“Education to Work Transition Project – Additional Financing" TF 0A3519 Funded by The International Development Association Implemented by The Ministry of Education and Higher Education Financial Statements and Independent Auditor’s Report For the Period from January 1, 2018 to December 31, 2018 “Education to Work Transition Project – Additional Financing" Funded by The International Development Association and implemented by The Ministry of Education and Higher Education (MoEHE) for the period from January 1, 2018 to December 31, 2018 Table of Contents Page Independent Auditor’s Report 1-3 Statement of Balance Sheet 4 Statement of Sources and Uses of Funds 5 Designated Bank Account Statement – World Bank 6 Notes to the Project Financial Statements 7-11 Annex A: Budget Utilization 12 Deloitte & Touche (M.E.) Al Mashreq Insurance Building Al-Nahda Area, Al Masyoun Ramallah, P.O. Box 447 Palestine Tel: +970 (0) 2 298 0048 Fax: +970 (0) 2 295 9153 www.deloitte.com Independent Auditor’s Report To The Ministry of Education and Higher Education (MoEHE) Ramallah – Palestine Opinion We have audited the accompanying financial statements of “Education to Work Transition Project- Additional Financing", (hereinafter “project”), funded by The World Bank through the International Development Association (hereinafter “IDA”), and implemented by The Ministry of Education and Higher Education - (hereinafter “MoEHE”). These financial statements comprise the statement of balance sheet as of December 31, 2018, the statement of sources and uses of funds, designated bank account statement and notes to the financial statements for the period from January 1, 2018 to December 31, 2018, including a summary of significant accounting policies and other related disclosures (together “the financial statement”). In our opinion, the accompanying financial statements present fairly, in all material respects, the balance sheet of the project funded by IDA and implemented by the MoEHE as of December 31, 2018, and the related statement of sources and uses of funds, designated bank account statement for the year then ended in accordance with the basis of accounting as described in Note (2). Basis of Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) especially ISA 800/805. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the MoEHE in accordance with the ethical requirements that are relevant to our audit of the financial statement in areas under the jurisdiction of the Palestinian Authority, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter- Basis of Accounting and Restriction on Distribution We draw attention to Note (2) to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist MoEHE in complying with the donor’s financial reporting provisions and agreement requirements. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for IDA and MoEHE, and should not be distributed to or used by parties other than IDA and MoEHE. Our opinion is not modified in respect of this matter. 1 Independent Auditor’s Report (continued) Other Matters Based on our review, in all material respects: 1. The project expenditures reimbursed on basis of Statements of Expenditures (SOE) are eligible to the Grant Agreement and are reflected in the financial statements. 2. The designated bank account has been used exclusively for payment of eligible expenditures as reflected in the financial statements. 3. The project’s accounting system (books and records), established and maintained by the MoEHE to record the financial transactions of the project, provides basis for preparation of the project’s financial statements. 4. Based on sample selected, internal control over financial reporting involved in the preparation of replenishments, direct payments, payments through special commitments, and reimbursements can be relied upon to support the related withdrawals. 5. The project was in all material respects in compliance with the laws, regulations, guidelines and provisions governed by the Grant Agreement. 6. Based on sample selected, procurement guidelines have been properly applied in accordance with the project’s Grant Agreement. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with the basis of accounting as described in Note (2); this includes determining that the basis of accounting used is an acceptable basis for the preparation of the financial statements in the circumstances, and for such internal control as management determines necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. Those charged with governance are responsible for overseeing MoEHE financial reporting process. 2 “Education to Work Transition Project- Additional Financing" Funded by The International Development Association and implemented by The Ministry of Education and Higher Education (MoEHE) for the period from January 1, 2018 to December 31, 2018 Statement of Balance Sheet All amounts are in USD As of December As of December Note Cumulative 31, 2018 31, 2017 Assets Current assets Cash on Hand 1,000 - 1,000 Cash at bank 7 94,165 317,289 411,454 Total current assets 95,165 317,289 412,454 Total assets 95,165 317,289 412,454 Liabilities and fund balance Fund balance 95,165 317,289 412,454 Total liabilities and fund balance 95,165 317,289 412,454 The accompanying notes form an integral part of these financial statements. 