Public Disclosure Authorized Report on the Republika Srpska part of the Public Disclosure Authorized PROJECT FINANCIAL STATEMENTS of the TECHNICAL ASSISTANCE FOR IMPROVING INVESTMENT CLIMATE AND Public Disclosure Authorized financed by: - Swedish Grant TF 011205 FOR THE YEAR ENDED DECEMBER 31, 2015 Public Disclosure Authorized
CONTENTS 1 Introduction 1 2 Independent Auditor's Report 3 3 Project financial statements for the year 2015 5 4 Notes to the project financial statements 7 APPENDICES A Designated account statement - Swedish Grant TF 011205 8 B SoE Withdrawal Schedule of Swedish Grant TF 011205 for the year ended December 31, 2015 9 C Reconciliation between World Bank's disbursement statements in USD and Swedish Grant TF 011205 account in USD according to the balance sheet as of December 31, 2015; SoE Withdrawal Schedule of Swedish Grant TF 011205 10
1. Introduction 1.1 Objectives of the Project The main objective of the Technical Assistance for Improving Investment Climate and Institutional Strengthening Project (the "Project") is to improve the investment climate of and reduce the costs of risk of conducting business in Bosnia and Herzegovina through improving its inspection system. 1.2 Components and activities of the Project The components and the activities for which the grant has been approved are as follows: Component 1: Establishment of the Interoperability Information System (IIS) to enable electronic data exchange between relevant institutions, respecting principles of data ownership in accordance with authority levels in BIH, including: (i) (ii) (ili) (iv) Establishing an information system that is accessible to all relevant institutions; Designing and implementing an information system in alignment with EU interoperability framework standards; Enabling the exchange of a variety of data, including data about inspection surveillance, data about business registration and other data between relevant institutions in alignment with positive regulations and agreements about data exchange; Engaging an international resident advisor for overall design and implementation of the IIS system. Component 2: Inspection Reform by upgrading quality infrastructure and working with inspection bodies on the following and related activities (i) (ii) (iii) (iv) (v) (vi) Establishing a risk-management system for inspection to ensure information-sharing and EU approach to risk-based inspection; Creating inspection checklists aligned with EU practices; Building institutional capacity at the Entity level with inspection, including technical training of inspection on new EU standards, study tours to EU to learn about best practices; Assisting in creating modern internal controls, market surveillance and food and safety inspections on the entity level, including any relevant inspection laws; Assisting in management and organizational changes of Entity inspectorate and improving legal infrastructure related to inspection laws; Assisting in establishment of cantonal inspectorate in the Central Bosnia Canton, Component 3: Redesigning and Streamlining procedures for business and exit (i) (ii) (iii) (iv) Eliminating unnecessary pre- registration requirements and documentation; Upgrading technical capacity of registration courts to comply with existing laws; Harmonizing laws at the Entity level to the extent possible; Streamlining of post-registration requirements. 1
1. Introduction (continued) 1.2 Components and activities of the Project (continued) Component 4: Project Implementation (i) (ii) Project management support; Capacity building in procurement, project implementation and financial management within Inspectorates. 1.3 Financing of the Project 1.3.1 Swedish Grant No. TF 011205 The State of Bosnia and Herzegovina ("the State') is the recipient of trust funds made available by by the Swedish Intemational Development Cooperation Agency ("SIDA") TF 011205 BOS in amount USD 3,750,000 The International Bank for Reconstruction and Development/International Development Association ("World Bank") is acting as Administrator of grant funds. Under the terms of a Subsidiary Finance Agreement between the State and Republika Srpska ("RS), funds of USD 1,500,000 have been lent to RS. Item Amount of the % of expenditure to Grant allocated be financed (in USD) (2) Goods, consultants services, training, audit cost, and incremental operating expenses under Part II of the Project 1,500,000 100% Subtotal 1,500,000 Swedish Grant TF 011205 became effective on July 11, 2013. Planned closing date is December 31, 2017. 2
