PKF MAK ALYANS LLC - Accountants & business advisors INTERNATIONAL DEVELOPMENT ASSOCIATION BUKHARA AND SAMARKAND SEWERAGE PROJECT WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY INTERNATIONAL DEVELOPMENT ASSOCIATION CREDIT No. 5698-UZ (ADDITIONAL FINANCING) SPECIAL-PURPOSE CASH BASIS FINANCIAL STATEMENTS AND STATEMENTS OF EXPENDITURES FOR THE PERIOD FROM JANUARY 01, 2019 TO DECEMBER 31, 2019 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL-PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2019 3 INDEPENDENT AUDITORS' REPORT 4 INTERNATIONAL DEVELOPMENT ASSOCIATION SPECIAL- PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2019: Special-Purpose Statement of Cash Receipts and Payments 6 3pudi,-Pui pCi. ?ttmant rf nrtnilrd Cnvlni hy nmponontr, Notes to Spocial-Purpose Financial Statements 8-20 2 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL- PURPOSE FINANCIAL STATEMENTS FOR YEAR ENDED DECEMBER 31, 2019 The Management of the Kommunkhizmat Agency (hereinafter - the "Agency") is responsible for the preparation of the Special-Purpose Financial Statements (hereinafter - the "Financial Statements") of the "Bukhara and Samarkand Sewerage Project" (hereinafter - the "Project") implemented by the Agency, funded by the International Development Association Credit, (hereinafter - the "IDA Credit") that present fairly the financial position of the Project as of December 31, 2019, and the funds received, and expenditures incurred for the year ended December 31, 2019, in compliance with the International Public Sector Accounting Standards "Financial Reporting under the Cash Basis of Accounting" (hereinafter - "IPSAS-Cash Basis") In preparing the Financial Statements, the management of the Agency is responsible for: * Selecting suitable accounting policies and applying them consistently; * 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's Special-Purpose Financial Statements. The Management of the Agency 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 fund balance of the Project, and which enable them to ensure that the Financial Statements of the Project comply with specific requirements in IPSAS-Cash Basis; * Maintaining statutory accounting records in compliance with legislation of the Republic of Uzbekistan; * Taking such steps as are reasonably available to them to safeguard the assets of the Project; and * Preventing and detecting fraud and other irregularities. The Financial Statements of the Project for the year ended December 31, 2019 were authorized for issue by the Agency's Management on June 30, 2020. On behalf of the Agency's Management: F. Jur Sh. PCU Coordinator PCU c ountant -3 PKF MAK ALYANS LLC PKF Accountants & business advisors INDEPENDENT AUDITOR'S REPORT To the Management of the Kommunkhizmat Agency Opinion We have audited the Special-Purpose Financial Statements (hereinafter - the "Financial Statements") of "Bukhara and Samarkand Sewerage Project" (hereinafter - the "Project") financed from Credit proceed (Credit No.5698-UZ / Additional Financing) of the International Development Association (hereinafter - the "IDA"), which comprise the special-purpose statement of cash receipt and payments for the period from January 01, 2019 to December 31, 2019, the statement of expenditures (hereinafter - "SOE"), the statement of designated accounts (hereinafter - "DA") and a summary of significant accounting policies and other explanatory notes. The Financial Statements have been prepared by management of the Agency using the International Public Sector Accounting Standards "Financial Reporting under the Cash Basis of Accounting" (hereinafter - "IPSAS - Cash Basis")- In our opinion, I. The iccompanying Special-Purposo Cash Basis Financial Statements, In all material rspFct.9, give H true and fair view of the financial position of the Project as of December 31, 2019, as well as Sources and Uses of Funds, Designated Accounts movements and its balances for the periods then ended and complios with the conditions of the Hnancing Agreement and In accordance with International Public Seclui Accuountiny Standard - Cash Jasis; I. Moreover, (a) with respect to the SOE for the year ended December 31, 2019, adequate supporting documents, records and accounts have been maintained to support claims to the IDA for reimbursements of expenditures incurred; and (b) the expenditures included in the withdrawal applications and reimbursed against are