INTEGRATED LAND ADMINISTRATION SYSTEM
PROJECT
PROJECT FINANCIAL STATEMENTS
AND
DESIGNATED ACCOUNT STATEMENT
TOGETHER WITH INDEPENDENT AUDITORS' REPORT
FOR THE YEAR ENDED
DECEMBER 31, 2016


INTEGRATED LAND ADMINISTRATION SYSTEM PROJECT
CONTENTS
Page
Project Financial Statements and Independent Auditors' Report:
Independent Auditors' Report                                                    1 -2
Statement of Assets and Liabilities                                               3
Statement of Sources and Uses of Funds                                          4-7
Statement of Expenditure by Components                                            8
Notes to the Project Financial Statements                                       9 - 12
Annex I - Reconciliation of the Loan Account                                      13
Independent Auditors' Report on the Designated Account Statement                 14
Designated Account Statement                                                      15
Management letter to the Project implementation Unit                            16 - 17
Checklist                                                                        18


Tel: +385 1 2395 741     BDO Croatia d.o.o.
Fax: +385 1 2303 691     10000 Zagreb
[B D O                      E-mail: bdo-croatia.hr   Trg J. F. Kennedy 6b
Republic of Croatia
Ministry of Justice
Utica grada Vukovara 49
10000 Zagreb
and
Republic of Croatia
State Geodetic Administration
Gru9ka 20
10000 Zagreb
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying Statements of assets and liabilities of the Integrated
Land Administration System Project (the Project) financed under the International Bank for
Reconstruction and Development Loan (the Loan) No. 8086-HR as at December 31, 2016
and the related Statement of sources and uses of funds and Statement of expenditure by
components (Project Financial Statement). These statements are the responsibility of the
Project Implementation Unit. Our responsibility is to express an opinion on this statement
based on our audit.
We conducted our audit in accordance with International Standards on Auditing. These
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the Project Financial Statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in
the Project financial statements. We believe that our audit provides a reasonable basis for
our opinion.
Registrirano kod Trgovakog suda u Zagrebu pod brojem 080044149
OlB 76394522236


IB   D   O                                                BDO Croatia d.o.o.
In our opinion, the Project Financial Statements as at December 31, 2016 present fairly in
all material respects, the cash receipts and payments in the year 2016 of the Project in
accordance with the World Bank's requirements.
The supplementary information included in Annex I to the Project Financial Statements are
presented for the purpose of additional analysis and is not a required part of the basic
Project Financial Statements. Such schedules have been subject to the auditing procedures
applied in our audit of the basic Project Financial Statements and, in our opinion, are
fairly stated in all material respects when considered in relation to the basic Project
Financial Statements taken as a whole.
Zagreb, May 31, 2017
BDO Croatia d.o.o.
Trg J. F. Kennedy 6b
10000 Zagreb
"D  V1) 0 1 ( L. ,u..
Zagmj), J.F. Kcimc,dy 61b
Zdenko Balen, member of Management           Zdenko Balen, certified auditor
Board
+
2


INTEGRATED LAND ADMINISTRATION SYSTEM PROJECT
STATEMENT OF ASSETS AND LIABILITIES
as at December 31, 2016
(EUR)
31 Dec 2016    31 Dec 2015       31 Dec 2014
Assets
Cash on the Loan Designated Account             248,393       160,255            586,500
Project expenditures                         16,365,750     9,976,224          5,141,144
16,614,143    10, 136,479         5,727,644
Liabilities
Loan IBRD 8086-HR                            13,138,103     8,300,798          5,102,914
Republic of Croatia                           1,784,000     1,126,768            624,730
Activities financed 100% from the State Budget  1,692,040     708,913                  -
16,614,143    10, 136,479         5,727,644
3


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STATEMENT OF SOURCES AND USES OF FUNDS - continued
as at December 31, 2016
Comments on Statement of Sources and Uses of Funds
(1)    The budget is based on total estimated expenditures needed to complete the
Project. In accordance with Amendment of the Loan agreement as of April
14, 2017 the Closing Date was extended by 12 months until April 30, 2018.
(2)    The first expenditure related to the Project was made on December 7, 2010.
(3)    The total Project budget is 20,097,290 EUR
and consist as follows:
IBRD Loan No. 8086-HR                16,500,000
Budget of the Republic of Croatia     1,905,250
Activities financed 100% from the
State Budget                          1,692,040
Total                               20,097,290
(4)  Expenditures in Croatian Kuna were translated into EUR at the exchange rate
ruling at the date of the transaction.
7


STATEMENT OF EXPENDITURE BY COMPONENTS
as at December 31, 2016
(EUR)
Component                            For the year
ended 31         Cumulative
December 2016
A - Land registration System Development                                -           124,780
B - Spatial information and Cadastre System Modernization         386,439         3,283,865
C - Improving Digital Services                                  4,713,204         8,628,585
D - Project management, Training and Public Awareness             306,757         1,500,582
Refund of the Advance P459-HR                                           -           922,025
Financing of activities from the Preparation phase                      -           172,623
Front-end Fee                                                           -            41,250
Activities financed from the Budget of the Republic of Croatia    983,127         1,692,040
TOTAL                                                           6,389,527        16,365,750
8


