Water Seuiyad Canal Protection Project (ID Credit No. 5902-XK) (Pl33829) Financial Statements for the yea enedDeember 3 1, 2022 (Wth Ineednuio' report thereon) ontents Management responsibility 1 Independent Auditor's Report 2-3 Statement of sources and uses of funds 4 Notes to the financial statements 5-13 Appendix 14-15 The accompanying project financial statements which comprise the Statement of Sources and Uses of Funds and a summary of significant accounting policies and other explanatory information, of the Kosovo Water Security and Canal Protection Project (IDA Credit 5902 - XK) - (the "Project"), signed between the Republic of Kosovo and the International Development Association ("IDA"), implemented by lber-Lepenc ("I-L") and the Ministry of Economic Development ("MED"), as at and for the period from 01 January 2022 to 31 December 2023 and included on pages 5 to 13, are the responsibility of, and have been approved by the Project's management. The Statement of Cumulative Expenditures Withdrawal Schedule, supplementary to the Annual Financial Statements, included in Appendix I to the Project's financial statements is presented for the purpose of additional analysis and is considered as integral part in relation to the basic project financial statements taken as a whole. The accompanying Project's financial statements, including the supplementary schedule of cumulative expenditures withdrawal, have been compiled by the Project's management, for the purposes of reporting to the lber-Lepenc Company management, the Ministry of Economic Development and the International Development Association, in conformity with the related requirements of the World Bank guidelines and terms and conditions of the IDA Credit No. 5902 - XK. Project's management, in furtherance of the integrity and objectivity of the Project's financial statements, has developed and maintained an internal control structure, including the appropriate control environment, accounting systems and control procedures. Project's management believes that internal controls provide assurance that financial records are reliable and form a proper basis for the preparation of financial statements, and that assets are properly accounted for and safeguarded. There are, however, inherent limitations that should be recognized in considering the assurances provided by the internal control structure. The internal control process also includes management's communication to employees of policies, which govern ethical business conduct. Grant Thornton LLC Prishtina, Independent Auditors, have been engaged to audit these Project's financial statements in accordance with the International Standards on Auditing. Their report is included on pages 2 and 3. 29 June 2023 Vigan Syla nd Bajrp Project Coordinator Financial Management Specialist Independent Auditor's Report of accompanying period from 01 in accordance with these requirements. We believe provide a basis for our opinion. We draw attention to the following: 1. As it is disc;osed r. Note I to the accompanying project financial statements, subsequent to the reporting date, on 1 March 2022 the contractual parties amended the basic Agreement to extend the initially set Project duration for up to 31 October 2023. On 171h of May 2023 the management submitted new request for postponing of the project up to 31 October 2024. At the date of issuance of these project financial statements the request is pending for approval from DA. Our audit opinion is not modified for the above matter. grantthornton-ks.com In preparing the financial statements, management is responsible for assessing the Project's abilty to continue as a Those charged with governance are responsible for overseeing the Project's financial reporting process. *u dbentifys and toa esoal asuac buhther risk ofmtraistatement of thee fro nancrial mistatements,wehrde ofado whterr duesignfrad erormnoisa auditrs reposiv toa thous rissn otinn Raudinevdee thsuatc isa sufficientf ssuande appropriateto purvide tat asi foauri oponucte isk acofdnc no t hIA wila ay detectin aaaera maeilmisatatement retngon frau exssishtgert than aeforoe rudn fro error as frau maysinvoe vaera cluior rgery,all o intentag misinreisereenaioso the ovlesnbl eepc e rd o flu inetea econtoil eiinso sr *Otae n ani undestandigmfentenlcnrlrevntoteadtnoretodsgauipoeueshtae Apappr pra audte ins crcusance s, but notxfrcthe prposesiofaexpressing and opinin ofessoa effectivensm *hoghu eaudt e p asen facutneoce:ue n h esnbees facutn sae * Coentf ded