MINISTRY OF REGIONAL DEVELOPMENT, CONSTRUCTION AND HOUSING AND COMMUNAL SERVICES OF UKRAINE SECOND URBAN INFRASTRUCTURE PROJECT», Special Purpose Financial Statements for the period from 21 November 2014 to 31 December 2016 Together with Independent Auditor’s Report URBAN INFRASTRUCTURE PROJECT - 2 Special Purpose Financial Statements For the period from 21 November 2014 to 31 December 2016 Contents: INDEPENDENT AUDITORS’ REPORT 3 SUMMARY OF SOURCES AND USE OF FUNDS 6 SUMMARY OF SOURCES AND USE OF FUNDS (CONTINUED) 7 SCHEDULE OF WITHDRAWALS FROM THE LOAN ACCOUNT 8 STATEMENT OF WITHDRAWALS THROUGH THE SUMMARY OF STATEMENTS OF EXPENDITURES 9 STATEMENT OF CASH WITHDRAWAL FROM SPECIAL ACCOUNTS 10 STATEMENT OF CASH WITHDRAWAL FROM SPECIAL ACCOUNTS (CONTINUED) 10 SPECIAL ACCOUNTS STATEMENT 11 SPECIAL ACCOUNTS STATEMENT (CONTINUED) 12 STATEMENT OF FACTUAL EXPENDITURES IN NATIONAL CURRENCY 13 RECONCILIATION BETWEEN RECORDS OF СPMU AND THE BANK 15 NOTES TO SPECIAL PURPOSE FINANCIAL STATEMENTS 16 WORLD BANK AUDIT DOCUMENTATION CHECKLIST 21 2 URBAN INFRASTRUCTURE PROJECT - 2 SUMMARY OF SOURCES AND USE OF FUNDS for the period from 21 November 2014 to 31 December 2016 in US dollars Actual For the period Total Balance at the beginning of the period 0 0 Fund source: Loans of IBRD and CTF 7,848,379 7,848,379 Total financing: 7,848,379 7,848,379 Project costs: Category 1-B: Kharkiv UC - Goods, works, non-consulting services, and consultants’ services for Part 1 of the Project 156,099 156,099 Category 1-D: Kyiv UC - Goods, works, non-consulting services, and consultants’ services for Part 1 of the Project 294,979 294,979 Category 1-E: Kirovohrad UC - Goods, works, non-consulting services, and consultants’ services for Part 1 of the Project 1,535,701 1,535,701 Category 1-F: Ternopil UC - Goods, works, non-consulting services, and consultants’ services for Part 1 of the Project 470,001 470,001 Category 1-G: Zhytomyr UC - Goods, works, non-consulting services, and consultants’ services for Part 1 of the Project 28,476 28,476 Category 2-А: Kramatorsk UC - Goods, works, non-consulting services, and consultants’ services for Part 1 of the Project 342,509 342,509 Category 3: Goods, works, non-consulting services, and consultants’ services for the Parts 2 and 3 of the Project 172,902 172,902 Category 4: Front-end fee 975,000 975,000 Total project costs: 3,975,667 3,975,667 Balance at the end of the period Special account А (1) – Kyiv UC (for the project 8391-UA) - USD 468,801 468,801 Special account K (2) – Kyiv UC (for the project TF017112) - USD 108,450 108,450 Special account В (1) – Kharkiv UC (for the project 8391-UA) - USD 630,500 630,500 Special account L (2) – Kharkiv UC (for the project TF017112) - USD 143,120 143,120 Special account С (1)– Kharkiv Waste Management UC (for the project 8391- UA) - USD 400,000 400,000 Special account M (2)– Kharkiv Waste Management UC (for the project TF017112) - USD 90,798 90,798 Special account D (1) – Kirovohrad UC (for the project 8391-UA) - USD 544,401 544,401 Special account N (2) – Kirovohrad UC (for the project TF017112) - USD 123,543 123,543 Special account E (1) – Ternopil UC (for the project 8391-UA) - USD 308,471 308,471 Special account O (2) – Ternopil UC (for the project TF017112) - USD 70,081 70,081 Special account F (1) – Zhytomyr UC (for the project 8391-UA) - USD 92,000 92,000 Special account Q (2) – Zhytomyr UC (for the project TF017112) - USD 22,000 22,000 Special account H (1) – Kramatorsk UC(for the project 8391-UA) - USD 410 410 Special account J (1) – Ministry of Regional Development, Construction and Housing and Communal Services of Ukraine (for the project 8391-UA) - USD 855,500 855,500 URBAN INFRASTRUCTURE PROJECT - 2 6 SUMMARY OF SOURCES AND USE OF FUNDS (CONTINUED) for the period from 21 November 2014 to 31 December 2016 in US dollars Actual For the period Total Current account А (1) – Kyiv UC (for the project 8391-UA) - UAH 11,454 11,454 Current account K (2) – Kyiv UC (for the project TF017112) - UAH 1,117 1,117 Current account В (1) – Kharkiv UC (for the project 8391-UA) - UAH - - Current account L (2) – Kharkiv UC (for the project TF017112) - UAH - - Current account С (1) – Kharkiv Waste Management UC (for the project 8391- UA) - UAH - - Current account M (2) – Kharkiv Waste Management UC (for the project TF017112) - UAH - - Current account D (1) – Kirovohrad UC (for the project 8391-UA) - UAH 76 76 Current account N (2) – Kirovohrad UC (for the project TF017112) - UAH 50 50 Current account E (1) – Ternopil UC (for the project 8391-UA) - UAH 262 262 Current account O (2) – Ternopil UC (for the project TF017112) - UAH - - Current account F (1) – Zhytomyr UC (for the project 8391-UA) - UAH - - Current account Q (2) – Zhytomyr UC (for the project TF017112) - UAH - - Current account H (1) – Kramatorsk UC(for the project 8391-UA) - UAH 80 80 Current account J (1) – Ministry of Regional Development, Construction and Housing and Communal Services of Ukraine (for the project 8391-UA) - UAH 1,598 1,598 3,872,712 3,872,712 Notes on pages 16 – 20 are an integral part of these financial statements. 7 URBAN INFRASTRUCTURE PROJECT - 2 SCHEDULE OF WITHDRAWALS FROM THE LOAN ACCOUNT for the period from 21 November 2014 to 31 December 2016 in US dollars Date of Payment USD Application number Category withdrawal Currency Amount equivalent FRONT END FEE (8391-UA) 4 21.11.2014 USD 750 000 750 000 FRONT END FEE (TF017712) 4 21.11.2014 USD 225 000 225 000 1-CPMU DA-J 31.07.2015 USD 320 000 320 000 8-KRD DA-D 23.12.2015 USD 1 633 170 1 633 170 5-KHW DA-C 23.12.2015 USD 400 000 400 000 4-KMT DA-H 23.12.2015 USD 340 000 340 000 3-ZHT DA-F 23.12.2015 USD 27 000 27 000 6-TER DA-E 23.12.2015 USD 525 000 525 000 9-KHV DA-B 23.12.2015 USD 630 500 630 500 10-CPMU DA-J 29.12.2015 USD 710 000 710 000 14-KYV DA-A 15.08.2016 USD 309 801 309 801 13-ZHT 1-G 30.08.2016 UAH 593 356 23 251 12-KMT DA-H 02.09.2016 USD 3 000 3 000 15-KHV 1-B 07.09.2016 EUR 114 892 128 452 2-KYV DA-K 26.09.2016 USD 60 000 60 000 1-ZHT 1-G 29.09.2016 UAH 134 688 5 225 17-KRD 1-E 14.11.2016 USD 199 882 199 882 6-KHV DA-L 28.11.2016 USD 143 120 143 120 3-KRD DA-N 28.11.2016 USD 370 720 370 720 7-KHW DA-M 28.11.2016 USD 90 798 90 798 5-KHV 1-B 01.12.2016 EUR 26 080 27 647 4-TER DA-O 02.12.2016 USD 119 172 119 172 21-TER 1-F 21.12.2016 UAH 5 384 147 204 643 23-KYV DA-A 29.12.2016 USD 410 000 410 000 22-ZHT DA-F 29.12.2016 USD 65 000 65 000 9-ZHT DA-Q 29.12.2016 USD 22 000 22 000 10-KYV DA-K 29.12.2016 USD 105 000 105 000 Total: 7,848,379 Summary by categories: Category 1-B total 156 099 Category 1-F total 204 643 Category 1-G total 28 475 Category 1-E total 199 882 Category 4 total 975 000 DA-A total 719 801 DA-B total 630 500 DA-C total 400 000 DA-D total 1 633 170 DA-E total 525 000 DA-F total 92 000 DA-H total 343 000 DA-J total 1 030 000 DA-K total 165 000 DA-L total 143 120 DA-M total 90 798 DA-N total 370 720 DA-O total 119 172 DA-Q total 22 000 Total: 7,848,379 Notes on pages 16 – 20 are an integral part of these financial statements. 8 URBAN INFRASTRUCTURE PROJECT - 2 STATEMENT OF WITHDRAWALS THROUGH THE SUMMARY OF STATEMENTS OF EXPENDITURES for the period from 21 November 2014 to 31 December 2016 in US dollars Category Application Total 1-В 1-D 1 -E 1-F 1-G 2-А 3 4 number 1. Applications submitted to the World Bank and reimbursed for the period from 21 November 2014 to 31 December 2016 FRONT END FEE (8391- - - - - - - - 750,000 750,000 UA) FRONT END FEE - - - - - - - 225,000 225,000 (TF017712) 2-CPMU - - - - - - 19,604 - 19,604 10-CPMU - - - - - - 29,917 - 29,917 11-CPMU - - - - - - 22,275 - 22,275 16-CPMU - - - - - - 27,045 - 27,045 20-CPMU - - - - - - 33,745 - 33,745 12-KMT - - - - - 328,408 - - 328,408 18-KMT - - - - - 14,101 - - 14,101 19-KYV - 239,546 - - - - - - 239,546 8-KYV - 55,433 - - - - - - 55,433 17-KRD - - 199,882 - - - - - 199,882 5-KHV 27,647 - - - - - - - 27,647 15-KHV 128,452 - - - - - - - 128,452 1-ZHT - - - - 5,225 - - - 5,225 13-ZHT - - - - 23,251 - - - 23,251 21-TER - - - 204,643 - - - - 204,643 Total 156,099 294,979 199,882 204,643 28,476 342,509 132,586 975,000 2,334,174 2. Costs actually incurred for the period from 21 November 2014 to 31 December 2016 From the Loan’s 156,099 - 199,882 204,643 28,476 - - 975,000 1,564,099 account From special - - 24,985 - - - - - 24,985 accounts From current accounts in - 294,979 1,310,834 265,358 - 342,509 172,902 - 2,386,582 national currency Total 156,099 294,979 1,535,701 470,001 28,476 342,509 172,902 975,000 3,975,667 3. Table of differences in Project costs between the World Bank records and CPMU for the period from 21 November 2014 to 31 December 2016 Reimbursed according to 156,099 294,979 199,882 204,643 28,476 342,509 132,586 975,000 2,334,174 IBRD information Amount of costs not reimbursed - - 1,335,819 265,358 - - 40,316 - 1,641,493 as at 31.12. 