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Р [ ! 1 Second National Water Supply and Sanitation Project Implementation Unit under State Amelioration and Water Management OJSC Statement of Sources and Uses of Funds for the period from I June 2019 to 30 September 2019 From I June 2019 From to I May 2018 30 September to US Dollars Note 2019 31 May 2019 Cumulative Opening balances IBRD Loan 8381 AZ 434,060 210,512 GoA 1,200,014 1,082,439 1,634,074 1,292,951 Add: Funds received by sources IDA Credit 4397 AZ (initial deposits) 4 - - 22,898,131 IDA Credit 4397 AZ (Direct payments) 4,022,905 IBRD Loan 7518 AZ (initial deposits) 4 35,781,767 1 BRD Loan 7518 AZ (Direct payments) - - 194,026,562 IBRD Loan 8381 AZ (initial deposits) 4 1,697,721 9,180,215 13,877,936 IBRD Loan 8381 AZ (Direct payments) 2,170,643 34,881,276 136,122,064 GoA 4,115,460 23,273,010 236,379,413 Other (tender fees) - 2,431 105,119 Less. Refund of unused GoA share (106,342) 7,983,824 67,336,932 643,107,555 Ad di(Less): Exchange differences IDA Credit 4397 AZ - - (82,525) IBRD Loan 7518 AZ (118,743) IBRD Loan 8381 AZ (11,245) (8,198) GoA (3,732) (145,943) Other (tender fees) 417 (14,977) _(354,992) Less: Expenditures IDA Credit 4397 AZ Goods (2,564,691) Consulting services (21,303,233) Incremental operating costs (2,994,260) Transfer fee for IDA funds (33) (26,8623217) IBRD Loan 7518 AZ Goods (229,282,552) Front end Fee (383,329) (229,6§§,88J1 ��° °} й��i�гс°� п°Qi�► v�i '� ? ш�®�-- си с� с csa а� ш` т �r cv аг �г> �t сл' м ai R�i q1� � 61L'7N� �К Фт � Q � СЭ � С � � � � ��� � � � [!i � .а�+'� � �С? �- L Q i � � � � � Li. .--� л л � � Ф� вt "�� уΡ� С7 г G. l!7 Gb N'ct . О С+'1 С] С? С�.... � � S� G <у ci� [r7 С3з 03 f� � �t Ф� � йУ � CS] {�} t"7 � г С7 i"] Ф С'7 р С� С i�* "м t0 С*л д Q ti? ti? 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Background The Project is directly implemented by the Project Implementation Unit ("PIU") established under the State Amelioration and Water ManagementOJSC, which is an Implementing Agency. The PlU is not a legal entity. The objective of the Project is to improve the availability, quality, reliability and sustainability of water supply and sanitation services of the Government of the Republic of Azerbaijan (hereinafter the "Borrower"). According to the signed Agreements the Project consists of the following parts: Part A: Rayon Investment 1. Rehabilitation an extension of water supply and sewerage systems as well as facilities for water, wastewater and sludge treatment in the Selected Rayons in the State Amelioration and Water Management Open Joint Stock Company's (SAWMC) Service Areas. 2. Rehabilitation an extension of water supply and sewerage systems as well as facilities for water, wastewater and sludge treatment in the Selected Rayons in the State Amelioration and Water Management Agency if Nakhchivan Autonomous Republic's (SAWMA) Service Areas. Part B: Institutional Modernisation 1. Capacity building and modernisation of the SAWMC, through (a) the provision of training for management, financial management, customer service, procurement, preventive maintenance and other subjects pertinent to effective and efficient management of the utilities: (b) development of performance monitoring, preventive maintenance and leak detection and repair; and (c) design and technical support for construction management, including procurement support and contract supervision for the investments. 2. Capacity building and modernisation of the SAWMA, through (a) the provision of training for management, financial management, customer service, procurement, preventive maintenance and other subjects pertinent to effective and efficient management of the utilities: (b) development of performance monitoring, preventive maintenance and leak detection and repair; and (c) design and technical support for construction management, including procurement support and contract supervision for the investments. Part C: Project Management 1. Strengthening of the management capacity of the SAWMC to monitor and administer implementation of the Project, including audit. 2. Strengthening of the management capacity of the SAWMA to monitor and administer implementation of the Project, including audit. The Project originally included 21 rayons, however, immediately after effectiveness, the Project faced .