OSHC «BARQI ТОЛК Preparation of Proposed W inter Energy Project Advance No. IDA Q9800-TJ Special purpose project financial statements for the year ended December 31, 2018 and independent auditors1report OPEN STOCK HOLDING COMPANY 4tBARQI ТОЛК» PROJECT IMPLEMENTATION UNIT PREPARATION OF PROPOSED WINTER ENERGY PROJECT ADVANCE NO. IDA Q9800-TJ TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,2018 2 INDEPENDENT AUDITORS’ REPORT 3-5 SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 Statement of cash proceeds and disbursements 6 Statement of uses of funds by project components 7 Notes to the special purpose project financial statements 8-12 STATEMENT OF MANAGEMENTS RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 The following statement, which should be read in conjunction with the independent auditors5 responsibilities stated in the independent auditors5 report set out on 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 “Preparation of Proposed Winter Energy Project” ， financed under Financing Agreements Advance No. IDA Q9800-TJ (the “Project”). Management is responsible for the preparation of this special purpose project financial statements, the financial position, cash proceeds and disbursements, uses of funds by project components, statement of applications for the year ended December 31, 2018 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”). In preparing the special purpose project financial statements, management is responsible for: • selecting suitable accounting policies and applying them consistently; • making judgments and estimates that are reasonable and prudent; • stating whether EPSAS and WB Guidelines have been followed, subject to any material departures disclosed and explained in the special purpose project financial statements; and • preparing the special purpose project financial statements on a going concern basis, unless it is inappropriate to presume 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 purpose project financial statements of the Project comply with IPSAS and WB Guidelines; • compliance with laws and regulations of the Republic of Tajikistan, 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 year ended December 31,2018 were approved and authorized for issue on June 12, 2019 by the management of the Project. DuKtmHkha^nedov A. A. Cnlef Accountant Head of РШ Financial manager of PIU June 12^2019 Dushanbe, Republic of Tajikistan M OORE STEPHENS MOORE STEPHENS KSC ASSURANCE SRL 175 Calea Floreasca, Floreasca Tower Building, 13th floor, District 1 Bucharest —Romania T +4 0374 490 074 F +4 0374 094 191 E info@moorestephens-ksc.ro www.moorestephens-ksc.ro INDEPENDENT AUDITORS1 REPORT To the Management of the Project “Preparation of Proposed Winter Energy Project” ： Report on the special purpose project financial statements Opinion [1] We have audited the accompanying special purpose project financial statements of ^Preparation of Proposed Winter Energy Project”， financed under Financing Agreements Advance No. IDA Q9800-TJ (the “Project”） which comprise the statement of cash proceeds and disbursements, the statement of uses of funds by project components for the year ended December 31, 2018 and a swnmary of significant accounting policies and other explanatory information (the ''special pmpose project financial statements”). [2] In our opinion, the accompanying special purpose project financial statements are consistent^ in all material respects, cash proceeds and disbursements, and uses of funds by Project components for the year ended December 31, 2018 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 [3] We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor^ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountants, Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in the Republic of Tajikistan, 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 [4] Without 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 “Preparation of Proposed Winter Energy Project” （the “Project”） operations. Other matter [5] 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 MOORE STEPHENS Responsibilities of management and those charged with governance for the special purpose project financial statements 1 [6] Management is responsible for the preparation 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 Bank5 s Financial Management '] Sector Boards ^Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities” （the “WB Guidelines”)， and for such internal control as management detennines is 1 necessary to enable the preparation of the special purpose project financial statements that are free from material misstatement, whether due to fraud or error. Auditor^ responsibilities for the audit of the special purpose project financial statements [7] Our objectives are to obtain reasonable assurance about whether the special purpose project financial statements as a whole aie free from