Gaza Water Supply and Sewage Systems Improvement Projects (GWSSSIP) Funded by the World Bank (WB) and the Islamic Development Bank (IDB) Implemented by the Palestinian Water Authority (PWA) and Coastal Municipalities Water Utility (CMWU) Financial Statements and Independent Auditor’s Report for the Year Ended December 31, 2015 Talal Abu Ghazaleh & Co. "Certified Public Accountants" Gaza Water Supply and Sewage Systems Improvement Projects (GWSSSIP) Funded by the World Bank (WB) and the Islamic Development Bank (IDB) Implemented by the Palestinian Water Authority (PWA) and Coastal Municipalities Water Utility (CMWU) Table of Contents Page Exhibit Independent Auditor’s Report 1 - Statement of Financial Position as of December 31, 2015 3 (A) Statement of Receipts and Disbursements for the Year Ended December 31, 4 (B) 2015 Statement of Designated Bank Account for the Year Ended December 31, 5 (C) 2015 Notes to the Financial Statements 6-12 - Independent Auditor’s Report Dr. Shokri Bushara Minister of Finance Ramallah - Palestine We have audited the accompanying financial statements of Gaza Water Supply and Sewage Systems Improvement Project (GWSSIP) – TF (013564), (018248), (018268), implemented by Palestinian Water Authority (PWA) and Coastal Municipalities Water Utility (CMWU) and funded by the World Bank (WB) and the Islamic Development Bank (IDB), which comprise the statement of financial position as of December 31, 2015, and statement of receipts and disbursements and statement of designated bank account for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the Cash Basis of Accounting as described in Note (2.1). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these 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 whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the 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 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 policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1 Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Gaza Water Supply and Sewage Systems Improvement Project (GWSSIP) – TF (013564), (018248), (018268), as of December 31, 2015, and its financial performance and its designated bank account for the year then ended in accordance with the basis of accounting specified in Note (2.1). In addition, with respect to SOEs, adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditures incurred and those expenditures were eligible for financing under the agreement. Moreover, the internal control involved in the preparation of the said SOEs can be relied upon to support the related withdrawals. Also the procurement guidelines of the World Bank have been properly applied in accordance with the Project's Grant Agreement. The financial statements for the year ended December 31, 2014 were audited by other auditor whose report thereon dated September 13, 2015 was unqualified. Talal Abu – Ghazaleh & Co. License No. 251/97 Jamal Milhem, CPA Certified Accountant Licence # (100/98) Ramallah, on April 30, 2016 2 Gaza Water Supply and Sewage Systems Improvement Project (GWSSSIP) TF 013564, TF 018248 and TF 018268 Funded by the World Bank (WB) and Islamic Development Bank (IDB) Statement of Financial Position as of December 31, 2015 Exhibit (A) (Amounts are expressed in US$) December 31, 2015 December 31, 2014 Islamic Islamic World Notes World Bank Development Total Development Total Bank Bank Bank Assets Cash and Cash Equivalents 4 994,523 200,000 1,194,523 284,567 61,250 345,817 Due from Coastal Municipalities Water Utility (CMWU) --- --- --- --- 382 382 Total Assets 994,523 200,000 1,194,523 284,567 61,632 346,199 Net Assets Net Assets – Exhibit (B) 994,523 200,000 1,194,523 284,567 61,632 346,199 Total Net Assets – Exhibit (B) 994,523 200,000 1,194,523 284,567 61,632 346,199 The accompanying notes constitute an integral part of these financial statements 3 Gaza Water Supply and Sewage Systems Improvement Project (GWSSSIP) TF 013564, TF 018248 and TF 018268 Funded by the World Bank (WB) and Islamic Development Bank (IDB) Statement of Receipts and Disbursements for the Year Ended December 31, 2015 Exhibit (B) (Amounts are expressed in US$) World Bank (WB) Islamic