ALAT AND KARAKUL WATER SUPPLY PROJECT IDA Public ...documents.worldbank.org/curated/en/654651471004434580/pdf/UZ-Alat... · ALAT AND KARAKUL WATER SUPPLY PROJECT (IDA LOAN No. 5189-UZ)

ALAT AND KARAKUL WATER SUPPLY PROJECT (IDA LOAN No. 5189-UZ) The World Bank Projects Coordination Unit of Uzkommunhizmat Agency Special-Purpose Cash Basis Financial Statements for the Year Ended 31 December 2015

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ALAT AND KARAKUL WATER SUPPLY PROJECT (IDA LOAN No. 5189-UZ) The World Bank Projects Coordination Unit of Uzkommunhizmat Agency Special-Purpose Cash Basis Financial Statements for the Year Ended 31 December 2015

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CONTENTS INDEPENDENT AUDITOR'S REPORT

SPECIAL-PURPOSE CASH BASIS FINANCIAL STATEMENTS

Special-Purpose Statement of Sources and Uses of Funds for the year ended 31 December 2015 .......... 5 Notes to Special-Purpose Cash Basis Financial Statements........................................................ 7 Statement of Expenditures - IDA Loan No. 5189-UZ ............................................................... 13

Independent Auditor's Report To the Management of the World Bank Projects Coordination Unit of Uzkommunhizmat Agency We have audited the accompanying Special-Purpose Cash Basis Financial Statements of the Alat and Karakul Water Supply Project (“Special-Purpose Cash Basis Financial Statements”), which comprise the Special-Purpose Statement of Sources and Uses of Funds for the year ended 31 December 2015, Notes thereto and the Statement of Expenditures for the year ended 31 December 2015 financed through the International Development Association (“IDA”) (Loan Agreement No. 5189-UZ dated 18 July 2013) and contributions received from the Government of the Republic of Uzbekistan. The Special-Purpose Cash Basis Financial Statements have been prepared by management of the World Bank Projects Coordination Unit (“PCU”) of Uzkommunhizmat Agency, in accordance with the International Public Sector Accounting Standard (IPSAS) “Financial Reporting under the Cash Basis of Accounting” promulgated by the International Federation of Accountants (IFAC).

Management's Responsibility for the Special-Purpose Cash Basis Financial Statements

The management of the PCU is responsible for the preparation of these Special-Purpose Cash Basis Financial Statements in accordance with the International Public Sector Accounting Standard (IPSAS) “Financial Reporting under the Cash Basis of Accounting” and for such internal control as management determines is necessary to enable the preparation of special-purpose financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these Special-Purpose Cash Basis 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 Special-Purpose Cash Basis Financial Statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Special-Purpose Cash Basis Financial Statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the Special-Purpose Cash Basis Financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the Special-Purpose Cash Basis 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 entity'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 Special-Purpose Cash Basis Financial Statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

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Basis for Qualified Opinion

We were unable to obtain sufficient appropriate audit evidence about the unrecognized amounts of financing of the Republic of Uzbekistan (contributions in kind) and taxes and duties for 2015 in the Special-Purpose Statement of Sources and Uses of Funds for the year ended 31 December 2015, because we were not provided with the respective financial information.

Consequently, we were unable to determine whether any adjustments to these amounts in the Special-Purpose Statement of Sources and Uses of Funds for the year ended 31 December 2015 were necessary.

Qualified Opinion

In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the accompanying Special-Purpose Cash Basis Financial Statements of the Alat and Karakul Water Supply Project for the year ended 31 December 2015 are prepared by the PCU, in all material respects, in accordance with the International Public Sector Accounting Standard (IPSAS) “Financial Reporting under the Cash Basis of.

