"Pasture and Livestock Management Improvement Project" IDA Credit No. 5521-KG IDA Grant No. H976-KG Special purpose project financial statements for the year ended December 31 , 2017 and independent auditors' report "PASTURE AND LIVESTOCK MANAGEMENT IMPROVEMENT PROJECT" IDA CREDIT NO. 5521-KG IDA GRANT NO. H976-KG TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 2 INDEPENDENT AUDITORS' REPORT 3-5 SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Statement of cash proceeds and disbursements 6-7 Statement of uses of funds by project components 8 Notes to the special purpose project financial statements 9-16 Annex to the special purpose programme financial statements 17 STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 The following statement, which should be read in conjunction with the independent auditors' responsibilities is made with a view to distinguish the respective responsibilities of management and those of the independent auditors in relation to the special purpose project financial statements of the Project "Pasture and Livestock Management Improvement Project", IDA Credit No. 5521 -KG, IDA Grant No. H976-KG (the "Project"). Management is responsible for the preparation of the special purpose project financial statements that present fairly, in all material respects, cash proceeds and disbursements and uses of funds by project components of the Project for the year ended December 31 , 2017 in accordance with International Public Sector Accounting Standard "F inancial Reporting Under the Cash Basis of Accounting" (the "TPSAS") issued by the International Public Accounting Standards Board of the International Federation of Accountants and the World Bank's Financial Management Sector Board 's "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities" (the "WB Guidelines"). In preparing the special purpose project financial statements, management is responsible for: • se lecting su itable accounting policies and applying them consistently; • making judgments and estimates that are reasonable and prudent; • stating whether IPSAS and WB Guidelines have been followed, subject to any material departures disclosed and explained in the special purpose project financial statements; and • preparing the special purpose project financial statements on a going concern basis, unless it is inappropriate to presume that the Project will continue its activity for the foreseeable future. Management is also responsible for: • designing, implementing and maintaining effective and sound system of internal control and for revealing risks in system of internal control; • maintaining proper accounting records that disclose, with reasonable accuracy at any time, the financial position of the Project, and which enable them to ensure that the special purpose project financial statements of the Project comply with IPSAS and WB Guidelines; • compliance with laws and regulations of the Kyrgyz Republic, accounting system of the Project and the requirements of the World Bank; • taking such steps as are reasonably available to them to safeguard the assets of the Project; and • detecting and preventing fraud and other irregularities. The special purpose project financial statements for the year ended December 31, 2017 were approved and authorized for issue by the management of the Project on May 11, 2018. '/ On beh,~ lf of the Man,~g~ment o the Project: :'{~i"' . ;,.',, Tynaiv-S,. Zhusupbekova S. Acting dit~~tor Financial manager May 11 , 2018 Mayll ,2018 Bishkek, Kyrgyz Republic Bishkek, Kyrgyz Republic 2 103 lbraimova str. T: + 996 (312) 90 05 05 ~AKER TILLY BC "Victory", 7th floor F: + 996 (312) 91 05 05 Bishkek, 720011 contact@bakertilly.kg BISHKEK Kyrgyz Republic www.bakertilly.kg INDEPENDENT AUDITORS' REPORT To the management of the Project "Pasture and Livestock Management Improvement Project" under the Ministry of Agriculture, Food Industry and Melioration of the Kyrgyz Republic: Report on the special purpose project financial statements Opinion We have audited the special purpose project financial statements of the Project "Pasture and Livestock Management Improvement Project" (the "Project") which comprise the statement of cash proceeds and disbursements and the statement of uses of funds by project components for the year ended December 31 , 2107, and a summary of significant accounting policies and other explanatory information (the "special purpose project financial statements"). In our opinion, the accompanying special purpose project financial statements present fairly, in all material respects, cash proceeds and disbursements and uses of funds by project components of the Project for the year ended December 31 , 2017 in accordance with International Public Sector Accounting Standard "Financial Reporting Under the Cash Basis of Accounting" (the "IPSAS") issued by the International Public Sector Accounting Standards Board of the International Federation of Accountants and the World Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities" (the "WB Guidelines"). 