r irrigation system enhancement project ibrd loan … · i . f. r [ c [ l . l . f . statement of...

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IRRIGATION SYSTEM ENHANCEMENT PROJECT

IBRD LOAN 8267-AM

IMPLEMENTED BY WATER SECTOR PROJECTS IMPLEMENTATION UNIT STATE INSTITUTION

SPECIAL PURPOSE FINANCIAL STATEMENTS

AND

INDEPENDENT AUDITOR'S REPORT

For the year ended 31 December 2014

YEREVAN March 2015

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TABLE OF CONTENT

Page

INDEPENDENT AUDITOR'S REPORT .............................................................................................. .3

STATEMENT OF FINANCIAL POSITION .......................................................................................... 5

STATEMENT OF SOURCES AND USES OF FUNDS ......................................................................... 6

STATEMENT OF USES OF FUNDS BY PROJECT ACTIVITY ......................................................... ?

SUMMARY OF SUMMARY REPORTS AND SOES ........................................................................... S

STATEMENT OF DESIGNATED ACCOUNT ...................................................................................... 9

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS ............................................... IO

ANNEX I. RECONCILIATION BETWEEN THE AMOUNTS SUBMITTED BY THE PIU AND

DISBURSED BY THE WORLD BANK ............................................................................................... l6

Irrigation System Enhancement Project Special Purpose Financial Statements for the year ended 31 December 2014 2/16

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"UOU -Ufil'l}..fl.S" U "lC

"SOS-AUDIT" LTD

INDEPENDENT AUDITOR'S REPORT N 25

On the special purpose financial statements of "Irrigation System Enhancement Project"

for the year ended 31 December 2014

To the management of "Water Sector Projects Implementation Unit" State Institution (the PIU)

We have audited the accompanying special purpose financial statements of"Irrigation System Enhancement Project" (the Project) financed by the IDRD Loan 8267-AM, which comprise the Statement of Financial Position as at 31 December 2014, the Statement of Sources and Uses of Funds, the Statement of Uses of Funds by Project Activity, Summary of summary reports and SOEs, the Statement of Designated Account for the year ended 31 December 2014, and a summary of significant accounting policies and other explanatory notes.

Management's Responsibility for the Financial Statements

The management of the PIU is responsible for the preparation and fair presentation of these special purpose financial statements in accordance with the basis of accounting described in the Note 2 accompanying these special purpose financial statements, and for such internal control as management determines is necessary to enable the preparation of special purpose financial statements that are free from material misstatements, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these special purpose financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (ISAs) as issued by International Auditing and Assurance Standards Board (IAASB). Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the special purpose financial statements are free from material misstatement. An audit involves performing procedures to obtain reasonable audit evidence about the amounts and disclosures in the special purpose financial statements. The procedures selected depend on the auditor's judgment including the assessment of the risk of material misstatement of the special purpose financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the special purpose financial statement 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 entity's internal control. An audit also includes the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the special purpose financial statements.

.Prmm =lnpLj_wp Ppqubu Uuwuup UungpwgLj_wo Uu11wu

=!=!; ~· bruwO 0037, U.S~qrwOjwO 38/55; =!bn.' (+37410) 20 11 51; !bw~u· (+37410) 20 11 50; www.sosaudit.am; tL-Ljmuu,. [email protected]

An Associate of the Crowe Horwath Business Alliance

38/55 A.Tigranyan, 0037 Yerevan, RA; Tel.: (+37410) 20 11 51; Fax: (+37410) 20 11 50; www.sosaudit.am; E-mail: [email protected]

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"UOU -Ufii'L}.P.S" U(J).(!

