I SECOND HEALTH AND SOCIAL PROTECTION PROJECT (IDA GRANT N9H839- KG, IBRD/IDA GRANT NQTF015135, KfW GRANT 201166396/201365469; IDA CREDIT N95235-KG) Special purpose project financial statements for the year ended 31 December 2017 Il Il Il El El Il Il Il I SECOND HEALTH AND SOCIAL PROTECTION PROJECT TABLE OF CONTENTS Page [I STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 1 INDEPENDENT AUDITOR'S REPORT 2-4 I] SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017: Statement of sources of financing and cash expenses by categories 5 Statement of cash expenses by project components 6 Statement of cash expenses by categories 7 Statement of special account 8-9 Notes to the special purpose project financial statements 10-19 I I1 I H I SECOND HEALTH AND SOCIAL PROTECTION PROJECT I STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 Management of the Second Health and Social Protection Project (the "Project") is responsible for the preparation of the special purpose project financial statements that present, in all material respects, the statement of sources of financing and cash expenses by categories, the statement of cash expenses by project components, the statement of cash expenses by categories and the statement of special account for the year ended 31 December 2017, in compliance with the International Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting" ("IPSAS - Cash Basis") and the World Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities" (the "WB Guidelines"). I In preparing the special purpose project financial statements, the Management is responsible for: * Properly selecting and applying accounting policies; * 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 and the WB Guidelines are Insufficient to enable users to understand the Impact of particular transactions, other events and conditions on the Project's financial position and financial performance; * Making an assessment of the Project's ability to continue as a going concern. The Management 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 financial position of the Project, and which enable them to ensure that the special purpose project financial statements comply with IPSAS - Cash Basis and the WB Guidelines; * Maintaining statutory accounting records In compliance with the Kyrgyz Republic legislation, IPSAS - Cash Basis, and the WB Guidelines; a Taking such steps that are reasonably available to them to safeguard the assets of the Project and to affirm that funds received were used for the purposes the financing was provided for; and * Preventing and detecting fraud and other Irregularities. The special purpose project financial statements for the year ended 31 December 2017 were approved by the Management on 6 November 2018. I ^7 On behalf the nagement: K. S, ev M. M. Atakulov G. Mamatova The I istdr of Heath of the Head of Finance Policy Head of Accounting I I Reptoiuc Department and Reporting Division 6 NoVember 2010.. Bisbkek,AKyrgyz'Aepublic Deloitte & Touche, LLC Office 906, 9th floor 19 Razzakov Street eloitteBishkek, 720040, eKyrgyz Republic Tel: +996 (312) 39 82 88 Fax: +996 (312) 39 82 89 deloitte.kg INDEPENDENT AUDITOR'S REPORT To the Management of Second Health and Social Protection Project Opinion We have audited the special purpose financial statements of the Second Health and Social Protection Project (the "Project"), which comprise the statement of sources of financing and cash expenses by categories, the statement of cash expenses by project components, the statement of cash expenses by categories and the statement of special account for the year ended 31 December 2017 and notes to the special purpose project financial statements, including a summary of significant accounting policies. In our opinion, the accompanying special purpose financial statements of the Second Health and Social Protection Project for the year ended 31 December 2017 are prepared, in all material respects, in accordance with the International Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting" ("IPSAS - Cash Basis") and the World Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities" (the "WB Guidelines"). Basis for Opinion We conducted our audit in accordance with International Standards of 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 (the "IESBA Code") together with the ethical requirements that are relevant to our audit of the special purpose project financial statements in the Kyrgyz Republic, and we have fulfilled our other ethical responsibilities in accordance with 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 opinion. Emphasis of Matter - Basis of Accounting and Restriction on Distribution and Use We draw attention to Note 2 to the special purpose project financial statements, which describes the basis of accounting. The special purpose project financial statements are prepared to assist the Project to comply with the requirements of the International Development Association ("IDA"). As a result, the special purpose project financial statements may not be suitable for another purpose. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as "Deloitte Global) does not provide services to clients. Please see wo tgage m in for a more detailed description of DTrL and its member firms. P 2018 Deloitte & Touche, LLC. All rights reserved. This report is intended solely for the use of the management of the Project, the Ministry of Health of the Kyrgyz Republic, the Mandatory Health Insurance Fund, and the Ministry of Finance of the Kyrgyz Republic, in communicating to the IDA. This report is not intended for the benefit of any other third parties and we accept no responsibility or liability to any party other than those mentioned above in respect of the report. Should any third party take decisions based on the contents of the report, the responsibility for such decisions shall remain with those third parties. Our opinion is not modified in respect of this matter. Responsibility of Management for the Special Purpose Project Financial Statements Management is responsible for the preparation and fair presentation of these special purpose project financial statements in accordance with the basis of accounting described in Note 2. This Includes determining that the IPSAS - Cash Basis and the WB Guidelines are an acceptable basis for the preparation of the special purpose project financial statements In the circumstances, and for such internal control as management determines is necessary to enable the preparation of special purpose project financial statements that are free from material misstatement, whether due to fraud or error. In preparing the special purpose project financial statements, management is responsible for assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless management either intends to liquidate the Project or to cease operations, or has no realistic alternative but to do so. Auditor's Responsibility for the Audit of the Special Purpose Project Financial Statements I Our objectives are to obtain reasonable assurance about whether the special purpose project 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 judgement and maintain professional scepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the special purpose project 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 related disclosures made by management. I I I I3 I a 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 auditor's report to the related disclosures 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 date of our auditor's report. However, future events or conditions may cause the Project to cease to continue as a going concern. 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. 6 November 2018 Bishkek, Kyrgyz Republic U4 I U I I I U I U U 4 U SECOND HEALTH AND SOCIAL PROTECTION PROJECT I STATEMENT OF SOURCES OF FINANCING AND CASH EXPENSES BY CATEGORIES FOR THE YEAR ENDED 31 DECEMBER 2017 In thousands of Soms (unless otherwise stated) Budget Notes means Special funds MHI funds Co-payment Total Balance as at 1 January 8 2017 - 217,798 267,080 39,035 523,913 Funds received 9 12,134,694 1,275,009 2,209,934 480,220 16,099,857 Cash expenses by categories: Salaries 7,150,454 567,493 694,681 7,463 8,420,091 Contributions to the Social Fund of the Kyrgyz Republic 1,215,487 95,792 119,975 1,288 1,432,542 Expenses for purchases of medicines 962,731 115,571 924,327 251,615 2,254,244 Utility 635,375 49,163 3,225 - 687,763 Other goods and services 412,081 91,807 81,145 19,633 604,666 Expenses for purchase of food 384,414 26,797 - 127,688 538,899 Equipment 290,534 63,030 338,243 - 691,807 Expenditures for the current repair of property 226,863 84,095 31,243 2,630 344,831 Social payment to public 189,310 - 6,878 - 196,188 Procurement of goods and materials for current economic purposes 179,225 94,600 183,406 41,989 499,220 Transportation expenses 153,968 20,737 2,385 - 177,090 Buildings and constructions 113,369 42,781 1,977 - 158,127 Travel expenses 53,315 19,076 25,220 - 97,611 Other expenses 167,568 15,211 12,231 313 195,323 Total expenses 12,134,694 1,286,153 2,424,936 452,619 16,298,402 Balance as at 31 December 2017 8 - 206,654 52,078 66,636 325,368 On behalf the nagement: K. S. M. MAtakulov G. Zh. Mamatova The M ster f Health of the Head of Finance Policy Department Head of Accounting and Kyrgy Republic Reporting Division 614-ovember 2018 Bishkek, Kyrgyz Republic Notes on pages 10-191orm an Integral part of these special purpose project financial statements. I I U I SECOND HEALTH AND SOCIAL PROTECTION PROJECT STATEMENT OF CASH EXPENSES BY PROJECT COMPONENTS FOR THE YEAR ENDED 31 DECEMBER 2017 In thousands of Soms (unless otherwise stated) Deviation of cash expenses Approved Updated from updated Budget Budget Cash budget Notes (unaudited) (unaudited) expenses (unaudited) 1. Government Guarantees Programme 4 13,318,185 13,427,239 12,684,426 -6% 2. Medical, Social and Rehabilitation Assistance 5 2,396,284 2,860,594 2,291,224 -20% 3. Public Health Care 6 751,561 851,229 802,168 -6% 4. Additional MHI Programme 7 250,836 219,036 228,545 4% 5. High Technologies Fund 241,500 264,100 216,107 -18% 6. Expenses of Ministry of Labour and Social Development 51,092 81,707 75,932 -7% Total 17,009,458 17,703,905 16,298,402 -8% On behalf the lanagement: K. S. po aev M. M. alov G. Zh. Mamatova The M ster oTfealth ofthe Head of Finance Policy Department Head of Accounting and Kyrgy R¶public