Project: “Enabling Digital Governance” (IBRD Loan No. 89470-YF) Project Financial Statements for the period from 1 January 2021 to 31 December 2021 and Independent Auditor's Report Project – Enabling Digital Governance International Bank for Reconstruction and Development Loan no. 89470-YF Page CONTENTS INDEPENDENT AUDITOR'S REPORT 1-2 PROJECT FINANCIAL STATEMENTS Cash Receipts Cash Payments Summary of Statement of Expenditures Project Account Statement Government Account Statement Project Balance Sheet Explanatory Notes INDEPENDENT AUDITOR’S REPORT TO THE OFFICE FOR INFORMATION TECHNOLOGIES AND E-GOVERNMENT, MINISTRY OF FINANCE AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Opinion We have audited the financial statements of the Project – “Enabling Digital Governance”, the project no. P164824 (hereinafter “the Project”), financed under the International Bank for Reconstruction and Development (hereinafter the “IBRD”) loan no. 89470-YF (hereinafter “the Loan Agreement”), which comprise Cash Receipts, Cash Payments, Summary of Statement of Expenditures, Project Account Statement, Government Account Statement, Project Balance Sheet and Explanatory Notes for the period from 1 January 2021 to 31 December 2021. In our opinion, the accompanying Project Financial Statements for the period from 1 January 2021 to 31 December 2021 have been prepared, in all material respects in accordance with the accounting cash receipts and disbursement basis described in Note 2, and complies with the rules and conditions stated under the Loan Agreement. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Project in accordance with the ethical requirements that are relevant to our audit of the financial statements in the Republic of Serbia and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Matter Summary of Expenditures was not submited to the IBRD during period from 25 June 2019 to 31 December 2021. Emphasis of Matter – Basis of Accounting We draw attention to Note 2 to the Project Financial Statements, which describes the accounting basis. The Project Financial Statements have been prepared in order to meet the requirements of the Loan Agreement concluded between the IBRD and Republic of Serbia, and for the purposes of informing the IBRD, the Office for Information Technologies and e- Government and the Ministry of Finance of the Republic of Serbia. As a result, these Project financial statements may not be suitable for another purpose. Our opinion is not modified in respect of this matter. Responsibilities of Management and Those Charged with Governance for the Project Financial Statements The Project's Management is responsible for the preparation of Project Financial Statements. The Project Implementation Unit under Office for Information Technology and e-Government is responsible for overall coordination of all Project implementation activities in accordance with Loan Agreement. The Central Fiduciary Unit is responsible for the preparation and fair presentation of these Project financial statements in accordance with the contractual basis of the Loan Agreement and the accounting basis based on cash inflows and outflows described in Note 2; which implies determining whether the accounting basis based on cash inflows and outflows is an acceptable basis for the preparation of financial statements in the circumstances and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Those Charged with Governance are responsible for overseeing the financial reporting process. INDEPENDENT AUDITOR’S REPORT TO THE OFFICE FOR INFORMATION TECHNOLOGIES AND E-GOVERNMENT, MINISTRY OF FINANCE AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (Continued) Auditor's Responsibilities for the Audit of the Project Financial Statements Our objectives are to obtain reasonable assurance about whether the Project Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Project Financial Statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Belgrade, 30 June 2022 Danijela Krtinic Certified Auditor BDO d.o.o. Belgrade 2 IBRD Loan 89470YF ‐ Enabling Digital Governance (EDGE) Project No. P164824 Project Financial Statements For the period from January 01, 2021 until December 31, 2021 Prepared by CFU Financial Management Specialist IBRD Loan 89470YF ‐ Enabling Digital Governance (EDGE) Project No. P164824 Cash Payments For the period from January 01, 2021 until December 31, 2021 in EUR Actual For the period from Category Activity Budget January 01, 2021 Cumulative to Date until December 31, 2021 1) Goods, works, non‐ consulting services, consulting services, 48,070,500.00 840,764.52 1,193,456.35 Training and Operating costs for the Project Component 1 -Foundations 23,345,400.09 75,956.15 123,090.96 for Digital Service Delivery Component 2 - Transforming Services for Citizens, 19,753,800.00 401,069.46 401,069.46 Businesses and Government Component 3 - Digital Skills Development, Institutional 4,579,290.09 360,768.01 617,445.51 