material misstatement, whether due to fraud or error, and to issue an auditor^ 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 the 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: 3 • 夏dentify 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 i 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, a 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. a • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. j • 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 4 a t achieves fair presentation. j □ 4 MOORE STEPHENS [8] 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. [9] We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to commmiicate with them all relationships and otlier matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Bucharest, Romania June 13, 2019 OPEN STOCK HOLDING COMPANY “BARQI TOJIK” PROJECT IMPLEMENTATION UNIT PREPARATION OF PROPOSED WINTER ENERGY PROJECT ADVANCE NO. IDA Q9800-TJ STATEMENT OF CASH PROCEEDS AND DISBURSEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 □ On US Dollars) Notes For the year Cumulative For the year Cumulative ended December ended December 1 31, 2018 31, 2017 □ Opening balance a Funds received Advance No. ЮА Q9800-TJ 4 358,993 4,990,478 1,792,428 4,631,485 □ OSHC "Barki Tojik" contribution 4 - 32,875 (71,130) 32,875 n Tota夏 funds received 358,993 5,023,353 1,721,298 4,664,360 □ Project expenses Part 1. Goods, Works, Non- □ Consulting Services, Consultants' Services, Training and Incremental □ Operating Costs 5 358,993 5,023,353 1,721,298 4,664,360 Part 2. Unallocated 5 - j Total project expenses 358,993 5,023,353 1,721,298 4,664,360 □ Closing balance 看 一 . □ Э June 12, 2019 Dushanbe, Republic of Tajikistan The notes on pages 8-12 form an integral part of the special puipose project financial statements. The Independent Auditors5 RqKMt is on pages 3-5 6 OPEN STOCK HOLDING COMPANY “BARQI TOJIK” PROJECT IMPLEMENTATION UNIT PREPARATION OF PROPOSED WINTER ENERGY PROJECT ADVANCE NO. IDA Q9800-TJ STATEMENT OF FUNDS BY PROJECT COMPONENTS FOR THE YEAR ENDED DECEMBER 31, 2018 (in US Dollars)_____________________________________________ For the year Cumulative For the year Cumulative ended December ended December 31,2018 31,2017 Part 1. Goods, Works, Non-Consulting Services, Consultants' Services, Training and Incremental Operating Costs Consultants' Services 330,948 4,318,458 1,621,038 3,987,510 Works - 423,618 - 423,618 Training - 72,536 22,572 72,536 Goods 28,045 196,597 65,544 168,552 Bussines trip - 12,144 12,144 12,144 Part 2. Unallocated 358,993 5,023,353 1,721,298 4,664,360 Л On behalf of the Management: amedov A. 齡 n Chief Accountant Head of РШ June The notes on pages 8-12 form an integral part of the special purpose project financial statements. The Independent Auditors9 Report is on pages 3-5 OPEN STOCK HOLDING COMPANY uBARQi ТОЛК» PROJECT IMPLEMENTATION UNIT PREPARATION OF PROPOSED WINTER ENERGY PROJECT ADVANCE NO. IDA Q9800-TJ NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 fin US Dollars)___________________________________________________________________________ 1. GENERAL INFORMATION According to the Agreement between the Republic of Tajikistan and International Bank for Reconstruction and Development / International Development Association (the uWorld Bank,5) dated July 31, 2015, the World Bank provided an Advance No. ША Q9800-TJ in the amount of 5,000,000 US Dollars to the Republic of Tajikistan. The Advance was provided for the “Preparation of Proposed Winter Energy Project” (the “Project”). The objective of the Activities is to facilitate the preparation of the proposed Winter Energy Project which aims to mitigate energy deprivation by improving access to affordable energy of the Tajik population in the wintertime in support of which the Recipient has requested the Association's financial assistance. Project purpose The Activities for which the Advance is provided consist of the following: Preparation of the Nurek Hydropower Plant (the Nurek HPP,5) rehabilitation and dam safety study; preparation of the Nurek HPP sedimentation study and additional studies related to Nurek HPP; preparation of the studies related to winter energy measures; installation of electricity meters in Dushanbe; provision of technical assistance to OSHC t(Barqi Tojik^ on a Financial Management Improvement Program, including evaluation of OSHC K Barqi Tojik11 payables and receivables and installation of 1C accounting software; provision of technical assistance to OSHC w Barqi Tojik^ related to a commercial management system; preparation of tender documents for the first year of WEP implementation; and Training. Project management The project is implemented by the Project Implementation Unit at the OSHC “Barqi Tojik”. { Barqi Tojik" to the Projects Contribution o f OSHC < OSHC “Barqi Tojik” contributes to the Project by performing direct payments， as well as providing funding sourceSj when granted funds are not readily available, which are subsequently reimbursed. 