MITR OF TRAUYANTIAC EMERGENCY COVID-19 HEALTH PROJECT Implemented by MINISTRY OF HEALTH Financed Under World Bank Loan Agreement Numbered 9103-TR As of December 31, 2022 and For the Year Then Ended Prepared by Bilgehan GOKMEN Omer KAVARAN Senior Treasury Controller Treasury Controller Ahmet AKDEMIR Junior Treasury Controller Report's Number 170/5 97/4 7/5 June 20, 2023 REPUBLIC OF TORKIYE MINISTRY OF TREASURY AND FINANCE Board of Treasury Controllers CONTENTS EX ECUTIVE SUM MAR Y .......................... ............................... ....................................... ........................................ ..... ................ 1 A . P ro je ct S u m m a ry .. .......................... ........... ...............-. ................ ,.........,.... .......... ...... ............... ................. ..................1 C . O b je ctiv e s o f A u di ..................................................................... ................................................................................. 1 C . S c o p e o f A u d it t ..................................................................... ......., ............................................................................... ......... 1 D . A u d it R e s u lts ................................................... .................................................. .................................. ................. .............. 2 E. M anagem ent Recom mendation ............................................................................ ............................................. 2 INDEPENDENT AUDIT REPORT'S & FINANCIAL STATEMENTS OF THE PROJECT.......................................3 INDEPENDENT AUD ITO0R'S REPO0RT ............................ ........ ....................,.,........... ................................... ......................... 4 O p in io n ................................. ........................................... ...................................... -........ . . ...................................................... 4 B a s is fo r O p in io n ........................................... ............. ............... ................ .....,,,....... .............. ..... .................................... -4 Em phasis of M atter in the Financial Statem ent ........................................................................... ...................... 4 G o in g C o n c e r n ........ ........ -.-.......... .................................................. ....................,...................... .... ................. ................. 5 Responsibilities of Management and Those Charged with Governance or other appropriate te rms fo r th e F in anc ial S tate men ts .............................. .............................,........................................................ ......... 5 Auditor's Responsibilities for the Audit of the Financial Statem ents.........................................................,5 ANNEX I: Financial Statem ent ......................................................................,........................................................................ 7 i EXECUTIVE SUMMARY REPUBLIC OF TCRIUYE MINISTRY OF TREASURY AND FINANCE Board of Treasury Controllers EXECUTIVE SUMMARY A. Project Summary A Loan Agreement numbered 9103-TR was signed between Republic of Turkiye (the Borrower) and International Bank for Reconstruction and Development (IBRD) on May 04, 2020 in order to finance Emergency COVID-19 Health Project carried out by the Ministry of Health. A total of 91.4 Million Euro will be used in the project and all of the mentioned amount will be financed from the World Bank resources. The closing date of the project is December 31, 2023. In addition to this agreement, a loan agreement numbered 9393-TR was signed between Republic of TCirkiye (the Borrower) and International Bank for Reconstruction and Development in order to provide additional financing to the project The additional financing amount is EURO 450.700,000,00. This amount will be used Part 1.E of the project that was added with the additional financing. The objective of the Project is prevent, detect and respond to the threat posed by COVID-19 in Tilrkiye. The Project consists of the following parts: 1. Emergency Covid-19 Response 2. Project Management, Monitoring and Evaluation In the audit period (01/01/2022 - 31/12/2022), total disbursements made under the Project is EURO 4.550.187,40 B. Objectives of Audit The objectives of our audit are: a) To give an opinion on whether the financial statements, prepared as of December 31, 2022 and for the year then ended, present fairly, in all material respects, the financial position of the Project in accordance with the cash receipts and disbursements basis of accounting, b) To determine, as of December 31, 2022, whether the Ministry of Health has complied, in all material respects, with the rules and procedures of the Loan Agreement numbered 9103-TR, c) To examine