Public Expenditure Management Network in Asia (Grant No. TF 0A4574) FINANCIAL STATEMENTS FOR THE PERIOD FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 WITH INDEPENDENT AUDITORS’ REPORT Independent Auditors’ Report To President of Korea Institute of Public Finance: We have audited the accompanying statements of income and expenditure and designated account of the Public Expenditure Management Network in Asia ("PEMNA") for the period from January 1, 2019 to February 29, 2020. These project financial statements are the responsibility of the management of the Korea Institute of Public Finance ("KIPF"). Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with International Standards on Auditing (ISA) published by the Auditing and Assurance Standards Board of the International Federation of Accountants (IFAC). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. During this audit, we were provided with all relevant reports for our examination including Interim Financial Report(IFR) previously submitted to the World Bank by KIPF. We examined these reports as well as the project’s designated account to see if the expenditures are eligible based on the criteria defined in the terms of the Grant Agreement and procurement plan approved by the World Bank. We also examined to see if any ineligible expenditure were included in the withdrawal applications and reimbursed. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations of the PEMNA for the period from January 1, 2019 to February 29, 2020, in conformity with MDTF Grant Agreement. Seoul, Korea April 17, 2020 Notice to Readers This report is effective as of April 17, 2020, the auditors’ report date. Certain subsequent events or circumstances may have occurred between the auditors’ report date and the time the auditors’ report is read. Such events or circumstances could significantly affect the accompanying financial statements and may result in modifications to the auditors’ report. -1- Public Expenditure Management Network in Asia (Grant No. TF 0A4574) STATEMENTS OF INCOME AND EXPENDITURE THE PERIOD FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 KRW NOTES FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 A-1. Received from the World Bank (DA-D) 500,000,000 A-2. Received from the World Bank (DA-D) 350,000,000 A-3. Received from the World Bank (DA-D) 130,000,000 Total Received from the World Bank (A) 980,000,000 B-1. Training and Workshops 1. Treasury CoP Seoul Meeting 3 42,196,243 2. Budget CoP Seoul Meeting 4 128,043,089 3. Plenary Conference 5 143,015,994 4. Budget CoP Jakarta Meeting 6 101,627,798 5. Treasury CoP Moscow Meeting 7 135,200,323 6. Budget CoP Dili Meeting 8 29,929,443 580,012,890 B-2. Operating Cost 9 114,323,164 B-3. Research Project 13,412,750 B-4. Dissemination of PEMNA Outputs 10 70,827,480 Total Expenditures(B) 778,576,284 C. Interest 147,398 D. Balance (A-B+C) 201,571,114 -2- Public Expenditure Management Network in Asia (Grant No. TF 0A4574) STATEMENTS OF DESIGNATED ACCOUNT THE PERIOD FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 KRW FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 A-1. Received from the World Bank (DA-D) 500,000,000 A-2. Received from the World Bank (DA-D) 350,000,000 A-3. Received from the World Bank (DA-D) 130,000,000 Total Received from the World Bank 980,000,000 B. Balance of designated account (As of Feb 29, 2020) (201,571,114) C-1. Additional amount to be claimed from DA-D (778,576,284) (The period from Jan 1, 2019 to Feb 29, 2020) Total Amount to be claimed from the World Bank (778,576,284) D. Amount claimed in previous applications not yet - credited at date of bank statements E. Interest 147,398 F. Difference - -3- Public Expenditure Management Network in Asia NOTES TO FINACIAL STATEMENTS THE PERIOD FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 1. GENERAL INFORMATION The Public Expenditure Management Network in Asia (PEMNA) is a peer-learning network of public expenditure management officials in East Asia and the Pacific (EAP) region. Established in 2012, PEMNA provides a unique forum for public officials to share their knowledge to build stronger national budget and treasury systems across the region. By learning from other countries’ experiences, members help their governments manage public resources more efficiently to provide valuable services to citizens, supporting continued growth and development in EAP. 2. SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with International Financial Reporting Standards. The significant accounting policies that have been applied for the preparation of the financial statements for the period from January 1, 2019 to February 29, 2020 are described below. 1) Cash and cash equivalents – The Company considers short-term deposits with maturities of three months or less on acquisition date to be cash and cash equivalents. 