"SOS-AUDIT" LTD

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, 1. the special purpose financial statements present fairly in all material respects the

financial position of the Project as at 31 December 2014, as well as the sources and uses of funds for the year ended 31 December 2014 in accordance with the basis of accounting described in the Note 2 accompanying these special purpose financial statements;

2. funds have been used in accordance with the conditions of the IBRD Loan Agreement 8267-AM dated 29 May 2013 signed between the Republic of Armenia and International Bank for Reconstruction and Development (IBRD), and World Bank related guidelines, with due attention to economy and efficiency, and only for the purposes for which the financing was provided;

3. supporting documents, records and accounts have been maintained to support claims for reimbursement of expenditures incurred. Expenditures included and reimbursed against withdrawal applications are eligible for financing under the IBRD Loan Agreement 8267-AM dated 29 May 2013;

4. the Designated account has been maintained in accordance with the provision of the IBRD Loan Agreement 8267-AM dated 29 May 2013, and World Bank related guidelines.

SOS-Audit LLC 24 March 2015

-~ Nazik Chitchyan

Auditor

.Qrmm ,nrnl.w~ P~qubu Uuwuu~ Uung~wgLj_wo UD11wli

=H; p. brt..wG 0037, U.S~qrwGjwG 38/55; =!bn.' (+37410) 20 11 51; !bwpu· (+37410) 20 11 50; www.sosaudit.am; tL-tJ'muu,-~sosaudit.am

An Associate of the Crowe Horwath Business Alliance

38/55 A.Tigranyan, 0037 Yerevan, RA; Tel.: (+3741 0) 20 11 51; Fax: (+3741 0) 20 11 50; www.sosaudit.am; E-mail: [email protected]

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STATEMENT OF FINANCIAL POSITION

Irrigation System Enhancement Project IBRD Loan 8267-AM As at31 December 2014

ASSETS

Cash

Designated account - ffiRD Loan 8267-AM (in USD)

Current account- Government ofRA (in AMD)

Total Cash

Prepayments

Cumulative project expenditures

Foreign exchange loss

TOTAL ASSETS

FUNDS AND LIABILITIES

Accounts payable Foreign exchange gain

Funds

IBRD Loan 8267-AM

Government of the Republic of Armenia

Total Funds

TOTAL FUNDS AND LIABILITIES

Feliks Meliqyan

Acting Director

Irrigation System Enhancement Project Special Purpose Financial Statements for the year ended 31 December 2014

Note

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3

7

5 7

6.1

6.2

31.12.2014 31.12.2013 USD USD

3,535,182.04 3,698,561.07

159,793.55 266,554.21

3,694,975.59 3,965,115.28

587,254.48 1,435,963.23

5,895,611.88 391,073.46

44,100.08

10,221,942.03 5,792,151.97

172,607.06 2,407.73 6,617.08

8,603,194.80 5,173,222.31

1,446,140.17 609,904.85

10,049,334.97 5,783,127.16

10,221,942.03 5,792,151.97

Aram Zakaryan

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STATEMENT OF SOURCES AND USES OF FUNDS

Irrigation System Enhancement Project IBRD Loan 8267-AM

For the year ended 3/ December 2014 lnUSD

Opening Working Capital Cash Prepayments Accounts payable Total Sources of Funds IBRD Loan 8267-AM Government of Republic of Armenia Total Foreign exchange gainl(loss) Uses of Funds (I) Goods, works, non-consulting

services, consultants' services, training and operating costs for the Project

(2) Front-end Fee Total Closing Working Capital Cash Prepayments Accounts payable Total

Irrigation System Enhancement Project Special Purpose Financial Statements


ACTUAL Reporting year 20 14 Cumulative as at

3l.Dec.20 14

3,965,115.28 1,435,963.23

(2,407.73) 5,398,670. 78

3,429,972.49 8,603,194.80 836,235.32 1,446,140.17

4,266,207.81 10,049,334.97 (50, 717.14) (44,100.08)

5,504,538.44 5,820,611.88 - 75,000.00

5,504,538.44 5,895,611.88

3,694,975.59 3,694,975.59 587,254.48 587,254.48

(172,607 .06) (172,607.06) 4,109,623.01 4,109,623.01

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BUDGET VARIANCE PAD Reporting year Cumulative as at Reporting year Cumulative as at