Reporting Division 6 ovember 2018 BIs(kek Kyrgyz Republic Notes,n,pages 10-19 form an integral part of these special purpose project financial statements. B6 I1 I I B I B 6 B SECOND HEALTH AND SOCIAL PROTECTION PROJECT STATEMENT OF CASH EXPENSES BY CATEGORIES FOR THE YEAR ENDED 31 DECEMBER 2017 In thousands of Soms (unless otherwise stated) Deviation of cash expenses Approved Updated from updated Budget Budget Cash budget (unaudited) (unaudited) expenses (unaudited) Salaries 8,115,260 8,591,963 8,420,091 -2% Expenses for purchases of medicines 2,632,920 2,696,416 2,254,244 -16% Contributions to the Social Fund of the Kyrgyz Republic 1,392,785 1,466,753 1,432,542 -2% Equipment 765,278 948,906 691,807 -27% Other goods and services 696,680 798,653 604,666 -24% Utility 681,764 713,561 687,763 -4% Social payment to public 622,609 222,987 196,188 -12% Expenses for purchase of food 581,280 572,945 538,899 -6% Procurement of goods and materials for current economic purposes 533,543 569,383 499,220 -12% Expenditures for the current repair of property 354,426 370,341 344,831 -7% Buildings and constructions 209,691 241,609 158,127 -35% Transportation expenses 177,818 190,603 177,090 -7% Travel expenses 85,510 114,427 97,611 -15% Other expenses 159,894 205,358 195,323 -5% Total 17,009,458 17,703,905 16,298,402 -8/0 On behalf 11e M a4ement: K. S, C ponb eV M. M. Atakulov Gi. i. MWmatova The MI ter of Health of the Head of Finance Policy Department Head of Accounting and Kyrg bpublic Reporting Division 6 November 2018 Bishkek, yrgyz Republic Notes on pages 10-9 form an Integral part of these special purpose project financial statements. 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GENERAL INFORMATION The National Health Care Reform Programme of the Kyrgyz Republic "Den sooluk" (2012-2016) was extended until 31 December 2018 by the Decree of the Government of the Kyrgyz Republic N2267 dated 11 May 2017. Financing Agreement between the Kyrgyz Republic and the International Development Association dated 16 December 2013, Grant Agreement between the Kyrgyz Republic and the International Bank for Reconstruction and Development and the International Development Association dated 28 May 2014, and Financing Agreement between the Kyrgyz Republic and KfW have been amended accordingly on 27 November 2017. Thus, the Second Health and Social Protection Project for 2012-2018 (the "Project") Is the continuation of the previous national health care reform programmes of the Kyrgyz Republic - "Manas" (1996-2005) and "Manas Taallmi" (2006-2011). The mission of the Project is to create the necessary conditions for the protection and promotion of the population and each Individual wellbeing, regardless of social status and gender differences. The Project includes two parts: 1) The Second Health and Social Protection Project; and 2) Strengthening the administrative capacity of the Ministry of Labour and Social Development of the Kyrgyz Republic. In order to Implement the Project three levels of management were Identified for an appropriate system of accountability: 0 First level. Zhogorku Kenesh (Parliament) and the Government of the Kyrgyz Republic oversee the Implementation of the Project; 0 Second level. The Ministry of Health (hereinafter - the MOH), Ministry of Finance, and the Mandatory Health Insurance Fund (hereinafter - the MHIF) provide strategic guidance and are responsible for the results of the Project. The Implementation of the Project is a -normal process of the MOH and all health care organisations that report to It; and 0 Third level. The executing Institutions provide technical coordination of the various structures, monitoring and reporting on the results of operations and carry out the detailed Implementation of annual action plans. The Project selected four areas for which population health care is planned to Improve: 0 Cardiovascular diseases (expected Improvement: reduction of mortality rates from cardiovascular diseases to 36.9 and 276.0 in a population of 100,000 aged between 30-39 years and 40-59 years respectively); 0 Protection of mothers and newborn children (expected improvement: target prevalence of anemia among children under 5 years of age - 5572; the proportion of children under 5 with diarrhea treated with ORS and zinc more than 75%; the proportion of children under 5 years with pneumonia who received the first dose of antibiotic Immediately after diagnosis (at primary health care / receiving room / emergency medical care levels) more than 75%; number of children treated with ORS for diarrhea and with antibiotic for pneumonia - 75,000; target infant mortality rate of no more than 16.6; target Infant mortality rate among children under 5 years old measured per 1000 live births - no more than 19.8); 0 Tuberculosis (expected improvement: reduction of tuberculosis mortality below 6 cases per 100,000 population by 2018, reduction of Incidences below 96 cases per 100,000 population by 2018); and 0 HIV infection (expected improvement: HIV spread rate of 110 cases per 100,000 population by 2018). 