SECOND COMMUNITY AGRICULTURAL RESOURCE MANAGEMENT AND COMPETITIVENESS PROJECT IRRD Loan No. 8374-AM IDA Credit No. 5504-AM IDA Credit No. 5505-AM IMPLEMENTED BY MINISTRY OF ECONOMY OF THE REPUBLIC OF ARMENIA SPECIAL PURPOSE FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT For the year ended 31 December 2019 YEREVAN June 2020 --- CONTENT Page INDEPENDENT AUDITOR'S REPORT ....... . .................. . ........................................... 3 STATEMENT OF CASH RECE IPTS AND PAYMENTS ...................................................... 5 STATEMENT OF USES OF FUNDS BY PROJECT ACTIVITY .............................................. 6 NOTES TO THE PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS ................. .. ........... ? ANNEX 1. RECONCILIATION BETWEEN THE AMOUNTS SUBMITIED BY THE PROJECT AND DISBURSED BY THE WORLD BANK..... .. .. .... . ..... . .................................................. 18 MANAGEMENT REPRESENTATION LETIER .. . ........ . .. . .. . .. . .. . .. . .................. ....... . .. ... . . 19 :: 19 - 5288~9 IBDO Tel • 4 liO 23 6 Davit Arh;,gnt E rra• , 'Jdc; rm • .a 'it ~t'l Fioor Ott ce 7 www .bdoarmen1a.am .:i INDEPENDENT AUDITOR'S REPORT To the Ministry of Economy of the Republic of Armenia Opinion We have audited the accompanying special purpose financial statements of the "Second Community Agricultural Resource Management and Competitiveness Project" ("Project"} financed by the IBRD Loan No. 8374-AM, IDA Credit No. 5504-AM and IDA Credit No. 5505-AM, which comprise the statement of cash receipts and payments, the statement of uses of funds by Project activity for the year ended 31 December 2019, and a summary of significant accounting policies and other explanatory notes. In our opinion, the special purpose financial statements present fairly in all material respects the cash receipts and payments of the Project for the year ended 31 December 2019 in accordance with International Public Sector Accounting Standard: Financial Reporting Under the Cash Basis of Accounting, (I PSAS-Cash Basis). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) as issued by International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC}. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Project and The Ministry of Economy of RA in accordance with the International Eth ics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled out other ethical requirements in accordance with IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter - Change of the Implementing Organization Without modifying our opinion, we draw your attention to Note 1.4 of the financial statements, describing the change of the implementing organization of the Project. Emphasis of Matter- Cash Basis of Accounting Without modifying our opinion, we draw attention t o Note 2 to the financial statements, which describes that financial statements are prepared in accordance with cash basis framework, as a result, they may not be suitable for another purposes. Emphasis of Matter -Subsequent events Without modifying our opinion, we draw attention to Note 9 to the financial statements, which describes possible effect of the impact of COVID-19 epidemic after the reporting date. Management's Responsibility for the Special Purpose Financial Statements The Project Management is responsible for the preparation and fair presentation of these special purpose financial statements in accordance with IPSAS·Cash Basis issued by the International Public Sector Accounting Standards Board (IPSASB} within the International Federation of Accountants (IFAC}, and Financial Management Manual for World Bank Financed Investment Operations (WB Guidelines}, and for such internal control as management determines is necessary to enable the preparation of special purpose financial statements that are free from material misstatements, whether due to fraud or error. 