PKF MAK ALYANS LLC PKF Accountants & business advisors INTERNATIONAL DEVELOPMENT ASSOCIATION ALAT AND KARAKUL WATER SUPPLY PROJECT WORLD BANK PROJECTS COORDINATION UNIT INTERNATIONAL DEVELOPMENT ASSOCIATION CREDIT No. 5189-UZ SPECIAL-PURPOSE CASH BASIS FINANCIAL STATEMENTS AND STATEMENTS OF EXPENDITURES FOR THE PERIOD FROM JANUARY 01, 2021 TO MAY 05, 2022 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL-PURPOSE FINANCIAL STATEMENTS FOR THE PERIOD ENDED MAY 05, 2022 3 INDEPENDENT AUDITORS' REPORT 4 INTERNATIONAL DEVELOPMENT ASSOCIATION SPECIAL- PURPOSE FINANCIAL STATEMENTS FOR THE PERIOD ENDED MAY 05, 2022: Special-Purpose Statement of Cash Receipts and Payments 6 Special-Purpose Statement of Detailed Costs by Components 7 Notes to Special-Purpose Financial Statements 8-20 2 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL- PURPOSE FINANCIAL STATEMENTS FOR PERIOD ENDED MAY 05, 2022 The Management of the Joint Stock Company "Uzsuvtaminot" (hereinafter - the "Uzsuvtaminot") is responsible for the preparation of the Special-Purpose Financial Statements (hereinafter - the "Financial Statements") of the "Alat and Karakul Water Supply Project" (hereinafter - the "Project") implemented by the Uzsuvtaminot, funded by the Intemational Development Association Credit, (hereinafter - the "IDA Credit") that present fairly the financial position of the Project as of May 05, 2022 (Completion Date), and the funds received, and expenditures incurred for the period ended May 05, 2022, in compliance with the International Public Sector Accounting Standards "Financial Reporting under the Cash Basis of Accounting" (hereinafter - "IPSAS-Cash Basis"). In preparing the Financial Statements, the management of the Uzsuvtaminot is responsible for: * Selecting suitable accounting policies and applying them consistently; * Presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable, and understandable information; * Providing additional disclosures when compliance with the specific requirements in IPSAS-Cash Basis are insufficient to enable users to understand the impact of particular transactions, other events, and conditions on the Project's Special-Purpose Financial Statements. The Management of the Uzsuvtaminot is also responsible for: * Designing, implementing and maintaining an effective and sound system of internal controls, throughout the Project; * Maintaining adequate accounting records that are sufficient to show and explain the Project's transactions and disclose with reasonable accuracy at any time the fund balance of the Project, and which enable them to ensure that the Financial Statements of the Project comply with specific requirements in IPSAS-Cash Basis; * Maintaining statutory accounting records in compliance with legislation of the Republic of Uzbekistan; * Taking such steps as are reasonably available to them to safeguard the assets of the Project; and * Preventing and detecting fraud and other irregularities. The Financial Statements of the Project for the period ended May 05, 2022 were authorized for issue by the Management of the Uzsuvtaminot on May 18, 2022. On behalf of the Management of Uzsuvtaminot: B. Umirzakov Z. Igamberdieva Acting P rdinator PCU Accountant AK0 L . A3 PKF MAK ALYANS LLC PKF Accountants & business advisors INDEPENDENT AUDITOR'S REPORT To the Management of the Joint Stock Company Uzsuvtaminot Opinion We have audited the Special-Purpose Financial Statements (hereinafter - the "Financial Statements") of "Alat and Karakul Water Supply Project" (hereinafter - the "Project") financed from Credit proceed (Credit No.5189-UZ) of the International Development Association (hereinafter - the "IDA"), which comprise the special-purpose statement of cash receipt and payments for the period from January 01, 2021 to May 05, 2022 (Completion Date), the statement of expenditures (hereinafter - "SOE"), the statement of designated accounts (hereinafter - "DA") and a summary of significant accounting policies and other explanatory notes. The Financial Statements have been prepared by management of the Uzsuvtaminot using the International Public Sector Accounting Standards "Financial Reporting under the Cash Basis of Accounting" (hereinafter - "IPSAS - Cash Basis"). In our opinion, 1. The accompanying Special-Purpose Cash Basis Financial Statements, in all material respects, give a true and fair view of the financial position of the Project as of May 05, 2022, as well as Sources and Uses of Funds, Designated Accounts movements and its balances for the periods then ended and complies with the conditions of the Financing Agreement and in accordance with International Public Sector Accounting Standard - Cash Basis; II. Moreover, (a) with respect to the SOE for the period ended May 05, 2022, adequate supporting documents, records and accounts have been maintained to support claims to the IDA for reimbursements of expenditures incurred; and (b) the expenditures included in the withdrawal applications and reimbursed against are eligible for financing under the Agreements. Ill. The Project Designated Accounts Statement