World Bank Documentdocuments.worldbank.org/curated/en/113781468922272410/...As of and for the year ended December 31, 2015 Statement of cash receipts and payments As of and for the

O GrantThornton

Project Financial Statements and

Independent Auditor's Report

Foreign Financing Project Management Center

Second Public Sector Modernization ProjectIBRD Loan Agreement 7854-AM

As of and for the year ended December 31, 2015

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Second Public Sector Modernization ProjectProject financial statementsAs of and for the year ended December 31, 2015

Contents

Page

Independeni auditors report..................................... 1.....1

Statement of cash reCelpts and payments ................................... 3

Statement of uses of funds by Project aciwRies ................................. 4

Notes to mhe projec financial statemen.s .................... ........... 5

J

O GrantThornton

Independent auditor's report 4ptbponpbpnbep ~Rl p topt;aub 0012

A.uqujW2luah Bil

1 +374 10 260 9641 +374 10260961

Grant Thornion CASC811 Vagharshyan Str0012 Yerevan, Armenia

T +374 10 260 964F -374 10 260 961www grantthomton.am

To the State Institution "Foreign Financing Projects Management Center" of the Ministry ofFinance of the Republic of Armenia,

We have audited the accompanying project financial statements of the Second Public SectorModernization Project (the "Project"), financed by the International Bank for Reconstruction andDevelopment (the "IBRD") Loan Agreement 7854-AM, which comprise the statement of cashreceipts and payments, the statement of uses of funds by Project activities as of and for the yearended December 31, 2015, and a summary of significant accounting policies and other explanatoryinformation.

Alanagement's Responsibiliyfor the 11r*f inaiui Statements

Management of the State Institution "Foreign Financing Projects Management Center" of theMinistry of Finance of the Republic of Armenia is responsible for the preparation and fairpresentation of these project financial statements in accordance with the International PublicSector Accounting Standard ("IPSAS") FinaiuiaReporting Under the Cash Basis ofAavanting issued bythe International Public Sector Accounting Standards Board of the International Federation ofAccountants, the World Bank guidelines, and the relevant points of the Loan Agreement 7854-AMand for such internal control as management determines is necessary to enable the preparation of

these project financial statements that are free from material misstatement, whether due to fraud or

error.

,luditor's Responsibily

Our responsibility is to express an opinion on these project financial statements based on ouraudit. 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 about whether the project financial statements are free from materialmisstatement.

0 GrantThornton

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the project financial statements. The procedures selected depend on the auditor'sjudgment, including the assessment of the risks of material misstatement of the project financialstatements, whether due to fraud or error. In making those risk assessments, the auditor considersinternal control relevant to the entity's preparation and fair presentation of the project financialstatements in order to design audit procedures that are appropriate in the circumstances, but notfor the purpose of expressing an opinion on the effectiveness of the entity's internal control. Anaudit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluating the overallpresentation of the project financial statements.

We believe that die audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion.

Opinion

In our opinion, the project financial statements present fairly the cash balance of the SecondPublic Sector Modernization Project as of December 31, 2015 and the cash received and cash paidfor die year then ended in accordance with the International Public Sector Accounting Standards("IPSAS") Finandal Rporting Under the Cash Basis ofAaovuinhg issued by the International PublicSector Accounting Standards Board of the International Federation of Accountants, die WorldBank guidelines and the relevant points of Loan Agreement 7 854-ANL

Basis ofA1arnti

Without modifying our opinion, we draw attention to note 2 to the project financial statements,which describes the basis of accounting. The project financial statements are prepared to assist themanagement of the State Institution "Foreign Financing Projects Management Center" of theMinistr of Finance of the Republic of Armeni to meet the requirements of the financial reportingof the World Bank. As a result, the project financial statements may not be suitable for anotherpurpose.

June 24, 2016 jGagik Gyulbudaghyast Emil Vassilyan, FCCA

Managing Partner nt Partner

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. ~ ~ ~ ~4 .. .... .. ...

