TRANSPORT REFORM AND
REHABILITATION CENTER
CREDIT NO 5108-GE
(THIRD EAST-WEST HIGHWAY IMPROVEMENT
PROJECT)
Special Purpose Project Financial Statements
For the Year Ended 31 December 2015


TRANSPORT REFORM AND REHABILITATION CENTER
THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT
CREDIT NO.5108-GE
TABLE OF CONTENTS
Page
STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION
AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS          1
INDEPENDENT AUDITORS' REPORT                                            2-3
SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015:
Statement of Sources and Uses of Funds                                 4
Balance Sheet Statement                                                 5
Statement of Expenditure Withdrawal Schedule                           6
Special Account Statement                                               7
Notes to the Special Purpose Project Financial Statements            8-12


TRANSPORT REFORM AND REHABILITATION CENTER
THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT
CREDIT NO.5108-GE
STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION
AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
Management of the Third East-West Highway Improvement Project (the "Project") implemented by the
Transport Reform and Rehabilitation Center (The "Center") is responsible for the preparation of the special
purpose project financial statements that present fairly the financial position of the Project as at 31
December 2015, and its sources and uses of funds and movement in special account for the year ended
31 December 2015, in compliance with the Cash Basis International Public Sector Accounting Standard,
Financial Reporting under the Cash Basis of Accounting ("IPSAS - Cash Basis), and in conformity with
the World Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and
Auditing for World Bank Financed Activities" (the "World Bank Guidelines").
In preparing the special purpose project financial statements, management is responsible for:
*   Properly selecting and applying accounting policies:
*   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, financial position and its sources and uses of funds and
movements in special accounts;
*   Making an assessment of the Projects ability to continue as a going concern.
Management 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 financial position of the Project,
and which enable them to ensure that the special purpose project financial statements of the Project
comply with the Guidelines on Annual Financial Reporting and Auditing for World Bank - Financed
Activities issued by the World Bank's Financial Management Sector Board:
*   Maintaining statutory accounting records in compliance with Georgian legislation;
*   Taking such steps that are reasonably available to them to safeguard the assets of the Project; and
*   Preventing and detecting fraud and other irregularities.
The special purpose project financial statements for the year ended 31 December 2015 were authorized
for issue on 30 June 2016 by the Management.
On behalf of Management:
Giorgi Tsagareli                               Marina MajagaUdze/
Director                                       Financial Manager
30 June 2016                                   30 June 2016
1


KPMG Georgia LLC
2nd Floor, Besiki Business Centre
4, Besiki Street
0108 Tbilisi, Georgia
Telephone    +995 322 93 5713
Fax          +995322982276
Internet     www.kpmg.ge
Independent Auditors' Report
To the management of the Transport Reform and Rehabilitation Center
We have audited the accompanying special purpose project financial statements of the
Additional Financing for the Third East-West Highway Improvement Project (the "Project"),
financed under the International Development Association (the "IDA"), Credit Agreement No.
5108-GE dated 28 June 2012, implemented by the Transport Reform and Rehabilitation
Center (the "Center"'), which comprise the Statement of Balance Sheet as at 31 December
2015 and the Statements of Sources and Uses of Funds, Statement of Expenditure
Withdrawal Schedule ("SOEs") and Special Account Statement for the year then ended, and
notes, comprising a summary of significant accounting policies and other explanatory
information. The special purpose project financial statements have been prepared by
management in accordance with the International Public Sector Accounting Standard:
Financial Reporting Under the Cash Basis of Accounting and in conformity with the World
Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and
Auditing for World Bank-Financed Activities" (the "World Bank Guidelines") as described in
Note 2 to the special purpose project financial statements.
Management's Responsibility for the Special Purpose Project Financial Statements
Management is responsible for the preparation and fair presentation of these special
purpose project financial statements in accordance with the International Public Sector
Accounting Standard: Financial Reporting Under the Cash Basis of Accounting and the
World Bank Guidelines, for determining the acceptability of the basis of accounting, and for
such internal control as management determines is necessary to enable the preparation of
special purpose project financial statements that are free from material misstatement,
whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these special purpose project financial
statements based on our audit. We conducted our audit in accordance with International
Standards on Auditing. Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about whether the special
purpose project financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the special purpose project financial statements. The procedures selected
depend on our judgment, including the assessment of the risks of material misstatement of
the special purpose project financial statements, whether due to fraud or error. In making
those risk assessments, we consider internal control relevant to the entity's preparation and
fair presentation of the special purpose project 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 policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation
of the special purpose project financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
KPMG Georgia LLC, a company ncorporated under the Laws
of Georgia, a member firm of the KPMG network of
independent member firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss entity