0 Auditor's Responsibility for the Audit of the Special Purpose Financial Statements Our objectives are to obtain reasonable assurance about whether the special purpose 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 high level of assurance, but is not a guaranty that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements arise from fraud and 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 special purpose financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout t he audit. We also: • Identify and assess the risks of material misstatement of the special purpose 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 internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. We communicate with management 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 Legal Requirements To comply with the terms of the Loan/Financing Agreements, the Project management shall insure that: 1. Funds have been used in accordance with the conditions of the Loan Agreement No. 8374-AM concluded between the International Bank for Reconstruction and Development (IBRD) and the Republic of Armenia, Financing Agreement No. 5504-AM and 5505-AM between the International Development Association (IDA) and the Republic of Armenia both dated 6 August 2014 ("Financing Agreements"), and World Bank related guidelines, with due attention to economy and efficiency, and only for the purposes for which the financing was provided; 2. Supporting documents, records and accounts have been maintained to support claims for reimbursement of expenditures incurred. Expenditures included in the withdrawal applications and reimbursed against are eligible for financing under the Financing Agreements; 3. The Designated accounts used have been maintained in accordance with the provision of the Financing Agreements, and World Bank related guidelines; 4. Works, Goods and Services financed have been procured in accordance with the Financing Agreements and World Bank related guidelines. 5. Sub-Projects grants complied with eligibility criteria, procedures and requirements set forth in the Project Operational Manual and Sub-Project grants agreements. In our opinion, the Project management has complied wit the above requirements during the year ended 31 December 2019. 24 June 2020 " BDO Armenia" cjsc BOO s ·1 \I L \(~_\( OF( \'ill RECEIPTS \\l> P \ ,\ I E :\r ~ ,\'< 1 • l_~nc11 /111r11/ '<·11u,1 ( r1111111 111111_ Resource \/,11111g,·111e111 am/ ( 1111111e11111·e11e11 l'rryecl 18/?/J '""'' \11Sr-l-.l.\ I, llJ I Cre c/11 \ o 550-1 . I I/. 11>.I Crec/11 \11 5505- I \ I Fur 1'1, n '• Jr e11dl!d 3 1 l>ecemher ] 0/9 In l \!> Actual Planned Variance Items Cumulative as Cumulative as at Cumulative as PAD Reporting year Reporting yea r Reporting year at 31.12.2019 31.12.2019 at 31. 12.2019 Opening Cash Balance 652,896.93 Sources of Funds IBRD Loan No. 8374-AM 1,521,435.92 10, 906,697. 54 IDA Credit No. 5504-AM 4,316,022.44 IDA Credit No. 5505-AM 2,400,582.15 GoA fund 104,301.98 1,097,881.86 Community fund 66,391.22 1,787,762.25 Other beneficiary 588,218. 36 2,466,238. 71 Bidding - (2 655.22) 604.13 Total 2,277 692.26 22, 975,789.08 _ _3,7~60 E~~nge gain/(loss) --- ------ -- - - (556.84L - - - Uses of Funds 1.Goods, works, non- consulting services, consultant's services, training and incremental operating costs under the Project (except for activities under Part I (b) and Part II (a) of the Proiect). 424,325.57 4, 307,608. 54 1,061,745.44 5,302,788.63 (637,419.87) (995,180.09) 9,150,000.00 2.Commurnty fund financing and targeted sub- project grants under Part I (b) and Part II (a) of the Project 2,000,518 .43 18, 100,616. 91 3,471,485.1 5 20,321 ,924.47 (1,470 , 966. 72) (2,221 , 307. 56) 30,850,000. 