2014 3l.Dec.2014 2014 3l.Dec.20 14

6,623,620.00 10,277,480.00 (3,193,647.51) (1 ,674,285.20) 30.000,000.00 1,655,910.00 2,569,380.00 (819,674.68) (1,123,239.83) 7.500,000.00

8,279,530.00 12,846,860.00 (4,013,322.19) (2, 797,525.03) 37,500,000.00

8,279,530.00 12,846,860.00 (2, 77 4,991.56) (7,026,248.12) 3 7,425,000.00 - - - 75,000.00 75,000.00

8,279,530.00 12,846,860.00 (2,774,991.56) (6,951,248.12) 37,500,000.00

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STATEMENT OF USES OF FUNDS BY PROJECT ACTIVITY

Irrigation System Enhancement Project IBRD Loan 8267-AM For the year ended 31 December 2014 lnUSD

Project Activities

Part A- Irrigation system enhancement A.1: Conversion of pump-based irrigation to gravity irrigation A.2: Upgrading of outlet and other canals conveying pumped water

Part B- Mana2ement information

8.1: Technical investigations 8.2: Supervisory control and data acquisition (SCADA) system installation

Part C- Project management and WUAs' support

C.1: Project management

C.2: WUAs' support

C.2.1: The WUAs' support group

C.2.2: Capacity building of WUAs' executive bodies C.2.3: Awareness raising and communication

activities

Project expenditures

Front- end Fee

Total Project ExiJenditures

Irrigation System Enhancement Project Special Purpose Financial Statements


ACTUAL Reporting year Cumulative as at

2014 3I.Dec.2014

4,654,819.88 4,654,819.88

4,654,819.88 4,654,819.88

- -

- -

- -849,718.56 1,165,792.00

670,830.01 986,903.45

178,888.55 178,888.55

- -170,345.11 170,345.11

8,543.44 8,543.44

5,504,538.44 5,820,611.88

- 75,000.00

5,504,538.44 5,895,§ l_ l. 8_!J

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BUDGET VARIANCE PAD Reporting year Cumulative as at Reporting year Cumulative as at

2014 3l.Dec.2014 2014 31.Dec.2014

6,421,280.00 9,394,880.00 (1, 766,460.12) (4,740,060.12) 33,100,000.00

6,153,580.00 9, 127,180.00 (1,498,760.12) (4,472,360. 12) 24,700,000.00

267,700.00 267,700.00 (267,700.00) (267 '700.00) 8,400,000.00

841,970.00 1,741,810.00 (841,970.00) I (1,741,81o.oo> 1,700,000.00

841,970.00 932,960.00 (841 ,970.00) (932,960.00) 900,000.00

- 808,850.00 - (808,850.00) 800,000.00

1,016,280.00 1,710,170.00 (166,561.44) (544,378.00) 2, 700,000.00

665,380.00 I ,293,3 80.00 5,450.01 (306,476.55) I ,500,000.00

350,900.00 416,790.00 ( 172,0 ll.45) (237,901.45) 1,200,000.00

- - - - 800,000.00

186,300.00 252,190.00 (15,954.89) (81,844.89) 240,000.00

164,600.00 164,600.00 (156,056.56) (/56, 056.56) 160,000.00

8.279,530.00 12,846,860.00 (2, 774,991.56) I (7,026,248.12) 37,500,000.00

- - - 75,000.00 -8,279,530.00 12,846,860.00 (2, 774,991.56) I (6,951,248.12> 37,500,000.00

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SUMMARY OF SUMMARY REPORTS AND SOEs

Irrigation System Enhancement Project IBRD Loan 8267-AM For the year ended 3I December 20I4 In USD

Application (I) Goods, works, non-consulting N services, consultants' services,

training and operating costs for the Project

3 1,301,438.93 4 229,929.60 5 818,833.49 6 1,079,770.47

Total 3,429,972.49


Total

1,301,438.93 229,929.60 818,833.49

1,079,770.47 3,429,972.49

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STATEMENT OF DESIGNATED ACCOUNT

