ROYAL GOVERNMENT OF CAMBODIA MINISTRY OF EDUCATION, YOUTH AND SPORT Higher Education Improvement Project Credit No. 6221 – KH Financial Statements for the period from 17 September 2018 to 31 December 2019 and Report of the Independent Auditors Ministry of Education, Youth and Sport Higher Education Improvement Project Credit No. 6221 – KH Contents Page 1 Statement by the Project Management 1 2 Report of the independent auditors 2 3 Statement of financial position 5 4 Statement of sources of funds and expenditures 6 5 Statement of designated accounts 7 6 Notes to the financial statements 8 Ministry of Education, Youth and Sport Higher Education Improvement Project Credit No. 6221 – KH Statement of financial position As at 31 December 2019 As at 31 December 2019 Note US$ Current assets Cash on hand 446 Cash at bank 3 4,421,378 Advances to Implementing Agencies 4 1,023,491 Net assets 5,445,315 Represented by: Fund balance at end of the period 5,445,315 The accompanying notes form an integral part of these financial statements. 5 Ministry of Education, Youth and Sport Higher Education Improvement Project Credit No. 6221 – KH Statement of sources of funds and expenditures for the period from 17 September 2018 to 31 December 2019 Period from 17 September 2018 to 31 December 2019 Note US$ Sources of funds Fund receipts – initial advance 5 6,733,728 Expenditures by category Goods 7 656,511 Consultants’ services 8 91,474 Training and workshops 9 479,644 Incremental operating costs 10 60,784 1,288,413 Excess of sources of funds over expenditures 5,445,315 Fund balance at beginning of the period - Fund balance at end of the period 5,445,315 Expenditures by components 6 Improve Teaching and Learning Capacity 492,432 Improving Research in STEM and Agriculture - Strengthening Sectoral Governance and Project Management 795,981 Contingent Emergency Response - 1,288,413 The accompanying notes form an integral part of these financial statements. 6 Ministry of Education, Youth and Sport Higher Education Improvement Project Credit No. 6221 – KH Statement of designated accounts for the period from 17 September 2018 to 31 December 2019 Period from 17 September 2018 to 31 December 2019 Note US$ Sources of funds Fund receipts from IDA 5 6,733,728 Expenditures by category Goods 7 656,511 Consultants’ services 8 91,474 Training and workshops 9 479,644 Incremental operating costs 10 60,784 1,288,413 Excess of sources of funds over expenditures 5,445,315 Fund balance at beginning of the period - Fund balance at end of the period 5,445,315 Represented by: Cash on hand 446 Cash at bank 3 4,421,378 Advances to Implementing Agencies 4 1,023,491 5,445,315 The accompanying notes form an integral part of these financial statements. 7 Ministry of Education, Youth and Sport Higher Education Improvement Project Credit No. 6221 – KH Notes to the financial statements for the period from 17 September 2018 to 31 December 2019 These notes form an integral part of, and should be read in conjunction with, the accompanying financial statements. 1. Background and activities Higher Education Improvement Project (“HEIP” or “the Project”) was established by the Credit No. 6221 – KH on 26 April 2018 between the Kingdom of Cambodia (“the Recipient”) represented by the Ministry of Economy and Finance (“MEF”) and the International Development Association (“IDA”), agrees to extend to the Recipient a credit in amount equivalent to Special Drawing Rights 61.8 million (US$90 million equivalent). Effective date of the Project was 17 September 2018. The contribution of the Royal Government of Cambodia is US$2.50 million. The Project is implemented by the Ministry of Education, Youth and Sport (“MoEYS”). The principal amount of the credit is repayable at 1.5625% semi-annual instalments and service charge rate of 0.75% per annum on the withdrawn credit balance from the IDA. The principle and service charge shall be payable on 15 April and 15 October commencing on 15 October 2024 and ending on 15 April 2056. The Project is expected to be completed on 30 June 2024. The objectives of the Project are to improve the quality and relevance of higher education and research mainly in science, technology, engineering and mathematics (“STEM”) and agriculture at targeted higher education institutions (“HIEs”), and to improve governance in the sector. The Project consists of the following parts: Part 1: Improving Teaching and Learning Capacity 1.1 Improving Teaching and Learning Capacity Carrying out of a program of activities designed to improve the quality of teaching and learning mainly in STEM and agriculture fields in selected public HEIs. 1.2 Improving Institutional Capacity Carrying out of a program of activities designed to improve the internal and external accountability of selected public HEIs in line with accreditation standards, through the provision of Grants to the selected public HEIs for the implementation of Subprojects comprising activities to strengthen the HEIs' institutional governance, financial and human resource management, and monitoring of graduates' participation in the labour market. 