whether adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditures incurred with respect to SOEs and to evaluate eligibility of these expenditures for financing under the World Bank Loan Agreement numbered 9103-TR. C. Scope of Audit We have performed an audit of financial statements of the projectas of December 31, 2022, and for the period then ended in accordance with the cash receipts and disbursements 1 REPUBLIC OF TURKIYE MINISTRY OF TREASURY AND FINANCE Board of Treasury Controllers basis of accounting. We have also performed a compliance audit on whether the Project activities are in line with the Loan Agreement and related World Bank Guidelines. Our audit was conducted in accordance with the International Standards on Auditing published by International Federation of Accountants and related World Bank guidelines. There was no limitation in our scope for the Project's audit. D. Audit Results For the financial statements of the project, our audit resulted with an unmodified opinion. In addition, as of December 31, 2022, and for the period then ended the Ministry of Health has complied, in all material respects, with the rules and procedures of the Loan Agreement. E. Management Recommendation Since we have not identified any material deficiency in internal control during our audit, we have not issued a Management Letter. 2 INDEPENDENT AUDIT REPORT'S & FINANCIAL STATEMENTS OF THE PROJECT REPUBLIC OF TRK1YE MINISTRY OF TREASURY AND FINANCE Board of Treasury Controllers INDEPENDENT AUDITOR'S REPORT TO MINISTRY OF HEALTH Opinion We have audited the Statement of Sources and Uses of Funds, Statement of Cumulative Investments and Statement of Special Account of the Health System Strengthening and Support Project as of December 31, 2022, and for the period then ended, and a summary of significant accounting policies and other explanatory information. The financial statements have been prepared by Ministry of Health based on financial reporting provisions of the Loan Agreement Numbered 9103-TR. In our opinion; a] The accompanying Statement of Sources and Uses of Funds, Statement of Cumulative Investments and Statement of Special Account present fairly, in all material respects, the financial position and cash flows of the Health System Strengthening and Support Project as of December 31, 2022 and for the period then ended in accordance with the provisions of the Loan Agreement Numbered 9103-TR. b) Ministry of Health, as of December 31, 2022 has complied with, in all material respects, the requirements of the Loan Agreement Numbered 9103-TR. c) With respect to the expenditures, adequate supporting documentation has been maintained and these expenditures are eligible for financing under the Loan Agreements numbered 9103-TR. 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 this report. We are independent of the Ministry of Health within the meaning of "IFAC Code of Ethics for Professional Accountants" and have fulfilled our other responsibilities under those ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter in the Financial Statement Without modifying our opinion, we draw attention to Note "2" to the financial statements, which describe the basis of accounting. The financial statements are prepared to assist Ministry of Health to comply with the financial reporting provisions of the loan agreement referred to above. As a result, the financial statements may not be suitable for another purpose. 4 REPUBLIC OF TURKtYE IMNISTRY OF TREASURY AND FINANCE Board of Treasury Controllers Going Concern The Projects financial statements have not been prepared using the going concern basis of accounting. The project will be completed on 31 December 2023. Responsibilities of Management and Those Charged with Governance or other appropriate terms for the Financial Statements Ministry of Health is responsible for the preparation and fair presentation of these financial statements in accordance with Loan Agreement Numbered 9103-TR, 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 Ministry of Health's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements The objectives of our audit 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 planning and performance of 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 entity's internal control, * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 5 REPUBLIC OF TORKIYE INISTRY OF TREASURY AND FINANCE Board of Treasury Controllers 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 are required to 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. We are also required to provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards, Ahmet TUTAL Chairman of Board of Treasury Controllers Akif Billent BOYAC10LU (Audit Partner) Vice Chairman Bilgehan GOKMEN mer KA ARAN AhmetAKDEMIR Senior Treasury Controller Treasury Controller Junior Treasury Controller Date: 20.06.2023 Addres: Ministry of Treasury and Finance Board of Treasury Controllers 06510, Emek, ANKARA/TORKIYE 