Ministry of Finance of the Republic of Belarus

Republican Unitary Enterprise "Data-Processing Centre ofthe Ministry of Finance of the Republic of Belarus"

Special Purpose Financial Statements under the Project

"Public Financial Management Modernization in the Republic of Belarus" LoanNo. 8606-BYfor the period from January 1, 2018 to December 31, 2018 with the independentauditor's report

Minsk | 2019

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Public Financial Management Modernization in the Republic of BelarusLoan No. 8606-BY

CONTENTS

STATEMENT ON THE MANAGEMENT'S RESPONSIBILITY FOR PREPARATION AND APPROVALOF THE SPECIAL PURPOSE FINANCIAL STATEMENTS UNDER THE PROJECT FOR THE PERIODFROM JANUARY 01, 2017 TO DECEM BER 31, 201801........... ...... . ........... . .......................... 3IN D EPEN D ENT A U DITO R'S O PINION.................... ................. ....-. .... .................. ...... 4

2

Public Financial Management Modernization in the Republic of BelarusLoan No. 8606-BY

STATEMENT ON THE MANAGEMENT'S RESPONSIBILITY FOR PREPARATION AND APPROVALOF THE SPECIAL PURPOSE FINANCIAL STATEMENTS UNDER THE PROJECT FOR THE PERIODFROM JANUARY 01, 2018 TO DECEMBER 31, 2018

Management of Republican Unitary Enterprise "Data-Processing Centre of the Ministry of Finance of theRepublic of Belarus" (hereinafter - RUE "Data-Processing Centre of the Ministry of Finance of theRepublic of Belarus") is responsible for preparation of the special purpose financial statements under theProject "Public Financial Management Modernization in the Republic of Belarus" (hereinafter - the Project)being implemented by RUE "Data-Processing Centre of the Ministry of Finance of the Republic ofBelarus", that present fairly in all material respects the financial position of the Project as at December 31,2018, as well as funds received and used under the Project for the period from January 01, 2018 toDecember 31, 2018 in accordance with the International Public Sector Accounting Standards (IPSAS).

While preparing the special purpose financial statements under the Project, the Management of RUE"Data-Processing Centre of the Ministry of Finance of the Republic of Belarus" (hereinafter - theManagement) is responsible for:

* adequate choice and application of accounting policies' principles;

* presentation of information including that on accounting policies in a form which ensures relevance,reliability, comparability and transparency of such information;

* compliance with the requirements of IPSAS and disclosure of all significant deviations from IPSAS inthe Notes to the special purpose financial statements under the Project.

The Management is also responsible for:

* development, introduction and maintaining of effective and reliable internal control system under theProject;

* maintenance of accounting in a form that allows to address the substance and explain transactionsunder the Project, and also to provide information of sufficient accuracy on the financial position of theProject at any date and ensure compliance with IPSAS;

* taking all possible reasonable steps to safeguard of the assets of the Project;

* detecting and preventing facts of financial and other irregularities.

The present special purpose financial statements under the Project for the period from January 01, 2018to December 31, 2018 were approved by M.L. Yermalovich, the Minister of Finance of the Republic ofBelarus, on April 10, 2019.

On behalf of the Management of RUE "Data-Processing Centre of the Ministry of Finance of the Republicof Belarus":

A.A. Narchuk O,E. SinishinaDirector Chief Accountant

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FBK-BEL LLC

Our ref. No. 05-01/168 of May 28, 2019

INDEPENDENT AUDITOR'S OPINION

To the Ministry of Finance of the Republic of Belarus, RUE "Data-Processing Centre of the Ministry ofFinance of the Republic of Belarus", the Management of the Project "Public Financial ManagementModernization in the Republic of Belarus"

Opinion

We have audited the special purpose financial statements under the Project "Public FinancialManagement Modernization in the Republic of Belarus" financed by the International Bank forReconstruction and Development (hereinafter - IBRD) according to Loan AgreementNo. 8606-BY of April 1, 2016 between the Republic of Belarus and IBRD (hereinafter - the Agreement)that include Loan Sources and Uses of Funds Statement, Uses of Funds, Designated Account Statement,Transit Account Statement, SOE Withdrawal Schedule as at December 31, 2018 and for the period fromJanuary 01, 2018 to December 31, 2018, and explanatory notes to the special purpose financialstatements including disclosure of the fundamental principles of the accounting policies.

