Report on the CONSOLIDATED PROJECT FINANCIAL STATEMENTS of the REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina financed by: - IDA Credit No. 5188-BA FOR THE YEAR ENDED DECEMBER 31, 2015 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina CONTENTS 1 Introduction 1 2 Independent Auditor's Report 4 3 Consolidated project financial statements for the year 2015 6 4 Notes to the consolidated project financial statements 11 APPENDICES A.1, Designated account statement - IDA Credit No. 5188-BA - FB&H 13 A,2 Petty cash statement - IDA Credit No. 5188-BA- FB&H 14 A.3 Designated account statement - IDA Credit No. 5788 BA - RS 15 A.4 Local bank account statement - Municipalities contribution - FB&H 16 B SoE Withdrawal Schedule of IDA Credit No. 5188-BA for the year ended December 31 ,2015 17 C Reconciliation between World Bank's disbursement statements in XDR and IDA Credit account in EUR according to the consolidated balance sheet as of December 31 ,2015; SoE Withdrawal Schedule of IDA Credit No. 5188-BA 18 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina 1. Introduction 1.1 Description of the Project Development Objective The development objectives of the Real Estate Registration Project is to support development of a sustainable real estate registration system with harmonized land register and cadastre records in urban areas of both the Federation of Bosnia and Herzegovina ("FB&H") and Republika Srpska ("RS"). Real estate registers (land registers and cadastres) provide base information layers for land administration and for the establishment of a National Spatial Data Infrastructure. They are considered harmonized when their contents are interlinked and verified. Sustainability is measured by the degree an institution generates revenue to match its costs, charges affordable fees, delivers quality services without discrimination and within a reasonable time. A key driving force for the real estate registration system will be the registration of real estate rights and mortgages, and the availability of reliable information to facilitate investments, real estate taxation and spatial planning, and to enable social monitoring of real estate transactions. The Project consists of the following components: Component A: Real Estate Registration Data Development Real estate registration data development will support land register and cadastre data harmonization on land, buildings and rights based on the actual situation in the field. The objective is to establish up- to-date and interlinked land register and cadastre databases, or integrated databases of real estate cadastre. The project will encourage and support the registration of legal rights in the land register (in FB&H) or the real estate cadastre (in the RS) using project produced data. The component will ensure equal treatment of all citizens regardless of their gender, ethnicity or social status by accompanying technical field work with raising public awareness, vulnerability mapping and social monitoring functions. Component B: Real Estate Registration Infrastructure Development Real estate registration infrastructure development will continue Land Registration Project work in improving working conditions and infrastructure in the cadastre offices across the country and in those few land registration offices in FB&H that were not targeted by LRP through: office renovations and purchases; creation of digital archives; and provision of furniture and equipment. The office purchases planned in RS have to be approved by the Land Committee of the World Bank. The objective is to improve working conditions, which will help to improve the quality of customer services, the adherence to service standards developed during LRP, and staff morale. Access to basic surveying technologies will be provided to areas and offices that still rely on conventional methodologies, and sustainability of the recently installed Global Navigation Satellite Systems (GNSS) network will be assured, Information technology investments will lead to further interlinking between real estate registers and other public datasets making the data accessible online to a wide audience and in support of multiple uses. This will lead to the incremental provision of electronic online services and eventually to electronic conveyancing. REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina 1. Introduction (continued) 1.1 Description of the Project Development Objective (continued) Component C: Policy and Institutional Development, and Project Management Policy and institutional development, and project management