for the period ended May 05, 2022 give a true and fair view of the financial position of the DA of the Project and of the cash flow for the periods then ended. Basis for Opinion We conducted our audit in accordance with the International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the Financial Statements in the Republic of Uzbekistan and we have fulfilled our other responsibilities under these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Special-Purpose Financial Statements The Management of the Uzsuvtaminot is responsible for the preparation and fair presentation of these Financial Statements in accordance with the IPSAS - Cash Basis, and for such intemal control as management determines is necessary to enable the preparation of Financial Statements those are free from material misstatement, whether due to.fraud or error. Tel: +99871 294-73-86 - Fax: +99871 294-73-85 * info@pkf.uz - www.pkf.uz - www.pkf.com PKF MAK ALYANS LLC - 22, Aviasozlar street - 1 passage - Tashkent, Uzbekistan - 100016 ISO 9001:2015 PKF MAK ALYANS LLC is a member firm of the PKF international Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. Cert. No: QMS-0185/C Auditor's Responsibility for the Audit of the Special-Purpose Financial Statements Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of intemal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project's intemal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * We conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. * Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in intemal control that we identify during our audit. Audit Organization "PKF MAK ALYANS LLC'" 22, Aviasozlar Street, 1st Passage 100016, Tashkent, Uzbekistan May 18, 2022 5 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT SPECIAL-PURPOSE STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR PERIOD ENDED MAY 05, 2022 Amounts are presented in US Dollars 01.01.2021- 31.12. 2020 umulative 05.05.2022 Actual Actual OPENING CASH BALANCES Designated Account PCU - Cash in USD 154044 398815 Special Account PCU - Cash in UZS (USD equivalent) - 5 Special Account BVK - Cash in UZS (USD equivalent) 569 2101 TOTAL 154613 400921 SOURCES OF FUNDS: RECEIPTS Direct Payments: IDA Credit 5189-UZ - Direct Payments 10 315931 12 435 022 74019669 Uzbek Government Co-financing - Direct Paments - 8159745 Reimbursements and Advances: IDA Credit 5189-UZ -Advance Payments 115000 - 5714571 IDA Credit 5189-UZ - Return of Unused Advances (51 046) - (2 051 046) IDA Credit 5189-UZ - Refunded Applications (1 223 602) - (3879263) Uzbek Government Co-financing - Advance Payments - - 3162844 IDA Credit 51 89-UZ - Receipts from other projects - - 26592 Other receipts ! Returns (16561) - (18) TOTAL RECEIPTS 9139723 12 435 022 85153094 TOTAL CASH AVAILABLE 9294335 12835943 85153094 USES OF FUNDS: PAYMENTS BY COMPONENTS Part A. Improvement of Water Supply Infrastructure (7593 468) (12 553 038) (81 835 515) PartB. Institutional Strengthening and Capacity Building (939 955) - (939 955) Part C. Feasibility Studies for Future Investments (42116) - (199795) Part 0. Project Management (205986) (127 669) (751 967) Paid / Refund of Bank charges 13843 - (6159) IDA Credit - Refund of Error Receipts from other projects of PCU 1 750 - (26 592) Uzbek Government Co-financing - Other expenses (527 925) - (527 925) TOTAL PAYMENTS (9 293 859) 12 680 707) (84 287 908) FX GAIN! (LOSS), net (5) (623) (864715) CLOSING CASH BALANCES Designated Account PCU - Cash in USD - 154 044 - Special Account PCU - Cash in UZS (USD equivalent) - .1 Special Account BVK - Cash in UZS (USD equivalent) 472 569 472 TOTAL 472 154613 472 Signed on behalf of the Uzsuvtaminot's Management on May 18, 2022 B. Umi Z. igamberdieva Acti PCU Accountant (6; IV \%*NVi -7 Notes on pages 8 to 20 form an integral part of the Special-Purpose Cash Basis Financial Statements. 6 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT SPECIAL-PURPOSE STATEMENT OF DETAILED COSTS BY COMPONENT FOR THE PERIOD ENDED MAY05, 2022 Amounts are presented in US Dollars Actual Components 01.01.2021-05.05.2022 Cumulative IDA Credit No.5189-UZ Part A. Improvement of Water Supply Infrastructure (8 396 645) (72 184 840) Part B. Institutional Strengthening and Capacity Building (667331) (667331) Part C. Feasibility Studies for Future Investments (42116) (199795) Part D. Project Management (205 986) (751 966) Sub-Total (9 312 078) (73 803 932) Government Co-financing Part A. Improvement of Water Supply Infrastructure 803176 (9650676) Part B. Institutional Strengthening and Capacity Building (272624) (272624) Paid / Refund of Bank Charges 13843 (6159) Sub-Total 544 395 (9 929 459) TOTAL PROJECT EXPENDITURE (8 767 683) (83733 391) Signed on behalf of the Uzsuvtaminot's Management on 18 May 2022 BU irzakov C Z. Igamberdieva Acting PCU rdinator PCU Accountant Notes on pages 8 to 20 form an integral part of the Special-Purpose Cash Basis Financial Statements. 