THE PALESTINIAN MINISTRY OF FINANCE SOCIAL PROTECTION ENHANCEMENT PROJECT TF0A5359 FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION AND MANAGED BY THE PALESTINIAN MINISTRY OF SOCIAL DEVELOPMENT PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM JANUARY 1, 2022 TO DECEMBER 31, 2022 TOGETHER WITH INDEPENDENT AUDITORS’ REPORT Table of Contents Page Independent Auditors’ Report 1-3 Balance Sheet 4 Statement of Sources and Uses of Funds and Changes in Fund Balance 5 Designated Bank Account Statement 6-8 Notes to the Financial Statements 9-14 THE PALESTINIAN MINISTRY OF FINANCE SOCIAL PROTECTION ENHANCEMENT PROJECT TF0A5359 FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION AND MANAGED BY THE PALESTINIAN MINISTRY OF SOCIAL DEVELOPMENT BALANCE SHEET AS AT DECEMBER 31, 2022 (Currency: USD) Note 2022 2021 ASSETS Current Assets Cash at Bank 3 291,678 455,061 Petty Cash - 3,425 Receivable from MoF (rejected payment due for refund) 4 - 1,005 Currency Variance - (112) Total Current Assets 291,678 459,379 Total Assets 291,678 459,379 LIABILITIES AND FUND BALANCE Fund Balance 9 291,678 459,379 Total Liabilities and Fund Balance 291,678 459,379 The accompanying notes form an integral part of these financial statements 4 THE PALESTINIAN MINISTRY OF FINANCE SOCIAL PROTECTION ENHANCEMENT PROJECT TF0A5359 FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION AND MANAGED BY THE PALESTINIAN MINISTRY OF SOCIAL DEVELOPMENT STATEMENT OF SOURCES AND USES OF FUNDS AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED DECEMBER 31, 2022 (Currency: USD) Cumulative Year Ended Year Ended up to December December December Notes 31, 2022 31, 2021 31, 2022 FUND BALANCE – BEGINNING OF YEAR 459,379 580,509 - SOURCES OF FUNDS Advance Payment from the World Bank 4 - 600,895 Replenishments from the World Bank 4 1,118,711 925,445 8,902,159 Reimbursement 4 - - 2,845,838 Total Sources of Funds 4 1,118,711 925,445 12,348,892 USES OF FUNDS Category 1 - Cash Transfer Program Support - - 8,998,807 Category 2 - Goods, Non-Consulting Services, Consulting Services, Operating Costs and Training under Parts 2 and 4 of the Project 5 930,529 499,337 1,765,119 Category 3 - Goods, Non-Consulting Services, Consulting Services, Operating Costs and Training under Part 3 of the Project 6 355,973 547,238 1,293,378 Total Uses of Funds 7 1,286,502 1,046,575 12,057,304 Currency Variance gain 90 - 90 CHANGE IN FUND BALANCE (167,701) (121,130) 291,678 FUND BALANCE – END OF YEAR 9 291,678 459,379 291,678 The accompanying notes form an integral part of these financial statements 5 THE PALESTINIAN MINISTRY OF FINANCE SOCIAL PROTECTION ENHANCEMENT PROJECT TF0A5359 FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION AND MANAGED BY THE PALESTINIAN MINISTRY OF SOCIAL DEVELOPMENT DESIGNATED BANK ACCOUNT STATEMENT- (USD-MoSD) FOR THE YEAR ENDED DECEMBER 31, 2022 (Currency: USD) Account Number 0458/3202341/001/3001/000 Depository Bank Bank of Palestine Address Ramallah Related Loan / Credit TF0A5359 Currency U.S. Dollar (USD) Note 2022 2021 BALANCE, BEGINNING OF YEAR 451,875 562,318 Receipts During the Year 4 1,119,587 925,445 1,119,587 925,445 Deduct: Payments for Project Expenditures 1,275,691 1,025,888 Transfer to ILS Bank Account 20,000 10,000 1,295,691 1,035,888 BALANCE, END OF YEAR 3 275,771 451,875 The accompanying notes form an integral part of these financial statements 6 THE PALESTINIAN MINISTRY OF FINANCE SOCIAL PROTECTION ENHANCEMENT PROJECT TF0A5359 FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION AND MANAGED BY THE PALESTINIAN MINISTRY OF SOCIAL DEVELOPMENT DESIGNATED BANK ACCOUNT STATEMENT – (USD- MoF) FOR THE YEAR ENDED DECEMBER 31, 2022 (Currency: USD) Account Number 0458/0206777/001/3001/007 Depository Bank