THE MINISTRY OF EDUCATION AND HIGHER EDUCATION EDUCATION TO WORK TRANSITION PROJECT (TF 012221) FUNDED BY INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2015 TOGETHER WITH INDEPENDENT AUDITORS’ REPORT Table of Contents Page Independent Auditors’ Report 1-2 Balance Sheet 3 Statement of Sources and Uses of Funds 4 Designated Bank Account Statement – World Bank 5 Notes to the Project Financial Statements 6-10 Annex 1: Results of Sub-Projects Spot Audits 11-12 THE MINISTRY OF EDUCATION AND HIGHER EDUCATION EDUCATION TO WORK TRANSITION PROJECT (TF 012221) FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) BALANCE SHEET AS AT DECEMBER 31, 2015 (Currency: USD) Note 2015 2014 Assets Current Assets Cash at bank 8 630,574 224,862 Total Current Assets 630,574 224,862 Total Assets 630,574 224,862 Liabilities and Fund Balance Fund balance 8 630,574 224,862 Total Liabilities and Fund Balance 630,574 224,862 The accompanying notes form an integral part of these financial statements 3 THE MINISTRY OF EDUCATION AND HIGHER EDUCATION EDUCATION TO WORK TRANSITION PROJECT (TF 012221) FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) STATEMENT OF SOURCES AND USES OF FUNDS FOR THE YEAR ENDED DECEMBER 31, 2015 (Currency: USD) Cumulative up to December Note 2015 2014 31, 2015 FUND BALANCE – BEGINNING OF YEAR 224,862 457,392 - SOURCES OF FUNDS Advance payment 3&7 - - 800,000 Replenishments received 3&6 1,827,473 840,292 3,067,396 Total Sources of Funds 1,827,473 840,292 3,867,396 USES OF FUNDS Category 1: Goods, Consultants' Services and Training under the Project 4&6&7 305,391 185,272 711,787 Category 2: Quality Improvement Fund (QIF) Grants for Sub-projects 4&6&7 1,102,367 866,219 2,480,209 Category 3: Incremental Operating Costs 4&6&7 14,003 21,331 44,826 Total Uses of Funds 1,421,761 1,072,822 3,236,822 CHANGE IN FUND BALANCE 405,712 (232,530) 630,574 FUND BALANCE – END OF YEAR 8 630,574 224,862 630,574 The accompanying notes form an integral part of these financial statements 4 THE MINISTRY OF EDUCATION AND HIGHER EDUCATION EDUCATION TO WORK TRANSITION PROJECT (TF 012221) FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) DESIGNATED BANK ACCOUNT STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2015 Account number 0458/2208336/001/3001/000 Depository bank Bank of Palestine Address Ramallah Related loan / credit TF 012221 Currency U.S. Dollar (USD) Note 2015 2014 Balance, beginning of year 277,272 457,392 Receipts during the year 3 1,827,473 840,292 1,827,473 840,292 Deduct: Payments for project expenditures from designated bank account 5 1,468,892 1,020,412 1,468,892 1,020,412 Balance, end of year 8 635,853 277,272 The accompanying notes form an integral part of these financial statements 5 THE MINISTRY OF EDUCATION AND HIGHER EDUCATION EDUCATION TO WORK TRANSITION PROJECT (TF 012221) FUNDED BY THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) NOTES TO THE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2015 (Currency: USD) 1. The Project and its Financing On July 2, 2012, the International Development Association (IDA), acting as administrator of the Trust Fund for Gaza and West Bank (World Bank), and the Palestinian Liberation Organization (PLO), for the benefit of the Palestinian Authority, has signed Trust Fund Grant Agreement Number “TF 012221” in the amount of USD 6,500,000 towards the cost of the Education to Work Transition Project - E2WTP (the Project). The Project is to be implemented by the Ministry of Education and Higher Education (MoEHE) over the period from July 2, 2012 to January 31, 2018. The objectives of the Project is to improve education to work transition of young Palestinians attending and participating Tertiary Education Institutions (TEI’s) through: (i) fostering partnerships between TEI’s and employers in order to make TEI’s study programs more relevant to the needs of the labor market; and (ii) enhancing the capacity of the MoEHE and TEI’s to collect, analyze and disseminate data collected through the TEI’s graduate tracking system to monitor the outcomes of TEI’s study programs, and to inform education policy formulation and implementation. The Project consists