Suleiman & Co. Certified Public Accountants - License No. 205 Correspondent Firm of RSM International in East Jerusalem, West Bank and Gaza THE PALESTINIAN MINISTRY OF FINANCE AND PLANNING Project Title FINANCE FOR JOBS PROJECT PHASE- 1 (TF0A1490) Funded by INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) Implemented by DEVELOPMENT ALTERNATIVES,Inc. GLOBAL,LLC Financial Statements for the Year Ended December 31, 2018 and Independent Auditors' Report Ramallah Al Masyoun Taj Mahal building No. 10 phone 970 2 297-5576 -Fax 970 2 297 5577 E-mail: info@suleimanco.com The Palestinian Ministry of Finance and Planning Finance for Jobs Project Phase- 1 (TF0A1490) Funded by International Development Association Financial Statements for the Year Ended December 31, 2018 Table of Contents Page No. Independent Auditors’ Report 2-4 Statement of Balance Sheet 5 Statement of Sources and Uses of Funds 6 Designated Bank Account Statement – World Bank 7 Notes to the Project Financial Statements 8-13 1 Suleiman & Co. Certified Public Accountants - License No. 205 Correspondent Firm of RSM International in East Jerusalem, West Bank and Gaza Independent Auditors’ Report To The Development Alternatives, Inc. Global, LLC Ramallah Opinion We have audited the financial statements of “Finance for Jobs Project Phase- 1” (TF0A1490) (hereinafter “the Project”), which comprise the statement of balance sheet funded by the International Development Association (IDA) and implemented by Development Alternatives Inc. (hereinafter “DAI Global, LLC”) as at December 31, 2018, and the related statement of sources and uses of funds, designated bank account statement for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements present fairly, in all material respects, the balance sheet of the Project as at December 31, 2018, and the related statement of sources and uses of funds, designated bank account statement for the year then ended in accordance with International Financial Reporting Standards (IFRSs). 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 Financial Statements section of our report. We are independent of the Project in accordance with the ethical requirements that are relevant to our audit of the financial statements in areas under the jurisdiction of the Palestinian Authority, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Going Concern The Project’s financial statements have been prepared using the going concern basis of accounting. The use of this basis of accounting is appropriate unless management either intends to liquidate the Project or to cease operations, or has no realistic alternative but to do so. As part of our audit of the financial statements, we have concluded that management’s use of the going concern basis of accounting in the preparation of the Project’s financial statements is appropriate. Management has not identified a material uncertainty that may cast significant doubt on the Project’s ability to continue as a going concern, and accordingly none is disclosed in the financial statements. Based on our audit of the financial statements, we also have not identified such a material uncertainty. However, neither management nor the auditor can guarantee the Project’s ability to continue as a going concern. Other Matters Based on our review, in all material respects: 1. The Project expenditures reimbursed on basis of Statements of Expenditures (SOE) are eligible to the Grant Agreement and are reflected on the financial statements. 2. The Designated Bank Account has been used exclusively for payment of eligible expenditures as reflected in the financial statements. 2 Suleiman & Co. Certified Public Accountants - License No. 205 Correspondent Firm of RSM International in East Jerusalem, West Bank and Gaza 3. The Project’s accounting system (books and records), established and maintained by the DAI Global, LLC to record the financial transactions of the Project, provides the basis for preparation of the Project’s financial statements; 4. Internal control over financial reposting involved in the preparation of replenishments, direct payments, payments through special commitments, and reimbursements can be relied upon to support the related withdrawals. 5. The Project was in all material respects in compliance with the laws, regulations, guidelines and provisions governed by the Grant Agreement. 