- - "-f--.- - - -L-. a . . . . -... /ll- 4- -.. I.X.J.... 0.,;.^, k%1r.r,fn f'~ at k zxH Second National Water Supply and Sanitation Project Implementation Unit under State Amelioration and Water Management OJSC Notes to Special Purpose Project Financial Statements for the period from 1 June 2019 to 30 September 2019 1. Background (continued) a) Financing Agreement with the IBRD Loan 7518 AZ A Loan Agreement 7518 AZ dated 16 October 2009 has been signed between the Republic of Azerbaijan ("Borrower") and the International Bank for Reconstruction and Development ("IBRD"). The IBRD agreed to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, the amount of two hundred thirty million Dollars (USD 230,000,000), as such amount may be converted from time to time through a Currency Conversion in accordance with the provisions of Section 2.07 of the Loan Agreement to assist in financing the project described in Schedule I to the Agreement. SAWMC Subsidiary Agreement To facilitate the carrying out of the SAWMC's Respective Part of the Project the Borrower shall make part of the proceeds of the Loan available to the SAWMC under a subsidiary agreement between the Borrower and the SAWMC, under terms and conditions agreed by the IBRD ("SAWMC Subsidiary Agreement"). Withdrawal of Loan Proceeds 1. The Borrower may withdraw the proceeds of the Loan in accordance with the provisions of Article II of the General Conditions, this Section and such additional instructions as the IBRD shall specify by notice to the Borrower (including the "World Bank Disbursement Guidelines for Projects' dated May 2006, as revised from time to time by the IBRD and as made applicable to this Agreement pursuant to such instructions), to finance Eligible Expenditure as set forth in the table below. 2. The following table specifies the categories of Eligible Expenditure 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 expenditure to be finances for Eligible Expenditure in each Category. Amount of Percentage of Category the Loan Expenditures to be Allocated Financed (net of VAT) (USD) Works (a) For Part A.1 of Project 670,000 75% (b) For Part A.2 of Project 330,000 Goods (a) For Part A.1 and B.1 of the Project. 139,645,000 75% (b) For Part A.2 and B.2 of the Project. 68,780,000 Amount payable pursuant Second National Water Supply and Sanitation Project Implementation Unit under State Amelioration and Water Management OJSC Notes to Special Purpose Project Financial Statements for the period from 1 June 2019 to 30 September 2019 1. Background (continued) a) Financing Agreement with the IBRD Loan 7518 AZ (continued) Originally, closing date of the loan was agreed to be 28 February 2013. However, due to delays and difficulties encountered during the implementation of the project closing date was prolonged until 31 December 2017. In addition to the agreed closing date, IBRD allowed the PIU additional 4 months of grace period in order to complete all documentation necessary for closing. As at 30 September 2019, the loan was fully utilised. Part of USD 575,000 front-end fee (see Note 1(a),2) for the amount of USD 191,671 was allocated to State Amelioration and Water Management Agency of Nakhchivan Autonomous Republic (SAWMA) in accordance with the provisions of Article IV of Loan agreement. As the Project is directly implemented by the PIU under State Amelioration and Water Management OJSC (SAWMC), any accounting records of SAWMA have not been included in these special purpose project financial statements for the period from 1 June 2019 to 30 September 2019 (see Note 2). b) Financing Agreement with the IDA Credit 4397 AZ A Credit Agreement 4397 AZ dated 16 October 2009 has been signed between the Republic of Azerbaijan ("Borrower") and International Development Association ("Association" or "IDA'). The Association agreed to extend to the Borrower, on the terms and conditions set forth or referred to in the Agreement, a credit in an amount equivalent to eighteen million eight hundred thousand Special Drawing Rights (SDR 18,800,000), (variously "Credit" and "Financing") to assist in financing the project described in Schedule I to the Agreement. Withdrawal of the Proceeds of the Financing The