Deloitte Deloitte d.d.o. Jadranska bb 71000 Sarajevo Bosnia and Herzegovina Tel: +387 (0)33 277 560 Fax: +387 (0)33 277 561 www.deloitte.com/ba 2. Independent Auditor's Report To the State of Bosnia and Herzegovina, Ministry of Finance and Treasury Attn. of Minister of Finance and Treasury H E. Mr. Vjekoslav Bevanda Report on the project financial statements We have audited the accompanying project financial statements of the Republika Srpska part of the Technical Assistance for Improving Investment Climate and Institutional Strengthening Project (the "Project"), which comprise of Summary of sources and uses of funds, Balance Sheet, Designated account statement, Statement of Credit withdrawals as of and for the year ended December 31, 2015 and a summary of significant accounting policies and other explanatory notes for the year then ended, financed under Swedish Grant TF 011205. These project financial statements have been prepared on the cash basis of accounting based on International Public Sector Accounting Standard ("IPSAS"), as described in Note 4.1. Responsibility for the project financial statements The State of Bosnia and Herzegovina, i.e. the management of the project implementation unit (the "Management") is responsible for the preparation and fair presentation of these project financial statements on the cash basis of accounting based on IPSAS, as described in Note 4.1, and on "Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities" issued by Financial Management Sector Board ("FMSB"), and for such internal control as Management determines is necessary to enable the preparation of the project 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 the project financial statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing and "Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities" issued by FMSB. Those Standards and Guidelines require that we plan and perform the audit to obtain reasonable assurance about whether the project financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the special purpose project financial statements. An audit also includes assessing of the accounting principles used and significant estimates made by management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of memberfirms, each of which is a legally separate and independent entity. Please see http./www deloitte,com/ba for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Member of Deloitte Touche Tohmatsu Limited
Report on the project financial statements (continued) Opinion In our opinion, the accompanying project financial statements present fairly, in all material aspects, the financial position of the Project as of December 31, 2015, and of the funds received and disbursed during the year then ended, in accordance with basis of accounting described in Note 4.1. Report on other requirements In addition, with respect to the Statements of Expenditure, adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditures incurred; and all expenditures included in withdrawal applications and reimbursed against are eligible for financing under the Project. Deloitte d.o.o. Sead ahtan id, director and licensed auditor Mirza Bihorac, licensed auditor Sarajevo, Bosnia and Herzegovina May 6, 2016 4
Project financial statements for the year ended December 31, 2015 (all amounts in USD, unless otherwise stated) 3. Project financial statements for the year 2015 3.1 Summary of sources and uses of funds under Swedish Grant TF 011205 Actual Cumulative Cumulative Cumulative Cumulative Ref. 2015 2015 2014 budget variance FINANCING Swedish Grant 011205 1,500,000 Initial deposit - 350,000 350,000 SoE replenishments 237,347 379,665 142,318 TOTAL FINANCING 3.2 237,347 729,665 492,318 1,500,000 770,335 PROJECT EXPENDITURE By Category Goods, consultants services, training, audit cost, and incremental operating expenses under Part II of the Project 330,414 509689 179,275 1,500,000 990,311 TOTAL EXPENDITURE 3.2 3301414 509,689 179,275 1,500,000 990,311 PROJECT EXPENDITURE By Component Establishment of the Interoperability Information System (IIS) 122,511 122,717 206 769,800 647,083 Inspection reform by upgrading quality infrastructure with inspection bodies 182,248 294,769 112,521 609,120 314,351 Redesigning and streamlining procedure for business entry and exit - 20,859 20,859 22,000 1,141 Project Implementation 25,655 71,344 45,689 99,080 27,736 TOTAL EXPENDITURE 3.2 330,414 509,689 179,275 1,500,000 990,311 5