10 SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 (CONTINUED) In thousands of Soms (unless otherwise stated) I The Project is implemented based on the Sector-Wide Approach ("SWAp 2"). A distinctive feature of the SWAp 2 Is to consolidate the efforts of the Government of the Kyrgyz Republic with the donor community: donor funds go to support the state health care budget within standard budget measures, rather than as individual projects. Donor funds involved in co-financing of programmes are transferred to the National Bank of the Kyrgyz Republic and then to the Ministry of Finance of the Kyrgyz Republic for the purpose of financing the health care programmes. The Project Imposes transfer of 50% of total donor funds to support the Government Guarantees Programme and the other 50% to the investment costs. Sources of financing The sources of financing the Project are: * Budget means; Special funds; Mandatory health insurance funds; and * Co-payment funds. 1 Budget means Budget means represent the funds of the republican and local budgets. In addition, budget funds Include donor financing on the basis of SWAp 2. The International Development Association ("IDA"), Swiss Agency for Development and Cooperation ("SDC"), and Kreditanstalt for Wiederaufbau Development Bank ("KfW") act as donors, providing financing in 2017. IDA acts as the administrator of grant funds. I Special funds The procedure of forming special funds is determined by the Regulation "On special means of health care organisations in the single payer system", approved by the Government Resolution #350 on 1 July 2011. Under this regulation, the health care organisations can render certain types of non-medical and medical chargeable services not included in the Government Guarantees Programme to entities and individuals. There is also a special programme that Includes funds from individuals and legal entities in the form of sponsorship, grants for the implementation of certain projects, as well as other funds not prohibited by legislation of the Kyrgyz Republic. Mandatory health insurance funds Mandatory health insurance funds are mainly contributions from mandatory health insurance. In accordance with the legislation, contributors are employers who monthly pay the equivalent of 2% of salary to the fund. Collection of premiums for mandatory health Insurance is done by the Social Fund of the Kyrgyz Republic. Insurance premiums for mandatory health Insurance are accumulated on account at Central Treasury of the Ministry of Finance of the Kyrgyz Republic and used In accordance with the objectives of MHIF. Co-payment funds Co-payment is prescribed by the Government Guarantees Programme on providing citizens of the Kyrgyz Republic with health care. For therapeutic services single co-payment contributions are within the range of 330 to 2,980 KGS. For surgical services co-payment varies from 430 to 3,870 KGS. Expenditures The following sub-programmes were implemented in 2017 under the Project: * Government Guarantees Programme (GGP); Medical, Social and Rehabilitative Assistance; * Public Health Care; * Additional Mandatory Health Insurance (MHI) Programme; * High Technologies Fund; and I * Social Protection. 11H I SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 (CONTINUED) In thousands of Soms (unless otherwise stated) EI Government Guarantees Programme The Government Guarantees Programme on providing citizens with health care includes a guaranteed amount, types and conditions of care for citizens of the Kyrgyz Republic: primary health care, emergency medical care, specialised medical care on an outpatient basis, inpatient care, medical assistance provided by the High Technologies Fund, dental care, drug and vaccine security, prevention of diseases. Medical, Social and Rehabilitation Assistance I The programme of medical, social and rehabilitative assistance Is divided into 3 sub-programmes. * Administration. The main purpose of the sub-programme "Administration" is to increase the capacity of the MOH for policy development, design and Implementation of regulatory mechanisms, to strengthen coordination within the health care system and inter-sectoral collaboration. One of the major objectives is to improve the centralised procurement of drugs and medical supplies as part of the priority programmes; * Medical and social, rehabilitative care. The objectives of the sub-programme "Medical and social, rehabilitative care" Is the realisation of state policy in the field of mental health, reducing morbidity and mortality from tuberculosis, and provision of reproductive health; and * Education. Sub-programme "Education" Is aimed at improving the medical education system and the implementation of sustainable and effective management of the health workforce. Public Health Care Public health care is represented by two separate services of preventive direction, which are aimed at protecting and promoting the health care of the population: * sanitary-epidemiological service; and * health promotion services. Improving the efficiency of public health services Is dependent on the three working areas: * epidemiological supervision including the control of infectious and non-infectious diseases; * strengthening of state regulation; and * health promotion, including the promotion of a healthy lifestyle, raising public awareness about the basic