2016 According to the data of 156,099 294,979 1,535,701 470,001 28,476 342,509 172,902 975,000 3,975,667 CPMU Notes on pages 16 – 20 are an integral part of these financial statements. 9 URBAN INFRASTRUCTURE PROJECT – 2 STATEMENT OF CASH WITHDRAWAL FROM SPECIAL ACCOUNTS for the period from 21 November 2014 to 31 December 2016 in US dollars Acc. A (1) №2523417024932 Kyiv UC Date of Withdrawals USD Category withdrawal Currency Amount Equivalent amount Sub_accounts 15.09.2016 USD 251,000 251,000 Total: 251,000 Summary by categories Sub_accounts 251,000 Total: 251,000 Acc. K (2) №2523518024932 Kyiv UC Date of Withdrawals USD Category withdrawal Currency Amount Equivalent amount Sub_accounts 20.10.2016 USD 56,550 56,550 Total: 56,550 Summary by categories Sub_accounts 56,550 Total: 56,550 Acc. D (1) №2523717014932 Kirovohrad UC Date of Withdrawals USD Category withdrawal Currency Amount Equivalent amount Sub_accounts 08.04.2016 USD 421,500 421,500 Sub_accounts 15.04.2016 USD 838,700 838,700 1-E 17.06.2016 USD 24,985 24,985 Sub_accounts 06.07.2016 USD 100 100 Sub_accounts 16.08.2016 USD 50,610 50,610 Total: 1,335,895 Summary by categories Sub_accounts 1,310,910 1-Е 24,985 Total: 1,335,895 Acc. N (2) №2523818014932 Kirovohrad UC Date of Withdrawals USD Category withdrawal Currency Amount Equivalent amount Sub_accounts 28.12.2016 USD 50 50 Total: 50 Summary by categories Sub_accounts 50 Total: 50 URBAN INFRASTRUCTURE PROJECT – 2 STATEMENT OF CASH WITHDRAWAL FROM SPECIAL ACCOUNTS (CONTINUED) for the period from 21 November 2014 to 31 December 2016 10 in US dollars Acc. E (1) №2523117034932 Ternopil UC Date of Withdrawals USD Category withdrawal Currency Amount Equivalent amount Sub_accounts 10.03.2016 USD 33,900 33,900 Sub_accounts 11.03.2016 USD 23,900 23,900 Sub_accounts 14.03.2016 USD 35,300 35,300 Sub_accounts 10.06.2016 USD 152,700 152,700 Sub_accounts 20.07.2016 USD 19,820 19,820 Total: 265,620 Summary by categories Sub_accounts 265,620 Total: 265,620 Acc. H (1) №2523517054932 Kramatorsk UC Date of Withdrawals USD Category withdrawal Currency Amount Equivalent amount Sub_accounts 04.02.2016 USD 31,981 31,981 Sub_accounts 04.02.2016 USD 307,567 307,567 Sub_accounts 30.09.2016 USD 3,043 3,043 Total: 342,591 Summary by categories Sub_accounts 342,591 Total: 342,591 Acc. J (1) №2523017004932 Ministry of Regional Development, Construction and Housing and Communal Services of Ukraine Date of Withdrawals USD Category withdrawal Currency Amount Equivalent amount Sub_accounts 04.09.2015 USD 21,500 21,500 Sub_accounts 13.10.2015 USD 8,200 8,200 Sub_accounts 28.10.2015 USD 1,850 1,850 Sub_accounts 20.11.2015 USD 19,000 19,000 Sub_accounts 04.12.2015 USD 3,300 3,300 Sub_accounts 08.12.2015 USD 18,200 18,200 Sub_accounts 25.12.2015 USD 19,800 19,800 Sub_accounts 02.08.2016 USD 7,200 7,200 Sub_accounts 06.09.2016 USD 11,600 11,600 Sub_accounts 07.10.2016 USD 11,100 11,100 Sub_accounts 04.11.2016 USD 11,100 11,100 Sub_accounts 07.12.2016 USD 10,900 10,900 Sub_accounts 28.12.2016 USD 11,100 11,100 Sub_accounts 29.12.2016 USD 1,750 1,750 Sub_accounts 29.12.2016 USD 17,900 17,900 Total: 174,500 Summary by categories Sub_accounts 174,500 Total: 174,500 Notes on pages 16 – 20 are an integral part of these financial statements. URBAN INFRASTRUCTURE PROJECT – 2 SPECIAL ACCOUNTS STATEMENT for the period from 21 November 2014 to 31 December 2016 11 in US dollars Deposit bank АТ Ukreximbank Loan No. 8391-UA Currency US dollars Acc. №2523517054932 Acc. №2523017004932 Acc. Acc. №2523817044932 Kramatorsk UC Ministry of Regional №2523717014932 Zhytomyr UC Development, Kirovohrad UC Construction and Housing and Communal Services of Ukraine BALANCE AT THE BEGINNING OF - - - - THE PERIOD 343,000 1,030,000 1,633,170 92,000 Revenues: Funds received Balancing the loan