AGENCY FOR AGRO CREDIT AND DEVELOPMENT SECONDRURAL INVESTMENT PROJECTAND ADDITIONAL FINANCING LOAN 81 89-AZ AND LOAN 8403-AZ from International Bank for Reconstruction and Development INDEPENDENT AUDITORS REPORT AND SPECIAL PURPOSE PROJECTFINANCIAL STATEMENTS For the year ended 31 December 2018 and for the period ended 31 March 2019 CONTENTS Page Independent Auditors' Report 3-4 Special Purpose Project Statement of Financial Position S Special Purpose Project Statement of Sources and Uses of Funds 6 Special Purpose Project Statement of Uses of Funds by Project Activities 7 Special Purpose Project Statement of Designated Account 8 Special Purpose Project Statement of Expenditure Wfthdrawal Schedule 9 Notes to the Special Purpose Project Financial Statements 10-15 MOORE STEPHENS Moore Stephens Azerbaijan Limited 13, Zeynalabdin Taghiyev Street Baku AZ1005, Azerbaijan +994 12 490 77 47/48/49 +994 12 490 77 50 INDEPENDENT AUDITORS' REPORT On Special Purpose Project Financial Statements To the Management of Agency for Agro Credit and Development Opinion We have audited the accompanying special purpose project financial statements of the Second Rural Investment Project and Additional Financing (the "Project"), implemented by Agency for Agro Credit and Development (the "Company"), which comprise the special purpose project statement of financial position, the special purpose project statement of sources and uses of funds, the special purpose project statement of project activities, statement of designated account, statement of expenditure withdrawal schedule as of and for the year ended 31 December 2018 and for the period ended 31 March 2019 and notes, comprising a summary of significant accounting policies and other explanatory information. In our opinion, the accompanying special purpose project financial statements for the year ended 31 December 2018 and for the period ended 31 March are prepared in all material respects, in accordance with financial reporting provisions of Article V of International Bank for Reconstruction and Development general conditions for loans dated 12 March 2012. Basis for opinion 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 Special Purpose Project Financial Statements section of our report. We are independent of the Project Executing Agency in accordance with the ethical requirements that are relevant to our audit of the special purpose project financial statements in Republic of Azerbaijan, 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 We draw attention to Note 2 to the special purpose project financial statements, which describes the basis of accounting. The special purpose project financial statements are prepared to assist the Project Executing Agency in complying with the financial reporting provisions of the Financial agreement referred to above. As a result, the special purpose project financial statements may not be suitable for another purpose. Our report is intended solely for the Project Executing Agency, the International Bank for Reconstruction and Development and should not be distributed to or used by parties other than the Project Executing Agency, the International Bank for Reconstruction and Development. Our opinion is not modified in respect of this matter. 3 MOORE STEPHENS Responsibilities of Management and Those Charged with Governance for the Special Purpose Financial Statements Management is responsible for the preparation of the special purpose project financial statements in accordance with the financial reporting provisions of Article V of International Bank for Reconstruction and Development general conditions for loans dated 12 March 2012 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. Those charged with governance are responsible for overseeing the Project's financial reporting process. Auditor's Responsibility for the Audit of the Special Purpose Project Financial Statements Our objectives are to obtain reasonable assurance about whether the special purpose project