Basis of Accounting and Restriction on Distribution and Use

Without modifying our opinion, we draw attention to Note 2 to the accompanying Special-Purpose Cash Basis Financial Statements, which describes the basis of accounting applied. The Special-Purpose Cash Basis Financial Statements are prepared to assist the PCU in complying with the financial reporting provisions of the Loan Agreement described above. As a result the Special-Purpose Cash Basis Financial Statements may not be suitable for other purposes. Our report is intended solely for the management of the PCU and IDA and should not be distributed to or used by any other parties.

D.A. Taradov Partner 20 June 2016 BDO Unicon AO

ALAT AND I{,ARAKUL WATER SUPPLY PROJECT (l0a IOAN No. 5189-UZ)The Wortd Bank Projects Coordination Unit of Uzkommunhizmat AgencySpecial-Purpose Cash Basis Financial Statemenfs for the Year Ended 31 December 2015

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Speciat -Purpose Statement of Sources and Uses of Funds for the year ended 31 December 2015

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I F I N A N C I N GL------

Loan from lnternat ional Development Agency

Avai lable fordistr ibut ion

Funds receivedCumulat iveCurrent

Direct PayrncntsDeslgnatcci Account

1 990 944 1 990 944750 000

Total loan from International Development Agency 73 72O 836 1 990 944 z 740 944 70 979 892

Contr ibut ion of the Republ ic of UzbekistanCont r jbu t ion : jn k indContr ibut ions in caslr

Total contr ibut ion of the Repubt ic of Uzbekistan 56 969 800 56 969 800

Other sourcesProceeds from sale of tender documentsOthcr rc.ccipts

4 1 1 4 4 1 1 41 9 0

Tota l o t l ' ie r i .curces 4 1 1 4 4 304

TOTAL FINANCING * 1 30 690 636 1 995 058 2 745 248 127 949 692

TXPENDITURTS BY CATEGORIES I Budget

Expendi tures Available fordistr ibut ionCurrent year Cumulat ive

A. lnrprovcrncrr I o1 Watcr- Suppty lnfrastructurc[J. lnst i tur t ior ta l Strcrrgthening and ( .apaci l -yBu i td ingC. Studies for Future InvestmentsD. Project Managemett tTaxes and dut ies[ ' inancing costs dur ing investment per iod

104 940 526

22 641 900

3 1 0 8 2 1 0

7 044 401

120 50;

7 044 401

n 5 4 ;

102 770 688

27 641 900

3 1 0 8 2 1 0

OLher 1 56[ ' o ra i gn cL r i " , . ] i t c y exchange (ga in ) / t oss

TOTAL EXPti ' iDI" fURES 1 3 0 6 9 0 6 3 6 z 164 890 2 169 859 128 520 798

TOTAL EXCESS OF FINANCING OVEREXPENDITURES

( 1 6 9 8 3 2 ) 5 7 5 3 8 9

s Coordination Unit of Uzkommunhizmat Agency on

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ALAT AND If iRAKUL WATER SUPPLY PROJECT (t0n lOnN No. 5189-UZ)The World Bank Projects Coordination Unit of Uzkommunhizmat AgencySpeciat-Purpose Cash Basis Financial Statemenfs for the Yeqr Ended 31 December 2015Iabularclle uL: tr-arc-p reseLted-u-Ul-DqUarc

Special-Purpose Statement of Sources and Uses of Funds for the year ended 31 December 201 5(Cont inued)

IIIEXPENDITURES BYL- - - - - - - - .

COMPONENTS

InternationaI Development Agency LoanA. lmprovement of Water Suppty Infrastructuret) . Inst i tut jonaI Strengthening and Capaci ty t ]u i td ingC, Studies for Future InvestmentsD. Project Management 173

720 836

2 044 401-

. t -

120 506

7 044 401-

125 437

71 550 998

Cumulat ive

Expendi tures under lnternat ional DevelopmentAgency Loan

73 720 836 2 164 907 2 1 6 9 8 3 8 7 1 5 5 0 9 9 8

Contr ibut ior ' of the Republ ic of UzbekistanA. lmprovemcnt of Water Suppty Infrast . ructureTaxes and dutieslr inancing costs dur ing investment per iod

