Report on the Consolidated Project Financial Statements of the ENEREGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Financed by: - IDA Loan No. 5393 BA - IDA Loan No. 5538 BA For the year ended 31 December 2018 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina CONTENTS 1 Introduction 1 2 Independent Auditor's Report 5 3 Consolidated Project Financial Statements for the year 2018 7 4 Notes to the Consolidated Project Financial Statements 14 APPENDICES A.1 Designated account statement - IDA Credit No. 5393 BA (FB&H) 16 A.2 Designated sub-account statement - IDA Credit No. 5393 BA (FB&H) 17 A.3 Designated account statement - IDA Credit No. 5393 BA (RS) 18 A.4 Designated sub-account statement - IDA Credit No. 5393 BA (RS) 19 A.5 Local Bank Account Statement - Government (FB&H) 20 A.6 Local Bank Account Statement - Co-financing (RS) 21 A.7 Petty Cash Statement 22 A.8 Account Statement - under IDA Credit No. 5393 BA (RS) 23 B.1 SoE Withdrawal Schedule of IDA Credit No. 5393 BA for the year ended 31 December 24 2018 B.2 SoE Withdrawal Schedule of IDA Credit No. 5538 BA for the year ended 31 December 26 2018 C.1 Reconciliation between World Bank's disbursement statements in XDR and IDA Credit 27 account in EUR according to the balance sheet as of 31 December 2018; SoE Withdrawal Schedule of IDA Credit No. 5393 BA C.2 Reconciliation between World Bank's disbursement statements in XDR and IDA Credit 29 account in EUR according to the balance sheet as of 31 December 2018; SoE Withdrawal Schedule of IDA Credit No. 5538 BA ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina 1. Introduction 1.1 Objectives of the Project The Project Development Objective (PDO) of the Energy Efficiency Project (BEEP) is to demonstrate the benefits of energy efficiency improvements in public sector buildings and support the development of scalable energy efficiency financing models. 1.2 Components and activities of the Project The Project consists of the following components and activities: Component 1: Energy efficiency investments in public facilities This component will support energy efficiency investments ('subprojects') in schools, hospitals and clinic centres. A small number of other public facilities (e.g., elderly homes, orphanages, other administrative buildings) may also be included. The component will finance energy efficiency upgrades, as well as related technical consultancy services (e.g., energy audits, technical and social M&E before and after subproject implementation, technical designs, supervision and subproject commissioning). These investments will reduce the energy consumption of selected public buildings, and demonstrate the economic viability of energy efficiency improvements, including reduced recurring energy costs and associated public expenditures. In addition, the subprojects will generate demonstrable co-benefits, such as reduced CO2 emissions and improved indoor comfort levels (e.g., improved indoor temperature, better lighting and indoor air quality). Component 2: Support for the development of scalable financing mechanisms and capacity buildings This component will support the development of sustainable energy efficiency financing mechanisms in the public sector, strengthen implementation capacity and help to increase public awareness on energy efficiency. The main activities supported will include: Activity I - Issues and Options Study on scalable financing mechanisms This activity will finance in an in-depth Issues and Options Study on scalable financing mechanisms for energy efficiency, which will be conducted during the first year of implementation. The study aims to support development of sustainable financing models and to help address some of the key barriers hampering scaling up financing and implementation of energy efficiency programs in the public sector. To this end, the study is expected to: (i) analyse key market barriers in the public sector, including public budgeting, financing and procurement rules, other legislative and regulatory barriers, institutional issues and low existing comfort levels; (ii) suggest specific options to address the identified main barriers; (iii) as an interim output, propose detailed design options for piloting scalable financing and contracting models that will be tested in the second and third year of implementation under Component 1; and (iv) recommend entity-wide options and specific design elements for sustainable financing mechanisms in the long-term as the final output of the study. Regarding design options for pilot projects (item iii) above), particular emphasis will be given on testing models that would allow funds to revolve or to increase their leverage. Accordingly, piloting options that the study would help explore may include: "budget capture" of energy cost savings; partial or full earmarking of captured energy cost savings for further energy efficiency activities, including repayments from cantons/municipalities in the FBH; or leveraging funds by requiring co-financing from beneficiary public agencies. Piloting options could also include the use of performance-based contracts for subproject implementation, or simple public ESCO models. Based on the recommendations developed under the Issues and Options Study, as well as early implementation experience, the PIU will submit specific piloting proposals to the PSCs by the end of the first year of implementation. 