EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (EITI) …€¦extractive industries transparency initiative (eiti) -post compliance phase ii in kygyz republic in kyrgyz republic mdtf

EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (EITI) -POST COMPLIANCE PHASE II IN KYGYZ REPUBLIC IN KYRGYZ

REPUBLIC

MDTF GRANT No. TF017411

IMPLEMENTED BYKYRGYZSTAN EITI SECRETARIAT OF

STATE AGENCY FOR GEOLOGY AND MINERAL RESOURCES

SPECIAL PURPOSE FINANCIAL STATEMENTS

AND

INDEPENDENT AUDITOR'S REPORT

For the period from 22 September 2015 to 15 March 2016

BISHKEKMarch 2016

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EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (EITI) -COMPLIANCE PHASE II IN KYRGYZ REPUBLIC

MDTF GRANT NO. TF017411

TABLE OF CONTENTS

Page

STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATIONAND PRESENTATION OF THE SPECIAL PURPOSE FINANCIAL STATEMENTS 3

INDEPENDENT AUDITOR'S REPORT 4-5

SPECIAL PURPOSE FINANCIAL STATEMENTSFor the period from 22 September 2015 to 15 March 2016:

Statement of cash receipts and payments 6

Statement of expenditures per components 7

Notes to the special purpose financial statements 8-11

ANNEX 1. RECONCILIATION BETWEEN THE AMOUNTS SUBMITTED BY THE EITISECRETARIAT AND DISBURSED BY THE WORLD BANK 12

2

STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATIONAND PRESENTATION OF THE SPECIAL PURPOSE FINANCIAL STATEMENTS FORTHE PERIOD FROM 22 SEPTEMBER 2015 TO 29 FEBRUARY 2016

The management Kyrgyzstan EITI Secretariat ("EITI Secretariat") of the State Agency forGeology and Mineral Resources ("SAGMR") is responsible for the preparation of the specialpurpose financial statements of "Extractive Industries Transparency Initiative (EITI) - PostCompliance Phase II in Kyrgyz Republic" ("Project") financed by Grant Agreement MDTFGrant No. TF017411 and that present fairly the Project's cash receipts and payments,expenditures per components for the period from 22 September 2015 to 15 March 2016, incompliance with the International Public Sector Accounting Standard "Financial Reportingunder the Cash Basis of Accounting" (IPSAS-Cash Basis) issued by the International PublicSector Accounting Standards Board (IPSASB) within the International Federation ofAccountants (IFAC) and the Financial Management Manual for World Bank FinancedInvestment Operations (WB Guidelines).

In preparing the special purpose financial statements, EITI Secretariat's management isresponsible for:* Properly selecting and applying accounting policies;

* Presenting information, including accounting policies, in a manner that providesrelevant, reliable, comparable and understandable information;

* Providing additional required disclosures for the period from 22 September 2015 to 15March 2016.

EITI Secretariat's Management 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 theProject's transactions, and which enable them to ensure that the special purpose financialstatements of the Project comply with IPSAS - Cash Basis and the WB Guidelines;

* Taking such steps that are reasonably available to them to safeguard the assets of theProject and to affirm that funds received have been used in accordance with the GrantAgreement MDTF Grant No. TF017411 dated 6 July 2015, and World Bank relatedguidelines, with due attention to economy and efficiency, and only for the purposes forwhich the financing was provided; and

* Preventing and detecting fraud and other errors.

The special purpose financial statements for the period from 22 September 2015 to 15 March2016 were authorized for issue on 30 March 2016 by the EITI Secretariat's Management.

On behalf of the EITI Secretariat's Management:

Karybek ev / U A Umut IshenkulovaHead of XY Financil Manager ofKyrgyzstan EITI Secre tI NITIATIVE Kyrgyzstan EITI Secretariat

3

11UOU_UflIV1bS" U(11Q

"SOS-AUDIT" LTD

INDEPENDENT AUDITOR'S REPORT

On the special purpose financial statements of theExtractive Industries Transparency Initiative (EITI) - Post Compliance Phase II in Kyrgyz Republic

for the period from 22 September 2015 to 15 March 2016

To the management of the Kyrgyzstan EITI Secretariat of the State Agency for Geology andMineral Resources ("EITI Secretariat")

We have audited the accompanying special purpose financial statements of the "ExtractiveIndustries Transparency Initiative (EITI) - Post Compliance Phase II in Kyrgyz Republic"(the Project) financed by Grant Agreement MDTF Grant No. TF01741 1, which comprise thestatement of cash receipts and payments, the statement of expenditures per components forthe period from 22 September 2015 to 15 March 2016, and a summary of significantaccounting policies and other explanatory notes.