31 719 6902Z 641 9403 1 0 8 2 1 0

31 219 69077 641 9043 1 0 8 2 1 0

f lxpendi turc, ; under contr ibut ion of the Republ ic ofUzbekistan 5 6 9 6 9 8 0 0 56 969 800

Other expcrrdi tures 1 56Foreign currency exchange (gain)/ loss

TOTAL EXPENDITURES

( 1 7

1 3 0 6 9 0 6 3 6 2 164 890 2 169 859 128 520 798

TOTAL EXCI:SS OF FINANCING OVER EXPENDITURES ( 1 6 e 8 3 2 ) 5 7 5 3 8 9

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ALAT AND KARAKUL WATER SUPPLY PROJECT (IDA LOAN No. 5189-UZ) The World Bank Projects Coordination Unit of Uzkommunhizmat Agency Special-Purpose Cash Basis Financial Statements for the Year Ended 31 December 2015 Tabular amounts are presented in US Dollars

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Notes to Special-Purpose Cash Basis Financial Statements 1. Principal activity The Alat and Karakul Water Supply Project (the “Project”) was launched based on Loan Agreement No. 5189-UZ dated 18 July 2013 signed by and between the International Development Association (“IDA”) and the Republic of Uzbekistan. The objective of the Project is to improve the coverage, quality, and efficiency of public water supply service in the districts of Alat and Karakul in the Bukhara region. The World Bank Projects Coordination Unit of Uzkommunhizmat Agency (“PCU”) was created under the Uzbek Agency Uzkommunhizmat (the “Agency”) of the Republic of Uzbekistan. Therefore, the Agency is responsible for implementation of the Project. The PCU provides assistance to the Agency in management and coordination of the Project funds provided by IDA loan and the contribution of the Uzbek Government. The total financing of the Project is estimated at USD 134.05 million. The Project is funded from several sources, including the Loan from IDA amounting to Special Drawing Rights 53.20 million (equivalent of USD 77.08 million) with the interest rate of 0.75% per annum on the principal amount. Commitment charge rate of 0.5% per annum shall be paid on the undrawn amount of the Loan. The principal amount of the Loan is repayable semi-annually over 25 years, including a grace period of five years, commencing from the year 2018. The other co-financing party is the Government of the Republic of Uzbekistan (the “Government”), whose contribution is USD 56.97 million. The Project is expected to last until 2017. The Ministry of Finance of the Republic of Uzbekistan is responsible for repayment of the Loan on behalf of the Republic of Uzbekistan, in accordance with Loan Agreement No. 5189-UZ dated 18 July 2013, signed by and between IDA and the Republic of Uzbekistan. However, there are sub-agreements between the Ministry of Finance and Bukhara Regional PE “Suvokova” (“BVK”) to agree to undertake obligations set forth in the Loan Agreement. The Project consists of the following components: Part A – Improvement of Water Supply Infrastructure (i) Engineering-design and operational technical assistance services to support the PCU, at the level of the

Project Implementing Entity, in the following tasks of Project implementation:

review of the available feasibility study and preparation of optimized preliminary designs;

preparation of detailed designs and bidding documents, construction supervision, and reporting;

improvement of utility operation, maintenance and management, all through the provision of goods and consultants’ services.

(ii) Rehabilitation and expansion of water production and bulk transmission systems through:

the construction of a new expanded water treatment plant in Dvoinik, including the rehabilitation of the existing intake and pre-sedimentation ponds;

the renewal and expansion of transmission systems including the 24 km trunk line from Dvoinik to Alat-town;

the rehabilitation of the 13 km trunk line from Alat-town to Karakul-town; and


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the rehabilitation and expansion of the transmission pumping stations and related water tanks to upgrade the production and transmission capacity to 49,800 m3 per day, all through the carrying out of works and the provision of goods and consultants’ services.