6. Procurement Guidelines have been properly applied in accordance with the Project’s Gr ant Agreement. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. DAI Global, LLC is responsible for overseeing the Project’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements The objectives of our audit are to obtain reasonable assurance about whether the Project financial statements taken 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 financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: 1. Identify and assess the risks of material misstatement of the 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. 2. 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. 3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 3 Suleiman & Co. Certified Public Accountants - License No. 205 Correspondent Firm of RSM in East Jerusalem, West Bank and Gaza 4. Evaluate the overall presentation, structure and content of the 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, if any. Ismail Suleiman Certified Public Accountant License number 131/2000 Ramallah, March 7, 2019 4 The Palestinian Ministry of Finance and Planning Finance for Jobs Project Phase- 1 (TF0A1490) Funded by International Development Association Financial Statements for the Year Ended December 31, 2018 Statement of Balance Sheet (All amounts in USD) Note 2018 2017 Assets Current assets Cash at bank and on hand 8 368,109 322,151 Total current assets 368,109 322,151 Total assets 368,109 322,151 Liabilities and fund balance Current Liabilities Accrued payroll tax 2,221 2,025 Total current Liabilities 2,221 2,025 Total liabilities 2,221 2,025 Fund balance 8 365,888 320,126 Total liabilities and fund balance 368,109 322,151 The accompanying notes form an integral part of these financial statements. 5 The Palestinian Ministry of Finance and Planning Finance for Jobs Project Phase- 1 (TF0A1490) Funded by International Development Association Financial Statements for the Year Ended December 31, 2018 Statement of Sources and Uses of Funds (All amounts in USD) Cumulative to December 31, Note 2018 2017 2018 Fund balance – beginning of year 320,126 - - Sources of fund Advance payment 3 - 500,000 500,000 Replenishments received 3 977,339 1,115,778 2,093,117 Total sources of fund 977,339 1,615,778 2,593,117 Uses of funds Category 1: Matching Grants under Part A of the project 88,296 - 88,296 Category 2: Goods, Non-consulting Services, Management Fees, and Incremental Operating Costs Training under Part B and C of the project: : Part A: Matching Grants 4 Part A: Matching Grants 10,893 9,138 20,031 Part B: ICF & Capacity Building 4 315,895 701,718 1,017,613 Part C: Project Management 4 440,057 481,259 921,316 Fixed Fee 76,436 103,507 179,943 Currency variances loss - 30 30 Total uses of funds 931,577 1,295,652 2,227,229 Change in fund balance 45,762 320,126 365,888 Fund balance – end of year 8 365,888 320,126 365,888 The accompanying notes form an integral part of these financial statements. Training 6 The Palestinian Ministry of Finance and Planning Finance for Jobs Project Phase- 1 (TF0A1490) Funded by International Development Association Financial Statements for the Year Ended December 31, 2018 Designated Bank Account Statement IBAN PS18 PALS 0458 2222 8700 0130 0100 0 Bank Account number 0458 / 2222870 / 001 / 3001 / 000 Depository bank Bank of Palestine Address Ramallah Related loan/ credit TF0A1490 Currency U.S. Dollar (USD) Note 2018 2017 Balance – beginning of year 322,151 - Receipts during the year 3 977,339 1,615,778 Total 1,299,490 1,615,778 Deduct Payments for project expenditures from designated bank account 5 931,381 1,293,597 Currency variances loss - 30 Total 931,381 1,293,627 Balance – end of year 8 368,109 322,151 The accompanying notes form an integral part of these financial statements. 