.f * ~prR~AOr,. *'t Af ~MINISTRY OF TREASURY AND FINANCE BOARD OF TREASURY CONTROLLERS SUSTAINABLE CITIES PROJECT Implemented by ILLER BANKASI A.S. Financed Under World Bank Grant Agreement Numbered TF-A5029 As of December 31, 2018 and For the Year Then Ended Prepared by Okan TUNSOY Selguk Erdal GUNAL Senior Treasury Controller Treasury Controller I UuReport's Number 249/7 - 47/6 INDEPENDENT AUDITOR'S REPORT June 19, 2019 CONTENTS EX ECUTIVE SUM MAR Y ....................................................................................................................................... 1 A. Pr oject Sum m ar y ......................................................................................................................................... 2 B. Ob jectives of Audit ........................................................................................... ....,...................................... 3 C . S co p e o f A u d it ............................................................................................................................................... 3 D . A u d it R esu lts ..................................... ............................................................................................................ 4 E. Managem ent Recom m endation .........................................................................................................E. 4 INDEPENDENT AUDIT REPORT'S & FINANCIAL STATEMENTS OF THE PROJECT...................5 INDEPENDENT AUDITOR'SREPOR ........................................................................................................ 6 0O p in io n .......................................... ................................................................................................................... 6 B a s is o f O p in io n ................................. ........................................................................................................... 6 Em phasis of Matter in the FinancialStatem ent .............................................................................. 6 Going Concern ............................................................................................................................................... 7 Responsibilities of Management and Those Charged with Governance or Other Appropriate Term s for the FinancialStatem ent ............................................................................ 7 Auditor's Responsibilities for the Audit of the Financial Statem ents......................................7 ANNEX 1: Financial Statem ents ...................................................................................................................... 9 EXECUTIVE SUMMARY REPUBLIC OF TURKEY MINISTRY OF TREASU RY AND FINANCE Board of TroasUry Controllers EXECUTIVE SUMMARY A. Project Summary The Grant Agreement between the Iller Bankasi A.S. and International Bank for Reconstruction and Development (World Bank) for Sustainable Cities Project, Grant Numbered TF-AS029 was signed on 28.09.2017 and received a grant of 23.125.000,00 Euro. Project is implemented by the Iller Bankasi A.S., the Project Management Unit. 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: Sustainable City Planning and Management System 1. Provision of technical assistance and goods to selected municipalities and their affiliated utilities to ensure comprehensive and integrated planning and management. 2. Provision of support to selected municipalities and their affiliated utilities in their preparation of feasibility studies, social and/or environmental impact assessments and engineering designs for Sub-projects. 3. Strengthening the capacity of the Recipient to implement the above described activities and to manage sustainable city systems, including in the areas of contract management, management and implementation of sustainable city investments through: a) Provision of support for embedding city-level actions for climate change, energy efficiency, water and sanitation, urban transport, solid waste management, and urban planning, and in building awareness on international practices to promote and implement sustainable cities actions; b) Provision of training and capacity building to municipalities; c) Preparation of reports and studies that examine required reforms and propose changes with an aim to improving planning practices for integrated and comprehensive planning; d) Provision of Operating Cost for implementation, management, monitoring and evaluation, and coordination activities under Part A of the Project. 