Strengthening and Change Management OPERATING COSTS 304,410.18 2,970.90 51,850.42 TRAINING (for all 87,599.64 0.00 0.00 components) Front End Fee Front End Fee 109,500.00 109,500.00 TOTAL 48,180,000.00 840,764.52 1,302,956.35 IBRD Loan 89470YF ‐ Enabling Digital Governance (EDGE) Project No. P164824 Summary of Statement of Expenditures For the period from January 01, 2021 until December 31, 2021 in EUR Actual For the period from Category Component / Activity Budget January 01, 2021 until Cumulative to Date December 31, 2021 1) Goods, works, non‐consulting services, consulting services, 48,070,500.00 840,764.52 1,193,456.35 Training and Operating costs for the Project Component 1 ‐Foundations for 23,345,400.09 75,956.15 123,090.96 Digital Service Delivery SER-EDGE-CQ-CS-19-01 44,660.01 78,155.01 SER-EDGE-IC-CS-20-15 31,296.14 44,935.95 Component 2 ‐ Transforming Services for Citizens, Businesses 19,753,800.00 401,069.46 401,069.46 and Government SER-EDGE-QCBS-CS-19-02 401,069.46 401,069.46 Component 3 ‐ Digital Skills Development, Institutional 4,579,290.09 360,768.01 617,445.51 Strengthening and Change Management SER-EDGE-QCBS-CS-19-03 97,655.47 97,655.47 SER-EDGE-QCBS-CS-19-04 45,271.40 45,271.40 SER-EDGE-DS-CS-19-07 26,892.00 62,748.00 SER-EDGE-DS-CS-19-08 24,432.00 57,008.00 SER-EDGE-DS-CS-19-09 24,432.00 57,008.00 SER-EDGE-DS-CS-19-10 24,432.00 57,008.00 SER-EDGE-DS-CS-19-11 24,432.00 57,008.00 SER-EDGE-DS-CS-19-12 15,276.00 35,644.00 SER-EDGE-DS-CS-19-13 19,092.00 44,548.00 SER-EDGE-DS-CS-19-14 24,432.00 57,008.00 SER-AUDIT-QSBS-CS-20-07-EDGE 15,736.00 15,736.00 SER-EDGE-IC-CS-20-18 9,250.14 16,187.64 SER-EDGE-DS-CS-20-19 9,435.00 14,615.00 OPERATING COSTS 304,410.18 2,970.90 51,850.42 CFU Rotation Model of Financing 46,311.00 Advertisements 1,964.91 2,972.36 Translation 1,005.99 2,567.06 TRAINING (for all components) 87,599.64 0.00 0.00 Front End Fee Front End Fee 109,500.00 109,500.00 TOTAL 48,180,000.00 840,764.52 1,302,956.35 IBRD Loan 89470YF ‐ Enabling Digital Governance (EDGE) Project No. P164824 Project Account Statement For the period from January 01, 2021 until December 31, 2021 Depository Bank National Bank of Serbia Project Account No. DA RS35908504779019323072 Project Account Currency EUR In EUR 1 Opening Balance Project Account Balance as at 25-Jun-19 0.00 Local Currency Account Balance 25-Jun-19 0.00 2 0.00 Add: Other WB deposits during reporting 3 period 4,000,000.00 4 (2+3) 4,000,000.00 Deduct: Eligible expenditures paid from the Project Account during reporting 5 period 1,086,040.46 6 (=5) 1,086,040.46 7 Closing Balance Project Account Balance as at 31-Dec-21 1,621,606.00 8 1,621,606.00 9 Difference (4-6-8) 1,292,353.54 * * Balance of Local Currency Account IBRD Loan 89470YF ‐ Enabling Digital Governance (EDGE) Project No. P164824 Government Account Statement For the period from January 01, 2021 until December 31, 2021 Depository Bank Treasury Administration Project Account No. RS35908504779019323072 Project Account Currency EUR In EUR 1 Opening Balance Government Account Balance as at 1-Jan-21 0.00 2 0.00 Add: Other Government deposits during 3 reporting period 75,666.44 4 (2+3) 75,666.44 Deduct: Eligible expenditures paid from theGovernment Account during 5 reporting period 75,666.44 6 (=5) 75,666.44 7 Closing Balance Project Account Balance as at 31-Dec-21 0.00 8 0.00 9 Difference (4-6-8) 0.00 * * Balance of Local Currency Account IBRD Loan 89470YF ‐ Enabling Digital Governance (EDGE) Project No. P164824 Project Balance Sheet For the period from January 01, 2021 until December 31, 2021 In EUR ASSETS Loan Account 39,690,500.00 Designated Account 3,376,606.00 Project (Local Currency) Account 302,451.62 Government Account Total 43,369,557.62 Project Expenditures in this period 765,098.08 NET ASSETS AS AT THE END OF THE 42,604,459.54 PERIOD LIABILITIES Accounts Payable 0.00 TOTAL LIABILITIES 0.00 Left on Loan Account 39,690,500.00 Designated Account 1,621,606.00 Project (Local Currency) Account 1,292,353.54 Government Account 0.00 Total 42,604,459.54 IBRD Loan 89470-YF – Enabling Digital Governance Project Explanatory Notes For the Period from 1 January 2021 to 31 December 2021 IBRD Loan – 89470-YF – Enabling Digital Governance Project Project No. P164824 EXPLANATORY NOTES For the period from 1 January 2021 to 31 December 2021 1. GENERAL INFORMATION AND OBJECTIVE AND NATURE OF THE PROJECT The International Bank for Reconstruction and Development (hereinafter referred to as “the IBRD”) has granted to the Republic of Serbia (hereinafter referred to as “the RoS” or “the Borrower”) a loan in the amount of EUR 43.8 million (IBRD Loan No. 89470-YF) to finance Enabling Digital Governance Project (hereinafter referred to as “the Project”). The IBRD made the loan available to the RoS as per the Loan Agreement (hereinafter referred to “the LA”), dated on 7 May 2019 and ratified by the Law on Ratification of the Loan Agreement (Enabling Digital Governance Project) between