“Central Asia roads links project – CARs-2” Grant No. D030-TJ, Credit No. 5593-TJ The project financial statements for the year ended December 31, 2019 and independent auditors’ report “CENTRAL ASIA ROADS LINKS PROJECT – CARS-2” GRANT NO. D030-TJ, CREDIT NO. 5593-TJ TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT’S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2019 2 INDEPENDENT AUDITORS’ REPORT 3-4 THE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2019: Summary of funds received and expenditures paid 5 Summary of expenditures paid by project components 6 Notes to the project financial statements 7-14 "GENTRAL ASIA RoADS LINKS PRoJECT _ GARS_2" GRANT No. D030_TJ, cREDlT No.5593-TJ SТАТЕПЛЕNТ ОF MANAGEMENT,S RESPONSIB|LIT|ES FOR ТНЕ PREPARATION AND APPROVAL оF тнЕ PRoJECT FlNANclAL STATEMENTS FoR тнЕ YEAR ENDED DEGEMBER 31, 2019 The following statement, which should Ье rеаd iп conjunction with the independent auditors' responsibilities is made with а view to distinguish the respective responsibilities of management and those of the independent auditors iп rеlаtiоп to the ргоjесt financial statements of the Ргоjесt "Central Asia rоаds links pýect - CARs-2', Grапt No. D030-TJ, Credit No. 5593-TJ (the "Project"). Мапаgеmепt is rеsропsiЬlе for the рrераrаtiоп of the pюject financial statements that рrеsепt fаirlу, iп all material respects, the summary of funds received and expenditures paid and the summary of ехрепditчrеs paid Ьу project components of the Рrоjесt for the уеаr ended December 3'l, 2019 in ассоrdапсе with lпtеrпаtiопаl Public Sесtоr Accounting Standard "Fiпапсiаl Reporting Uпdеr the Cash Basis of Accounting" (the "lPSAS") issued Ьу the lпtеrпаtiопаl Public Accounting Standards Воагd of the lпtеrпаtiопаl Fеdеrаtiоп of Accountants and the Wоrld Bank's Fiпапсiаl Management Sесtог Board's "Guidelines: Аппчаl Fiпапсiаl Rерогtiпg and Auditing fоr World Вапk Fiпапсеd Activities" (the "WB Guidelines"). lп рrераriпg the project financial statements, management is responsible fоr: . selecting suitable accounting policies and applying them consistently; . making judgments and estimates that аrе геаsопаьlе and prudent; о stating whether lpsAs and wB Guidelines have Ьееп followed, subject to апу material dерагtчrеs disclosed апd explained in the project financial statements; and . ргераriпg the pюject financial statements оп а going сопсегп basis, unless it is iпаррrоргiаtе to presume that the Рюjесt will Ье implemented in ассоrdапсе with the established реriоd . Мапаgеmепt is also responsible fоr: о designing, implementing and maintaining effective and sound system of iпtегпаl сопtгоl and for rечеаliпg risks iп system of iпtеrпаlсопtrоl; о maintaining рrорег accounting rесоrds that disclose, with rеаsопаьlе ассчrасу at апу time, the financial position of the Project, and which епаЬlе them to епsчrе that the project financial statements of the Project comply with lPSAS and WB Guidelines; . compliance with laws апd regulations of the Republic of Tajikistan, accounting system of the project and the rеquirеmепts of the World Вапk; . taking such steps as аrе rеаsопаьlу available to them to safeguard the assets of the project; and detecting and preventing fraud апd оthеr irrеgчlаritiеs. The project financial statements fоr the уеаr ended DесеmЬег 31, 2019 wеге approved and authorized fоr issue оп August 14,2019 Ьу the mапаgеmепt of the Рюjесt. +\ \d ilЁ Askarzoda Sh. Project Director Head of Fiпапсе and accounting Department of the ltЛinistry of ТrапsроЁ August 14,2020 August 14,2020 Dushanbe, the Republic of Tajikistan Dushanbe, the Republic of Tajikistan ,,CENTRAL ASIA RoADS LINKS PRoJEGT GARS-2" - GRANT No. D030_TJ, cREDlT No.5593_TJ SUMMARY OF FUNDS RECEIVED AND EXPENDITURES PAID FoR тнЕ YEAR ENDED DEGEMBER 31,2019 (iп US dollars) Fоr the year Fоr the уеаr cumulative ended ended December 31, DесеmЬеr 3,1, 2019 2018 Орепiпg balance 866;220 1,584,310 Funds recejved Credit No.5593-TJ 5 9,254,630 10,499,407 32,528,868 Grапt No. D030-TJ 5 6,481,204 contribution of the Government of the Republic of Tajikistan 5 1,528,529 1,9,t3,589 6,772,409 ,l0,783,.159 Tota! funds received 12,412,996 45,782,481 оthеr iпсоmе 141 Total rесеiрЪ 10,783,159 12,412,99в 45,782,в22 Pýect expenses works fоr Раrt l 9,708,212 12,391,0и 4о,462,245 Goods; поп-сопsчltiпg services, consultants' services, training and iпсrеmепtаl operating costs (including , audit) 663,816 74о,о74 4,031,539 pýect ехрепsеs ,t0,372,028 44,493,7u Total 1 3,1 31 ,078 Fоrеigп exchange loss 2 8 11,489 Glоsiпg ЬаIапсе _127J34g_ _1,277,Mg_ ý o\i Askarzoda Sh. / Project Director Head of Fiпапсе and Accounting DераЁmепt of the Ministry of ТrапsроЁ August 14, Augubt 14,2020 Dushanbe, the Republic of Tajikistan kistan Dushanbe, the Republic of Tajikistan The notes оп pages 7-14 form ап iпtеgrаl part of the рюjесt financial Statements. The independent auditors' rероrt is оп pages 3,4. 