financial statements as a whole are 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 these special purpose project financial statements. As part of our audit in accordance with ISAs, we exercise professional judgement maintain professional scepticism throughout the audit. We also: - identify and assess the risks of material misstatement of the special purpose project financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain evidence that is sufficient and appropriate to provide a basis for our 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, international 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 Fund's internal control. - evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. - evaluate the overall presentation, structure and content of the special purpose project financial statements, including the disclosures, and whether the special purpose project financial statements represent the underlying transactions and events in a manner that achieves fair presentation. The engagement partner of the audit report resulting in this independent auditors' report is: Hikmet Allahverdiyev Moore Stephens Azerbaijan Baku, Azerbaijan 31 May 2019 4 AGENCY FOR AGRO CREDIT AND DEVELOPMENT SECOND RURAL INVESTMENT PROJECT AND ADDITIONAL FINANCING SPECIAL PURPOSE PROJECT STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2018 AND FOR THE PERIOD ENDED 31 MARCH 2019 (Expressed in US dollars) For the period ended 31 March Cumulative as at Cumulative as at Note 2019 31 December 2018 31 December 2017 ASSETS AND CUMULATIVE EXPENDITURE Cash at bank: 4 Government Project Account 41,112 132,416 1,141,727 IBRD Loan No. 8189 IBRD Loan No. 8403 576 Transit Account 41,112 132,416 1,142,303 Cumulative project expenditure: IBRD No. 8189 53,957,553 53,957,553 53,957,553 IBRD No. 8403 86,916,016 86,824,712 83,038,313 TOTAL ASSETS AND CUMULATIVE EXPENDITURE 140,914,681 140,914,681 138,138,169 SOURCES OF FUNDS Project financing: IBRD Loan No. 8189 30,000,000 30,000,000 30,000,000 IBRD Loan No. 8403 50,000,000 50,000,000 48,465,013 Government Counterpart Financing 36,613,532 36,613,532 36,613,532 Communities' Contribution 11,519,634 11,519,634 10,278,131 Other Income 13,387,387 13,387,387 13,387,387 Accumulated foreign exchange difference (605,872) (605,872) (605,894) TOTAL SOURCES OF FUNDS 140,914,681 140,914,681 138,138,169 Subhan Asgerov KhayalZaidov ; Project Management Unit Director Project Management Unit Finnce Manager The notes set out on pages 10-15 form an integral part of these special purpose project financial statements. 5 AGENCY FOR AGRO CREDIT AND DEVELOPMENT SECOND RURAL INVESTMENT PROJECT AND ADDITIONAL FINANCING SPECIAL PURPOSE PROJECT STATEMENT OF SOURCES AND USES OF FUNDS AS AT 31 DECEMBER 2018 AND FOR THE PERIOD ENDED 31 MARCH (Expressed in US dollars) For the For the year For the year Cumulative for period ended ended ended the period 31 March 31 December 31 December ended Note 2019 2018 2017 31 March 2019 OPENING BALANCES Government Project Account 132,416 1,141,727 717,974 IBRD Loan No. 8189 - 40,272 IBRD Loan No. 8403 - 576 1,056,772 Transit Account 132,416 1,142,303 1,815,018 ADD: FUNDS RECEIVED BY SOURCES IBRD Loan No. 8189 - 30,000,000 IBRD Loan No. 8403 1,534,987 - Government Counterpart Financing - 6,869,724 36,613,532 Communities' Contribution 1,241,503 1,195,637 11,519,634 Other Income - 13,386,897 13,387,387 Foreign exchange gain/(loss) - 22 (9,412) (605,872) - 2,776,512 21,442,846 140,914,681 LESS: EXPENDiTURE BY CATEGORIES IBRD Loan No. 8189 5 Grants 4,290,179 45,390,057 Consultant Services - 3,339,919 incremental Operating Costs 22,588 3,843,353 - 510,152 Training k16,378 761,550 Civil Works -37,522 Front-end fee - 75,000 4,329,145 53,957,553 IBRD Loan No, 8403 5,8 Grants -2,231,339 15,150,271 76,714,848 Consultant Services 57,656 709,943 1,424,825 5,020,484 Incremental Operating Costs 33,648 668,518 1,046,137 4,151,954 Goods 47,968 64,008 413,424 Training - 128,630 100,864 454,799 Civil Works - 311 35,507 Front-end fee - - - 125,000 91,304 3,786,398 17,786,416 86,916,016 TOTAL EXPENDITURE 91,304 3,786,398 22,115,561 140,873,569 CLOSING BALANCE 4 Government Project Account 41,112 132,416 1,141,727 IBRD Loan No. 8189 IBRD Loan No. 8403 576 Transit Account 41,112 132,416 1,142,303 Subhan Asgerov Khayal Zaidov C Project Management Unit(Difector Project Manag&ment Unit Fin nce Manager The notes set out on pages 10-15 form an integral part of these special purpose project financial statements. 