Project financial statements for the year ended December 31, 2015 (all amounts in USD, unless otherwise stated) 3. Project financial statements for the year 2015 (continued) 3.2 Balance sheet as of December 31, 2015 showing accumulated funds of the Project and bank balances concerning World Bank Funding ASSETS December 31, December 31, Ref. 2015 2014 Project expenditure under Swedish Grant TF 011205 3.1. 509,689 179,275 509,689 179,275 Designated account - Swedish Grant TF 011205 A 219,976 313,043 219,976 313,043 Total assets 729,665 492,318 LIABILITIES Swedi rant TF 011205 C 729,665 492,318 otal liabilities 729,685 492,318 d~ ed and authorised y: e Pre ag Tomid Dejan Cudid P1 Director Project Coordinator Banja Luka, ay 6, 2016 6
Project financial statements for the year ended December 31, 2015 (all amounts in USD, unless otherwise stated) 4. Notes to the project financial statements 4.1 Basis of preparation and accounting records These project financial statements have been prepared in accordance with the International Public Sector Accounting Standard: "Financial Reporting under the Cash Basis of Accounting" issued by the Public Sector Committee of the International Federation of Accountants, and incorporate the accounting policies below, which have been consistently followed in all material respects and comply with the "Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities", issued by the Financial Management Sector BoardAccounting policies The Project's fiscal year is January 1 to December 31 for the recording of all transactions. Cash basis of accounting All receipts and expenses under Swedish Grant are recorded on actual receipt and payment basis of accounting as per approved categories. Project expenditure is stated at original cost on the Balance sheet Direct payments Direct payments concern the amounts paid directly from the Grant account of the World Bank. Statement of Expenditure (SoE) Statements of Expenditure are used to state the expenditure under Swedish Grant during a certain period. These statements are sent to the World Banks' disbursement department who authorises the payment of the expenditure through the Designated account. Currency conversions The reporting currency is USD. Sources and use of funds (payments to suppliers and contractors) in currencies other than USD have been converted to USD using the currency rate at the moment of the transaction. Bank balances, recorded on the balance sheet at year-end, have been converted at year-end rate. Designated account This is the total amount of the withdrawals from the Grant account for the Project. Swedish Grant account is in USD. Interest on Designated account Interest earned on the Designated account belongs to the Borrower. 7
Project financial statements for the year ended December 31, 2015 (all amounts in USD, unless otherwise stated) APPENDIX A Account owned by: DESIGNATED ACCOUNT STATEMENT Ministry of Finance and Treasury of Bosnia and Herzegovina Account No.: 5672410000397466 Depository Bank: Address: Sberbank a.d. Banja Luka Jevrejska ulica br. 71, Banja Luka Related Credit: Swedish Grant TF 011205 Currency: USD Ref. USD Opening balance January 1, 2015 3.2 313,043 Add: World Bank replenishments B 237,347 237,347 Deduct: Payments to suppliers - Expenditure under Swedish Grant 330,414 330,414 Ending balance December 31, 2015 3.2 219,976 8
Project financial statements for the year ended December 31, 2015 (all amounts in USD, unless otherwise stated) APPENDIX B SoE Withdrawal Schedule of Swedish Grant TF 011205 for the year ended December 31, 2015 Goods, consultants services, training, audit cost, and incremental operating expenses Initial under Part II of the Total Total deposit Project application replenished Previous years 350,000 179,275 179,275 492,318 Application 3* 106,152 106,152 93,109 Application 4 144,238 144,238 144,238 Application 5** - 80,024 80,024 - Total SoE applications 330,414 330,414 237,347 Total 2015-330,414 330,414 237,347 Cumulative 2015 350,000 509,689 509,689 729,665 * Application No- 3 was replenished in 2015, but expenses were made in 2014 (USD 36,957) and in 2015 (USD106, 152), Application No 5 was replenished in 2016, but expenses were made in 2015. 9
Project financial statements for the year ended December 31, 2015 (all amounts in USD, unless otherwise stated) APPENDIX C Reconciliation between World Bank's disbursement statements in USD and Swedish Grant TF 011205 account in USD according to the balance sheet as of December 31, 2015; SoE Withdrawal Schedule of Swedish Grant TF 011205 Changes in Swedish Grant (in USD) Original amount 1,500 000 Disbursed in previous years 492,318 Withdrawal 3 93,109 Withdrawal 4 144,238 Total disbursed in 2015 237,347 Cumulative disbursements 729,665 Calculated undisbursed balance as of December 31, 2015 770,335 Undisbursed balance as per World Bank Summary for December 2015 770,335 10