Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Financial Sector Modernization Project SECO Grant No TF011975/Component 2 Special Purpose Project Financial Statements for the period of the project inception date (17 September 2012) to the last payment date (15 November 2016) and Auditors Report
Contents Independent Auditors Report... 3 Statement of Financial Position... 5 Statement of Summary of Sources and Uses of Funds... 6 Statement of Uses of Funds by the Project Components... 7 Statement of Designated Account... 8 Statement of Withdrawals from Designated Account and Direct payments by IBRD... 9 Notes to the Special Purpose Project Financial Statements... 10
Financial Sector Modernization Project SECO Grant No TF011975/Component 2 Notes to the special purpose project financial statements 1. Description of the Project On 17 September 2012 the Government of the Republic of Azerbaijan (the Recipient ) entered into a Grant Agreement No TF011975 (the Grant ) with the International Bank for Reconstruction and Development (the IBRD or the World Bank ), acting as administrator of grant funds provided by State Secretariat for Economic Affairs of the Government of the Swiss Confederation (the SECO ) for financing costs of the Financial Sector Modernization Project (the Main Project ). According to the Agreement the Main Project is divided into two components which should be implemented by the Recipient: Component 1: Capital Market Modernization Project with allocated grant funds of USD 1,600,000 Component 2 ( the Project ): Azerpost Training of employees and rebranding of Azerpost with allocated grant funds of USD 550,000. These special purpose project financial statements is prepared for the Component 2 of the Main Project only. The primary objectives of the Project is to strengthen capacity of the Azerpost to provide financial and other business services in order to improve access to payment services and access to other key financial services and business infrastructure in rural areas, including interconnectivity of its regional and local offices. The Project consists of following parts: (a) Training of Azerpost employees (b) Conducting a rebranding campaign of Azerpost (c) Audit and Corrective Action Plan: Carrying out the 2011 and 2012 audit of AzerPost and Preparation of 2011 and 2012 corrective action plan based on the findings of the 2011 and 2012 audit report. The Recipient through the Ministry of Communications and Information Technology ( MOCIT ) entered into the agreement (the On-lending Agreement ) with Central Bank of Azerbaijan (the CBAR ) for establishment of a Project Coordination Unit ( PCU ) within the CBAR. The PCU is implementing agency and is not a legal entity. The main objectives of PCU is to assist Azerpost in carrying out the Project, including responsibility for the procurement process, financial management and the preparation of withdrawal applications for the Project. The Project s original completion date was 30 June 2016 and disbursement deadline date was 30 October 2016. The last payment date on Project s behalf was 15 November 2016, for which withdrawal application has been submitted on 28 October 2016. The PCU s main office is located on the following address: 32 Rashid Behbudov Street, Baku, AZ1014, Azerbaijan. 10
Financial Sector Modernization Project SECO Grant No TF011975/Component 2 Notes to the special purpose project financial statements 2. Significant accounting policies The accounting policies set out below are applied consistently to all periods presented in these financial statements. a) Accounting basis These special purpose project financial statements are prepared in accordance with the International Public Sector Accounting Standard ( IPSAS ) Financial Reporting under the Cash Basis of Accounting issued by the International Public Sector Accounting Standards Board ( IPSASB ), an independent standardsetting body within the International Federation of Accountants ( IFAC ) and incorporate the following principal accounting policies, 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 World Bank's Financial Management Sector Board. These Special Purpose Project Financial Statements have been prepared under the historical cost convention. Project financing is recognised as a source of project funds when the cash is received. Project expenditure is recognised as a use of project funds when payment is made. b) Reporting currency The Project s reporting currency is United States dollars ( US dollars or USD). All financial information presented in USD, except when otherwise indicated. c) Method of Disbursement The methods of disbursement used from the inception of the financing up to and including the Project end period of were as follows: Advance- The IBRD may advance grant proceeds into the Designated Account of the Recipient to finance eligible expenditure as they are incurred and for which supporting documents will be provided at a later date. Direct Funding - The IBRD may make payments, at the Recipient s request, directly to a third party for eligible expenditure. 11
Financial Sector Modernization Project SECO Grant No TF011975/Component 2 Notes to the special purpose project financial statements d) Method of Withdrawal Designated account The Recipient has established a Designated Account at a commercial bank acceptable to the IBRD in accordance with the Grant Agreement. Designated Account is established, managed, replenished and liquidated in accordance with Grant provisions and detailed arrangements agreed upon between the Recipient and the IBRD. The reconciliation between amounts received and disbursed trough Designated account are shown in the Statement of Designated Account. Direct payments from the IBRD Under this method, the Project management prepares applications based on supporting documents which are submitted to the IBRD. Payments are made by IBRD directly to the contractors. 3. Actual vs. Budget Statement of Uses of Funds by Project Components: Total Project cumulative for the Project period Notes In US Dollars Budgeted Actual Variance Project Components: Trainings for Azerpost employees 295,000 327,136 (32,136) 1 Conducting a rebranding campaign of Azerpost 130,000 148,718 (18,718) 2 Audit and Corrective Action Plan 105,000 87,123 17,877 Incremental Operation Costs 20,000 6,691 13,309 Total Project Expenditure 550,000 569,668 (19,668) Note 1: USD 32,136 extra expenses are explained with increase in the Contract price due to the requested additional works (Contract amendment - 2). Note 2: USD 18,718 extra expenses are explained with USD/AZN currency changes and the claim amount (Protocol between Azerpost LLC and Guydyon B.V.). 4. Approval of the special purpose project financial statements These special purpose project financial statements were authorized for issue by Management of the Project Coordination Unit on 25 November 2016. 12