6 ANNEX I: Financial Statements MINISTRY OF HEALTH TURKEY EMERGENCY COVID-19 HEALTH PROJECT (9103-TR) STATEMENT OF SOURCES AND USES OF FUNDS 31.12.2022 and for the Period Ending on This Date (In Euros) Actual Planned Deviation Current Period Cumulative Current Period Cumulative Current Period Cumulative I- SOURCES OF THE FUNDS A- Government Funds 0,00 0,00 0,00 0,00 0,00 0,00 B- Other Sources 0,00 0,00 0,00 0,00 0,00 0,00 C- World Sank Loan 0,00 81.451.106,49 0,00 81.451.150,00 0,00 43,51 1- Direct Payments 0,00 0,00 0,00 0 00 0,00 0,00 2- Designated Account 0,00 81.451,106,49 000 81.451.150,00 0'00 43,51 a) Advance 0,00 40.200.000,00 0,00 40.200.000.00 0,00 0,00 b) SOE Method 0,00 41.251.106,49 0,00 41.251.150,00 0,00 43,51 c) Summary Statement Method 0,00 0.00 0,00 0,00 0,00 0,00 3-Other 0.00 0,00 0,00 0,00 0,00 0,00 a) WB Administrative Commission 0,00 0,00 0,00 0,00 0,00 0,00 D- Refunds to DA TOTAL SOURCES 0,00 81.451.106,49 0,00 81.451.160,00 0,00 43,51 I- USES OF FUNDS 1. Emergency COVID-19 Response 4.543.533,50 61 .226.07,17 4.543.60D,0 61 .226.133,67 66,50 66,50 TOTAL COMPONENT 1 4.543.533,50 6122.067,17 4.543.600,00 61.226.133,67 66,50 6, 50 II. Project Management, Monitoring and Evaluation Provison of support, including goods, consultng services nonconsulting services, and Operating Costs 6.653,90 6.653,91 6,00,00 6.700,00 46,10 46,10 TOTAL COMPONENT II 6.653,90 6.653,10 6 . 7 0 0 , 0 0 6.70,0 46,10 46,10 Total Project Expenditures 4.550.187,40 61.232,721,08 4.550.300,00 61.232833,67 112,60 112,60 SubtotaJ 0,0& 0,00 0,0a 0,00 0,00 0,00 a) WB Administrative Commission 0,00 0,00 0,00 0.00 0,00 0,00 TOTAL USES 4.550.187,40 61.232.721,08 4.550.300,00 61.232.833,67 112,60 112,80 Opening Balance 24.768.572,82 Closing Balance 20.218.385,40 Kenan POLAT Acting Project Director MINISTRY OF HEALTH TURKEY EMERGENCY COVID-19 HEALTH PROJECT (9103-TR) STATEMENT OF CUMULATIVE INVESTMENTS 31.12.2022 and for the Period Ending on This Date (In Euros) 1- INVESTMENTS Actual Planned Deviation 1C Pere na cnt Period Cumulative Current Period Cumulativ I. Emergency COVID-M e Response 4.543.533,50 61.226.067,17 4.543.600,00 61.226133,67 66,50 66,50 TOTAL COMPONENT I 4.543.533,50 61.226.067,17 4.543.600,00 61.226.133,67 66,50 66,50 11. Project Management, Monitoring and Evaluation Provision of support, includng goods, consulting services, noncorsulting services, 6.653,90 6653,91 6700,00 6.700,00 and Operating Costs 46,10 4609 TOTAL COMPONENT II 6.653,90 6.653,91 6.700,00 6.700,00 46,10 46,09 Total Project Exenditures 4.550.187,40 61.232.721,08 4.550.300,00 61.232.833,67 112 ,60 11259 Kenan POLAT Acting Project Director MINISTRY OF HEALTH TURKEY EMERGENCY COVID-19 HEALTH PROJECT (9103-TR) DESIGNATED ACCOUNT STATEMENT ACCOUNT NO: 941632007 AT THE CENTRAL BANK OF TORKiYE For the Date 31.12.2022 and the Period Ending On This Date (in Euros) Opening Balance 24.768.572,82 Reimbursements to DA 0,00 a) Advance 0,00 b) SOE Method 0,00 c) Summary Statement Method 0,00 Direct Payments 0,00 Available Funds 24.768.572,82 Withdrawals Made for Expenditures 4.550.187,40 Total Uses from DA 4.550.187,40 Closing Balance 20.218.385,40 Kenan POLAT Acting Project Director REPUBLIC OF TIJRKiYE MINISTRY OF HEALTH EMERGENCY COVID-19 HEALTH PROJECT (LOAN NO. 9103-TR) NOTES ON PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDING ON 31.12.2022 1. GENERAL INFORMATION ON THE PROJECT The Loan Agreement for the COVID-19 Emergency Health Project (COVID -19 SADP) was signed between the Government of Republic of Tirkiye and International Bank for Reconstruction and Development (IBRD). With the signing of the Presidential Decree on 21.05.2020 and the opinion of the Ministry of Treasury and Finance on 22.05.2020, the World Bank announced that the Project would enter into force before 29.05.2020. The Project consists of 2 main components and sub-components. The aim of the project is to prevent, detect, and respond to the threat posed by COVID-19 in Tilrkiye and the component activities are carried out together by different units of the Ministry of Health. Component 1 includes Emergency COVID-19 Response and Component 2 includes Project Management, Monitoring and Evaluation. Table I below shows the Project Components and the funds allocated to each component in accordance with the Loan Agreement. There are 3 implementing units (given below) for 2 main components and their subcomponents which will be executed by the Ministry of Health under the Project, and the Program Implementation Plan demonstrates which unit is responsible for which component. Component 1. Emergency COVID-19 Response 89,572,000 Component 2. Project Management, Monitoring and Evaluation 1,828,000 TOTAL PROJECT AMOUNT 91,400,000 Ministry of Health, Project Implementing and Expenditure Units: 1. General Directorate of Public Health 2. General Directorate of Public Hospitals 3. Project Management and Support Unit Total project amount has been allocated to the Ministry of Health of