nsste sk pna maes a maemunt efe ianal stemnts ahetofsaue no fad ase merial,unceranty pexistsrw are prequredeposv to daatetoe norss ad ts report odc thet reaeisoue hufcen eean apriat noprvdar as fHuo epr ipno.Ters f nu ueetnge u m a tiase * orEva y,uatetoeall o isnmsrpresentation,, stucur an o te oerth e ta ten l ncudnthedolsre.n w ebther hn unancarstatemef ntserescnto thlevune ytn transatins nde eesin ai mannedr that aee Wepcommuiate ih thoe chuare ut ovemancetregarpnge aong oxrsiganonther matrsfhepnecpveands tmn o the di Cnomgiiatp u in g,noa gany'sgs atde lnisi internal controlta.e dn f u rsEaut taporantes Thrno LLCunin MoiisueadteraoalenAndo o nigesiae Pr th n di 29 idJun e 2023ned wehramtilunranyexsteatud o Auditsor /odtosta may ast igniican dobt o theCompny' abiity o cotinu asa ggrantthornton-ksonclde .com mateialuncrtantyexiss, e ae rquied t drw atenionin ur aditr'sreprt o th reate diclour3 Water Security and Canal Protection Project (IDA Credit No. 5902-XK) - 500,281.00100 7100000,000 5000 144 H 398.0 1,286.00 Uses n of l funds'l rein fimdatobr Lepene"a 14aemn -pec-lis Incrmentl oeratng osts11 ,28111 9,21.1 Water Security and Canal Protection Project (IDA Credit No. 5902-XK) Notes to the Financial Statements For the year ended December 31, 2022 (in EUR, unless otherwise stated) 1) General The Financing Agreement for the Kosovo Water Security and Canal Protection Project (IDA Credit 5902 - XK) - (the "Project'), was signed between the International Development Association ("Association") and the Republic of Kosovo ("Recipient") on January 27, 2017. The project became effective on June 26, 2017, and its closing date is set on October 31, 2023. The Association agrees to extend to the Recipient, on the terms and conditions set forth or referred to the Agreement, a credit (variously, "Credit" and "Financing"), in an amount to twenty-two million Euro (Euro 22,000,000) to assist in financing the project. The Project is implemented by Iber-Lepenc ("I-L") and the Ministry of Economic Development (MED). Pursuant to the loan agreement the Iber-Lepenc has established a Project Coordination Unit (PCU) with functions, staffing and resources satisfactory to the Association for the purpose of ensuring prompt and efficient overall coordination, day-to-day implementation of, and communication relating to, Project activities and results. As of December 31, 2022, the Project Coordination Unit had 6 employees. Project Description The objective of the Project is to contribute to restoring the Iber Canal to its original capacity to improve water resource management for various canal water users in Central Kosovo. The Project consists of the following Parts: Part 1. Infrastructure Rehabilitation and Modernization Re-establish the transit capacity of the Iber Canal, enable closure of the canal for maintenance, strengthen the canal's structural safety against extreme events, and enhance the Gazivoda dam safety by carrying out activities, Including: (a) Carrying out small works for Gazivoda dam safety, and canal repair and increased stability for protection against renewed physical damage from landslides and unstable soils; (b) Constructing a new balancing and emergency reservoir along the canal in the Mihaliq area(in Vushtri municipality) for short-term water storage to bridge peak water demend and to enable continuation of water supply to the users during the temporary outages for canal repair, or during extreme events that disrupt the canal flow(Canceled with Amendment No.1 to the Financing Agreement); Part 2. Water Resources Protection and Management Implement water resources protection and management measures to increase the Gazivoda-Iber system operational efficiency and to protect canal ambient water quality, including: (a) Carrying out works (such as selective fencing and covering of certain canal sections) to protect the canal against renewed pollution, accidental pollution and other threats and man-made disruptions; (b) Installing equipment for better management of gates and regulation of water flows,as well as for water monitoring(for the main Iber Canal and for its secondary delivery system),including provisions for remote monitoring and controlling of related structures. 