The World Bank Implementation Status & Results Report KAREP: Kyrgyz Audit and Financial Reporting Enhancement Project (P151789) KAREP: Kyrgyz Audit and Financial Reporting Enhancement Project (P151789) EUROPE AND CENTRAL ASIA | Kyrgyz Republic | Governance Global Practice | Recipient Executed Activities | Investment Project Financing | FY 2017 | Seq No: 3 | ARCHIVED on 24-Sep-2020 | ISR39340 | Implementing Agencies: State Service for Regulation and Supervision of Financial Markets, Ministry of Finance Project Implementation Unit, Kyrgyz Republic Key Dates Key Project Dates Bank Approval Date: 02-Aug-2016 Effectiveness Date: 19-Jun-2017 Original Closing Date: 30-Mar-2020 Revised Closing Date: 28-Feb-2022 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) KAREP Development Objective is to equip the Kyrgyz Republic with a sound institutional framework for corporate financial reporting by: (i) improving the statutory framework, bringing it closer to good international practices; (ii) enhancing institutional capacity of the regulators, including the financial markets regulator (SSRSFM) and the state property fund, (iii) assisting selected key State Owned Enterprises (SOEs) in improving their financial reporting systems and processes, thus, contributing to better corporate governance and management accountability, and (iv) modernizing accounting education and literacy. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Moderately Unsatisfactory Moderately Unsatisfactory Overall Implementation Progress (IP) Moderately Unsatisfactory Moderately Unsatisfactory Implementation Status and Key Decisions The Project's progress towards achieving the objectives: Component 1: Improving the statutory framework in audit and corporate financial reporting - There is a good progress with this component. 1. Draft Laws on Accounting and Auditing were reviewed and approved by the Expert Council on Accounting, Financial Reporting and Audit on June 12, 2020. Drafts, including differentiated corporate financial requirements for various types of entities were submitted on June 23 ,2020 to relevant ministries for coordination. Ministries and agencies are working remotely, the coordination process is delayed. 2. Translation of IFRS for SMEs into Kyrgyz language completed in June 2019 and terminology has been approved by the review-committee on 16 March 2020. Currently the updated translation of standards is under assessment of the review-committee. Draft translation is available. 3. Selection of the translation company on IFRS and ISA standards is in process. 4. A draft concept note on Public Depository of Financial Statements is prepared and is currently analyzed by SSRSFM. Key provisions, to allow establishment, functioning and submission of Financial Statements by entities via a single depository are included in draft Accounting Law. 5. Clarification of institutional responsibilities of SSRSFM is in progress. To large extent, the financial institutional responsibilities in regulating financial reporting are clarified, some issues to be clarified are in respect of depository of FSs and certification of auditors Draft regulation will be developed in November 2020 for regulating financial reporting and audit in accordance with the updated legislation. Component 2: Strengthening Accountancy Education and Literacy is primarily on track: 9/24/2020 Page 1 of 5 The World Bank Implementation Status & Results Report KAREP: Kyrgyz Audit and Financial Reporting Enhancement Project (P151789) 1.The benchmarking report on accounting education in the Kyrgyz Republic and a roadmap for reforms under the KAREP project were completed in 2019 and finalized in July 2020. In January 2020, the findings of the benchmarking were presented to the Ministry of Education, with the next steps agreed between SSRSFM and the Ministry of Education on improving university level accounting education. 2. Local universities professors and examiners will be trained in development of competency-based examinations and integrative case studies. 3. Train-the-Trainer programs on IFRS and IFRS for SMEs were developed and tailored to the needs of the preparers of general-purpose financial statements. 19 trainers selected and 8-day workshop for trainers (3 to 10 July 2019) was conducted. 4. Training programs on IFRS and IFRS for SMEs developed and 4 trainings have been conducted. The program has trained 120 accounting teachers. Trainings on IFRS and IFRS for SMEs to be continued according to the KAREP Action plan. 5. Training program for preparers of financial statements developed and has trained 94 accountants during 2019-2020. Activity will continue as soon as pandemic situation allows. 6. Cooperation with the Ministry of Education and leading universities teaching accounting is on track. Consensus was reached between SSRSFM and Ministry of Education on the need to overhaul the standard curriculum within the broader goal of defining a competency framework for accountants and auditors. 