-a . k4 MINISTRY OF TREASURY AND FINANCE BOARD OF TREASURY CONTROLLERS EMPLOYMENT SUPPORT PROJECT FOR SYRIANS UNDER TEMPORARY PROTECTION AND TURKISH CITIZENS Implemented by TURKISH LABOR AGENCY (ISKUR) Financed Under International Bank of Reconstruction and Development Grant Agreement Numbered TF-AS478 As of December 31, 2020 and For the Year Then Ended Prepared by Nuri ATE$ Meryem KO$AR Senior Treasury Controller Treasury Controller Report's Number 103/3 47/11 INDEPENDENT AUDITOWS REPORT 0 -~ June 21, 2021 CONTENTS EX E C U T IV E SU MMA R Y .................................................................................................................................................................. 3 A . Project Sum m ar ..................................................................................................................................................................... 3 B . O bjectives of A udit ................................................................................................................................................................. 3 C . Scope of A u dit ................................................................................................................................................................. . ..... 3 D . A udit R esults ................................................................................... ........ ............................................................... ..... . E . M anagem ent R ecom m endation ....................................................................................................................................... 4 IN D E PE N D EN T A U D IT O R 'S S R EPO R T ............................. .................... ............................... .............. ................................ 6 O pinion ................................................................................... ............... .. ................ ................................................................ 6 B asis for O pinion ......................................................................... -..... .................. ............. ................................................ - 6 Em phasis of M atter in the Financial Statem en ....................................................................................................... 7 G oing Concern ........................................................................................................................................................................... 7 Responsibilities of Management and Those Charged with Governance or other appropriate term s for the Financi al Statem ents ................................................................................................................................ 7 Auditor's Responsibilities for the Audit of the Financial Statements..........................................................7 1 EXECUTIVE SUMMARY REPUBLIC OF TURKEY MINISTRY OF TREASURY AND FINANCE Board of Treasury Controllers EXECUTIVE SUMMARY A. Project Summary Grant Agreement numbered TF-A5478 of "Employment Support Project for Syrians under Temporary Protection and Turkish Citizens" was signed between Republic of Turkey and International Bank of Reconstruction and Development (IBRD) on December 21, 2017. Employment Support Project for Syrians under Temporary Protection (SuTP) and Turkish Citizens has been carried out within the scope of European Union Facility for Refugees in Turkey (EU FRIT/FACILITY) by Ministry of Labor and Social Security (MoLSS) and ISKUR in order to improve the employability of SuTP and Turkish citizens in the places selected from the regions where SuTP live intensively. Grant Agreement's amount, numbered TF-A5478, signed between IBRD and Republic of Turkey (represented by MoLSS) is C 45.450.000 (forty five million and four hundred fifty thousand Euro). In terms of project, as of December 31, 2020, £14.881.211,96 was disbursed from ISKUR's portion. B. Objectives of Audit The objectives of our audit are; a) To give an opinion on whether the financial statements, prepared as of December 31, 2020, and for the year then ended, present fairly, in all material respects, the financial position of the Project in accordance with the cash receipts and disbursements basis of accounting, b) To determine, as of December 31, 2020, whether ISKUR has complied, in all material respects, with the rules and procedures of the Grant Agreement numbered TF- A5478, c) To examine whether adequate supporting documentation has been maintained to support expenditures incurred and to evaluate eligibility of these expenditures for financing under the IBRD Grant Agreement numbered TF-A5478. C. Scope of Audit We have performed an audit of financial statements of the Employment Support Project for Syrians under Temporary Protection and Turkish Citizens as of December 31, 2020 in accordance with the cash receipts and disbursements basis of accounting. We have also performed a compliance audit on whether Project activities are in line with Grant Agreement. 