SPECIAL PURPOSE FINANCIAL STATEMENTS AND … · 516 503 (13) (13) 4 249,119 249,119 249,986 249,986 The project special purpose jînancial statements were approved by the management

PHRD Grant No. TF014855

IMPLEMENTED BYMOLDOVA SOCIAL INVESTMENT FUND

SPECIAL PURPOSE FINANCIAL STATEMENTS

AND

INDEPENDENT AUDITOR’S REPORT

For the year ended 31 December 2016

CHISINAUMarch 2017

CONTENT

Page

iNDEPENDENT AUDITORS’ REPORT 3

STATEMENT OF SOURCES AND USES OF FUNDS 5

STATEMENT OF EXPENDITURE BY PROJECT ACTIVITY 6

STATEMENT OF SOES 7

STATEMENT OF DESIGNATED ACCOUNT 8

NOTES TO THE PROJECT SPECIAL PURPOSE FiNANCIAL STATEMENTS 9

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Special Purpose Financial StatenientsP1-I/ID Technical Assistance /n, the Integration oj (‘hi/c/ten with Dcsoh,lines into ‘Io:nstreo,n Schools Project

PI-IRD Grant No. TFOI 4855for the year ended 3! December 20/6 2/14

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BAKER TILLYCS Baker Tilly Klitou and Partners SRL65 Stefan cel Mare si Sfant Blvd5th Floor, office 507MD-aooi, Chisinau— Moldova

Tel: +37322233003Fax: +373 22 234044

INDEPENDENT AUDITORS’ REPORTEmail: info®bakertilly.mdWebsite: www.bakertilly.md

To the Management of PHRD Technical Assistance for the Integration of Children with Disabilities intoMainstream Schools Project

Report on the Special Purpose Project Financial Statements

Opinion

[1] We have audited the special purpose project financial statements of “PI-IRD Technical Assistancefor the Integration of Children with Disabilities into Mainstream Schools” project (the “Project”),under the Moldova Social Investment Fund project partially financed by PHRD Grant No.TF014855 which comprise the statement of financial position, the statement of sources and usesof funds, the statement of expenditure by project activity, the statement of SOEs, the statement ofdesignated account for the year ended 31 December 2016 and a summary of significant accountingpolicies and other explanatory information (notes to the special purpose project financialstatements).

In our opinion, the accompanying special purpose project financial statements of the project forthe year ended 31 December 2016 present fairly in all material respects the financial position andsources and uses of funds for the year then ended in accordance with International Public SectorAccounting Standard “Financial Reporting Under the Cash Basis of Accounting” (the ‘IPSAS”)issued by the International Public Sector Accounting Standards Board of the InternationalFederation of Accountants and the Financial Management Manual for World Bank’s FinancedInvestment Operations.

Basis for Opinion

[2] We conducted our audit in accordance with International Standards on Auditing. Ourresponsibility under those standards are further described in the Auditors’ Responsibility for theAudit of special purpose project financial statements section of our report. We are independentfrom the Project in accordance with ethical requirements that are relevant to our audit of thefinancial statements in the Republic of Moldova, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter — Basis of Accounting and restriction on Distribution and Use

[3] We draw attention to Note 2 to the special purpose project financial statements, which describesthe basis of accounting. The special purpose project fmancial statements were prepared to assistthe project in complying with the financial reporting provisions of the World Bank Guidelines andGrant agreement requirements. As a result, may not be suitable for another purpose.

Associated offices:Cyprus: Nicosia T: +357 22 458500, Cyprus: Limassol T: +357 25 591515, Cyprus: Larnaca T: +357 24 663299 .

