Energy Efficiency Improvement in Kazakhstan project, funded under Grant agreement No. TF014185 dated 18 June 2014, concluded between Government of the Republic of Kazakhstan and International Bank of Reconstruction and Development Financial statements for the year ended 31 December 2018 and Independent Auditor's report ergy Efficiency Improvement in Kazakhstan Project NT No. TF014185 Cnents Page nsibility of the management for the preparation and approval of financial statements for the rended December 31, 2018 ............ 3 ependent Auditor's report ...... .........................................................................4-6 nclat statements for the year ended December 31, 2018: ement of cash flows .............................................................................................7 ement of expense by components ............................................................................ 8 s to the financial statements ............................................................................. 9-14 ENDIX 1 Reconciliation of sums, approved by :KHENERGYEXPERTISE JSC AND DISBURSED BY THE WORLD BANK .....................................15 2 Responsibility of the management for the preparation and approval of financial statements for the year ended December 31, 2018 The following statement, which should be read in conjunction with the presentation of an independent auditor, was made In order to delineate the responsibility of management and the auditor regarding the financial statements of the Institute for. management of Electric power and energy saving development institute Joint Stock Company (Kazakhenergyexpertise) (hereinafter - Executive Agency) is responsible for preparation of financial statements of Energy Efficiency Improvement in Kazakhstan project (hereinafter - Project), funded under Grant agreement No. TF014185 between the Government of the Republic of Kazakhstan and International Bank of Reconstruction and Development dated 18.06.2014 (hereinafter - Agreement) that fairly present the cash flows under the Project, expenses by components for the period of 1 January 2018 to 31 December 2018, the financial position of the project as of 31 December 2018 In accordance with "Financial reporting for cash accounting" of the IFRS for Public sector, published by International ederatlion of Accountants, and also in accordance with requirements of World Bank for financial reporting preparation. in preparing the financial statements, the Executive agency is responsible for: " Ensuring correct selection and application of accounting policies. Disclosure including accounting policy in a form ensuring relevance, reliability, comparability and clarity of information disclosed. " Additional disclosures when compliance with IFRSs requirements is insufficient for users to understand the impact f certain transactions, other events or conditions on the financial position or financial performance of the Executive agency. Assessing Executive agency's ability to continue operations in the foreseeable future. Executive agency is also responsible for: Design, implementation and ensuring reliable internal control in the Executive agency. Accounting that allows for the disclosure of Executive agency's transactions under the Project and providing sufficiently accurate information on the Executive agency's financial position as of any date and ensuring financial statements compliance with "Financial reporting for cash accounting" of the IFRS for Public sector, published by International Federation of Accountants, and also in accordance with the provisions of the Grant agreement No. TF014185 between the Government of the Republic of Kazakhstan and International Bank of Reconstruction and Development. Taking all reasonable efforts to ensure safety of Project assets and confirmation that the funds received in accordance with the Grant Agreement No. TF014185 between the Government of the Republic of Kazakhstan and the International Bank for Reconstruction and Development, which was signed on June 18, 2014 and ratified on March 19, 2015, were used only for the intended purpose with due attention to economy and efficiency; Financial mismanagement detection and prevention. The accompanying financial statements for the year ended December 31, 2018 were approved by the Executive y's Management on June 26, 2019: rman of the Board 6flm B.A. Smagulov Stamp here Nur-Suitan, Republic of Kazakhstan 3 TeA.: +7 727 331 31 34 TOO "BDO Kazakhstan" (aKc: +7 727 331 31 35 yA. ra6Ayll/Ha, 6 B D O info@bdokz.com AlMaTtI, Ka3axcTaH www.bdokz.com A15H4E3 Tel: +7 727 331 31 34 