Additional Financing for Municipal Infrastructural
Development Project"
Grant No. H769-TJ
Special Purpose Project Financial Statements
for the period from January 1, 2016 to April 30, 2016 and
grace period from May 1, 2016 to August 31, 2016
and independent auditors' report


"ADDITIONAL FINANCING FOR MUNICIPAL INFRASTRUCTURAL DEVELOPMENT
PROJECT"
GRANT NO. H769-TJ
TABLE OF CONTENTS
Page
STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION
AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS
FOR THE PERIOD FROM JANUARY 1, 2016 TO APRIL 30, 2016 AND
GRACE PERIOD FROM MAY 1, 2016 TO AUGUST 31, 2016                       2
INDEPENDENT AUDITORS' REPORT                                          3-4
SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS
FOR THE PERIOD FROM JANUARY 1, 2016 TO APRIL 30,2016 AND
GRACE PERIOD FROM MAY 1, 2016 TO AUGUST 31, 2016
Statement of cash proceeds and disbursements                         5
Statement of uses of funds by project components                     6
Notes to the special purpose project financial statements          7-12


STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND
APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS
FOR THE PERIOD FROM JANUARY 1, 2016 TO APRIL 30, 2016 AND
GRACE PERIOD FROM MAY 1, 2016 TO AUGUST 31, 2016
The following statement, which should be read in conjunction with the independent auditors'
responsibilities stated in the independent auditors' report set out on pages 3-4, is made with a view to
distinguish the respective responsibilities of management and those of the independent auditors in relation
to the special purpose project financial statements of "Additional financing for Municipal Infrastructural
Development Project", financed under Financing Agreements GrantNo. H769-TJ (the "Project").
Management is responsible for the preparation of the special purpose project financial statements that
present fairly, in all material respects, cash proceeds and disbursements and uses of funds by project
components of the Project for the period from January 1, 2016 to April 30, 2016 and grace period from
May 1, 2016 to August 31, 2016 in accordance with International Public Sector Accounting Standard
"Financial Reporting Under the Cash Basis of Accounting" (the "IPSAS") issued by the International
Public Accounting Standards Board of the International Federation of Accountants and the World Bank's
Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World
Bank Financed Activities" (the "WB Guidelines").
In preparing the special purpose project financial statements, management is responsible for:
*  selecting suitable accounting policies and applying them consistently;
*  makingjudgments and estimates that are reasonable and prudent;
*  stating whether IPSAS and WB Guidelines have been followed, subject to any material departures
disclosed and explained in the special purpose project financial statements; and
*  preparing the special purpose project financial statements on a going concern basis, unless it is
inappropriate to presume that the Project will continue its activity for the foreseeable future.
Management is also responsible for:
*  designing, implementing and maintaining effective and sound system of internal control and for
revealing risks in system of internal control;
*  mnintaining proper accounting records that disclose, with reasonable accuracy at any time, the financial
position of the Project, and which enable them to ensure that the special purpose project financial
statements of the Project comply with IPSAS and WB Guidelines;
*  compliance with laws and regulations of the Republic of Tajikistan, accounting system of the Project
and the requirements of the World Bank;
* inking such steps as are reasonably available to them to safeguard the assets of the Project; and
*  detecting and preventing fraud and other irregularities.
The special purpose project financial statements for the period from January 1, 2016 to April 30, 2016 and
grace period from May 1, 2016 to August 31, 2016 were approved and authorized for issue on
October 31, 2016 by the management of the Project.
On behall   he Management
D.SNattc oda                                 H. An(6ov'
Director                                      Chief accountant
October 31, 2016                              October 31, 2016
Dushnnbc, Republic of Tajikistan              Dushanbe, Republic of Tajikistan
2