financing - - 247,127 - proportion Interest accrued - - - - TOTAL FUNDS RECEIVED 343,000 1,030,000 1,880,297 92,000 Maintenance: costs Transfer of funds into national 342,590 174,500 1,310,911 - currency Direct payments from special - - 24,985 - accounts Payment for bank services - - - - TOTAL COSTS 342,590 174,500 1,335,895 - BALANCE AT THE END OF THE 410 855,500 544,401 92,000 PERIOD Deposit bank АТ Ukreximbank Continued Loan No. 8391-UA Currency US dollars Acc. №2523117034932 Acc. Acc. №2523917074932 Acc. №2523217064932 Ternopil UC №2523417024932 Kharkiv Waste Kharkiv UC Kyiv UC Management UC BALANCE AT THE BEGINNING OF - - - - THE PERIOD 525,000 719,801 400,000 630,500 Revenues: Funds received Balancing the loan financing 49,091 - - - proportion Interest accrued - - - - TOTAL FUNDS RECEIVED 574,091 719,801 400,000 630,500 Maintenance: costs Transfer of funds into national 265,620 251,000 - - currency Direct payments from special - - - - accounts Payment for bank services - - - - TOTAL COSTS 265,620 251,000 - - BALANCE AT THE END OF THE 308,471 468,801 400,000 630,500 PERIOD Notes on pages 21 – 25 are an integral part of these financial statements. URBAN INFRASTRUCTURE PROJECT – 2 SPECIAL ACCOUNTS STATEMENT (CONTINUED) for the period from 21 November 2014 to 31 December 2016 12 in US dollars Deposit bank АТ Ukreximbank Loan No. TF017112 Currency US dollars Acc. № Acc. № Acc. № Acc. № Acc. № Acc. № 2523818014932 2523918044932 2523218034932 2523518024932 2523018074932 2523318064932 Kirovohrad UC Zhytomyr UC Ternopil UC Kyiv UC Kharkiv Waste Kharkiv UC Management UC BALANCE AT THE BEGINNING OF THE - - - - - - PERIOD Revenues: Funds 370,720 22,000 119,172 165,000 90,798 143,120 received Interest accrued - - - - - - TOTAL FUNDS 370,720 22,000 119,172 165,000 90,798 143,120 RECEIVED Maintenance: costs Transfer of funds into national 50 - - 56,550 - - currency Balancing the loan 247,127 - 49,091 - - - financing proportion Direct payments from special - - - - - - accounts Payment for bank - - - - - - services TOTAL COSTS 247,177 - 49,091 56,550 - - BALANCE AT THE 123,543 22,000 70,081 108,450 90,798 143,120 END OF THE PERIOD Notes on pages 16 – 20 are an integral part of these financial statements. URBAN INFRASTRUCTURE PROJECT – 2 STATEMENT OF FACTUAL EXPENDITURES IN NATIONAL CURRENCY for the period from 21 November 2014 to 31 December 2016 13 in US dollars ----- Payment----- USD Equivalent Currency Amount amount Category 1-D: Kyiv UC - Goods, works, non-consulting services, UAH 7,691,902 294,979 and consultants’ services for Part 1 of the Project Category 1-E: Kirovohrad UC - Goods, works, non-consulting UAH 33,434,660 1,310,834 services, and consultants’ services for Part 1 of the Project Category 1-F: Ternopil UC - Goods, works, non-consulting UAH 6,744,723 265,358 services, and consultants’ services for Part 1 of the Project Category 2-А: Kramatorsk UC - Goods, works, non-consulting UAH 8,853,984 342,509 services, and consultants’ services for Part 1 of the Project Category 3: Goods, works, non-consulting services, and UAH 4,230,711 172,902 consultants’ services for the Parts 2 and 3 of the Project Total expenditures of the period 60,955,980 2,386,582 Notes on pages 16 – 20 are an integral part of these financial statements. 14 URBAN INFRASTRUCTURE PROJECT – 2 RECONCILIATION BETWEEN RECORDS OF СPMU AND THE BANK for the period from 21 November 2014 to 31 December 2016 in US dollars Loan amount 350,000,000 Subtract: Project costs: Category 1-B: Kharkiv UC - Goods, works, non-consulting services, and consultants’ services for Part 1 of the Project 156,099 Category 1-D: Kyiv UC - Goods, works, non-consulting services, and consultants’ services for Part 1 of the Project 294,979 Category 1-E: Kirovohrad UC - Goods, works, non-consulting services, and consultants’ services for Part 1 of the 1,535,701 Project Category 1-F: Ternopil UC - Goods, works, non-consulting services, and consultants’ services for Part 1 of the Project 470,001 Category 1-G: Zhytomyr UC - Goods, works, non-consulting services, and consultants’ services for Part 1 of the 28,476 Project Category 2-А: Kramatorsk UC - Goods, works, non-consulting services, and consultants’ services for