4 “Education to Work Transition Project- Additional Financing" Funded by The International Development Association and implemented by The Ministry of Education and Higher Education (MoEHE) for the period from January 1, 2018 to December 31, 2018 Statement of Sources and Uses of Funds (All amounts are in USD) From January 1, 2018 From February 3, 2017 Note Cumulative to December 31, 2018 to December 31, 2017 Sources of Funds Advance Payment 3 - 500,000 1,283,434 Replenishment 3 783,434 20,210 803,644 Total Sources of Funds 783,434 520,210 1,303,644 Uses of Funds Component 1: Education to Work Transition Grant Facility 4 972,706 202,815 1,175,017 Component 2: Higher Education Graduate Tracking System 4 16,506 - 16,506 Component 3: Project Management 4 16,346 106 16,452 Total Uses of Funds 1,005,558 202,921 1,207,975 Fund Balance - end of year (222,124) 317,289 95,669 The accompanying notes form an integral part of these financial statements. 5 “Education to Work Transition Project- Additional Financing" Funded by The International Development Association and implemented by The Ministry of Education and Higher Education (MoEHE) for the period from January 1, 2018 to December 31, 2018 Designated Bank Account Statement – World Bank (All amounts are in USD) Bank Account number 0458/3200770/001/3001/000 Bank Name Bank of Palestine P.L.C Address Ramallah Related loan/credit TF 0A3519 - Education to Work Transition Project – Additional Financing Currency USD Note As of December 31, 2018 As of December 31, 2017 Balance - beginning of year 317,289 - Receipts during the year 3 783,434 520,210 Total 1,100,723 520,210 Deduct Payments for project expenditures 898,227 202,921 from designated bank account Petty Cash at hand 1,000 - Outstanding Payments 106,331 - Total 1,005,558 202,921 Balance - end of year 95,165 317,289 The accompanying notes form an integral part of these financial statements. 6 “Education to Work Transition Project- Additional Financing" Funded by The International Development Association and implemented by The Ministry of Education and Higher Education (MoEHE) for the period from January 1, 2018 to December 31, 2018 Notes to the Project Financial Statements (All amounts are in USD) 1. Background On December 21, 2016, The Palestinian Liberation Organization (PLO) for the benefit of the Palestinian Authority has received from the World Bank through the International Development Association additional financing to the Education to Work Transition Project, project code TF 0A3519 (hereinafter “project”) in the amount of USD 5,000,000. The objective of the project is to improve education to work transition of young Palestinians attending participating Tertiary Education Institutions (TEIs) through: a. Fostering partnerships between TEIs and employers in order to make TEIs’ study programs more relevant to the needs of the labor market; and b. Enhancing the capacity of the MoEHE and TEIs to collect, analyze and disseminate data collected through the TEIs’ graduate tracking system to monitor the outcomes of TEIs’ study programs, and to inform education policy formulation and implementation. The Grant Agreement closing date will be on January 31, 2022 with a four-month grace period ending on May 31, 2022. The project consists of the following components with the budgeted amounts of each: Budget amount Budget line item (USD) Component 1: Education to Work Transition Grant Facility Consultancies, workshops and training 383,950 Grants 3,874,695 Sub-total Component 1 4,258,645 Component 2: Higher Education Graduate Tracking System Consultancies, workshops and training 110,000 Sub-total Component 2 110,000 Component 3: Project Management Consultancies 556,355 Operating Costs 75,000 Sub-total Component 3 631,355 Total 5,000,000 2. Basis of Accounting and Presentation  The project’s financial statements were prepared by MoEHE in accordance with the following: - The classifications of the Project’s budget. - 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. - The terms of reference of the implementation partner agreement set with the IDA.  Presentation of the project’s financial statements in U.S. Dollars was done as follows: a. Contributions received in U.S. Dollars are presented in the Project’s statement of sources and uses of funds at the actual amount received in U.S. Dollars. b. Disbursements in New Israeli Shekels were converted into the U.S. Dollars equivalent using the exchange rate prevailing on the date of each transaction. c. The accounts of this project are maintained within the general set of accounts of MoEHE which are accounted for under a separate cost center in U.S. Dollars. 7 “Education to Work Transition Project- Additional Financing" Funded by The International Development Association and implemented by The Ministry of Education and Higher Education (MoEHE) for the period from January 1, 2018 to December 31, 2018 Notes to the Project Financial Statements (continued) (All amounts are in USD) 3. Sources of Funds The advance payment and replenishment received from the IDA that are related to the period from February 3, 2017 to December 31, 2018 were as follows: Description Date Amount Year 2018 Replenishments January 17, 2018 182,707 May 8, 2018 9,665 September 3, 2018 205,816 September 16, 2018 126,997 November 22, 2018 258,249 783,434 Year 2017 Advance payment June 17, 2017 500,000 Replenishments October 29, 2017 20,210 520,210 8 “Education to Work Transition Project- Additional Financing" Funded by The International Development