u o HEALTH PROJECTS IMPLEMENTATION UNIT SA MINISTRY OF HEALTH OF THE REPUBLIC OF ARMENIA o o ADDITIONAL FINANCING FOR THE HEALTH SYSTEM MODERNIZATION PROJECT (APL2) B IBRD Credit 7987-AM 68324 o o o SPECIAL PURPOSE FINANCIAL STATEMENTS o AND o INDEPENDENT AUDITOR'S REPORT o For the period from 8 June 2011 to 31 December 2011 o o o o o o YEREVAN April 2012 o o u o TABLE OF CONTENT o Page INDEPENDENT AUDITOR'S REPORT ................................................................................................. 3 STATEMENT OF FINANCIAL POSITION ............................................................................................. 5 STATEMENT OF PROJECT SOURCES AND USES OF FUNDS ......................................................... 6 ] STATEMENT OF USES OF FUNDS BY PROJECT ACTIVITy ........................................................... 7 SUMMARY OF SUMMARY REPORTS AND SOES ............................................................................. 8 o DESIGNATED ACCOUNT STATEMENT .............................................................................................. 9 NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS ................................................. 10 o ANNEX 1. RECONCILIATION BETWEEN THE AMOUNTS SUBMITTED BY THE PROJECT AND DISBURSED BY THE WORLD BANK ....................................................................................... 14 o o o o o o o o o o o o Additional Financingfor the Health System Moderni=ation Project (APL2) Special Purpose Financial Statements for the periodfrom 8 June 2011 to 31 December 2011 2114 o .. uou-unl.-q.:ps .. utile "SOS-AUDIT" LTD INDEPENDENT AUDITOR'S REPORT N 16 On the special purpose financial statements of Additional Financingfor the Health System Modernization Project (APL2) for the periodfrom 8 June 2011 to 31 December 2011 To the Management ofthe Health Projects Implementation Unit State Agency (HPIU) We have audited the accompanying special purpose financial statements of Additional Financing for the Health System Modernization Project (APL2), which comprise the Statement of Financial Position as at 31 December 2011, the Statement of Project Sources and Uses of Funds, the Statement of Uses of Funds by Project Activity, Summary of summary reports and SOEs, Designated Account Statement for the period from 8 June 2011 to 31 December 2011, and a summary of significant accounting policies and other explanatory notes. o Management's Responsibility for the Financial Statements HPIU's management is responsible for the preparation and fair presentation of these special o purpose financial statements in accordance with International Financial Reporting Standards issued by the International Accounting Standard Board, 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. o Auditor's Responsibility o 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. Those Standards require that we comply with ethical requirements and plan and perform the o audit to obtain reasonable assurance whether the special purpose financial statements are free from material misstatement. o 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 o 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 o 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, o as well as evaluating the overall presentation of the special purpose financial statements. o :'1"1; l:il1uwli 0037. U. S~ql1wliJwli 38; "lbll.l~w9u' (+37410) 201151; tL-llmuUl' sosaudit@web.am, sosaudit@yandex.ru «3nlli~pwli~» PC!; h/h 241061006276 o 38 A. Tigranyan. Yerevan 0037; RA; Tel./fax: (+37410) 2011 51; E-mail: sosaudit@web.am. sosaudit@yandex.ru "Unibank" CJSC; CA241061006276 flU OU -Ufll'-L}.f1S" U IIlC "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 of 31 December 2011, as well as sources and uses of funds, designated account movement and its balance for the period from 8 June 2011 to 31 December 2011 in accordance with International Financial Reporting Standards; 2. funds have been used in accordance with the conditions of the 7987-AM Credit Agreement signed between the Republic of Armenia and International Bank for Reconstruction and Development, 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. The expenditures included in the withdrawal o applications and reimbursed against are eligible for financing under the 7987-AM Credit Agreement. o o SOS-Audit LLC 10 April 