the RoS and the IBRD (“Official Gazette of the Republic of Serbia – International Treaties, No. 06/19), which includes the terms of its utilisation and implementation. The Principal Payment Date begins on 15 May 2024 and ends on 15 November 2033. The RoS will provide promptly as needed during Project implementation, an amount equivalent to EUR 4.38 million as counterpart funds for the Project, so the total budget for the Project amounts to EUR 48,180,000. Therefore, all payments made during Project implementation will be divided in the portion 91%:9%, where 91% will be financed from the Loan amount and 9% will be financed from the budget of the RoS. Payments made from the Loan amount will be exempt of the VAT and Custom duties, while payments made from the budget of the RoS will include this costs. The objective of the Project is to improve access, quality, and efficiency of selected administrative e-government services. The Project consists of the following parts: 1. Component 1 - Foundations for digital services delivery - Ensuring the foundations for e-Government advancement are in place, including the regulatory environment, implementation of the interoperability platform, cybersecurity, and resilience (budgeted EUR 23,345,400). 2. Component 2 - Transforming services for citizens, businesses and government - Comprising the stocktaking of public services followed by data and document management, business process reengineering (BPR), and digitalization of selected services based on objective criteria including citizens/business demand, time/money savings, improvements in transparency and accountability, reductions in gender gap, tackling the digital divide (urban vs. rural, gender, education, access, cost, etc.), and volume and level of complexity (budgeted EUR 19,753,800). 3. Component 3 - digital skills development, institutional strengthening and change management - Supporting change management activities in the public administration to implement the e-Government agenda, strengthen the Office for Information Technology and e-Government convening and advocacy capacities to lead e-Government reforms, and tackling resistance. This component will also support project management (budgeted EUR 4,579,290). The loan proceeds have also been used to cover the front-end fee of EUR 109,500 payable to the Bank. The LA became effective as of 25 June 2019. The Project Closing Date is 30 June 2024, as the final deadline to meet the requirements for withdrawal of the loan proceeds and fulfilment of the consultants’ contractual obligations. The deadline for the disbursements is 4 months after the Closing date, by which applications may be submitted to the IBRD for withdrawal and the documentation of eligible expenditures under the Project. 2 IBRD Loan – 89470-YF – Enabling Digital Governance Project Project No. P164824 EXPLANATORY NOTES For the period from 1 January 2021 to 31 December 2021 1. GENERAL INFORMATION AND OBJECTIVE AND NATURE OF THE PROJECT (Continued) The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Loan ("Category"), the allocation of the amounts of the Loan to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category, by the LA: Percentage of Amount of the Expenditures to be Loan Allocated financed (inclusive of expressed in Taxes other than VAT Category EUR and Custom Duties) (1) Goods, works, non- consulting services, consulting services, Training 43,690,500 91% and Operating Costs for the Project (2) Front-end Fee 109,500 Total loan amount 43,800,000 Structure of the Projects cost and financing is shown in the table below: % of Source Total Amount in EUR financing IBRD EUR 43,690,500.00 91% IBRD EUR 109,500.00 RoS EUR 4,380,000.00 9% Total Project Cost EUR 48,180,000.00 100% Components are presented in details as follows: Component 1 - Foundations for Digital Service Delivery: The objective of this component is to establish the necessary cross-cutting foundations to support the use of Information and Communication Technology (ICT) in the provision of public services to citizens and businesses, including standards, procedures, and digital infrastructure. This component is structured around four subcomponents: Subcomponent 1.1 will finance the implementation of the Interoperability Platform (IoP) as an integrated tool for the safe and secure exchange of data between government entities. This subcomponent will finance, inter alia: (i) the conceptualization and design of the interoperability framework; (ii) the development and implementation of the IoP; (iii) the design and development of e-Trusted services; and (iv) the development of a platform for enabling mobile access to government services. Inputs required under the Subcomponent 1.1 are Technical Assistance (TA) and ICT investments (software and hardware). 