NOTES TO THE PROJECT FINANCIAL STATEMENTS
as at December 31, 2016
1.   GENERAL
The objective of the Integrated Land Administration System Project is to modernize
the Land administration system in order to improve the government services from the
point of view of efficiency, transparency and cost. The project represents a
continuation of the Real property Registration and Cadastre Project and it further
deepens the reforms and integration of the land administration system.
Performance indicators are as follows:
higher customer satisfaction with the services of the land administration
reduced processing time of transactions in the Land Registry and Cadastre
higher percentage of users that send requests/transactions online
greater use of spatial data to be exchanged between state institutions/ministries.
Beneficiaries of the Project are:
- the public, since they will have greater access to information and better services
with fully integrated digital data;
- the entire business community, again with faster access to information and
services;
- other government bodies that will share more easily and have a better insight into
the government spatial data.
The Project encompasses the following four components:
Component A. - Land Registration System Development
Component B. - Spatial Information and Cadastre System Modernization
Component C. - Improving Digital Services
Component D. - Project Management, Training and Public Awareness
The Project is being implemented over a 6,5 year turn.
The Advance agreement for the Project preparation No. P459-HR between the Republic
of Croatia and the International Bank for Reconstruction and Development (the Bank) in
the amount of 1,450,000 USD was signed on August 3, 2010. Advance funds, pursuant to
the Agreement, financed the purchase of goods and consulting services for:
-  preparatory analysis and studies for preparation of detailed Project implementation
plan
-  pilot Project of the system expansion (roll-out) of JIS on four locations
-  execution of the Project.
Advance funds were used by November 15, 2011.
9


NOTES TO THE PROJECT FINANCIAL STATEMENTS (continued)
as at December 31, 2016
The Loan agreement for the Project No. IBRD-8086-HR between Republic of Croatia
and the Bank in the amount of 16,5 million Euros was signed on August 17, 2011.
Law on ratification of the Loan agreement between Republic of Croatia and the
International Bank for Reconstruction and Development for the Implementation of the
Integrated Land Administration System Project was adopted on 24th session of the Croatian
Parliament on October 21, 2011 and published on November 7, 2011 in the Official
Gazette, International Agreements No. 13/2011.
The Loan became effective on November 15, 2011.
This report contains an overview of the use of funds in 2016 and the total for the
period from the effective date of the advance agreement No. P459-HR and the IBRD Loan
No. 8086-HR to December 31, 2016.
2.   BASIS OF ACCOUNTING AND SUMMARY OF ACCOUNTING POLICIES
2.1.  Accounting Records and Basis of Presentation
The Project maintains its accounting records using the World Bank guidelines
(Annual Financial Reporting and Auditing for World Bank - Financed Activities, Procurement
Handbook and Disbursement Handbook).
2.2.  Implementation of the Project
Ministry of Justice and State Geodetic Administration, by the relevant Ministry of
construction and spatial planning (hereinafter: MGiPU) concluded the Agreement on
Implementation of the Integrated System of Land Administration Project on May 16, 2011
and on March 14, 2012 and February 13, 2014 agreement on amendments to the
Agreement on the Implementation of the Integrated Land Administration System.
The Agreement was concluded for the purpose of the regulation of mutual relations
and responsibilities in the Project implementation, determining body for implementation
of the Project and allocation of responsibilities.
The bodies responsible for implementing the Project are Project Steering
Committee, Coordinators of components of the Project in the Ministry of Justice and the
State Geodetic Administration and the Project Implementation Unit.
The Project Steering Committee has two co-chairs: Assistant Minister of Justice for
civil, commercial and administrative law in the Ministry of Justice and the Director of the
State Geodetic Administration.
Members of the Project Steering Committee are: MGiPU Assistant Minister, Head of
the Land Registry Management Service in Ministry of Justice, Head of the Division of
Cadastral System of the State Geodetic Administration, named representative of the
Supreme Court of the republic of Croatia and a named representative of the Ministry of
Finances.
10


