_A. pwe The World Bank Group Agreed Upon Procedures Report on the Public Expenditures for Administrative Capacity Endurance (PEACE) in Ukraine Project for the periods from March to August 2o22 (follow-up on Phase I) and from September to December 2022 (Phase II) September 2023 Agreed-Upon Procedures Report for Distribution Purposes on the Public Expenditures for Administrative Capacity Endurance (PEACE) in Ukraine project To The World Bank Group: Purpose of this agreed-upon procedures report Our report is solely for the purpose of assisting The World Bank Group and, as applicable, the Ministry of Finance of Ukraine in achieving the following objectives, stated below, in respect of the expenditures, reported to The World Bank for reimbursement under the Public Expenditures for Administrative Capacity Endurance (PEACE) in Ukraine project (hereinafter -- the Project) for the periods from March to August 2022 (follow-up on Phase I) and from September to December 2022 (Phase Il), and may not be suitable for another purpose: (1) Objective 1: Determine whether monthly reports on eligible government expenditures were correctly compiled and consolidated on the basis of reports received from lower-level units, and financial data included in such reports reconciles with Treasury data or other applicable data sources; (2) Objective 2: Determine whether Government has functioning controls over preparation and compilation of such monthly eligible government expenditure reports, including exclusion of items that are financed by the government but not eligible to be financed by the Project; determine whether Government has functioning controls over accrual, payment and subsequent recording of those eligible government expenditures. (3) Objective 3: Determine for a sample of eligible government expenditures included in each such monthly report, that those expenditures are correctly stated, and eligible, and such expenditures have been made in accordance with the project documents and Project Operating Manual. Responsibilities of the engaging party and the responsible party The World Bank Group (the Engaging Party) has acknowledged that the agreed-upon procedures are appropriate for the purpose of the engagement. The Ministry of Finance of Ukraine (the Responsible Party), as identified by The World Bank Group, is responsible for the subject matter on which the agreed-upon procedures are performed. Practitioner's responsibilities We have conducted the agreed-upon procedures engagement in accordance with International Standard on Related Services (ISRS) 4400 (Revised), Agreed-Upon Procedures Engagements. An agreed-upon procedures engagement involves our performing the procedures that have been agreed with The World Bank Group, and reporting the findings, which are the factual results of the agreed-upon procedures performed. We make no representation regarding the appropriateness of the agreed-upon procedures. This agreed-upon procedures engagement is not an assurance engagement. Accordingly, we do not express an opinion or an assurance conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported. Professional ethics and quality management We have complied with the ethical requirements in the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code). For the purpose of this engagement, there are no independence requirements with which we are required to comply except for the independence requirements included in the Certificate of Offerers Eligibility and Authority To Sign Proposal (Firm Qualification Questionnaire REVISED 08-30-2021.docx file from the Request for Proposal package of documents), including: no official of the World Bank Group or its Member Governments has received or will be offered by us any direct or indirect benefit arising from these agreed-upon procedures or any resulting contracts; we are not engaged in any activity that would put us in a conflict of interest with any member of the World Bank Group; Page 2 0f 62 we have not been associated, or had been involved in any way, directly or indirectly, with the preparation of the design, specifications and I or other documents used as a part of the Project; no World Bank Group staff member or their immediate family are an owner, officer, partner or board member or have a financial interest with us; no member of our team holds a current or former appointment with the World Bank Group. Our firm applies International Standard on Quality Management 1, which requires the firm to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Procedures and findings We have performed the procedures described in the Narrative part of this agreed-upon procedures report, which were agreed upon with The World Bank in the terms of engagement dated 13 December 2022, with the amendments dated 8 February 2023 and 9 June 2023, on reconciling of the expenditures, reported to The World Bank for reimbursement under the Public Expenditures for Administrative Capacity Endurance (PEACE) in Ukraine project for the period from March to August 2022, to the applicable source data . Due to a lengthy process of obtaining information and clarifying the discrepancies noted, we were unable to perform or finalise certain procedures, as described in the Narrative part of the report. This Agreed-Upon Procedures Report for Distribution Purposes represents a sanitized version of the Agreed-Upon Procedures Report dated 7 September 2023 with the aim to exclude sensitive and personal data as follows: - exclude personal data and positions of people interviewed; - exclude processes flowcharts; - exclude names of IT systems and commercial enterprises; - exclude detailed description of relevant controls; - exclude details of units tested; - reduced narratives of discrepancies to the extent of a high-level aggregation. No additional procedures were performed by us other than updating the report as described above. Restriction on distribution and use Our report is solely for the purpose set forth in the first paragraph of this report and is not to be used for any other purpose. The other parties are not a party to the agreement (the terms of reference) between you and us and therefore we do not owe or assume a duty of care to other parties, who may rely upon this agreed upon procedures report at their own risk and discretion. The other parties can assess for themselves the procedures and findings reported by us and draw their own conclusions from the factual findings reported by us. / 26 September 2023 Kyiv, Ukraine Page 3 0f 62 Contents Follow-up on Phase I: Agreed-upon procedures on Project expenditures from March to August 2022 5 I. Pensions 5 1. Understanding and evaluation of controls over transfers from budget for Pensions (from March through August 2022) 5 2. Verification of monthly reports on eligible Pension payments 5 3. Verification of the eligibility of expenditures on Pension payments on sample basis 6 II. Government employees' wages 8 1. Understanding and evaluation of controls over Government employees' wages 8 2. Verification of monthly reports on Government employees' wages 8 3. Verification of the eligibility of expenditures on Government employees' wages on sample basis 11 III. School employees' wages 13 1. Understanding and evaluation of controls over School employees' wages 13 2. Verification of monthly reports on School employees' wages 13 3. Verification of the eligibility of expenditures School employees' wages on sample basis .............13 IV. Internally Displaced Persons (IDPs) payments 16 1. Understanding and evaluation of controls over Internally Displaced Persons (IDPs) payments ..16 2. Verification of monthly reports on Internally Displaced Persons (IDPs) payments 16 3. Verification of the eligibility of Internally Displaced Persons (DPs) payments on sample basis..17 Phase II: Agreed-upon procedures on Project expenditures from September to December 2022 18 I. First responders' salaries 18 1. Understanding and evaluation of controls over First responders' salaries 18 2. Verification of monthly reports on First responders' salaries 23 3. Verification of the eligibility of expenditures First responders' salaries on sample basis 28 II. Medical employees' salaries 30 1. Understanding and evaluation of controls over Medical employees' salaries (Program of Medical Guarantees, or PMG) 30 2. Verification of monthly reports on Medical employees' salaries 36 3. Verification of the eligibility of expenditures Medical employees' salaries on sample basis39 III. Social assistance payments 41 1. Understanding and evaluation of controls over Social assistance payments: GMI + HUS + Disabilities 41 2. Verification of monthly reports on Social assistance payments 51 3. Verification of the eligibility of expenditures Social assistance payments on sample basis......... 54 IV. Pensions 56 1. Understanding and evaluation of controls over transfers from budget for Pensions (from September through December 2022) 56 2. Verification of monthly reports on eligible Pension payments 60 3. Verification of the eligibility of expenditures on eligible Pension payments on sample basis 62 Page 4 0f 62 Follow-up on Phase I: Agreed-upon procedures on Project expenditures from March to August 2022 This report contains the results of agreed-upon procedures performed over the Project expenditures for the period from March to August 2022, which were not covered during Phase I reporting due to a lengthy process of obtaining information and clarifying the discrepancies noted. The structure of the report is maintained for the whole scope of the agreed-upon procedures, with the details provided for areas pending from the Phase I reporting only. The sections fully addressed during Phase I reporting are not repeated in this report. I. Pensions 1. Understanding and evaluation of controls over transfers from budget for Pensions (from March through August 2022) Covered during Phase I reporting. 2. Verification of monthly reports on eligible Pension payments 2.1. Reconciliation of the information in the monthly reports on eligible Pension payments to the reports previously submitted to the World Bank for reimbursement. Covered during Phase I reporting. 2.2. Reconciliation of reports on eligible Pension payments to the Treasury data Covered during Phase I reporting. 2.3. Reconciliation of individual monthly reports received from lower-level units or sub-entities to the consolidated monthly report on eligible Pension payments ■■■■■■■■■■■■■■■■■■■■■■■ We selected one region from each of the four geographic areas of Ukraine (Central, Western, Eastern and South) - namely, regions and traced central level reports for respective expenditure category through the whole chain of reporting to the primacy reporting level. We reconciled data in the following reports for July 2022: i. ■■■■ Pension payment ledgers generated by the Pension Fund of Ukraine for payments to be made through commercial banks and a state-owned post operator format; in July 2022, in electronic de-personalised ii. Annex 1 to the Report on the payment of pension for each of three eligible pension categories within the PEACE Project submitted to the World Bank for reimbursement, with the following data split by regions of Ukraine: a. number of pensioners covered by accruals, b. total amounts of accruals for pensions, c. number of payments to pensioners, d. total amounts of pensions paid. We reconciled the following data from the Annex 1 (ii) to the data as per the Pension payment ledgers (i) for four regions selected: ■ The number of payments to pensioners in the reporting period, persons; ■ total amounts of pensions paid for the reporting period. Page 5 0f 62 As a result, we noted the following discrepancies, presented in tabular format: Data per Annex 1 Data per Pension payment ledgers Discrepancies Amount of pension Amount of pension Amount of pension Region Number of Number of Number of paid for three paid for three paid for three pensioners, pensioners, pensioners, categories of categories of categories of persons persons persons pensions, UAH pensions, UAH pensions, UAH 467844 2,186,585,965 453000 1,966,753,766 -14844 -219,832,200 311367 1,133,149,307 321577 1,153,231,100 10210 20,081,792 264560 1,041,407,752 269171 1,034,844,991 4611 -6,562,761 369188 1,368,935,166 376328 1,377,489,682 7140 8,554,516 According to representatives from the Pension Fund, the discrepancies are linked to the time difference between the compilation of the Annex 1 (ii) and the Pension payment ledgers (i). The Annex 1 (ii) is generated at the beginning of the period, indicating the planned amount of payments and the number of pensions, whereas the Pension payment ledgers (i) are compiled at the end of the period, reflecting the actual cash expenditures of the budget. Thus, the total amount of pensions indicated in the Pension payment ledgers (i) should exceed the amount of pensions specified in the Annex 1 (ii) because the Pension payment ledgers include payments for previous periods that were not disbursed or received by pensioners earlier due to technical reasons. However, the above explanation does not resolve the discrepancies noted for ■■■■■■■■■■- regions. As of the date of the requested submission of the Phase II Report, we raised the question with the Pension Fund but the clarification of discrepancies was still in progress. As such, we were not able to finalise the agreed-upon procedures for this part of scope and thus it was agreed to include the results of those procedures to the next stage of the agreed-upon procedures reporting on PEACE Project. 