Bank of Palestine Address Ramallah Related Loan / Credit TF0A5359 Currency U.S. Dollar (USD) Note 2022 2021 BALANCE, BEGINNING OF YEAR - - Deposit by MoF During the Year 4 1,005 - - - 1,005 - Deduct: Amount Refunded to IDA During the Year 4 896 - 896 - BALANCE, END OF YEAR 3 109 - The accompanying notes form an integral part of these financial statements 7 THE PALESTINIAN MINISTRY OF FINANCE SOCIAL PROTECTION ENHANCEMENT PROJECT TF0A5359 FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION AND MANAGED BY THE PALESTINIAN MINISTRY OF SOCIAL DEVELOPMENT DESIGNATED BANK ACCOUNT STATEMENT – (ILS-MoSD) FOR THE YEAR ENDED DECEMBER 31, 2022 (Currency: USD) Account Number 0458/3202341/099/3001/000 Depository Bank Bank of Palestine Address Ramallah Related Loan / Credit TF0A5359 Currency New Israeli Shekel (ILS) Equivalent USD Note 2022 2021 BALANCE, BEGINNING OF YEAR 3,186 17,296 Receipts During the Year (from USD account) 20,000 10,000 Cash Deposit (Return of Petty Cash) 1,300 3,319 21,300 13,319 Deduct: Payments for Project Expenditures 8,598 27,171 Currency Variance 90 258 8,688 27,429 BALANCE, END OF YEAR 3 15,798 3,186 The accompanying notes form an integral part of these financial statements 8 THE PALESTINIAN MINISTRY OF FINANCE SOCIAL PROTECTION ENHANCEMENT PROJECT TF0A5359 FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION AND MANAGED BY THE PALESTINIAN MINISTRY OF SOCIAL DEVELOPMENT NOTES TO THE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2022 (Currency: USD) 1. SPEP and Its Financing The Palestinian Liberation Organization, for the benefit of the Palestinian Authority, and the International Development Association (the World Bank or/and IDA), acting as administrator of the Trust Fund for Gaza and West Bank, signed Trust Fund Grant Agreement Number TF0A5359 (the Grant Agreement), dated August 15, 2017, whereby IDA made a grant to the Palestinian Authority, in the amount of USD 15,000,000 to finance a project entitled “Social Protection Enhancement Project” (the Project or/and SPEP), managed by the Ministry of Social Development (MoSD). The closing date of SPEP is March 20, 2025. The objective of the Project is to establish a single targeting and referral system to provide cash benefits and services to poor and vulnerable households. The Project consists of the following parts: Part 1 - Cash Transfer Program Support Provision of quarterly Cash Transfers to Beneficiaries selected in accordance with the criteria and procedures set forth in the Operations Manual. Part 2 - Social Registry Developing a Social Registry for improved coverage and targeting of social programs, through: (a) provision of financing and technical assistance to MOSD to develop a social registry information system ("Social Registry"), including, inter alia, development of Social Registry operations manual and related information architecture, transition of beneficiary information from the Cash Transfer Program to the Social Registry, setting up the monitoring and evaluation procedures and improvement of the grievance redress mechanism, all in order to support registration and determination of eligibility of potential beneficiaries for social programs; and (b) provision of financing for home visits to eligible households of potential beneficiaries of social programs, inclusion of newly identified eligible households into the Social Registry, identification of households receiving assistance from other donor programs, and distribution of household identification cards for those eligible to enrol into the Social Registry. 