ENERGY EFFICIENCY PROJECT GEF GRANT NUMBER TF012163 IMPLEMENTED BY ARMENIA RENEWABLE RESOURCES AND ENERGY EFFICIENCY FUND SPECIAL PURPOSE FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT For the period from January 1, 2016 to September 14, 2016 YEREVAN October 2016 TABLE OF CONTENT Page INDEPENDENT AUDITOR'S REPORT ..................................................................................... 3 STATEMENT OF FINANCIAL POSITION ................................................................................ 5 STATEMENT OF SOURCES AND USES OF FUNDS................................................................. 6 STATEMENT OF USES OF FUNDS BY PROJECT ACTIVITY.................................................. 7 SUMMARY OF SUMMARY REPORTS AND SOES................................................................... 8 STATEMENT OF DESIGNATED ACCOUNT......................................................................................9 NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS.........................................10 ANNEX 1. RECONCILIATION BETWEEN THE AMOUNTS SUBMITTED BY THE PROJECT AND DISBURSED BY THE WORLD BANK ............................................................................. 16 1 Energv Efficiency Project Special Purpose Financial Statements For the period from.January 1, 2016 to September 14, 2016 2 "1UOU-uJnI_kTst' Unlie "SOS-AUDIT" LTD INDEPENDENT AUDITOR'S REPORT On the special purpose financial statements of "Energy Efficiency Project" For the period from January 1, 2016 to September 14, 2016 To the management of Armenia Renewable Resources and Energy Efficiency Fund (the Fund) We have audited the accompanying special purpose financial statements of "Energy Efficiency Project" (the Project) financed by the GEF Grant Number TF012163, which comprise the Statement of Financial Position as at September 14, 2016, the Statement of Sources and Uses of Funds, the Statement of Uses of Funds by Project Activity, Summary of summary reports and SOEs, the Statement of Designated Account for the period from January 1, 2016 to September 14, 2016, and a summary of significant accounting policies and other explanatory notes. Management's Responsibility for the Financial Statements The management of the Fund is responsible for the preparation and fair presentation of these special purpose financial statements in accordance with the accrual basis of accounting described in the Note 2 accompanying these special purpose financial statements, and for such internal control as management determines is necessary to enable the preparation of special purpose financial statements that are free from material misstatements, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these special purpose financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as issued by International Auditing and Assurance Standards Board. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the special purpose financial statements are free from material misstatement. An audit involves performing procedures to obtain reasonable audit evidence about the amounts and disclosures in the special purpose financial statements. The procedures selected depend on the auditor's judgment including the assessment of the risk of material misstatement of the special purpose financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the special purpose financial statement 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 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 financial statements. epnnL AInpt(up Phqlbtu UUnitub Uunghwg4wub Ulurlud 9t; p.bVLwG 0037, U. Shqpwjwb 38155; bn.' (+37410) 20 11 51; www. sosaudit.am; t[-lnuui' info@sosauditym An Associate of the Crowe Horwath Business Alliance 38/55 A. Tigranyan, 0037 Yerevan, RA; Tel.: (+37410) 20 11 51; www. sosaudit.am; E-mail: info@sosauditam "UOU-UFHS" U1Q "SOS-AUDIT" LTD We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, 1. the special purpose financial statements present fairly in all material