In our opinion, the accompanying special purpose financial statements under the Project fairly in allmaterial respects represent the financial position of the Project as at December 31, 2018, as well asreceived and used Project funds for the period from January 01, 2018 to December 31, 2018 inaccordance with the International Public Sector Accounting Standard "Financial Reporting under the CashBasis of Accounting" developed by the International Public Sector Accounting Standards Board of theInternational Federation of Accountants.

Basis for Opinion

We conducted our audit in accordance with the requirements of Law of the Republic of Belarus of July 12,2013 "On Auditing Activity", the National Rules on Auditing Activities effective in the Republic of Belarus,the International Standards on Auditing (hereinafter - "ISAs"). Our responsibilities under these standardsare further described in the section "Auditor's Responsibilities for the Audit of the Special PurposeFinancial Statements" of this Auditor's Report. We are independent of RUE "Data-Processing Centre ofthe Ministry of Finance of the Republic of Belarus" in accordance with the Code of Ethics for ProfessionalAccountants of the International Ethics Standards Board for Accountants ("IESBA Code"), and we havefulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

FBK-Beli Limited Liability Company201-22A Logoisky highway I Minsk | 220090 Republic of BelarusTel/fax +375 (17) 355 42 23 I E-mail fbk@fbk.by I www.fbk.byTIN 690398039

FBK-Bel LLC is a member firm of the PKF International Limited family of legally independent firmsand does not accept any responsibilty or liability for the actions or inactions of any individual member or correspondent firm or firms 4

FBK-BEL LLC PKFRestriction on Distribution and Use

This Auditor's Report is intended solely for the use of the Ministry of Finance of the Republic of Belarus,Republican Unitary Enterprise "Data-Processing Centre of the Ministry of Finance of the Republic ofBelarus" for presentation of information to IBRD on the Project funds received and used. This Auditor'sReport is not intended for the use of third parties, and we do not bear any responsibility or liability to anyother parties except the Ministry of Finance of the Republic of Belarus and RUE "Data-Processing Centreof the Ministry of Finance of the Republic of Belarus" in respect of this Auditor's Report. In case of taking adecision by such parties based on the contents of this Auditor's Report, the third parties are liable for suchdecisions.

Responsibilities of the Management and Those Charged with Governance for the Special PurposeFinancial Statements under the Project

The Management of the Project is responsible for preparation and fair presentation of the special purposefinancial statements under the Project prepared in accordance with the International Public SectorAccounting Standard "Financial Reporting under the Cash Basis of Accounting" developed by theInternational Public Sector Accounting Standards Board of the International Federation of Accountantsand for the internal control system that the Management considers necessary for preparation of thespecial purpose financial statements under the Project that is free from material misstatement, whetherdue to fraud or error.

Auditor's Responsibilities for the Audit of the Special Purpose Financial Statements under theProject

Our objective is to obtain reasonable assurance on whether the special purpose financial statements arefree from material misstatement, whether due to fraud or error, and to issue an auditor's report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with the 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 theaggregate, they could reasonably be expected to influence economic decisions of users taken on basis ofthese special purpose financial statements.

Within the frames of the audit held in accordance with the ISAs, we apply professional judgment andmaintain professional skepticism throughout the audit. We also:

* identify and assess the risks of material misstatement of the special purpose financial statementswhether due to fraud or error; design and perform audit procedures responsive to those risks; obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting amaterial misstatement resulting from fraud is higher than that resulting from an error, as fraud may involvecollusion, forgery, intentional omissions, misrepresentations, or the override of internal control system;* obtain an understanding of the internal control system relevant to the audit, in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion onthe effectiveness of the internal control system;

* evaluate appropriateness of the accounting policies used and reasonableness of accounting estimatesand related disclosures made by the Management;

* evaluate presentation of the special purpose financial statements as a whole, their structure andcontents, including disclosures, as well as whether the special purpose financial statements present theunderlying transactions and events in a manner that ensures their reliable representation.

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FBK-BEL LLC PKFWe communicate with the Management and those charged with governance regarding, among othermatters, the planned scope and timing of the audit as well as significant audit findings, including anysignificant deficiencies in the internal control system that we identify in the course of the audit.

