“Rural Water Supply and Sanitation Project” Grant No. TF0A6255 The project financial statement for the period from March 7, 2018 to December 27, 2019 and the grace period from December 28, 2019 to April 27, 2020 and independent auditors’ report “RURAL WATER SUPPLY AND SANITATION PROJECT” GRANT NO. TF0A6255 TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT’S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM MARCH 7, 2018 TO DECEMBER 27, 2019 AND THE GRACE PERIOD FROM DECEMBER 28, 2019 TO APRIL 27, 2020 3 INDEPENDENT AUDITORS’ REPORT 4-5 THE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM MARCH 7, 2018 TO DECEMBER 27, 2019 AND THE GRACE PERIOD FROM DECEMBER 28, 2019 TO APRIL 27, 2020: Summary of funds received and expenditures paid 6 Summary of expenditures paid by project components 7 Notes to the project financial statements 8-13 STATEMENT оF MANAGEMENT,S RESPoNSlBlLlTlES FoR тнЕ PREPARATIoN AND APPROVAL ОF ТНЕ PROJECT FINANCIAL STATEMENTS FОR ТНЕ PERIOD FROM MARCH 7,2018 то DEGEMBER 27, 2019 AND тнЕ GRACE PERloD FRoM DECEMBER 28, 2019 то APRIL 2т,2020 The following statement, which should Ье rеаd in conjunction with the independent auditors' responsibilities is made with а view to distinguish the геsресtiче responsibilities of management and those of the independent auditors iп relation to the ргоjесt financial statements of the Рrоjесt "Rчrаl Wаtеr Supply and Sanitation Project", Grant No. ТFOА6255 (the "Project"). Management is rеsропsiЬlе fоr the ргерагаtiоп of the project fiпапсiаl statements that рrеsепt fairly, iп all material respects, the summary of funds received and expendituгes paid and the sчmmаrу of expenditures paid Ьу project components of the Project fоr the period frоm Магсh 7,2018 to December 27,2019 апd the grace period fгоm DесеmЬеr 28, 2019 to Арril 27, 2020 in ассоrdапсе with lпtеrпаtiопаl Public Sector Accounting Standard "FinancialRepoгting Underthe Cash Basis of Accounting" (the "lPSAS") issued Ьу the lпtеrпаtiопаl Public Accounting Standards Board of the lnternational Fеdеrаtiоп of Accountants and the Wоrld Bank's Financial Management Sector Board's "Guidelines: Аппчаl Financial Reporting and Auditing fоr Wоrld Вапk Fiпапсеd Activities" (the "WB Guidelines"). lп рrераriпg the рrоjесt financial statements, mапаgеmепt is rеsропsiЬlе fоr: . selecting suitable accounting policies and applying them consistently; . making judgments and estimates that аrе rеаsопаьlе and prudent; о stating whether lpsAs and wB Guide|ines have Ьееп followed, subject to апу mаtеriаl dераrtчrеs disclosed апd explained iп the project financial statements; and . рrераriпg the project financial statements оп а going сопсеrп basis, unless it is iпаррrорriаtе to рrеsчmе that the Project will continue its activity fоr the foreseeable fчtчrе. Management is also responsible fоr: . designing, implementing and maintaining effective and sound system of iпtеrпаl сопtrоl and fог revealing risks in system of internal сопtrоl; о maintaining рrореr accounting records that disclose, with reasonable ассчrасу at апу time, the financial position of the Project, and which епаЬlе them to епsчrе that the project financial statements of the Pýect comply with lPSAS and WB Guidelines; . compliance with laws and regulations of ihe Republic of Tajikistan, accounting system of the project and the rеqчirеmепts of the World Bank; . taking such steps as аrе rеаsопаь|у available to them to safeguard the assets of the Рrоjесt; and . detecting and preventing fraud, еrrоr and оthеr irrеgчlаritiеs. The рrоjесt financial statements for the реriоd frоm March 7,2О18 to December 27,2019 and the grасе period frоm DесеmЬеr 28, 2019 to Арril 27,2020 wеrе approved and authorized fоr issue оп Мау 22,2020 Ьу the management of the Project. Tabarzoda J. Gепеrаl director of SUE "Khojagii Manziliyu ёilfiЖ""очпt/пt ot SUE "Khojagii Manziliyu Коmmчпаli" Мау 22,2020 Мау 22,2020 Dushanbe, the Republic of Tajikistan Dushanbe, the Republic of Tajikistan 65 Stefan cel Mare şi Sfânt Blvd 7th Floor, Office 715 2001 Chisinau Moldova T: +373 22 233003 F: +373 22 234044 info@bakertilly.md www.bakertilly.md INDEPENDENT AUDITORS’ REPORT To the management of the Project “Rural Water Supply and Sanitation Project” under the SUE “Khojagii Manziliyu Kommunali”: Report on the project financial statements Opinion [1] We have audited the project financial statements of the Project “Rural Water Supply and Sanitation Project” (the “Project”), which comprise the summary of funds received and expenditures paid and the summary of expenditures paid by project components for the period from March 7, 2018 to December 27, 2019 and the grace period from