00 3.Front- end fee 57,500.00 - 57,500.00 57, 500.00 Unallocated 2 612 500.00 Total 2 424 844.00 22,465 725.45 4 533,230.60 25,682,213.11 (2 108 386.60) (3 216 487.66) 42 670 000.00 --- Closing cash and cash equivalents Balanc~note 6) 509,506. 79 509,506. 79 The accompanying notes form~~ these project special purpose financial statements. 24 June 2020 "-' ~ ~f7 Davit Mejlumyan Hrant Tev\fiirdanfcin Project Manager Financial manager ~ fATE~IENT CH l SES OF Fl '\DS BY PRO.Jl'. CT ACTIVIT\ \econd ( i1111111111i11 . lgric11/111ral RL sourct! \la1111gl!111e111 1111d I Olll/ll!lillre11e1.1 l'rojecl II/RI> /, 11,11 \'o Sr./- I I/ II>. I Crec/11 \o 551i./- I I/. //J. I Credit \ o. 551J5- .. r I/ / 11r 1he n·<1r 1!11clecl 31 l>l'ce111ha :!IJ /') /11 l SD Actual Planned Variance Parts Reporting Cumulative as Reporting Cumulative as Cumulative as PAD Reporting year year at 31.12.2019 year at 31.12.2019 at 31.12.2019 A. Community Pasture/livestock Management System 1, 102,915.14 14,462,823. 34 2 741,567.82 16,904, 103.62 (1,638,652.68) (2,441 280.28) 27,870,000.00 A.1 Pasture/ Livestock Management Planning ft Support System 3,870,000.00 58,332. 15 940,263.81 174,409.05 1,066,449.64 (116,076. 90) (126,185.83) A. 2 Community Grants 1 044,582.99 13,522,559.53 2,567, 158. 77 15,837,653. 98 (1,522,575.781 12, 315,094.45) 24,000,000.00 B. Value chain development 971,408. 14 4,705,373.70 956, 779.37 4,674, 124.60 14,628.77 31 249.10 7,440,000.00 B. 1 Sub-pro1ect investments 955, 935.44 4,578,057.38 904,326.38 4,484,270.49 51,609.06 93,786.89 6,850,000.00 B.2 Support Services 15,472. 70 127,316.32 52,452. 99 189 854.11 _[36,980.2'!.) (61_537. 79) 590,000.00 C. Strengthening Public Sector Institution 74,535.46 1,995,854.22 353,820.92 2,542,822.14 1279,285.461 (546, 96 7. 92) 2,450,000.00 C.1 Public Animal Health Services 30,745.66 655,554.36 292, 162. 30 1,218201.85 1261,416.64) (562,647.49) 1,940,000.00 C.2 Institutional development 43 789.80 1 340 299.86 61,658.62 1,324,620.29 I 17 ,868.82) 15,679.57 510,000.00 D. Project Coordination and Management 275,985.26 1,244, 174.19 481 062.49 1,503,662.75 1205,077. 23) 1259 488.561 2,240,000.00 0.1 Project Management 257,425.49 1,164 ,885.99 469,062.49 1,425,601.95 (211,637.00) (260,715.96) 1, 740,000.00 D.2 Monitoring and Evaluation 18 559.77 79,288.20 12 000.00 78 060.80 6 559.77 1 227.40 500,000.00 Front end fee 57,500.00 57,500.00 - 57,500.00 Unallocated - 2,612,500.00 Total Expenditure 2,424,844.00 22,465 , 725.45 4,533,230.60 25,682,213.11 12, 108,386.60) 13,216,487.661 42 670,000.00 ti 15 NOTES TO THE PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS Seco11d ( '01111111111i1y .·lgric11/111ra/ Resource .\ fa11age111e111 and Co111pe1 ii il'e11e.u Projecl IN/Wf.11011 \118r.J-l\l. llJ ICredi1 \'o j50./-.l.\f. tn.ICredi1 \o. jjOj-.1.\/ /·or !he l'ear ended 31 !Jecemher 2019 1. General Information 1. 1. The Project On 6 August 2014 the Loan agreement was signed between the Republic of Armenia and International Bank for Reconstruction and Development (IBRD), according to which IBRD provided to the Republic of Armenia Loan No. 8374-AM at the amount of 23 ,000,000 United States dollars (USD). On 6 August 2014 the Financing agreement was signed between the Republic of Armenia and International Development Association (IDA), according to which IDA provided to the Republic of Armenia credit No. 5504-AM at the amount of 3,800,000 Special Drawing Rights (SOR) and credit No. 5505-AM at the amount of 2 ,460,000 Special Drawing Rights (SOR). Loan and Credits were provided for implementation of Second Community Agricultural Resource Management and Competitiveness Project (the Project). Both Loan Agreement and Financing agreement became effective on 23 January 2015. The closing date of the Project was initially presented to be 31 May 2020. On the 26lh of March 