PKF MAK ALYANS LLC PKF Accountants & business advisors INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION (ADMINISTRATOR) IMPROVING PRE-PRIMARY AND GENERAL SECONDARY EDUCATION PROJECT (PROJECT MANAGEMENT TEAM) MINISTRY OF PUBLIC EDUCATION OF REPUBLIC OF UZBEKISTAN (EXECUTING AGENCY) GLOBAL PARTNERTHIP FOR EDUCATION TRUST FUND GRANT No.18066-UZ SPECIAL-PURPOSE CASH BASIS FINANCIAL STATEMENTS AND STATEMENTS OF EXPENDITURES FOR THE YEAR ENDED DECEMBER 31, 2017 MINISTRY OF PUBLIC EDUCATION OF THE REPUBLIC OF UZBEKISTAN IMPROVING PRE-PRIMARY AND GENERAL SECONDARY EDUCATION PROJECT OF UZBEKISTAN TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL-PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 3 INDEPENDENT AUDITORS' REPORT 4 TRUST FUND GRANT SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017: Special-Purpose Statement of Cash Receipts and Payments 6 Special-Purpose Statement of Detailed Costs by Components/Categories 7 Notes to Special-Purpose Financial Statements 8-16 2 MINISTRY OF PUBLIC EDUCATION OF THE REPUBLIC OF UZBEKISTAN IMPROVING PRE-PRIMARY AND GENERAL SECONDARY EDUCATION PROJECT OF UZBEKISTAN STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR YEAR ENDED 31 DECEMBER 2017 The Management of the Project Management Team (hereinafter - "PMT") is responsible for the preparation of the Special-Purpose Financial Statements (hereinafter - 'Financial Statements") of the "Improving Pre-Primary and General Education Project of Uzbekistan" (hereinafter - "Project") funded by the Global Partnership for Education Trust Fund (hereinafter -"GPE TF") that present fairly the financial position of the Project as of 31 December 2017, and the funds received, and expenditures incurred for the year ended 31 December 2017, in compliance with International Public Sector Accounting Standards "Financial Reporting under the Cash Basis of Accounting" (hereinafter - "IPSAS-Cash Basis"). In preparing the Financial Statements, the management of the PMT is responsible for: * Selecting suitable accounting policies and applying them consistently; * Presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable, and understandable information; * Providing additional disclosures when compliance with the specific requirements in IPSAS-Cash Basis are insufficient to enable users to understand the impact of particular transactions, other events, and conditions on the Projects Special-Purpose Financial Statements; and * Making an assessment of the Project's ability to continue as a going concern. The Management of the Project is also responsible for * Designing, implementing and maintaining an effective and sound system of internal controls, throughout the Project; * Maintaining adequate accounting records that are sufficient to show and explain the Project's transactions and disclose with reasonable accuracy at any time the fund balance of the Project, and which enable them to ensure that the Financial Statements of the Project comply with specific requirements in IPSAS-Cash Basis; * Maintaining statutory accounting records in compliance with legislation of the Republic of Uzbekistan; * Taking such steps as are reasonably available to them to safeguard the assets of the Project; and * Preventing and detecting fraud and other irregularities. The Financial Statements of the Project for the year ended 31 December 2017 were authorized for issue by the Project's Management on June 26, 2018. On behalf of the Project's Management: D. Boltabaev A. Abdurakhmonov Project Coordinator Financial Specialist PKF MAK ALYANS LLC Accountants & INDEPENDENT AUDITOR'S REPORT business advisors To the Management of the Ministry of Public Education of Uzbekistan Opinion We have audited the Special-Purpose Financial Statements (hereinafter - the "SPFS") of "Improving Pre-Primary and General Secondary Education Project" (hereinafter - the "Project") financed from Grant proceeds of the International Bank for Reconstruction and Development/International Development Association (collectively the "World Bank"), acting as administrator of the Global Partnership for Education Trust Fund (hereinafter - the "GPE TF"), Grant Agreement No,TF018066 which comprise the special-purpose statement of cash receipt and payments for the year ended 31 December 2017, the statement of expenditures (hereinafter - the "SOE"), the statement of designated account (hereinafter - the "DA") and a summary of significant accounting policies and other explanatory notes. The SPFS have been prepared by management of the Project using the International Public Sector Accounting Standards "Financial Reporting under the Cash Basis of Accounting" (hereinafter - "IPSAS - Cash Basis"). In our opinion, 1. The accompanying Special-Purpose