2) Revenue Recognition - The Company recognizes revenue by percentage-of-completion method in case of R&D revenues. If, in applying the percentage-of-completion method however, neither of the revenue, cost or percentage-of-completion can reasonably be determined, nor is the pertaining revenue certain to be collected, the estimated recoverable amount, which should not be more than costs incurred is credited to income while the costs is charged to expenses. -4- Public Expenditure Management Network in Asia NOTES TO FINACIAL STATEMENTS THE PERIOD FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 3. Treasury CoP Seoul Meeting KRW FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 Participants' Airfare and Accommodation Cost 31,582,374 Participants' Subsistence Allowance 10,613,869 42,196,243 4. Budget CoP Seoul Meeting KRW FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 Service Payments (Interpreters) 7,192,573 Service Payments (Photographer) 1,540,000 Meeting Package 28,103,000 Shipping Cost 152,560 Participants' Airfare 50,906,000 Participants' Accommodation Cost 29,267,400 Participants' Subsistence Allowance 10,881,556 128,043,089 5. Plenary Conference KRW FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 Service Payments (Interpreters) 15,244,654 Service Payments (Photographer) 788,895 Service Payments (MC) 2,511,416 Meeting Materials - Stationery 517,840 Souvenirs 5,624,800 Shipping cost 65,000 Participants' Airfare 64,211,976 Participants' Accommodation Cost 45,206,582 Participants' Subsistence Allowance 8,844,831 143,015,994 -5- Public Expenditure Management Network in Asia NOTES TO FINACIAL STATEMENTS THE PERIOD FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 6. Budget CoP Jakarta Meeting KRW FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 Service Payments (Interpreters) 1,619,509 Service Payments (Photographer) 2,959,069 Service Payments (presenters) 119,700 Meeting Package 24,160,125 Meeting Materials - Stationery 51,200 Printing 1,062,614 Participants' Airfare 47,948,659 Participants' Accommodation Cost 16,250,548 Participants' Subsistence Allowance 6,201,657 Ground Transfer 1,254,717 101,627,798 7. Treasury CoP Moscow Meeting KRW FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 Service Payments (Interpreters) 8,964,936 Service Payments (Photographer) 2,916,722 Participants' Visa Fee 1,620,060 Participants' Airfare 62,138,200 Participants' Accommodation Cost 49,973,035 Participants' Subsistence Allowance 9,587,370 135,200,323 -6- Public Expenditure Management Network in Asia NOTES TO FINACIAL STATEMENTS THE PERIOD FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 8. Budget CoP Dili Meeting KRW FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 Service Payments (Photographer) 1,773,500 Meeting Materials - Stationery 150,000 Participants' Air fare (Cancellation fee) 23,495,850 Participants' Accommodation Cost (Cancellation fee) 4,510,093 29,929,443 9. Operating Cost KRW FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 Secretariat Operating Cost for 2019 Plenary Conference 17,455,685 Secretariat Operating Cost for 2019 B-CoP Jakarta Meeting 15,606,646 Secretariat Operating Cost for 2019 T-CoP Moscow Meeting 25,707,878 Secretariat Operating Cost for 2020 B-CoP Dili Meeting 3,482,730 (Cancellation fee) PEMNA - World Bank Implementation Support Meeting 2,451,930 Office Equipment 3,337,920 MDTF FY2018 Financial Audit Fee 3,000,000 MDTF FY2019 Financial Audit Fee 4,000,000 Secretariat Service Cost for PEMNA Activities (Mar-Jul) 19,625,420 Secretariat Service Cost for PEMNA Activities (Aug-Nov) 15,343,760 Secretariat Service Cost for PEMNA Activities (Dec) 4,311,195 114,323,164 -7- Public Expenditure Management Network in Asia NOTES TO FINACIAL STATEMENTS THE PERIOD FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 10. Dissemination of PEMNA Outputs KRW FROM JANUARY 1, 2019 TO FEBRUARY 29, 2020 PEMNA Report Publication 7,590,000 Online Survey 1,226,207 Website 50,152,740 Extension of SSL Certificate and SharePoint 171,564 PEMNA Promotional materials 1,221,000 Completion Report 9,673,969 Look back on PEMNA 792,000 70,827,480 -8- Management Letter Mr. Kim, Yu-Chan Korea Institute of Public Finance (KIPF) Management Letter from Induk Accounting Corporation to the President of KIPF We have recently completed our audit of the project ‘Public Expenditure Management Network in Asia (Grant No. TF 0A4574) for the period from January 1 to February 29, 2019 in accordance with International Standards on Auditing (ISA) published by the International Auditing and Assurance Standards Board of the International Federation of Accountants (IFAC). The purpose of this letter is to comment on the accounting records, systems, and controls that were examined during the course of this audit; identify specific deficiencies and areas of weakness in systems and controls and make recommendation for their improvement; report on instances of non- compliance with the terms of the financial agreement; quantify and report expenditures that are considered to be ineligible and either paid out of the designated account(s) or which have been claimed from the World Bank; communicate with matters that have come to our attention during the audit which might have a significant impact on the implementation of the project; and bring to the KIPF’s attention any other matters that the auditor considers pertinent. During our audit of the project in accordance with the ISAs, we did not find any matters that have come to our attention that we consider pertinent to be brought to KIPF’s attention. In our view, based on the audited statements, the PEMNA Secretariat executes the financial resources for the project in accordance with the Grant Agreement. The PEMNA Secretariat under the KIPF, a government-funded research institute with a longstanding tradition of fiscal prudence, has a reliable internal control system. Furthermore, we believe that the KIPF’s sound financial status will continue to secure a stable environment for KIPF to carry out the mission of PEMNA and the scope of its activities. We would be pleased to discuss the above noted matters with you at your convenience. If you have any questions or concerns, please do not hesitate to contact us. Yours truly, Seoul, Korea April 17, 2020 -9-