respects the financial position of the Project as at September 14, 2016, as well as the sources and uses of funds for the period from January 1, 2016 to September 14, 2016 in accordance with the accrual basis of accounting described in the Note 2 accompanying these special purpose financial statements; 2. funds have been used in accordance with the conditions of the Global Environment Facility (GEF) Grant Agreement TF012163 dated April 20, 2012 signed between the Republic of Armenia and International Bank for Reconstruction and Development (IBRD), and World Bank related guidelines, with due attention to economy and efficiency, and only for the purposes for which the financing was provided; 3. supporting documents, records and accounts have been maintained to support claims for reimbursement of expenditures incurred. Expenditures included in the withdrawal applications and reimbursed against are eligible for financing under the GEF Grant Agreement TFO 12163. 4. the Designated account used has been maintained in accordance with the provision of the GEF Grant Agreement TFO 12163, and World Bank related guidelines. Emphasis of matters Without qualifying our opinion we draw your attention to Note 8 of these special purpose financial statements which disclosed that the financing under the Grant Agreement TF012163 was completed as at the reporting date. "SOS-Audit" LLC 21 October 2016 hazaryan ik Chitchyan Director ' itor 'COC-AY;q14T 005131 TI; p.bpkuini 0037. U. Spqpulbjlb 38/55; Abn.' (+37410) 20 11 51: . dit.am; tt*iinuu, info@sosaudit.,m An Associate of the Crowe Horwath Business Alliance 38/SS A. Tigranyan, 0037 Yerevan, RA; Tel.: (+37410) 20 11 51: www. sosaudit am; E-mail: info@sosaudit.am STATEMENT OF FINANCIAL POSITION Energy Efficiency Project GEFGrant TFO12163 As at 14 September 2016 14.09.2016 01.01.2016 Note USD USD ASSETS AND EXPENDITURES Cash and cash equivalents Designated account (GEF Grant TF012163) 5,993.28 37,644.81 Current account (revolving funds) 3,129.28 - Total Cash 9,122.56 37,644.81 Prepayments 5 416,793.06 729,593.00 Cumulative project expenditures 3 7,841,989.10 4,989,750.47 Foreign exchange loss 75,531.29 27,481.70 Total Assets and Expenditures 8,343,436.01 5,784,469.98 FUNDS AND LIABILITIES Accounts payable 4 311,045.04 192,923.12 Funds GEF Grant TF012163 6.1 1,819,472.35 1,584,130.23 GoA co-financing 6.2 317,628.99 270,615.32 Financing from Revolving funds 6.3 5,866,884.56 3,728,142.19 Other 28,405.07 8,659.12 Total Funds 8,032,390.97 5,591,546.86 Total Funds and Liabilities 8,343,436.01 5,784,469.98 Tamara Babayan _ 'j$anush Gorgyan Director ancial Manager 21 October 2016 tj. The notes on pages 10-15 form an integaparta special purpose project financial statements. Energy Efficiency Project Special Purpose Financial Statements For the period from January 1, 2016 to September 14, 2016 5 〕！論 〔、 l (DN all nr nr w3 00 05 CA 0ý 00 t- 00 t, w r4 k.o C4 clo 1.0 nr C2N f4 cm C2ý c; 0; %0 r- it r4 r- cbý Lq r4 t- r4 CN 05 rn "C 00 CN 00 an MD %0 fl Cl ri CD f4 r4 el tn Le! rn r4 lu Q Nr % 1-2 No C:b r4 19 RS tri 4. SUMMARY OF SUMMARY REPORTS AND SOEs Energy Efficiency Project GEF Grant TFO12163 For the periodfrom January 1, 2016 to September 14, 2016 In USD Application N Expenditure category Total Value date 2. Goods, consultants' services and Operating Costs under Part B of the Project 16-DA 136,907.60 136,907.60 18-Mar-2016 17-DA 59,312.59 59,312.59 10-Jun-2016 18-DA 39,121.93 39,121.93 30-Jun-2016 19-DA 144,006.72 144,006.72 13-Sep-2016 Total 379,348.84 379,348.84 Energy Fffciency Project Special Purpose Financial Statements For the period from January 1. 2016 to September 14, 2016 8 STATEMENT OF DESIGNATED ACCOUNT Energy Efficiency Project GEF Grant TF012163 For the periodfrom January 1, 2016 to September 14, 2016 Designated Account GEF Grant TF012163 Currency USD Account number 900000910175 Bank Central Treasury 4 Tigran Mets str., 1-st floor, Yerevan Location Republic of Armenia, 0010 01.01.2016- 14.09.2016 1. Opening balance 37,644.81 Add: 2. Cumulative opening discrepancy . 