Ministry of Education and Higher EducationRepublic of Lebanon -Second Education Development Project -EDP I - Loan# 7966

Report and financial informationfor the period from 1 January 2014 to 31 December 2014

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Ministry of Education and Higher Education, Republic of LebanonSecond Education Development Project - EDP II - Loan# 7966

Report and financial informationfor the period from I January 2014 to 31 December 2014

Page

Independent Auditor's Report 1-2

Statement of cash receipts and payments by category 3

Detailed statement of cash payments classified by component 4

Statement of movements in the Designated Account 5

Notes to the financial information 6-9

List of signed contracts Appendix A

pwc

Independent Auditor's Reportto the Ministry of Education and Higher Education, Republic of Lebanon

Report on the financial information

We have audited the accompanying financial information of the Second EducationDevelopment Project (EDP II) ("the Project") which comprises: (i) Statement of cash receiptsand payments by category; (ii) Statement of cash payments classifying the uses of funds forthe period from I January 2014 to 31 December 2014; (iii) Statement of movements in theDesignated Account; and (iv) the notes to the financial information. The financialinformation has been prepared by the Education Sector Development Secretariat ("ESDS") inaccordance with the accounting policies described in note 2 of the financial information, asapproved by the World Bank, and as required by the terms of the Financial OperationalManual of Loan No. LE-7966, dated April 2012.

The ESDS's responsibility for the financial information

The ESDS is responsible for the preparation of this financial information in accordance withthe accounting policies described in note 2 to the financial information. This includesdetermining that the basis of accounting set out in note 2 is an acceptable basis for thepreparation of the statement in the circumstances, and for such internal control as the ESDSdetermines is necessary to enable the preparation of financial information that is free frommaterial misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on this financial information based on our audit.We conducted our audit in accordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance whether the financial information is free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial information. The procedures selected depend on the auditor'sjudgement, including the assessment of the risks of material misstatement of the financialinformation, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity's preparation of the financial information inorder to design audit procedures that are appropriate in the circumstances. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation ofthe financial information.

We believe that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion.

PricewaterhouseCoopers, Saba House Bldg., Block B/C, Said Freiha Str., Haznih, Lebanon, MoF # 95693P.O. Box 11-3155, Beirut, Lebanon, Telephone +961 (5) 4286oo, Facsimile +961 (5) 951979, w

Independent Auditor's Report (continued)to the Ministry of Education and Higher Education, Republic of Lebanon

Opinion

In our opinion, the financial information for the Project for the period from I January 2014 to31 December 2014 presenting the sources and uses of fhnds, the expenditures by loancomponent and the movement in the Designated Account, is prepared, in all materialrespects, in accordance with the accounting policies described in note 2 to the financialinformation.

Basis of accounting and restriction on distribution and use

Without modifying our opinion, we draw attention to note 2 to the financial information,which describes the basis of accounting. The financial information is prepared to enable theESDS to meet its reporting obligations to the World Bank under the terms of the LoanAgreement No. LE-7966. As a result, the financial information may not be suitable foranother purpose. Our report is intended solely for the Ministry of Education and HigherEducation, Republic of Lebanon and the World Bank and should not be distributed to or usedby parties other than the Ministry of Education and Higher Education, Republic of Lebanonand the World Bank.

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Beirut, Lebanon4 August 2015

7023

3Ministry of Education and Higher Education, Republic of LebanonSecond Education Development Project - EDP II - Loan# 7966

Statement of cash receipts and payments by categoryfor the period from I January 2014 to 31 December 2014

Note From From inceptionI January to 29 November 2012 to

31 December 2014 31 December 2013USS USS

Sources of fundsIBRD loan funds 6 1,163,145 850,576IBRD loan direct payments 6 - 230,750

1,163,145 1,081,326Uses of funds by project componentEarly childhood education 4 230,235 -Education sector policy

development and management 5 621,031 946,873

851,266 946,873

Incremental operating costsProject management and operating costs 21,672 10,703

872,938 957,576

Surplus 290,207 123,750

The notes on pages 6 to 10 are an integral part of this financial information.

4Ministry of Education and Higher Education, Republic of LebanonSecond Education Development Project- EDP II - Loan# 7966

Detailed statement of cash payments classified by componentfor the period from I January 2014 to 31 December 2014

Note From From inceptionI January to 29 November 2012 to

31 December 2014 31 December 2013uS$ US$

Early childhood educationQuality and quantity of KG Schools 4 230,235

Education sector policy developmentand management

Institutional capacity developmentand efficiency 5 118,072 102,983

Information for planningand management 5 19,800

Sector development management,monitoring and evaluation 5 502,959 824,090

621,031 946,873

Incremental operating costsProject management and operating costs 21,672 10,703

Total expenditures by loan componentand sub-components 872,938 957,576

The notes on pages 6 to 10 are an integral part of this financial information.

5Ministry of Education and Higher Education, Republic of LebanonSecond Education Development Project - EDP 11 - Loan# 7966

Statement of movements in the Designated Account

From From inception1 January to 29 November 2012 to

31 December 2014 31 December 2013UsS USS

Designated Account balance atbeginning of period 123,750 -

Add:IBRD loan funds 1,163,145 850,576IBRD loan direct payments - 230,750

1,163,145 1,081,326

Less:Uses of funds (872,938) (957,576)

Designated Account balance atend of period 413,957 123,750

The notes on pages 6 to 10 are an integral part of this financial information.