Part 1 of the 342,509 Project Category 3: Goods, works, non-consulting services, and consultants’ services for the Parts 2 and 3 of the Project 172,902 Category 4: Front-end fee 975,000 Total project costs: (3,975,667) Special account А (1) – Kyiv UC (for the project 8391-UA) - USD 468,801 Special account K (2) – Kyiv UC (for the project TF017112) - USD 108,450 Special account В (1) – Kharkiv UC (for the project 8391-UA) - USD 630,500 Special account L (2) – Kharkiv UC (for the project TF017112) - USD 143,120 Special account С (1) – Kharkiv Waste Management UC (for the project 8391-UA) - USD 400,000 Special account M (2) – Kharkiv Waste Management UC (for the project TF017112) - USD 90,798 Special account D (1) – Kirovohrad UC (for the project 8391-UA) - USD 544,401 Special account N (2) – Kirovohrad UC (for the project TF017112) - USD 123,543 Special account E (1) – Ternopil UC (for the project 8391-UA) - USD 308,471 Special account O (2) – Ternopil UC (for the project TF017112) - USD 70,081 Special account F (1) – Zhytomyr UC (for the project 8391-UA) - USD 92,000 Special account Q (2) – Zhytomyr UC (for the project TF017112) - USD 22,000 Special account H (1) – Kramatorsk UC (for the project 8391-UA) - USD 410 Special account J (1) – Ministry of Regional Development, Construction and Housing and Communal Services of 855,500 Ukraine (for the project 8391-UA) - USD Current account А (1) – Kyiv UC (for the project 8391-UA) - UAH 11,454 Current account K (2) – Kyiv UC (for the project TF017112) - UAH 1,117 Current account В (1) – Kharkiv UC (for the project 8391-UA) - UAH - Current account L (2) – Kharkiv UC (for the project TF017112) - UAH - Current account С (1) – Kharkiv Waste Management UC (for the project 8391-UA) - UAH - Current account M (2) – Kharkiv Waste Management UC (for the project TF017112) - UAH - Current account D (1) – Kirovohrad UC (for the project 8391-UA) - UAH 76 Current account N (2) – Kirovohrad UC (for the project TF017112) - UAH 50 Current account E (1) – Ternopil UC (for the project 8391-UA) - UAH 262 Current account O (2) – Ternopil UC (for the project TF017112) - UAH - Current account F (1) – Zhytomyr UC (for the project 8391-UA) - UAH - Current account Q (2) – Zhytomyr UC (for the project TF017112) - UAH - Current account H (1) – Kramatorsk UC (for the project 8391-UA) - UAH 80 Current account J (1) – Ministry of Regional Development, Construction and Housing and Communal Services of 1,598 Ukraine (for the project 8391-UA) - UAH Total funds available (3,872,712 ) Total withdrawal: (7,848,379) Balance as at 31 December 2016 342,151,621 Notes on pages 16 – 20 are an integral part of these financial statements. 15 URBAN INFRASTRUCTURE PROJECT – 2 NOTES TO SPECIAL PURPOSE FINANCIAL STATEMENTS for the period from 21 November 2014 to 31 December 2016 in US dollars 1. Project description Ukraine received loan funding in the amount of USD 350m from the International Bank for Reconstruction and Development (IBRD) under the Loan Agreement dated 26 May 2014 between Ukraine and the International Bank for Reconstruction and Development No. 8391-UA and the Loan Agreement dated 26 May 2014 between Ukraine and the Clear Technologies Fund (CTF) No. TF017112 regarding Urban infrastructure Project – 2. The objective of the project is to improve the quality and efficiency of water, wastewater and solid waste services in selected cities of Ukraine. The project consists of the following parts: Part 1: Urban Infrastructure Improvement Implementation of selected investment in the rehabilitation and upgrading of priority infrastructure specified in a Utility Company’s Investment Program, with specific focus on water supply, wastewater, and solid waste sectors and including: (a) rehabilitation and upgrading of water supply systems; rehabilitation and upgrading of existing wastewater and sludge treatment facilities; provision of goods for water treatment systems, pumping stations, operations and maintenance and technical assistance for detailed designs and tender documents and construction supervision; and (b) rehabilitation, construction and management of solid waste landfills. Part 2: Institutional Strengthening and Capacity Building (a) Provision