Greece: AthensT:+3o 2155006060, Romania: BucharestT: +40 21 3156100, Bulgaria: Sofia T: +3592 9580980, Moldova: Chisinau T: +37322233003Registered in Moldova (Reg. No. 1007600043180) List of directors can be found at the Company’s registered Office, C rus

Export AwardAn independent member of Baker Tilly International 3

BAKER TILLY

Responsibilities of Those Charged with Governance for the special purpose project financialstatements

[4] Management is responsible for the preparation of the special purpose Project financial statements ‘]in accordance with International Public Sector Accounting Standard “Financial Reporting Underthe Cash Basis ofAccounting” (the “IPSAS”) issued by the International Public Sector AccountingStandards Board of the International Federation of Accountants, and Financial ManagementManual for World Bank Financed Investment Operations, and for such internal control asmanagement determines is necessary to enable the preparation of the special purpose projectfinancial statements that are free from material misstatement, whether due to fraud or error.

In preparing the special purpose financial statements, management is responsible for assessing theProject ability to continue as a going concern, disclosing as applicable, matters relating to goingconcern and using the going concern basis of accounting unless management intends to ceaseoperations of the Project or has no realistic alternative but to do so.

Those charged with Governance are responsible for overseeing the Project’s fmancial reportingprocess.

Responsibilities for the Audit of the Special Purpose Project Financial Statements

[5] Our objective is to obtain reasonable assurance about whether the special purpose project financialstatements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with International Standardson Auditing will always detect a material misstatement when it exists. Misstatements can arisefrom fraud or error and are considered material if, individually or in the aggregate, they couldreasonably be expected to influence the economic decisions of users taken on the basis of thesespecial purpose project financial statements.

Baker Tilly Klitou and Partners SRL

]Chisinau, R. MoldovaMarch3O,2017

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STATEMENT OF SOURCES AND USES OF FUNDS

“PHRD Technical Assistancefor the Integration ofChildren with Disabilities into Mainstream Schools” ProjectFinanced by PHRD Grant No. TF014855For the periodfrom 1 October 2014 to 31 December 2016Amounts are in USD

TOTAL OPENING CASH

Sources of Funds

PHRD Grant No. TF014855

Community Contribution

TOTAL FUNDS

Project Expenditures(1) Goods, consultants’ services,Training and Operating Costs underPart 1 and Part 3 of the Project(2) Goods, consultants’ services,Training and Operating Costs underPart 2 of the ProjectTOTAL PROJECTEXPENDITURES

Foreign currency gaini(loss)

TOTAL CLOSING CASH

Year ended Cumulative Year ended Cumulative31 Dec 2016 as at 31 Dec 2015 as at

31 Dec 2016 31 Dec 2015

249,986 - - -

5

143,228 697,739 554,511 554,511

45,808 45,808 - -

189,036 743,547 554,511 554,511

6

182,568 487,079 304,512 304,512

7,852 7,852 - -

190,419 494,931 304,512 304,512

516 503 (13) (13)

4 249,119 249,119 249,986 249,986

The project special purpose jînancial statements were approved by the management of the Moldova SocialInvestment Fund on 30 March 2017 and signed on its behalf The accompanying notes form an integral part ofthese project special purposeJinancial statements.

Mircea EsanuMSIF Executive irector

Special Purpose Financial Siate,,zcnt~‘I’HR/) Tec/zizzeal ,Í ssistwzce for the Imegrarion of Children izith Disabilities into Maizzsţ,eanz Sc/zoo/s ProjeLi

PHRD Grant No. TF014855for the lear ezzded 3! December 20/6 5 14

Ludmila NitaMSIF Financial Director

STATEMENT OF EXPENDITURE BY PROJECT ACTIVITY

“PHRD Technical Assistancefor the Integration ofChildren with Disabilities into Mainstream Schools” ProjectFinanced by PHRD Grant No. TF014855For the year ended 31 December 2016Amounts are in USD

Components

Part 1. District-Level Planninga. Trainingsb. Consulting services

Part 2. Demonstration Pilot Sub-project

a. Civil worksb. C/S Designc. C/S Supervision of

Constructiond. Estimator of Civil workse. C/S Educational Programsf. C/S Development of modules,

training on child-centerg. C/S Monitoring Follow-up

Engineer

Part 3. Project Management,Monitoring and Evaluation, andDissemination

a. Expenditure verificationsb. Evaluation costsc. Baseline studyd. Training

TOTAL

The project special purpose Jînancial statements were approved by the management of the Moldova SocialInvestment Fund on 30 March 2017 and signed on its behalf The accompanying notes form an integral art ofthese project special pur osejin ncial statements.