1 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina 1. Introduction (continued) 1.2. Components and activities of the Project (continued) These pilots will help incrementally build market capacity and gradually move towards more scalable models as implementation experience is gained and the market evolves. The development of entity-wide scalable financing mechanisms (item iv above) will be based on the recommendations of the Issues and Options Study, and take into account outcomes from stakeholder consultations, as well as implementation experiences from pilot projects supported under Component 1. Based on the strong interest of the entity Government to establish revolving financing mechanisms, and given that there is an existing Environmental Protection Fund, which also cover energy efficiency, long-term options are likely to include specific design elements and suitable financial products/services that the Fund could offer to support operation of revolving mechanisms for energy efficiency investments (e.g., energy service agreements, loans, ESCO financing and re-financing, technical services, etc.). The ministerial-level PSC or the Federation Ministry of Physical Planning in will submit a proposal on scalable financing models to the entity Cabinets of Ministers order to ensure sustainability of energy efficiency financing beyond the project's lifetime. Activity 2 - On-the-job trainings for municipal energy managers Implementation of subprojects under Component I will be used to provide on-the-job training for municipal energy managers in order to increase their capacity in preparing, implementing and supervising energy efficiency investments in public buildings. Each municipality where selected subprojects will be implemented is expected to designate a municipal energy manager, who will participate in all supervision activities during implementation, prepare annual reports on the results of the subprojects after completion, and support data collection for the entity databases for public buildings. These provisions will be included in the MoU between the Ministry of Physical Planning, the municipality and project beneficiary, as well as the ToR for the supervision consultant. The on-the-job trainings will be accompanied by complementary capacity building activities for municipal energy managers, which may cover the following key areas: * Sharing of energy audits for subprojects located in the energy manager's municipality of the energy manager and training on the content of energy audits, including for instance: concepts of degree- days, heat losses, energy consumption, characteristics of materials, efficiency of boilers, temperature control, variable flow pumps, balancing of network, thermostatic valves, insulation of walls and roofs, technology of efficient windows, etc. * Presentation of technical specifications and drawings of the project design for energy efficiency retrofits in public buildings; * Methodology for evaluating the compliance of works with technical specifications; * Basic rules for the Operation and Maintenance of the system; * Introduction/ explanations on energy passports for buildings; * Introduction of databases that can be used, at municipal level, for obtaining a permanent feedback about the energy performance of municipal building, and physical warning on uncontrolled energy consumptions; * Introduction of energy management and assessment tools, such as the TRACE (developed by ESMAP and available for free); * Presenting the planned database for buildings at entity level and training related to the role of municipal energy managers to maintain and populate the database. 2 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina 1. Introduction (continued) 1.2. Components and activities of the Project (continued) Accordingly, the training and role of the municipal energy manager will be specifically linked to the issuance of buildings passports and can help to populate the national database. Particularly, the energy manager will: (i) be trained on relevant aspects of data collection for the database (e.g. preliminary energy audits, energy passports, monitoring and evaluation, etc.) through the workshop and on-the-job-training, (ii) after completion of the subprojects, preparation of annual evaluation and reports to the PIU on effects of the EE retrofits in the selected public buildings in the territory of the relevant municipality, including: measurement and evaluation of indoor temperatures, effectiveness of energy savings, behaviour of users, improvement of comfort and working conditions, O&M issues, durability/conditions of equipment and materials; and (iii) supporting data collection for the database for public buildings. These on-the-job trainings will help to build capacity of municipal energy managers with regards to preparation, measurements, implementation and supervision of energy efficiency investments in public buildings. In addition, energy manager may expand acquired skills in other fields in the municipality, such as street lighting, water pumping and consumption, transportation, etc. Activity 3 - On-the-job trainings for issuing energy labels for public buildings Implementation of subprojects under Component 1 will be used to provide on-the-job training to qualified private companies (e.g., energy auditing or engineering companies) for issuance of energy certificates and labelling of buildings