Head of the auditing organisation:

Director A.G. Reneisky

May 28, 2019

Audited organisation:

Republican Unitary Enterprise "Data-Processing Centre of the Ministry of Finance of the Republic ofBelarus" (RUE "Data-Processing Centre of the Ministry of Finance of the Republic of Belarus")

17, Kalvaryiskaya str., Minsk, 220010, Republic of Belarus;

State registration: was registered by the Minsk City Executive Committee on June 30, 2000 in the UnifiedState Register of legal entities and individual entrepreneurs under No. 100049849;

Taxpayer's identification number - 100049849.

Auditing organisation:

FBK-Bel Limited Liability Company (FBK-Bel LLC);

office 201, 22A Logoisky highway, Minsk, 220090, Republic of Belarus;

State registration: was registered by Minsk City Executive Committee on February 6, 2009 in the UnifiedState Register of legal entities and individual entrepreneurs under No.690398039;

Taxpayer's identification number - 690398039.

6

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Caleulated DA clasing Ьаl апееlRасчитанны й остаr окденеж ны хсредств на9 спеуиально выделенном счеr е75 535,10

©А closing Ьаl аn ее as of 31.12.2018 carried fоплгагд to next period - per bankstatementslQ статокдонежны х средств на 31.12.2018 на спеуиально вы деленном10 счете, перенесенны й на следун� щий отчотны й пориод 75 535�,10DifforenCe between 9 апд 10/ Разница междулиниями 9 и 10(should bo zero ar г; хрlаi педl дрлжна быть равна нулю или вбъяснена) 0'QO

Ехрl апаt гоп of any diserepancylfl6 ьиснение любы хразмиц или насоответст вий�

Agreed Ьу ! С огласонано:

First Deputy Minisler of Finance oFtlie RcpuЫ ic оf В еl апгsг _t Териы й sаместитель М инистра ф инансов Республикх Gепарусь М г, Yuriy М . Selivers[ оч/ Ю . М С елинерстоаНеадofi Ьe I� epartrnant of1 �i»ancial, Bcormmic Activity апд Accpuniin�of (he Mfnishy of Fiuanee of ti � e Repuhlic af Belanrs/ ��i ячаri ьнмкупраалеr гмис�эиs ансов, учст ан отчстнасти � .М инистерстиафииансs�вРеспубликиFеларусь �/' f � , Г� /"r г> Ms. Larisa А . � гтдknчл,' I1. �!,. ЕрлгакрпаНеадaf Firra пcial Teclr ггologics pepartment �of the Minislry of Сi иапсеuf thc Repгrbiic pf Helan гs/[Iп�гальникуправпениифинаысонг,гктеwгологи�М иггистерствасj гигганспвЛеспубдики5 сларусь

М г. Апдгсу А . Narcl гuk/ А . А . Нарпук

Depn �уbireetor vf RUE "L7aЬa-Prncessin�; Cexter ofli гe Ministryof ]гinance of гЬеКерпЫ i е e�f Baiafirs' Ч3 апt естхrельдгиректора УП " ИВL1 М инсСахка"

М г� . Vitali А . Boika! В . А . Бойко

НеадOf Acc иuncing Depaпment of RUE "C� ata-PrncessingCenter of the Miiьishy о£ Finaoce оРthe RepuЫic орВеl агдгs"1 �J iСлааныи б хга,пте УП " Й В М ин r хна" '" i�У р � � � r � , е Ms. O1ga С:. Sinishina! р .Е . Синиш инаZ � L-i-- _� i'

f'

APP�tOVFD В У 1 У °[' ВL. рЖ )[ ЛI рMiaister of Finaaice ofthe Repul� lic of Bel лrlrs/М инистрг� ииансонУ н� iлики Беларусь

. Гl � ,: ы � � � aksirn P,.Yerrпalovidil

� М �.J� ц ави ц

" � � � 2 б14 г.