will support policy and legal development in support of reaching the project development objective. The objective is to enhance sustainability of the real estate registration. The component will have a strong focus on institutional development and capacity building, addressing the long term challenges of sustainability and governance of real estate registers and emphasizing financial sustainability, quality of service and client orientation and social vulnerabilities. Training for the judiciary and land registration personnel on the new real estate legislation, regulations and procedures will be systematized in RS and on other related subjects in both RS and FB&H. In FB&H, the LRP supported training and education program that target the land administration employees across the sector, i.e. in land registries, cadastre offices, planning authorities, etc., and this will continue- The program will ensure the continuity of the training through seminars and workshops in the fields of law, management, ICT, cadastral science, physical planning, etc. The component also includes necessary project management and monitoring support. An impact evaluation (IE) technique will be used to assess how citizens will benefit from the real estate registration programs. The intention is not only to demonstrate the impacts but also to use the evaluation results for improving land registration services, and making urban planning and local property taxation more effective and sustainable. 2 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina 1. Introduction (continued) 1.2 Funding of the Project 1.2.1 IDA Credit No. 5188-BA The State of Bosnia and Herzegovina ("B&H") is the borrower of the International Development Association (IDA) Credit No. 5188-BA, dated August 21, 2013 amounting XDR 22,700,000. Under the terms of a Subsidiary Finance Agreement between B&H, and FB&H and RS, total funds amounting XDR 11,600,000 have been lent to FB&H and funds of XDR 11,100,000 have been lent to RS. Categories of items to be finance out of the proceeds of the Credit, the allocation of the amounts of the Credit to each category and the percentage of expenditures for items so to be financed in each category originally are as follows: Item Amount of the % of expenditure financing allocated to be financed (in XDR) Goods, works, consultants' service, non-consultants (1) services, training and operating costs for Part 1 of the Project 11,600,000 100% (2) Goods, works, consultants' service, non- consultants services, training and operating costs for Part 2 of the Project 9,200,000 100% (3) Purchase of new premises/ branch offices costs for Part 2 of the Project 1,900,000 100% TOTAL 22,700,000 IDA Credit No. 5188-BA became effective on September 23, 2013. Planned closing date is August 31, 2018. 3 Deloitte d.o.o. Jadrarska bb Deloitte. 71000 Sarajevo Bosnia and Herzegovina Tel: +357 (0)33 277 560 Fax: +387 (0)33 277 561 www.deloitte.comlba 2. Independent Auditor's Report To the State of Bosnia and Herzegovina, Ministry of Finance and Treasury Attn. of Minister of Finance and Treasury H.E. Mr. Vjekoslav Bevanda Report on the consolidated project financial statements We have audited the accompanying consolidated project financial statements of the Real Estate Registration Project (the "Project"), which comprise of Summary of sources and uses of funds, Balance Sheet, Designated account and petty cash statements, Statement of Credit withdrawals as of and for the year ended December 31, 2015, and a summary of significant accounting policies and other explanatory notes for the years then ended, financed under IDA Credit No. 5188-BA. These project financial statements have been prepared on the cash basis of accounting based on International Public Sector Accounting Standard ("IPSAS"), as described in Note 4.1. Responsibility for the consolidated project financial statements The State of Bosnia and Herzegovina, i.e. the management of the project implementation units in Federation of Bosnia and Herzegovina and Republika Srpska (the "Management") is responsible for the preparation and fair presentation of these consolidated project financial statements on the cash basis of accounting based on IPSAS, as described in Note 4-1, and on "Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities" issued by Financial Management Sector Board ("FMSB"), and for such internal control as Management determines is necessary to enable the preparation of the consolidated project financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on the consolidated project financial statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing and "Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities" issued by FMSB. Those Standards and Guidelines require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated project financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the special purpose consolidated project financial statements. An audit also includes assessing of the accounting principles used and significant estimates made by management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entty, Please see http:/Mww,wdeloittecom/ba for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Member of Deloitte Touche Tohmatsu Limited Report on the consolidated project financial statements (continued) Opinion In our opinion, the accompanying consolidated project financial statements present fairly, in all material aspects, the financial position of the Project as of December 31, 2015, and of the funds received and disbursed during the years then ended, in accordance with basis of accounting described in Note 4.1. Report on other requirements In addition, with respect to the Statements of Expenditure, adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditures incurred; and all expenditures included in withdrawal applications and reimbursed against are eligible for financing under the Project. Deloitte d.o.o. Sead Bahtanovid, director and licensed auditor Mirza Bihorac, licensed auditor Sarajevo, Bosnia and Herzegovina May 6, 2016 5 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended December 31, 2015 (alt amounts in EUR, unless otherwise stated) 3. Consolidated project financial statements for year 2015 3.1 Summary of sources and uses of funds under IDA Credit No. 5188-BA, Municipalities' contribution and Other income Actual Cumulative Cumulative Cumulative Cumulative Ref. 2015 2015 2014 budget variance FINANCING IDA Credit No. 5188-BA 3.1.1 4,238,601 9,428,309 5,189,708 25,742,111 16,313,802 Municipalities' contribution 3.1.2 161,982 277,709 115,727 277,709 - Other income 3.1.3 59,204 61,419 2,215 - (61,419) TOTAL FINANCING 3.2 4,459,787 9,767,437 5,307,650 26,019,820 16,252,383 PROJECT EXPENDITURE By Category Goods, works, consultants' services, non-consultant services training and operating costs for Part 1 of the Project 1,542,686 2,163,472 620,876 13,434,429 11,270,957 Goods, works, consultants' service, non-consultants services, training and operating costs for Part 2 of the Project 2,939,348 4,909,523 1,970,175 10,431,135 5,521,612 Purchase of new premises/ branch offices costs for Part 2 of the Project 87,533 358,808 271,275 2,154,256 1,795,448 TOTAL EXPENDITURE 32 4,569,567 7,431,803 2,862,236 26,019,820 18,588,017 PROJECT EXPENDITURE By Component Real Estate Registration Data Development 2,913,030 3.864,665 951,635 13,042,728 9,178,063 Real Estate Registration Infrastructure Development 1,249,698 2,781,837 1,532,139 7,154,664 4,372,827 Policy and Institutional Development, and Project Management 406,839 785,301 378,462 5,822,428 5,037,127 TOTAL EXPENDITURE 3.2 4,569,567 7,431,803 2,862,236 26,019,820 18,588,017 6 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended December 31, 2015 (all amounts in EUR, unless otherwise stated) 3. Consolidated project financial statements for year 2015 (continued) 3.1.1 Summary of sources and uses of funds under the IDA Credit agreement No. 5188-BA Actual Cumulative Cumulative Cumulative Cumulative Ref. 2015 2015 2014 budget variance FINANCING IDA Credit No. 5188-BA 25,742,111 Initial deposit - 4,000,000 4,000,000 SoE replenishments 4,238,601 5,428,309 1,189,708 TOTAL FINANCING 3.1 4,238,601 9,428,309 5,189,708 25,742,111 16,313,802 PROJECT EXPENDITURE By Category Goods, works, consultants' services, non-consultant services training and operating costs for Part 1 of the Project 1,499,167 2,011,308 512,141 13,156,720 11,145,412 Goods, works, consultants' service, non-consultants services, training and operating costs for Part 2 of the Project 2,939,348 4,909,523 1,970,175 10,431,135 5,521,612 Purchase of new premises/ branch offices costs for Part 2 of the Project 87,553 358,808 271,275 2,154,256 1,795,448 TOTAL EXPENDITURE 3.2 4,526,048 7,279,639 * 2,753,591 25,742,111 18,462,472 * Difference for EUR 22 between Cumulative 2015 in the table 3.1.1. (EUR 7,279,639) and Cumulative 2015 in Appendix B (EUR 7,279,617) relates to the bank fees paid in 2015, which will be claimed through the application in 2016. 