eligible for financing under the Agreements. Ill. The Project Designated Accounts Statement for the year ended December 31, 2019 give a true and fair view of the financial position of the DA of the Project and of the cash flow for the periods then ended. Basis for Opinion We conducted our audit in accordance with the 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 our report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the Financial Statements in the Republic of Uzbekistan and we have fulfilled our other responsibilities under these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Special-Purpose Financial Statements The Management of the Agency is responsible for the preparation and fair presentation of these Financial Statements in accordance with the IPSAS - Cash Basis, and for such internal control as management determines is necessary to enable the preparation of Financial Statements those are free from material misstatement, whether due to fraud or error. Tel: +99871 294-73-86 - Fax: +99871 294-73-85 * info@pkf.uz * www,pkf.uz * www.pkf.corn PKF MAK ALYANS LLC * 22, Aviasozlar street - 1 passage * Tashkent, Uzbekistan * 100016 ISO 9001:2008 PKF MAK ALYANS LLC is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. tort N' OMSflfTAf Auditor's Responsibility for the Audit of the Special-Purpose Financial Statements Our objectives 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 taken together, they could reasonably be expected to influence the economic decisions of users taken based on these Financial Statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout 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. * 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 Project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disnlostires in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the dato of our audItorc roport Huwwvwr, [ulurw wvwnti or condlt kn' may canm thi Prnjil In cwwe ti 'Oii6L1n as a going concern. * 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 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. lkromjon rinbaev [kromjon Urinbaev General Director Qualified Auditor Certificate of Auditor Qualification under No.04383 dated 10 July 2012 Audit Organization "PKF MAK ALYANS LLC" 22, Aviasozlar Street, 1St Passage 100016, Tashkent, Uzbekistan 30 June 2020 5 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT SPECIAL-PURPOSE STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR YEAR ENDED DECEMBER 31, 2019 Amounts are presented in US Dollars 211 ! 2019 31 1 201]1@ - Cumulative OPENING CASH BALANCES Diaaed Account PCU -Cash in USD 871 689 974 387 Special Account.PCU - Cash in UZS (USD equivalent) -202 -TOTAL 871 689 974 589 SOURCES OF FUNDS: RECEIPTS IDA Credit 5698-UZ - Direct Payments 20586 638 13709496 38 433855 IDA Credit 5698-UZ - Replenishments -5281 Other receipts 10 800 _12 200 TOTAL RECEIPTS 20 597 438 13709 496 43664276 TOTAL CASH AVAILABLE 21 469 127 14684 085 43 664 276 USES OF FUNDS: PAYMENTS BY COMPONENTS Part A. Institutional Strengthening and Capacity Bu ilding (55 000) - (55 000) Part B. Phsical Investments (20613 905) 13668545)1 (42564418) Part C. Project M.anagement (209 652) (142 451) (452889) Othqjka ______ _____ ____________________ (1 400) [(1400) TOTAe PYMENTS (20 87857 (13812396 43073707 FX GAIN/ (LOSS) net CLOSING CASH BALANCES Desnated Account PCU - Cash in USD 590 563 871 689 590 563 Special Account PCU - Cash in UZS (USD equivalent) 7 - 7 TOTAL 590 570 871 689 590 570 Signed on behalf of the Agency's Management on June 30, 2020, F. Ju nov PCU Coorditor P ef Accountant Notes on pages 8 to 20 form an integral part of the Special-Purpose Cash Basis Financial Statements. 6 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT SPECIAL-PURPOSE STATEMENT OF DETAILED COSTS BY COMPONENT FOR THE YEAR ENDED DECEMBER 31, 2019 Amounts are presented in US Dollars Actual Components 312.209 Cumulative IDA Credit No.5698-UZ Part A. Institutional Strengthening and Capacity Building A Institutional Strengthenng and Capacit Building_(VK) A.2 Institutional Strengtheninuildin (SVK) A.3 Institutional Strengthening of the Recipients water secto AA Financing of Feasibility Studies for future investments (55000) (55000) Sub-Total (55 000) (55 000) Part B. Physical Investments B-1 Rehabilitation of Se age System of B(14310 599) (24 993707) B.2 Rehabilitation of Sewerage System of Samarkand (6303306) (11570711) Sub-Total (20 613 905) (42 564 418) Part C. Project Management 0.1 Operating costs (151239) (318078) 0.2 Audit (58412) (134811) Other payments -(1400) Sub-Total (096654(4544289) TOTAL PROJECTEXPENDIU(20 878 557) (43 073 707) Signed on behalf of the Agency's Management on 30 June 2020 F Jur Sh. PCU 062inor PCU ccountant Ntot on pag:rs 8 to 20 form an integral part of the Specril-Purpose Cash Basis Financial Statements 7 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Amounts are presented in US Dollars 1 PROJECT AND ITS OPERATION The Government of Uzbekistan (hereinafter - the "Govemment") is implementing the 2nd Phase of Project "Sewerage systems of Bukhara and Samarkand cities" through regional Water Supply Utilities of the Bukhara (BVK) and Samarkand (SVK) and the Project Coordination Unit (PCU) in Tashkent. The main objective of the Project is to increase efficiency and stability of the sewerage system operation in Bukhara and Samarkand. This shall be achieved by means of reconstruction of the sites of existing sewerage systems and facilities as well as expansion of municipal sewerage system in chosen areas not connected to municipal sewerage system at present. The Project is financed by the IDA with a loan of SDR 74.7 million (equivalently to USD 105.0 million). Total cost of the Project is equal to USD 191.89 million, including the additional financing from International Development Association (IDA) in the amount equivalent to USD 105.0 million. The Financing Agreement and the Project Agreement were signed on May 13, 2016. The Sub-Credit Agreements between the Government and Water Supply Utilities were signed July 12, 2016 and finally Financing Agreement became effective since August 12, 2016. Project description The Project consists of the following parts: Part A: Institutional Strengthening and Capacity Building 1 Insitutional strengthening and capacity building of BVK and lnral communities through, inter alia: (a) provision of staff training in utility management with an emphases on improving general management, water and wastewater systems operation, and consumer orientation; (b) design and implementation of public awareness raising campaigns and customer satisfaction surveys; and (c) improvement of internal control and accountability systems; (d) enhancement of the accounting establishment of BVK; and (e) establishment of a pilot SCADA. 2. Institutional strengthening and capacity building of SVK and local communities through, inter alia: (a) provision of staff training in utility management with an emphases on improving general management, water and wastewater systems operation, and consumer orientation; (b) design and implementation of public awareness raising campaigns and customer satisfaction surveys; and (c) improvement of internal control and accountability systems; (d) enhancement of the accounting establishment of SVK; and (e) establishment of a pilot SCADA. 3. Institutional strengthening of the Recipient's water sector services through the provision of technical assistance to review, inter alia: (a) the strategy for the management and development of water sector services at the national level, (b) the technical standards applied in the supply of water sector services; and (c) the price-setting policies for said services. 4, Financing of feasibility studies for future priority (non-Project) investments in the water supply and sanitation sector of the Recipient. Part B: Physical Investments 1. Rehabilitation of Bukhara Sewerage System, including, inter alia: (a) replacement of existing sewers; (b) rehabilitation of existing wastewater pumping stations and construction of an additional wastewater pumping station; (c) construction of new sewers; (d) completion of the rehabilitation of Bukhara Wastewater Treatment Plant; (e) provision of operational equipment; and (f) provision of technical assistance required therefor. 