STATE AUDIT OFFICE OF GEORGIA Project Financial Statements Advancing public participation in the audit process in Georgia (SAFE Grant No. TFOAI 357) With accompanied independent auditor's report For the period from November 10, 2015 to October 31, 2016 STATE AUDIT OFFICE OF GEORGIA Advancing public participation in the audit process in Georgia (SAFE Grant No. TFOAI 357) PROJECT FINANCIAL STATEMENTS For the period from November 10, 2015 to October 31, 2016 Currency: USD Contents: INDEPENDENT AUDITOR'S REPORT ........................................................... 3 STATEMENT OF THE PROJECT SOURCES AND USES OF FUNDS ...................5................5 STATEMENT OF USES OF FUNDS BY PROJECT ACTIVITY............................................ 6 NOTES TO THE PTOJECT FINANCIAL STATEMENT ................................................. 7 Page 2 of 10 T: +995 32 254 58 45 2 Tarkhnishviti Str. T: +995 32 218 81 88 Vere Busin-ts Centre @ bdo@bdo.ge 0179 Tblisi ID www.bdo.geGe INDEPENDENT AUDITOR'S REPORT To the management of the STATE AUDIT OFFICE OF GEORGIA We have audited the accompanying project financial statements of the project - Advancing public participation in the audit process in Georgia (Grant No. TFOA1 357) (further "Project"), which comprise the statement of the Project sources and uses of funds, the statement of the project sources and uses of funds by project activity and the notes comprising a summary of significant accounting policies and other explanatory information to the financial statements prepared by the management for the period from November 10, 2015 to October 31, 2016 in relation to the grant #TFOA1357 provided by International Bank for Reconstruction and Development and contribution (further "World Bank") received from the State Audit Office of Georgia (further "SAOG"). The financial statements have been prepared by the management in accordance with the basis of accounting described in the following paragraph. Management's responsibility for the Financial Statement Management is responsible for the preparation and fair presentation of this financial statement in accordance with the IPSAS "Financial Reporting Under The Cash Basis of Accounting" issued by the International Public Sector Accounting Standards Board (the IPSASB) of the International Federation of Accountants (IFAC) and the World Bank guidelines, as well as the relevant points of the Grant Agreement No. TFOA1 357. and for the such internal control as management determines is necessary to enable the preparation of the financial statement that is free from material misstatement, whether due to fraud or error. Auditor's responsibility Our responsibility is to express an opinion on the financial statement 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 statement. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the organisation's preparation and fair presentation of the financial statement 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 organisation'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 statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the project financial statements of the project Advancing public participation in the audit process in Georgia (Grant No. TFOAI 357) for the period from November 10, 2015 to October 31, 2016 are prepared in all material respects, in accordance with the IPSAS "Financial Reporting Under The Cash Basis of Accounting" issued by the International Public Sector Accounting Standards Board (the IPSASB) of the International Federation of Accountants (IFAC) and the World Bank guidelines, as well as the relevant points of the Grant Agreement No. TFOA1357. BDO LLC, a Geo imited liabity comrary. is a member of BDO International imr od, a UK c m y 7 ?d by guarantee, and forms 'of the inzelrnationd D VO rk of independent member f -i. IBDO Basis of Accounting Without modifying our opinion, we draw attention to Note 2 to the financial statement, which describes the basis of accounting policy. The financial statement is