7 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended December 31, 2015 (all amounts in EUR, unless otherwise stated) 3. Consolidated project financial statements for year 2015 (continued) 3.1.2 Summary of sources and uses of funds under Municipalities' contribution (FB&H only) Actual Cumulative Cumulative Cumulative Cumulative Ref. 2015 2015 2014 budget variance FINANCING Municipalities' contribution 161,982 277,709 115,727 277,709 - TOTAL FINANCING 3.1 161,982 277,709 115,727 277,709 - PROJECT EXPENDITURE By Category Goods, works, consultants' services, non-consultant services training and operating costs for Part 1 of the Project 43,519 152,164 108,645 277,709 125,545 TOTAL EXPENDITURE 3.2 43,519 162,164 108,645 277,709 125,545 8 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended December 31, 2015 (all amounts in EUR, unless otherwise stated) 3. Consolidated project financial statements for year 2015 (continued) 3.1.3 Summary of sources and uses of funds under Other income (FB&H only) Actual Cumulative Cumulative Cumulative Cumulative Ref. 2016 2015 2014 budget variance FINANCING Tender documentation sold - IDA Credit account 253 474 221 - (474) Tender documentation sold - Municipalities account 2,458 4,452 1,994 - (4,452) VAT returns 56,493 56,493 - - 56,493 TOTAL FINANCING 3.1 59,204 61,419 2,215 - (61,419) PROJECT EXPENDITURE By Category - - TOTAL EXPENDITURE 3.2 - - 9 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended December 31, 2015 (all amounts in EUR, unless otherwise stated) 3. Consolidated project financial statements for year 2015 (continued) 3.2 Consolidated balance sheet as of December 31, 2015 showing accumulated funds of the Project and bank balances concerning World Bank Funding December 31, December 31, Ref. 2015 2014 ASSETS Project expenditure under IDA Credit No. 5188-BA 3.1.1 7,279,639 2,753,591 Project expenditure under Municipalities' contribution 3.1.2 152,164 _ 108,645 7,431,803 2,862,236 Designated account - IDA Credit No. 5188-BA - FB&H A.1 1,434,493 1,950,565 Petty cash statement - IDA Credit No. 5188-BA - FB&H A.2 244 144 Designated account - IDA Credit No. 5188-BA - RS A,3 714,407 485,629 Local bank account - Municipalities' contribution - FB&H A.4 186,490 9,076 2,335,634 2,445,414 Total assets 9,767,437 5,307,650 LIABILITIES IDA Credit No. 5188-BA C 9,428,309 5,189,708 Municipalities' contribution 3.1.2 277,709 115,727 Other income 3.1.3 61,419 2,215 Total liabilities 9,767,437 5,307,650 10 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended December 31, 2015 (all amounts in EUR, unless otherwise stated) 4. Notes to the consolidated project financial statements 4.1 Basis of preparation and accounting records These consolidated project financial statements have been prepared on the cash basis of accounting based on International Public Sector Accounting Standards issued by the Public Sector Committee of the International Federation of Accountants, and incorporate the accounting policies below, which have been consistently followed in all material respects and comply with the "Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities", issued by the Financial Management Sector Board. 4.2 Accounting policies The Project's fiscal year is January 1 to December 31 for the recording of all transactions. Cash basis of accounting All receipts and expenses under IDA Credit are recorded on actual receipt and payment basis of accounting as per approved categories. Project expenditure is stated at original cost on the Balance sheet Direct payments Direct payments concern the amounts paid directly from the IDA Credit account of the World Bank. Statement of Expenditure (SoE) Statements of Expenditure are used to state the expenditure under IDA Credit during a certain period. These statements are sent to the World Banks' disbursement department who authorises the payment of the expenditure through the Designated account. Currency conversions The reporting currency is Euro (EUR). Sources and use of funds (payments to suppliers and contractors) in currencies other than EUR have been converted to EUR using the currency rate at the moment of the transaction. Bank balances, recorded on the balance sheet at year-end, have been converted at year-end rate. Designated accounts This is the total amount of the withdrawals from the IDA Credit accounts for the Project. IDA Credit account is in XDR. Local bank account This concerns bank account at local bank (other than Designated accounts) in local currency translated at the exchange rate at the date of the balance sheet. 