2012 o ~ Nazik Chitchyan Auditor D o o o o o ,,; I:iIlL.W(j 0037, U. S~qllw(jJw(j 38; ,bn.l!j>w.eu· (+374 10) 20 11 51; tL-tj1nuuf sosaudit@web.am, sosaudit@yandex.ru «anL(j~pw(j4» PQ; h/h 241061006276 o 38 A. Tigranyan, Yerevan 0037; RA; Tel.lfax: (+37410) 201151; E-mail: sosaudit@web.am, sosaudit@yandex.ru "Unibank" CJSC; CA 241 061006276 o STATEMENT OF FINANCIAL POSITION Additional Financingfor the Health System Moderni=ation Project (APL2) o IBRD Credit 7987-AM As at 31 December 201 I 31.12.2011 o ASSETS note USD Cash and cash equivalents o Designated account (IBRD Credit 7987-AM) Current account (GoA) Current account (bid security fund) 1,200,000.63 1,114,198.76 1,234.25 o Total Cash Cumulative project expenditures 3 2,315,433.64 3,393,320.50 Operating costs from bid security fund 558.17 o TOTAL ASSETS 3,393,878.67 5,709,312.31 o FUNDS AND LIABILITIES Accounts payable 4 277,591.91 o Funds IBRD Credit 7987-AM 5 3,540,109.97 GoA 1,896,350.97 o Bid security Total Funds 1,825.17 5,438,286.11 o Foreign exchange gain/(loss) 6 (6,565.71) o TOTAL FUNDS AND LIABILITIES 5,709,312.31 The special purpose financial statements were approved by the management of Health Project Implementation o Unit State Agency and Signed on its behalf on 10 April 2012. The accompanying notes form an integral part of these special purpose financial statements. o r ur Stepanyan o Chief Financial Officer o o o o Additional Financingfor the Health System Moderni=ation Project (APL2) Special Purpose Financial Statements for the periodfrom 8 June 2011 to 31 December 2011 5/14 o STATEMENT OF PROJECT SOURCES AND USES OF FUNDS Additional Financing/or the Health System Modernization Project (APL2) IBRD Credit 7987-AM For the period/rom 8 June 201 I to 31 December 2011 InUSD ACTUAL PLANNED VARIANCE PAD Reporting period Cumulative to Reporting period Cumulative to Reporting period Cumulative to Date Date Date Opening Working Capital Cash and cash equivalents - Accounts payable - Total - Sources of Funds IBRD Credit 7987-AM 3,540,109.97 3,540,\09.97 5,420,972.00 5,420,972.00 (1,880,862.03) (1,880,862.03) 19,000,000 GoA fund 1,896,350.97 1,896,350.97 1,806,990.50 1,806,990.50 89,360.47 89,360.47 6,333,300 Bid security fund 1,825.17 1,825.17 - - - - - Total 5,438,286.11 5,438,286.11 7,227,962.50 7,227,962.50 (1,791,501.56) (1,791,501.56) 25,333,300.00 Foreil!:n exchanl!:e I!:ain/(Ioss) (6,565.71) (6,565.71) Uses of Funds 1. Works 665,879.18 665,879.18 1,906,162.50 1,906,162.50 (1,240,283) (1,240,283) 11,704,600.00 2.Goods 2,435,144.00 2,435,144.00 4,721,000.00 4,721,000.00 (2,285,856) (2,285,856) 9,010,700.00 3.Consultants' Services 244,797.32 244,797.32 600,800.00 600,800.00 (356,003) (356,003) 3,021,000.00 4.Training - - - - - - 935,000.00 5.0perating costs - - - - - - 614,500.00 Front end fee 47,500.00 47,500.00 - - 47,500.00 47,500.00 47,500.00 Total 3,393,320.50 3,393,320.50 7,227,962.50 7,227,962.50 (3,834,642.00) (3,834,642.00) 25,333,300.00 Operating costs from bid funds 558.17 558.17 Closing Working Capital Cash and cash equivalents 2,315,433.64 2,315,433.64 Accounts payable (277,591.91) (277,591.91) Total 2,037,841.73 2,037,841.73 Additional Financingjor the Health System Moderni::ation Project (APL2) Special Purpose Financial Statements jor the periodfrom 8 June 2011 to 31 December 2011 6/ 14 STATEMENT OF USES OF FUNDS BY PROJECT ACTIVITY Additional Financingfor the Health System Modernization Project (APL2) IBRD Credit 7987-AM For the periodfrom 8 June 2011 to 31 December 2011 InUSD ACTUAL PLANNED VARIANCE PAD Project Activities Reporting Cumulative to Reporting Cumulative to Reporting Cumulative to period Date period Date period Date A. Family Medicine Development - - 21l,662.50 21l,662.50 (21l,662.50) (211,662.50' 3,112,000.00 A2. Retraining and Residency Program for FPs and FNs - - - - - - 381,000.00 A3. Strengthening ofPHC infrastructure - - 211,662.50 211,662.50 (211,662.50) (211,662.50) 2,731,000.00 B. Pilot Hospital Restructuring and Improvement 3,345,820.50 3,345,820.50 6,991,300.00 6,991,300.00 (3,645,479.50) (3,645,479.50\ 19,091,300.00 B 1. Optimization in Regional Hospitals 3,345,820.50 3,345,820.50 6,991,300.00 6,991,300.00 (3,645,479.50) (3,645,479.50) 19,091,300.00 C. Institutional development - - - - - - 2,413,000.00 Cl. Health Policy Development & Management Functions - - - - - - 404,000.00 C2. Strengthening of