2020 some changes in the Loan / Financing Agreements were made, by which the closing date of the Project was set 30 April 2022. The Grace Period for submitting withdrawal applications for the expenditures incurred before the Closing date is four months following the Closing date. 1.2. The Project's objectives The objectives of the Project are to: (i) improve productivity and sustainability of pasture and livestock systems in targeted communities; and (ii) increase the marketed production from selected livestock and high value agri-food value chains. The Project consists of the following components. Community pasture/livestock management system, • Value chain development, • Strengthening public sector institutions, • Project coordination and management. 1.3 . Project Budget The Projec t is financed from the following sources: International Bank for Reconstruction and Development (IBRO), International Development Association (IOA), The Government of the Republic of Armenia (GoA), Beneficiaries. t - - ---r --- \_ --c:.:o~ . IBRO Loan IOA Credit IOA Credit Government Beneficiari 8374-AM 5504-AM 5505-AM 1 of the RA es Total - -- ~--- ---+------~ SOR USO SOR USO I USO SOR ori~in updated* updated** SOR ori~in updated* updated** USO USO USO 1.Goods, works, non · consulting services, 1 consultant's services, training and inc remental operating costs under the Project (except for activities under Part I (b) and Part II (a) of the Projec t) . 4,800,000 0-+-___. 930 ,00_ 1_ 24 3_ ...L.-'- 00 o --' 1,__ -+-_ ,8_26 8_ ___,,' -+--- --71 '""' 4 o'-" 5-"--,o--'-- oo _ _ _ 99 0~ ·, 0 _0_0__ ,3 1~_ _ 7 4~ ,9 _ 8.....__2 3_ ~ 46 _ o~ 78 ,__ · +-- 5-+----- _ 0~4 1_ _ 6 2~59 _4__, ITTommunity fund financing and targeted 1 sub-project grants under Part I (b) and Part II (a) of the Project 18, 142 500 2, 170,000 2,476,000 3,460, 103 1 050,000 1,470 ,000 2 039,933 1 806 752 5, 728,000 31, 177,288 3.Front· end fee 57,500 57,500 Unallocated 700,000 960,000 +------1-----+---~-1------+------1-------+------+-----~ _o ._T a1_ _ _ _ _ _ _.._12 _t_ _3-"- ,_ _o oo ,_ _,_ o_ oo 3 ,'- ___.___, 8_ o, ooo 0_,_ 3, 800, ooo 5, 28 6, 9 7 4 2,460,000 _ _b_460,000 3,414,871 4,267 537 5,728,000 41,697,382 *Amendment Credit Agreements dated 26 March, 2020, reallocation of the expenditures category. • Budget USO equivalent of SDR underlined loan is calculated based on cumulative funds received in USD plus USD equivalent of undisbursed funds (if any) in SDR as at reporti ng date. SDR/ USD rate at 31. 12. 2019 is set 1 SDR=1.3828 USD (31. 12. 2018 is 1. 3941 ). 1.4. Project implementation Till 13 October 2017, the Project was implement ed by "Agricultural Projects Implementation Unit" State Institution (the AP IU) under the Ministry of Agriculture of the Republic of Armenia (RoA) that was established in accordance with the Republic of Armenia Government decree #765 dated 22 December 1999. In accordance with the Government of the RoA Decree N 243-A dated 9 Mar 2017, the Minister of Finance of the RoA and Minister of Agriculture of the RoA get order to make changes in the Project Loan/ Financing agreements in order to pass the implementation of the Project to Agriculture Development Fund, while to pass fiduciary responsibility of the Project to the "Foreign Financing Projects Management Center" of the Ministry of Finance of the RoA (FFPMC). The related changes in the Loan/Financing Agreements was approved by the Decree of the President of the RoA. The Decree become effective on 12 October 2017. From November 2017 until 29 March 2019, the fiduciary part of the Project was implemented by the FFPMC. Started from 29 March 2019 until 1 June 2019, by the Decree N 283-A dated 21 March 2019, the project implementation and fiduciary part of the Project was transferred to the Ministry of Agriculture of the Republic