3. GEF advance/replenishment 235,342.12 Less: 4. Refund to GEF from DA . 5. Present outstanding amount advanced to DA 272,986.93 6. DA closing balance as at 14.09.2016 5,993.28 Add: 7. Amount of eligible expenditures paid 266,993.65 8. Service charges (if debited into DA) Less: 9. Interest earned (if credited into DA) 1O.Total advance/replenishment accounted for 272,986.93 11. Discrepancy (5)-(10) . Energy Efficiency Project Special Purpose Financial Statements For the period from January 1, 2016 to September 14, 2016 9 NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS Energy Eficiency Project GEF Grant TFO12163 For the periodfrom January 1, 2016 to September 14, 2016 1. General Information 1.1. Project Financing According to the Agreement concluded between the Republic of Armenia and International Bank for Reconstruction and Development (IBRD) on 20 April 2012, IBRD acting as an Implementing Agency of the Global Environment Facility (GEF) provided the Republic of Armenia GEF Grant TFO12163 in the amount of 1,820,000 United States dollars (USD). Grant was provided for implementation of Energy Efficiency Project (the Project). The Project financing agreement became effective on 10 August 2012. -7 The Closing date for the expenditures to be financed by the GEF Grant TF012163 is set on 30 June 2016. The grace period for withdrawal applications is set on 31 October 2016. All the payments and withdrawal applications related to the GEF Grant TF012163 were completed as at 14 September 2016. As at signing these special purpose financial statements, there are continuing and new contracts still in force under the scope of the Project. After the Closing date, 30 June 2016, of the GEF Grant TF012163, expenditures related to those contracts are wholly financed through the Revolving funds. 1.2. Project objectives The objective of the Project is to reduce energy consumption in social and other public facilities through the removal of barriers to the implementation energy efficiency investments in the public sector. The Project consists of the following parts: A - Energy Efficiency Investments in Public Facilities, B - Technical Assistance Energy Efficiency Project Special Purpose Financial Statements For the period from January 1, 2016 to September 14, 2016 10 1.3. Project Budget The Project is being financed by the following sources: - International Bank for Reconstruction and Development (IBRD), -100% financing exclusive of taxes. - The Government of the Republic of Armenia (GoA) -taxes, - Financing from Revolving funds of the Republic of Armenia. IBRD Government Revolving fund Total Category of the RA USD USD USD USD Component 1- Energy Efficiency Investments in under Part A of the Project 700,000 140,000 6,000,000 6,840,000 Component 2- Goods, consultants' services and Operating Costs under Part B of the Proiect 1,120,000 160,000 540,000 1,820,000 Total 1,820,000 300,000 6,540,000 8,660,000 1.4. Project Implementation The Project is implemented by Armenia Renewable Resources and Energy Efficiency Fund (the Fund). The Fund activity address is: 32 Proshyan str., Ist lane, Yerevan 0019, Republic of Armenia. r I Energv Efficiency Project Special Purpose Financial Statements For the period from January 1, 2016 to September 14, 2016 1 2. Accounting policy 2.1 Preparation and presentation offinancial statements The special purpose financial statements have been prepared based on the accrual basis of accounting and presented in accordance with Financial Management Manual for World Bank Financed Investment Operations (March 2010): RM 3 - Financial Reporting and Auditing. In accordance with the accrual bases of accounting the expenditure is recognized when the transaction occur (expense incurred), and not only when cash or its equivalent is received or paid. The transactions are recorded in the accounting records and recognized in the special purpose financial statements of the periods to which they relate. { The special purpose financial statements consist of: - Statement of financial position, - Statement of sources and uses of funds, - Statement of uses of funds by project activity, - Summary of summary reports and SOEs, - Statement of designated account, - Notes to the special purpose financial statements. u Reporting currency of special purpose financial statements is US dollar (USD). 