SMINISTRY OF TREASURY AND FINANCE HOARD OF TREASURY CONTROLLERS SUSTAINABLE CITIES PROJECT - II Implemented by ILLER BANKASI A.S. Financed Under International Bank for Reconstruction and Development (IBRD) Loan Agreement Numbered 8843-TR As of December 31, 2023 and For the Year Then Ended Prepared by YalVin AY Servan KUTLUCAN Senior Treasury Controller Treasury Controller Rumeysa IZGI Junior Treasury Controller Report's Number 58/5 - 21/5 - 13/5 INDEPENDENT AUDITOR'S REPORT June 12, 2024 REPUBLIC OF TORKiYE MINISTRY OF TREASURY AND FINANCE The Board of Treasury Controllers CONTENTS EXECUTIVE SUMMARY ...................................................................................................................................... 2 A . P ro je ct S u m m a ry ......................................................................................................................................... 3 B . O b je ctiv e s o f A u d it ...................................................................................................................................... 4 C . S c o p e o f A u d it ............................................................................................................................................... 5 D . A u d it M eth o d o lo gy .................................................................................................................................... 5 E . A u d it R e s u lts ......................................................... ....................................................................................... 6 F. Management Recomm endation ............................................................................................................. 6 INDEPENDENT AUDIT REPORT'S & FINANCIAL STATEMENTS OF THE PROJECT...................3 O p in ion............................................................................................................................................................ 8 B a s is fo r 0O p in io n .......................................................................................................................................... 8 Em phasis of Matter in the FinancialStatem ent .. ............................................................................ 9 G o in g C o n c e rn ............................ ................................................................................................................... 9 Responsibilities of Management and Those Charged with Governance or other appropriate terms for the Financial Statem ent s............................................................................. 9 Auditor's Responsibilities for the Audit of the Financial Statements......................................9 Report on Other Legal and Regulatory Requirements................................................................ ANNEX 1: Financial Statem ents of theProject ........................................................................................ 12 EXECUTIVE SUMMARY REPUBLIC OF TURKIYE MINISTRY OF TREASURY AND FINANCE The Board of Treasury Controllers EXECUTIVE SUMMARY A. Project Summary The Loan Agreement between the Iller Bankasi A.S. and International Bank for Reconstruction and Development (tBRD-World Bank) for Sustainable Cities Project - II, Loan Numbered 8843-TR was signed on 16.05.2018 and received a loan of 73.500.000,00 Euro. Project is implemented by Project Management Unit (PMU) under Iller Bankasi A.S, International Relations Department. The objective of the Project is to improve the planning capacity of, and access to targeted municipal services in, participating municipalities and utilities. The Project consists of the following parts: * Part A: Municipal Investments 1. Financing of demand-driven municipal infrastructure investments, through the provision of Sub-loans to Sub-borrowers to finance the cost of goods, works, non-consulting and consulting services that are required for the carrying out of Sub-project investments in eligible sectors and services, including, inter alia: (a) water and wastewater services, (b) public transport, (c) solid waste management, (d) energy efficiency and renewable energy, (e) municipal social infrastructure and services, (0 municipal firefighting services, (g) municipal building reconstruction or retrofitting for resilience, and (h) pollution reduction, through marine litter management, plastic waste reduction and implementing clean air compliance plans. 