Cash Basis Financial Statements, in all material respects, give a true and fair view of the Financial Position of the Project as of 31 December 2017, as well as Sources and Uses of Funds, Designated Accounts movements and its balances for the periods then ended and complies with the conditions of the Grant Agreement and in accordance with International Public Sector Accounting Standard; II. Moreover, (a) with respect to the SOE for the year ended 31 December 2017 adequate supporting documents, records and accounts have been maintained to support claims to the World Bank for reimbursements of expenditures incurred; and (b) the expenditures included in the withdrawal applications and reimbursed against are eligible for financing under the Grant Agreement. Ill. The Designated Accounts statement for the year ended 31 December 2017 give a true and fair view of the Financial Position of the DA of the Project and of the cash flow for the periods then ended. Basis for Opinion We conducted our audit in accordance with the Intemational Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the 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 SPFSs in the Republic of Uzbekistan and we have fulfilled our other responsibilities under 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 audit opinion. Key Audit Matters There is no key audit matters to communicate. Responsibilities of Management and Those Charged with Governance for the Special-Purpose Financial Statements The Management of the PMT under the Ministry of Public Education of the Republic of Uzbekistan ("MOPE") is responsible for the preparation and fair presentation of these SPFSs in accordance with the International Public Sector Accounting Standard ("IPSAS"), and for such internal control as management determines is necessary to enable the preparation of SPFSs that are free from material misstatement, whether due to fraud or error. Tel: +99871 294-73-86 - Fax: +99871 294-73-85 - info@pkf.uz * www.pkf.uz * www.pkf.com PKF MAK ALYANS LLC * 22, Aviasozlar street * I passage * Tashkent, Uzbekistan * 100016 ISO 9001:2008 PKF MAK ALYANS LLC is a member firm of the PKF international Limted family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. Cert. No: QMS-00741A In preparing the SPFSs, 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 charges with governance are responsible for overseeing the Project's financial reporting. Auditor's Responsibility for the Audit of the Special-Purpose Financial Statements Our objectives are to obtain reasonable assurance about whether the SPFSs 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 SPFSs. 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 SPFSs, 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 auditors 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 SPFSs, 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. Audit Organization "PKF MAK ALYANS LLC" Ravshan Asfandiyarov Authorized audit license issued by the Ministry of Finance Qualified Auditor/General Director of the Republic of Uzbekistan under No.00531 dated Certificate of Auditor Qualification 30 January 2008, under No.14/1 dated 26 June 2015 22, Aviasozlar Street, 1 Passage 100016, Tashkent, Uzbekistan 26 June 2018 MINISTRY OF PUBLIC EDUCATION OF THE REPUBLIC OF UZBEKISTAN IMPROVING PRE-PRIMARY AND GENERAL SECONDARY EDUCATION PROJECT OF UZBEKISTAN SPECIAL-PURPOSE STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR YEAR ENDED DECEMBER 31, 2017 Tabular amounts are presented in US Dollars 31.12. 2017 31.12. 2016 2015-2019 Budget Actual Actual Variance Variance % Amount ___ __ Opening Fund Balances Cash in USD 313996 549628 Cash in UZS (USD equivalent) 2990 3874 Total 316986 553502 Sources of Funds: Funds Received GPE Trust Fund Grant - Direct Payments 9 522 501 20 655 568 GPE Trust Fund Grant - Initial Advance to Designated Account - - GPE Trust Fund Grant - Advances received to Designated Account 300000 1 000000 GPE Trust Fund Grant - Transit Account 500 000 - Sub- Total GPE Trust Fund Disbursements 49 900 000 10 322 501 21 655 568t - Contribution in distribution of goods 4 218 000 964 009 1 793 726 Sub- Total Government funds 4218000 964 009 1 793 726 TOTAL OF FUNDS RECEIVED 54118000 11286510 23 449 294 Uses of Funds: Expenditure Incurred - Cl - Improving Access to Quality Early (22 500 000) (7 837 659) (6 649 565) (7 959702) 35.38 Childhood Education Opportunities C2 - Improving Conditions for Better Learning (21 300 000) (2096208) (13 069 899) (4734 142) 22,23 Outcomes in General Educational Secondary Schools C3 - Strengthening the Capacity to Monitor the (6100000) (185 592) (2 172 605) (3378 186) 55.38 Education System Sub-Total of GPE Trust Funds (49 900 000) (10 119 459) (21892069) (16 