BAKER TILLY                C9 CLNR
Baker Tilly Klitou and Partners SRL
52 Splaiul Independentel
050085 Bucharest
Romania
T: +40 213156100 | F: +40 21 3156102
info@bakertillyklitou.ro
INDEPENDENT AUDITORS' REPORT                                               www.bakertillyklitou.ro
To the Management of "Additional financing for Municipal Infrastructural Development Project" under
the State Committee on Investments and Government Property Management of the Republic of Tajikistan:
Report on the Special Purpose Project Financial Statements
[1] We have audited the accompanying special purpose project financial statements of "Additional financing for
Municipal Infrastructural Development Project" (the "Project") which comprise the statement of cash
proceeds and disbursements and the statement of uses of funds by project components for the period from
January 1, 2016 to April 30, 2016 and grace period from May 1, 2016 to August 31, 2016, and a summary of
significant accounting policies and other explanatory information (the "special purpose project financial
statements").
Management's responsibility for the special purpose project financial statements
[2] Management is responsible for the preparation and fair presentation of these special purpose project financial
statements in accordance with International Public Sector Accounting Standard "Financial Reporting Under
the Cash Basis of Accounting" (the "IPSAS") issued by the International Public Accounting Standards Board
of the International Federation of Accountants, and the World Bank's Financial Management Sector Board's
"Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities" (the "WB
Guidelines"), and for such internal control as management determines is necessary to enable the preparation
of the special purpose project financial statements that are free from material misstatement, whether due to
fraud or error.
Auditors' responsibility
[3] Our responsibility is to express an opinion on these special purpose project financial statements based on our
audit. We conducted our audit in accordance with International Standards on Auditing. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the special purpose project financial statements are free from material misstatement.
[4] An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
special purpose project financial statements. The procedures selected depend on the auditors' judgment,
including the assessment of the risks of material misstatement of the special purpose project financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
controls relevant to the entity's preparation and fair presentation of the special purpose project financial
statements 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 entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the special purpose project financial
statements.
Offices:
Cyprus                Greece           Bulgaria            Romania                Moldova
Nicosia  T: +357 22 458500  Athens, Thessaloniki  Sofia T: +359 2 9580980  Bucharest T: +40 21 3156100  Chisinau T: +373 22 233003
Limassol T: +357 25 591515  T: +30 215 500 6060
Larnaca T: +357 24 663299
Registered in Romania (RN: 140/4820/2004). List of directors can be found at the Companys Registered Office
An independent member of Baker Tilly International  3


BAKER      TILLY        OFEXCELEN
[5] We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit qualified opinion.
Basis for qualified opinion
[6] The special purpose project financial statements for the year ended December 31, 2015 were audited by another
auditor. We are unable to satisfy ourselves as to the correctness of the opening balances, cumulative financing
and expenses under audit due to unwillingness of predecessor auditor to collaborate with us to discuss and
resolve material differences encountered in the opening balances.
There were no alternative audit procedures that we could perform to confirm independently the the correctness
of the opening balances.
We were also unable to determine whether adjustments might be necessary for the special purpose project
financial statements for the year ended December 31, 2015.
Qualified Opinion
[7] In our opinion, except for the effects of the matter described in paragraph [6], the accompanying special
purpose project financial statements present fairly, in all material respects, cash proceeds and disbursements
and uses of funds by project components for the period from January 1, 2016 to April 30, 2016 and grace
period from May 1, 2016 to August 31, 2016 in accordance with International Public Sector Accounting
Standard "Financial Reporting Under the Cash Basis of Accounting" (the "IPSAS") issued by the International
Public Sector Accounting Standards Board of the International Federation of Accountants, and the World
Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for
World Bank Financed Activities" (the "WB Guidelines").
Emphasis of matter
[8] Without further qualifying our opinion, we draw attention to Note 2 to the special purpose project financial
statements which describes the basis of accounting. These special purpose project financial statements were
prepared for complying with the appropriate World Bank Guidelines and Grant agreement requirements, and
therefore are not intended to be a complete presentation of the Additional financing for Municipal
Infrastructural Development Project (the "Project") operations.
Other Matter
[9] The special purpose project financial statements are prepared to assist the Project to comply with the
requirements of the World Bank. As a result, the special purpose project financial statements may not be
suitable for another purpose.
Baker Tilly Klitou and Partners SRL                          a
Bucharest, Romania                                            pPIRMPS
October 31, 2016                                           S     i o
4