Transport Reform and Rehabilitation Center
Independent Auditors' Report
Opinion
In our opinion, the special purpose project financial statements for the year ended 31
December 2015 present fairly, in all material respects, the financial position of the Project as
at 31 December 2015, and its sources and uses of funds for the year then ended in
accordance with the International Public Sector Accounting Standard: Financial Reporting
Under the Cash Basis of Accounting and the World Bank Guidelines.
Other Matters
The special purpose project financial statements of the Project as at and for the year ended
31 December 2014 were audited by other auditors whose report dated 22 June 2015
expressed an unmodified opinion on those statements.
Data included on pages 4 to 12 of the accompanying special purpose project financial
statements that are marked as "Unaudited" have not been audited.
Basis of Accounting
Without modifying our opinion, we draw attention to Note 2 to the special purpose project
financial statements, which describes the basis of accounting. The special purpose project
financial statements are prepared to assist the Center to comply with the requirements of IDA
and for providing information to the Government of Georgia and IDA to assist them in
evaluating the Project implementation. As a result, the special purpose project financial
statements may not be suitable for another purpose
KPMG Georgia LLC                     6-   <C    L 
30 June 2016


TRANSPORT REFORM AND REHABILITATION CENTER
THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT
CREDIT NO. 5108-GE
STATEMENT OF SOURCES AND USES OF FUNDS
FOR THE YEAR ENDED 31 DECEMBER 2015
(in US Dollars)
Actual                      Planned                    Variance
Year to      Cumulative      Year to     Cumulative      Year to     umulative to
date         to date         date         to date        date         date
Unaudited     Unaudited     Unaudited     Unaudited
FUNDS RECEIVED BY
SOURCES
International
Development Association
(IDA) funds               10,847,116     36,207,058
Government of Georgia
"GoG') co-financing        2,377,485     11,033,701
TOTAL FUNDS RECEIVED      13,224,601     47,240,759
Foreign exchange difference       -           (31)
LESS: EXPENDITURES
Component 1 - Construction of
Sveneti-Ruisi section      7,406 658     26,900 331     7,406.658    26 900,331           -             -
Component 2 - Roads Safety  1 792,219     4,194 948     1,792,219     4,194.948           -             -
Component 3 - Project
Management                   53,734        204 739        53.734       204,739             -
IDA TOTAL                  9,252,611     31,300,018    9,252,611     31,300,018           -             -
Component 1 - Construction of
Sveneti-Ruisi section      1 895,228      9,909 503     1,895,228     9,909,503           -             -
Component 2 - Roads Safety  448,382       1,052.560      448,382      1,052,560           -             -
Component 3 - Project
Management                   33,848         71,607        33,848        71 607            -             -
GoG TOTAL                  2,377,458     11,033,670     2,377,458    11,033,670           -             -
TOTAL PROJECT
EXPENDITURES              11,630,069     42,333,688    11,630,069    42,333,688           -             -
NET (OUTFLOW)/INFLOW
OF FUNDS                   1,594,532      4,907,040
The special purpose project financial statements were approved by the management of Transport Reform
and Rehabilitation Center on 30 June 2016 and were signed on its behalf by:
Giorgi Tsagareli                                         Marina Majagatadze
Director                                                 Financial Manager
30 June 2016                                                             30 June 2016
The notes on pages 8 to 12 form an integral part of these special purpose project financial statements
4