6 AGENCY FOR AGRO CREDIT AND DEVELOPMENT SECOND RURAL INVESTMENT PROJECT AND ADDITIONAL FINANCING SPECIAL PURPOSE PROJECT STATEMENT OF USES OF FUNDS BY PROJECT ACTIVITIES AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2018 AND FOR THE PERIOD ENDED 31 MARCH 2019 (Expressed in US dollars) Cumulative uses of funds by Project activities for the period ended 31 March 2019: Rural Community Project Technical Services Infrastructure/ Management and for Rural and Results Infrastructureland Livelihoods Monitoring Livelihoods Total Communities' Contribution 11,519,637 - - 11,519,637 Government Counterpart 46,693,352 1,937,841 722,739 49,353,932 IBRD Loan No.8189 21,532,855 6,138,127 2,329,018 30,000,000 IBRD Loan No.8403 42,359,062 5,947,136 1,693,802 50,000,000 Total 122,104,904 14,023,104 4,745,559 140,873,569 Uses of funds by Project activities for the period ended 31 March 2019 Rural Project Technical Services Community Management for Rural Infrastructurel and Results Infrastructure/ and and Livelihoods Monitoring Livelihoods Total Communities' Contribution - Government Counterpart - 73,784 17,520 91,304 IBRD Loan No.8189 . IBRD Loan No.8403 - - - - Total 73,784 17,520 91,304 Uses of funds by Project activities for the year ended 31 December 2018: Rural Project Technical Services Community Management for Rural Infrastructurel and Results Infrastructurel and and Livelihoods Monitoring Livelihoods Total Communities' Contribution 1,241,503 - - 1,241,503 Government Counterpart 989,836 278,908 78,618 1,347,362 IBRD Loan No.8189 . IBRD Loan No.8403 845,989 351,544 1,197,533 Total 2,231,339 1,124,897 430,162 3,786,398 Uses of funds by Project activities for the year ended 31 December 2017: Rural Project Technical Services Community Management for Rural Infrastructurel and Results Infrastructurel and and Livelihoods Monitoring Livelihoods Total Communities' Contribution 1,195,637 - - 1,195,637 Government Counterpart 17,729,197 1,377,032 574,332 19,680,561 IBRD Loan No.8189 - 21,740 16,378 38,118 IBRD Loan No.8403 515.616 520,036 165.593 1.201.245 Total 19,440,450 1,918,808 756,303 22,115,561 Subhan Asgerov Khayal Zaidov_"'2 - 1 Project Management UntIDirector Project Management Unit Fin nce Manager The notes set out on pages 10-15 form an integral part of these special purpose project financial statements. 7 AGENCY FOR AGRO CREDIT AND DEVELOPMENT SECOND RURAL INVESTMENT PROJECT AND ADDITIONAL FINANCING SPECIAL PURPOSE PROJECT STATEMENT OF DESIGNATED ACCOUNT AS AT 31 DECEMBER 2018 AND FOR THE PERIOD ENDED 31 MARCH 2019 (Expressed in US dollars) IBRD-8189DA IBRD-8403DA Cumulative For the For the For the year For the year for the period For the year year For the ended ended ended period ended ended 31 ended 31 period ended 31 31 31 March 31 March December December 31 March December December 2019 2019 201 8 2017 2019 0 20172019 2018 2017 Balance at the beginning of reporting period 40,272 577 1,056,772 - 40,272 576 1,056,772 ADD: Advances and replenishments - 1,634,987 - 50,000,000 Foreign Exchange gain/(loss) - (1,454) - (32) (11,477) 181,471 Due to Government Counterpart funds ( (700) - (337,997) 156,526 (181,471) (2,154 - 1,196,958 145,049 50,000,000 DEDUCT: Eligible expenditure - - (37,067) - (1,183,722) (1,206,163) (49,286,490) Bank charges - 139) - (1,181) (419) (375,498) Transaction loss (912) - (12,630) 5,337 (338,012) Total expenditures - - (38,118) - (1,197,533) (1,201,245) (50,000,000) Balance at the end of reporting period . sre Subhan Asgerov Khayal Zaidov -' Project Management Uhibirector Project Management Unit Finan e Manager The notes set out on pages 10-15 form an integral part of these special purpose project financial statements 8 -о м и ео � :� � � "г�' й О С�Л p�i � с а+ � г N f0 iY т ФD '� 'с _ t4 � амi й й о� � � � � пг v 1- � О © � � ' � � � � � r- M1, С � � � .