INTEGRATED LAND ADMINISTRATION SYSTEM PROJECT PROJECT FINANCIAL STATEMENTS AND DESIGNATED ACCOUNT STATEMENT TOGETHER WITH INDEPENDENT AUDITORS' REPORT FOR THE YEAR ENDED JANUARY 31, 2019 INTEGRATED LAND ADMINISTRATION SYSTEM PROJECT CONTENTS Page Project Financial Statements and Independent Auditors' Report: Independent Auditors' Report 1 -2 Statement of Assets and Liabilities 3 Statement of Sources and Uses of Funds 4-7 Statement of Expenditure by Components 8 Notes to the Project Financial Statements 9 - 12 Annex I - Reconciliation of the Loan Account 13 Independent Auditors' Report 14 Designated Account Statement 15 Management letter to the Project implementation Unit 16 - 17 Checklist 18 Tel: +385 1 2395 741 BDO Croatia d.o.o. Fax: +385 1 2303 691 10000 Zagreb E-maiL: bdo-croatia.hr Trg J. F. Kennedy 6b Republic of Croatia Ministry of Justice Utica grada Vukovara 49 10000 Zagreb and Republic of Croatia State Geodetic Administration Gru9ka 20 10000 Zagreb INDEPENDENT AUDITOR'S REPORT We have audited the accompanying Statements of assets and liabilities of the Integrated Land Administration System Project (hereinafter:"the Project") financed under the International Bank for Reconstruction and Development Loan ("Loan") No. 8086-HR as at January 31, 2019 and the related Statement of sources and uses of funds and Statement of expenditure by components ("Project Financial Statement"). These statements are the responsibility of the Project Implementation Unit. Our responsibility is to express an opinion on this statement based on our audit. We conducted our audit in accordance with International Standards on Auditing. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the Project Financial Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Project financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Project Financial Statements as at January 31, 2019 present fairly in all material respects, the cash receipts and payments in the year 2019 of the Project in accordance with the World Bank's requirements. Registrirano kod TrgovaEkag suda u Zagrebu pod brojem 080044149 01B 76394522236 1 IB D O BDO Croatia d.o.o. The supplementary information included in Annex I to the Project Financial Statements are presented for the purpose of additional analysis and is not a required part of the basic Project Financial Statements. Such schedules have been subject to the auditing procedures applied in our audit of the basic Project Financial Statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic Project Financial Statements taken as a whole. Zagreb, June 14, 2019 BDO Croatia d.o.o. Trg J. F. Kennedy 6b 10000 Zagreb CROATIA BDO Crata d.o.o. za prutanje revizookih, konzalting ( i ra&onovodstvenih usluga Zagreb, J.E Kennedy 6/b Vedrana Stipi , member of Management Vedrana Stipic, certified auditor Board 2 ` м �� � � � � о � v .- '^ .- r: г . h° G� N й `' �`':, � � � .- и и '�'+ и м `N 'С1 и сд�ч h"' aorn ,а м h" Е и и�.,д �t r,„ r,,, �,.. �t w�- н ца цi $ ,о °' чi � N О� � М г С7 �' � � д� I О СК1 �- �" О м `' `' �ь.i% ь. i � g О ��а о � r °� г� r � �а ор � � м � �N,, �' � ty N М ,р •- �,,, ,р �р ' � �,. � �[! л �- �- К1 м `� `' Ш Й Й _V ,р `� ,�р � М h. еФр � Е r" N� �° с`� '� Ф�°^ � а .- ,�„ � b' о .- ,д' � м � � r�" м гмч м ~ Е- С�: � �' 1Т Г N N д" и ш м •- .- г ц : °ц «� � Z N М �"` ° r" � r'` � � �а �- о г,,,� � .- � � �� g� � �" Gi й N g � �'i ,�i r„i � Ш � N н °`ч N н Q м СС,�С Ш и а� �' ш �- Z � г°ч ,00о � � «, о ,°Dд J �L^ `" "� ,мр« � н ' оа � ° � � ,�, г r~• '"�г' ,г,�( С � � м гч � _! -br гч i,y `г° мi н N Z "� 4 � � t/� сФч � � и "Q Н1 С � О." � � '� О �+ с о :'-' = п � � � � � � � ��w° ° Fa .� ш с й '� �. о� " � .� ,,, � ..с '$ ц� и� о а и � �� � ,�i., ,� о � �'-' � � � � _ ,и�( �'! � й о_л ,� � � � � Е F- и � l�� � го о v � а Vf R1 о. 