0 GrantThornton Independent Auditor's Report and Special Purpose Financial Information Results - Based Road Maintenance and Safety Project (P132982) For the period from 1 January to 31 December 2017 Contents Page Independent Auditos Report i-ii Statement of Sources and Uses of Funds 1 Statement of Withdrawal Applications 2 Notes to the Special Purpose Financial Information 3-7 Appendixes I-Ill O GrantThornton Grant Thornton Sh,p. Rr. Sami Frasheri, Kompleksi T.I.D, Shk B, Floor 1, 10 000 Tirana, Albania T +355 4 22 74 832 F +355 4 22 56 560 ontac@algL=en Independent Auditor's Report To the Management of the "Results - Based Road Maintenance and Safety Project" and Ministry of Finance and Economy of the Republic of Albania Opinion We have audited the accompanying special purpose financial infonnation comprising the statement of sources and uses of funds, statement of withdrawal applications and related notes of the "Results - Based Road Maintenance and Safety Project" (further referred to as the "Project"), implemented by the Albanian Road Authority financed under International Bank for Reconstruction and Development ('IBRD') Loan Agreement Number 8489-AL and Government of Albania Contributions for the period from 1 January to 31 December 2017. In our opinion, the special purpose financial information of the Project "Results - Based Road Maintenance and Safety" is prepared, in all material respects, in accordance with the cash receipts and disbursement basis of accounting as set out in note 2 to the special purpose financial information. Basis for Opinion We conducted out audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the audit of the special purpose financial information section of our report. We are independent of the entity in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to out audit of the special purpose financial information in Albania, and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for out opinion. Emphasis of Matter- Basis of Accounting and Restriction on Distribution Without modifying our opinion, we draw attention to note 2 to the special purpose financial information, which describe the basis of accounting. The special purpose financial information are prepared to assist the Project to comply with the financial reporting provisions of the financing agreements set out in the note I to the special purpose information. As a result, the special purpose financial information may not be suitable for another purpose. Our report is intended solely for the Project, the donors and the Ministry of Finance and Economy and should not be used by or distributed to parties other than the Project, the donors or the Ministry of Finance and Economy. Responsibilities of Management for the Special Purpose Financial Information Management is responsible for preparation and fair presentation of the special purpose financial information in accordance with the basis of accounting described in notes 2 and 3; this includes determining that the cash receipts and disbursements basis of accounting is an acceptable basis for the preparation of the special purpose financial information in the circumstances, and for such internal control as management determines is necessary to enable the preparation of a special purpose financial information that is free from material misstatement, whether due to fraud or error. Auditors Responsibility for the Audit of the Special Purpose Financial Information Our objectives are to obtain reasonable assurance about whether the special purpose financial information as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this special purpose financial information. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the special purpose financial information, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for out opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controL * Obtain an understanding of internal control relevant to the audit 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. * Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the special purpose financial information or, if such disclosures are inadequate, to modify out opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the entity to cease to continue as a going concern. ii * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates, if any, and related disclosures made by management. * Evaluate the overall presentation, structure and content of the special purpose financial information, including the disclosures, and whether the special purpose financial information represents the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Grant Thornton sh.p.k. Tirana, Albania 31 May 2019 1923 07M iii Statement of Sources and Uses of Funds For the period Cumulative from For the period from 1 January 10 April 2015 to from 1 January to to 31 December 31 December Note 31 December 2017 2016 2017 Sources of funds IBRD funding 3 - 8,244,751 8,244,751 GoAcontributions 4 2,730,184 316,017 3,046,200 Sale of Bid documents 5 - 1,719 5,815 Interest received 6 3,739 5,019 8,758 Total 2,733,923 8,567,506 11,305,524 Uses of funds Training 7 (41,275) - (41,275) Civil Works 8 (2,326,420) - (2,325,420) Consultancy services 9 (327,160) (401,756) (728,916) Goods 10 - (4,892) (4,892) Incremental operating costs 11 (8,801) (12,350) (21,154) GoA contributions 4 (2,730,184) (316,017) (3,046,201) Total (5,432,840) (735,015) (6,107,858) Excess of receipts over disbursements (2,698,917) 7,832,491 5,137,667 Exchange rate difference 3,098 (1,535) 1,574 Cash at the beginning of the period 10 7,835,060 4,105 - Cash at the end of the period 10 5,139,241 7,835,061 5,139,241 The Statement of Sources and Uses of Funds is to be read in conjunction with the notes set out on pages 3 to 7 and forming an integral part of the special purpose financial information. The special purpose financial information of Results - Based Road Maintenance