(iii) Rehabilitation and expansion of urban and rural water networks through:

the rehabilitation and expansion of existing water distribution systems in Alat-town and Karakul-town, including treated water tanks, treated water pumping stations, disinfection systems, distribution networks, installation of meters on about 7,200 existing household connections and installation of about 1,600 new household connections and meters; and

construction of new rural water transmission and distribution systems, including pumping, storage, networks and metered connections in about 120 of the surrounding villages based on the optimized feasibility study and preliminary design cost estimates, all through the carrying out of works and the provision of goods and consultants’ services.

Part В - Institutional Strengthening and Capacity Building

(i) Institutional strengthening and capacity building through the carrying out of institutional assessments of

the capacity, organization and training needs of the Project Implementing Entity to improve its management and operational performance for a sustainable water supply service in the Alat and Karakul districts.

(ii) Strengthening the capacity of utility management and operations staff by providing local and international training on management and technical operations, through the provision of consultants’ services and training.

(iii) Strengthening the management and operational capacity of Project Implementing Entity through:

the establishment of modem procedures and systems, including hardware and software, for billing, collection, customer service, internal auditing, accounting and record keeping;

the provision of operations and maintenance equipment and machinery; and

the provision of laboratory equipment and supplies, all through the provision of goods, consultants’ services and Training.

(iv) Developing a communications strategy and carrying out of public consultations and awareness campaign, consumer satisfaction and gender surveys, through the provision of consultants’ services.

Part С - Studies for Future Investments Preparation of a feasibility study of sewerage and on-site sanitation investments needs in the towns and districts of Alat and Karakul, to accompany the increased provision of water supply services. Part D - Project Management Strengthening the capacity of the PCU in Project management, monitoring and coordination capacity, through the provision of goods, consultants’ services, including Project financial and technical audits, and training, and financing of incremental operating costs. Taxes and duties Taxes and duties which are not assessed on goods, works and services acquired with loan funds provided by IDA and the Government of the Uzbek Republic due to granted exemption. Financing costs during the investment period Borrowing costs during the investment period.


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Other Other costs represent funds used by error for financing expenditures under other PCU projects. 2. Basis of presentation These Special-Purpose Cash Basis Financial Statements have been prepared in accordance with the International Public Sector Accounting Standard (IPSAS) "Financial Reporting under the Cash Basis of Accounting" promulgated by the International Federation of Accountants (IFAC) as required in accounting and reporting guidelines of the IBRD as set out in Financial Monitoring Reports (FMRs) for Bank-financed projects issued by the IBRD in 2002. 3. Significant accounting policies Reporting currency and translation methodology. The reporting currency of the Project's Special-Purpose Cash Basis Financial Statements is US Dollars (“USD”) and a significant portion of financing and expenditures of the Project is in USD. However, the Project also has Uzbekistan Soums (“UZS”) accounts, which are used to receive funds in UZS and pay expenditures in UZS. The assets acquired and expenditures incurred in UZS were translated into USD using the following principles of translation:

Monetary assets denominated in UZS have been translated to USD using the official rate of exchange of the Central Bank of Uzbekistan (“CBU”) of UZS 2,809.98 to USD 1, effective as at 31 December 2015 (2014: UZS 2,422.4 to USD 1);

Income/expenditures earned/incurred in UZS have been translated to USD using the CBU rate of exchange effective at the date of transaction; and

Gains/losses resulting from the translation of UZS bank account movements are recorded as an exchange gain/loss in the respective Statements of Designated and Current Accounts and the Special-Purpose Statement of Sources and Uses of Funds (“SSUF”).