aspects of health. Additional Mandatory Health Insurance (MHI) Programme Additional MHI Programme alms to provide preferential drug provision of the population through a network of pharmacies on an outpatient basis. The programme is valid only for the Insured population and the mechanism of the programme is to make available certain drugs at pharmacies by prescription. When dispensing from the pharmacy, the patient pays only a fraction of the cost of purchasing the drug, the other part of the cost is reimbursed to the pharmacy by MHI funds. High Technologies Fund Medical care that requires high technological assistance is supported by MOH, which provides payment to health care organisations of the cost of expensive and high technological medical services. The main objectives of the programme is to ensure access of the population to expensive high technological treatments and to improve the procurement of high technological medical services. Social Protection The main objective of the "Social Protection" component of the Second Health and Social Protection Project based on SWAp 2 is assistance to the Ministry of Labour and Social Development in enabling the Government to enhance effectiveness and targeting performance of social assistance and social services aimed at supporting poor and vulnerable populations. I 12 I SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 (CONTINUED) In thousands of Soms (unless otherwise stated) For achievement of the mentioned goal the Ministry of Labour and Social Development of the Kyrgyz Republic implements the given component for the following objectives: * Increase of social care system efficiency in providing care to the needy protecting them from poverty; * continue undertakings of the previous project, in particular further implement and improve the registry of social assistance beneficiaries under the information system of social care; and * support to strengthening the national policy towards vulnerable groups, including people with special needs; diagnostic review of the disability certification service with the objective of streamlining disability certification in accordance with modem approaches focusing on abilities and opportunities for rehabilitation. The Ministry of Health of the Kyrgyz Republic Management System The Board consisting of 9 people, the personal composition of which is approved by the Prime Minister of the Kyrgyz Republic, operates for a discussion of policy documents on health care, the most important issues of health care reform, medical education and science, as well as reports of officials of the health care system. Total operational management of the MOH is realised by the Central Office. Funding issues, along with the MHIF and its regional offices are decided by the Central Office; and part of the financing from the local budget of Bishkek health care facilities by Department of Health Care System of El Bishkek City Hall. The MOH has two subordinate departments: the Department of Disease Prevention and State Sanitary and Epidemiological Supervision and the Department of Drug Supply and Medical El Equipment. For the managing purposes all other health care organisations are divided into organisations El directly subordinate to the MOH and territorial (regional, city, district) health care organisations. I13 El SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PRO3ECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 (CONTINUED) In thousands of Soms (unless otherwise stated) Health care facilities are presented as follows: N2 Medical institution Quantity Main functions of Institutions 1 Family Practice Centers 66 - Provision of medical care at the outpatient level; and - Coordination of activities of Family Physicians Groups and services dedicated to speciaised type of primary health care. 2 Territorial hospitals 41 - Provision of qualified consultative and diagnostic care to population. 3 National and scientific centers, scientific- 8 - Provision of specialised medical care In various fields applying advanced research Institutions equipment and scientific achievements attracting highly qualified medical staff; and - Conducting medical, preventive, educational activities, and scientific research In fundamental and applied medicine. 4 Oblast united hospitals 7 - Provision of specialised consultative and diagnostic care to population. 5 General practice centers 28 - Provision of primary medical, consultative, diagnostic, dental, emergency, and extended care; and - Conducting of activities on promotion of healthy lifestyle. 6 Anti-tuberculosis facilities 27 - Provision of consultative, diagnostic, and extended care to patients diagnosed with tuberculosis. 7 The Department of Diseases Prevention 52 - Coordination of activities of state bodies and businesses on issues of sanitary and State Sanitary and Epidemiological and epidemiological welfare of citizens; Supervision - Research and assessment of adverse factors influencing on health of employed and other citizens; and - Defining priorities In scientific research related to sanitary and epidemiological welfare of citizens. 8 National Hospital 1 - Diverse organisation of tertiary level of medical care; and - Provision of qualified, specialised, extended, consultative, and diagnostic care to population. 