Report on the Republika Srpska part of the Project Financial Statements of the EMPLOYMENT SUPPORT PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Financed by: - IBRD Loan No. 8687 - BA For the year ended 31 December 2019 EMPLOYMENT SUPPORT PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina CONTENTS 1 Introduction 1 2 Independent Auditor's Report 3 3 Project financial statements for the year 2019 5 4 Notes to the project financial statements 7 APPENDICES A Designated account statement 8 B SoE Withdrawal Schedule of IBRD Loan No. 8687 - BA 9 C Reconciliation between IBRD's Historic Transaction Report and IBRD Loan account in EUR according to the to the balance sheet as of 31 December 2019; SoE Withdrawal Schedule of IBRD 8687 - BA 10 EMPLOYMENT SUPPORT PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina 1. Introduction 1.1 Objectives of the Project The objective of the Project is to increase formal private sector employment among targeted groups of registered job seekers in the Republika Srpska, through next steps: increasing job placement through Active labour market program, increase number of redesigned Active labour market program's to improve job placements, increasing job placement through intermediation and improving management systems and monitoring. 1.2 Components and activities of the Project The Project consists of the following parts Part B.1 Support for Employment Promotion 1. Implementation of the RS's Active Labour Market Programs, including inter alia by providing on the job training, developing business skills and providing grants to eligible unemployed persons for Self-Employment. 2. Implementation of a range of intermediation measures to promote employment including by providing: - services for job seekers by improving in-take registration processes, offering counselling services, developing Individual Action Plans and monitoring progress on placement of jobseekers; and - services for employers by promoting better outreach and communication and providing human resources and automated services. Part B.2 Support for Management systems; Monitoring and Communications Strengthening the capacity of the RS PES to monitor the ALMPs and employment services by: a) upgrading its information technology system to carry out a range of services including: (i) enabling data exchange amongst employment bureaus and other institutions; (ii) offering online services; (iii) monitoring online services offered to job seekers and employers; (iv) monitoring branch/local offices' performance; and (v) monitoring and disseminating labor market trends; and b) preparing and implementing an effective communication strategy targeting jobseekers, employers and policy-makers. 1 EMPLOYMENT SUPPORT PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina 1. Introduction (continued) 1.3 Financing of the Project The State of Bosnia and Herzegovina ("B&H") is the recipient of trust funds made available by International Bank for Reconstruction and Development, in the form of a Loan No. 8687 - BA amounting to the equivalent of EUR 50,000,000. Under the terms of a subsidiary finance agreement, funds of the equivalent of EUR 21,000,000 have been lent to RS. The following table specifies 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 % of expenditure to be Category (in EUR) financed 100% of expenditures that are covered under Section IV.B.7 (a) of Loan Eligible Expenditure Programs under Parts Agreement Schedule 2 and 4 B.1(1) and B.1(2) of the Project 20,000,000 50% for others Goods, non-consulting services, consultants' services, Training, and Incremental Operating 5 Costs for Part B.2 of the Project 500,000 100% 6 Unallocated under Part B of the Project 447,500 100% Amount payable pursuant to Section 2.03 of this Agreement in accordance with Section 207 (b) of the 7 Front - end fee 52,500 General Conditions Amount due pursuant to Interest Rate Cap or Interest Rate Collar Section 2.08(c) of Loan 8 premium - Agreement Subtotal 21,000,000 Planned closing date of the Project is 1 October 2021. 2 o bakertilly Baker Tilly Re Opinion d.o.o. Grbavidka 4 71000 Sarajevo Bosna i Hercegovina T: +387 (0) 33 552 150 F: +387 (0) 33 552 152 info@ bakertilly.ba www.bakertilly.ba 2. Independent Auditor's Report To the State of Bosnia and Herzegovina, Ministry of Finance and Treasury Attn. of Minister of Finance and Treasury H.E. Mr. Vjekoslav Bevanda Report on the Project Financial Statements Opinion We have audited the accompanying project financial statements of the Republika Srpska part of the Employment Support Project (the "Project"), which comprise of Summary of sources and uses of funds, Balance sheet, Designated account, Statement of loan and grant withdrawals as of and for the year ended 31 December 2019, and a summary of significant accounting policies and other explanatory notes for the year then ended, financed under IBRD Loan No. 8687 - BA. In our opinion, the accompanying project financial statements present fairly, in all material aspects, the financial position of the Project as of 31 December 2019, and of the funds received and disbursed during the year then ended, in accordance with the cash basis of accounting based on International Public Sector Accounting Standard ("IPSAS"), as described in Note 4.1. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and "Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities" issued by FMSB. 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 Ministry of Finance and Treasury 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 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. Responsibilities of Management and Those Charged with Governance for the Project Financial Statements The management of project coordination unit is responsible for the preparation of these project financial statements in accordance with the cash basis of accounting based on IPSAS, as described in Note 4.1., and for such internal control as management determines is necessary to enable the preparation of project financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Project or to cease operations or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the financial reporting process. JIB: 4200960550009 - PDV: 200960550009 - Raiffeisen Bank d.d. BiH: 1610000045270008 Baker Tilly Re Opinion d.o.o. 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. Responsibilities for the Audit of Financial Statements Our objectives are to obtain reasonable assurance about whether the 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 detected 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 financial statements. 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 project financial statements, 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 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, 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 Project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * 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 Project'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 financial statements or, if such disclosures are inadequate, to modify our 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 Project to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the project financial statements, including the disclosures, and whether the financial statements represent 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. Report on other requirements In addition, with respect to the Statement of Expenditure, adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditure incurred; and all expenditure included in withdrawal applications and reimbursed against are eligible for financing under the project. Signed n hal of Baker Tilly Re Opinion 0 PrQ V BAKER TILLY Nihad Fejzic, Dire or and Certified audit RE OP NION ; Ezita Imamovi6, Certified Auditor o O0NI Sarajevo, Bosnia and Herzegovina 14 May 2020 4 EMPLOYMENT SUPPORT PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2019 (all amounts in EUR, unless otherwise stated) 3. Project financial statements for the year 2019 3.1 Summary of sources and uses of funds under the Loan No. 8687 - BA Actual Cumulative Cumulative Cumulative Cumulative Ref. 2019 2019 2018 budget variance FINANCING Loan No. 8687- BA 21,000,000 Direct payments - 52,500 52,500 Reimbursement 2,054,107 5,520,107 3,466,000 TOTAL FINANCING * 3.2 2,054,107 5,572,607 3,518,500 21,000,000 15,427,393* PROJECT EXPENDITURE By Category Eligible expenditure program 2,049,107 5,515,107 3,466,000 20,000,000 14,484,893 Goods, non-consulting services, consultants' services, Training, and Incremental Operating Costs for Part B.2 of the Project 628 628 - 500,000 499,372 Unallocated under Part B of the Project - - - 447,500 447,500 Front - end fee - 52,500 52,500 52,500 - TOTAL EXPENDITURE 3.2 2,049,735 5,568,235 3,518,500 21,000,000 15,431,765 PROJECT EXPENDITURE Increasing job placement through Active Labor Market Programs 1,549,107 5,015,107 3,466,000 14,000,000 8,984,893 Improving design of ALMPs to increase job placement 500,000 500,000 - 2,000,000 1,500,000 Increasing job placement through intermediation - - - 2,500,000 2,500,000 Improving Management - - - 1,500,000 1,500,000 Goods, non-consulting services, consultants' services, Training, and Incremental Operating Costs 628 628 - 500,000 499,372 Unallocated - - - 447,500 447,500 Front - end fee - 52,500 52,500 52,500 - TOTAL EXPENDITURE 3.2 2,049,735 5,568,235 3,518,500 21,000,000 15,431,765 5 EMPLOYMENT SUPPORT PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2019 (all amounts in EUR, unless otherwise stated) 3. Project financial