5 "CENTRAL ASIA RoADS LINKS PRoJEGT _ GARS_2" GRANT No. D030_TJ, cREDlT No.5593-TJ SUMMARY ОF EXPENDITURES PAID BY PROJECT COMPONENTS FoR тнЕ YEAR ENDED DEGEMBER 31,2019 (iп US dollars) Fоr the уеаr Fоr the уеаr cumulative ended ended December 31, DесеmЬеr 3't, 20.19 2018 Part 1: Rehabilitaton of priority гоаd sections iп ,10,200,535 12,792,474 42,541,443 Sugd Oblast Part 2: lmрrочеmепt of road operations and asset management ргасtiсеs 54,704 175,362 1,275,153 Рагt 3: Рюjесt management and implementation 1в3,242 677,188 -_-!q=L ____19372,0ж __44,493,7ц_ -1-9J91,079_ / Project Director Head of Fiпапсе and Accounting DераЁmепt of the Ministry of Transport August 14,2020 August 14,2020 Dushanbe, the Republic of Tajikistan Dushanbe, the Republic of Tajikistan The notes оп pages 7-14 fоrm ап integral part of the project financial statements. The independent auditors' rероrt is оп pages 3-4, “CENTRAL ASIA ROADS LINKS PROJECT – CARS-2” GRANT NO. D030-TJ, CREDIT NO. 5593-TJ NOTES TO THE PROJECT FINANCIAL STATEMETS FOR THE YEAR ENDED DECEMBER 31, 2019 (in US dollars) 1. GENERAL INFORMATION According to the Financing Agreements between the Republic of Tajikistan and International Development Association (the “IDA”, “the World Bank”) dated April 16, 2015, the IDA provided a Grant No. D030-TJ and a Credit No. 5593-TJ in the amount of 4,700,000 Special Drawing Rights and 26,500,000 Special Drawing Rights, respectively to the Republic of Tajikistan. The Grant and Credit were provided for implementation of the Project “Central Asia roads links project - CARs-2” (the “Project”). According to the Financing agreements expenses under Category I (Works for Part I) are shared between Grant/Credit and the Government of the Republic of Tajikistan using the following proportion: 83% - contribution of the IDA (Grant/Credit funds) and 17% - contribution of the Government of the Republic of Tajikistan. Project purpose The objective of the Project is to increase transport connectivity between the Republic of Tajikistan and neighboring countries along priority cross-border road links in Sugd Oblast, and to support improvements in road operations and asset management practices. The Project is implemented during 2015-2020, and comprises of 3 parts: Part 1: Rehabilitation of priority road sections in Sugd Oblast; Part 2: Improvement of road operations and asset management practices; Part 3: Project management and implementation. Part 1: Rehabilitation of priority road sections in Sugd Oblast Rehabilitating approximately 70 kilometers of road sections in Sugd Oblast, including and within close proximity of the road linking Kuckkak-Kim-Isfara-Guliston Dehmoi-Proletarsk-Madaniyat, and Kanibadam-Patar through the provision of works and consultants’ services. Part 2: Improvement of road operations and asset management practices Provision of goods and consultants’ services for improving road operations and asset maintenance practices, including: (i) a review of technical standards, norms and parameters on vehicle weight and axle road limits and tariffication, development of an axle loading control plan and financing of equipment necessary to implement the axle loading control plan; (ii) procurement of roughness profiler; and (iii) support towards final deployment of a road asset management system, and preparation of a Transport Sector Development Strategy within the Ministry of Transport of the Recipient. Part 3: Project management and implementation Providing support for project coordination, implementation and management through the provision of goods, consultants’ services, training, and incremental operating costs, including for Project’s external audit. Project management Project is implemented by Project Implementation Group (the “PIG”) under the Ministry of Transport of the Republic of Tajikistan. Original duration of the Project was from April 16, 2015 to August 31, 2020. According to letter from World Bank dated July 22, 2020 the closing date of the Project was prolonged till December 31, 2020. 