3. Verification of the eligibility of expenditures on Pension payments on sample basis As the basis for our sample, we used pension ledgers generated by the Pension Fund of Ukraine for payments to be made through commercial banks in July 2022, in electronic de-personalised format (only sequential numbers and amounts), to prevent from personal data processing. Before sampling, we reconciled pension ledgers to the monthly reports (refer to Section 2 above) to ensure that further verification is done on pensions reported as eligible for reimbursement. One spending unit from each of the geographical regions of Ukraine was included: regions (for Central, Western, Eastern and South geographic regions respectively). From each spending unit, we requested to provide pension passports for 120 randomly selected items. Pension passport represents electronic profile on pension assignment per individual, with the structure of amounts per assignment criteria, downloaded from Penson system. Our sample covered each of the three eligible pension categories - pension by age, pension on disability, pension on loss of breadwinner. The sample included 12o pensioners in total. Verification was done by checking that: a) Pensions fromour sample were indeed incurred for one of the three eligible pension categories- pension by age, pension on disability, pension on loss of breadwinner; b) Pensions are appropriately supported as having been incurred, are verifiable, and are substantiated by appropriate supporting evidence; c) Pension passport contains no evidence of military background of the beneficiary; d) Pension attributes and assignment amounts are consistent with the current legislation on pensions in Ukraine. Page 6 0f 62 Results of testing of each sampled transaction in tabular format, including quantification of ineligible expenditures impact, if any. Pension by age Pension Pension amount Sample size, amount per per our Unconfirmed Residual Region pension discrepancies, Comment pensioners passports, recalculation, amount, UAH UAH UAH UAH 2 3 4 5 6 7 - 42 143,944.2 143,539.2 404.9 0.0 10 32,906.1 32,466.3 439.9 (0.1) 0.1 final result, only rounding 10 43,917.9 43,917.9 discrepancies noted 10 35,676.7 35,353.1 323.6 (0.1) The results of the Pension by age testing are preliminary and do not account for two pension components, namely, the Surcharges of UAH 100 or UAH 135 for indexation applied on 1 March 2022, for which we have not yet obtained the supporting evidence column 5). Provided such supporting evidence is available, the amount of the discrepancies would correspond to the amounts indicated in column 6. Pension on disabili Pension Pension amount amount per per our Unconfirmed Residual Region Sample size, pension discrepancies, Comment pensioners passports, recalculation, amount, UAH UAH UAH UAH 2 3 4 5 6 7 41 110,523.9 108,174.1 2,349.8 0.0 10 31,253.7 24,295.2 6,958.5 0.0 10 28,102.4 26,647.2 1,455.3 (0.1) 10 22,957.3 21,549.8 1,407.6 (o.o) The results of the Pension by disability testing are preliminary due to several unconfirmed amounts of some pension components that require more information about the pensions recipients (column 5) beyond the information we have already received. If we confirm the specified components, the amount of the discrepancies would correspond to the amounts indicated in column 6. Pension on loss ofbreadwinner Pension Pension amount amount per perPwC Unconfirmed Residual Sample size, pension discrepancies, Comment Region pensioners recalculation, amount, UAH passports, UAH UAH UAH 2 3 4 5 6 7 40 108,367.5 98,538.1 9,829.2 0.2 10 29,382.7 24,703.3 4,679.3 0.1 10 28,422.9 24,699.0 3,723.8 0.0 10 23,482.5 20,969.6 2,513.0 (o.o) The results of the Pension on loss ofbreadwinner testing are preliminary due to several unconfirmed amounts of some pension component that require more information about the pensions recipients (column 5) beyond the information we have already received. If we confirm the specified components, the amount of the discrepancies would correspond to the amounts indicated in column 6. Page 7 0f 62 II. Government employees' wages 1. Understanding and evaluation of controls over Government employees' wages Covered during Phase I reporting. 2. Verification of monthly reports on Government employees' wages 2.1. Reconciliation of the information in the monthly reports on Government employees' wages to the reports previously submitted to the World Bank for reimbursement. Covered during Phase I reporting. 2.2. Reconciliation of reports on Government employees' wages to the Treasury data; Covered during Phase I reporting. 2.3. Reconciliation of individual monthly reports received from lower-level units or sub-entities to the consolidated monthly report on Government employees' wages We reconciled data in the following reports for July 2o22 for selected regions ofUkrairie from each of the four geographical areas of Ukraine (Central, Western, Eastern and South) - namely, regions. 2.3.1. Reconciliation of data at aggregated level - central data to the data from territorial subunits of the regions. Covered during Phase I reporting. 2.3.2. Reconciliation of data at detailed level - the aggregated data from territorial subunits of the regions to the data on cash payments per person. The following reports were used: i. Report on Expenditures on salaries of Government employees in non-security sectors, except for persons who joined the military (mobilized) or territorial defence units of the Armed Forces of Ukraine, prepared by Regional Government Authorities, split by particular territory units of Government Authorities (all streams - state bodies in non-security sectors; agencies, inspectors, other government authorities, and regional state administrations), and by state budget codes (2111 - base salary of Government employees, 2120 - social insurance contributions), which includes the following data: • The actual number of eligible employees (headquarter and regional branches) in the reporting period, persons; • Planned expenditures of the general fund of the state budget for the salary payment of all employees (headquarter and regional branches), according to the State Treasury data; • Cash expenditures of the general fund of the state budget for the salary payment of all employees (headquarter and regional branches) for the reporting period, according to the State Treasury data; • Expenditures on salaries of eligible employees (headquarter and regional branches) for the reporting period. ii. Accrual and payment ledgers on salaries of Government employees for July 2022, on a sample of particular territory units of Government Authorities in selected territory subclusters from four regions, as follows: Page 8 0f 62 iii. Account Statements of State Treasury of Ukraine, aggregated by codes of expenditures, for July 2022, on a sample of particular territory units of Government Authorities in selected territory subclusters from four regions, as described in p.(ii) above. As a result, we noted the following discrepancies, presented in tabular format: Cash expenditures of the general fund of the state budget for the salary Number payment of all employees Accrual and payment State Treasury bank statements of units (headquarter and regional ledgers Region at the branches) for June 2022, level of according to the Treasury the data, UAH thousand region General Discrepancy CECE CECE CECE CECE Discrepancy Total fund CECE (7) =(6)- Total 2111 2120 2111 2120 (11) =(10)-(5) 2111 (3) 1 2 3 4 5 6 7 8 9 10 11 26 16,193 3,582 19,776 16,546 353 16,546 3,652 20,198 423 21 8,118 1,802 9,920 8,118 0 8,118 1,799 9,917 (3) 3 1,028 230 1,258 1,028 0 1,028 230 1,258 0 3 1,294 290 1,584 1,294 0 1,294 274 1,568 (16) 5 2,063 454 2,517 2,063 0 2,063 457 2,520 3 5 1,534 342 1,876 1,534 0 1,534 342 1,876 0 4 2,155 465 2,620 2,508 353 2,508 551 3,059 439 Discrepancies noted during reconciliation of data at detailed level for region are in line with discrepancies noted in reconciliation described in p.2.3.1. Total amount of discrepancies is UAH 423 thousand (column 11) which includes discrepancies in CECE 2111 (basic salary) in the amount of UAH 353 thousand and discrepancies in CECE 2120 (social insurance contributions) in the amount of UAH 69 thousand. According to explanation received from the respective authorities responsible for salary accruals, the discrepancies are the result of manual errors in the reporting at local level. Page 9 of 62 Cash expenditures of the general fund of the state budget for the salary Number payment of all employees Accrual and payment State Treasury bank statements of units (headquarter and regional ledgers Region at the branches) for June 2022, level of according to the Treasury the data, UAH thousand region General Discrepancy CECE CECE CECE CECE Discrepancy Total fund CECE (7) =(6)- Total 2111 2120 2111 2120 (11) =(10)-(5) 2111 (3) 1 2 3 4 5 6 7 8 9 10 11 16,158 3,413 19,571 16,222 64 16,211 3,430 19,641 70 19 7,416 1,590 9,006 7,415 (1) 7,443 1,588 9,031 24 5 1,622 363 1,985 1,647 25 1,647 380 2,027 42 3 1,119 213 1,332 1,121 2 1,117 214 1,331 (1) 6 1,791 380 2,171 1,794 3 1,794 381 2,175 4 6 1,710 345 2,055 1,769 59 1,710 345 2,055 0 4 1,174 242 1,416 1,174 0 1,174 242 1,416 0 7 1,327 279 1,606 1,301 (26) 1,327 279 1,606 0 Discrepancies noted during reconciliation of data at detailed level for region are in line with discrepancies noted in reconciliation described in p.2.3.1. Total amount of discrepancies is UAH 70 thousand (column 11) which includes discrepancies in CECE 2111 (basic salary) in the amount of UAH 53 thousand and discrepancies in CECE 2120 (social insurance contributions) in the amount of UAH 16 thousand. The reasons of discrepancies are as follows: - Discrepancies in the amount of UAH 37 thousand are receivables or payables that were settled in the next period; - Discrepancies in the amount of UAH 16 thousand are manual errors in the reporting at local level. 14,968 3,249 18,217 14,968 0 14,968 3,249 18,217 0 19 8,310 1,825 10,135 8,310 0 8,310 1,825 10,135 0 9 2,170 463 2,633 2,170 0 2,170 463 2,633 0 5 1,422 297 1,719 1,422 0 1,422 297 1,719 0 7 6 1,547 340 1,887 1,547 0 1,547 340 1,887 0 5 1,519 324 1,843 1,519 0 1,519 324 1,843 0 13,830 2,648 16,478 13,830 0 13,830 2,648 16,478 0 18 7,242 1,390 8,633 7,242 0 7,242 1,390 8,633 0 8 2,024 410 2,433 2,024 0 2,024 410 2,433 0 3 1,775 350 2,124 1,775 0 1,774 350 2,124 0 5 1,415 258 1,673 1,415 0 1,415 258 1,673 0 8 1,375 241 1,615 1,375 0 1,375 241 1,615 0 During the reconciliation we noted subsequent corrections in CECE 2120 for one district administration, however this had no effect on the final total amount of CECE 2120 (social insurance contributions) for this district administration. Page 10 of 62 3. Verification of the eligibility of expenditures on Government employees' wages on sample basis As the basis for our sample, we used accrual and payment ledgers of budget holders, in electronic de-personalised format (only sequential numbers, positions and respective components of accrued payments), to prevent from personal data processing. Before sampling, we reconciled accrual and payment ledgers to the monthly reports (refer to Section 2 above) to ensure that further verification is done on government employees' wages reported as eligible for reimbursement. Two budget holders from each of the geographical regions of Ukraine was included: regions (for Central, Western, Eastern and South geographic regions respectively): The sample included 120 government employees in total. From each budget holder, we requested to provide the supporting documents for each component of accruals, including: staff matrices, timesheets, vacation orders, bonus orders; orders for assigning additional components of remuneration such as payment for ranking, payment for seniority, payment for intensity of labour, payment for overtimes, payment for additional workload, payment for classified information (state secrecy), extra-payment for night work, various types of financial assistance, salary indexation. Verification was done by checking that: a) Payments are accrued for government employees whose employment at respective authorities is supported by respective orders for appointment; b) All components of accrued remuneration are appropriately supported as having been incurred, are verifiable, and are substantiated by appropriate supporting evidence; c) Remuneration components and calculation of accrued amounts are consistent with the current labour legislation in Ukraine and underlying data. As the accrual and payment ledgers of budget holders contain no evidence of military background of the beneficiary persons, we were not able to check the correctness of exclusion of military staff from the amounts reported. Moreover, the change in legislation on cancellation of salary payments to military staff and subsequent clarification took place on 19 July 2022, according to the Law of Ukraine dated 1 July 2022 No.2352-IX 'On Amendments to Certain Laws of Ukraine Regarding the Optimization of Labour Relations'. Thus, payments of the average salary for mobilised government employees were stopped starting from July 2022. As a result of procedures performed, we noted the following discrepancies, presented in tabular format: Page 11 0f 62 Salary Number of accrued Salary Adjustments Discrepancy employees per accrued per made in Budget holders in the our Discrepancy, August and after Region payroll UAH adjustment, sample for register, recalculation, September, verification UAH Note 1, UAH UAH UAH 15 428,662 428,662 0 (o) r 15 436,144 436,144 0 0 15 245,709 245,709 0 0 15 228,819 228,819 0 0 15 260,207 260,207 0 0 r 15 140,407 140,407 0 0 15 137,408 139,616 (2,208) 2,208 0 - 15 364,158 364,158 0 0 During recalculation of accrued salary for Regional Administration we noted overpayment for 5 employees in the total amount of UAH 2,208. Based on the inquiry with responsible representatives of the budget holder, the amount was accrued mistakenly in July 2022 - however, it was correctly subtracted from the accrued salary in August and September 2022. As an additional check, we received and checked the documents for August and September 2022 and confirmed that this amount was correctly excluded from the accrued salary reported for reimbursement in respective periods. Page 12 0f 62 III. School employees' wages 1. Understanding and evaluation of controls over School employees' wages Covered during Phase I reporting. 2. Verification of monthly reports on School employees' wages 2.1. Reconciliation of the information in the monthly reports on School employees' wages to the reports previously submitted to the World Bank for reimbursement. Covered during Phase I reporting. 2.2. Reconciliation of reports School employees' wages to the Treasury data; Covered during Phase I reporting. 2.3. Reconciliation of individual monthly reports aggregated from lower-level units to the consolidated monthly report on School employees' wages Covered during Phase I reporting. 