Contribution of the Republic of Uzbekistan. Contribution of the Republic of Uzbekistan represents in-kind and cash contributions by the Government. In-kind contributions are provided as tax/duties exemption for goods, works and services the PCU and BVK procured under IDA loan and the contribution of the Republic of Uzbekistan. Designated and current bank accounts in the Republic of Uzbekistan. The PCU and BVK operate designated bank accounts. The USD Designated Accounts represent funds provided by IDA to improve borrower cash flow and facilitate prompt disbursement of funds. The accounts are opened with JSCB “HamkorBank”. Accounting and reporting for the Designated Accounts are maintained by the financial staff of the Project and controlled by the Agency. The USD Designated Accounts are used to cover IDA's share of eligible expenditures in both local and foreign currencies. The eligible expenditures are reported to IDA through SOE. The USD Designated Accounts are replenished by IDA on the basis of the Designated Account Reconciliation Statement prepared by the PCU for validation of the USD Designated Account and SOE. Designated and Current Accounts in UZS were opened for receiving funds generated by sales of the bidding documentation, conversion of funds credited to USD Designated Accounts under the IDA loan, paying contracts concluded under the Project and salaries to the PCU employees, financing Project management expenditures and for cash withdrawals. The outstanding balances of the above Project accounts as at 31 December 2015 and 31 December 2014 are disclosed in Note 6.


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4. Taxation In accordance with Resolution No.ПП-2001 of the President of the Republic of Uzbekistan of 15 July 2013 «On implementation of the Alat and Karakul Water Supply Project financed by IDA” and joint Resolution No. 64 of the Ministry of Finance of the Republic of Uzbekistan dated 16 April 2004, No. 2004-15 the State Tax Committee of the Republic of Uzbekistan dated 16 April 2004 , and No. 01-02/19-22 of the State Customs Committee of the Republic of Uzbekistan dated 16 April 2004 “On approval of Regulation on taxation of goods (works, services) imported and acquired on the territory of the Republic of Uzbekistan with funds borrowed and guaranteed by the Republic of Uzbekistan under investment projects with participation of international financial institutions and foreign governmental financial organizations”, goods, works and services provided and paid on the territory of the Republic of Uzbekistan which are financed with IDA loans are exempt from taxes and customs duties. The Special-Purpose Statement of Sources and Uses of Funds for the year ended 31 December 2015 includes personal income tax withheld at source of USD 3,859, privately-held pension fund contribution of USD 2,342 and unified social payment of USD 7,475. Cumulative payments from the Project inception amounted to USD 4,476, USD 2,625 and USD 8,418, respectively. 5. Commitments

There was 2 IDA-funded contract (2014: 1 contract) concluded within the framework of the Project as at 31 December 2015. The liabilities under this contract are as follows:

Sources of financing Expenditure category 2015 2014

IDA А. Improvement of Water Supply Infrastructure

8 771 000 -

IDA D. Project Management 4 000 6 667

Total 8 775 000 6 667


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6. Designated and Other Bank Accounts with Banks of the Republic of Uzbekistan The following bank accounts are opened under the Project: Bank account Source of financing Note 2015 2014

USD Designated Account - PCU IDA loan 7 573 474 745 018 UZS Designated Account - PCU (payroll account) IDA loan 9 1 246 62

UZS Designated Account - PCU IDA loan 8 54 141

USD Designated Account - PCU IDA loan, Other sources 11 615 -

UZS Current Account- PCU

IDA loan, Government of the Republic of Uzbekistan, Other sources

10 - -

Total 575 389 745 221

7. USD Designated Account Statement - PCU Account No. 22626840904262646001 Depositary bank Tashkent Branch of JSCB “HamkorBank” Location 14, Furkat str., Tashkent, Republic of Uzbekistan Source of financing IDA loan No. 5189-UZ Currency USD USD

Balance as at 1 January 2015 745 018 Add:

Deduct: Improvement of Water Supply Infrastructure 53 457

Financing of project management expenditures 30 300 Audit 2 667 Converted to UZS Current Account – PCU (22626000104262646001) 85 120 Balance as at 31 December 2015 573 474


