u 99573 0 0 0 0 0 0 FOREIGN FINANCING PROJECTS MANAGEMENT CENTRE D TAX ADMINISTRATION MODERNIZATION PROJECT CREDIT No. 5114-AM D SPECIAL PURPOSE FINANCIAL STATEMENTS 0 AND 0 INDEPENDENT AUDITORS' REPORT For the period from 28 December 2012 to 31 December 2013 D and for the year ended 31 December 2014 D 0 0 0 D 0 0 0 r u 0 0 CONTENTS 0 Independent Auditors' Report Statement of Project Sources and Uses of Funds 3 5 D Statement of Uses of Funds by Project Activity Notes to the Special Purpose Financial Statements 8 9 0 0 0 0 D 0 0 0 0 0 0 0 0 0 2 0 n u tPft-/;Jl-tP/J liDUJ/IUI tPPC 0 PHP Audit CJSC />pwlfwpwuwqwu hwugc. '1..-WJPWUIJJWb 47. 4, bp!Jwu, 22 .:bn. (010)204090 D ltPHP PHP Audit Rqp:,tmtion aclclrr:.~.,·: 4 714 Nalbancly1111 ,·tr.. Ycn:nm. AI111L'11ill Clnpl:lmucntpJwu hwug/;. Ut]nugj12. bpwq pjlqu/;u q/;umpnu. bp!Jwb. 22 Actil'ity aclcln:.~.,·: 2 Aclont.~ .\1r.. Era Bu.,incs.\· Ccntn.~ Ycn:ran. A1111cni11 Tel. tJ·t/JnUI/1 E-muil (01/)204090 gcncml(fiphp.am D INDEPENDENT AUDITORS' REPORT 0 To the Director of Foreign Financing Projects Management Centre We have audited the accompanying special purpose financial statements of the Tax Administration, 0 Modernization Project, which comprise Statement of Project Sources and Uses of Funds, Statement of Uses of Funds by Project Activity and Statement of Designated Account and Government Co-financed Account for the period from 28 December 2012 to 31 December 2013 and for the year ended 31 December 2014, and Statement of Financial Position as at 31 December 2013 and 31 December 2014 D and a summary of significant accounting policies and other explanatory notes. Management's Responsibility for the Special Purpose Financial Stalemrmls 0 Management is responsible for the preparation and fair presentation of these special purpose financial statements in accordance with the cash basis of accounting in line with International Public Sector 0 Accounting Standards (IPSAS): Financial Reporting under the Cash Basis of Accounting. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of these special purpose financial statements that are free from D material misstatements, whether due to fraud or error and selecting and applying appropriate accounting policies. 0 Auditors' Responsibility Our responsibility is to express an opinion on these special purpose financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those 0 standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the special purpose financial statements are free of material misstatement. D An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the special purpose financial statements and to assess whether funds allocated to the Project were 0 spent both efficiently and in conformity with " Financial Agreement for the Tax Administration Modernization Project " (Credit # 5114) signed between the International Development Association (IDA) and Republic of Armenia dated 9 July 2012 (Financing Agreement). The procedures selected 0 depend on the auditor's judgment, including the assessment of the risks of material misstatement of the special purpose financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair 0 presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting principles used by 0 management, as well as evaluating the overall presentation of the special purpose financial statements. We believe that the audit evidence we have obtained is sufficient appropriate to provide a basis for our opinion. 0 0 3 0 n u Independent Auditors' Report 0 Pagel 0 Opinion 0 In our opinion, the special purpose financial statements present fairly in all material respects the project sources and uses of funds, uses of funds by project activity and its cash flows for the period from 28 December 2012 to 31 December 20 13 and for the year ended 31 December 20 14 in accordance with the cash basis of accounting in line with International Public Sector Accounting 0 Standard (IPSAS): Financial Reporting under the Cash Basis of Accounting and Financing Agreement between the Republic of Armenia and International Development Association dated July 9, 2012 (Credit #51 14-AM). 0 Restriction 011 Use and Distribution 0 The special purpose financial statements have been prepared for providing information to the Government of the Republic of Armenia, the International Development Association to assist them in evaluating the Project implementation. As a result, the special purpose financial statements may not be 0 suitable for another purpose. 