7 2. PRESENTATION OF THE PROJECT FINANCIAL STATEMENTS Basis of preparation These project financial statements have been prepared in accordance with the International Public Sector Accounting Standard (the “IPSAS”) “Financial Reporting under the Cash Basis of Accounting” issued by the Public Sector Committee of the International Federation of Accountants, and incorporate the following principal accounting policies, which have been consistently followed in all material respects and comply with the World Bank’s Financial Management Sector Board’s “Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities” (the “WB Guidelines”). Under the cash basis approach income (or expenditure) is recognized when cash is received (or paid) irrespective of when goods or services are received or provided. The Project’s approved budget disclosed by categories of expenses is not publicly available and as such comparison of budget and actual amounts is not presented. These project financial statements consist of: • Summary of funds received and expenditures paid; • Summary of expenditures paid by project components; • Notes to the project financial statements, including short description of main statements of accounting policy and other descriptive notes. The reporting currency of these project financial statements is US dollars (the “USD”). 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash basis of accounting The project financial statements are prepared on a cash basis of accounting. The cash basis of accounting recognizes transactions and events only when cash (including cash equivalents) is received or paid by the Project. The project financial statements prepared under the cash basis provide information about the sources of cash raised during the period, the purposes for which cash was used and the cash balances at the reporting date. The measurement focus in the project financial statements is balances of cash and changes therein. Foreign currency Operations in foreign currency initially are counted in functional currency by the currency exchange rate settled by National bank of Tajikistan (“NBT”) on a date of operation. Funds received are translated into US dollars at official exchange rate of Special Drawing Rights (the “SDR”) at the date of funds receipt. All payments made in local currency are translated into US dollars at the official exchange rate defined by NBT at the date of the last conversion . Monetary assets and liabilities expressed in foreign currency are converted to functional currency at official exchange rate on a date settled by the NBT. All foreign exchange differences resulted from maturity or recounting are included in the summary of funds received and expenditures paid. Non-monetary items are valued according to their historic cost in foreign currency, which are recalculated on rates of the initial operation date. Cash and cash equivalents Cash and cash equivalents include cash on hand and due from banks, which can be converted to the corresponding amount of cash in the short term. Balances of advances paid to employees at the end of the period are also part of closing cash position. 8 Taxes Calculation and payment of personal income tax and social security contributions from income of staff and consultants is made in accordance with the requirements and rates of the Tax Code of the Republic of Tajikistan and relevant legislation of the Republic of Tajikistan. Project expenses The expenses are recorded in the period when they were actually paid. Sources of funds The funds were provided by the World Bank to the Project by advance, replenishment of designated account or through direct payment. 