"Kazakhstan Resilient Landscapes Restoration Project" Project Financed as part of GEF Grant Agreement No. TFOB6007 dated June 23, 2021, Between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development Financial Statements for the Year Ended December 31, 2022, December 31, 2021, and Independent Auditor's Report "Kazakhstan Resilient Landscapes Restoration Project" Project GEF Grant Agreement No. TFOB6007 Table of Content Page Statement of Management's Responsibilities for the Preparation and Approval of Financial Statements for the Year ended December 31, 2022, and December 31, 2021, ...............3 Independent auditor's report ................................................................................. 4-6 Financial statements for the year ended December 31, 2022, and December 31, 2021: Statement of cash receipts and disbursements ...............................................................7 Statem ent of Expenditure by Com ponents ....................................................................................8 Notes to the financial statem ents ..........................................................................9-14 ANNEXE 1. Reconciliation between the amounts submitted by the Executive Agency and those disbursed by the W orld Bank............................................................................ 15 2 Statement of Management's Responsibilities for the Preparation and Approval of Financial Statements for the Year ended December 31, 2022, and December 31, 2021 The following statement which should be read in conjunction with the Auditor's Responsibilities section is made to distinguish the respective responsibilities of the Auditor concerning the financial statements of RSE "Committee of Forestry and Wildlife of the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan". Management of RSE "Committee of Forestry and Wildlife of the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan" (the 'Executive Agency') is responsible for the preparation of financial statements for the "Kazakhstan Resilient Landscapes Restoration Project" Project (the 'Project'), funded under the GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development dated June 23, 2021 (the 'Agreement'), that fairly presents cash receipts and disbursements under the Project and expenditure by components from June 23, 2021, to December 31, 2022, and the financial position of the Project as of December 31, 2022, following the International Public Sector Accounting Standard (IPSAS) 'Financial Reporting under the Cash Basis of Accounting' issued by the International Federation of Accountants (IFAC) and the World Bank requirements for financial statements preparation. In preparing the financial statements, the Executive Agency is responsible for: * Selection and application of the relevant accounting policies * Appropriate, reliable, comparable and clear disclosures including accounting policies * Additional disclosures for the year ended December 31, 2022, and December 31, 2021. Executive Agency management is responsible for: * Designing, implementing and maintaining efficient and reliable internal controls over the Project implementation * Record keeping that allows for the disclosure of the Project's transactions and ensures the financial statements comply with the International Public Sector Accounting Standard (IPSAS) 'Financial Reporting under the Cash Basis of Accounting' issued by the International Federation of Accountants (IFAC) and the GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development * Taking all reasonable efforts to ensure the safety of the Project's assets, and confirming that the funds received under the GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development on June 23, 2021, was spent with due diligence to cost-effectiveness and economic efficiency and only for the intended purposes * Fraud and abuse detection and prevention. The accompanying financial statements for the year ended December 31, 2022, and December 31, 2021, were approved by the Executive Agency management on June 30, 2023: Vice-chairman RSI "Committee of Forestry and Wildlife of the Ministry of Ecology and Natural Resources i E. N. Kutpanbayev of the Republic of Kazakhstan" Seat Astana, Kazakhstan 3 Ten.:+7 727 331 31 34 TOO "BDO Qazaqstan" (DaKc: +7 727 331 31 35 yn. Fa6gynnHa, 6 info@bdoqz.com AniMaTbi, Ka3aXCTaH www.bdoqz.com Al 5H4E3 Tet: +7 727 331 31 34 BDO Qazaqstan LLP Fax: +7 727 331 31 35 6 Gabdullin Street info@bdoqz.com Atmaty, Kazakhstan www.bdoqz.com A15H4E3 INDEPENDENT AUDITOR'S REPORT To the management of the "Kazakhstan Resilient Landscapes