December 28, 2019 to April 27, 2020 and a summary of significant accounting policies and other explanatory information (the “ project financial statements”). [2] In our opinion, the accompanying project financial statements present fairly, in all material respects, the summary of funds received and expenditures paid and the summary of expenditures paid by project components of the Project for the period from March 7, 2018 to December 27, 2019 and the grace period from December 28, 2019 to April 27, 2020 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”). Basis for opinion [3] We conducted our 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 project financial statements section of our report. We are independent of the Project 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 our audit of the project financial statements and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of matter [4] Without qualifying our opinion, we draw attention to Note 2 to the project financial statements, which describe the basis of accounting. These project financial statements were prepared for complying with the appropriate World Bank Guidelines and Financing and Grant agreement requirements. Other matter [5] The project financial statements are prepared to assist the Project to comply with the requirements of the World Bank. As a result, the project financial statements may not be suitable for another purpose. ADVISORY  ASSURANCE  TAX ICS Baker Tilly Klitou & Partners SRL trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. 4 "RURAL WATER SUPPLY AND SANlTATloN PRoJEGT" GRANT No. тFOА6255 SUMMARY ОF FUNDS RECEIVED AND EXPENDITURES PAlD FoRTHE PERloD FRом MARGH 7,2018 то DEGEMBER 27, 2019 AND тнЕ GRAсE PERloD FRoM DECEMBER 28,2019 то APRIL 27,2о20 (iп US dollars) Notes Fоr the grace Fоr the period cumulative period from from March 7, December 28, 2018 to 2019 to DесеmЬеr ' April 2Т,2020 27,2019 Орепiпg Ьаlапсе 4 35,371 Fчпds received Grant No. тF 0'l649'l-TJ 11,21э 277,800 289,013 Total funds received 277,80о ,t 1,213 289,013 оthеr iпсоmе Total rесеiрЪ , 11,213 227,8о0 289,013 Project ехрепsеs consultation services 6 40,200 227,800 268,000 Goods 6 Тrаiпiпgs and workshops 6 з72 ,l4,992 Operating expenses 6 14,620 Total рrфесt expenses 40,572 242,420 282,992 Fоrеigп exchange loss ,о1 Оthеr ехрепsеs : ": Closing Ьа]апсе 4 --ц9L -цqL -99,3il- оп behalf of Tabarzoda J. Gепеrаl director of SUE "Khojagii Manziliyu Chlefaccountant of SUE "Khojagii Manziliyu Коmmчпаli" Мау 22,2О2О Мау 22,202О Dushanbe, the Republic of Tajikistan Dushanbe, the Republic of Tajikistan The notes оп pages 8_,l 3 form ап integral раrt of the project financial statements. The independent auditors' report is оп pages 4-5 о "RURAL WATER SUPPLY AND SANlTATloN PRoJECT" GRANT No. тFOА6255 SUMMARY ОF EXPENDITURES PAlD BY PROJECT COMPONENTS FoR тнЕ PERloD FRoM MARcH 7, 2018 то DECEMBER 27, 2019 AND тнЕ GRACE PERloD FRом DECEMBER 28, 2019 то APRIL 27,2020 (iп US dollars) Fоr the grace For the period Cumu]ative period from frоm March 7, DесеmЬеr 28, 2018 to 2019 to DесеmЬеr April 27,2020 2т,2019 Consulting Services, including Audit 40,200 227,800 268,000 Training, Seminars, and Workshops з72 ,l4,620 Operating ехрепsеs 14,992 40,572 _242,4ю_ _282,992 оп behalf of Tabarzoda J. General director of SUE "Khojagii Manziliyu of SUE "Khojagii Manziliyu КоmmчпаIi" Коmmчпаli" Мау 22,2020 Мау 22,2020 Dushanbe, the Republic of Tajikistan Dushanbe, the Republic of Tajikistan The notes оп pages 8-13 form ап iпtеgrаl part ofthe project financial Statements. The independent auditors' rероrt iS оп pages 4-5 “RURAL WATER SUPPLY AND SANITATION PROJECT” GRANT NO. TF0A6255 NOTES TO THE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM MARCH 7, 2018 TO DECEMBER 27, 2019 AND THE GRACE PERIOD FROM DECEMBER 28, 2019 TO APRIL 27, 2020 (in US dollars) 1. GENERAL INFORMATION According to the Agreements between the Republic of Tajikistan and International Development Association (the “IDA”) dated March 7, 2018, the IDA provided a Grant No. TF0A6255 in the amount of 386,000 US Dollars (the “USD”) to the Republic of Tajikistan. The Grant was provided for implementation of the Project “Rural Water Supply and Sanitation Project” (the “Project”). Project purpose The objective of the Project is to support the preparation of the RWSSP and improve the capacity of the Recipient's КМК for Project implementation. The Project consists of the following parts:  Part 1. Preparation of Project Documents Carrying out technical, economic and financial feasibility studies, including social and environmental assessments, preparation of the detailed engineering designs and Bidding documents for targeted rural water supply and sanitation systems.  