2 RITE131IC OF TIRKEY MINIS TRY Of: TREASURY AND IFINANCL Board of I reasury Controllers * Part B: Municipal Investments Establish and operate a municipality credit facility targeted to infrastructure investments, through the provision of Sub-loans to Sub-borrowers [including municipalities and their affiliated utilities) to finance the cost of goods, works, non-consultant services and consultants' services required to carry out investments in Sub-projects, including in the public transport, water and sanitation, solid waste management, and energy sectors. * Part C: Project Management Provision of support to the Recipient for implementation of Part B of the Project including provision of goods and consultants' services for supervision and monitoring and evaluation, as well as for public outreach and communication. Within the scope of Project, the following Special Designated Accounts were opened in T.C. Ziraat Bank; The account numbers of the bank accounts opened for this project are as follow; - TR 1100 0100 1745 9990 0248 5151: Special Account (EURO) - TR 3800 0100 1745 9990 0248 5150: (TL Account) - TR 8100 0100 1745 9990 0248 5152: (USD Account) B. Objectives of Audit The objectives of our audit are; a] To give an opinion on whether the financial statements, prepared as of December 31, 2018 and for the period then ended, present fairly, in all material respects, the financial position of the project in accordance with the cash receipts and disbursements basis of accounting, b] To determine, as of December 31, 2018, whether the Iller Bankasi A.S., the Project Management Unit has complied, in all material respects, with the rules and procedures of the Grant Agreement numbered TF-A5029, c) To examine whether adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditures incurred and evaluate eligibility of these expenditures for financing under the Grant Agreement. C. Scope of Audit We have performed an audit of financial statements of Sustainable Cities Project as of December 31, 2018 in accordance with the cash receipts and disbursements basis of accounting. 3 REPUBL131ICF 01U[RKFY MIINISTRY OF" TREASURY AND INANC Board of Trcasury Controllers This report covers the period between January 1, 2018 and December 31, 2018. We have also performed a compliance audit on whether project activities are in line with the Grant Agreement. Our audit was conducted in accordance with International Standards on Auditing published by International Federation of Accountants (IFAC) applicable to the audit of financial statements and compliance auditing. There was no limitation in our scope for the Project's audit. D. Audit Results For the financial statements of project; our audit resulted with an unqualified opinion. As of December 31, 2018, Iller Bankasi A.S., the Project Management Unit has complied, in all material respects, with the rules and procedures of the Grant Agreement numbered TF- A5029. In addition, with respect to expenditures, adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditures incurred; and which expenditures are eligible for financing under the Grant Agreement numbered TF-A5029. E. Management Recommendation Since we have not identified any findings during our audit, we have not issued a Management Letter. 4 INDEPENDENT AUDIT REPORT'S & FINANCIAL STATEMENTS OF THE PROJECT RE1LUBLIC O1 T.RKEY MINIS RY OF I REAS[URY AND FINANCE Board of Treasur Controllers INDEPENDENT AUDITOR'S REPORT TO ILLER BANKASI A.S. Opinion We have audited the Statement of Sources and Uses of Funds, Statement of Cumulative Investments and Statement of Special Account of the Sustainable Cities Project as of December 31, 2018, and for the period between 01.01.2018-31.12.2018, and a summary of significant accounting policies and other explanatory information. The financial statements have been prepared by Iller Bankasi A.S., the Project Management Unit based on financial reporting provisions of the Grant Agreement Numbered TF-A5029. In our opinion; a) The accompanying Statement of Sources and Uses of Funds, Statement of Cumulative Investments and Statement of Special Account present fairly, in all material respects, the financial position and cash flows of the Sustainable Cities Project as of December 31, 2018 and for the period then ended in accordance with the provisions of the Grant Agreement Numbered TF-A5029. b) Iller Bankasi A.S., the Project Management Unit, as of December 31, 2018 has complied with, in all material respects, the requirements of the Grant Agreement Numbered TF- A5029. c) With respect to expenditures, adequate supporting documentation has been maintained to support claims to the World Bank for reimbursement of expenditures incurred, and these expenditures are eligible for financing under the Grant Agreement Numbered TF- A5029. Basis of 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. 