7 The Palestinian Ministry of Finance and Planning Finance for Jobs Project Phase- 1 (TF0A1490) Funded by International Development Association Financial Statements for the Year Ended December 31, 2018 Notes to the Project Financial Statements (All amounts in USD) 1. The Project and its Financing The Palestinian Liberation Organization (PLO), For the benefit of the Palestinian Authority (PA), and the International Development Association (the World Bank), acting as an administrator of the Trust Fund for Gaza and West Bank, signed a Trust Fund Grant Agreement dated March 10, 2016 (the Grant Agreement), whereby the world made a grant, to the PA in an amount equals to USD 5,000,000, grant number TF0A 1490, To finance a project entitled “Finance for Jobs Project- Phase I” (the Project). In accordance with the Grant Agreement, the PA shall cause the Project to be carried out jointly by the Palestinian Ministry of Finance and Planning (MoFP) and a Project Implementation Agreement agency. Accordingly, an Implementation Agreement dated November 20, 2016 (the Implementation Agreement), has been signed between the MoFP and Development Alternatives, Inc. Global, LLC (DAI Global, LLC) under which DAI Global, LLC has been contracted as the Project Implementation Agency (PIA). The effective date of the Grant Agreement is November 30, 2016. The categories to be financed by the World Bank and the percentage of expenditure for items to be financed in each category, is as updated by the amendment to the Grant Agreement dated July 17, 2017, are as follows: Allocated Percentage of Amount Expenditure Category (USD) to be financed Category 1: Matching Grants under Part A of the Project 1,500,000 100% Category 2: Goods, Non-consulting Services, Consultants Services, Management Fees, Training and Incremental Operating Costs under Part B and C of the Project. 3,500,000 100% 5,000,000 The objective of the Project is to test the effectiveness of selected financial inventions. The Project consists of the following parts: Part A: Entrepreneurship Ecosystem Matching Grant Provision of Matching Grants to Beneficiaries to build their business development capacity and their business advisory capacity. Part B: Capacity Building 1. Building a pipeline of job-focused private sector investments through conducting feasibility assessments on said private investments; and developing and utilizing a cost- benefit analysis methodology in conducting said assessments. 2. Supporting a program of activities to support the market preparation and related capacity building activities to assist the recipient to issue a development-impact bond instrument. 3. Supporting a program of activities to develop capacity of the MoFP to enable it to: (a) effectively engage with the private sector to collaborate on innovative solutions to job creation; (b) better understand market failures and risks of the private sector; and (c) assess, develop, and manage innovative financing instruments. 8 The Palestinian Ministry of Finance and Planning Finance for Jobs Project Phase- 1 (TF0A1490) Funded by International Development Association Financial Statements for the Year Ended December 31, 2018 Notes to the Project Financial Statements – continued (All amounts in USD) Summary of Significant Accounting Policies – continued Part C: Project Management Strengthening the capacity of DAI Global, LLC for project management, coordination, monitoring and evaluation, including, inter alia, fiduciary control and oversight, environmental and social safeguards assessment, and preparation of project reports. 2. Summary of Significant Accounting Policies The Project financial statements are prepared under the historical cost convention. Significant accounting policies follow:  Basis of accounting The Project financial statements are prepared using the cash basis of accounting, which is a comprehensive basis of accounting other than International Financial Reporting Standards (IFRS). Under this basis of accounting, sources of funds are recognized when related cash is received from the World Bank and uses of funds are recognized when cash payments are made by DAI.  Foreign currency The Project’s basic functional currency is the United States Dollar (USD). Transactions that are expressed or denominated in other currencies were translated to USD using exchange rates in effect at the time of each transaction. Differences arising from the fluctuations in exchange rates were treated as exchange gains or losses in the statement of sources and uses of funds and designated bank account statement. 