Public Disclosure Authorized ADRIATIC SEA POLLUTION CONTROL PROJECT I GEF GRANT TF 017706 PROJECT FINANCIAL STATEMENTS, DESIGNATED ACCOUNTS STATEMENT AND INDEPENDENT AUDITORS REPORT for the period from I January 2016 to 31 December 2016 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized ADRIATIC SEA POLLUTION CONTROL PROJECT I GEF Grant TF 017706 CONTENTS Project Financial Statements and Independent Auditor's Report: Independent Auditor's Report Statement of Assets and Liabilities 2 Statements of Sources and Uses of Funds 3-5 Statement of Uses of Funds by Activities of the Project 6 Summary Statement of Expenditure (SOE) - Application for Loan Withdrawal 7 - 9 Notes to the Project Financial Statements - 10 -12 Payments made into Designated Grant Account 13 Designated Grant Account Statement 14 Auditing Documentation Checklist MOORE STEPHEN5 ALTDIT AUDIT ZAOREB REVIZilSKE TSLUGE. ZAGREB Audit d.o.o. za revizijske usluge Radni6ka cesta 54 10000 Zagreb HRVATSKA Tel:+385 (0) 1 3667 994 Fax:+395 (0) 1 3667 997 E-mail:[email protected] INDEPENDENT AUDITOR'S REPORT 1. We have audited the accompanying Financial Statements of the ADRIATIC SEA POLLUTION CONTROL PROJECT I (hereinafter: the "Project") financed under GEF Grant No. TF 017706, which comprise: the Statement of Assets and Liabilities of the Project as of 31 December 2016, the Statements of Sources and Uses of Funds of the Project and the Statement of Uses of Funds by Activities of the Project for the period since 1 January 2016 till 31 December 2016 (all together: the "Project Financial Statements"). 2. The Project Financial Statements are the responsibility of the Project's management. Our responsibility is to express an opinion on the Project Financial Statements based on our audit. 3. We conducted our audit in accordance with International Standards of Auditing and International Bank for Reconstruction and Development Guidelines. Those standards and guidelines require that we plan and perform audit to obtain reasonable assurance about whether the Project Financial Statements are free of material misstatements. An audit also includes assessing the accounting principles used and significant estimates made by Project's management, as well as evaluating the overall Project Financial Statements presentation. We believe that our audit provides a reasonable basis for our opinion. 4. In our opinion, the Financial Statements of the ADRIATIC SEA POLLUTION CONTROL PROJECT 1, in all significant terms of reference, truthfully and fairly present, assets and liabilities of the Project as of 31 December 2016, sources and uses of funds of the Project and uses of funds by activities of the Project, and cash receipts and payments of the Project in the Designated Account for the year ended 31 December 2016, in accordance with International Accounting Standards for public sector and International Bank for Reconstruction and Development Guidelines. 9 5. With respect to Summary Statement of Expenditure ("SOE") - Application for Loan Withdrawal: (a) adequate supporting documentation has been maintained to support claims for reimbursements of expenditures incurred; (b) the Summary Statement of Expenditure has been reconciled to the other Project Financial Statements without exception and (c) the expenditure disbursements underlying the Summary Statement of Expenditure have been made in accordance with International Bank for Reconstruction and Development requirements. Zagreb, 2 May 2017 Audit d.o.o. Radni6ka cesta 54 10000 Zagreb k Marijana Pranji, director Marijana Pr (j6,certified auditor th.ore tephensfnternan-al Lankedn- mehers'bn prncipedni,audzestru 1 1 hewor/ld I1 ADRIATIC SEA POLLITION CONTROL PROJECT I GEF Grant TF 017706 STATEMENT OF ASSETS AND LIABILITIES (in IIRK At 31 At 31 At 31 December December December Notes 2016 2015') 2014 ASSETS Cash assets - Designated Grant Account 3 1,105,357 1,732,121 Paid from the Grant Account 8 February 2016 0 (390,000) Eligible costs of the Project 4 5,684,752 3,254,466 706,710 Project Expenditures - Environmental Protection and Energy Efficiency Fund 1,414,281 813,617 176,677 Fees - Designated Grant Account 3 2,356 1,156 - 8,206,746 5,411,360 883,387 SOURCES Grant 5/i/ 6,766,475 4,583,324 706,710 Environmental Protection and Energy Efficiency Fund 5/ii/ 1,414,281 813,617 176,677 8,180,756 5,396,941 883,387 NET ASSETS2 ) 6 25,990 14,419 - 1) The first costs associated with the Project were created in 2014, but they are reimbursed from the proceeds of the Grant in 2015 when there has been a first deposit into the Designated Grants Account and when the preparation of the financial statements of the Project have been started 2) Net assets represents interest on the Designated Grant Account Notes from page 10 to 12 form an integral part of these Project Financial Statements. Independent Auditor's Report - page 1. 