3 IBRD Loan – 89470-YF – Enabling Digital Governance Project Project No. P164824 EXPLANATORY NOTES For the period from 1 January 2021 to 31 December 2021 1. GENERAL INFORMATION AND OBJECTIVE AND NATURE OF THE PROJECT (Continued) Subcomponent 1.2 Establishment of the Government Meta-Register. The Project will support the consolidation and interoperability of the most important public registries into one Meta-Register, including the Tax, Customs, Citizens, Addresses, Cadaster, and Business registries as agreed with the Government of Serbia (GoS). This will be done through: (i) the consolidation of key registries, and (ii) the carrying out of activities required to support the interoperability of the most important public registries into one Meta-Register. Establishment of the Government Meta-Register, are technical assistance (TA) and ICT investments (software and hardware). Subcomponent 1.3 Implementation of the Disaster Recovery Data Center (DRDC). This subcomponent will support a redundancy system and will finance, inter alia: (i) the acquisition of equipment for the DRDC; and (ii) the carrying out of feasibility studies, cost estimations and technical specifications, and the acquisition of connectivity equipment and systems. Inputs require under the Subcomponent 1.3 will primarily be ICT investments (software and hardware) and TA. Subcomponent 1.4 Strengthening Cybersecurity, Data protection, and Regulatory Environment. The Project will support activities aimed at ensuring compliance with the General Data Protection Regulation (GDPR) and Data Protection Law and the drafting and implementation of required e-government bylaws and secondary regulations (cybersecurity, meta-register, and data management, among others). This subcomponent will finance activities, including, inter alia: (i) elaboration of e-government bylaws and secondary regulations; (ii) the drafting of a cybersecurity rulebook; (iii) establishment of a cybersecurity and data protection department (Computer Emergency Response Team (CERT)); and (iv) the establishment of a cybersecurity laboratory and training center, including the Security Operations Center (SOC) and the Network Operations Center (NOC). Inputs required under the Subcomponent 1.4 are TA and ICT investments (software and hardware). Component 2 - Transforming Services for Citizens, Businesses, and Government: the objective of this component is to improve back-office processes to reduce administrative burdens and increase efficiency of service delivery. This will be done through reengineering, digitalization, and piloting of selected administrative e-services. This component is structured around four subcomponents: Subcomponent 2.1 Data and Document Management. The Project will finance the establishment of methodologies, procedures, and guidelines for the collection, storage, management, and use of data and electronic documents, including, inter alia: the implementation of the Data and Document Management System (DDMS) to enable the Government of Serbia to make more informed decisions by increasing its data analytics capabilities. Inputs required under the Subcomponent 2.1 are TA and ICT investments. 4 IBRD Loan – 89470-YF – Enabling Digital Governance Project Project No. P164824 EXPLANATORY NOTES For the period from 1 January 2021 to 31 December 2021 1. GENERAL INFORMATION AND OBJECTIVE AND NATURE OF THE PROJECT (Continued) Subcomponent 2.2 Administrative Service Inventory. The Project will support the development of a comprehensive administrative service catalogue for services to citizens and businesses, including, inter alia, the preparation of the administrative service inventory. At the minimum, the Rulebook should define mandatory measures, procedures, and standards compliant to the GDPR and cybersecurity which will constitute an obligatory requirement to access and interact with the e-Government system. Inputs under this subcomponent will consist of TA. Subcomponent 2.3 Business Process Reengineering. The Project will finance the preparation of a minimum of 150 “as-is” process maps from the administrative service inventory, including, inter alia, the development of a methodology for their prioritization, and the elaboration of “to-be” process maps for a minimum of 50 prioritized services. Inputs under the subcomponent will consist of TA. Subcomponent 2.4 Digitalization of Pilot Services. The Project will finance the digitalization and piloting of a minimum of 30 selected online services to be offered to citizens, businesses, and government through the Government of Serbia e-Portal (euprava.gov.rs) and the mobile applications based on specifications and requirements established in an e-Portal rulebook and by using predefined application programming interfaces (APIs). This subcomponent will also finance TA for the Help Desk to provide support to users and collect feedback on digitalized services. Inputs required under the subcomponent are TA and ICT investments. Component 3 – Digital Skills Development, Institutional Strengthening and Change Management: The objective of this component is to strengthen the