TRANSPORT REFORM AND REHABILITATION CENTER
THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT
CREDIT NO. 5108-GE
BALANCE SHEET STATEMENT
AS OF 31 DECEMBER 2015
(in US Dollars)
31 December
2015
ASSETS
IDA Designated Account                                                        4,907,040
TOTAL ASSETS                                                                  4,907,040
Funds received:
Funds received from IDA                                                      36,207,058
Funds received from GoG                                                      11,033,701
Total funds received                                                         47,240,759
Project expenditures:
Financed by IDA                                                             (31,300,018)
Financed by GoG                                                             (11,033,670)
Total project expenditures                                                  (42,333,688)
Foreign exchange difference                                                       (31)
TOTAL PROJECT EXPENDITURES AND OTHER FUNDS                                    4,907,040
The special purpose project financial statements were approved by the management of Transport Reform
and Rehabilitation Center on 30 June 2016 and were signed on its behalf by:
Giorgi Tsagareli                                 Marina Majageidzie
Director                                         Financial Manager
30 June 2016                                     30 June 2016
The notes on pages 8 to 12 form an integral part of these special purpose project financial statements.
5


TRANSPORT REFORM AND REHABILITATION CENTER
THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT
CREDIT NO. 5108-GE
STATEMENT OF EXPENDITURE WITHDRAWAL SCHEDULE
FOR THE YEAR ENDED 31 DECEMBER 2015
(in US Dollars)
Withdrawal Withdrawal Total SOE  Total SOE  Total SOE Attributable Attributable Attributable Total SOE
No.    application   in     attributable attributable to 2015 -  to 2015 -  to 2015 -  Attributable
date    withdrawal  to 2014   to 2015   Component Component Component    to 2016 -
schedule                           1         2           3
Unaudited
9       18 Feb 15     5,072      3,621     1,451          -      1,451         -
10        9 Jul 15    5,533          -      5,533         -      5,533         -
11      28 Oct 15    37,639          -     37,639         -      3,190     34,449         -
12      16 Mar 16    53,862          -     4554434              26,105     19,338      8,419
102,106     3,621     90,066          -     36,279    53,787      8,419
The special purpose project financial statements were approved by the management of Transport Reform
and Rehabilitation Center on 30 June 2016 and were signed on its behalf by:
Giorgi Tsagareli                                 Marina Maoaalgdze
Director                                         Financial Manager
30 June 2016                                     30 June 2016
The notes on pages 8 to 12 form an integral part of these special purpose project financial statements.


TRANSPORT REFORM AND REHABILITATION CENTER
THIRDT EAST-WEST HIGHWAY IMPROVEMENT PROJECT
CREDIT NO. 5108-GE
SPECIAL ACCOUNT STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2015
(in US Dollars)
Account No.                            202250928
Depository Bank                        State Treasury
Address                                16 V. Gorgasali street
Tbilisi, 0114
Georgia
Balance as at 1 January 2015                                                  3,312,535
ADD
Funds received from IDA                                                      10,847,116
DEDUCT
Funds used for the Project expenditures                                      (9,252,611)
Balance as at 31 December 2015                                                4,907,040
The special purpose project financial statements were approved by the management of Transport Reform
and Rehabilitation Center on 30 June 2016 and were signed on its behalf by:
Giorgi Tsagareli                                  Marina Majagiiadle
Director                                          Financial Manager
30 June 2016                                      30 June 2016
The notes on pages 8 to 12 form an integral part of these special purpose project financial statements.
7