2 ADRIATIC SEA POLLUTION CONTROL PROJECT I GEF Grant TF 017706 STATEMENTS OF SOURCES AND USES OF FUNDS OF THE PROJECT I STATEMENT OF SOURCES AND USES OF FUNDS OF THE PROJECT - GRANT FUNDS (in HRK) Cumulative 2016 2015 2014 until 31 Plan until Variance December 2019 2016 1 2 3 4 5 6(5 minus 4) FINANCING From Designated Account 2,431,486 2,191,554 - 4,623,040 - From Bank Account of FZOEU - refunded from the Grant - 357,358 706,710 1,064,068 - 2,431,486 2,548,912 706,710 5,687,108 27,306,500 21,619,392 EXPENDITURE Consultants' Services in the Project 2,430,286 2,547,756 706,710 5,684,752 27,306,500 21,621,748 Fees - Designated Grant Account 1,200 1,156 - 2,356 - (2,356) 2,431,486 2,548,912 706,710 5,687,108 27,306,500 21,619,392 * 1) The first expenses associated with the Project were created in 2014, when they are paid to the Fund, but they are reimbursed from the proceeds of the Grant in 2015. II STATEMENT OF SOURCES AND USES FUNDS OF THE PROJECT - RESOURCES OF ENVIRONMENTAL PROTECTION AND ENERGY EFFICIENCY FUND (in HJRK) Cumulative until 31 2014 December 2016 2015 December 2016 1 2 3 4 FINANCING Environmental Protection And Energy Efficiency Fund 600,664 636,940 176,677 813,617 600,664 636,940 176,677 813,617 EXPENDITURE Consultants' Services in the project 600,664 636,940 176,677 813,617 600,664 636,940 176,677 813,617 Resources of Environmental Protection and Energy Efficiency Fund were used for payment of VAT invoices received from suppliers. Notes from page 10 to 12 form an integral part of these Project Financial Statements. Independent Auditor's Report - page 1. 3 ADRIATIC SEA POLLUTION CONTROL PROJECT I GEF Grant TF 017706 STATEMENTS OF SOURCES AND USES OF FUNDS - continued /i/ Adriatic Sea POLLUTION CONTROL PROJECT (Project) is a regional project, which is designed as part of the wider Adriatic program for the environment. The project includes activities in two riparian countries of the Adriatic Sea, in Croatia and in Bosnia and Herzegovina. Project objectives are: (A) reduce the discharge of pollutants from the cross-border character, especially nitrogen, in selected "black spots" in the Croatian coast of the Adriatic Sea; and (B) improve the capacity of the Republic of Croatia and Bosnia and Herzegovina for the preparation of . pollution control projects in selected localities in Croatian coast of the Adriatic Sea and Herzegovina and strengthen the capacity for monitoring sea water quality. The project consists of the following parts: Part 1. Demonstrative investments to reduce nutrient discharges and improve the ability of monitoring the quality of sea and - (a) Design and construction works of integrated system with purpose of leachate collection management on landfill Sitnica. (b) Purchase and installation of equipment for monitoring sea water quality and strengthening regional capacity for monitoring sea water quality. Part 2. Technical assistance (a) support for (i) performing evaluation of sources of nutrients, including spot and non-spot sources in two sensitive areas / "black spots" in Croatian coast of the Adriatic Sea (Dubrovnik Neretva County) and in the Neretva's delta, and (ii) preparing policy analysis, legislative and / or institutional reforms needed . to address the problems related to water quality. (b) Technical assistance for the preparation of conceptual design and design documentation, including the preparation of tender documents for access to EU funds for investments in the processing and management of leachate in accordance with the requirements of the EU in selected places in Croatian coast of the Adriatic Sea. Notes from page 10 to 12 form an integral part of these Project Financial Statements. Independent Auditor's Report - page . 4 ADRIATIC SEA POLLUTION CONTROL PROJECT I GEF Grant TF 017706 STATEMENTS OF SOURCES AND USES OF FUNDS - continued It was agreed that for the implementation of these objectives and monitoring the implementation of the Project in the Republic of Croatia as the implementing agency Fund for Environmental Protection and Energy Efficiency Fund (the "Fund") is appointed. For those parts of the Project in the Republic of Croatia is planned financing from the grant from the Global Environment Facility (Global Environment Fund - GEF) in the amount of USD 4,330,000. In accordance with the concluded Grant Agreement dated 8 September 2014, the Closing Date was 15 March 2017, but in accordance with Amendment of the Grant Agreement as of 26 September 2016 the Closing Date was extended until 15 February 2019, as well as the use of funds and the reallocation of demonstrative investments funds. Consequently, a restructuring of the Project was carried out, in which the rehabilitation of the landfill site of Sitnica on Kor6ula was included in the Project, instead of the Diklo landfill in Zadar. The first costs related to the project were made in July 2014 and have been paid from the Fund's bank .