2. Provision of technical consulting services for: (a) the Sub-borrowers' supervision of design and construction activities carried out under Sub-projects, including municipal studies and analysis to inform Project investment planning, assessment of disaster and climate risk and gender gaps for Sub-projects, feasibility studies, technical designs and construction supervision; and (b) the capacity development of Sub-borrowers in support of the functions set forth in (a) of this sub-Part, including preparation and implementation of environmental and social safeguard policies (including for occupational health and safety). 3 RIPUBLIC OF TIRKIYE MINISTRY OF TREASURY AND FINANCE hie Board of Treasury Controllers Part B: Project Management Provision of goods, non-consulting and consulting services in support of the Borrower in Project management, including, inter alia, monitoring and evaluation, reporting, public outreach, and communications. Within the scope of Project, the following Special Designated Accounts were opened in Vakif Bank T.A.0; The account numbers of the bank accounts opened for this project are as follows; - TR15 0001 5001 5804 8017 5953 92: SSP-2 Special Account (EURO) - TR56 0001 5001 5804 8017 5954 30: S5P-2 Reimbursement Account (EURO) - TR97 0001 5001 5800 7308 6692 24: S$P-2 (TL Account) - TR34 0001 5001 5804 8017 5955 35: SSP-2 (USD Account) - TR 4100 0150 0158 0480 1759 5506: 5SP-2 (EURO) - TR25 0001 5001 5804 8023 3387 76: SP-2 (GBP Account) B. Objectives of Audit The objective of the audit is to express an opinion on the Financial Statements of the Sustainable City Project - II for the period ended 31 December 2023. The audit includes but not limited to the following tasks. In evidencing compliance with agreed project financing arrangements, we are expected to carry out tests to confirm that: (a) All funds have been used in accordance with the conditions of the relevant financing agreements, with due attention to economy and efficiency, and only for the purposes for which the financing was provided. Relevant financing agreements include the Loan Agreement numbered 8843-TR. [b) Goods, works, and services financed have been procured in accordance with relevant financing agreements, including specific provisions of the World Bank Procurement Guidelines. (c) All necessary supporting documents, records, and accounts have been maintained in respect of all project activities, including expenditures reported using Statements of Expenditure (SOE) method of reporting. (d) Respective reports issued during the period were in agreement with the underlying books of account. 4 REPUBLIC OF TJRKIYE MINISTRY OF TREASURY AND HNANCE The Board of [reasury Controllers C. Scope of Audit The audit was conducted in accordance with International Standards on Auditing. Those Standards require that the auditor plans and performs the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. The audit included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. The audit also included assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. There was no limitation in our scope for the Project's audit. D. Audit Methodology Financial Statements Verified that the financial statements have been prepared in accordance with International Public Sector Accounting Standards. Audited all the SOEs submitted to the World Bank in support of requests for periodic replenishment of the project-designated account. Examined expenditures for eligibility based on criteria defined in the terms of the financing agreement and detailed in the Project Appraisal Document. In addition, we examined; (a] the SOEs have been prepared in accordance with the provisions of the relevant financing agreement; (b] expenditures have been made wholly and necessarily for the realization of project objectives; (c) information and explanation necessary for the purpose of the audit have been obtained; (d] supporting records and documents necessary for the purpose of the audit have been retained, and (e) the SOEs can be relied upon to support the related withdrawal applications. 