0 0 Davit Yedigaryan Director Lilit Minasyan Manager, Audit Department 0 PHP Audit cjsc 30June2015 0 D D 0 0 0 0 0 4 0 n :=Jc:Jc::::Jc::Jc:::Jc::::Jr=Jc::::Jc:::=Jc:::::lc::::Jc:=Jc:Jr=Jc:=)C:=:Jc:=:ic:::Jc:=:lc:::Jc=: Tax Administration Modernization Project Statement ofProject Sources and Uses of Funds for the periodfrom 28 December 2012 to 31 December 2013 and 01./anuary 2014to3/ December 20/4 Project Actual Planned Variance Appraisal Document Life of 2014 2013 Cumulative 2014 2013 Cumulative 2014 2013 Cumulative Proicct Opening Cash Balance Government co- financing account for Credit 106,883 Designated Account for World Bank financing 29,004 Total 135,887 Add: Sources of Funds Government co- finincing 713,586 146,698 860,284 World Bank financing 3,310,335 200,000 3,510,335 Total donor funds 4,023,921 346,698 4,370,619 Foreign Exchange Difference Government co- financing (15,344) 241 (15, I03} Total (15,344) 241 (15,103) 5 =:JCJC:Jc::Jc:::Jc:::J~c::Jc::lt::::lc::Jc:::::::Jc::::Jc::Jc:::::1c::::J c:::J c::::l c=l c:::: Tax Administration Modernization Proj ect Statement ofProject Sources and Uses ofFunds for the periodfrom 28 December 2012to 31 December 2013 and 01January, 2014to31 December 2014 Project Actual Planned Variance Appraisal Document . Life of 2014 2013 Cumulative 2014 2013 Cumulative 2014 2013 Cumulative p . t ro ec Less: Uses of Funds Procurement of goods(co-financed by Government) 497,231 25,640 522,871 369,894 23,850 393,744 127,337 1,790 129, 127 Consultancy services (co- financed by Government) 27,040 6, 192 33,232 27,481 6,192 33,673 (441) (44 1) Training (co- financed by Government) Operating expenses (co-financed by Government) 17,637 8,224 25,861 19,879 8,808 28,687 (2,242) (584) (2,826) Procurement of goods (financed by credit) 3,010,335 128,192 3,138,527 2,656,290 119,250 2,775,540 354,045 8,942 362,987 Consultancy services (financed by credit) 109,523 17,850 127,373 111,730 17,850 129,580 (2,207) - (2,207) Training (financed by credit) 20,659 - 20,659 26, 168 . 26, 168 (5,509) - (5,509) Operating expenses (financed by credit) 5 I, I 56 24,954 - 76,110 57,070 27,650 84,720 (5,914) (2,696) (8,610) Government co- financing 541,908 40,056 581,964 417,254 38,850 456,104 124,654 1,206 125,860 3,012,360 6 =::Jc::Jc:::Jc::JCJr:::Jc=:JCJ[::::JCJc:::::J[::::J[:=Jc::Jc::J[::::Jc::::Jc::Jc=Jc:::JC:: Ta'r Administration Modernization Project Statement ofProject Sources and Uses of Funds for the periodfrom 28 December 2012 to 31 December 2013 and OJJanuary' 2014 to3/ December 2014 Project Actual Planned Variance Appraisal Document Life of 2014 2013 Cumulative 2014 2013 Cumulative 2014 2013 Cumulative Pro·ect Credit financing 3,191,673 170,996 3,362,669 2,851,258 164,750 3,016,008 340,415 6,246 346,661 12,049,440 Total 3,733,581 211,052 3,944,633 3,268,512 203,600 3,472,112 465,069 7,452 472,521 15,061,800 Closing Cash Balance Government co- financing account for credit 263,217 106,883 Designated Account for credit (World Bank financing) 147,666 29,004 Total 410,883 135,887 The project special purpose financial statements were approved by the management of Foreign Financing Projects Management Centre and signed on its behalf on 30 June 2015. / J~ Edgar Avetyan Armen Shahnazaryan Executive director ~inancial Manager 7 =::::1 ~ c:::J ~ c:::J c:::::::J c::J c:=:J c::::J c:J C:=J c::J c:::J c:::J c:::::J c::J c=:J c::::J c:::::J c:::J c:: Tax Administration Moderni=ation Proj ect Statement of Uses ofFunds by Project Activityfor the periodfrom 28 December 2012 to 31 December 2013 and 0/January 2014 to3 I December 2014 Actual Planned Variance PAD Life of 2014 2013 Cumulative 2014 2013 Cumulative 2014 2013 Cumulative Project Project Activities Part A: Institutional Development am/ cllange ma11agement 46,445 13,986 60,431 49,710 11,956 61,666 (3,265) 2,030 (1,235) 1,198,457 Government co- financing 36,323 2,331 38,654 35,210 1,992 37,202 1,113 339 1,452 239,691 Credit financing 10,122 11,655 21,777 14,500 9,964 24,464 (4,378) 1,691 (2,687) 958,766 Part B: Strengtltenecl Operations Government co- - 139,846 139,846 - 131,144 131,144 - 8,702 8,702 1,477,043 financing - 23,309 23,309 - 21,858 21 ,858 - 1,451 1,45 I 295,409 Credit financing - I 16,537 I 16,537 - 109,286 109,286 - 7,251 7,251 1, I 8 I ,634 Parte: IT Infrastructure am/ System Modernization Government co- 3,566,924 - 3,566,924 3,090,434 - 3,090,434 476,490 - 476,490 11,459,800 financing 475,826 - 475,826 350,044 - 350,044 125,782 - 125,782 2,291,960 Credit financing 3,091,098 - 3,091,098 2,740,390 . 