State of Palestine p State Audit & Administrative 1(g Control Bureau r9j.-0 *Juo President Bureau J Independent Auditors' Report To: World Bank & MoF. Report on the Audit of Project's Financial Statements Opinion We have audited the Projects' statement of Balance sheet for the period ended December 31st, 2023, Statement of Sources and Uses of Funds for the period ended December 3 1t, 2023, Designated Bank Account Statements, and a summary of significant accounting policies and Notes to the Project Financial Statements. In our opinion, the accompanying statements present fairly, in all material respects, the financial position of "Public Financial Management Improvement Project Phase 2 "-PFMIP-Ph2 (P177742) -implemented by MOF and HCPP" for the period ended December 3 1st, 2023, and its accompanied notes for the period then ended in accordance with the financial reporting provisions explained in the notes to financial statements (note # 2 Summary of Significant Accounting polices) which state the following: "The Project Financial Statements are prepared using modified cash basis of accounting, which is a comprehensive basis of accounting other than International Financial Reporting Standards (IFRS). Sources of funds are recognized when cash is received or when the direct payment is effected by the World Bank, and uses of funds are recognized when cash payments are made, when related cheques/bank transfer requests are issued by MOF&HCPPP or when expenditure are due for direct payment. Issued cheques/bank transfer requests which have note cleared the bank statement as of period ended are presented as "Accounts Payable" in the balance sheet. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs), SAACB Law, and the World Bank Term of Reference. Our responsibilities under those standards and regulations are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We Ramallah - P.0 Box 755 TEL. 02-2972293 -2972290 FAX. 022967716 GAZA facb@asaacb.ps : j _>A , 'www.saacb.ps :,jj93;7 ti--1 State of Palestine State Audit & Administrative Control Bureau President Bureau W FJ are independent of the entity (Project Management) in accordance with SAACB mandate and our Code of Ethics for together with the other ethical requirements that are relevant to our audit of the Project's financial statements in Palestine, and we have fulfilled our other ethical responsibilities. 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 We draw the attention to Note (2) to the financial statements, which describes the basis of accounting. The financial statements are prepared using modified cash basis of accounting for a one Project implemented by MOF (Ministry of Finance) and HCPP (High Council for Public Procurement Policies) with involvement of the State Audit and Administrative Control Bureau (SAACB), Palestinian Anti-Corruption Commission (PACC), and Palestinian Central Bureau of Statistics (PCBS). Our audit opinion is on the implementation of this project and does not reflect the financial position of MOF and HCPP or other implementing entities. As a result, the financial statements may not be suitable for another purpose. Our opinion is not modified in respect of this matter. Responsibilities of Management and Those Charged with Governance for the Financial Statements. Management is responsible for the preparation and fair presentation of the financial statements in accordance with the financial reporting provision in the notes to financial statements section below, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the entity's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so. Ramallah - P.0 Box 755 TEL. 02-2972293 -2972290 FAX. 022967716 GAZA facb,saacb.ps :0j3S )L 49 www.saacb.ps :03 j-S'I J1-Ji State of Palestine State Audit & Administrative 14Iil iJiI Control Bureau President Bureau J Those charged with governance are responsible for overseeing the organization's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are 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 and SAACB mandate will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or taken together, they could reasonably be expected to influence the economic