Central Finance and Contracting Unit Ministry of Finance and Economy of Albania Capacity Building Support to Implement the Integrated Planning System (IPS) (Grant No: MDTF 013972) Special purpose financial information for the year ended 31 December 2016 Contents Page Independent Auditor's Report 1-iml Statement of Sources and Uses of Funds I Statement of Withdrawal Applications 2 Notes to the Special Purpose Financial Information 3-7 Appendices I-ITT O GrantThornton Grant Thornton Sh,p.k, Rr Sami Frasheri, Kornpleksi T.D, Shk. B, Floor 1, 10 000 Tirana, Albania T +355 4 22 74 832 F +355 4 22 56 560 Independent Auditor's Report wwwgranihornt.lI To Ministry of Finance of Republic of Albania and the Management of the Project "Capacity Building Support to Implement the Integrated Planning System (IPS)" Opinion We have audited the accompanying special purpose financial information comprising the statement of sources and uses of funds, statement of withdrawal applications and the related notes of the Project "Capacity Building Support to Implement the Integrated Planning System (IPS)" (further referred to as the "Project") implemented by the Central Financing and Contracting Unit within the Ministry of Finance and Economy and financed by the Multi-Donor Trust Fund 013972 ("MDTF 013972" or the "Trust Fund") from the International Bank for Reconstruction and Development ("IBRD" or the "World Bank") for the period from 1 January to 31 December 2016. The special purpose financial information has been prepared by the management of the Project in accordance with policies described in notes 2 and 3 of the special purpose financial information. In our opinion, the special purpose financial information of the Project "Capacity Building Support to Implement the Integrated Planning System (IPS)" is prepared, in all material respects, in accordance with the cash receipts and disbursement basis of accounting as set out in notes 2 and 3 to the special purpose financial information. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (SAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the audit of the special purpose financial information section of our report. We are independent of the entity 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 special purpose financial information in Albania, and we have fulfilled our other ethical responsibilities in accordance with 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 We draw attention to notes 2 and 3 to the special purpose financial information, which describe the basis of accounting. The special purpose financial information is prepared to provide information to Project's donors and lenders, and to Ministry of Finance and Economy of Republic of Albania and the management of the Project. As a result, the statement may not be suitable for another purpose. Our opinion is not modified in respect of this matter. Our report is intended solely for the information and use of the Project's management, the donors and lenders, and the Ministry of Finance and Economy of Republic of Albania and it should not be further distributed without our prior written consent. Responsibilities of Management and Those Charged with Governance for the Special Purpose Financial Information Management is responsible for preparation and fair presentation of the special purpose financial information in accordance with the basis of accounting described in notes 2 and 3; this includes determining that the cash receipts and disbursements basis of accounting is an acceptable basis for the preparation of the special purpose financial information in the circumstances, and for such internal control as management determines is necessary to enable the preparation of a special purpose financial information that is free from material misstatement, whether due to fraud or error. Auditor's Responsibility for the Audit of the Special Purpose Financial Information Our objectives are to obtain reasonable assurance about whether the special purpose financial information as a whole is 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 this special purpose financial information. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the special purpose financial information, 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. 11 * 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 entity's internal control. * 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 entity'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 financial information 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 entity to cease to continue as a going concern. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates, if any, and related disclosures made by management., * Evaluate the overall presentation, structure and content of the special purpose financial information, including the disclosures, and whether the special purpose financial information represents the underlying transactions and events in a manner that achieves fair presentation. 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. Grant Thornton sh.p.k/ Tirana, Albania 30 November 2017 Ili Capacity BuIiding Support to implement the Integrated Planning System For the period frn i January to 31 December 2016 (amounts are expressed in EUR unless othewise statedl Statement of Sources and Uses of Funds Period from Period from Cumulative From I January to 1 January to 27 March 2013 to Note December 2016 December 2015 31 December 2016 Sources of funds: Multi - Donor Trust Fund: 013972 funding 4 132,867 474,592 1,390,578 Interest received - 113 285 Total 132,867 474.705 1,390,863 Uses of funds: Goods 5 (37.066) (307,791) (344,857) Consultancy services 6 (96,278) (247.473) (834,076) Training 7 (19,524) (20,161) (157,050) Incremental operating costs 8 (1,468) (3,908) (8,826) Total (154,336) (579,333) (1,344,809) (Deficit)/Surplus of receipts over disbursements (21,469) (104,628) 46,054 Cash at the beginning of the period 67,523 172,151 - Cash at the end of the period 9 46,054 67,523 46,054 The Statement of Sources and Uses of Funds is to be read in conjunction with the