THE SERVING PEOPLE, IMPROVING HEALTH PROJECT Special purpose financial statements For the period from 01 January 2018 to 31 December 2018 Contents: INDEPENDENT AUDITOR’S REPORT ____________________________________________________________ 3 SPECIAL PURPOSE STATEMENT OF SOURCES AND USES OF FUNDS __________________________________ 6 USE OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT FUNDS BY THE PROJECT COMPONENTS ______________________________________________________________________________ 7 SCHEDULE OF WITHDRAWALS FROM THE LOAN ACCOUNT _________________________________________ 8 STATEMENT OF CASH WITHDRAWAL FROM DESIGNATED ACCOUNT (COMPONENT 1) __________________ 9 DESIGNATED ACCOUNT STATEMENT (COMPONENT 1) ___________________________________________ 10 STATEMENT OF CASH WITHDRAWAL FROM DESIGNATED ACCOUNT (COMPONENT 2, 3) _______________ 11 DESIGNATED ACCOUNT STATEMENT (COMPONENT 2, 3) _________________________________________ 12 STATEMENT OF WITHDRAWALS THROUGH THE SUMMARY SHEETS AND STATEMENTS OF EXPENDITURES 13 STATEMENT OF ACTUAL EXPENDITURE IN NATIONAL CURRENCY __________________________________ 14 RECONCILIATION BETWEEN THE PCSU AND THE BANK RECORDS __________________________________ 15 NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS ______________________________ 16 WORLD BANK AUDIT DOCUMENTATION CHECKLIST ______________________________________________ 23 2 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT SPECIAL PURPOSE STATEMENT OF SOURCES AND USES OF FUNDS FOR THE YEAR ENDED 31 DECEMBER 2018, AND CUMULATIVE AS AT 31 DECEMBER 2018 (in US dollars) Actual Budget Variance For the For the For the For the For the For the year whole whole whole year ended year ended ended 31 period of period of period of 31 31 December the Project the Project the Project December December 2018 implementa implementa implementa 2018 2018 tion tion tion Total available funds at the beginning of the period 14 348 868 - Designated account B 334 742 - Designated account C 813 380 National currency accounts in STSU* (component 1) see Note 5 (UAH) 13 186 514 National currency accounts in STSU (components 2, 3) see Note 5 (USD) 14 232 - Sources of funds: Funds from IBRD 32 119 038 72 983 157 Co-financing 8 862 423 20 960 926 Total financing 40 981 461 93 944 083 PROJECT EXPENDITURES: (1) Category 1 Goods, works, non-consulting services, consultants` services and Operating Costs for Part 1 of the Project 30 589 146 55 459 961 21 940 609 53 477 711 (8 648 537) (1 982 250) (2) Category 2 Goods, works, non-consulting services, consultants` services and Operating Costs for Part 2 of the Project 1 709 508 2 246 570 1 458 624 1 990 237 (250 884) (256 333) (3) Category 3 Goods, non- consulting services, consultants` services and Operating Costs for Part 2 of the Project 491 758 1 062 307 331 871 882 066 (159 887) (180 241) Front-end Fee 536 825 536 825 - - Expenses on account of co- financing (Category 1) 8 862 423 20 960 926 13 396 001 20 639 255 4 533 578 (321 671) Total project expenditure: 41 652 835 80 266 589 37 127 105 77 526 094 (4 525 730) (2 740 495) Total available funds at the end of the period 13 677 493 - - - - Designated account B 495 626 - - - - Designated account C 15 390 - - - - National currency accounts in STSU (component 1) see Note 5 (UAH) 13 136 736 - - - - National currency accounts in STSU (components 2, 3) see Note 5 (USD) 29 742 - - - - *State treasury service of Ukraine (STSU) Notes on pages 16 – 23 are an integral part of these special purpose project financial statements . 6 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT USE OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT FUNDS BY THE PROJECT COMPONENTS FOR THE YEAR ENDED 31 DECEMBER 2018, AND CUMULATIVE AS AT 31 DECEMBER 2018 (in US dollars) Actual Budget Variance For the Accumula For the Accumula For the Accumula period ted period ted period ted Part 1 Improving service delivery at the local level (1) Category 1 Goods, works, non- consulting services, consultants' services and Operating Costs for Part 1 of the Project to be implemented by: (a) Vinnitsa Oblast (state administration and city council) 4 751 121 5 386 454 4 618 735 5 448 455 (132 386) 62 001 (b) Volyn Oblast 4 410 326 5 239 128 2 107 116 4 497 200 (2 303 210) (741 928) (c) Dnipropetrovsk Oblast 4 998 232 6 448 328 3 132 046 8 706 056 (1 866 186) 2 257 728 (d) Zakarpattya Oblast 2 408 164 4 612 709 1 397 123 5 620 767 (1 011 041) 1 008 058 (e) Zaporizhzhya Oblast 944 580 2 426 306 1 632 894 1 