Ttirkiye as EUR 91,400,000. The relevant unit which will execute the Project on behalf of the Ministry of Health is the Project Management and Support Unit. Accordingly, under the COVID-19 Emergency Health Project (COVID-19 SADP), the implementing units of the Ministry of Health (General Directorates, Departments, and Divisions) will be responsible for planning, budgeting and implementing their own activities and Therefore, the Project Executing Units will continue to execute their payment and procurement operations with their expenditure authorizations. Project Management Support Unit is responsible for procurement and payment regarding the activities stipulated in the projects, Component 2 of the Project titled Project Management, Monitoring and Evaluation as well as coordinating planning of the Units/budget requests with Strategy Development Presidency, monitoring and providing any kind of technical support. In addition, PMSU is responsible for keeping accounting records of all expenditures made within the scope of the project and preparing Financial Monitoring Reports. 2. BASIC ACCOUNTING POLICIES a. Transactions regarding the project are entered into accounts on a cash basis. According to this basis, income occurs when the funds are received, and expense occurs when the funds are paid, b. Payments is made to the selling institutions through direct payments or through a designated account. c. Accounts are kept in the local currency of TRY and the credit currency of EURO. Payments, which are made in currency other than the local currency or EURO, are exchanged into EURO by using the exchange rate on the date of payment and are passed into accounts. d. Financial tables have been prepared with the aim of ensuring that the Ministry of Health acts in accordance with the financial provisions of the Loan Agreement No. 9393-TR. 3. WORLD BANK LOAN The Loan Agreement for the COVID-19 Emergency Health Project (COVID -19 SADP) was signed between the Government of Republic of Tilrkiye and International Bank for Reconstruction and Development (IBRD). With the signing of the Presidential Decree on 21.05.2020 and the opinion of the Ministry of Treasury and Finance on 22.05.2020, the World Bank announced that the Project would enter into force before 29.05.2020. All project funds which have been used by the end of the review period are used by designated account methods and a total of EUR 4,550,187.40 have been spent from the loan account. 4. LIMITED USE OF FUNDS AND OTHER ASSETS In accordance with the loan agreement made between the Government and the World Bank, the utilization of the funds in the designated account is limited to the project aims. The project funds which are not used by the end of the project will be returned to the Undersecretariat of Treasury to be distributed to those providing this fund in accordance with the provisions of the relevant financing agreement. Fixed assets procured by the project funds belong to the user institutions and their use is limited to project purposes until the completion of the project. 5. CASH BALANCE AS OF 31 DECEMBER 2021 The existing cash balance expressed in Euro on 31 December 2022 is as follows: Loan Funds Government Source Total DESIGNATED f 20,218,385.40 -C 6 20, 21 8, 385.4 0 ACCOUNT 6. PLANNED EXPENDITURES The advance limit of the Project No. 9103-TR used to be EUR 15,200,000 at the World Bank. In parallel with our request on 05.12.2020, the Project advance limit within the scope of Project No. 9103-TR was increased to EUR 40,200,000 by the World Bank. The reason for increasing the project advance limit was the high amount of payment for activities under the Project No. 9103-TR. In the ongoing process, we evaluated that the advance limit of EUR 40,200,000 was a high limit, and it was requested from the World Bank on 08.09.2021 to lower the advance limit to the previous advance limit of EUR 15,200,000 for Project No. 9103-TR. Accordingly, it was requested to update the advance limit by reducing it by EUR 25,000,000 and to transfer the remaining EUR 2,540,723.89 to the designated account. However, EUR 27,540,723.89, which is the entire application amount, was inadvertently transferred to the designated account by the World Bank. Since the correspondent bank commission would be charged for the refund transactions to be realized as a result of all these procedures, the correction transactions were abandoned. Therefore, the above-mentioned amount of EUR 27,540,723.89 could not be refunded and remained in the designated account. Under the COVID-19 Emergency Health Project (COVID-19 SADP), the budget allocated for the Ministry of Health was TRY 600,000,000.00 for the current period of 2023. The share of the General Directorate of Public Health was TRY 120,000,000.00 and the General Directorate of Public Hospitals was TRY 480,000,000.00 in the said budget. The realized expenditures by the Ministry of Health amounted to EUR 4,550,187.40 in 2022. Kenan POLAT Acting Project Director