5 REPUBLIC OF TORKiYE MINISTRY OF TREASURY AND FINANCE The Board of Ireasurv Controllers Review of Designated Accounts During the audit of the project financial statements, we reviewed the activities of the project's designated account such as payments made and reconciliation of period-end balances. Internal Controls Evaluated significant internal controls to obtain a sufficient understanding of the design of relevant controls, policies and procedures and whether they have been in operation during the period under review. Compliance with Agreement Terms and Applicable Laws and Regulations Reviewed, assessed and reported on compliance with the terms and conditions of the Loan Agreement numbered 8843-TR. Representations by Implementing Agency Obtained specific written representations from management. E. Audit Results For the financial statements of project; our audit resulted with an unmodified opinion. In addition, other reporting responsibilities about the project are included under the "Report on Other Legal and Regulatory Requirements" heading of the report. F. Management Recommendation Since we have not identified any findings during our audit, we have not issued a Management Letter. 6 INDEPENDENT AUDIT REPORT'S & FINANCIAL STATEMENTS OF THE PROJECT RIFPUBLIC OF TiRKiYE MINISTRY OF TREASURY AND FINANCE The Board of Treasury Cortrollers INDEPENDENT AUDITOR'S REPORT TO ILLER BANKASI A.S. Opinion We have audited the Statement of Sources and Uses of Funds, Statement of the Comparison of Budget and Actual Amount, Statement of Withdrawal Application Summary, and Statement of Designated Account of the Sustainable Cities Project - II as of December 31, 2023, and for the period then ended, and notes to the financial statements including a summary of significant accounting policies. The financial statements have been prepared by Iller Bankasi A.S. in accordance with cash basis International Public Sector Accounting Standards and financial reporting provisions outlined in Loan Agreement Numbered TR- 8843. The accompanying financial statements present fairly, in all material respects, the financial position and cash flows of the Sustainable Cities Project - 11 as of December 31, 2023 and for the period then ended in accordance with cash basis International Public Sector Accounting Standards and financial reporting provisions outlined in Loan Agreement Numbered TR- 8843. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Financial Statements" section of this report. We are independent of the Iller Bankasi A.S., the Project Management Unit, within the meaning of "IFAC Code of Ethics for Professional Accountants" and have fulfilled our other responsibilities under those ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 8 REPUBLIC OF TLRKIYE MINISTRY OF TREASURY AND FINANCE The Board of Treasury Controllers Emphasis of Matter in the Financial Statement Without modifying our opinion, we draw attention to Note "2" to the financial statements, which describe the basis of accounting. The financial statements are prepared to assist Sustainable Cities Project - II Management Unit to comply with the financial reporting provisions of the Loan Agreement referred to above. As a result, the financial statements may not be suitable for another purpose. Going Concern The Projects financial statements have not been prepared using the going concern basis of accounting. The project will end July 29, 2026. Responsibilities of Management and Those Charged with Governance or other appropriate terms for the Financial Statements Iller Bankasi A.S., the Project Management Unit is responsible for the preparation and fair presentation of these financial statements in accordance with Loan Agreement Numbered TR-8843, 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. Those charged with governance are responsible for overseeing the Iller Bankasi A.S., the