Report on the Republika Srpska part of the

PROJECT FINANCIAL STATEMENTS

of the

REAL ESTATE REGISTRATION PROJECT

of the Ministry of Finance and Treasury of Bosnia and Herzegovina

financed by:

- IDA Credit No. 5188-BA

FOR THE YEAR ENDED DECEMBER 31, 2015

REAL ESTATE REGISTRATION PROJECTof the Ministry of Finance and Treasury of Bosnia and Herzegovina

CONTENTS

1 Introduction 1

2 Independent Auditor's Report 3

3 Project financial statements for the year 2015 5

4 Notes to the project financial statements 7

APPENDICES

A Designated account statement - IDA Credit No, 5788 BA 8

B SoE Withdrawal Schedule of IDA Credit No. 5788 BA 9

C Reconciliation between World Bank's disbursement statements in XDR and IDA Creditaccount in EUR according to the balance sheet; SoE Withdrawal Schedule of IDA Credit No.5788 BA 10

REAL ESTATE REGISTRATION PROJECTof the Ministry of Finance and Treasury of Bosnia and Herzegovina)

1. Introduction

1.1 Description of the Project Development Objective

The development objectives of the Real Estate Registration Project is to support development of asustainable real estate registration system with harmonized land register and cadastre records inurban areas of both the Federation of Bosnia and Herzegovina ("FB&H") and Republika Srpska ("RS").Real estate registers (land registers and cadastres) provide base information layers for landadministration and for the establishment of a National Spatial Data Infrastructure. They are consideredharmonized when their contents are interlinked and verified. Sustainability is measured by the degreean institution generates revenue to match its costs, charges affordable fees, delivers quality serviceswithout discrimination and within a reasonable time. A key driving force for the real estate registrationsystem will be the registration of real estate rights and mortgages, and the availability of reliableinformation to facilitate investments, real estate taxation and spatial planning, and to enable socialmonitoring of real estate transactions.

The Project consists of the following components:

Comoonent A: Real Estate Registration Data DevelopmentReal estate registration data development will support land register and cadastre data harmonizationon land, buildings and rights based on the actual situation in the field. The objective is to establish up-to-date and interlinked land register and cadastre databases, or integrated databases of real estatecadastre.

The project will encourage and support the registration of legal rights in the land register (in FB&H) orthe real estate cadastre (in the RS) using project produced data. The component will ensure equaltreatment of all citizens regardless of their gender, ethnicity or social status by accompanying technicalfield work with raising public awareness, vulnerability mapping and social monitoring functions.

Component B: Real Estate Registration Infrastructure DevelopmentReal estate registration infrastructure development will continue Land Registration Project work inimproving working conditions and infrastructure in the cadastre offices across the country and in thosefew land registration offices in FB&H that were not targeted by LRP through: office renovations andpurchases; creation of digital archives; and provision of furniture and equipment. The office purchasesplanned in RS have to be approved by the Land Committee of the World Bank. The objective is toimprove working conditions, which will help to improve the quality of customer services, the adherenceto service standards developed during LRP, and staff morale.

Access to basic surveying technologies will be provided to areas and offices that still rely onconventional methodologies, and sustainabiliy of the recently installed Global Navigation SatelliteSystems (GNSS) network will be assured, Information technology investments will lead to furtherinterlinking between real estate registers and other public datasets making the data accessible onlineto a wide audience and in support of multiple uses. This will lead to the incremental provision ofelectronic online services and eventually to electronic conveyancing.

REAL ESTATE REGISTRATION PROJECTof the Ministry of Finance and Treasury of Bosnia and Herzegovina)

1. Introduction (continued)

1.1 Description of the Project Development Objective (continued)

Component C: Policy and Institutional Development, and Project ManagementPolicy and institutional development, and project management will support policy and legaldevelopment in support of reaching the project development objective. The objective is to enhancesustainability of the real estate registration. The component will have a strong focus on institutionaldevelopment and capacity building, addressing the long term challenges of sustainability andgovernance of real estate registers and emphasizing financial sustainability, quality of service andclient orientation and social vulnerabilities.

Training for the judiciary and land registration personnel on the new real estate legislation, regulationsand procedures will be systematized in RS and on other related subjects in both RS and FB&H. InFB&H, the LRP supported training and education program that target the land administrationemployees across the sector, i.e. in land registries, cadastre offices, planning authorities, etc., and thiswill continue. The program will ensure the continuity of the training through seminars and workshops inthe fields of law, management, ICT, cadastral science, physical planning, etc.

The component also includes necessary project management and monitoring support. An impactevaluation (IE) technique will be used to assess how citizens will benefit from the real estateregistration programs. The intention is not only to demonstrate the impacts but also to use theevaluation results for improving land registration services, and making urban planning and localproperty taxation more effective and sustainable.

1.2 Financing of the Project

1.1.1 IDA Credit No. 5188-BA

The State of Bosnia and Herzegovina ("B&H") is the borrower of the International DevelopmentAssociation (IDA) Credit No. 51880 BA, dated August 21, 2013 amounting XDR 22,700,000.

