INDEPENDENT AUDITORS' REPORT Kosovo Health Projectdocuments.worldbank.org/curated/en/825971501171446275/... · 2016-12-31 · At December 31, 2016, the Project had 3 employees Project

FICADEX ALBANIA Ltd

INDEPENDENT AUDITORS' REPORT

With audited financial statements

for the year ended December 31, 2016

Kosovo Health Project

(IDA Credit No. 5442 - XK)

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Project

"Kosovo Health" Project

Financed under World Bank (IDA Credit No. 5442 - XK)

Project ID P147402

Status Effective

Approval date May 13, 2014

Signing date January 15, 2015

Effective date May 20, 2015

Closing date October 30, 2019

Country Kosovo

Audited by

"FICADEX ALBANIA" Ltd

Jacques COLIBERT

Marije DUSHI

www.ficadex.com

SARA CEVE " street; Building no. 6, No. 1;Municipal Unit no. 8, Tirana-Albania

" Migjeni -street, 147 Q. 4, Durres - Albania;

Tel/fax + 355 52 37 859

Mission

Audit of special purpose Financial Statements

For the year ended December 31, 2016

Report

Date: July 21, 2017

Version: Final report

Declaration of responsibility

The entire documentation was provided by the Project Implementing Unit (PIU) and Ministry of Finance(MOF) of Kosovo.

Content

Independent Auditors' Report Page

With

Audited financial statements of the project

* Statement of sources and uses of funds for the year ended December 31, 2016 1

* Statement of expenditures for year ended December 31, 2016

* Notes to the financial statements for the year ended December 31, 2016 2

Supplementary schedule to the financial statements: 3-10

Accumulated statement of expenditures for the period May 13, 2014(approval date) up to December 31, 2016

"FICADEX ALBANIA" Ltd Mobile: + 355 69 40 52 787Tel/fax: + 355 52 2 37 859

Migjeni" street,147 Q. 4, Durres - Albania E-mail: [email protected]; alficadexa hotnail.com;

SARACEVE" street; Building no. 6, No. 1; Web site: www.ficadex.com

Municipal Unit no. 8, Tirana-Albania

INDEPENDENT AUDITORS' REPORT

To the MVinister of Finance, Republic of Kosovo

Opinion

In our opinion, the accompanying financial statements present fairly, in all material respects, the fundsreceived and expenses paid by the "Kosovo Health" Project, financed under World Bank (IDA Credit No.5442 - XK), for the year ended December 31, 2016 in accordance with the cash receipts anddisbursements basis as described in note 2 to the financial statements.

We have audited the financial statements of the "Kosovo Health" Project, financed under World Bank(IDA Credit No. 5442 - XK), which comprise the statement of cash receipts and payments and thestatement of disbursements for the year ended December 31, 2016, and notes to the statement of cashreceipts and disbursements, including a summary of significant accounting policies.

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 the Auditof the Financial Statements section of our report. We are independent of the Project in accordance withthe ethical requirements that are relevant to our audit of the financial statements of the Project in Kosovo,and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour opinion.

Emphasis of Matter - Basis ofAccounting

Without modifying our opinion, we draw attention to note 2 to the financial statements, which describesthe basis of accounting. The financial statements are prepared on the cash basis of accounting, which is abasis of accounting other than accounting principles generally accepted in the Republic of Kosovo.

The financial statements are prepared to assist the Project to meet the requirements of World Bank andthe Government of Republic of Kosovo. As a result, the financial statements may not be suitable foranother purpose.

Responsibilities ofManagement for the financial statements

Management is responsible for preparation and fair presentation of the financial statements in accordancewith the cash receipts and disbursements basis of accounting described in Note 2; this includesdetermining that the cash receipts and disbursements basis of accounting is an acceptable basis for thepreparation of the financial statements in the circumstances, and for such internal control as managementdetermines is necessary to enable the preparation of a financial statements that are free from materialmisstatement, whether due to fraud or error.


"Migjeni" street,147 Q. 4, Durres - Albania E-mail: [email protected]; alficadex&hotmail comn



Responsibilities of Those Charged with Governance

Those charged with governance are responsible for overseeing the Project's financial reporting process.

Auditor's responsibilities for the audit of the financial statements

The objectives of our audit are to obtain reasonable assurance about whether the financial statements as awhole are free from material misstatements, whether due to fraud or error, and to issue an auditor's reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with International Standards on Auditing (ISAs) will always detect amaterial misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence the economicdecisions of users taken on the basis of these financial statements.