Second Public Sector Modernization Project 3Project financial statementsAs of and for the year ended December 31, 2015

Statement of cash receipts and payments


In US dollars

Actual Planned Variance PAD

Asof Asof AsofDecember December December

For the year 31, 2015 For the year 31. 2015 For the year 31. 2015 Project life

Cash balance as of January 1, 2015(note 4) 321.365

Add: cash receipts

IBRD Fund (note 5) 1,728.502 8,252,837

Government co-financing 371,285 1.842503

Total cash receipts 2.099.787 10.095,340

Exchange rate difference 365 (17,781)

Less. cash payments(1) Goods, works, consultants'

services, Training and IncrementalOperating Costs for the Project 2,237,046 9,870,588 2.230,000 9.863,542 7,046 7,046 11,117.500

(2) Front-end Fee - 22.500 22.500 - + 22.500Total cash payments 2,237,046 9,893.088 2.230,000 9.886.042 7,046 7,046 11140,000Cash balance as of December 31,

2015 (note 4) 184,471

The adjusted budget reflected in the reports, which were submitted by the FFPMC to the Republicof Armenia Ministry of Finance served as a basis for the planned amounts when preparing Projectfinancial statement.

The prolect financial statements were approved on June 24, 2016 by:

Edar Apr an i rmen.Shabnar DaDirector financial manager

This statement ii to be read in conjunction wath the n6tcs toaild formingpart. of re projlct financi2l statements set out

Mt pagesL tcoli.

.... ........


Statement of uses of funds by Projectactivities


In US dollars

Actual Planned Variance PADAsof Asof Asof

December December DecemberFor the year 31, 2015 For the year 31, 2015 Forthe year 31. 2015 Project life

1 Strengthening institutional capacityin policy making and servicedelivery 329,492 2,490.720 330,000 2.491,228 (508) (508) 3,300,000

2- Maximizing the efficiency of humanresources in the public sector 378,322 690,575 380,000 692.253 (1,678) (1,678) 1,445,000

3. Systems development for improvedperformance and transparency 1.338,217 S,715,058 1,326,000 5,702.841 12,217 12,217 4,740,000

4 Just-in-Time technical assistance 17,448 17,448 18.000 18,000 (552) (552) 520,0005. Project management and

implementation 173,567 979,287 176,000 981.720 (2,433) 12,433) 1,135,000Total 2237,046 9.893.088 2,230,000 9,886,042 7.046 7.046 11.140.000

tis statemenr is to be read in conjunction with ile nores to -and faming part of the projcct financial statements set ouion pages 5 to 10.


Notes to the project financial statements

I Activity

The Loan Agreement 7854-AM of the Second Public Sector Modernization Project (the "Project")was signed on March 30, 2010 between the Republic of Armenia and the International Bank forReconstruction and Development (the "IBRD") The total amount of the Loan was agreed to be US

dollars 9,000,000.

The objective of the Project is to enhance the performance of public sector management for betterservice delivery by: (i) strengthening institutional capacity in policy formulation; (ii) maximizing theefficiency of human capital; and (iii) developing information systems for internal work flow andexternal communication.

The Project consists of the following parts:

a) Strengthening institutional capacity in policy making and service delivery;

b) Maximizing the efficiency of human resources in the public sector;

c) Systems development for improved performance and transparency;

d) Just-In-Time technical assistance,

e) Project management and implementation,

In accordance with the Loan Agreement 7854-AM dated March 30, 2010, the financing of theProject is implemented through the following categories;

Percentage ofExpenditures to

Amount of the be financedLoan Allocated (exclusive of

Category (In US dollars) Taxes)

1- Goods, works, consultants' services, Training and Incremental OperatingCosts for the Project 8,977,500 100%

2. Front-end Fee 22,500

9'a00,000

Front-end fee represents payable by the Republic of Armenia (the Borrower) and is equal to onequarter of one percent (0.25%) of the Loan amount. The front-end fee in amount of US dollars22,500 was withheld by the IBRD on July 26, 2010.