853 340 688 314 (572 966) (f) Lviv Oblast 1 768 076 10 057 855 3 536 821 10 053 084 1 768 745 (4 77) (g) Poltava Oblast 8 104 001 16 179 800 5 269 838 12 902 347 (2 834 163) (3 277 453) (h) Rivne Oblast 3 204 646 5 109 381 246 036 4 396 462 (2 958 610) (712 919) Part 1 total 30 589 146 55 459 961 21 940 609 53 477 711 (8 648 537) (1 982 250) Part 2 Strengthening Ministry of Health governance (2) Category 2 Goods, works, non- consulting services, consultants' services and Operating Costs for Part 2 of the Project 1 709 508 2 246 570 1 458 624 1 990 237 (250 884) (256 333) Part 2 total 1 709 508 2 246 570 1 458 624 1 990 237 (250 884) (256 333) Part 3 Project management, and monitoring and evaluation (3) Category 3 Goods, non-consulting services, consultants' services and Operating Costs for Part 3 of the Project 491 758 1 062 307 331 871 882 066 (159 887) (180 241) Part 3 total 491 758 1 062 307 331 871 882 066 (159 887) (180 241) Front-end Fee - 536 825 - 536 825 - - Expenses on account of co-financing (Category 1) 8 862 423 20 960 926 13 396 001 20 639 255 4 533 578 (321 671) PROJECT EXPENDITURES TOTAL 41 652 835 80 266 589 37 127 105 77 526 094 (4 525 730) (2 740 495) SUMMARY BY PARTS: Improving service delivery at the local level 30 589 146 55 459 961 21 940 609 53 477 711 (8 648 537) (1 982 250) Strengthening Ministry of Health governance 1 709 508 2 246 570 1 458 624 1 990 237 (250 884) (256 333) Project management, and monitoring and evaluation 491 758 1 062 307 331 871 882 066 (159 887) (180 241) Front-end Fee - 536 825 - 536 825 - - Expenses on account of co-financing (Category 1) 8 862 423 20 960 926 13 396 001 20 639 255 4 533 578 (321 671) PROJECT EXPENDITURES TOTAL 41 652 835 80 266 589 37 127 105 77 526 094 (4 525 730) (2 740 495) Notes on pages 16 – 23 are an integral part of these special purpose project financial statements. 7 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT SCHEDULE OF WITHDRAWALS FROM THE LOAN ACCOUNT FOR THE PERIOD FROM 01 JANUARY 2018 TO 31 DECEMBER 2018 (in US dollars) Application Date of Payment Category number Withdrawal Currency Amount Equivalent USD 46 1-G 01.03.2018 EUR 30 986 38 220 47 2 13.03.2018 USD 76 850 76 850 48 1-H 16.03.2018 EUR 395 920 489 793 50 DA-C 05.04.2018 USD 4 718 000 4 718 000 51 UNC Issuance 10.04.2018 1 500 000 - 53 1-C 26.04.2018 UAH 1 445 881 55 250 UN-U-1 2, UN- U UNC 00001 04.05.2018 USD 688 509 688 509 57 DA-C 22.05.2018 USD 1 282 105 1 282 105 54 DA-B 22.05.2018 USD 550 000 550 000 56 1-C 22.05.2018 UAH 1 869 253 72 200 55 1-C 24.05.2018 UAH 32 074 546 1 236 490 60 1-G 13.06.2018 UAH 13 791 465 531 463 59 1-G 11.06.2018 USD 156 129 156 129 62 1-H 25.06.2018 EUR 153 710 177 735 65 1-C 09.07.2018 UAH 4 009 318 153 144 67 DA-C 28.06.2018 USD 2 075 000 2 075 000 66 1-G 09.07.2018 UAH 4 651 878 177 688 64 1-G 09.07.2018 UAH 1 761 107 67 269 63 1-A 10.07.2018 UAH 8 511 617 325 617 71 1-C 13.07.2018 UAH 13 957 048 533 526 73 DA-B 03.08.2018 USD 750 000 750 000 72 1-G 08.08.2018 UAH 22 659 309 847 394 74 1-G 31.08.2018 UAH 22 484 670 806 480 75 1-A 28.08.2018 USD 96 635 96 635 69 1-A 28.08.2018 USD 104 456 104 456 77 2 20.09.2018 AUD 317 047 228 686 78 DA-C 01.10.2018 USD 7 823 500 7 823 500 80 1-G 10.10.2018 UAH 30 190 877 1 086 785 82 1-G 10.10.2018 UAH 9 551 378 343 822 83 2 13.11.2018 USD 83 614 83 614 84 1-G 26.11.2018 UAH 26 235 743 949 538 88 DA-C 18.12.2018 USD 2 140 000 2 140 000 85 1-H 21.12.2018 EUR 637 659 726 740 87 DA-C 26.12.2018 USD 2 726 400 2 726 400 Total 32 119 038 Summary schedule by categories: Category 1 total 8 976 374 Category 2 total 1 077 659 Category 3 total - FEF - DA-B total 1 300 000 DA-C total 20 765 005 Total 32 119 038 Notes on pages 16 – 23 are an integral part of these special purpose project financial statements 8 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT STATEMENT OF CASH WITHDRAWAL FROM DESIGNATED ACCOUNT (COMPONENT 1) FOR THE PERIOD FROM 01 JANUARY 2018 TO 31 DECEMBER 2018 (in US dollars) Payment Number Category Date of Withdrawal Currency Amount 1 STSU 28.12.2018 USD 2 711 010 2 STSU 19.12.2018 USD 2 140 000 3 STSU 06.12.2018 USD 409 656 4 STSU 16.10.2018 USD 7 413 845 5 STSU 08.10.2018 USD 9 173 6 STSU 24.07.2018 USD 15 123 7 STSU 12.07.2018 USD 2 136 719 8 STSU 23.05.2018 USD 2 792 357 9 STSU 03.05.2018 USD 382 335 10 STSU 16.04.2018 USD 2 757 508 11 STSU 21.02.2018 USD 795 269 Total: 21 562 995 Summary schedule by category Category 1 total - STSU 21 562 995 Total: 21 562 995 Notes on pages 16 – 23 are an integral part of