capacities of citizens, businesses, and the government to achieve project results. This will be done through three subcomponents: Subcomponent 3.1 Strengthening Digital Skills and Knowledge Sharing. The Project will finance carrying out of training for public servants to improve ICT skills and carry out outreach campaigns to promote the uptake of digital services, including, inter alia, the elaboration of an ICT and HR strategy and its associated action plan. The strategy and action plan expected to be carried out in the first year of Project implementation will include a training plan and criteria for minimum digital competences. Inputs required under the subcomponent are TA and training. Subcomponent 3.2 Change Management, Communication, and Citizen Feedback. The Project will finance the design of a change management strategy, action plan and communication strategy and the development and deployment of citizen engagement tools to collect and respond to citizen feedback and measure citizen satisfaction. A change management strategy and action plan will be developed during the first year of Project implementation, thereafter the Project will support implementation to facilitate stakeholder buy-in. Inputs required under the subcomponent will include TA and training and investments in ICT (citizen engagement tools). 5 IBRD Loan – 89470-YF – Enabling Digital Governance Project Project No. P164824 EXPLANATORY NOTES For the period from 1 January 2021 to 31 December 2021 1. GENERAL INFORMATION AND OBJECTIVE AND NATURE OF THE PROJECT (Continued) Subcomponent 3.3 Project Management. The Project will finance the establishment and operation of a Project Implementation Unit (PIU) at the Office for Information Technology and e Government (OITeG) and provision of technical assistance to support implementation of Project related activities. These TA activities refer to activities identified during the life of the Project that are consistent with the Project Development Objective (PDO) and those required to ensure compliance with IBRD safeguards requirements. Inputs required for the implementation of this subcomponent include TA, training, operating costs, and equipment for the PIU. As of 31 December 2021, withdrawn loan amount is EUR 4,109,500.00. The loan proceeds are also used to cover the Front-end Fee in the amount of EUR 109,500 on 25 June 2019. The amount of EUR 107,415.89 was financed from the budget of the RoS. Total payments made for the period from 1 January 2021 to 31 December 2021 amounted to EUR 1,302,956.35 - total payments from the loan amounted to EUR 1,195,540.46 and total payments form the budget account of the RoS amounted to EUR 107,415.89. Actual expenses, compared to the budget, are presented in the table below: Actual EUR Cumulative to Category Activity Budget EUR 31 December 2021 2021 Goods, works, non-consulting services, consulting services, Training and Operating costs for the Project Component 1 23,345,400.09 75,956.15 123,090.96 Component 2 19,753,800.00 401,069.46 401,069.46 Component 3 4,579,290.09 360,768.01 617,445.51 Operating costs 304,410.18 2,970.90 51,850.42 Training 87,599.64 - - Front-end Fee Front-end Fee 109,500.00 - 109,500.00 Total 48,180,000.00 840,764.52 1,302,956.35 Office for Information Technology and e-Government (OITeG) is responsible for the day- to-day implementation of project activities. OITeG is also responsible for project coordination and management. OITeG Director serves as the Project Director. The Central Fiduciary Unit of Ministry of Finance (CFU) is responsible for the preparation of the financial statements and their appropriate disclosure and the Project Implementation Unit (PIU) under OITeG, Project Director or authorized person from the OITeG verify those statements by signing them. 6 IBRD Loan – 89470-YF – Enabling Digital Governance Project Project No. P164824 EXPLANATORY NOTES For the period from 1 January 2021 to 31 December 2021 2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING CONVENTION 2.1. General The Project Financial Statements are prepared according to the comprehensive basis of accounting that is in line with the requirements of the Project Operations Manual. The financial reporting provisions of the Agreement are based on the generally accepted accounting principles and relevant IBRD guidelines. The Project Financial Statements are prepared in accordance with the International Public Sector Accounting Standard: Financial Reporting Under the Cash Basis of Accounting (IPSAS-Cash Basis), issued by the International Public Sector Accounting Standards Board (IPSASB) within the International Federation of Accountants (IFAC), and presented in accordance with the Financial Management Manual for World Bank Financed Investment Operations (March 2010): RM 3- Financial Reporting and Auditing. 