The Project is implemented by the State Institution "Foreign Financing Projects ManagementCenter" of the Ministry of Finance of the Republic of Armenia (the "FFPIC'. The FFPNIC wasestablished as a state institution by the Republic of Armenia Government Resolution # 37 datedMarch 29, 2000, on the basis of the Department of Aid Coordination and Technical Assistance ofthe Ministry of Economy of the Republic of Armenia. The founder of the FFPAIC is theGovernment of the Republic of Armenia.

The legal address of FFPNlC is 4 Tigran lets avenue, Yerevan, Republic of Armenia.

The average number of the FFPMC staff in 2015 was 21 (2014; 26).

Second Public Sector Modernization Project SProject financial statementsAs of and for the year ended December 31, 2015

2 Significant accounting policies

2.1 Statement of complianceThe project financial statements are prepared in accordance with IPSAS FinandalReporting Under theCash Basis ofAmnunting, the World Bank guidelines and the relevant points of the Loan Agreement7854-AN.

Alternatively, the FFP,IC presents a statement of financial position of the Project as of thereporting date as an encouraged additional disclosure, as prescribed in the part 2 of IPSAS FinancialReporting Under he Cash Basis ofAcconing (refer to note 9).

2.2 Project financial statementsThe project financial statements include

a) The statement of cash receipts and payments of the Project for the year ended December31, 2015, showing the World Bank and counterpart funds separately, and the statement ofuses of funds by Project activities,

b) Accounting policies and explanatory notes (including additional accounting policies anddisclosures), covering

* Summary of summary reports or SOEs used as the basis for the submission ofwithdrawal applications in the notes, as appropriate;

* Statement of designated account in the notes, as appropriate;

* Statement of financial position showing accumulated funds of the Project, bankbalances, other assets of the Project, and liabilities, if any, as described in the note2.1.

2-3 Functional and presentation currencyThe national currency of the Republic of Armenia is Armenian dram. These project financialstatements are presented in US dollars (presentation currency).

In preparing the project financial statements, transactions in currencies other than US dollar arerecorded at the rates of exchange defined by the Central Bank ofArmenia prevailing on the dates ofthe transactions. At each reporting date, monetary items denominated in foreign currencies areretranslated at the rate defined by the Central Bank of Armenia prevailing on that date, which is483.75 for US dollar 1 as of December 31, 2015 (December 31, 2014: drams 474.97 for US dollar 1),Any exchange rate differences are recognized in the statement of cash receipts and payments andthe accumulated figure of exchange rate difference is disclosed in the Statement of financial positionunder "Exchange rate difference".

2.4 ExpensesExpenses incurred in the framework of the Project are recognized on the cash basis of accounting,i.e. when the relevant cash is paid The expenses are recognized in the statement of cash receipts andpayments under the caption "cash payments". Additionally, the Project expenses are disclosed in thestatement of uses of funds by Project activities.


2.5 Project financingFinancing received in the framework of the Loan Agreement 7854-ANI is recorded in the statementof cash receipts and payments as "cash receipts" and is recognized at each replenishment, Inaddition, the Project funds received are disclosed in the Statement of financial position (refer to note

9).

2.6 The World Bank financingTo finance eligible expenditures for the Loan Agreement, the World Bank disburses proceeds fromthe Loan account using one or more of the disbursement methods, which are stated below'

a. Reimbursement

The Bank may reimburse the borrower to finance eligible expenditures that the borrower hasprefinanced from its own resources.

b. Advance

The Bank may advance loan proceeds into a Designated account of the borrower to financeeligible expenditures as they are incurred and for which supporting documents will be providedat a later date.

c. Direct payments

The Bank may make payments, at the borrower's request, directly to a third party for eligibleexpenditures.

d. Special commitment

The Bank may pay amounts to a third party for eligible expenditures under Specialcommitments entered into, in writing, at the borrower's request and on terms and conditionsagreed between the Bank and the borrower.

3 Closing date of the projectAccording to the letter dated October 6, 2014, the closing date of the Project was defined as January31, 2017.

