Montenegro Industrial Waste Management and Cleanup Project Project ID: P122139 Loan No. 84280-ME Financial Statements for the period from 1 January 2022 to 31 December 2022 and Independent Auditor’s Report Montenegro Industrial Waste Management and Cleanup Project Project ID: P122139 Loan No.84280-ME CONTENTS Page INDEPENDENT AUDITOR’S REPORT 1-2 PROJECT FINANCIAL STATEMENTS Statement of Sources and Uses of Funds 3 Statement of Uses of Funds by Project Activities 4 Special Account Statement 5 Notes to the Project Financial Statements 6 - 16 Annex 1 – Project Financial Statements INDEPENDENT AUDITOR’S REPORT Environment Protection Agency of Montenegro Opinion We have audited the accompanying financial statements of the “Montenegro Industrial Waste Management and Cleanup Project” (hereinafter referred to as: Project), financed under International Bank for Reconstruction and Development (hereinafter referred to as: IBRD) Loan Agreement No.P122139 and Government of Montenegro (hereinafter referred to as: GoM) as of 31 December 2022 and for the period from 1 January 2022 to 31 December 2022. These Project financial statements include Statement of Sources and Uses of Funds, Statement of Uses of Funds by Project Activities and Statement of Special Account. In our opinion, the Project financial statements present fairly, in all material respects, the balance on the Special Account as of 31 December 2022 and the movements on the Special Account and the Sources and Uses of Funds of the Project for the period from 1 January 2022 to 31 December 2022, in accordance with the World Bank guidelines and procedures and contractual basis of the Project. In addition, (a) with respect to SOE, adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditures incurred; and (b) which expenditures are eligible for financing under the Project Agreement No.P122139. 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 Montenegro, 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. Emphasis of Matter – Basis of Accounting Without modifying our opinion, we draw attention to Note 2.b. to the financial statements, which describes the basis of accounting. The financial statements are prepared in accordance with the World Bank guidelines and procedures and contractual basis of the Project. As a result, the financial statements may not be suitable for another purpose. Responsibilities of Project Management and Those Charged with Governance for the Financial Statements Management of the Project is responsible for the preparation and fair presentation of the financial statements in accordance with the World Bank guidelines and procedures and contractual basis of the Project 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 Project's financial reporting process. INDEPENDENT AUDITOR’S REPORT Environment Protection Agency of Montenegro (Continued) Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the 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 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. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. The Project is closed in 2022. • 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, 19 February 2024 Zdravko Gardovic Certified Auditor 2 Montenegro Industrial Waste Management and Clean-up Project – IWMCP Project ID: P122139 LOAN AGREEMENT No. 84280-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 1 January 2022 to 31 December 2022 1. GENERAL INFORMATION The Government of Montenegro, acting through the Ministry of Sustainable Development and Tourism (hereinafter referred to as: MSDT) adopted the first National Sustainable Development Strategy of Montenegro (hereinafter referred to as: the Strategy) in 2007. In 2008, the GoM established the Environmental Protection Agency as an operative implementation authority of the law on environmental protection. GoM is in the process of adoption of new strategy for sustainable development by 2030. The priority themes, strategic objectives, measures and sub-measures of sustainable development by the year 2030 represent the response of Montenegro to the UN Agenda for sustainable development by 2030. The Government of Montenegro (hereinafter referred to as: GoM), during 2011, accessed the process of negotiating financial assistance