these special purpose project financial statements 9 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT DESIGNATED ACCOUNT STATEMENT (COMPONENT 1) FOR THE PERIOD FROM 01 JANUARY 2018 TO 31 DECEMBER 2018 (in US dollars) Account No 25137120055000 Bank JSC Ukreximbank Address Ukraine, 03150, Kyiv, Antonovicha str., 127 Relevant loan Loan Agreement # 8475-UA Currency US dollars OPENING BALANCE 813 380 Receipts: Funds received 20 765 005 TOTAL FUNDS RECEIVED 20 765 005 Deductions: expenditure Transfer of funds to the transit account 21 562 995 Bank services - TOTAL COSTS 21 562 995 CLOSING BALANCE 15 390 Notes on pages 16 – 23 are an integral part of these special purpose project financial statements 10 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT STATEMENT OF CASH WITHDRAWAL FROM DESIGNATED ACCOUNT (COMPONENT 2, 3) FOR THE PERIOD FROM 01 JANUARY 2018 TO 31 DECEMBER 2018 (in US dollars) Payment Number Category Date of Withdrawal Currency Amount 1 STSU 19.12.2018 USD 25 000 2 STSU 04.12.2018 USD 165 000 3 STSU 20.11.2018 USD 5 100 4 STSU 02.11.2018 USD 62 000 5 STSU 04.09.2018 USD 98 000 6 STSU 07.08.2018 USD 115 000 7 STSU 01.08.2018 USD 61 134 8 STSU 18.07.2018 USD 8 788 9 STSU 03.07.2018 USD 100 000 10 STSU 02.07.2018 USD 200 000 11 STSU 14.06.2018 USD 61 134 12 STSU 12.06.2018 USD 90 000 13 STSU 25.05.2018 USD 11 000 14 STSU 04.05.2018 USD 32 000 15 STSU 05.04.2018 USD 43 500 16 STSU 19.03.2018 USD 26 500 17 STSU 08.02.2018 USD 31 440 18 STSU 06.02.2018 USD 3 520 Total: 1 139 116 Summary schedule by category Category 2 total - Category 3 total - STSU 1 139 116 Total: 1 139 116 Notes on pages 16 – 23 are an integral part of these special purpose project financial statements 11 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT DESIGNATED ACCOUNT STATEMENT (COMPONENT 2, 3) FOR THE PERIOD FROM 01 JANUARY 2018 TO 31 DECEMBER 2018 (in US dollars) Account No 25136110055000 Bank JSC Ukreximbank Address Ukraine, 03150, Kyiv, Antonovicha str., 127 Relevant loan Loan Agreement # 8475-UA Currency US dollars OPENING BALANCE 334 742 Receipts: Funds received 1 300 000 TOTAL FUNDS RECEIVED 1 300 000 Deductions: expenditure Transfer of funds to the transit account 1 139 116 TOTAL COSTS 1 139 116 CLOSING BALANCE 495 626 Notes on pages 16 – 23 are an integral part of these special purpose project financial statements 12 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT STATEMENT OF WITHDRAWALS THROUGH THE SUMMARY SHEETS AND STATEMENTS OF EXPENDITURES FOR THE PERIOD FROM 01 JANUARY 2018 TO 31 DECEMBER 2018 (in US dollars) Category Total Application number 1 2 3 1. Expenditures actually incurred during 2018 Total: 21 612 773 631 849 491 758 22 736 380 2. Applications submitted to the World Bank and reimbursed for the period from 01 January 2018 to 31 December 2018 87 2 728 249 - - 2 728 249 81 2 151 469 - - 2 151 469 78 7 039 774 - - 7 039 774 76 - 27 027 47 595 74 622 68 783 488 - - 783 488 61 - 56 170 59 071 115 241 58 1 536 614 - - 1 536 614 52 539 146 - - 539 146 49 5 137 315 - - 5 137 315 45 - 23 756 39 083 62 839 44 - 19 114 42 826 61 940 Total: 19 916 055 126 067 188 575 20 230 697 3. Expenditures factually incurred during 2017 and compensated by the World Bank during 2018 61 - 56 170 59 071 115 241 49 5 137 315 - - 5 137 315 45 - 23 756 39 083 62 839 44 - 19 114 42 826 61 940 Total: 5 137 315 99 040 140 980 5 377 335 4. Expenditures factually incurred during 2018 and compensated by the World Bank during 2018 87 2 728 249 - - 2 728 249 81 2 151 469 - - 2 151 469 78 7 039 774 - - 7 039 774 76 - 27 027 47 595 74 622 68 783 488 - - 783 488 58 1 536 614 - - 1 536 614 52 539 146 - - 539 146 Total: 14 778 740 27 027 47 595 14 853 362 5. Table of differences in Project costs between the World Bank records and Project Consultancy Support Unit (PCSU) for the period from 01 January 2018 to 31 December 2018 Category Total 1 2 Reimbursed according to IBRD information 19 916 055 126 067 188 575 20 230 697 Amount of costs not provided for reimbursement as at 31 December 2018 (1 696 718) (505 782) (303 183) (2 505 683) According to PCSU data 21 612 773 631 849 491 758 22 736 380 Notes on pages 16 – 23 are an integral part of these special purpose project financial statements 13 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT STATEMENT OF ACTUAL EXPENDITURE IN NATIONAL CURRENCY FOR THE PERIOD FROM 01 JANUARY 2018 TO 31 DECEMBER 2018 (in US dollars) Expenditures by Categories Payment USD Equivalent Currency Amount Currency (1) Category 1 