A further description of the auditor's responsibilities for the audit of the financial statements is includedin appendix A of this auditor's report, which is located at page number 3.

Kosovo July 21, 2017

DEXInia

L-tu

FICAD

Marije DUSHI -

Jacques COLIBERT


"Migjeni" street ,147 Q. 4, Durres - Albania E-mail: [email protected]; alficadexg-hotmail.com;



Appendix A

Auditor's responsibilities for the audit of the financial statementsI

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professionalskepticism throughout the audit.

We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud orerror, design and perform audit procedures responsive to those risks, and obtain audit evidence that issufficient and appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error, as fraud may involvecollusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the project's internal control.

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 financial statements, including thedisclosures, and whether the financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scopeand timing of the audit and significant audit findings, including any significant deficiencies in internalcontrol that we identify during our audit.

'In accordance with revised International Standards on Auditing (ISAs)3 1


(IDA Credit No. 5442-XK

Statement of Sources and Uses of Funds

For the year ended December 31, 2016(in EUR unless otherwise stated)

CumulativeUp to from

Period ended May 13, 2014 May 13, 2014

Sources and uses Notes (Inception date) to (Inception date)to:December December December December31, 2016 31, 2015 31,2014 31,2016

Sources of Funds:

IDA Credit No. 5442 - XKfunding 4 56,736.65 31,323.48 - 88,060.13

Temporary advances byGovernment of Kosovo 5 1,556,608.45 25,413.17 31,323.48 1.613,345. 10

Total sources 1,613,345.10 56,736.65 31,323.48 1,701,405.23

Uses of Funds:

Goods 6 (1,330,845.46) (4,160.00) -(1,335,005.46)

Technical Services 7 - (11,095.00) (11,095.00)

Consulting services 8 (265,864.03) (47,599.84) (20,228.48) (333,692.3 5)

Training and workshop 9 (12,818.00) (4,111.75) -(16,929.75)

Incremental Costs 10 (3,817.61) (865.06) ________ -(4,862.67)

Total uses 11 (1,613,345.10 (56,736. 65) (31,323.48) ___1,701,405.23)

Exchange rate differences(

Balance at the end of theyear ________ ______

The Statement of Sources and Uses of Funds is to be read in conjunction with the notes set out on

pages 3 to 10 and forming an integral part of the financial statements.

The financial statements of the Kosovo Health Project (IDA credit No. 5442-XK) were authorised for

issue by the management of the Project on June 20, 2017 and signed on its behalf by:

Fatime AR(tNLIU-QOd J Nexhip SHEHOLLI

Project Coordinator Financial Management Specialist

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(IDA Credit No. 5442-XK)Notes to the Financial Statements

For the year ended December 31, 2016(in EUR, unless otherwise stated)

1) General

The Financing Agreement for the Kosovo Health Project (IDA Credit 5442 - XK) - (the "Project'), wassigned between the International Development Association ("Association") and the Republic of Kosovo("Recipient") on January 15, 2015 The May 20, 2015 is the effective date of the project.

The Association agrees to extend to the Recipient, on the terms and conditions set forth or referred to theAgreement, a credit (variously, "Credit" and "Financing"), in an amount equivalent to sixteen millionfive hundred thousand Special Drawing Rights (SDR 16,500,000) (equivalent of USD 25.5 million, astranslated on the agreement January 15, 2015) to assist in financing the project.

The Recipient shall implement the Project through MoH, and establish within MoH and thereaftermaintain at all times during the implementation of the Project, a Project Coordination Unit (PCU) withfunctions, staffing and resources satisfactory to the Association for the purpose of ensuring prompt andefficient overall coordination, day-to-day implementation of, and communication relating to, Projectactivities and results. To this end, the Recipient through MoH, shall appoint staff (including, inter alia, aProject coordinator, a procurement specialist and a financial managernent\ specialist).

The Recipient shall not later than sixty (60) days after the effectiveness of the Project, set up andmaintain throughout implementation of the Project, a Project Steering Committee (PSC) with acomposition of staff, mandate, terms of reference and resources satisfactory to the Association. Withoutlimitation upon the generality of the foregoing, the PSC shall be chaired by the Minister of Health or hisdesignee, and shall include, inter alia the representatives of MoF and Ministry of Local Government(MoLG), two representatives of the Participating Municipalities on an annual rotating basis, and otherrelevant stakeholders recommended by MoH.