2,740,390 350,708 - 350,708 9, 167,840 Part D: Project management 120,211 57,220 177,432 128,368 60,500 188,868 (8,156) (3,280) (11,436) 926,500 Government co- financing 29,758 14,416 44,174 32,000 15,000 47,000 (2,242) (584) (2,826) 185,300 Credit financing 90,454 42,804 133,258 96,368 45,500 141,868 (5,914) (2,696) (8,610) 741 ,200 Total project expendeture 3,733,581 211,052 3,944,633 3,268,512 203,600 3,472,112 465,069 7,452 472,521 15,061,800 8 u Tax Administration Moderni=ation Project Notes to the Special Purpose Financial Statements 0 for the periodfrom 28 December 2012to 31 December 2013 andfor the year ended 31 December 2014 0 1 (a) Background Organisation and operations 0 The Foreign Financing Projects Management Centre (FFPMC) State Institution was established by RoA Minister of Economy Decree No. 37, dated 29 March 2000. Within the scope of its operation the FFPMC is guided by local legal acts and Credit and Grant Agreements, signed between the 0 Government of Armenia and the International Development Association (World Bank). The main objective of operation of FFPMC is to implement projects on the account of credit and grant proceeds allocated to the Republic of Armenia by the World Bank. 0 According to the financing agreement concluded between the International Development Association and Republic of Armenia dated 9 July 2012 (Financing Agreement) a credit in an amount equivalent to seven million eight hundred thousand Special Drawing Rights (SDR 7,800,000) was extended for the 0 implementation of Tax Administration Modernization Project to finance procurement of goods, consultants' services and incremental operating expenses. 0 Tax consequences arising from the procured goods, consultants' services and incurred operating expenses are paid form the proceeds of the co-financing received from the Government of the Republic of Armenia. Total amount of Government co-financing approximates to USD 3,000,000. 0 The Project's objective is to modernize Armenia's tax administration in order to: • Increase voluntary tax compliance , D • • Reduce tax evasion, Reduce compliance costs, • Increase administrative efficiency. 0 The Project consists of the following parts: • Part A: Institutional Development and Change Management 0 Provision of consultants' services to the Ministry of Finance (former State Revenue Committee for Tax) of the Republic of Armenia workflow analysis and developing organizational restructuring plan, and purchase of equipment for tax administration centers, D • Part B: Strengthened Operations Provision of consultants' services to the Ministry of Finance, and goods and infonnation technology (IT) systems and software to tax service centers providing range of services to 0 • taxpayers, Part C: IT Infrastructure and Systems Modernization Provision of goods to the Ministry of Finance to upgrade its Information and Communication 0 • Technology to develop a comprehensive and integrated tax management system, Part D: Project Management Provision of Operating Costs and consultants' services to FFPMC and Ministry of Finance to 0 assist in the Project implementation and management, and provision of technical assistance, including Training. c Closing date ofthe Project is 30 April 2016. 0 0 9 0 n u Tax Administration Moderni=ation Project Notes to the Special Purpose Financial Statements 0 for the periodfrom 28 December 2012to 31 December 2013 andfor the year ended 31 December 2014 2 Basis of preparation D (a) Statement of compliance The special purpose financial statements are prepared in accordance with the cash basis of accounting D in line with the International Public Sector Accounting Standard (IPSAS): Financial Reporting under the Cash Basis of the Accounting. 0 The special purpose project financial statements consist of: Project Sources and Uses of Funds, Uses of Funds by Project Activity, D Statement of Financial Position, Statement of Designated Accounts, Statement of Project Account. 