Goods, works, non-consulting services, consultants' services and Operating Costs for Part 1 of the Project UAH 824 377 067 30 589 146 (2) Category 2 Goods, works, non- consulting services, consultants' services and Operating Costs for Part 2 of the Project UAH 45 831 265 1 709 508 (3) Category 3 Goods, non-consulting services, consultants' services and Operating Costs for Part 3 of the Project UAH 13 302 868 491 758 Total expenditures: 883 511 200 32 790 412 Co-financing Payment USD Equivalent Currency Amount Currency (1) Category 1 Goods, works, non-consulting services, consultants' services and Operating Costs for Part 1 of the Project UAH 240 033 530 8 862 423 (2) Category 2 Goods, works, non- consulting services, consultants' services and Operating Costs for Part 2 of the Project UAH - - (3) Category 3 Goods, non-consulting services, consultants' services and Operating Costs for Part 3 of the Project UAH - - Total expenditures: 240 033 530 8 862 423 Notes on pages 16 – 23 are an integral part of these special purpose project financial statements 14 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT RECONCILIATION BETWEEN THE PCSU AND THE BANK RECORDS FOR THE PERIOD FROM 01 JANUARY 2018 TO 31 DECEMBER 2018 (in US dollars) According to PCSU for Expenditures not yet As per the World Bank's Category 2018 claimed for reimbursement records total for 2018 1-A 4 751 121 793 454 41 838 1-B 4 410 326 2 571 805 172 256 1-C 4 998 232 1 119 977 834 860 1-D 2 408 164 525 824 58 744 1-E 944 580 141 333 1 261 280 1-F 1 768 076 4 711 973 904 1-G 8 104 001 1 006 362 1 401 785 1-H 3 204 646 670 565 392 648 2 1 709 508 604 822 99 040 3 491 758 444 163 140 980 TOTAL: 32 790 412 7 883 016 5 377 335 FEF 536 825 DA-B 74 622 DA-C 3 430 959 TOTAL: 18 895 769 The Loan Amount under the Agreement 214 729 837 Expenditures under the Project for 2015-2017 (40 864 119) The balance as of 01.01.2018 under the Loan Agreement 173 865 718 Deduct: Opening balance of funds Designated account B 334 742 Designated account C 813 380 National currency accounts in STSU (component 1) 13 186 514 National currency accounts in STSU (components 2, 3) 14 232 Total: 14 348 868 Deduct: Project expenditures: (1) Category 1 Goods, works, non-consulting services, consultants' services and Operating Costs for Part 1 of the 30 589 146 Project (2) Category 2 Goods, works, non- consulting services, consultants' services and Operating Costs for Part 2 of the 1 709 508 Project (3) Category 3 Goods,non-consulting services, consultants' services and Operating Costs for Part 3 of the Project 491 758 Front-end Fee - Total Project expenditures: (32 790 412) Designated account B 495 626 Designated account C 15 390 National currency accounts in STSU (component 1) 13 136 736 National currency accounts in STSU (components 2, 3) 29 741 Total available funds: (13 677 493) Total withdrawals: (32 119 037) Balance as at December 31, 2018 141 746 681 Notes on pages 16 – 23 are an integral part of these special purpose project financial statement 15 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018, AND CUMULATIVE AS AT 31 DECEMBER 2018 (IN US DOLLARS) 1. BACKGROUND On June,15 2015 the Loan Agreement # 8475-UA dated 19 Marсh 2015 between Ukraine and International Bank for Reconstruction and Development become effective. In accordance with the Agreement the Loan amount equals to 214,729,837 US dollars and is provided for the realization of the the Serving People, Improving Health Project. By its letter #2015/6/15-44 dated June,15 2015, the World Bank confirmed the entry into force of the Loan Agreement between Ukraine and the International Bank for Reconstruction and Development ("The World Bank") of March 19, 2015 about implementation of the Project "Serving people, Improving Health Project". Ukraine fully complied with all four preconditions defined by the World Bank on March 19, 2015. The objectives of the Project are to improve the quality of health services in selected oblasts, with special focus on primary and secondary prevention of cardiovascular diseases and cancer, and to enhance the efficiency of the health care system. The Project consists of the following parts, namely: Part 1. Improving service delivery at the local level Part 2. Strengthening Ministry of Health governance Part 3. Project management, and monitoring and evaluation Improving service delivery at the local level (regional component) will support health care reform at the regional level in 8 selected on a competitive basis regions (Vinnytsia, Volyn, Dnipropetrovsk, Zakarpattia, Zaporohzhia, Lviv, Poltava, and Rivne regions, Vinnytsia city). Within the framework of universal primary objective of improving the prevention and treatment of inot nfectious diseases and not the associated strengthening mechanisms for the provision of services in the areas to be implemented different priority areas, namely: 1) improving primary health care in general; 2) reduction of cardiovascular disease and mortality; 3) early detection and treatment of cancer; 4) rationalization of the system of hospitals and government in it. A public health sector governance improvement" (central component) that will be implemented at the level of the Ministry of Health of Ukraine, provides: 1) the development and introduction of new DRG-based financing health care methods 2) the development of public health 3) Information and communication support health care reform and 4) informational support of health 5) strengthening of the institutional capacity of the Ministry of Health of Ukraine and areas covered by the project The purpose of the component is to strengthen the strategic management of the health system, and to ensure the proper coordination of the sector at the regional level with the Ministry of Health. Project management, and monitoring and evaluation (central component) is aimed at supporting the Project coordination at the national level, which will be responsible for project implementation and technical assistance areas, as well as undertaking monitoring and evaluation of the project. Project executive in charge is the Ministry of Health governance of Ukraine, Vinnitsa, Volyn, Dnipropetrovsk, Zakarpattya, Zaporohzhia, Lviv, Poltava, Rivne state administrations and Vinnitsa city council. The Closing Date is September 30, 2020. Principal Payment date on each February 15 and August 15 beginning August 15, 2020 through on February 15, 2038. 16 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 The following expenses are financed under the Loan: Loan amount № Category in US dollars % of expenditures financed (1) Goods, works, non-consulting services, consultants’ services and Operating Costs for Part 1 of the Project to be implemented by: (a) Vinnitsa Oblast (state administration 32 850 400 and city council) 100% (b) Volyn Oblast 30 000 000 (c) Dnipropetrovsk Oblast 40 000 000 (d) Zakarpattya Oblast 6 529 600 (e) Zaporizhzhya Oblast 4 000 000 (f) Lviv Oblast 10 150 000 (g) Poltava Oblast 41 000 000 (h) Rivne Oblast 25 000 000 (2) Goods, works, non-consulting services, 100% consultants’ services and Operating Costs 20 200 000 for Part 2 of the Project (3) Goods, non-consulting services, 100% consultants’ services and Operating Costs 4 463 012 for Part 3 of the Project Amounts due pursuant to Section 2.08 (с) (4) Front-end Fee 536 825 of the Loan Agreement TOTAL: 214 729 837 2. Basic accounting policies 2.1. Designated Accounts In order to achieve the objectives of the Project, the State Treasury of Ukraine on the request of the Ministry of Health of Ukraine has opened and maintains two separate US dollar Designated accounts at the Public Joint-Stock Company “State Export and Import Bank of Ukraine” (Ukreximbank) in order to implement Components No.1, Components No.2 and No.3 of the Project. The Bank has designated the limits of Designated accounts in an amount equivalent to $20,000,000 for the Designated Account created for the needs of activities under Component No.1 of the Project, and in an amount equivalent to $2,500,000 for the Designated Account created for the purposes of Components No.2,3 of the Project, and must be deposited from the Loan account into the respective Designated Accounts. Funds committed and further drawdowns to replenish the Designated account are withdrawn by the Recipient, who is to deliver withdrawal applications for money transfer to the Designated Account to the Bank. 2.2. Receipts and Expenditures Recognition The Project maintains its records and prepares its financial statements on the cash basis. Receipts are recognized when they are received on the bank accounts on which the advances from the Bank are deposited. Expenditures are recorded on the day of withdrawals from those accounts. 2.3. Reporting Currency According to the Bank’s requirements the currency of these financial statements is the US dollar . 2.4. Revaluation of expenditures incurred in national currency All expenditures that were actually incurred during the reporting period in national currency (UAH) are converted into US dollar and reported in the Special financial statements at the conversion rate on the date of conversion. 