Restoration Project" Project funded under the GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development Opinion We have audited the accompanying financial statements of the "Kazakhstan Resilient Landscapes Restoration Project" Project funded under the GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development (the 'Project'), and implemented by RSI "Committee of Forestry and Wildlife of the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan" which comprise the statement of cash receipts and disbursements for the year ended December 31, 2022, and December 31, 2021, and the statement of expenditure by components for the year ended December 31, 2022, and December 31, 2021, and notes including the summary of significant accounting policies (the 'financial statements'). In our opinion: 1. The financial statements fairly present, in all material respects, cash receipts and disbursements of the Project for the year ended December 31, 2022, and December 31, 2021, in accordance with the International Public Sector Accounting Standard (IPSAS) 'Financial Reporting under the Cash Basis of Accounting' issued by the International Federation of Accountants, as well as in accordance with the requirements for the preparation of financial statements under GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development. 2. All external funds have been spent following GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development, dated June 23, 2021, with due diligence to cost- effectiveness and economic efficiency and only for the intended purposes. 3. All the necessary supporting records and allocated accounts are being maintained in respect of all Project activities including expenses under Statements of Expenditure (SOE). SOEs for the period correspond with the records. 4. The allocated account is being maintained following the Agreement and the World Bank-related guidelines. 5. Goods, works and services have been procured following the Agreement and the World Bank- related guidelines. ToEap"uecT5o c orpawieHHeo oT6eTcTBeHHOCTb1o "BDO Qazaqstan", 3aperHcTpHpo6aHHoe a coornereTnT c 3aKonoaTe/bCTBOM Pecny6A"K" Ka3aXCTaH, naCneTcA yZIacTH OM meApyHapoAH1-o o6beAiHeHnA BDO international Limited, 6pWaHCKuoro 06u4ecrea C oeeTcraeHoCTbi0, orpaHMie-noA rapamueT ero 4 YMaCTH1ROB, M MqeBCH MCTbWO Me*KAyHapoAHow ceT He3dBHWHMblX KUMIIdHOO1 bO. BDO Qazaqstan, a limited liability partnership, registered under the laws of the Republic of Kazakhstan, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing. Our responsibilities under those standards are further described in Auditor's Responsibilities for the Audit of Financial Statements section of our report. We are independent of the Project and RSI "Committee of Forestry and Wildlife of the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan" in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) and ethical requirements relevant to our audit of the financial statements in Kazakhstan, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Special Considerations - Basis of Accounting We draw attention to Note 2 of these financial statements describing the accounting principles. The financial statements have been prepared to assist the Executive Agency in complying with the World Bank requirements. As a consequence, these financial statements may not be suitable for another purpose. We do not express a modified opinion on this matter. Responsibilities of Management and Those Charged with Governance for the Financial Statements Project management is responsible for the preparation and fair presentation of the financial statements in accordance with the International Public Sector Accounting Standard (IPSAS) 'Financial Reporting under the Cash Basis of Accounting' issued by the International Public Sector Accounting Standards Board (IPSASB) of the IFAC, and in accordance with the GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the international Bank for Reconstruction and Development, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements are free from material misstatement, due to fraud or errors, and to express our opinion. Reasonable assurance is a high level of assurance but it does not guarantee that an audit conducted in accordance with International Standards on Auditing 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 affect the presentation of these financial statements in general. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of financial statements due to fraud or errors; develop and conduct audit procedures in response to these risks; we obtain audit evidence that is sufficient and appropriate to serve as a basis for expressing our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than the one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of the internal control system that is relevant for the audit to design audit procedures that are appropriate in the circumstances, but not to express 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. 5 Auditor's Responsibilities for the Audit of the Financial Statements (continued) * Evaluate the appropriateness of applying the going concern assumption by the management and based on the audit evidence obtained, conclude if there is significant uncertainty related to the events or conditions that could cast significant doubt on the Project's ability to continue as a going concern. If we conclude that such a material uncertainty exists, we must draw attention in our audit report to the appropriate disclosures in the financial statements or, if such disclosures are inappropriate, to modify our opinion. Our findings are based on the audit evidence obtained before our audit report date. However, future events or conditions may result in the Project's ability to continue as a going concern. * 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 for the Project implementation 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. BDO Qazaqstan LLP State license No. 21012748 issued by the Internal State Audit Committee under the Ministry of Finance of the Republic of Kazakhstan on 19 March 2021 for audit _ _ _ _ R. Rakhimbaev, Director D. 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PROJECT BACKGROUND 1. 1. Project GEF Grant Agreement No. TFOB6007 (the 'Agreement') between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan (the 'Recipient') and the International Bank for Reconstruction and Development (the 'World Bank') acting as an Implementing Agency of the Global Environment Facility (GEF) was signed on June 23, 2021 (the 'Project Date'). Under the Agreement, the Global Environment Facility provides a grant for 4,344,036 (four million three hundred forty-four thousand and thirty-six) US dollars (the 'Grant') to implement the "Kazakhstan Resilient Landscapes Restoration Project" Project (the 'Project') by the Executive Agency - RSI "Committee of Forestry and Wildlife of the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan" (the 'Executive Agency'). Grant is withdrawn in US dollars and paid out in US dollars and Kazakhstan tenges. The Withdrawal Period and the Closing Date are September 30, 2025. 1.2. Project Objectives and Description The objective of the Project is to pilot agroforestry practices using a community-centered approach and to build the Recipient's capacity for landscape management and restoration. The Project consists of the following parts: Part 1: Piloting community centered approach on dryland agroforestry and landscape restoration Provision of Sub-Grants to Eligible Beneficiaries in Kyzy[orda and Zhambyl obLasts to carry out Sub- projects related to landscape restoration, including inter alia, through: (a) piloting of community-based afforestation methods by using advanced planting technologies; (b) piloting of a farmer-based approach in the establishment of agroforestry demonstration plots of fast-growing fruit trees and tree pLantations for combining forestry with fruit production, horticulture, and livestock production; (c) construction of a nursery; and (d) purchase of technical and protective equipment. Part 2: Capacity building of the Forestry and Wildlife Committee for integrated landscape management Provision of support of to strengthen of the Committee of Forestry and Wildlife afforestation capacity for a sustainable and productive sector and integrated landscape management, through inter alia: (a) carrying out technical studies, consultations and related good agroforestry practice surveus; (b) mapping of dry Aral Seabed for continued long-term afforestation; (c) establishing a depository of forest species' seeds for scientific and research purposes; (d) carrying out an inventory of unaccounted forests to understand and clarify the magnitude of land degradation problems; (e) preparing forestry management plans for newly accounted forests; and (f) carrying out regional cooperation, exchange of experience and dissemination of best practices activities. Part 3: Project coordination and monitoring Provision of support - througt goods, consulting services, non-consulting services, operating costs and training - to PIU for Project management and implementation, including Project procurement, financial management, compliance with environmental and social standards, communications and outreach, monitoring and reporting-, and development and distribution of basic communication materials related to the Project. 