9 Kyrgyz State Medical Academy, Medical 3 - Meeting the need of the health care sector In receiving secondary, tertiary, institutes additional and post-graduate professional and medical education based on inseparable process of education, scientific research, clinical work; and - Conducting fundamental and applied scientific research In medicine and other related sciences. 10 Dental Care 36 - Prevention of dental diseases; -Timely detection and treatment of patients having diseases in facial area; and -Provision of specialised, consultative, and diagnostic care on the ambulatory level. 11 Mental health facilities 6 - Extended and ambulatory examination, treatment, and social rehabilitation of individuals having mental disorders. 12 Emergency stations and units 2 - Twenty-four-hour free emergency care for patients and injured individuals. 13 Gynecological hospitals, maternity 4 - Treatment of patients having gynecological diseases, pregnant women hospital, perinatal centers experiencing complications, assistance in child delivery; - Providing emergency obstetric and neonatal services; and - Perinatal centers provide medical care to pregnant women experiencing complications, when birth of premature children is expected, who need further treatment. 14 Medical colleges 10 - Meeting the needs of the health care sector In qualified specialists with medical and pharmaceutical secondary education. 15 Children hospitals 3 - Provision of medical, consultative, and diagnostic care to children. 16 Infectious diseases hospital 1 - Provision of medical, consultative, diagnostic, and extended care to patients having infectious diseases. 17 Blood centers 6 - Transfusiology; - Production of blood components and products; and - Cross-field coordination in provision of blood components and products. 18 Center of quarantine and extremely 5 - Provision of consultative and other assistance to the health care facilities dangerous diseases, Republican Center regarding quarantine and extremely dangerous diseases; of Immunoprophylaxis - Monitoring of plague hot spots; - Epidemiological supervision over quarantine and extremely dangerous diseases, - Laboratory research; and - Immunisation. I 14 I SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 (CONTINUED) In thousands of Soms (unless otherwise stated) IN- Medical Institution Quantity Main functions of Institutions 19 Forensic medical examination 7 - Post-mortem examination; - Examination of victims and accused Individuals; and - Processing of materials and criminal cases initiated by law enforcement authorities and prosecutor's office. 20 Drug abuse centers 2 - Provision of medical, consultative, diagnostic, and extended care to drug addicts. 21 AIDS centers 9 - Provision of consultative, diagnostic, medical, and preventive care to HIV positive individuals; - Epidemiological supervision over HIV; and - Collection and analysis of data related to HIV. 22 Groups of family physicians 711* - Structural units of Centers of Family Medicine and General Practice Centers which operate In the MOH system and employ therapists, pediatricians, obstetrician-gynecologists, family physicians, nurses and junior medical staff for provision of primary care to all family members. 23 Adult rehabilitation centers 3 - Provision of specialised medical care In a field of rehabilitation medicine, balneology, physiotherapy, and sports medicine. 24 Child rehabilitation centers 5 - Provision of specialised medical care for children in a field of rehabilitation medicine, balneology, physiotherapy, and sports medicine. 25 Medical Information centers 8 - Management of united health care sector database by organisation of cross- fild system of data collection, processing, storing and provision (based on up- to-date computer technologies), which enables to dynamically assess the state of health and provide Information support for decision-making; -Analysis of medical statistical data on health care facilities network, staff, activities, citizens state of health; and - Management of medical statistical reporting system. 26 Oblast centers of reproductive health 3 - Provision of speclailsed medical care in a field of reproductive health. 27 Preventive Medicine NGO 1 - Provision of scientific and other assistance regarding environmental protection, nutrition hygiene, Infectious control, medical services quality control, conducting research and research findings implementation. 28 Morbid anatomy bureaus 1 - Improvement of medical and prophylactic care by: - clarification of the causes of death; * ensuring reliable data for government statistics of the causes of death; and - analysis of diagnostics and medical care deficiencies. 29 Health strengthening centers 2 - Health strengthening activities; - Development of information and educational materials and manuals, learning models; and - Conducting training sessions on health strengthening. I 30 Feldsher-Obstetrical Ambulatory Points 1,011 - Provision of care and treatment for women during pregnancy, childbirth and postnatal period. 31 Oncological facilities 1 - Provision of high quality and efficient preventive, advisory, medical and 2 Odiagnostic care in sphere of oncology and radiation therapy. 