Agency for the Delivery of Integrated Services Albania

Citizen-Centric Service Delivery Project(Part 1 b-c, 2 b-c, 3b, 4)

(Loan No: 8521 - AL)

(Project Preparation Advance No: P472)

For the Period from 1 January to 31 December 2017

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Chen-enifi Serice [elivey~ Project

Frteyea enI 31 DXc.mher 2017!

Contents

Page

Independent Auditor's Report

Statenent of Sources and Uses of Funds

Statement of Withdrawil Applications 2Notes to the Special Purpose Financial Information 3 9Appendices I-VI

GrantThornton

Grant Thornton Sh.p.k.Rr: Sam- Frascei, Kompleksi T-I.D, Shk. B.Floor 1, 10000Tirana, Albania

Independent Auditor's Report 355 4 225 583

To the Managemcnt of the project "CitizenCentric Service Delivery Project" and iMinistrv of Financeand Economy of the Republic of Albania

Opinion

We have audited the accompanying special purpose financial information comprising the statement ofsources and uses of funds, statement of withdrawal applications and the related notes of the Project"Citizen-Centric Service Delivery Project" (further referred to as the "Project") implemented by theAgency for the Delivery of Integrated Services Albania ("ADISA") and financed by the LoanAgreement No. 8521 - AL ("IBRD 8521 - AL") and the Project Preparation Advance No: P472("PPA - P472") from the International Bank for Reconstruction and Development ("IBIU)" or the"World Batik) for the period from 10 April 2015 to 31 December 2017. The special purpose financialinformation has been prepared by the management of the Project in accordance with policiesdescribed in notes 2 and 3 of the special purpose financial information.

In our opinion, the special purpose financial information of the Project "Citizen-Centric ServiceDelivery Project" is prepared, in all material respects, in accordance with the cash receipts anddisbursement basis of accounting as set out in notes 2 and 3 to the special purpose financialinformation.

CIr ti:0n-nrs Servtc eier rjc

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Ourresponsibilities under those standards are further described in the Auditor's Responsibilities for theaudit of the special purpose financial information section of our report. We are independent of theentity in accordance with the International Ethics Standards Board for Accountants' Code of Ethicsfor Professional Accountants (IESBA Code) together with the ethical requirements that are relevantto our audit of the special purpose financial information in Albania, and we have fulfilled our otherethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter - Basis of Accounting and Restriction on Distribution

We draw attention to notes 2 and 3 to the special purpose financial information, which describe thebasis of accounting. The special purpose financial information is prepared to provide information toProject's donors and lenders, and to M\Jinistry of Finance and Economy of Republic of Albania and themanagement of the Project. As a result, the statement may not be suitable for another purpose. Ouropinion is not modified in respect of this matter. Our report is intended solely for the information anduse of the Project's management, the donors and lenders, and the inistry of Finance and Economyof Republic of Albania and it should not be further distributed without our prior written consent.

Responsibilities of Management and Those Charged with Governance for the Special PurposeFinancial Information

M\fanagement is responsible for preparation and fair presentation of the special purpose financialinformation in accordance with the basis of accounting described in notes 2 and 3; this includesdetermining that the cash receipts and disbursements basis of accounting is an acceptable basis for thepreparation of the special purpose financial information in the circumstances, and for such internalcontrol as management determines is necessary to enable the preparation of a special purposefinancial information that is free from material misstatement, whether due to fraud or error.

Auditor's Responsibility for the Audit of the Special Purpose Financial Inform ation

Our objectives are to obtain reasonable assurance about whether the special purpose financialinformation as a whole is free from material misstatement, whether due to fraud or error, and to issuean auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but isnot a guarantee that an audit conducted in accordance with ISAs will always detect a materialmisstatement when it exists. Misstatements can arise from fraud or error and are considered materialif, individually or in the aggregate, they could reasonably be expected to influence the economicdecisions of users taken on the basis of this special purpose financial information.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintainprofessional scepticism throughout the audit, We also:

* Identify and assess the risks of material misstatement of the special purpose financialinformation, whether due to fraud or error, design and perform audit procedures responsive to thoserisks, 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 resultingfrom error, as fraud may involve collusion, forgery, intentional omissions, mistepresentations, or theoverride of internal control-* Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the entity's internal control.* Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the entity's ability to continue as a goingconcern. If we conclude that a material uncertainty exists, we are required to draw attention in ourauditor's report to the related disclosures in the special purpose financial information or, if suchdisclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However, future events or conditions may cause theentity to cease to continue as a going concern.* Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates, if any, and related disclosures made by management.* Evaluate the overall presentation, structure and content of the special purpose financialinformation, including the disclosures, and whether the special purpose financial informationrepresents the underlying transactions and events in a manner that achieves fair presentarion.