BDO Kazakhstan LLP Fax: +7 727 331 31 35 6 Gabdullin Street info@bdokz.com Almaty, Kazakhstan www.bdokz.com A15H4E3 INDEPENDENT AUDITOR'S REPORT To the management of "Energy efficiency improvement in Kazakhstan" project, funded under Grant agreement of the Trust fund No. TF014185, made between the Government of the Republic of Kazakhstan and International Bank of Reconstruction and Development. Conclusion by audit results We have audited the attached financial statements of Energy efficiency improvement in Kazakhstan project, funded under Trust Fund Grant Agreement No. TF014185, made between the Government of the Republic of Kazakhstan and International Bank of Reconstruction and Development (hereinafter - Project) and implemented by Electric power and energy saving development institute JSC (Kazakhenergyexpertise), which comprise the statement of cash flows for the year ended 31 December 2018, the statement of expense by components for the year ended 31 December 2018, and also and notes to the separate financial statements, including summary of significant accounting policies (hereinafter - financial statements). In our opinion: 1. Presented financial statements fairly present in all material aspects the cash flows of the Project for the year ended December 31, 2018, in accordance with "Financial reporting for cash accounting" of the IFRS for Public sector, published by International Federation of Accountants, as well as in accordance with the requirements for the preparation of financial statements of the Trust Fund Grant Agreement No. TF014185, concluded between the Government of the Republic of Kazakhstan and the International Bank for Reconstruction and Development. 2. All external funds were used in accordance with the terms of the Grant Agreement TF01 4185 dated June 18, 2014 between the Government of the Republic of Kazakhstan and the International Bank for Reconstruction and Development, the Project Agreement dated June 18, 2014 between the International Bank for Reconstruction and Development (hereinafter referred to as World Bank) and Electric power and energy saving development institute JSC (Kazenergyexpertise) and the Subsidiary Agreement dated October 30, 2014 between the Ministry of Industry and Infrastructural Development of the Republic of Kazakhstan and Electric power and energy saving development institute JSC (Kazenergyexpertise), the letter of expenditure dated 18 June 2014, with due regard to the observance of the principles of economy and efficiency, and only for the purposes for which the funding was provided. 3. All necessary supporting documents, records and a special account are maintained in respect of all types of Project activities, including expenses that are kept according to the expenditure statement of expenses (SOE). Statements for the period correspond to the accounting books. 4. The special account is maintained in accordance with the provisions of the Agreement and the applicable instructions of the World Bank. 5. Goods, works, services were procured in accordance with the Agreement and special provisions of the World Bank Procurement Guidelines. U" CA 41 IWafH-NoA oTwTmmoOrnwTI "ODO Kazakhstan*, 3apermmTPSoaaHoe a COOTBerTa"m5 C raOATr~1oMPCYJK aTAer YAC "Ko OmeAYHapowHorft 6ewmmIHm BDO international Limited, (Sp"lTa"Mro o6ute-Ba c oTaTCnWeoHCTbIM, orp&HW4eHH0A 4aaTie r S11* seTcH f acTCA o 4-mewAyHapoA4oA cerm He3asmacmx KomUnaHsA BO. K'i`htan, a limited liability partnership, registered under the laws of the RepubliC of Kazakhstan, is a member of BDO international Limited, a UK ited by guarantee, and forms part of the international B00 network of independent member firms. ais 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 the Project and Electric power and energy saving development institute JSC (Kazakhenergyexpertise) in accordance with the Code of Ethics of Professional Accountants of the International Ethics Standards Board for Accountants (IESBA Code) and ethical requirements that are relevant to our audit of financial statements in Kazakhstan, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics of Professional Accountants. We believe that the audit evidence we have obtained is sufficient and appropriate to serve as a basis for the expression of our opinion. Paragraph of matter !e draw your attention to Note 7 to the financial statements, where we have disclosed the reasons for jelays during the implementation of the Project. Our opinion is not modified in relation to this aspect. iportant circumstances - accounting principles .e draw attention to the following information set out in Note 2 to the