7 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE PERIOD ENDED MAY 05, 2022 Amounts are presented in US Dollars I PROJECT AND ITS OPERATION The Government of the Republic of Uzbekistan (hereinafter - the "Government") has received the approval of the International Development Association (IDA) for a credit to improve the coverage, quality and efficiency of public water supply service in districts of Alat and Karakul in the Bukhara region through the implementation of the Alat and Karakul Water Supply Project (hereinafter - the "Project"). The Project will finance the rehabilitation, replacement, and limited expansion of water supply infrastructure and the institutional capacity building of the Bukhara Regional Suvokova (BVK) utility. Total cost of the Project is USD 139,0 million. In accordance with the financing agreement between the IDA and the Government under the No.5189-UZ dated 18 July 2013, the Project will be financed by the Credit of the IDA in the amount of SDR 53,2 million (Fifty three million two hundred Special Drawing Rights) (equivalently to USD 82,0 million) and remaining amount of funds will be co-financed by the source of the Uzbek Govemment in cash and in-kind forms of contributions for implementation of the "Alat and Karakul Water Supply Project" on the terms and conditions stipulated in the Financial Agreement, for the purpose of co-financing the Project with the repayment term of 25 years, including 5 years of grace period. The payment currency is US Dollars with the initial closing date - December 31, 2017. The Uzbek Government contribution in the amount of USD 53,9 million, including in kind of exempted taxes and customs duties amounting to USD 22,6 million and cash contributions amounting to USD 31,3 million, incurred within framework of the Project implementation. The Ministry of Finance of the Republic of Uzbekistan is responsible for repayment of the IDA Credit on behalf of the Uzbekistan in accordance with the Financing Agreement. Moreover, there is the agreement of on-lending between the Ministry of Finance of the Republic of Uzbekistan and the Bukhara SUE "Suvokava" (hereinafter- the "BVK') on accepting the obligations specified in the Financing Agreement. The main objective of the Project is a rehabilitation, replacement, and limited expansion of water supply infrastructure and the institutional capacity building of the Bukhara region. According to the Uzbekistan's Presidential Decree PP No.2001 dated July 15, 2013, the Kommunkhizmat Agency (hereinafter - the "Agency") was designated as the Executing Agency and responsible for the target and effective use of Credit funds. To ensure the coordination of works under the Project, the existing under the Agency, the PCU is responsible for the overall Project management, control and accounting of the Project funds in compliance with the IDA guidelines and relevant National regulatory requirements. Furthermore, in line with the letter of the Ministry of Finance of the Republic of Uzbekistan dated September 10, 2018 requesting the IDA to extend the Closing Date of the Project, and according to the reply letter of the IDA dated November 08, 2018, the IDA has agreed to the above request and the Completion Date of the Project firstly was extended up to 30 June 2020. However, the Completion Date of the Project further was extended up to 31 December 2020. In addition, by the request letter dated 07 November 2020 of the Ministry of Finance of Uzbekistan to extend the Closing Date of the Project, the IDA has agreed to extension and on 21 December 2020 by sending a reply letter the IDA has established 30 November 2021 as a Closing date (plus 4 months grace period). Further disbursements from the IDA Credit will be made for withdrawal applications received by close of business on 31 March 2022 in respect of eligible expenditures made before the Closing Date (i.e. payments made or payments due for goods, works and services that have been provided prior to the Closing Date). The Project consists of the following parts (components): Part A: Improvement of Water Supply Infrastructure 1. Engineering-design and operational technical assistance services to support the Project Implementing Entity and the PCU and its Bukhara branch in the following tasks of Project implementation: (a) review of the available feasibility study and preparation of optimized preliminary designs; (b) preparation of detailed designs and bidding documents, construction supervision, and reporting; and (c) improvement of utility operation, maintenance and management, all through the provision of goods and consultants' services. 8 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE PERIOD ENDED MAY 05, 2022 Amounts are presented in US Dollars 2. Rehabilitation and expansion of water production and bulk transmission systems through: (a) the construction of a new expanded water treatment plant in Dvoinik, including the rehabilitation of the existing intake and pre-sedimentation ponds; (b) the renewal and expansion of transmission systems including the 24 km trunk line from Dvoinik to Alat-town; (c) the rehabilitation of the 13 km trunk line from Alat-town to Karakul-town; and (d) the rehabilitation and expansion of the transmission pumping stations and related water tanks to upgrade the production and transmission capacity to about 49,800 m3 per day, all through the carrying out of works and the provision of goods and consultants' services. 