32 Other 14 Total 2,084 * Number of groups of family doctors who are Independent legal entities - 17. I The Project management The cooperation of the Government of the Kyrgyz Republic with the donor community is coordinated through regular discussions of the "round table" twice a year, annual joint revisions of implementation of Second Health and Social Protection Project, and the summits on health care, which are held with the participation of the Central Office of the Government of the Kyrgyz Republic, as well as of ministries and agencies implementing the Project. I I fl SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 (CONTINUED) In thousands of Soms (unless otherwise stated) The overall coordination of the Second Health and Social Protection Project Is realised by the MOH in partnership with the Ministry of Finance, the Ministry of Labour and Social Development, and the MHIF under the Government of the Kyrgyz Republic. Questions of inter-sectoral collaboration, joint policies, coordination and synchronisation of the activities of the ministries and agencies that are involved in the Project, are reviewed semi-annually at the meetings of Coordination Council on Pubilc Health Care under the Government of the Kyrgyz Republic headed by the Deputy Prime Minister. Implementation of the Project within the health care sector is coordinated by the Health Care Policy Council of the MOH, headed by the Minister of Health. The functions of the secretariat of the Council on Health Policy are assigned to the Department of Strategic Planning and Implementation of Health Programs of MOH. Monitoring of Second Health and Social Protection Project implementation is conducted by constantly operating task teams of the MOH of the Kyrgyz Republic which prepare Internal El quarterly reports. 2. ACCOUNTING POLICY Financial Statements Presentation Principles Basis of accounting These special purpose project financial statements are prepared on the cash basis of accounting based on International Public Sector Accounting Standard" Financial Reporting under the Cash Basis of Accounting" ("IPSAS-Cash Basis' Issued by the International Public Sector Accounting Standards Board and incorporate the following principal accounting policies, which have been consistently followed in all material respects and comply with the Guidelines on Annual Financial Reporting and Auditing for World Bank - Financed Activities issued by the World Bank's Financial Il Management Sector Board. The Project financing Is recognised as a source of the Project funds when the cash is received. The Project expenditures are recognised as a use of the Project funds when the payments are made. Preparation and presentation of the financial statements Special purpose project financial statements have been prepared based on the cash accounting basis in accordance with the requirements of the Operational Manual of Second Health and Social Protection Project and Include the following components: Statement of sources of financing and cash expenses by categories; * Statement of cash expenses by project components; * Statement of cash expenses by categories; * Statement of special account; and * Notes to the special purpose project financial statements. The summary of significant accounting policies used in the preparation of the special purpose project financial statements is stated below. These policies were used consistently during the whole reporting period. Accounting method These special purpose project financial statements were prepared on the cash-basis accounting method that implies that expenses are the funds used for payment for works, goods and services and which are disclosed in statements when paid. Presentation currency and transactions in foreign currency These special purpose project financial statements are denominated in Soms. Donated financing obtained by the Project is converted into national currency at the rate of the National Bank of the Kyrgyz Republic at the date of conversion. 16 El SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 (CONTINUED) In thousands of Soms (unless otherwise stated) I Comparative information These special purpose project financial statements do not present corresponding figures, as they are not required by IPSAS-Cash Basis. 3. GOVERNMENT GUARANTEES PROGRAMME UPDATED BUDGET BY SOURCES H (UNAUDITED) Budget Special Total means funds MHI funds Co-payment (unaudited) 1.1. In-patient hospitals 5,902,795 379,998 1,381,449 495,272 8,159,514 1.2. Family practice centers 2,499,846 76,300 766,453 58,781 3,401,380 1.3. General practice centers 896,883 12,859 212,613 29,057 1,151,412 1.4. Dentistry 205,575 101,715 - - 307,290 1.5. Emergency 140,594 452 - - 141,046 1.6. Groups of family physicians 47,198 190 34,242 104 81,734 1.7. Administrative expenses of MHIF - - 184,863 - 184,863 Total 9,692,891 571,514 2,579,620 583,214 13,427,239 4. GOVERNMENT GUARANTEES PROGRAMME BY CATEGORIES OF CASH EXPENSES Deviation of cash expenses from Approved Updated updated Budget Budget Cash budget (unaudited) (unaudited) expenses (unaudited) Salaries 6,828,748 7,167,683 7,062,218 -1% Expenses for purchases of medicines 