received for the Project from the World Bank that were deposited into the designated bank account with the Trade Bank of Iraq to finance eligible Project expenditures were as follows: Cumulative from From inception 2016 to 31 2018 date December 2018 Date USD USD USD 15 March 2o16 - 150,000 150,000 13 July 2016 - 4,850,000 4,850,000 12 April 2017 - 157,474 157,474 5 December 2017 - 21,202 21,202 2 January 2018 339,204 - 339,204 1 July 2018 366,679 - 366,679 21 October 2018 390,491 - 390,491 23 December 2018 183,315 1,279,689 5,17,676 6,458,365 (5) CASH AT BANK The opening and closing balances of the designated bank account with Trade Bank Iraq were as follows: 2018 USD USD Opening balance 4,648 4,842,714 Closing balance 4426,695 4,642,583 5 � ... r� а� � � О �А ь.�`i` с� �п � �'+ С1 �' `�е �j � � С� Gp � � С�О N .ь, .>, � �� W Vi � � Й � �у Q �j � �' '� ь"�' 4D м С) С� '� 11 � а � I `� о � ` � ° � .ь� +м г^. r. � н.. н ьU С�7 �С"� � �А �О (,�j � ц7 Сб � �;� А rn ui о �тэ л � � е� О � �11 н °` � �. *� с"n � ;-' � � И ы' � @? � �..+ � ``... � � � � �� 4] и а� � � �� � � � � � � � А � � � � v rл � `° м � ,� о �� й ,� °� °' `° �с' а' ��, ь.'7 м гi +G ч��..s � � и и ^� e�i й °} � '� а3 ст a�i � � � � � �'г r � G7 С.� °1 ы � а � � � � с w � и с7 � й3 •� й � � '� й � С7 С�' :�; rл С3 F�., �r °'�� ,�1 � Q � � Q� ^° i+ �„ь `�ь•�`, i.� U U U � ° � � � � н н д � . 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