"Implementation of the National Strategy for Development of Statistics Project" Grant No. TF 017862 Special Purpose Project Financial Statements for the period from June 23, 2015 to December 31, 2015 and for the year ended December 31, 2016 and independent auditors' report "IMPLEMENTATION OF NATIONAL STRATEGY FOR DEVELOPMENT OF STATISTICS PROJECT" GRANT NO. TF 017862 TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM JUNE 23, 2015 TO DECEMBER 31, 2015 AND FOR THE YEAR ENDED DECEMBER 31,2016 2 INDEPENDENT AUDITORS' REPORT 3-5 SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM JUNE 23, 2015 TO DECEMBER 31, 2015 AND FOR THE YEAR ENDED DECEMBER 31, 2016: Statement of cash proceeds and disbursements 6 Statement of uses of funds by project components 7 Notes to the special purpose project financial statements 8-15 STATEMENT OF MANAGEMENT'S RESPONSBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM JUNE 23, 2015 TO DECEMBER 31, 2015 AND FOR THE YEAR ENDED DECEMBER 31, 2016 The following statement, which should be read in conjunction with the independent auditors' responsibilities stated in the independent auditors' report set out onl pages 3-5, is made with a view to distinguish the respective responsibilities of management and those of the independent auditors in relation to the special purpose project financial statements of the "Implementation of national strategy for development of statistics project", Grant No. TF 017862 (the "Project"). Management is responsible for the preparation of the special purpose project financial statements that present fairly, in all material respects, cash proceeds and disbUrserments and uses of funds by project components of the Pr-oject for the period from June 23, 2015 to December 31, 2015 and for the year ended December ,31, 2016 in accordance with International Public Sector Accounting Standard "Financial Reportin Under the Cash Basis of Accounting" (the "PSAS") issued by the International Public Accounting Standards Board of the International Federation of Accountaits and the World Bank's Finaicial anygmaSector Board's "Guidelines.' Annual Financial Reporting and Auditing for World Bank Financed Activities" (thic"W13 Guide lines"). In preparing the special purpose project financial statements, management is responsible for: * SelCtitg Suitable accounting policies and applying them consistently; Smaking judgments and estimates that are reasonable and prudent; * stating whether IPSAS and WB Guidelines have been followed, subject to any mater~ial departures disclosed and explained in the special purpose project financial statements; and * preparing the special purpose project financial statements onl a going concern basis, unless it is inappropriate to presumne that the Project will continue its activity for the foreseeable future, Management is also responsible for: * designing, implementing and maintaining effective and sound system of internal control and for revealing risks in system of internal control; * maintaining proper accounting records that disclose, with reasonable accuracy at any time, the financial position of the Project, and which enable them to ensure that the special purpse project fiancial statements of the Project comply with IPSAS and WB Guidelines; * compliance with laws and regulations of the Kyrgyz Republic, accounting system of the Project and the requirements of the World Bank; * taking such steps as are reasonably available to them to safeguard the assets of the Project; and * detecting and preventing fraud and other irregularities. The special purpose project financial statements for the period from June 23, 2015 to December 31, 2015 and for the year ended December 31, 2016 were approved and authorized for issue on March 24, 2017 by the management of the Project. On behalf of the Ma Orsae Clicheib a A. FirstfDeputyCl ZaPMG Projec Manager Project Director Shtybaeva G Mamat a A. Acting Head of MAFS N PMG Financial Manager March 24, 2017 March 24, 2017 Hishkek, Kyrgyz Republic Bishkek, Kyrgyz Republic 2 BAKER TILLY 115 "Albrainovastr- T: + 996(312)90 0505 BC "Dordoi Plaza", 6th floor F: + 996 (312) 91 05 05 BBishkek, 720021 contact@bakertillykg BISH KEK ~ Kyrgyz Republic wwbalkerfilyAg INDEPENDENT AUDITORS' REPORT To the Management of the "Implementation of national strategy for development of statistics project" under the National Statistical Committee of the Kyrgyz Republic: Opinion We have audited the accompanying special purpose project financial statements of "Implementation of national strategy for development of statistics project" (the "Project") which comprise the statement of cash proceeds and disbursements and the statement of uses offunds by project components for the period from June 23, 2015 to December 31, 2015 and for the year ended December 31, 2016, and a summary of significant accounting policies and other