Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 LOAN AGREEMENT No 8324-ME Financial Statements for the period from 30 March 2014 to 31 December 2015 and Independent Auditor s Report Public Disclosure Authorized
Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 Loan Agreement No 8324-ME CONTENTS Page INDEPENDENT AUDITOR S REPORT 1-2 PROJECT FINANCIAL STATEMENTS Statement of Sources and Uses of Funds Statement of Uses of Funds by Project Activities Special Account Statement Notes to the Project Financial Statements Annex 1 Project Financial Statements Annex 2 Supporting Documentation Special Purpose SOEs Used as the Basis for the Submission of Withdrawal Applications
INDEPENDENT AUDITOR S REPORT To the Ministry of Economy of Montenegro We have audited the accompanying financial statements of the Additional financing for the Montenegro Energy Efficiency Project (hereinafter referred to as: MEEP AF), financed under International Bank for Reconstruction and Development (hereinafter referred to as: IBRD) Loan Agreement No 8324-ME as of 31 December 2015, and for the period from 30 March 2014 to 31 December 2015. These financial statements include Statement of Sources and Uses of Funds, Statement of Uses of Funds by Project Activities and Statement of Special Account. Management s Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements in accordance with the World Bank Guidelines and procedures and contractual basis of the MEEP AF and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on MEEP AF financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and to relevant World Bank guidelines. Those standards and World Bank guidelines require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the preparation of the financial statements 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 MEEP AF s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the MEEP AF s financial statements present fairly, in all material respects, the balance on the Special Account as of 31 December 2015 and the movements on the Special Account and the Sources and Uses of Funds of Project for the period from 30 March 2014 to 31 December 2015, in accordance with the World Bank guidelines and procedures and contractual basis of the Additional financing for the Montenegro Energy Efficiency Project.
INDEPENDENT AUDITOR S REPORT To the Ministry of Economy of Montenegro (Continued) Basis of Accounting The MEEP AF s financial statements are compiled in accordance with cash basis of accounting, as stated in Note 2.1. (b) to the financial statements. Other Matters In addition, (a) with respect to SOE, adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditures incurred; and (b) which expenditures are eligible for financing under the Loan Agreement No 8324-ME. Belgrade, 29 July 2016 Milovan Popovic Certified Auditor 2
Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 Loan Agreement No 8324-ME STATEMENT OF SOURCES AND USES OF FUNDS For the Period from 30 March 2014 to 31 December 2015 In EUR Cumulative to 31 December 2015 2014 2015 Opening Cash Balance (Designated Account - DA) 865,926.82 - - Add: Sources of Funds GoM-contribution to payments from DA - - - GoM-contribution to Direct Payments - - - IBRD Funds-payments to DA 910,190.79 522,167.55 1,432,358.34 IBRD Funds-contribution to Direct Payments 889,674.01-889,674.01 Refunds Application (369,799.73) 369,799.73 - Total 1,430,065.07 891,967.28 2,322,032.35 Less: Uses of Funds Works 1,975,725.72-1,975,725.72 Goods - - - Consultants' Services 126,773.83 26,513.41 153,287.24 Training & WS & ST - - - Operating Costs 4,494.09 1,976.95 6,471.04 Total 2,106,993.64 28,490.36 2,135,484.00 Closing Cash Balance (DA) 188,998.25 863,476.89 186,548.35 3
Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 Loan Agreement No 8324-ME STATEMENT OF USES OF FUNDS BY PROJECT ACTIVITIES For the Period from 30 March 2014 to 31 December 2015 2015 2014 In EUR Cumulative to 31 December 2015 Project Activities 1. Ministry of Health (Works & Goods) 1,975,725.72-1,975,725.72 2. Project Management 95,892.00 26,513.41 122,405.41 3. Technical Assistance 35,375.92 1,976.95 37,352.87 Total Project Expenditure 2,106,993.64 28,490.36 2,135,484.00 Biljana Maslac Project coordinator Zoran Mijovic Technical Service Unit Director 4
Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 Loan Agreement No 8324-ME SPECIAL ACCOUNT STATEMENT For the Period from 30 March 2014 to 31 December 2015 In EUR 2015 2014 Total Opening balance at the beginning of the year 865,926.82 - - Plus: Advances during the year 910,190.79 522,167.55 2,322,032.35 Interest earned and retained on account - - Refunds Application (369,799.73) 369,799.73 - Less: Refund to IBRD from DA during the year - - - Amount of eligible expenditures paid during the year 1,217,319.63 28,490.36 2,135,484.00 Closing balance as at the end of the year 188,998.25 863,476.92 186,548.35 Balance as of 31 December as per Special Account Bank Statement 188,998.25 865,926.82 188,998.25 Discrepancies (list and explain below) 0.00 2,449.90 2,449.90 * Amount of 2,449.90 comprises of 1,730.10 withdrawn as per pro-forma invoice to be repaid to Designated A/C and 4,180.00 for the audit in reference to IBRD 76370 the accounts will be balanced off in a due course. 5
Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 Loan Agreement No 8324-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 30 March 2014 to 31 December 2015 1. GENERAL INFORMATION Montenegro on its way to European integrations follows international trend in the energy sector, recognizing energy as a product of a particular interest for the national as well as for the global economy. Montenegro as an Ecological state strives to develop its energy sector while at the same time respecting principle of sustainable development and ensuring maximum protection of environment. The GOM, during 2008, accessed the process of negotiating financial assistance with the World Bank, International Bank for Reconstruction and Development (hereinafter referred as to: IBRD) for the purposes of supporting energy efficiency project. The GOM and the IBRD agreed on financing the Montenegro Energy Efficiency Project MEEP on 10 November 2008. The overall MEEP costs have been budgeted in amount of EUR 6,500 thousand from IBRD Loan financing. The MEEP implementation period starts on 1 April 2009 and ending on 31 December 2012. The MEEP is extended on 22 March 2012 till 30 June 2013, on 26 April 2013 is extended till 30 March 2014 and on 28 February 2014 is extended till 20 December 2014. The GOM and the IBRD agreed on financing the Additional Financing for the Montenegro Energy Efficiency Project - MEEP AF in the amount of EUR 5,000 thousand. The MEEP AF implementation period starts on April 2014 and ending on 30 March 2017. MEEP AF is a continuation of the project MEEP. The MEEP AF will be realized by the GOM while implementation will be divided between Ministry of Economy and Ministry of Health. 6
Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 Loan Agreement No 8324-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 30 March 2014 to 31 December 2015 1. GENERAL INFORMATION (Continued) The development objective of Additional Financing for the Montenegro Energy Efficiency Project (MEEP AF) is to improve energy efficiency performance in targeted public sector buildings with a view to developing a sustainable energy efficiency improvement program in Montenegro s public sector. In the following table, the acceptable categories of expenses that can be financed from the Loan are presented, as well as the allocated amount of the funds from the Loan for each Category and the percentage of costs that have to be financed for eligible expenses by each category: Category Amount of the Loan Allocated (expressed in EUR) Percentage of Expenditures to be financed (inclusive on Taxes) 1. Goods, works, non consulting services, consultants services and Training for the Project EUR 4,777,500.00 100% 2. Operating Costs EUR 210,000.00 100% 3. Front-end Fee EUR 12,500.00 Amount payable pursuant to Section 2.03 of the Agreement in accordance with Section 2.07 (b) of the General Conditions 4. Interest Rate Cap and Interest Rate Collar premium - Amount payable pursuant to Section 2.07(c) of the Agreement Total amount EUR 5,000,000.00 7
Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 Loan Agreement No 8324-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 30 March 2014 to 31 December 2015 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies have been adopted in the preparation of the financial statements. These have consistently been applied with those of the prior year. 2.1. Basis of preparation (a) (b) (c) (d) General The MEEP AF Financial Statements have been prepared for the purpose of reporting to the IBRD on the activities of the MEEP AF related to funds received for the completion of the MEEP AF objectives in accordance with the IBRD Loan Agreement. Cash-basis for accounting Accounting records are maintained in accordance with cash basis of accounting, in accordance with the World Bank guidelines. Cash basis means a basis of accounting that recognizes transactions and other events only when cash is received or paid. Reference currency The Technical Service Unit under the Ministry of Finance has adopted the EURO ( EUR ) as its reference and measurement currency for consistency with the reporting requirements, as it reflects the economic substance of the underlying events and transactions. The MEEP AF reporting currency is EUR. Going concern The accompanying financial statements have been prepared for the period starting from 30 March 2014 to the 31 December 2015. The MEEP AF implementation period starts in April 2014 and ending on 30 March 2017. 8
Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 Loan Agreement No 8324-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 30 March 2014 to 31 December 2015 3. SPECIAL ACCOUNT The Technical Service Unit (hereinafter referred as to: TSU) administers the Special Account. The TSU prepares withdrawal applications for replenishment of the Special Account which ought to be signed by designated signatories. Payments from the Special Account are executed by the means of payment orders. After all the procedures with respect to flow of documents, verifications and authorizations prescribed by internal controls are applied, payment orders signed by designated signatories are submitted for payments from either the Special Account or the Budget (for Government contribution) split in accordance with eligible percentages of financing. In the case of Direct Payment the application form for such method payment is submitted to the Bank with the same authorized signatories as described above. Miodrag Radonjic, Director General of Directorate General for State Treasury, had privileges to the Special Account of the MEEP AF. Disbursement of funds from the Special Account is done in respect of the written approval from the Senior Financial Officer and Project Coordinator. Details concerning the Special Account of the MEEP AF are as follows: Account No. 2345011-61-02010658 Depository Bank Crnogorska komercijalna banka a.d. Podgorica Address Moskovska bb, Podgorica Currency EUR Bank Accounts with Crnogorska komercijalna banka a.d. Podgorica are non interest bearing to the deposit made to the Special Account by the IBRD. Note: The GOM and the IBRD agreed on financing the Montenegro Energy Efficiency Project Additional Financing - MEEP AF. Because the MEEP AF is a continuation of the project MEEP, IBRD has allowed the use of the same Special Account for MEEP AF. 9
Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 Loan Agreement No 8324-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 30 March 2014 to 31 December 2015 4. SUMMARY OF EXPENDITURES Number of withdrawal application IBRD s initial payment to the MEEP AF designated account amounted to EUR 500,000 and it was paid as of 9 May 2014. With every further withdrawal application for replenishment of the Special Account, TSU submits to the IBRD Summary of expenditures made by the date of application. The review of submitted summary is presented in the table below, and detailed summaries are shown in the Annex 2 of the report: Date of withdrawal application Application amount Goods, Works and Consultants' Services Operating Costs Total Approved amount WA 36 04.08.2014. 9,693.35 8,930.82 762.53 9,693.35 9,693.35 WA 37 06.11.2014. 12,474.20 11,721.72 752.48 12,474.20 12,474.20 Total 2014 22,167.55 20,652.54 1,515.01 22,167.55 22,167.55 WA 38 25.03.2015. 12,589.46 11,721.72 867.74 12,589.46 12,589.46 WA 39 29.05.2015. 384,747.40 383,251.97 1,495.43 384,747.40 384,747.40 WA 43 29.07.2015. 323,826.87 323,244.42 582.45 323,826.87 323,826.87 WA 44 06.10.2015. 189,027.06 187,996.64 1,030.42 189,027.06 189,027.06 Total 2015 910,190.79 906,214.75 3,976.04 910,190.79 910,190.79 Total 2014 and 2015 932,358.34 926,867.29 5,491.05 932,358.34 932,358.34 10
Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 Loan Agreement No 8324-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 30 March 2014 to 31 December 2015 4. SUMMARY OF EXPENDITURES (Continued) IBRD made direct payments in 2015 of expenditures amounting to EUR 889,674.01. The major expenditures in 2014 and 2015 relate to the following: CONTRACTOR / SUPPLIER DESCRIPTION Invoice/Contract Ref # Total invoiced amount /EUR/ Paid from SA WB Credit /EUR/ Works VH - Montenegro d.o.o. Ening d.o.o. Ening d.o.o. Civil Construction WoRks for General Hospital Danilo I Cetinje, Health Centre Cetinje, General Hospital Kotor (main building and children building) and Helath Center Kotor Thermo-technical Installations with Electrical Installations for General Hospital Danilo I-Cetinje, Health Center Cetinje, General Hospital Kotor (main buliding and children building) and Health Centre Kotor and Institute for Children Disease in Clinic Centre Montenegro Thermo-technical Installations with Electrical Installations at the Clinic Center MNE-EE-AF-8324-7637-ME- ICB-W-14-A.2/B7 767,423.77 767,423.77 MNE-EE-AF-8324-7637-ME- ICB-W-14-A.2/B7 704,601.35 704,601.35 MNE-AF-EE-8324-ME-ICB-W- 14-A.1. 503,700.60 503,700.60 Consultants' Services Nik Com Engineering d.o.o. Work Supervision for Objects from I and II Sets and Clinical Centre Montenegro MNE-EE-AF-8324-ME-QCBS- CS-14-B.1.2. 45,538.92 45,538.92 Nik Com Engineering d.o.o. Detailed Energy Audit, Technical Design, Technical Monitoring and Evaluation Consultant for Objects for Objects from I and II Sets and Clinic Center of Montenegro MNE-EE-AF-8324-ME-QCBS- CS-14-B.1.1. 15,029.70 15,029.70 Biljana Maslac Project coordinator Paid salaries, taxes and contributions 61,836.79 61,836.79 Other 37,352.87 37,352.87 Total 2,135,484.00 2,135,484.00 11
Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 Loan Agreement No 8324-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 30 March 2014 to 31 December 2015 5. UNDISTRIBUTED FUNDS Undistributed funds for the MEEP AF as of 31 December 2015 are shown as follows: Date of payment Amount Total amount of the loan 5,000,000.00 Disbursed 2014 Payments to Designated account: WA-01 9 May 2014 500,000.00 WA-36 11 September 2014 9,693.35 WA-37 14 November 2014 12,474.20 2015 Payments to Designated account: WA-38 25 March 2015 12,589.46 WA-39 29 May 2015 384,747.40 WA-43 29 July 2015 323,826.87 WA-44 06 October 2015 189,027.06 2015 Direct payments: WA-40 29 June 2015 211,334.15 WA-41 27 July 2015 369,926.75 WA-42 26 August 2015 308,413.11 Front-end Fee 12,500.00 Undisbursed 2,665,467.65 The undisbursed amount of the loan is reconciled with confirmation received by IBRD. 12
Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 Loan Agreement No 8324-ME NOTES TO THE PROJECT FINANCIAL STATEMENTS For the Period from 30 March 2014 to 31 December 2015 6. INTERNAL ORGANIZATION AND INTERNAL CONTROL SYSTEM 6.1. MEEP AF Management The GOM, throughout the duration of the MEEP AF, maintains the MEEP AF Steering Committee which is headed by the Ministry of Economy, who is responsible for the overall MEEP AF oversight and coordination and for preparing MEEP AF Reports. Ministry of Health is responsible for preparing, designing and implementing energy efficiency measures in health objects, and for coordinating with the MEEP AF Steering Committee. The Ministry of Economy appointed as Project Coordinator Biljana Maslac with respect to qualifications and terms of reference acceptable to the Bank. The Project Coordinator is responsible for supporting the MEEP AF Steering Committee, the Ministry of Economy and the Ministry of Health in the implementation, coordination, monitoring and evaluation of the MEEP AF, and for coordinating with the MEEP AF Steering Committee and the Technical Service Unit (TSU) under the Ministry of Finance of Montenegro. 6.2. Ministry of Finance of Montenegro - Technical Services Unit (TSU) The TSU has been established within the Ministry of Finance to support implementation of all World Bank financed projects. The TSU is responsible for the following functions: (i) procurement; (ii) financial management; and (iii) disbursement and auditing arrangements. The TSU will provide these services to the implementing entities of the projects financed by World Bank. The roles and responsibilities of the TSU and the MEEP AF implementing entities are regulated in accordance with a Memorandum of Understanding. The TSU staff comprising of the Senior Procurement Specialist/Director, Procurement Specialist, Senior Financial Specialist and Financial Specialist. 