3. Verification of the eligibility of expenditures School employees' wages on sample basis As the basis for our sample, we used accrual and payment ledgers of schools, in electronic de-personalised format (only sequential numbers, positions and respective components of accrued payments), to prevent from personal data processing. Before sampling, we reconciled accrual and payment ledgers to the monthly reports (refer to Section 2 above) to ensure that further verification is done on school employees' wages reported as eligible for reimbursement. Two schools from each of the geographical regions of Ukraine was included: (for Central, Western, Eastern and South geographic regions respectively): The sample included 120 school employees in total. From each school we requested to provide the supporting documents for each component of accruals, including: staff matrices, timesheets, vacation orders, bonus orders; orders for assigning additional components of remuneration such as payment for class management, payment for seniority, payment for prestige of the teacher's profession, payment for inclusivity, payment for cabinet management, surcharge for notebook checking, various types of financial assistance, salary indexation. Page 13 0f 62 Verification was done by checking that: a) Payments are accrued for school employees whose employment at respective authorities is supported by respective orders for appointment; b) All components of accrued remuneration are appropriately supported as having been incurred, are verifiable, and are substantiated by appropriate supporting evidence; c) Remuneration components and calculation of accrued amounts are consistent with the current labour legislation in Ukraine and underlying data. As the accrual and payment ledgers of budget holders contain no evidence of military background of the beneficiary persons, we were not able to check the correctness of exclusion of military staff from the amounts reported. Moreover, the change in legislation on cancellation of salary payments to military staff and subsequent clarification took place on 19 July 2022, according to the Law of Ukraine dated 1 July 2022 No.2352-IX 'On Amendments to Certain Laws of Ukraine Regarding the Optimization of Labour Relations'. Thus, payments of the average salary for mobilised school employees were stopped starting from July 2022. As a result, we noted the following discrepancies, presented in tabular format: Salary Salary Sample accrued accrued per Budget holders amount, per payroll PwC Discrepancy, Comment Region UAH employees register, recalculation, UAH UAH No discrepancies were 15 278,551 278,551 noted r 15 213,852 213,863 (11) Deviation due to manual error in calculation of 5% allowance for one employee. There were no adjustments on the next month to correct salary amount. I id 15 486,956 Please refer to Note 1 I II below 15 232,787 231,669 1,118 rI II No discrepancies were 10 181,632 181,632 noted I .:I 20 294,075 294,075 No discrepancies were noted The amount of surcharge for notebook checking for one employee was calculated with manual 15 172,346 171,841 505 errors. School made an - adjustment of accrued salary in August 2022 in the amount of identified discre ancies. Deviation is due to wrong tariff amount used for calculation of accrued 15 177,023 177,062 38) salary for one employee. There were no adjustments on the next month to correct sala amount. Page 14 0f 62 Note 1 For Lyceum village territory subcluster of region, we identified manual ■■■■■ errors in the calculated salaries, particularly in the computation of vacation pay. We directed inquiries to the designated personnel of the lvillage territory subcluster seeking clarification. Subsequently, we received confirmation that errors were made in the salary calculations for July 2022 across the two selected schools, requiring a reassessment of the salary computation to determine the magnitude of the discrepancy. Following this communication, we experienced a lapse in contact with the illage territory subcluster for a certain period. Later, we were informed that the responsible staff member would not be recalculating the July 2022 salaries due to lack of time. Thus, we are unable to assess the amount of potential discrepancies for For Lyceum ■■■■■ fvillage territory sub cluster of■■■■■■ lregion, the discrepancies were explained by responsible staff as manual errors. There were no adjustments in the next month to correct the wage amount. Page 15 0f 62 IV. Internally Displaced Persons (IDPs) payments 1. Understanding and evaluation of controls over Internally Displaced Persons (IDPs) payments Covered during Phase I reporting. 2. Verification of monthly reports on Internally Displaced Persons (IDPs) payments 2.1. Reconciliation of the information in the monthly reports on Internally Displaced Persons (IDPs) payments to the reports previously submitted to the World Bank for reimbursement. Covered during Phase I reporting. 2.2. Reconciliation of reports on Internally Displaced Persons (IDPs) payments to the Treasury data; 2.2.1. Reconciliation of total amount of expenditure on payments of assistance to IDPs in the amounts paid using the funds transferred by the State (i.e., not only eligible amounts) to Treasury data Covered during Phase I reporting. 2.2.2. Reconciliation of eligible expenditures of IDPs payments to Treasury data We reconciled data in the following reports on sample basis, for June and July 2022: i. Payment orders from the Ministry of Social Policy to State Treasury for transfer of funds for IDPs payments, including details on number of IDPs and total amount of IDPs payments. ii. Report submitted to the World Bank for reimbursement, which includes: o Eligible expenditure on payments of assistance to IDPs - monthly totals, including: • number of IDPs covered by accruals, • total amounts of accruals for IDPs, • number of IDPs covered by payments, • total amounts of payments for IDPs. We made the following reconciliations: Number of IDPs covered by payments per the Report (ii) was compared to the data per payment orders from the Ministry of Social Policy to State Treasury (i), Total amounl of payments for IDs per the Report (ii) was compared to the data per payment orders fonn the Ministry of Social Policy to State Treasury (i). Upon reconciling data from payment orders issued by the Ministry of Social Policy to the State Treasury (i) with the information from the Report (ii), a discrepancy was identified in the total amount of payments and the number of recipients of assistance for Internally Displaced Persons (IDPs) in July 2022. According to representatives from the Ministry of Social Policy, this discrepancy arises due to the time difference between the compilation of Report (ii) and the actual assistance payments to IDPs within a specific period. Report (ii) is generated at the beginning of the period, reflecting the planned payment amounts and the number of IDPs (including the number of registered payment applications and the assigned assistance amounts), while payment orders are generated during the period and show the real cash expenditure of the budget, including assistance not received or payments for previous periods that were delayed due to technical issues. As a result, we obtained an expanded Report (ii) on assistance payments to IDPs for July 2o22, including information about the actual cash expenditures of the budget. We cross-referenced the data from payment orders issued by the Ministry of Social Policy to the State Treasury (i) with the data per the expanded report (ii) for July 2o22 and did not identify any discrepancies. Page 16 0f 62 As for June 2022, we have not received the respective expanded Report (ii) as of the date of :finalisation. of our procedures over Phase II. We will follow up on this part of reconciliation during the next stage of the agreed-upon procedures reporting on PEACE Project. 2.3. Reconciliation of individual monthly reports received from lower-level units or sub-entities to the consolidated monthly report on Internally Displaced Persons (IDPs) payments 2.3.1. Reconciliation of data at aggregated level - central data to the data from territorial subunits of the regions. We reconciled data in the following reports for July 2022: i. Annex to the Report submitted to the World Bank for reimbursement, with the information on accrued and paid amounts under certain types of assistance and subsidies - split by regions of Ukraine, including: • number of IDPs covered by accruals, • total amounts of accruals for IDPs, ■ number of IDPs covered by payments, • total amounts of payments for IDPs. ii. Registers on payments to IDPs for July 2022 (four reports - for the three main payment dates and the fourth supplementary payment date), prepared by the Ministry of Social Policy, with the details split by Social Security Departments in the districts of Ukraine (territorial subunits of the regions), including: • number of IDPs covered by payments, • total amounts of payments for IDPs. We compared the data as per report (i) and reports (ii) and noted certain discrepancies. According to representatives from the Ministry of Social Policy, the discrepancy is linked to the time difference between the compilation of the report (i) and the registers (ii). Report (i) is generated at the beginning of the period, indicating the planned amount of payments and the number of IDPs (specifically, the number of registered applications for payment and the assigned amounts of assistance), whereas the registers (ii) are compiled at the end of the period, reflecting the actual cash expenditures of the budget, including assistance not received or assistance payments for previous periods that were delayed due to technical issues. In the light of this, we obtained an expanded report (i) on assistance payments to IDPs for July 2022, which includes information about the actual cash expenditures of the budget. We cross-referenced the registers (ii) with the expanded report (i) and did not identify any discrepancies. 2.3.2. Reconciliation of data at detailed level - aggregated data from territorial subunits of the regions to detailed data provided by Informational Computing Center on payments to IDPs Covered during Phase I reporting. 3. Verification of the eligibility of Internally Displaced Persons (IDPs) payments on sample basis Covered during Phase I reporting. Page 17 0f 62 Phase II: Agreed-upon procedures on Project expenditures from September to December 2022 I. First responders' salaries 1. Understanding and evaluation of controls over First responders' salaries To obtain understanding of controls, we initially considered the information on the process and controls available in Project Operations Manual (POM): Process description First responders' wages accruals are performed based on budget estimates of State Emergency Service (SES) and subordinate authorities and agencies (budget holders) in accordance with the Law on the State Budget of Ukraine for the relevant year. The Budget Code of Ukraine treats the remuneration of employees of budget institutions, including SES, as protected expenditure categories. On a monthly basis, budget holders provide payment orders to the State Treasury for the transfer of funds to their accounts in authorized commercial banks, having checked the compliance of such orders with open budget allocations and the availability of funds. At the same time, budget holders submit payment information to authorized commercial banks for transferring wages to employees' bank accounts. On a monthly basis, the State Treasury reports to the Department of Defence, State Security and Law Enforcement Finances at the Ministry of Finance on cash expenditures of budget holders under the general fund of state budget, based on information generated by I. The State Treasury, in accordance with the Budget code of Ukraine and the Regulation on the State Treasury Service of Ukraine approved by Resolution No. 215 0f the Cabinet of Ministers of Ukraine dated 15 April 2015, performs control over the targeted allocation of budget funds as part of processing payments on budget holders' accounts. Verification of payment and accruals of salaries to relevant employees takes place on the basis of monthly reports separately for each type of unit. Exclusion of military staff is ensured through the separation of accruals of military staff by subordinate authorities of State Emergency Service and its subtraction from general accruals in the reports prepared by SES. According to the changes in Article 119 of the Code of Labour Laws implemented by the Law of Ukraine 'On Amendments to Certain Laws of Ukraine Regarding the Optimization of Labour Relations' No. 2352, mandatory payment of average wages to employees called up for military service during mobilization was canceled starting from 19 July 2022. The SES terminated such payments for most of the staff, maintaining the payments only to the conscripted employees defined as teachers (tutors at educational facilities of the State Emergency Service subordinated authorities). At the same time, such employees are released from the performance of duties provided for in the employment contract, and their time is marked in timesheet by the letter code 'IN' ('other unworked time provided for by law, in particular, performance of state and public duties, pre-conscription training, military service, blood donations, vacations, etc.'). The salary paymenls are evidenced by the State Treasury's monthly data on cash expenditures of budget holders under economic classification codes of 2110 (salary payment) and 2120 (social insurance contributions), which are generated by l and provided to the Ministry of Finance. Information on the actual number of relevant employees and the total amount of eligible payments is received by the Ministry of Finance every month from the budget holders in the reporting form developed by the Ministry of Finance. The Department of Defence, State Security and Law Enforcement Finances at the Ministry of Finance verifies the amount of payments specified in the report of the budget holder, comparing it with the data of the State Treasury. Exclusion of persons who are called up for military service (conscripted) or are serving as part of the Territorial Defence Forces of the Armed Forces of Ukraine is carried out independently by each budget holder on the basis of personnel records while preparing the monthly report. Page 18 0f 62 4 :'4, '¢ y 1i 4 @ g 4· ¢,4/8 Using the above information as the starting point, we inquired the representatives of key responsible participants of the process, including the Department of Defence, State Security and Law Enforcement Finances at the Ministry of Finance, and the SES. Representatives of the Department of International Financial Projects of the Ministry of Finance of Ukraine were also present during the inquiries. We received and considered the reports provided by the Ministry of Finance of Ukraine to the World Bank, as well as reports from the budget holders and State Treasury data. Based on the above information, we prepared the list of relevant controls. The summary of controls is provided in Table 1. Summary of controls - First responders' salaries. Since access to personal data is not allowed without explicit consent of the personal data owner, the list of controls was prepared based on inquires and limited observations only depending on circumstances for each particular control. We did not perform the testing of operating effectiveness of controls during the period subject to our procedures. Therefore, the results of our evaluation may not reveal control gaps which existed during the period. Page 19 of 62 Table 1. Summary of Controls - First responders' salaries Control ID Sub-process Description of control Control design evaluation procedures Issue category MNS.01 n/a (all) The IT landscape is expected to ensure that transactional data is Inquired representatives from the State