3 REPUBLIC OF TURKEY MINISTRY OF TREASURY AND FINANCE Board of Treasury Controllers Our audit was conducted in accordance with the International Standards on Auditing published by International Federation of Accountants. There was no limitation in our scope for the Project's audit. D. Audit Results For the financial statements of project; our audit resulted with an unqualified opinion. In addition, as of December 31, 2020, ISKUR has complied, in all material respects, with the rules and procedures of the Grant Agreement numbered TF-A5478. With respect to expenditures, adequate supporting documentation has been maintained to support claims to the World Bank for reimbursement of expenditures incurred; and which expenditures are eligible for financing under the IBRD Grant Agreement numbered TF- A5478. E. Management Recommendation A management letter, dated June 21, 2021, to the attention of the ISKUR was issued separately from this report. The objective of this Management Letter is to enable the auditors to communicate appropriately to those charged with governance and management deficiencies in internal control that the auditors have identified during the audit and that, in the auditors' professional judgment, are of sufficient importance to merit their respective attentions. For this purpose, our recommendations are attached to the Letter. 4 INDEPENDENT AUDIT REPORT'S & FINANCIAL STATEMENTS OF THE PROJECT REPUBLIC OF TURKEY MINISTRY OF TREASURY AND FINANCE Board of Treasury Controllers INDEPENDENT AUDITOR'S REPORT TO TURKISH LABOR AGENCY ANKARA Opinion We have audited the Statement of Sources and Uses of Funds, Statement of Cumulative Investments, Statement of Requests for Reimbursement (SOE Statement) and Statement of Special Account of the "Employment Support Project for Syrians Under Temporary Protection and Turkish Citizens Project" as of December 31, 2020, and for the period then ended, and a summary of significant accounting policies and other explanatory information. The financial statements have been prepared by Turkish Labor Agency (ISKUR) based on financial reporting provisions of the Grant Agreement Numbered TF-A5478. In our opinion; a) The accompanying Statement of Sources and Uses of Funds, Statement of Cumulative Investments, Statement of Requests for Reimbursement (SOE Statement) and Statement of Special Account present fairly, in all material respects, the financial position and cash flows of the "Employment Support Project for Syrians Under Temporary Protection and Turkish Citizens Project" as of December 31, 2020 and for the period then ended in accordance with the provisions of the Grant Agreement Numbered TF-A5478. b) ISKUR, as of December 31, 2020 has complied with, in all material respects, the requirements of the Grant Agreement Numbered TF-A5478. c) With respect to SOEs, adequate supporting documentation has been maintained to support claims to the World Bank for reimbursement of expenditures incurred, and these expenditures are eligible for financing under the Grant Agreement Numbered TF-A5478. Basis for Opinion We conducted our audit in accordance with 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 this report. We are independent of the ISKUR within the meaning of "IFAC Code of Ethics for Professional Accountants" and have fulfilled our other responsibilities under those ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 6 REPUBLIC OF TURKEY MINISTRY OF TREASURY AND FINANCE Board of Treasury Controllers Emphasis of Matter in the Financial Statement Without modifying our opinion, we draw attention to Note 2 to the financial statements, which describe the basis of accounting. The financial statements are prepared to assist ISKUR to comply with the financial reporting provisions of the contract referred to above. As a result, the financial statements may not be suitable for another purpose. Going Concern The Projects financial statements have not been prepared using the going concern basis of accounting. The project will end on December 2021. Responsibilities of Management and Those Charged with Governance or other appropriate terms for the Financial Statements ISKUR is responsible for the preparation and fair presentation of these financial statements in accordance with Grant Agreement Numbered TF-A5478, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Those charged with governance are responsible for overseeing the ISKUR's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements The objectives of our audit 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 auditor's 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 planning and performance of 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 internal control. 7 REPUBLIC OF TURKEY MINISTRY OF TREASURY AND FINANCE Board of Treasury Controllers 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 entity's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * 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 are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We are also required to provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Ahmet TUTAL Chairman of Board of Treasury Controllers Akif Billent BOYACIOLU (Audit Partner) Vice Chairman Nuri ATES Meryei 05R Senior Treasury Controller Treasur 'ontroller Date: June 21, 2021 Address: Ministry of Treasury and Finance Board of Treasury Controllers 06510, Emek, ANKARA/TORKiYE 8 5 .. _ \ О � з м _ N �с О pry и '_' ю � .иi r � � ��.. 