with the World Bank, International Bank for Reconstruction and Development (hereinafter referred to as: IBRD) for the purposes of reducing contamination of the Montenegro’s natural resources and public health risks of exposure to this contamination from selected industrial waste disposal sites. The GoM and the IBRD agreed on financing the Project Montenegro Industrial Waste Management and Clean-up - IWMCP. The Government of Montenegro has signed the Loan Agreement 8428-ME in amount of EUR 50,000,000 with IBRD dated 10 October 2014. The financing is approved for the Project titled “Montenegro Industrial Waste Management and Clean-up - IWMCP” (hereinafter referred to as: Project). The Project will be realized by the Ministry of Sustainable Development and Tourism (hereinafter referred to as: MSDT), while implementation will be divided between the Ministry of Sustainable Development and Tourism (hereinafter referred to as: MSDT) and the Environmental Protection Agency (hereinafter referred to as: EPA). The Project development objective is to reduce environmental and health risks posed by selected industrial waste disposal sites and strengthen the local institutional capacity for regulation and management of industrial and hazardous waste. Key outcome indicators are: (i) Contaminated land managed or dump sites closed under the project; (ii) Number of industries related to the priority industrial waste disposals sites with agreements for ongoing and future waste disposal in compliance with national legislation for solid waste management and (iii) Reduction of pollution exposures paths by remediation measures. The project will have three components: (1) The remediation of selected legacy industrial waste disposal sites in Montenegro; (2) Support future industrial hazardous waste management related to the remediation sites; (3) Project Management. According to latest Implementation Status and Results Report published by the World Bank as of 31 October 2023 the Project is closed. 6 Montenegro Industrial Waste Management and Clean-up Project – IWMCP Project ID: P122139 LOAN AGREEMENT No. 84280-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 1 January 2022 to 31 December 2022 1. GENERAL INFORMATION (Continued) In the following table, the acceptable categories of expenses that can be financed from the Loan are presented, as well as the allocated amount of the funds from the Loan for each Category and the percentage of costs that have to be financed for eligible expenses by each category: Amount of the Loan Allocated Percentage of (expressed in Expenditures to be Category EUR) financed 1. Goods, works, non-consulting services, consultants’ services, incremental Operating costs and training and audit for the Project 43,793,260.49 100% Amount payable pursuant to Section 2.07 (a) of 2. Refund of the Preparation the Advance 781,739.51 General Conditions Amount payable pursuant to Section 2.03 of the Agreement in accordance with Section 2.07 (b) of 3. Front-end Fee 125,000.00 the General Conditions Amount due pursuant to 4. Interest Rate Cap and Interest Section 2.07(c) of the Rate Collar premium - Agreement Cancelled pursuant to Section 7.11 of the 5. Cancellation 5,300,000.00 General Conditions Total amount 50,000,000.00 7 Montenegro Industrial Waste Management and Clean-up Project – IWMCP Project ID: P122139 LOAN AGREEMENT No. 84280-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 1 January 2022 to 31 December 2022 1. GENERAL INFORMATION (Continued) The following table presents use of funds per category of costs as of 31 December 2022 in comparison with amount of loan to be allocated to each category: Amount of the Percentage Uses of funds Loan Allocated of available Category (in EUR) (in EUR) loan used 1. Goods, works, non-consulting services, consultants’ services, incremental Operating costs and training and audit for the Project 32,915,145.62 43,793,260.49 75.16% 2. Refund of the Preparation Advance - 781,739.51 - 3. Front-end Fee - 125,000.00 - 4. Interest Rate Cap or Interest Rate Collar premium - - - 5. Cancellation - 5,300,000.00 - Total 32,915,145.62 50,000,000.00 65.83% 8 Montenegro Industrial Waste Management and Clean-up Project – IWMCP Project ID: P122139 LOAN AGREEMENT No. 