9 The Palestinian Ministry of Finance and Planning Finance for Jobs Project Phase- 1 (TF0A1490) Funded by International Development Association Financial Statements for the Year Ended December 31, 2018 Notes to the Project Financial Statements – continued (All amounts in USD) 3. Sources of Funds Up to December 31, 2018, DAI received the following payments from the World Bank: Withdrawal Application (WA) Number Date of Advance Fund Transfer Payment Category 1 Category 2 Total Cumulative amount up to December 31, 2017 500,000 - 1,115,778 1,615,778 2018 F4JS-8 January 24, 2018 - - 177,819 177,819 F4JS-9 March 26, 2018 - 9,726 171,617 181,343 F4JS-10 April 19, 2018 - 39,568 80,551 120,119 F4JS-11 July 6, 2018 - - 135,807 135,807 F4JS-12 August 28, 2018 - 11,925 100,731 112,656 F4JS-13 November 20, 2018 - 12,165 237,430 249,595 Amount received during the year 2018 - 73,384 903,955 977,339 Cumulative amount up to December 31, 2018 500,000 73,384 2,019,733 2,593,117 10 The Palestinian Ministry of Finance and Planning Finance for Jobs Project Phase- 1 (TF0A1490) Funded by International Development Association Financial Statements for the Year Ended December 31, 2018 Notes to the Project Financial Statements – continued (All amounts in USD) 4. Uses of Funds This item represents the following: 2018 2017 Part A: Entrepreneur ship Ecosystem Part B: Matching Capacity Part C: Project Cumulative up to Grant Building Management Total Total December 31, 2018 Category 1: Matching Grants 88,296 - - 88,296 - 88,296 Category 2: Goods, Non-consulting Services, Consultants’ Services, Management Fees, Training and Incremental Operating Costs 10,893 315,895 516,493 843,281 1,295,622 2,138,903 99,189 315,895 516,493 931,577 1,295,622 2,227,199 5. Payments for Project Expenditures Below is reconciliation of the Project expenditures shown in the designated bank account statement with the Project expenditures shown in the statement of sources and uses of funds: 2018 2017 Total uses of funds per statement of sources and uses of funds 931,577 1,295,652 Add: Accrued payroll tax as of December 31, 2017 2,025 - Deduct: Accrued payroll tax as of December 31, 2018 (2,221) (2,025) Currency variances loss - (30) Payments as reported in designated bank account statement 931,381 1,293,597 11 The Palestinian Ministry of Finance and Planning Finance for Jobs Project Phase- 1 (TF0A1490) Funded by International Development Association Financial Statements for the Year Ended December 31, 2018 Notes to the Project Financial Statements – continued (All amounts in USD) 6. SOE Procedures (Payments from Designated Bank Account) Payments from designated bank account represent amounts disbursed by DAI under the Project for the following disbursement categories: Withdrawal Application (WA) Number Payment Method Category 1 Category 2 Total Cumulative amount up to December 31, 2017 - 1,295,652 1,295,652 2018 Payment from designated bank F4JS-9 account 9,726 171,617 181,343 Payment from designated bank F4JS-10 account 39,568 80,551 120,119 Payment from designated bank F4JS-11 account - 135,807 135,807 Payment from designated bank F4JS-12 account 11,925 100,731 112,656 Payment from designated bank F4JS-13 account 12,165 237,430 249,595 Total Client connection up to December 31, 2018 73,384 2,021,788 2,095,172 Add: Expenses recorded by DAI in year 2018 but not reported to IDA as of December 31, 2018: (Reported subsequently in WA #14) 14,912 114,894 129,806 Accrued payroll tax - 2,221 2,221 Currency variances loss - - - DAI records as of December 31, 2018 88,296 2,138,903 2,227,199 12 The Palestinian Ministry of Finance and Planning Finance for Jobs Project Phase- 1 (TF0A1490) Funded by International Development Association Financial Statements for the Year Ended December 31, 2018 Notes to the Project Financial Statements – continued (All amounts in USD 7. Reconciliations Between World Bank Records (Client Connection) and DAI Records Cumulative up to December 31, 2018 Project account per the client connection Advance payment transferred to DAI 500,000 Category 1: Matching Grants under Part A of the Project 73,383 Category 2: Goods, Non-consulting services, consultants’ services, management fees, training and incremental operating costs under part B and C of the project 2,019,734 2,593,117 Project accounts per DAI Global, LLC records Category 1: Matching Grants under Part A of the Project 88,296 Category 2: Goods, Non-consulting services, consultants’ services, management fees, training and incremental operating costs under part B and C of the project 2,138,903 Accrued payroll tax (2,221) Currency variances loss 30 2,225,008 Cash at bank as of December 31, 2018 (note 8) 386,109 8. Fund Balance – End of Year The fund balance at December 31, 2018 represents the following: USD Cash maintained in the USD designated bank account 368,109 Deduct: Accrued payroll tax (2,221) 365,888 13