Emergency Service. Decentralised system maintained completely & accurately: - Application, assignment, accrual and accounting of salaries Issue noted: architecturally are performed in one centralised system. This ensures There is no centralised system to account salaries of SES workers. consistent payment accrual and calculation process across Ukraine. Regional departments and Subordinate authorities of SES perform - Changes to the payment-related data of SES worker is recorded accounting in different programs and submit orders in different formats (what, when, how and by whom was changed) which allows to of data. Therefore, SES fully relies on the aggregated data received and subsequently monitor changes for appropriateness. has limited ability to validate data at a central level. MNS.02 Separation of Specialists of every Regional department and subordinate authority Inquired representatives from the State Emergency Service. Formal documentation military-related of SES report to SES on labour costs of relevant employees for each Inspected report on expenditures for wages of employees of the State matter payments reporting period. SES summarises this data to a general report Emergency Service of Ukraine submitted by SES and information on according to the form provided by the Ministry of Finance for every cash expenditures of the general fund of the state budget for wages regional department and subordinate, and submits it to the Ministry with accruals to employees of SES submitted by State Treasury for of Finance. period from May to December 2022 and confirmed that the total amount of actual expenses does not exceed total amount of planned Regional departments and Subordinate authorities of SES exclude expenses. salary accruals to people related to military service from the non- military ones so that military-related payments are not reported to Issue noted: the World Bank for reimbursement. There is no formal document to be used as evidence of control execution. The Ministry of Finance does not keep any evidence of control performed (working papers, email communication etc.) so existence of control confirmed through inquiry only. MNS.03 Salary accrual Specialists of Financial Department in Regional departments and Inquired representatives from the State Emergency Service. Formal documentation Subordinate authorities of SES create paysheet, that contains matter, Weaknesses in information about accrued and withheld amounts of salary of each Inspected paysheets of four selected regions for October 2022. system worker. Director and Head of Financial Department sign it and apply a seal of authority. Issues noted: Out of 801 paysheets observed for four selected regions, seal was Control: absent on 732 paysheets, 1 paysheet had signature of accountant only, Respective local authorities provide official verification of paysheets and 9 paysheets had both signatures belonging to one person. (hard copies) to prevent unauthorised payments. MNS.04 Salary payment Accountants of each Regional department and Subordinate authority Inquired representatives from the State Emergency Service. No issues of SES create payment orders that are used by State Treasury to Inspected payment orders on four selected regions for October 2022 perform payments. Head of Financial Departments/Accountant and and confirmed that they are properly verified. Director of these authorities check payment orders and submit it to State Treasury for further processing. No issues noted Control: Head of Financial Department/Accountant checks amount of payment and bank details in the order and then Head of Authority Page 20 of 62 Control ID Sub-process Description of control Control design evaluation procedures Issue category verifies all details again and they both submit it with their digital signatures plus with seal of the authority in the IT-system. MNS.05 Salary payment State Treasury processes the payments from treasury account of Inquired representatives from the State Emergency Service. No issues authority-manager of budget funds to the accounts of this authority Inspected payment orders on four selected regions for October 2022 at respective banks for further distribution of salary payments. and confirmed that they were verified by stamps of respective treasurers and processed. Control: State Treasury verifies the amounts and details in payment order to No issues noted the amounts and details per budget assignation. MNS.06 Salary payment Control: Inquired representatives from the State Emergency Service. Formal documentation Regional departments and Subordinate authorities of SES submit Inspected payment registers on one of selected regions for October matter payment registers on their regions, verified and signed by 2022 and confirmed that they are properly authorised. responsible people: Accountant, Head of Financial and Economical Department, Head of Regional Authority, Reviewer and a seal of Issue noted: authority to respective banks thus preventing unauthorised payment In some payment registers under the name of Head of Main registers to be used in salary payments. Department of SES in the - region there were signatures of the deputy. However, deputies are authorised to sign payment registers as well, so we consider this issue as minor documentation issue. MNS.07 Complaints SES monitors any issues on salary payments through appeals from References evidencing implementation of control: No issues management employees received by State Labor Service, Government Contact https://dsns.gov.ua/upload/1/6/0/3/1/5/S/vebsait-za-2022-rik._dox Center, MIA Contact Center https://zakon.rada.gov.ua/rada/show/v0127388-13#Text https://ck.dsns.gov.ua/zvernennya-gromadyan/zakon-ukrayini-pro- Control: zyernennya-gromadyan All claims must be reviewed and responded to within the term pre- defined by law (typically - one month). Investigation takes place in http://kiey.dsp.gov.ua/zvernennya-gromadyan/ case of necessity. (zvern@kiev.dsp.gov.ua) No issues noted MNS.08 Salary payments The State Treasury submits a report on cash expenditures under the Inquired representatives from the State Emergency Service. Manual project specific monitoring relevant programs of managers of budget funds of the State process, with no formalized Emergency Service System according to the codes of the economic Inspected "Expenditures for wages of employees of the State output of control classification of expenditures 2110 (salary payment) and 2120 (social Emergency Service of Ukraine, except persons called up for military insurance contribution), generated y tr-system l to the service during conscription." submitted by SES and "Information on Ministry of Finance. Information from payment register on the actual consolidated data of the State Treasury Service of Ukraine (STSU) on number of relevant civil defence workers and the total amount of cash expenditures of the general fund of the state budget for wages payments made to them is received by the Ministry of Finance every with accruals according to the budget programs of the State Emergency month from the State Emergency Service in accordance with the Service (SES)" submitted by State Treasury for the period from May to report form developed by the Ministry of Finance. The Department December 2022 and confirmed that total amount of actual expenses for management of expenditure on defence, state security and law does not exceed total amount of planned expenses. enforcement verifies the amount of payments indicated in the report of the State Emergency Service, comparing it with the Treasury's Issue noted: data on the planned indicators of the planned and actual cash There is no formal document to be used as evidence of control expenditures. If any financial data does not match, the department execution. The Ministry of Finance does not keep any evidence of clarifies the reasons and applicable data with SES to receive exact Page 21 0f 62 Control ID Sub-process Description of control Control design evaluation procedures Issue category matching of values. control performed (working papers, email communication etc.) so existence of control confirmed through inquiry only. Control: The Ministry-of Finance detects any divergences between the salary arrounts accrued by respective authorities and planned/paid by State Treasury. Page 22 0f 62 2. Verification of monthly reports on First responders' salaries 2.1. Reconciliation of the information in the monthly reports on First responders' salaries to the reports previously submitted to the World Bank for reimbursement. We reconciled data in the following reports for the period from September to December 2022: i. Summarised Report prepared by the State Emergency Service of Ukraine, which includes Expenditures for wages of first responders except for military staff, with the following data, split by the State Emergency Service of Ukraine sub-units: ■ Actual number of eligible employees in the reporting period, persons; ■ Planned expenditures of the general fund of the state budget for the salary payment of all employees, according to the Treasury data, split by state budget codes (2110 - salary payments, 2120 - social insurance contributions, i.e. only the components eligible for reimbursement); ■ Cash expenditures of the general fund of the state budget for the salary payment of all employees for the reporting period, according to the Treasury data, split by state budget codes (2110 - salary payments, 2120 - social insurance contributions, i.e. only the components eligible for reimbursement); ■ Expenditures on salaries of eligible employees for the reporting period. ii. Report on the payment of salaries to the eligible first responders within the PEACE Project provided to the World Bank, including: o Aggregated table "Expenditures on salaries of first responders, except for persons who joined the military (mobilized) or territorial defence units of the Armed Forces of Ukraine", with the following data: ■ Actual number of eligible employees in the reporting period, persons; ■ Planned expenditures of the general fund of the state budget for the salary payment of all employees, according to the Treasury data, split by state budget codes (2110 - salary payments, 2120- social insurance contributions, i.e. only the components eligible for reimbursement); ■ Cash expenditures of the general fund of the state budget for the salary payment of all employees for the reporting period, according to the Treasury data, split by state budget codes (211o - salary payments, 2120 - social insurance contributions, i.e. only the components eligible for reimbursement); ■ Expenditures on salaries of eligible employees for the reporting period. o Annex 1 of the report submitted to the World Bank for reimbursement, with the information as per the Aggregated table, split by the State Emergency Service of Ukraine sub-units (Annex 1), on the following data: ■ Actual number of eligible employees in the reporting period, persons; ■ Planned expenditures of the general fund of the state budget for the salary payment of all employees, according to the Treasury data, split by state budget codes (2110 - salary payments, 2120- social insurance contributions, i.e. only the components eligible for reimbursement); ■ Cash expenditures of the general fund of the state budget for the salary payment of all employees for the reporting period, according to the Treasury data, split by state budget codes (2110 - salary payments, 2120 - social insurance contributions, i.e. only the components eligible for reimbursement); ■ Expenditures on salaries of eligible employees for the reporting period. We reconciled all data included in the aggregated table to the respective groupings of data provided in Annex1, with only rounding discrepancies noted. Page 23 0f 62 We reconciled the data from Annex 1 to the data as per the Report (i) for the positions mentioned above, split by the State Emergency Service of Ukraine sub-units. As a result of reconciliation, no discrepancies were noted. 2.2. Reconciliation of reports on First responders' salaries to the Treasury data; We reconciled data in the following reports for the period from September to December 2o22: i. State Treasury Report with information on cash expenditures of the general fund of the state budget for wages with accruals according to the budget programs of the State Emergency Service of Ukraine, split by the State Emergency Service of Ukraine sub-units, including: • Planned expenditures of the general fund of the state budget for the salary payment of all employees, according to the Treasury data, split by state budget codes: 2110 - salary payments, including 2111 - base salary, and 2112 - remuneration of military staff, including additional payments for first responders established during the period of the martial law due to hardship, and remuneration of first responders summoned as a military staff (see Note 1); and 212o- social insurance contributions in total for 2111 and 2112, with no split into eligible and military staff; • Cash expenditures of the general fund of the state budget for the salary payment of all employees, according to the Treasury data, split by state budget codes: 2110- salary payments, including 2111 - base salary, and 2112 - remuneration of military staff, including additional payments for first responders established during the period of the martial law due to hardship, and remuneration of first responders summoned as a military staff (see Note 1); and 212o- social insurance contributions in total for 2111 and 2112, with no split into eligible and military staff. Note 1: remuneration reported under the state budget code 2112 is included into the expenditures for the World Bank reimbursement only in part related to additional payments for first responders established during the period of the martial law due to hardship, while remuneration of first responders summoned as a military staff is excluded from the amount for reimbursement. ii. Report on the payment of salaries to the eligible first responders within the PEACE Project provided to the World Bank, in particular, with the following data: • Planned expenditures of the general fund of the state budget for the salary payment of all employees, according to the Treasury data, split by state budget codes: 2110- salary payments (including 2111 in the whole amount and 2112 in the amount related to additional payments for first responders established during the period of the martial law due to hardship), 2120 - social insurance contributions; • Cash expenditures of the general fund of the state budget for the salary payment of all employees for the reporting period, according to the Treasury data, split by state budget codes: 2110- salary payments (including 2111 in the whole amount and 2112 in the amount related to additional payments for first