3. Rehabilitation and expansion of urban and rural water networks through: (a) the rehabilitation and expansion of existing water distribution systems in Alat-town and Karakul-town, including treated water tanks, treated water pumping stations, disinfection systems, distribution networks, installation of meters on about 7,200 existing household connections and installation of about 1,600 new household connections and meters; and (b) construction of new rural water transmission and distribution systems including pumping, storage, networks and metered connections in about 120 of the surrounding villages based on the optimized feasibility study and preliminary design cost estimates, all through the carrying out of works and the provision of goods and consultants' services. Part B: Institutional Strengthening and Capacity Building: 1. Institutional strengthening and capacity building through the carrying out of institutional assessments of the capacity, organization and training needs of the Project Implementing Entity to improve its management and operational performance for a sustainable water supply service in the Alat and Karakul districts. 2. Strengthening the capacity of utility management and operations staff by providing local and international training on management and technical operations, through the provision of consultants' services and Training. 3. Strengthening the management and operational capacity of Project Implementing Entity through: (a) the establishment of modem procedures and systems, including hardware and software, for billing, collection, customer service, internal auditing, accounting and record keeping; (b) the provision of operations and maintenance equipment; and (c) the provision of laboratory equipment and supplies, all through the provision of goods, consultants' services and Training. 4. Developing a communications strategy and carrying out of public consultations and awareness campaign, consumer satisfaction and gender surveys, through the provision of consultants' services. Part C: Studies for Future Investments Preparation of a feasibility study of sewerage and on-site sanitation investment needs in the towns and districts of Alat and Karakul, to accompany increased water supply service, through the provision of consultants' services. Part D: Project Management Strengthening the capacity of the Project Coordination Unit at the level of the Project Implementing Entity, for Project management, monitoring and coordination, through the provision of goods, consultants' services, including financial and technical audits, and Training, and financing of Incremental Operating Costs. In accordance with the World Bank's letter No.05610/18 dated November 08, 2018, the share of Expenditures to be financed by IDA changed as follows: 9 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE PERIOD ENDED MAY 05, 2022 Amounts are presented in US Dollars In Special Drawing Initial Amount of Revised Amount of Share of Expenditures to be Financed Rights (SDR) Credit Allocated Credit Allocated Works 18 960 000 42 290 000 69.20% up to September 9, 2018 and 100% from September 10, 2018 onwards Goods 69.20% up to September 9, 2018 and 26 540 000 3 210 000 100% from September 10, 2018 onwards Consulting services including audit, Training 7 700 000 7 700 000 100% and Incremental Operating Costs Total 53 200 000 53 200 000 Project management According to Presidential Decree, the PCU is established in Tashkent city under the Executive Board of the "Kommunkhizmat" Agency (hereinafter - "Agency"). The PCU is accountable to the authorized person-the General Director of the Agency. The PCU is guided in its activity by the Decree of the President of Uzbekistan N2PP-2001 dated 15 July, 2013, the Financing and Project Agreements, applicable World Bank guidelines, sub-financing agreement, as well as the Constitution and Laws of the Republic of Uzbekistan, decrees and instructions of the Cabinet of Ministers, regulator)- acts of the Ministry of Finance of Republic of Uzbekistan and the established Operational Manual. The Agency is responsible for overall Project coordination and reporting. The PCU will be responsible for provision of assistance to the BVK in implementation of the Project in procurement, financial management, and other aspects to the extent required, in direct communication with the World Bank. In addition, the Agency is responsible to: * supervise and take part in day-to-day operational activities relating to the Project, including procurements and financial management; * incorporation of financial monitoring system for control and accounting for disbursement and funds of co- financing organizations, for providing adequate monitoring and providing recommendation to the PCU Coordinator regarding availability and payout of IDA and the Government of Uzbekistan funds; * prepare statements of