THE PALESTINIAN MINISTRY OF FINANCE HEALTH SYSTEM RESILIENCY STRENGTHENING PROJECT – TF018986 FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION AND MANAGED BY THE PALESTINIAN MINISTRY OF HEALTH PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020 TOGETHER WITH INDEPENDENT AUDITORS’ REPORT The Palestinian Ministry of Finance Health System Resiliency Strengthening Project Funded by the International Development Association And Managed by the Palestinian Ministry of Health Balance Sheet As at December 31, 2020 (Currency: USD) Note 2020 2019 Assets Current Assets Cash at bank 512,132 706,717 Total Current Assets 512,132 706,717 Total Assets 512,132 706,717 Liabilities and Fund Balance Liabilities Current Liabilities Accounts Payable 10 24,394 934 Total Current Liabilities 24,394 934 Total Liabilities 24,394 934 Fund Balance Fund balance 487,738 705,783 Total Liabilities and Fund Balance 512,132 706,717 The accompanying notes form an integral part of these financial statements 4 The Palestinian Ministry of Finance Health System Resiliency Strengthening Project Funded by the International Development Association And Managed by the Palestinian Ministry of Health Statement of Sources and Uses of Funds For the Year Ended December 31, 2020 (Currency: USD) Cumulative Year Ended Year Ended Up to December 31, December 31, December Note 2020 2019 31, 2020 FUND BALANCE – BEGINNING OF 705,783 590,073 - YEAR SOURCES OF FUNDS Replenishments 3 775,058 387,912 4,016,862 Direct payments 3 - - 1,452,506 Advance payment 3 - 130,962 750,000 UN Advances 3 162,202 - 162,202 Total Sources of Funds 937,260 518,874 6,381,570 USES OF FUNDS Category 1: Goods, Consultants’ Services, Training and Operating Costs: Component 2: Rationalizing Outside 4 904,742 293,527 2,379,482 Medical Referrals Component 3: Supporting Health Coverage to Strengthen 5 162,202 - 872,927 Sector Resilience Component 4: Project Management and 6 88,361 109,637 567,485 Capacity Building 1,155,305 403,164 3,819,894 Category 2: Operation and Maintenance Expenditures for Health Facilities: Component 1: Emergency and Rapid - - 2,073,938 Response Window - - 2,073,938 Total Uses of Funds 1,155,305 403,164 5,893,832 CHANGE IN FUND BALANCE (218,045) 115,710 487,738 FUND BALANCE – END OF YEAR 487,738 705,783 487,738 The accompanying notes form an integral part of these financial statements 5 The Palestinian Ministry of Finance Health System Resiliency Strengthening Project Funded by the International Development Association And Managed by the Palestinian Ministry of Health Designated Bank Account Statement For the Year Ended December 31, 2020 Account number 000/3001/001/2177660/0457 Depository bank Bank of Palestine Address Ramallah Related loan / credit TF018986 Currency U.S. Dollar (USD) Year Ended Year Ended December 31, December 31, Note 2020 2019 Balance, beginning of year 706,717 602,249 Add: Receipts during the year 3 775,058 518,874 775,058 518,874 Deduct: Payments for project expenditures from designated bank account 7 969,643 414,406 969,643 414,406 Balance, end of year 512,132 706,717 The accompanying notes form an integral part of these financial statements 6 The Palestinian Ministry of Finance Health System Resiliency Strengthening Project Funded by the International Development Association And Managed by the Palestinian Ministry of Health Notes to the Project Financial Statements For the Year Ended December 31, 2020 (Currency: USD) 1. The Project and its Financing The Palestinian Liberation Organization, for the benefit of the Palestinian Authority, and the International Development Association (the World Bank), acting as administrator of the Trust Fund for Gaza and West Bank, signed a grant agreement (the Agreement), dated February 4, 2015, whereby the World Bank made a grant, to the Palestinian Authority, in the amount of USD 7,250,000 to finance a project entitled "Health System Resiliency Strengthening Project" (the Project), managed by the Palestinian Ministry of Health (MoH). Thereafter, on September 15, 2015, amendment No.1 to the Agreement was signed to increase the grant amount to USD 8,500,000 by adding additional funds of USD 1,250,000 to category 1. The categories to be financed by the World Bank and the percentage of expenditure for items to be financed in each category are as follows: - Allocated Percentage of Amount Expenditure to Category (USD) be Financed (1) Goods, consultants’ services, training and operating costs 6,500,000 100% (2) Operation and maintenance expenditures for health facilities 2,000,000 100% 8,500,000 The objective of the Project is to support the Palestinian Authority in securing continuity in healthcare service delivery and building its resilience to withstand the future surge in demand for effective healthcare coverage. The Project comprises the following parts: Component 1: Emergency and Rapid Response Window Provision of funds to cover selected non-medical recurrent costs of operating and maintaining health service facilities of MoH. Component 2: Rationalizing Outside Medical Referrals Carrying out of a program of activities designed to improve the efficiency of health system without compromising on access and quality of health services. 