of technical assistance to strengthen, at the sub-national level, the capacity and efficiency of municipalities/cities and utility entities to operate and manage their water supply, wastewater and solid waste infrastructure and systems, including: (i) development of policies and inter-sectoral instruments for water and wastewater management; (ii) development of policies for solid waste management to improve municipal service delivery and strengthen governance; and (iii) enhancement of social accountability mechanisms in the sectors with a view to improving performance. (b) Provision of technical assistance to strengthen, at the national level, policy dialogue and strategy development for improved service delivery and regulation in the water supply, wastewater, and solid waste sectors, including in the areas of tariffs, alternative financing options, sector governance, public awareness, benchmarking, and accountability mechanisms. Частина 3: Project Management Provision of support to the CPMU in its management and implementation of the Project activities, including financing of Incremental Operating Costs, cost of Project financial and technical audits and feasibility studies of potential urban infrastructure improvement investments. To facilitate the carrying out of each Utility Company’s Respective Part of the Project in accordance with its Utility Company’s Investment Program that has been approved by the Bank, the Borrower, through the Ministry of Finance, shall make part of the proceeds of the Loan equal to an amount approved by the Bank, available to said Utility Company under a subsidiary agreement between the Borrower (represented by MoF, Minregion and National Commission of the State Public Utilities Regulation), the municipal/regional council concerned and the Utility Company, under terms and conditions a pproved by the Bank (“Subsidiary Agreement”). 2. Basic accounting policies Basis of preparation The special financial statements were prepared on the cash basis. Accounting policy was consistently applied throughout the entire period of using the Loan funds. 16 ПРОЕКТ «РОЗВИТОК МІСЬКОЇ ІНФРАСТРУКТУРИ - 2» ПРИМІТКИ ДО СПЕЦІАЛЬНОЇ ФІНАНСОВОЇ ЗВІТНОСТІ За період, з 21 листопада 2014 по 31 грудня 2016 року в доларах США Reporting period These statements cover the period of using the funds of the Loans from November 21, 2014 till December 31, 2016. The Closing Date shall be October 31, 2020 or such later date as the Bank shall establish. The final date for closing all payments under the Loan Agreements is set to be four month after the specified Closing Date. Reporting currency In compliance with the World Bank requirements, the reporting currency is USD. Recognition of proceeds and expenses CPMU maintains its records and prepares its financial statements on the cash basis. Proceeds are reported when originating from bank accounts supported by advances from the IBRD. Expenses are reported as at the date of funds withdrawal from the account. The Bank’s requirement is to withdraw funds from the Loan Account based on statements of expenditures in order to cover contractual expenses for. For submission of payment applications or statements of expenditures payable from Special Accounts the Borrower shall provide the Bank with the following supporting documents: - the documents confirming the eligible costs (e.g. copies of payment receipts, invoices from suppliers) for payments under the contracts costing USD 500 000 and more; - for payments for goods under the contracts costing USD 300 000 and more; for payments under the contracts costing USD 100 000 and more for the consulting services of the companies and USD 50 000 for services of individual consultants, training costs and operational expenses; - statements of expenditures executed in special form for all other types of expenses/contracts; - payment registers in special form for payments under the contracts which require the preliminary inspection from the Bank. For confirming applications of statements of direct expenditures are required the supporting documents for eligible expenses, e.g. payment receipts, invoices from suppliers. Special Bank Accounts The following Special Accounts have been