9 "Kazakhstan Resilient Landscapes Restoration Project" Project funded under the GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development Notes to the financial statements 1. PROJECT BACKGROUND (continued) 1.3. Project Implementation The Ministry of Ecology and Natural Resources of the Republic of Kazakhstan (the "Recipient") ensures the overall coordination and control of the Project activities throughout the entire period of the Project implementation. The Recipient ensures the Project implementation through the Executive Agency in line with the provisions of the management compliant with the World Bank requirements, which shall include, inter alia, the following: a) Implementation mechanisms, procurement procedures and financial management for the Project; b) Operating and administrative procedures for the Project; c) Criteria and procedural arrangements for the selection, evaluation, implementation, and supervision of subprojects; d) Procedural requirements for the implementation of Environmental Management Plans for the subprojects under the Environmental Management Framework document; e) Project monitoring, evaluation, management and reporting mechanisms, and f) Operating procedures and functions of the Project Management Committee. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1. Basis of preparation and presentation The financial statements have been prepared under the International Public Sector Accounting Standard (iPSAS) 'Financial Reporting under the Cash Basis of Accounting' issued by the International Public Sector Accounting Standards Boards of the International Federation of Accountants, and under the provision of GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development. Accounting policies set out below have been applied consistently over the reporting periods presented in these financial statements. 2.2. Cash basis of accounting The financial statements are presented under the cash basis of accounting which means that the transactions and events are recognized only at the Project funds' receipts or disbursements. 2.3. Presentation currency These financial statements are presented in US dollars (the 'USD'). Transactions in foreign currencies are translated to the presentation currency at the exchange rates prevailing at the reconversion dates. Exchange differences arising from the restatement of transactions from the other currencies to US dollars are accounted for as a net change in exchange rates. The official exchange rate of the US dollar as of December 31, 2022, is 462.65 tenge (as of December 31, 2021: 431.67 tenge). 2.4. Budget The budget for expenditures is planned by the Executive Agency based on the procurement plan and signed contracts. 10 "Kazakhstan Resilient Landscapes Restoration Project" Project funded under the GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development Notes to the financial statements 3. CASH To carry out operations under the GEF Grant No. TFOB6007 the bank accounts were opened in CenterCredit JSC, Astana: * KZ448562203215135968 in USD; * KZ398562203115135945 in KZT. Cash balances as of December 31, as well as the transactions of the account for the year ended December 31, 2022, and December 31, 2021, are detailed below: US dollars 2022 2021 Balance on January 1 7,983 - RECEIPTS Replenishment of account 1,758,098 70,000 1,758,098 70,000 EXPENDITURES Project expenditures 1,622,710 62,014 Net foreign exchange loss/(gains) (144) 3 1,622,566 62,017 Balance on December 31 143,515 7,983 Including those denominated: In USD 143,500 7,594 In KZT 15 389 4. STATEMENT OF EXPENDITURES (SOE) US dollars No. Withdrawal Total amount Project Total Application SOE date applied for expenditures 1-A - 06.09.2021 70,000 2-A - 11.02.2022 230,000 3-A 1* 30.06.2022 - 108,035 108,035 4-A 2 17.08.2022 - 48,304 48,304 5-A - 15.09.2022 155,000 - - 6-A 3 27.09.2022 - 128,326 128,326 7-A - 10.10.2022 128,000 - - 8-A 3 20.10.2022 130,736 130,737 130,737 10-A 5 07.11.2022 287,318 287,318 287,318 11-A 6 24.11.2022 274,675 274,674 274,674 12-A 7 12.12.2022 280,394 280,394 280,394 13-A 8 28.12.2022 271,975 271,975 271,975 Total 1,828,098 1,529,763 1,529,763 Application No.3-A SOE-1 dated June 30, 2022, covers expenditures for 2021 and the Qi of 2022 11 "Kazakhstan Resilient Landscapes Restoration Project" Project funded under the GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development Notes to the financial statements 5. STATEMENT OF FINANCIAL POSITION