all financial transactions in Project co-financing; * keep records of all financial transactions within the Project framework; and * keep all Project accounts, the targeted use of funds within the Project framework, preparing financial reports and conducting financial control in conformity with the existing norms and regulations of the Republic of Uzbekistan and the World Bank financial reporting guidelines. The Kommunkhizmat Agency is an agency at the Governmental level, responsible for the coordination of water supply and sewerage projects in Uzbekistan. The PCU was established by the Agency for the control and coordination of projects financed by the World Bank. In line with the Decree of the President of Uzbekistan No.4883 dated 06 November 2020, the Kommunkhizmat Agency under the Ministry of Housing and Communal Services of Uzbekistan was fully liquidated since 01 January 2021. Further, by the Order of Cabinet of Ministers of Uzbekistan under the No.169 dated 30 March 2021, the Joint Stock Company "Uzsuvtaminot" was assigned as the legal successor of the liquidated Kommunkhizmat Agency with respect to the IDA Credits No.5189 - UZ and No.5698 - UZ. In addition, the JSC "Uzsuvtaminot" has undertaken the full rights and commitments in the framework of the Project. Accordingly, the World Bank Projects Coordination Unit of Kommunkhizmat Agency was re-named as the World Bank Projects Coordination Unit. 10 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE PERIOD ENDED MAY 05, 2022 Amounts are presented in US Dollars 2 SIGNIFICANT ACCOUNTING POLICIES Basis of preparation These special-purpose Financial Statements have been prepared in accordance with the International Public Sector Accounting Standard (IPSAS) "Financial Reporting under the Cash Basis of Accounting" promulgated by the International Federation of Accountants (IFAC). Those standards require that cash receipts shall be effective when received and expenditures of funds shall be effective when they are paid rather than when incurred. The Financial Statements prepared under the cash basis provide readers with information about the sources of cash raised during the period, the purpose for which cash was used and the cash balances at the reporting date. The measurement focus in the financial statements is balances of cash and changes therein. The Project's special- purpose cash basis Financial Statements are prepared on the basis of cash receipts and disbursements which are a comprehensive basis of accounting. The Financial statements prepared and presented the special-purpose financial statements, which include the following components: * A statement of cash receipts and payments, which recognizes all cash receipts, cash payments and cash balances controlled by the PCU and BVK; * Accounting policies and explanatory notes; and * Approved budget, a comparison of budget and actual amounts. The financial statements prepared in US Dollars with rounding to Dollar. The reporting period of the financial statements - is the period from January 01, 2021 to May 05, 2022. Cash and cash equivalents Cash and cash equivalents are recognized at cost and include cash at cash desk, cash at Designated and Special accounts at domestic banks and cash in transit. In accordance with IPSAS "Financial Reporting under Cash Basis of Accounting" cash is controlled by an entity when the entity can use the cash for the achievement of its own objectives or otherwise benefit from the cash and exclude or regulate the access of others to that benefit. During the period from January 01, 2021 to May 05, 2022, the Designated bank accounts of the Project at the JSCB "Hamkorbank" Tashkent city branch were used for financing with the IDA's Credit No.5189 - UZ funds in hard currency. In addition, the Project has the Special accounts in Uzbek Soums (UZS) for the expenditures in UZS for operational expenses of the Project. All cash inflows and cash outflows of the Special accounts - BVK occur out of both sources i.e. the IDA credit funds and the Co-financing funds. During the reporting period, there were made the Direct payments through IDA credit accounts and Co-financing through BVK accounts. Fixed Assets Fixed assets procured by the Project with the purposes of effective achievement of Project objectives are entered to the Cost Records right after being received. 