2.2 Foreign currency transactions Project accounts are maintained and transactions are made in USD and Armenian Drams (AMD). Transactions denominated in local currency are translated into USD as follows: - Contributions of the RA Government expressed in AMD are translated into USD at the average exchange rate at currency market issued by the Central Bank of Armenia (CBA) at the date of transfer. - Payments to contractors and suppliers expressed in AMD are translated into USD at the average exchange rate at currency market issued by the CBA at the date of payment. - Monetary assets and liabilities are translated into USD at the average exchange rate at currency market issued by the CBA at the reporting date. - Transaction and translation exchange differences (gains/losses) are recognized and presented in financial statements in net as an Exchange difference. The average exchange rate at currency market issued by the CBA as at 31 December 2015 is 1 USD =483.75 AMD LI The average exchange rate at currency market issued by the CBA as at 14 September 2016 is I USD =474.00 AMD 2.3 Taxes The Project related taxes and mandatory payments are calculated and paid in accordance with tax regulations of the Republic of Armenia. Energy Efficiency Project Special Purpose Financial Statements For the period from January 1, 2016 to September 14, 2016 12 3. Project expenditures allocation on funds Expenditure GEF Grant GoA Revolving Other* Total Expenditure _ TF012163 GoA fund USD USD USD USD USD Reimrting period . I. Energy Efficiency Investments under Part A of the Project - - 2,503,519.99 16,749.97 2,520,269.96 2. Goods, consultants' services and Operating Costs under Part B the Project 264,792.80 25,305.63 41,870.24 - 331,968.67 Total 264,792.80 25,305.63 2,545,390.23 16,749.97 2,852,238.63 Cumulative as:at 14.09.2016 1. Energy Efficiency Investments under Part A of the Project 670,606.37 113,650.18 5,555,599.23 24,915.11 6,364,770.89 2. Goods, consultants' services and Operating Costs under Part B the Project 1,1 13,945.49 201,425.12 161,353.62 493.98 1,477,218.21 --Total 1,784,551.86 315,075.30 5,716,952.85 25,409.09 7,841,989.10 *Expenses included in these columns have not been paid, as according to contracts these amounts were calculated as penalties and retained. 4. Accounts payable 14.09.2016 01.01.2016 USD) USD Energy Efficiency Investments under Part A of the Project* 311,045.04 190,562.09 Goods, consultants' services and Operating Costs under Part B of the Project - 2,361.03 Total 311,045.04 192,923.12 (*) As at reporting date the outstanding payables relate to construction works under the Project financed through Revloving funds. The list if those payabels is as follows: Company Contract Completion Beneficiary Amount of Payable as at 14.09.2016 date contract AMD AMD USD equivalent "Mekusich" PC EE-CW- Sept. 2017 Vanadzor 81,124,327 32,935,346 69,483.86 50/2016 penitentiary "Redinet" LLC EE-CW- Sept. 2017 Yerevan hospital 229,000,000 114,500,000 241,561.18 41/2015-2 penitentiary 310,124,327 147,435,346 311,045.04 Energy Efficiency Project Special Purpose Financial Statements For the period from January 1, 2016 to September 14, 2016 13 5. Prepayments 14.09.2016 01.01.2016 USD USD Energy Efficiency Investments under Part A of the Project* 416,793.06 729,593.00 Total 416,793.06 729,593.00 (*) As at reporting date the outstanding prepayments relate to construction works under the Project financed through Revioving funds. The list if those payabels is as follows: Company Contract Completion Beneficiary Amount of Prepayments as at date contract 14.09.2016 AMD AMD USD equivalent "Araratshin" LLC- EE-CW- Dec 2017 Municipality of 206,600,000 41,320,000 87,173.00 "Zet profil" LLC 51/2016 Hrazdan, JV kindergarten 12, kindergarten 13 "Zet profil" LLC- EE-CW- Feb 2018 Russian- 152,000,000 30,400,000 64,135.02 : "Araratshin" LLC 52/2016 Armenian JV Slavonic ___________university ______ ______ "Zet profil" LLC- EE-CW- Mar 2018 Qanaqer-Zeytun 140,000,000 28,000,000 59,071.73 "Araratshin" LLC 54/2016-1 medical center JV _ CJSC "Magh-shinanyut" EE-CW- Nov 2017 Erebuni 197,400,000 19,740,000 41,645.57 LTD 45/2015-2 penitentiary "Redinet" LLC EE-CW- Nov 2017 Nubarashen 466,244,100 46,624,410 98,363.73 42/2015-2 penitentiary L "Redinet" LLC EE-CW- Sep 2017 Sevan 314,775,000 31,475,000 66,404.01 43/2015-1 penitentiary I__ I 1,477,019,100 197,559,410 416,793.06 6. Financing 6.1 GEF Grant TF 012163 financing Reporting As at 14.09.2016 period Cumulative USD USD Advance (144,006.72) 5,993.28 SOE and Summary Reports 379,348.84 1,813,479.07 235,342.12 1,819,472.35 Total financing budget 1,820,000.00 Percentage of finance provided as at 14 Sep 2016 100% Energy Eficiency Project Special Purpose Financial Statements For the period from January 1, 2016 to September 14, 2016 14 1I 6.2 Government financing Reporting As at 14.09.2016 period Cumulative USD USD Contributions in cash 47,013.67 317,628.99 47,013.67 317,628.99 Total financing budget 300,000.00 Percentage of finance provided as at 14 Sep 2016 106% 6.3 Financing from Revolving funds UReporting As at 14.09.2016 period Cumulative USD USD Contributions in cash 2,138,743.36 5,866,885.55 Total financing budget 6,540,000.00 Percentage of finance provided as at 14 Sep 2016 90% 7. Expenditure budget execution 0 Cumulative .Expenditures Totalio Project components aseat14 e budget Execution as at 14 Sep 2016 USD USD % Component 1- Energy Efficiency Investments in Public Facilities 6,364,770.89 6,840,000 93% Component 2- Technical Assistance 1,477,218.21 1,820,000 81% Total 7,841,989.10 8,660,000 91% 8. Project completion The GEF Grant TF012163 financing was completed as at June 30, 2016 (Closing Date), and the transactions related to it were completed as at September 14, 2016 (the Reporting Date, or Grace Period). As at the date of signing these special purpose financial statements: a. No expenses related to the GEF Grant TF012163 were incurred after the Closing Date; the payments made during the Grace period related to expenses incurred before the Closing Date; b. No withdrawals from GEF Grant TFO12163 were made after Closing date; c. No expenditures related to the GEF Grant TF012163 were submitted to the WB after the Reporting date; d. The prepayments and payables outstanding to contractors on the Project as at the Reporting Date relate to construction works financed through the Revolving funds (note 5,6); e. The cash balance outstanding as at Reporting date consists: - Balance at GEF Grant TFO12163 Designated account at the amount of USD 5,993.28 to be refunded to WB after paying for final audit service; - Balance at Revolving fund co financing account at the amount of USD 3,129.28 for paying accounts payable; f. We are not aware about any pending or existing litigations against the Project. Energy Efficiency Project Special Purpose Financial Statements For the periodfrom January 1, 2016 to September 14, 2016 15 ANNEX 1. RECONCILIATION BETWEEN THE AMOUNTS SUBMITTED BY THE PROJECT AND DISBURSED BY THE WORLD BANK Energy Efficiency Project GEF Grant TF012163 For the periodfrom January 1. 2016 to September 14, 2016 In USD Category Appl. N Fund WB Difference Advance (repayment) 19-DA (144,006.72) (144,006.72) 2. Goods, consultants' 16-DA 136,907.60 136,907.60 services and Operating Costs 1-DA 136,9079601 26,9 under Part B of the Project 17-DA 59,312.59 59,312.59 - 18-DA 39,121.93 39,121.93 -_____ 19-DA 144,006.72 144,006.72 - 379,348.84 379,348.841 Total 379,348.84 235,342.12 5 EnergV Efficiency Project Special Purpose Financial Statements For the period from January 1, 20/6 to September 14, 2016 16 El