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By the approval of the World Bank on April 25, 2018, the deadline for the project was extended until 31 December 2018. The Project's financial operations continued during January 2019, during the financial closure of the project, when the suppliers' accounts for completed activities were paid until the end of the project on 31 December 2018. During this period there was no withdrawal from the Loan 8086-HR account in the IBRD, because the total amount of the Loan withdrawn from the Loan Account has been withdrawn from EUR 16,500,000.00 (100.001/6 of the Loan). In the same period from different foreign currency loan account in Raiffeisenbank d.d. Zagreb was paid EUR 24,704.40, so the balance of the funds as at 31 January 2019 was EUR 0.00. (2) The first expenditure related to the Project was made on December 7, 2010. (3) The final status of the Project on 31st January 2019 is 21,149,268 EUR and consist as follows: EUR IBRD Loan No, 8086-HR 16,500,000 Budget of the Republic of Croatia 2,371,638 Activities financed 100% from the State Budget 2,277,630 Total 21,149,268 (4) Expenditures in Croatian Kuna were translated into EUR at the exchange rate ruling at the date of the transaction. 7 INTEGRATED LAND ADMINISTRATION SYSTEM PROJECT STATEMENT OF EXPENDITURE BY COMPONENTS as at January 31, 2019 (EUR) For the year Component ended 31 Cumulative January 2019 A - Land registration System Development 0 124,780 B - Spatial information and Cadastre System Modernization 0 4,179,371 C - Improving Digital Services 2,750 11,150,517 D - Project management, Training and Public Awareness 50,045 2,281,072 Refund of the Advance P459-HR 0 922,025 Financing of activities from the Preparation phase 0 172,623 Front-end Fee 0 41,250 Activities financed from the Budget of the Republic of Croatia 0 2,277,630 TOTAL 52,795 21,149,268 8 INTEGRATED LAND ADMINISTRATION SYSTEM PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS as at January 31, 2019 1. GENERAL The objective of the Integrated Land Administration System Project is to modernize the land administration system in order to improve the government services from the point of view of efficiency, transparency and cost, The project represents a continuation of the Real property Registration and Cadastre Project and it further deepens the reforms and integration of the land administration system. Performance indicators are as follows: - higher customer satisfaction with the services of the land administration reduced processing time of transactions in the Land Registry and Cadastre higher percentage of users that send requests/transactions online - greater use of spatial data to be exchanged between state institutions/ministries. Beneficiaries of the Project are: - the public, since they will have greater access to information and better services with fully integrated digital data; - the entire business community, again with faster access to information and services; - other government bodies that will share more easily and have a better insight into the government spatial data. The Project encompasses the following four components: Component A. - Land Registration System Development Component B. - Spatial Information and Cadastre System Modernization Component C. - Improving Digital Services Component D. - Project Management, Training and Public Awareness The Project is being implemented over a 6,5 year turn. The Advance agreement for the Project preparation No, P459-HR between the Republic of Croatia and the International Bank for Reconstruction and Development (the Bank) in the amount of 1,450,000 USD was signed on August 3, 2010. Advance funds, pursuant to the Agreement, financed the purchase of goods and consulting services for: - preparatory analysis and studies for preparation of detailed Project implementation plan - pilot Project of the system expansion (roll-out) of JIS on four locations - execution of the Project. Advance funds were used by November 15, 2011. 9 INTEGRATED LAND ADMINISTRATION SYSTEM PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS - continued as at January 31, 2019 The Loan agreement for the Project No, IBRD-8086-HR between Republic of Croatia and the Bank in the amount of 16,5 million Euros was signed on August 17, 2011. Law on ratification of the Loan agreement between Republic of Croatia and the International Bank for Reconstruction and Development for the Implementation of the Integrated Land Administration System Project was adopted on 24th session of the Croatian Parliament on October 21, 2011 and published on November 7, 2011 in the Official Gazette, International Agreements No, 13/2011. The Loan became effective on November 15, 2011. This report contains an overview of the use of funds in 2018 and the total for the period from the effective date of the advance agreement No, P459-HR and the IBRD Loan No, 8086-HR to January 31, 2019. 