financial statements, which describes the accounting principles. Financial statements have been prepared to assist the Executing gency in complying with World Bank requirements. As a result, these financial statements may not be sitable for another purpose. We do not express a modified opinion in connection with this matter. Responsibility of the management for the financial statements roject Management is responsible for the preparation and fair presentation of the financial statements n accordance with "Financial reporting for cash accounting" of the IFRS for Public sector, published by ASB for Public Sector of IFA, and in accordance with the provisions of the Grant Agreement No. TF014185, oncluded between the Government of the Republic of Kazakhstan and the International Bank for econstruction and Development, and for such internal control as management determines is necessary , enable the preparation of financial statements that are free from material misstatements, whether due a fraud or error. Auditor's responsibility for the audit of Financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are ree from material misstatement, whether due to fraud or error and to issue an auditor's report that ncludes our opinion. Reasonable assurance is a high level of assurance, but it does not guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. isstatements can arise from fraud or error and are considered material if, individually or in the ggregate, they could reasonably be expected to influence the economic decisions of users taken on the asis of these financial statements. As part of an audit in accordance with International Standards on Auditing, we exercise professional Judgement and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of financial statements, whether due to fraud r error, design and perform audit procedures responsive to those risks and obtain audit evidence that is fficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than the one sulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, r the override of internal control; Obtain an understanding of the internal control system that is relevant r the audit in order to design audit procedures that are appropriate in the circumstances, but not for e Purpose of expressing an opinion on the effectiveness of the Projects internal control; Evaluate the appropriateness of accounting policies used and the reasonableness of accounting "tMates and related disclosures made by management; 5 uditor's responsibility for the audit of Financial statements (continued) Evaluate the overall presentation, structure and content of the financial statements, including the sclosures, and whether the financial statements represent the underlying transactions and events in a anner that achieves fair presentation. e communicate those charged with governance regarding, among other matters, the planned scope and ming of the audit and significant audit findings, including any significant deficiencies in the internal ntrol that we identify during our audit. .DO Kazakhstan LLP tate license No. 15003448 for audit activity isued on February 19, 2015, by of the ommittee for Financial Control of the Ministry f Finance of the Republic of Kazakhstan, Nur- Sultan Dlrector G0 o Auditor D. Bab44y Auditor Qualificat rtificate No. 0000303 issued by the Qualification Commission for certification of auditors of the Republic of Kazakhstan on 23.12.1996. 6 June 2019 Rublic of Kazakhstan, Almaty, Gabdullin street 6 Ё О й и ~ � � м .- � �N � h � � � � � д�е- s м : .� _ и G О .- .- '' � У р � � й ��,' � � aa,i м н � � С `� г�i �r w �� �; � м и s� р, � � � rNi .�р� ��„ £' Р м а"i�N м м •о � -✓ N а0 �1' � a.vlл ' +� Р м м { т ~ •.. Р Ё R� � в . � � ю и м оо й � �"^ °� N О w N h. cV р й � �о �О _ 17 Р �I' Р �^ '� С Д Р а k„ м к а ,�а. оИi � � � у� -- оо оо оо r. г. v оо .о +оо � о cS � в- N г' Р м N О� рр w а0 � О р и� О м м и м �у � ` 0 Р h �,q" .Q" .D � р�t N �N О �N� ��Т N е- О и N'�' rt Cl N .= о � ор м � � р 'i� г' ,� Р Р V д! . 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С! � � L Ql � м-� �% •.+,'' � ' д'',v� �i � й й с° гй а`. й со � а ,q со й�.� ' л�� '.��v �;,,�` •,a•ei \\ Е�'�L��,'•.��, P�rif �.