ADRIATIC SEA POLLUTION CONTROL PROJECT IGEF GRANT TF 017706
PROJECT FINANCIAL STATEMENTS,DESIGNATED ACCOUNTS STATEMENT AND
INDEPENDENT AUDITORS REPORTfor the period from I January 2016 to 31 December 2016
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ADRIATIC SEA POLLUTION CONTROL PROJECT IGEF Grant TF 017706
CONTENTS
Project Financial Statements and Independent Auditor's Report:
Independent Auditor's Report
Statement of Assets and Liabilities 2
Statements of Sources and Uses of Funds3-5
Statement of Uses of Funds by Activities of the Project 6
Summary Statement of Expenditure (SOE) - Application for Loan Withdrawal 7 - 9
Notes to the Project Financial Statements- 10 -12
Payments made into Designated Grant Account13
Designated Grant Account Statement 14
Auditing Documentation Checklist
ALTDIT MOORE STEPHEN5AUDIT ZAOREB
REVIZilSKE TSLUGE. ZAGREB
Audit d.o.o. za revizijske uslugeRadni6ka cesta 54
10000 ZagrebHRVATSKA
Tel:+385 (0) 1 3667 994Fax:+395 (0) 1 3667 997
E-mail:[email protected]
INDEPENDENT AUDITOR'S REPORT
1. We have audited the accompanying Financial Statements of the ADRIATIC SEAPOLLUTION CONTROL PROJECT I (hereinafter: the "Project") financed under GEF Grant No. TF017706, which comprise: the Statement of Assets and Liabilities of the Project as of 31 December 2016,the Statements of Sources and Uses of Funds of the Project and the Statement of Uses of Funds byActivities of the Project for the period since 1 January 2016 till 31 December 2016 (all together: the"Project Financial Statements").
2. The Project Financial Statements are the responsibility of the Project's management. Ourresponsibility is to express an opinion on the Project Financial Statements based on our audit.
3. We conducted our audit in accordance with International Standards of Auditing and InternationalBank for Reconstruction and Development Guidelines. Those standards and guidelines require that we
plan and perform audit to obtain reasonable assurance about whether the Project Financial Statements arefree of material misstatements. An audit also includes assessing the accounting principles used andsignificant estimates made by Project's management, as well as evaluating the overall Project FinancialStatements presentation. We believe that our audit provides a reasonable basis for our opinion.
4. In our opinion, the Financial Statements of the ADRIATIC SEA POLLUTION CONTROLPROJECT 1, in all significant terms of reference, truthfully and fairly present, assets and liabilities of theProject as of 31 December 2016, sources and uses of funds of the Project and uses of funds by activitiesof the Project, and cash receipts and payments of the Project in the Designated Account for the year ended31 December 2016, in accordance with International Accounting Standards for public sector andInternational Bank for Reconstruction and Development Guidelines.
9 5. With respect to Summary Statement of Expenditure ("SOE") - Application for LoanWithdrawal:(a) adequate supporting documentation has been maintained to support claims for reimbursements ofexpenditures incurred; (b) the Summary Statement of Expenditure has been reconciled to the other ProjectFinancial Statements without exception and (c) the expenditure disbursements underlying the SummaryStatement of Expenditure have been made in accordance with International Bank for Reconstruction andDevelopment requirements.
Zagreb, 2 May 2017
Audit d.o.o.