Project Management Unit's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements The objectives of our audit 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 will always detect a material misstatement when it exists. Misstatements can arise fromfraud 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 these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the planning and performance of 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 9 REPUBLIC OF TURKlYE MINISTRY OF TREASURY AND FINANCE The Board of Treasury Controllers 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. * 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. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We are required to 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 are also required to 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. 10 REPUBLIC OF T0RKIYE MINISTRY OF IREASURY AND FINANCE The Board of Treasury Controllers Report on Other Legal and Regulatory Requirements The conclusions drawn from the audits conducted within the scope of the other reporting requirements are as follows; a) Iller Bankasi A.S., as of December 31, 2023 has complied with, in all material respects, the requirements of the Loan Agreement Numbered TR-8843. b) With respect to SOEs, adequate supporting documentation has been maintained to support claims to the IBRD for reimbursement of expenditures incurred, and these expenditures are eligible for financing under the Loan Agreement Numbered TR-8843. Okan SULER Acting Chairman of The Board of Treasury Controllers Akif Billent BOYACIOGLU (Audit Partner) Vice Chairman Yalgin AY Servan KUTLUCAN Rumeysa iZGI Senior Treasury Treasury Junior Treasury Controller Controller Controller Date: 12.06.2024 Address: Ministry of Treasury and Finance The Board of Treasury Controllers ANKARA/TORKIYE 11 ANNEX I: Financial Statements of the Project ILLER BANKASI A$. SUSTAINABLE CITIES PROJECT - II (8843-TR) STATEMENT OF SOURCES and USES of FUNDS As of December 31, 2023 and For The Year Then Ended. (In EURO) Notes Current Period Previous Period Cumulative I-SOURCES OF FUNDS A- IBRD Loan 12.147.471,89 5.038.775,11 50.619.457,53 1- Special Account 12.147.471,89 5.038.775,11 50.435.707,53 a) Advance (Net) 0,00 0,00 20.000.000,00 b) SOE Procedures 12.147.471,89 5.038.775,11 30.435.707,53 2- Front-end-Fee 2/f 0,00 0,00 183.750,00 TOTAL FUNDS RECIEVED 12.147.471,89 5.038.775,11 50.619.457,53 11-A USES OF FUNDS by COMPONENT I-INVESTMENT COST A- Municipal Investments 10.392.732,92 11.114.788,62 36.497.224,48 Total Investment Costs 10.392.732,92 11.114.788,62 36.497.224,48 II-RECURRING COST Front-end-Fee 2/f 0,00 0,00 183.75000 Total Recurring Costs 0,00 0,00 183.750,00 TOTAL USES OF FUNDS by COMPONENT 10.392.732,92 11.114.788,62 36.680.974,48 II-B USES OF FUNDS by CATEGORY Category 1- Goods, Works, Non-Consulting Services, and 10.392.732,92 11.114.788,62 36.497.224,48 Consultants' Services Category 2- Front-end-Fee 2/f 0,00 0.00 183.750.00 TOTAL USES OF FUNDS by CATEGORY 10.392.732,92 11.114.788,62 36.680.974,48 Cash at the Beginning of the Period 1.01.2023 12.183.744,08 Cash at the End of the Period 31.12.2023 13.938.483,05 Prepared by Controlled by Approved by G8k9en TANRIOVEN Gamze ASLAN $evket Altu TASDEMIR Expert Manager Headof epart ent 12.06.2024 2.06.202 12 ILLER BANKASI A5. STATEMENT of COMPARISON BUDGET AND ACTUAL AMOUNT SUSTAINABLE CITIES PROJECT - 11 (8843-TR) 01.01.2023-31.12.2023 Curent Period Cumulative NOTES Actual Final Budget Original Budget Progress (%) Actual Planned Progress (%) 1 2 3-12 4 5 6-4/5 Sources of Funds IBRD Loan 6/a 12 147 471,89 13.200.00.,00 13 200 000,00 92% 50.619.457,53 34 975.000,00 145% Total Sources of Funds 12.147.471,89 13.200.000,00 13.200.000,00 92% 50.619.457,53 34.975.000,00 145% Uses of Funds 1 By Component A- Municipal Invesstmenos 6/b 10.392 732,92 18.000.000.00 18.000 00,00 58% 36497 224,48 56286 250,00 65% 0,00 0,00 0,00 183 750.00 183.750,00 100% Total Uses Of Funds By Component 10.392.732,92 18.000.000,00 18.000.000,00 58% 36.680,974,48 56.470.000,00 65% 2 By Expenditure Category Category I - Goods. Works, Non Uonsdrng,Servces, andConsultans 6/b 10.392 732,92 18 000.000,00 18.000,000,00 58% 36.497.224,5 56.286.250,00 65% Services Caregory 2 - Frorn end Fee 0,00 0,0 0.0 0 183 75000 100% Total Uses Of Funds By Component 10.392.732,92 18.000.000,00 18.000.000,00 58% 36.680.974,48 56.470,000,00 65% Prepared by Controlled by Prepared by Gokgen TANRIOVEN Hasan Fehmi TIOL] Sevket Altug T DEMIR Expert Manager Head of De artent 11 06.2024 11.062024 11.06 6 - 1- - _ б Z 4 � Ет �3 б ч i = а 3 � � '" _ � и. а .