���`Fгн� �м-"* �� У � с -. - l ,. � .7 : - -.'f: '4_,' -.t'У У � Energy efficiency Improvement In Kazakhstan Project Trust Fund Grant No. TF014185 Notes to the financial statements for the year ended December 31, 2018 (in uS doliars) NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2018 (all amounts in US dollars) GENERAL INFORMATION Project Grant Agreement No. TF014185 (hereinafter - Agreement) between the Government of the Republic of Kazakhstan (hereinafter - Government) and the International Bank for Reconstruction and Development acting as administrator of the Trust Fund of one donor for the program for improving energy efficiency and the development of youth associations (hereinafter - The World Bank), was signed on June 18, 2014 and ratified on March 19, 2015 (the "project start date"). Under the Agreement, the Trust Fund provides a grant of 21,763,000 (twenty one million seven hundred sixty three thousand) US dollars (hereinafter referred to as the "Grant") for the implementation of the Energy Efficiency Improvement in Kazakhstan Project (hereinafter - Project) whose executive agency is Chairman of the Board of the Electric power and energy saving development institute JSC (Kazakhenergyexpertise) (hereinafter - the Executive Agency). Grant withdrawals are made in US dollars, and payments are made in US dollars and Kazakhstani tenge. The end of the Grant Agreement is December 29, 2020. 1.2. Project Goals The objectives of the project are to improve: (I) energy efficiency of state and socially significant facilities and (ii) an enabling environment for sustainable energy financing. The project includes the following components: Part 1: Preparation and implementation of representational subprojects in state and socially significant facilities Implementation of eligible subprojects to reduce energy consumption in public buildings in accordance with the criteria set out in the Project Operational Manual. a Part 2: Technical Assistance to the Recipient and the Executive Agency of the Project (1) Building the capacity of MINT and the Project Executive Agency for coordination, implementation, monitoring, evaluation and management. 00 Conducting technical research in the field of energy efficiency. (iii) Conduct awareness raising and information campaigns related to subprojects funded under Part 1 of the Project. Ov) Development of legal, institutional and regulatory documents to support the establishment of sustainable energy financing mechanisms. (v) Development of detailed financing mechanisms and implementation of economically viable financing schemes for energy efficiency investments, including the creation of a list of energy efficiency investment projects that are ready for financing. 1.3. Project implementation The Ministry of Industry and Infrastructurat Development of the Republic of Kazakhstan on behalf of the Republic of Kazakhstan (hereinafter - the "Recipient") provides overall coordination and control over the Project activities throughout the entire period of the Project implementation. The Recipient undertakes to ensure the implementation of the Project by the Executive Agency of the Project, in accordance with the provisions of the guidelines that meet the requirements of the World Bank, which, among other things, should include the following, a) implementation mechanisms, procurement procedures, and aspects of financial management of the Project; 9 Energy efficiency Improvement in Kazakhstan Project Trust Fund Grant No. TF014185 Notes to the financial statements for the year ended December 31, 2018 (in US dollars) 1. GENERAL INFORMATION (continued) b) operational and administrative procedures for project implementation; c) criteria and procedural requirements for the selection, evaluation, implementation and monitoring of subprojects; d) procedural requirements for the implementation of environmental management plans for the execution of subprojects in accordance with the Environmental Management Framework Document; e) monitoring, evaluation, management and reporting mechanisms for project implementation; and f) operational procedures and functions of the Project Steering Committee. 2. SUMMARY OF THE KEY ACCOUNTING POLICIES 2.1. Preparation and presentation of financial statements Financial statements were prepared in accordance with "Financial Reporting for Cash Accounting" of IFRS for Public Sector, published by the IASB for Public Sector of the International Federation of Accountants and in accordance with the requirements of the Trust Fund Grant Agreement No. TF014185 between the Government of the Republic of Kazakhstan and the International Bank for Reconstruction and Development, acting as Trust Fund administrator of one donor. The accounting policies described below have been applied consistently in the reporting periods presented in these financial statements. 2.2. Cash accounting method The financial statements of the project are presented on a cash basis. Cash accounting method recognizes transactions and events only when funds are received or paid under the Project. 