and Safety Project were authorized for issue by the management of the Albanian Road Authority on 3 March 2018 and signed on its behalf by: Sonila Qato Alma Lleshi General Director Budgeting and Planning Directogy Albanian RoadAuthority Albanian Road Authorny C1 Statement of Withdrawal Applications 10 Aplil 2015 - 31 December 2016 Withdrawal applkcatlon Datl o ithdrawaI Type of Donor number appica waon Disturh~mnt Lxan ConeIdtancy SevIces Incremental Goods CCY lBRD WA- 1 040.2016 Advance 8.244751 597,983 - 137 032 Euro Total 8,244,761 sa 137,032 01January 2017 -31 December 2017 Wlhdrawa appleation Date of withdrawal Type ol Donor number applcatlon Psbursemet Loan Conhultancy 5ervices Ineremental GoodCCY IBRO Total - - 2 General Information "Results - Based Road Maintenance and Safety Project" (further referred to as the "Project") is implemented by the Albanian Road Authority ("ARA')financed under International Bank for Reconstruction and Development ('IBRD') Loan Agreement Number 8489-AL and Government of Albania Contributions for the period from 1 January to 31 December 2017 The objectives of the Project are to: (a) maintain the condition and improve the safety of the Borrower's Primary Road and Primary-Secondary Road networks; and (b) strengthen sustainable and efficient road asset management and safety practices, for the benefit of road users. The Project consists of the following parts: Part- Maintenance Works and Monitoring (a) Carrying out periodic and routine maintenance of Primary Roads and Primary-Secondary Roads. (b) Carrying out activities to monitor roads maintenance of Primary Roads and Primary-Secondary Roads and ensure that the defined levels of service and complied with, including (i) carrying out initial road safety audits; (ii) conducting periodic International Road Safety Assessment Program('IRAP") Surveys to ensure that identified additional road safety black-spots and required safety enhancements are incorporated in the maintenance works for the relevant roads; and (iii) developing and implementing the Social Transparency System. Part 2 - Institutional Reforms (a) Carrying out activities to enhance the capacity of Ministry of Infrastructure and Energy (formerly known as Ministry of Transport and Infrastructure) and ARA with respect to their implementation of activities to promote road safety, which shall inter alia include: (i) conducting toad safety audit training accreditation courses; (ii) conducting road safety media campaigns; and (iii) developing an integrated database to enhance the Accident Information System. (b) Carrying out activities to strengthen ARA's capacity to: (i) collect and analyze road data; (ii) conduct road condition surveys to collect input data for the Road Asset Management (RAMS); and (iii) use the lAMS to prepare multi-year maintenance programs of expenditures and investments. Part3 - Sector reforms (a) Providing technical and advisory services to the Borrower on various sector reforms and medium to long-term planning activities, including finalizing its transport strategy. Part 4 - Project Management and Audits (a) Strengthening the capacity of the ARA, and the Project Management Team to carry out Project management activities, including compliance with safeguards, financial management and procurement arrangements, as well as the financing of the Operating Costs. (b) Carrying out monitoring activities including the Beneficiary Impact Assessments and the Technical Audits. 3 The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Loan ("Category"), the allocation of the amounts of the Loan to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category. Amount of the Loan Allocated(expressed in Percentage of Expenditures to be financed Category Euro) (Inclusive of Taxes) (1) Goods, Works, consultants' services and up to 50% in accordance with the provisions of Training for Parts 1 and 2 of the Project 59,310,000 the POM (2) Consultants' services and Operating up to 84% in accordance with the provisions of Costs for Parts 3 and 4 of the Project 6,425,250 the POM Amount payable pursuant to Section 2.03 of this Agreement in accordance with section 2.07 (3) Front-end Fee 164,750 (b) of the General Conditions (4) Interest Rate Cap or interest Rate Collar Amount due pursuant to Section (2.08) of this Premium - Agreement TOTAL AMOUNT 65,900,000 4 2. Summary of significant accounting policies A sumary of significant accounting policies underlying the preparation of the Project's financial statements is presented below, a) Basis of preparation The special purpose financial information has been prepared in accordance with the receipts and the Cash Basis of Accounting as further explained below under paragraph C 'Recognition of income and expenses'. The financial information includes the period from 01 January to 31 December 2017. Cumulative information on cash receipts and disbursements from the Project's inception to date is presented in the Statement of Sources and uses of Funds for information purposes only. The financial statements are presented in Euro. The financial statements comprise the Statement of Sources and Uses of Funds, the Statements of Expenditures used as the basis for the submission of withdrawal applications and a summary of significant accounting policies and other explanatory notes. As supplementary schedules to the financial statements are presented the Statements of Special and Accounts and Single Treasury Account associated with the Project. b) Foreign currency transactions The Project has adopted the Euro as its reporting currency for consistency with the reporting needs of its main donor, the World Bank. Cash and bank balances in other currencies are converted into Euro at the year-end rate of exchange. Transactions in currencies other than Euro are conveted to the reporting currency at the rate ruling at the date of the transaction. Foreign exchange differences are recognized in the Statement of Sources and Uses of Funds. As at 31 December 2017, 1 Euro was equivalent to 132.95 AIL c) Recognition of income and expenses Income is recognized when received rather than when earned and expenses are recognized when paid rather than when incurred. Accordingly, direct payments of the Project, which are made from the proceeds of the Project, are recognized as sources and uses of funds at the time the payment is made. d) Taxation The Project is exempt from income tax. The Project is liable for withholding tax and personnel income tax for its staff. 