decisions of users taken based on these financial statements. As part of an audit in accordance with ISA's and SAACB mandate, we exercise professional judgment and maintain professional skepticism throughout the audit. We also > Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risk, 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 the one resulting from error, as fraud may involve collusion, forgery, intentional omission, 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 expressing an opinion on the effectiveness of the internal control. > Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. > Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidenced obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the organization'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 financial statements or, if such disclosure Ramallah - P.0 Box 755 TEL. 02-2972293 -2972290 FAX. 022967716 GAZA fachld.saacb.ps ~jS~~.#I' sabp ~jlI~2 State of Palestine State Audit & Administrative Control Bureau President Bureau III .-" ujo 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 overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements 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. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law and regulations preclude public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Mr e nistrative Control Bureau Jn Ramallah - P.0 Box 755 TEL. 02-2972293 -2972290 FAX. 022967716 GAZA fach@ tsaacb.ps :sj ]I .y w .saacb.ps : S yo The Ministry of Finance Public Financial Management Improvement Project Phase 2 (P162850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 Public Financial Management Improvement Project Phase 2 PFMIP-Ph2 (P177742) Funded by The World Bank (TFOB8064) Financial Statements for the Year Ended December 31, 2023 1 The Ministry of Finance Public Financial Management Improvement Project Phase 2 (P162850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 Table of Contents Page No. Statement of Balance Sheet 3 Statement of Sources and Uses of Funds 4 Designated Bank Accounts Statements 5-6 Notes to the Project Financial Statements 7-14 Annex to the Project Financial Statements: 15 Project Budget and Disbursement per Component and Beneficiary Institution 2 The Ministry of Finance Public Financial Management Improvement Project Phase 2 (PI62850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 Statement of Balance Sheet AS of December 31, 2023 All Amounts in USD As of As of December 31, December Note 2022 31, 2023 Assets Current assets Cash at banks 7 403,630.33 560,018.60 Account receivable 9 3,062.65 1,345.20 Total current assets 406,692.98 561,363.80 Total assets 406,692.98 561,363.80 Liabilities and fund balance Current liabilities Account Payable Income tax deduction 8 2,944.51 7,934.36 Total current liabilities 2,944.51 7,934.36 Fund balance 403,748.47 553,429.44 Total liabilities and fund balance 406,692.98 561,363.80 The accompanying notes form an integral part of these Financial Statements. 3 The Ministry of Finance Public Financial Management Improvement Project Phase 2 (P162850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 Statement of Sources and Uses of Funds For the year ended December 31,2023 All Amounts in USD For the Year For the Cumulative Ended Year Ended up to December December December Note 31,2022 31,2023 31,2023 Source of fund Advance payment 3 550,162.44 294,386.56 844,549.00 Replenishments received 3 0.00 841,108.21 841,108.21 Reimbursement/Direct Payments 3 0.00 135,952.00 135,952.00 Total source of fund 550,162.44 1,271,446.77 1,821,609.21 Uses of funds Category 1: Goods, non-consulting services, consulting services, Training, and Operating Costs under Parts 1, 2, 3,5, and 6 of the Project 4 128,635.80 845,412.41 974,048.21 Category 2: Goods, non-consulting services, consulting services, Training, and Operating Costs under Part 4 of the Project 4 17,778.17 276,353.39 294,131.56 Total Uses of funds 146,413.97 1,121,765.80 1,268,179.77 Fund balance 403,748.47 149,680.97 553,429.44 Fund Balance- beginning of year 0.00 403,748.47 0.00 Fund Balance- end of year 403,748.47 553,429.44 553,429.44 The accompanying notes form an integral part of these Financial Statements. 