2.5. Reporting period According to the Bank's requirements, given report includes a period from January 1th, 2018 to December 31th, 2018. 17 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 3. Loan Account In accordance with the terms of the Loan Agreement No. 8475-UA of March 19th, 2015 between Ukraine and the Bank, the Bank withdraws from the Borrower's behalf the Loan Account and pays to itself a commission for granting a loan in the amount of one quarter of one percent (0.25%) from the amount of the Loan immediately after the date of Agreement’s entry into the force. 4. Designated bank accounts On July 9th, 2015, two Designated Accounts were opened in the Joint Stock Company "The State Export- Import Bank of Ukraine" (JSC Ukreximbank) Kyiv, Ukraine for the implementation of the Project "Serving people, Improving Health Project" in accordance with the Loan Agreement No. 8475-UA. In accordance with the requirements of the Resolution of the Cabinet of Ministers of Ukraine dated September 5th, 2007 No.1090 "Some Issues of Implementation of Budget Programs for Implementation of Economic and Social Development Projects Supported by the International Bank for Reconstruction and Development", a Designated account is a foreign currency account opened in Authorized Bank in the name of the State Treasury Service for the term of the Loan agreement. In order to convert currency and transfer funds for Component No.1 of the Project to regional subprojects, for Components No.2,3 of the Project the Ministry of Health prepares and submits to the State Treasury of Ukraine a written application for the transfer to the accounts of the special fund of the state budget of the hryvnia equivalent in foreign currency. For realization of expenditures in national currency within the framework of the project of the Ministry of Health the executors of regional subprojects opened in the State Treasury service registration accounts at the expense of the special fund of the state budget in the context of separate budget programs and accounts in Ukreximbank for settlements in foreign currency. 5. Cash Flow with the Accounts in Ukrainian banks for the period from January 1, 2018 to December 31, 2018 Cash flows on the accounts in the STSU Category 1of the Project in UAH and USD during the reporting period: Category 1-A UAH account US dollar UAH Balance as at January 1, 2018 327 035 8 648 599 Inflow : Inflow from the foreign currency account 7 489 654 202 172 043 Total inflow: 7 489 654 202 172 043 Expenditures : Expenditures incurred during the reporting period 4 751 121 125 550 408 Total expenditures: 4 751 121 125 550 408 Balance as at December 31, 2018 3 065 568 85 270 234 Starting from 1 January, 2018 to 31 December, 2018 there was no Cash Flow in the currency account in 1-A Category. Category 1-B UAH account US dollar UAH Balance as at January 1, 2018 1 740 118 47 737 639 Inflow : Inflow from the currency account 3 639 141 98 351 597 Total inflow: 3 639 141 98 351 597 Expenditures : Expenditures incurred during the reporting period 4 410 326 119 208 815 Total expenditures: 4 410 326 119 208 815 Balance as at December 31, 2018 968 933 26 880 421 18 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 Currency account US dollar Balance as at January 1, 2018 - Inflow: Inflow from the UAH account 442 067 Total inflow: 442 067 Expenditures: Sale from the currency account 442 067 Total expenditures: 442 067 Balance as at December 31, 2018 - Category 1-C UAH account US dollar UAH Balance as at January 1, 2018 3 153 892 87 506 495 Inflow : Inflow from the currency account 4 576 342 122 977 993 Total inflow: 4 576 342 122 977 993 Expenditures : Expenditures incurred during the reporting period 4 998 232 134 710 765 Total expenditures: 4 998 232 134 710 765 Balance as at December 31, 2018 2 732 002 75 773 723 Starting from 1 January, 2018 to 31 December, 2018 there was no Cash Flow in the currency account in 1-C Category. Category 1-D UAH account US dollar UAH Balance as at January 1, 2018 2 138 017 59 523 159 Inflow : Inflow from the currency account 2 187 037 60 942 769 Total inflow: 2 187 037 60 942 769 Expenditures : Expenditures incurred during the reporting period 2 408 164 67 027 377 Total expenditures: 2 408 164 67 027 377 Balance as at December 31, 2018 1 916 890 53 438 551 Currency account US dollar Balance as at January 1, 2018 - Inflow : Inflow from the UAH account 1 233 726 Total inflow: 1 233 726 Expenditures : Sale from the currency account 1 233 726 Total expenditures: 1 233 726 Balance as at December 31, 2018 - Category 1-E UAH account US dollar UAH Balance as at January 1, 2018 345 798 8 990 328 Inflow : Inflow from the currency account 2 665 638 71 246 783 Total inflow: 2 665 638 71 246 783 Expenditures : Expenditures incurred during the reporting period 1 354 207 36 027 838 Total expenditures: 1 354 207 36 027 838 Balance as at December 31, 2018 1 657 229 44 209 273 Starting from 1 January, 2018 to 31 December, 2018 there was no Cash Flow in the currency account in 1-E Category. 