Radni6ka cesta 54
10000 Zagreb k
Marijana Pranji, director Marijana Pr (j6, certified auditor
th.ore tephens fnternan-al
Lankedn- mehers 'bnprncipedni,aud zestru1 1 he wor/ld
I1
ADRIATIC SEA POLLITION CONTROL PROJECT IGEF Grant TF 017706
STATEMENT OF ASSETS AND LIABILITIES
(in IIRK
At 31 At 31 At 31December December December
Notes 2016 2015') 2014
ASSETSCash assets - Designated Grant Account 3 1,105,357 1,732,121Paid from the Grant Account 8 February 2016 0 (390,000)Eligible costs of the Project 4 5,684,752 3,254,466 706,710Project Expenditures - Environmental Protection andEnergy Efficiency Fund 1,414,281 813,617 176,677Fees - Designated Grant Account 3 2,356 1,156 -
8,206,746 5,411,360 883,387
SOURCES
Grant 5/i/ 6,766,475 4,583,324 706,710Environmental Protection and Energy Efficiency Fund 5/ii/ 1,414,281 813,617 176,677
8,180,756 5,396,941 883,387
NET ASSETS2 ) 6 25,990 14,419 -
1) The first costs associated with the Project were created in 2014, but they are reimbursed from theproceeds of the Grant in 2015 when there has been a first deposit into the Designated Grants Accountand when the preparation of the financial statements of the Project have been started
2) Net assets represents interest on the Designated Grant Account
Notes from page 10 to 12 form an integral part of these Project Financial Statements.Independent Auditor's Report - page 1.
2
ADRIATIC SEA POLLUTION CONTROL PROJECT IGEF Grant TF 017706
STATEMENTS OF SOURCES AND USES OF FUNDS OF THE PROJECT
I STATEMENT OF SOURCES AND USES OF FUNDS OF THE PROJECT - GRANTFUNDS
(in HRK)Cumulative
2016 2015 2014 until 31 Plan until VarianceDecember 2019
2016
1 2 3 4 5 6(5 minus 4)
FINANCING
From Designated Account 2,431,486 2,191,554 - 4,623,040 -
From Bank Account of FZOEU -refunded from the Grant - 357,358 706,710 1,064,068 -
2,431,486 2,548,912 706,710 5,687,108 27,306,500 21,619,392
EXPENDITURE
Consultants' Services in the Project 2,430,286 2,547,756 706,710 5,684,752 27,306,500 21,621,748
Fees - Designated Grant Account 1,200 1,156 - 2,356 - (2,356)
2,431,486 2,548,912 706,710 5,687,108 27,306,500 21,619,392
* 1) The first expenses associated with the Project were created in 2014, when they are paid to the Fund, but
they are reimbursed from the proceeds of the Grant in 2015.
II STATEMENT OF SOURCES AND USES FUNDS OF THE PROJECT - RESOURCESOF ENVIRONMENTAL PROTECTION AND ENERGY EFFICIENCY FUND
(in HJRK)Cumulative
until 312016 2015 2014 DecemberDecember
2016
1 2 3 4
FINANCINGEnvironmental Protection And EnergyEfficiency Fund 600,664 636,940 176,677 813,617
600,664 636,940 176,677 813,617
EXPENDITURE
Consultants' Services in the project 600,664 636,940 176,677 813,617
600,664 636,940 176,677 813,617
Resources of Environmental Protection and Energy Efficiency Fund were used for payment of VAT
invoices received from suppliers.
Notes from page 10 to 12 form an integral part of these Project Financial Statements.Independent Auditor's Report - page 1.
3
ADRIATIC SEA POLLUTION CONTROL PROJECT IGEF Grant TF 017706
STATEMENTS OF SOURCES AND USES OF FUNDS - continued
/i/ Adriatic Sea POLLUTION CONTROL PROJECT (Project) is a regional project, which is designed
as part of the wider Adriatic program for the environment. The project includes activities in two riparian
countries of the Adriatic Sea, in Croatia and in Bosnia and Herzegovina.
Project objectives are:
(A) reduce the discharge of pollutants from the cross-border character, especially nitrogen, in selected
"black spots" in the Croatian coast of the Adriatic Sea; and
(B) improve the capacity of the Republic of Croatia and Bosnia and Herzegovina for the preparation of
. pollution control projects in selected localities in Croatian coast of the Adriatic Sea and Herzegovina and
strengthen the capacity for monitoring sea water quality.
The project consists of the following parts:
Part 1. Demonstrative investments to reduce nutrient discharges and improve the ability of monitoring
the quality of sea
- (a) Design and construction works of integrated system with purpose of leachate collection and
management on landfill Sitnica.
. (b) Purchase and installation of equipment for monitoring sea water quality and strengthening regional
capacity for monitoring sea water quality.