explanatory information (the "special purpose project financial statements"). In our opinion, the accompanying special purpose project financial statements present fairly, in all material respects, cash proceeds and disbursements and uses of funds by project components of the Project for the period from June 23, 2015 to December 31, 2015 and for the year ended December 31, 2016 in accordance with International Public Sector Accounting Standard "Financial Reporting Under the Cash Basis of Accounting" (the "IPSAS") issued by the International Public Sector Accounting Standards Board of the International Federation of Accountants, 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 on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Special purpose project 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 ([ESBA Code) together with the ethical requirements that are relevant to our audit of the 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 Without further qualifying our opinion, we draw attention to Note 2 to the special purpose project financial statements, which describe the basis of accounting. These special purpose project financial statements were prepared for complying with the appropriate World Bank Guidelines and Grant agreement requirements, and therefore are not intended to be a complete presentation of the "Implementation of national strategy for development of statistics project" (the "Project") operations. Other matter The special purpose project financial statements are prepared to assist the Project to comply with the requirements of the World Bank. As a result, the special purpose project financial statements may not be suitable for another purpose. 3 T Responsibilities of Management and Those Charged with Governance 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 International Public Sector Accounting Standard "Financial Reporting Under the Cash Basis of Accounting" (the "IPSAS") issued by the International Public Accounting Standards Board of the International Federation of Accountants, and the World Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities" (the "WB Guidelines"), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibilities for the Audit of the Special Purpose Project Financial Statements Our objectives are to obtain reasonable assurance about whether these 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 special purpose project 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 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 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 auditor's report to the related disclosures in the special purpose project 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. * Evaluate the overall presentation, structure and content of the special purpose project financial statements, including the disclosures, and whether the special purpose project financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 4 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. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. March 24, 2017 Bishkek, K ublic j Kubat Alymkulov Certified accountant, FCCA . Certificate of auditor of the Kyrgyz Repubic' A4069 Audit Director, Baker Tilly Bishkek LLC "Baker Tilly Bishkek" LLC, License Series A # 0049 issued by the State Committee on Review and Regulation of the financial market of the Kyrgyz Republic 5 "IMPLEMENTATION OF NATIONAL STRATEGY FOR DEVELOPMENT OF STATISTICS PROJECT" GRANT NO. TF 017862 STATEMENT OF CASH PROCEEDS AND DISBURSEMENTS FOR THE PERIOD FROM JUNE 23, 2015 TO DECEMBER 31, 2015 AND FOR THE YEAR ENDED DECEMBER 31, 2016 (in US Dollars) Notes For the year Cumulative For the period Cumulative ended from June 23, December 31, 2015 2016 to December 31, 2015 Opening balance 4 257,484 - - Funding sources 0 rant No. TF 017862 5 822,886 1,122,886 300,000 300,000 Total financing 822,886 1,122,886 300,000 300,000 Olier income 6 4,792 7,223 2,431 2,431 Total receipts 827,678 1,130,109 302,431 302,43 I Ilroject expenses 7 6oods 710,774 731,789 21,015 21,015 Non-consulting services - - Consultants' services 62,317 84,562 22,245 22,245 I rtining 33,000 33,000 Incremental operating costs 13,387 14,742 1,355 1,355 Iotal project expenses 819,478 864,093 44,615 44,615 Iher expenses 592 924 332 332 (losing balance 4 265,092 265,092 257,484 257,484 On behalf of the Mana ement: (rosbae ChecheiWeva A. First Deputy Chairman of NSC KR, PMG Project Manager Project Director Sintybaeva G. Mamato a A. Acting Head of MAFS NSkR PMG Financial Manager Morch 24, 2017 March 24, 2017 idllkek, Kyrgyz Republic Bishkek, Kyrgyz Republic Sit noes on pages S-15 form an integral part of the special purpose project financial statements. The Independent Auditors Repoi- is on 6 "IMPLEMENTATION OF NATIONAL STRATEGY FOR DEVELOPMENT OF STATISTICS PROJECT" GRANT NO. TF 017862 STATEMENT OF FUNDS BY