in accordance with the provisions of the EU Directive on Energy Performance of Buildings and related entity regulations. Selected subprojects will be used to show-case how these regulations should be implemented on the ground. As a result of this activity, energy passports and energy labels for all subprojects are expected to be issued during implementation. This will not only help to build implementation capacity of private companies and populate the databases for public buildings, but also enhance the visibility of project results. Activity 4 - Communication and Promotion activities Communication and promotion activities will include information, education and promotion activities to increase awareness on the benefits of energy efficiency by disseminating information on project activities, progress, results, lessons learned and impacts. Communication and awareness activities are expected to use different media channels, including print, web, conferences, TV, etc. Target groups will include clients and staff in public facilities, including NGOs, various market actors (e.g., construction companies, ESCOs, financing institutions), local, entity and state governments as well as the broader public. A consultancy company will be hired, as appropriate on a multi-year contract basis, to develop a targeted communication strategy, propose and implement agreed activities, produce information material, etc. Activity 5 - Other technical assistance and trainings During project implementation, additional trainings and technical assistance will be provided on as needed basis. This may include: (i) technical assistance and trainings to various private and public target groups to strengthen their capacity to prepare, appraise, implement, finance and monitor energy efficiency projects; for instance, this could comprise trainings for energy audit companies, design and construction companies, equipment suppliers, commercial banks or other energy service providers. It is also expected that the implementation of new financing and contracting models will require preparatory and complementary trainings for public and private stakeholders as well as involvement and consultations with financial institutions; (ii) technical assistance activities to support the development or implementation of relevant regulations in the buildings and construction sectors, if specific needs arise during implementation; (iii) as necessary, development of terms of reference or design specifications for agreed project activities, and (iv) other relevant support needed for scaling-up energy efficiency in public buildings. 3 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina 1. Introduction (continued) 1.2. Components and activities of the Project (continued) Component 3: Project Management and Operating Cost The component will ensure effective project management by the PlUs through financing additional experts, trainings for PlU staff, and covering incremental operating costs. 1.3 Financing of the Project 1.3.1. IDA LOAN No. 5393 BA and IDA LOAN No. 5538 BA The State of Bosnia and Herzegovina borrows from the International Development Association (IDA) under the Investment Project Financing (IDA blend-term credit) No. 5393- BA (Portion A), and 5538- BA (portion B) funding amounting to XDR 20,800,000. (5393 BA amounts XDR 18,200,000 and 5538- BA amounts XDR 2,600,000). Under terms of Subsidiary Agreement signed between State of Bosnia and Herzegovina and Federation of Bosnia and Herzegovina ("FBiH"), XDR 12.48 million were made available and the following split was encounter: (i) Portion A of the Credit (Credit 5393-BA) XDR 10,920,000 and Portion B of the Credit (Credit 5538-BA) XDR 1,560,000. Under the terms of a subsidiary finance agreement between State of Bosnia and Herzegovina and Republika Srpska ("RS"), funds of the equivalent of 5393 RS amount 7,280,000 XDR and RS 5538/BA amount XDR 1,040,000 have been lent to RS. The Project financing split and participation of the Credit in financing of each of the purpose are summarised as follows: Amount of Amount of the % of Portion A of the Portion B of the ep of Item Credit allocated Credit allocated ture to be (Credit 5393-BA) (Credit 5538-BA) financed (in XDR) (in XDR) (1) Goods, works, non-consulting services, 10,920,000 1,560,000 100% and consultants' services, training and incremental operating costs for the Part A of the Project (2) Goods, works, non-consulting services, 7,280,000 1,040,000 100% and consultants' services, training and incremental operating costs for the Part B of the Project Total 18,200,000 2,600,000 IDA blend-term credit No. 5393 BA and 5538 BA became effective on 27 May 2015. Planned closing date is 30 June 2018. 1.3.2. Retroactive financing Retroactive financing in an aggregate amount of up to XDR 1,950,000 incurred until the project effectiveness date. Advance Contracting and Retroactive Financing shall be carried out in accordance with the Procurement Guidelines or Consultant Guidelines, as the case may be, up to an amount of USD 1,500,000 equivalent for each entity. This provision is useful to meet any immediate financing needs. 