84280-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 1 January 2022 to 31 December 2022 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies have been adopted in the preparation of the financial statements. These have consistently been applied with those of the prior year. 2.1. Basis of preparation (a) General The Project Financial Statements have been prepared for the purpose of reporting to the IBRD on the activities of the Project related to funds received for the completion of the Project objectives in accordance with the IBRD Loan Agreement and GEF Grant Agreement. (b) Cash-basis for accounting Accounting records are maintained in accordance with cash basis of accounting, in accordance with the World Bank guidelines and procedures and contractual basis of the Project. Cash basis means a basis of accounting that recognizes transactions and other events only when cash is received or paid. (c) Reference currency The Technical Service Unit under the Ministry of Finance has adopted the Euro (“EUR”) as its reference and measurement currency for consistency with the reporting requirements, as it reflects the economic substance of the underlying events and transactions. The Project reporting currency is EUR for IBRD Loan. (d) Going concern The accompanying financial statements have been prepared for the period starting from 1 January 2022 to 31 December 2022. The Project is closed. 9 Montenegro Industrial Waste Management and Clean-up Project – IWMCP Project ID: P122139 LOAN AGREEMENT No. 84280-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 1 January 2022 to 31 December 2022 3. SPECIAL ACCOUNT The Technical Service Unit (hereinafter referred to as: TSU) administers the Special Account. The TSU prepares withdrawal applications for replenishment of the Special Account which ought to be signed by designated signatories. Payments from the Special Account are executed by the means of payment orders. After all the procedures with respect to flow of documents, verifications and authorizations prescribed by internal controls are applied, payment orders signed by designated signatories are submitted for payments from either the Special Account or the Budget (for Government contribution) split in accordance with eligible percentages of financing. In the case of Direct Payment the application form for such method payment is submitted to the Bank with the same authorized signatories as described above. Director General of Directorate General for State Treasury and Minister of Finance, have privileges to the Special Account of the Project. Disbursement of funds from the Special Account is done in respect of the written approval from the Senior Financial Officer and Project Coordinator since July, 2014. Details concerning the Special Account of the Project are as follows: Account No. 265-02010658 EUR Depository Bank Crnogorska komercijalna banka a.d. Podgorica Address Bulevar Revolucije 17, Podgorica Currency EUR Bank Accounts with Crnogorska komercijalna banka a.d. Podgorica are noninterest- bearing to the deposit made to the Special Account by IBRD. 10 Montenegro Industrial Waste Management and Clean-up Project – IWMCP Project ID: P122139 LOAN AGREEMENT No. 84280-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 1 January 2022 to 31 December 2022 4. SUMMARY OF EXPENDITURES The review of submitted summary is presented in the table below: Goods, works, non-consulting services and consultants’ Number of Date of services, Training withdrawal withdrawal Application and Operating application application amount Costs Total Approved amount WA-05 07.03.2019. 457,021.59 457,021.59 457,021.59 457,021.59 WA-06 24.06.2019. 1,714,046.03 1,714,046.03 1,714,046.03 1,714,046.03 WA-07 05.06.2019. 265,485.11 265,485.11 265,485.11 265,485.11 WA-08 25.07.2019. 1,405,957.29 1,405,957.29 1,405,957.29 1,405,957.29 WA-09 02.09.2019. 768,080.82 768,080.82 768,080.82 768,080.82 WA-10 04.10.2019. 1,340,312.52 1,340,312.52 1,340,312.52 1,340,312.52 WA-11 19.11.2019. 789,699.92 789,699.92 789,699.92 789,699.92 WA-12 21.01.2020. 1,096,068.53 1,096,068.53 1,096,068.53 1,096,068.53 WA-13 06.02.2020. 429,278.57 429,278.57 429,278.57 429,278.57 WA-14 30.03.2020. 454,348.26 454,348.26 454,348.26 454,348.26 WA-15 23.04.2020. 