8 Ministry of Education, Youth and Sport Higher Education Improvement Project Credit No. 6221 – KH Notes to the financial statements (continued) for the period from 17 September 2018 to 31 December 2019 1. Background and activities (continued) Part 1: Improving Teaching and Learning Capacity (continued) 1.3 Supporting Private HEIs Carrying out of a program of activities designed to: (a) improve the quality of teaching and learning mainly in STEM and agriculture fields in selected private HEIs. (b) improve the internal and external accountability of selected private HEIs in line with accreditation standards, Part 2: Improving Research in STEM and Agriculture Carrying out of a program of activities designed to improve the quality and relevance of research in STEM and agriculture fields in selected public HEIs through the provision of Grants to the selected HEIs for the development and implementation of research Subprojects which result in peer reviewed publications. Part 3: Strengthening Sectoral Governance and Project Management 3.1 Strengthening Sectoral Governance Carrying out of a program of activities designed to strengthen the system of higher education through the improvement of quality assurance mechanisms, expansion of information systems, and development of legislation for autonomous HEIs. 3.2 Project Management and Monitoring and Evaluation Carrying out of the day-to­day implementation, coordination, and management of Project activities including planning and execution, financial management, procurement, internal and external audits, environmental and social safeguards management, and monitoring, reporting and evaluation. Part 4: Contingent Emergency Response Provision of immediate response to an Eligible Crisis or Emergency, as needed. 9 Ministry of Education, Youth and Sport Higher Education Improvement Project Credit No. 6221 – KH Notes to the financial statements (continued) for the period from 17 September 2018 to 31 December 2019 1. Background and activities (continued) The Project are implemented by the following: • Ministry of Education, Youth and Sport – Project Management Unit (“PMU”); • Royal University of Phnom Penh (“RUPP”); • Institute of Technology of Cambodia (“ITC”); • University of Battambang (“UBB”); • Royal University of Agriculture (“RUA”); • Svay Rieng University (“SRU”); and • Accreditation Committee of Cambodia (“ACC”). The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Financing (“Component”), the allocations of the amounts of the Financing to each Component, and the percentage of expenditures to be financed for Eligible Expenditures in each Component: Amount of Percentage of financing allocated expenditures to be financed No. Category (expressed in SDR) (Inclusive of taxes) 1 Goods, works, non-consulting services, 8,450,000 100% consulting services, Training and Operating Costs under Part 3 of the Project 2 Grants under Parts 1.1, 1.2 and 2 of the 47,850,000 100% of amounts disbursed. Project 3 Grants under Part 1.3 of the Project 5,500,000 100% of amounts disbursed. 4 Emergency Expenditures under Part 4 0 100% of the Project Total 61,800,000 The Recipient will provide US$2.5 million contribution, which comprises of support of staff and researcher costs, office space and utilities. 10 Ministry of Education, Youth and Sport Higher Education Improvement Project Credit No. 6221 – KH Notes to the financial statements (continued) for the period from 17 September 2018 to 31 December 2019 2. Significant accounting policies The following significant accounting policies have been adopted by the Project in the preparation of these financial statements. (a) Basis of accounting The financial statements, which are expressed in United States Dollars (“US$”), have been prepared in accordance with a modified cash receipts and disbursements basis of accounting. This is a basis of accounting that is designed to meet the requirements of the Project; it is not designed to produce financial statements that are compatible with International Financial Reporting Standards. Under this basis of accounting, income is recognised when funds are received in cash and expenditure is recognised when payments are made rather than when it is incurred, except for the advanced payments made to suppliers and Implementing Agencies (“IAs”) that are initially recognised as a receivable and only recognised as payments when they have been liquidated by supporting invoices. The financial statements present sources and uses of funds and the related financial information in relation to the IDA fund withdrawals and disbursements from the Project's designated accounts together with the corresponding counterpart funds as specified under the Financing Agreement Credit No. 6221 – KH. The financial statements do not include any fund receipts or expenditures relating to Disbursement-Linked Indicator (“DLI”) components. (b) Statement of designated accounts The statement of designated accounts is prepared in accordance with the Financing Agreement, and is purely used to receive and disburse for expenditure funded by the IDA. (c) Non-expendable equipment The cost of non-expendable equipment is charged to the statement of sources of funds and expenditures upon acquisition. For control and management purposes, a memorandum account for non-expendable equipment is maintained by way of a non-expendable equipment listing. 