THE PALESTINIAN MINISTRY OF FINANCE AND PLANNING STRENGTHENING FISCAL RESILENCE AND BUSINESS ENVIRONMENT TRUST FUND GRANT GRANT NUMBER TF0A9743 FUNDED BY INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FINANCIAL STATEMENTS FOR THE PERIOD FROM FEBRUARY 20, 2019 TO SEPTEMBER 30, 2019 TOGETHER WITH INDEPENDENT AUDITORS’ REPORT THE PALESTINIAN MINISTRY OF FINANCE AND PLANNING STRENGTHENING FISCAL RESILENCE AND BUSINESS ENVIRONMENT TRUST FUND GRANT FUNDED BY INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) BALANCE SHEET AS AT SEPTEMBER 30, 2019 (Currency: USD) Note USD Assets Current Assets Cash at bank - Total Current Assets - Total Assets - Liabilities and Fund Balance Fund balance - Total Liabilities and Fund Balance - The Accompanying Notes form an Integral Part of these Financial Statements 4 THE PALESTINIAN MINISTRY OF FINANCE AND PLANNING STRENGTHENING FISCAL RESILENCE AND BUSINESS ENVIRONMENT TRUST FUND GRANT FUNDED BY INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) STATEMENT OF SOURCES AND USES OF FUNDS FOR THE PERIOD FROM FEBRUARY 20, 2019 TO SEPTEMBER 30, 2019 (Currency: USD) Note USD FUND BALANCE – BEGINNING OF PERIOD - SOURCES OF FUNDS Grant revenue received from IDA 1 30,000,000 Total sources of funds 30,000,000 USES OF FUNDS Transfer to Single Treasury Accounts – General Expenditure – ILS 3 29,999,956 Bank Charges 44 Total uses of funds 30,000,000 CHANGE IN FUND BALANCE - FUND BALANCE – END OF PERIOD - The Accompanying Notes form an Integral Part of these Financial Statements 5 THE PALESTINIAN MINISTRY OF FINANCE AND PLANNING STRENGTHENING FISCAL RESILENCE AND BUSINESS ENVIRONMENT TRUST FUND GRANT FUNDED BY INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) DEPOSIT ACCOUNT STATEMENT – USD FOR THE PERIOD FROM FEBRUARY 20, 2019 TO SEPTEMBER 30, 2019 (Currency: USD) Account number 0458/0206777/001/3001/015 IBAN PS75PALS045802067770013001015 Depository bank Bank of Palestine Address Ramallah, P.O. Box 471 Related loan / credit Grant Number TF0A9743 Currency US. Dollars Note USD Balance, beginning of period - Receipts during the Audit Period 1 29,999,956 29,999,956 Deduct: Transfer to Single Treasury Accounts – General Expenditure – ILS 3 29,999,956 29,999,956 Balance, end of period - The Accompanying Notes form an Integral Part of these Financial Statements 6 THE PALESTINIAN MINISTRY OF FINANCE AND PLANNING STRENGTHENING FISCAL RESILENCE AND BUSINESS ENVIRONMENT TRUST FUND GRANT FUNDED BY INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) NOTES TO THE GRANT FINANCIAL STATEMENTS FOR THE PERIOD FROM FEBRUARY 20, 2019 TO SEPTEMBER 30, 2019 1. The Grant and its Financing The Palestinian Liberation Organization (the Recipient) (for the benefit of the Palestinian Authority) and the International Development Association (IDA) (as administrator of the Trust Fund for Gaza and West Bank) signed the ninth Development Trust Fund Grant Agreement entitled “Strengthening Fiscal Resilence and Business Environment Trust Fund Grant” (the Grant Agreement), Grant Number TF0A9743, dated February 20, 2019, whereby IDA made a grant (the Grant) of USD 30,000,000 to the Palestinian Authority. The objectives of the Grant are to support the strategic priorities of the Palestinian Authority envisaged in its development strategy – the National Policy Agenda (NPA) (2017 – 2022) and to provide essential financing for the Palestinian Authority’s budget. On March 3, 2019, MoFP received the total Grant amount of USD 29,999,956, net of bank charges of USD 44, in the Grant special deposit bank account. On April 1, 2019, MoFP converted the full USD amount into ILS through the bank at the exchange rate of USD 1 to ILS 3.617 (the market rate) yielding the amount of ILS 108,509,841 which was deposited in MoFP Central Treasury Account in ILS. The following table presents amounts received in USD and converted to ILS: Amount in Converted Date of Conversion from USD to ILS (USD) amount (ILS) April 1, 2019 29,999,956 108,509,841 29,999,956 108,509,841 2. Summary of Significant Accounting Policies The Grant Financial Statements are prepared under the historical cost convention. Significant accounting policies follow: - • Basis of accounting – The Financial Statements are prepared using the cash basis of accounting, which is a comprehensive basis of accounting other than International Financial Reporting Standards (IFRS). Revenues are recognized when cash provided by IDA is received by MoFP and disbursements are recognized when the cash payments are made. 7 • Foreign currency – The basic functional currency of the Palestinian Authority’s Ministry of Finance and Planning (MoFP) is the New Israeli Shekel (ILS). The Grant funds were received by MoFP in USD and were converted to ILS using the actual exchange rate used by MoFP’s local bank at the date of the transfer. The exchange rate against USD used in the conversion was USD 1 to ILS 3.617. 3. Transfer to Single Treasury Accounts – General Expenditure – ILS On April 1, 2019, MoFP transferred the total Grant amount of USD 29,999,956 from the Grant special bank account to MoFP Single Treasury Accounts in ILS, after converting this amount from USD to ILS, through the bank, at an exchange rate of USD 1 to ILS 3.617 (the market rate). This amount was used in the payment of salaries, paid in ILS, to certain civil servants and pensioners of certain Palestinian Authority’s ministries and institutions for the month of March 2019, as follows: Amount paid Equivalent in ILS amount in USD March 2019 Salaries Ministry of Education and Higher Education 85,292,128 23,580,904 Ministry of Health 21,656,520 5,987,426 Ministry of Social Development 1,561,193 431,626 108,509,841 29,999,956 4. Reconciliation Between IDA Records (Client Connection) and MoFP Records USD Grant accounts per the client connection Payment transferred to MoFP 30,000,000 Grant accounts per MoFP records Amount recorded in MoFP records 29,999,956 Difference *44 * This amount represents bank charges. 8