7 Component 3: Supporting Health Coverage to Strengthen Sector Resilience Carrying out of a program of activities designed to support the establishment of national health coverage scheme including considering options for separating MoH’s roles in financing, service provision and regulation of healthcare. Component 4: Project Management and Capacity Building Strengthening of the capacity of MoH in project management and monitoring and evaluation through provision of consultants’ services, including audit, training and financing of the operating costs. The Agreement specifies that expenses, up to an aggregate amount not to exceed USD 2,000,000, incurred prior to the date of the Agreement but on or after October 1, 2014 are eligible for financing. In accordance with the Agreement, the closing date of the Project was planned to be June 30, 2020, however, on January 16, 2020, the World Bank approved the extension of the closing date of the Project to December 31, 2021. 2. Summary of Significant Accounting Policies The Project financial statements are prepared under the historical cost convention. Significant accounting policies follow: - Basis of accounting - The Project financial statements are prepared using the modified cash basis of accounting, which is a comprehensive basis of accounting other than International Financial Reporting Standards (IFRSs). Sources of funds are recognized either when cash is received or when the direct payment is effected by the World Bank. Uses of funds are recognized when cash payments are made, when related cheques/bank transfer requests are issued by MoH or when expenditure are due for direct payment. Issued cheques/bank transfer requests which have note cleared the bank statement as of year end are presented as “Accounts Payable” in the balance sheet. For presentation purposes in the Statement of Sources and Uses of Funds, amounts deducted by the World Bank as recovery from previously made advance payment are presented as part of replenishments and as reductions from the advance payment. - Foreign currency - The Project’s basic functional currency is the United States Dollar (USD). Transactions that are expressed or denominated in other currencies were translated to USD using exchange rates in effect at the time of each transaction. Differences arising from the fluctuations in exchange rates were treated as exchange gains or losses in the Statement of Sources and Uses of Funds and Designated Bank Account Statement. 8 3. Sources of Funds Sources of funds comprise: Payment Method/Type Amount Received Total Withdrawal Application Expenditure Date of fund Advance/ Replenishment Total Direct UN Sources of (WA) # Category transfer (Recovery) Amount Received Payment Advances* Funds Cumulative amount up to 750,000 3,241,804 3,991,804 1,452,506 - 5,444,310 December 31, 2019 2020 HSRSP – 26 Category 1 February 26, 2020 - 43,283 43,283 - - 43,283 HSRSP – 27 Category 1 May 11, 2020 - 63,558 63,558 - - 63,558 HSRSP – 28 Category 1 June 24, 2020 - 41,257 41,257 - - 41,257 HSRSP – 29 Category 1 July 23, 2020 - 155,765 155,765 - - 155,765 HSRSP – 30 Category 1 July 30, 2020 - 207,230 207,230 - - 207,230 HSRSP – 31 Category 1 October 7, 2020 - - - - 162,202 162,202 HSRSP – 32 Category 1 December 17, 2020 - 174,604 174,604 - - 174,604 HSRSP – 33 Category 1 December 22, 2020 - 89,361 89,361 - - 89,361 Total during the year 2020 - 775,058 775,058 - 162,202 937,260 Cumulative amount up to 750,000 4,016,862 4,766,862 1,452,506 162,202 6,381,570 December 31, 2020 * More details about the UN advance payment of USD 162,202 are presented in Note 5 below. 9 4. Component 2: Rationalizing Outside Medical Referrals This item comprises: Year Ended Year Ended December 31, December 31, 2020 2019 Goods 642,865 79,094 Consultants’ services 261,877 214,433 904,742 293,527 5. Component 3: Supporting Health Coverage to Strengthen Sector Resilience This item comprises: Year Ended Year Ended December 31, December 31, 2020 2019 Consultants’ services* 162,202 - 162,202 - * The amount of USD 162,202 represents the second installment directly paid by the World Bank, through withdrawal application #31, to the World Health Organization (WHO), a UN Organization, for the provision of technical assistance under the agreement entitled “Health Financing and Human Resources for Health (HRH)”, which was