Part 2. Water Institutions Improvement Plan Carrying out performance assessment for participating water institutions and their branches and provide technical assistance support to build capacity to improve their operating, financial and technical efficiencies.  Part 3. Capacity Building and Training Program (а) Provision of technical assistance for development of training programs and learning materials; and (b) carrying out trainings and workshops on management, technical, financial and safeguards aspects of rural water supply projects.  Part 4. Project Management and Audit (а) Project management to improve existing financial and operating systems recommended in the action plan and provide training, workshop and seminar on procurement framework and financial management; (b) Carrying out financial audit of the use of the Grant funds. Project management The State Unitary Entity “Khojagii Manziliyu Kommunali” is the authorized body responsible for the preparation and implementation of the Project. The General Director of State Unitary Entity “Khojagii Manziliyu Kommunali” (“PIC”) is responsible for overall project management to ensure that project resources are used as budgeted and that project development objectives will be achieved. Duration of the Project is from March 7, 2018 to December 27, 2019 and the grace period from December 28, 2019 to April 27, 2020. 8 2. PRESENTATION OF THE PROJECT FINANCIAL STATEMENTS Basis of preparation These project financial statements have been prepared in accordance with the International Public Sector Accounting Standard (the “IPSAS”) “Financial Reporting under the Cash Basis of Accounting” issued by the Public Sector Committee of the International Federation of Accountants, 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 Board’s “Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities” (the “WB Guidelines”). Under the cash basis approach income (or expenditure) is recognized when cash is received (or paid) irrespective of when goods or services are received or provided. 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. These project financial statements consist of:  Summary of funds received and expenditures paid;  Summary of expenditures paid by project components;  Notes to the project financial statements, including short description of main statements of accounting policy and other descriptive notes. The reporting currency of these project financial statements is US dollars (the “USD”). 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash basis of accounting The 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 Project. The 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 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 conversion rate of the National Bank of Tajikistan (the “NBT”) on a date of operation. Monetary assets 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 the summary of funds received and expenditures paid. 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. 9 Taxes Calculation 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 and relevant legislation of the Republic of Tajikistan. Project expenses The expenses are recorded in the period when they were actually paid. Sources of funds The funds were provided by the World Bank to the Project through direct payment and advance to the end supplier of goods and/or services. 4. CASH AND CASH EQUIVALENTS Cash and cash equivalents as at April 27, 2020 and December 27, 2019 comprise: Source of financing Currency As at April As at December 27, 2020 27, 2019 Escrow account in CJSC "Orienbank" Grant No. TF0A6255 TJS 5,700 - Designated account Grant No. TF0A6255 USD - 33,383 Transit account Grant No. TF0A6255 TJS 5 1,617 Cash in hand Grant No. TF0A6255 TJS - 371 5,705 35,371 We draw attention to Note 11 to the project financial statements, which describes that the Project had commitments for covering audit service expenses for the period from March 7, 2018 to December 27, 2019 and the grace period from December 28, 2019 to April 27, 2020 in the amount of 6,000 US dollars. As of March 12, 2020 the Project has transferred the audit service expenses to the escrow account in CJSC “Orienbank” in the amount of 58,140 TJS equivalent to 5,700 USD. 5. FUNDS RECEIVED The funds received are presented by the following financing methods and sources of financing: For the grace For the period Cumulative period from from March 7, December 28, 2018 to 2019 to December 27, April 27, 2020 2019 Direct payment 11,213 227,800 239,013 Advances to Designated Account - 50,000 50,000 11,213 277,800 289,013 10 6. PROJECT