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 Management Unit to comply with the financial reporting provisions of the grant agreement referred to above. As a result, the financial statements may not be suitable for another purpose. 6 REPUIBIAC OF TURKEY NINISFRY OF TREASURY AND FINANCE Board oi Treasury Controllers Going Concern The Projects financial statements have not been prepared using the going concern basis of accounting. The project will end on June 30, 2020. 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 Grant Agreement Numbered TF-A5029, 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 from fraud 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 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. 7 REPL[UBLIC OF IIIRKEY MINIS FRY OF I REASURY AND FINANCE Board of Treasur\ Controllas * 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. Ahmet TUTAL Acting Chairman of Board of Treasury Controllers Akif Bilent BOYAC10GLU (Audit Partner] Vice Chairman 'Okan TUNSOY(_y Selyuk Erdal GONAL Senior Treasury Controller Treasury Controller Date: 19/06/2019 Address: Ministry of Treasury and Finance Board of Treasury Controllers 06510, Emek, ANKARA/TORKIYE 8 ANNEX I: Financial Statements С О � О О О ; v -..- - .� �.. � � � � .._. О .ы, р С С 4G С ..р` tti, f�, � С О r�I N � � _ _ ,- С _Cr L. ^' "�^ С^ Г� ^ О р С О � G С С д С7 О �. С С^ О и С О О � О � 'J С �: С О � �= с р с а _ о г л � а �с � � �, с о гч пь с СС � �оосоСо �г- �п ^р С оо соссоСо��о � -т Са � оС..:оо�_ос�со = �' со � с °о �'' � � _ -t п � �� _С •-' О С О Q у Е С С- +а7 .. �f° �г, и-; � г-.; м м �i д � С 'С, ' р Z Gг� N fi � � С � i. гд � С7 ^ С 4 С О С С^ J О �л � ^ р �. О� � д С С С.^.у С��. С С Ф �' �7 О О Z С С С С С С J.С С С С - �--� � р ь. С С С О �Т q1 'Q (] R ч� С С С7 �-1 �S д (J" ��" С rJ С р С О _ ". 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Е" � � �'1 J С %..! �G ILLER BANKASI SUSTAINABLE CITIES PROJECT - GRANT TFOA5029 STATEMENT OF CUMULATIVE INVESTMENTS As of December 31, 2018 and For The Year Then Ended (In EURO) I- INVESTMENTS Actual Planned Variance YTD Cumulative YTD Cumulative YTD Cumulative I-Investment Costs A- Goods, consultants' services, Training and Operating Costs, 133.491,45 133.491,45 400.491,45 400.491,45 267.000,00 267-000,00 Total Investment Costs 133.491,45 133.491,45 400.491,45 400.491,45 267.000,00 267.000,00 H-Recurring Costs A- Front-End-Fee 0,00 0,00 0,00 0,00 0,00 0,00 Total Recurring Costs 0,00 0,00 0,00 0100 0,00 0,00 PROJECT INVESTMENTS 133.491,45 133.491,45 400.491,45 400.491,45 267.000,00 267.000,00 2- INVESTMENTS BY SUB-CATEGORIES Actual Planned Variance Category Name YTD Cumulative YTD Cumulative YTD Cumulative Goods, consultants' services, Training, and Operating Costs 133.491,45 133.491,45 400.491,45 400.491,45 267.000,00 267.000,00 Front end Fee 0,00 0,00 0,00 0,00 0,00 0,00 TOTAL 133.491,45 133.491,45 400.491,45 400.491,45 267.000,00 267.000,00 Oderne taribindeki 6zel hesabin bulundugu banka ah kuru kallanflmj tir. .� о � о � Е� р а G ,д � � � � � р � � С � С г3'� Е^ д � ° О �+ О О ад � д Q� G� © � О С С � � � О О Сч � Е-+ � у w д °� м � � W � L с� �7 � � � � � v ® о о � . fy � О С � С� � W� �: гц С С1 О О � � i�1 I.y {"W,) С ыц С" С� !� � ,�,� � _r ,...... � Lz,. g�j Q L:� �,G�� О� 4 � �о �.' 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December 31, 2018 (in EURO) Opening Balance (01.01.2018) 0,00 Reimbursements to SA 2.000.000,00 2.000,000,00 a) Advance 2.000.000,00 b) SOE Procedure 0,00 c) Summary Sheet 0,00 Refunds to SA 0,00 0,00 Available Funds 2.000.000,00 Payments Made for Expenditures 133.491,45 Service charges for the account 0,00 Total Project Investments 133.491,45 133.491,45 Klosing Balance (31.12.2018) 1. 