PUEILIC � 1NAMCfAL A1UqGEVцIENT MOLtERN1ZATfOЛJ PR4JECT 1fipoe кr" М одернwзация системь[управления государствонны ми ф инвмсами в Рёспублике Беларусь"Transik Accounk Statement ! О тчет о состоянии транзитнАго Счета1BR© 86060

for the period from 011011201$ # о З111212018за период с 4110112oi8 по 3 1 11 212 01 8

in USDГвдолларак СС11А

OpenPng balance as of 01.01.2418, including l Остатокденеж ны хсредств на начало Rеропт 9 Реri одlQтчетны й nериод1 отчетного n ериода 01.01.201$, вклю чая

Loan funds 1 Gредст ва Займа 2 �®гPnterest еагледl процвнты банка 1�28Advance from DA during the реri одl Сумма авансов, посryпившая со слецwально 0 �� 4

2 вы деленного счета782 046,72

Amouni of efigi Ы e oжpenditures paid durint � tha present регi одl Сумма3 санкуионированных раехадов оплаченн:i я в отчетном периоде 782 045,094 Refundsl возмещение на спеуиально вы деленны й счет5 lnterest еагледl процонты бамка O,DO6 Ser цice сh аrg е5l Стоимость услуг 5,667 Differences arising in the ге orfin 4,44

р g periodlРазница, возникш ая в оr чеr мом периоде$ Catculated closing Ьаl апсеlРасчитаины й ост аr окденежны хсредств на транзитномечете

9, 319 DA closing balance as of 31.12.2018 carried forward to next period - per bank statements,includ'rng 1Q стаr окденежны х средств на 31.12.2018 на транзитном счете,перенесенны й на следуго [ ций отчетны й лериод - соrr гасно вt, т искебамка, s клю чая9, З1Loan lunds 1 Средстs а Займа

10 Pntore$1 еагледlпроуенты Банка 2,91[?ifference between 8 and 9l Разнгn а ме 6,40ц иWулиниями 8 м 9

0,40(should be zero or ехрl аiлед/ должма быr ыравна нулю илиобъяснена)

Explanation of апуtlis сгерапсуl рбъяснение пюбых раэниц ипи несоотвеr ствий:

Agrecd bY ! Согласооано:

First Dcputy Minister aF Fi иauce о[�[]ie RcFэuЫ ic of Helanrsl �Нерный sамсстительМ инистрафиггансовУеспублики Беларусь - Mr. Yuriy М , Seliverstov/ Ю . М . СеливерстовНгадot'the Departmeиt of Fi иaneial, Econmztic Actiwity апдAccouutin#;of tlre Miпist гy of Finaцce oFthe RepuЫ ic о£ Belarus!fi ачаn ьньзкуправленин фиггагзсов, учетаи ртчетности 7М инисасрсгвафинаисов Ресагу5ликиБслаl �Усб /',' � �i г4 � � /`r' � Ms. Larisa А. EnпakovcV TLA, ЕрмаконаНеадoFFinanciaf Tech гrotogics Depaftиient

ofthe Miиislгy oFFй7ance о£[ ЬеRepu Ыic oFF3elaruslНачальникулранления � инансовыхтехнологийМ инхотеретеафиианеовРесиу6ликиb слдрусь

Mr. Апдгеу А . Лf агс]iuk/ А,А . Нар�гукDcputy pirector aFRUE "Data-T'rocessing Ce пter of thc Mi пistryof рiпаисе of the Rcpu6lio о£ Веi апгв"!Замесr ительдирекгрра 3'CI" ИВI( М иьде�гигга" � � � у� � �

М г. Vifali А . FЭoika! В .А . БайкоНеадOf Aecountin � Departmcгv of12 UE "pata-Processing

�Ceutcr of fha Ministгy of Fin лnce oEths Кepu Ы ic of Belarus"/ �ГлавиыйбухгалтерУП "И ВЦ М инсрина"� � � � �� � Ms, С)1g дЕ. Sinishina/ б,Е. Синиигина

�l ��

Explanatory notes to Financial Statements of the project named "Public FinancialManagement Modernization in the Republic of Belarus" No 8606 for 20181. General information

The International Bank for Reconstruction and Development has allocated a loan to the Republicof Belarus represented by the Ministry of Finance for implementing the Project "Public FinancialManagement Modernization Project" (hereinafter referred to as "the Project") under the terms setout in the Loan Agreement between the Republic of Belarus. and International Bank forReconstruction and Development dated I April 2016. The Project is approved by the Law of theRepublic of Belarus dated I I July 2016 No 390-3.

The Project supports implementation of the Public Financial Management Reform Strategy(hereinafter referred to as "the Strategy") approved by Resolution of the Council of Ministers ofthe Republic of Belarus No. 1080 of 23 December 2015. The Strategy is consistent with the WorldBank Group Partnership Strategy for the Republic of Belarus for 2014 - 2017 and supportsenhancement of transparency of public finance.