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^ Financial Management Sector Board's ''Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities5 ' (the “WB Guidelines”). Under the cash basis system income (or expenditure) is recognized when cash is received (or paid) irrespective o f when goods or services are received. The Projecfs 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 cash proceeds and disbursements; ® Statement of uses of funds by project components; • 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^). 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 official currency NBT”) on a date of operation. exchange rate settled by the National Bank of Tajikistan (the (< All payments made in local currency are translated into USD at the official exchange rate defined by National Bank of Tajikistan, at the date of transaction. Monetary assets and liabilities expressed in foreign currency are converted to functional currency at official exchange rate on a date settled by the NBT. All foreign exchange differences resulted from maturity or recounting are included in statement of cash proceeds and disbursements. 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 In accordance with the subsidiaiy agreement between Ministry of Finance of the Republic of Tajikistan and OSHC < (Barqi Tojik,;,, which is conducted for the Advance, the Project is exempted from value added tax and social tax payments. Calculation and payment of personal income tax and pension fund contributions from income of local staff and consultants is made in accordance with the requirements and rates of the Tax Code of the Republic of Tajikistan. Project expenses The expenses are recorded in the period when they were actually paid. Sources of funds The funds were provided by the World Bank to the Project through direct payment to the end supplier of goods and/or services, reimbursement of expenses and contribution of OSHC “Barqi Tojik”. 4. FUNDS RECEXVED The funds received were presented by the following reimbursement methods: For the year For the year ended December Cumulative ended December Cumulative 31,2018 31,2017 Financing method / sources of financing: Advance No. IDA Q9S00-TJ Direct payment 270,002 4,669,061 1,560,002 4,399,059 Reimbursement 88,991 321,417 232,426 232,426 358,993 4,990,478 1,792,428 4,631,485 OSHC ,rBarki Tojikr, contribution Incurred expenses 1,825,303 1,721,298 1,825,303 Reimbursed to OSHC "Barki Tojik" - (1,792,428) (1,792,428) (1,792,428) 32,875 (71,130) 32,875 358,993 5,023,353 1,721,298 4,664,360 10 5. PROJECT EXPENDITURES Project expenditures by components are presented in the statement of funds by project components. Project expenditures on major categories are presented in the statement of cash proceeds and disbursements. Breakdown of project expenses by nature is presented as follows: For the year Cumulative For the year Cumulative ended December ended December 31,2018 31,2017 Consultants' Services 330,948 4,152,946 1,621,038 3,821,998 Works - 423,618 - 423,618 Audit ■ 144,584 ■ 144,584 Training 72;535 22,572 72,535 Goods 28,045 135,313 65,544 107,268 Business trip ■ 12,144 12Д44 12,144 Payroll ■ 20,929 ■ 20;929 Accounting software 61,284 - 61,284 358,993 5,023,353 1,721,298 4,664,360 6. FINANCIAL POSITION Financial position as at December 31, 2018, and 2017 comprise of: December 31, December 31， 2018 2017 ASSETS AND EXPENDITURES Cumulative project expenditures 5,023,353 4,664,360 TOTAL ASSETS AND EXPENDITURES 5,023,353 4,664,360 FINANCING Advance received 4,990,478 4,631,485 OSHC "Barki Tojik" contribution 32,875 32,875 TOTAL FINANCING 5,023,353 4,664,360 11 1. WITHDRAWAL APPLICATIONS Withdrawal applications for the year ended December 31,2018 comprise: Sources of Application Date Direct Total Reimbursement financing payment Q 9800- TJ 27 March 13,2018 220,829 220,829 28 March 22, 2018 88,991 88,991 29 March 19,2018 49Д72 ■ 49,172 270,001 _________ 88?991 358,992 8. UNDRAWN FUNDS For the year ended December 31,2018 undrawn funds are presented as follows: Advance No. IDA Q9800-TJ Approved advance amount 5,000,000 Disbursed during the period from January 1, 2017 to December 31, 2018 ______ 4,990,478 Undrawn amount __________ 9,522 Advance No. IDA Q9800-TJ Advance received as at January 1, 2017 4,631,485 Disbursed in 2018 ________ 358,993 Advance received as at December 31,2018 4,990,478 9. 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. As of December 31? 2018, there were no contractual obligations. 10. LEGAL CASES There were no any legal claims related to the Project. 11. EVENTS AFTER THE REPORTING DATE As at the date of issue of the special purpose project financial statements no other significant events or transactions happened, which should be disclosed in the special purpose project financial statements. 12