2.3. Presentation currency These financial statements are presented in US dollars (USD). Transactions in foreign currencies are translated to the presentation currency at exchange rates at the dates of the transactions. Reimbursement of VAT from the republican budget is recalculated into US dollars at exchange rates as of the date of the payment of the second-tier bank. Exchange differences arising from the translation of transactions denominated in other currencies into US dollars are presented as a net value from changes in exchange rates. The official exchange rate of the US dollar as of December 31, 2018 is KZT 384.20. 2.4. Taxes Tax payments are accrued and paid in accordance with the tax legislation of the Republic of Kazakhstan. In 2018, according to the tax legislation of the Republic of Kazakhstan, the advance payments on corporate income tax amounted to 16,867 US dollars, the tax was not accrued. The overpayment of corporate income tax at December 31, 2018 was USD 40,984. 2.5. Budget The expenditure budget is based on the Executive Agency's development plan. The development plan is formed on the basis of the procurement plan and contracts. 10 gy efficiency improvement In Kazakhstan Project Trust Fund Grant No. TF014185 Nota to the financial statements f the year ended December 31, 2018 5n US dollars) 3. STATEMNOFEPNE(SE No, of Date of Total amount Amount on a The amount on VAT refund APPlic. withdrawal of the pr nh nd Amount of the application reiear the subsequent from the application S 23.02,2018 901,231 rfn 344h 10.05.2018 374,822 901231 -901,231 S 22.05.2018 984,556 3 0 338,062 (65,043) 309,779 28.06.2018 1,084,103 59,887 924,669 (174,762) 809,794 0g 28.06.2018 1,084,103 1 40 27.08.2018 607,324 ,084,103 1,084,103 42 08.11.2018 1,020,147 607,324 607,324 ta',17 1,020,147 tl4,972,183 96,64 4,875,536 (239,805) 4,732,378 plication 31 dated 23.02.2018 reflects the expenses for 2017. pliction 34 dated 10.05.2018 reflects the expenses for 2017, including return of the VAT from the budget of Repub3c of Kazakhstan In the amount of 65,043 US dollars. plication 35 dated 22.05.2018 reflects the VAT return in the amount of 174,762 US dollars for 2017. INFORMATION ON SPECIAL ACCOUNTS ransactions under Grant No. TF014185, the following accounts were opened in Halyk Bank of Kzkstan JSC: % special account KZ206017111000000401, in US dollars; * account for the special account KZ226017111000000365, in EUR; account for the special account KZ676017111000000525, in KZT. 2018 2017 ncoming balance January 01 2,154 1,941 hus: Recharge2,5194 Pls ehre5,264,000 4,750,000 Minus: Returns to special accounts 5 05,000 us- VAT refund from the budget of the Republic of (252,000) aakhstan62,72758 us: Other income (accrued income) 27,58 inus: Other Payments 14,528 urrent outstanding balance 5,895,025 4 ,7 7 7 ,5 2 4 nding balance as of 31 December 288 2,154 Plus: Amount of expenses paid 5,894,737 4,772,974 Plus: Currency exchange difference 2,9 Total advance 29 5,895,025 4,777,524 11 nergy efficiency improvement in Kazakhstan Project Trust Fund Grant No. TF014185 .ote to the financial statements for the year ended December 31, 2018 (in US dollars) 5. STATEMENT OF FINANCIAL POSITION The statement of financial position discloses the assets, liabilities and net assets of the Project as of December 31, 2018 and as of December 31, 2017. This report has been prepared on an accrual basis. 31.12.2018 31.12.2017 items Note USD USD ASSETS cash 6 288 2,154 Advances issued (i) 426,418 1,049 CIT advance payment 40,984 24,117 Ioassets 467,690 27,320 LIABILITIES Payables (ii) 215,208 81,955 Total liabilities 215,208 81,955 NT ASSETS 252,482 (54,635) Revenues (cumulative) 4 Grant- SDTF GRANT No. TF014185 (SDC Trust Fund special account 11,384,000 6,120,000 replenshment) Refund from a special account (708,000) (708,000) VAT refund from the budget of the Republic of Kazakhstan 947,018 318,147 Other income 14,528 14,528 Total revenue 11,637,546 5,744,675 Expenses (cumulative) 7 Work 7,759,292 3,708,414 ds 86,266 72,262 Consulting services 3,161,575 1,799,435 Training 40,571 26,278 Operating expenses 320,436 175,997 Difference of exchange rates 2,396 2,396 other expenses 14,528 14,528 Total expenses 11,385,064 5,799,310 T net assets 252,482 (54,635) i) at the end of 2018, the issued advances in the amount of USD 426,418 are represented by advances for capital repairs to improve energy efficiency in the amount of USD 422,928, as well as by the "State extradepartmental expertise of projects" RSE REM (RSE "State Expertise") for the state assessment of design estimates documentation in the amount of USD 3,490. ii) Accounts payable in the amount of USD 215,208 are represented by debt for construction and assembly work in the amount of USD 146,203, debt for consulting services in the amount of USD 67,599, and debt for other operational services in the amount of USD 1,406. 