following table specifies the categories of Eligible Expenditure that may be financed out of the proceeds of the Financing ("Category"), the allocation of the amounts of the Financing to each Category and the percentage of expenditures to be financed for Eligible Expenditure in each Category. Amount of the Percentage of Expenditure Category Loan to be Financed (net of Allocated VAT) SDR (1) Works for Part A,2 of the Project 251,000 (2) Goods (a) For Part A.1 and B.1 of the Project 7,474,000 75% (b) For Part A.2 and B.2 of the Project 3,681,000 (3) Consultant's Services, including Audit and Training S- . . . I . I -I - - -- - - fl 77l C%flf% 7rC01- Second National Water Supply and Sanitation Project Implementation Unit under State Amelioration and Water Management OJSC Notes to Special Purpose Project Financial Statements for the period from 1 June 2019 to 30 September 2019 Background (continued) b) Financing Agreement with the IDA Credit 4397 AZ (continued) Originally, closing date of the loan was agreed to be 28 February 2013. However, due to delays and difficulties encountered during the implementation of the project closing date was prolonged until 31 December 2017. In addition to the agreed closing date, IDA allowed the PIU additional 4 months of grace period in orderto complete all documentation necessary for closing. As at 30 September 2019, the loan was fully utilised. Loans for the total amount of USD 920,422 were withdrawn from IDA Credit 4397 AZ by the State Amelioration and Water Management Agency of Nakhchivan Autonomous Republic (SAWMA) in 2010 and 2011 in accordance with the provisions of Article II of Credit agreement. As the Project is directly implemented by the PIU under State Amelioration and Water Management OJSC (SAW MC), any accounting records of SAWMA have not been included in these special purpose project financial statements for the period from 1 June 2019 to 30 September 2019 (see Note 2). c) Financing Agreement with the IBRD Loan 8381 AZ A Loan Agreement 8381 AZ dated 22 October 2014 has been signed between the Republic of Azerbaijan ("Borrower") and the International Bank for Reconstruction and Development ("IBRD"). The IBRD agreed to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, the amount of one hundred fifty million Dollars (USD 150,000,000), as such amount may be converted from time to time through a Currency Conversion in accordance with the provisions of Section 2.07 of the Loan Agreement to assist in financing the project described in Schedule I to the Agreement. Amount of the Percentage of Category Loan Expenditures to be Allocated Financed (net of VAT) (USD) (1) Goods, works, non-consulting services, and consultants' services, Training and Incremental 149,625,000 75% Operating Costs for the Project Amount payable pursuant to Section 2.03 of this (2) Front-end Fee 375,000 Agreement in accordance with Section 2.07 (b) of the General Conditions (3) Interest Rate Cap or Interest Rate Collar Amount due pursuant to premium - Section 2.07(c) of the Agreement Second National Water Supply and Sanitation Project Implementation Unit under State Amelioration and Water Management OJSC Notes to Special Purpose Project Financial Statements for the period from 1 June 2019 to 30 September 2019 2. Accounting Policies These special purpose project financial statements cover the part of the project implemented by PIU under the State Amelioration and Water Management OJSC. Transactions related to the part of the project implemented by the State Amelioration and Water Management Agency of Nakhchivan Autonomous Republic have been excluded. a) Basis of Accounting These special purpose project 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. These Special Purpose Project Financial Statements have been prepared under the historical cost convention. 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 project financial statements cover the period from 1 June 2019 to 30 September 2019. 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"). The Project's transactions are funded and used in USD, AZN and EUR. In accordance with the requirements of the World Bank, these special purpose project financial statements are presented in 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 respective exchange rates 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. At 30 September 2019 the official exchange rate set by the Central Bank of Azerbaijan Republic ("CBAR") was 1.7000 (31 May 2019: 1.7000) for USDIAZN and 1.8592 (31 May 2019: 1.8918) for EURIAZN. 