PROJECT COMPONENTS FOR THE PERIOD FROM JUNE 23, 2015 TO DECEMBER 31, 2016 AND FOR THE YEAR ENDED DECEMBER 31, 2016 (in US Dollars) For the year Cumulative For the period Cumulative ended, from June 23, December 31, 2015 2016 to December 31, 2015 Component 1: Improving organization of statistics Component 2: Strengthening technological capacity, information communication technologies, upgrading and extending statistical infrastructure 710,774 710,774 Component 3: Modernizing production and dissemination of 22,306 22,306 Component 4: Strengthening statistical intellectual and human 7,496 7,496 - Component 5: Project management 78,902 123,517 44,615 44,615 819,478 864,093 44,615 44,615 On behalf of the Management: Orosbae . own, Checheilkdva A. ;irst Deputy an PMG Project Manager Project Dire, siltybaeva G. Mamat a A. Acting Head of PMG Financial Manager lmarch 24,2017 March 24, 2017 Iisikek, Kyrgyz Republic Bishkek, Kyrgyz Republic I le itotes on pages 8-15 form an integral part of the special purpose project financial statements. The Independent Auditors' Report is on 7 "IMPLEMENTATION OF NATIONAL STRATEGY FOR DEVELOPMENT OF STATISTICS PROJECT" GRANT NO. TF 017862 NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM JUNE 23, 2015 TO DECEMBER 31, 2015 AND FOR THE YEAR ENDED DECEMBER 31, 2016 (in US Dollars) 1. GENERAL INFORMATION According to the Grant Agreement between the Kyrgyz Republic and International Development Association (the "IDA") signed on February 4, 2015, the IDA provided a Grant No. TF 017862 in the amount of 2,500,000 US Dollars (the "USD") to the Kyrgyz Republic, The International Development Association (World Bank) acting as administrator of the Program to Support Statistical capacity Building in Eastern Europe and the Countries of Commonwealth of Independent States Multi-Donor Trust Fund. The Grant was provided for the "Implementation of national strategy for development of statistics project" (the "Project"). Effective date of the Project is June 23, 2015. Project completion date is June 30, 2018. Project purpose The objective of the "Implementation of national strategy for development of statistics project" (the "Project") is to improve the capacity of the Kyrgyz Republic's statistical system ("Recipient") to produce and disseminate reliable and timely statistics that are in line with international standards and responsive to user needs. The Project comprises the following parts: Component 1: Improving organization of statistics; Component 2: Strengthening technological capacity, information comm in i cation technolingies, Upgrading and expanding statistical infrastructure; Component 3: Modernizing production and dissemination of statistical data; Component 4: Strengthening statistical intellectual and human capacity; Component 5: Project management. Component 1: Improving organization of statistics Improving the Recipient's organization of statistics through: i) the strengthening of the legal and regulatory foundation governing the Kyrgyz Republic statistical system to define the role and responsibilities of the NSC and the country's ministries and agencies (MAs); ii) the strengthening of the roles and responsibilities of the NSC on methodological coordination, development and coordination of use of metadata common for statistics and administrative information systems to ensure efficient and effective operation of the national statistical system; and iii) public awareness on available statistical information including, inter alia, the carrying out of a general user requirements analysis, the development of data presentation standards for various groups of users and the improvement of producer- user dialogue. Component 2: Strengthening technological capacity, information communication tech nologies, upgrading and expanding statistical inftastructure Providing modern information communication technologies (ICTs) to all staff at the central and regional levels to improve the efficiency and effectiveness of the statistical system through the carrying oul of program of activities, including: i) the introduction of an advanced data processing systems in rcgioiull offices and local units; ii) the upgrading of data storage and setting up of iho system For inforumtlion 8 security; and iii) the modernization of printing facilities and other equipment essential to produce publications prepared by the NSC. Component 3: Modernizing production and dissemination of statistical data Carrying out a program of activities aimed at modernizing production and dissemination of statistical data through: i) the implementation of the SNA-2008; ii) the improvement of the methodology, organizational arrangement and tool; ii) for the collection, analysis and usage of different types of selected statistics, including those critical to the poverty estimates and system of national accounts, gender