2.2. Accounting Records and Basis of Preparation The Project Financial Statements, except for the Balance Sheet, for the period from 1 January 2021 to 31 December 2021 were prepared on a cash basis. According to this basis, funds are recognized when cash is received, and expenses are recognized when cash is paid out. The following statements that constitute an integral part of the Project Financial Statements were prepared for the period from 1 January 2021 to 31 December 2021: Cash Receipts, Cash Payments, Summary of Statement of Expenditures, Project Account Statement, Government Account Statement and Project Balance sheet. 2.3. Reporting currency The Dinar (RSD) is the functional currency in Serbia. For the purpose of the Project Financial Statements presentation, a presentation currency is EUR, i.e. the reporting currency of the Project Financial Statements is EUR. All reports are originally prepared in EUR. 2.4. Exchange rates All cash receipts were made in the reporting currency (EUR). Cash payments are made in EUR and RSD. The funds in EUR are transferred to RSD account periodically, when needed. All transactions, realized in RSD were translated into EUR by applying the “first-in, first-out” method. The “first- in, first-out” method uses the oldest exchange rate realised during the conversion of EUR to RSD, to account for transactions, until funds received at that exchange rate have been expended (exchange rate of first instalment applies until the amount is spent and if there is not enough resources to fully pay the next expense; then, the following expense is translated in EUR totally by applying the exchange rate of the next instalment). Expenses are allocated chronologically to instalments. 2.5. Narrative reports The PIU prepares semi-annual progress reports in the form agreed with the IBRD. 7 IBRD Loan – 89470-YF – Enabling Digital Governance Project Project No. P164824 EXPLANATORY NOTES For the period from 1 January 2021 to 31 December 2021 3. DESIGNATED ACCOUNTS For the purpose of the Project two designated accounts were open, one in EUR and the other in RSD. Funds from the budget of the RoS which are part of the total Project amount are paid through budget account of the Ministry of Finance that is not used only for the Project financing (other items/invoices/contracts beyond Project activities also use this account). For the disbursement of the loan to the Designated Account in EUR the following persons are authorised: Sinisa Mali, Minister of Finance, Jelena Tanaskovic, State Secretary in the Ministry of Finance, Ana Tripovic, Acting Director of the Public Debt Administration in the Ministry of Finance, Mihailo Jovanovic, Director of the Office for Information Technologies and e Government, Slavisa Antic, Assistant Director, Sector for Legal, HR, Financial and Administrative Affairs in the OITeG and Snezana Jovanovic, Senior Advisor for Financial and Accounting Coordination in the OITeG. For disbursement of funds from the Designated Account, the following persons are authorized: Mihailo Jovanovic, Director of the Office for Information Technologies and e Government, Slavisa Antic, Assistant Director, Sector for Legal, HR, Financial and Administrative Affairs in the OITeG, Snezana Jovanovic, Senior Advisor for Financial and Accounting Coordination in the OITeG, Marko Gvero, Acting Director of Treasury Administration, and Sandra Vraneš, Acting Assistant Director of Treasury Administration. Authorized persons from the Treasury Administration use their authorizations only during the closing of the account. DESIGNATED ACCOUNT Details concerning the Project’s Designated Account in EUR are as follows: Account No. 504779-100193230 IBAN RS35908504779019323072 Office for Information Technology and e-Government Depository bank National Bank of Serbia Address Pop Lukina 7-9 Currency (Euro) EUR According to the bank statements, outstanding balance on the DA amounts to EUR 1,621,606.00. It is non-interest bearing account. 8 IBRD Loan – 89470-YF – Enabling Digital Governance Project Project No. P164824 EXPLANATORY NOTES For the period from 1 January 2021 to 31 December 2021 3. DESIGNATED ACCOUNTS (Continued) As of and for the Period from 1 January 2021 through 31 December 2021 Special Account DA Statement (in EUR) is presented in the following table: 1 January 2021 – 31 December 2021 Opening balance 3,376,606.00 Inflows to EUR account - Transfers from EUR to RSD account 13-Jul-21 (265,000.00) 23-Sep-21 (1,490,000.00) Total transfers from EUR account (1,755,000.00) Ending balance 1,621,606.00 LOCAL CURRENCY ACCOUNT STATEMENT The Director of OITeG has an exclusive right to the Designated Account in RSD. Disbursement of funds from the Designated Account is carried out in respect of the electronic certificate approved by the Treasury Administration. Payments from Special Accounts are executed by means of payment orders. After all the procedures with respect to flow of documents, verifications and authorisations prescribed by internal controls are applied, payment orders signed by designated signatories are submitted for payments from Designated Accounts. Details concerning the Project’s Designated Account in RSD are as follows: Account No. 102511101 Office for Information Technology and e-Government Depository bank Treasury Administration Address Pop Lukina 7-9 Currency RSD According to the bank statement, outstanding balance on local currency account as of 31 December 2021 amounts to RSD 151,493,323.03. It is non-interest bearing account. 