We communicate with those charged with governance regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.

Grant Thornton shp.k.

Tirana, Albania

24 May 2019

iii

C th Centric Serc DUvr Prjc

Statement of Sources and Uses of Funds

For the period from For the period from Cumulative fromNote 1 January to 1 January to 10 April 2015 to

31 December 2017 31 December 2016 31 December 2017Sources of funds

IBRD 85210 4 885,653 1,245,403 2,131,056Project Preparation Advance No. P472 4 - 913,992Return of Project Preparation Advance 4 (792,463) (792,463)Income from Interests 310 419Total 885,653 453,250 2,253,002

Uses of funds

Consultancy services 5 451,346 689,416 1,145,160Goods 6 163,347 226,488 389,835Non consulting services 7 137,071 7,001 144,072Training 8 25,333 13,213 38,546Incremental operating costs 9 32,931 19,006 53,661Civil Works 10 382,007 382,007Total 1,192,035 955,124 2,153,280

(Deficit)/Surplus of receipts overdisbursements (306,382) (501,874) 99,722Exchange rate differences 361 (25,669) (23,508)Cash begin period 11 382,234 909,777Cash end of period 11 76,213 382,234 76,213

The Statement of Sources and Uses of Funds is to be read in conjunction with the notes set out on pages 3 to 10and forming an integral part of the special purpose financial information.

The special purpose financial information of Citizen-Centric Service Delivery Project were authorized for issue bythe management of the Agency for the Delivery of Integrated Services Albania on 11 February 2017 and signedon its behalf by:

Mr. Lorin Ymer' , Mr. Gezin KallaijxhiExecutive Dim;ctr Director offinance andAdministration of RevenueAgeng for the rey of mitt ed ices Albania Ageng forth of teg ed Services Albania

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Notcs to the Special Purpose FinancialInformatiOll

1. General Information

The Government of Albania (GoA) began a program of public service delivery, entitled "Innovation againstCorruption," in June 2014. The GoA intends to fundamentally change how public services are providedthrough a variety of interventions, including the creation of a one-stop-shop for adi-ninistrative services,regulatory reform, re-engincering how services are approved, increasing the number of services providedonline, and implementing performance management measures. The GoA's objectives in implementing thesereforms are to reduce the scope for corruption, foster a citizen-focuscd ethos for provision of public services,and reduce the time of service delivery both for citizens and businesses.

The objective of the Project is to ilprove the efficiency of delivery and access to selected administrativeservices in Albania.

1.1 Project Background

The objective of the Project is to improve the efficiency of delivery and access to selected -administrativeservices in Albania.

1.2 Project components

Part 1- Enhancing the Backend Systems

a) Supporting the U-npiementation of the Borrower's program for simplification and u-npr<)vemcnt of itsbusiness processes (Business Process Re-enginetring) to reduce time to citizens in obtaining therequisite approvals, through provision of financing of salaries and Social SecurltN, Contributionsincurred bv the Borrower out of its budgetary allocation for said program (Part I (a) EligibleExpenditure Programs ("EEP").

b) Strengthening the capacity of Agency for Delivery of Integrated Public Services ('ADISA") andthe Participating Agencies to provide improved Adnurii strative Senices through provision oftechnical assistance and Training,

C) Strengthening the Participating -Agencies' Information Communication Technology ("ICT")capacity through inter alia converting information into digital format, optimizing databases topromote more effective use of data, and developing software through provision of technicalassistance and goods.