4. CASH AND CASH EQUIVALENTS Cash and cash equivalents as at December 31, 2019 and 2018 comprise: Source of financing Currency December 31, December 31, 2019 2018 Designated account Grant No. D030-TJ USD 1,277,349 866,179 Transit account Grant No. D030-TJ TJS - - Transit account Contribution of the Government of the Republic of Tajikistan TJS - 1 Cash on hand Grant No. D030-TJ TJS - 40 1,277,349 866,220 5. FUNDS RECEIVED The funds received are presented by the following financing methods and sources of financing: For the year For the year Cumulative ended ended December 31, December 31, 2019 2018 Grant No. D030-TJ Reimbursement of expenses - - 3,446,644 Advances - - 2,000,000 Direct payments - - 1,034,560 Credit No. 5593-TJ Advances 1,055,545 - 1,055,545 Direct payments 8,199,085 10,499,407 31,473,323 The Government of the Republic of Tajikistan Contribution 1,528,529 1,913,589 6,772,409 10,783,159 12,412,996 45,782,481 9 6. PROJECT EXPENSES The Project expenses by components are presented in the summary of expenditures paid by project components. The Project expenses on major categories are presented in the summary of funds received and expenditures paid. Breakdown of project expenses by categories, natures and sources of financing is presented as follows: Works for Part I For the year ended December 31, 2019 Grant Credit Contribution of Total No. D030-TJ No. 5593-TJ the Government of the Republic of Tajikistan Construction works - 8,199,084 1,509,128 9,708,212 Resettlement action plan - - - - - 8,199,084 1,509,128 9,708,212 For the year ended December 31, 2018 Grant Credit Contribution of Total No. D030-TJ No. 5593-TJ the Government of the Republic of Tajikistan Construction works - 10,499,407 1,761,025 12,260,432 Resettlement action plan - - 130,572 130,572 - 10,499,407 1,891,597 12,391,004 Cumulative Grant Credit Contribution of Total No. D030-TJ No. 5593-TJ the Government of the Republic of Tajikistan Construction works 2,280,649 31,473,322 6,384,190 40,138,161 Resettlement action plan - - 324,084 324,084 2,280,649 31,473,322 6,708,274 40,462,245 Goods, non-consulting services, consultants’ services, training and incremental operating costs (including audit) For the year ended December 31, 2019 Grant Credit Contribution of Total No. D030-TJ No. 5593-TJ the Government of the Republic of Tajikistan Consulting services for construction supervision - 492,323 - 492,323 Payroll and related taxes 80,182 - - 80,182 Equipment 49,283 - - 49,283 Bank services 493 830 19,400 20,723 Audit 11,764 - - 11,764 Consulting services 5,421 - - 5,421 Communication 2,939 - - 2,939 Business trips 600 - - 600 Fuel expenses 40 - - 40 Other 541 - - 541 151,263 493,153 19,400 663,816 10 For the year ended December 31, 2018 Grant No. Credit No. Contribution of Total D030-TJ 5593-TJ the Government of the Republic of Tajikistan Consulting services for construction supervision 401,469 - - 401,469 Consulting services 207,914 - - 207,914 Payroll and related taxes 87,211 - - 87,211 Bank services 1,115 - 21,992 23,107 Trainings 6,739 - - 6,739 Fuel expenses 5,291 - - 5,291 Stationery 3,582 - - 3,582 Communication 2,671 - - 2,671 Business trips 1,890 - - 1,890 Other 200 - - 200 718,082 - 21,992 740,074 Cumulative Grant No. Credit No. Contribution of Total D030-TJ 5593-TJ the Government of the Republic of Tajikistan Consulting services for construction supervision 1,524,934 492,323 - 2,017,257 Traffic counters 664,615 - - 664,615 Consulting services 537,664 - - 537,664 Payroll and related taxes 324,730 - - 324,730 Roughness profiler 165,565 - - 165,565 Vehicles 119,756 - - 119,756 Bank services 3,858 830 57,493 62,181 Equipment 49,283 - - 49,283 Trainings 16,490 - - 16,490 Office equipment 14,170 - - 14,170 Communication 12,431 - - 12,431 Audit 11,764 - - 11,764 Stationery 11,582 - - 11,582 Fuel expenses 10,255 - - 10,255 Business trips 5,273 - - 5,273 Software 2,932 - - 2,932 Office renovation 2,097 - - 2,097 Other 3,494 - - 3,494 3,480,893 493,153 57,493 4,031,539 11 7. FINANCIAL POSITION Financial position as at December 31, 2019 and 2018 comprise: December 31, December 31, 2019 2018 ASSETS AND EXPENDITURES Cash and cash equivalents 1,277,349 866,220 Cumulative project expenses 44,493,784 34,121,756 Foreign exchange loss 11,489 11,487 TOTAL ASSETS AND EXPENDITURES 45,782,622 34,999,463 FINANCING Funds received 45,782,481 34,999,322 Other income 141 141 TOTAL FINANCING 45,782,622 34,999,463 8. WITHDRAWAL APPLICATIONS Withdrawal applications for the year ended December 31, 2019 comprise: Sources of Application Value date Direct Advances Total financing payments Credit No. 5593-TJ 40 January 10, 2019 1,254,483 - 1,254,483 