� � о F- -' � - � ° о � а � _ G Е '� � i �. ' и � `\ F � - _ - . . . �.._ .: \\ �_ � �� � w � :. г r t, �а� �� � i. о. J i . ^_ ��: д_ �'а F - �' � � ` _ �о _ U г °i � � � ,"�� н � � � а о � G т р ° z � � � °_ L � � 4 е � ° _ а _ z�t и й � г: � � д` �.. - - 5 й r � 'Е' 3 `� � - wa-_ г� � г�° и С 4J /// ` � iЭ п � t а к а г ч и z а и г_ � 1-'У- ш ° �� С 5 у Р. v - - � t � О � �= q U _ р к � т Q � Ъ 3 � - ` _ � � � - � <_ - - - ' Ё ° + а - - <_, ё ° _ т � - Е а � ° � � - ' � � � - - : •- ' У `о 2 д ` 'а z S= ё t �� V � "t ? ё ` ; А 'i г i й �с с`. � 1LLER BANKASI A$. SUSTAINABLE CITIES PROJECT - 11 (8843-TR) SPECIAL ACCOUNT STATEMENT ACCOUNT NO- 00158048017595392 For the Year Ended December 31, 2023 (In EURO) Opening Balance (01.01.2023) 12.183.744,08 Reimbursements to SA 12.147.471,89 Refunds to SA 0,00 Available Funds 24.331.215,97 Payments Made for Expenditures 10.392.732,92 Service charges for the account 0,00 Total Project Investments 10.392.732,92 [Closing Balance (31.12.2023) 13.938.1 ,05 Prepared by Controlled by Approved by Gbk en TANRIOVEN - -lasan Fehmi T16LI $evket Altug TA$DEMIR Expert Manager Head of Department 11.06.2024 11.06.2024 11.46.2,024 ILLER BANK Sustainable Cities Project - II No: TR-8843 NOTES TO THE PROJECT FINANCIAL TABLES As of 31.12.2023 1. THE OBJECTIVES AND STRUCTURE OF THE PROJECT Within the scope of the Country Partnership Strategy (CPS), which sets the framework for the financial cooperation with World Bank between July 2012 - June 2016, loan for the Sustainable Cities Project (SCP) provided by ILBANK with World Bank financing is planned to be used for the need of the local governments. Loan Agreement (TR-8843) is signed between the International Bank for Reconstruction and Development (the World Bank) and ILBANK (Bank) under the guarantorship of the Ministry of Treasury and Finance of Tilrkiye (Formerly Undersecretariat of Treasury) on 26 May 2018. With the Sustainable Cities Project - II; it is aimed to apply international experiences in Tflrkiye in the fields of environmental, financial and social sustainability, which are the three basic elements of sustainability. The project includes financing projects in the water, wastewater, solid waste, urban transportation, energy efficiency and renewable energy sectors. The proposed loan amount is USD 300.000.00,00 and support for infrastructure service investments will be provided to participating metropolitan municipalities. The proposed program is designed as a Series of Project (SoP), whereby municipalities' inclusion in the program and access to investment financing will be in phases, in line with the sustainable cities approach. Municipalities will be eligible for the program and financing based on their readiness and meeting the selection criteria (as outlined under Component B). Component A: Municipal Investments: This component, which will have a financing of approximately USD 300.000.000,00, will provide support to participating metropolitan municipalities for infrastructure service investments. The second Project Series was signed for EUR 73.500.000,00 (USD 91.540.000,00). Component B: Project Management and Institutional Capacity Building: This component, which is a loan of approximately USD 1.000.000,00, will be used to finance co s ancy services and trainings deemed necessary for ILBANK to carry o its proj t nf 1 /8 evaluation and supervision functions and safeguard responsibilities. However, this component will not be utilized in this Project Series. The project is managed under the coordination of Project Management Unit (PMU) established under International Relations Department of ILBANK. The Operational Manual which is prepared