responders established during the period of the martial law due to hardship), 2120 - social insurance contributions. We reconciled Cash expenditures of the general fund of the state budget for the reporting period, presented in the Report on the payment of salaries to the eligible first responders within the PEACE Project provided to the World Bank (ii), to the respective data as per the report provided by State Treasury (i), with only rounding discrepancies noted. Page 24 of 62 2.3. Reconciliation of individual monthly reports received from lower-level units or sub-entities to the consolidated monthly report on First responders' salaries 2.3.1. Reconciliation of data at aggregated level - central data to the data from territorial subunits of the regions. We reconciled data in the following reports for October 2o22 for selected regions of Ukraine from each of the four geographical areas of Ukraine (Central, Western, Eastern and South) - namely, The following reports were used: i. Report on the payment of salaries to the eligible first responders within the PEACE Project provided to the World Bank, including Annex 1 with the information as per the Aggregated table, split by the State Emergency Service of Ukraine sub-units, on the following data: • Actual number of eligible employees in the reporting period, persons; • Planned expenditures of the general fund of the state budget for the salary payment of all employees, according to the Treasury data, split by state budget codes (2110 - salary payments, 2120 - social insurance contributions, i.e., only the components eligible for reimbursement); • Cash expenditures of the general fund of the state budget for the salary payment of all employees for the reporting period, according to the Treasury data, split by state budget codes (2110 - salary payments, 2120 - social insurance contributions, i.e., only the components eligible for reimbursement); • Expenditures on salaries of eligible employees for the reporting period. ii. Report prepared by the State Emergency Service of Ukraine on Expenditures for wages of first responders except for military staff, split by particular territory State Emergency Service sub-units and by state budget codes (2110 - base salary and of First responders, 212o - social insurance contributions), which includes the following data: • Actual number of eligible employees in the reporting period, persons; • Planned expenditures of the general fund of the state budget for the salary payment of all employees, according to the Treasury data, split by state budget codes (2110 - salary payments, 2120 - social insurance contributions, i.e., only the components eligible for reimbursement); • Cash expenditures of the general fund of the state budget for the salary payment of all employees for the reporting period, according to the Treasury data, split by state budget codes (2110 - salary payments, 2120 - social insurance contributions, i.e., only the components eligible for reimbursement); • Expenditures on salaries of eligible employees for the reporting period. iii. Report prepared by regional State Emergency Service units on Expenditures for wages of first responders except for military staff, split by particular territory State Emergency Service sub-units and by state budget codes (211o - base salary and of First responders, 2120 - social insurance contributions) for SES Territorial bodies and subordinate divisions (budget code 1006280), which includes the following data: • Actual number of eligible employees in the reporting period, persons; • Planned expenditures of the general fund of the state budget for the salary payment of all employees, according to the Treasury data, split by state budget codes (2110 - salary payments, 2120 - social insurance contributions, i.e., only the components eligible for reimbursement); • Cash expenditures of the general fund of the state budget for the salary payment of all employees for the reporting period, according to the Treasury data, split by state budget codes (2110 - salary payments, 2120 - social insurance contributions, i.e., only the components eligible for reimbursement); • Expenditures on salaries of eligible employees for the reporting period. Page 25 0f 62 We reconciled the data from Annex 1 (i) to the data as per the Report (ii) for the positions mentioned above, split by the State Emergency Service of Ukraine sub-units. As a result of reconciliation, no discrepancies were noted. We reconciled the data as per Report (ii) to the respective data as per Report (iii) for SES Territorial bodies and subordinate divisions (budget code 1006280) using only the following data: • Actual number of eligible employees in the reporting period, persons; • Cash expenditures of the general fund of the state budget for the salary payment of all employees for the reporting period, according to the State Treasury data; ■ Expenditures on salaries of eligible employees for the reporting period. As a result of reconciliation, no discrepancies were noted. 2.3.2. Reconciliation of data at detailed level - the aggregated data from territorial subunits of the regions to the data on cash payments per person. The following reports were used: i. Report prepared by regional State Emergency Service units on Expenditures for wages of first responders except for military staff, split by particular territory State Emergency Service sub-units and by state budget codes (2110 - base salary and of First responders, 2120 - social insurance contributions) for SES Territorial bodies and subordinate divisions (budget code 1006280), which includes the following data: ■ Actual number of eligible employees in the reporting period, persons; ■ Planned expenditures of the general fund of the state budget for the salary payment of all employees, according to the Treasury data, split by state budget codes (2110 - salary payments, 2120- social insurance contributions, i.e., only the components eligible for reimbursement); • Cash expenditures of the general fund of the state budget for the salary payment of all employees for the reporting period, according to the Treasury data, split by state budget codes (2110 - salary payments, 2120 - social insurance contributions, i.e., only the components eligible for reimbursement); • Expenditures on salaries of eligible employees for the reporting period. ii. Accrual and payment ledgers on salaries of First responders for October 2022, on a sample of particular territory State Emergency Service sub-units from four regions, as follows: Page 26 0f 62 iii. Account Statements of State Treasury of Ukraine, aggregated by codes of expenditures, for October 2022, on a sample of particular territory State Emergency Service sub-units from four regions, as described in p.(ii) above. As of the date of the requested submission of the Phase II Report, the verification procedures and clarifications of discrepancies were still in progress. As such, we were not able to finalise the agreed-upon procedures for this part of scope and thus it was agreed to include the results of those procedures to the next stage of the agreed-upon procedures reporting on PEACE Project. Page 27 0f 62 3. Verification of the eligibility of expenditures First responders' salaries on sample basis As the basis for our sample, we used accrual and payment ledgers of the territory State Emergency Service sub-units, in electronic de-personalised format (only sequential numbers, positions and respective components of accrued payments), to prevent from personal data processing. Before sampling, we reconciled accrual and payment ledgers to the monthly reports (refer to Section 2 above) to ensure that further verification is done on government employees' wages reported as eligible for reimbursement. Two budget holders from each of the geographical regions of Ukraine was included: (for Central, Western, Eastern and South geographic regions respectively): The sample included 120 first responders in total. From each budget holder, we requested to provide the supporting documents for each component of accruals, including: staff matrices, timesheets, vacation orders, bonus orders; orders for assigning additional components of remuneration such as payment for ranking, payment for seniority, payment for intensity of labour, payment for overtimes, payment for additional workload, extra-payment for night work, various types of financial assistance, salary indexation. Verification was done by evidencing that: a) Payments arc accrued for those employees whose employment is supported by respective orders for appointment; b) All components of accrued remuneration are appropriately supported as having been incurred, are verifiable, and are substantiated by appropriate supporting evidence; c) Remuneration components and calculation of accrued amounts are consistent with the current labour legislation in Ukraine and underlying data. As the accrual and payment ledgers of the territory State Emergency Service sub-units contain no evidence of military background of the beneficiary persons, we were not able to check the correctness of exclusion of military staff from the amounts reported. Moreover, the change in legislation on cancellation of salary payments to military staff and subsequent clarification took place on 19 July 2022, according to the Law of Ukraine dated 1 July 2022 N0.2352-IX 'On Amendments to Certain Laws of Ukraine Regarding the Optimization of Labour Relations'. Thus, payments of the average salary for mobilised first responders employees were stopped starting from July 2022. As the information and documents for testing were provided to us shortly before the requested submission of the Phase II Report, we managed to start the procedure on checking all the accruals to the supporting documents provided, to identify certain discrepancies due to missing supporting documents, and to request the clarifications with respective supporting evidence, but we did not have a chance to finalise verification and to receive the requested additional Page 28 of 62 clarifications. As such, we were not able to finalise the agreed-upon procedures for this part of scope and thus it was agreed to include the results of those procedures to the next stage of the agreed-upon procedures reporting on PEACE Project. Page 29 of 62 II. Medical employees' salaries 1. Understanding and evaluation of controls over Medical employees' salaries (Program of Medical Guarantees, or PMG) To obtain understanding of controls, we initially considered the information on the process and controls available in Project Operations Manual (POM): Process description In accordance with the Law of Ukraine "On State Financial Guarantees of Medical Services to the Population", the program of state guarantees of medical services to the population defines the list and scope of medical services, medical products and medicines, which are guaranteed to be covered for patients in full at the expense of the State Budget of Ukraine. The state financing is based on the tariffs for prevention, diagnosis, treatment and rehabilitation in connection with diseases, injuries, poisoning and pathological conditions, as well as in connection with pregnancy and childbirth. Every year, the Ministry of Health of Ukraine determines the scope of medical services to be covered by state financing and initiates contracting of medical service providers. The National Health Service of Ukraine (NHSU), supported by experts, develops procurement conditions and specifications for each type of medical services and calculates the cost of services within the available budget resources. As the next step, the Cabinet of Ministers of Ukraine approves the program of medical guarantees for the respective year, and the NHSU arranges procurement of services and contracting with medical service providers (health facilities). The Project applies to employees whose remuneration is covered by the payments from the NHSU to respective health facilities for medical services provided within the Medical Guarantee Program (MGP) in accordance with contracts for medical care of the population described above, excluding the persons called up for military service (conscripted) or those who serve in the Territorial Defence Forces. of the Armed Forces of Ukraine. Employees include both medical and non-medical personnel. The requirements for specialists' qualification and the number of specialists to be hired are determined by the procurement specifications on medical services for each medical services category covered by the MGP ad approved y the NHSU. According to the contracts, information atout me%ja!2;"as""eu the beginning and the end of employment relationships of every employee is entered into s""""3 Protection (e-Health) by responsible people in health facilities for further compliance check in accordance with the algorithm for calculating the compliance of the medical service provider with the requirements to medical specialization and the number of specialists included in the terms for the purchase of medical services under contracts for medical care of the population under the program of medical guarantees, approved by order of the NHSU No.77 dated 21 February 2022. Expenditures of the MGP are financed under budget program 2308060 "Implementation of the program of state ■■■I guarantees of population medical care" whose budget manager is the NHSU. In accordance with the medical service contract requirements, health facilities enter information on the provided medical services into system. Based on this information, a monthly report on the provided medical services is formed and checked for compliance with the contract requirements by the NHSU. If the compliance check is passed, the NHSU submits payment information to the State Treasury for the transfer of funds to bank accounts of health facilities. Before making a charge, the State Treasury provides a compliance check of payments with budget allocations and availability of funds. Salary payments on employees' bank accounts are provided by each health facility independently. As required by the medical service contracts, health facilities are reporting on expenses according to the form approved by the NHSU on a quarterly basis and submit the reports on salaries to the NHSU on monthly basis. Payments under MGP are evidenced by monthly reports from the State Treasury on cash expenditures according to the budget program 2308060 "Implementation of the program of state guarantees of population medical care", which are generated by l and provided to the Ministry of Finance. Information on the number of relevant employees and expenditures on salary payment is formed by the NHSU based on the data provided by health facilities and submitted to the Ministry of Finance in accordance with the form developed by the Ministry of Finance. The Department of