7. Public awareness and thematic reform support activities under the Project must be increased. Such a complex reform of accounting, reporting, audit and accounting education affects many counterparts. Up to date, only a limited number of public awareness events and publications took place. KAREP aims to build public awareness and create the reform momentum to facilitate the implementation process. This can only be achieved through extensive stakeholders’ consultations and multiple awareness events. Component 3: Project Administration by Project Implementation Unit (PIU) and Financial Management 1. The Project has been subject to regular financial management supervision and remains rated Satisfactory for financial management (FM) performance. A supervision mission on FM arrangements was carried out in September 2019 and verified that the procedures of the Project Implementation Unit (PIU) are satisfactory and acceptable to the World Bank. The PIU’s planning and budgeting capacity is also deemed appropriate. Semi-annual financial reports (last one as of December 31, 2019) are submitted on time and found to be acceptable. 2. According to the Grant Agreement, Project activities should be audited by an independent auditor acceptable to the Bank at the end of the periods indicated in the World Bank’s request. It was agreed to have one audit covering the period for FY2017-2019 and another audit for the remaining project implementation period. The respective audited report (the years ended December 31, 2019; December 31, 2018 and December 31, 2017) were received by due date and were acceptable to the Bank. No internal control issues that require the management’s attention and can negatively affect the Project implementation were identified during the audit for the reporting periods. 3. The project procurement was migrated to STEP. An interactive training on STEP was delivered to PIUs and Bank staff on February 25, 2020. Taking project extension into account an updated Procurement Plan shall be submitted to the Bank for NOL through STEP. Risks Overall Risk Rating Risk Category Rating at Approval Previous Rating Current Rating Overall -- Moderate Substantial 5. Results Project Development Objective Indicators IN00887168 ►Legal framework on financial reporting and audit modernized, inconsistencies with other legislation assessed and amended (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 01-Sep-2017 -- 01-Sep-2020 31-Mar-2021 IN00887240 Audit Legislation is Updated (Yes/No, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target 9/24/2020 Page 2 of 5 The World Bank Implementation Status & Results Report KAREP: Kyrgyz Audit and Financial Reporting Enhancement Project (P151789) Value No -- No Yes Date 15-Sep-2017 -- 01-Sep-2020 31-Mar-2021 IN00887241 Accounting and financial reporting legislation is updated (Yes/No, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value No -- No Yes Date 15-Sep-2017 -- 01-Sep-2020 31-Mar-2021 IN00887236 ►Translation of international standards available, regularly updated and incorporated into Kyrgyz legislation. (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 15-Sep-2017 05-Oct-2017 01-Sep-2020 31-Dec-2021 IN00887237 ►Institutional responsibilities of regulators clarified, their capacity improved, sustainable funding mechanisms are designed (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 15-Sep-2017 04-Oct-2017 01-Sep-2020 31-Dec-2021 IN00887238 ►Number of teachers’/ lecturers’ are trained in knowledge of international standards (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 120.00 30.00 Date 15-Sep-2017 -- 01-Sep-2020 27-Mar-2020 IN00887239 ►Universities curricula/ manuals are updated with international standards (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No -- No Yes Date 15-Sep-2017 -- 01-Sep-2020 31-Dec-2020 Overall Comments PDO The indicators are adjusted to reflect on the project extension and updated some data. Some indicators are already completed (mainly those that had number of people to be trained); the project will continue some of those activities to better outreach targeted audiences. 9/24/2020 Page 3 of 5 The World Bank Implementation Status & Results Report KAREP: Kyrgyz Audit and Financial Reporting Enhancement Project (P151789) Intermediate Results Indicators IN00887169 ►Benchmarking study of accounting and audit models of local universities with international standards and best practices (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No Yes Yes Date 15-Sep-2017 05-Oct-2017 01-Sep-2020 30-Jun-2020 IN00887170 ►Local universities professors and examiners are trained in development of competency based examinations and integrative case studies (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 15-Sep-2017 04-Oct-2017 01-Sep-2020 31-Dec-2021 Overall Comments RE Benchmarking study indicators is completed. Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P151789 TF-A3153 Effective USD 1.24 1.24 0.00 0.70 0.54 56% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P151789 TF-A3153 Effective 05-Dec-2016 05-Dec-2016 19-Jun-2017 30-Mar-2020 28-Feb-2022 Cumulative Disbursements 9/24/2020 Page 4 of 5 The World Bank Implementation Status & Results Report KAREP: Kyrgyz Audit and Financial Reporting Enhancement Project (P151789) Restructuring History Level Approved on 26-Mar-2020 ,Level 2 Approved on 09-May-2020 Related Project(s) There are no related projects. 9/24/2020 Page 5 of 5