notes set out on pages 3 to 7 and form an integral part of the special purpose financial information. The special purpose financial information of Capacity Building Support to Implement the Integrated Planning System project were authorized for issue by Central Finance and Contracting Unit 'CFCU' on 2 October 2017 and signed on its behalf by: anol Simo jaalr Orjana Irahint General Director Director/ Directorate for implementation CentrsFindb at$ Contracting Unit of World Bank and other donors project Central Finance and Contracting Unit rCC i E E 8w 20 a Ma u LO &n t4-- 4-j4 e E CL) moa Capacity Building Support to implement the integrated Planning System For the period from 1 January to 31 December 2016 famounts are expressed in FUR unless otherwise stated) Notes to the Special Purpose Financial Information I General The Capacity Building Support to Implement the Integrated Planning System (the "Project") managed through the Central Finance and Contracting Unit (CFCU) within the Ministry of Finance of Albania was established with the objective to strengthen the implementation of the Integrated Planning System, by creating the conditions for introducing a performance orientation in the policy planning and budgetary processes and by improving the institution capacity to monitor results at the strategy and program levels. The Project consists of thefollouingparts: Part One: Public Financial Management (PFM) including management of donor funds: This component finances technical assistance and training for strengthening PFM performance, primarily targeting weaknesses identified by the Public Expenditure and Financial Assessment (PEFA) in the 2011 assessment. The activities are envisaged and rated in terms of priority based on their contribution to the achievement of the Project Development Objective in order to ensure its attainability under different funding scenarios. Part Two: Policy Coordination and Aid Management: This component finances technical assistance and training for policy planning, coordination, and monitoring and evaluation of the Integrated Planning System (IPS) in the central government. Part Three: Developing IPS Management Information Systems: This component finances investment in the development of the Albania Financial Management Information System, and technical assistance for its preparation and implementation. The design and implementation of the External Assistance Management Information System and Integrated Planning Information System are also included in this component. Part Four: Project Management: This component supports Central Finance and Contracting Unit (CFCU) to strengthen its capacity for improved project implementation, focusing on procurement, financial management and monitoring. This component also includes necessary incremental operating costs related to project management, including the overall management and coordination, and project- related fiduciary activities (procurement and financial management). The CFCU within the Ministry of Finance is responsible for the day-to-day Project management and coordination. 3 Capacity Building Support to Implement the Integrated Planning System For the period from 1 January to 31 December 2016 (amounts are expressed in EUR unless otherwise stated) I General (continued) The Project is financed by the Multi-Donor Trust Fund 013972 ("MDTF 013972" or the "Trust Fund") from the International Bank for Reconstruction and Development ("IBRD" or the "World Bank"). According to the Grant Agreement NoXTF013972 dated 27 March 2013, between the Government of Albania ("GoA or the Recipient") and IBRD as the administrator of grant funds provided under the Capacity Building Support to Implement the Integrated Planning system (CBSI), GoA was entitled to receive an amount up to EUR 2,714,297 to finance the Project's activities. According to the Amendment No.1 to the Grant Agreement dated on 7 October 2015, between the Government of Albania ("GoA" or the "Recipient") and IBRD as administrator of grant funds provided under the Capacity Building Support to Implement the Integrated Planning system (CBSI), GoA will receive an amount up to EUR 3,815,107 to finance the Project's activities. According to the Amendment No.2 to the Grant Agreement dated on 24 August 2016, between the Government of Albania ("GoA" or the "Recipient") and IBRD as administrator of grant funds provided under the Capacity Building Support to Implement the Integrated Planning system (CBSI), the closing date is 30 June 2018 and the amount that GoA will receive is EUR 3,815,107 to finance the Projectes activities. The table below sets forth the items to be financed out of the proceeds of the Trust Fund, the allocation of the amounts of the Trust Fund and the percentage of expenditures to be financed: Amount of the Grant allocated (n % of expenditures to be financed Categories Euro) (Inclusive Taxes) Goods, Consultancy Services, Training and Workshops, Incremental Operating Costs 3.815,107 100% Total 3,815,107 100% As at 31 December 2016, EUR 1,390,578 was disbursed from the Trust Fund. The Project covers four activities, namely Public Financial Management, Improving Policy Coordination and Aid Management, IPS Management Information System and Project Management. 2 Basis of preparation The special purpose financial information has been prepared in accordance with the accounting policies in note 3, under the Cash Basis of Accounting, The special purpose financial information is presented in EUR. Euro is also functional currency of the Project being the currency in which funds are received and most of expenses are settled. The special purpose financial information comprise the Statement of Sources and Uses of Funds, the Statement of Withdrawal Applications (and related expenditure) used as the basis for the submission of withdrawal applications and a summary of significant accounting policies and other explanatory notes. As supplementary schedules to the special purpose financial information are presented the Statements of Special and Project's Accounts associated with the Project. Supplementary scheduled are not part of these special purpose financial information and are unaudited. 