5 3. IBRD funding Funds received from the Donor for the period from 01 January to 31 December 2017 were composed as follows: Period from 1 January to 31 Period from 1 January to 31 December 2017 December 2016 Advance Payment 8,244751 Total 8,244,751 4. GoA contributions GoA contributions are composed as follows: For the period from 1 January to For the period from 1 January to 31 December 2017 31 December 2016 GOA Contribution for VAT 882,807 101,997 GOA Contribution for Local Cost 1 847,377 214,020 Total 2,730,184 316,017 5. Sale of Bid documents Sale of bid documents represents revenues from the sale of documents for bid procedures performed by the Project. For the period from 1 January to For the period from 1 January to 31 December 2017 31 December 2016 Sale of Bid Documents 1,719 Total 1,719 S. Interest Received The funds disbursed from the donor ate transferred to the second level bank account at Credins Bank. Interest received represents revenue fron the interest earned during the period by project bank accounts. 7. Training The training for the period from 01 January to 31 December 2017 were composed as follows: For the period from 1 January to For the period from 1 January to 31 December 2017 31 December 2016 ILO Training Workshop- Torino 21,662 International Federation - Executive Seminar "Asphalt Materials and Strategies for Managing and Maintaining your Pavements" 11,153 Training Workshop "Project Management Professional Training" 8,460 Total 41,275 6 S. Civil Works The civil works services for the period from 01 January to 31 December 2017 were composed as follows: For the period from 1 January to For the period from 1 January to 31 December 2017 31 December 2016 Contract A 650,741 - Contract B 548,286 Contract C 421,655 Contract D 704,738 Total 2,325,420 9. Consultancy Services The consultancy services for the period from 01 January to 31 December 2017 were composed as follows: For the period from 1 January to For the period from 1 January to 31 December 2017 31 December 2016 Consultancy services Monitoring Consultant 275,503 289,196 International Consultant for Bid Preparation - 86,449 Consultant's salaries 51,657 26,111 Total 327,160 401,756 10. Goods Goods for the period from 01 January to 31 December 2017 were composed as follows: For the period from 1 January to For the period from 1 January to 31 December 2017 31 December 2016 Financial Software 4,892 Total 4,892 11. Increem ntal Operating costs Operating costs for the period from 01 January to 31 December 2017 were composed as follows: For the period from For the period from 1 January to 31 December2017 1 January to 31 December 2016 Office IT equipment 474 11,474 Bank charges 2,407 581 Stationaries/Printing 188 295 Fuel and oil 2,350 - Rental expenses 3,382 - Total 8,801 12,350 7 12. Cash at the end of the period Cash on hand and at banks as at 01 January to 31 December 2017 was composed as follows: 31 December 2017 31 December 2016 Total Amount In Amount in Equivalent in (equivalent in Total (equivalent EU ALEUR EUR) In EUR) Cash on hand and at ERALERER banks: Second Level Bank IBRD Credit Project account 5,131,284 1,057,988 7,958 5,139,241 7,835,060 Total 5,131,284 1,057,988 7,958 5,139,241 7,835,060 13. Subsequent events There are no other significant events that would require either adjustments or additional disclosures in the special purpose financial information. 8 APPENDICES Results - Based Road Maintenance and Safety Project P132982 Statements of Special Accounts and Project Accounts for the period from 10 April 2010 to 31 December 2017 (Supplementary schedules to the Special Purpose Financial Information) Appendix 1 Supplementary Schedule of Special Account Statement Donor IBRD AL 30 1011 1008 00000 Account No: 0000 2117 660E Depository Bank Bank of Albania Skenderbeg Square, No 1, Address Tirana, Aibania Currency EUR EUR 2017 2016 Opening Balance at beginning of period - - Funds received: 8,244,751 Replenishment 8,244,751 Disbursements: 8,244,751 Funds transferred to Credins Bank in EUR 8,144,751 Funds transferred to Credins Bank ALL account 100,000 TOTAL Balance at end of the period Appendix 2 Supplementary Schedule of Project Account Statement IBRD Account No: AL 32 2121 1016 0000 0000 0075 4686 Depository Bank CREDINS BANK Address Str asmail Qemali, Tirana Currency EUR EUR 2017 2016 Opening Balance at beginning of period (cash on hand) 7,767,475 4,104 Funds received: Funds transferred from IBRD Special Account 8,144,751 Sale of Bid documents 1,719 Interest received 3.703 5,019 Total 3,703 8,151,489 Disbursements: Project expenditures (2,637,578) (387,591) Bank charges (2316) (527) Total (2,639,894) (388,118) Balance at end of the period 5,131,284 7,767,475 IH Appendix 3 Supplementary Schedule of Single Treasury Account Account No: Depostory ankIBIRD Depository Bank AL 32 2121 1016 0000 0000 00754588 Address CREDINS BANK Currency Str. Ismail Qemail. Tirana ALL EUR 2017 2017 Opening Balance at beginning of period (cash on hand) 9,139,446 67,584 Funds received: Funds transferred from IBRD Special Account . Interest received 4,992 37 Total 4,992 37 Disbursements. Project expenditures (8,074,112) (60,055) Bank charges (12338) (91) Total (8086,450) (60,147) Exchange rate differences - 484 Balance at end of the period 1,057,988 7.958