Expenditures of Humanitarian Sector at the Ministry of Finance reconciles the data on expenditures indicated in the NHSU report with the total amount of expenses for the payment of services under the MGP received from State Treasury and with the information on payments under the medical care contracts provided by the NHSU. Page 30 0f 62 Exclusion on conscripted people is performed by health facilities and checked by the Department of Expenditures of Humanitarian Sector at the Ministry of Finance of Ukraine. According to the changes in Article 119 of the Code of Labour Laws implemented by the Law of Ukraine 'On Amendments to Certain Laws of Ukraine Regarding the Optimization of Labour Relations' No. 2352, mandatory payment of average wages to employees called up for military service during mobilization was canceled starting from 19 July 2022. There are only few employees who are serving as part of the Territorial Defence Forces of the Armed Forces of Ukraine that are still receiving average salaries, and their data is excluded from the reports before submission to the World Bank for reimbursement. Health facilities contracted by the NHSU are independent in managing the funds received for the provision of medical services to the population and use these funds in accordance with the procedure established by law. The NHSU does not interfere in the economic activity of health facilities. E-Health is a complex block of modules that consists of central components and services, information system of the NHSU and the main data warehouse (DWH) that are integrated with each other. Healthcare facility specialists work directly in Medical Information Systems (MISes) and record all the details of service provided (patient, visits, diagnoses, prescriptions etc.) there. MISes are developed independently by the 3rd party providers (typically in different communities) and connected to e-Health system based on set of publicly available technical rules after verification by e-Health administrator. As of the report issue date, there are 32 MISes that are connected toe-Health via an application programming interface (API). Data from MISes on services provided under the PMG is uploaded to central components and services of e-Health stem. e-Health s stem interacts with state re isters b secure connection rovided b the Using the above information as the starting point, we inquired the representatives of key responsible participants of the process, including the Ministry of Health of Ukraine, the National Health Service of Ukraine, and the Department of Expenditures of Humanitarian Sector at the Ministry of Finance of Ukraine. Representatives of the Department of International Financial Projects of the Ministry of Finance of Ukraine were also present during the inquiries. We received and considered the reports provided by the Ministry of Finance of Ukraine to the World Bank, as well as reports from the budget holders and State Treasury data. Based on the above information, we prepared the list of relevant controls. The summary of controls is provided in Table 2. Summary of controls - Medical employees' salaries. Since access to personal data is not allowed without explicit consent of the personal data owner, the list of controls was prepared based on inquires and limited observations only depending on circumstances for each particular control. We did not perform the testing of operating effectiveness of controls during the period subject to our procedures. Therefore, the results of our evaluation may not reveal control gaps which existed during the period. Page 31 0f 62 Table 2. Summary of Controls - Medical employees' salaries Control ID [Sub-process Description of control Control design evaluatlon procedures Issue category MED.01 n/a (all) The IT landscape is expected to ensure that transactional data is Inquired representatives of the NHSU. 1) Decentralised system maintained completely & accurately: 2) Partial automation - Application, assignment, accrual and accounting of salaries Issues noted: architecturally are performed in one centralised system. This 1) Accounting and calculation of salaries are performed in different systems by ensures consistent payment accrual and calculation process across each health facility independently. There is no centralised control over the Ukraine. correctness of salary calculation; MED.02 n/a (all) Owner of MIS (MIS operator) applies to the state enterprise that is Observed orders "On the approval of technical requirements to the electronic No issues noted an administrator of e-Health for further testing of MIS. During next Medical Information System for its connection to the central database of thee- 30 days, administrator tests the system in accordance with the Health system and the test program to establish compliance with such testing program approved by the NHSU. After testing, administrator requirements" signed by the Head of NHSU and "Technical requirements for the creates test conclusion and submits it to MIS operator. To be electronic Medico/ Information System for its connection to the central database connected to e-Health, every MS must pass all respective of thee-Health system" as attachment to the relevant orders. procedures of testing and verification to confirm its security and eligibility for interaction with information resources of the NHSU. Please, refer to links to find the respective documents and list of Medical Please, find links to full list of technical requirements and list of Information Systems that passed through the test program: connected MIS in Control design evaluation procedures column. Control: - Administrator of e-Health properly tests every MIS before connecting it toe-Health. O bserved copy of testing conclusion formed by the administrator that confirms that selected MIS meets the technical requirements for module 3.10 "Treatment plan". This conclusion was verified by signature of appropriate person and a seal of the enterprise. No issues noted. MED.03 Separation of Every health facility reports on the amount of accrued funds and Inquired representatives of the Department of Humanitarian Budget Manual process military-related number of non-conscripted employees, who are recipients of Expenditures of the Ministry of Finance. payments salaries, to the National Health Service of Ukraine (NHSU) for reimbursement. The NHSU receives reports from health facilities Inspected summarised working file of NHSU with data from all health facilities for only on non-military people and summarises the data to the report December 2022 and observed that respective fields are filled-in and number of "Information on the salary payment under the MGP [Medical employees and salary expenses on each region matches the data in report Page 32 0f 62 Control ID ub-process Description of control Control design evaluation procedures Issue category Guarantee Program) based on data from the reports of the relevant Information on labor payment under the MGP based on data from the reports of service providers under the medical guarantee program" that the relevant service providers under the medical guarantee program" that was contains field "The actual number of employees at the full time and submitted to the Ministry of Finance for further reporting of expenditures eligible part-time work (including external) whose salaries are paid at the for reimbursement. expense of the funds of the medical guarantee program, for the reporting month, excluding employees who are called up for military Issue noted: service (conscripted) or are serving in the Territorial Defence Forces There is a discrepancy between general number of relevant medical employees of the Armed Forces of Ukraine, actually employed units". This data of one of the regions as per the working file and total number of employees is summarised in the report "Information on labor payment under indicated in the report. We received an explanation that the number of physical the MGP based on data from t"e reports of the relevant service workers was mistakenly included instead of the number of salary rates (in full providers under the medical guarantee program" in the field "The time equivalent) by one of the facilities, while salary amounts were indicated actual number of relevant employees of medical service providers in correctly in the report. The report is completed manually, so that the salary the reporting period, according to the NHSU" and submitted to the amount is entered rather than calculated based on the number of workers and Ministry of Finance for reimbursement. salary rates in full time equivalent. Control: Responsible specialists of health facilities exclude salaries of people related with military service from the report submitted to the World Bank for reimbursement. MED.04 Master data All expenses on services provided by health facilities are calculated Inquired representatives of the NHSU. No issues noted maintenance by system based on catalogue of tariffs. To keep calculations accurate, Department of Contractual Work of NHSU, supported by IT Observed description of the process of updating tariffs for payment of medical Department of NHSU, regularly refreshes tariffs. services provided by NHSU and relevant screenshots. Control: Additionally, inspected the MS-Excel file received from IT Department with tariffs NHSU regularly updates master data in the system for calculation of uploaded from the system and with no discrepancy between service costs in the reimbursement expenses on medical services. file and tariffs from the above screenshots. MED.OS Salary payment Financial specialists of health facilities calculate salaries of medical Inquired representatives of the NHSU. Pending, subject to to medical workers according to primary documents (internal statutes, staff finalisation of procedures workers lists and collective agreements). Minimum amounts of salaries are on verification of the regulated by Resolution No.28 dated 13 January 2023 and are Note. Since control is decentralised and correctness is verified at each healthcare sample of salaries based defined for doctors (UAH 20,000) and for medical staff (UAH 13,500) facility, we do not test specific control activities at facility level but rather on supporting documents with some exclusions specified in the resolution. highlight whether facilities in general have controls that ensure correct salary (Phase 2, Section 11.3 of calculation. this Report) Control: Health facilities calculate salaries in accordance with specified norms No issues noted. and rules to prevent improper salaries to be paid. MED.06 Salary payment Health facilities submit payment registers signed by responsible Inspected payment registers from four selected regions (5 health facilities in No issues noted to medical persons: Head of Financial Department/ Accountant and Director of total) for October 2022 and confirmed that all registers are signed by Accountant workers facility, to respective banks for payment of salaries to card accounts and Head and stamped by a seal of health facility. of employees. No issues noted. Control: Page 33 0f 62 Control ID ub-process Description of control Control design evaluation procedures Issue category Responsible persons of health facilities prevent processing of non- eligible salary payments. MED.07 Medical records Every record in DWH is signed by qualified electronic signature (QES) Inquired representatives of the NHSU. No issues noted recording & of the doctor who created it. If the doctor corrects his/her record, it maintenance is also signed and saved in the previous and current versions. There Inspected technical requirements to MISes approved by the Head of NHSU, which is no technical functionality that allows any user to delete or edit were valid from September to December 2022, and confirmed that they define data directly in DWH. general requirement to provide verification of data exclusively by QES. In case of data verification by external software, MIS is required to check integrity of signed Control: content. System prevents modification/deletion of records. No issues noted. MED.OB Service Every health facility reports on the general amounts of accrued Inquired representatives of the NHSU. No issues noted reimbursement salary under MPG, account bala,ces and number of respective Observed "Protocol of creating and verifying of qualified and improved electronic under MGP employees to NHSU. These salaries are accrued for services signature" for the report from a selected health facility for December 2022 and provided under MGP and are subject to reimbursement. Head of confirmed that it was signed by QES of the director of facility, and reported data facility confirms report by his/her qualified electronic signature is complete. (QES) and submits it to NHSU by email. No issues noted. Control: Health facilities sign the reports to mark them eligible for further processing by NHSU. MED.09 National Health Specialist of the Department of interaction with providers of NHSU Inquired representatives of the NHSU. Manual process Service of receives the reports on provided services from health facilities, Ukraine (NHSU) identifies each report by its name and code of Unified State Register Observed the aggregated MS Excel file used by NHSU for analysis of the reports makes a of Enterprises and Organizations of Ukraine and summarises all such on provided services under MGP for December 2022 and noted the following: compliance reports into one aggregated MS Excel file. The file has embedded - the file contains checks on whether there are no categories of employees with check of reports formulas to check whether the figures reported by healthcare zero salary or vice versa in each health facility; on medical facilities are correct. The specialist compares current values with - the file contains data on the previous month (number of workers, average services values from previous periods and assess whether the health facility monthly expenses, account balance) and respective data on the reported month. could have provided reported volumes and types of services based on its resources and abilities. In case of any discrepancy, the Observed letter from a selected health facility dated 14 December 2022 with specialist contacts the health facility to obtain clarification about the explanation of increased costs in June and July 2022, properly authorised by reasons for divergences with expectations. signature of Senior Accountant and the stamp of health facility. Control: Issue noted: Department of interaction with providers performs reasonability Clarification of increased costs was received from a health facility on 13 check of data submitted by health facilities for reimbursement. December 2022 only, i.e. over four months after the situation occurred. MED.10 Service Based on validated reports on provided