At December 31, 2016, the Project had 3 employees

Project Description

The objectives of the Project

The objective of the Project is to contribute to improving financial protection from health spending forthe poor and quality of care for priority maternal and child health and non-communicable diseaseservices.

The Project consists of thefollowing Parts:

Part A. Improving Financial Protection and Quality of Care

1. Provision of support to improve financial protection against health care costs including:

(a) Finalizing the preparation of the policy documents, by-laws and the operational system designfor health sector reforms;

(b) Building the capacity of MoH staff.and staff in other health sector institutions to implement thehealth sector reforms;

(c) Providing support for investments in information systems including the relevant software tosupport health sector reforms;

(d) Developing and implementing an outpatient drug be nefit scheme to reimburse insuredindividuals for the costs of drugs; and

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1) General (continued)

(e) Designing and implementing communication activities to inform the public and health sectorstakeholders about their rights and responsibilities and gather feedback on the health sectorreforms.

2. Provision of support to improve the quality of health care and service delivery through inter alia:

(a) Building the capacity of staff in various health sector institutions to carry out theirresponsibilities, including on the management of Performance Agreements, purchasing ofequipment and development of a maintenance system for equipment health facilities;

(b) Supporting strategic purchasing of primary care services through the: (i) development andfinalization of the by-laws to implement the Performance Agreements; (ii) development of aCapitation Performance Payments Manual; and (iii) strengthening the capacity of MoH,Participating Municipalities and Primary Healthcare Institutions to implement the CapitationPayments scheme; and

(c) Provision of support for investments in information systems, including the E-health DevelopmentFramework, National Institute of Public Health information system and the E-prescription systemto improve the quality of health care.

3. Carrying out annual Independent Technical Audits.

Part B. Strengthening Primary Care

Improving access to quality primary care services in participating municipalities through financing ofCapitation Payments.

Part C. Project Management

Provision of support to strengthen the capacity of MoH to carry out the technical and administrativemanagement of the Project, including conducting audits, purchasing of equipment, and financing ofOperating Costs.

Withdrawal Conditions; Withdrawal Period

Notwithstanding the provisions of Part A of the Section IV of Financing Agreement, no withdrawal shallbe made:

(a) For payments made prior to the date of this Agreement, except that withdrawals up to anaggregate amount not to exceed C300,000 equivalent, may be made for payments under Category(1) made prior to this date but on or after January 10, 2014, for Eligible Expenditures;

(b) Under Category 2, unless the Recipient through the MoH has: (i) prepared and adopted aCapitation Performance Payments Manual satisfactory to the Association; and (ii) entered into aPerformance Agreement, satisfactory to the Association with the respective ParticipatingMunicipality; and

(c) If, at any time, the Association determines that any portion of the amounts disbursed by theRecipient under Category (2) was made for expenditures which are not eligible under theCapitation Payments Performance Manual, the Recipient shall promptly refund any such amountto the Association as the Association shall specify by notice to the Recipient.

The Closing Date is October 30, 2019.

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1) General (continued)

IDA Credit No.5442-XK

The following table specifies the categories of Eligible Expenditures that may be financed out of theproceeds of the financing ("Category"), the allocations of the amounts of the financing to each Categoryand the percentage of expenditures to be financed for Eligible Expenditures in each category:

Amount of the Amount Equivalent % of expenditures toCategory financing allocated (expressed in $US) be financed

(expressed in SDR) inclusive of taxes

1) Goods, non-consultingservices, consultants' servicesTraining and Operating costsfor the Project, includingaudits 8,411,000 12,998,800 100%

2) Capitation Payments underPart B of the Project 8,089,000 12,501,200 100%

Total amount 16,500,000 25,500,000

Amounts translated using exchange rates on inception date of the project (SDR/$US 0.647059)

The Government of Kosovo will repay the principal amount of the Credit in semi-annual instalmentspayable as of describe in following:

Date Payment Due Principal Amount of the Credit repayable

- -(__ __ _ _ expressed asa percentage)*_____On each April 15 and October 15, in each year:

* Commencing on October 15, 2019, to and 1.65%including, April 15, 2029

* Commencing April 15, 2029, to and 3.35%including, April 15, 2039.