11 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE PERIOD ENDED MAY 05, 2022 Amounts are presented in US Dollars Financing The financing for the Designated Accounts is recognized when funds are transferred from IDA Credit accounts to the Project's Designated Accounts, which are opened at the Tashkent City Branch (TCB) of the JSCB "Hamkorbank" of the Republic of Uzbekistan. The Government Co-financing is recognized when the payments are made directly from account of the Treasury of the Ministry of Finance of the Republic of Uzbekistan and the funds transferred into the BVK accounts for further payments to contractors. Disbursement methods of World Bank (IDA) (a) Reimbursement: The World Bank may reimburse the borrower for expenditures eligible for financing pursuant to the Financing Agreement (eligible expenditures) that the borrower has pre-financed from its own resources. (b) Advance: The World Bank may advance funds from the Financing Account into a Designated Account of the borrower to finance eligible expenditures as they are incurred and for which supporting documents will be provided at a later date. (c) Direct Payment: The World Bank may make payments, at the borrower's request, directly to a third party (for example, supplier, contractor, or consultant) for eligible expenditures. (d) Special Commitment: The World Bank may pay amounts to a third party for eligible expenditures under the special commitments entered into, in writing, at the borrower's request and on terms and conditions agreed between the World Bank and the borrower. Project expenditure The Project's special-purpose cash basis Financial Statements are prepared based upon the accounting records of the PCU, which are maintained in both USD and UZS. The initial accounting records consist of summaries of disbursement documents and other payment vouchers. Accounting of the PCU, within the Agency, is conducted in accordance with the applicable laws of the Republic of Uzbekistan with the specific implementation of the Project, including applying cash method. The policy management programs also include preparation of detailed of cost report on a cash basis in accordance with Intemational Accounting Standards for the Public Sector. The accounting is carried out using the Excel sheets. In accounting, the following operations are used: - Taking into account the actual costs; - Accounting of cash transactions; - Accounting of fixed assets; - Accounting of stocks; - Accounting of remuneration; - Settlements with debtors and creditors; - Reporting. The Financial Management of the Project is carried out by the following tasks: 1) Analysis of the performance costs; 2) Analysis of cash expenses and for transfers; 3) Analysis of financial condition; 4) An analysis of budget execution. At the end of each quarter, all the items of expenditure for the quarter and total year to-date are counted up, in order to identify the remainder and in a similar way to keep records of cash expenditure for transfers. 12 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE PERIOD ENDED MAY 05, 2022 Amounts are presented in US Dollars Foreign currency translation (i) Functional and Presentation currencies The functional currency of the Project is the currency of the primary economic environment in which it operates. The Projects functional currency is Uzbek Soums ("UZS"), however, the major portion of its transactions are in USD. These special-purpose Financial Statements of the Project are also presented in the presentation currency of US Dollars ("USD") as this is convenient for the readers of the financial statements. (ii) Transactions and Balances The assets' additions and expenditure paid for in UZS were translated into USD using the following principles of transaction: * Monetary assets denominated in UZS have been translated into USD using the exchange rate of the Operating bank on the date of conversion; * All revenues earned and expenditure incurred in UZS denominated into USD were recorded by the exchange rate of Operating bank effective at the date of conversion; * Gain/Loss resulting from the translation of UZS into USD: Cash & cash equivalents outstanding as at reporting date are translated into USD by using the official rate of the CBU, effective at the reporting date. The official exchange rate set by the CBU and effective, as at May 05, 2022: UZS 11,161.96 to USD 1 (31.12.2021: UZS 10,837.66 to USD 1; 31.12. 2020: UZS 10,476.92 to USD 1; 31.12,2019: UZS 9,507.56 to USD 1). At present, the UZS is not a convertible currency outside Uzbekistan. Bank Accounts of the Project During the period from January 01, 2021 to May 05, 2022, the PCU held its Designated Accounts for IDA Credit accounts in USD at the bank named TCB JSCB "HAMKORBANK". In addition, the UZS Special Accounts and other accounts for IDA Credit and Co-financing funds opened at the local bank accordingly. The PCU operates a Designated Accounts in accordance with the provisions laid down in the Financing Agreement. The USD Designated Accounts represent revolving the funds provided from the IDA to facilitate prompt disbursement of funds to implement the Project. The USD Designated Account are used to cover the IDA's share of eligible expenditures, in both, local and foreign currencies. The eligible expenditures are reported to the IDA through the Expenditure Reports/Statement of Expenditure (SOE). The USD Designated Account is replenished by the IDA on the basis of request, prepared by the PCU for validation of USD Designated Account. The UZS Special Accounts were opened to convert the funds received into USD Designated Account from IDA for payments to suppliers and withdrawal of cash. Cash & cash equivalents outstanding as at reporting date are translated into USD at the official rate of the CBU effective at the reporting date. The outstanding balances of the above accounts as at May 05, 2022 are disclosed in Note 6. Principles and standards of financial management system The Financial Management Manual comprises of policies and procedures to assist in ensuring the orderly and efficient management and control of all project resources, and to render proper accountability to all stakeholders. It is concerned with effective financial control over project assets, liabilities, funds, and expenditure together with the systems required accounting for the financial operations of the project. The manual sets forth the policies and procedures for the guidance of all the staff involved in financial management. 