Under the terms of a Subsidiary Finance Agreement between B&H and RS, total funds amountingXDR 11,100,000 have been lent to RS.

Categories of items to be finance out of the proceeds of the Credit, the allocation of the amounts of theCredit to each category and the percentage of expenditures for items so to be financed in eachcategory originally are as follows:

Amount of the % of expenditure toItem financing be financed

allocated(in XDR)

(2) Goods, works, consultants' service, non-consultantsservices, training and operating costs for Part 2 ofthe Project 9,200,000 100%

(3) Purchase of new premises/ branch offices costs forPart 2 of the Project 1,900,000 100%

Subtotal 11,100,000

IDA Credit No. 51880 BA became effective on September 23, 2013. Planned closing date is August31, 2018.

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Deloitte d,o-o.Deloitte,,, Jadranska bb71000 SarajevoBosnia and Herzegovina

Tel: +387 (0)33 277 560Fax: +387 (0)33 277 561www.deloitte,corn/ba

2. Independent Auditor's Report

To the State of Bosnia and Herzegovina,Ministry of Finance and TreasuryAttn. of Minister of Finance and Treasury H.E. Mr. Vjekoslav Bevanda

Report on the project financial statements

We have audited the accompanying project financial statements of the Republika Srpska part of theReal Estate Registration Project (the "Project'), which comprise of Summary of sources and uses offunds, Balance sheet, Designated account statement, Statement of Credit withdrawals as of and forthe year ended December 31, 2015, and a summary of significant accounting policies and otherexplanatory notes for the year then ended, financed under IDA Credit agreement No. 5188-BA. Theseproject financial statements have been prepared on the cash basis of accounting based onInternational Public Sector Accounting Standard ("IPSAS"), as described in Note 4.1

Responsibility for the project financial statements

The State of Bosnia and Herzegovina, i.e. the management of the project implementation unit (the"Management") is responsible for the preparation and fair presentation of these project financialstatements on the cash basis of accounting based on IPSAS, as described in Note 4.1, and on"Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities" issued byFinancial Management Sector Board ("FMSB"), and for such internal control as the Managementdetermines is necessary to enable the preparation of the project financial statements that are free frommaterial misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on the project financial statements based on our audit. Weconducted our audit in accordance with the International Standards on Auditing and "Guidelines:Annual Financial Reporting and Auditing for World Bank - Financed Activities" issued by FMSB. ThoseStandards and Guidelines require that we plan and perform the audit to obtain reasonable assuranceabout whether the project financial statements are free of material misstatement

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thespecial purpose project financial statements. An audit also includes assessing of the accountingprinciples used and significant estimates made by the Management, as well as evaluating the overallstatement presentation.

We believe that our audit provides a reasonable basis for our opinion.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited byguarantee, and its network of member firms, each of which is a legally separate and independent entity-Please see http:J/www.deloitte-com/ba for a detailed description of the legal structure of DeloitteTouche Tohmatsu Limited and its member firms.

Member of Deloitte Touche Tohmatsu Limited

Report on the project financial statements (continued)

Opinion

In our opinion, the accompanying project financial statements present fairly, in all material aspects, thefinancial position of the Project as of December 31, 2015 and of the funds received and disbursedduring the year then ended, in accordance with basis of accounting described in Note 4.1,

Report on other requirements

In addition, with respect to the Statements of Expenditure, adequate supporting documentation hasbeen maintained to support claims to the World Bank for reimbursements of expenditures incurred;and all expenditures included in withdrawal applications and reimbursed against are eligible forfinancing under the Project.

Deloitte d.o.o.

Sead Bahtanovid, director and licensed auditor Mirza Bihorac, )ensed auditor

Sarajevo, Bosnia and Herzegovina "/

May 6, 2016

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REAL ESTATE REGISTRATION PROJECTof the Ministry of Finance and Treasury of Bosnia and HerzegovinaProject financial statements for the year ended December 31, 2015(all amounts in EUR, unless otherwise stated)

3. Project financial statements for the year 2015

3.1 Summary of sources and uses of funds under the IDA Credit agreement No. 5188-BA

Actual Cumulative Cumulative Cumulative CumulativeRef. 2014 2015 2014 budget variance

FINANCING

IDA Credit No. 5188 BOS 12,585,391Initial deposit - 2,000,000 2,000,000SoE replenishments 3,255,659 3,982,738 727,079

TOTAL FINANCING 3.1 3,255,659 5,982,738 2,727,079 12,585,391 6,602,653

PROJECT EXPENDITURE

By Category

Goods, works, consultants' service,non-consultants services, training andoperating costs for Part 2 of theProject 2,939,348 4,909,523 1,970,175 10,431,135 5,521,612

Purchase of new premises/ branchoffices costs for Part 2 of the Project 87,533 358,808 271,275 2,154,256 1,795,448

TOTAL EXPENDITURE 3.2 3,026,881 5,268,331 2,241,450 12,585,391 7,317,060

PROJECT EXPENDITUREBy Component

Real Estate Registration DataDevelopment 2,302,742 3,184,845 882,103 5,488,956 2,304,111Real Estate Registration infrastructureDevelopment 485,604 1,638,256 1,152,652 3,332,580 1,694,324