11 Ministry of Education, Youth and Sport Higher Education Improvement Project Credit No. 6221 – KH Notes to the financial statements (continued) for the period from 17 September 2018 to 31 December 2019 2. Significant accounting policies (continued) (d) Foreign currency transactions The Project transacts its operations and maintains its accounting records primarily in the US$. Transactions in currencies other than US$ are converted into US$ at the rates of exchange prevailing on the transaction dates. Fund balances in currencies other than US$ are translated into US$ at the open market exchange rates at the reporting date. All foreign exchange differences are recognised in the statements of sources of funds and expenditures, and designated accounts. 3. Cash at bank As at 31 December 2019 US$ International Development Association 4,421,378 4. Advances to Implementing Agencies It represents the advance to Implementing Agencies: As at 31 December 2019 US$ University of Battambang 329,008 Institute of Technology of Cambodia 304,964 Svay Rieng University 149,057 Royal University of Agriculture 90,648 Accreditation Committee of Cambodia 85,003 Royal University of Phnom Penh 64,811 1,023,491 12 Ministry of Education, Youth and Sport Higher Education Improvement Project Credit No. 6221 – KH Notes to the financial statements (continued) for the period from 17 September 2018 to 31 December 2019 5. Fund receipts Period from 17 September 2018 to 31 December 2019 US$ Initial advance from International Development Association 6,733,728 6. Expenditures by components Period from 17 September 2018 to 31 December 2019 US$ Improve Teaching and Learning Capacity Improving Teaching and Learning Capacity 172,620 Improving Institutional Capacity 319,812 492,432 Strengthening Sectoral Governance and Project Management Strengthening Sectoral Governance 161,519 Project Management and Monitoring and Evaluation 634,462 795,981 1,288,413 13 Ministry of Education, Youth and Sport Higher Education Improvement Project Credit No. 6221 – KH Notes to the financial statements (continued) for the period from 17 September 2018 to 31 December 2019 7. Goods Period from 17 September 2018 to 31 December 2019 US$ Materials and technical equipment 90,250 Transportation vehicles 519,701 Office equipment 46,560 656,511 8. Consultants’ services Period from 17 September 2018 to 31 December 2019 US$ Contracted national consultants 73,474 Contracted international consultants 18,000 91,474 9. Training and workshops Period from 17 September 2018 to 31 December 2019 US$ Daily subsistence allowances 316,360 Refreshment 16,078 Training materials 15,979 Room and equipment rent 84,487 Travelling related expenses 46,740 479,644 14 Ministry of Education, Youth and Sport Higher Education Improvement Project Credit No. 6221 – KH Notes to the financial statements (continued) for the period from 17 September 2018 to 31 December 2019 10. Incremental operating costs Period from 17 September 2018 to 31 December 2019 US$ Incremental staff 2,050 Advertising 9,076 Bank charge 884 Communication 900 Transportation allowance 964 Mission 30,735 Office supplies 8,622 Meeting expenses 3,935 Vehicle rental 3,618 60,784 11. Reconciliation of designated accounts Period from 17 September 2018 to 31 December 2019 US$ Balance at beginning of the period - Add: Total fund received from IDA during the period 6,733,728 Less: Total amounts withdrawn for the expenditure during the period (1,288,413) Balance at end of the period 5,445,315 15 Ministry of Education, Youth and Sport Higher Education Improvement Project Credit No. 6221 – KH Notes to the financial statements (continued) for the period from 17 September 2018 to 31 December 2019 12. Withdrawal applications Withdrawal Date Civil works Goods Consultants’ Training and Incremental Initial Total application services workshops operating advance number costs US$ US$ US$ US$ US$ US$ US$ IDA Fund WA 001-DA 16-Jan-19 - - - - - 6,733,728 6,733,728 16 Ministry of Education, Youth and Sport Higher Education Improvement Project Credit No. 6221 – KH Notes to the financial statements (continued) for the period from 17 September 2018 to 31 December 2019 13. Commitments As at 31 December 2019, the Project has the following commitments: As at 31 December 2019 US$ Civil works 94,968 Goods 208,032 Consultants 970,825 1,273,825 14. Comparative figures There are no comparative figures as this is the first set of financial statements prepared since the commencement of the Project. 17