THE PALESTINIAN MINISTRY OF FINANCE AND PLANNING FISCAL STABILITY AND BUSINESS ENVIRONMENT DEVELOPMENT POLICY TRUST FUND GRANT GRANT NUMBER TF0A5996 FUNDED BY INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FINANCIAL STATEMENTS FOR THE PERIOD FROM DECEMBER 6, 2017 TO APRIL 30, 2019 TOGETHER WITH INDEPENDENT AUDITORS’ REPORT THE PALESTINIAN MINISTRY OF FINANCE AND PLANNING FISCAL STABILITY AND BUSINESS ENVIRONMENT DEVELOPMENT POLICY TRUST FUND GRANT FUNDED BY INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) BALANCE SHEET AS AT APRIL 30, 2019 (Currency: USD) Note USD Assets Current Assets Cash at bank - Total Current Assets - Total Assets - Liabilities and Fund Balance Fund balance - Total Liabilities and Fund Balance - The Accompanying Notes form an Integral Part of these Financial Statements 4 THE PALESTINIAN MINISTRY OF FINANCE AND PLANNING FISCAL STABILITY AND BUSINESS ENVIRONMENT DEVELOPMENT POLICY TRUST FUND GRANT FUNDED BY INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) STATEMENT OF SOURCES AND USES OF FUNDS FOR THE PERIOD FROM DECEMBER 6, 2017 TO APRIL 30, 2019 (Currency: USD) Note USD FUND BALANCE – BEGINNING OF PERIOD - SOURCES OF FUNDS Grant revenue received from IDA 1 30,000,000 Total sources of funds 30,000,000 USES OF FUNDS First Transfer to Single Treasury Accounts – General Expenditure – USD 3 19,999,956 Second Transfer to Single Treasury Accounts – General Expenditure – USD 4 7,120,388 Third Transfer to Single Treasury Accounts – General Expenditure – ILS 5 2,879,612 Bank Charges 44 Total uses of funds 30,000,000 CHANGE IN FUND BALANCE - FUND BALANCE – END OF PERIOD - The Accompanying Notes form an Integral Part of these Financial Statements 5 THE PALESTINIAN MINISTRY OF FINANCE AND PLANNING FISCAL STABILITY AND BUSINESS ENVIRONMENT DEVELOPMENT POLICY TRUST FUND GRANT FUNDED BY INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) DEPOSIT ACCOUNT STATEMENT - USD FOR THE PERIOD FROM DECEMBER 6, 2017 TO APRIL 30, 2019 (Currency: USD) Account number 0458/0206777/001/3001/008 IBAN PS70PALS045802067770013001008 Depository bank Bank of Palestine Address Ramallah, P.O. Box 471 Related loan / credit Grant Number TF0A5996 Currency US. Dollars Note USD Balance, beginning of period - Receipts during the Audit Period 1 29,999,956 29,999,956 Deduct: First Transfer to Single Treasury Accounts – General Expenditure – USD 3 19,999,956 Second Transfer to Single Treasury Accounts – General Expenditure – USD 4 7,120,388 Third Transfer to Single Treasury Accounts – General Expenditure – ILS 5 2,879,612 29,999,956 Balance, end of period - The Accompanying Notes form an Integral Part of these Financial Statements 6 THE PALESTINIAN MINISTRY OF FINANCE AND PLANNING FISCAL STABILITY AND BUSINESS ENVIRONMENT DEVELOPMENT POLICY TRUST FUND GRANT FUNDED BY INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) NOTES TO THE GRANT FINANCIAL STATEMENTS FOR THE PERIOD FROM DECEMBER 6, 2017 TO APRIL 30, 2019 1. The Grant and its Financing The Palestinian Liberation Organization (the Recipient) (for the benefit of the Palestinian Authority) and the International Development Association (IDA) (as administrator of the Trust Fund for Gaza and West Bank) signed the eighth Development Trust Fund Grant Agreement entitled “Fiscal Stability and Business Environment Development Policy Trust Fund Grant” (the Grant Agreement), Grant Number TF0A5996, dated December 6, 2017, whereby IDA made a grant (the Grant) of USD 30,000,000 to the Palestinian Authority. The objectives of the Grant are to support the strategic priorities of the Palestinian Authority envisaged in its development strategy – the National Policy Agenda (NPA) (2017 – 2022) and to provide essential financing for the Palestinian Authority’s budget. On December 21, 2017, MoFP received the total Grant amount of USD 29,999,956, net of bank charges of USD 44, in the Grant special deposit bank account. MoFP transferred the Grant funds to MoFP Single Treasury Accounts in three tranches. Two of these three tranches were transferred from the Grant special bank account to related MoFP Single Treasury Accounts in USD and