9 IBRD Loan – 89470-YF – Enabling Digital Governance Project Project No. P164824 EXPLANATORY NOTES For the period from 1 January 2021 to 31 December 2021 3. DESIGNATED ACCOUNTS (Continued) As of and for the Period from 1 January 2021 through 31 December 2021 (In RSD) Local Currency Sub-account Statement (in RSD) is presented in the following table: 1 January 2021 - 31 December 2021 Opening balance 35,455,384.12 Inflows to RSD account 15-Jul-21 31,060,491.00 27-Sep-21 174,662,419.00 Total inflows to RSD account 205,722,910.00 Outflows by months from RSD account Jan-21 (1,630,558.31) Feb-21 (3,324,856.16) Mar-21 (4,969,137.41) Apr-21 (1,630,558.31) May-21 (2,025,263.31) Jun-21 (3,068,297.91) Jul-21 (16,877,571.08) Aug-21 (24,196,987.25) Sep-21 (1,873,997.75) Oct-21 (3,506,039.07) Nov-21 (23,483,579.64) Dec-21 (3,098,124.89) Total outflows from RSD account (89,684,971.09) Ending balance 151,493,323.03 The amount presented in the Project Account Statement and Balance Sheet in the amount of EUR 1,292,353.54 represents the difference between the total withdrawn amount and the closing balance on Project Account in EUR and the total amount of eligible expenditures paid. If the cash balance held in RSD at the end of the year was translated using the closing rate (the closing rate is the spot exchange rate at the reporting date), the stated amount of cash would be lower for the amount of EUR 3,948.90. If the cash balance held in RSD at the end of the year was translated using the exchange rate of the last conversion of EUR to RSD, the stated amount of cash would be lower for the amount of EUR 3.12. Together with RSD payments from RSD special account which presents 91% of total expenditures paid from 1 January 2021 until 31 December 2021 for the needs of the Project, 9% was paid out of budget account of the Ministry of Finance (MoF) in the amount of RSD 8,869,943.56 (EUR 75,666.44). As of and for the Period from 1 January 2021 through 31 December 2021 (In RSD) outflows of the budget account of the MoF (in RSD) are presented in the following table: 10 IBRD Loan – 89470-YF – Enabling Digital Governance Project Project No. P164824 EXPLANATORY NOTES For the period from 1 January 2021 to 31 December 2021 3. DESIGNATED ACCOUNTS (Continued) 1 January 2021 – 31 December 2021 RSD EUR Outflows by months from RSD account Jan-21 (161,264.02) (1,375.65) Feb-21 (328,832.63) (2,805.08) Mar-21 (491,453.17) (4,192.30) Apr-21 (161,264.02) (1,375.65) May-21 (200,300.77) (1,708.65) Jun-21 (142,194.72) (1,212.97) Jul-21 (1,830,474.35) (15,614.72) Aug-21 (2,389,852.52) (20,386.87) Sep-21 (188,594.68) (1,609.05) Oct-21 (346,751.11) (2,958.39) Nov-21 (2,322,551.81) (19,813.08) Dec-21 (306,409.76) (2,614.03) Total outflows from RSD account (8,869,943.56) (75,666.44) 4. SUMMARY STATEMENT OF EXPENDITURES The Front-end Fee was paid from the amount of loan on 25 June 2019, in the amount of EUR 109,500. Replenishments of the Designated Account are made on the basis of the Withdrawal application prepared and submitted by the CFU. The applications are approved/signed electronically by the person authorized to dispose of Loan account Mr. Slavisa Antic. The IBRD’s initial payment to the Project designated account amounted to EUR 4,000,000.00 and it was paid on 24 October 2019. The review of submitted summaries is presented in the table below: Number of Date of SOE Application Approved Date of withdrawal withdrawal submitted to amount amount disbursement application application IBRD Front-end Fee 25-Jun-19 109,500 - 109,500 25-Jun-19 WA EDGE 01 18-Oct-19 4,000,000 - 4,000,000 24-Oct-19 Total 4,109,500 - 4,109,500 During 2019 and 2020, the CFU did not submit SOEs to the IBRD. In 2021, there was no withdrawal of funds from the loan account. Total payments made from the funds of the loan up until 31 December 2021 cumulatively amounted to EUR 1,086,040.46 (excluding the front-end fee) and total payments form the budget account of the RoS up until 31 December 2021 cumulatively amounted to EUR 107,415.89. 