12 efficiency improvement In Kazakhstan Project 'n!und Grant No. TF014185 8tsto the financial statements fo,te year ended December 31, 2018 5i U dollars) 6. CASH Cahbalances as of December 31 are as follows: U..dollars 2018 2017 I kjbalances 2885 din Denmntd In KzT 288 2,15 7. PROJECT COSTS a. Project expenditures financed by the Trust Fund (in US dollars) for 2018 Expese ctegry A ofDeceber31, 018 Cumulatively on Expese ctegry A ofDeceber31, 018 December 31, 2018 -6tgory 1: Goods, work, non-consulting services, cnulting services, training and operating expenses In 4,390,815 8,036,017 th ramework of the Implementation of Part 1 of the Caeory 2: G oods, work, non-consulting services, cosuting services, training and operating expenses In 1,503,922 3,584,317 th ramework of the implementation of Part 2 of the Prjct TTL 5,894,737 11,620,334 b, Application of the project expenditure budget (in US dollars) for 2018 Cumulatively on Bugtude Expnsecatgoy Dce2er 1' Expenditures application (a) Ctgry 1: Goods, work, non-consulting services, O 4uting services, training and operating expenses 8,036,017 8,730,325 92% Inteframework of the implementation of Part 1 of th roject Ctgry 2: Goods, work, non-consulting services, cOslting services, training and operating expenses 3,584,317 4,333,474 83% Inteframework of the Implementation of Part 2 of tePoject TOTAL11,620,334 13,063,799 89% Terason for non-execution of the budget and the Implementation of the Project Is failed tenders frteprocurement of works, as well as violation of the terms under the contracts (Grant funds Afe he reporting date, the deadline for the conclusion of the project implementation was extended uni ecember 29, 2020. 13 efficiency improvement in Kazakhstan Project Fund Grant No. TF014185 t to the financial statements e year ended December 31, 2018 ( dollars) PROJECT FINANCING Cumulatively on As of December 31, 2018 December 31, 2018 t payments 5 pents from special accounts 5,894,737 11,620,334 TAL 5,894,737 11,620,334 at Budget of the Grant No. TF014185 21,763,000 percentage of use of funds of the Grant No. 53.39% 14185 12/31/2018 10,142,666 sed portion of Grant No. TF014185 on 12/31/2018 10,142,666 DATA ON FIXED ASSETS AND INTANGIBLE ASSETS b on acquired fixed assets and intangible assets are as follows (in US dollars): Cumulatively on December 31, Name For 2018 2018 Sftware 148,076 Office equipment 10,626 26,930 erver equipment 52,816 Office furniture 3,378 6,262 OTAL 14,004 234,084 EVENTS AFTER THE REPORTING DATE ( plications No. 45 dated January 23, 2019, No. 47 dated February 19, 2019, No. 49 dated March 2019 were submitted and approved by the World Bank for the expenses incurred and paid in 2018 e amount of 1,569,736 US dollars. In March 2019, it was decided to extend the project implementation period until December 29, or the successful implementation of the project, it is important to enhance training and build city of key stakeholders, and therefore the World Bank has redistributed funds in the amount of 750,000 from Category 1 to Category 2. TRIALS ng the period of the project and on the date of approval of the financial statements, the Executive cy did not have any lawsuits against either the Executive Agency or third parties or organizations he part of the Executive Agency. DATE OF ISSUE T e financial statements were approved for release by the Chairman of the Board of the Electric power energy saving development institute JSC (Kazakhenergyexpertise) on June 26, 2019. 14 efficiency improvement in Kazakhstan Project nd Grant No. TF014185 the financial statements ar ended December 31, 2018 1ix 1. Reconciliation between data provided by the Executive Agency and World Bank pyets Application Data from the World Bank Expense category for Executive data Deviation withdrawal Agency NS 714,060 714,060* ctgry 1: Goods, work, non-consultingN01,813 10413 sevcs, consulting services, training and N940 607,324 607,324* oeaing expenses in the framework of the N942 1,020,147 1,020,147* nmleentation of Part 1 of the Project N4 0,6 0,6 NA49 (469,423) (469,423) Caegry 2: Goods, work, non-consulting NO35 270,496 270,496* sries, consulting services, training and N947 1,160,829 1,160,829- oprtng expenses In the framework of the Imleentation of Part 2 of the Project N949 (22,738) (22,738)- 5,265,866 5,265,866* 15