TRANSPORT REFORM AND REHABILITATION CENTER
THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT
CREDIT NO. 5108-GE
NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
(in US Dollars)
1.  BACKGROUND
The Investment Center for Euro-Asian Transport Corridor was established in 1995 as a non-
entrepreneurial and non-profit legal entity under the laws of Georgia in accordance with the Georgian
Presidential Decree N 119 dated 16 April 1995, The founder of the Investment Center for Euro-Asian
Transport Corridor is the Georgian Government.
A project unit named "Transport Reform and Rehabilitation Center" (the "Center") was formed within
the Investment Center for Euro-Asian Transport Corridor. The Center's principal activity is to manage
allocated credits/loans received from the International Development Association ("IDA"), the
International Bank for Reconstruction and Development ("IBRD"), the Asian Development Bank
(ADB) and the European Investment Bank (EIB) and monitor the implementation of transport sector
projects.
The Center implements the Third East-West Highway Improvement Project (the "Project"), financed
under the International Development Association ("IDA"). Credit Agreement No. 5108-GE (the
"Agreement") in the amount of 27.7 million Special Drawing Rights ("SDR") was signed between the
Government of Georgia ("GoG") and IDA on 28 June 2012. The main objectives of the Project are: to
contribute to the gradual reduction of road transport costs and improve access, ease of transit and
road safety along central part of the East-West Corridor of Georgia and strengthen the capacity of
the Road Department in the Ministry of Regional Development and Infrastructure of Georgia
(RDMRDI) and relevant government entities to plan and manage the road network and to improve
road safety.
2.  BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance - These special purpose project financial statements have been prepared
in accordance with the Cash Basis International Public Sector Accounting Standard, Financial
Reporting under a Cash Basis of Accounting and in conformity with the World Bank's Financial
Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank-
Financed Activities" (the "World Bank Guidelines")
The purpose of these special purpose project financial statements is to provide information to the
Government of Georgia and the International Development Association to assist them in evaluating
the Project implementation.
Cash basis of accounting - Project financing is recognized as a source of project funds when the
cash is received. Project expenditures are recognized as a use of the Project funds on the cash
basis when the payments are made.
Presentation currency - The national currency of Georgia is the Georgian Lari ("GEL"). These
special purpose project financial statements are presented in United States Dollars ("US Dollar" or
"USD"), since management believes that this currency is more meaningful for the users of the
special purpose project financial statements. All financial information presented in USD has been
rounded to the nearest USD unless otherwise stated.
Transactions in other currencies - Transactions in currencies other than the presentation currency
are converted to US Dollars at the exchange rate prevailing at the date of the transaction.
Cash - Cash represents the balances with the State Treasury of Georgia.


TRANSPORT REFORM AND REHABILITATION CENTER
THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT
CREDIT NO. 5108-GE
NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
(in US Dollars)
3.  SPECIAL ACCOUNT
The special account is a designated disbursement account of the Project maintained in US Dollars at
the State Treasury to ensure the payment of eligible expenditures, within defined limits, which do not
require individual authorisation from IDA in accordance with the Agreement.
4.  BASIS OF FUNDING
According to the terms of the Agreement, the expenditures of all works, goods and consultant
services contracts, including all applicable taxes are co-financed by proceeds received from IDA and
the GoG at a proportional rate of 80% and 20%, respectively.
The land acquisition and associated resettlement costs are funded entirely by the GoG.
5.  METHODS OF WITHDRAWAL
The methods of withdrawal used from the inception of the credit to 31 December 2015 were as
follows:
(a) Special Account
The Center withdraws the eligible amounts from the special account and prepares and sends
replenishment requests to the World Bank with authorized signatures. The replenishment requests
and respective documentation are reviewed by the World Bank and an approved amount is
transferred to the special account.
(b) Direct Payment
Available amounts are drawn from time to time within limits determined under the credit agreement
for direct payments of eligible expenditures for sub-projects. Direct payments are made by the World
Bank directly to third parties. The Center forms withdrawal applications for request of direct
payments and sends it to the World Bank, for settlement.
(c) GoG Current Account
The Project maintains a separate account where funds from the GOG are accumulated. The funds
are further disbursed to sub-contractors based on the share of expenditures to be incurred. The
Project has a common GEL account and special organization code for their funds in the State
Treasury of Georgia.
6.  STATEMENT OF EXPENDITURES (SOE)
Withdrawals are to be made on the basis of SOEs for expenses on contracts within the following
contractual limits:
(i) All expenditures for works valued at less than USD 2,000,000;
(ii) Consultant services contracts (firms) valued at less than USD 100,000;
(iii) Consultant services contracts (individuals) valued at less than USD 50,000;
(iv) All expenditures for goods and non-consulting services valued at less than USD 300,000.
9