EXPENSES Project expenses by components are presented in the summary of expenditures paid by project components. Project expenses on major categories are presented in the summary of funds received and expenditures paid. Breakdown of project expenses by categories, nature and sources of financing is presented as follows: Consulting Services, including audit For the grace For the period Cumulative period from from March 7, December 28, 2018 to 2019 to December 27, April 27, 2020 2019 Preparation of feasibility study, environmental and social safeguard documents, engineering designs and bidding documents and assessment of institutional capacity including financial performance of implementing agency and its branches. - 227,800 227,800 Related taxes 40,200 - 40,200 40,200 227,800 268,000 OPERATING EXPENSES For the grace For the period Cumulative period from from March 7, December 28, 2018 to 2019 to December 27, April 27, 2020 2019 Conducting a two-day project opening workshop - 7,917 7,917 Development of the website for the "Tojikobdehot" and conecting to the Internet, and providing Internet during 12 months - 6,584 6,584 Stationery purchase costs 372 - 372 Bank fee - 119 119 372 14,620 14,992 7. FINANCIAL POSITION Financial position as at April 27, 2020 and December 27, 2019 presented as follows: As at April As at December 27, 2020 27, 2019 ASSETS AND EXPENDITURES Cash and cash equivalents 5,705 35,371 Cumulative expenses 282,992 242,420 Foreign exchange loss 316 9 TOTAL ASSETS AND EXPENDITURES 289,013 277,800 FINANCING Funds received 289,013 277,800 TOTAL FINANCING 289,013 277,800 11 8. WITHDRAWAL APPLICATIONS Withdrawal applications for the period from March 7, 2018 to December 27, 2019 and the grace period from December 28, 2019 to April 27, 2020: For the period from March 7, 2018 to December 27, 2019 Sources of Application Value date Advances Direct Total financing payment Grant No. TF0A6255 1 March 15, 2019 - 100,500 100,500 2 May 14, 2019 - 42,712 42,712 3 August 19, 2019 50,000 - 50,000 4 December 27, 2019 - 84,588 84,588 50,000 227,800 277,800 For the grace period from December 28, 2019 to April 27, 2020. Sources of Application Value date Advances Direct Total financing payment Grant No. TF0A6255 6 April 27, 2020 - 11,213 11,213 7* April 27, 2020 - - - - 11,213 11,213 * Withdrawal applications No. 7* were provided as report of spend funds, there were no requests for reimbursement of funds, as results no payments were made by World Bank. Deleted withdrawal applications for the period from March 7, 2018 to December 27, 2019 and the grace period from December 28, 2019 to April 27, 2020 comprise: Sources of Application Value date Advances Direct Total financing payment Grant No. TF0A6255 5 March 20, 2020 - 40,200 40,200 - 40,200 40,200 12 9. STATEMENT OF DESIGNATED ACCOUNT Designated account for the period from March 7, 2018 to December 27, 2019 and the grace period from December 28, 2019 to April 27, 2020 is presented as follow: Bank OJSC Bank "Eskhata" Currency US dollars Bank account 20206840000020100458 Bank’s location 34 Bekhzod str., Dushanbe, Republic of Tajikistan Balance as March 7, 2018 - Advances received 50,000 Reimbursement of expenses - Total funds received to a designated account 50,000 Transfers to transit account 16,584 Bank fee 33 Balance as at December 27, 2019 33,383 Transfer to transit account 33,383 Balance as at April 27, 2020 - 10. UNDRAWN FUNDS For the period from March 7, 2018 to December 27, 2019 and the grace period from December 28, 2019 to April 27, 2020 undrawn funds are presented as follow: Grant No. TF0A6255 in USD Approved financing amount 386,000 Disbursed amount from March 7, 2018 to December 27, 2019 277,800 Disbursed amount from December 28, 2019 to April 27, 2020 11,213 Undrawn financing amount 96,987 11. COMMITMENTS In the normal course of activities, the Project concludes agreements with suppliers of goods and services in accordance with the established budget and procurement plan. The Project had commitments for covering audit service expenses for the period from March 7, 2018 to December 27, 2019 and the grace period from December 28, 2019 to April 27, 2020 in the amount of 6,000 US dollars. In escrow account in CJSC "Orienbank" the Project have amount of 5,700 US dollars and the remaining part will be paid on expenses of SUE “Khojagii Manziliyu Kommunali” (the “PIU”). 12. LEGAL CASES There were no any legal claims related to the Project. 13. EVENTS AFTER THE REPORTING DATE As at the date of issue of the project financial statements no significant events or transactions occurred which should be disclosed in the project financial statements. 13