4 Capacity Building Support to implement the integrated Planning System For the period from 1 January to 31 December 2016 (amounts are expressed in EUR unless otherwise stated) 3 Summary of significant accounting policies A summary of significant accounting policies underlying the preparation of the Project's special purpose financial information is presented below. 3.1 Foreign currency transactions Funds are received in EUR and expenses paid in EUR, ALL or USD. The Project has adopted the EUR as its reporting currency for consistency with the reporting needs of its main donor, the World Bank. Cash and bank balances in other currencies are converted into EUR at the year-end rate of exchange. Transactions in currencies other than EUR are converted to the reporting currency at the rate ruling at the date of the transaction. As at 31 December 2016, 1 Euro is equivalent to 135.23 ALL (31 December 2015, 1 Euro is equivalent to 137.28 AL). 3.2 Cash Cash comprises cash on hand, demand deposits and cash equivalents. Demand deposits and cash equivalents comprise balances with banks and investments in short term money market instruments. Amounts appropriated to the Entity are deposited in the Entity's bank account and are controlled by the Entity. Receipts from exchange transactions are deposited in trading fund accounts controlled by the Entity. They are transferred to revenue at each year end. 3.3 Recognition of income and expenses Income is recognized when received rather than when earned, and expenses are recognized when paid rather than when incurred. Accordingly, direct payments of the Project's expenses, which are made from the proceeds of the trust fund, are recognized as sources and uses of funds at the time the payment is made. The Statement of Withdrawal Applications presents only applications submitted during the year and only expenses settled through such applications. Expenses presented in the notes to the financial statements include all expenses settled during the year in spite of the supporting withdrawal application period. 3.4 Taxation The project is exempt from income tax. The Project is liable for withholding tax and is not exempt from Value Added Tax ("VAT") based on the Agreement. 5 Capacity Building Support to Implement the Integrated Planning System For the period from I January to 31 December 2018 (amounts are expressed in EUR unless otherwise stated) 4 MDTF- Donor Trust Fund: 013972 funding Period from Period from I January to 31 December 2016 1 January to 31 December 2015 Replenishments 132,867 246,958 Direct Payments 227,634 Total 132,867 474,592 Replenishments represent funds disbursed by the Trust Fund to the Special Account based on the withdrawal applications prepared by the Project. Direct payments represent amounts paid directly by the Trust Fund based on contracts between the Project and contractors. 5 Goods Period from Period from 1 January to 31 December 2016 1 January to 31 December 2015 Hardware _ 45,839 Software 37,066 261,952 Total 37,086 307,791 6 Consultancy services Consultants' services were as follows: Period from Period from 1 January to 31 December 2016 1 January to 31 December 2015 Public Financial Management 31,725 - Improving policy Coordination and Aid Management 27,549 86,890 IPS Management Information System 34,229 154,458 Project Management 2,775 6,125 Total 96,278 247,473 7 Training Period from Period from I January to 31 December 2016 1 January to 31 December 2015 Public Financial Management 14,010 350 Improving policy Coordination and Aid Management - (15) IPS Management Information System Project Management 5,514 19,826 Total 19,524 20,161 The negative amount is related to a reimbursement of advance given in the prior year. 6 8 Incremental operating costs Incremental operating costs were composed as follows: Period from Period from 1 January to 31 December 2016 1 January to 31 December 2015 Bank charges 450 1,279 Publication costs 623 750 Postage fees 253 179 Office supplies 142 1,700 Total 1,468 3,908 9 Cash at the end of the period Period from Period from MDTF 013972 1 January to 31 December 2016 1 January to 31 December 2015 Cash on hand 64 98 Cash at Banks: 45,990 67,426 Project Account - BKT 45,990 67,425 Total 46,054 67,523 10 Subsequent events There are no other significant events that would require either adjustments or additional disclosures in the special purpose financial information. 7 APPENDICES (unaudited) (MDTF 013972 - ALB) Capacity Building Support to Implement the Integrated Planning System Statements of Special and Project's Accounts (Supplementary schedules to the Special purpose financial information) I Capacity Building Support to Implement the Integrated Planning System For the period from 1 January to 31 December 2016 (anounts are expressed in EUR unless otherwise stated) Appendix 1 Supplementary Schedule of Special Account Statement Donor MDTF 013972 Account No. 2117543E Depository Bank Bank of Albania Address Shashi "Skenderbej", No.1, Tirana Currency EUR 2016 2015 Balance as at 01 January Funds received: Initial Deposit Replenishments from Trust Fund 132,867 246,958 Total funds received 132,867 246,958 Disbursements: Funds transferred to the Project Account in EUR 132.717 246,533 Bank charges 150 425 Total disbursements 132,867 246,958 Balance as at 31 December II Capacity Building Support to Implement the Integrated Planning System For the period from I January to 31 December 2016 (amounts are expressed in EUR unless otherwise stated) Appendix 2 Supplementary Schedule of Current Account Statement Donor MDTF 013972 Account No. 515678596CLTJCFEURA1 Depository Bank BKT Address Rr."Deshmoret e 4 Shkurtit", Tirane Currency EUR 2016 2015 Balance as at 1 January 67,523 172,009 Funds received: Transferred from the Special Account 132,867 246,726 Interest received - 112 Total funds received 132,867 246,839 Disbursement: Project expenditures 153,714 350,143 Bank as 623 1,279 Total disbursements 154,337 351,422 Balance as at 31 December 46,054 67,425 III