0 Cash basis of accounting recognises transactions and other events only when cash is received or paid. 0 (b) Reporting currency The reporting currency of special purpose financial statements is US dollar (USD). All financial information presented in USD has been rounded to the nearest USD. 0 3 Significant accounting policies 0 (a) Foreign currency transactions In the scope of the Project IDA makes disbursements in USD on the designated account D 900000903451 for the project. Payment of eligible and accepted expenditires (goods, services and other) should be made by the FFPMC out of designated account, or FFPMC will submit withdrawal applications to the Bank for payments to contractors, suppliers and consultants directly from loan 0 account. FFPMC converts the amounts received and transfers to contractors, suppliers and consultants. The outstanding balances of the project account are translated to USD based on the USD exchange 0 rate defined by the Central Bank of the Republic of Armenia as at 3 I December 20 I 3 and 3 I December 2014 equaling to AMD 405.64 and AMD 474.97. (b) Taxes D All the applicable tax liabilities are calculated and paid m accordance to tax regulations of the Republic of Armenia. 0 (c) Funds for the Project Funds for the Project are received from the International Development Association and from Government of Armenia. 0 (d) Planning of cash payments The planned amount of cash payments presented in the special purpose financial statements are based 0 on the Project Appraisal Document (PAD- Annex 7: Procurement plan dated 2 April2012). D 0 0 n u Tar: Administration Modernization Project 0 Notes to the Special Purpose Financial Statements for the periodfrom 28 December 2012 to 31 December 2013 andfor the year ended 31 December 2014 0 4 Reconciliation statement of withdrawal applications 0 Withdrawal Application Application Type Amount Requested by Amount Paid by World Difference Reference FFPMC Bank 0 1A Advance to Designated Account USD 200,000 USD 200,000 USD 0 2A Advance to Designated Account Direct Payment under 300,000 300,000 0 3 DP 4 DP Category 1 Direct Payment under Category 1 645,072 1,290,144 645,072 1,290,144 Direct Payment under 0 5 DP Category 1 1,075,120 3,510,336 I ,075,120 3,510,336 0 0 0 0 0 D 0 0 0 0 0 IJ 0 n u Tax Administration Moderni=ation Project Notes to the Special Purpose Financial Statements 0 for the periodfrom28 December 20/2to 31 December 2013 and/or the year ended 31 December 2014 0 5 Statement of Designated Account and Government Co-financed Account USD D 2014 2013 Opening balance 29,004 Add: D Advance/replenishment received from World Bank during the current period 300,000 200,000 Present outstanding amount advanced to the designated account 329,004 200,000 D Closing balance carried fonvard to next period Add: Amount of eligible expenditures paid during the current period 147,666 181,338 29,004 170,996 Total advance accounted for 329,004 200,000 D USD 2014 2013 0 Opening balance Add: 106,883 0 Government co-financing during the current period Present outstanding amount advanced to project account Closing balance carried fonvard to next period 713,586 820,469 263,217 146,698 146,698 106,883 0 Add: Amount of eligible expenditures paid during the current period Less: Interest earned Total advance accounted for 541,908 ( 15,344) 820,469 40,056 241 146,698 0 0 D D 0 0 0 D D 12 D n u Tax Administration Modernization Project Notes to the Special Purpose Financial Statements 0 for the periodfrom28 December 2012 to 31 December 2013 andfor the year ended 31 December 2014 0 6 Statement of Financial Position USD 2014 2013 0 ASSETS Current assets Caslt ami caslt equivalellls 0 Government co-financing account for credit Designated Account for credit (World Bank financing) 263,217 147,666 106,883 29,004 Total current assets 410,883 135,887 0 Non-current assets Cumulative Project Expe11deture 0 Government co-financed cumulative expendeture Credit financed cumulative expendeture Total non-current assets 581 ,964 3,362,669 3,944,633 40,056 170,996 211 ,052 Total assets D 4,355,516 346,939 FUNDS 0 Project financing Government co-financing account for credit 860,284 146,698 Designated Account for credit (World Bank financing) 3,510,335 200,000 D Total funds 4,370,619 346,698 0 Foreign exchange difference Government co-financing account for credit (15,103) 241 Designated Account for credit (World Bank financing) Total foreign exchange difference (15,103) 241 Total net assets and liabilities 4,355,516 346,939 D 0 0 0 0 0 0 l3 0 n u Tax Administration Modernization Project Notes to the Special Purpose Financial Statements 0 for the periodfrom 28 December 2012 to 31 December 2013 andfor the year ended 31 December 20/.J 0 7 Events after the reporting date The Statement of Expenditures (SOE)- Application No.6 DA for the period from 28 December 2012 0 to 30 June 2014 was provided to World Bank on 27 January 2015 by FFPMC. Total expendeture for the period from 28 December 2012 to 30 June 2014 was USD 274,463. D 0 0 D 0 0 0 D 0 0 0 0 0 0 t4 0 n