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TFOA5478 SPECIAL ACCOUNT STATEMENT ACCOUNT NO:94 14 32 008 AT CENTRAL BANK AS OF DECEMBER 31,2020 AND FOR THE YEAR THEN ENDED (In EURO's) Note Opening Balance 1.882.805,66 Reimbursements to SA 5 14.493.918,20 a) Advance b)Recovery of Advance 7 (800.000,00) c) SOE Procedure 15.293.918,20 Available Funds 16.376.723,86 Payments Made for Expenditures 14.881.211,96 Bank fees charged Transfer of Interest and Exchange 13.584,89 Difference Income to Trust Account 6 Total Project Investments 14.894.796,85 Closing Balance 1.481.927,01 GENERAL DIRECTORATE OF TURKISH EMPLOYMENT AGENCY EMPLOYMENT SUPPORT PROJECT FOR SYRIANS UNDER TEMPORARY PROTECTION AND TURKISH CITIZENS NR. TF0A5478 NOTES RELATED TO PROJECT FINANCIAL STATEMENTS AS OF THE PERIOD ENDING ON 31.12.2020 1. OBJECTIVES AND STRUCTURE OF THE PROJECT Employment Project for Syrians under Temporary Protection (SuTP) and Turkish Citizens (the Project) has been carried out within the scope of European Union Facility for Refugees in Turkey (EU FRiT/FACILITY) by Ministry of Family, Labour and Social Services (MoFLSS) and I$KUR (Turkish Employment Agency) in order to improve the employability of SuTP and Turkish citizens in the places selected from the regions where Syrians under Temporary Protection (SuTP) live intensively. The entire project is funded with a grant of 45.45 million Euros provided according to the Grant Agreement signed between Republic of Turkey and International Bank of Reconstruction and Development (IBRD) on 21 December 2017 and entering into force on 21 March 2018. The closing date of the project was extended by 1 year on 31.12.2020 and updated to 31.12.2021. Beneficiaries of the Project The main beneficiaries of the Project will be working age (15 - 64 ages) SuTP and Turkish citizens living in the selected regions where SuTP live intensively. The companies and public sector employers, which will benefit from subsidised labour force, will also be the indirect beneficiaries of the Project. Communities where project beneficiaries live will be indirect beneficiaries of the project via improvements in public services and infrastructure through improvements in I5KUR's services and labour market transition programmes which will be conducted within the scope of the project. In addition, institutional support will be given to MoFLSS and i5KUR. The Project has two main components: Component 1 - Employment Services and Active Labour Market Programmes (ALMP) Component 2 -- Institutional Support for EmployrieriL Services and ALMPs Component 1 includes language training, labour market transition programmes, skills training courses, applied training programmes for SuTP, various active labour market measures such as covering work permit fees of project beneficiaries who are employed, and support for employment services such as evaluation, counselling and matching. Component 2 will give institutional support to ISKUR and MoFLSS for the services which will be rendered for SuTP. This support includes human resources support for project coordination and implementation, IT support, support for communication, monitoring and evaluation and activities such as improvement of physical infrastructure. Budget of the Project and Financing The entire project will be funded by a Grant of 50 million Euros provided by European Union within the scope of EU FACILITY which is a special fund for supporting Turkish Government during the socio-economic integration of SuTP. The Grant in question will be managed as a composite Trust Fund with sections run by the Recipient (MoFLSS) and the World Bank (the Bank). In accordance with the Administrative Agreement for Trust Fund, total amount of usable fund is 48 million Euros, after deducing an administrative fee of 4 per cent for the Bank. The Recipient-executed Trust fund (RETF) will amount to 45.45 million Euros and finance the activities stated in the Grant Agreement and the Project Appraisal Document (PAD). 44.25 million Euros of the Grant amount is allocated to I5KUR by the Recipient as per the Subsidiary Agreement stipulated in the Grant Agreement. 2. MAIN ACCOUNTING POLICIES (a) Transactions related to the project are accounted on cash basis. On this basis, funds are recorded as resource when they are received, and recorded as expenditure when they are used. (b) Eligible expenditures can be made through designated account (advance) in accordance with the disbursement letter. For withdrawal with advance method, a Designated Account in Euro currency (with upper-limit of 5.000.000 Euros and managed by Turkish Employment Agency PUB (i5KUR-PUB)) was opened in Halk Bank which is one of the commercial banks acceptable by the World Bank. However, this upper limit was increased to 10 million Euros when the project contract was amended and the project was extended on 31.12.2020. Advance balance ceiling for the account managed hy iKKURPUB was determined as Euro in the Disbursement Letter. (c) Transactions related to the project are recorded as and followed in terms of EURO. Transactions realised in other currencies are converted into EURO using valid buying exchange rate of the Central Bank of the Republic of Turkey on the transaction date. (d) Chart of accounts for the Project, which is used within the scope of the project and has been formed to follow fund resources and disbursements in detail required in the project reporting, was created via chart of accounts offered in Accounting Principles and Policies on Projects Financed by the World Bank and Chart of Accounts and Financial Statements Draft Manual which were published by the Board of Treasury Controllers. In this context, since IKUR is in the scope of the 4th chart of the Law no. 5018, the Agency has its own regulations of accounting applications. Relevant account descriptions were made in this chart of accounts. Fund resources and disbursements related to the project are kept in computerised record system in accordance with this determined chart of accounts. Transactions related to all parts of the project are recorded in the books of the project in the system and the project financial statements and reports are produced by the system. 