Regulatory, Oversight and Management Function - - - - - - 285,000.00 C3. Improvement of the Public Expenditure Management in Health Sector - - - - - - 850,000.00 C4. NCD Prevention & Control - - - - - - 644,000.00 C5. Improvement of Medical Education System - - - - - - 230,000.00 D. Pro.ject Management - - 25,000.00 25,000.00 (25,000.00) (25,000.00) 669,500.00 Front end Fee 47,500.00 47,500.00 - - 47,500.00 47,500.00 47,500.00 Total Project Expenditures 3,393,320.50 3,393,320.50 7,227,962.50 7,227,962.50 (3,834,642.00) (3,834,642.00) 25,333,300.00 Operating costs from Bidding documents 558.17 558.17 Additional Financingfor the Health System Moderni=ation Project (APL2) Special Purpose Financial Statements for the periodfrom 8 June 2011 to 31 December 2011 7//4 u o SUMMARY OF SUMMARY REPORTS AND SOEs Additional Financingfor the Health System Modernization Project (APL2) o IBRD Credit 7987-AM For the periodfrom 8 June 2011 to 31 December 2011 InUSD o App.N Works, goods, o consultants' services, training, operating costs o HPAF-2 HPAF-3 1,328,653.70 663,956.27 1,992,609.97 o o o o o o o o o o o o Additional Financingfor the Health System Modernization Project (APL2) Special Purpose Financial Statements for the periodfrom 8 June 2011 to 31 December 2011 8/14 o I J DESIGNATED ACCOUNT STATEMENT Additional Financingfor the Health System Modernization Project (APL2) o IBRD Credit 7987-AM For the periodfrom 8 June 2011 to 31 December 2011 InUSD o Designated Account Currency IBRD Credit 7987-AM USD o Account number Bank 900000902131 Central Treasury o 1 Meliq Adamyan Street, Yerevan Republic of Armenia, Location 0010 o 2011 o 1. Opening balance as at 08.06.2011 Add: USD 2. Cumulative opening discrepancy o 3. IBRD advance/replenishment 3,492,609.97 o Less: 4. Refund to IBRD from DA o 5. Present outstanding amount advanced to DA 6. DA closing balance as at 31.12.2011 3,492,609.97 1,200,000.63 o Add: 7. Amount of eligible expenditures paid 2,292,609.34 o 8. Service charges (if debited into DA) Less: o 9. Interest earned (if credited into DA) to.Total advance accounted for 3,492,609.97 o II. Discrepancy (5)-(10) o o Additional Financingfor the Health System Modernization Project (APL2) Special Purpose Financial Statements for the periodfrom 8 June 2011 to 31 December 2011 9/ 14 j o NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS Additional Financing/or the Health System Moderni=ation Project (APL2) o IERD Credit 7987-AM For the period/rom 8 June 2011 to 31 December 2011 o 1. General Information 1.1. Project Financing o According to the Agreement concluded between the Republic of Armenia and International Bank for Reconstruction and Development (IBRD) on 26 January 2011, IBRD provided the Republic o of Armenia Credit 7987-AM in the amount of 19,000,000 United States dollars (USD). Credit was provided to implement the "Additional financing Health System Modernization Project (APL2)" (the Project) which finance on-going activities of "Health System Modernization Project (APL2)". o The additional financing agreement of the Project became effective on 8 June 2011. The closing date of the Project is 31 December 2014. o 1.2. Project objectives o The objective of the Project is to strengthen the Ministry of Health capacity for more effective system governance, scaling up family medicine-based primary health care and upgrading selected healthcare service delivery networks/infrastructure in the selected marzed to provide o more accessible, quality and sustainable health care services to the population. The Project consists of the foHowing parts: o Family Medicine Development, Optimization of Hospital Infrastructure, Institutional Development, Project Management. 1.3. Project Budget D The Project is being financed by the following sources: o International Bank for Reconstruction and Development (IBRD), The Government of the Republic of Armenia (GoA), Community funds. Co-financing rate of25% is applied for all expenditure categories ofthe Project. o IBRD Government Community 7987-AM o Category Works, goods, consultants' USD of the RA usn usn Total USD o services, training, operating costs 18,952,500 6,230,800 102,500 25,285,800 Front end fee 47,500 - - 47,500 o Total 19,000,000 6,230,800 102,500 25,333,300 o Additional Financingfor the Health System Moderni=ation Project (APL2) Special Purpose Financial Statements for