for the purpose of carrying out the work and operations of the PMU in a healthy manner, entered into force with the decision of the Board of Directors of ILBANK dated December 20, 2018 and 31/851 numbered. PMU consists of a project manager and Directorates of Technical Management, Contract Management, Financial Management, Business Development and Disaster Management: DIROCTORATE of TECHNICAL MANAGEMENT Name - Surname Title Starting Date at the Department of International Relations Gamze ASLAN Project Manager 10.06.2010 Sevil UYSAL Technical Expert 2005 Canan GULHAN Technical Expert 17.08.2018 Emre YAL(IN Technical Expert 26.02.2019 Firat SEVILGEN Technical Expert 7.01.2022 Ayfer KARAALP Technical Expert 25.02.2019 Ash Ozer OZTURK Expert 25.06.2019 Muhammed Ibrahim ATIK Technical Expert 14.10.2019 Qagri GORBOZ Engineer 28.09.2021 Samet AGKA$ Engineer 24.09.2021 Erdi GLJNE$ Engineer 27.09.2021 Emin Bariy ELMACI Engineer 8.10.2021 Ongun UZUNGUNGOR Engineer 11.10.2021 Nurgill DEMiRC Engineer 24.09.2021 Rasim AYDIN Engineer 24.09.2021 Elif DONMEZ ARSLANTA$ Engineer 18.04.2023 Ceren AYYILDIZ Engineer 18.05.2023 Bar OZONLO Engineer 3.05.2023 Atakan BALCI Engineer 17.04.2023 Ceren SAGKURT Urban Planner 2.05.2023 Giilsim trem MANDI Engineer DIROCTORATE of FINANCIAL MANAGEMENT Hasan Fehmi T[ILI Manager 13.12.2006 Funda ETIN Expert 15.01.2008 Nesrin CILDIK Expert 31.10.2008 G6ken TANRIOVEN Expert 29.07.2011 Rabia ULUTA$ Expert 2008 i 2/8 Mehmet Ragip BAYRAK Expert 12.03.2019 Esra BELYURT Expert 18.03.2019 Hakan BA$ESGIOGLU Management Staff 23.07.2018 Fatma Betfil OZSOY Expert 2022 Cihat DEMEZ Management Staff 13.10.2021 Ece CAM Engineer 24.09.2021 Ktibra SARITEPECi Management Staff 30.09.2021 Yasin BOLAT Management Staff 24.09.2021 Gkhan ARTUN Management Staff 14.04.2023 Ikra Cemre OLKER Management Staff 26.04.2023 Seren ERDOGDU Engineer DIROCTORATE of CONTRACT MANAGEMENT Ozkan §70§EN Manager 27.02.2018 Turhan Atakan GCLYURDU Expert 6.08.2008 Yusuf AK Technical Expert 4.03.2019 Selen ERGUN Expert 13.11.2016 Lerzan KURT Expert 24.06.2013 Cennet DALGIC Expert 25.03.2018 Kaan GOLLO Technical Expert 10.02.2019 Selim HIZAL Technical Expert 29.03.2019 Arda Hakan OZGOL Technical Expert 15.12.2018 Kasim Emre ALTUNYALDIZ Technical Expert 8.10.2021 Okan GOL Engineer 1.10.2021 Selin KOQ Engineer 24.09.2021 Emre Can ATALAY Engineer 14.07.2023 Muazzez Ozlem. MuLSzeR 0zlemEngineer 25.04.2023 GCLSERO6LU Eytip AYAZ Engineer 20.04.2023 Osman SONMEZ Engineer 17.04.2023 Yeliz DEMIRHAN ARDA Architect DIROCTORATE of BUSINESS DEVELOPMENT Gontil EJDEROGLU Manager 5.05.2008 Duygu KARABAY Expert 26.08.2013 Deniz KARAER Technical Expert 14.01.2019 Gdnseli Zeynep ULUG Management Staff 9.07.2019 Zehra KELE$ Management Staff 2021 Selin ADIKUTLU Urban Planner 28.09.2021 Sunay BiLGE Urban Planner 27.09.2021 Giil*en Ay en PARLAK Urban Plarnr 24.09.2021 Betill ATMACA Urban Planner 3.05.2023 Simay CANATAR Urban Planner 25.04.2023 DIROCTORATE of DISASTER MANAGEMENT Sinan GUMU$OK Acting Manager Taner BA$AR Technical Expert 8.03.2019 3/8 Abdullah FURKAN Technical Expert 12.04.2023 Bahar UGURLU Expert 10.08.2020 Berna EROGLU Engineer 7.10.2021 Hamza Kagan QAKIR Engineer 14.04.2023 Merve GENGTURK Engineer 24.09.2021 GUlin BALCI Engineer 14.04.2023 Ruklye NACAR Management Staff 28.09.2021 The table below illustrates the starting and the ending dates of the PMU staff: Name - Surname Starting Date Ending Date Ozlem AGCA 17.11.2014 10,08.2019 Nazik DELIKTA$ 21.05.2018 2021 1Ihan ALTINBA$ 4.06.2013 2022 Fahri OZDIN 5.03.2019 2022 Nevzat TOGRUL 16.04.2014 2023 Ahmet ACAR - 2023 Ay enur UYGUN 03.05.2023 05.06.2023 Berfin Nur AHfIN 27.04.2023 05.06.2023 PMU ensures the coordination between the team responsible for Sustainable Cities Project - II in World Bank and Iller Bank; and carries out the selection of the Municipalities and/or Administrations, relations with the Ministry of Treasury and Finance and the Presidency of Strategy and Budget, and the selection of individual consultant and consulting fins, during the preparation and execution phases of the project; together with the Word Bank and Iller Bank units assigned within the scope of the