Part 2. Technical assistance
(a) support for (i) performing evaluation of sources of nutrients, including spot and non-spot sources in
two sensitive areas / "black spots" in Croatian coast of the Adriatic Sea (Dubrovnik Neretva County) and
in the Neretva's delta, and (ii) preparing policy analysis, legislative and / or institutional reforms needed
. to address the problems related to water quality.
(b) Technical assistance for the preparation of conceptual design and design documentation, including
the preparation of tender documents for access to EU funds for investments in the processing and
management of leachate in accordance with the requirements of the EU in selected places in Croatian
coast of the Adriatic Sea.
Notes from page 10 to 12 form an integral part of these Project Financial Statements.
Independent Auditor's Report - page .4
ADRIATIC SEA POLLUTION CONTROL PROJECT IGEF Grant TF 017706
STATEMENTS OF SOURCES AND USES OF FUNDS - continued
It was agreed that for the implementation of these objectives and monitoring the implementation of
the Project in the Republic of Croatia as the implementing agency Fund for Environmental Protection and
Energy Efficiency Fund (the "Fund") is appointed. For those parts of the Project in the Republic of
Croatia is planned financing from the grant from the Global Environment Facility (Global Environment
Fund - GEF) in the amount of USD 4,330,000.
In accordance with the concluded Grant Agreement dated 8 September 2014, the Closing Date
was 15 March 2017, but in accordance with Amendment of the Grant Agreement as of 26 September
2016 the Closing Date was extended until 15 February 2019, as well as the use of funds and the
reallocation of demonstrative investments funds. Consequently, a restructuring of the Project was carried
out, in which the rehabilitation of the landfill site of Sitnica on Kor6ula was included in the Project,instead of the Diklo landfill in Zadar.
The first costs related to the project were made in July 2014 and have been paid from the Fund's bank
. account. In 2015 these costs have been reimbursed to the Fund after the opening of the Designated
Account.
Notes from page 10 to 12 form an integral part of these Project Financial Statements.Independent Auditor's Report - page 1.
5
ADRIATIC SEA POLLUTION CONTROL PROJECT IGEF Grant TF 017706
STATEMENT OF USES OF FUNDS BY ACTIVITIES OF THE PROJECT
(in HRK)
Cumulative201620152014until 31201620152014 December
2016
2 3 4
Part 1. Demonstrative investments to reduce nutrient dischargesand improve the ability of monitoring the quality of sea
(a) Design and construction works of integrated system with
purpose of leachate collection and management on landfill Sitnica. -
(b) Purchase and installation of equipment for monitoring seawater quality and strengthening regional capacity for monitoringsea water quality. ______________________________
Part 2. Technical assistance(a) support for (i) performing evaluation of sources of nutrients,including spot and non-spot sources in two sensitive areas / "black
* spots" in the Croatian coast of the Adriatic Sea (Dubrovnik -
Neretva County) and the Neretva's delta, and (ii) preparing policyanalysis, legislative and I or institutional reforms needed toaddress the problems. related to water quality. --
* (b) Technical assistance for the preparation of conceptual designand design documentation, including the preparation of tenderdocuments for access to EU funds for investments in theprocessing and management of leachate in accordance with the
* requirements of the EU in the Croatian coast of the Adriatic Sea. 2,430,286 2,547,756 706,710_ 5,684,752
2,430,286 2,547,756 706,710 5,684,752
TOTAL EXPENDITURE 2,430,286 2,547,756 706,710 5,684,752
Notes from page 10 to 12 form an integral part of these Project Financial Statements.
206
ADRIATIC SEA POLLUTION CONTROL PROJECT 1GEF Grant TF 017706
SUMMARY STATEMENT OF EXPENDITURE ("SOE") - APPLICATION FOR
LOAN WITHDRAWAL
Amount of Amount paid Payment date
Invoice eligible from the from the
Type of amount expense - account of account of
Application No. 1 - Refunding expenditure HRK HRK Fund - HRK Fund
Summary sheetNo. 1 Consulting 440,136 352,109 352,109 25 July 2014
Total Application No.1 440,136 352,109 352,109
Amount of Amount paid Payment date
Account eligible from the from the
Type of amount expense - account of account of
Application No. 2 - Refunding expense HRK HRK Fund - HRK Fund
26 January
Summary sheet No. 1 Consulting 443,251 354,601 354,601 201506 March
Summary sheet No. 1 Consulting 446,698 357,358 357,358 2015
Total Application No.2 889,949 711,959 711,959
Application No. 3 is related to the request for pre-financing payment to the Designated Grant Account and there are
no expenses reported in the Summary sheet.