� � С7 О i {� N �у � И С � с � Ш _ г � (й г И � М r И tП °� i .� L.... � -. t� � С� � '� п� С � -l U Q� М д и И ' � � О �-- = N �Ч � с м�,.... � L ,� � � м .С �,,.. т Й .� г ` О .�. � � ` О'� � с . рр О 7 _ VJ р � � С? ,Ё; f1i [Л 4_� J N � Ci � М � r N CJ � i i П7 U р� S3 а,', � И� ti ш а � а� � � � Sll - ш� Е т аэ ¢ � оо о � •� с д аС ,`,, � И �� � � _•`-' � й то м � � й.� с U � .� Г [� С т � т Q �7 с у'�Ci у Qм М iL� U� � г C�U� С? .....с О � ш .� . а � с ' � � сп �_ г � г � с - ��� � � � V � Ш � ° � ач И у , � � � Е- Ll � и и v й' �i3 � т Q � О у, � � м v л �' �ц � _ _ � ш ш .� а v цг � � � @ с й. � � .� �ry ;� ,�,� ` � с гn � � � - а_�� ° о } 4 N� Е о °� "' � � ��� �,� � гг � � F. 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Z р U�- L ш а� О Х •� Q� с„_•._, ш U tt1 ОС � а л � � �J г1 .- т � � ¢й йО�j � а ° Г � s � г°•� � � �'о - � и cL AGENCY FOR AGRO CREDIT AND DEVELOPMENT SECOND RURAL INVESTMENT PROJECT AND ADDITIONAL FINANCING NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 NAD FOR THE PERIOD ENDED 31 MARCH 2019 (Expressed in US dollars) NOTE 1. BACKGROUND IBRD Loan Designated Account No. 8189 Second Rural Investment Project ("the Project") is a project established by the Government of Azerbaijan and and implemented by the State Service on Management of Agricultural Projects and Credits under the Ministry of Agriculture of Republic of Azerbaijan for rural communities to organize and build infrastructure projects in five areas of our country. The Project Development Objective is to improve access to and use of comm un ity-d riven rural infrastructure and expand economic activities for rural households through: (i) financing demand-driven, community-identified priority rural infrastructure investments- (ii) strengthening the capacity of communities in partnership with municipalities and local suppo institutions to effectively identify, plan and implement their development priorities; (iii) building opportunities for rural employment and livelihood support services; and, (iv) supporting project management capacity in order to coordinate, plan, monitor, program and supervise a wide range of community driven activities. The project is a multi-sector investment loan with a total investment cost estimated at USD 53,600,000, of which USD 30,000,000 will be financed by IBRD. It will scale up Project both geographically into currently un-serviced regions and vertically through the inclusion of pilot livelihood support services and second generation institutional support in current Project active project areas. The Project has three components: Component A - Rural Community Infrastructure Three categories of micro-project grants will be supported under Component A: (i) micro projects in previously un-serviced regions which meet eligibility criteria set out in the Operational Manual (OM)- (ii) second generation micro-projects in active Project communities with high performance ratings ir m previous micro-project implementation and which meet eligibility criteria set out in the OM, and; (iii) micro- projects submitted by Common Interest Groups supported under the pilot scheme in Component 8 which meet eligibility criteria as established in the OM. Component B - Technical Assistance for Rural Infrastructure This component will fund technical support services for micro-project implementation and pilot livelihood support services. There are two sub-components, namely: (i) sub-component 131 on Supporting Micro- Project (MP) Development and (ii) sub-component B2 on Piloting Livelihood Support Services. Component C - Project Management and Results Monitoring This component will finance the administrative and operational