*The percentages represent the percentage of the principal amount of the Credit to be repaid, except asthe Association may otherwise specify pursuant to Section 3.03 (b) of the General Conditions.

The maximum Commitment Charge Rate payable by the Recipient on the unwithdrawn FinancingBalance shall be one-half of one percent (1/2 of 1%) per annum.

The Service Charge payable by the Recipient on the Withdrawn Credit Balance shall be equal to three-fourths of one percent (3/4 of 1%).

The Interest Charge payable by the Recipient on the Withdrawn Credit Balance shall be equal to one anda quarter percent (1.25%) per annum.

As at December 31, 2016, EUR 88 060.13, (2016: 56,736.65) ,(2015: 31 323.48) was disbursed from theCredit.




2) Basis of preparation

The financial statements of the project for the year ended December 31, 2016 have been prepared for thepurpose of complying with the provisions of the Project's objectives, the World Bank guidelines andterms and conditions of the IDA Credit No. 5442 - XK.

The financial statements comprise the statement of sources (Cash Receipts) and uses (Payments); thestatement of expenditures used as the basis for the submission of withdrawal applications for year endedDecember 31, 2016, and a summary of significant accounting policies and other explanatory notes.

The cumulative statements of expenditure used as the basis for the submission of withdrawal applicationsfor the period from inception date on May 15, 2014 (Inception date)' till December 31, 2016 arepresented as supplementary schedules. Cumulative information on receipts and disbursements from theProject's inception date to December 31, 2016 is presented in the Statement of Sources and Uses ofFunds for information purposes only.

The financial statements have been prepared in accordance with cash basis IPSAS - Financial Reportingunder the Cash Basis of Accounting, which differs from Kosovo and International Financial ReportingStandards. On this basis, income is recognised when received rather than when earned and expenses arerecognised when paid rather than when incurred. Accordingly, direct and indirect payments of theProject's expenses, which are made from the proceeds of the credit, are recognised as sources and uses offunds at the time the payment is made.

The financial statements prepared for the special purpose are presented in Euro ("EUR"), unlessotherwise stated.

3) Summary of significant accounting policies

A summary of significant accounting policies underlying the preparation of the Project's financialstatements is presented below.

3.1 Foreign currency transactions

The project accounts are maintained in Euro ("EUR").

Transactions in foreign currencies are translated to the functional currency at exchange rates on the datesof the transactions.

Initial credit amount are maintained at the historical exchange rates. The project translates the undrawncredit balance at the rates in effect on the year end.

The exchange rates in effect as at December 31, 2016 and December 31, 2015 were as follows:

Period 31.12.2016 31.12.2015Currency

EUR USD 1.06 1.09

USD/EUR 0.95 0.92

SDR/EUR 1.27 1.27

SDR/$US 1.35 1.39

'The expenditures incurred from Government of Kosovo for the period 13 May 2014 to 31 December 2014, are reimbursed from IDA Credit5442-XK with WA KHP/01, date 23.10.2015, according to paragraph B / a, Section IV " of the Financing Agreement, dated January 15, 2015.

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3) Summary of significant accounting policies (continued)

3.2 Recognition of income and expenses

Income is recognised when received rather than when earned, and expenses are recognised when paidrather than when incurred.

3.3 Taxation

The Project is not exempt from income Tax, Value Added Tax (VAT) and Custom Duties for the creditspart. The local employees of the project are liable for personal tax and social security contributions.

4) IDA Credit No. 5442-XK funding

IDA funding is composed are detailed as follows:

Credit Year ended Year ended31 December 2016 31 December 2015

Reimbursements 56,736.65 31,323.48

Direct payments

Total 56,736.65 31,323.48

Reimbursements represent the IDA funds for cover the payments already made by Government ofKosovo for this project using withdrawal applications prepared by the Project.

5) Temporary advances received by government of Kosovo

The temporary advances received by Government of Kosovo are detailed as follows:

Year ended Year ended Year endedFinanced by: 31 December 31 December 31 December

2016 2015 2014

Temporary advances received by GOK 1,556,608.45 25,413.17 31,323.48

Total 1,556,608.45 25,413.17 31,323.48

The cumulative temporary advances received by GOK of 1,613,345.10 Euro represent WithdrawalApplication no. KHP/03, date 17.01.2017 and KHP/04, date 28.03.2017.