4 bakertilly Baker Tilly Re Opinion d.o.o. Grbavi6ka 4 71000 Sarajevo Bosna i Hercegovina 2. Independent Auditor's Report T: +387 (0) 33 552 150 F: +387 (0) 33 552 152 info@bakertilly.ba To the State of Bosnia and Herzegovina, www.bakertilly.ba Ministry of Finance and Treasury Attn. of Minister of Finance and Treasury H.E. Mr. Vjekoslav Bevanda Report on the Consolidated Project Financial Statements Opinion We have audited the accompanying Consolidated Project Financial Statements of the Energy Efficiency Project (the "Project"), which comprise of Summary of sources and uses of funds, Balance sheet, Designated account statements, local bank account statements, Petty cash statement, Statements of Credit withdrawals as of and for the year ended 31 December 2018, and a summary of significant accounting policies and other explanatory notes for the year then ended, financed under IDA Credit No. 5393-BA and IDA Credit No. 5538-BA. In our opinion, the accompanying consolidated project financial statements present fairly, in all material aspects, the financial position of the Project as of 31 December 2018, and of the funds received and disbursed during the year then ended, in accordance with the cash basis of accounting based on International Public Sector Accounting Standard ("IPSAS"), as described in Note 4.1. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and "Guidelines: Annual Financial Reporting and Auditing for World Bank-Financed Activities" issued by FMSB. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Ministry of Finance and Treasury in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Project Financial Statements The management of project implementation unit in FBiH and management of project coordination unit in RS is responsible for the preparation of separate project financial statements in accordance with the cash basis of accounting based on IPSAS, as described in Note 4.1. Guidelines: Annual Financial Reporting and Auditing for World Bank-Financed Actitvities, and for such internal control as management determines is necessary to enable the preparation of separate project financial statements that are free from material misstatement, whether due to fraud or error. In preparing the separate financial statements, management is responsible for assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Project or to cease operations or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the financial reporting process. These consolidated financial statements are sum of separate project financial statements. 5 JIB: 4200960550009 - PDV: 200960550009 - Raiffeisen Bank d.d. BiH: 1610000045270008 Baker Tilly Re Opinion d.o.o. trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Responsibilities for the Audit of Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated project 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 consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the consolidated project 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 Project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Project to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the consolidated project financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We 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. Report on other requirements In addition, with respect to the Statement of Expenditure, adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditure incurred; and all expenditure included in withdrawal applications and reimbursed against are eligible for financing under the project. Signed n hal of Baker Tilly Re Opinion d. . Nihad Fe zic, Dire or and Certified Audito BAKER TILLY Ezita Imamovi6, Certified Auditor . RE OPINION Sarajevo, 6 June 2019 d. o.o.0 R'A J~ 6 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated Project Financial Statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) 3. Consolidated Project Financial Statements for the year 2018 3.1. Summary of sources and uses of funds under the IDA Credit No. 5393 - BA, IDA Credit No. 5538 - BA, Government contribution and Other income Actual Cumulative Cumulative Cumulative Cumulative Ref. 2018 2018 2017 budget variance FINANCING IDA Credit No. 5393 - BA 3.1.1 3,707,940 21,489,880 17,781,940 22,995,182 1,505,302 IDA Credit No. 5538 - BA 3.1.2 920,506 1,313,107 392,601 3,454,838 2,141,731 IDA Co-financing 3.1.3 506,247 1,675,347 1,169,100 - (1,675,347) Government contribution 3.1.4 656,075 1,732,169 1,076,094 - (1,732,169) Other income 3.1.5 29 53 24 - (53) TOTAL FINANCING 3.2 5,790,797 26,210,556 20,419,759 26,450,020 239,464 PROJECT EXPENDITURE By Category Goods, works, consultants' services and operating costs for Part 1 of the Project 4,028,547 12,473,429 8,444,882 15,899,020 3,425,591 Goods, works, consultants' services and operating costs for Part 2.8 of the Project 1,624,884 11,524,120 9,899,236 10,551,000 (973,120) TOTAL EXPENDITURE 3.2 5,653,431 23,997,549 18,344,118 26,450,020 2,452,471 PROJECT EXPENDITURE By Component Energy Efficiency investments 5,025,415 22,047,771 17,022,356 22,564,974 517,203 Support for the development of scalable financing mechanisms and capacity building 310,822 989,403 678,581 2,199,992 1,210,589 Project management and implementation 317,194 960,375 643,181 1,685,054 724,679 TOTAL EXPENDITURE 3.2 5,653,431 23,997,549 18,344,118 26,450,020 2,452,471 7 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated Project Financial Statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) 3. Consolidated Project Financial Statements for the year 2018 (continued) 3.1.1 Summary of sources and uses of funds under the IDA Credit No. 5393 - BA Actual Cumulative Cumulative Cumulative Cumulative Ref. 2018 2018 2017 budget variance FINANCING IDA Credit No. 5393 - BA 22,995,182 Initial deposit - 1,460,000 1,460,000 - Direct payments 2,814,147 8,980,798 6,166,651 SoE replenishments 893,793 11,049,082 10,155,289 - TOTAL FINANCING 3.1. 