Amount of Amount paidInvoice eligible from the Exchange
Type of amount expense - Designated Date of rate USD
Application No. 4 expenditure HRK H4RK account - USD payment /HRK
10 August
Summary sheet No. I Consulting 441,487 353,190 51,561 2015 6.850I1 September
Summary sheet No. I Consulting 487,500 390,000 59,252 2015 6.582
Total Application No.4 928,987 743,190 110,813
Notes from page 10 to 12 form an integral part of these Project Financial Statements.
Independent Auditor's Report - page 1.7
ADRIATIC SEA POLLUTION CONTROL PROJECT I
GEF Grant TF 017706
SUMMARY STATEMENT OF EXPENDITURE ("SOE") - APPLICATION FOR
LOAN WITHDRAWAL - continued
Amount of Amount paidInvoice eligible from the Exchange
Type of amount expense - Designated Date of rate USD
Application No. 5 expenditure HRK HRK account - USD payment /HRK25 September
Summary sheet No. I Consulting 438,623 350,898 52,608 2015 6.67025 September
Summary sheet No. 1 Fees - 1,156 170 2015 6.670
Total Application No.5 438,623 352,054 52,778
Amount paid
Amount of from the
Invoice eligible Designated Exchange
Type of amount expense - account - Date of rate USD
Application No. 6 expenditure HRK HRK USD payment /HRK28 December
Summary sheet No. I Consulting 882,888 706,310 102,661 2015 6.8808 February
Summary sheet No. I Consulting 487,500 390,000 58,036 2016 6.720
Total AppLication No.6 1,370,388 1,096,310 160,697
1) In accordance with generally accepted accounting policies in the Operations Manual of the Project, modified
accrual principle was applied where the costs are recognized when incurred and revenue when they become
available. This transaction occurred in December 2015 and paid in February 2016
Amount paid
Amount of from theInvoice eligible Designated Exchange
Type of amount expense- account- Date of rate USD
Appliction o. 7 expenitre HRK H1RK USD payment /HRK
Summary sheet No. 1 Consulting 441,488 353,190 53,660 30 March 2016 6.582
Summary sheet No. 1 Consulting 441,488 353,190 54,505 24 June 2016 6.480
Srilanka March, April
Summary sheet No. 2 Conference 27,628 4,016 and June 2016
Total Application No.7 882,976 734,008 112,181
Notes from page 10 to 12 form an integral part of these Project Financial Statements.
Independent Auditor's Report - page 1.
HRK SD pymen /HR
ADRIATIC SEA POLLUTION CONTROL PROJECT IGEF Grant TF 017706
Amount paidAmount of from the
Invoice eligible Designated ExchangeType of amount expense - account - Date of rate USD
Application No. 8 expenditure HRK HRK USD payment /HRK
Summary sheet No. 1 Consulting 487,500 390,000 59,091 22 July 2016 6.60002 September
Summary sheet No. I Consulting 487,500 390,000 59,289 2016 6.578
Fees - 1,200 - 18 July 2016
Total Application No.8 975,000 781,200 118,380
Amount paid
Amount of from the
Invoice eligible Designated Exchange
Type of amount expense - account - rate USD
Application No. 9 xpenditure HRK HRK USD Date of payment /HRK
Summary sheet No. I Consulting 216,359 173,088 25,582 31 October 2016 6.600
Summary sheet No. I Consulting 487,500 390,000 55,319 20 December 2016 7.050
Summary sheet No. 1 Consulting 441,487 353,190 49,977 29 December 2016 7.067
STotal Application No.9 1,145,346 916,278 130,878
Notes from page 10 to 12 form an integral part of these Project Financial Statements.
