Agency for the Delivery of Integrated Services Albania. Citizen-Centric Service Delivery Project (Part 1 b-c, 2 b-c, 3b, 4)

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Agency for the Delivery of Integrated Services Albania Citizen-Centric Service Delivery Project (Part 1 b-c, 2 b-c, 3b, 4) (Loan No: AL) (Project Preparation Advance No: P472) Special purpose financial information for the year ended Public Disclosure Authorized

2 Contents Page Independent Auditor's Report 1-ini Statement of Sources and Uses of Funds 1 Statement of Withdrawal Applications 2 Notes to the Special Purpose Financial Information 3-9 Appendices I-VI

3 O GrantThornton Independent Auditor's Report Grant Thornton Sh.p.k. Rr: Sami Frasheri, Kompleksi T.J.D, Shk. B, Floor 1, Tirana, Albania T F To: Ministry of Finance and Economy of Republic of Albania and the Management of the Project "Citizen- Centric Service Delivery Project" Opinion We have audited the accompanying special purpose financial information comprising the statement of sources 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 the Agency for the Delivery of Integrated Services Albania ("ADISA") and financed by the Loan Agreement No AL ("IBRD AL") and the Project Preparation Advance No: P472 ("PPA - P472") from the International Bank for Reconstruction and Development ("IBRD" or the "World Bank) for the period from 10 April 2015 to 31 December The special purpose financial information has been prepared by the management of the Project in accordance with policies described in notes 2 and 3 of the special purpose financial information. In our opinion, the special purpose financial information of the Project "Citizen-Centric Service Delivery Project" is prepared, in all material respects, in accordance with the cash receipts and disbursement basis of accounting as set out in notes 2 and 3 to the special purpose financial information.

4 Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the audit of the special purpose financial information section of our report. We are independent of the entity in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the special purpose financial information in Albania, and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have 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 the basis of accounting. The special purpose financial information is prepared to provide information to Project's donors and lenders, and to Ministry of Finance and Economy of Republic of Albania and the management of the Project. As a result, the statement may not be suitable for another purpose. Our opinion is not modified in respect of this matter. Our report is intended solely for the information and use of the Project's management, the donors and lenders, and the Ministry of Finance and Economy of 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 Purpose Financial Information Management is responsible for preparation and fair presentation of the special purpose financial information in accordance with the basis of accounting described in notes 2 and 3; this includes determining that the cash receipts and disbursements basis of accounting is an acceptable basis for the preparation of the special purpose financial information in the circumstances, and for such internal control as management determines is necessary to enable the preparation of a special purpose financial information that is free from material misstatement, whether due to fraud or error. Auditor's Responsibility for the Audit of the Special Purpose Financial Information Our objectives are to obtain reasonable assurance about whether the special purpose financial information as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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 the aggregate, they could reasonably be expected to influence the economic decisions 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 maintain professional scepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the special purpose financial information, whether due to fraud or error, design and perform audit procedures responsive to those risks, 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 resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

5 * Obtain an understanding of internal control relevant to the audit 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. * Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the special purpose financial information or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the entity to cease to continue as a going concern. * 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 special purpose financial information, including the disclosures, and whether the special purpose financial information represents the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Grant Thornton sh.p.k Tirana, Albania, 13 December 2017 III

6 Fo' the period from 10 Aprfl 2015 to 31 December 2016 (amounts expressed in FUR unless otherwse stated) Statement of Sources and Uses of Funds For the period from For the period from Cumulative from Sources of funds Note 1 January to 10 April to 10 April 2015 to 31 December December December 2016 IBRD ,245,403-1,245,403 Project Preparation Advance No. P , ,992 Return of Project Preparation Advance 4 (792,463) - (792,463) Income from Interests Total , ,101 1,367,351 Uses of funds Goods 5 (226,488) - (226,488) Consultancy services 6 (689,416) (4,881) (694,297) Non consulting services 7 (7,001) - (7,001) Training 8 (13,213) - (13,213) Incremental operating costs 9 19,006) (1,724) (20,730 Total (6,605) 61,729) (Deficit)ISurplus of receipts over disbursements (501,874) 907, ,622 Exchange rate differences (25,669) 2,281 (23,388) Cash begin period ,777 - Cash end of period , , ,234 The Statement of Sources and Uses of Funds is to be read in conjunction with the notes set out on pages 3 to 9 and forning an integral part of the special purpose financial information. The special purpose financial information of Citizen-Centric Service Delivery Project were authorized for issue by the management of the Agency for the Delivery of Integrated Services Albania on 6 November 20 7 and signed on its behalf by: E Ss. Mr. Gezim Kallajxhi Director offinance andadminitration ofrevenue At eig'7 enies Albania Ageng for the Deivey of Integrated Senices Albania 1