Development Bank (IDB) From From Up to January 1, Up to Up to January 1, Up to Note December 2015 to December December 2015 to December 31, 2014 December 31, 2015 31, 2014 December 31, 2015 31, 2015 31, 2015 Receipts Transfers from Donors 4,346,391 4,025,577 8,371,968 10,049,588 543,829 10,593,417 Direct Payments --- --- --- --- 546,346 546,346 Total Receipts 5 4,346,391 4,025,577 8,371,968 10,049,588 1,090,175 11,139,763 Disbursements Component (1) Improving Water Supply and Wastewater Facilities 1,415,616 2,254,499 3,670,115 6,524,613 530,479 7,055,092 Component (2) CMWU Capacity Building & Operational Support 285,770 284,064 569,834 3,073,343 408,477 3,481,820 Component (3) Project Management, Monitoring & Evaluation 2,360,438 777,058 3,137,496 390,000 12,469 402,469 Total Disbursements 6 4,061,824 3,315,621 7,377,445 9,987,956 951,425 10,939,381 Change in Net Assets during the Year 284,567 709,956 994,523 61,632 138,750 200,382 Net Assets, Beginning of the Year – Exhibit (A) --- 284,567 --- --- 61,632 --- Adjustment an Beginning of the Year --- --- --- --- (382) (382) Net Assets, End of the Year – Exhibit (A) 284,567 994,523 994,523 61,632 200,000 200,000 The accompanying notes constitute an integral part of these financial statements 4 Gaza Water Supply and Sewage Systems Improvement Project (GWSSSIP) TF 013564, TF 018248 and TF 018268 Funded by the World Bank (WB) and Islamic Development Bank (IDB) Statement of Designated Bank Account for the Year Ended December 31, 2015 Exhibit (C) (Amounts are expressed in US$) World Bank (WB) Islamic Development Bank (IDB) Total Total Note TF013564 TF018248 TF018268 2015 2014 2015 2014 Cash Balance, Beginning of the Year 284,567 --- --- 284,567 189,677 61,250 290,566 Cash Receipts during 2015 5 1,988,706 520,430 1,516,441 4,025,577 1,936,713 543,829 2,194,488 Cash Disbursements during 2015 6 (1,810,113) (498,116) (1,007,392) (3,315,621) (1,841,823) (405,079) (2,423,804) Cash Balance, End of the Year 4 463,160 22,314 509,049 994,523 284,567 200,000 61,250 The accompanying notes constitute an integral part of these financial statements 5 Gaza Water Supply and Sewage Systems Improvement Project (GWSSSIP) TF 013564, TF 018248 and TF 018268 Funded by the World Bank (WB) and Islamic Development Bank (IDB) Notes to the Financial Statements (Amounts are expressed in US$) 1. Coastal Municipalities Water Utility (CMWU) Coastal Municipalities Water Utility (CMWU) is a public utility established on October 30, 2000 pursuant to the Palestinian Authorities’ Local Government Law No (1) for the Year 1997 to consolidate the existing small municipal water departments into a service delivery unit. CMWU’s Vision CMWU’s vision is to be the leading national institution in the provision of water and sanitation services. CMWU’s Mission CMWU’s mission is to provide the Gaza Strip ' residents with integrated, distinct, and environmentally safe water and sanitation services through the optimal utilization of available resources and creative solutions. CMWU’s Goals CMWU is aiming at:  Developing and conserving water resources in cooperation with Palestinian Water Authority.  Disinfection of water from source to consumer including water network.  Extending the water supply services to all Gaza Strip inhabitants.  Covering all costs of operation, maintenance and development by improving the billing system Cost Recovery.  Improve wastewater and storm water collection and treatment according to the Palestinian standards for Re – use. 2. Project Background The Palestinian Liberation Organization (PLO) for the benefit of the Palestinian Authority has received grants from the World Bank in the amount of US$ 18.1 million, and the Coastal Municipalities Water Utility (CMWU) as an implementation unit under the Palestinian Water Authority (PWA) has received a grant from the Islamic Development Bank (IDB) in the amount of US$ 17.76 million in parallel, toward the costs of the Gaza Water Supply and Sewage Systems Improvement Project (the Project). The Palestinian Water Authority (PWA) is the responsible body for the implementation, monitoring and evaluation of the Project. The Project Management Unit (PMU) of PWA and CMWU have the