ficadex albania ltd independent auditors' report … · for the year ended december 31, 2014;...

FICADEX ALBANIA Ltd

INDEPENDENT AUDITORS' REPORT

With audited financial statements

for the year ended December 31, 2014; year ended December 31, 2015 and

year ended December 31, 2016

Kosovo Education System Improvement Project

(IDA Credit No. 5726 - XK)

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Project

"Kosovo Education System Improvement" Project

Financed under World Bank (IDA Credit No. 5726 - XK)

Project ID P149005

Status Effective

Approval date September 10, 2015,

Signing date November 20, 2015

Effective date May 13, 2016

Closing date December 31, 2019

Country Kosovo

Audited by

"FICADEX ALBANIA" Ltd

Jacques COLIBERT

Marije DUSHI

www.ficadex.com

"SARACEVE" street; Building no. 6, No. 1;Municipal Unit no. 8, Tirana-Albania

"Migieni" street,147 Q. 4, Durres - Albania;

Tel/fax + 355 52 37 859

Mission

Audit of special purpose Financial Statements

For the year ended December 31, 2014; year ended December 31, 2015 and year ended December 31,2016

Report

Date: July 13, 2017

Version: Final report

Declaration of responsibility

The entire documentation was provided by the Project Implementing Unit (PIU) and Ministry of Finance(MOF) of Kosovo.

Content

Independent Auditors' Report Page

With

Audited financial statements of the project

* Statement of sources and uses of funds for the year ended December 31, 12014; year ended December 31, 2015 and year ended December 31, 2016.

* Statement of expenditures for year ended December 31; year ended December 231, 2015 and year ended December 31, 2016.

* Notes to the financial statements for the year ended December 31, 2014; yearended December 31, 2015 and year ended December 31, 2016.

Supplementary schedule to the financial statements:

Accumulated statement of expenditures for the period from September 15,2014 up to December 31, 2016 i

"FICADEX ALBANIA" Ltd Mobile: + 355 69 40 52 787Tel/fax: + 355 52 2 37 859

"Migjeni" street,147 Q. 4, Durres - Albania E-mail: alficadexagmail.com; alficadexAhotmail.com;

SARACEVE" street; Building no. 6, No. 1; Web site: www.ficadex.com

Municipal Unit no. 8, Tirana-Albania

INDEPENDENT AUDITORS' REPORT

To the Minister of Finance, Republic of Kosovo

Opinion

In our opinion, the accompanying financial statements present fairly, in all material respects, the fundsreceived and expenses paid by the "Kosovo Education System Improvement" Project, financed under WorldBank (IDA Credit No. 5726 - XK), for the year ended December 31, 2014; year ended December 31, 2015and year ended December 31, 2016 in accordance with the cash receipts and disbursements basis asdescribed in note 2 to the financial statements.

We have audited the financial statements of the "Kosovo Education System Improvement" Project, financedunder World Bank (IDA Credit No. 5726 - XK), which comprise the statement of cash receipts and paymentsand the statement of disbursements for the year ended December 31, 2014; year ended December 31, 2015and year ended December 31, 2016, and notes to the statement of cash receipts and disbursements, includinga summary of significant accounting policies.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilitiesunder those standards are further described in the Auditor's Responsibilities for the Audit of the FinancialStatements section of our report. We are independent of the Project in accordance with the ethicalrequirements that are relevant to our audit of the financial statements of the Project in Kosovo, and we havefulfilled 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 ouropinion.

Emphasis of Matter - Basis ofAccounting

Without modifying our opinion, we draw attention to note 2 to the financial statements, which describes thebasis of accounting. The financial statements are prepared on the cash basis of accounting, which is a basis ofaccounting other than accounting principles generally accepted in the Republic of Kosovo.

The financial statements are prepared to assist the Project to meet the requirements of World Bank and theGovernment of Republic of Kosovo. As a result, the financial statements may not be suitable for anotherpurpose.