4 The Ministry of Finance Public Financial Management Improvement Project Phase 2 (P162850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 Designated Bank Account Statement- MoF DA- A- 3210928 Bank Account number 0458/3210928/001/3001/000 Depository bank Bank of Palestine Address Ramallah Related loan/ credit TFOB8064 Currency U.S. Dollar (USD) Note 2022 2023 Balance - beginning of year 0.00 179,043.51 Receipts during the period 3 307,797.45 969,108.57 Total 307,797.45 1,148,152.08 Deduct Payments for project expenditures from designated bank accounts 4&9 125,691.29 704,470.56 Add: Account Receivable 9 3,062.65 (3,062.65) Total 128,753.94 701,407.91 Balance - end of year 7 179,043.51 446,744.17 The accompanying notes form an integral part of these Financial Statements. 5 The Ministry of Finance Public Financial Management Improvement Project Phase 2 (P162850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 Designated Bank Account Statement- HCPPP DA- B- 3210905 Bank Account number 0458/3210905/001/3001/000 Depository bank Bank of Palestine Address Ramallah Related loan/ credit TFOB8064 Currency U.S. Dollar (USD) Note 2022 2023 Balance - beginning of year 0.00 224,586.82 Receipts during the period 3 166,386.20 Total 242,364.99 390,973.02 Deduct Payments for project expenditures from designated bank accounts 4&9 17,778.17 276,353.39 Add: Account Reivable 9 0.00 1,345.20 Total 17,778.17 277,698.59 Balance - end of year 7 224,586.82 113,274.43 The accompanying notes form an integral part of these Financial Statements. 6 The Ministry of Finance Public Financial Management Improvement Project Phase 2 (P162850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 Notes to the Project Financial Statements 1. The Project and its Financing The Palestinian Liberation Organization (PLO) for the benefit of the Palestinian Authority has received a grant from the World Bank in the amount of US$ 8 million towards the cost of Public Financial Management Improvement Project (PFMIP Ph.2). This project will be implemented by the Ministry of Finance (MOF) and the High Council for Public Procurement Policies (HCPPP), there is other three implementing entities will manage and implement activities: the State Audit & Administrative Control Bureau (SAACB), Palestinian Anti-Corruption Commission (PACC), and Palestinian Central Bureau of Statistics (PCBS) The Project's development objective (PDO) is to is improve public financial management, procurement management, and data use in the Palestinian Authority The Grant Agreements closing date will be on April 30, 2027 with four-month grace period ending on August 31, 2027. The Project consists of the following components: 1. Part 1: Improving Budget Expenditure Management and Control (US $1.50 million) 2. Part 2: Financial Accountability (US $2.00 million) 3. Part 3: Enhancing Revenue Mobilization (US $1.50 million). 4. Part 4: Improving Public Procurement Management (US $2.00 million). 5. Part 5: Closing Critical Data Gaps and Modernizing Statistics Production (US $0.25 million), and 6. Part 6: Project Implementation Support and Management (US $0.75 million) The following table sets forth the budget per each category of the project: Budget from World Bank Category (USD) Category 1: Goods, non-consulting services, consulting services, Training, and Operating Costs under Parts 1, 2, 3,5, and 6 of the Project 6,0000,000 Category 2: Goods, non-consulting services, consulting services, Training, and Operating Costs under Part 4 of the Project 2,000,000 Total Budget 8,000,000 7 The Ministry of Finance Public Financial Management Improvement Project Phase 2 (P162850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 2. Sununary of Significant Accounting Policies The Project Financial Statements are prepared as per government applicable standards for Internationally funded projects. Significant accounting policies follow: * Basis of accounting The Project Financial Statements are prepared using modified cash basis of accounting, which is a comprehensive basis of accounting other than International Financial Reporting Standards (IFRS). Under