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8. UZS Designated Account – PCU Account No.: 22626000104262646001 Depositary bank Tashkent Branch of JSCB “HamkorBank” Location 14, Furkat str., Tashkent, Republic of Uzbekistan Source of financing IDA loan No. 5189-UZ Currency UZS

UZS USD Balance as at 1 January 2015 341 321 141 Add:

Converted from USD Designated Account – PCU (22626840904262646001) 223 802 036 85 120 Transfer from UZS Designated Account - Alat-Karakul (22622000904262646002) 798 672

295

Recovery of overpaid payables for services rendered 11 000 4 Transfer from UZS Current Account – PCU (20210000604262646001) 500 000 183 Deduct:

Financing of project management expenditures 118 289 463 45 046 Transfer to UZS Current Account - PCU (20210000604262646001) 104 526 883 39 545 Transfer to UZS Designated Account - Alat-Karakul (22622000904262646002) 2 460 320 997 Bank commission 23 389 9 Foreign currency exchange loss - 92 Balance as at 31 December 2015 152 974 54 9. UZS Designated Account - PCU (payroll account) Account No.: 22622000904262646002 Depositary bank Tashkent Branch of JSCB “HamkorBank” Location 14, Furkat str., Tashkent, Republic of Uzbekistan Source of financing IDA loan No. 5189-UZ Currency UZS UZS USD

Balance as at 1 January 2015 148 948 62 Add: Transfer from UZS Current Account - PCU (20210000604262646001) 104 032 009 39 364 Return of funds earlier transferred for payroll payment 2 500 000 890 Transfer from UZS Designated Account – Alat-Karakul (22626000104262646001) 2 460 320 997 Deduct: Financing of project management expenditures 104 842 547 39 719 Transfer to UZS Designated Account – Alat-Karakul (22626000104262646001) 798 672 295 Foreign currency exchange loss - 53 Balance as at 31 December 2015 3 500 058 1 246


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10. UZS Current Account – PCU Account No.: 20210000604262646001 Depositary bank Tashkent Branch of JSCB “Hamkobank” Location 14, Furkat str., Tashkent, Republic of Uzbekistan

Source of financing

IDA loan No. 5189-UZ, Government of the Republic of Uzbekistan, Other sources

Currency UZS

UZS USD Balance as at 1 January 2015 - - Add:

Transfer from UZS Current Account – PCU (22626000104262646001) 104 526 883 39 545 Proceeds from sale of tender documents 4 669 131 1 767 Converted from USD Designated Account - PCU (20210840804262646013) 4 661 364 1 732 Deduct:

Transfer to UZS Designated Account - Alat-Karakul (22622000904262646002) 104 032 009 39 364 Financing of project management expenditures 9 325 369 3 659 Transfer to UZS Designated Account – PCU (22626000104262646001) 500 000 183 Foreign currency exchange gain - (162) Balance as at 31 December 2015 - - 11. USD Designated Account - PCU Account No. 20210840804262646013 Depositary bank Tashkent Branch of JSCB “HamkorBank” Location 14, Furkat str., Tashkent, Republic of Uzbekistan Source of financing IDA loan No. 5189-UZ, Other sources Currency UZS UZS

USD Balance as at 1 January 2015

-

Add:

- Proceeds from sale of tender documents

2 347

Deduct:

Converted to UZS Current Account - PCU (20210000604262646001)

1 732

Balance as at 31 December 2015

615


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Statement of Expenditures - IDA Loan No. 5189-UZ

Application number Initial advance Total amount per applications Reimbursed from

Designated Account - - - Total - - - Reconciliation of financing made through Designated Account - IDA Loan No. 5189-UZ Current year Cumulative

Advances - 750 000 Total financing made through Designated Account - 750 000

ALAT AND KARAKUL WATER SUPPLY PROJECT IDA Public ...documents.worldbank.org/curated/en/654651471004434580/pdf/UZ-Alat... · ALAT AND KARAKUL WATER SUPPLY PROJECT (IDA LOAN No. 5189-UZ)

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