had been utilized to cover recurring expenditures in USD. The remaining tranche was converted to ILS through the bank at an exchange rate of USD 1 to ILS 3.535 (the market rate) and was transferred into MoFP Single Treasury Account in ILS to be utilized to cover recurring expenditures in ILS. The following table presents details of MoFP transfers of the Grant funds from the Grant special bank account to related MoFP Single Treasury Accounts: Date of transfer from the Grant special bank account to MoFP Single Amount Converted Treasury Accounts in (USD) amount (ILS) Grant Amount Utilized December 28, 2017 19,999,956 - for USD Expenditures February 14, 2018 7,120,388 - Grant Amount Utilized February 19, 2018 2,879,612 10,179,429 for ILS Expenditures 29,999,956 10,179,429 7 2. Summary of Significant Accounting Policies The Grant Financial Statements are prepared under the historical cost convention. Significant accounting policies follow: - • Basis of accounting – The Financial Statements are prepared using the cash basis of accounting, which is a comprehensive basis of accounting other than International Financial Reporting Standards (IFRS). Revenues are recognized when cash provided by IDA is received by MoFP and disbursements are recognized when the cash payments are made. • Foreign currency – The basic functional currency of the Palestinian Authority’s Ministry of Finance and Planning (MoFP) is the New Israeli Shekel (ILS). The Grant funds were received by MoFP in USD. Certain disbursements from the Grant funds have been made to settle expenditures due for settlement in USD, and certain part of these funds was converted to ILS using the actual exchange rate prevailing at the date of the transfer. The exchange rate against USD used in the conversion was USD 1 to ILS 3.535. 3. First Transfer to Single Treasury Accounts – General Expenditure – USD On December 28, 2017, MoFP transferred the amount of USD 19,999,956 from the Grant special bank account to MoFP Single Treasury Accounts in USD in order to be used to settle certain recurring expenditures incurred in USD by certain Palestinian Authority’s ministries and institutions. This amount had been allocated to cover the following expenditure categories: Amount paid in USD Medicine 13,073,791 Professional Fees 3,458,287 Buildings and Constructions 1,504,631 Medical Consumables 1,380,170 Laboratory Materials 236,001 Miscellaneous General Expenses 209,250 Building Maintenance and Repairs 137,826 19,999,956 4. Second Transfer to Single Treasury Accounts – General Expenditure – USD On February 14, 2018, MoFP transferred the amount of USD 7,120,388 from the Grant special bank account to MoFP Single Treasury Accounts in USD in order to be used to settle certain recurring expenditures incurred in USD and due for payment in USD by certain Palestinian Authority’s ministries and institutions. This amount had been allocated to cover the following expenditure categories: Amount paid in USD Electricity Tariff Support – Gaza 6,945,991 Buildings and Constructions 174,397 7,120,388 8 5. Third Transfer to Single Treasury Accounts – General Expenditure – ILS On February 19, 2018, MoFP transferred the remaining amount of USD 2,879,612 from the Grant special bank account to MoFP Single Treasury Accounts in ILS, after converting this amount from USD to ILS, through the bank, at an exchange rate of USD 1 to ILS 3.535 (the market rate). This amount was used to settle certain recurring expenditures incurred in ILS and due for payment in ILS by certain Palestinian Authority’s ministries and institutions, and had been allocated to cover the following expenditure categories: Amount paid Equivalent in ILS amount in USD Electricity 5,626,570 1,591,675 Electricity Tariff Support – West Bank 2,770,711 783,794 Medical Treatment Expenses 1,782,148 504,143 10,179,429 2,879,612 6. Reconciliation Between IDA Records (Client Connection) and MoFP Records USD Grant accounts per the client connection Payment transferred to MoFP 30,000,000 Grant accounts per MoFP records Amount recorded in MoFP records 29,999,956 Difference *44 * This amount represents bank charges. 9