Responsibilities of Management for the financial statements

Management is responsible for preparation and fair presentation of the financial statements in accordancewith the cash receipts and disbursements basis of accounting described in Note 2; this includes determiningthat the cash receipts and disbursements basis of accounting is an acceptable basis for the preparation of thefinancial statements in the circumstances, and for such internal control as management determines isnecessary to enable the preparation of a financial statements that are free from material misstatement,whether due to fraud or error.

1 P a

"FICADEX ALBANIA" Ltd Mobile: + 355 69 40 52 787Tel/fax: + 355 52 2 37 859

"Migieni" street,147 Q. 4, Durres - Albania E-mail: alficadexAgmail.com; [email protected];



Responsibilities of Those Charged with Governance

Those charged with governance are 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 financial statements as awhole are free from material misstatements, whether due to fraud or error, and to issue an auditor's reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with International Standards on Auditing (ISAs) will always detect a materialmisstatement 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 ofusers taken on the basis of these financial statements.

A further description of the auditor's responsibilities for the audit of the financial statements is included inappendix A of this auditor's report, whi is located at page number 3.

Kosovo July 13, 2017

EXFICADEX AL niaMarije DUSHI - Pa t

Jacques COLIBERT

"FICADEX ALBANIA" Ltd Mobile: + 355 69 40 52 787Tellfax: + 355 52 2 37 859

"Migjeni" street,147 Q. 4, Durres - Albania E-mail: alficadexagmail.com; alficadex(dhotmail.com;



Appendix A

Auditor's responsibilities for the audit of the financial statements'

As part of an audit, we exercise professional judgment and maintain professional skepticism throughout theaudit.

We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud orerror, design and perform audit procedures responsive to those risks, and obtain audit evidence that issufficient and appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error, as fraud may involvecollusion, 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 thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the project's internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates,if any, and related disclosures made by management.

Evaluate the overall presentation, structure and content of the financial statements, including thedisclosures, and whether the financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scopeand timing of the audit and significant audit findings, including any significant deficiencies in internalcontrol that we identify during our audit.

'In accordance with revised International Standards on Auditing (ISAs)

31JP:


(IDA Credit No. 5726-XK)

Statement of Sources and Uses of FundsFor the year ended December 31, 2014;year ended December 31, 2015 and year ended December 31, 2016(in EUR unless otherwise stated)

From Cumulative fromPeriod ended September 15, September 15, 2014

2014 (Inception (Inception Date) to:Sources and uses Notes Date) to

December December December 31, December 31, 201631, 2016 31, 2015 2014

Sources of Funds:

IDA Credit No. 5726 - XK 50,615.85 . - 50,615.85funding 4

Temporary advances by 67,383.77 17,600.00 2,200.00 87,183.77Government of Kosovo 5

Total sources 117,999.62 17,600.00 2,200.00 137,799.62

Uses of Funds:

Goods 6 (8,565.99) - (8,565.99)

Consulting services 7 (64,571.36) (17,600.00) (2,200.00) (84,371.36)

Training and workshop 8 (30,069.37) - (30,069.37)

Incremental Costs 9 (14,792.90) - - (14,792.90

Total uses 10 (117,999.62) (17,600.00) (2,200.00) (137,799.62)

Exchange rate differences - -_-

Balance at the end of theyear

The Statement of Sources and Uses of Funds is to be read in conjunction with the notes set out on

pages 3 to 11 and forming an integral part of the financial statements.

The financial statements of the Kosovo Education System Improvement Project (IDA credit No. 57260

-XK) were authorised for issue by the management of the Project on June 12, 2017 and signed on its

behalf by:

Edita A Mirj ta S

Projech?oordinator Financial M agement Specialist

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(IDA Credit No. 5726-XK)Notes to the Financial StatementsFor the year ended December 31, 2014;year ended December 31, 2015 and year ended December 31, 2016(in EUR, unless otherwise stated)

1) General

The Financing Agreement for the Kosovo Education System Improvement Project (IDA Credit 5762 -XK) - (the "Project'), was signed between the International Development Association ("Association")and the Republic of Kosovo ("Recipient") on November 20, 2015. September 10, 2015 is the Bankapproval date and May 13, 2016 is the effective date of the project. The project inception date isSeptember 15, 2014 the date when period for retroactive expenditure starts.