1,764,475 1,695,547 1,356,991 -20% Contributions to the Social Fund of the Kyrgyz Republic 1,170,027 1,219,039 1,199,724 -2% Social payment to public 622,609 222,971 196,172 -12% Utility 557,988 584,281 578,033 -1% Equipment 521,548 606,718 511,905 -16% Expenses for purchase of food 519,268 512,772 485,224 -5% Procurement of goods and materials for current economic purposes 479,261 498,152 440,773 -12% Expenditures for the current repair of property 282,061 293,583 276,883 -6% Other goods and services 230,650 246,165 219,560 -11% Transportation expenses 115,619 122,027 117,781 -3% Buildings and constructions 90,302 114,104 101,498 -11% Travel expenses 57,306 60,672 56,271 -7% Other expenses 78,323 83,525 81,393 -3% Total 13,318,185 13,427,239 12,684,426 -6% H H H H 17 H H U SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 (CONTINUED) In thousands of Soms (unless otherwise stated) I 5. MEDICAL, SOCIAL AND REHABILITATION ASSISTANCE BY CATEGORIES OF CASH EXPENSES Deviation of cash expenses from Approved Updated updated Budget Budget Cash budget (unaudited) (unaudited) expenses (unaudited) Salaries 923,623 1,026,723 969,090 -6% Other goods and services 400,085 487,367 330,633 -32% Expenses for purchases of medicines 255,378 367,786 311,110 -15% Equipment 222,208 315,745 157,772 -50% Contributions to the Social Fund of the Kyrgyz Republic 159,991 177,951 164,906 -7% Buildings and constructions 113,795 120,691 50,075 -59% Utility 102,901 106,415 88,982 -16% Expenses for purchase of food 57,468 56,005 50,386 -10% Transportation expenses 44,206 48,789 41,329 -15% Expenditures for the current repair of property 42,681 43,476 36,878 -15% Procurement of goods and materials for current economic purposes 34,584 47,354 38,089 -20% Travel expenses 13,798 29,731 21,386 -28% Social payment to public - 16 16 0% Other expenses 25,566 32,545 30,572 -6% Total 2,396,284 2,860,594 2,291,224 -20% 6. PUBLIC HEALTH CARE BY CATEGORIES OF CASH EXPENSES Deviation of cash expenses from Approved Updated updated Budget Budget Cash budget (unaudited) (unaudited) Expenses (unaudited) Salaries 362,889 397,557 388,783 -2% Expenses for purchases of medicines 120,731 149,947 141,491 -6% Other goods and services 65,945 65,121 54,473 -16% Contributions to the Social Fund of the Kyrgyz Republic 62,767 69,763 67,912 -3% Expenditures for the current repair of property 29,684 33,282 31,070 -7% Equipment 21,522 26,443 22,130 -16% Utility 20,875 22,865 20,748 -9% Procurement of goods and materials for current economic purposes 19,698 23,877 20,358 -15% Transportation expenses 17,993 19,787 17,980 -9% Travel expenses 14,406 24,024 19,954 -17% Buildings and constructions 5,594 6,814 6,554 -4% Expenses for purchase of food 4,544 4,168 3,289 -21% Other expenses 4,913 7,581 7,426 -2% Total 751,561 851,229 802,168 -6% I 7. ADDITIONAL MHI PROGRAMME Additional MHI programme aims to provide preferential provision of medicines to the population through a network of pharmacies on an outpatient basis. The budget of the programme is formed from the funds of mandatory health Insurance. 18 I SECOND HEALTH AND SOCIAL PROTECTION PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 (CONTINUED) In thousands of Soms (unless otherwise stated) For the year ended 31 December 2017, the original budget for the programme equaled to KGS 260,836 thousand and updated budget equaled to KGS 219,036 thousand, while actual cash expenses amounted to KGS 228,545 thousand resulting in six percent overbudget. There are no consequences of cash expenses exceeding the approved budget for this component of the Second Health and Social Protection Project. Mandatory Health Insurance Fund receives funds from the Social Fund and reimburses pharmacies based on their requests for reimbursement, which in turn depend on the patients' actual demand for medicines. Thus, overbudget implies greater customer demand for medicines. B. CASH BALANCES 31 December 1 January 2017 2017 Balance of special funds of central office of MOH and subordinate organisations 162,118 174,295 Balance of special funds of organisations subordinate to MHIF 44,536 43,503 Special funds 206,654 217,798 Funds of organisations subordinate to MHIF to be returned to the budget of the Kyrgyz Republic 26,911 266,803 Cash balances of central office of MHIF on account at Central Treasury of the Ministry of Finance of the Kyrgyz Republic 25,167 - Balances of MHI funds at health facilities - 277 MHI funds 52,078 267,080 Balance of co-payment funds 66,636 39,035 Co-payment funds 66,636 39,035 Total: 325,368 523,913 9. FUNDS RECEIVED Budget means Special funds MHI funds Co-payment Total Government funds 11,297,014 1,275,009 2,209,934 480,220 15,262,177 Donors' funds 837,680 - - - 837,680 Total: 12,134,694 1,275,009 2,209,934 480,220 16,099,857 10. SUBSEQUENT EVENTS As of the date of issue of these special purpose project financial statements the Management have not Identified any significant subsequent events after the reporting date which require disclosure. 11. APPROVAL OF SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS These special purpose project financial statements were authorised for Issue by the Management of the Project on 6 November 2018. U U. 19 U I