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ADDITIONAL FINANCING FOR "MUNICIPAL INFRASTRUCTURAL DEVELOPMENT
PROJECT" GRANT NO. H769-TJ
NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS
FOR THE PERIOD FROM JANUARY 1, 2016 TO APRIL 30, 2016 AND
GRACE PERIOD FROM MAY 1, 2016 TO AUGUST 31, 2016
(in US Dolars)
1.  GENERAL INFORMATION
According to the Agreement between the Republic of Tajikistan and the International Development
Association (the "IDA") dated August 23, 2012, the IDA provided additional financing in the form of
Grant No. H769-TJ in the amount of 7,700,000 Special Drawing Rights (the "SDR") to the Republic
of Tajikistan to render assistance in financing the Project "Development of municipal infrastructure".
Project purpose
The objective of the Project is to improve the availability, quality and efficiency of basic municipal
services for the population of the towns that participate in the Project. An added objective, as an
urgent response to the anticipated floods of the spring of 2012, is to contribute to their mitigation with
the supply of emergency materials.
The Project consists of the following parts:
Part A. Municipal Infrastructure Rehabilitation
Rehabilitation, repair, construction, and replacement of infrastructure and equipment for basic
municipal services in the Participating Towns, including the following activities:
*   Rehabilitating, repairing, constructing and replacing infrastructure and equipment for basic
municipal services in Farkhor through the provision of goods and works, including construction
of'a temporary waste deposit and sludge drying beds;
*   Rehabilitating, repairing, constructing and replacing infrastructure and equipment for basic
municipal services in Vose through the provision of goods and works, including construction of a
new water storage tank and ventilated improved pit latrines;
*     iEstablishing, rehabilitating, repairing, and replacing household connections to the water network
in Fnrkhor through the provision of goods and works;
*   Acquiring utility services maintenance equipment, to support KMK in responding to disruption
of services through the provision of goods; and
*   Acquiring cement, fuel and gabion wire mesh to support the Ministry of Land Reclamation and
Water Resources of Recipient in preparing for flooding.
Part I. Technical and Institutional Strengthening of KMK and its local subsidiary utility
enterprises
Assisting the institutional strengthening of KMK and its local subsidiary utility enterprises, including
the following activities:
*   Installing water usage meters in Farkhor;
* Installing a modern collection and billing system through the use of electronic kiosks;
*   Raising awareness on water conservation, solid waste disposal issues, and the advantages of
metering through a public information campaign;
*   Installing a Monitoring Information System (MIS) at KMK to automate collection, storing,
processing, and sharing data and reports related to communal services;
*   Installing a modem accounting and billing system in the Participating Towns;
*   Developing a Municipal Sector Strategy to focus on municipal issues and reforms required to
improve the delivery of communal services;
7


*   Training and building technical capacity to all utilities to implement and operate newly installed
metering program; and
*   Preparing feasibility studies to prepare investment projects identified by the Municipal Sector
Strategy.
Part C Project Management
Strengthening of the capacity of KMK and the PMU for project management, implementation,
monitoring and evaluation, including the development and maintenance of a monitoring and
evaluation system, periodic surveys of beneficiary satisfaction in Participating Towns, audit,
procurement, disbursement and financial management activities through provision of goods, technical
assistance and training, and financing of Incremental Operating Costs.
Project management
The project is implemented by the Project Management Centre that is budgetary institution located in
the Republic of Tajikistan, Dushanbe, Karabayev N. 56 str..
Duration of the Project is from August 23, 2012 to April 30, 2016 and grace period from May 1, 2016
to August 31, 2016.
2. PRESENTATION OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS
Basis of preparation
These specinl purpose project financial statements have been prepared in accordance with the
Internationnl Public Sector Accounting Standard (the "IPSAS") "Financial Reporting under the Cash
isis of Accounting" issued by the Public Sector Committee of the International Federation of
Aceountants, and incorporate the following principal accounting policies, which have been consistently
followed in all material respects and comply with the World Bank's Financial Management Sector
lBourd's "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities"
(the "Wk Guidelines").
Under the cnsh basis system income (or expenditure) is recognized when cash is received (or paid)
irrespective of when goods or services are received.
The Project's approved budget disclosed by categories of expenses is not publicly available and as
such comparison of budget and actual amounts is not presented.
TIhese special purpose project financial statements consist of:
*  Statement of cash proceeds and disbursements;
* Statement of uses of funds by project components;
*  Notes to the special purpose project financial statements, including short description of main
statements of accounting policy and other descriptive notes.
'hle reporting currency of these special purpose project financial statements is US dollars
(the "IJSD").
8