3

Part 2: Enhancing Citizen Interface with Service Delivery

a. Supporting implementation of the Borrower's program to improve the quality of its public serviceculture including through inter alia (i) disseminating information on government services to thepublic; (ii) providing transactional web presence through electronic authentication, E-filing and E-payments; and (iii) monitoring of citizen feedback and improvements in performance, throughprovision of financing of salaries and Social Security Contributions incurred by the Borrower out ofits budgetary allocation for said program (Part 2(a) PEP).

b. Strengthening the Borrower's capacity to develop and implement a range of program activities,including: (i) communication programs (ii) incentives of various actors to effectively implement theProject; (iii) citizen outreach and awareness campaigns; and (iv) citizen feedback mechanisms.

c. Carrying out of minor refurbishment of front offices of select service providing institutions.d. Establishing a Call Center through provision of goods and technical assistance.

Part 3: Building Capacity to Deliver

a) Supporting the implementation of the Borrower's program on achieving the InstitutionalPrerequisites for the Citizen Centric Service Delivery Reform Program, namely: (i) approval of theCitizen Centric Service Delivery Reform Program document; and (ii) conducting of the survey forthe baseline information on the objectives of the Project, through provision of financing of salariesand Social Security Contributions incurred by the Borrower out of its budgetary allocation for saidprogram (Part 3(a) EEP).

b) Strengthening the Borrower's capacity to deliver public services through inter alia:i) designing and implementing a program for adoption and implementation of proposed reforms to

be identified under the Project;ii) improving data collection including through developing service standards, conducting regular

assessments; strengthening monitoring tools and conducting third party audits andDisbursement-Linked Indicators "DLs" verification; and

iii) strengthening ADISA's Project management capacity.

Part 4: Citizen Service Center and Project Management

a) Citizen Service Center ("CSC")i) Conducting a study on the current state of public services delivery.ii) Preparing a concept of the CSC model and its design, and supporting CSC establishment.iii) Establishing a citizen feedback mechanism to promote effective use of the CSC model.

b) Project Management UnitStrengthening the capacity of ADISA to implement the Project, including, inter alia, through therecruitment of a Project manager, financial management specialist, administrative specialist andprocurement specialist.

4

1. General Information (continued)

The following table specifies the categories of Eligible Expenditures that may be financed out of the proceedsof the Loan (Category"), the allocation of the amounts of the Loan to each Category, and the percentage ofexpenditures to be financed for Eligible Expenditures in each Category,

Amount of the Loan Percentage of Expenditures to beCategory Allocated financed(expressed in EURO) (inclusive of Taxes)

(1) Eligible Expenditures Programunder Parts I (a), 2(a) and 3(a) of theProject 22,895,000 100% up to the DLI amount

(2) Goods, works, non-consulting

services, and consultants' services,Training and Operating Costs underParts 1(b), 1(c), 2(b), 2(c) and 3(b) and[(4)] of the Project 4,431,750 100%

(3) Refund of the Preparation Amount payable pursuant to SectionAdvance 1,900,000 2.07 (a) of the General Conditions

Amount payable pursuant to Section

203 of this Agreement inaccordance with Section 2.07 (b) of

(4) Front-end Fee 73,250 the General Conditions

) Interest Rate Cap or Interest Rate Amount due pursuant to SectionCollar premium [2 .08(c)] of this Agreement]

TOTAL AMOUNT 29,300,000

2. Basis of preparation

The special purpose financial information has been prepared in accordance with the accounting policies innote 3, under the Cash Basis of Accounting.

The special purpose financial information is presented in EUR, Euro is also functional currency of theProject being the currency in which funds are received and most of expenses are settled.

The special purpose financial information comprise the Statement of Sources and Uses of Funds, theStatement of Withdrawal Applications (and related expenditure) used as the basis for the submission ofwithdrawal applications and a summary of significant accounting policies and other explanatory notes.

S

3. Summary of significant accounting policies

A summary of significant accounting policies underlying the preparation of the Project'sfinancial statements is presented below.

3.1. Foreign currency transactions

The Project has adopted the Euro as its reporting currency for consistency with the reporting needs of itsmain donor, the World Bank.

Cash and bank balances in other currencies are converted into Euro at the year-end rate of exchange.Transactions in currencies other than Euro arc converted to the reporting currency at the rate ruling at thedate of the transaction. Foreign exchange differences are recognized in the Statement of Sources and Uses ofFunds.

The equivalent in Euro of the amount of funds received and returned for the PPA is different in theStatement of Sources and Uses of Funds when compared to the Statement of Withdrawal Application due tothe different exchange rate applied. We have used the exchange rates published by the Bank of Albania in theStatement of Sources and Uses of Funds which are presented below.