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6) Goods

Year ended Year ended31 December 2016 31 December 2015

Computers - 4,160.00

Office Furniture 2,020.24 -

IT Equipment 31,115.2 -

Contracts for Medical Equipment L-2 Diagnostic 328,000.00 -equipment

Medical Equipment L-2 - Customs expense 14,146.06 -

Medical Equipment L- 1 758,330.35 -

Medical Equipment L-3&L-5 190,038.00 -

Medical Equipment L-3&L-5 - Customs expense 7,195.61

Total 1,330,845.46 4,160.00

7) Consultant services

Expenditures for Consultant services are detailed as follows:

Item Year ended Year ended31 December 2016 31 December 2015

PCU project manager 19,689.60 21,600.00

Financial management specialist 15,353.60 16,800.00

Procurement Specialist 13,185.60 9,199.84

Personal income tax PCU project manager 1,190.40

The employee pension contribution PCU 720.00

The employer pension contribution PCU 720.00Personal income tax FMS 886.40

The employee pension contribution FMS 560.00

The employee pension contribution FMS 560.00

Personal income tax PS 734.40

The employee pension contribution PS 480.00

The employee pension contribution PS 480.00Support to the MoH to develop design parameters for anoutpatient drug benefit systemSupport to the MoH to develop design parameters for an 26,070.00outpatient drug benefit systemImproving Quality of Care 73,122.35

Improving Quality of Care 13,200.00

External Audit for KHP 1,688.00

External Audit for KHP grant 2,321.00 1

Total 265,864.03 47,599.84

1,190.408




8) Training and workshop

Year ended Year ended31 December 2016 31 December 2015

Training of PCU project manager - 747.15

Training Financial management specialist - 758.65

Training Procurement Specialist - 600.32

Training of UKCK-biochemist - 878.98

Training of chief of budget and administration department - 946.65

Workshop - 180.00

Study Tour MoH in Ankara -Turkey 12,818.00 --- -

Total 12,818.00 4,111.75

9) Incremental operating costs

Expenditures for incremental operating costs are detailed as follows:

Year ended Year endedItem 31 December 2016 31 December 2015

Mobile phone and postal expenses 960.00 320.00

Office supplies - 947.53 149.66

Costs for meetings and conferences 1,054.90 295.40

Publications of advertisements 855.18 100.00

Total 3,817.61 865.06

10) Expenditures by sources of funds

Expenditures by sources of funds for the year ended December 31, 2016 are detailed as follows:

IDA Credit No. 5442 -Temporary TotaItem X f advances from December 31,

XKfunding GOK 2016

Goods - 1,330,845.46 1,330,845.46

Consultant services - 265,864.03 265,864.03

Training &workshop - 12,818.00 12,818.00

Incremental operation costs - 3,817.61 3,817.61

Total 31.12.2016 - 1,613,345.10 1,613,345.10

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11) Expenditures by parts:

The expenditures by Project Parts are detailed as follows:

o g Training &work Incremental TotalParts Goods Consulting T o operating 31.12.2016services shop 3.221

costsImproving Financial

Part A Protection and Quality ofCare 1,328,825.21 211,304.03 12,818.00 - 1,552,947.24Provision of support to

1. improve financialprotection against healthcare costs - 120,972.68 12,818.00 -

Provision of support to

2 improve the quality ofhealth care and servicedelivery - 86,322.35 - -Carrying out annual

3 Independent TechnicalAudits - 4,009.00 - -

Part B Strengthening PrimaryCare - -

Part C Project Management 2,020.24 54,560.00 - 3,817.61 60,397.85

Total 31.12.2016 1,330,845.46 265,864.03 12,818.00 3,817.61 1,613,345.10

Total 31.12.2015 4,160.00 47,599.84 4,111.75 865.06 56,736.65

12) Un-drown credit facilities.

The balance of the undrawn credit from IDA Credit No. 5442- XK as of December 31, 2016 in XDR is1.34433 USD.

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(IDA Credit No. 5442-XK

Statement of Cumulative Expenditures Withdrawal Schedule

(Supplementary scheduleto the Annual Financial Statements)

For the period from May 13, 2014 to December 31, 2016

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Documents

INDEPENDENT AUDITORS' REPORT Kosovo Health Projectdocuments.worldbank.org/curated/en/825971501171446275/... · 2016-12-31 · At December 31, 2016, the Project had 3 employees Project