19 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 Category 1-F UAH account US dollar UAH Balance as at January 1, 2018 1 860 221 49 666 603 Inflow : Inflow from the currency account - - Total inflow: - - Expenditures : Expenditures incurred during the reporting period 1 768 076 47 227 255 Total expenditures: 1 768 076 47 227 255 Balance as at December 31, 2018 92 145 2 439 348 Currency account US dollar Balance as at January 1, 2018 - Inflow : Inflow from the UAH account 413 331 Total inflow: 413 331 Expenditures : Sale from the currency account 413 331 Total expenditures: 413 331 Balance as at December 31, 2018 - Category 1-G UAH account US dollar UAH Balance as at January 1, 2018 1 043 489 28 577 705 Inflow : Inflow from the currency account 8 044 454 218 563 260 Total inflow: 8 044 454 218 563 260 Expenditures : Expenditures incurred during the reporting period 8 104 001 220 098 088 Total expenditures: 8 104 001 220 098 088 Balance as at December 31, 2018 983 942 27 042 877 Currency account US dollar Balance as at January 1, 2018 - Inflow : Inflow from the UAH account 516 460 Total inflow: 516 460 Expenditures : Sale from the currency account 516 460 Total expenditures: 516 460 Balance as at December 31, 2018 - Category 1-H UAH account US dollar UAH Balance as at January 1, 2018 1 266 514 33 457 466 Inflow : Inflow from the currency account 3 741 695 100 033 203 Total inflow: 3 741 695 100 033 203 Expenditures : Expenditures incurred during the reporting period 3 204 646 85 228 220 Total expenditures: 3 204 646 85 228 220 Balance as at December 31, 2018 1 803 563 48 262 449 Starting from 1 January, 2018 to 31 December, 2018 there was no Cash Flow in the currency account in 1-H Category. 20 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 Categories 2 та 3 UAH account US dollar UAH Balance as at January 1, 2018 14 232 391 647 Inflow : Inflow from the currency account 2 216 776 59 572 261 Total inflow: 2 216 776 59 572 261 Expenditures : Expenditures incurred during the reporting period 2 201 266 59 134 133 Total expenditures: 2 201 266 59 134 133 Balance as at December 31, 2018 29 742 829 775 In addition, during the reporting period, payments were made from the loan account (direct payment method) for the amount of 1 077 659,21 USD. Payments are made directly to the account of the service provider. Currency account US dollar Balance as at January 1, 2018 - Inflow : Inflow from the UAH account 13 714 Total inflow: 13 714 Expenditures : Sale from the currency account 13 714 Total expenditures: 13 714 Balance as at December 31, 2018 - In accordance with the Resolution of the Cabinet of Ministers of Ukraine dated 27 May 2015, No. 350 “On Approval of the Procedure and Conditions for Granting Subvention from the State Budget to Local Budgets on the Reform of Regional Health Systems for the Implementation of Measures related to the Serving People, Improving Health Project joint with the International Bank for Reconstruction and Development ” under the withdrawal applications prepared in accordance with the provisions of the Loan Agreement between Ukraine and the International Bank for Reconstruction and Development dated 19 March 2015, No. 8475-UA, the Subvention may be granted to the subvention administrator by transferring from the loan account of the International Bank for Reconstruction and Development to the suppliers of goods (executors of works, service providers) under contracts concluded by the subvention administrator within the framework of the project implementation, to fulfill the cash obligations of the subvention administrator under such contracts. The loan, transferred from the loan account of the International Bank for Reconstruction and Development, is considered a subvention transferred from the state to the local budget, from the local budget to the subvention administrator, from