of Armenia. After 1 June 2019; by the law of RA on making changes and amendments in the law of RA on "Government Structure and Activities" (H0-253-N dated 23 March 2018), The Ministry of Agriculture of RA and the Ministry of Economic Development and Investment of RA have been reorganized through the merger, creating the Ministry of Economy of RA. Currently, the program is implemented by the Ministry of Economy of RA, coordi nated by the Agriculture Projects Implementation Department of the Ministry of Economy of RA. 2. Summary of significant accounting policies 2.1. Prepara tion and presenta tion of f inancial st a t ements The special purpose financial statements are prepared in accordance with the International Public Sector Accounting Standard (IPSAS): Financial Reporting Under the Cash Basis of Accounting, (IPSAS· Cash Basis) issued by the International Public Sector Accounting Standards Board (IPSASB) within the International Federation of Accountants (IFAC), and presented in accordance with Financial Management Manual for World Bank Financed Investment Operations: RM 3 - Financial Reporting and Auditing (March 2010). The special purpose project financial statements consist of: Statement of cash receipts and payments, Statement of uses of funds by project activity, Summary of significant accounting policies and other explanatory notes. The principal accounting policies applied in the preparation of these special purpose financial statements are set out below. These policies have been consistently applied to all the periods presented. 2. 2 Cash basis of account ing The special purpose financial statements are prepared and presented using the cash basis of accounting. Cash basis means a basis of accounting under which transactions and other events are recognized only when cash or its equivalent is received or paid. Financial statements prepared under the cash basis provide information about the sources of cash raised during the period, the purpose for which cash was used and the cash balances at the reporting date. Q 2.3. Presentation currency The presentation currency of these special purpose financial statements is United States Dollar (USD). 2.4. Foreign currency transactions Foreign currency is a currency other than the presentation currency of the Project. Transactions in foreign currencies are translated to functional currency at exchange rates at the dates of the transactions. Settlement rate of foreign currency over presentation currency published by the Central Bank of the Republic of Armenia is taken as the exchange rate. Project accounts are maintained and transactions are made in USD and Armenian Dram (AMD). Transactions denominated in local currency are translated into USD as follows: Contributions of the Republic of Armenia and beneficiaries expressed in AMD are presented in USD at the official exchange rate defined by the Central Bank of Armenia at the date of transfer. Payments to contractors and suppliers expressed in AMD are presented in USD at the exchange rates defined by the CBA at the date of payment. The currency exchange rate defined by the CBA as at 31.12. 2018 is: USD 1 = 483. 75 AMD. The currency exchange rate defined by the CBA as at 31. 12. 2019 is: USD 1 = 479. 70 AMD. 2.5 . Taxes All applicable taxes are paid in accordance to common tax regulations of the Republic of Armenia. /() 3. Summary of Summary reports and SOEs For the year ended 31 December 2019 3. 1. IDA Credit No. 5504-AM No SOE withdrawal application was submitted related to IDA Credit No. 5504-AM during the reporting penod. 3.2. IDA Credit No. 5505-AM No SOE withdrawal application was submi tted relat ed t o IDA Credit No. 5505-AM during the reporting period . 