3. FINANCIAL STATEMENTS In accordance with the provisions of the relevant Agreement, utilisation of funds provided within the project is limited to the project objective. Projects funds, which are not yet used at the end of the project, will be returned in accordance with the relevant provisions of the agreement. Regarding utilisation of the project funds, unaudited interim financial statements covering each three-month calendar period are prepared and submitted to the World Bank. 4. CASH AT HAND The funds received within the scope of the project are kept in a designated account and no cash at hand is held. 5. PROJECT DESIGNATED ACCOUNT The bank account in Euro with TR36 0001 2009 4520 0058 0001 92 iban number, which has been opened at the Halk Bank Ankara Corporate Branch, is used as a Designated Account. Advance balance ceiling has been determined as 5 million Euros in the disbursement letter, and as of the end of the review period, a total of 14.493.918,20 Euros have been taken into the designated account and 14,881.211,96 Euros have been spent from the designated account. Within the scope of the early evaluation of the said designated account, a total of 13,584.89 Euros (interest income 13,148.75 Euros, Foreign Exchange Gains 436.14 Euros) has been obtained. For all resource withdrawals from the World Bank, an electronic form is filled in via the World Bank Client Connection system and the application is electronically signed by the authorities and sent to the World Bank. Authorized Signatures for the withdrawal applications were filled in the form attached to the Letter of Disbursement and notified to the World Bank. In the withdrawals, additional forms mentioned in the Disbursement Letter and bearing authorized signatures and certain supporting documents depending on the nature of the withdraw are presented to the World Bank. To report eligible expenditures paid from the Designated Account: - i. Statement of Expenditure prepared in the format provided for expenditures / contracts related to the purchase of goods and services, education and operating costs, - ii. Statement of Expenditure prepared in the format provided for payments within the scope of Active Labour Market Programs (ALMP), - iii. Designated account reconciliation notification and related bank account statement are submitted. Eligible expenditures made from Designated Accounts are reported quarterly or more frequently if needed. Guidance on financial transactions guide has been published and necessary revisions have been made for the payment transactions made from the grant sources in the Designated Account for activities and expenditures, which are considered appropriate for the project components. The guidance covers all processes related to financial management at the central and local level and the practitioners carry out transactions in accordance with these rules. Within the scope of the project, due to the Ruling dated 31.07.2018 and numbered 99274 and annexed VAT Exemption Certificate received from the Revenue Administration, invoices or documents equivalent to invoice made out by the relevant parties for payments are issued without VAT. The mentioned certificate and letter were renewed due to the extension of the project. (The Ruling dated 27.6.2019 and numbered 2320417 and its annex, the certificate dated 27.6.2019 and numbered VAT.IPA.CERT.2019 / E.196.) 6. INTEREST AND FOREIGN EXCHANGE GAIN Within the scope of the project, an advance of 5 million Euros was transferred to the project special account on 13.07.2018. Since the World Bank did not have a clear attitude about whether interest will be earned at first, the balance in the project special account has been evaluated in the time deposit accounts for the following 4 months, according to the General Communique on the Public Treasurer, to which our Institution is also subject. As a result of this evaluation, 13.148.75 Euros of interest and 436.14 Euros of foreign exchange gain were obtained and transferred to the project special account. Afterwards, by the mailings made with the World Bank and in the meeting held on December 4, 2018, it was decided that the project resources should be monitored in the drawing account and the outflows from the project account would be only project expenditures. At the same time, the World Bank stated in the e-mails that the interest and foreign exchange gain can be used by ISKUR for project expenditures or non-project expenditures. Later The World Bank wanted this income not to appear in the project special account. Therefore, the interest and exchange rate income was transferred to the institution accounts in Turkish Lira on 8 January 2020 and is used in project foreign exchange expenses if needed. 7. ADVANCE RENEWAL With the advance withdrawals, through the Client Connection system and based on documentary evidence (SOE and Project designated account breakdown), the designated account is supplemented to the ceiling level of 5 million Euros. The money amount requested in Iskur9, Iskur10, Iskur1l, Iskurl2, Iskurl3, Iskurl4 and Iskurl5 applications is the same as the transferred by the World Bank to the Project special account. However, because the last 6 months of the project closing date was entered since the Iskurl6 application, after 200,000 Euros was deducted in advance for each month, money has been sent to our special account. The first deduction was made in the application made with Iskurl6 in August. 683,785.73 statement of expenditure was made here, but 483,785.73 Euros were transferred to our project special account. The second deduction was made in the Iskurl7 application in November, when the expenditure statements in August, September and October were made collectively. Therefore for the expenditure statement made as 1.998.923, 26 euros, 1.398.923,26 Euros has been transferred to our project special account. Totally 800.000 Euro has been deducted. In other words, our withdrawal ceiling has been reduced to 4.200.000, 00 Euros