Development of Public Financial Management is one of top-priority goal of domestic policy of theRepublic of Belarus, The reforming of this System shall improve public financial management byenhancing the methodological, informational, technical, technological and analytical approachesto planning, execution and accounting of the public finances at all levels of the budget system ofthe Republic of Belarus.

The total Project funding is 10,000,000.00 USD.

The Project consists of three Components as follows:1. Budget management regulations and procedures.2. PFM IT solutions.3. Change Management.

In conformity with Loan Agreement dated I April 2016 and the Order of the Ministry of Financeof the Republic of Belarus dated 19 July 2016 No. 211 "On implementation of the "Public FinancialManagement Modernization Project" RUE "Data- Processing Centre of the Ministry of Finance ofthe Republic of Belarus" has been assigned as a project implementing agency.

UE "Data-Processing Centre of the Ministry of Finance of the Republic of Belarus" keepsaccounting records and primary documents regarding the funds transferred to its accounts.Financial management for project funding has been conducted in line with the followingguidelines:-World Bank Disbursement Guidelines for Projects dated I May 2006;-International Bank for Reconstruction and Development General Conditions for Loansdated March 12, 2012.-Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed byIBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised in January 2011.-Loan Agreement and Disbursement Letter dated April 1, 2016, established specialprocedures for the Loan funds use.-Order of the Ministry of Finance of the Republic of Belarus dated 19 July 2016 No. 211"On implementation of the Public Financial Management Modernization Project>>;

Project Operational Manual.

Public Financial Management Modernization in the Republic of BelarusLoan No. 8606-BY

2. Accounting policy

Fundamental accounting principles - the present Financial Statements of the Project are preparedon a cash basis, which complies with the requirements of International Accounting Standardsdeveloped by the Public Sector Committee of the International Federation of Accountants (IFAC).A project financing is deemed to be a source of the project's funds at the moment of receipt offunds. Project costs is deemed to be an application of project's funds at the moment of payment.Foreign currency transactions - the present Financial Statements are prepared in US Dollars.Transactions in other currency are transferred in US Dollars at the actual currency rate.Reporting base - the present Financial Statements are based on the accounting documents of UE"Data-Processing Centre of the Ministry of Finance of the Republic of Belarus" and separateaccounting records of Project assets .

3. The World Bank FundingThe Project Designated Account is replenished by the World Bank based on WithdrawalApplications authorized by representatives of the Ministry of Finance of the Republic ofBelarus. During the reporting period the financing was conducted to the Project DesignatedAccount via advancing modality and direct payments.

4. Bank Accounts of the Project

Project Bank Accounts are opened at OAO "ASB Belarusbank".

a. Project Designated Account in US DollarsThe Project Designated Account No. BY39AKBB362002062040660000

0 0 has beenopened in US Dollars.The outstanding balance of the Designated Account equals USD 75,535.10.

b. Project Account in Byelorussian Roubles (transit account)The Project Account in Byelorussian Roubles No. BYO2AKBB36200206203056000000 has beenopened for US Dollars conversion in Byelorussian rubles to make payments to national consultantsand contractors. The outstanding balance of the Project Account in Byelorussian Rubles equalsBYR 19.97, including bank interest to be transferred to the national budget of the Republic ofBelarus, in the amount of BYR 13.83.

5. Foundation of financingProject funds may be withdrawn to finance 100% of eligible expenses, consisting of Goods, Non-consulting Services, Consulting Services, Audit, Training, Operating costs inclusive of Taxes.

Public Financial Management Modernization in the Republic of BelarusLoan No. 8606-BY

Reconciliation of the project funding and actual expendituresWithdrawal applicationsExpenses incurred from I January 2018 to 31 December 2018 1,116,346.91Total expenses incurred from 1 January 2018 to 31 December 2018 1,116,346.91Funds received from IBRD from I January 2018 to 31 December 2018: 1,186,618.64Replenishment of the Special Designated Account 925,530.00Direct payments

261,088.64Plus: Balance on the Special Designated Account at 1 January 2018 5,265.00Plus: Balance on the Transit Account at 1 January 2018 1.28Minus: Balance on the Special Designated Account at 31 December 2018 75,535.10Minus: Balance on the Transit Account at 31 December 2018 2.91Total expenses incurred from I January 2018 to 31 December 2018 1,116,346.91