2. BASIS OF ACCOUNTING AND SUMMARY OF ACCOUNTING POLICIES 2.1. Accounting Records and Basis of Presentation The Project maintains its accounting records using the World Bank guidelines (Annual Financial Reporting and Auditing for World Bank - Financed Activities, Procurement Handbook and Disbursement Handbook). 2.2. Implementation of the Project Ministry of Justice and State Geodetic Administration, by the relevant Ministry of construction and spatial planning (hereinafter: MGiPU) concluded the Agreement on Implementation of the Integrated System of Land Administration Project on May 16, 2011 and on March 14, 2012 and February 13, 2014 agreement on amendments to the Agreement on the Implementation of the Integrated Land Administration System. The Agreement was concluded for the purpose of the regulation of mutual relations and responsibilities in the Project implementation, determining body for implementation of the Project and allocation of responsibilities. The bodies responsible for implementing the Project are Project Steering Committee, Coordinators of components of the Project in the Ministry of Justice and the State Geodetic Administration and the Project Implementation Unit. The Project Steering Committee has two co-chairs: Assistant Minister of Justice for civil, commercial and administrative law in the Ministry of Justice and the Director of the State Geodetic Administration. Members of the Project Steering Committee are: MGiPU Assistant Minister, Head of the Land Registry Management Service in Ministry of Justice, Head of the Division of Cadastral System of the State Geodetic Administration, named representative of the Supreme Court of the republic of Croatia and a named representative of the Ministry of Finances. 10 INTEGRATED LAND ADMINISTRATION SYSTEM PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS -continued as at January 31, 2019 2.2. Implementation of the Project - continued The Project Steering Committee manages the Project, monitors the implementation of individual phases of the project, spending, discusses the reports of the Land Registry Management Service, Division of Cadastral Systems and Project Implementation Unit, determines the priority areas, monitors the budget spending, coordinates the donor engagement and makes decisions related to the implementation of the Project and gives permissions for all the key plans and changes of plans. Coordinators of the Project components at the Ministry of Justice and State Geodetic Administration coordinate the implementation of the activities of individual components for which they are nominated and are accountable for their work to the institutions that nominated them. The Project Implementation Unit, whose superior is Project Steering Committee, is responsible for the procurement, financial management, disbursements, monitoring and evaluation and compliance of safeguard mechanisms within the Project and it serves as the Secretary of the Project Steering Committee. On the side of the lender the Bank, there is a Project team with the leader of the Project team responsible for the coordination and monitoring of the implementation of the Project. Realisation of the Project is determined by the regulations of the Bank for the Project implementation, procurement, contract management, use of the Loan, auditing and reporting to the Bank and the EU. 2.3. Project Expenditure The Project Expenditure is stated at original cost on the Statement of Assets and Liabilities. 