signed on April 12, 2018 between the Palestinian Ministry of Health and WHO. 6. Component 4: Project Management and Capacity Building This item comprises: Year Ended Year Ended December 31, December 31, 2020 2019 Consultants’ services (salaries and related services) 87,090 105,088 Operating costs (B) 1,271 4,549 88,361 109,637 (B) Operating costs comprise: Year Ended Year Ended December 31, December 31, 2020 2019 Communication 696 1,197 Bank charges 298 210 Office supplies and utilities 277 469 Office maintenance - 411 Printing and advertising - 1,920 Other miscellaneous costs - 342 1,271 4,549 10 7. Payments for Project Expenditures Below is the reconciliation between the Project expenditures as presented in the designated bank account statement and Project expenditures as presented in the statement of sources and uses of funds: Year Ended Year Ended December 31, December 31, 2020 2019 Payments for project expenditures as reported in designated 969,643 414,406 bank account statement Add: Outstanding cheques as of year end 24,394 934 (Deduct): Expenditure recorded in 2018 and paid in 2019 - (144) (Deduct): Outstanding cheques, as of beginning of year, which (934) (12,032) cleared the bank during the year Add: Direct payments 162,202 - Total uses of funds per statement of sources and uses of funds 1,155,305 403,164 8. SOE Procedures (Payments from Designated Bank Account) SOE procedures represent amounts disbursed by MoH under the Project for the following disbursement categories: - Withdrawal Application (WA) # Payment Method Category 1 Category 2 Total Cumulative amount up to December 31, 2019 2,664,589 2,073,938 4,738,527 2020 (Deduct): Amount recorded by MoH and reported to the World Bank but not (934) - (934) replenished as of December 31, 2019 Payment from designated Add: WA# HSRSP – 26 43,283 - 43,283 bank account (Deduct): Amount replenished by the World Bank in WA# HSRSP - 26 (43,283) - (43,283) related to 2019 costs Payment from designated Add: WA# HSRSP – 27 63,558 - 63,558 bank account Payment from designated Add: WA# HSRSP – 28 41,257 - 41,257 bank account Payment from designated Add: WA# HSRSP – 29 155,765 - 155,765 bank account Payment from designated Add: WA# HSRSP – 30 207,230 - 207,230 bank account UN Advances (through Add: WA# HSRSP – 31 direct payment from the 162,202 - 162,202 World Bank) Payment from designated Add: WA# HSRSP – 32 174,604 - 174,604 bank account Payment from designated Add: WA# HSRSP – 33 89,361 - 89,361 bank account Add: Amount recorded by MoH but not Payment from designated 262,262 - 262,262 replenished as of December 31, 2020* bank account Total amount disbursed during the 1,155,305 - 1,155,305 year 2020 (Total uses of funds) Cumulative amount up to December 3,819,894 2,073,938 5,893,832 31, 2020 * Out of the amount of USD 262,262, an amount of USD 43,558 was reported subsequently in WA #34. 11 9. Reconciliations between World Bank Records (Client Connection) and MoH Records December December 31, 2020 31, 2019 Project accounts per the client connection Advance payments transferred to MoH, net of amounts recovered 750,000 750,000 Category 1: Goods, consultants, services, training and operating 3,395,429 2,620,372 costs Category 2: Operation and maintenance expenditures for health 2,073,939 2,073,938 facilities UN Advances 162,202 - 6,381,570 5,444,310 Project accounts per MoH records Category 1: Goods, consultants, services, training and operating 3,819,894 2,664,589 costs Category 2: Operation and maintenance expenditures for health 2,073,938 2,073,938 facilities Cash at Bank 512,132 706,717 Accounts Payable (24,394) (934) 6,381,570 5,444,310 Difference - - 10. Accounts Payable This item represents outstanding payments, mainly related to salary payments under the Project, where the related cheque / bank transfer request has been issued by MoH during the year 2020 but did not clear the bank as of December 31, 2020. 11. Other Events During the year 2020, Corona Virus (COVID 19) has spread globally and has substantially impacted the global economy. As a result of the continuous impact of COVID 19 on the global economy and on the various sectors and accompanying restrictions imposed in Palestine and the World related to transportation, travel and quarantine, it is possible that the Project’s activities and plans may be affected. The extent and duration of these impacts remain uncertain and are dependent on future developments that cannot be accurately predicted at the present time. Therefore, the Project management has not been able to estimate the magnitude of the potential impact at the date of approval of the Project’s financial statements. Note that future development may have an impact on future financial performance, cash flows and the financial position of the Project. 12