072 030) 32.21% Investment financing (Distribution of goods) 1 (4 218000) 1 (964 009) (1 793 726) (1 460 265) 1 34.62 Sub-Total of Government Funds 4218 000) (964 009) (1793 726) 1 460 265) 34.62% TOTAL EXPENDITURE INCURRED (54118000) (11 083 468) (23 685795) (17532295) 32.40% FX Exchange Loss (82) (16) Closing Fund Balances Cash in USD 19882 313996 Cash in UZS (USD equivalent) 64 2990 Cash in Transit in USD 500 000 - Total 519946 316986 Signed on behalf of the Project's Management on 26 June 2018 D. Boltabaev A. Abdurakhmonov Project Coordinator Financial Specialist Notes on pages 8 to 16 form an integral part of the Special-Purpose Cash Basis Financial Statements. MINISTRY OF PUBLIC EDUCATION OF THE REPUBLIC OF UZBEKISTAN IMPROVING PRE-PRIMARY AND GENERAL SECONDARY EDUCATION PROJECT OF UZBEKISTAN SPECIAL-PURPOSE STATEMENT OF DETAILED COSTS FOR THE YEAR ENDED DECEMBER 31, 2017 Tabular amounts are presented in US Dollars Components Actual Planned I Budget* Variance Cumula Cumula Cumula 2072017 2017 Cu tive tive Tive Component 1: Improving Access to Quality Early Childhood Education Opportunities Sub-component 1.1. Developing more flexible and efficient ECCE service - 529 515 30000 1100 000 30 000 570 485 provision Sub-component 1.2. Implementing quality early childhood education opportunities 7837659 14010783 12450384 21400000 4612725 7389217 Sub-Total 7 837 659 14540298 12480384 22500000 4642725 7959702 Component 2: Improving Conditions for Better Learning Outcomes in General Educational Secondary Schools Sub-component 2.1. Supporting training programs for teachers and school 95336 1269057 156336 3200000 61000 1930943 managers Sub-component 2.2. Supporting the implementation of minimum school 2 000 871 15296 802 5 035 000 18 100 000 3034 129 2 803 198 standards Sub-Total 2 096 208 16 565 859 5 191336 21300000 3095129 4734141 Component 3: Strengthening the Capacity to Monitor the Education System Sub-component 3.1. Strengthening the - 2 180 390 45000 5000000 45000 2819610 education system monitoring capacity Sub-component 3.2. Project management 185 592 541 424 213 440 1 100000 27848 558 576 (including audit services) Sub-Total 185592 2721814 258440 6100000 72848 3378186 TOTAL GPE TRUST FUNDS' 10119459 33827971 17930 160 49900 000 7810 702 16 072 029 EXPENDITURE Government of Uzbekistan Funds Activity - Distribution of goods from 964 009 2757 735 964 009 4 218 000 - 1 460 265 Tashkent city to schools (to be purchased using GPE Trust Funds) Total Government of Uzbekistan Funds' 964 009 2757735 964 009 4218 000 - 1 460 265 Expenditure TOTAL PROJECT EXPENDITURE 11 083 468 36585705 18894 169 54 118 000 7 810 702 17 532 295 (*) - Budget figures have rounded. D. Boltabaev A. Abdurakhmonov Project Coordinator Financial Specialist 7 Notes on pages 8 to 16 form an integral part of the Special-Purpose Cash Basis Financial Statements. 7 MINISTRY OF PUBLIC EDUCATION OF THE REPUBLIC OF UZBEKISTAN IMPROVING PRE-PRIMARY AND GENERAL SECONDARY EDUCATION PROJECT OF UZBEKISTAN NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Tabular amounts are presented in US Dollars 1 PROJECT AND ITS OPERATION On October 29, 2014, the Government of Uzbekistan and the World Bank signed the Trust Fund Grant Agreement No 18066 -UZ on the implementation of the Improving Pre-Primary and General Secondary Education Project (the Project). The initially the Project, which was aligned with the Education Sector Plan (ESP) for the Republic of Uzbekistan 2013-2017, was being implemented since January 2015, and to be closed in January 2018. It is financed by a Global Partnership for Education (GPE) Trust Fund Grant of USD 49.9 Million plus USD 4.2 Million from the Government of Uzbekistan (GoU), in the form of investment financing. The GoU contribution will finance the distribution of goods (to be purchased using GPE grant funds) from Tashkent city to schools. Moreover, on September 08, 2016 the World Bank has issued the Restructuring Paper on a proposed Project Restructuring of Improving Pre-Primary and General Secondary Education Project (the Grant dated October 29, 2014) to change in Disbursement estimates, the changes to Components and Cost, also changes in Grant Closing Date. The GPE Country Grants and Performance Committee meeting has approved via non-objection the proposed revision to Uzbekistan Education Sector Program Implementation Grant (ESPIG). In order to accommodate the expanded coverage of activities under the revised project design, and to compensate for initial delays, the proposed restructuring has extended the closing date by 18 months, from January 31, 2018 to July 31, 2019. Further, on September 13, 2016, the Secfion IV.B.2 under Schedule 2 to the Grant Agreement was amended and the Closing Date of the Grant Agreement was extended until July 31, 2019. 