TRANSPORT REFORM AND REHABILITATION CENTER
THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT
CREDIT NO. 5108-GE
NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
(in US Dollars)
7. RECONCILIATION OF AMOUNTS SHOWN AS RECEIVED FROM THE IDA TO ACTUAL
EXPENDITURES OF THE PROJECT
31 December
2015
Application of Withdrawals Schedule
Expenses incurred in 2015 as per the Applications of Withdrawals Schedule   9,252,611
Expenses incurred in 2015 without Applications of Withdrawals Schedule             -
9,252,611
IDA funds received in 2015                                                 10,847,116
10,847,116
Add:
Opening Balance
Special Account                                                             3,312,535
3,312,535
Less:
Closing Balance
Special Account                                                             4,907,040
4,907,040
TOTAL EXPENDITURES INCURRED IN 2015                                         9,252,611


TRANSPORT REFORM AND REHABILITATION CENTER
THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT
CREDIT NO. 5108-GE
NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
(in US Dollars)
8. PROJECT EXPENDITURES BY COMPONENTS
Actual                   Planned                  Variance
Project activities   Year to     Cumulativ     Year to     Cumulativ    Year to   Cumulative
date       e to date      date       e to date     date      to date
Unaudited    Unaudited   Unaudited   Unaudited
Component 1 - Construction
of Sveneti-Ruisi section
Civil works               9,272,494   33,629,972    9,272,494   33,629,972
Land acquisition and        29,392     3,179,862      29,392     3,179,862
Resettlements                                                                      -
TOTAL COMPONENT 1         9,301,886   36,809,834    9,301,886   36,809,834
Component 2 - Roads Safety
Consultancy               2,240,601    5,116,501    2,240,601    5,116,501         -
Vehicles, office equipment and   -      131,007            -      131,007
computers for RDMRDI
TOTAL COMPONENT 2         2,240,601    5,247,508    2,240,601    5,247,508         -
Component 3 - Project
Management
The Center's fees and       70,059       70,059       70,059       70,059
operating costs
Financial audit             17,523       52,569       17,523       52,569
RDMRDI Consultants               -      153,718            -      153,718
TOTAL COMPONENT 3           87,582      276,346       87,582      276,346          -
TOTAL PROJECT
EXPENDITURES             11,630,069   42,333,688   11,630,069   42,333,688         -
The Project consists of the following main components:
*   Component 1 - Upgrading the existing E60 East-West Highway form Sveneti to Ruisi to a dual
carriageway road;
*   Component 2 - Institutional strengthening;
*   Component 3 - Institutional support to the Road Department in the Ministry of Regional
Development and Infrastructure (RDMRDI) of Georgia and the Center related to the Project
implementation, audits and the Project monitoring and evaluation.
The categories of expenditures incurred are presented in line with the categories specified in the
Agreement.
Each component of the Project expenses is further divided into four types of expenses for The SOE
purposes: civil works, goods, consultants' services and operating costs.
11


TRANSPORT REFORM AND REHABILITATION CENTER
THIRD EAST-WEST HIGHWAY IMPROVEMENT PROJECT
CREDIT NO. 5108-GE
NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
(in US Dollars)
9.  COMMITMENTS AND CONTINGENCIES
Management is not aware of any commitments and contingencies which would have a material
impact on this special purpose project financial statements as at 31 December 2015 for the year then
ended.
10. GEORGIAN OPERATING ENVIRONMENT
The Center's operations are located in Georgia. Consequently, the Center is exposed to the
economic and financial markets of Georgia, which display characteristics of an emerging market.
The legal, tax and regulatory frameworks continue development, but are subject to varying
interpretations and frequent changes which together with other legal and fiscal impediments
contribute to the challenges faced by entities operating in Georgia. The special purpose project
financial statements reflect management's assessment of the impact of the Georgian operating
environment on the operations of the Center. The future operating environment may differ from
management's assessment.
11. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
There were no significant events subsequent to the balance sheet date
12. APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS
These special purpose project financial statements were authorized for issue by the management of
the Center on 30 June 2016
12