3.3. IBR D Loan No. 8374-AM Application I Value date 1.Goods, works, non- 2.Community Total number consulting services, fund financing consultant 's services, training and targeted I and incremental operating sub-project costs under the Project (except grants under Part for activities under Part I (b) I (b) and Part II and Part II (a) of the Project). (a) of the Project I I USD USD USD 17 I 25.01.2019 47,337.56 690,319.16 737 ,656.72 I ' 18 29.03.2019 123,556.50 460,222.70 583,779 .20 ! Total 170,894.06 1, 150,541.86 1, 321,4 35.92 II 4. Statement of designated account 4. 1. IDA Credit No. 5504-AM and IDA Credit No. 5505-AM Designated Account IDA Credit No. 5504-AM and IDA Credit No. 5505-AM Currenry USO Account number 900000903873 Bank Central Treasury 1 Meliq Adamyan str., Yerevan, 0010 Location Republic of Armenia For the year ended 31 December 20!.L_ USO 1. Opening balance as at 01.01.2019 Add : 2. Cumulated opening discrepancy 3. IDA Fund advance/replenishment Less: 4. Refund to IDA from DA 5. Present outstanding amount advanced to DA 6. DA closing balance as at 31.12.2019 Add: 7. Amount of eligible expenditures paid Less: 8. Interest earned (if credited into DA} 9. Total advance accounted for 10. Discrepancy (5)-(9} I:! 4.2 . IBRD Loan 8374-AM Designated Account IBRD Loan No. 8374-AM Currency USO Account number 900000903881 Bank Central Treasury 1 Meliq Adamyan str. , Yerevan, 0010 Location Republic of Armenia For the year ended 31 December 2019 USO 1. Opening balance as at 01.01 . 2019 162,343.28 Add: 2. Cumulated opening discrepancy 3. IBRD Fund advance/replenishment 1,521,435.92 Less: 4. Refund to IBRD from DA 5. Present outstanding amount advanced to DA 1,683,779 . 20 6. SA closing balance as at 31. 12. 2019 144,525.05 Add: 7. Amount of eligible expenditures paid 1,539,254.15 Less: 8. Interest earned (if credited into DA) 9. Total advance accounted for 1, 683 , 779 . 20 10. Discrepancy (5)-(9) 13 5. Statement of financial position The Statement s of Financial Position discloses assets, liabilities and net assets of the Project as at reporting date. It i s prepared i n accrual basis that i s t ransactions are recognized when they occur (and not only when cash is received or paid). Note 31 . 12.2019 01.0 1.20 19 USO USO ASSETS Cash and cash equivalents 6 509 ,506. 79 652,896. 93 Prepayments 44 656 .49 380,558.12 Tot al assets 554, 163. 28 1,0 33 ,455.0 5 LI ABILITIES Payables 88,480.85 46,054.57 Total liabilities 88!480. 8 5 46,054 . 57 NET ASSETS Cumulative income IBRD Loan No. 8374-AM 8. 1 10, 906,697. 54 9,385 ,261.62 IDA Credit No. 5504-AM 8.2 4,316,022.44 4,3 16 ,022.44 IDA Credi t No. 5505-AM 8.3 2,400,582.15 2,400,582.15 GoA fund 8.4 1,097 ,881. 86 993 ,579.88 Community fund 8. 5 1,787,762.25 1,721 ,371.03 Other beneficiary 8.5 2,466, 238.71 1,878 ,020.35 Bidding 604.13 3,259.35 22, 975, 789.08 20, 698,096.82 Cumulative expenses Project expenses {22 ,462, 118.11) {19, 670,524.89) {2 2! 462, 118.11 ) {1 9,6 70, 524. 89) Foreign e xchange gain/( loss) {47,988.54) (40, 171.45) Total net asset s 465,682.4!_ 987,400.j_li_ 6. Cash and cash equi v alents Account Underl ying 31. 12. 2019 01.0 1.2019 held at Currency US O USO Designated Account IDA Credit 5504-AM, 5505- AM Treasury USO Designated Account IBRD Loan 8374-AM T reasury USO 144,525.05 162,343.28 Government Co -fi nancing account T reasury AMO Community Co-financing account T reasury AMO 364 ,981.74 487 ,898.43 Bidding account T reasury AMO 2,6 __? 5. 22 Total 509,506. 79 652,896.93 I./ 7. Project expenditures 7. 1. Project expenditures per funds Expenditure IBRO Loan 8374- I IOA Credit I IOA Credit Govem Comm uni Other Total AM 5504-AM 5505-AM ment of the RA ty fund benef1c1a ,_ - - I I ries USO USO USO USO USO USO Reportin11 year 1.Goods, works, non· I consulting services, consultant's services, I training and I incremental operating costs under the Project (except for act1v1t1es I under Part I (b) and Part II (a) of the Project). 