7l The Project has organized around three components and its sub-components, as described below, which relate to the following key dimensions of investments: access to quality early childhood education opportunities and learning conditions for students of general secondary education. Changes to Components and Cost in line with the Project restructuring paper: Component 1 - Improving Access to Quality Early Childhood Education Opportunities: under the proposed restructuring, Component 1 has expanded in both coverage and scope. It increased in value by approximately US$1.8 million, from US$20.7 million as originally planned to US$22.5 million following restructuring, with the difference coming from Component 2. The objective of this component is to improve access to early learning opportunities and quality pre -primary education in rural areas of Uzbekistan. The restructuring has expanded the coverage of the half-day model of ECCE by implementing it in an additional 1,200 rural pre-primary centers, which increased the total number of rural pre-primary centers supported by the Project from 1,220 to 2,420, or 92% of all rural pre-primary centers in Uzbekistan. These additional 1,200 centers would also be equipped with furniture, outdoor and indoor recreation equipment, and teaching and learning materials. Moreover, the early reading program would be expanded with the implementation of small libraries in these additional 1,200 rural pre-primary centers, as well as with the distribution of storybooks to additional 153,000 parents of young children currently not enrolled in ECCE and living in rural areas of Uzbekistan. Finally, an additional 2,000 preschool teachers would be trained on the half-day model of pre-primary education. These changes would allow the Project to benefit an additional 108,000 pre-primary students and 2,000 teachers, thereby enhancing development outcomes. The restructured Component 1 has supported two new activities: (i) analysis of existing State requirements for pre-primary education, provision of recommendations to improve these requirements, and related capacity building; and (ii) preparation and production of digital content for child development in four key areas (socio-emotional development, physical development, reading and writing preparedness, and cognitive development) The implementing unit of this component would be MoPE's Department of Pre-School Educational Institutions. By the end of the Project, it is expected that the ECCE enrollment rate of children aged 3 to 6 in rural areas would increase from 8.5 percent to 13.1 percent. 8 MINISTRY OF PUBLIC EDUCATION OF THE REPUBLIC OF UZBEKISTAN IMPROVING PRE-PRIMARY AND GENERAL SECONDARY EDUCATION PROJECT OF UZBEKISTAN NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Tabular amounts are presented in US Dollars Subcomponent 1.1 - Developing More Flexible and Efficient ECCE Service Provision. This subcomponent would finance the development of more flexible forms of ECCE service provision, which included a half-day school readiness program for children aged 5 to 6 and early literacy promotion activities targeting families with children aged 3 to 6. The implementation of the half-day model would be supported by the subcomponent 1.2 and would benefit 50,000 children aged 5 to 6 (of which 25,000 are girls), by the end of the Project. The implementation of the early literacy promotion activities would benefit 300,000 children (of which 150,000 are girls) over the duration of the Project. Subcomponent 1.2 - Implementing Quality Early Childhood Education Opportunities. This subcomponent would support activities to improve the quality of Pre-Primary education, by providing teaching and leaming materials (TLM), furniture and equipment to existing Pre-Primary education institutions where the half-day ECCE programs would be held as well as promoting early literacy activities. Additionally, this subcomponent would finance training activities for pre-school teachers and master trainers to deliver the half-day model. By the end of the project, it is expected the 50,000 children aged 5 to 6 (of which 25,000 are girls) would attend the half-day program, in 1,220 existing Pre-Primary centers located in rural areas of Uzbekistan. Component 2 - Improving Conditions for Better Learning Outcomes in General Educational Secondary Schools: this restructuring has expanded this Component in coverage and scope, such as for the Component 1. This Component decreased in value by US$1.8 million, from US$23.12 million as originally planned to US$21.30 million following restructuring. The objective of this component is to improve conditions for better learning