41 January 14, 2019 220,884 - 220,884 42 March 27, 2019 1,067,142 - 1,067,142 43 March 29, 2019 188,095 - 188,095 44 July 3, 2019 86,286 - 86,286 45 July 1, 2019 344,673 - 344,673 46 July 18, 2019 556,266 - 556,266 47 July 22, 2019 139,257 - 139,257 48 July 19, 2019 - 1,055,545 1,055,545 49 August 27, 2019 288,011 - 288,011 50 September 24, 2019 265,517 - 265,517 51 September 26, 2019 134,846 - 134,846 52 October 22, 2019 426,409 - 426,409 53 October 24, 2019 103,878 - 103,878 54 November 7, 2019 984,587 - 984,587 55 November 13, 2019 239,857 - 239,857 57 December 12, 2019 568,981 - 568,981 58 December 16, 2019 138,610 - 138,610 59 December 31, 2019 1,191,303 - 1,191,303 8,199,085 1,055,545 9,254,630 Contribution of the Government of the Republic of Tajikistan 1,528,529 - 1,528,529 9,727,614 1,055,545 10,783,159 12 9. STATEMENT OF DESIGNATED ACCOUNT Statement of designated account for the year ended December 31, 2019 comprises: Bank National Bank of Tajikistan Currency US Dollars Bank account 22696840700088 Bank’s location 107A Rudaki ave, Dushanbe, Republic of Tajikistan Balance as at January 1, 2019 866,179 Advances 1,055,545 Total funds received 1,055,545 Transfers to transit account 205,531 Expenses paid 438,844 Balance as at December 31, 2019 1,277,349 10. UNDRAWN FUNDS As at December 31, 2019 undrawn funds are presented as follows: Grant Credit No. D030-TJ No. 5593-TJ in SDR in SDR Approved financing amount 4,700,000 26,500,000 Disbursed during the period from April 16, 2015 to December 31, 2019 4,697,917 23,166,511 Undrawn financing amount 2,083 3,333,489 Financing received as at January 1, 2019 4,697,917 16,479,545 Disbursed in 2019 - 6,686,966 Financing received as at December 31, 2019 4,697,917 23,166,511 11. COMMITMENTS In the normal course of activities, the Project concludes agreements with suppliers of goods and services in accordance with the established budget and procurement plan. Contract value of obligations valid as at December 31, 2019 was as follows: Counterparty Contract No. Contract value Paid up to Remaining December 31, amount to be paid 2019 Branch of "China Railway WUJU CARs-2/ICB-CW, (Group) Corporation Co Ltd" CARs-2/DC-W-01 30,943,748 30,006,605 937,143 Dohwa Engineering Co. Ltd CARs/CS-SSS-01 391,712 266,352 125,360 Diloshub LLC CARs/NCB-G-04 96,048 48,024 48,024 Aleksandra Spernol CARs/CS-SSS-02 30,347 - 30,347 Khabibulloev Khabibullo CARs/CS-SSS-02 21,686 5,422 16,265 13 *According to the contract No. CARs-2/ICB-CW dated March 28, 2016 with Branch of China Railway WUJU (Group) Corporation Co. Ltd, the Project should pay the contractor 80% of the total contract amount in US dollars applying fixed exchange rate of 6.6207. 12. LEGAL CASES There were no any legal cases related to the Project. 13. EVENTS AFTER THE REPORTING DATE Project financing During 2020 until the date of issue of these project financial statements the World Bank provided financing to the Project as follows: Sources of Applications Value Date Direct Advances Total financing payments Credit No. 5593-TJ 60 January 3, 2020 203,901 - 203,901 61 May 22, 2020 - 673,164 673,164 203,901 673,164 877,065 Pandemic COVID-19. In early 2020, an outbreak of COVID-19 has been found in a number of countries. In Tajikistan, the first cases of infection with the coronavirus COVID-19 were officially confirmed on April 29, 2020. The project is implemented by the Ministry of Transport of the Republic of Tajikistan. Pandemic coronavirus has made changes in terms of realization of many investment projects. In order to prevent the spread of coronavirus, the Ministry of Transport has restricted visits by third parties. All ministry employees were also instructed to take a coronavirus test. Project employees were not sent on vacation or remote work, all employees worked as usual. While the exact effect of the COVID-19 is unknown, it is clear that it poses substantial risks. The Project assesses the situation and undertakes mitigating steps to reduce the impact that may be caused by the adverse market situation. At the moment, negotiations have begun on prolongation of implementation period of the Project. As at the date of issue of the project financial statements no other significant events or transactions occurred, except for the events or transactions described above. 14