project. Coordination of procurements within the scope of the sub-projects, coordination of technical and environmental affairs of the sub-projects, and disbursement of loan proceeds and also debt service are also carried out by the PMU. 2. ACCOUNTING POLICIES The PMU, currently organized under the Department of International Relations of Iller Bank in accordance with the provisions of the Loan Agreement, ensures that the sub-loans drawn from the Loan and disbursed to the Municipalities/Administrations are recorded on a "cash basis" within the Iller Bank accounting system. On the other hand, PMU ensures that the records regarding: * The amount of World Bank loan, * The amount withdrawn from the loan, * The amount paid to the suppliers/contractors/consultants and to the Municipalities/Administrations to be paid to the tax offices on behalf of them as per the provisions of the Sub-Loan Agreements, * Accrued amounts such as credit fees and interest. are kept within the accounting software of Department of Accounting and Financial Affairs of Iller Bank, in order to monitor in terms of credit categories and expenditure items in euro and contract currency. The Sustainable Cities Project - II's bookkeeping is kept within the accounting system of Department of Accounting and Financial Affairs of Iller Bank. With the current software, progress payment data is entered into to the software by the staff of Department of International Relations and the system automatically controls the accuracy of the calculations. The progress payments with correct calculations are sent to the Accounting and Financial Affairs Department for accounting by adding the value date and expenditure data after the payment is made. The following policies shall be followed in accounting records of Iller Bank: a) Iller bank will use cash based accounting related to the Project. According to cash basis accounting the withdrawals form the Loan to the Special Account are recorded as a "Loan Liability" in Euro. b) The amount of payments to the suppliers/contractors/consultants upon the request of the Municipalities/Administrations" as per the Sub-Loan Agreements will be debited to the loan account opened for each one of the Municipalities/Administrations, i.e. as a "Receivable". c) The amount determined after the required deductions for tax, stamp duty, decision tax, VAT withholding, etc., as per the local regulations,And the conditions of the contract will be transferred directly to the account of the supplier/consultant/contractor providing the services/goods/works from the Special Account by International Relations Department PMU. The total amount of the deductions will be paid to the related account of the Municipality/Administrations who are responsible to pay to the tax offices on behalf of the contractor. d) The payments by Iller Bank PMU for the objectives of the Project will be recorded as "Non-Interest Expenses" account in the Iller Bank's accounts in local currency 5/ e) The amount of exchange rate gain or loss arising from the revaluation of the Euro dominated receivables and payables revalued using the Euro/TL exchange rate prevailing at the date of the balance sheet will be recorded as foreign exchange gain or loss. f) The amount of sub-loan used by the Municipalities/Administrations based on Sub- Loan Agreements will be recorded to the following account: 1 - Loans 143 - Mid-Term and Long -Term Special Area Loan (Foreign Currency) 1430012 - World Bank Sustainable Cities Project - II The total amount of expenses for the Sustainable Cities Project - II including the front-end-fee is EUR 36.680.974,48 at the end of the year of 2023. Front-end-fee (EUR 183.750,00) was charged by the World Bank from the financing account by deduction at source; this amount was not transferred to the Project's Special Account. g) The disbursements related to the sub projects will be recorded into the legal books of Iller Bank and the Municipality/Administrations which are using the loan proceeds. A copy of the disbursement is received and reviewed by Iller Bank upon submission by the Municipality/Administrations. Because the disbursements/expenses