opened by the Borrower in AT Ukreximbank in US dollars, EURO as well as the current accounts in national currency UAH: a. Special Accounts A and K under two Loan Agreements in respect of Kyiv UC (for financing the expenses of the Category 1 of the Project); b. Special Accounts В and L under two Loan Agreements in respect of Kharkiv UC (for financing the expenses of the Category 1 of the Project); c. Special Accounts С and M under two Loan Agreements in respect of Kharkiv Waste Management UC (for financing the expenses of the Category 1 of the Project); d. Special Accounts D and N under two Loan Agreements in respect of Kirovohrad UC (for financing the expenses of the Category 1 of the Project); e. Special Accounts Е and О under two Loan Agreements in respect of Ternopil UC (for financing the expenses of the Category 1 of the Project); f. Special Accounts F and Q under two Loan Agreements in respect of Zhytomyr UC (for financing the expenses of the Category 1 of the Project); g. Special Account H under the Loan Agreement No. 8391-UA in respect of Kramatorsk UC (for financing the expenses of the Category 2 of the Project); h. Special Accounts J under the Loan Agreement No. 8391-UA in respect of the Ministry of Regional Development, Construction and Housing and Communal Services (for financing the expenses of the Category 3 of the Project); 17 ПРОЕКТ «РОЗВИТОК МІСЬКОЇ ІНФРАСТРУКТУРИ - 2» ПРИМІТКИ ДО СПЕЦІАЛЬНОЇ ФІНАНСОВОЇ ЗВІТНОСТІ За період, з 21 листопада 2014 по 31 грудня 2016 року в доларах США Payments out of the Special Accounts shall be made exclusively for Eligible Expenditures. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for Eligible Expenditures. IBRD set the following limits of “Marginal amounts in US dollars” for each of Special Accounts (maximum amounts that are subject to withdrawal from the Loan Account and depositing in Special Account): - 926,000 US dollars for Special Account A - 6,159,000 US dollars for Special Account B - 3,575,000 US dollars for Special Account C - 2,795,000 US dollars for Special Account D - 2,981,000 US dollars for Special Account E - 2,437,000 US dollars for Special Account F - 523,000 US dollars for Special Account H - 1,500,000 US dollars for Special Account J - 210,000 US dollars for Special Account K - 1,398,000 US dollars for Special Account L - 811,000 US dollars for Special Account M - 634,000 US dollars for Special Account N - 676,000 US dollars for Special Account O - 553,000 US dollars for Special Account Q The minimal amount of applications for cash withdrawal is 20% of the Marginal amount of Special Account. 3. Budget Expenditures for the items stated below can be financed from the Loan’s funds; they should be used only to perform activities under the following categories. According to Amendments made to the Loan Agreement No. 8391-UA dated 24 August 2016 and signed by Parties on 6 September 2016 the allocation of funds between the specified Utility Companies shall be made in the following way: Allocated funds of the % of financed Category Loan (in US dollars) expenses 1) Goods, works, non-consulting services, and consultant’s 81,5% services for Part 1 of the Project to be implemented by: (a) Donetsk UC deleted (b) Kharkiv UC 69,727,625 (c) Kharkiv Waste Management UC 35,755,000 (d) Kyiv UC 9,264,000 (e) Kirovohrad UC 36,097,884 (f) Ternopil UC 29,815,000 (g) Zhytomyr UC 32,507,625 (1) (h) Vinnytsia UC 39,473,116 96,6% (2) Goods, works, non-consulting services, and consultant’s 100% services for Part 1 of the Project to be implemented by: (a) Kramatorsk UC 5,236,000 (b) Kolomiya UC 3,092,250 (c) Ivano-Frankivsk UC deleted (d) Cherkasy UC 12,309,000 (e) Novovolynsk UC 5,985,000 18 ПРОЕКТ «РОЗВИТОК МІСЬКОЇ ІНФРАСТРУКТУРИ - 2» ПРИМІТКИ ДО СПЕЦІАЛЬНОЇ ФІНАНСОВОЇ ЗВІТНОСТІ За період, з 21 листопада 2014 по 31 грудня 2016 року в доларах США Allocated funds of the % of financed Category Loan (in US dollars) expenses (f) Chuguiv UC 4,987,500 (3) Goods, works, non-consulting services, and consultant’s services for the Parts 2 and 3 of the Project to be implemented by: (j) CPMU services 15,000,000 100% (4) Front-end fee 750,000 100% TOTAL 300,000,000 According to Amendments made to the Loan Agreement