“Private Sector Competitiveness Project” Grant No. H771-TJ Financial statements For the year ended 31 December 2015 with independent auditors’ report “Private Sector Competitiveness Project”, Grant No. H771-TJ Financial statements Contents INDEPENDENT AUDITORS’ REPORT Statement of cash receipts and payments ................................................................................................................................................... 1 Statement of funds by project components ............................................................................................................................................... 2 Statement of applications .............................................................................................................................................................................. 3 Statement of special account ........................................................................................................................................................................ 4 NOTES TO THE FINANCIAL STATEMENTS 1. General information .......................................................................................................................................................................... 5 2. Bases of preparation .......................................................................................................................................................................... 5 3. Summary of significant accounting policies .................................................................................................................................. 6 4. Cash and cash equivalents ................................................................................................................................................................ 6 5. Project cumulative expenses ............................................................................................................................................................ 7 6. Funds ................................................................................................................................................................................................... 7 7. Undrawn funds .................................................................................................................................................................................. 7 8. Legal cases ........................................................................................................................................................................................... 7 9. Events after reporting period .......................................................................................................................................................... 7 APPENDIX 1. RECONCILIATION OF THE AMOUNTS PROVIDED BY THE PROJECT AND REFUNDED BY THE WORLD BANK ................................................................................................................... 8 Independent auditors’ report To the Management of the “Private Sector Competitiveness Project” We have audited the accompanying financial statements of the “Private Sector Competitiveness Project” (the “Project”), which comprise the statement of cash receipts and payments, the statement of funds by project components, the statement of applications, the statement of special account for the year ended 31 December 2015, and a summary of significant accounting policies and other explanatory information (the “financial statements”). Management's responsibility for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Public Sector Accounting Standard (IPSAS) Financial Reporting Under the Cash Basis of Accounting issued by the International Public Sector Accounting Standards Board of the International Federation of Accountants, and the financial reporting provisions of Grant Agreement No. H771-TJ between the Republic of Tajikistan and the World Bank, and for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial statements 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. “Private Sector Competitiveness Project”, Notes to the financial statements Grant No. H771-TJ for the year ended 31 December 2015 In US dollars 1. General information According to the Agreement between Republic of Tajikistan, International Bank of Reconstruction and Development (hereafter the “World Bank”) and International Development Association (“IDA”) signed on 8 July 2012, the IDA provided financing in the form of Grant No. H771-TJ in the amount of Special Drawing Rights (“SDR”) 6,500,000 to the Republic of Tajikistan to render assistance in financing the “Private Sector Competitiveness Project” (hereinafter the “Project”). Project purpose The Project’s purpose is to eliminate major obstacles in development of entrepreneurship and attract investments by simplifying the procedures for registration of entities and processes of obtaining permissions for construction; to improve regulatory provisions and infrastructure that are fundamental for provision of access to financial services and to facilitate the development of mining industry, where Tajikistan has competitive advantages. The Project comprises the following components:  Component 1: Improvement of entrepreneurial environment.  Component 2: Facilitating the development of mining industry.  Component 3: Project management.  Component 4: Improvement of Financial Infrastructure.  Component 5: Project management. Duration of the Project is from 8 July 2012 to 30 September 2017. Project management The project implementation is carried out by Project Management Unit (“PMU”) within the State Committee on Investments and Government Property Management of the Republic of Tajikistan based on operating management, located in the Republic of Tajikstan, Dushanbe, 27 Shotemur str. 2. Bases of preparation These financial statements are prepared in accordance with the International Public Sector Accounting Standard (“IPSAS”) Financial Reporting under the Cash Basis of Accounting issued by the Public Sector Committee of the International Federation of Accountants, and relevant profits of the Grant No. H771-TJ. 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 financial statements consist of:  Statement of cash receipts and payments.  Statement of funds by project components.  Statement of applications.  Statement of special accounts.  Notes to the financial statements, including short description of main statements of accounting policy and other descriptive notes. The reporting currency of these financial statements is US dollars. 5 “Private Sector Competitiveness Project”, Notes to the financial statements Grant No. H771-TJ for the year ended 31 December 2015 In US dollars 3. Summary of significant accounting policies Cash basis of accounting 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. 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 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 exchange rate settled by National Bank of the Republic of Tajikistan (the “NBRT”) on a date of operation. Monetary assets and liabilities expressed in foreign currency are converted to functional currency at official exchange rate settled by the NBRT on a reporting date. All foreign exchange differences resulted from maturity or recounting are included in statement of cash receipts and payments. Non-monetary items are valued according to their historic cost in foreign currency, which presented on rates of the initial operation date. In preparing financial statements the following exchange rates of NBRT in regard to Tajik somoni were used: 31 December 2015 6.9902 31 December 2014 5.3079 Cash and cash equivalents Cash and cash equivalents include cash on hand and demand deposits on current and interest-bearing accounts. Taxes Calculation and payment of personal income tax and social security 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 World Bank to the Project by replenishment of special account or through direct payment to the end supplier of goods and/or services. 4. Cash and cash equivalents Cash and cash equivalents as at 31 December comprise: 2015 2014 Special account in foreign currency 419,569 351,995 Current account in national currency (tender documentation sale) 966 – Cash on hand in foreign currency (tender documentation sale) 94 301 Transit account in national currency 2 12 Total 420,631 352,308 6 “Private Sector Competitiveness Project”, Notes to the financial statements Grant No. H771-TJ for the year ended 31 December 2015 In US dollars 5. Project cumulative expenses Project expenditures on major categories are presented in the statement of cash receipts and payments. Project expenditures on major components are presented in the statement of funds by project components. Project expenditures based on sources of financing are presented as follows: 2015 2014 Sources of financing For the period Cumulative For the period Cumulative Grant No. H771-TJ 949,000 1,878,637 794,411 929,637 Total 949,000 1,878,637 794,411 929,637 6. Funds Financing of the Project in 2015 and 2014 was made in the following way: 2015 Financing method / source of financing Grant H771-TJ Total Advances/(reimbursement) 1,016,537 1,016,537 Total 1,016,537 1,016,537 2014 Financing method / source of financing Grant H771-TJ Total Reimbursement 531,663 531,663 Total 531,663 531,663 7. Undrawn funds As of 31 December 2015, the undrawn part of Grant equals to 6,816,820 US dollars (2014: 8,070,170 US dollars). 8. Legal cases There were not any legal claims relating to the Project. 9. Events after reporting period On 18 February 2016 the World Bank replenished the request № 5 in the amount of 330,437 US dollars. On 28 April 2016 the World Bank replenished the request № 10 in the amount of 287,540 US dollars. 7 “Private Sector Competitiveness Project”, Appendix to the financial statements Grant No. H771-TJ for the year ended 31 December 2015 In US dollars Appendix 1. Reconciliation of the amounts provided by the Project and refunded by the World Bank For the year ended 31 December 2015: Categories of expenditures Application Project World Bank Variance Grant No. H771-TJ 5 397,974 397,974 − 6 − − − 6/1 171,872 171,872 − 7 136,194 136,194 − 8 310,497 310,497 − Total 1,016,537 1,016,537 − For the year ended 31 December 2014: Categories of expenditures Application Project World Bank Variance Grant No. H771-TJ 2 64,821 64,821 − 3 169,186 169,186 − 4 297,656 297,656 − Total 531,663 531,663 − 8