As at 31 December 2017, 1 Euro was equivalent to 132.95 All.

3.2. Cash

Cash comprises cash on hand, demand deposits and cash equivalents. Demand deposits and cash equivalentscomprise balances with banks and investments in short term money market instruments. Amountsappropriated to the Entity are deposited in the Entity's bank account and are controlled by the Entity.Receipts from exchange transactions are deposited in trading fund accounts controlled by the Entity. Theyare transferred to revenue at each year end.

3.3. Recognition of income and expenses

Income is recognized when received rather than when earned, and expenses are recognized when paid ratherthan when incurred. Accordingly, direct payments of the Project's expenses, which are made from theproceeds of the trust fund, are recognized as sources and uses of funds at the time the payment is made. TheStatement of Withdrawal Applications presents only applications submitted during the year and only expensessettled through such applications. Expenses presented in the notes to the special purpose financialinformation include all expenses settled during the year in spite of the supporting withdrawal applicationperiod.

3.4. Taxation

The Project is exempt from income tax. The Project is liable for withholding tax and personnel income taxfor its staff

6

4. IBRD funding

Funds received from IBRD funding for the period from 01 January 2017 to 31 December 2017 werecomposed as follows:

Period from Period from1 January to 31 December 2017 1 January to 31 December2016

Project Preparation Advance

Initial deposit 400.000Replenishments 885,653 845,403Return of Project Preparation Advance (792,463)Income from interest -310Total 885,653 453,250

Project Preparation Advance represents funds disbursed by IBRD to the Special Account based on theProject Preparation Advance No. P472 out of the World Banks Projeer Preparation Facility for supportingthe preparation of the project.

The initial deposit represents funds disbursed to the Special Account based on the planned projectexpenditures at the Project's inception.

Replenishments represent funds disbursed by IBRD to the Special Account based on the withdrawalapplications prepared by the Project.

5. Consultancy services

The consultancy services for the period from 01 January 2017 to 31 December 2017 were composed asfollows:

Period from Period from1 January to 31 December2017 1 Januaryto31 December 2016

Component 1: Enhancing the Backend Systems 165,240 196,475Component 2: Enhancing Citizen Interface withService Delivery 213,179 277,224Component 3: Building Capacity to Deliver 72,927 215,717Total 451,346 689,416

6. Goods

Goods for the period from 01 January 2017 to 31 December 2017 were composed as follows:

Period from Period from1 January to 31 December 2017 1 January to 31 December 2016

Office Equipment 72,402 134,003IT Equipment 83,592 57,127Vehicle - 35,358Advertising 7,353

Total 163,347 226,488

8

7. Non Consulting Services

The non-consultancy services for the period from 01 January 2017 to 31 December 2017 were composed asfollows:

Period from Period from1 Jnuatyto 31 December2017 1 January to 31 December 2016

Digital Network- Call center services 58,150 7001Spot Airing- Delta Publicity 22,733 0Mindshare Albania-Information Campaign: Mediabuying 56188 0

137,071 7,001

8. Training

Training for the period from 01 January 2017 to 31 December 2017 was composed as follows:

Period from Period from1 January to 31 December 2017 1 Januaryto31 December2016

Training ADISA 12,479 3,088DU Training 12,854 10,125Total 25,333 13,213

9. Incremental Operating costs

Operating costs for the period from 01 January 2017 to 31 December 2017 were composed as follows:

Period from Period fromI January to 31 December 2017 1 January to 31 December 2016

Bank Charge 1,785 2,424Health and Social Insurance 6,421 3,078Publications 7,677 5,523Stationeries 8,683 5,504Fieri-construction permit 6,090 .Other Incremental Costs 2,275 2,477Total Incremental Operating Costs 32,931 19,006

10. Civil Works

Civil Works for the period from 01 January 2017 to 31 December 2017 were composed as follows:

Period from Period from1 January to 31 December 2017 1 January to 31 December 2016

Kavaja refurbishment 82,112

Fieri construction 299,895

Total Incremental Operating Costs 382,007

9

I'

11. Cash at banks

Cash at banks as at3l December 2016 was composed as follows:

Period from Period from1 January to 31 December 2017 1 January to 31 December 2016

Cash at Banks

IBRD Special Account BoA EUR 292,74IBRD Credins Bank Account in ALL (equivalent inEUR) 41,213 53,028IBRD Credins Bank Account in EUR 35,000 36732IBRD ABI Bank Account in USD (equivalent inEUR)

Total 76,213 382,334

12. Subsequent events

There are no other significant events that would require either adjustments or additional disclosures in thespecial purpose financial information.