Mircea Es nu ,

MSIF Executive Director-

Year ended Cumulative Year ended Cumulative31 Dec 2016 as at 31 Dec 2015 as at

31 Dec 2016 31 Dec 2015

- 279,292 279,292 279,292- 279,292 279,292 279,292

7,852 7,852 - -

12,455 12,455 - -

10,186 10,186 - -

2,750 2,750 - -

60,099 60,099 - -

92,550 92,550 - -

4,527 4,527 - -

190,419 190,419 - -

- 25,220 25,220 25,220

- 25,220 25,220 25,220190,419 494,931 304,512 304,512

Ludmila NitaMSIF Financial Directoi’-’

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JSpeciol Purpo~e Financial Stnicmeiu

í’lIRD 7’ech,zical ,4ssis”,zeefoi ~he ĺntegra~ion o/Chikl,en hit/I I)isabihties ř;zr~~ A Ía’nstceani Sc/roots ‘ ProjectPHRD Grant No. TF014855for the pear eizde’l 3/ December 20/6 6 14

STATEMENT OF SOES

“PHRD Technical Assistance for the Integration ofChildren with Disabilities into Mainstream Schools” ProjectFinanced by PHRD Grant No. TF014855For the year ended 31 December 2016Amounts are in USD

App. Value date Expenditure category Total# Goods, consultants’ services, Goods, consultants’ services,

Training and Operating Costs Training and Operating Costs

under Part l and Part 3 of the under Part 2 of the ProjectProject

1 2

MF7 23-Sep-2016 69,524 - 69,524

MF8 09-Nov-2016 73,660 45 73,705

143,183 45 143,228Total

The project special purpose jinancial statements were approved by the management of the Moldova SocialInvestment Fund on 30 March 2017 and signed on its behalf The accompanying notes form an integral part ofthese project special purposejinancial statements.

Special Purpose Financial SrntemcnivPHRD Tee/zizical . Issistance for ihe lniegru~ion n/Children u/rh Disabzl,íies 11,10 A lazzisirean, Sc/zouis~’ l’roJecl

PHRD Grant No. TF014855for (lie ecar ended 31 Decenzber 20/6 7/14

Mircea.EsanuMSIF Executive D ector

Ludmila NitaMSIF Financial

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STATEMENT OF DESIGNATED ACCOUNT

“PHRD Technical Assistance for the Integration of Children with Disabilities into Mainstream Schools” Project ‘1Under the Moldova Social Investment Fund ProjectFinanced by PHRD Grant No. TF014855For the year ended 31 December 2016

MD83NB0000000 227101/13 1 121C0Account No. 03261884029 0498AACurrency USD* MDL**

National Bank ofDepository Bank Moldova State Treasury

1 Grigore VieruAvenue, C. Tanase Street 7,

Chisinau, Moldova Chisnau, Moldova

Year ended31 Dec 2016

USD1. Opening balance as at01.01.20162. Add: opening discrepancy

3. IDA advance/replenisbment

4. Community Contribution

5. Present outstanding amountadvanced to DA

6. DA closing balance as at31.12.2016 _______________________________________________________

7. Add: Amount of eligibleexpenditures paid

8. Less: interest earned (ifcredited to DA)

9. Total advance accounted for _____________________________________________________

10. Closing discrepancy ***

(*) Payments in MDL are performed through local currency account No. 268129102024901 at the State Treasure(C. Tanase Street 7, Chisnau, Moldova).(**) Account No. 227101/131121C00498AA at the State Treasure (C. Tanase Street 7, Chisnau, Moldova) is also

being usedfor the “Social Infrastructure and Energy EfJîciency “project (KJW). Amounts related to KJW are notpresented in the above table. All amounts relate only to PHRD project.(***) FX loss gain or (loss)

The project special purpose Jinancial statements were approved by the management of the Moldova SocialInvestment Fund on 30 March 2017 and signed on its behalf The accompanying notes form a integr part ofthese project special purposeJinancial statements.