Management's Responsibility for the Special Purpose Financial Statements

The management of the EITI Secretariat is responsible for the preparation and fairpresentation of these special purpose financial statements in accordance with InternationalPublic Sector Accounting Standard: Financial Reporting Under the Cash Basis ofAccounting, (IPSAS-Cash Basis) issued by the International Public Sector AccountingStandards Board (IPSASB) within the International Federation of Accountants (IFAC), andFinancial Management Manual for World Bank Financed Investment Operations, and forsuch internal control as management determines is necessary to enable the preparation ofspecial purpose financial statements that are free from material misstatements, whether due tofraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these special purpose financial statements basedon our audit. We conducted our audit in accordance with International Standards on Auditing

(ISAs) as issued by International Auditing and Assurance Standards Board (IAASB) withinthe IFAC. Those standards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance whether the special purpose financialstatements are free from material misstatement.

An audit involves performing procedures to obtain reasonable audit evidence about theamounts and disclosures in the special purpose financial statements. The procedures selecteddepend on the auditor's judgment including the assessment of the risk of materialmisstatement of the special purpose financial statements, whether due to fraud or error. Inmaking those assessments, the auditor considers internal control relevant to the preparationand fair presentation of the special purpose financial statement in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the internal control.

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p; . bplwO 0037, L.Shqptwjwl 38/55; 9bn.' (+37410) 20 11 51; Iwu' (+37410) 20 11 50; www.sosaudit.am; l[-inun' [email protected]

An Associate of the Crowe Horwath Business Alliance38/55 A.Tigranyan, 0037 Yerevan, RA; Tel.: (+37410) 20 11 51; Fax: (+37410) 20 11 50; www.sosaudit.am; E-mail: [email protected]

"U OU-UUPTh-IfS" Uffll!

"SOS-AUDIT" LTD

An audit also includes the appropriateness of accounting policies used and the reasonablenessof accounting estimates made by management, as well as evaluating the overall presentationof the special purpose financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our opinion.

Opinion

In our opinion,1. the special purpose financial statements present fairly in all material respects the cash

receipts and payments for the period from 22 September 2015 to 15 March 2016 inaccordance with IPSAS-Cash Basis;

2. funds have been used in accordance with the conditions of the Grant AgreementMDTF Grant No. TF017411 dated 6 July 2015 between the InternationalDevelopment Association (IDA) and the Kyrgyz Republic, and World Bank relatedguidelines, with due attention to economy and efficiency, and only for the purposesfor which the financing was provided;

3. supporting documents, records and accounts have been maintained to support claimsfor reimbursement of expenditures incurred. Expenditures included in the withdrawalapplications and reimbursed against are eligible for financing under the GrantAgreement MDTF Grant No. TF017411;

4. The Designated account used has been maintained in accordance with the provision ofthe Grant Agreement MDTF Grant No. TF017411, and World Bank relatedguidelines.

Emphasis of matters

Without qualifying our opinion we draw your attention to Note 8 of these special purposefinancial statements which disclosed that the Project was completed as at the reporting date.

"SOS-Audit" LLC30 March 2016

ell h aryan Gnel Khachatryan, FCCAnot r Auditor

SpnnlfL Rnp wp hqi~bu UUnluh Uunghugi4wb UGrwidBR; p. bputu0 0037, U.SilqptuOJwu 38/55; Aba2.' (+37410) 20 11 51; 'bwpu' (+37410) 20 11 50; www.sosaudit.am; ti-Lilnutn' [email protected]

An Associate of the Crowe Horwath Business AllianceI38/55 A.Tigranyan, 0037 Yerevan, RA; Tel.: (+37410) 20 1151; Fax: (+37410) 20 1150; www.sosaudit.am; E-mail: [email protected]

Extractive Industries Transparency Initiative (EITI) - Post Compliance Phase II in Kyrgyz RepublicMDTF Grant No. TF017411

Statement of cash receipts and paymentsFor the period from 22 September 2015 to 15 March 2016(Amounts are shown in US dollars)

Note Actual Budget VarianceReporting Cumulative as at Reporting Cumulative as Reporting Cumulative as at

period 15.Mar.2016 period at 15.Mar.2016 period 15.Mar.2016

TOTAL OPENING CASH _

Sources of Funds 7MDTF Grant No. TF017411 252,360 252,360

TOTAL FUNDS 252,360 252,360

Other income (interest accrued) 152 152

Project Expenditures 6(1) Goods, non-consulting services,consultants' services including audit, Trainingand Incremental Operating Costs 237,203 237,203 300,000 300,000 (62,797) (62,797)

TOTAL PROJECT EXPENDITURES 237,203 237,203 300,000 300,000 (62,797) (62,797)