5 Water Security and Canal Protection Project (IDA Credit No. 5902-XK) Notes to the Financial Statements For the year ended December 31, 2022 (in EUR, unless otherwise stated) 1) General (continued) Part 3. Project Management Provision of support for Project implementation, coordination and monitoring and evaluation, including enhancing capacity of the Project Implementing Entity (through hiring of consultants), training and financing of Incremental Operating Costs. Withdrawal Conditions; Withdrawal Period Notwithstanding the provisions of Part A of the Section IV of Financing Agreement, no withdrawal shall be made for payments made prior to the date of the Agreement, except that withdrawals up to an aggregate amount not exceed Euro 250,000.00 may be made for payments made prior to this date but on or after the date, which is twelve months prior to the date of this Agreement, for Eligible Expenditure. IDA Credit No.5902-XK The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the financing ("Category"), the allocations of the amounts of the financing to each Category and the percentage of expenditures to be financed for Eligible Expenditures in each category: Amount of the financing % of expenditures to be Category allocated financed iExpressed in EUR) i Inclusive of taxes 1) Goods, works, non-consulting services, consultants' services and Incremental Operating Costs under Part 1(b) of the Project 362,426.56 100% 2) Goods, works, non-consulting services, consultants' services under all Parts of the Project (except Part 1(b), Incremental Operatin:: Costs and Trainini- 15,000,000 100% Cancelled as of Februaiv 2 2022 6,637,573.44 Pursuant Section 8.01 GC Total amount 22,000,000 The Government of Kosovo will repay the principal amount of the Credit in semi-annual instalments payable as of describe in following: Date Payment Due Principal Amount of the Credit repayable fExpressed as a percentaue) * On each April 15 and October 15, in each year: * Commencing on October 15, 2021, to and 1.65% including, April 15, 2031 * Commencing April 15, 2031, to and including, 3.35% April 15, 2041. *The percentages represent the percentage of the principal amount of the Credit to be repaid, except as the Association may otherwise specify pursuant to Section 3.03 (b) of the General Conditions. 6 Water Security and Canal Protection Project (IDA Credit No. 5902-XK) Notes to the Financial Statements For the year ended December 31, 2022 (in EUR, unless otherwise stated) 2) General (continued) The maximum Commitment Charge Rate payable by the Recipient on the unwithdrawn Financing Balance shall be one-half of one percent (1/2 of 1%) per annum. The Service Charge payable by the Recipient on the Withdrawn Credit Balance shall be equal to three-fourths of one percent (3/4 of 1%). The Interest Charge payable by the Recipient on the Withdrawn Credit Balance shall be equal to one and a quarter percent (1.25%) per annum. 3) Basis of preparation The financial statements of the project for the year ended December 31, 2022, have been prepared for the purpose of complying with the provisions of the Project's objectives, the World Bank guidelines and terms and conditions of the IDA Credit No. 5902 - XK. The financial statements comprise the statement of sources (Cash Receipts) and uses (Payments); the statement of expenditures used as the basis for the submission of withdrawal applications for year ended December 31, 2022, and a summary of significant accounting policies and other explanatory notes. The cumulative statements of expenditure used as the basis for the submission of withdrawal applications for the period from inception date on January 27, 2017 (Inception date)' till December 31, 2022 are presented as supplementary schedules. Cumulative information on receipts and disbursements from the Project's inception date to December 31, 2022, is presented in the Statement of Sources and Uses of Funds for information purposes only. The financial statements have been prepared in accordance with cash basis IPSAS - Financial Reporting under the Cash Basis of Accounting, which differs from Kosovo and International Financial Reporting Standards. On this basis, income is recognised when received rather than when earned and expenses are recognised when paid rather than when incurred. Accordingly, direct and indirect payments of the Project's expenses, which are made from the proceeds of the credit, are recognised as sources and uses of funds at the time the payment is made. The financial statements prepared for the special purpose are presented in Euro ("EUR"), unless otherwise stated. 4) Summary of significant accounting policies A summary of significant accounting policies underlying the preparation of the Project's financial statements is presented below. 