Irrigation System Enhancement Project IBRD Loan 8267-AM For the year ended 31 December 2014

Designated Account

Currency

Account number

Bank

Location

1. Opening balance Add:

2. Cumulative opening discrepancy

3. IBRD advance/replenishment

Less: 4. Refund to IBRD from DA

5. Present outstanding amount advanced to DA

6. DA closing balance as at 31.12.20I4

Add: 7. Amount of eligible expenditures paid

8. Service charges (if debited into DA)

Less: 9. Interest earned (if credited into DA)

tO. Total advance/replenishment accounted for

II. Discrepancy (5)-(1 0)


IBRD Loan 8267-AM

USD

900000906132

Central Treasury I Meliq Adamyan Street, Yerevan

Republic of Armenia, 00 I 0

2014 USD

3,698,561.07

3,429,972.49

7,128,533.56

3,535,I82.04

3,593,351.52

7,128,533.56

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NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS

Irrigation System Enhancement Project IBRD Loan 8267-AM For the year ended 3I December 2014

1. General Information

1.1. Project Financing

According to the Loan Agreement 8267-AM dated 29 May 2013 concluded between the Republic of Armenia and International Bank for Reconstruction and Development (IBRD), IBRD provided financing in the amount of 30,000,000 United States dollars (USD) for the implementation of "Irrigation System Enhancement Project" (the Project).

The Project financing agreement became effective on 15 July 2013. The Closing date for the expenditures to be financed by the Loan is set on 30 June 2017. The Grace period for submitting withdrawal application for expenditures incurred before the Closing date is four months following the Closing date: 30 October 2017.

1.2. Project objectives

The objectives of the Project are to: a) reduce the amount of energy used and improve irrigation conveyance efficiency in

targeted irrigation schemes, b) improve the availability and reliability of important sector data and information for

decision-makers and other stakeholders.

The Project consists of the following parts: A - Irrigation system enhancement project, B - Management information, C- Project management and WUAs' support.

1.3. Project Budget

The Project is being financed by the following sources: International Bank for Reconstruction and Development (IBRD), The Government of the Republic of Armenia (Government ofRA).

Co-financing rate of 20% is applied for goods, works, non-consulting services, consultants' services, training and operating costs for the Project.

Category

l.Goods, works, non-consulting services, consultants' services, training and operating costs for the Project

2.Front-end fee

Total


IBRD 8267-AM

USD

29,925,000

75,000

30,000,000

Government Total ofRA

USD USD

7,500,000 37,425,000

- 75,000

7,500,000 37 500,000

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1.4. Project Implementation

The Project is implemented by "Water Sector Projects Implementation Unit" State Institution (the PIU). The PIU address is: Baghramyan Street 75/44, Yerevan 0033, Republic of Armenia.

Irrigation System Enhancement Project Special Purpose Financial Statements for the year ended 31 December 2014 11116

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2. Accounting policy

2.1 Preparation and presentation of financial statements

The special purpose financial statements have been prepared based on the accrual basis of accounting and presented in accordance with Financial Management Manual for World Bank Financed Investment Operations (March 20 I 0): RM 3 - Financial Reporting and Auditing.

In accordance with the accrual bases of accounting the expenditure is recognized when the transaction occur (expense incurred), and not only when cash or its equivalent is received or paid. The transactions are recorded in the accounting records and recognized in the special purpose financial statements of the periods to which they relate.

The special purpose financial statements consist of: Statement of financial position, Statement of sources and uses of funds,

-------=s=-ta- tement of uses of funds by project activitY. Summary of summary reports and SOEs, Statement of designated account, Notes to the special purpose financial statements.

Reporting currency of special purpose financial statements is US dollar (USD).

2.2 Foreign currency transactions

Project accounts are maintained and transactions are made in USD and Armenian Drams (AMD). Transactions denominated in local currency are translated into USD as follows:

Contributions of the RA Government expressed in AMD are translated into USD at the average exchange rate at currency market issued by the Central Bank of Armenia (CBA) at the date of transfer. Payments to contractors and suppliers expressed in AMD are translated into USD at the average exchange rate at currency market issued by the CBA at the date of payment. Monetary assets and liabilities are translated into USD at the average exchange rate at currency market issued by the CBA at the reporting date. Transaction and translation exchange differences (gains/losses) are recognized and presented in financial statements in net as an Exchange difference.