NOTES TO THE PROJECT FINANCIAL STATEMENTS (continued)
as at December 31, 2016
2.2.  Implementation of the Project (continued)
The Project Steering Committee manages the Project, monitors the implementation
of individual phases of the project, spending, discusses the reports of the Land Registry
Management Service, Division of Cadastral Systems and Project Implementation Unit,
determines the priority areas, monitors the budget spending, coordinates the donor
engagement and makes decisions related to the implementation of the Project and gives
permissions for all the key plans and changes of plans.
Coordinators of the Project components at the Ministry of Justice and State
Geodetic Administration coordinate the implementation of the activities of individual
components for which they are nominated and are accountable for their work to the
institutions that nominated them.
The Project Implementation Unit, whose superior is Project Steering Committee, is
responsible for the procurement, financial management, disbursements, monitoring and
evaluation and compliance of safeguard mechanisms within the Project and it serves as the
Secretary of the Project Steering Committee.
On the side of the lender the Bank, there is a Project team with the leader of the
Project team responsible for the coordination and monitoring of the implementation of the
Project.
Realisation of the Project is determined by the regulations of the Bank for the
Project implementation, procurement, contract management, use of the Loan, auditing
and reporting to the Bank and the EU.
2.3.  Project Expenditure
The Project Expenditure is stated at original cost on the Statement of Assets and
Liabilities.
2.4.  Liabilities
The Advance agreement No. P459-HR between Republic of Croatia and the Bank in
the amount of 1,450,000 USD was signed on August 3, 2010. Advance was approved for the
preparation of the Project whose aim is to modernize the Land Administration System to
improve government services in terms of efficiency, transparency and cost. Project leaders
and beneficiaries are the Ministry of justice and the State Geodetic Administration.
Advance funds were used by November 15, 2011.
In accordance with the Decision of the Croatian Government to initiate proceedings
for the making of the Loan agreement for the Project, authorised Croatian delegation has
made final negotiations with the Bank in June 2011 and the Loan agreement was signed on
August 17, 2011.
Contracted amount of the Loan is 16,5 million Euros, The Loan became effective on
November 15, 2011.
In accordance with Amendment of the Loan agreement as of April 14, 2017 the
Closing Date was extended by 12 months until April 30, 2018.
11


NOTES TO THE PROJECT FINANCIAL STATEMENTS (continued)
as at December 31, 2016
2.4.  Liabilities (continued)
The principal and the interests are the responsibility of the Republic of Croatia.
Return of the principal starts on November 15, 2015 with final maturity on
November 15, 2030. Payment dates of principal are May 15 and November 15.
The amount of interest paid by the Borrower for each interest period is equal to the
reference rate for the Loan currency plus the fixed spread, provided that upon conversion
of alt or partial amount of the principal of the Loan, interests, which the Borrower pays
during the conversion period, are determined in accordance with the relevant regulations
of the Article 4 General Conditions.
Republic of Croatia is obligated to pay the Front-end Fee for the use of the Loan in
the amount of 0,25% of the Loan.
2.5.  Contributions by the Republic of Croatia
The Republic of Croatia is responsible for paying Project expenditures in accordance with
the Loan Agreement. The total amount of Project expenditures paid by the Republic of
Croatia for the year ended December 31, 2016 amounted to 1,640,359 EUR.
12


ANNEX I
RECONCILIATION OF THE LOAN ACCOUNT
(EUR)
The amount of the loan used by December 31, 2016                            13,138,103
Cash on the Designated Account                                                  248,393
Increase: total expenditure stated in the Statement of Sources and Use of Funds  12,889,710
Total expenditure                                                           13,138,103
13


Tel: +385 1 2395 741    BDO Croatia d.o.o.
Fax: +385 1 2303 691    10000 Zagreb
E-mail: bdo-croatia.hr  Trg J. F. Kennedy 6b
Republic of Croatia
Ministry of Justice
Utica Grada Vukovara 49
10000 Zagreb
and
Republic of Croatia
State Geodetic Administration
Gru9ka 20
10000 Zagreb
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying Designated Account Statement of the Integrated Land
Administration System Project (the Project) financed under International Bank for
Reconstruction and Development Loan No. 8086-HR as at December 31, 2016. The
Designated Account Statement is the responsibility of the Project implementation Unit.
Our responsibility is to express an opinion on the Designated Account Statement based on
our audit.
We conducted our audit in accordance with International Standards of Auditing. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the Designated Account Statement is free of material misstatements. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in
the Designated Account Statement. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the accompanying Designated Account Statement as at December 31, 2016
present fairly, in all material respects, the movements in the year 2016 on the Designated
Account of the Project, in accordance with World Bank guidelines.
Zagreb, May 31, 2017
BDO Croatia d.o.o.
Trg J. F. Kennedy 6b
10000 Zagreb               BO 01a'03 1.o.o.
za pru LI'jer izursih,konzaing
A Zaigl'ct, i.v. Komiedy 6/1b
Zdenko Baten,                                     Zdenko Balen, certified auditor
member of Management Board
Registrirano kod Trgovakog suda u Zagrebu pod brojem 080044149
OlB 76394522236
14


DESIGNATED ACCOUNT STATEMENT
as at December 31, 2016
Bank: Raiffeisenbank Austria d.d., Zagreb
IBAN: HR282484008 - 1300158260
Balance as at January 1, 2016                         160 255
Increase
Withdrawal                                           4,837,305
Decrease:
Payments from the Designated Account                                    (4,749,167)
Exchange rate
Balance as at 31 December 2016                                              248,393
Note: Designated Account for the Loan was opened on February 27, 2012 in Raiffeisenbank Austria d.d.,
Zagreb, IBAN HR282484008-1300158260.
15