responsibility for managing all procurement and financial issues related to the Project. The Project aims to improve the water supply and wastewater facilities including, water supply network rehabilitation and reconfiguration, rehabilitation of water wells, service water meters 6 replacement and district meters installation, upgrading and maintenance of wastewater pumping stations and utility capacity building and operational support. The Project consists of the following parts: Part A: Improving water supply and wastewater facilities. Part B: CMWU capacity building and operational support. Part C: Project management, monitoring and evaluation. 3. Basis of Accounting The statement of receipts and disbursements was prepared on the cash basis of accounting, according to the cash basis, revenues/funds are recognized when received and disbursements are recognized when paid. The Financial statements are presented in US$. 4. Cash and Cash Equivalents Cash and cash equivalents, as of December 31, comprise of the following: December 31, 2015 2014 Bank of Palestine – A/C # 2210401 – USD – WB TF013564 463,160 284,567 Bank of Palestine – A/C # 2216755 – USD – WB TF018248 22,314 --- Bank of Palestine – A/C # 2216876 – USD – WB TF018268 509,049 --- Sub-Total 994,523 284,567 Bank of Palestine – A/C # 223900 – USD – IDB 200,000 61,250 Total - Exhibit (A) 1,194,523 345,817 7 5. Transfers from Donors World Bank Islamic (WB) Development Bank (IDB) Exhibit (B) 8,371,969 11,139,763 5.1 World Bank (WB) Date TF013564 TF018248 TF018268 Total Replenishment (16) January 11, 2015 271,176 --- --- 271,176 Replenishment (17) February 25, 2015 236,864 --- --- 236,864 Replenishment (18) April 9, 2015 280,955 --- --- 280,955 Replenishment (19) April 14, 2015 132,110 --- --- 132,110 Replenishment (20) May 11, 2015 115,418 --- --- 115,418 Replenishment (21) May 24, 2015 250,480 --- --- 250,480 Replenishment (22) June 11, 2015 120,822 --- --- 120,822 Replenishment (23) September 6, 2015 430,365 --- --- 430,365 Replenishment (24) November 11, 2015 150,516 --- --- 150,516 Replenishment (1) February 17, 2015 --- 300,000 --- 300,000 Replenishment (2) August 11, 2015 --- 82,367 --- 82,367 Replenishment (3) October 1, 2015 --- 138,063 --- 138,063 Replenishment (1) March 24, 2015 --- --- 1,000,000 1,000,000 Replenishment (2) August 11, 2015 --- --- 270,192 270,192 Replenishment (3) November 11, 2015 --- --- 246,249 246,249 Total Transfers During 2015 1,988,706 520,430 1,516,441 4,025,577 Transfers Up to December 31, 2014 4,346,391 --- --- 4,346,391 Total Transfers Up to December 31, 2015 6,335,097 520,430 1,516,441 8,371,968 Note (5) 5.2 Islamic Development Bank (IDB Date US $ IDB GCC-05-18 January 29, 2015 127,660 IDB AFD-33 February 12, 2015 38,796 IDB GCC-04-23 April 2, 2015 117,727 IDB AFD-33 May 11, 2015 59,646 IDB GCC-10-06 August 31, 2015 200,000 Total Transfers During 2015 543,829 Direct Payments – IDB GCC-07-17/A 356,141 Direct Payments – IDB KDF-06 190,205 Total Direct Payments During 2015 546,346 Total Receipts During 2015 1,090,175 Transfers Up to December 31, 2014 10,049,588 Grand Total – Note (5) 11,139,763 8 6. Disbursements of TF 013564, TF018248 &TF013268 World Bank (WB) Islamic Development Bank From Cumulative Cumulative Cumulative From January January 1, Cumulative Up Up to Up to Up to 1, 2015 to 2015 to to December 31, December 31, December December December 31, December 2015 2014 31, 2015 31, 2014 2015 31, 2015 1. Improving Water Supply and Wastewater Facilities 1.1 Civil Works Water Supply Network Rehabilitation and Reconfiguration 166,163 767,749 933,912 4,854,899 411,184 5,266,083 Rehabilitation of Water Wells 504,369 493,634 998,003 1,095,729 --- 1,095,729 Service Water Meter Replacement and Installation of District Meters --- 132,737 132,737 573,985 119,295 693,280 Upgrading and Maintenance of Wastewater Pumping Stations 372,565 813,829 1,186,394 --- --- --- 1.2 Goods Water Supply Rehabilitation and Reconfiguration 372,519 --- 372,519 --- --- --- Rehabilitation of Water Wells --- 46,550 46,550 --- --- --- Sub-Total – Note (6.1, 6.2, 6.3) 1,415,616 2,254,499 3,670,115 6,524,613 530,479 7,055,092 2. CMWU Capacity Building and Operational Support 2.1 Civil