No. TF017112 dated 24 August 2016 and signed by Parties on 6 September 2016 the allocation of funds between the specified Utility Companies shall be made in the following way: Allocated funds of the % of financed Category Loan (in US dollars) expenses 1) Goods, works, non-consulting services, and consultant’s 18,5% services for Part 1 of the Project to be implemented by: (a) Donetsk UC видалено (b) Kharkiv UC 15,826,675 (c) Kharkiv Waste Management UC 8,118,000 (d) Kyiv UC 2,103,000 (e) Kirovohrad UC 8,191,358 (f) Ternopil UC 6,769,000 (g) Zhytomyr UC 7,376,675 (1) (h) Vinnytsia UC 1,390,292 3,4% (2) Front-end fee 225,000 100% TOTAL 50,000,000 4. Schedule of loan repayment Schedule of repayment of the Loan No. 8391-UA looks like the following: Principal loan amount to Date of repayment be repaid, % (USD) on each June 15 and December 15, 3,85% (11,550,000) * 25 beginning June 15, 2019 payments = 288,750,000 to and including June 15, 2031 on December 15, 2031 3,75% (11,250,000) TOTAL 300,000,000 Schedule of repayment of the Loan No. TF017112 looks like the following: Principal loan amount to Date of repayment be repaid, % (USD) on each June 15 and December 15, 5% (2,500,000) * 20 beginning June 15, 2024 payments = 50,000,000 to and including June 15, 2033 TOTAL 50,000,000 According to the Loan Agreement No. 8391-UA the interest payable by the Borrower for each Interest Period shall be at a rate equal to the Reference Rate for the Loan Currency plus the Variable Spread, provided, that upon a conversion of all or any portion of the Principal amount of the Loan, the interest payable by the Borrower during the Conversion Period on such amount shall be determined in accordance with the relevant provisions of the Article IV of the General Conditions. Notwithstanding the foregoing, if any amount of the Withdrawn Loan Balance remains unpaid when due and such non-payment continues for a period of thirty days, then the interest payable by the Borrower shall instead be calculated as provided in Section 3.02 (e) of the General Conditions. 19 ПРОЕКТ «РОЗВИТОК МІСЬКОЇ ІНФРАСТРУКТУРИ - 2» ПРИМІТКИ ДО СПЕЦІАЛЬНОЇ ФІНАНСОВОЇ ЗВІТНОСТІ За період, з 21 листопада 2014 по 31 грудня 2016 року в доларах США According to the Loan Agreement No. TF017112 the Service Charge payable by the Borrower on the Withdwarn Loan Balance shall be equal to three-fourths of one percent (3/4 of 1%) per annum. The payment dates are June 15 and December 15. 5. Economic environment The principal business activities are performed on the territory of Ukraine. Ukrainian economy is in a protracted crisis, complicated by military conflict in eastern Ukraine and unrecognized separation of the Autonomous Republic of Crimea. The stabilization of the situation in Ukraine largely depends upon the govern the government’s actions to address the armed conflict, refo rming the financial, administrative, fiscal and legal systems of the country. In order to solve the above problems the government introduces very stringent and unpopular measures, such as partial mobilization of reservists population, introduction of new taxes and fees, restrictions on cash and non-cash foreign currency transactions, and so on. 20 WORLD BANK AUDIT DOCUMENTATION CHECKLIST Name of Loan/Credit: World Bank UKRAINE Loan/Credit # 8391- UA, TF017112 Period from November, 21, 2014 to December 31, Audit Report: 2016 Check if Check if Included N/A I. Audit report (Opinion): A. Applicable accounting standards noted X B. Applicable auditing standards noted X C. Opinion rendered on all forms of withdrawals: 1. Statement of Expenditures X 2. Special Account X D. All sources of financing for the project are noted X II. Financial Reports: A. Revenue Earning Entity (all of the following are required): 1. Balance sheet X 2. Cash Flow Statement X 3. Income Statement X B. Non-Revenue Earning Entity (all of the following are required): 1. Balance sheet X 2. Summary of Sources and Uses of Funds X C. If applicable (refer to Loan Agreement): 1. Statement of Expenditure (SOE) Statement X 2. Special Account Statement X III. Notes to the Financial Statements X IV. Reconciliation between World Bank records and project records X V. Management Letter X 21