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8 (atocunts expressed in EUR unless othewise stated) Notes to the Special Purpose Financial Information 1. General Information The Government of Albania (GoA) began a program of public service delivery, entitled "Innovation against Corruption," in June The GoA intends to fundamentally change how public services are provided through a variety of interventions, including the creation of a one-stop-shop for administrative services, regulatory reform, re-engineering how services are approved, increasing the number of services provided online, and implementing performance management measures. The GoA's objectives in implementing these reforms are to reduce the scope for corruption, foster a citizen-focused 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 improve the efficiency of delivery and access to selected administrative services in Albania. 1.1 Project Background The objective of the Project is to improve the efficiency of delivery and access to selected administrative services in Albania. 1.2 Project components Part 1: Enhancing the Backend Systems a) Supporting the implementation of the Borrower's program for simplification and improvement of its business processes (Business Process Re-engineering) to reduce time to citizens in obtaining the requisite approvals, through provision of financing of salaries and Social Security Contributions incurred by the Borrower out of its budgetary allocation for said program (Part 1(a) Eligible Expenditure Programs ("EEP). b) Strengthening the capacity of Agency for Delivery of Integrated Public Services ("ADISA") and the Participating Agencies to provide improved Administrative Services through provision of technical assistance and Training. c) Strengthening the Participating Agencies' Information Communication Technology ("ICT") capacity through inter alia converting information into digital format, optimizing databases to promote more effective use of data, and developing software through provision of technical assistance and goods. 3

9 (itotunts are expressed in FUR unless otherwise state) Part 2: Enhancing Citizen Interface with Service Delivery a. Supporting implementation of the Borrower's program to improve the quality of its public service culture including through inter alia (i) disseminating information on government services to the public; (ii) providing transactional web presence through electronic authentication, E-filing and E-payments; and (iii) monitoring of citizen feedback and improvements in performance, through provision of financing of salaries and Social Security Contributions incurred by the Borrower out of its budgetary allocation for said program (Part 2(a) EEP). 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 the Project; (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 Institutional Prerequisites for the Citizen Centric Service Delivery Reform Program, namely: (i) approval of the Citizen Centric Service Delivery Reform Program document; and (ii) conducting of the survey for the baseline information on the objectives of the Project, through provision of financing of salaries and Social Security Contributions incurred by the Borrower out of its budgetary allocation for said program (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 and Disbursement-Linked Indicators "DLIs" 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) iii) Preparing a concept of the CSC model and its design, and supporting CSC establishment, Establishing a citizen feedback mechanism to promote effective use of the CSC model. b) Project Management Unit Strengthening the capacity of ADISA to implement the Project, including, inter alia, through the recruitment of a Project manager, financial management specialist, administrative specialist and procurement specialist. 4

10 (amounts aore expressed in EUR unless otheiwise stated) 1. General Information (continued) The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Loan ("Category"), the allocation of the amounts of the Loan to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category Category Amount of the Loan Percentage of Expenditures to Allocated be financed (expressed in EURO) (inclusive of Taxes) (1) Eligible Expenditures Program under Parts I (a), 2 (a) and 3(a) of the Project 22,895, % up to the DLI amount (2) Goods, works, non-consulting services, and consultants' services, Training and Operating Costs under Parts 1(b), 1(c), 2(b), 2(c) and 3(b) and [(4)] of the Project 4,431, % Amount payable pursuant to (3) Refund of the Preparation Section 2.07 (a) of the General Advance 1,900,000 Conditions Amount payable pursuant to Section 2.03 of this Agreement in accordance with Section 2.07 (b) (4) Front-end Fee 73,250 of the General Conditions (5) Interest Rate Cap or Interest Amount due pursuant to Section Rate Collar premium [ 2.08(c)] of this Agreement] TOTAL AMOUNT 29,300, Basis of preparation The special purpose financial information has been prepared in accordance with the accounting policies in note 3, under the Cash Basis of Accounting. The special purpose financial information is presented in EUR. Euro is also functional currency of the Project 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, the Statement of Withdrawal Applications (and related expenditure) used as the basis for the submission of withdrawal applications and a summary of significant accounting policies and other explanatory notes. 3. Summary of significant accounting policies A summary of significant accounting policies underlying the preparation of the Project's financial statements is presented below. 5