statistics, consumer price index or a specific sector and ecological statics; iii) the transition to electronic data collection system in all statistical domains; iv) the strengthening of the organizational capacity of the NSS; v) the improvement of the unified system of classification and coding; vi) the strengthening of statistical registers; vii) the provision of methodological support to statistical censuses and surveys; viii)the improvement of the management of the quality of statistical data and data dissemination and the alignment of the production of statistical indicators with the Recipient's needs of the national strategy for the development of statistics; and ix) the enhancement of the use of administrative data for statistical purposes. Component 4: Strengthening statistical intellectual and human capacity Strengthening the Recipient's statistical intellectual capacity through: i) the carrying out of a human resource needs assessment; and ii) the setting of a system of staff rotation, the implementation of continuous education and retraining of staff (especially staff in regions), effective collaboration with institutions of higher education. Component 5: Project Management: Carrying out Project Management, including financing Project Incremental Operating Costs. Project management The Management is implemented by the Project Management Group (the "PMG") within the scope of the National Statistical Committee of the Kyrgyz Republic. 2. PRESENTATION OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS Basis of preparation These special purpose project financial statements have been prepared in accordance with the International Public Sector Accounting Standard (the "IPSAS") "Financial Reporting under the Cash Basis of Accounting" issued by the Public Sector Committee of the International Federation of Accountants, and incorporate the following principal accounting policies, which have been consistently followed in all material respects and comply with the World Bank's Financial Management Scutor Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities" (the "WB Guidelines") Under the cash basis approach income (or expefiditure) is recognized when cash is received (or paid) irrespective of when goods or services are received. The Project's approved budget disclosed by categories of expenses is not publicly available and as such comparison of budget and actual amounts is not presented, These special purpose project financial statements consist of: * Statement of financial position; * Statement of cash proceeds and disbursements; 9 . Notes to the special purpose project financial statements, including short description of main statements of accounting policy and other descriptive notes. The reporting currency of these special purpose project financial statements is US Dollars (the "USD"). 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash basis of accounting Special purpose project financial statements are prepared on a cash basis of accounting. The cash basis of accounting recognizes transactions and events only when cash (including cash equivalents) is received or paid by the entity. Special purpose project financial statements prepared under the cash basis provide readers with information about the sources of cash raised during the period, the purposes for which cash was used and the cash balances at the reporting date. The measurement focus in the special purpose project financial statements is balances of cash and changes therein, Foreign currency Operations in foreign currency initially are counted in functional currency by the currency exchange rate settled by commercial bank on a date of operation. All payments made in national currency are translated into USD at the currency exchange rate defined by commercial bank at the date of transaction, Monetary assets and liabilities expressed in foreign currency are converted to functional currency at currency exchange rate on a date settled by commercial bank. Non-monetary items are valued according to their historic cost in foreign currency, which are recalculated on rates of the initial operation date. Cash and cash equivalents Cash and cash equivalents include cash on hand and due from banks, which can be converted to the corresponding amount of cash in the short term. Taxes Calculation and payment of personal income tax and social security contributions from income of staff and consultants is made in accordance with the requirements and rates of the Tax Code of the Kyrgyz Republic and relevant legislation of the Kyrgyz Republic. Project expenses The expenses are recorded in the period when they were actually paid, Sources of funds The funds were provided by the World Bank td the Project by replenishment of designated account or through direct payment to the end supplier of goods and/or services. 