prepared to provide information to the World Bank. As a result, the statement may not be suitable for another purpose. Tbilisi, Georgia > L & 28 November, 2016 STATE AUDIT OFFICE OF GEORGIA Advancing public participation in the audit process in Georgia (Grant No. TF0A1357) STATEMENT OF THE PROJECT SOURCES AND USES OF FUNDS For the period from November 10, 2015 to October 31, 2016 Currency: USD Statement of the project sources and uses of funds for the period from November 10, 2015 to October 31, 2016: Actual Planned Variance Current Year to Cumulative Current Year to Cumulative Current Year to Cumulative period Date to Date period Date to Date period Date to Date Opening Working Capital Designated Account Transit account - - Total - - Sources of Funds Grant Funds 125,000 125,000 125;000 125,000 125,000 125,000 - - - Counterpart Funds 44,684 44,684 44,684 35,542 35,542 35,542 (9,142) (9,142) (9,142) Subtotal 169,684 169,684 169,684 158,424 158,424 158,424 (9,142) (9,142) (9,142) Foreign Exchange (478) (478) (478) - - Difference Total 169,206 169,206 169,206 - - Less: Uses of Funds Goods and non- consulting services: 27,696 27,696 27,696 30,157 30,157 30,157 2,461 2,461 2,461 World Bank 17,276 17,276 17,276 18,733 18,733 18,733 1,457 1,457 1,457 SAO Contribution 10,420 10,420 10,420 11,424 11,424 11,424 1,004 1,004 1,004 Training and Workshops: 32,874 32,874 32,874 36,958 36,958 36,958 4,084 4,084 4,084 World Bank 31,434 31,434 31,434 36,958 36,958 36,958 5,524 5,524 5,524 SA0 Contribution 1,440 1,440 1,440 - - (1,440) (1,440) (1,440) Consultants' Services: 68,650 68,650 68,650 69,309 69,309 69,309 659 659 659 World Bank 68,650 68,650 68,650 69,309 69,309 69,309 659 659 659 SA0 Contribution - - - - - - Operating cost: 32,824 32,824 32,824 24,118 24,118 24,118 (8,706) (8,706) (8,706) World Bank - - - - - - - - SA0 Contribution 32,824 32,824 32,824 24,118 24,118 24,118 (8,706) (8,706) (8,706) Total 162,045 162,045 162,045 160,542 160,542 160,542 (1,503) (1,503) (1,503) Closing Working Capital Designated Account Transit Account 6,646 6,646 6,646 Tax Receivables 515 515 515 Total 7,161 7,161 7,161 These statements including the notes are signed by: /Date/ M. Natsvlishvili Project manager Director of State Budget Analysis and Strategic Planning Department This statement is to be read in conjunction with the notes to and forming part of the project financial statements set out on pages 7 to 10. Page 5 of 10 STATE AUDIT OFFICE OF GEORGIA Advancing public participation in the audit process in Georgia (Grant No. TFOA1 357) STATEMENT OF USES OF FUNDS BY PROJECT ACTIVITY For the period from November 10, 2015 to October 31, 2016 Currency: USD Statement of the project sources and uses of funds by project activity for the period from November 10, 2015 to October 31, 2016: Actual Planned Variance Aoet Note Current Year to Cumulative Current Year to Cumulative Current Year to Cumulative Activities period Date to Date period Date to Date period Date to Date Part 1: Multi- stakeholder Awareness 101,748 101,748 101,748 98,127 98,127 98,127 (3,621) (3,621) (3,621) Building World Bank 67,484 67,484 67,484 74,009 74,009 74,009 6,525 6,525 6,525 SAO Contribution 5 34,264 34,264 34,264 24,118 24,118 24,118 (10,146) (10,146) (10,146) Part II: Capacity Building for Engagement 41,929 41,929 41,929 43,940 43,940 43,940 2,011 2,011 2,011 Strategy and Action Plan World Bank 31,509 31,509 31,509 32,516 32,516 32,516 1,007 1,007 1,007 SAO Contribution 5 10,420 10,420 10,420 11,424 11,424 11,424 1,004 1,004 1,004 Part Ill: Knowledge Capture & 18,368 18,368 18,368 18,475 18,475 18,475 107 107 107 Regional Learning World Bank 18,368 18,368 18,368 18,475 18,475 18,475 107 107 107 SAO Contribution - - - - - - - Total Project 162,045 162,045 162,045 160,542 160,542 160,542 (1,503) (1,503) (1,503) Expenditure I - These statements including the notes are signed by: Ifi 20(G ---.I_ ____- /Date/ M. Natsvlishvili Project manager Director of State Budget Analysis and Strategic Planning Department This statement