2. Rehabilitation of Samarkand Sewerage System, including inter alia: (a) replacement of existing sewers; (b) rehabilitation of existing wastewater pumping stations and construction of an additional wastewater pumping station; (c) construction of new sewers; (d) completion of the rehabilitation and upgrading of the Samarkand main wastewater treatment plant; (e) provision of operational equipment; and (f) provision of technical assistance required therefor; and (g) construction of a new wastewater treatment plant located in Farkhad. WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Amounts are presented in US Dollars Part C: Project Management Strengthening the PCU's and the respective PIUs Project management, monitoring and coordination capacity through the provision of goods and consultant services (including Project auditing services), Training, and Operating Costs. According to the Uzbekistan's Presidential Decree PP No.2526 dated 06 May 2016, the Kommunkhizmat Agency (hereinafter - the "Agency") was designated as the Executing Agency and responsible for the target and effective use of Credit funds. The Ministry of Finance of the Republic of Uzbekistan is responsible for repayment of the IDA Credit on behalf of the Government of Uzbekistan in accordance with the Financing Agreement. Moreover, there is the agreement of on-lending between the Ministry of Finance of the Republic of Uzbekistan and the Water Supply Utilities of BVK and SVK on accepting the obligations specified in the Financing Agreement. To ensure the coordination of works under the Project, the existing under the Agency, the PCU is responsible for the overall Project management, control and accounting of the Project funds in compliance with the IDA guidelines and relevant National regulatory requirements. Furthermore, in line with the letter of the Ministry of Finance of the Republic of Uzbekistan dated September 10, 2018 requesting the IDA tu uxtund the Closing Date of the Project, and according to the roply lolei of the IDA dated November 02, 2018, the IDA has agreed to the above request and the Completion Date of the Project was extended up to 31 December 2020 with the close of business on 30 April 2021in respect of the eligible expenditures made before the Closing Date (i.e. the payments made or the payments due for goods, works and services that have been provided prior to the Closing Date). The below table specifies the categones of Eligible Expenditures those are financed by IDA. Category Amount of Portion A of Percentage of Expenditures to be the Credit (IDA 5698-UZ) Financed (exclusive of taxes, Allocated In Special except Withheld taxes) Drawing Rights (SDR) Goods, works, non-consulting services, 100% consultants' services, (including auditing services), Training and Operating Costs: (a) For Parts A.1 and B.1 of the Project 34 300000 (b) For Parts A.2 and B,2 of the Project 30 540 000 (2) Goods, Consultants' services (including auditing services), Training and Operating Costs 3060 000 100% under Parts A.3, A.4, and C of the Project Total 67 900 000 Project management According to Presidential Decree, the PCU is established in Tashkent city under the Executive Board of the "Kommunkhizmat" Agency (hereinafter - "Agency"). The PCU is accountable to the authorized person-the General Director of the Agency. The PCU is guided in its activity by the Decree of the President of Uzbekistan NPP-2526 dated 05 May, 2016, the Financing and Project Agreements, applicable World Bank guidelines, sub-financing agreement, as well as the Constitution and Laws of the Republic of Uzbekistan, decrees and instructions of the Cabinet of Ministers, regulator)- acts of the Ministry of Finance of Republic of Uzbekistan and the established Operational Manual. 9 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Amounts are presented in US Dollars The Agency is responsible for overall Project coordination and reporting. The PCU will be responsible for provision of assistance to the BVK and SVK in implementation of the Project in procurement, financial management, and other aspects to the extent required, in direct communication with the World Bank. In addition, the Agency is responsible to: * supervise and take part in day-to-day operational activities relating to the Project, including procurements and financial management; * incorporation of financial monitoring system for control and accounting for disbursement and funds of co- financing organizations, for providing adequate monitoring and providing recommendation to the PCU Coordinator regarding availability and payout of IDA and the Government of Uzbekistan funds; - prepare statements of all financial transactions in Project co-financing; * keep records of all financial transactions within the Project framework; and * keep all Project accounts, the targeted use of funds within the Project framework, preparing financial reports and conducting financial control in conformity with the existing