Mircea Esanu Ludmila NitaMSIF Executive Direct MS]F Financial Director

Special Pinpo.~e Eu i Sţo’e,,zcntç“P1-/Ri) rech,iic»l . lss’stw,ce /or the hiregrizizon of Children wit/i Disabilities info hlainsţream Schools’ P;’ojeclPHRD Grant \o. TFO14855

Address

Year ended31 Dec 2016 Total

USDUSD

249,986 - 249,986

143,228 - 143,228

- 45,808 45,808

393,214 45,808 439,022

202,795 46,324 249,119

190,419 - 190,419

393,214 46,324 439,538

- 516 516

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for he icar e;ided 3, December 20/6 8//4

NOTES TO THE PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS

“PHRĽ’ Technical Assistancefor the Integration of Children with Disabilities into Mainstream Schools” ProjectFinanced by PHRD Grant No. TF014855For the year ended 31 December 2016

1. General information

1.1. The Financing and Project Agreement

According to the Letter Agreement dated 6 August 2013 between the Republic ofMoldova andInternational Development Association (the IDA), the IDA, acting as administrator of grantfunds provided by Japan under the Policy and Human Resources Development (PHRD),provided PHRD Grant No. TFO 14855 in the amount of 2,860,000 USD (United States dollars)to the Republic of Moldova.The grant was provided for implementation of”PHRĐ Technical Assistance for the Integrationof Children with Disabilities into Mainstream Schools” project (hereinafler Project).The closing date for grant disbursement was initially set at 30 July 2016. According to the firstamendment of the contract, dated 2 June 2016, the closing date for grant disbursement wasextended to 31 January 2018.

The Grace Period for submitting withdrawal application for expenditures incurred before theClosing date is four months following the Closing date.

1.2. The Project objective

The objective of the Project is to demonstrate through pilot activities that local governmentscan successfully apply national policies that promote integration of children with disabilitiesinto the mainstream education system (NPDIE).

The project consists of the following parts:

Part 1: District-Level Planning(a) Carrying out and information campaign of NPDIE;(b) Preparing plans for the implementation of the NPDIE;(c) Preparing list of criteria for selecting Beneficiaries.

Part 2: Demonstration Pilot Sub-projectsCarrying out Pilot Sub-projects, aimed at integrating children with disabilities into mainstreamschools.

Part 3: Project Management, Monitoring and Evaluation, and Dissemination.

Şveczol Piupose Financial S’aze;neizisPURl) Technical Assistance foc the Integration n/Children with Disabilities into i’ Ícijnsíreanz Schools I’rojec(

PHRD Gram No. TF014855for (lie rear ended 3/ December 20/6 9/14

PHRD Grant No.# Category TF014855

USD(1) Goods, consultants’ services, Training and Operating Costs wider Part l

l and Part 3 of the Project 1,020,000(2) Goods, consultants’ services, Training and Operating Costs wider Part 2

2 of the Project 1,840,000

2,860,000

1. 4.Project Implementation

The Project is implemented by Moldova Social Investment Fund (MSIF), established by aDecree of the Government of Moldova, as an autonomous public institution.The address of the registered office of the Project is 124, Stefan cel Mare str., Chisinau,Republic of Moldova.

2. Accounting policy

2.1 Preparation andpresentation offinancial statements

The special purpose financial statements are prepared in accordance with the InternationalPublic Sector Accounting Standard: Financial Reporting Under the Cash Basis ofAccounting(IPSAS-Cash Basis), issued by the International Public Sector Accounting Standards Board(IPSASB) within the International Federation of Accountants (IFAC), and presented inaccordance with Financial Management Manual for World Bank Financed InvestmentOperations (March 2010): RM 3 — Financial Reporting and Auditing.