Other expenditures (banking charges) 38 38

TOTAL CLOSING CASH 5 15,271 15,271

,APMAr

Karybe &ev r oRAC Umut IshenkulovaHead of 7 RS Financial Manager ofKyrgyzstan EITI Secretariat IT ' 0 Kyrgyzstan EITI Secretariat

30 March 2016o .The notes on pages 8-11 form an integra special purpose financial statements.

6

Extractive Industries Transparency Initiative (EITI) -Post Compliance Phase II in Kyrgyz RepublicMDTF Grant No. TF017411

Statement of expenditures per componentsFor the period from 22 September 2015 to 15 March 2016(Amounts are shown in US dollars)

Actual Budget Variance

Reporting Cumulative as at Reporting Cumulative as at Reporting Cumulative as atperiod 15.Mar.2016 period 15.Mar.2016 period 15.Mar.2016

Part 1. Support Continuous Quality Improvements inEITI Report Preparation and Production 142,976 142,976 147,000 147,000 (4,024) (4,024)

Part 2. Build Capacity and Organize Workshops toReach Wider Citizens and StrengtheningCommunications Activities 20,762 20,762 23,250 23,250 (2,488) (2,488)

Part 3. Institutionalization of EITI and Improving LegalActs 54,706 54,706 55,000 55,000 (294) (294)

Part 4. Operational Support for Efficient EITIImplementation 18,759 18,759 28,158 28,158 (9,399) (9,399)

Total Allocated 237,203 237,203 253,408 253,408 (16,205) (16,205)

Unallocated - 46,592 46,592 (46,592) (46,592)

TOTAL 237,203 237,203 300,000 300,000 (62,797) (62,797)

KaryV r_aev Umut IshenkulovaHead of Financial Manager ofKyrgyzstan EITI Secretari Lus aKyrgyzstan EITI Secretariat

30 March 2016 NTAIL c

The notes on pages 8 -11 form se special purpose financial statements.

7

Extractive Industries Transparency Initiative (EITI) -Post Compliance Phase II in Kyrgyz RepublicIMDTF Grant No. TF017411

Notes to the special purpose financial statementsFor the period from 22 September 2015 to 15 March 2016(Amounts are shown in US dollars)

1. General information

1.1. The Project

The Grant Agreement MDTF Grant No. TF017411 was concluded on 6 July 2015 between the KyrgyzRepublic and the International Development Association (IDA), according to which IDA acting asadministrator of grants provided by Multi-Donor Trust Fund (MDTF), provided financing to theKyrgyz Republic in the amount of 300,000 US dollars (USD).The Grant Agreement became effective on 22 September 2015.

The financing was provided for the implementation of "Extractive Industries Transparency Initiative(EITI) - Post Compliance Phase II in Kyrgyz Republic" (the Project).

The Closing date of MDTF Grant No. TF017411 is set 31 December 2015.The Grace Period for submitting withdrawal application for expenditures incurred before the Closingdate is four months following the Closing dates: 30 April 2016.

1.2. The Project objectives

The objective of the project is to increase transparency and governance in the Recipient's extractiveindustries sector through adherence to the new EITI Standard on the disclosure of revenues, licenses,and sub-national payments.

The Project consists of the following parts:

Part 1: Support Continuous Quality Improvements in EITI Report Preparation and Production;Part 2: Build Capacity and Organize Workshops to Reach Wider Citizens and StrengtheningCommunications Activities;Part 3: Institutionalization of EITI and Improving Legal Acts;Part 4: Operational Support for Efficient EITI Implementation.

1.3. The Project Budget and Financing

The Project is wholly financed by MDTF Grant No. TFO 17411, inclusive of taxes.

MDTF Grant ExpenditureGrant No. Financing

Category TF017411 Total (inclusive of taxes)USD USD

equivalent %(1) Goods, non-consulting services,consultants' services including audit, Trainingand Incremental Operating Costs 300,000 300,000 100%Total 300,000 300,000

1.4. Project Implementation

The State Agency for Geology and Mineral Resources under the Government of Kyrgyz Republic(SAGMR) coordinates the activities for the EITI implementation through the Kyrgyzstan EITISecretariat (EITI Secretariat).The EITI Secretariat and SAGMR address is: 2 Erkindik Avenue, office 312, Bishkek, KyrgyzRepublic.

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2. Summary of significant accounting policies

2.1. Preparation and presentation offinancial statements

The special purpose financial statements are prepared in accordance with the InternationalPublic Sector Accounting Standard: Financial Reporting Under the Cash Basis ofAccounting(IPSAS-Cash Basis), issued by the International Public Sector Accounting Standards Board(IPSASB) within the International Federation of Accountants (IFAC), and presented inaccordance with Financial Management Manual for World Bank Financed InvestmentOperations (March 2010): RM 3 - Financial Reporting and Auditing.

The principal accounting policies applied in the preparation of these special purpose financialstatements are set out below. These policies have been consistently applied to all the periods

presented.