of the following components: 1. Component 1: Education To Work Transition Innovation Grant Facility; 2. Component 2: Higher Education Graduate Tracking System; and 3. Component 3: Project Management and Coordination. The following table sets forth the budget per each category of the project: Category Budget (USD) Category 1: Goods, Consultants' Services and Training under the Project 2,200,000 Category 2: Quality Improvement Fund (QIF) Grants for Sub-Projects 4,000,000 Category 3: Incremental Operating Costs 300,000 6,500,000 6 2. Summary of Significant Accounting Policies The Project financial statements are prepared under the historical cost convention. Significant accounting policies follow: - - Basis of accounting - The Project financial statements are prepared using the cash basis of accounting, which is a comprehensive basis of accounting other than International Financial Reporting Standards (IFRS). Under this basis of accounting, sources of funds are recognized when related cash is received from the World Bank and uses of funds are recognized when cash payments are made by MoEHE. - Foreign currency - The Project’s basic functional currency is the United States Dollar (USD). Transactions that are expressed or denominated in other currencies were translated to USD using exchange rates in effect at the time of each transaction. Differences arising from the fluctuations in exchange rates were treated as exchange gains or losses in the statement of sources and uses of funds and designated account statement. 3. Sources of Funds Up to December 31, 2015, MoEHE received the following payments from the World Bank for the Project purposes: Category 1: Category 2: Category 3: Withdrawal Date of Goods, QIF Grants Incremental Application (WA) Fund Advance Consultants’ for Sub- Operating Number Transfer Payment and Training projects Costs Total Cumulative amount up to December 31, 2014 800,000 339,195 872,374 28,354 2,039,923 2015 January 6, E2WTP WA 15 2015 - 39,873 91,582 941 132,396 February E2WTP WA 16 3, 2015 - 24,917 363,886 1,528 390,331 April 26, E2WTP WA 17 2015 - 14,370 310,085 572 325,027 June 18, E2WTP WA 18 2015 - 54,511 191,790 7,219 253,520 September E2WTP WA 19 10, 2015 - 50,741 116,670 2,355 169,766 October E2WTP WA 20 25, 2015 - 37,581 245,396 1,385 284,362 December E2WTP WA 21 9, 2015 - 83,501 187,940 630 272,071 Amount received during the year 2015 - 305,494 1,507,349 14,630 1,827,473 Cumulative amount up to December 31, 2015 800,000 644,689 2,379,723 42,984 3,867,396 7 4. Uses of Funds This item represents the following: 2015 Project Components Component 1: Component 2: Education to Higher Component 3: Work Education Project Transition Graduate Management Cumulative up Innovation Tracking and to December Grant Facility System Coordination Total 2014 31, 2015 Category 1: Goods, Consultants' Services and Training 96,788 61,285 147,318 305,391 185,272 711,787 Category 2: QIF Grants for Sub-projects* 1,102,367 - - 1,102,367 866,219 2,480,209 Category 3: Incremental Operating Costs - - 14,003 14,003 21,331 44,826 1,199,155 61,285 161,321 1,421,761 1,072,822 3,236,822 *QIF grants represent amounts paid to different universities within Component 1 “Education to Work Transition Innovation Grant Facility”, as detailed below: USD Cumulative up to December Grant Number TEI 2015 2014 31, 2015 QIF-Cycle 1 C1-13-U-BZU-1-01 Birzeit University 9,387 - 52,387 C1-13-C-ISC-1-02 Ibn Sina College 91,958 - 137,937 C1-13-U-IUG-1-03 Islamic University of Gaza 99,619 - 149,429 C1-13-U-NNU-1-04 An-Najah National University 20,000 97,740 166,610 C1-13-U-NNU-1-05 An-Najah National University 42,865 42,865 128,595 C1-13-C-PAUC-1-06 Palestine Ahliya University College 69,773 94,693 209,320 C1-13-U-PPU-1-07 Palestine Polytechnic University 100,000 50,000 200,000 C1-13-C-PTCD-1-08 Palestine Technical College- Deir Al-Balah 93,340 46,670 186,680 C1-13-U-PTUK-1-09 Palestine Technical University- Kadoorie 142,680 - 190,240 C1-13-C-UCAS-1-10 University College for Applied Sciences 48,320 48,320 144,960 Dar Al -Kalima University College of Arts C1-13-C-DKC-1-12 and Culture 68,841 67,029 135,870 C1-13-C-WUC-1-11 Wajdi Nihad Abu