norms and regulations of the Republic of Uzbekistan and the World Bank financial reporting guidelines. The Kommunkliizmat Agency is an agency at the Governmental level, responsible for the coordination of water supply and sewerage projects in Uzbekistan. The PCU was established by the Agency lor the control and coordination of projects financed by the World Bank. 10 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE PERIOD ENDED OCTOBER 31, 2019 Amounts are presented in US Dollars 2 SIGNIFICANT ACCOUNTING POLICIES Basis of preparation These special-purpose Financial Statements have been prepared in accordance with the International Public Sector Accounting Standard (IPSAS) "Financial Reporting under the Cash Basis of Accounting" promulgated by the International Federation of Accountants (IFAC). Those standards require that cash receipts shall be effective when received and expenditures of funds shall be effective when they are paid rather than when incurred. The Financial Statements prepared under the cash basis provide readers with information about the sources of cash raised during the period, the purpose for which cash was used and the cash balances at the reporting date. The measurement focus in the financial statements is balances of cash and changes therein. The Project's special- purpose cash basis Financial Statements are prepared on the basis of cash receipts and disbursements which are a comprehensive basis of accounting. The Financial statements prepared and presented the special-purpose financial statements, which include the following components: * A slatement of cash receipts and payments, which rocognizes all cash receipts, cash payments and cash balances controlled by Ihe PCU, BVK d1d 3VK, * Accounting policies and explanatory nutes; and * Approved budget, a comparison of budget and actual amounts. The financial statements prepared In US Dollars with oiudiy l DullLi. The reporting period of the financial statcmcntc is the period from January 01, 2019 to December 31, 2019. Cash and cash equivalents Cash and cash equivalents are recognized at cost and include cash at cash desk, cash at Designated and Special accounts at domestic banks and cash in transit. In accordance with IPSAS "Financial Reporting under Cash Basis of Accounting" cash is controlled by an entity when the entity can use the cash for the achievement of its own objectives or otherwise benefit from the cash and exclude or regulate the access of others to that benefit. During the period from January 01, 2019 to December 31, 2019, the Designated bank accounts of the Project at the JSCB "Hamkorbank" Tashkent city branch were opened for financing with the IDA's Credit No.5698 - UZ funds in hard currency. In addition, the Project has the Special accounts in Uzbek Scums (UZS) for the expenditures in UZS for operational expenses of the Project. During the reporting period, there were made the Direct payments through IDA accounts. Fixed Assets Fixed assets procured by the Project with the purposes of effective achievement of Project objectives are entered to the Cost Records right after being received. Financing The financing for the Designated Accounts is recognized when funds are transferred from IDA Credit accounts to the Project's Designated Accounts, which are opened at the Tashkent City Branch (TCB) of the JSCB "Hamkorbank" of the Republic of Uzbekistan, 11 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Amounts are presented in US Dollars Disbursement methods of World Bank (IDA) (a) Reimbursement: The World Bank may reimburse the borrower for expenditures eligible for financing pursuant to the Financing Agreement (eligible expenditures) that the borrower has pre-financed from its own resources. (b) Advance: The World Bank may advance funds from the Financing Account into a Designated Account of the borrower to finance eligible expenditures as they are incurred and for which supporting documents will be provided at a later date. (c) Direct Payment: The World Bank may make payments, at the borrower's request, directly to a third party (for example, supplier, contractor, or consultant) for eligible expenditures. (d) Special Commitment: The World Bank may pay amounts to a third party for eligible expenditures under the special commitments entered into, in writing, at the borrower's request and on terms and conditions agreed between the World Bank and the borrower. Project expenditure