2.2 Cash basis of accounting

Project financing is recognised as a source of project funds when the cash is received. Projectexpenditures are recognised as a use of project funds when the payments are made.

2.3 Reporting currency

The reporting currency of these special purpose financial statements is United States dollars(USD).The expenditures made in local currency, Kyrgyz Som (KGS), are translated into USD basedat the exchange rate prevailing at the date of the transaction as issued by the commercial bankwhere the amounts are held..

The exchange rate defined by the National Bank of the Kyrgyz Republic is as follows:15 March 2016: USD 1 = 72.2287 KGS.

2.4. Taxes

The taxes are paid in accordance with the tax regulation of the Kyrgyz Republic.

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3. Summary of Summary Reports and SOEs

Payment categories TotalWithdrawal Withdrawalapplication application (1) Goods, non-consulting

No value date services, consultants' servicesincluding audit, Training andIncremental Operating Costs

30 Dec 2015 55,412.26 55,412.26

5 15 Mar 2016 104,843.36 104,843.36

Total 160,255.62 160,255.62

4. Statement of Designated Account

Bank account number 1030120800008138

Bank OJSC "Commercial Bank Kyrgyzstan"Bank location Erkindik 58, Bishkek, Kyrgyz Republic

Currency USD

Grant No. TF017411

22.09.2015-15.03.2016

1. Opening balance as at 22.09.2015

2. Add: opening discrepancy

3. WB advance/replenishment 175,4124. Less: Refund to WB from DA _

5. Present outstanding amount advanced to DA 175,412

6. DA closing balance as at 15.03.2016 15,1577. Add: Amount of eligible expenditures paid 160,255

8. Less: interest earned (if credited to DA) -

9. Total advance accounted for 175,412

10. Closing discrepancy (5)-(9)

5. CashUnderlying 15 Mar 2016Currency USD

Designated Account -MDTF Grant No. TFO 17411 USD 15,157Interest account KGS 114

15,271

(*) Accounts are held at OJSC "Commercial Bank Kyrgyzstan" (Bishkek, Kyrgyz Republic).

10



6. Project Expenditures

Cumulative

Expendituresas at 15 Mar 2016 Total budget Execution (a)

Category USD USD %(1) Goods, non-consulting services, consultants'services including audit, Training and IncrementalOperating Costs 237,203 300,000 79%

Total 237,203 300,000 79%

(a) Underperformance of the budget is mainly due to non-use of unallocated budget.

7. Financing

MDTF Grant No. TF017411Reporting Cumulative as

period at 15 Mar 2016USD USD

Advances/ (advance recovery) 15,157 15,157Direct Payments 76,948 76,948SOE and Summary Report 160,255 160,255

Total 252,360 252,360

Total financing budget 300,000

Percentage of finance provided as at 15 Mar 2016 84%

8. Project completion

The Project was completed as at 31 December 2015 (the Closing Date), and the Grace period for

submitting withdrawal application for expenditures incurred before the Closing date set at 30 April

2016. However, all the transactions were completed as at 15 March 2016 (Reporting date).

As at the date of signing these special purpose financial statements:

a. No expenditures related to the Project were incurred after the Closing Date; the payments made

during the Grace period related to expenditures incurred before the Closing Date;

b. No withdrawals from grant account were made after Reporting date;

c. No expenditures related to the Project were submitted to the WB after the Reporting date;d. There were no uncovered prepayments or payables outstanding to contractors related to the

Project as at the Reporting Date, except for the final audit service;

e. The outstanding cash balance as at Reporting Date, will be used to pay final audit service (USD

6,578 including related taxes); the residual amount at the Designated account shall be refunded to

the WB, and residual amount in the Interest account shall be transferred to the state budget;

f. We are not aware about any pending or existing litigations against the Project.

1 11


ANNEX 1. RECONCILIATION BETWEEN THE AMOUNTS SUBMITTED BY THE EITISECRETARIAT AND DISBURSED BY THE WORLD BANKFor the period from 22 September 2015 to 15 March 2016(Amounts are shown in US dollars)

MDTF Grant No. TF017411

EITIExpenditure Category Appl. SECRETARIAT WB Difference

1 120,000.00Advance (recovery) I SECRETARIAT 10,843.36

5 (104,843.36)

15,156.64(1) Goods, non-consulting services, 2DP 52,113.39 52,113.39 -consultants' services including audit, 55,412.26 55,412.26 _

Training and Incremental OperatingCosts 4DP 24,834.30 24,834.30 -

5 104,843.36 104,843.36 -

237,203.31 237,203.31Total 237,203.31 252,359.95

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EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (EITI) …€¦extractive industries transparency initiative (eiti) -post compliance phase ii in kygyz republic in kyrgyz republic mdtf