9 Part 3 - Case Management System Provision of financing and technical assistance to MoSD to develop Case Management System ("CMS") including development of a communications campaign, CMS methodology, provision of training of social workers and supervisors, and supporting development of infrastructure necessary to implement the CMS. Part 4 - Program Management and Monitoring Strengthening of MoSD’s capacity for Project management, monitoring and evaluation, training, Project audit and Project Operating Costs. The above parts of the Project and related budget have been allocated to the following categories of eligible expenditures under the Grant Agreement: Amount of the Grant Allocated (in USD) Percentage of Expenditure to be Category Original Revised Financed Category 1 - Cash Transfers under Part 1 of 50% of the amounts the Project 9,000,000 9,000,000 disbursed by MoSD Category 2 - Goods, Non-Consulting Services, Consulting Services, Operating Costs and Training under Parts 2 and 4 of the Project 2,400,000 3,200,000 100% Category 3 - Goods, Non-Consulting Services, Consulting Services, Operating Costs and Training under Part 3 of the Project 3,600,000 2,800,000 100% 15,000,000 15,000,000 2. Summary of Significant Accounting Policies MoSD adopted and applied the following principal accounting policies in preparing the financial statements of SPEP: 2.1 Basis of Accounting – SPEP’s financial statements are prepared using the cash basis of accounting, which is a comprehensive basis of accounting other than International Financial Reporting Standards (IFRSs). Under this basis, receipts are recognized when cash provided by the World Bank is received by MoSD and expenditures are recognized when the cash payments are made. 2.2 Historical Cost Convention – SPEP’s financial statements have been prepared based on the historical cost convention. 2.3 Foreign Currency - SPEP’s financial statements are presented in the United States Dollar (USD) which is the basic functional currency of SPEP. Transactions that are expressed or denominated in other currencies were translated to USD using exchange rates in effect at the time of each transaction. Differences arising from the fluctuations in exchange rates, if any, were treated as exchange gains or losses in the Statement of Sources and Uses of Funds and Changes in Fund Balance. 10 3. Cash at Bank Cash at bank represents cash available in the designated bank accounts of SPEP as of December 31, 2022 and 2021, as follows: USD 2022 2021 Cash at Bank of Palestine Account No. 0458/3202341/001/3001/000 in USD 275,771 451,875 Cash at Bank of Palestine Account No. 0458/3202341/099/3001/000 in ILS 15,798 3,186 Cash at Bank of Palestine Account No. 0458/0206777/001/3001/007 in USD 109 - 291,678 455,061 4. Sources of Funds Sources of funds represent the amounts paid by IDA and received by MoSD into the Project’s designated bank account (Bank of Palestine Account No. 0458/3202341/001/3001/000 - USD) during the year 2022, as follows: Payment Method/Type Amount Received Total Withdrawal Value Advance/ Total Sources of Application (WA) # Date (Recovery) Replenishment Reimbursement Received Funds Cumulative up to December 31, 2021 600,895 7,783,448 2,845,838 11,230,181 11,230,181 2022 January 14B 11, 2022 - 141,516 - 141,516 141,516 April 18, 15B 2022 - 217,365 - 217,365 217,365 August 1, 16B 2022 - 249,024 - 249,024 249,024 January Refund to IDA * 11, 2022 - (876) - (876) (876) October 17B 11, 2022 - 511,682 - 511,682 511,682 Total Receipts During the Year - 1,118,711 - 1,118,711 1,118,711 Cumulative up to December 31, 2022 600,895 8,902,159 2,845,838 12,348,892 12,348,892 * Represents amount refunded by MoF to IDA to settle the error identified during the year 2020 in the amount of USD 896. To finance this refund, MoF deposited an amount of USD 1,005 into the SPEP’s designated bank account and transferred an amount of USD 896 to IDA on January 9, 2022. According to the client connection, the refunded amount was received on January 11, 2022, in the net amount of USD 876. 