The Project's special-purpose cash basis Financial Statements are prepared based upon the accounting records of the PCU, which are maintained in both USD and UZS. The initial accounting records consist of summaries of disbursement documents and other payment vouchers. Accounting of the PUU, within the Agency, Is conducted ki accuuiddwu oitl 1Ie applicble law3 of the 11cpublio of Uzbokictan with the specific implementation of the Project, including applying cash method. The policy management programs also include preparation of detailed of cost report on a cash basis in accordance with International Accounting Standards for the Public Sector. The accounting is carried out using the Excel sheets. In accounting, the following operations are used: - Taking into account the actual costs - Accounting of cash transactions; - Accounting of fixed assets; - Accounting of stocks; - Accounting of remuneration; - Settlements with debtors and creditors; - Reporting. The Financial Management of the Project is carried out by the following tasks: 1) Analysis of the performance costs; 2) Analysis of cash expenses and for transfers; 3) Analysis of financial condition; 4) An analysis of budget execution. At the end of each quarter, all the items of expenditure for the quarter and total year to-date are counted up, in order to identify the remainder and in a similar way to keep records of cash expenditure for transfers. 12 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Amounts are presented in US Dollars Foreign currency translation (i) Functional and Presentation currencies The functional currency of the Project is the currency of the primary economic environment in which it operates, The Project's functional currency is Uzbek Soums ("UZS"), however, the major portion of its transactions are in USD. These special-purpose Financial Statements of the Project are also presented in the presentation currency of US Dollars ("USD") as this is convenient for the readers of the financial statements. (ii) Transactions and Balances The assets' additions and expenditure paid for in UZS were translated into USD using the following principles of transaction: * Monetary assets denominated in UZS have been translated into USD using the exchange rate of the Central Bank of Uzbekistan ("CBU") on the date of conversion * All revenues earned and expenditure incurred in UZS denominated into USD were recorded by the exchange rate of CBU, effective at the date of conversion: Gain/Loss resulting from the translation of UZS into USD: Cash & cash equivalents outstanding as at reporting date are translated into USD by using the official rate of the CBU, effective at the reporting date. The officiul cxchanqe rati (-nt hy thn CRU and effective, as at npr.emher 31, 2019: JZS 9,50/,bb to USD 1 (31:12.2018: UZS 8,339.55 to USD 1). At present, the UZS is not a convertible currency outside Uzbekistan. Bank Accounts of the Project During the period from January 01, 2019 to December 31, 2019, the PCU held its Designated Accounts for IDA Credit accounts in USD at the bank named TCB JSCB "HAMKORBANK". In addition, the UZS Special Accounts and other accounts for IDA Credit and Co-financing funds opened at the local bank accordingly. The PCU operates a Designated Accounts in accordance with the provisions laid down in the Financing Agreement. The USD Designated Accounts represent revolving the funds provided from the IDA to facilitate prompt disbursement of funds to implement the Project. The USD Designated Account are used to cover the IDA's share of eligible expenditures, in both, local and foreign currencies. The eligible expenditures are reported to the IDA through the Expenditure Reports/Statement of Expenditure (SOE). The USD Designated Account is replenished by the IDA on the basis of request, prepared by the PCU for validation of USD Designated Account. The UZS Special Accounts were opened to convert the funds received into USD Designated Account from IDA for payments to suppliers and withdrawal of cash. Cash & cash equivalents outstanding as at reporting date are translated into USD at the official rate of the CBU effective at the reporting date. As at 31 December 2019, the official rate of CBU RUz. set at UZS 9,507.56 per USD1. The outstanding balances of the above accounts as at December 31, 2019 are disclosed in Note 6. Principles and standards of financial management system The Financial Management Manual comprises of policies and procedures to assist in ensuring the orderly and efficient management and control of all project resources, and to render proper accountability to all stakeholders. It is concerned with effective financial control over project assets, liabilities, funds, and expenditure together with the systems required accounting for the financial operations of the project. The manual sets forth the policies and procedures for the guidance of all the staff involved in financial management. 