Work Construction of Utility Central Facilities --- --- --- 2,057,043 408,477 2,465,520 Operational Assistance of CMWU --- 139,096 139,096 --- --- --- 2.2 Goods Construction of Utility Central Facilities 91,748 28,800 120,548 --- --- --- Technical Assistance for CMWU --- 4,988 4,988 1,016,300 --- 1,016,300 Operational Assistance for CMWU 108,234 --- 108,234 --- --- --- 2.3 Consultancy Services Construction of Utility Central Facilities 80,801 --- 80,801 --- --- --- Technical Assistance for CMWU 4,987 111,180 116,167 --- --- --- Sub-Total - Note (6.1, 6.2, 6.3) 285,770 284,064 569,834 3,073,343 408,477 3,481,820 3. Project Management Monitoring and Evaluation 3.1 An External Monitoring and Evaluating Expert --- 19,720 19,720 --- --- --- 3.3 PMU’s Incremental Costs 2,360,438 757,338 3,117,776 390,000 12,469 402,469 Sub-Total - Note (6.1, 6.2, 6.3) 2,360,438 777,058 3,137,496 390,000 12,469 402,469 Total – Exhibit (B) 4,061,824 3,315,621 7,377,445 9,987,956 951,425 10,939,381 9 6.1 Disbursements of TF 013564 World Bank (WB) From Cumulative Cumulative January 1, Up to Up to 2015 to December 31, December December 2014 31, 2015 31, 2015 1. Improving Water Supply and Wastewater Facilities 1.1 Civil Works Water Supply Network Rehabilitation and Reconfiguration 166,163 351,629 517,792 Rehabilitation of Water Wells 504,369 267,897 772,266 Service Water Meter Replacement and Installation of District Meters --- 132,737 132,737 Upgrading and Maintenance of Wastewater Pumping Stations 372,565 355,532 728,097 1.2 Goods Water Supply Rehabilitation and Reconfiguration 372,519 --- 372,519 Rehabilitation of Water Wells --- 46,550 46,550 Sub-Total 1,415,616 1,154,345 2,569,961 2. CMWU Capacity Building and Operational Support 2.1 Civil Work Construction of Utility Central Facilities --- --- --- 2.2 Goods Construction of Utility Central Facilities 91,748 28,800 120,548 Technical Assistance for CMWU --- 4,988 4,988 Operational Assistance for CMWU 108,234 --- 108,234 2.3 Consultancy Services Construction of Utility Central Facilities 80,801 --- 80,801 Technical Assistance for CMWU 4,987 --- 4,987 Sub-Total 285,770 33,788 319,558 3. Project Management Monitoring and Evaluation 3.1 An External Monitoring and Evaluating Expert --- 19,720 19,720 3.3 PMU’s Incremental Costs 2,360,438 602,260 2,962,698 Sub-Total 2,360,438 621,980 2,982,418 Total – Note (6) 4,061,824 1,810,113 5,871,937 10 6.2 Disbursements of T.F 018248 Cumulative From January Cumulative Up to 1, 2015 to Up to December 31, December 31, December 2014 2015 31, 2015 1. Improving Water Supply and Wastewater Facilities 1.1 Civil Works Water Supply Network Rehabilitation and Reconfiguration --- 107,061 107,061 Rehabilitation of Water Wells --- 225,737 225,737 Upgrading and Maintenance of Wastewater Pumping --- 26,062 26,062 Stations Sub-Total --- 358,860 358,860 2. CMWU Capacity Building and Operational Support 2.1 Civil Work Operational Assistance for CMWU --- 139,096 139,096 Sub-Total --- 139,096 139,096 3. Project Management Monitoring and Evaluation 3.3 PMU’s Incremental Costs --- 160 160 Sub-Total --- 160 160 Total – Note (6) --- 498,116 498,116 6.3 Disbursements of T.F 018268 World Bank (WB) Cumulative From January Cumulative Up Up to 1, 2015 to to December December December 31, 31, 2015 31, 2014 2015 1. Improving Water Supply and Wastewater Facilities 1.1 Civil Works Water Supply Network Rehabilitation and Reconfiguration --- 309,059 309,059 Upgrading and Maintenance of Wastewater Pumping --- 432,235 432,235 Stations Sub-Total --- 741,294 741,294 2. CMWU Capacity Building and Operational Support 2.4 Consultancy Services Utility Capacity Building and Operational Support & --- 111,180 111,180 CMWU Recurrent Costs Sub-Total --- 111,180 111,180 3. Project Management Monitoring and Evaluation 3.3 PMU’s Incremental Costs --- 154,918 154,918 Sub-Total --- 154,918 154,918 Total – Note (6) 1,007,392 1,007,392 11 7. Special Bank Account (World Bank) TF013564 TF018248 TF018268 Balance as Per Records as at December 31, 2015 463,160 22,314 509,049 Balance Per Bank Statement as at December 31, 2015 463,160 22,314 509,049 Add: Amount Claimed but Not Yet Replenished 36,840 277,686 490,951 500,000 300,000 1,000,000 12