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash basis of accounting
Special purpose project financial statements are prepared on a cash basis of accounting. The cash
basis of accounting recognizes transactions and events only when cash (including cash equivalents) is
received or paid by the entity. Special purpose project financial statements prepared under the cash
basis provide readers with information about the sources of cash raised during the period, the
purposes for which cash was used and the cash balances at the reporting date. The measurement focus
in the special purpose project financial statements is balances of cash and changes therein.
Foreign currency
Operations in foreign currency initially are counted in functional currency by the official currency
exchange rate settled by the National Bank of Tajikistan (the "NBT") on a date of operation.
Funds received are translated into USD at official exchange rate of Special Drawing Rights (the "SDR")
at the date of funds receipt. All payments made in local currency are translated into USD at the official
exchange rate defined by National Bank of Tajikistan, at the date of transaction.
Monetary assets and liabilities expressed in foreign currency are converted to functional currency at
official exchange rate on a date settled by the NBT.
All foreign exchange differences resulted from maturity or recounting are included in statement of
cash proceeds and disbursements.
Non-monetary items are valued according to their historic cost in foreign currency, which are
recalculated on rates of the initial operation date.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and due from banks, which can be converted to the
corresponding amount of cash in the short term.
Taxes
Cniculation and payment of personal income tax and social security contributions from income of
local staff and consultants is made in accordance with the requirements and rates of the Tax Code of
the Republic of Tajikistan.
Project expenses
The expenses are recorded in the period when they were actually paid.
Sources of funds
Tli flinds were provided by the World Bank and co-financed by the Government of the Republic of
Tajikistan to the Project by replenishment of special account or through direct payment to the end
supplier of goods and/or services.
9