3,707,940 21,489,880 17,781,940 22,995,182 1,505,302 PROJECT EXPENDITURE By Category Goods, works, consultants' services and operating costs for Part I of the Project 3,478,314 11,771,671 8,293,357 13,911,642 2,139,971 Goods, works, consultants' services and operating costs for Part 2.B of the Project 76,467 9,130,974 9,054,507 9,083,540 (47,434) TOTAL EXPENDITURE 3.2 3,554,781 20,902,645 17,347,864 22,995,182 2,092,537 8 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated Project Financial Statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) 3. Consolidated Project Financial Statements for the year 2018 (continued) 3.1.2 Summary of sources and uses of funds under the IDA Credit No. 5538 - BA Actual Cumulative Cumulative Cumulative Cumulative Ref. 2018 2018 2017 budget variance FINANCING IDA Credit No.5538 - BA 3,454,838 Initial deposit 150,000 150,000 - Direct payments - - - - SoE replenishments 770,506 1,163,107 392,601 - TOTAL FINANCING 3.1. 920,506 1,313,107 392,601 3,454,838 2,141,731 PROJECT EXPENDITURE By Category Goods, works, consultants' services and operating costs for Part 1 of the Project 206,748 206,748 - 1,987,378 1,780,630 Goods, works, consultants' services and operating costs for Part 2.B of the Project 945,855 1,176,659 230,804 1,467,460 290,801 TOTAL EXPENDITURE 3.2 1,152,603 1,383,407 230,804 3,454,838 2,071,431 9 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated Project Financial Statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) 3. Consolidated Project Financial Statements for the year 2018 (continued) 3.1.3 Summary of sources and uses of funds under the IDA Co-financing (RS only) Actual Cumulative Cumulative Cumulative Cumulative Ref. 2018 2018 2017 budget variance FINANCING IDA Co-financing A.3 506,247 1,675,347 1,169,100- (1,675,347) TOTAL FINANCING 506,247 1,675,347 1,169,100 (1,675,347) PROJECT EXPENDITURE By Category (2) Goods, works, consultants' services and operating costs for Part 2.B of the Project A.3 602,562 1,216,487 613,925- (1,216,487) TOTAL EXPENDITURE 602,562 1,216,487 613,925 - (1,216,487) 10 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) 3. Consolidated Project Financial Statements for the year 2018 (continued) 3.1.4 Summary of sources and uses of funds under Government contribution (FB&H only) Actual Cumulative Cumulative Cumulative Cumulative Ref. 2018 2018 2017 budget variance FINANCING VAT Reimbursement 408,079 1,385,724 977,645 - (1,385,724) Other income (Canton Sarajevo contribution) 66,468 82,308 15,840 - (82,308) Other income (Canton Hercegova6ko-neretvanjski contribution) 181,528 264,137 82,609 - (264,137) TOTAL EXPENDITURE 3.1. 656,075 1,732,169 1,076,094- (1,732,169) PROJECT EXPENDITURE By Category Goods, works, consultants' services, training and operating costs for Part 1 of the Project 343,485 495,010 151,52512 (495,010) TOTAL EXPENDITURE 3.2 343,485 495,010 151,525 - (495,010) 11 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) 3. Consolidated Project Financial Statements for the year 2018 (continued) 3.1.5 Summary of sources and uses of funds under Other income (FB&H only) Actual Cumulative Cumulative Cumulative Cumulative Ref. 2018 2018 2017 budget variance FINANCING Other income 29 53 24 (53) TOTAL FINANCING 3.1.1. 29 53 24 -(53) PROJECT EXPENDITURE By Category Goods, works, consultants' - - - services and operating costs for Part 1 of the Project TOTAL EXPENDITURE 3.2 - 12 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) 3. Consolidated Project Financial Statements for the year 2018 (continued) 3.2. Balance sheet as of 31 December 2018 showing accumulated funds of the Project and bank balances concerning World Bank Funding 31 December 31 December Ref. 2018 2017 ASSETS Project expenditure under IDA Credit No. 5393 BA 3.1.1 20,902,645 17,347,864 Project expenditure under IDA Credit No. 5538 BA 3.1.2 1,383,407 230,804 IDA Co-financing 3.1.3 1,216,487 613,925 Project expenditure under Government contribution 3.1.4 495,010 151,525 23,997,549 18,344,118 Designated account - IDA Credit No. 5393 BA A.1, A.2 462,162 155,457 (FB&H) Designated account - IDA Credit No. 5393 BA, A.3 54,394 439,506 5538 BA (RS) Designated sub-account - IDA Credit No. 5393 BA A.4 - - (RS) Local bank account- Government (FB&H) A.5 1,237,159 924,569 Local bank account - co-financing (RS) A.6 336,149 555,175 Petty cash-IDA (FB&H) A.7 433 934 Receivables for paid VAT - under IDA Credit No. A.8 122,710 - 5393 BA 2,213,007 2,075,641 Total assets 26,210,556 20,419,759 LIABILITIES IDA Credit No. 5393 BA C.1 21,489,880 17,781,940 IDA Credit No. 5538 BA C.2 1,313,107 392,601 IDA Co-financing 3.1.3 1,675,347 1,169,100 Government contribution 3.1.4 1,732,169 1,076,094 Other income 3.1.5 53 24 Total liabilities 26,210,556 20,419,759 13 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) 4. Notes to the consolidated project financial statements 4.1 Basis of preparation and accounting records These consolidated project financial statements have been prepared on the cash basis of accounting based on International Public Sector Accounting Standards issued by the Public Sector Committee of the International Federation of Accountants, and incorporate the accounting policies below, which have been consistently followed in all material respects and comply with the "Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities", issued by the Financial Management Sector Board. 