320,Q(>7.43 1 1Q4,258.14 424,325. 57 - 2.Commun1ty fund financing and targeted sub· project grants I I under Part I (b) and I Part II fal of the Pro1ect 1,219,186.72 193, 113.48 588,218.23 2,000,518.43 3.Front-end fee . I . Total 1 539 254.15 . 104 258.14 193 113.48 588 218.23 2 424 844.00 Cumulative as at 31 12 2019 I 1.Goods, works, non- I I consulting services, I consultant's services, I I training and incremental operating I costs under the Project (except for act1v1t1es .mder Part I (b) and Part II (a) of the Project). _ 1 327 702.93 1 354 829.19 549914.17 1 074 689.54 . I 472.71 4 307 608.54 2.Community fund financing and targeted sub-project grants under Part I (b) and Part II (a) of the Pro1ect 9 376 969.56 1 2 961,193.251 ' 850 067.98 1 21 914.49 1 423 633. 15 2 466 238.48 18 100,616.91 3.Front·end fee 57,500.00 57,500.00 I Total 10 762 172.49 4 316 022.44 I 2 400 582.15 I 1 096 604.03 1 423 633.15 2 466 711. 19 22 465 725.45 7. 2. Expenditure budget execution I Cumulative I Category Expendi tures as at 3 1 Dec 201 9 Total budqet I Execution ·- I USD USD % I 1.Goods, works, non- consulting services, consultan t' s services, training and incremental operating costs under I the Project (except for activities under Part I (b) and Part II ial of the Project). 4,307 ,608 . 54 10 462 594 41 % 2.Community fund financing and targeted sub-project I grants under Part I (bl and Part II (a) of the Proiect 18 100 616.9 1 31 177 288 58% I 3.Front-end fee 57,500.00 57 500 100% 1 1--- Unallocated - - Total - 22,465, 725.45 I 41 ,697,382 54% 15 8. Financing 8.1. IBRD Loan 8374-AM Reporting Cumulative as year at 31 Dec 2019 USO USO Advances/ (advance recovery) 200,000.00 1, 100,000.00 SOE and Summary Report 1,321,435.92 9,749, 197.54 Front-end fee 57,500.00 Total 1, 521 ,43 5.92 10, 906,697.54 Total financing budget 23,000,000.00 Percentage of finance provided as at 31 Dec 2019 47% 8.2. IDA Credit 5504-AM Reporting Cumulative as year at 3 1 Dec 201 9 USO USO Advances/ (advance recovery) SOE and Summary Report 4,316,022.44 Total 4, 316,022.44 Total financing budget 5, 286, 974.00 Percentage of finance provided as at 31 Dec 2019 82% 8.3. IDA Credit 5505-AM Reporting Cumulative as year at 31 Dec 2019 USO USO -~ Advances/ (advance recovery) SOE and Summary Report 2,400!582.15 Total 2, 400, 582 . 15 Total financing budget 3' 414,87..!.:.QQ_ Percentage of finance provided as at 31 Dec 2019 70% 8 . 4. Government of RoA Reporting Cumulative as year at 31 Dec 2019 USO USO Financed 104,301.98 097,881.86 1}_ Total financing budget 4,267,537.00 Percentage of finance provided as at 31 Dec 2019 26% 16 8 . 5. Beneficiaries Reporting Cumulative as year at 31 Dec 2019 USO USO Community funds 66,391 .22 1,787,762.25 Other beneficiaries 588,2 18.36 2,466,238.71 654,609 . 58 4, 254 ,000 .96 Tot al financing budget 5, 728,000.00 Percentage of f inance provided as at 31 Dec 2019 74% 9. Event s after the reporting date/ Subsequent events COVID-19 epidemic Considering breakout of new coronavirus (COVID-1 9) epidemic in the world, as well as Republic of Armenia Government Decree on declari ng State of Emergency from March 16 to July 13, 2020 throughout Armen ia, the Project management believes that the situation may have a negative impact on the Project, in particular it may lead to: • Delays in t he works, • Difficulties to coordinate project activities, and • Other negative outcomes due to limitations. Given the unpredictability of events , Project management does not consider it possible to estimate t he fina ncial impact of the above event on the reports. 