4. CASH AND CASH EQUIVALENTS
Cash and cash equivalents as at August 31, 2016, April 30, 2016 and December 31, 2015 comprise:
August 31,        April 30,      December 31,
2016             2016             2015
Special account in foreign currency                 -           592,857          283,175
Co-financing by the Government of the Republic
of Tajikistan special account in national
currency                                         2,443           26,541           27,035
Escrow account in the OJSC "Orienbank"          19,000           19,000                -
Transit account in national currency               21                 -              48
Transit account in foreign currency                12                12                -
Tender account in foreign currency                   -                -             513
Cash on hand                                         -              119            1,514
21,476          638,529          312,285
The cash balance as at August 31, 2016 in amount of 19,000 US dollars was temporarily transferred to
the escrow account in the OJSC "Orienbank" to cover subsequent expenses associated to liabilities on
completing the Project (Note 10).
5.   CUMULATIVE PROJECT EXPENDITURES
Project expenditures by components are presented in the statement of funds by project components.
Project expenditures on major categories are presented in the statement of cash proceeds and
disbursements. Project expenditures by source of financing are presented as following:
Grace period   Cumulative   For the period  Cumulative       2015        Cumulative
from May 1,                     from
2016 to                   January I to
August 31,                    April 30,
2016                         2016
Yources offlnuncing
Grant No. 11769-T.      220,042     11,936,765       739,159     11,716,723     2,707,815      9,968,973
Co-financing by
the Government of the
Republic ofTijikistan        -             -             -              -       243,726       1,008,591
220,042     11,936,765       739,159     11,716,723     2,951,541     10,977,564
6. GRANTS RECEIVED
The grants received were presented by the following:
Grace period     For the period        2015
from May 1,          from
2016 to        January I to
August 31,         April 30,
2016              2016
Grant No.H769-TJ
Direct payments                                                       -           65,855
Reimbursement of expenses                           -          1,060,812        2,851,499
Collnancing by the Government of
the Republic of Tajikistan                          -                 -          202,903
-          1,060,812        3,120,257
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7. FINANCIAL POSITION
Financial position as at August 31, 2016, April 30, 2016 and December 31, 2015 comprise of:
August 31,        April 30,      December 31,
2016             2016              2016
ASSETS AND EXPENDITURES
Cash and cash equivalents                      21,476           638,529         312,285
Cumulative project expenditures             11,936,765       11,716,723       10,977,564
Refunds                                      403,015                -                -
Foreign exchange differences                   12,670            12,670           6,960
Other expenses                                  6,201             6,201           6,203
TOTAL ASSETS AND EXPENDITURES               12,380,127       12,374,123       11,303,012
FINANCING
Grants received                             12,344,176       12,344,176       11,283,364
Other income                                   35,951            29,947          19,648
TOTAL FINANCING                             12,380,127       12,374,123       11,303,012
8.   WITHDRAWAL APPLICATIONS
Withdrawal applications for the period from January 1, 2016 to April 30, 2016 and grace period from
May 1, 2016 to August 31, 2016 comprise:
Sources of financing    Application     Date        Reimbursement         Total
of expenses
For the period from January 1,
2016 to April 30, 2016
Grant No. IF769-TJ
28      February 3, 2016       503,368          503,368
29      March 7, 2016          213,350          213,350
30      April 1, 2016          344,094          344,094
1,060,812        1,060,812
Grace period from May 1,
2016 to August 31,2016
(Irant No. 11 H769-TJ                                                -                -
Total:                                                        1,060,812        1,060,812
11


9.   SPECIAL ACCOUNT
Special account for the period from January 1, 2016 to April 30, 2016 and grace period from
May 1, 2016 to August 31, 2016 comprise:
Special accounts                                           Grant H769-TJ
Currency                                                  US Dollars
Bank account                                              20206840816905000423
Bank                                                      OJSC "Orienbank"
Bank's location                                           95/1 Rudaki avenue str., Dushanbe,
Tajikistan
Description                                                 US Dollars          Total
Balance as at January 1, 2016                                    283,175          283,175
Reimbursement of expenses                                       1,060,812        1,060,812
Total funds received to a special account                       1,060,812        1,060,812
The amount of eligible expenditures paid                         133,803           133,803
Transferred to Iransit account and cash on hand                  598,327           598,327
Transfer of funds to transit account foreign currency             19,000            19,000
Banuie as at April 30, 2016                                     592,857          592,857
Total funds received to a special account                 _                _
The amount of eligible expenditures paid                          20,106            20,106
Trnnsferred to transit account and cash on hand                  169,736           169,736
Reinald                                                          403,015          403,015
linlatie as at August 31, 2016                                         -                 -
10. COMMITMENTS
In the normal course of activities, the Project concludes agreements with suppliers of goods and
service in accordance with the established budget and procurement plan. As at August 31, 2016
the Ir,ject had commitments for covering audit service expenses in amount of 8,000 US dollars to
lUnker 'illy Klitou and Partners SRL. The rest of funds in amount of 11,000 in the escrow account
will be refunded to the Donor back.
11. GOING CONCERN
le period of duration of the Project was completed on April 30, 2016 and grace period on August 31,
2016.
12. LEGAL CASES
There were no any legal claims related to the Project.
13. EVENTS AFTER THE REPORTING DATE
T[here were no any events after the reporting date.
12