10

APPENDICES

(Loan No: 8521-AL)

(Project Preparation Advance No: P472)

(itzei-('cntric Service Delivery Project(lart 1 b-c, 2 b-c, 3b, 4)

Statements of Special and Project's Accounts

(Supplementary schedules to the Special purposefinancial information)

Appendix 1

Supplementary Schedule of Special Account Statement

Donor IBRD PPA P472-AL

Account No: 2117674E

Depository Bank Bank of Albania

Address Sheshi Skenderbej, No 1, TiranaCurrency USD

2017 2016Balance at beginning of period .

Funds received:

Advance from IBRDFunds transferred from Project OperationalAccount-POA in USD 895231

Total funds received 895,231

Disbursements:Funds transferred to Project OperationalAccount-POA in USD 895,021Funds transferred to Project OperationalAccount-POA in EUR 210Total disbursements 895,231

Balance at end of the period

I

Appendix 2

Supplementary Schedule of Special Account Statement

Donor IBRD Loan 8521-AL

Account No: 2117674E

Depository Bank Bank of Albania

Address Sheshi Skenderbej, No 1, Tirana

Currency EUR

2017 2016Balance at beginning of period 292,474

Funds received:

Advance from IBRD 885,653 399,900Replenishment 4,950,000 845,103Total funds received 6,128,227 1,245,003

Disbursements:Funds transferred to Project OperationalAccount-POA in ALL 957,827 562,529Funds transferred to Project OperationalAccount-POA in EUR 220,000Funds transferred to Project OperationalAccount-POA in EUR 4,950,000 390,000Bank charges 400 -

Total disbursements 6,128,227 952,529

Balance at end of the period - 292,474

III

Appendix 3

Supplementary Schedule of Project Operational Account Statement-Euro

Donor IBRD Loan 8521-AL

Account No: 1304047Depository Bank ABI Bank

Address Rr. Kavajes Nr.59, TiraneCurrency EUR

2017 2016Balance at beginning of period 36,732Funds received:

Funds received from Special Account 220,000 390,000Funds received from bank Interest .

266,732 390,000Disbursements:

Project expenditures:

Consulting services 199,473 342,233Training 21,157 10,125Incremental Costs - 910Bank charges 1102Total 221,732 363,268

Loss from exchange rate

Balance at end of the period 35,000 36,732

IV

Appendix 4

Supplementary Schedule of Project Operational Account Statement-ALL

Donor IBRD Loan 8521-AL

Account No: 1304047Depository Bank ABI Bank

Address Rr Kavajes Nr.59, Tirane

Currency ALL

2017 2016Balance at beginning of period 7,170,924Funds received:

Funds received from Special Account 128,764,213 76,993,499Funds received from bank Interest

Total 128,764,213 76,993,499Disbursements:

Goods 21,945,345 25,996,202Civil works 51,139,336Non consulting services 18,533,910 951,356Consulting services 34,028,797 40,964,937Training 567,130 -

Incremental Costs 4,202,573 1,910,078Bank Charges 38,650Total 130,455,742 69,822,574

Loss from exchange rate 48,128

Balance at end of the period 5,479,395 7,170,924Equivalent in EUR 41,214 53,028

V

kppendix 4

Supplementary Schedule of Project Operational Account Statement-USD

Donor IBRD PPA P472-AL

Account No: 1304047Depository Bank Credins BankAddress Rr."Ismail Oemalf, Nr. 4, TiraneCurrency USD

2017 2016Balance at beginning of period - 992,879Funds received:

Funds received from Special AccountFunds received from bank Interest 343Funds Transferred from Project OperationalAccount - POA in ALL 73Total 416Disbursements:

Goods 39,798Consulting services 51,344Training 3,418Incremental Costs 3,504Funds Transferred to Project SpecialAccount in USD 895,231Total 993,295

Loss from exchange rate

Balance at end of the period

Equivalent in EUR

VI