4.2 Accounting policies The Project's fiscal year is 1 January to 31 December for the recording of all transactions. Cash basis of accounting All receipts and expenses under IDA Credit is recorded on actual receipt and payment basis of accounting as per approved categories. Project expenditure is stated at original cost on the balance sheet. Direct payments Direct payments concern the amounts paid directly from the IDA Credit accounts of the World Bank. Statement of Expenditure (SoE) Statements of Expenditure are used to state the expenditure under IDA Credit during a certain period. These statements are sent to the World Bank's disbursement department who authorises the payment of the expenditure through the Designated accounts. Currency conversions The reporting currency is Euro (EUR). Sources and use of funds (payments to suppliers and contractors) in currencies other than EUR have been converted to EUR using the currency rate at the moment of the transaction. Bank balances, recorded on the balance sheet at year-end, have been converted at year-end rate that due to the Currency Board arrangement has not been changed throughout the year. Designated accounts This is the total amount of cash withdrawals from the IDA Credit accounts for the Project. IDA Credit account is in XDR. 14 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) 4. Notes to the Consolidated Project Financial Statements (continued) 4.2 Accounting policies (continued) Local bank accounts This concerns bank accounts at local banks (other than Designated accounts) in local currency translated at the exchange rate at the date of the balance sheet. Other income Other income includes interest earned on cash funds at the bank accounts. Interest on Designated accounts Interest earned on the Designated accounts belongs to the Borrower. Interest on local bank accounts Interest earned on the local bank accounts used for the payments from IDA Credit funds belongs to the Borrower. 15 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX A.1 DESIGNATED ACCOUNT STATEMENT - FB&H Account owned by: Ministry of Finance and Treasury of Bosnia and Herzegovina Account No.: BA391994990031508235 Depository Bank: Sparkasse bank dd BiH Address: Zmaja od Bosne 7, 71000 Sarajevo Related Credit: IDA Credit No. 5393 BA & IDA Credit No. 5538 BA Currency: EUR Ref. EUR Opening balance 1 January 2018 3.2 155,444 Add: World Bank replenishments B 1,177,090 Interest 27 1,177,117 Deduct: Transfer to designated sub-account A.2 863,153 Payments to suppliers - Expenditure under IDA Credit 7,295 870,448 Ending balance 31 December 2018 3.2 462,113 16 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX A.2 DESIGNATED SUB-ACCOUNT STATEMENT - FB&H Account owned by: Ministry of Finance and Treasury of Bosnia and Herzegovina Account No.: 1994990031508235 Depository Bank: Sparkasse bank dd BiH Address: Zmaja od Bosne 7, 71000 Sarajevo Related Credit: IDA Credit No. 5393 BA & IDA Credit No. 5538 BA Currency: BAM Ref. BAM EUR Opening balance 1 January 2018 3.2 26 13 Add: Transfers from DA - IDA Credit 5393 - BA A.1. 1,688,181 863,153 Interest 3 2 1,688,184 863,155 Deduct: Payments to suppliers - Expenditure under IDA Credit 1,687,314 862,710 Transfer to petty cash 800 409 1,688,114 863,119 Ending balance 31 December 2018 3.2 96 49 17 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX A.3 DESIGNATED ACCOUNT STATEMENT - RS Account owned by: Ministry of Finance and Treasury of Bosnia and Herzegovina Account No.: 5672410000606210 Depository Bank: SberBank a.d. Banja Luka Address: Jevrejska 71, Banja Luka Related Credit: IDA Credit No. 5393 BA Currency: EUR Ref. EUR Opening balance 1 January 2018 439,506 Add: World Bank replenishments B.1 637,209 Transfers from Designated sub-account - IDA Credit A.2 - 637,209 Deduct: Payments to suppliers - Expenditure under IDA Credit 8,361 Transfers to Designated sub-account - IDA Credit A.2 1,013,960 1,022,321 Ending balance 31 December 2018 3.2 54,394 18 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX A.4 DESIGNATED SUB - ACCOUNT STATEMENT - RS Account owned by: Ministry of Finance and Treasury of Bosnia and Herzegovina Account No.: 5672410000606210 Depository Bank: SberBank a.d. Banja Luka Address: Jevrejska 71, Banja Luka Related Credit: IDA Credit No. 5393 BA Currency: BAM Ref. BAM EUR Opening balance 1 January 2018 - - Add: Transfer from Designated account - IDA Credit A. 1 1,983,133 1,013,960 1,983,133 1,013,960 Payments to suppliers - Expenditure under IDA Credit A.1 1,983,133 1,013,960 1,983,133 1,013,960 Ending balance 31 December 2018 3.2 - 19 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX A.5 LOCAL BANK ACCOUNT STATEMENT - FB&H Account owned by: Ministry of Physical Planning Account No.: 1027080000010242 Depository Bank: Union banka dd Sarajevo Address: Dubrova6ka br.6, Sarajevo Related Credit: Other sources of financing (income) Currency: BAM Ref. BAM EUR Opening balance 1 January 2018 3.2 1,808,300 924,569 Add: Reimbursement of VAT 798,133 408,079 Canton Hercegova6ko-neretvanjski contribution 355,038 181,528 Canton Sarajevo contribution 130,000 66,468 A.1 1,283,171 656,075 Deduct: Payments - expenditure under