17 ANNEX 1. RECONCILIATION BETWEEN THE AMOUNTS SUBMITTED BY THE PROJECT AND DISBURSED BY THE WORLD BANK Second Community Agricultural Resource Management and Competitiveness Project /BRO Loon No.8374-AM, /DA Credit No. 5504- AM, /DA Credit No. 5505- AM For the year ended 31 December 2019 In USO IBRD Loan No. 8374-AM Category Appl. N Project WB Difference Advance/ (repayment) 18 (400,000.00) (400,000.00) - 19 400,000.00 400,000.00 - 20 200,000.00 200,000.00 - 200,000.00 200,000.00 - 1. Goods, works, non- consulting services, consultant's services, training and 17 47) 337. 56 47,337.56 - incremental operating costs under the 18 123,556.50 123,556.50 - Project (except for activities under Part I (b) and Part II (a) of the Project). 170,894.06 170,894.06 2.Community fund financing and targeted 17 690, 319.16 690,319.16 - sub-project grants under Part I (b) and 18 460, 222. 70 460,222. 70 Part II (a) of the Project 1,150,541.86 1, 150,541.86 1,521,435.92 1,521,435.92 IDA Cred it No. 5504- AM No withdrawal applications were submitted related to IDA Credit No. 5504-AM during the reporting period. IDA Credit No. 5505-AM No withdrawal applications were submitted related to IDA Credit No. 5505-AM during the reporting period . -.; 18 Management Representation Letter 24 June 2020 To: BOO Armenia cjsc 23/6 Davit Anhaght Street, floor 5, Yerevan, Armenia This representation letter is provided in connection with your audit of the Financial Statements for the year ended 31 Dec 2019 of the "Second Community Agricultural Resource Management and Competitiveness Project" ("Project") financed by IBRD Loan No. 8374-AM, IDA Credit No. 5504-AM and IDA Credit No. 5505-AM, and implemented by the Ministry of Economy of the RA. We acknowledge our responsibility for: • preparation of the financial statements in accordance with IPSAS·cash basis; • keeping accounts and financial documents that are correct, complete, fair, representing the true facts, in conformity with the objectives of the Project, and national legislation. • design and implementation of internal control to prevent and detect fraud. • completeness of information concerning financing received or due and own financing concerning their period examined, for the project being examined. • availability of any information and explanations, either orally or by written confirmation, which might be required by the Auditor in the execution of their audit. We confirm, to the best of our knowledge, that: • We have made available to you all books of account and supporting documentation. • There were no material transactions that had not been properly recorded in the accounting records underlying the financial statements. • The internal control system is reliable: approval and control of financial and other documents , segregation of duties is adequately done; • The project funds have been used in accordance with the established budget; • The financial activities are performed in conformity with the project objectives and adherence to the Loan/Financing agreements terms. • The financial resources are used in an economical and efficient manner. • There have been no irregularities involving management or employees who have a significant rol e in the accounting and internal control systems or that could have a material effect on the financial statements. • The financial statements are free of material misstatements, including omissions. • There has been no noncompliance with requirements of regulatory authorities that could have a material effect on the financial statements in the event of noncompliance. • Events subsequent to period end were disclosed. • No claims in connection with litigation have been or are expected to be received. • We not aware of any fraud or suspected fraud affecting the Project involving: a. Management, b. Employees who have significant roles in internal control, or c. Others where the fraud could have a material effect on the financial statements. t!ZL~-;;?-.;J Davit Mej lumyan Hra Project manager I9