this basis of accounting, sources of funds are recognized either when cash is received or when the direct payment is affected by the World Bank, and uses of funds are recognized when cash payments are made, when related cheques/bank transfer requests are issued by MOF&HCPPP or when expenditure are due for direct payment. Issued cheques/bank transfer requests which have note cleared the bank statement as of period end are presented as "Accounts Payable" in the balance sheet. For presentation purposes in the Statement of Sources and Uses of Funds, amounts deducted by the World Bank as recovery from previously made advance payment are presented as part of replenishments and as reductions from the advance payment. * Foreign currency The Project's basic functional currency is the United States Dollar (USD). Transactions that are expressed or denominated in other currencies were translated to USD using exchange rates in effect at the time of each transaction. Differences arising from the fluctuations in exchange rates were treated as exchange gains or losses in the Statement of Sources and Uses of Funds. 8 The Ministry of Finance Public Financial Management Improvement Project Phase 2 (Pl62850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 3. Sources of Funds Up to December 31, 2023, MoF& HCPPP received the following payments from the World Bank: MOF HCPPP MoF DA-A (3210928) 19i8 P. HCPPP DA-B (3210905) /D. oa. /D a. Total /D a. Total Total MOF HCPPP Poec Advance Rep./ Advance Rep./ Payment Cat. 1 Total Cat. 1 Payment Cat. 1 Total Cat. 2 Cumulative amount up to December 31, 2022- Note 3 307,797 0 307,797 0 307,797 242,365 0 242,365 0 242,365 550,162 2023 01/05/2023-WA# A2 110,075 226,732 336,807 336,807 336,807 22/8/2023-WA# A3 (80,183) 306,080 225,897 225,897 225,897 31/08/2023-WA# A4 DP 135,952 135,952 135,952 10/09/2023-WA# 2B 2,184 164,202 166,386 166,386 166,386 30/11/2023-WA# AS 262,311 144,094 406,405 0 406,405 0 0 0 0 406,405 Total 2023 292,203 676,906 969,109 135,952 1,105,061 2,184 164,202 166,386 0 166,386 1,271,447 Cumulative amount up to December 31, 2023 600,000 676,906 1,276,906 135,952 1,412,828 244,549 164,202 408,751 0 408,751 1,821,609 9 The Ministry of Finance Public Financial Management Improvement Project Phase 2 (P162850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 4. Uses of Funds This item represents the following: MOF DA-A HCPPP DA-B Reimbursement/ Direct (3210928) (3210905) Payments Total Cat. 1 Cat. 2 Cat. 1 Cat. 2 Cumulative amount up to December 31, 2022 128,636 17,778 0 0 146,414 2023 Component 1-Improving Budget Expenditure Management and Control 174,862 0 174,862 Component 2- Financial Accountability 293,569 135,952 429,521 Component 3-Enhancing Revenue Mobilization 60,907 0 60,907 Component 4-Improving Public Procurement Management 276,353 0 276,353 Component 5-Closing Critical Data Gaps and Modernizing Statistics Production 0 0 0 Component 6-Project Implementation Support and Management 180,123 0 180,123 Total 2023 709,460 276,353 135,952 0 1,121,766 Cumulative amount up to December 31, 2023 838,096 294,132 135,952 0 1,268,180 10 The Ministry of Finance Public Financial Management Improvement Project Phase 2 (P162850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 5. Payments for Project Expenditures Below is the reconciliation of the Project expenditures shown in the Designated Bank Account Statement with the Project expenditures shown in the Uses of Funds: 2023 D. MoF DA- A HCPPP DA- B Payment Total Payments as reported in designated bank accounts statement 704,470.56 276,353.39 0 980,823.95 Direct Payments 135,952.00 135,952.00 Add: taxes payable as of December 31, 2023 (Note 9) 4,989.85 0.00 4,989.85 Total uses of funds per Statement of Uses of Funds 709,460.41 276,353.39 135,952.00 1,121,765.80 11 The Ministry of Finance Public Financial Management Improvement Project Phase 2 (P162850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 6. Reconciliations Between Client Connection and MoF Records, cumulative up to December 31, 2023 Total MOF HCPPP Project DA (A)- D.P/ Total DA (B)- D.P/ Total 3210928 Reimburse. MOF 3210905 Reimburse. HCPPP Project Ficures per