463,791.95 463,791.95 463,791.95 463,791.95 WA-16 09.06.2020. 753,079.85 753,079.85 753,079.85 753,079.85 WA-17 17.06.2020. 318,920.56 318,920.56 318,920.56 318,920.56 WA-18 09.07.2020. 344,248.57 344,248.57 344,248.57 344,248.57 WA-19 13.08.2020. 348,048.87 348,048.87 348,048.87 348,048.87 WA-20 23.09.2020. 361,821.41 361,821.41 361,821.41 361,821.41 WA-21 19.10.2020. 397,743.58 397,743.58 397,743.58 397,743.58 WA-22 23.10.2020. 414,893.52 414,893.52 414,893.52 414,893.52 WA-23 10.12.2020. 368,639.78 368,639.78 368,639.78 368,639.78 WA-24 15.12.2020. 530,575.19 530,575.19 530,575.19 530,575.19 WA-25 28.12.2020. 562,267.83 562,267.83 562,267.83 562,267.83 WA-26 28.01.2021. 422,385.70 422,385.70 422,385.70 422,385.70 11 Montenegro Industrial Waste Management and Clean-up Project – IWMCP Project ID: P122139 LOAN AGREEMENT No. 84280-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 1 January 2022 to 31 December 2022 4. SUMMARY OF EXPENDITURES (Continued) Goods, works, non-consulting services and consultants’ Number of Date of services, Training withdrawal withdrawal Application and Operating application application amount Costs Total Approved amount WA-27 05.03.2021. 954,320.34 954,320.34 954,320.34 954,320.34 WA-28 06.04.2021. 189,058.66 189,058.66 189,058.66 189,058.66 WA-29 06.04.2021. 192,603.26 192,603.26 192,603.26 192,603.26 WA-30 06.04.2021. 60,702.00 60,702.00 60,702.00 60,702.00 WA-31 08.04.2021. 57,313.02 57,313.02 57,313.02 57,313.02 WA-32 08.04.2021. 4,700.00 4,700.00 4,700.00 4,700.00 WA-33 21.04.2021. 90,045.00 90,045.00 90,045.00 90,045.00 WA-34 21.04.2021. 2,100.00 2,100.00 2,100.00 2,100.00 WA-35 21.04.2021. 778,134.46 778,134.46 778,134.46 778,134.46 WA-36 23.06.2021. 404,701.83 404,701.83 404,701.83 404,701.83 WA-37 02.07.2021. 941,285.97 941,285.97 941,285.97 941,285.97 WA-38 04.08.2021. 779,575.71 779,575.71 779,575.71 779,575.71 WA-39 04.08.2021. 1,904,028.70 1,904,028.70 1,904,028.70 1,904,028.70 WA-40 10.09.2021. 1,047,860.79 1,047,860.79 1,047,860.79 1,047,860.79 WA-41 18.10.2021. 1,246,585.86 1,246,585.86 1,246,585.86 1,246,585.86 WA-42 05.11.2021. 427,047.16 427,047.16 427,047.16 427,047.16 WA-43 18.01.2022. 768,939.68 768,939.68 768,939.68 768,939.68 WA-44 18.01.2022. 728,171.39 728,171.39 728,171.39 728,171.39 WA-45 30.03.2022. 337,509.27 337,509.27 337,509.27 337,509.27 WA-46 30.03.2022. 1,203,452.35 1,203,452.35 1,203,452.35 1,203,452.35 WA-47 30.03.2022. 262,672.70 262,672.70 262,672.70 262,672.70 WA-48 29.04.2022. 380,861.96 380,861.96 380,861.96 380,861.96 WA-49 26.05.2022. 348,947.95 348,947.95 348,947.95 348,947.95 WA-53 20.07.2022. 1,618,080.01 1,618,080.01 1,618,080.01 1,618,080.01 WA-54 27.07.2022. 405,728.98 405,728.98 405,728.98 405,728.98 12 Montenegro Industrial Waste Management and Clean-up Project – IWMCP Project ID: P122139 LOAN AGREEMENT No. 84280-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 1 January 2022 to 31 December 2022 4. SUMMARY OF EXPENDITURES (Continued) WA-55 04.08.2022. 203,109.95 203,109.95 203,109.95 203,109.95 WA-56 12.09.2022. 642,357.86 642,357.86 642,357.86 642,357.86 Total 29,986,610.31 29,986,610.31 29,986,610.31 29,986,610.31 13 Montenegro Industrial Waste Management and Clean-up Project – IWMCP Project ID: P122139 LOAN AGREEMENT No. 84280-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 1 January 2022 to 31 December 2022 4. SUMMARY OF EXPENDITURES (Continued) The major expenditures paid during period from 1 January 2022 to 31 December 2022 relate to the following: Total invoiced Contractor/Supplier Description Contract Ref # amount /EUR/ Goods, works, non consulting services, consultants’ services, Training and Operating Costs Valgo Montenegro d.s.d. Remediation Works for Shipyard Bijela Podgorica – Montenegro MNE-IWMCP-8428-ICB-W-17-1.3.5 3,549,703.75 Remediation Works on Mine Tailings Disposal Facility Gradac - Pljevlja, Bemax d.o.o. Montenegro MNE-IWMCP-8428-ICB-W-19-1.1.2. 1,555,530.62 Remediation Works on Coal and Ash Disposal Facility - Pljevlja, MNE-IWMCP-8428-ICB-W-19- Bemax d.o.o. Montenegro 2.1.2.2. 359,843.38 Preliminary and Final - Main Technical Design Documentation for Remediation of KAP Solid Waste MNE-IWMCP-8428-QCBS-CS-19- SAFEGE Disposal Site 5.1.5.1. 