Association and implemented by The Ministry of Education and Higher Education (MoEHE) for the period from January 1, 2018 to December 31, 2018 Notes to the Project Financial Statements (continued) (All amounts are in USD) 4. Uses of Funds 2018 2017 Amount Amount Cumulative Component 1: Education to Work Transition Grant Facility 1. Consultancies, workshops and training Consultancies services 56,071 21,500 77,571 56,071 21,500 77,571 2. Grants Al-Najah National University 109,409 18,647 128,056 Al-Quds University 98,319 19,663 117,982 Palestine Ahliya University College 86,998 - 86,998 Gaza C.C. for Tourism Studies 86,061 15,175 101,236 Palestine Polytechnic University 82,558 13,450 96,008 University of Palestine 72,445 14,489 86,934 Islamic University of Gaza 69,225 11,605 80,830 Modern University College 53,802 21,566 75,368 University College of Applied Sciences 40,835 13,612 54,447 Palestine Technical University- Kadorie 37,360 18,680 56,040 Palestine Technology College- Arroub 35,126 17,563 52,689 Birzeit University 33,729 16,865 50,594 Dar al-Kalima University College of Arts & Culture 32,813 - 32,813 Hebron University 15,626 - 15,626 Gaza University 15,168 - 15,168 Al-Azhar University 14,301 - 14,301 Bethlehem Bible College 12,987 - 12,987 Palestine Nursing College 11,723 - 11,723 College of Intermediate Studies 8,150 - 8,150 916,635 181,315 1,097,950 Sub-total - Component 1 972,706 202,815 1,175,521 Component 2: Higher Education Graduate Tracking System 1. Consultancies, workshops and training 16,506 - 16,506 Sub-total - Component 2 16,506 - 16,506 Component 3: Project Management 1. Consultancies 11,056 - 11,056 2. Operating Costs 5,290 106 5,396 Sub-total - Component 3 16,346 106 16,452 Total 1,005,558 202,921 1,208,479 9 “Education to Work Transition Project- Additional Financing" Funded by The International Development Association and implemented by The Ministry of Education and Higher Education (MoEHE) for the period from January 1, 2018 to December 31, 2018 Notes to the Project Financial Statements (continued) (All amounts are in USD) 5. Payments for Project Expenses Below is a reconciliation of the project designated bank account statement with the project statement of sources and uses of funds: From From January 1, February 2018 to 3, 2017 to December December 31, 2018 31, 2017 Receipts as reported in designated bank account statement 783,434 520,210 Less: Project Fund Balance (222,124) 317,289 Total uses of funds per statement of sources and uses of funds 1,005,558 202,921 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: 2018: Disbursement Category Component 1: Education Component 2: Higher Component 3: Withdrawal Application Payment Method to Work Transition Grant Education Graduate Project Total (WA) Number Facility Tracking System Management Payment from designated bank E2WTP-AF WA 4 7,223 - 2,437 9,660 account Payment from designated bank E2WTP-AF WA5 193,772 4,455 7,589 205,816 account Payment from designated bank E2WTP-AF WA 6 120,014 5,784 1,199 126,997 account Payment from designated bank E2WTP-AF WA 7 250,543 3,071 4,636 258,250 account Payment from designated bank E2WTP-AF WA 8 140,455 - 43 140,498 account Payment from designated bank E2WTP-AF WA 9 260,699 3,196 442 264,337 account 972,706 16,506 16,346 1,005,558 2017: Disbursement Category Component 1: Education Component 2: Higher Withdrawal Application Component 3: Project Payment Method to Work Transition Grant Education Graduate Total (WA) Number Management Facility Tracking System Payment from designated bank E2WTP-AF WA 1 - - - - account Payment from designated bank E2WTP-AF WA 2 20,150 - 60 20,210 account Payment from designated bank E2WTP-AF WA 3 182,665 - 42 182,707 account Payment from designated bank E2WTP-AF WA 4 - - 4 4 account 202,815 - 106 202,921 10 “Education to Work Transition Project- Additional Financing" Funded by The International Development Association and implemented by The Ministry of Education and Higher Education (MoEHE) for the period from January 1, 2018 to December 31, 2018 Notes to the Project Financial Statements (continued) (All amounts are in USD) 7. Bank Account Fund Balance – End of Year The fund balance as December 31, 2018 and 2017 represents the following: As of December As of December 31, 2018 31, 2017 Cash in project bank account 200,495 317,289 Add: Petty Cash 1,000 - Deduct: Outstanding payments (106,330) - Project book balance as per MoEHE records 95,165 317,289 11 “Education to Work Transition Project- Additional Financing" Funded by The International Development Association and implemented by The Ministry of Education and Higher Education (MoEHE) for the period from January 1, 2018 to December 31, 2018 Annex A: Budget Utilization (All amounts are in USD) Budget line item Budget Actual Remaining Balance Budget Utilization Component 1: Education to Work Transition Grant Facility Consultancies, workshops and training 383,950 77,571 306,379 20.20% Grants 3,874,695 1,097,950 2,776,745 28.34% Sub-total Component 1 4,258,645 1,175,521 3,083,124 27.60% Component 2: Higher Education Graduate Tracking System Consultancies, workshops and training 110,000 16,506 93,494 15.01% Sub-total Component 2 110,000 16,506 93,494 15.01% Component 3: Project Management Consultancies 556,355 11,056 545,299 1.99% Operating Costs 75,000 5,396 69,604 7.19% Sub-total Component 3 631,355 16,452 614,903 2.61% Total 5,000,000 1,208,479 3,791,521 24.17% 12