11 5. Category 2 - Goods, Non-Consulting Services, Consulting Services, Operating Costs and Training under Parts 2 and 4 of the Project This item represents the following expenses paid under parts 2 and 4 of the Project: 2022 2021 Part 2 - Social Registry Goods 183,093 214,542 Non-Consulting Services - - Consulting Services 103,136 116,469 Operating costs and Training 450,334 993 Sub-total Part 2 - Social Registry 736,563 332,004 Part 4 - Program Management and Monitoring Goods - - Non-Consulting Services - - Consulting Services 187,213 159,501 Operating costs and Training 6,753 7,832 Sub-total Part 4 - Program Management and Monitoring 193,966 167,333 Total 930,529 499,337 6. Category 3 - Goods, Non-Consulting Services, Consulting Services, Operating Costs and Training under Part 3 of the Project Represents expenses paid under part 3 of the Project “Case management System” as follows: 2022 2021 Part 3 - Case Management System Goods 160,750 238,356 Non-Consulting Services - - Consulting Services 189,514 288,882 Operating costs and Training 5,709 20,000 Total 355,973 547,238 12 7. Reconciliation Between Replenishments (Expenditures Replenished by World Bank) and Expenditures Recorded in MoSD Books Below is a reconciliation between World Bank replenishments and expenses recorded in MoSD books during year 2022 for each category: Withdrawal Application Payment (WA) # Method Category 1 Category 2 Category 3 Total Cumulative up to December 31, 2021 8,998,807 834,590 937,405 10,770,802 Add: WA# 15B Replenishment - 208,157 9,208 217,365 Add: WA# 16B Replenishment - 240,811 8,213 249,024 Add: WA# 17B Replenishment - 370,086 141,596 511,682 Add: Amount recorded by Payment from MoSD but not reported designated to the World Bank as of bank account December 31, 2022 - 111,475 196,956 308,431 Total amount disbursed during the year 2022 (Total uses of funds) - 930,529 355,973 1,286,502 Cumulative disbursed amount up to December 31, 2022 8,998,807 1,765,119 1,293,378 12,057,304 8. Reconciliations Between World Bank (Client Connection) and MoSD Records Below is a reconciliation between the World Bank records (Client Connection) and MoSD records as at December 31, 2022: 2022 2021 Project accounts per the client connection Advance payment transferred to MoSD 600,020 600,895 Category 1 - Cash Transfer Program Support 8,998,807 8,998,807 Category 2 - Goods, Non-Consulting Services, Consulting Services, Operating Costs and Training under Parts 2 and 4 of the Project 1,653,645 768,653 Category 3 - Goods, Non-Consulting Services, Consulting Services, Operating Costs and Training under Part 3 of the Project 1,096,420 861,826 12,348,892 11,230,181 Project accounts per MoSD records Category 1 - Cash Transfer Program Support 8,998,807 8,998,807 Category 2 - Goods, Non-Consulting Services, Consulting Services, Operating Costs and Training under Parts 2 and 4 of the Project 1,765,119 834,590 Category 3 - Goods, Non-Consulting Services, Consulting Services, Operating Costs and Training under Part 3 of the Project 1,293,378 937,405 Currency Variance (90) (112) Returned amount not yet credit - 1,005 Cash on Hand at the end of the year - 3,425 Cash at Bank 291,678 455,061 12,348,892 11,230,181 Difference - - 13 9. Fund Balance - End of Year The fund balance as of December 31, 2022 and 2021 represent the following: 2022 2021 Cash at USD designated bank account 275,771 451,875 Cash at USD designated bank account 109 - Cash at ILS designated bank account 15,798 3,186 Cash on Hand at the end of the year - 3,425 Receivable from MoF (rejected payment due for refund) - 1,005 Currency Variance - (112) 291,678 459,379 14