Policy and Institutional Development,and Project Management 238,535 445,230 206,695 3,763,855 3,318,625

TOTAL EXPENDITURE 3.2 3,026,881 5,268,331 2,241,450 12,585,391 7,317,060

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REAL ESTATE REGISTRATION PROJECTof the Ministry of Finance and Treasuryof Bosnia and HerzegovinaProject financial statements for the year ended December 31, 2015(all amounts in EUR, unless otherwise stated)

3. Project financial statements for the year 2015 (continued)

3.2 Balance sheet as ofDecember 31, 2015showing accumulated funds of the project andbank balances concerning World Bank funding

December 31, December31,Ref. 2015 2014

ASSETS

Project expenditure under IDA Credit No 5188-BA 3 1 5 2658 331 2,241 450

5,268,331 2,241,450

Designated account - IDA Credit No. 5188-BA A 714,407 485,629

714,407 485,629

Total assets 5,982,738 2,727,079

LIABILITIES

IDA Credit No 5188-BA C 5 982,738 2 727,079

Total liabilities 5,982,738 2,727,079

Signed and authorised by:

Darko Miskovic ana recii

PIU Director Financial Manager

Banja Luka, May 6, 2016

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REAL ESTATE REGISTRATION PROJECTof the Ministry of Finance and Treasury of Bosnia and HerzegovinaProject financial statements for the year ended December 31, 2015(all amounts in EUR, unless otherwise stated)

4. Notes to the project financial statements

4.1 Basis of preparation and accounting records

These project financial statements have been prepared in accordance with the International PublicSector Accounting Standard: "Financial Reporting under the Cash Basis of Accounting" issued by thePublic Sector Committee of the International Federation of Accountants, and incorporate theaccounting policies below, which have been consistently followed in all material respects and complywith the "Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities",issued by the Financial Management Sector Board.

4.2 Accounting policies

The Project's fiscal year is January 1 to December 31 for the recording of all transactions.

Cash basis of accounting

All receipts and expenses under IDA Credit are recorded on actual receipt and payment basis ofaccounting as per approved categories.

Project expenditure is stated at original cost on the Balance sheet.

Direct payments

Direct payments concern the amounts paid directly from the Credit account of the World Bank.

Statement of Expenditure (SoE)

Statements of Expenditure are used to state the expenditure under IDA Credit during a certain period.These statements are sent to the World Bank's disbursement department who authorises the paymentof the expenditure through the Designated account.

Currency conversions

The reporting currency is Euro (EUR). Sources and use of funds (payments to suppliers andcontractors) in currencies other than EUR have been converted to EUR using the currency rate at themoment of the transaction.

Bank balances, recorded on the Balance sheet at year-end, have been converted at year-end rate.

Designated account

This is the total amount of the withdrawals from the Credit account for the Project. The Credit accountis in XDR.

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REAL ESTATE REGISTRATION PROJECTof the Ministry of Finance and Treasury of Bosnia and HerzegovinaProject financial statements for the year ended December 31, 2015(all amounts in EUR, unless otherwise stated)

APPENDIX A DESIGNATED ACCOUNT STATEMENT

Account owned by: Ministry of Finance and Treasury of Bosnia and Herzegovina

Account No: 5672140000415605

Depository Bank: Sberbank a.d.

Address; Jevrejska br.71, Banjaluka

Related Credit: IDA Credit No. 5188-BA

Currency: EUR

Ref. EUR

Opening balance January 1, 2015 485,629

Add:World Bank replenishments B 3,255,659

3,255,659

Deduct:

Payments to suppliers - Expenditure under IDA Credit 3,026 881

3,026,881

Ending balance December 31, 2015 12 714,407

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REAL ESTATE REGISTRATION PROJECTof the Ministry of Finance and Treasury of Bosnia and HerzegovinaProject financial statements for the year ended December 31, 2015(all amounts in EUR, unless otherwise stated)

APPENDIX C Reconciliation between World Bank's disbursement statements in XDR andIDA Credit account in EUR according to the balance sheet;SoE Withdrawal Schedule of IDA Credit No. 5188-BA

Changes in Exchange Changes inIDA Credit rate used IDA Credit

(in XDR) (in EUR)

Original amount 11,100,000 1.133819 12,585,391

Disbursed in previous years 2,387,476 2,727,079

Withdrawal 3 454,505 1,244011 565,409Withdrawal 4 475,865 1.242233 591,135Withdrawal 5 280,615 1.275153 357,827Withdrawal 6 521,866 1257524 656,259Withdrawal 7 864,734 1 254755 1,085,029

Total disbursed in 2015 2,597,585 3,255,659

Cumulative disbursements 4,985,061 5,982,738

Calculated undisbursed balanceas of December 31, 2015 6,114,939 6,602,653Undisbursed balance as per WorldBank Summary for December 2015 6,114,939 1.26831 7 755638

Potential exchange rate gain 1,152,985

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