project implementation and management costs, including overheads of Project Management Unit (PMU) professional staff as well as PMU and Regional Operations Office (ROO) support staff, project outreach and support to Regional Grant Approval Committees (RGACs).The withdrawal of proceeds from the ORD loan will be made in accordance with the following schedule: Percentage of Expenditure to Amount of the Loan finance, Net of Value added Category Allocated, USD tax 1 , Goods, works, non-consulting services, consultants' services including audit, Training, and Incremental Operating Costs for the Project 8,925,000 100% 2. Grants 21,000,000 90% Amount payable pursuant to Section 2.03 of this Loan Agreement in accordance with Section 2.07 (b) of the General 3. Front-end Fee 75,000 Conditions 4. Interest Rate Cap or Interest Rate Amount due pursuant to Section Collar premium - 2.07 (c) of this Agreement Total: 30,000,000 10 AGENCY FOR AGRO CREDIT AND DEVELOPMENT SECOND RURAL INVESTMENT PROJECT AND ADDITIONAL FINANCING NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 FOR THE PERIOD ENDED 31 MARCH 2019 (Expressed in US dollars) Government Contribution. The Government's contribution of USD 20,000,000 to finance project expenditures will be disbursed from budget allocations through the Treasury system of the MoF and managed by the PMU. Funds will be released to the project to finance project expenditures as expenditures are incurred and the Project Account shall be replenished regularly to minimize delays in project implementation. Beneficiary Contribution. The beneficiary contribution to finance project expenditures is USD3,600,000. Retroactive financing. Withdrawals up to an aggregate amount not to exceed USD 4,200,000 equivalent might be made for payments made on or after 1 April 2012, for eligible expenditures. IBRD Loan Designated Account No. 8403 Additional Financing for the Second Rural Investment Project was signed on 22 October 2014. The Project consists of the Original Project as modified as follows: Part A: Rural Community Infrastructure and Livelihoods Provision of grants to finance eligible demands-driven Micro-projects: (1) in rural infrastructure, including the connector roads pilot; and (2) in livelihoods support, in accordance with the Operational manual. Part B: Technical Assistance for Rural Infrastructure and Livelihoods 1. Provision of training and consultants' services to support micro-project development by enhancing the capacity of engaged local stakeholders, including communities, local authorities, Regional Grant Approval Committees and staff in the ROOs, in all aspects of micro-project program development related to contracting, procurement, financial management and participatory monitoring and evaluation. 2. Provision of training and consultants' services to carry out livelihood support services in twenty-six (26) communities, that have already implemented successfully, Micro-projects focused on economic infrastructure for the purpose of developing the capacity of involved stakeholders, such as local communities, groups and individuals to identify, plan and implement income-generating Micro- projects. Part C: Project Management and Results Monitoring Provision of goods and consultants' services to assist the PMU and its ROOs for the purpose of effective management and implementation of Project activities, including the monitoring and evaluation of the Project. AGENCY FOR AGRO CREDIT AND DEVELOPMENT SECOND RURAL INVESTMENT PROJECT AND ADDITIONAL FINANCING NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 AND FOR THE PERIOD ENDED 31 MARCH 2019 (Expressed in US dollars) The withdrawal of proceeds from the IBRD loan will be made in accordance with the following schedule: Percentage of Expenditure to Amount of the Loan finance, Net of value added Category Allocated, USD tax 1. Goods, works, non-consulting services, consultants' services including audit, Training, and Incremental Operating Costs for the Project 18,800,000 100% 2. Grants 31,075,000 90% Amount payable pursuant to Section 2.03 of this Loan Agreement in accordance with Section 2.07 (b) of the General 3. Front-end Fee 125,000 Conditions 4. Interest Rate Cap or Interest Rate Amount due pursuant to Section Collar premium - 2.07 (c) of this Agreement Total: 50,000,000 The registered address of the Project is 80 U.Hajibeyli Street, Government House, Baku, Azerbaijan. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES a) Basis of Accounting These special purpose financial statements are prepared in accordance with the International Public Sector Accounting Standard ("IPSAS") Financial Reporting under the Cash Basis of Accounting issued by the International Public Sector Accounting Standards Board ("IPSASB"), an independent standard-setting body within the International Federation of Accountants ("IFAC") and incorporate the following principal accounting policies, which have been consistently followed in all material respects and comply with the "Guidelines: Annual Financial Reporting and Auditing for International Bank Reconstruction and Development - Financed Activities" issued by the International Bank for Reconstruction and Development Financial Management Sector Board. Project financing is recognised as a source of project funds when the cash is received. Project expenditure is recognised as a use of project funds when payment is made. b) Period of accounts These special purpose financial statements cover the year ended 31 December 2018. c) Transactions and balances in foreign currencies The Project is domiciled in the Republic of Azerbaijan where the local currency is the Azerbaijani manat ("AZN"). Because the majority of the Project's transactions are funded and expended in United States dollars and in accordance with the requirements of the International Bank for Reconstruction and Development, these special purpose financial statements are presented in United States dollars ("US dollar"or "USD"), which is the reporting currency of the Project. Transactions in other currencies are treated as transactions in foreign currencies. Cash receipts and payments arising from transactions in a foreign currency are recorded in the Project's reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of receipt and payment. Cash balances held in a foreign currency are reported using the closing rate, which is the spot exchange rate at the reporting date. Unrealised gains and losses arising from changes in foreign currency exchange rates are not cash receipts and payments. However, the effect of exchange rate changes on cash held in a foreign currency is reported in the statement of sources and uses of funds and other statements in order to reconcile cash at the beginning and the end of the period. These amounts are presented separately from cash receipts and payments and include the differences, if any, had those cash receipts and payments and balances been reported at end-of-period exchange rates. On 31 December 2018, the official AZN/USD exchange rate set by the Central Bank of Azerbaijan ("CBAR") was AZN 1.7001 (31 December 2017: AZN 1.7707). 12 AGENCY FOR AGRO CREDIT AND DEVELOPMENT SECOND RURAL INVESTMENT PROJECT AND ADDITIONAL FINANCING NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 AND FOR THE PERIOD ENDED 31 MARCH (Expressed in US dollars) d) Designated account The Designated Account is a disbursement account of the Project maintained in US dollars with the International Bank of Azerbaijan in order to effect payment of eligible expenditure within defined limits, which do not require individual authorisation from IBRD, in accordance with the Agreement. NOTE 3.CLOSING DATE OF THE PROJECT (Note 8) Based on letter from 18 September 2018, the closing date of the Project was established on 31 March 2019. NOTE 4. CASH IN BANK Asat Asat As at 31 March 31 December 31 December 2019 2018 2017 IBRD Loan No 8189 AZ, USD - - IBRD Loan No 8403 AZ, USD - 576 Government Project Account, USD 41,112 132,416 