belong to the agency (ie., Municipality/Administrations) they will be recorded as "Loan Receivable" in Iller Bank's books by Municipality/Administrations. h) The Special Account with Vakiflar Bank is in Euro. The prevailing selling exchange rate for Euro/TL of Vakiflar Bank will applied for the above mentioned payments from the Special Account. i) Accounting transactions will be recorded in Euro as the currency of Loan Agreement. The collection in local currency is converted itto Euro at the rate of Vakiflar Bank prevailing at the date of collection for preparatioh of the Statement of Source and Use of the Funds. The payments in Euro are recorded using the exchange rate of Euro/TL prevailing at the date of payment. 3. STATEMENT OF FINANCE The use of the funds in Special Account is limited by only project objectives in conformity with the provisions of the Loan Agreement between the World Bank and Iller Bank. The unused project funds at the end of the project may be cancelled in accordance with the provisions of the related Loan Agreement. The assets obtained by using the Project funds are belong to the Municipality/Administrations and the usage of the assets limited by the project objectives until the project completion. The loan-user agencies keep the necessary records in accordance with the requirements of the Law no. 5018 to monitor/control the assets during period of the project and Sub-Projects. 4. WORLD BANK LOAN The debt service (principal, interest, front-end-fee) will be made by Iller Bank in accordance with the provisions of the Loan Agreement, concluded on 16 May 2018 between World Bank and 11ler Bank. Iller Bank required from all the Municipality/Administrations to open an "Escrow Account" to fulfill the debt service liability according to the provisions of the Sub Loan Agreements. The Municipality/Administrations are required to deposit the amounts determined by applying the rates as indicated in the Sub-Loan Agreements to the amount of the water bills collected by both their own collection offices and/or via the banks. The balance of the Escrow Accounts can not be withdrawn by the Municipality/Administrations without a written permission of Iller Bank yet the Municipality/Administrations can use the account balances to earn revenues from the investment areas as specified in the Sub-Loan Agreement. The required debt service shall be made by purchasing Euro with the amounts accumulated in the Escrow accounts and transferred to Iller Bank before the due date of the debt service. In other words in essencethe revenues from the water bills of the Municipality/Administrations constitute the security of the loan. In the case in which the amount transferred to the Escrow Account is not sufficient to pay for the debt service Iller Bank has the right to appeal to the Municipality/Administrations' general budget tax shares, rent incomes, etc. respectively. 7 5. CASH POSITION AT DECEMBER 2023 The cash position at 31 December 2023 means the balance between the withdrawals from the loan to the Special Account and the amount of disbursement from Special Account and it is EUR 13.938.483,05. Project funds are held only in the Vakiflar Bank's Special Account, no other accounts or cash other than the Special Account is used. T.C. VAKIFLAR BANK T.A.O. SPECIAL ACCOUNT (ACCOUNT NO: 00158048017595392) 31.12.2023 Balance 13.938.483,05 EURO 6. EXPLANATION ON BUDGET REALIZATION a) The original budget, final budget, and planned budget sections under the title "Sources of Funds" in "Statement of Comparison Budget and Actual Amount" are generated using the amounts projected in the Project Apprasial Document (PAD) and calculated in EUR based on the percentage of USD amounts projected over the years in the PAD. b) The original budget and final budget sections under the title "Uses of Funds" in "Statement of Comparison Budget and Actual Amount" are the estimated expenditure amounts for the year 2023 in the Aide-M6moire document dated December, 2022. Planned budget section is calculated by adding the expenditure amount realized until the year 2022 to the estimated expenditure amount for the year 2023. 8/8