the period from 8 June 20 JJ to 31 December 2011 10114 o o 1.4. Project Implementation The Project is implemented by "Health Project Implementation Unit" SA (HPIU) of the Ministry o of Health of the Republic of Armenia. The address of the HPIU is: Shirvanzade Street 17, Yerevan, the Republic of Armenia. o 2. Accounting policy o 2.1 Preparation and presentation offinancial statements The special purpose financial statements have been prepared in compliance with International o Financial Reporting Standards issued by the International Federation of Accountants (IFAC) and presented in accordance with Financial Management Manual for World Bank Financed Investment Operations (March 2010): RM 3 - Financial Reporting and Auditing. o The special purpose financial statements consist of: o Statement of Financial Position, Statement of Project sources and uses of funds, Statement of uses of funds by project activity, o Summary of summary reports and SOEs, Statement of Designated Account, Notes to the Special Purpose Financial Statements. o 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: o 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) o 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. o 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 o 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 2011 is 1 o USD =385.77 AMD 2.3 Taxes o The Project related taxes and mandatory payments are calculated and paid in accordance with tax regulations ofthe Republic of Armenia. o o Additional Financingjor the Health System Moderni::ation Project (APL2) Special Purpose Financial Statements jor the periodjrom 8 June 2011 to 31 December 2011 11/ 14 o u o 3. Project expenditures allocation on funds Reporting period Cumulative o Expenditure category IBRD Credit 2011 GoA Total IBRD Credit As at 31.12.2011 GoA Total o I.Works 7987-AM USD 499,409 USD 166,470 USD 665,879 7987-AM USD 499,409 USD 166,470 USD 665,879 o 2.Goods 3.Consultants' Services 1,826,358 183,598 608,786 61,199 2,435,144 244,798 1,826,358 183,597 608,786 2,435,144 61,199 244,797 o 4.Training 5.0perating costs - - - - - - - - - - - - Front end fee 47,500 - 47,500 47,500 - 47,500 o Total 2,556,865 836,455 3,393,320 2,556,865 836,455 3,393,320 D 4. Accounts payable 31.12.2011 USD o Works Goods 33,493.29 244,098.62 o Total 277,591.91 o 5. IBRD Credit 7987-AM financing Financing was provided with the following disbursement methods: o 2011 USD o Advance Reimbursement- Summary Sheet Front end fee 1,500,000.00 1,992,609.97 47,500.00 3,540,109.97 o 6. Exchange gain/(loss) o 31.12.2011 USD Translation (17,981.52) o Transaction Net exchange gain/(loss) 11,415.81 (6,565.71) o o o Additional Financingjor the Health System Moderni;;ation Project (APL2) Special Purpose Financial Statements jor the periodfrom 8 June 2011 to 31 December 2011 12114 o o 7. Budget implementation As at Budget Implementation o Expenditure category 31.12.2011 USD USD % o I.Works 2.Goods 3.Consultants' Services 665,879.18 2,435,144.00 244,797.32 11,704,600.00 9,010,700.00 3,021,000.00 6% 27% 8% o 4.Training 5.0perating costs - - 935,000.00 614,500.00 - - Front end fee 47,500.00 47,500.00 100% o Total 3,393,320.50 25,333,300.00 13% o 8. Events after the reporting date The Project expenditures for the reporting period at the total amount of usn 299,999.37 o registered at the application HPAF -4 were submitted to WB on 10 April 2012 and not approved yet. o o o o o o o o o o o Additional Financingjor the Health System Modernization Project (APL2) Special Purpose Financial Statements jor the periodfrom 8 June 2011 to 31 December 2011 13/14 o u o ANNEX 1. RECONCILIATION BETWEEN THE AMOUNTS SUBMITTED BY THE PROJECT AND DISBURSED BY THE WORLD BANK o Additional Financingjor the Health System Modernization Project (APL2) IBRD Credit 7987-AM For the period ended 31 December 2011 o In USD Category Appl.N PIU WB Difference o Advance l.Works, goods, HPAF-l HPAF-2 1,500,000.00 1,500,000.00 1,328,653.70 1,500,000.00 1,500,000.00 1,328,653.70 - - - o consultants' services, training, operating costs HPAF-3 663,956.27 1,992,609.97 663,956.27 1,992,609.97 - 2. Front end fee 47,500 47,500 o 3,540,109.97 3,540,109.97 o o o o o o o o o o o o Additional Financing/or the Health System Moderni::ation Project (APL2) Special Purpose Financial Statements for the period.from 8 June 2011 to 31 December 2011 1411 4 o