Independent Auditor's Report - page 1.9
ADRIATIC SEA POLLUTION CONTROL PROJECT IGEF Grant TF 017706
NOTES TO THE PROJECT FINANCIAL STATEMENTS
1. GENERAL
The Republic of Croatia signed the Agreement on the grant with the International Bank forReconstruction and Development (IBRD) for the implementation of the GEF Project control pollution of
the Adriatic Sea I.Grant is available to the Environmental Protection and Energy Efficiency Fund ("Fund") as the bodyresponsible for implementation of the Project. Project implementation unit (PIU) was established in theFund with the employees of the Fund.
2. BASIS FOR PREPARATION OF THE PROJECT FINANCIAL STATEMENTSAND THE ACCOUNTING POLICIES
2.1. Accounting policies and the basis for reporting
The financial statements of the Project have been prepared in accordance with generally acceptedaccounting policies in the Operations Manual Project, applying the modified accrual principle accordingto which the costs are recognized when incurred and revenue when they become available, and in
accordance with the International Bank for Reconstruction and Development Guidelines which are
harmonized with International Accounting Standards for the public sector.
2.2. Currency used in reporting
Accounting records of the Project are maintained in local currency - Croatian Kuna ("HRK") and USdollars ( "USD"). The amounts in Project Financial Statements are stated in HRK.
3. CASH ASSETS
For the implementation needs of the Project, the Fund as a project Implementation Entity (PIE) has
opened with Hrvatska pogtanska banka d.d., Zagreb, as the Agent bank, Designated Grant Account where
the inflow of funds and payment of the Project's expenditures are recorded.
(in USD)At 31 December
2016
Designated Grant Account Balance 154,195.60
Notes from page 10 to 12 form an integral part of these Project Financial Statements.Independent Auditor's Report - page 1.
10
ADRIATIC SE1 POLLUTION CONTROL PROJECT IGEF Grant TF 017706
NOTES TO THE PROJECT FINANCIAL STATEMENTS - continued
Designated Grant Account balance as of 31 December 2016 is confirmed by the bank statement ofHrvatska pogtanska banka d.d., Zagreb.
The balance on Designated Account as of 31 December 2016 stated in HRK in the amount of HRK1,105,356,71 represents equivalent value of USD balance using the middle exchange rate of CroatianNational Bank as of31 December 2016 in the amount of I USD =7.169 HRK.
4. PROJECT EXPENDITURE
Project expenditure comprises of:
(in HRK)
2016 2015 2014
Review by categories
Consultants' Services in the Project 7,099,033 4,068,083 883,387
Fees - Designated Grant Account 2,356 1,156 -
Total 7,101,389 4,069,239 883,387
Notes from page 10 to 12 form an integral part of these Project Financial Statements.Independent Auditor's Report - page 1.
11
ADRIATIC SEA POLLUTION CONTROL PROJECT ICEF Grant TF 017706
NOTES TO THE PROJECT FINANCIAL STATEMENTS - continued
5. LIABILITIES / SOURCES
li/ Grant
On 08 September 2014, the Republic of Croatia signed the Agreement on the grant from the International
Bank for Reconstruction and Development (IBRD) for the implementation of the GEF Project control
pollution of the Adriatic Sea l.
By this Agreement, GEF supported control environmental pollution in the Adriatic Sea through the
financing of projects in Croatia and Bosnia and Herzegovina. Based on this Agreement the IBRD has
granted the Republic of Croatia, a grant in the amount of USD 4,330,000 to assist in financing the Project.
The Agreement entered into force on 5 December 2014 and the Closing Date is 15 February 2019.
In order to facilitate the implementation of the project, the Republic of Croatia on 1 December 2014
entered into a supplemental agreement with the Fund as a body for the implementation of the project,
which sets out the tasks the Fund in the implementation of the project.
Given the ineligibility of remediation of landfill Diklo as demonstration investment under the Project, the
new location was identified that is eligible for co-financing from the Grant - landfill Sitnica, Municipality
of Blato and Municipality of Vela Luka, on island Kor6ula. Accordingly, the Project was restructured
whereby remediation of landfill Sitnica on Kor6ula was included in the Project.