4.1 Foreign currency transactions The project accounts are maintained in Euro ("EUR"). Transactions in foreign currencies are translated to the functional currency at exchange rates on the dates of the transactions. Initial credit amount is maintained at the historical exchange rates. The project translates the undrawn credit balance at the rates in effect on the year end. Water Security and Canal Protection Project (IDA Credit No. 5902-XK) Notes to the Financial Statements For the year ended December 31, 2022 (in EUR, unless otherwise stated) 4) Summary of significant accounting policies (continued) 4.1 Foreign currency transactions (continued) The exchange rates in effect as of December 31, 2022 and December 31, 2021 were as follows: Currency December 31, 2022 December 31, 2021 EUR/ USD 1.07 1.12 USD/EUR 0.94 0.89 SDR/EUR 1.25 1.23 SDR/USD 1.33 1.38 4.2 Recognition of income and expenses Income is recognised when received rather than when earned, and expenses are recognised when paid rather than when incurred. 4.3 Taxation The Project is not exempt from Value Added Tax (VAT) and Custom Duties for the credits part. The local employees of the project are liable for personal income tax and social security contributions. 5) IDA Credit No. 5902-XK financing IDA funding is detailed by method of disbursement as follows: Year ended Year ended on December 31, on December 31, 2021 2022 DP-WSCP-01 1 219,612.22 - DP-WSCP-010 178,756.84 KWSCP 029 330,000.00 DP-WSCP-009 203,131.91 DP-WSCP-008 145,926.89 - KWSCP 027 Reimbursement 162,426.56 162,426.56 DP-WSCP-007 481,242.09 481,242.09 DP-WSCP-006 (DP-Direct payment) 238,507.27 238,507.27 DP-WSCP-005 474,056.30 474,056.30 DP-WSCP-004 427,317.47 427,317.47 DP-WSCP-003 1,121,263.00 1,121,263.00 DP-WSCP-002 348,774.07 348,774.07 DP-WSCP-001 270,857.79 270,857.79 KWSCP-022 Reimbursements 361,561.80 361,561.80 KWSP-002 Reimbursement 200,000.00 200,000.00 KWSCP-001 Advance 500,000.00 500,000.00 Total 5,663,434.21 4,586,006.35 Reimbursements represent the IDA funds for cover the payments already made by WSCP Designated account and ME for this project using withdrawal applications prepared by the Project. 8 Water Security and Canal Protection Project (IDA Credit No. 5902-XK) Notes to the Financial Statements For the year ended December 31, 2022 (in EUR, unless otherwise stated) 6) Temporary advances received by government of Kosovo The temporary advances received by Government of Kosovo for the year ended 31 December 2022 and cumulative is composed as follows: 2022 2021 Temporary advances received by GOK - 151,759.40 Government Funds Movement during the year - 151,759.40 Government Funds as at December 31,2022 7) Temporary advances received by Iber-Lepenc Jsc The temporary advances received by Iber-Lepenc Jsc for the year ended 31 December 2022 and cumulative is composed as follows: 2022 2021 Temporary advances received by IL 10,000.00 5,000.00 Iber Lepenc Funds Movement during the year 10,000.00 - Iber Lepenc Funds as at December 31,2022 10,000.00 5,000.00 8) Goods Year ended Year ended on December 31, on December 31, 2022 2021 JV Inteadria and Oscar EL_- I - One unit 4x4 Drive Vehicle under WSCPP 31,000.00 Total ___ - 31,000.00 9 Water Security and Canal Protection Project (IDA Credit No. 5902-XK) Notes to the Financial Statements For the year ended December 31, 2022 (in EUR, unless otherwise stated) 9) Consultant services Expenditures for Consultant services are detailed as follows: Year ended Year ended on December 31, on December 31, 2022 2021 WSCP-CS- )CBS-2 544 295.95 516,371.33 Debabrata Maiumdar 12,100.00 16,500.00 Project coordination uniti PC ' staff net salai 37,117.38 42,660.00 Ranko Diokig 2,160.00 Emrush U1kani 5,000.00 - Audit of WSCPP 5,000.00 5,000.00 Personal income tax for PCU staff 3,611.16 3,852.00 Emploxee pension contribution for PCU staff 1,928.16 2,448.00 Emlo, er pension contribution for PCU staff . 