8L& 508,55, Odeme tarihindeki ozel hesabin bLlkinduku banka ahs kUru kutlanflmi tir. ILLER BANK Sustainable Cities Project - Component A No: TF0A5029 NOTES TO THE PROJECT FINANCIAL TABLES As of 31.12.2018 1. THE OBJECTIVES AND STRUCTURE OF THE PROJECT Grant Agreement (TF0A5029) is signed between the International Bank for Reconstruction and Development (the World Bank) and Iller Bank on 28 September 2017. With the Grant Agreement; financing will be provided for technical assistance needs of metropolitan municipalities to develop planning tools and practices. With this grant, it will be possible to provide technical support to municipalities as well as to prepare feasibility reports and projects. Iller Bank is responsible for the preparation and dissemination of the data related to the loan usage regularly and in a format to be agreed with the World Bank. The names and titles of personnel that have been working in PMU as of 2018 are as follows: 1. Necla AK9A - Project Director, Geological Engineer (MSc) and Economy (BSc) 2. Sevil UYSAL - Environmental Engineer, MSc, Technical and Environmental Coor. 3. Z. G6nl EJDEROGLU Geological Engineer and Economy. Technical Coordinator and responsible for reporting of the land acquisition issues. 4. Ozkan (GEN - Civil Engineer, Technical Coordinator 5. Funda QETIN - Expert 6. Hasan Fehmi TIGLI - Expert 7. T. Atakan GOLYURDU - Expert 8. $.Altug TA$DEMIR - Expert 9. Lerzan MUTLU - Expert 10. G6kcen TANRIOVEN -Expert The below table illustrates the starting and the ending dates of the PMU staff: 1/4 iNanie-Surnane Starting Date Ending Date G6khan GOK(E 27.07.2011 1$.01. 018 PMU is responsible for coordination between the team responsible for Sustainable Cities Project -Component A in World Bank and Iler Bank. execution of the preparatory work, cooperation with the assigned units of Iller Bank, the selection of the Municipalities and/or Administrations. relations with the Strategy and Budget Presidency and other public institutions. PMU executes the works related to procurement within the scope of projects, technical coordination of the sub-projects, and disbursement of grant proceeds. 2. ACCOUNTING POLICIES PMU which is currently organized within the Iller Bank International Relations Department and established as per the provisions of the Grant Agreement recorded the amounts withdrawn from the Grant and the amounts paid to the municipalities/administrations on "cash basis" in the Iller Bank accounting system. On the other hand PMU: * The amount of World Bank grant, * The amount withdrawn from the grant., * 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-Grant Agreements, * Iller Bank Accounting and Financial Affairs Department has maintains records in accounting software in order to monitor in terms of credit categories and expenditure items in euro and contract currency. The following policies shall be followed in accounting records of 111er Bank: a) Iler Bank will use cash based accounting related to the Project. According to cash basis accounting the withdrawals form the Grant to the Special Account are recorded as a "funds allocated to our bank" in Euro. b) In accordance with the sub-grant agreements concluded with the Municipalities / Administrations, upon the request of the Municipalities / Administrations, the payment amount will be deducted from the funds allocated to our bank. 2/4 c) The amount determined afLer 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 Municipatlit/Administrations who are responsible to pay to the tax offices on behalf of the contractor. d) The amount sub-grant used by the Municipalities/Administrations based on Sub-Grant Agreements will be recorded to the following account: 3 - Deposits and Other Foreign Resources 385 - Funds Allocated to Our Bank (Foreign Currency) 38501 - World Bank Sustainable Cities Project The total amount of receivable from the Sustainable Cities Project - Component A is 133.491,45 at the end of the year of 2018. e) The Special Account with T.C. Ziraat Bank is in Euro. The prevailing selling exchange rate for Euro/IL of T.C. Ziraat Bank will applied for the above mentioned payments from the Special Account. f) Accounting transactions will be recorded in Euro as the currency of Grant Agreement. The collection in local currency is converted into Euro at the rate of T,C. Ziraat Bank prevailing at the date of collection for preparation of the source and use of the funds and cumulative investment table. 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 Grant 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 Grant 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 grant-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. 3/4 4. CASH POSITION AT DECEMBER 2018 The cash position at 3 1 December 2018 rneans the balance between the withdrawals from the grant to the Special Account and the amount of disbursement from Special Account and it is 1.866.508,55 Euro. Project funds are held only in the T.C. Ziraat Bank's Special Account, no other accounts or cash other than the Special Account is used. T.C. ZIRAAT BANK SPECIAL ACCOUNT 31.12.2018 Balance 1.866.508,55 FURO 4/4