The Association agrees to extend to the Recipient, on the terms and conditions set forth or referred to theAgreement, a credit (variously, "Credit" and "Financing"), in an amount equivalent to seven million ninehundred thousand Special Drawing Rights (SDR 7,900,000) (equivalent of USD 11.0 million, astranslated on the agreement) to assist in financing the project described in Schedule 1 to the Agreement("Project").

The Recipient, through MEST, shall establish, and thereafter maintain at all times during theimplementation of the Project, a PCU within MEST: with functions and responsibilities satisfactory tothe Association including, carrying out Project procurement, financial management, and reporting andmonitoring implementation progress, and with resources and staffing (with qualifications, experience andunder terms of reference) satisfactory to the Association.

The Recipient through MEST established a Project Coordination Unit (PCU) and recruited core staff(including a Project coordinator, procurement specialist and financial management specialist) withqualifications and experience under terms of reference, and with resources satisfactory to the Association.

Within sixty (60) days from the Effective Date, the Recipient, through MEST, shall establish, andthereafter maintain, a Project Steering Committee chaired by the Minister of Education, Science andTechnology or his designee, which will be responsible for providing policy guidance for, and oversightof, the Project.

Within forty (40) days from the Effective Date, the Recipient, through MEST, shall establish, andthereafter maintain, a Project Implementation Committee chaired by the Minister of Education, Scienceand Technology or his designee,

The Recipient, through MEST, has adopted the Project Operations Manual which is prepared andapproved in accordance with paragraph 4 of Section 1/ A of schedule 2 to the Agreement.

At December 31, 2016, the Project had 2 full time employees and 5 local consultants paid by daily rate.

Project Description

The objectives of the Project

The objective of the Project is to strengthen selected systems that contribute to quality, accountability,and efficiency improvements in education in the Republic of Kosovo.

The Project consists of the following Parts:

Part 1. Enhancing strategic planning, financial management, monitoring and decision - making inthe education sector

(a) Strengthen strategic planning and financial management capacities of MEST, MEDs, schools and

universities through training and technical assistance activities including:

3



1). General (continued)

(i) At the central level, inter alia: a) carry out reviews of the national allocation formula for the

education specific grant going to pre-university education and reviews of local budgetingprocesses in pre-university education; and b) develop annual monitoring procedures for nationaland local budgeting processes and resource allocation based on the revised per capita financingformula, and develop education spending indicators to assess and monitor education spendingefficiency.

(ii) At the municipal level, inter alia, provide support to MEDs to use the pre-university education

financing formula and to apply the guidelines provided by MEST.

(iii) At the school level, inter alia, strengthen the financial management capacities of school directors.

(iv) At the university level, inter alia, strengthen governance and management structures and training

including: a) development of criteria and programs for full institutional financial autonomy; b)defining accountability norms and standards through bylaws developed within the contextprovided by the Higher Education Law; and c) development of procedures for assessingperformance of university leaders and management.

(b) Enhance and modernize the systems and practices of data management and analysis in the educationsector through activities including:

(i) Establish rules and procedures for effective information management, use, data analysis anddissemination.

(ii) Set up core central registries and detailed design of systems for integrated informationmanagement (new architecture and systems), and develop and implement key central registries(including student registry and school registry).

(iii) Enhance the existing Education Management Information System platform for hosting andintegrating existing and new information systems and databases, and its capabilities to aggregatedata for more advanced statistical analysis and reporting.

(iv) Build capacity of schools, MEDs, university leaders and managers, and central government staff

(including MEST departments) in using the systems described above.