outcomes in rural general educational secondary schools, by improving the training system for teachers and school managers and increasing the availability of adequate equipment and teaching and learning materials. By the end of the proposed Project, it is expected an improved in-service teacher training system. Even though the total value of this Component has decreased (with the difference transferred to Component 1), it was expanded relative to the original design because of the savings from activities that it currently finances. The number of rural general educational secondary schools that benefit from minimum school standards has increased by 412, from 1,220 to 1,632, or 24% of all rural general educational secondary schools in Uzbekistan. These 412 schools would receive ICT equipment, which would benefit an additional students. The restructuring would support the analysis of existing State educational standards, provision of recommendations to improve these standards, and related capacity building (training of approximately 350 people). Subcomponent 2.1 - Supporting Training Programs for Teachers and School Managers. This subcomponent would support the professional development of education personnel through improvements of training conditions at all 16 in-service training and retraining institutions, upgrade of training modules, revision of regulatory framework of the promotion system, and development of information systems in support to the training system. The implementing unit of this subcomponent would be the Main Department for Organizing Activity of Educational Establishments. By the end of the Project, it is expected that 200,000 teachers and school managers of Pre-Primary and general educational secondary schools are trained in advanced areas of teaching and education management. Subcomponent 2.2 - Supporting the Implementation of Minimum School Standards. Funds of this subcomponent would be used to finance the implementation of minimum school standards in rural general educational secondary schools. The concept of minimum school standards in Uzbekistan includes requirements for teaching and learning materials, ICT equipment, furniture, and school infrastructure. This subcomponent would support the implementation of minimum school standards in terms of ICT equipment for computer labs and teaching and learning materials, upon completion of any necessary improvements in schools' infrastructure at the expense of the State or local budget. This subcomponent would complement the GoU's and donors efforts to provide general educational secondary schools with adequate teaching and learning resources, materials and aids. This is to be done in full alignment with the priorities of the ESP and in coordination with education projects or initiatives supported by other donors also focused on equipping schools with teaching and learning resources. The provision of the ICT equipment and teaching and learning materials is closely related to the ESP Output "2.2 - Schools Equipped with Modern Tools, Libraries, Laboratory Equipment and Computers, which allow for Effective Utilization of Modem Teaching Technologies". 9 MINISTRY OF PUBLIC EDUCATION OF THE REPUBLIC OF UZBEKISTAN IMPROVING PRE-PRIMARY AND GENERAL SECONDARY EDUCATION PROJECT OF UZBEKISTAN NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Tabular amounts are presented in US Dollars Component 3 - Strengthening the Capacity to Monitor the Education System (total estimated cost: US$ 6.3 million, of which US$ 6.08 is from the GPE grant). This component would support activities aimed at strengthening the students' assessment system and supporting project day-to-day management. A lean Project Management Team would be established to support the existing structures for project implementation within MoPE. By the end of the Project, it is expected that the results of students' assessments in Mathematics and native language for grades 4 and 9 are analyzed and publicly disseminated. Component 3 did not change under this restructuring. Sub-component 3.1 - Strengthening the Education System Monitoring Capacity. This subcomponent would support the strengthening of the existing capacity to monitor the education system, which is one of the major responsibilities of MoPE's Main Department of Development of the Training and Education Process in General Secondary Schools. Improving the monitoring capacity is aligned with ESP Output "2.4 - M&E strategy extended to include monitoring of QBE criteria in the general secondary education teaching process and learning environment". Project funds would be used to build capacity on education quality monitoring as well as to improve existing management information systems. Additionally, this