1,141,727 Transit account - - - 41,112 132,416 1,142,303 NOTE 5. EXPENSES BY SOURCES OF FINANCING Period ended 31 March 2019 IBRD Loan No. 8403 Source of Civil Consultant Incremental finance Grants Works Services operating Costs Trainings Goods Total IBRD Loan - - - - - - Government Counterpart - - 57,656 33,648 - - 91,304 Communities' Contribution - - - - - Total - - 57,656 33,648 - - 91,304 Year ended 31 December 2018 IBRD Loan No. 8403 Source of Civil Consultant Incremental finance Grants Works Services operating Costs Trainings Goods Total IBRD Loan - - 541,463 495,807 116,775 43,488 1,197,533 Government Counterpart 989,836 - 168,480 172,711 11,855 4,480 1,347,362 Communities' Contribution 1,241,503 - - - 1,241,503 Total 2,231,339 - 709,943 668,518 128,630 47,968 3,786,398 13 AGENCY FOR AGRO CREDIT AND DEVELOPMENT SECOND RURAL INVESTMENT PROJECT AND ADDITIONAL FINANCING NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 AND FOR THE PERIOD ENDED 31 MARCH (Expressed in US dollars) Year ended 31 December 2017 IBRD Loan No. 8403 Incremental Source of Civil Consultant operating finance Grants Works Services Costs Trainings Goods Total IBRD Loan 515,616 311 460,146 197,766 15,905 11,501 1,201,245 Government Counterpart 14,030,501 - 964,679 848,371 84,959 52,507 15,981,017 Communities' Contribution 604,154 - - - 604,154 Total 15,150,271 311 1,424,825 1,046,137 100,864 64,008 17,786,416 NOTE 6. METHODS OF WITHDRAWAL The methods of withdrawal used from the inception of the IBRD Loan up to 31 December 2018 were as follows: 6.1 Designated account Available amounts were drawn from time to time within limits determined by the loan agreements for the direct payment of eligible expenditure for sub-projects from the designated account. 6.2 Project account The Project maintains a separate account where the Government counterpart funds are accumulated. The funds are further disbursed to contractors based on the shares of expenditure to be incurred by each contractor, 6.3 Statement of expenditure (SOE) The Project submits to the International Bank for Reconstruction and Development an application for reimbursement of payments already made using an Application for Withdrawal (Form 2380E) with SOE forms, bank reconciliation forms and the bank account statement. NOTE 7. OPERATING ENVIRONMENT The Project's principal activities are within Republic of Azerbaijan. Consequently, the Project is exposed to economic and financial markets of Republic of Azerbaijan, which display characteristics of an emerging market. The legal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changes which together with the other legal and fiscal impediments contribute to the challenges faced by entities operating in Republic of Azerbaijan. The special purpose project financial statements reflect management's assessment of the impact of the operating environment in Republic of Azerbaijan on the operations of the Project. The future operating environment may differ from management's assessment. 14 AGENCY FOR AGRO CREDIT AND DEVELOPMENT SECOND RURAL INVESTMENT PROJECT AND ADDITIONAL FINANCING NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 AND FOR THE PERIOD ENDED 31 MARCH (Expressed in US dollars) NOTE 8. POST BALANCE SHEET EVENTS There were not any adjusting or significant non-adjusting events that occurred between the reporting date and the date of authorization of these special purpose project financial statement. All non-recoveredinon-claimed expenditures Actual Total expenditures Actual Estimated as at expenditures IBRD IBRD Communitie Government Expenditures 31 December to 31 March Loan Loan s. Counterpart Incurred to 31 2018 2019 8189-AZ 8403- AZ Contribution Financing July 2019 Civil Works - - - - - - - Consultant Services 709,943 57,656 - - - 29,406 797,006 Goods 47,968 - - - - - 47,968 Grants 2,231,339 - - - - 11,706 2,231,339 Incremental operating Costs 668,518 33,648 - - - - 713,872 Trainings 128,631 - - - - - 128,631 Total 3,786,399 91,304 - - 41,112 3,918,816 15