(c) Provision of:

(i) School Development Grants to Selected Schools to finance School Development Subprojectsfor the strengthening of school capacity to plan and manage resources, and promote citizenengagement; and

(ii) Technical assistance to support selected primary schools to prepare and implement multiple-

year school development plans and training on management, planning and self-evaluation.

Part 2. Strengthening management capacity and accountability to enhance quality of education

a) Implement the career system for teachers' professional development, performance assessment,and career advancement; and strengthen, complement and systematize the teacher career systemand licensing scheme through, inter alia, provision of technical assistance to support:

(i) the development of a staggered implementation plan for teacher performance assessment;

(ii) the development of a competency-based teacher licensing and promotion scheme;

4



1) General (continued)

(iii) the development of an induction program for new teachers with temporary one-year licenses;and

(iv) the improvement of the teacher's professional development including, the upgrade of the

teacher licensing database.

b) Strengthen the capacities of key institutions for monitoring educational outcomes and assessment

of student learning through activities including:

(i) Set up a model national assessment program incorporating procedures, technical standardsand reporting methods aligned with international best practices.

(ii) Develop feedback systems for examination for decision makers and schools that are timely,and provide comprehensive information on learning outcomes.

(iii) Establish an integrated Information Communications Technology system for processingexaminations and assessments.

(iv) Participate in international student assessments including, analyzing results.

c) Improve accountability and quality assurance of higher education through development of key

professional licensing statutes in priority economic fields.

Part 3. Implementation and Communications Support

(a) Provide Project implementation support to MEST and PCU including financing of:(i) consultants' services and training for implementing and managing Project procurement,

disbursements, financial management, monitoring and reporting; and(ii) Operating Costs; and I

(b) Carrying out of communication and outreach activities (including, convening of working groups,seminars and workshops).

The Closing Date is December 31, 2019.

IDA Credit No.5726-XK

The following table specifies the categories of Eligible Expenditures that may be financed out of the

proceeds of the financing ("Category"), the allocations of the amounts of the financing to each Category

and the percentage of expenditures to be financed for Eligible Expenditures in each category:

Amount of the Amount % of expenditures toCategory financing allocated Equivalent be financed

(expressed in SDR) (expressed in (inclusive of taxes)$US)

1) Goods, non-consulting 100% of expendituresservices, consultants' services and 100% of School(including for project audits), Development GrantsSchool Development Grants, DisbursedTraining and Operating costs 7,900,000 11,000,000

Total amount 7,900,000 11,000,000

Amounts translated using exchange rates on inception date of the project (SDR/$US 1.50)

5



1) General (continued)

The Government of Kosovo will repay the principal amount of the Credit in semi-annual instalmentspayable as of describe in following:

Date Payment Due Principal Amount of the Credit repayable(expressed as a percentage)*

On each April 15 and October 15, in each year:

* Commencing on October 15, 2020, to and 1.65%including, April 15, 2030

* Commencing October 15, 2030, to and 3.35%including April 15, 2040.

*The percentages represent the percentage of the principal amount of the Credit to be repaid, except asthe Association may otherwise specify pursuant to Section 3.03 (b) of the General Conditions.

The maximum Commitment Charge Rate payable by the Recipient on the unwithdrawn FinancingBalance shall be one-half of one percent (1/2 of 1%) per annum.

The Service Charge payable by the Recipient on the Withdrawn Credit Balance shall be equal to three-fourths of one percent (3/4 of 1%).

The Interest Charge payable by the Recipient on the Withdrawn Credit Balance shall be equal to one anda quarter percent (1.25%) per annum.

As at December 31, 2016, EUR 50 615.85 was disbursed from the Credit.

2) Basis of preparation

The financial statements of the project for the year ended December 31, 2014; year ended December 31,2015 and year ended December 31, 2016 have been prepared for the purpose of complying with theprovisions of the Project's objectives, the World.Bank guidelines and terms and conditions of the IDACredit No. 5726 - XK.