subcomponent would finance the purchase of ICT equipment for all 14 province education departments, 194 district education departments and MoPE. In addition, 832 users of these management information systems would be trained using project funds. Sub-component 3.2- Project Management: This subcomponent would finance the following activities: technical assistance to strengthen MoPE's capacity to implement the proposed Project; project audits; and operational and staffing costs of the Project Management Team. As the implementation would rely primarily on the existing structure of MoPE and the proposed activities to be financed by the Project are part of the everyday work of its staff, a Project Management Team would be set up to support the day -to-day management of the Project. A team of five local consultants would be hired using project funds for this purpose, including a Project Coordinator, a Procurement Specialist, a Financial Management Specialist, a Monitoring and Evaluation Specialist, and a translator. Additionally, six local consultants would be hired to technically support the implementation of the proposed activities - three for the Component 1, two for the Component 2 and one for the 3d Component. Lastly, given the concentration of several procurement activities to be prepared and launched in the first year of implementation, a Procurement Specialist with international experience will be hired using project funds to assist the Project Management Team (PMT) under a time-based contract. The PMT within the MOPE is located at 5, Mustaqillik Square, Tashkent city, 100016, Uzbekistan. 10 MINISTRY OF PUBLIC EDUCATION OF THE REPUBLIC OF UZBEKISTAN IMPROVING PRE-PRIMARY AND GENERAL SECONDARY EDUCATION PROJECT OF UZBEKISTAN NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Tabular amounts are presented in US Dollars 2 SIGNIFICANT ACCOUNTING POLICIES Basis of preparation These special-purpose Financial Statements have been prepared in accordance with the International Public Sector Accounting Standard (IPSAS) "Financial Reporting under the Cash Basis of Accounting" promulgated by the International Federation of Accountants (IFAC). Those standards require that cash receipts shall be effective when received and expenditures of funds shall be effective when they are paid rather than when incurred. The Financial Statements prepared under the cash basis provide readers with information about the sources of cash raised during the period, the purpose for which cash was used and the cash balances at the reporting date. The measurement focus in the financial statements is balances of cash and changes therein. The Project's special- purpose cash basis Financial Statements are prepared on the basis of cash receipts and disbursements which are a comprehensive basis of accounting. Cash and cash equivalents Cash and cash equivalents are recognized at cost and include cash at cash desk, cash at designated and special accounts at domestic banks and cash in transit. Project expenditures The Project's special-purpose cash basis Financial Statements are prepared based upon the accounting records of the PMT, which are maintained in both USD and UZS. The initial accounting records consist of summaries of disbursement documents and other payment vouchers. Accounting of PMT within the MOPE is conducted in accordance with the applicable laws of the Republic of Uzbekistan with the specific implementation of the Project, including applying cash method. The policy management programs also include preparation of detailed of cost report on a cash basis in accordance with International Accounting Standards for the Public Sector. The accounting is carried out using the Accounting software IC. In accounting, the following articles are used: - Taking into account the actual costs; - Accounting of cash; - Accounting of cash transactions; - Accounting of fixed assets; - Accounting of stocks; - Accounting of remuneration; - Settlements with debtors and creditors; - Reporting. The Financial Management of the Project is carried out by the following main points: 1) Analysis of the performance costs; 2) Analysis of cash expenses and for transfers; 3) Analysis of financial condition; 4) An analysis of budget execution. An analytical account of the sums received by the Project of funding is separate from the breakdown of the total amount financed by categories of expenditure. At the end of each month / quarter are counted up all the items of expenditure for the quarter and total year to-date, in order to identify the remainder and in a similar way to keep records of cash expenditures for transfers. 