323,744.00 Other 1,128,957.07 Total 6,917,778.82 14 Montenegro Industrial Waste Management and Clean-up Project – IWMCP Project ID: P122139 LOAN AGREEMENT No. 84280-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 1 January 2022 to 31 December 2022 5. UNDISTRIBUTED FUNDS Undistributed funds for the Project as of 31 December 2022 are shown as follows: In EUR Date of payment Amount Total amount of the loan 50,000,000.00 Refund of the Preparation Advance 781,739.51 Front - end fee 125,000.00 Cancellation 5,300,000.00 Disbursed 2015 Payments to Designated account and Direct Payments: WA-01 26-Jan-15 1,000,000.00 WA-02 13-Aug-15 129,527.36 2018 Payments to Designated account and Direct Payments: WA-03 25-Jan-18 323,186.80 WA-04 2-Oct-18 2,285,950.19 2019 Payments to Designated account and Direct Payments: WA-05 7-Mar-19 457,021.59 WA-06 24-Jun-19 1,714,046.03 WA-07 5-Jun-19 265,485.11 WA-08 25-Jul-19 1,405,957.29 WA-09 2-Sep-19 768,080.82 WA-10 4-Oct-19 1,340,312.52 WA-11 19-Nov-19 789,699.92 2020 Payments to Designated account and Direct Payments: WA-12 21-Jan-20 1,096,068.53 WA-13 6-Feb-20 429,278.57 WA-14 30-Mar-20 454,348.26 WA-15 23-Apr-20 463,791.95 WA-16 9-Jun-20 753,079.85 WA-17 17-Jun-20 318,920.56 WA-18 9-Jul-20 344,248.57 WA-19 13-Aug-20 348,048.87 WA-20 23-Sep-20 361,821.41 WA-21 19-Oct-20 397,743.58 WA-22 23-Oct-20 414,893.52 15 Montenegro Industrial Waste Management and Clean-up Project – IWMCP Project ID: P122139 LOAN AGREEMENT No. 84280-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 1 January 2022 to 31 December 2022 5. UNDISTRIBUTED FUNDS (Continued) 2021 Payments to Designated account and Direct Payments: WA-23 10-Dec-21 368,639.78 WA-24 15-Dec-21 530,575.19 WA-25 28-Dec-21 562,267.83 WA-26 28-Jan-21 422,385.70 WA-27 5-Mar-21 954,320.34 WA-28 6-Apr-21 189,058.66 WA-29 6-Apr-21 192,603.26 WA-30 6-Apr-21 60,702.00 WA-31 8-Apr-21 57,313.02 WA-32 8-Apr-21 4,700.00 WA-33 21-Apr-21 90,045.00 WA-34 21-Apr-21 2,100.00 WA-35 21-Apr-21 778,134.46 WA-36 23-Jun-21 404,701.83 WA-37 2-Jul-21 941,285.97 WA-38 4-Avg-21 779,575.71 WA-39 4-Avg-21 1,904,028.70 WA-40 10-Sep-21 1,047,860.79 WA-41 18-Oct-21 1,246,585.86 WA-42 5-Nov-21 427,047.16 2022 Payments to Designated account and Direct Payments: WA-43 18-Jan-22 768,939.68 WA-44 18-Jan-22 728,171.39 WA-45 30-Mar-22 337,509.27 WA-46 30-Mar-22 1,203,452.35 WA-47 30-Mar-22 262,672.70 WA-48 29-Apr-22 380,861.96 WA-49 26-May-22 348,947.95 WA-53 20-Jul-22 1,618,080.01 WA-54 27-Jul-22 405,728.98 WA-55 4-Avg-22 203,109.95 WA-56 12-Sep-22 642,357.86 Front - end Fee - Undisbursed 10,067,985.83 The undisbursed amount of the loan is reconciled with the confirmation received by the IBRD. 16 Montenegro Industrial Waste Management and Clean-up Project – IWMCP Project ID: P122139 LOAN AGREEMENT No. 84280-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 1 January 2022 to 31 December 2022 6. INTERNAL ORGANIZATION AND INTERNAL CONTROL SYSTEM 6.1. Project Management The Ministry of Sustainable Development and Tourism has established the Project Steering Committee with a composition and terms of reference acceptable to the Bank. The Project Steering Committee is responsible for overall Project oversight and coordination. For the implementation of the Project, the EPA maintains the Project Management Unit in a form and with functions, staffing, resources, terms of reference and qualifications and scope of responsibilities satisfactory to the Bank. The Project Management Unit shall assist EPA with Project implementation and be responsible for management of the Project activities, including environmental and social matters, monitoring, reporting and coordination. 6.2. Ministry of Finance of Montenegro - Technical Services Unit The TSU has been established within the Ministry of Finance to support implementation of all World Bank financed projects. The TSU is responsible for the following functions: (i) procurement; (ii) financial management; and (iii) disbursement and auditing arrangements. The TSU will provide these services to the implementing entities of the Projects financed by the World Bank. The roles and responsibilities of the TSU and the Project implementing entities are regulated in accordance with a Memorandum of Understanding. The TSU staff comprises of the Senior Procurement Specialist/Director, Procurement Specialist, Senior Financial Specialist and Financial Specialist. 