services, specialists of NHSU Observed payment orders for the transfer of funds to eight health facilities from No issues noted reimbursement creates "Register of payment instructions of managers (recipients) four selected regions for October 2023, signed by two signatures of responsible under MGP of budget funds", based on which NHSU provide payments under persons. MGP to health facilities. Thus, Head of Financial Department/ Accountant and Head of NHSU check payment orders in the register No issues noted. and submit it to the State Treasury for the transfer of funds to the account of the health facility in respective bank. Page 34 0f 62 Control ID ub-process Description of control Control design evaluation procedures Issue category Control: Head of Financial Department/ Accountant checks the amount to be paid and bank details in the payment order, the Head of NHSU verifies all details again, and they both submit the payment order with their digital signatures and a seal of NHSU. MED.11 Service State Treasury processes payments from treasury account of NHSU Observed payment orders for the transfer of funds to eight health facilities from No issues noted reimbursement to the accounts of health facilities at respective banks. When four selected regions for October 2022 and confirmed that they were processed under MGP payment is processed, responsible specialist (treasurer) confirms it and stamped by state treasurers. by his/her stamp put on the order. No issues noted. Control: State Treasury verifies the amounts and details in payment order to the amounts and details per budget assignation. MED.12 Complaints NHSU monitors any issues on salary payments through appeals from Evidence of control: No issues noted management medical employees received by state authorities, local self- https://zakon_rada.gov.ua/laws/show/20355-19#Text government bodies, State Labor Service, government contact info@nSzu.gov.ua center, NHSU contact center. https://service.e-health_gov._ua/storage/editor/files/zyit-pro-rezultati-rozglyadu- Control: zyernen-gromadyan-u-natsionalniy-sluzhbi1674530295_pdf All claims must be reviewed and responded to within the term pre- defined by law (typically - one month). Investigation takes place in No issues noted. case of necessity. MED.13 MGP payments Department of Expenditures of Humanitarian Sector at the Ministry Inquired representatives of the Department of Humanitarian Budget Manual project specific monitoring of Finance traces the salary amounts in the report "Information on Expenditures of the Ministry of Finance. process, with no the actual number of eligible employees of medical service providers formalized output of and expenses for wages within the MGP", sent as attachment to Observed cover letters from the NHSU to the Ministry of Finance for the period control cover letter from NHSU, to the data on cash expenditures under the from August to December 2022 singed by electronic signatures of the Head of MGP provided by State Treasury, and clarifies the discrepancies, if NHSU. any. Inspected reports from the NHSU to the Department of Expenditures of Humanitarian Sector at the Ministry of Finance and reports from Department of Control: Expenditures of Humanitarian Sector at the Ministry of Finance to Department of The Ministry of Finance detects and investigates discrepancies International Financial Projects of the Ministry of Finance of Ukraine for the between funds accrued by health facilities and planned/paid by period from September to December 2022 with total values of all respective State Treasury. indicators aligned. Issue noted: There is no formal document to be used as evidence of control execution. The Ministry of Finance does not keep any evidence of control performed (working papers, email communication etc.) so existence of control confirmed through inquiry only. Page 35 0f 62 2. Verification of monthly reports on Medical employees' salaries 2.1. Reconciliation of the information in the monthly reports on Medical employees' salaries to the reports previously submitted to the World Bank for reimbursement. We reconciled data in the following reports for the period from September to December 2022: i. Summarised Report "Information on remuneration under the Program of Medical Guarantees (PMG) based on data from the reports of eligible service providers under the program of medical guarantees" prepared by the National Health Service of Ukraine (NHSU), which includes the number of eligible PMG service providers based on the submitted reports, according to NHSU, actual number of eligible employees of medical service providers in the reporting period according to NHSU data, and costs of salaries with accruals under PMG in the reporting period, according to NHSU data in UAH thousand split by type of care: Emergency, Primacy, Secondary. ii. Report on the payment of salaries under PMG within the PEACE Project provided to the World Bank, including: o Aggregated table "Information on payment of salaries under the Program of Medical Guarantees (PMG) based on data from reports of eligible service providers under the program of medical guarantees" (Table 3 of the above Report), with the following data: • Number of eligible PMG service providers based on the submitted reports, according to NHSU; • Actual number of eligible employees of medical service providers in the reporting period, according to NHSU; • costs of salaries with accruals under PMG in the reporting period, according to NHSU data in UAH thousand split by type of care: Emergency, Primacy, Secondary. We reconciled all data included in the above report to the respective groupings of data provided in Annex 1 (see below), with no discrepancies noted except for a rounding difference on total cost of salaries for November 2023. o Annex 1 with the information as per the Aggregated table, split by regions of Ukraine, on the following data: • Number of eligible PMG service providers based on the submitted reports, according to NHSU; • Actual number of eligible employees of medical service providers in the reporting period, according to NHSU; • costs of salaries with accruals under PMG in the reporting period, according to NHSU data in UAH thousand split by type of care: Emergency, Primacy, Secondary. We reconciled the data from Annex 1 to the data as per the Report (i) for the following positions: • Number of eligible PMG service providers based on the submitted reports, according to NHSU; • Actual number of eligible employees of medical service providers in the reporting period, according to NHSU; • costs of salaries with accruals under PMG in the reporting period, according to NHSU data in UAH thousand split by type of care: Emergency, Primacy, Secondary. As a results of reconciliation, no discrepancies were noted except for rounding differences. 2.2. Reconciliation of reports Medical employees' salaries to the Treasury data; We reconciled data in the following reports for the period from September to December 2022: Page 36 0f 62 i. Bank statements on account of National Health Service of Ukraine in State Treasury, containing information on fund transfers under the program of state guarantees of medical care for the population (2308060). ii. Report on the payment of salaries under PMG within the PEACE Project provided to the World Bank, in particular, "Information on the total amount of expenditures of the general fund of the state budget for the implementation of the program of state guarantees of medical care for the population" (Table 2), provided to the World Bank, including information on implementation of the program of state guarantees of medical care for the population (2308060), with the following data: • Planned expenditures of the general fund of the state budget, according to the Treasury in the reporting period; • Cash expenditures of the general fund of the state budget for the reporting period, according to the Treasury data. We reconciled Cash expenditures of the general fund of the state budget for the reporting period, presented in Table 2 of the Report on the payment of salaries under PMG within the PEACE Project provided to the World Bank, to the respective data as per the bank statements provided by State Treasury and noted the following discrepancies: Report to the World bank State Treasury data Final discrepancy, UAH Cash expenditures of the Cash expenditures of the Discrepancy, UAH billion Adjustment, UAH billion billion Period general fund, general fund, UAH billion UAH billion Sept-22 12.15 12.15 0.00 0.00 0.00 Oct-22 11.04 11.04 0.00 0.00 0.00 Nov-22 7.13 7.13 0.00 0.00 0.00 Dec-22 20.31 20.36 (0.05) 0.04 (0.01) Total 50.63 50.68 (0.05) 0.04 (0.01) We inquired the of the National Health Service of Ukraine (NHSU) concerning the difference of UAH 0.05 billion between the Report (ii) and the Treasury bank statements (i) in December 2022. According to the NHSU representative, the discrepancy of UAH 0.04 billion occurred due to a refund of UAH 12.2 million to NHSU accounts, which, due to accounting complexities, was reflected three times in the bank account statement of the NHSU (totalling UAH 36.6 million, constituting the difference amount of UAH 0.04). The final discrepancy of UAH 0.01 billion is a rounding difference. 2.3. Reconciliation of individual monthly reports received from lower-level units or sub-entities to the consolidated monthly report on Medical employees' salaries 2.3.1. Reconciliation of aggregated amount of expenditure on payments to Medical employees We reconciled data in the following reports for October 2o22 for selected regions of Ukraine from each of the four geographical areas of Ukraine (Central, Western, Eastern and South) - namely, 1. Annex 1 from Report on the payment of salaries under PMG within the PEACE Project provided to the World Bank, with the following data split by regions of Ukraine: • Actual number of eligible employees of medical service providers in the reporting period, according to NHSU; • costs of salaries with accruals under PMG in the reporting period, according to NHSU data in UAH thousand split by type of care: Emergency, Primary, Secondary. ii. Summarised Report "Information on remuneration under the Program of Medical Guarantees (PMG) based on data from the reports of eligible service providers under the program of medical guarantees" prepared by the Page 37 of 62 National Health Service of Ukraine (NHSU), which includes the number of eligible PMG service providers based on the submitted reports, according to NHSU, actual number of eligible employees of medical service providers in the reporting period according to NHSU data, and costs of salaries with accruals under PMG in the reporting period, according to NHSU data in UAH thousand split by type of care: Emergency, Primary, Secondary. iii. Reports prepared by the National Health Service of Ukraine, separately for each region of Ukraine, aggregating the data at level of each healthcare facility. The reports include the number of medical staff excluding military staff, and expenses on their wages and social contributions. We reconciled the following data from the Annex 1 (i) to the data as per the Reports (iii) for four regions of Ukraine: • The actual number of eligible employees in the reporting period, persons; • Total expenses on wages and social contributions of eligible employees for the reporting period. The discrepancy in one person was noted for one of the regions. As for the total expenditures on wages and social contributions, only rounding discrepancies were noted. We reconciled the following data from the Summarised Report (ii) to the data as per the Reports (iii): • The actual number of eligible employees in the reporting period, persons; • Total expenses on wages and social contributions of eligible employees for the reporting period. No discrepancies were noted. 2.3.2. Reconciliation of detailed amounts of expenditures on payments to Medical employees as per the payment ledgers of healthcare facilities to the aggregated amounts of expenditures on payments to Medical employees We reconciled data in the following reports for October 2o22 for selected healthcare facilities from the following regions of Ukraine from each of the four geographical areas of Ukraine (Central, Western, Eastern and South) - namely, the following: i. Reports prepared by the National Health Service of Ukraine, separately for each region of Ukraine, aggregating the data at level of each healthcare facility. The reports include the number of medical staff excluding military staff, and expenses on their wages and social contributions; ii. Accrual and payment ledgers on payments to Medical employees for October 2022, on a sample of particular territory healthcare facility from four regions, as follows: iii. Account Statements of State Treasury of Ukraine, aggregated by codes of expenditures, for October 2022, on a sample of particular territory healthcare facility from four regions, as described in p.(ii) above. As of the date of the requested submission of the Phase II Report, the verification procedures and clarifications on Page 38 of 62 discrepancies were still in progress. As such, we were not able to finalise the agreed-upon procedures for this part of scope and thus it was agreed to include the results of those procedures to the next stage of the agreed-upon procedures reporting on PEACE Project. 