is to be read in conjunction with the notes to and forming part of the project financial statements set out on pages 7 to 10. Page 6 of 10 STATE AUDIT OFFICE OF GEORGIA Advancing public participation in the audit process in Georgia (Grant No. TFOA1 357) NOTES TO THE PTOJECT FINANCIAL STATEMENT For the period from November 10, 2015 to October 31, 2016 Currency: USD 1. Basic Activities Financing agreement #TF0A1357 was signed between the State Audit Office of Georgia and the World Bank on 10 November 2015. The project "Advancing public participation in the audit process in Georgia" is supported by the World Bank and by the state audit office and aims to enhance the quality and credibility of public external audits in the Member country's territory by mainstreaming citizen engagement into the external audit. The project consists of the following parts: i) Multi-stakeholder awareness building; ii) Capacity building for engagement strategy and action plan; iii) Knowledge, capture and regional learning. 2. Significant accounting Policy a) Statement of compliance Project's policy is to prepare financial statements in accordance with the IPSAS "Financial Reporting Under The Cash Basis of Accounting" issued by the International Public Sector Accounting Standards Board (the IPSASB) of the International Federation of Accountants (IFAC) and the World Bank guidelines, as well as the relevant points of the Grant Agreement No. TFOA1 357. b) Revenues and expenditures The Project's policy is to prepare the financial statements on the cash basis of accounting. On this basis, revenue is recognized when received rather than when earned and expenses are recognized when paid rather than when incurred c) Reporting Currency and Translation Methodology The reporting currency of the Project financial statements is US Dollar (USD). Functional currency is Georgian Lari (GEL). The majority of the Project expenses were made in Georgian Lari and expenditures paid in GEL were translated into USD using the following principles of translation: * In preparing the project financial statements, transactions in currencies other than US dollar have been translated into USD using the official exchange rate of the National Bank of Georgia prevailing on the dates of conversion from Designated Account to Transit account (GEL account); * Exchange Gains/losses resulting from the translation of movements of GEL bank accounts were recorded as an exchange difference (loss) in the Statement of Project Sources and Uses of Funds d) Designated Account (DA) The Designated Account, opened by the State Treasury in the National Bank of Georgia, is the account through which the replenishments from the World Bank are drawn. For all eligible expenses, appropriate amount of fund is transferred from DA account into Transitory Account. e) Transitory Account The Transitory Account is held at State Treasury for the converted amount in GEL, since the payments within the country can be done only in the local currency. All payments, in any currency, are made through transitory account. Page 7 of 10 STATE AUDIT OFFICE OF GEORGIA Advancing public participation in the audit process in Georgia (Grant No. TF0AI 357) NOTES TO THE PTOJECT FINANCIAL STATEMENT For the period from November 10, 2015 to October 31, 2016 Currency: USD 3. Counterpart Contribution The State Audit Office of Georgia has provided counterpart financing for the Project's recurring costs. Counterpart financing consist of the following components: Amount in Gel Amount in USD Salary for the project members 76,521 32,824 Monitors for web platforms 24,467 10,420 Representation expenses for Media Training 3,295 1,372 Representation expenses for the Korean experts visit 144 67 Total GEL 104,427 USD 44,684 These expenses were made in Georgian Lari and for the grant purposes recorded in USD at the rates of exchange defined by the National Bank of Georgia, prevailing on the dates of transactions. Total financing provided by the State Audit Office of Georgia amounted to USD44,684. 