The financial statements comprise the statement of sources (Cash Receipts) and uses (Payments); thestatement of expenditures used as the basis for the submission of withdrawal applications for the periodfrom September 15, 2014 (start of period for reimbursement of retroactive expenditures)' to December31, 2016, and a summary of significant accounting policies and other explanatory notes. The cumulativestatements of expenditure used as the basis for the submission of withdrawal applications for the periodfrom Project Inception Date on September 15, 2014 till December 31, 2016 are presented assupplementary schedules. Cumulative information on receipts and disbursements from. the Project's Bankapproval date to December 31, 2016 is presented in the Statement of Sources and Uses of Funds forinformation purposes only.

The expenditures incurred by Government of Kosovo for the period September 15, 2014 to 30 November 2015, have not been reimbursed fromIDA Credit 5726-XK as the MF did not sign and submit the WA (ESIP/01, see Note 5). Expenditure incurred by the GoK for the periodDecember 2015 were reimbursed under WA ESIP/02, date 20 December 2016, according to paragraph B /1, Section II of the FinancingAgreement, dated November 20, 2015.

6



2) Basis of preparation (continued)

The financial statements have been prepared in accordance with cash basis IPSAS - Financial Reportingunder the Cash Basis of Accounting, which differs from Kosovo and International Financial ReportingStandards. On this basis, income is recognised when received rather than when earned and expenses arerecognised when paid rather than when incurred. Accordingly, direct and indirect payments of theProject's expenses, which are made from the proceeds of the credit, are recognised as sources and uses offunds at the time the payment is made.

The financial statements have been prepared in accordance with cash basis IPSAS - Financial Reportingunder the Cash Basis of Accounting which differs from Kosovo and International Financial ReportingStandards. On this basis, income is recognised when received rather than when earned and expenses arerecognised when paid rather than when incurred. Accordingly, direct and indirect payments of theProject's expenses, which are made from the proceeds of the credit, are recognised as sources and uses offunds at the time the payment is made.

The financial statements prepared for the special purpose are presented in Euro ("EUR"), unlessotherwise stated.

3) Summary of significant accounting policies

A summary of significant accounting policies underlying the preparation of the Project's financialstatements is presented below.

3.1 Foreign currency transactions

The project accounts are maintained in Euro ("EUR").

Transactions in foreign currencies are translated to the functional currency at exchange rates on the datesof the transactions.

Initial credit amount are maintained at the historical, exchange rates. The project translates the undrawncredit balance at the rates in effect on the year end.

The exchange rates in effect as at December 31, 2016 and December 31, 2015 were as follows:

Period 31.12.2016 31.12.2015

Currency

EUR/ USD 1.06 1.09

USD/EUR 0.95 0.92

SDRIEUR 1.27 1.27

SDR/$US 1.35 1.39

3.2 Recognition of income and expenses

Income is recognised when received rather than when earned, and expenses are recognised when paidrather than when incurred.

3.3 Taxation

The Project is not exempt from income Tax, Value Added Tax (VAT) and Custom Duties for the creditspart. The local employees of the project are liable for personal tax and pension contributions.

7



4) IDA Credit No. 5726-XK funding

IDA funding is composed are detailed as follows:

Credit Year ended Year ended31 December 2016 31 December 2015

Reimbursements 50,615.85

Total 50,615.85

Reimbursements represent the IDA funds to cover the payments already made by Government of Kosovofor this project using withdrawal applications prepared by the Project.

5) Temporary advances received by Government of Kosovo

The temporary advances received by Government of Kosovo are detailed as follows:

Year ended Year ended Year endedFinanced by: 31 December 31 December 31 December

2016 2015 2014

Temporary advances received by GOK 67,383.77 17,600.00 2,200.00

Total 67,383.77 17,600.00 2,200.00

The cumulative temporary advances received by GOK of Euro 71,783.78 are reimbursed in 2017. Theamount of Euro 15,400 was not submitted for reimbursement by the Ministry of Finance as it was

expenditure in prior fiscal years before the reimbursement year. According to the Ministry of Finance,

expenditure in years before agreement date is not submitted for reimbursement.