6.3. Explanation on Internal Control System Adequate system of internal controls has been instituted within the TSU for projects under implementation and is also applied to this MEEP AF. Defined controls and procedures are applied in practice which has been verified by the Bank s financial management supervision and annual audits by private audit firms for prior audit engagements. In general, key internal controls applied for the MEEP AF include: Existence of appropriate authorizations and approvals; Good segregation of duties; Different persons being responsible for different phases of transaction; Reconciliations between records and actual balances, as well as with third parties are performed on regular basis; Complete original documentation exists to support all MEEP AF transactions. 13
Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 Loan Agreement No 8324-ME Annex 1: Project Financial Statements
Montenegro Montenegro Energy Eficiency Project Loan No.: IBRD 8324 ME Project Sources & Uses of Funds For the Quarter (Q4) Period ending 31.12.2015. [in Euro] Actual Planned Variance Current Year-To Cumulative Current Year-To Cumulative Current Year-To Cumulative Quarter Date To-Date Quarter Date To-Date Quarter Date To-Date Opening Cash Balance (DA) 313,422.84 865,926.82 - - - - 859,660.17 865,926.82 - Add: Sources of Funds GoM-contribution to payments from DA - - - - - - - - - GoM-contribution to Direct Payments - - - - - - IBRD Funds-payments to DA 189,027.06 540,391.06 1,432,358.34 (357,210.27) (357,210.27) 5,923,533.24 IBRD Funds-contribution to Direct Payments - 889,674.01 889,674.01 - - - - - 725,142.05 Total 502,449.90 2,295,991.89 2,322,032.35 - - - 502,449.90 508,716.55 6,648,675.29 Less: Uses of Funds IBRD 8324 ME Works 288,597.92 1,975,725.72 1,975,725.72 - - - 366,781.54 366,781.54 366,781.54 Goods - - - - - - - - - Consultants' Services 23,873.73 126,773.83 153,287.24 - - - 16,470.43 22,331.29 48,844.70 Training & WS & ST - - - - - - - - - Operating Costs 980.00 4,494.09 6,471.04 - - - 1,802.99 2,208.78 4,153.71 Total 313,451.65 2,106,993.64 2,135,484.00 - - - 385,054.96 391,321.61 419,779.95 Closing Cash Balance (DA*) 188,998.25 188,998.25 186,548.35 - - - 502,449.90 508,716.55 538,904.99 Note: * Amount of 2,449.90 comprises of 1,730.10 withdrawn as per pro-forma invoice to be repaid to Designated A/C and 4,180.00 for the audit in reference to IBRD 76370 the accounts will be balanced off in a due course. Prepared By: Vesna Jestrovic TSU Senior Finance Officer Technical Services Unit - Ministry of Finance Tel:+382 20 201 696 Fax:+382 20 201 698 Mob:.+ 382 67 317 317 E-mail 1: vesna_tsu@yahoo.com E-mail 2: vesna.jestrovic.tsu@t-com.me Page 1
Montenegro Montenegro Energy Eficiency Project Loan No.: IBRD 8324 ME Uses of Funds By Project Activities For the Quarter (Q4) Period ending 31.12.2015. [in Euro] Actual Planned Variance PAD Project Activities Current Year-To Cumulative Current Year-To Cumulative Current Year-To Cumulative Life of Quarter Date To-Date Quarter Date To-Date Quarter Date To-Date Project (a) 1.1. Ministry of Health (Works & Goods) 288,597.92 1,975,725.72 1,975,725.72 - - - 366,781.54 366,781.54 366,781.54 2.1. Project Management 23,873.73 95,892.00 122,405.41 - - - 8,826.45 14,687.31 41,200.72 3.1. Technical Assistance 980.00 35,375.92 37,352.87 - - - 9,446.97 9,852.76 11,777.69 Total Project Expenditure 313,451.65 2,106,993.64 2,135,484.00 - - - 385,054.96 391,321.61 6,529,550.25 Page 1
Montenegro Montenegro Energy Eficiency Project Loan No.: IBRD 8324 ME Bank Reconciliation as of DECEMBER 31, 2015 [in EUR] Opening balance at the beginning of the quarter 313,422.84 Plus: Advances during the quarter 189,027.06 Interest earned and retained on account - Less: Refund to IBRD from DA during the quarter - 502,449.90 Amount of eligible expenditures paid during the quarter 313,451.65 313,451.65 Closing balance as at the end of the quarter 188,998.25 Balance as of 31.12.2015. as per Special Account Bank Statement 188,998.25 Discrepancies (list and explain below) 0.00 * Page 1
Additional financing for the Montenegro Energy Efficiency Project - MEEP AF Project ID: P107992 Loan Agreement No 8324-ME Annex 2: Supporting Documentation Special Purpose SOEs Used as the Basis for the Submission of Withdrawal Applications