/ii/ Other sources
Since the value-added tax, customs duties and excise duties do not fall into the category of eligible
expenditure and not financed from the proceeds of the Grant, these costs will be settled by the Fund.
6. NET ASSETS
Net assets at 31 December 2016 in the'amount of HRK 25,990 relate to interest accrued on the funds in
the Designated account of the Grant.
Notes from page 10 to 12 form an integral part of these Project Financial Statements.
Independent Auditor's Report - page 1.12
ADRIATIC SEA POLLUTION CONTROL PROJECT IGEF Crant TF 017706
PAYMENTS MADE INTO DESIGNATED GRANT ACCOUNT
Account No. HR6623900011500090782 (USD)Depository Bank Hrvatska pogtanska banka d.d., Zagreb
Address Jurigi6eva 4, Zagreb
Related Grant GEF Grant No. TF 017706
ExchangeAmount in Amount in rae
Date HKUDrateHIRK USD HRKIUSD
27 March 2015, 2,780,090 400,000 6.9516 September 2015. 739,066 110,813 6.67
2015. 3,519,156 510,813
18 July 2016 2,192,432 325,697 6.732016 2,192,432 325,697
Total 5,711,588 836,510
Payments calculated according to the mean rate of the Croatian National Bank.
Notes from page 10 to 12 form an integral part of these Project Financial Statements.
Independent Auditor's Report - page 1.13
ADRIATIC SEA POLLUTION CONTROL PROJECT IGEFGrani TF017706
DESIGNATED GRANT ACCOUNT STATEMENT
Account No. HR6623900011500090782 (USD)
Depository Bank Hrvatska po tanska banka d.d., ZagrebAddress Jurigi6eva 4, ZagrebRelated Grant GEF Grant No. TF 017706
(in HRK)Balance of Designated Account at 31 December 2015. 1,732,021
Add:
Withdrawal of the Grant to the Designated Grant Account 2,192,4322,192,432
Total 3,924,453
Balance of the Designated account at 31 December 2016 1,105,357
Add:The costs reported in the statement of sources and use of proceeds of theGrant - Paid from the Designated Account 2,430,286Fees 1,200The cost paid from the Designated Account in 2016 390,000Exchange rate differences 9,181
2,830,667Deduct:Interest in the Designated Account (11,571)
(11,571)
Total 3,924,453
Note 1: The Designated Account is recorded in USD. Balance as of 31 December 2016 in theamount of USD 154,195.60 USD is confirmed by the bank statement of Hrvatskapogtanska banka d.d., Zagreb. The balance in the USD is stated in HRK using themiddle exchange rate of Croatian National Bank as of 31 December 2016 in the amountof I USD = 7.169 HRK and amounts to HRK 1,105,356.71
Notes from page 10 to 12 form an integral part of these Project Financial Statements.Independent Auditor's Report - page 1.
14
ADRIATIC SEA POLLUTION CONTROL PROJECT IGEF Grant TF 017706
AUDIT DOCUMENTATION CHECKLIST
Name of Project Adriatic Sea Pollution control Project I
Grant GEF: TF 017706
Check if Checkincluded if N/A
I Audit Report (Opinion)A. Applicable accounting standards noted
B. Applicable auditing standards noted
C. Opinion rendered on all forms of withdrawals
1. Summary Statement of Expenditure ("SOE") - Application
for Loan Withdrawal
D. All sources of financing for the Project are noted
II Financial Reports:A. Revenue Earning Entity
1. Balance Sheet
2. Cash Flow Statement
3. Income Statement
B. Non-Revenue Earning entity
1. Statement of Assets and Liabilities
2. Statements of Sources and Uses of Funds
C. If applicable (refer to Grant)1. Statement of Uses of Funds by Activities of the Projects
2. Summary Statement of Expenditure ("SOE") - Applicationfor Loan Withdrawal 4
3. Designated Accounts' Statements
III Notes to the Financial Statements
IV Management Letter