the subvention administrator to the supplier of goods (executor of works, service provider) in the amount of the UAH equivalent of the transferred funds, calculated at the official exchange rate of the National Bank on the remittance day, or when the International Bank for Reconstruction and Development makes payments in UAH - in the amount of such payment. In accounting, financial and budget reporting, in terms of revenues and expenditures of the local budget at the expense of the subvention such transactions are recognized on the basis of information from the Ministry of Health on transfers made from the loan account from the International Bank for Reconstruction and Development submitted to the main administrator of funds of the local budget and the subvention administrator in the form specified by the Resolution. 6. Economic environment The Project is being implemented in the territory of Ukraine. The Ukrainian economy is in a protracted crisis, which is complicated by the military conflict in eastern Ukraine and the unrecognized separation of the Autonomous Republic of Crimea. The stabilization of the situation in Ukraine will largely depend on the government's actions aimed at resolving the military conflict, reforming the country's financial, administrative, fiscal and legal systems. The impact of these issues on the business environment in Ukraine, as well as their final settlement, can not be predicted with sufficient probability. However, all these issues can have a negative impact on the stability of the economic environment and operating activities of the Project. 21 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 7. Contracts List of contracts in force at December 31, 2018: Type of goods or services Contracts value in Contract (CW/GO/CS/OP/TR) USD currency Consulting Services / CS 11 877 228 USD Training / TRNG 193 873 USD Works / W 32 684 127 USD Technical services / TS 439 196 USD Goods / G 28 626 712 USD Operating costs / OE 47 793 USD 8. Inventories Inventories purchased at the expenses of Loan during current period are the following: 2018 Accumulated Medical Office Medical Office equipment. equipment Other equipment. equipment Other Part 1 Improving service delivery at the local level (1) Category 1 Goods, works, non- consulting services, consultants' services and Operating Costs for Part 1 of the Project to be implemented by: (a) Vinnitsa Oblast (state administration and city council) 916 238 2 107 - 1 255 285 2 107 116 (b) Volyn Oblast 3 091 101 260 822 - 3 091 101 569 240 - (c) Dnipropetrovsk Oblast 1 533 619 46 884 66 165 1 592 993 58 299 71 513 (d) Zakarpattya Oblast 2 315 360 115 494 76 701 4 231 589 116 577 76 701 (e) Zaporizhzhya Oblast 73 608 149 411 - 948 045 468 941 - (f) Lviv Oblast 1 651 569 - 57 617 7 412 424 240 114 57 617 (g) Poltava Oblast 6 447 269 - - 10 556 815 83 622 - (h) Rivne Oblast 930 508 380 714 74 351 3 198 814 388 313 74 351 Part 1 total 16 959 271 955 431 274 834 32 287 067 1 927 214 946 605 Part 2 and 3 Strengthening Ministry of Health governance and project management, monitoring and evaluation (2 and 3) Category 2 and 3 Goods, works, non- consulting services, consultants' services and operating Costs - 86 332 228 686 - 118 271 229 360 Part 2 and 3 total - 86 332 228 686 - 118 271 229 360 PROJECT INVENTORIES TOTAL 16 959 271 1 041 763 503 520 32 287 067 2 045 485 509 659 22 THE SERVING PEOPLE, IMPROVING HEALTH PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 WORLD BANK AUDIT DOCUMENTATION CHECKLIST Name of Loan/Credit: THE SERVING PEOPLE, IMPROVING HEALTH PROJECT Loan/Credit # # 8475-UA For the period from 01 January 2018 to 31 December Audit Report: 2018 Check if Check if Included N/A I. Audit report (Opinion): A. Applicable accounting standards noted X B. Applicable auditing standards noted X C. Opinion rendered on all forms of withdrawals: 1. Statement of Expenditures X 2. Designated Account X D. All sources of financing for the project are noted X II. Financial Reports: A. Revenue Earning Entity (all of the following are required): 1. Balance sheet X 2. Cash Flow Statement X 3. Income Statement X B. Non-Revenue Earning Entity (all of the following are required): 1. Balance sheet X 2. Summary of Sources and Uses of Funds X C. If applicable (refer to Loan Agreement): 1. Statement of Expenditure (SOE) Statement X 2. Designated Account Statement X III. Notes to the Financial Statements X IV. Reconciliation between World Bank records and project records X V. Management Letter X 23