13 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE PERIOD ENDED MAY 05, 2022 Amounts are presented in US Dollars The policies and guidelines convey standards for sound financial management and administration for the project, and are designed to: * promote orderly, economic, efficient and effective operations consistent with project objectives; * prevent and detect fraud and errors; * ensure accuracy and completeness of the accounting records; * facilitate timely preparation of financial information and ensure that financial statements are fairly and accurately presented; * safeguard Project assets; and * ensure compliance with applicable laws, policies and regulations. Changes in accounting policy will be applied from the date of amendment at the beginning of each financial year and will not have retroactive application and the financial results will not be amended for the past accounting periods. Primary accounting documents - the basis for reflection each business transaction in the accounting records is a primary accounting document recording the fact of the operations and the disposal of the head to carry it out. Primary accounting documents shall be created at the time of the business transaction. The primary accounting documents is not permitted to amend, is nor confirmed by the participants of the business transaction The bank and cash monetary instruments corrections are not allowed. All original documents should be filed and kept in the appropriate folders. Measurement of operational transactions- all committed transactions are measured at their historical cost at the date of the transaction. 3 TAXATION The Project, being the state non-commercial unit, is exempted from taxes and levies in line with the Tax Code of the Republic of Uzbekistan. The Decree of the Presidenfs of the Republic of Uzbekistan No. PP-2001 dated July 15, 2013 states that the goods, works and services purchased with the IDA funds within the framework of the Project are exempted from customs payments, VAT, mandatory contributions to the state funds-in-trust. The same policy is applied with respect to goods, works and services purchased with the Government Funds. Such exemption is considered as a contribution of the Uzbek Government toward the implementation of the Project. 4 SUBSEQUENTEVENTS There is no an event after the end of the reporting period, which would require disclosures in these Financial Statements. 5 APPROVAL OF SPECIAL-PURPOSE FINANCIAL STATEMENTS The special-purpose financial statements were approved by the Management of the Uzsuvtaminot for issue on 18 May 2022. 14 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE PERIOD ENDED MAY 05, 2022 Amounts are presented in US Dollars 6 Statements of Cash Balances of the Project The Project had the following Cash Balances as at May 05, 2022: Source of funds Currency Note Account Amount in USD IDA Credit No.5189-UZ USD 7 Designated account -PCU IDA Credit No.5189-UZ UZS 8 Special account -PCU IDA Credit No.5189-UZ UZS 9 Special account -BVK Government Co-financing UZS 9.1,9.2 Special accounts -BVK 472 Total 472 The Special accounts in UZS - BVK opened at JSCB "Hamkorbank" Bukhara region branch in Uzbekistan, used for the purpose of financing the Project, from IDA credit and the Government Co-financing funds. 15 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE PERIOD ENDED MAY 05, 2022 Amounts are presented in US Dollars 7 Statement of USD Designated Account Account No. 22626 840 9042 6264 6001 Depository Bank: TCB JSCB HAMKORBANK" Address: Furqat Street, 14, Tashkent Related Credit No. 5189-UZ (IDA) Currency: US Dollars (USD) USD Opening Balance as at 01 January 2021 154 044 Cash Inflow: IDA Replenishments 115000 Cash Outflow: Transfer into Special UZS Account (Conversion) (218 597) Return of unused IDA funds (50 447) Closing Balance as at 05 May 2022 - B. Umirzakov Z. Igamberdieva Acting P PCU Accountant 16 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE PERIOD ENDED MAY 05, 2022 Amounts are presented in US Dollars 8 Statement of UZS Special Account Account No. 22626 000 1042 6264 6001 Depository Bank: TCB JSCB "HAMKORBANK" Address: Furqat Street, 14, Tashkent Related Credit No. 5189 - UZ (IDA) Currency: Uzbek Soums (UZS) Note 000'UZS USD Equivalent Opening Balance as at 01 January 2021 Cash Inflow: Transfer from USD Designated Account (Conversion) 2330206 218597 Cash Outflow: Financing of eligible