6) Goods

Year ended Year endedItem 31 December 2016 31 December 2015

IT equipment 6,196.00 -

Furniture 2,369.99

Total 8,565.99

8



7) Consultant services

Expenditures for Consultant services are detailed as follows:

Item Year ended Year ended31 December 2016 31 December 2015

Project Coordinator 26,026.40 17,600.00

Financial Management Specialist 12,509.40 -

Procurement Specialist 4,256.20 -

School Development Grant Expert 4,983.88 -

SDG Task Manager 4,121.40 -

SDG Assistant 2,490.60 -

TPD&TPA Consultant 2,816.40 -

IS Analyst 2,306.90 -

Expert Implementation Support for Student Assessment 5,060.18 -

Total 64,571.36 17,600.00

8) Training and workshops


Implementation and Improvements to the Teacher Career 7,093.50 -System

Improving accountability and quality assurance of higher 21,485.87 -education through the development of key professionallicensing statutes in priority economic fields

Strengthening capacities of key institutions for monitoring 1,490.00 -educational outcomes and assessment

Total 30,069.37 -

9



9) Incremental operating costs

Expenditures for incremental operating costs are detailed as follows:


Pension contribution 2,952.25

Phone expenses 275.76

Petty cash - Implementation and Communications 1,000.00Support

Project launch 1,652.70Advertisements 1,616.00

Translation services 5,414.09 -

Workshops 1,882.10

Total 14,792.90 -

10) Expenditures by sources of funds

Expenditures by sources of funds for the year ended December 31, 2016 are detailed as follows:

IDA Credit No. Temporary Total DecemberItem advances from5726 - XK funding GvK 31, 2016GOK

Goods 6,196.00 2,369.99 8,565.99

Consultant services 33,950.00 30,621.36 64,571.36

Training &workshops 7,093.50 22,975.87 30,069.37

Incremental operation costs 3,376.35 11,416.55 14,792.90

Total 31.12.2016 50,615.85 67,383.77 117,999.62

Total 31.12.2015 - 17.600.00 17,600.00

10



11) Expenditures by parts:

The expenditures by Project Parts are detailed as follows:

Parts Goods Consulting Training Incremental Total 31.12.2016services &work shop operating costs

Enhancing strategicplanning, financial

Part 1 management, monitoringand decision - making inthe education sector - -

Strengthen strategicplanning and financialmanagement capacities of

a. MEST, MEDs, schools anduniversities through trainingand technical assistanceactivities - - -

Enhance and modernize thesystems and practices of data

b. management and analysis inthe education sector throughactivities - 2,306.90 - - 2,306.90

School Development Grantsc. to Selected Schools....

Technical assistance - - -

Strengthening managementcapacity and accountability

Part 2 to enhance quality ofeducation - - - -

Implementation anda. Improvements to the Teacher

Career System - 2,816.40 7,093.50 - 9,909.90

Strengthening capacities ofkey institutions for

b. monitoring educationaloutcomes and assessment ofstudent learning - 5,060.18 1,490.00 - 6,550.18

Improving accountabilityand quality assurance ofhigher education through the

c. development of keyprofessional licensingstatutes in priority economicfields - - 21,485.87 - 21,485.87

Implementation andPart 3 Communications Support 8,565.99 54,387.88 - 14,792.90 77,746.77

Total 31.12.2016 8,565.99 64,571.36 30,069.37 14,792.90 117,999.62

Total 31.12.2015 - 17,600.00 - - 17,600.00

12) Un-drawn credit facilities.

The balance of the undrawn credit from IDA Credit No. 5726 - XK as of December 31, 2016 in XDR is

7,860,719.46 or 10,567,400.99 USD.

11

Kosovo Education System Improvement Project

(IDA Credit No. 5726-XK)

Statement of Cumulative Expenditures Withdrawal Schedule

(Supplementary scheduleto the Annual Financial Statements)

For the period from September 15, 2014 to December 31,2016

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