13 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Amounts are presented in US Dollars The policies and guidelines convey standards for sound financial management and administration for the project, and are designed to: * promote orderly, economic, efficient and effective operations consistent with project objectives; * prevent and detect fraud and errors; * ensure accuracy and completeness of the accounting records; * facilitate timely preparation of financial information and ensure that financial statements are fairly and accurately presented; * safeguard Project assets; and * ensure compliance with applicable laws, policies and regulations. Changes in accounting policy will be applied from the date of amendment and will not have retroactive application and the financial results will not be amended for the past accounting periods. Primary accounting documents - the basis for reflection each business transaction in the accounting records is a primary accounting document recording the fact of the operations and the disposal of the head to carry it out. Primary accounting documents shall be created at the time of the business transaction. The primary accounting documents is not permitted to amend, is nor confirmed by the participants of the business transaction The bank and cash monetary instruments corrections are not allowed. All original documents should be filed and kept in the appropriate folders. Measuiement of operational transactions- all commItted transactions arc muusured dt their histoncal cost at the date of the transaction. 3 TAXATION The Project is exempted from taxes and levies in line with the Tax Code of the Republic of Uzbekistan. The Decree of the President's of the Republic of Uzbekistan No. PP-2526 dated 06 May 2016 states that the goods, works and services purchased with the IDA funds within the framework of the Project are exempted from customs payments, VAT, mandatory contributions to the state funds-in-trust. Such exemption is considered as a contribution of the Uzbek Government toward the implementation of the Project. 4 SUBSEQUENT EVENTS There are no events after the end of the reporting period, which would require adjustments to or disclosures in these Financial Statements. 5 APPROVAL OF SPECIAL-PURPOSE FINANCIAL STATEMENTS The special-purpose financial statements were approved by the Management of the Agency for issue on 30 June 2020. 14 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Amounts are presented in US Dollars 6 Statements of Cash Balances of the Project The Project had the following Cash Balances as at December 31, 2019: Source of funds Currency Note Account Amount in USD IDA Credit No.5698-UZ USD 7 Designated account -PCU 590 563 IDA Credit No.5698-UZ UZS 8 Special account -PCU 7 Total 590 570 The Designated Account in USD - PCU and Special Accounts in UZS - PCU were opened at JSCB "Harnkorbank" Tashkent branch in Uzbekistan. These Designated and Special Accounts are for the purpose of financing the Project's eligible expenditures made by the fund of IDA. 15 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Amounts are presented in US Dollars 7 Statement of USD Designated Account Account No. 22626 840 9042 6264 6002 Depository Bank: TCB JSCB "HAMKORBANK" Address: Furqat Street, 14, Tashkent Related Credit No. 5698-UZ (IDA) Currency: US Dollars (USD) USD Opening Balance as at 01 January 2019 871 689 Cash Inflow: IDA Replenishments Cash Outflow: Transfer into Special UZS Account (Conversion) (281 111) Return of wrong amount to other projects Closing Balance as at 31 December 2019 590 563 F, JuraA Sh. Us PCU Coordinator PCU C ountant 16 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Amounts are presented in US Dollars 8 Statement of UZS Special Account Account No. 22626 000 3042 6264 6002 Depository Bank: TCB JSCB "HAMKORBANK" Address: Furqat Street, 14, Tashkent Related Credit No. 5698 - UZ (IDA) Currency: Uzbek Soums (UZS) 000'UZS USD Equivalent Opening Balance as at 01 January 2019 Cash Inflow: Transfer from USD Designated Account (Conversion) 2490773 281111 Returned tax amount 72 8 Return of amounts 795 94 Cash Outflow: Financing of eligible expenditure (2 491 573) (281 206) Closing Balance as at 31 December 2019 67 7 17 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Amounts are presented in US Dollars 10 RECONCILIATON OF IDA FINANCING Disbursements Notes Client Connection Client Connection Project data Variance data for 2019 data cumulative cumulative Direct payments 11 20 586638 38433855 38433 855 Advances and Replenishments - 5 218221 5 218 221 20 586 638 43652076 43652076 - 11 IDA DIRECT PAYMENTS DURING REPORTING PERIOD The IDA has made the payments, at the borrower's request, directly to a third party for the eligible expenditures. The table below presents the Direct Payments made during the reporting period to the counterparties from the funds of IDA: Counterparty Category 01.01.2019 - 31.12.2019 LUDWIG PFEIFFER HOCH UND TIEFBAU 1A 1891 613 LUDWIG PFEIFFER HOCH UND TIEFBAU 1A 265632 GRANT THORNTON " 1B 12 /36 GRANT TIIORNTON 200 NAZAR RUSINESS AND TECHNOLOGY 2 4364 GRANT THORNTON 2 25962 EGIS EAU SA 18 21000 EGIS EAU SA 1A 108180 MAXSUS SUV OURILISH INVEST 1B 130 027 EGIS EAU SA 18 15 720 SDE CGTH 1B 350955 EGIS EAU SA j 18 19590 SPETS POLIMER MONTAJ SANATSIYA 18 124 124 149-MEXANIZATSIYALASHGAN KOCHMA KOLONNA 18 291 649 MAXSUS SUV OURILISH INVEST 18 378 168 EGIS EAU SA 1A 24 557 BUILDING DEVELOPMENT HOLDING 1A 530482 OBI HAYOT ENGINEERING LLC 1A 34 484 EGIS EAU SA 1A 64421 LUDWIG PFEIFFER HOCH UND TIEFBAU 1A 541 698 SHOXRUX BINOKOR QURUVCHI PE 1B 29 184 M A X S U S S U V Q U R IL IS H IN V E S T 1 3 7 2 1 7 4 EGIS EAU SA 18 120740 149-MEXANIZATSIYALASHGAN KOCHMA KOLONNA 1B 430 271 SADE CGTH 1B 399 824 EGIS EAU SA 1 21261 OBI HAYOT ENGINEERING LLC 1A 114 138 MESMER EAST LLC 1A 500000 149-MEXANIZATSIYALASHGAN KOCHMA KOLONNA 1B 204 046 MAXSUS SUV OURILISH INVEST 1B 303088 EGIS EAU SA 1B 12 310 GRANT THORNTON 1B 16 114 LUDWIG PFEIFFER HOCH UND TIEFBAU 1 A 275 652 LUDWIG PFEIFFER HOCH UND TIEFBAU 1A 817 621 BUILDING DEVELOPMENT HOLDING 1A 287 865 GRANT THORNTON 2 2 000 18 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Amounts are presented in US Dollars Continuation 149-MEXANiZATSIYALASHGAN KOCHMA KOLONNA 1B 76425 LUDWIG PFEIFFER HOCH UND TIEFBAU 1A 359566 LUDWIG PFEIFFER HOCH UND TIEFBAU 1A 107685 BUILDING DEVELOPMENT HOLDING 1A 108617 OBI HAYOT ENGINEERING LLC 1A 81 119 MESMER EAST LLC 1A 586 697 SADE CGTH 18 685 951 EKOSTANDART EKSPERT 2 5500 MAXSUS SUV QURILISH INVEST 18 332486 TONG SUV OURILISH LLC 1B 92914 SPETS POLIMER MONTAJ SANATSIYA 12 1440 149-MEXANIZATS]YALASHGAN KOCHMA KOLONNA 1B 92 124 EGIS EAU SA 1B 18734 MAXSUS SUV QURILISH INVEST 1B 10044 EGIS EAU SA 1A 115 168 BUILDING DEVELOPMENT HOLDING 1A 279 866 - GRANT THORNTON 2 _ 1 200 OB8 HAYOT ENGINEERING LLC 1A 43 638 LUDWIG PFEIFFER HOCH UND TIEFDAU 1A 209172 MESMER EAST LLC IA 49770 SPETS POLIMER MONTAJ SANATSIYA 1B 49871 MAXSUS SUV OURILISH INVEST 1B 75060 GRANT_THORNTON 1B3 22 381 SADE CGTH' 18 350934 EGIS EAU SA 1 16572 14-MEXANIZATSIYALASHGAN KOCHMA KOLONNA 18 46 380 081 HAYOT ENGINEERING LLC 1A 32053 BUILDING DEVELOPMENT HOLDING 1A 324 753 EGIS EAU SA 15 328 MESMER EAST LLC 1A 404081 SPETS POLIMER MONTAJ SANATSIYA 1A 564476 SPETS POLIMER MONTAJ SANATSIYA 1A EGIS EAU SA 1A 24732 OBI HAYOT ENGINEERING LLC 1A 34759 LUDWIG PFEIFFER HOCH UND TIEFBAU lA 482 478 LUDWIG PFEIFFER HOCH UND TIEFBAU 1A 167 483 EKOSTANDART EKSPERT 227 500 EGIS EAU SA 1B 13 111 MESMER EAST LLC 1A 180 523 KRANTAS LLC 168536 EGIS EAU SA 17 531 BUILDING DEVELOPMENT HOLDING A391 312 OBI HAYOT ENGINEERING LLC 1A 96 792 149-MEXANIZATSIYALASHGAN KOCHMA KOLONNA 1110 029 SADE CGTH 350458 EGIS EAU SA 1A 65425 EKOSTANDART EKSPERT 2 22000 SPETS POLIMER MONTAJ SANATSIYA 11 271828 MESMER EAST LLC 1A 140 253 01 HAYOT FNGINFFRING LLC 1A 1097155 19 WORLD BANK PROJECTS COORDINATION UNIT OF KOMMUNKHIZMAT AGENCY BUKHARA AND SAMARKAND SEWERAGE PROJECT NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Amou~nts are presented in US Dollars Continfu ation BUILDING DEVELOPMENT HOLDING 1A 213505 LUDWIG PFEIFFER HOCH- UND TIEFBAU I_A 260535 EGIS EAU SA 19B 109302 KRANTAS LLC _______ 18 101 767 LUDWIG PFEIFFER HOCH UND TIEFBAU 1A 722810 MESMER EAST LLC 1A 464084 SPETS POLIMER MONTAJ SANATSIYA 1A 1 147706 TOTAL IDA DIRECT PAYMENTS FOR 2019 20 586 638 2U