1,928.16 2,448.00 Total 613,140.81 589,279.33 10 Water Security and Canal Protection Project (IDA Credit No. 5902-XK) Notes to the Financial Statements For the year ended December 31, 2022 (in EUR, unless othervise stated) 10) Training and workshop Year ended Year ended on December 31, on December 31, 2022 2021 Western Balkans Citizen Engagement - - Total 11) Incremental operating costs Expenditures for incremental operating costs are detailed as follows: Year ended Year ended on December 31, on December 31, 2022 2021 Costs for Bank Fee _ 139.90 158.70 Telecommunication services I 1,260.84 - Translation Services 890.00 Court expenses 1,000.00 - Tyres for PIU Vehicle - 395.20 Maintenance of PIU Vehicle 1,003.30 275.00 Fuel for PIU Vehicle 3,351.57 724.59 Representation 1,635.5 1,607.14 Total 9,281.11 3,160.63 12) Works Expenditures for works are detailed as follows: Year ended Year ended on December 31, on December 31, 2022 2021 Gener 2 Shpk-Rehabilitation works for Iber Le[enc Canal 203,131.91 481,242.09 Total 203,131.91 481,242.09 The expenditure amount above relates to the Works contract (WSCP-W-ICB-1) "Rehabilitation of the Iber Lepenc Canal" awarded to Gener 2 with the total contract value Euro 11,212,627.50.The expenditure amount of Euro 203,131.91 is the 3-d interim payment amount. The objective is to repair and rehabilitate the open parts of the IL canal, to reduce the water losses and to keep functional operability of the canal at a sustainable level. The construction scope of the works contract, inter alia, includes the following: Earthworks and clearing, Canal rehabilitation, Water bypassing, Buffer reservoir, Concrete works and Utilities and Service roads. 11 Water Security and Canal Protection Project (IDA Credit No. 5902-XK) Notes to the Financial Statements For the year ended December 31, 2022 (in EUR, unless otherwise stated) 13. Expenditure by project activities The expenditures by Project Parts for the year ended December 31, 2022 is as follows: Training Incremental Total Year Parts Goods &work operating Workson services Work December 31, shop costs 2022 Infrastructure Pr Rehabilitation and Modernization - - - 203,131.91 203,131.91 Water Resources 2 Protection and Management Part Project 3 Management - 613,140.81 - 9,281.11 - 622421.92 Total Year ended on December 31, 2022 - 613,140.81 - 9,281.11 203,131.91 825,553.83 Total Year ended on December 31, 2021 31,000.00 589,279.33 - 3,160.63 481,242.09 1,104,682.05 12 Water Security and Canal Protection Project (IDA Credit No. 5902-XK) Notes to the Financial Statements For the year ended December 31, 2022 (in EUR, unless otherwise stated) 14) Expenditures by category of funds' sources Expenditures by sources of funds for the year ended 31 December 2022 are composed as follows: Item IDA Credit No. 5902 Temporary advances funding by "Iber-Lepenc"JSC Total Goods - - Consultants' services 613,140.81 10,000.00 613,140-81 Training and workshops - - - Incremental operating costs 9,281.11 - 9,281.11 Works 203,131.91 - 203,131.91 Total December 31. 2021 825,553.83 10000.00 825,553.83 Total December 31, 2021 1,104,682.05 1,104,682.05 15) Commitments and contingencies Litigations As at 31 December 2022 the PIU was involved in one court case with one of its contractor related to the project activity throughout the implementation period. As of the reporting date there is no any decision from the court and management believes that there will be no provision required against the pending case in the court. ....... ...... Appendix I Water Security and Canal Protection Project (IDA Credit No. 5902-XK Statement of Cumulative Expenditures Withdrawal Schedule (Supplementary schedule to the Annual Financial Statements) For the period from January 27, 2017, to December 31, 2022 � ,-, ы � .� i к аN О � И ( v О ......... '�. � Z ...... ��.. О .-� � i , , . ._ , _ .. . . . . а� i �� ' i �д ; �" � i � � , R � � � .� а v � и I �-, � _ . _ _ , . �. v � � � 3 `" ! ��' � �� а , и . , � и � __.-� _ ' _ _.....А...._ ._-_..._ . _ i � I � � м � ы С , ' �� � ( . . . . Ч � `� � b µ ы, � . с _ м � � � гs, , ._ ; _ _ _ _ _ , О , Q� ��. ���. О i ,,,. .'. ��. ��. N� �G . , ......, , ' � v - ��. ��. ��. о . -� .., ��. � . � v п � ' ' I ' , � _. � _ _ . . . .. _.....ш ...._._.... ....... _ ......... ....._ I i � I ( ( ,,, ,,, ( ,,, ( � . �. . . . ',, ',, ,,,. ( � . � , � ,,,. , '.,. . ( ' . i ,,,,. '.. '. € i Water Security and Canal Protection Project (IDA Credit No. 5902-XK)) Accumulated statement of expenditures Supplementary schedule for the year ended 31 December 2022 (in EUR, unless otherwise state4) 16) Statement of Desi-nated Account Account number 1901217935041302 Depository Bank Banka Kombetare Tregtare - Njesia Pejton Prishtine Address Rr. Ukshin Hoti Nr 29 Qyteza Pejton Loan Number 5902-XK Currency Eurc, (Amounts in EUR) For the period from I January 2022 to 31 December 2022 As of 1 January 2022 2,922.06 Add: Inflows Transfer from IL and IDA (KWSCP 029) 339,632-00 342,554.06 Deduct: Outflows Amount of eligible expenses paid during the period (93,125.97) Advances given for trainings and workshops (93,125.97) At 31 December 2022 249,428.09