10 4. CASH AND CASH EQUIVALENTS Cash and cash equivalents as at December 31, 2016 and December 31, 2015 comprise: December 31, December 31, 2016 2015 Designated account in foreign currency (US Dollar) 258,793 255,385 Interest account in national currency (Kyrgyz Som) 5,444 2,099 Tender account in foreign currency (US Dollar) 405 - Tender account in national currency (Kyrgyz Som) 450 - 265,092 257,484 5. GRANTS RECEIVED The financing was presented by the following methods: For the year For the period Total ended from June 23, December 31, 2015 2016 to December 31, 2015 Financing method / sources of financing: Grant No. TV 017862 Advance/Initial deposit - 300,000 300,000 Replenishment of designated account ("DA") / Statement of expenditures ("SOE") 307,748 - 307,748 Direct payments 515,138 - 515,138 Total grants received 822,886 300,000 1,122,886 6. OTHER INCOME Other income represents interest income accrued by the serving bank on the outstanding balances of cash on designated account and sale of tender documents. For the year For the period Total ended, from June 23, December 31, 2015 2016 to December 31, 2015 Interest income 3,937 2,431 6,368 Sale of tender documents 855 - 855 4,792 2,431 7,223 7. PROJECT EXPENDITURES Project expenditures on major categories are presented in the statement of cash proceeds and disbursements. Project expenditures by components are presented in the statement of funds by project components. Breakdown of project expenses by sub-categories is presented as follows: GOODS, NON-CONSULTING SERVICES, CONSULTANTS' SERVICES, TRAINING AND INCREMENTAL OPERATING COSTS For the year Cumulative For the period Cumulative ended from June 23, December 31, 2015 2016 to December 31, 2015 Goods 710,774 731,789 21,015 21,015 Consultants' services: Payroll and related taxes 62,317 84,562 22,245 22,245 Training 33,000 33,000 - - Incremental operating costs: Translation services 11,565 11,565 - - Advertising expenses 603 1,389 786 786 Stationery 425 994 569 569 Other 794 794 - - 819,478 864,093 44,615 44,615 8, FINANCIAL POSITION Financial position as at December 31, 2016 and December 31, 2015 comprise: December 31, December 31, 2016 2015 ASSETS AND EXPENDITURES Cash and cash equivalents 265,092 257,484 Cumulative project expenditures 864,093 44,615 Other expenditures 924 332 TOTAL ASSETS AND EXPENDITURES 1,130,109 302,431 FINANCING Grants received 1,122,886 300,000 Other income 7,223 2,43 I TOTAL FINANCING 1,130,109 302,431 12 C>r-00 00I oc o 'f l .- s 00 00 If kc n non o o o n0 -< II 1 I 0< t o 1 E 00 -· g o o fl,) 1 x L n n 8ca c.- 0 0 1o -d1 00 0n 0O o as- >C> ca 1, rn 1 1 ca o o. 0 rnn 0 0G in 4*-4 o Ono a e tt 000 4-ca 555, 10. DESIGNATED ACCOUNT Designated account for the period from June 23, 2015 to December 31, 2015 and for the year ended December 31, 2016 comprise; O,JSC "Commercial Bank Bank KYRGYZSTAN" Currency US Dollars Bank account 1030120800006219 Bank's location 54A Togolol(Moido str, Bishkek, Kyrgyzstan Description US Dollars Total Balance as at June 23, 2015 Advance received / Initial deposit 300,000 300,000 Total funds received to a designated account 300,000 300,000 The amount of eligible expenditures paid 44,615 44,61 Balance as at December 31, 2015 255,385 255,385 Replenishment of DA / SOE 307,748 307,748 Total funds received to a designated account 307,748 307,748 The amnount of eligible expenditures paid 304,340 __ 304,340 Balance as at December 31, 2016 258,793 258,793 11. UNDRAWN FUNDS As at December 31, 2016 undrawn funds are presented as follows: Grant No, TV 0 17862 Approved grant amount 2,5.00,000 Disbursed during the period from June 23, 2015 to December 31, 2015 300,000 Disbursed in 2016 822,886 Undrawn amount 1,377,114 Grant No. TP 017862 Opening disbursed amount Disbursed during the period1,286 Closing disbursed amount 1,122,886 1.4 12. COMMITMENTS In the normal course of activities, the Project concludes agreements with suppliers of goods and services in accordance with the established budget and procurement plan. Contract value of obligations valid as at December 31, 2016 was as follows: Counterparty Contract # Contract Paid up to Remaining value December 31, amount to 2016 be paid LLC "Intercom KG" KGSTAT/2/SH/20l6/Video KGS 158,160 - KGS 158,160 LLC "Novaya Poligrafiya" KGSTAT/2/ICB/2016/02 USD 133,444 - USD 133,444 13. LEGAL CASES There were no any legal claims related to the Project. 14. EVENTS AFTER THE REPORTING DATE During 2017 until the date of issue of these special purpose project financial statements the World Bank provided financing to the Project as follows: Date Application Grant No. 'TF 017862 February 9, 2017 (direct payment) 7 120,100 March 3, 2017 (replenishment of DA / SOE) 8 70,304 190,404 As at the date of issue of the special purpose project financial statements no other significant events or transactions occurred, except for the events or transactions described above. 15