2.4. Liabilities The Advance agreement No. P459-HR between Republic of Croatia and the Bank in the amount of 1,450,000 USD was signed on August 3, 2010. Advance was approved for the preparation of the Project whose aim is to modernize the Land Administration System to improve government services in terms of efficiency, transparency and cost. Project leaders and beneficiaries are the Ministry of justice and the State Geodetic Administration, Advance funds were used by November 15, 2011. In accordance with the Decision of the Croatian Government to initiate proceedings for the making of the Loan agreement for the Project, authorised Croatian delegation has made final negotiations with the Bank in June 2011 and the Loan agreement was signed on August 17, 2011. Contracted amount of the Loan is 16,5 million Euros. The Loan became effective on November 15, 2011. In accordance with Amendment of the Loan agreement as of April 14, 2017 the Closing Date was extended until April 31, 2018. With the approval of the World Bank from April 25, 2018, the deadline for completing the Project has been extended until 31 December 2018. The Projects financial operations continued in January 2019, during the financial closure of the project, when supplier accounts were paid for the activities carried out until the end of the project on 31 December 2018. 11 INTEGRATED LAND ADMINISTRATION SYSTEM PROJECT NOTES TO THE PROJECT FINANCIAL STATEMENTS - continued as at January 31, 2019. 2.4. Liabilities - continued The principal and the interests are the responsibility of the Republic of Croatia. Return of the principal starts on November 15, 2015 with final maturity on November 15, 2030. Payment dates of principal are May 15 and November 15. The amount of interest paid by the Borrower for each interest period is equal to the reference rate for the Loan currency plus the fixed spread, provided that upon conversion of all or partial amount of the principal of the Loan, interests, which the Borrower pays during the conversion period, are determined in accordance with the relevant regulations of the Article 4 General Conditions. Republic of Croatia is obligated to pay the Front-end Fee for the use of the Loan in the amount of 0,25% of the Loan. 2.5. Contributions by the Republic of Croatia The Republic of Croatia is responsible for paying Project expenditures in accordance with the Loan Agreement. The total amount of Project expenditures paid by the Republic of Croatia for the year ended January 31, 2019 amounted to 28,091 EUR. 12 INTEGRATED LAND ADMINISTRATION SYSTEM PROJECT ANNEX I RECONCILIATION OF THE LOAN ACCOUNT (EUR) The amount of the loan used by January 31, 2019 16,500,000 Cash on the Designated Account 0 Increase: total expenditure stated in the Statement of Sources and Use of Funds 16,500,000 Total expenditure 16,500,000 13 Te: +385 1 2395 741 BDO Croatia d.o.o. Fax: +385 1 2303 691 10000 Zagreb E-mail: bdo-croatia.hr Trg J. F. Kennedy 6b Republic of Croatia Ministry of Justice Utica Grada Vukovara 49 10000 Zagreb and Republic of Croatia State Geodetic Administration Gruika 20 10000 Zagreb INDEPENDENT AUDITORS' REPORT We have audited the accompanying Designated Account Statement of the Integrated Land Administration System Project (the Project) financed under International Bank for Reconstruction and Development Loan No, 8086-HR as at January 31, 2019. The Designated Account Statement is the responsibility of the Project implementation Unit. Our responsibility is to express an opinion on the Designated Account Statement based on our audit. We conducted our audit in accordance with International Standards of Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Designated Account Statement is free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Designated Account Statement. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the accompanying Designated Account Statement as at January 31, 2019 present fairly, in all material respects, the movements in the year 2018 on the Designated Account of the Project, in accordance with World Bank guidelines. Zagreb, June 14, 2019 BDO Croatia d,o,o, CROATIA Trg J, F, Kennedy 6b 3)0Ow o.o. 10000 Zagreb za eneuIVrj r:orah, uonzaidt Z Eb ;v 13 nc Ke dy b Vedrana Stip) , Vedrana Stipi , certified auditor member of Management Board Registrirano kod TrgovaEkog suda u Zagrebu pod brojem 080044149 0113 76394522236 14 INTEGRATED LAND ADMINISTRATION SYSTEM PROJECT DESIGNATED ACCOUNT STATEMENT as at January 31, 2019 Bank: Raiffeisenbank Austria d.d., Zagreb IBAN: HR282484008 - 1300158260 Balance as at January 1, 2019 24,704 Increase Withdrawal 0 Decrease: Payments from the Designated Account (24,704) Balance as at January 31, 2019 0 Note: Designated Account for the Loan was opened on February 27, 2012 in Ralffeisenbank Austria d d., Zagreb, IBAN HR282484008-1300158260. 15