the client connection Amount Advanced Less Recovered (note 3) 600,000 600,000 244,549 244,549 844,549 Add: Client-connection balance by category (note 3) Cat 1. Goods, non-consulting services. Consultants' services, Training and Operating Costs 676,906 135,952 812,858 812,858 Cat 2. Goods, non-consulting services. Consultants' services, Training and Operating Costs 164,202 0 164,202 164,202 Total Client connection Figures 1,276,906 135,952 1,412,858 408,751 0 408,751 1,821,609 Project Figures per MoF records Cash at Bank as per records as of Dec. 31, 2023 (note 7) 446,744 446,744 113,274 113,274 560,019 Add: Disbursements (note 4) Cat 1. Goods, non-consulting services. Consultants' services, Training and Operating Costs 838,096 135,952 974,048 974,048 Cat 2. Goods, non-consulting services. Consultants' services, Training and Operating Costs 294,132 294,132 294,132 Deduct: Account Payable (note 9) (7,934) (7,934) 0 0 (7,934) Add: account receivable as of December 31, 2023 (note 8) 0 0 1,345 - 1,345 1,345 Total Project Figures 1,276,906 135,952 1,412,858 408,751 0 408,751 1,821,609 12 The Ministry of Finance Public Financial Management Improvement Project Phase 2 (PI 62850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 7. Cash at Banks - End of Period The cash at banks at December 31, 2023 represents the following: 2022 2023 MoF DA- A HCPPP DA- B Total MoF DA- A HCPPP DA- B Total Cash at bank- USD 179,043.51 224,586.82 403,630.33 446,000.38 113,274.43 559,274.81 Cash at bank- ILS - - - 743.79 - 743.79 179,043.51 224,586.82 403,630.33 446,744.17 113,274.43 560,018.60 8. Accounts Payable This item represents: a. Income tax deducted Taxes deducted from employee salaries and not accounted for income tax Department as of December 31 and b. Amounts due to consultants that have not been settled by December 31, 2023: 2022 2023 MOF a. Income tax Tax Mahmoud Elshantaf 673.65 Tax Mahmoud Elshantaf 465 Tax Sami Khalifa 1304.1 Tax Sani Khalifa 876 Tax Fahed Al Sheikh 654 Tax Fahed Al Sheikh 981 Abdelkareem Bader 4.65 Tax Rana Kamal 345 Tax Eman Harb 4.65 Tax Eman Harb 18 Tax Ammar Alsalami 162.81 TAX Osama Haidaria 7 Tax Abdelrahman Alomari 131.35 Tax Anmar Alsalain 113.1 Tax Fadi Nasar 4.65 Tax Abdelrahman Alomari 91.97 Tax Rwand Fadaleh 4.65 Tax Fadi Nasar 18 Tax Rwand Fadaleh 18 Tax Ahmad Kasib 18 Tax- Baraa Zaiton 54.45 Tax- Razan Al Far 95.1 Tax- Ahmad Badah 10.02 Tax- Leena 12 Income Tax- Shatha 12 Income Tax-Duha 18 Tax- Abeer 393 Sub total 3,545.64 b. Due to consultants Due to Majed 2,821.32 Due to Suleiman 1,567.40 Sub total 4,388.72 Total L2,944.51 Total 7,934.36 13 The Ministry of Finance Public Financial Management Improvement Project Phase 2 (P162850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 HCPPP Total 0.00 Total 0.00 Total 2022 2,944.51 Total 2023 7,934.36 9. Accounts Receivable: 2022 2023 MOF Paid by Mistake 3062.65 Total 3,062.65 Total 0.00 HCPPP Paid by Mistake 12/12/2023 828 Paid by Mistake 12/12/2023 517.20 Total 0.00 Total 1,345.20 Total 2022 3,062.65 Total 2023 1,345.20 14 The Ministry of Finance Public Financial Management Improvement Project Phase 2 (P162850) Funded by the World Bank Financial Statements For the Year Ended December 31, 2023 Annex to the Project Financial Statements Project Budget and Disbursement per Component and Beneficiary Institution Disbursements up to December 31, Disbursements Disbursements up to 2022 During 2023 December 31, 2023 Components Beneficiaries Budget Cat 1. Cat 2. Cat 1. Cat 2. Cat 1. Cat 2. Component 1-Improving Budget Expenditure Management and MoF 1,500,000 9,450 174,862 184,312 Control MoF 1,000,000 54,800 393,338 448,138 Component 2- Financial Accountability SAACB 500,000 14,985 36,183 51,168 PACC 500,000 0 0 0 Component 3-Enhancing Revenue Mobilization MoF 1,500,000 0 60,907 60,907 Component 4-Improving Public Procurement Management HCPPP 2,000,000 17,778 276,353 294,132 Component 5-Closing Critical Data Gaps and Modernizing Statistics MoF 250,000 0 0 Production 0 Component 6-Project Implementation Support and Management PMU 750,000 49,401 180,123 229,523 Total 8,000,000 128,636 17,778 845,412 276,353 974,048 294,132 146,414 1,121,766 1,268,180 15