11 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended December 31, 2015 (all amounts in EUR, unless otherwise stated) 4. Notes to the consolidated project financial statements (continued) 4.2 Accounting policies (continued) Other income Other income includes tender documentation sold. Interest on Designated account Interest earned on the Designated account belongs to the Borrower. Interest on local bank account Interest earned on the local bank account used for the payments from Municipalities' contribution is treated as additional source of financing of the Project. 12 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended December 31, 2015 (all amounts in EUR, unless otherwise stated) APPENDIX A.1 DESIGNATED ACCOUNT STATEMENT- FB&H Account owned by: Ministry of Finance and Treasury of Bosnia and Herzegovina Account No.: 105050810 Depository Bank: NLB Banka d.d. TuzIa Address: Martala Tita br. 34 Tuzta Related Credit: IDA Credit No. 5188-BA Currency: EUR Ref. EUR Opening balance January 1, 2015 3.2 1,950,565 Add: World Bank replenishments B 982,942 Tender documentation sold 153 983,095 Deduct: Payments to suppliers - Expenditure under IDA Credit 1,495,845 Transfer to Petty cash - IDA Credit A.2 3,322 1,499,167 Ending balance December 31, 2015 3.2 1,434,493 13 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended December 31, 2015 (all amounts in EUR, unless otherwise stated) APPENDIX A.2 PETTY CASH STATEMENT - FB&H Address: PIU - FGU, Sarajevo Related Credit: IDA Credit No. 5188-BA Currency: BAM Ref. BAM EUR Opening balance January 1, 2015 3.2 282 144 Add: Transfers from Local bank account - IDA Credit A-1 6,497 3,322 Tender documentation sold 196 100 6,693 3,422 Deduct: Payments to suppliers - Expenditure under IDA Credit 6,497 3,322 6497 3,322 Ending balance December 31, 2015 3.2 478 244 14 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended December 31, 2015 (all amounts in EUR, unless otherwise stated) APPENDIX A.3 DESIGNATED ACCOUNT STATEMENT - RS Account owned by: Ministry of Finance and Treasury of Bosnia and Herzegovina Account No: 5672140000415605 Depository Bank: Sberbank a.d. Address: Jevrejska br.71, Banjatuka Related Credit: IDA Credit No. 5188-BA Currency: EUR Ref. EUR Opening balance January 1, 2015 485,629 Add: World Bank replenishments 8 3,255,659 3,255,659 Deduct: Payments to suppliers - Expenditure under IDA Credit 3,026,881 3,026,881 Ending balance December 31, 2015 3.2 714,407 15 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended December 31, 2015 (all amounts in EUR, unless otherwise stated) APPENDIX A.4 LOCAL BANK ACCOUNT STATEMENT - FB&H Account owned by: PlU - FGU Sarajevo Account No.: 1320102014103979 Depository Bank: NLB Banka d.d, TuzIa Address: Margala Tita br. 34 Tuzla Related Credit: Municipalities' contribution Currency: BAM Ref. BAM EUR Opening balance January 1, 2015 3.2 17,751 9,076 Add: Contribution from Municipalities in FB&H 316,809 161,982 VAT returns 110,491 56,493 Tender documentation sold 4,807 2,458 432,107 220,933 Deduct: Payments to suppliers - Expenditure under Municipalities 85,116 43,519 85,116 43,519 Ending balance December 31, 2015 3.2 364,742 186,490 16 -t I lu æ i r 2ø 0 T mOÉ 0 0 0DL 00 c - n -- Co CO NO 0 CO g r\> _ 0 N æ flLOflcO ca NI Q L C,_ C L 0 N ir) (N LnONnLn U L0L C4 rK c o NccNC 0 gfl - - - - C'd ^ CN < o 0 CCO C) (D N N CL r- CQ r cc u-> ~~ ~ 4-12aé -L CO CO CG , 0 o Ce C Q Cg C N 4 lz I - = - >' e..Lø>C> L ci 0 ILc o.0 CG N_ CL 0 U- ONnl<( uc ' III 4 _0<9 St SQ ææ c e - n E Lu C) - S LL CO - t) t Lo >x w~ æý Z w U- & CO rr c0« c mCCl - e er - L m Mz << D. ~~~c L9 (j: tj', moo o rm 0d + OL . . e (o wc C c. < u- u-2. u 1 Y r W W c 1 REAL ESTATE REGISTRATION PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended December 31, 2015 (all amounts in EUR, unless otherwise stated) APPENDIX C Reconciliation between World Bank's Disbursement Statements in XDR and IDA Credit account in EUR according to the consolidated balance sheet as of December 31, 2015; SoE Withdrawal Schedule of IDA Credit No. 5188-BA Changes in Exchange Changes in IDA Credit rate used IDA Credit (in XDR) (in EUR) Original amount 22,700,000 25,742,111 Disbursed in previous years 4,541,631 5,189,708 FBIH-5 39,738 1.246011 49,514 FBIH-6 254,652 1.263913 321,858 FBIH-7 489,702 1.248862 611,570 RS-3 454,505 1.244011 565,409 RS-4 475,865 1.242233 591,135 RS-5 280,615 1.275153 357,827 RS-6 521,866 1.257524 656,259 RS-7 864,734 1.254755 1,085,029 Total disbursed in 2015 3,381,677 4,238,601 Cumulative disbursements as of December 31, 2015 7,923,308 9,428,309 Calculated undisbursed balance as of December 31, 2015 ___14,776,692 16,313,802 Undisbursed balance as per World Bank Summary for December 2015 14,776,692 1.26831 18,741,427 Potential exchange rate gain 2,427,625 18