Statement of financial position discloses assets, liabilities and net assets of the Project as of December 31, 2022, and as of December 31, 2021. US dollars December 31 December 31 Items Note 2022 2021 ASSETS Cash 3 143,515 7,983 Inventory - Advances issued Other assets Total assets 143,515 7,983 LIABILITIES Payables (31.12.2022, 31.12.2021 12 12 the National Bank exchange rate)* Total liabilities 12 12 NET ASSETS 143,503 7,971 Income (accumulated) GEF Grant No. TFOB6007 1,828,098 70,000 Other proceeds - Total income 1,828,098 70,000 Expenses (accumulated) 6 Consultants' services 594,370 61,305 Non-consulting services 50,687 - Works 307,308 Goods 693,253 - Operating costs 38,910 647 Bank services 208 74 Exchange rate difference (141) 3 Other expenses Total expenses 1,684,595 62,029 Total net assets 143,503 7,971 12 "Kazakhstan Resilient Landscapes Restoration Project" Project funded under the GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development Notes to the financial statements 6. PROJECT EXPENDITURES a. Expenditures under the Project funded by the GEF Grant Agreement for 2021-2022 US dollars As of As of Cumulative as of Expenditure December 31 December 31 December 31, 2022 2021 2022 Category 1: Goods, works, non- consulting services, consulting services, operating costs, and Training under Part 62,014 1,622,710 1,684,724 1 (a), 1(c), 1(d), Part 2 and Part 3 of the Project Category 2: Goods, works, non- consulting services, consulting services, financed through Subgrants under Part 1(b) of the Project TOTAL 62,014 1,622,710 1,684,724 b. Project's budget for expenditure execution for 2021-2022 US dollars Expenditure Cumulative as of Budget for Budget December 31, 2022 expenditure execution Category 1: Goods, works, non-consulting services, consulting services, operating costs, and Training 1,684,724 1,685,481 100% under Part 1 (a), 1(c), 1(d), Part 2 and Part 3 of the Project Category 2: Goods, works, non-consulting services, consulting services, financed through Subgrants under Part 1(b) of the Project TOTAL 1,684,724 1,685,481 100% 7. PROJECT FINANCING US dollars As of Cumulative as of December 31 December 31 2022 2022 Direct payments Payments from allocated accounts 1,828,098 1,828,098 TOTAL 1,828,098 1,828,098 Total GEF Grant No. TFOB6007 budget 4,344,036 Used under the GEF Grant No. TFOB6007 as of December 31, 2022 42.1% Non-used part of the GEF Grant No. TFOB6007 as of December 31, 2022 2,515,938 13 "Kazakhstan Resilient Landscapes Restoration Project" Project funded under the GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development Notes to the financial statements 8. PROPERTY, PLANT AND EQUIPMENT, CONSTRUCTION IN PROGRESS AND INTANGIBLE ASSETS Long-term purchased assets are presented below: US dollars December 31 December 31 Cumulative as of Item 2022 2021 December 31, 2022 Property, plant and equipment - 12,135 12,135 Construction in progress - 59,275 59,275 Intangible assets - 240,056 240,056 TOTAL - 311,466 311,466 9. EVENTS AFTER THE REPORTING PERIOD There have been no events between the reporting period date and the date of approval of these financial statements that would have affected these financial statements. 10. LITIGATIONS There are no pending Litigations brought by the Executive Agency against the third parties or entities or by the third parties or entities against the Executive Agency as of the date of approval of the financial statements. 11. FINANCIAL STATEMENTS ISSUE DATE These financial statements have been authorised for issue on June 30, 2023, by the Vice-Chairman of the RSI "Committee of Forestry and Wildlife of the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan". 14 "Kazakhstan Resilient Landscapes Restoration Project" Project funded under the GEF Grant Agreement No. TFOB6007 between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and the International Bank for Reconstruction and Development Notes to the financial statements Annexe 1. Reconciliation between the amounts submitted by the Executive Agency and those disbursed by the World Bank US dollars Withdrawal Executive World Application Agency Bank 1-A 70,000 70,000 2-A 230,000 230,000 Category 1: Goods, works, non- 5-A 155,000 155,000 consulting services, consulting services, 7-A 128,000 128,000 operating costs, and Training under Part 8-A 130,736 130,736 1 (a), 1(c), 1(d), Part 2 and Part 3 of the 10-A 287,318 287,318 Project 11-A 274,675 274,675 12-A 280,394 280,394 13-A 271,975 271,975 Category 2: Goods, works, non- consulting services, consulting services, financed through Subgrants under Part 1(b) of the Project TOTAL 1,828,098 1,828,098 - 15