the Government contribution 671,799 343,485 671,799 343,485 Ending balance 31 December 2018 3.2 2,419,672 1,237,159 20 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX A.6 LOCAL ACCOUNT STATEMENT - RS Account owned by: Ministry of Finance and Treasury of Bosnia and Herzegovina Account No.: 562 099 81350309-15 Depository Bank: NLB Bank a.d. Banja Luka Address: Milana Tepi6 br 2, Banja Luka Related Credit: Co-financing IDA Credit No. 5393 BA Currency: BAM Ref. BAM EUR Opening balance 1 January 2018 3,2 1,085,830 555,175 Add: VAT return A,1 670,132 342,633 670,132 342,633 Deduct: VAT payments A,1 1,098,510 561,659 1,098,510 561,659 Ending balance 31 December 2018 3,2 657,452 336,149 21 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX A.7 PETTY CASH STATEMENT - FB&H Address: PIU, Sarajevo Related Credit: Credit No. 5393 BA Currency: BAM Ref. BAM EUR Opening balance 1 January 2018 3.2 1,826 934 Add: Transfers from Designated sub-account - IDA 5393 - BA A.2 800 409 800 409 Deduct: Payments - Expenditure under IDA 5393 - BA 1,780 910 A.1 1,780 910 Ending balance 31 December 2018 3.2 846 433 22 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX A.8 ACCOUNT STATEMENT - RS Account owned by: Ministry of Finance Republika Srpska Account No.: 555-09000114230-81 Depository Bank: Nova banka Banja Luka Address: Marije Bursa6 7 Banja Luka Related Credit: Co-financing Currency: BAM Ref. BAM EUR Opening balance 1 January 2018 0 Add: Fond za za§titu 2ivotne sredine and Municipality Modri6a replenishment 320,000 163,613 320,000 163,613 Deduct: Payments to suppliers - Expenditure 80,000 40,903 Transfers to Designated sub-account - A.2 - 80,000 40,903 Ending balance 31 December 2018 3.2 240,000 122,710 23 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX B.1 SoE Withdrawal Schedule of IDA Credit No. 5393 BA for the year ended 31 December 2018 Goods, works, Goods, works, consultants' consultants' services, and services, and operating operating costs costs for Part for Part 2.B of Initial 1 of the the Project Total Total deposit Project application replenished Previous period 536,467 8,293,357 9,054,507 17,347,864 17,781,940 Application 54* (FB&H) - 157,304 - 157,304 157,304 Application 55* (FB&H) - 29,506 - 29,506 29,506 Application 56* (FB&H) - 124,831 - 124,831 124,831 Application 57* (FB&H) - 166,348 - 166,348 166,348 Application 59 (FB&H) - 114,439 - 114,439 114,439 Application 60 (FB&H) - 142,814 - 142,814 142,814 Application 61 (FB&H) - 121,944 - 121,944 121,944 Application 62 (FB&H) - 41,682 - 41,682 41,682 Application 63 (FB&H) - 171,466 - 171,466 171,466 Application 65 (FB&H) - 29,930 - 29,930 29,930 Application 66 (FB&H) - 58,018 - 58,018 58,018 Application 68 (FB&H) - 89,638 - 89,638 89,638 Application 69 (FB&H) - 70,933 - 70,933 70,933 Application 70 (FB&H) - 92,202 - 92,202 92,202 Application 71 (FB&H) - 24,108 - 24,108 24,108 Application 72 (FB&H) - 19,874 - 19,874 19,874 Application 73 (FB&H) - 53,893 - 53,893 53,893 Application 74A (FB&H) - 31,446 - 31,446 31,446 Application 75A (FB&H) - 29,105 - 29,105 29,105 Application 76 (FB&H) - 194,346 - 194,346 194,346 Application 77 (FB&H) - 36,196 - 36,196 36,196 Application 78 (FB&H) - 119,751 - 119,751 119,751 Application 80 (FB&H) - 194,045 - 194,045 194,045 Application 81 (FB&H) - 35,466 - 35,466 35,466 Application 82 (FB&H) - 65,097 - 65,097 65,097 Application 83 (FB&H) - 93,502 - 93,502 93,502 Application 84 (FB&H) - 295,312 - 295,312 295,312 Application 87 (FB&H) - 83,598 - 83,598 83,598 Application 88 (FB&H) - 21,828 - 21,828 21,828 Application 89 (FB&H) - 29,732 - 29,732 29,732 Application 90 (FB&H) - 75,793 - 75,793 75,793 Application 91**** (FB&H) - 64,388 - 64,388 - Total direct payments in 2018 -2,878 ,5355 2,878,535 2,814 ,147 24 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX B.1 SoE Withdrawal Schedule of IDA Credit No. 5393 BA for the year ended 31 December 2018 (continued) Goods, Goods, works, works, consultants' consultants' services, and services, and operating costs operating for Part 2.B of costs for Part the Project Initial I of the Total Total deposit Project application replenished Application 57 (RS) (10,987) - 10,987 10,987 - Application 58 (RS) (4,746) - 4,746 4,746 - Application 59 (RS) (617) - 617 617 - Application 60 (RS) (49,771) - 49,771 49,771 - Application 61 (RS) (10,346) - 10,346 10,346 - Application 58** - - - 258,348 (FB&H) - Application 64** - - - 85,283 (FB&H) - Application 67 (FB&H) - 135,493 - 135,493 135,493 Application 79 (FB&H) - 155,654 - 155,654 155,654 Application 85 (FB&H) - 152,574 - 152,574 152,574 Application 86 (FB&H) - 106,441 - 106,441 106,441 Application 92*** (FB&H) - 57,981 - 57,981 - Application 97*** (FB&H) - 56,024 - 56,024 - Total SoE applications in 2018 (76,467) 664,167 76,467 740,634 893,793 Total 2018 (76,467) 3,542,702 76,467 4,512,962 3,707,940 Cumulative as of 31 December 2018 460,000 11,836,059 9,130,974 20,967,033 21,489,880 * Application No.54-57 were sent to the CC in 2017 but were processed in 2018. ** Application No.58 and 64 were replenished in 2018, but expenses were made in 2017. Application No.92 and 97 were replenished in 2019, but expenses were made in 2018 **** Application 91 was sent to the CC in 2018 but was processed in 2019. Applications No. 54-57 (direct payments in FB&H) were sent to the CC in total amount of EUR 477,989 but were processed in 2018. 