3. Verification of the eligibility of expenditures Medical employees' salaries on sample basis As the basis for our sample, we used accrual and payment ledgers of healthcare facilities, in electronic de-personalised format (only sequential numbers, positions and respective components of accrued payments), to prevent from personal data processing. Before sampling, we reconciled accrual and payment ledgers to the monthly reports (refer to Section 2 above) to ensure that further verification is done on healthcare employees' wages reported as eligible for reimbursement. One or two healthcare facilities from each of the geographical regions of Ukraine was included: (for Central, Western, Eastern and South geographic regions respectively): The sample included 130 healthcare workers in total. For each employee, we requested to provide the supporting documents for each component of accruals, including: staff matrices, timesheets, vacation orders, bonus orders; orders for assigning additional components of remuneration such as payment for ranking, payment for seniority, payment for intensity oflabour, payment for overtimes, payment for additional workload, payment for sick leave and vacation, extra-payment for night work, various types of financial assistance, salary indexation. Verification was done by checking that: a) Payments are accrued for medical employees whose employment at respective health facilities is supported by respective orders for appointment; b) All components of accrued remuneration are appropriately supported as having been incurred, are verifiable, and are substantiated by appropriate supporting evidence; c) Remuneration components and calculation of accrued amounts are consistent with the current labour legislation in Ukraine and underlying data. As the accrual and payment ledgers of budget holders contain no evidence of military background of the beneficiary persons, we were not able to check the correctness of exclusion of military staff from the amounts reported. Moreover, the change in legislation on cancellation of salary payments to military staff and subsequent clarification took place on 19 July 2022, according to the Law of Ukraine dated 1 July 2022 N0.2352-IX 'On Amendments to Certain Laws of Ukraine Regarding the Optimization of Labour Relations'. Thus, payments of the average salary for conscripted employees were stopped starting from July 2022. As a result, we noted the following discrepancies, presented in tabular format: Page 39 0f 62 Residual Salary Salary Unconfirmed discrepancies, Sample accrued accrued per amount due to Region Medical amount, assuming we Comment Facilities per payroll our time received employees register recalculation constraints support for column 6 1 2 3 4 5 6 7 8 - Er Preliminary result, no 20 267,598 267,598 136,595 0 discrepancies noted Final result, no discrepancies 20 240,298 240,298 - 0 noted -E 24 223,142 223,124 4,057 19 Discrepancies (column 7) under discussion -E Discrepancies due to manual error in calculation of a bonus payment 20 346,802 347,088 191,879 (286) for one employee. There were no adjustments on the next month to correct salary amount. r Preliminary result, no -r 20 539,123 539,123 230,168 (o) discrepancies noted Discrepancies (column 7) under 26 355,189 373,351 26,276 (18,162) discussion The results of the medical employees' salaries testing are preliminary due to several unconfirmed amounts of some wage components which require additional information from healthcare facilities (column 6) beyond the information we have already received. If the specified components are confirmed, the amount of discrepancies would correspond to the amount indicated in column 6. Page 40 0f 62 III. Social assistance payments 1. Understanding and evaluation of controls over Social assistance payments: GMI + HUS + Disabilities To obtain understanding of controls, we initially considered the information on the process and controls available in Project Operations Manual (POM): Process description Social assistance is a payment provided by The State to those citizens who are in difficult life circumstances for reasons beyond their control. The scope of Phase II of the Agreed Upon Procedures on the Public Expenditures for PEACE Project includes three types of social payments: Guaranteed Minimum Income (GMI), payments to people with disabilities from childhood (Disabilities) and Housing and Utilities Subsidy (HUS). Guaranteed Minimum Income (GMI) is a state social assistance that is defined by The Law of Ukraine "On state social assistance to low-income families" paid to low-income families that permanently live on the territory of Ukraine and for reasons beyond their control, have an average monthly total income lower than the subsistence minimum for the family. The appointment and payment of social assistance is carried out by the structural subdivisions of social protection of the population at the registered place of residence or the place of residence of the authorized representative of such family. Such assistance is granted for six months from the month of application for its appointment. However, according to the Resolution No. 214 of the Cabinet of Ministers of Ukraine dated 7 March 2022, payments are extended to persons living in the territories of territorial communities where hostilities are being waged or temporarily occupied by the Russian Federation in accordance with the "List of territories where hostilities are (were) being waged or temporarily occupied by the Russian Federation" until the month following the month of the end of hostilities in the relevant territory or the end of temporary occupation, even if the recipient missed the deadline for its re-verification. For those who live in other regions of Ukraine, payment of assistance continued till 31 of December 2022. The amount of payment is defined as the difference between the subsistence minimum for the family and the average monthly total income of the low-income family. Subsistence minimum for the family is defined as the sum of the subsistence minimums calculated and approved in accordance with the Law of Ukraine "On the Subsistence Minimum" for persons belonging to the main social and demographic groups of the population. The average monthly aggregate income of a low-income family for the purpose of state social assistance is determined in accordance with the Procedure for calculating the average monthly aggregate income of a family (household) for all types of state social assistance, approved by Resolution No. 632 of the Cabinet of Ministers of Ukraine dated 22 July 2020. The National Social Service of Ukraine provides control over the correctness of the appointment and payment of assistance to low-income families and the use of state budget funds aimed at providing such assistance. During the provision of state social assistance, the property status of family members is checked on a monthly basis in accordance with the procedure determined by the Cabinet of Ministers of Ukraine. Financing of assistance to low-income families is carried out through the state budget program 2501030 "Payment of some types of benefits, compensations, financial support and payment of services to certain categories of the population". The main manager of budget funds under which is the Ministry of Social Policy. Budget funds are distributed by the Ministry of Social Policy during the formation of the passport of the budget program, considering the planned number of recipients. Every month, regional social protection authorities prepare a summarised application regarding the need for budget funds for the payment of assistance based on the applications of structural subdivisions of social protection of the population and submit it to the Ministry of Social Policy. After that, the Ministry of Social Policy transfers the budget funds to the regional social protection authorities, which distribute them to the accounts ofthe stretral sub@divisions ot social protection""" BS"]'o-pie subdiyii2Ii2"Sep@mcents to the accounts of the recipients of assistance in authorized banks or through the postal operator ti During the period of martial law, in accordance with the Resolution of the Cabinet of Ministers of Ukraine No. 215 "On the peculiarities of the calculation and payment of cash assistances, benefits and housing subsidies during the period of martial law" dated 7 March 2022, on the territory of administrative and territorial units where social protection authorities do not have the opportunity to ensure the preparation of payment documents, - accrual and payment Page 41 0f 62 amounts are estimated on the basis of data on social payments recipients available in database of the State Enterprise "Information and Computing Centre of the Ministry of Social Policy" (ICC). Using this data, ICC forms respective registers of recipients with all necessary payment information. The registers are submitted to the Ministry of Social Policy, which creates and submits payment orders to the State Treasury. Based on the payment orders, the State Treasury transfers funds from treasury account of the Ministry of Social Policy to bank accounts of regional social protection authorities, and submits payment registers to respective banks for further distribution of funds - either to ■■■■■■■I the recipients' personal bank accounts or through the payment system bank (operated by a state-owned in case if a recipient has no bank account. When payments are done, respective banks prepare a register with the information on payments which did not reach the recipients' accounts, and transfers the unpaid amount of funds to the treasury account of the Ministry of Social Policy. Payments to people with disabilities from childhood (Disabilities): monthly state social assistance is defined by the Law of Ukraine "On state social assistance to persons with disabilities since childhood and children with disabilities". It is assigned and paid to persons with disabilities since childhood for the entire period of disability established by medical and social examination bodies, and to children with disabilities - for the period specified in the medical report, but no more than one month after the child with disabilities reaches 18 years of age. For children with disabilities, who turned 18 in February 2022 and in other months during the regime of martial law and who did not have an opportunity to undergo an examination and receive a medical and social examination opinion regarding the establishment of the status of a person with a disability, the payment of social assistance continues for the period of martial law and for one month after the date of its cancellation. The Project does not include payments for people with disabilities who are on full state maintenance in social protection facilities. Financing of assistance to people with disabilities is carried out through the state budget program 2501030 "Payment of some types of benefits, compensations, financial support and payment of services to certain categories of the population" by the same mechanism as GMI. Housing and Utilities Subsidy (HUS): in accordance with the Resolution of the Cabinet of Ministers of Ukraine No. 848 "On simplifying the procedure for providing subsidies to the population to reimburse the costs of paying for housing and communal services, purchasing liquefied gas, solid and liquid stove household fuel" dated 21 October 1995, state social assistance is provided to consumers of housing and communal services residents of households living in houses who are unable to pay for housing and communal services, expenses on management of an apartment building or acquisition costs of solid and liquid household fuel and liquefied gas in their households. Until December 2022, applications for the appointment and payment of a housing subsidy with the necessary documents could be submitted by citizens to the structural subdivisions for social protection of the population in one of the following ways: either by mail or in electronic form through the official website of the Ministry of Social Policy, or in the information systems of executive authorities and local self-government bodies integrated with it, or using the Unified State Web Portal of Electronic services Calculation is performed in accordance with the calculation algorithm defined by Resolution No. 1156 of the Cabinet of Ministers of Ukraine dated 27 July 1998. The amount of the subsidy is calculated as the difference between the cost of housing and communal services within the limits of social norms and the amount of mandatory payment, which is determined individually according to the unified formula: the average monthly household income per person is divided by the amount of the subsistence minimum per person per month. The percentage of mandatory payment is proportional to the income. The subsidy is calculated separately for the heating season and separately for the summer period, based on the cost of services in these periods. Until November 2022 (inclusive), once a month before accrual, local authorities on social protection issued transmitted payment information into the accrual system on FTP-server to make it available for processing on a central level in "Automated information processing environment of the Minist of Social Policy of Ukraine for the operations of centralized processes". Data was obtained mainl from Ts stem, but some re ions used other IT s stems in articular: . Accrual was performed by specialists of regional social protection authorities semi-centrally in each region. Until August 2022 (inclusive), financing of housing subsidies was provided under the budget program 2501230 "Payment ofbenefits and housing subsidies to citizens for the payment of housing and communal services, the purchase. Page 42 0f 62 of solid and liquid household fuel and liquefied gas in monetary form", defined by the Ministry of Social Policy as the main manager of budget funds, and according to the same algorithm as assistance to low-income families. From September, payments were performed by the Pension Fund of Ukraine (PFU) which received payment information from structural subdivisions on social protection issues, signed summarised payment registers from the Ministry of Social policy and created summarised "Application for the transfer of funds for the payment of housing subsidies and benefits for the payment of housing and communal services, the purchase of solid and liquid household fuel and liquefied gas". These applications were submitted to the Ministry of Social Policy for further use in preparing payment orders. Based on payment orders, the State Treasuz transferred funds from the treasury account of the Ministry to the bank account of the PFU in state-owned bani. The bank distributed these funds to recipients according to the payment register received from the Ministry of Social Policy. Starting from December 2022, all processes of document acceptance and processing moved from social protection authorities to the Pension Fund of Ukraine. All HUS holder cases with the history for the last five year migrated from previously used systems to the PFU system. Application on appointment with respective documents is submitted in the ■I following ways: either through service centers and web-portal of the PFU or through the same executive authorities and local self-government bodies and ■■■■■■■■■■■■■■■■■■■■■ as it was done before December 2022, as described above. All operations of appointment and calculation are performed in the system by five different specialists in back offices of the PFU with a principle of exterritoriality in place: all specialists who process one application are located in different regions of Ukraine, and only the first and the last specialists process application in the region where it was submitted. Accruals of housing and utility subsidies are performed in a centralised way in each region by regional authorities of the PFU at the time previously defined and communicated by the Head Department of the PFU. The Head Department monitors whether an accrual process was started and successfully finished in all regions successfully and communicates with regional authorities to resolve technical issues, if any. The Department of social Expenditures of the Ministry of Finance of Ukraine obtains %"3_'