11 For the period hfm 10 April 2015 to 31 December 2016 (amounts are expressd in EUR unless other,wse stajted) 3.1. Foreign currency transactions The Project has adopted the Euro as its reporting currency for consistency with the reporting needs of its main 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 are converted to the reporting currency at the rate ruling at the date of the transaction. Foreign exchange differences are recognized in the Statement of Sources and Uses of Funds. The equivalent in Euro of the amount of funds received and returned for the PPA is different in the Statement of Sources and Uses of Funds when compared to the Statement of Withdrawal Application due to the different exchange rate applied. We have used the exchange rates published by the Bank of Albania in the Statement of Sources and Uses of Funds which are presented below. Date of funds Exchange Rate Exchange Rate Exchange Rate Received/Returned EURIALL USD/ALL EUR/USD 31-Aug Jun The Statement of Withdrawal application is prepared in accordance with the exchange rates used by the World Bank in the respective Payment Advices and World Bank Monthly Disbursement Summary - December 2016 which are EUR 1 = for the PPA initial deposit and EUR 1 USD As at 31 December 2016, 1 Euro was equivalent to A1, 3.2. Cash Cash comprises cash on hand, demand deposits and cash equivalents. Demand deposits and cash equivalents comprise balances with banks and investments in short term money market instruments. Amounts appropriated 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. They are transferred to revenue at each year end Recognition of income and expenses Income is recognized when received rather than when earned, and expenses are recognized when paid rather than when incurred. Accordingly, direct payments of the Project's expenses, which are made from the proceeds of the trust fund, are recognized as sources and uses of funds at the time the payment is made. The Statement of Withdrawal Applications presents only applications submitted during the year and only expenses settled through such applications. Expenses presented in the notes to the special purpose financial information include all expenses settled during the year in spite of the supporting withdrawal application period Taxation The Project is exempt from income tax. The Project is liable for withholding tax and personnel income tax for its staff. 6

12 (amounts expressed in EUR unless othe wise stater) 4. IBRD funding Funds received from IBRD funding for the period from 10 April 2015 to 31 December 2016 were composed as follows: 1 January to 31 December April to 31 December 2015 Project Preparation Advance 913,992 Initial deposit 400,000. Replenishments 845,403 Return of Project Preparation Advance (792,463) Income from interest 310 Total 453, ,992 Project Preparation Advance represents funds disbursed by IBRD to the Special Account based on the Project Preparation Advance No. P472 out of the World Bank's Project Preparation Facility for supporting the preparation of the project. The initial deposit represents funds disbursed to the Special Account based on the planned project expenditures at the Project's inception. Replenishments represent funds disbursed by IBRD to the Special Account based on the withdrawal applications prepared by the Project. 5. Goods Goods for the period from 10 April 2015 to 31 December, 2016 were composed as follows: 1 January to 31 December April to 31 December 2015 Office Equipment 134,003. IT Equipment 57,127 Vehicle 35,358 Total 226, Consultancy services The consultancy services for the period from 10 April 2015 to 31 December, 2016 were composed as follows: 1 January to 31 December April to 31 December 2015 Component 1: Enhancing the Backend Systems 196,475 - Component 2: Enhancing Citizen Interface with Service Delivery 277,224 - Component 3: Building Capacity to Deliver 215,717 4,881 Total 689,416 4,881 8

13 (amournts are exprer:ssed in EUR unless otherwise stated) 7. Non Consulting Services Non Consulting Services amounting to EUR 7,001 (2015: EUR 0) during the period from 1 January to 31 December 2016 comprise the expenses paid to Digital Network for the Call Center Services offered in accordance with the project procurement plan. 8. Training Training for the period from 10 April 2015 to 31 December, 2016 were composed as follows: 1 January to 31 December April to 31 December 2015 Training ADISA 3,088 DU Training 10,125 Total 13, Incremental Operating costs Operating costs for the period from 10 April 2015 to 31 December, 2016 were composed as follows: 1 January to 31 December April to 31 December 2015 Bank Charge 2, Health and Social Insurance 3,078 Publications 5,523 1,469 Stationeries 5,594 Other Incremental Costs 2, Total Incremental Operating Costs 19,006 1, Cash at banks Cash at banks as at3l December 2016 was composed as follows: Cash at Banks IBRD Special Account BoA EUR 292,574 IBRD Credins Bank Account in ALL (equivalent in EUR) 53,028 1 January to 31 December April to 31 December2015 IBRD Credins Bank Account in EUR 36,732 - IBRD ABI Bank Account in USD (equivalent in EUR) 909,777 Total 382, , Subsequent events There are no other significant events that would require either adjustments or additional disclosures in the special purpose financial information. 9