The average exchange rate at currency market issued by the CBA as at 3I December 2013 is I USD =405.64 AMD

The average exchange rate at currency market issued by the CBA as at 3I December 20 I4 is I USD =474.97 AMD

2.3 Taxes

The Project related taxes and mandatory payments are calculated and paid in accordance with tax regulations of the Republic of Armenia.


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3. Project expenditures allocation on funds

Expenditure category

(1) Goods, works, non-consulting services, consultants' services, training and operating costs for the Project

(2) Front- end fee

Total

l"igation System Enhancement Project Special Purpose Financial Statements for the year ended 31 December 2014

Reporting year 2014

IBRD Loan GoA 8267-AM

USD USD

4,403,630.70 1,100,907.74

- -4,403,630. 70 1,100,907.74

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Cumulative As at 31.12.2014

Total IBRD Loan GoA Total 8267-AM

USD USD USD USD

5,504,538.44 4,656,489.43 1,164,122.45 5,820,611.88

- 75,000.00 - 75,000.00

5,504,538.44 4,731,489.43 1,164,122.45 5,895,611.88

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4. Prepayments

Works of the Project Operating costs of the Project

Total

5. Payables

Works ofthe Project Operating costs of the Project

Total

6. Financing

6.1. IBRD Loan 8267-AM financing

Advance Reimbursement-SOB procedure Summary Report Front-end fee

Total financing budget Percentage of finance provided as at 31 Dec 2014

6.2. Government financing

Contributions

Total financing budget Percentage of finance provided as at 31 Dec 2014


31.12.2014 USD

586,110.26 1,144.22

587,254.48

31.12.2014 USD

170,876.24 1,730.82

172,607.06

Reporting year2014

USD

3,121,685.17 308,287.32

3,429,972.49

Reporting year 2014

USD 836,235.32 836,235.32

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31.12.2013 USD

1,435,963.23

1,435,963.23

31.12.2013 USD

2,407.73 2,407.73

As at 31.12.2014 Cumulative

USD 5,000,000.00 3,219,907.48

308,287.32 75,000.00

8,603,194.80

30,000,000 29%

As at 31.12.2014 Cumulative

USD 1,446,140.17 1,446,140.17

7,500,000 19%

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7. Foreign exchange gain/(loss)

Translation of payables Translation of cash balances

8. Expenditure budget execution

Cateeory l.Goods, works, non-consulting services, consultants' services, training and operating costs for the Project 2.Front- end fee

Total

9. Events after the reporting date

Cumulative Expenditures

as at 31 Dec 2014 USD

5,820,611.88 75,000.00

5,895,611.88

31.12.2014 USD

(6,006.77) (3 8,093.31) (44,100.08)

Total budget USD

37,425,000.00 75,000.00

3 7,500,000.00

31.12.2013 USD

52.38 6,564.70 6,617.08

Execution %

16 100

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The Project expenditures for the reporting period at the total amount of USD 1,464,817.96 registered at the application# 7 were submitted to WB on 21 January 2015 and approved on 29 January 2015.


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ANNEX 1. RECONCILIATION BETWEEN THE AMOUNTS SUB:MITTED BY THE PIU AND DISBURSED BY THE WORLD BANK

Irrigation System Enhancement Project IBRD Loan 8267-AM For the year ended 31 December 2014 lnUSD

Category

(1) Goods, works, non-consulting services, consultants' services, training and operating costs for the Project

Total


Appl. N

3 4 5 6

PIU WB Difference

I ,301 ,43 8.93 1,301,438.93 -229,929.60 229,929.60 -818,833.49 818,833.49

1,079,770.47 1,079,770.47 -3,429,972.49 3,429,972.49 -

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