The Management policy is to prepare and present special purpose financial statements underthe cash basis of accounting, which recognizes transactions and events only when cash(including cash equivalents) are received or paid by the entity.

Financial Statements prepared under the cash basis provide readers with information about thesources of cash raised during the period, the purpose for which cash was used and the cashbalances at the reporting date.

The project special purpose financial statements consist of:- Statement of sources and uses of funds,- Statement of expenditure by project activity,- Statement of SOBs,- Statement of Designated accounts,- Significant accounting policies and other explanatory notes.

Reporting currency of special purpose financial statements is United States dollars (USD).

Special Pinpo.h Finoncial StatementsP//RD Technical. Issistanee for the Integration of C/n/die,, ui//i Disabilities into AÍa’nstreaiu Schools’ Project

PHRD Grant \o TFO 14855for the icar ended 3/ December 2/1/6 10/14

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1.3. The Budget

The Project is financed by PHRD Grant No. TF014855, inclusive of taxes and no less than 3%by community contributions. According to the first amendment of the contract, dated 2 June2016, the budget was modified as follows:

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2.2 Foreign currency transactions

Project accounts are maintained and transactions are made in USD and Moldavian Leu (MDL).Transactions denominated in local currency are translated into USD as follows:

- Payments in MDL are translated into USD at the conversion rate determined by theNational Bank of Moldova (BNM).

- As at reporting date, cash balances denominated in MDL are translated into USD at theexchange rate established by BNM at that date.

- Transaction and translation exchange rate differences (gain/loss) are reflected in theProject Sources and Uses of Funds.

The exchange rate established by BNM as at 31 December 2016 is USD 1 19.98 14 MDL.The average exchange rate established by BNM for the year 2016 is USD 1 19.923 8 MDL.The exchange rate established by BNM as at 31 December 2015 is USD 1 19.6585 MDL.The average exchange rate established by BNM for the year 2015 is USD 1 18.8 161 MDL.

2.3 Taxes

According to tax code of the Republic of Moldova, all the goods and services designed for theimplementation of MSIF sub-projects are to be delivered/rendered with application of zeroVAT.

2.4 Accounting System

MSIF has adequate written statements and explanations of its accounting policies andprocedures such as:

. Chart of accounts,

. Specification of accounting records,

. Accounting procedures and the required supporting documents,

. Assignment of responsibilities and delegation of authority,

. Documentation and approval requirements for recording transactions and makingjournal entries.

2.5 Internal Control System

MSIF internal control system is able to ensure that financial records are reliable and complete.In particular, the internal control system ensures proper recording and safeguarding of assetsand resources, adherence to financial management policies and orderly and efficient conduct ofoperations.

Speciol Purpose Financial Statements

[‘bIRD Technical Assistance for the Integrutiozi ofOzi/dren wit/I Disabilities into AÍainsţ,ea,n Sc/zoo/s ‘ ProjectPb/RD Grant No. TFO/4855for the rear eizded 31 December 2016 II 14

3. Statement of Financial Position

The Statement of Financial Position discloses assets, liabilities and net assets of the Projects as atreporting date. It is prepared in accrual basis that is transactions are recognized when they occur (andnot only when cash is received or paid).

ASSETSCashAdvances to contractors

31 Dec 2016USD

249,119

31 Dec 2015USD

Total assets

LIABiLITIESPayables to contractorsTotal liabilities

NET ASSETSCumulative incomePHRD Grant No. TFO 14855

Cumulative expenses

Project expenses

Foreign exchange gainl(loss)

Total net assets

4. Cash

5

6

249,119 249,986

743,547 554,511743,547 554,511

494,931 304,512

494,931 304,512

503 (13)