11 MINISTRY OF PUBLIC EDUCATION OF THE REPUBLIC OF UZBEKISTAN IMPROVING PRE-PRIMARY AND GENERAL SECONDARY EDUCATION PROJECT OF UZBEKISTAN NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Tabular amounts are presented in US Dollars Foreign currency translation (i) Functional and Presentation currencies The functional currency of the Project is the currency of the primary economic environment in which it operates. The Project's functional currency is Uzbek Soums ("UZS"), as the major portion of its transactions are in UZS. These special-purpose Financial Statements of the Program are also presented in the presentation currency of US Dollars ("USD") as this is convenient for the readers of the financial statements. (ii) Transactions and Balances The assets' additions and expenditure paid for in UZS were translated into USD using the following principles of transaction: * Monetary assets denominated in UZS have been translated into USD using the rate of exchange of the Central Bank of Uzbekistan ("CBU") on the date of conversion; * Before 05 September, 2017 - All income/expenditure eamed/incurred in UZS denominated into USD were recorded as an exchange rate of CBU, effective at the date of receipt or payment of the funds, however, after 05 September 2017, the rate used, effective on the date of conversion; * Gain/Loss resulting from the transaction of UZS into USD: Cash & cash equivalents outstanding as at reporting date are translated into USD at the rate of the CBU effective at the reporting date. The official exchange rate set by the CBU and effective, as at 31 December 2017 was UZS 8,120,07 to USD 1 (2016: UZS 3,231.48 to USD 1; 2015: UZS 2.809.98). Since September 05 2017, the exchange exists relating to converting the UZS into other currencies. At present, the UZS is still not a convertible currency outside Uzbekistan. Bank Accounts of the Project During the period from January 01, 2017 to December 31, 2017, the PMT held in Uzbekistan bank USD Designated Grant Account for GPE Trust Fund Split Disbursements, UZS Special Account and other accounts at named JSCB 'NATIONAL BANK". The PMT operates a Designated Grant Account in accordance with the provisions laid down in the Grant Agreement. The USD Designated Grant Account represents revolving funds provided from the GPE Trust Fund to facilitate prompt disbursement of funds. The funds are maintained at JSCB "NATIONAL BANK". The USD Designated/Grant Account is used to cover the GPE Trust Fund's share of eligible expenditures in both local and foreign currencies. The eligible expenditures are reported to the World Bank through Expenditure Reports/SOE. The USD Special/Grant Account is replenished by the GPE Trust Fund on the basis of request, prepared by the PMT for validation of USD Designated Account. The UZS Special Account was opened to convert the funds received on USD Designated Grant Account for Grant proceeds from WB/GPE and for payments to suppliers and withdrawal of cash. The outstanding balances of the above accounts as at December 31, 2017 are disclosed in Note 5. 3 SUBSEQUENT EVENTS There are no events after the end of the reporting period, which would require adjustment to or disclosure in these financial statements. 4 APPROVAL OF SPECIAL-PURPOSE FINANCIAL STATEMENTS The special-purpose financial statements were approved by the Management of the Project for issue on 26 June 2018. 12 MINISTRY OF PUBLIC EDUCATION OF THE REPUBLIC OF UZBEKISTAN IMPROVING PRE-PRIMARY AND GENERAL SECONDARY EDUCATION PROJECT OF UZBEKISTAN NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Tabular amounts are presented in US Dollars 5 Statements of Cash Balances of the Project The Project had the following Cash Balances as at December 31, 2017 at JSCB "NATIONAL BANK": Sources of funds Currency Note Name of account 2017 2016 Amount in USD Amount in USD GPE TF Grant Account USD 6 Designated Grant Account 19 882 313996 UZS Special Account UZS 7 Special Account 64 2 990 Transit Account USD Cash in Transit 500 000 - Total 519946 316986 6 Statements of USD Designated Grant Account Account No.: 22696 840 1001 0104 4003 Depositary Bank: JSCB "NATIONAL BANK" Address: Tashkent, Uzbekistan Related Grant No.: GPE TF 18066-UZ Currency: US Dollars (USD) 2017 2016 Opening Balance as at January 01 313996 549628 GPE TF Advance Disbursements 300 000 1 000 000 Returned travel allowances 429 - Cash Outflow: Transfer into UZS Special Account (Conversion) (429 605) (569 400) Financing eligible expenditure (164927) (666210) Commission fees charged by intermediary bank (11) (22) Closing Balance as at December 31 19882 313996 D. Boltabaev A. Abdurakhmonov Project Coordinator Financial Specialist 13 MINISTRY OF PUBLIC EDUCATION OF THE REPUBLIC OF UZBEKISTAN IMPROVING PRE-PRIMARY AND GENERAL SECONDARY EDUCATION PROJECT OF UZBEKISTAN NOTES TO SPECIAL-PURPOSE STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Tabular amounts are presented in US Dollars 7 Statements of UZS Special Account Account No.: 22696 000 4001 0104 4003 Depositary Bank: JSCB "NATIONAL BANKN Address: Tashkent, Uzbekistan Related Grant No.: GPE TF 18066-UZ Currency: Uzbek Soums (UZS) USD Equivalents 2017 2016 Opening Balance as at January 01 2990 3874 Cash Inflow: Transfer from USD Designated Grant Account 429 605 569 400 Cash Outflow: Financing of eligible expenditure (432 449) (570 268) FX Loss (82) (16) Closing Balance as at 31 December 64 2990 14 MINISTRY OF PUBLIC EDUCATION OF THE REPUBLIC OF UZBEKISTAN IMPROVING PRE-PRIMARY AND GENERAL SECONDARY EDUCATION PROJECT OF UZBEKISTAN NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Tabular amounts are presented in US Dollars 8 Equipment Purchased for Project Needs from Grant Proceeds Item Computers Furniture Office Equipment TOTAL Cost as at December 31, 2016 12 763 4789 2 784 20 336 Revalued Cost as at January 01, 2017 - Acquisitions during the year - - _- Depreciation charge during the year (2 857) (1 051) (611) (4519) Net book value as at December 31, 2017 9906 3738 2 173 15817 9 Statement of Salary Payable December 31, 2017 December 31, 2016 Salary payable Salary payable to consultants: Remuneration - Pension fund contribution (2%) - Personal Income Tax Total Salary payable 10 GPE Trust Fund Grant Proceeds December 31, 2017 Cumulative Grant Proceeds Designated Grant Account Advances received to Designated Account 300 000 2 000 000 Cash in Transit 500000 500000 Direct Pa ments 9 522 501 31 848087 Total GPE TF Grant Proceeds 10 322 501 34348087 11 Statement of Expenditure (including reconciliation) for the year ended December 31, 2017 STATEMENT OF EXPENDITURE - GPE TF No.18066-UZ WDA number Project Management Expenditure Used from Designated account in FY 2017 43* 270 011.50 - 49 174 617.23 174 617.23 52 113 045.60 113045.60 57 72 508.94 72 508.94 236 786.33 236 786.33 Total 866 969.60 596 958.10 (1) Note*: WDA No.43 has included the expenditures of the Project for the period October 01 - December 31, 2016 amounting to USD 270 011.50 and liquidated in 2017. (2) Note": Total amount of expenditures for the period October 01 - December 31, 2017 amounting to USD 236 786,33 were not documented through SOE by the Project in 2017. 15 MINISTRY OF PUBLIC EDUCATION OF THE REPUBLIC OF UZBEKISTAN IMPROVING PRE-PRIMARY AND GENERAL SECONDARY EDUCATION PROJECT OF UZBEKISTAN NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Tabular amounts are presented in US Dollars Reconciliation of financing made through Designated Account - GPE TF Grant No.18066-UZ in FY 2017 Expenditure claimed in SOE 49, 52 and 57 630 183.27 Less: Expenditure per SOE liquidated by WB for the period from 01.10.2016 to 31.12.2016 270 011.50 Total Expenditure per S E liquidated by WB for the period from 01.01.2017 to 30.09.2017 360 171.77 Add: Expenditure made for the period from 01.10.2017 to 31.12.2017 but not claimed 236 786.33 Total financing made through Designated Account in 2017 596 958.10 12 Direct Payments WDA Year Expenditure by Sub-Compon nts No 1.2.1 1.2.2 1.2.3 1.2.6 2.1.3 2.2.1 2.2.2 Total 44 2017 - - 106745.80 - - 106 74560 50 2017 213491.20 - - 213491.20 51 2017 - 628 517.52 33079.87 - . 661 59739 53 2017 171999.36 - - 17199936 54 2017 . . . 391 897.70 391 89770 55 2017 66 528.00 118 272 00- 18480.0 6 2017 13347496 133474.96 58 2017 - 30000.00 . 30 000.00 59 2017 42999.84 - 42 999,84 60 2017 - 218840.40 98319,60 - - 317 160,00 61 2017 - 358600.00 - 358600,00 63 2017 - . - 609 338. 11 60933811 64 2017 1 33908.48 238059.52 - 371968.00 65 2017 . - 117 96054 117960.54 f 2017 . 358600,00 - 358 600.00 Sub-total 214 999.20 1 047794.40 517 730.99 1 037 436.80 . 1 252 71.31 4070632.70 SC-04 2017 - 91419.94 4 811.58 , 96231.52 SC-04 2017 76913.60 4048.08 80961,68 SC-04 2017 174902.54 9205.40 184 107.94 SC-04 2017 203 552.93 10 713.31 21426624 SC-04 2017 . 279 099.80 14689.46 29378926 SC-04 2017 - 292 95649 15418.76 308 37525 SC-04 2017 - 850 171.57 44745.87 894 917.44 SC004 2017 - 442037.28 23265,12 - 465 302.40 SC-04 2017 368634.07 19 401.79 - - 388035.86 SC-04 2017 626454.86 27708.15 . - 554 163.01 Sub-total 3306143.08 174007.52 - * 3480150.60 SC-05 2. 145971,36 14597136 SC.05 2017 . - - 230353.44 230353,44 SC105 2017 . - - 238 780.80 238 780.80 SC-05 2017 . - 66733.20 66733.20 SC-06 2017 - 88547484 205 148.16 213 696.00 SC-06 2017 - 4608.00 110592.00 - 115200.00 SC-07 2017 419066592 . 419065.92 SC-07 2017 408087.68 - 408087.68 SC-08 2017 133828.80 - F . - 13382880 Sub-total 960 982.40 13 15584 315 740.10 681 838.80 1 971 717.20 TOTAL 1 175981.60 4 307 093.32 1 007 470.67 1 037 436.80 1 252071.31 681 830.00 9522 500.50 16