6Ministry of Education and Higher Education, Republic of LebanonSecond Education Development Project - EDP 11 - Loan# 7966

Notes to the financial informationfor the period from I January 2014 to 31 December 2014

1 Project background

The Lebanese Republic has obtained from the International Bank for Reconstruction andDevelopment "IBRD" of the World Bank a loan of US$ 40 million to finance theimplementation of the Second Education Development Project (EDP II).

The objectives of the Project are to: (i) improve teaching quality and the learningenvironment in general education and in preschool in the Lebanese Republic; and(ii) increase governance and managerial capacity of the Ministry of Education and HigherEducation (MEHE) and schools.

The Education Sector Development Secretariat (ESDS) within the MEHE is responsible foroverall coordination and implementation of the EDP II.

2 Principal accounting policies and basis of preparation

The Education Sector Development Secretariat ("ESDS") prepares the financial informationof the Education Development Project 11 (EDP II) ("the Project").

The Project's governing documents provide certain guidelines for governing its financialactivities. To ensure observance of limitations and restrictions on the use of financialresources, the ESDS classifies the Project's uses of funds for accounting and reportingpurposes under the following components:

Coimponent I - Early Childhood Education (US$ 15.7 million): The first componentsupports increasing the schools' readiness upon students' entry into primary education. Thisincludes increasing infrastructure capacity, enhancing learning resource materials, initiatinga program of professional development for preschool teachers, evaluating theimplementation of early childhood education programs, and assisting the Ministry ofEducation and Higher Education to measure the preschool learning environment andstudents' readiness for first grade.

Component 2 - Supporting Improvenents in Quality of Education (US$ 7.6 million): Thesecond component enhances school-based development through improving the quality ofteaching and learning at the school level. It also enhances teacher professional developmentthrough establishing a national system of professional standards and other mechanismsincluding induction programs and trainings related to the teachers' professionaldevelopment.

7Ministry of Education and Higher Education, Republic of LebanonSecond Education Development Project - EDP II - Loan# 7966

2 Principal accounting policies and basis of preparation (continued)

Component 3 - Education sector policy developient and nanagement (US$ 16.7million): The third component provides advisory services and technical assistance to theMinistry of Education and Higher Education to strengthen the education sector.

Incremental operating costs: consists of necessary incremental expenditures related to themanagement and implementation of the Project.

The Project's expenditures are reflected in the unaudited Interim Financial Reports (lFRs)presented to the World Bank office in Beirut on a quarterly basis.

For the period from I January 2014 to 31 December 2014, total cash receipts received fromthe World Bank amounted to US$ 1,163,145 (from inception 29 November 2012 to31 December 2013 - US$ 850,576), disbursements made amounted to US$ 872,938 (frominception 29 November 2012 to 31 December 2013 - US$ 957,576) and IBRD loan directpayments amounted to nil (from inception 29 November 2012 to 31 December 2013 -US$ 230,750).

The significant accounting policies adopted by the ESDS in the preparation of the statementare as follows:

Basis of preparation

The financial information has been prepared in accordance with the cash receipts anddisbursements basis of accounting.

Sources of Funds

Funds received are recognised when cash is received.

Use of Funds

Uses of funds, expenses and other disbursements are recognised when cash is disbursed.Eligible expenditures under the Loan Agreement are used, accounted for and classified inaccordance with the conditions of the Loan Agreement and applicable laws and regulationsof the ESDS's financial activities.

8Ministry of Education and Higher Education, Republic of LebanonSecond Education Development Project - EDP [l - Loan# 7966

3 Project expenditures by loan component

From From inception1 January 29 November 2012

to 31 December 2014 to 31 December 2013Us$ us$

Early childhood education 230,235 -Education sector policy development

and management 621,031 946,873Project management and operating costs 21,672 10,703

872,938 957,576

4 Early childhood education

Goods 230,235 -

5 Education sector policy development and management

From From inceptionI January 29 November 2012

to 31 December 2014 to 31 December 2013US$ Uss

Institutional capacity developmentand efficiency

Consultants' services 118,072 102,983

Information for planning and managementGoods - 19,800

Sector development management,monitoring and evaluation

Consultants' services 407,976 801,277Training 58,918 22,813Goods 36,065 -

502,959 824,090

621,031 946,873

9Ministry of Education and Higher Education, Republic of LebanonSecond Education Development Project - EDP II - Loan# 7966

6 IBRD loan funds and direct payments received

The below table lists the IBRD loan funds received in the Designated Account for the periodfrom I January 2014 to 31 December 2014:

Receipt dates usS

20 January 2014 376,2507 July 2014 157,38810 October 2014 305,1495 December 2014 324,358

Total IBRD loan funds 1,163,145

There were no direct payments made by the World Bank to the Project for the period fromI January 2014 to 31 December 2014.

7 Movements on the Designated Account

The table below shows the movement on the Designated Account from I January 2014 till31 December 2014:

UsSDebit Credit Balance

At 1 January 2014 - 123,750 123,75031 January 2014 40,521 376,250 459,47928 February 2014 42,419 - 417,06031 March 2014 - - 417,06030 April 2014 36,655 - 380,40531 May 2014 37,793 - 342,61230 June 2014 35,670 - 306,94231 July 2014 87,012 157,388 377,31831 August 2014 182,467 - 194,85130 September 2014 18,882 - 175,96931 October 2014 305,476 305,149 175,64230 November 2014 38,757 - 136,88531 December 2014 47,286 324,358 413,957Designated Account at31 December 2014 872,938 1,286,895 413,957

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