Gharbieh College - 117,390 161,085 786,783 564,707 1,863,113 QIF-Cycle 2 C2-14-C-UCAS-2-02 University College of Applied Sciences 49,582 49,582 99,164 C2-14-U-NNU-2-03 An-Najah National University 46,180 46,180 92,360 C2-14-U-QU-2-06 Al-Quds University 98,170 - 98,170 C2-14-U-BZU-2-08 Birzeit University 31,179 31,179 62,358 C2-14-C-HHCT-2-09 Hisham Hijjawi College of Technology 90,473 - 90,473 C2-14-U-AZU-2-01 Al-Azhar University- Gaza - 44,088 44,088 C2-14-U-PPU-2-04 Palestine Polytechnic University - 42,000 42,000 C2-14-U-BU-2-05 Bethlehem University - 48,483 48,483 C2-14-U-HU-2-07 Hebron University - 40,000 40,000 315,584 301,512 617,096 1,102,367 866,219 2,480,209 8 5. Payments for Project Expenditures Below is a reconciliation of the Project expenditures shown in the designated bank account statement with the Project expenditures shown in the statement of sources and uses of funds: 2015 2014 Payments as reported in designated bank account statement 1,468,892 1,020,412 Add: Outstanding payments as of December 31, 2015 (note 8) 5,279 - Less: Outstanding payments as of December 31, 2014 cleared from bank during year 2015 (52,410) 52,410 Total uses of funds per statement of sources and uses of funds 1,421,761 1,072,822 6. SOE Procedures (Payments from Designated Bank Account) Payments from designated bank account represent amounts disbursed by MoEHE under the Project for the following disbursement categories: Disbursement Category Withdrawal Category 1: Category 2: Category 3: Application Goods, QIF Grants Incremental (WA) Consultants’ for Sub- Operating Number Payment Method and Training projects Costs Total Cumulative amount up to December 31, 2014 339,195 872,374 28,354 1,239,923 2015 E2WTP WA 15 Payment from designated bank account 39,873 91,582 941 132,396 E2WTP WA 16 Payment from designated bank account 24,917 363,886 1,528 390,331 E2WTP WA 17 Payment from designated bank account 14,370 310,085 572 325,027 E2WTP WA 18 Payment from designated bank account 54,511 191,790 7,219 253,520 E2WTP WA 19 Payment from designated bank account 50,741 116,670 2,355 169,766 E2WTP WA 20 Payment from designated bank account 37,581 245,396 1,385 284,362 E2WTP WA 21 Payment from designated bank account 83,501 187,940 630 272,071 305,494 1,507,349 14,630 1,827,473 Total Client connection up to December 31, 2015 644,689 2,379,723 42,984 3,067,396 Add: Expenses recorded by MoEHE in year 2015 but not reported to IDA as of December 31, 2015: E2WTP WA 22 67,098 100,486 1,842 169,426 MoEHE Records as of December 31, 2015 711,787 2,480,209 44,826 3,236,822 9 7. Reconciliations Between World Bank Records (Client Connection) and MoEHE Records Cumulative up to December 31, 2015 Project accounts per the client connection Advance payment transferred to MoEHE 800,000 Category 1: Goods, Consultants' Services and Training under the Project 644,689 Category 2: QIF Grants for Sub-projects 2,379,723 Category 3: Incremental Operating Costs 42,984 3,867,396 Project accounts per MoEHE records Category 1: Goods, Consultants' Services and Training under the Project 711,787 Category 2: QIF Grants for Sub-projects 2,480,209 Category 3: Incremental Operating Costs 44,826 Bank balance per MoEHE records as of December 31, 2015 (note 8) 630,574 3,867,396 Difference - 8. Fund Balance - End of Year The fund balance at December 31, 2015 represents the following: USD Cash maintained in the USD designated bank account 635,853 Deduct: Outstanding payments as at December 31, 2015* (5,279) Bank balance as per MoEHE records as of December 31, 2015 630,574 * Represents payments of Project expenses processed and recorded in MoEHE accounting system in the year ended December 31, 2015 but cleared the bank subsequent to December 31, 2015. 