expenditure (2323216) (217981) Return of unused IDA funds (6 990) (616) Closing Balance as at 05 May 2022 17 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE PERIOD ENDED MAY 05, 2022 Amounts are presented in US Dollars 9 Statement of UZS Special Accounts (opened for BVK in Bukhara region) Account No. 22626 000 0003 0941 2009 Depository Bank: TCB JSCB "HAMKORBANK' Address: Bukhara region branch Related Credit No. 5189 - UZ (IDA) Currency: Uzbek Soums (UZS) Note 000"UZS USD Equivalent Opening Balance as at 01 January 2021 Cash Inflow: Financing 8 2075547 184004 Returns 413487 36724 Cash Outflow: Financing eligible expenditure (2 487 416) (220 583) Closing Balance as at 05 May 2022 1 618 145 9.1 Statement of UZS Special Accounts (opened for BVK in Bukhara region) Account No. 22626 000 5003 0941 2001 Depository Bank: TCB JSCB "HAMKORBANK" Address: Bukhara region branch 000'UZS USD Equivalent Opening Balance as at 01 January 2021 5036 481 Cash Inflow: Financing 8 372 773 Cash Outflow: Financing eligible expenditure (10 687) (1 010) Closing Balance as at 05 May 2022 2 721 244 9.2 Statement of UZS Special Accounts (opened for BVK in Bukhara region) Account No. 22626 000 7003 0941 2002 Depository Bank: TCB JSCB "HAMKORBANK" Address: Bukhara region branch 000'UZS USD Equivalent Opening Balance as at 01 January 2021 924 88 Cash Inflow: Financing - - Cash Outflow: Financing eligible expenditure - FX Loss - (5) Closing Balance as at 05 May 2022 924 83 18 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE PERIOD ENDED MAY 05, 2022 Amounts are presented in US Dollars 10 RECONCILIATON OF IDA FINANCING Disbursements Notes Client Connection Client Connection Project data Variance data for 2021-2022 data cumulative cumulative Direct payments 11 10315931 74019669 74019669 Reimbursement and Advances 12 115000 5714571 5714571 Returned Applications 12 (1 223 602) 3 879 263) (3 879 263) Returns of Unused Advances 12 (51046) (2051 046) (2051 064 -18 Intermediary bank commission held - - 18 18 TOTAL 9156283 73803931 73803931 11 IDA DIRECT PAYMENTS DURING REPORTING PERIOD The IDA has made the payments, at the borrowers request, directly to a third party for the eligible expenditures. The table below presents the Direct Payments made during the reporting period to the counterparties from the funds of IDA: Counterparty Category 01.01.2021 - 05.05.2022 AQUAMUNDO GMBH 3 -Services 44620.19 QURILISH KOCHMA KOLONNA 017 LLC 1 -Works 100641.18 JV KOGON REMSTROYKOMPLEKT 1 -Works 239 597.29 MESMER EAST LLC 1 -Works 568924.18 CHINA PETROLEUM PIPELINE ENGINEERING 1 -Works 634 566.15 BURCIN BUDAK 3 -Services 18000.00 SHIMBAR 1 -Works 636 624.87 KPMG AUDIT LLC 3-Services 26 400.00 MESMER EAST LLC 1 -Works 313421.65 BURCIN BUDAK 1 -Works 12000.00 KPMG AUDIT LLC 3-Services 17600.00 SHIMBAR 1 -Works 346 778.38 MESMER EAST LLC 1 -Works 955 278.85 JV KOGON REMSTROYKOMPLEKT 1 -Works 81 680.52 MESMER EAST LLC 1 -Works 293 260.49 SHIMBAR I -Works 547 963.48 BURCIN BUDAK 3-Services 12000.00 MESMER EAST LLC I -Works 406 258.64 MESMER EAST LLC 1 -Works 271 209.23 BURCIN BUDAK 3-Services 12000.00 SHIMBAR 1 -Works 235 774.53 BURCIN BUDAK 3 -Services 18000.00 SHIMBAR 1 -Works 239 060.86 KPMG AUDIT LLC 3 -Services 26 400.00 KPMG AUDIT LLC 3-Services 17600.00 AQUAMUNDO GMBH 3 -Services 42017.10 SHIMBAR 1 -Works 234 562.07 QURILISH KOCHMA KOLONNA 017 LLC 1 -Works 61 951.78 SHIMBAR 1 -Works 337 208.31 MESMER EAST LLC 1 -Works 271 209.23 SHIMBAR 1 -Works 512620.80 SHIMBAR 1 -Works 512 620.80 JV REMSTROYKOMPLEKT INVEST INJINIRI 1 -Works 494961.25 QURILISH KOCHMA KOLONNA 017 LLC 1 -Works 516113.89 QURILISH KOCHMA KOLONNA 017 LLC 1 -Works 357005.58 CHINA PETROLEUM PIPELINE ENGINEERING I -Works 900 000.00 SUB-TOTAL IDA DIRECT PAYMENTS 10 315931.30 Less: Returned Applications SUNIR Co. & SHAFAB ENGINEERING Co. 1 -Works (1 223 601.91) TOTAL IDA DIRECT PAYMENTS FOR 2021-2022 9 092 329.39 19 WORLD BANK PROJECTS COORDINATION UNIT ALAT AND KARAKUL WATER SUPPLY PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE PERIOD ENDED MAY 05, 2022 Amounts are presented in US Dollars 12 REIMBURSEMENTS AND ADVANCES The IDA may reimburse the Designated Account - PCU for eligible expenditures for financing pursuant to the Financing Agreement (eligible expenditures) that the borrower has pre-financed. The IDA may advance funds from the Financing Account into the Designated Account - PCU to finance eligible expenditures as they are incurred and for which supporting documents will be provided at a later date. The Republic of Uzbekistan may advance payment into the Designated Account - BVK for the purpose of Co- financing the Project's eligible expenditures. The table below presents the reimbursement and advance payments by the funds of IDA and Co-financing of the Uzbekistan: Items 2021-2022 2020 Cumulative Reimbursements and Advance Payments 115000 5714571 Returns of Unused Advances of IDA by PCU (51 064) (2 051 064) Intermediary bank commission held 18 - 18 TOTAL IDA ADVANCES 63 954 3 663 525 Advances from Co-financing of Uzbekistan - - 3 162 844 TOTAL CO-FINANCING ADVANCES - - 3 162 844 20