4 Cash balances

In US dollars As of As ofDecember 31, January 1.

2015 2015Designated account (note 7) 184,471 316,032Government co-financing account - 5,333

184.471 321.365


5 IBRD Fund

In US dollars As ofFor the year ended December 31,

December 31, 2015 2015

Other procedures 1.687,072 2,632,378

SOE procedures (note 6) 291,430 4,507.609

Direct payment - 590.350

Front-end fee - 22,500

Designated account advance 250,000 1,250.000

Redemption of the designated account advance 500.000) (750,000)

1,728,502 8,252,837

Under the method of "SOE procedures" of financing, the FFPMC requests advance to anddocumentation of designated account accompanied by the statement of expenditure (SOE).

Under the method of "Other procedures" of financing, die FFP.IC requests advance to anddocumentation of designated account accompanied by the records evidencing eligible expendituresfor payments against contracts valued at more than the amounts in accordance with theDisbursement Letter and contracts that are subject to the World Bank's prior review.

The FFPAIC reports regularly on the use of loan proceeds advanced to a designated account. This isdisclosed as redemption of the designated account advance.

6 SOE withdrawal schedule

For the year ended December 31. 2015

In US dollars

Category

Application No. Goods, works, consultants' services, Training and

Incremental Operating Costs for the Project

19 DA 194,653

20 DA 18,647

21 DA 49,445

22 DA 28.685

Total 291.430

Second Public Sector Modernization Project )Project financial statementsAs of and for the year ended December 31, 2015

77 Designated account statement


In US dollars

Opening balance as of January 1, 2015 316.032Add.

Cumulative unexplained discrepancy

Loan replenishment during the year 1,728.502

1.728,502 1.728.502

Less, Refund to the IBRD from the designated account during the year

Present outstanding amount advanced to thedesignated account (1) 2.044,534

Closing balance as of December 31, 2015 184.471

Add:

Amount of eligible expenditures paid during the year 1,860,063

Service charges (if applicable) -

1,860,063 1.860.063

Less, Interest earned (if credited into the designated account)

Total advance accounted for (2) 2.044,534

Discrepancy (1) - (2) to be explained

8 Reconciliation between the amounts received by the FFPMC anddisbursed by the World Bank

For the year ended December 31. 2015

In US dollars

The WorldCategory Appl. FFPMC Bank DifferenceGoods, works. consultants'services, Training andIncremental Operating Costsfor the Project

19 DA 568.098 568,09820 DA 910.342 910,34221 DA 272,664 272,66422 DA 227,398 227,398

1,978,502 1,978,502 -

Designated account advance 19 DA 250.000 250 000 -

Redemption of the Designatedaccount advance 20 GA (500,000) (500,000) -

Total 1.728,502 1,728,502 -


9 Statement of financial positionAs described in the note 2.1, the policy of the FFPMC is to prepare the project financial statementsin accordance with IPSAS Finanda/Reporting Under the Casb Basis ofAavunting. However, the FFP,ICalso has presented a separate statement of financial position as a disclosure encouraged under IPSASFinanal Reporfing Under the Cash Basis ofAa44nti0ng.

US dollar

As of December As of December31. 2015 31.2014

Assets

Current assetsBalances in bank accountsDesignated account 184.471 316,032Government co-financing account - 5.333

184,471 321.365

Advances and prepayments 58,489 58,912

242,960 380.277

Non-current assetsProject expenditures 9.907,136 7,646,987

9.907.136 7,646,987

Total assets 10,150.096 8,027,264

Net assets funded byIBRD Fund 1 842,503 6,524.335Government co-financing 8,252,837 1,471,218Other 6,513 4.912

10.101.853 8,000.465

Accounts payable 55,524 45,550

Exchange rate difference (7.281) (18.751)

Total net assets 10.150,096 8.027,264

Documents

World Bank Documentdocuments.worldbank.org/curated/en/113781468922272410/...As of and for the year ended December 31, 2015 Statement of cash receipts and payments As of and for the