statements for the year 2019 (continued) 3.2 Balance sheet as of 31 December 2019 showing accumulated funds of the Project and bank balances concerning World Bank funding 31 December 31 December Ref. 2019 2018 ASSETS Project expenditure under Loan No. 8687 - BA 5,568,235 3,518,500 Designated account * 4,372 - Total assets 5,572,607 3,518,500 LIABILITIES IBRD Loan No. 8687 - BA 5,572,607 3,518,500 Total liabilities 5,572,607 3,518,500 * Designated account relates only for payments goods, non-consulting services, consultants' services, training and incremental operating costs. Payments for eligible expenditure program were made from th budget account. By insight into IBRD's Historic Transaction Report, the amount of undisbursed balance is adjusted with the amount presented in Project financial statements for the 2019 year. Signed and authorised by: eo Ko aevid Gordana Latinovid Pale, 14 May 2020 6 EMPLOYMENT SUPPORT PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2019 (all amounts in EUR, unless otherwise stated) 4. Notes to the project financial statements 4.1 Basis of preparation and accounting records These project financial statements have been prepared in accordance with the International Public Sector Accounting Standard: "Financial Reporting under the Cash Basis of Accounting" issued by the Public Sector Committee of the International Federation of Accountants, and incorporate the accounting policies below, which have been consistently followed in all material respects and comply with the "Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities", issued by the Financial Management Sector Board. 4.2 Accounting policies The Project's fiscal year is 1 January to 31 December for the recording of all transactions. Cash basis of accounting All receipts and expenses under IBRD Loan are recorded on actual receipt and payment basis of accounting as per approved categories. Project expenditure is stated at original cost on the balance sheet. Direct payments Direct payments concern the amounts paid directly from the credit account of the World Bank. Statement of Expenditure (SoE) Statements of Expenditure are used to state the expenditure under IBRD Loan during a certain period. These statements are sent to the World Bank's disbursement specialist who authorises the payment of the expenditure through the Designated account. Currency conversions The reporting currency is EUR. Sources and use of funds (payments to suppliers and contractors) in currencies other than EUR have been converted to EUR using the currency rate at the moment of the transaction. Bank balances, recorded on the balance sheet at year-end, have been converted at year-end rate. Designated account This is the total amount of the withdrawals from the Credit account for the Project. The Credit account is in EUR. Interest on Designated account Interest earned on the Designated account belongs to the Borrower. 7 EMPLOYMENT SUPPORT PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2019 (all amounts in EUR, unless otherwise stated) APPENDIX A DESIGNATED ACCOUNT STATEMENT Account owned by: Ministry of Finance and Treasury of Bosnia and Herzegovina Account No.: 393387304805267381 Depository Bank: UniCredit banka d.d. Related Credit: Loan No. 8687 - BA Currency: EUR EUR Opening balance 1 January 2019 - Add: World Bank replenishments 5,000 Subtotal 5,000 Deduct: Payments to suppliers 628 Subtotal 628 Ending balance 31 December 2019 4,372 8 EMPLOYMENT SUPPORT PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2019 (all amounts in EUR, unless otherwise stated) APPENDIX B SoE Withdrawal Schedule of IBRD Loan No. 8687 - BA Eligible Expenditure G, nCS, Programs CS, TR, Initial under Parts IOC Part Front End Total Total deposit B2 A.2 Fee application disbursed Previous years - 3,466,000 - 52,500 3,518,500 3,518,500 Application No. 2 - 2,049,107 - - 2,049,107 2,049,107 Application No. 3 - 628 - - 628 5,000 Cumulative 2019 - 2,049,735 - - 2,049,735 2,054,107 Cumulative 31 December 2019 - 5,515,735 - 52,500 5,568,235 5,572,607 9 EMPLOYMENT SUPPORT PROJECT of the Ministry of Finance and Treasury of Bosnia and Herzegovina Project financial statements for the year ended 31 December 2019 (all amounts in EUR, unless otherwise stated) APPENDIX C Reconciliation between IFAD's Historic Transaction Report and IBRD Loan account in EUR according to the to the balance sheet as of 31 December 2019; SoE Withdrawal Schedule of IBRD 8687 - BA Changes in Loan (in EUR) Original amount 21,000,000 Disbursed in previous period 3,518,500 Withdrawal 2 2,049,107 Withdrawal 3 5,000 Total disbursed in 2019 2,054,107 Cumulative disbursements 5,572,607 Calculated undisbursed balance as of 31 December 2019 15,427,393 Undisbursed balance as per IBRD's Historic Transaction Report 15,427,393 Difference - 10