10 Annex 1 Results of Sub-Projects Spot Audits A) Introduction One major component of the Education to Work Transition Project is the Quality Improvement Fund (QIF) Grants (component 1) which has a total budget of USD 4 million. This component provides incentives to Tertiary Education Institutions (TEIs) to develop and implement employment-oriented education programs in partnership with the private sector. The main goals of the QIF Grants are to (i) increase the productive linkages between TEIs and businesses; (ii) promote social responsibility among the business community; and (iii) better prepare graduates to find and keep gainful employment. Total disbursements for this component as at December 31, 2015 is USD 2,480,209, as detailed in note 4 to the Project’s financial statements, which are divided into 2 cycles: 1. QIF - Cycle 1 Under this cycle, a total of 11 sub-projects exist as of December 31, 2015 which were awarded to 10 TEIs for total disbursement amounts of USD 1,863,113 distributed between 4 universities and 6 colleges of which one university and two colleges are located in Gaza Strip. 2. QIF - Cycle 2 Under this cycle, a total of 9 sub-projects exist as of December 31, 2015 which were awarded to 9 TEIs for total disbursement amounts of USD 617,096 distributed between 7 universities and 2 colleges of which one university and one college are located in Gaza Strip. B) Scope and Objectives We performed spot audits for randomly selected grants as set out in the Terms of Reference (ToR) for this engagement. Our audit testing was performed to:  Obtain reasonable assurance about whether the expenditures claimed by the TEIs in the Statements of Expenditures (SOEs) are free of material misstatement.  Ascertain the TEIs’ compliance with the terms of MoEHE’s funding agreement as well as the achievement of physical and other progress under the sub-projects.  Ensure that resources received have been used for payment of eligible expenditures in accordance with the funding agreement. The specific objectives of the spot audits are:  Ensure that the sub-project grants were awarded in accordance with procedures agreed by the World Bank.  Resources received by TEIs were used for eligible expenditures.  Inspection of original supporting documents at TEIs’ offices.  Physical inspection of assets acquired under the grant. 11 Based on the above, we selected a sample comprising 11 grants implemented by 7 education institutions in the West Bank and Gaza. Total grant population during 2015 was 20 grants, percentage covered was 55%. These audited grants were: Sample Date of # Grant # TEI Project Name Visit Cycle 1 1 C1-13-U-NNU-1-04 An-Najah National Linking with the private IT sector: the IT March University-IT faculty curriculum reform 20, 2016 2 C1-13-U-NNU-1-05 An-Najah National Improvement of Students Skills towards March University-FI Employment Enhancement: Collaboration 20, 2016 Between An-Najah Training Innovation Centers with PFIU 3 C1-13-U-PPU-1-07 Palestine Increasing Student Employability and March Polytechnic entrepreneurial skills through a modified 24, 2016 University problem- based learning model derived from the real live needs of the labor market 4 C1-13-C-PTCD-1-08 Palestine Technical Development of the Fashion Design March College- Deir Al- Specialization and clothes industry 24, 2016 Balah 5 C1-13-U-PTUK-1-09 Palestine Technical Enhancing the Quality of Accounting March University Information Systems (AIS) Program at 22, 2016 Kadoorie (PTUK) Palestine Technical University- Kadoorie (PTUK) 6 C1-13-C-UCAS-1-10 University College Pal Aps for Building the Capacity of the IT March for Applied students in areas of programming and 23, 2016 Sciences development of smart phones applications Cycle 2 7 C2-14-C-UCAS-1-02 University College Palfarm for the Agriculture Diploma March of Applied Sciences Students Capacity Building 23, 2016 8 C2-14-U-NNU-2-03 An-Najah National Linking with the Private Tourism Sector: The March University Tourism and Archaeology Department 20, 2016 Curriculum Reform 9 C2-14-U-PPU-2-04 Palestine Enhancing Graduate Engineers March Polytechnic Employability using a Win-Win Innovative 24, 2016 University Triple Helix Partnership Model 10 C2-14-U-HU-2-07 Hebron University Development and Improvement of March Agricultural Practical Courses 24, 2016 11 C2-14-U-BZU-2-08 Birzeit University Development of the Palestinian Academic March Archeology Program Offered by Birzeit 21, 2016 University for the Benefit of Rural Tourism in Palestine C) Results Our spot audits did not identify any findings to be reported. 12