6.3. Explanation on Internal Control System Adequate system of internal controls has been instituted within the TSU for projects under implementation and is also applied to this Project. Defined controls and procedures are applied in practice which has been verified by the Bank’s financial management supervision and annual audits by private audit firms for prior audit engagements. In general, key internal controls applied for the Project include: • Existence of appropriate authorizations and approvals; • Good segregation of duties; • Different persons being responsible for different phases of transaction; • Reconciliations between records and actual balances, as well as with third parties are performed on regular basis and • Complete original documentation exists to support all Project transactions. 17 Montenegro Industrial Waste Management and Cleanup Project Project ID: P122139 Loan No. 84280-ME Annex 1: Project Financial Statements Montenegro Industrial Waste Management and Cleanup Project Loan No.: IBRD 8428 ME Project Sources & Uses of Funds For the Quarter (Q4) Period ending 31.12.2022. [in Euro] Actual Planned Variance Current Year-To Cumulative Current Year-To Cumulative Current Year-To Cumulative Quarter Date To-Date Quarter Date To-Date Quarter Date To-Date Opening Cash Balance (DA) 1,000,007.46 828,290.60 - - - - 1,000,007.46 828,290.60 - Add: Sources of Funds GoM-contribution to payments from DA - - 207.37 - - - - - 207.37 GoM-contribution to Direct Payments - - - - - - IBRD Funds-payments to DA - 1,328,815.08 7,584,054.76 - 1,328,815.08 7,584,054.76 IBRD Funds-contribution to Direct Payments - 5,571,017.02 26,141,219.91 - - - - 5,571,017.02 26,141,219.91 Total 1,000,007.46 7,728,122.70 33,725,482.04 - - - 1,000,007.46 7,728,122.70 33,725,482.04 Less: Uses of Funds Works/TS - 5,465,077.75 26,797,926.28 - - - - 5,465,077.75 26,797,926.28 Goods - 137,150.00 303,225.28 - - - - 137,150.00 303,225.28 Consultants' Services 186,112.30 1,307,589.12 5,701,717.08 - - - 186,112.30 1,307,589.12 5,701,717.08 Training & WS & ST - - 3,010.11 - - - - - 3,010.11 Operating Costs 3,551.28 7,961.95 109,266.87 - - - 3,551.28 7,961.95 109,266.87 Total 189,663.58 6,917,778.82 32,915,145.62 - - - 189,663.58 6,917,778.82 32,915,145.62 Closing Cash Balance (DA*) 810,343.88 810,343.88 810,336.42 - - - 810,343.88 810,343.88 810,336.42 * Note: The difference of € 7.46 relates to the unwithdrawn funds from the D/A, the funds will be withdrawn and accounts balanced of in a due course. Prepared By: Vesna Jestrovic TSU Senior Finance Officer Technical Services Unit - Ministry of Finance Tel:+382 20 201 696 / 697 Fax:+382 20 201 698 Mob:.+ 382 67 317 317 e-mail 1: vesna_tsu@yahoo.com e-mail 2: vesna.jestrovic@mif.gov.me Page 1 Montenegro Industrial Waste Management and Cleanup Project Loan No.: IBRD 8428 ME Uses of Funds By Project Activities/Components For the Quarter (Q4) Period ending 31.12.2022. [in Euro] Actual Planned Variance PAD Project Activities/Components Current Year-To Cumulative Current Year-To Cumulative Current Year-To Cumulative Life of Quarter Date To-Date Quarter Date To-Date Quarter Date To-Date Project (a) 1. Remediation of Selected Legacy Industrial Waste Disposal Sites 155,574.25 6,641,173.17 31,774,386.78 - - - 155,574.25 6,641,173.17 31,774,386.78 2. Future Industrial Hazardous Waste Management - 137,150.00 284,357.60 - - - - 137,150.00 284,357.60 3. Project Management 34,089.33 139,455.65 856,401.24 - - - 34,089.33 139,455.65 856,401.24 - Total Project Expenditure 189,663.58 6,917,778.82 32,915,145.62 - - - 189,663.58 6,917,778.82 32,915,145.62 Page 2 Montenegro Industrial Waste Management and Cleanup Project Loan No.: IBRD 8428 ME Bank Reconciliation as of DECEMBER 31, 2022 [in EUR] Opening balance at the beginning of the quarter 1,000,007.46 Plus: Advances during the quarter - Interest earned and retained on account - 1,000,007.46 Less: Refund to IBRD from DA during the quarter - Amount of eligible expenditures paid during the quarter 189,663.58 189,663.58 Closing balance as at the end of the quarter 810,343.88 Balance as of 31.12.2022. as per Special Account Bank Statement 810,343.88 Discrepancies (list and explain below) 0.00 * Note: Page 3