4. Statement of Financial Position As at October 31, 2016 Cash and cash equivalents: Designated Account (USD) Transit account (GEL) 6,646 Tax receivables 515 7,161 Project expenditures 162,045 Foreign exchange difference 478 Total assets 169,684 Funding: IDA/IBRD 125,000 Beneficiary's Funds 44,684 Liabilities _ 169,684 Total liabilities and Funding 169,684 5. Designated Account Statement For the period from November 10, 2015 to October 31, 2016 1 Opening Balance as at November 10, 2015 Add: 2 Cumulative unexplained discrepancy 3 IDA/IBRD advance/replenishment during the current quarter 125,000 4 Less: Refund to IDA/IBRD from DA during the current semester 5 Present outstanding amount advanced to DA 125,000 6 DA closing balance as at 31 /OCT/2016 carried forward to next period 7 Add: Amount of eligible expenditures paid during the current semester 117,361 8 Service charges 9 Less: Interest earned (if credited into DA) 10 Total advance accounted for 117,361 11 Discrepancy(5)-(10) to be explained (See Note 6) 7,639 Page 8 of 10 STATE AUDIT OFFICE OF GEORGIA Advancing public participation in the audit process in Georgia (Grant No. TFOAI 357) NOTES TO THE PTOJECT FINANCIAL STATEMENT For the period from November 10, 2015 to October 31, 2016 Currency: USD 6. Discrepancy Discrepancy consists of Amount Transit Account (note 2.e) 6,646 Tax Receivables (notel 1) 515 Foreign exchange loss (note 2.c) 478 TOTAL 7,639 7. SOE Withdrawal Schedule Expenditure categories Withdrawal No. Goods Training and Consultants' Total Workshops Services 1-A 2-A - 8,108 12,242 20,350 3-A - 4,448 13,813 18,261 4-A - 19,401 21,429 40,830 5-A 17,677 1,034 21,742 40,453 17,677 32,991 69,226 119,894 8. SAOG delegates were on the study tour in South Korea from 18th of June until 25th of June, 2016. Before the study tour, SAOG paid 9,881 USD for hotel accommodation and per-diem expenses to delegates and presented this amount of expenditure in the Withdrawal Application #4-A on 20th of June, 2016. After completion of the study tour, actual days SAOG representatives spent in Korea was one day less than planned. SAOG delegates refunded one-day expenditure of 2,695 USD to the Transit Account of the grant in the State Treasury (on 8th of July, 2016), recognized this amount in the Project Financial Statements, and excluded it from eligible expenditures. However, SAOG has not submitted revised Withdrawal Application to the World Bank and thus, the Withdrawal Application #4-A is excessively presented by respective one-day expenditure of 2,695 USD. 9. Reconciliation Between the Amounts Received by SAO and Disbursed by the World Bank Withdrawal The World Dfeec Category/sub-category Aicatio Value Date SAO Difference Application Bank 2-A 30-Mar-16 20,350 20,350 Goods, Consultant Services, Training 3-A 2-Jun-16 18,261 18,261 and Workshop, Operating Costs 4-A 20-Jun-16 40,830 40,830 5-A 31-Oct-16 40,453 40,453 119,894 119,894 Designated Account advance 1-A 21-Dec-15 50,000 50,000 50,000 50,000 Redemption of Designated Account 2-A 30-Mar-16 - - - Advance 3-A 2-Jun-16 - - - 4-A 20-Jun-16 (4,441) (4,441) - 5-A 31-Oct-16 (40,453) (40,453) - (44,894) (44,894) - Total 125,000 125,000 - Page 9 of 10 STATE AUDIT OFFICE OF GEORGIA Advancing public participation in the audit process in Georgia (Grant No. TFOA1 357) NOTES TO THE PTOJECT FINANCIAL STATEMENT For the period from November 10, 2015 to October 31, 2016 Currency: USD 10. Cash and cash equivalents For the period from November 10, 2015 to October 31, 2016 Balance of Project Funds at start of reporting period as at November 10, 2015 Total cash receipts 169,684 WB 125,000 SAO 44,684 Total cash payments 162,560 WB 117,876 SAO 44,684 7,124 Expenses from foreign exchange difference (478) Balance of Project Funds at the end of reporting period as at October 31, 2016 6,646 11. VAT receivables For the period from November 10, 2015 to October 31, 2016 VAT Paid (15,436) Reverted VAT 14,898 Foreign exchange difference, net 23 VAT receivables 515 Page 10 of 10