14 (amounts expressed in EUR unless otheiwise stjted) APPENDICES (Loan No: 8521-AL) (Project Preparation Advance No: P472) Citizen-Centric Service Delivery Project (Part 1 b-c, 2 b-c, 3b, 4) Statements of Special and Project's Accounts (Supplementary schedules to the Special purpose financial information)

15 (amounts expressedl in EUR unloss othoiwise stated) Appendix 1 Supplementary Schedule of Special Account Statement Donor IBRD PPA P472-AL Account No: Depository Bank Address Currency E Bank of Albania Sheshi Skenderbej, No 1, Tirana USD Balance at beginning of period Funds received: Advance from IBRD - 1,000,000 Funds transferred from Project Operational Account-POA in USD 895,231 Total funds received 895,231 1,000,000 Disbursements: Funds transferred to Project Operational Account-POA in USD 895,021 1, Funds transferred to Project Operational Account-POA in EUR Total disbursements 895,231 1,000,000 Balance at end of the period II

16 (anounts are expressod in EUR unlo.s othenwise stated) Appendix 2 Supplementary Schedule of Special Account Statement Donor IBRD Loan 8521-AL Account No: Depository Bank Address Currency E Bank of Albania Sheshi Skenderbe, No 1, Tirana EUR Balance at beginning of period. Funds received: Advance from IBRD 399,900 Replenishment Total funds received 1,245,003 Disbursements: Funds transferred to Project Operational Account-POA in ALL 562,529 Funds transferred to Project Operational Account-POA in EUR 390,000 Total disbursements 952, Balance at end of the period 292,474 Ill

17 For the period fror 10 April 2015 to 31 December 2016 (amounts are expresse d in EUR unless othowiso stated) Appendix 3 Supplementary Schedule of Project Operational Account Statement-Euro Donor IBRD Loan 8521-AL Account No: Depository Bank ABI Bank Address Rr. Kavajes Nr.59, Tiran6 Currency EUR Balance at beginning of period Funds received: Funds received from Special Account 390,000 Funds received from bank Interest Disbursements: Project expenditures: Consulting services Training Incremental Costs Total 390, ,233 10, ,268 Loss from exchange rate Balance at end of the period 36,732 IV

18 (amoun?ts expresod ri EUR inless othew,ise statd) Appendix 4 Supplementary Schedule of Project Operational Account Statement-ALL Donor IBRD Loan 8521-AL Account No: Depository Bank ABI Bank Address Rr, Kavajes Nr.59, Tirane Currency ALL Balance at beginning of period Funds received: Funds received from Special Account 76,993,499 Funds received from bank Interest Total 76,993,499 Disbursements: Goods 25,996,202 Non consulting services 951,356 Consulting services 40,964,937 Incremental Costs 1,910,078 Total 69,822,574 Loss from exchange rate Balance at end of the period 7,170,924 Equivalent in EUR 53,028 V

19 (amounts expressod in EUR unhess otherwie stated) Appendix 4 Supplementary Schedule of Project Operational Account Statement-USD Donor IBRD PPA P472-AL Account No: Depository Bank Credins Bank Address Rr."Ismail Qemali", Nr. 4, Tirand Currency USD Balance at beginning of period 992,879 Funds received: Funds received from Special Account ,000,000 Funds received from bank Interest Funds Transferred from Project Operational Account - POA in ALL 73 Total Disbursements: 416 1,000,119 Goods 39,798 - Consulting services 51,344 5,332 Training 3,418. Incremental Costs 3,504 1,908 Funds Transferred to Project Special Account in USD 895,231 Total 993,295 7,240 Loss from exchange rate Balance at end of the period 992,879 Equivalent in EUR 909,777 VI