3. Cash at bank 30 Second National Water Supply and Sanitation Project Implementation Unit under State Amelioration and Water Management OJSC Notes to Special Purpose Project Financial Statements for the period from 1 June 2019 to 30 September 2019 OE) Withdrawal Schedule period from 1 June 2019 to 30 September 2019 ;cordance with terms of IDA Credit No. 4397 AZ during the period. period from 1 May 2018 to 31 May 2019 :cordance with terms of IDA Credit No. 4397 AZ during the period. te period from 1 June 2019 to 30 September 2019 accordance with terms of IBRD Credit No. 7518 AZ during the period. ie period from 1 May 2018 to 31 May 2019 accordance with terms of IBRD Credit No. 7518 AZ during the period. ie period from 1 June 2019 to 30 September 2019 quested_ _ Required for Category squested Advance/Initial Consultant Incremental Reimbursed imount deposit Goods Training services costing amount 1,697,721 -1,003,447 116,892 368,782 208,600 1,697,721 2,300,000 - 2,215,018 63,433 21,549 - - 3,997,721 - 3,218,465 180,325 390,331 208,600 1,697,721 eriod from I May 2018 to 31 May 2019 Required for Category eq uested- Advancellnitial Consultant Incremental Reimbursed tmount deposit Goods Training services costing amount 2,799,710 - 2,344,599 153,004 243,115 58,992 2,799,710 2,928,832 - 2,781,031 99,190 11,695 36,915 2,728,831 2,181,754 - 1,815,014 90,618 233,936 42,186 1,681,754 1,969,920 - 1,702,216 85,444 182,260 - 1,969,920 9,880,216 - 8,642,860 428,256 671,006 138,093 9,180,215 16 Second National Water Supply and Sanitation Project Implementation Unit under State Amelioration and Water Management OJSC Notes to the Special Purpose Financial Statements for the period from 1 June 2019 to 30 September 2019 5. Method of Withdrawal a) Designated or Special Account The Special Accounts held with the Kapital Bank ASC in the Republic of Azerbaijan are designated disbursement accounts of the Project to effect the payment of eligible expenditure within defined limits, which do not require individual authorisation from IDA and IBRD. The Project is authorized to make payments out of the special account exclusively for eligible expenditures in accordance with the provisions of the Financing Agreement. To replenish the designated account the Project furnishes to the requests for deposits into the special account, supporting documents and other evidence verifying that payments in respect of which replenishment is requested are made exclusively for eligible expenditures. The special accounts usually comprise: a) deposits and replenishments received from IDA and IBRD; b) payments substantiated by withdrawal applications; c) the remaining balances at the end of each financial year. b) Direct payments from the Credit Account Under this method, the PIU prepares applications based on supporting documents which are submitted to the IDA and IB RD. Payments are made from the credit account directly to the contractors. c) Project account (GoA) The Project maintains a separate account in Treasury Office No. 12 of the State Treasury Agency under the Ministry of Finance where the Government funds are accumulated. The funds are further disbursed to contractors based on the shares of expenditure to be incurred by each party to the Agreement. d) Statement of expenditure ("SOE") Under the SOE method, the Project forwards to the IDA and IBRD an application for reimbursement of payments already made using an application for withdrawal with SOE forms as the only documentation. 6. Operating Environment The Project's principal activities are within the Republic of Azerbaijan. Laws and regulations affecting entities operating in Azerbaijan are subject to rapid changes and the Project's operations could be at risk as a result of negative changes in the political and economic environment. 7. Actual vs. Budget The Project does not make publicly available its approved budget, therefore, there is not a comoarison of budget with actual amounts in these special purpose proiect financial statements.