25 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX B.2 SoE Withdrawal Schedule of IDA Credit No. 5538 BA for the year ended 31 December 2018 Goods, Goods, works, works, consultants' consultants' services, and services, and operating costs operating for Part 2.B of costs for Part the Project Initial 1 of the Total Total deposit Project application replenished Previous period 593,844 230,804 230,804 392,601 Application 01 (FB&H) 150,000 - - - 150,000 Total initial deposit 150,000 - - - 150,000 Application 03** (RS) 128,778 - - - 128,778 Application 04** (RS) -- - - 145,268 Application 05** (RS) - - - 85,536 Application 06 (RS) - 180,984 180,984 180,984 Application 07 (RS) (167,613) - 167,613 167,613 - Application 08 (RS) 92,000 - - - 92,000 Application 09 (RS) (46,813) - 46,813 46,813 - Application 10 (RS) - 3,785 3,785 3,785 Application 11 (RS) (17,246) - 17,246 17,246 - Application 12 (RS) (36,755) - 36,755 36,755 Application 13 (RS) (36,708) - 36,708 36,708 - Application 14 (RS) - 858 858 858 Application 15 (RS) (94,189) - 94,189 94,189 - Application 16 (RS) (89,592) - 89,592 89,592 - Application 17 (RS) (35,333) - 35,333 35,333 - Application 18 (RS) (235,979) - 235,979 235,979 - Application 02 (FB&H) - 133,297 - 133,297 133,297 A p p lica tio n 0 3 (F B & H ) -7 3 ,4 5 1 - 7 3 ,4 5 1 - Total SoE applications in 2018 (539,450) 206,748 945,855 1,152,603 770,506 Total 2018 (389,450) 206,748 945,855 1,152,603 920,506 Cumulative as of 31 December 2018 204,394 206,748 1,176,659 1,383,407 1,313,107 26 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX C.1 Reconciliation between World Bank's Disbursement Statements in XDR and IDA Credit account in EUR according to the balance sheet as of 31 December 2018; SoE Withdrawal Schedule of IDA Credit No. 5393 BA Changes in Changes in IDA Credit Exchange IDA Credit (in XDR) rate used (in EUR) Original amount 18,200,000 22,995,182 Disbursed in previous years 14,030,026 17,781,940 Application 54 (FB&H) 133,098 1.181863 157,304 Application 55 (FB&H) 24,966 1.181863 29,506 Application 56 (FB&H) 105,622 1.181863 124,831 Application 57 (FB&H) 140,750 1.181863 166,348 Application 58 (FB&H) 219,162 1.178797 258,348 Application 59 (FB&H) 97,081 1.178797 114,439 Application 60 (FB&H) 121,153 1.178797 142,814 Application 61 (FB&H) 103,732 1.175563 121,944 Application 62 (FB&H) 35,457 1.175563 41,682 Application 63 (FB&H) 145,858 1.175563 171,466 Application 64 (FB&H) 72,560 1.175337 85,283 Application 65 (FB&H) 25,465 1.175337 29,930 Application 66 (FB&H) 49,363 1.175337 58,018 Application 67 (FB&H) 115,280 1.175337 135,493 Application 68 (FB&H) 74,035 1.210751 89,638 Application 69 (FB&H) 58,327 1.216132 70,933 Application 70 (FB&H) 76,153 1.210751 92,202 Application 71 (FB&H) 19,941 1.208980 24,108 Application 72 (FB&H) 16,438 1.208980 19,874 Application 73 (FB&H) 44,577 1.208980 53,893 Application 74 A (FB&H) 26,122 1.203819 31,446 Application 75 A (FB&H) 24,177 1.203838 29,105 Application 76 (FB&H) 162,291 1.197519 194,346 Application 77 (FB&H) 30,226 1.197519 36,196 Application 78 (FB&H) 98,204 1.219421 119,751 Application 79 (FB&H) 127,646 1.219421 155,654 Application 80 (FB&H) 161,778 1.199452 194,045 Application 81 (FB&H) 29,391 1.206722 35,466 Application 82 (FB&H) 53,879 1.208204 65,097 Application 83 (FB&H) 77,389 1.208204 93,502 Application 84 (FB&H) 244,422 1.208208 295,312 Application 85 (FB&H) 125,786 1.212964 152,574 Application 86 (FB&H) 87,753 1.212964 106,441 Application 87 (FB&H) 68,348 1.223111 83,598 Application 88 (FB&H) 17,976 1.214303 21,828 Application 89 (FB&H) 24,474 1,214841 29,732 Application 90 (FB&H) 62,251 1.217534 75,793 Total disbursed in 2018 3,101,131 3,707,940 Cumulative disbursements 17,131,157 21,489,880 27 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX C.1 Reconciliation between World Bank's Disbursement Statements in XDR and IDA Credit account in EUR according to the balance sheet as of 31 December 2018; SoE Withdrawal Schedule of IDA Credit No. 5393 BA (continued) Changes in Changes in IDA Credit Exchange IDA Credit (in XDR) rate used (in EUR) Cumulative undisbursed balance as of 31 December 2018 1,068,843 1,753,978 Undisbursed balance as per World Bank Summary for December 2018 1,068,843 1.214452 1,298,058 Potential exchange rate loss (455,920) 28 ENERGY EFFICIENCY PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Consolidated project financial statements for the year ended 31 December 2018 (all amounts in EUR, unless otherwise stated) APPENDIX C.2 Reconciliation between World Bank's Disbursement Statements in XDR and IDA Credit account in EUR according to the balance sheet as of 31 December 2018; SoE Withdrawal Schedule of IDA Credit No. 5538 BA Changes in Exchange Changes in IDA Credit rate used IDA Credit (in XDR) (in EUR) Original amount 2,600,000 3,454,838 Withdrawal 01 (FB&H) 124,361 1.206163883 150,000 Withdrawal 02 (FB&H) 109,831 1.213654673 133,297 Withdrawal 03 (RS) 108,961 1.181872 128,778 Withdrawal 04 (RS) 122,915 1.181857 145,268 Withdrawal 05 (RS) 72,592 1.178311 85,536 Withdrawal 06 (RS) 153,532 1.178803 180,984 Withdrawal 08 (RS) 78,260 1.175568 92,000 Withdrawal 10 (RS) 3,125 1.211200 3,785 Withdrawal 14 (RS) 716 1.198324 858 Cumulative disbursements 1,263,552 1,313,107 Calculated undisbursed balance as of 31 December 2018 1,325,925 2,141,731 Undisbursed balance as per World Bank Summary for December 2018 1,325,925 1,610,270 Potential exchange rate loss (531,461) 29