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 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 our audit of the special purpose project financial statements in the Kyrgyz Republic, and we have fulfilled our other 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. Emphasis of matter Without qualifying our opinion, we draw attention to Note 2 to the special purpose project financial statements which describe the basis of accounting. These special purpose project financial statements were prepared for complying with the appropriate World Bank Guidelines and Financing agreement requirements. Other matter The special purpose project financial statements are prepared to assist the Project to comply with the requirements of the World Bank. As a result, the special purpose project financial statements may not be suitable for another purpose. 3 Responsibilities of management and those charged with governance for the special purpose project financial statements Management is responsible for the preparation and fair presentation of the special purpose project financial statements in accordance with International Public Sector Accounting Standard "Financial Reporting Under the Cash Basis of Accounting" (the "IPSAS") issued by the International Public Accounting Standards Board of the International Federation of Accountants, and the World Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities" (the "WB Guidelines"), 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. Auditor's responsibilities 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 the special purpose project financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism 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 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 special purpose project 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 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. 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. 4 Kubat Alymkulov Certified accountant, FCCA Audit certificate of the Kyrgyz Republic No. 0069 Audit Director, Baker Tilly Bishkek LLC Baker Tilly Bishkek LLC, License Series A No. 0049 issued by the State Committee on Review and Regulation of the financial market of the Kyrgyz Republic May 11,2018 Bishkek, Kyrgyz Republic 5 "PASTURE AND LIVESTOCK MANAGEMENT IMPROVEMENT PROJECT" IDA CREDIT NO. 5521-KG IDA GRANT NO. H976-KG STATEMENT OF CASH PROCEEDS AND DISBURSEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 (in US Dollars) Notes For the year Cumulative For the year Cumulative ended ended December 31, December 31, 2017 2016 Opening balance 4 1,585,509 APIU 393,402 ARIS 1,192,107 Funds received IDA Credit 5521-KG 5 IDA Grant H976-KG 5 1,165,054 3,366,050 2,200,996 2,200,996 APIU 328,580 1,029,576 700,996 700 ,996 ARIS 836,474 2,336,474 1,500,000 I ,500,000 Community contribution 5 27,821 27,821 ARIS 27,821 27,821 Total funds received 1,192,875 3,393,871 2,200,996 2,200,996 Other income 7 20,388 45,988 25,600 25,600 APIU 4,599 22,175 17,576 I 7,576 ARJS 15,789 23,813 8,024 8,024 Total receipts 1,213,263 3,439,859 2,226,596 2,226,596 Project expenses I. Goods, works, non-consulting services, consultant's services, training, and incremental operating costs for Parts I.A(i), (ii), and (iv), Part I.B, Parts I.C(i) - (iii), Parts 11.A(i i) - (iii), Parts 11.B(i) and (iii) - (v), and Part ITI(i) of the Project 6 454,579 779,276 324,697 324,697 APIU 454,579 779,276 324,697 324,697 2. Goods, works, non-consulting services, consultant's services, training, and incremental operating costs for Parts 1.A(iii) and (v) and Part IIl(ii) of the Project 6 451,280 691,939 240,659 240,659 ARIS 451,280 691,939 240,659 240 ,659 3. Sub-Grants for Part I.A(v) and Part I.C(iv) of the Project 6 194,845 270,103 75,258 75,258 ARIS 194,845 270,103 75,258 75,258 4. Sub-Grants for Part II .A(i) and Part 11.B(ii) of the Project 6 Total project expenses 1,100,704 1,741,318 640,614 640,614 6 "PASTURE AND LIVESTOCK MANAGEMENT IMPROVEMENT PROJECT" IDA CREDIT NO. 5521-KG IDA GRANT NO. H976-KG STATEMENT OF CASH PROCEEDS AND DISBURSEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2017 (in US Dollars) Notes For the year Cumulative For the year Cumulative ended ended December 31, December 31, 2017 2017 Other expenses 8 15,488 15,961 473 473 AP JU 13,809 14,282 473 473 ARIS 1,679 1,679 Closing balance 4 1,682,580 l ,682,580 1,585,509 1,5 85,509 APIU 258,193 25 8,193 393,402 393,402 ARIS 1,424,3 87 1,424,3 87 1,192,1 07 1,192,107 On behalf of the Management: ~