11 IBRD Loan – 89470-YF – Enabling Digital Governance Project Project No. P164824 EXPLANATORY NOTES For the period from 1 January 2021 to 31 December 2021 4. SUMMARY STATEMENT OF EXPENDITURES (Continued) (1) Goods, works, non-consulting services, consulting services, Training and Operating Costs for the Project amounted to EUR 840,764.52 for the period from 1 January 2021 until 31 December 2021 (cumulative for the Project EUR 1,193,456.35) and consisted of the following: 01 January 2021 – Cumulative to 31 December 2021 Contract 31 December 2021 Consultant Activity amount 91% 9% 100% 91% 9% 100% Component 1 -Foundations for Digital Service Delivery JV Law office Legal Advisor 211,066.00 40,640.60 4,019.41 44,660.01 71,121.05 7,033.96 78,155.01 DRDC Consultant 46,000.00 28,479.49 2,816.65 31,296.14 40,891.72 4,044.23 44,935.95 69,120.09 6,836.06 75,956.15 112,012.77 11,078.19 123,090.96 Component 2 - Transforming Services for Citizens, Businesses and Government Omni Group Business Analysis of Transforming Services for Solution d.o.o Citizens 1,934,248.18 364,975.72 36,093.74 401,069.46 364,975.72 36,093.74 401,069.46 364,975.72 36,093.74 401,069.46 364,975.72 36,093.74 401,069.46 Component 3 - Digital Skills Development, Institutional Strengthening and Change Management 3.1 Institutional Strengthening and Change Management Strengthening Digital Skills and Knowledge in Governmental JV Deloitte d.o.o. Institutions 953,347.08 88,866.48 8,788.99 97,655.47 88,866.48 8,788.99 97,655.47 Change Management and JV Deloitte d.o.o. Institutional Strengthening 441,955.34 41,196.97 4,074.43 45,271.40 41,196.97 4,074.43 45,271.40 130,063.45 12,863.42 142,926.87 130,063.45 12,863.42 142,926.87 12 IBRD Loan – 89470-YF – Enabling Digital Governance Project Project No. P164824 EXPLANATORY NOTES For the period from 1 January 2021 to 31 December 2021 4. SUMMARY STATEMENT OF EXPENDITURES (Continued) 01 January 2021 – Cumulative to 31 December 2021 Contract 31 December 2021 Consultant Activity amount 91% 9% 100% 91% 9% 100% 3.3 Project Management Project Manager 132,219.00 24,471.72 2,420.28 26,892.00 57,100.68 5,647.32 62,748.00 ICT Software and Applications Associate 2 120,124.00 22,233.12 2,198.88 24,432.00 51,877.28 5,130.72 57,008.00 PPID Cybersecurity Specialist 120,124.00 22,233.12 2,198.88 24,432.00 51,877.28 5,130.72 57,008.00 ICT Hardware Associate 120,124.00 22,233.12 2,198.88 24,432.00 51,877.28 5,130.72 57,008.00 ICT Software and Application Associate 1 120,124.00 22,233.12 2,198.88 24,432.00 51,877.28 5,130.72 57,008.00 Project Management Associate 75,107.00 13,901.16 1,374.84 15,276.00 32,436.04 3,207.96 35,644.00 Outreach Associate 44,548.00 17,373.72 1,718.28 19,092.00 40,538.68 4,009.32 44,548.00 PPID GDPR Specialist 120,124.00 22,233.12 2,198.88 24,432.00 51,877.28 5,130.72 57,008.00 BDO DOO Audit 78,680.20 14,319.76 1,416.24 15,736.00 14,319.76 1,416.24 15,736.00 S&E Safaguard Consultant 46,250.00 8,417.50 832.64 9,250.14 14,730.62 1,457.02 16,187.64 Consultant for monitoring and evaluation 30,525.00 8,585.85 849.15 9,435.00 13,299.65 1,315.35 14,615.00 198,235.31 19,605.83 217,841.14 431,811.83 42,706.81 474,518.64 OPERATING COSTS CFU Rotation Model - - - 42,143.01 4,167.99 46,311.00 Other 2,703.51 267.39 2,970.90 5,033.68 505.74 5,539.42 2,703.51 267.39 2,970.90 47,176.69 4,673.73 51,850.42 Total 765,098.08 75,666.44 840,764.52 1,086,040.46 107,415.89 1,193,456.35 Five consultants (firms/ JVs) engaged on the Project from the beginning of the Project until 31 December 2021 are approved through prior review concept by the IBRD. Total of 18 contracts with consultants were signed during that period. Eight members of PIU are co-opted/delegated/taken over from another project so IBRD had already approved them through prior review concept. 13 IBRD Loan – 89470-YF – Enabling Digital Governance Project Project No. P164824 EXPLANATORY NOTES For the period from 1 January 2021 to 31 December 2021 4. SUMMARY STATEMENT OF EXPENDITURES (Continued) The Consultant Omni Group Business Solution d.o.o. has been engaged in 2021 for Analysis of Transforming Services for Citizens. The contract was signed as of 20 January 2021 with total value of the contract is je USD 2,347,402.54, while paid amount in 2021 was EUR 401,069.46. JV Deloitte d.o.o. has been awarded with two contracts in 2020. One is for for Strengthening Digital Skills and Knowledge Sharing in Governmental Institutions (total value of the contract is USD 1,159,365.48, while paid amount in 2021 was EUR 97,655.47) and the other is for Change Management and Institutional Strengthening (total value of the contract is USD 537,461.93, while paid amount in 2021 was EUR 45,271.40). 5. BALANCE SHEET In EUR 31 December 2021 ASSETS Loan Account 39,690,500.00 Designated Account 3,376,606.00 Project (Local Currency) Account 302,451.62 Total 43,369,557.62 Project Expenditures in this period 765,098.08 NET ASSETS AS AT THE END OF THE PERIOD 42,604,459.54 Liabilities Accounts Payable - TOTAL LIABILITIES - Left on Loan Account 39,690,500.00 Designated Account 1,621,606.00 Project (Local Currency) Account 1,292,353.54 Other - Total 42,604,459.54 A total amount of EUR 4,000,000 was withdrawn for the Project to the designated account, Front-end Fee was withdrawn from the Loan account by the IBRD and paid to the IBRD on behalf of the Borrower in the amount of EUR 109,500, while the amount of EUR 39,690,500.00 of the Loan was left to be used in the future. 14