249,119 249,985

Designated Account

Designated AccountCommunity contributionaccount

Account held at

State Treasure ofMoldova

State Treasure ofMoldova

State Treasure ofMoldova

UnderlyingCurrency

USD

MDL

MDL

31 Dec 2016USD

202,789

6

46,324249,119

31 Dec 2015USD

249,981

5

249,986

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Special Purpose Financial Stn’eiiients“l’/IRD Technical Assistance/br the Integration of Children ‘iiili Disabilities into AÍainstreaiiz Schools’ ProjectPHRD Grout No. TF014855/hr the ‚‘eor ended 31 December 2016 /2/14

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Note

4 249,986 1

5. Project Financing

5.1. PHRD Grant No. TF014855

Financing was provided through the following disbursement methods:

Year ended31 Dec 2016

USD

Cumulative as at31 Dec 2016

USD

Total budgetPercentage of finance providedas at 31 Dec 2016

6. Project Expenditure Budget Execution

2,860,000

26%

CumulativeExpenditures

as at 31 Dec 2016 ~ Total budget ExecutionCategory USD USD %(1) Goods, consultants’ services, Tramiiig and 487,079 l ,020,000 48%Operating Costs under Part l and Part 3 of theProject(2) Goods, consultants’ services, Training and 7,852 l ,840,000 0%Operating Costs under Part 2 of the Project

494,931 2,860,000 17%Total

Though the grant was signed on Aug 2013 (Note l .1 .), it became effective only on Feb 2014.Then the management of MSIF was changed and the Project commenced in summer 2014.However, the reform in education sector took place and MSIF had to wait for the decision onthe hub-schools that in future won’t be closed and where the investment would be sustainable,as well as there was need to coordinate with WB’s other multi-million project related toreconstruction of schools.

Currently, MSIF has finished the development of technical drawings and is in the process ofprocuring civil works for 19 Sub-projects, as they have already transferred their contribution toMSIF accounts. One sub-project is under implementation since November 2016.

Based on the amendment letter ui~om the World Bank dated 2 June 2016, the closing date of theproject was extended till 31 January 2018.

Special Purpose Financial Sunemetzts“PHRD Technical Assisiwice for the Integration oJClzildren ivi;/i Disabilities 111(0 A lainstreani Schools ProjectPHRD Grant No. TF014855for the year ended 3/ December 2016 /3 /4

AdvanceStatement of Expenditures (SOEs)Total

- 250,000190,419 494,931190,419 744,931

ANNEX 1. RECONCILIATION BETWEEN THE AMOUNTS SUBMITTED BY THEMSIF AND DISBURSED BY THE WORLD BANK

“PHRD TechnicalAssistance for the Integration ofChildren with Disabilities into MainstreamSchools” ProjectFor the year ended 31 December 2016Amounts are in USD

PHRD Grant No. TF014855

(*) The expenditures were submitted under the wrong category in withdrawal application No.MF4; then they were included in withdrawal application No.5 and approved by the WB.

7. Events after the reporting date

During 2017 until the date of issue of these special purpose project financial statements, theWorld Bank has replenished the special account of the Project on 17 January 2017 in amountof USD 47,191.

Specuil Pi’rpo~e Financial StatementsP1/RI) Technical Assistance for i/zr Integration of Children with Disabilities into ilÍa’nstream Sc/ion/s•’ Project

PHRD Grant A’o. TF014855for the year ended 3/ December 2016 14 /4

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Expenditure Category Application Date MSIF WB DifferenceAdvance (recovery)

MF1 10/10/2014 250,000 250,000 -

(1) Goods, consultants’ MF2 2/23/2015 59,402 59,402 -

services, Trammg andOperating Costs under MF3 4/10/2015 71,282 71,282 -

Part 1 and Part 3 ~ MF4 8/20/2015 75,013 75,013 -

Project5 12/14/2015 48,980 48,980 -

6 12/22/2015 49,835 49,835 -

7 9/23/2016 69,524 69,524 -

8 11/9/2016 73,705 73,705 -

447,741 447,741 -

(2) Goods, consultants’services, Training andOperating Costs underPart 2 of the Project MF4 8/20/2015 17,654 (l7,654)~Total 715,395 697,741 (17,648)