consolidated project financial statements...

Report on the

CONSOLIDATED PROJECT FINANCIAL STATEMENTS

of the

AGRICULTURE AND RURAL DEVELOPMENT PROJECT

of the Ministry of Finance and Treasury of Bosnia and Herzegovina

financed by:

- IDA Credit No. 4325 BOS- Swedish Grant TF 090773

FOR THE YEAR ENDED DECEMBER 31, 2016

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AGRICULTURE AND RURAL DEVELOPMENT PROJECTof the Ministry of Finance and Treasury of Bosnia and Herzegovina

CONTENTS

1 Introduction 1

2 Independent Auditor's Report 8

3 Consolidated project financial statements for the year 2016 10

4 Notes to the consolidated project financial statements 17

APPENDICES

A.1 Designated account statement - IDA Credit No. 4325 BOS - FB&H 19

A.2 Local Bank account statement - IDA Credit No.4325 BOS - FB&H 20

A.3 Designated account statement - IDA Credit No. 4325 BOS - RS 21

A.4 Local bank account statement - Government contribution - FB&H 22

A.5 Petty cash statement - Government contribution - FB&H 23

A.6 Local bank account statement - Government contribution - RS 24

A.7 Local bank account statement - Government contribution - RS 25

B.1 SoE Withdrawal Schedule of IDA Credit No.4325 BOS for the year ended December 31, 2016 26

B.2 SoE Withdrawal Schedule of Swedish Grant TF 090773 for the year ended December 31, 2016 27

C.1 Reconciliation between World Bank's disbursement statements in XDR and IDA Credit account in

EUR according to the consolidated balance sheet as of December 31, 2016; SoE Withdrawal

Schedule of IDA Credit No. 4325 BOS 28

C.2 Reconciliation between World Bank's disbursement statements in SEK and Swedish Grant

account in EUR according to the consolidated balance sheet as of December 31, 2016; SoE

Withdrawal Schedule of Swedish Grant TF090773 29


1. Introduction

1.1 Objectives of the Project

The objective of the Agriculture and Rural Development Project (the "Project") is to assist the State of

Bosnia and Herzegovina ("B&H") to strengthen the capacity of its state and entity-level institutions to

deliver more efficient and effective agricultural services and support programs in order to make a

substantial contribution to an acceleration of the B&H's eligibility to access support provided under the

EU Instrument for pre-accession assistance for rural development.

1.2 Components and activities of the Project

The project is comprised of the following three components:

(A) Agricultural and information and institutional capacity building

The key objective of this component is the harmonization of the various activities and functions at the

level of both entities (the Federation of Bosnia and Herzegovina - "FB&H" and Republika Srpska -

"RS") to facilitate the consolidation of State-level systems as and when such opportunity arises. It is

comprised of the following sub-components:

- Al - Improving agriculture and rural sector information systems, including information technology

hardware and software and the establishment of a secure wide area network for agriculture

information system and rural development payment information transfer.

- A2 - Strengthening state veterinary, food safety and phytosanitary services, by further developing

the veterinary office of B&H (VO), the administration of B&H for the protection of plant health

(APPH) and the food safety agency of B&H (FSA), with a view to harmonize and enforce uniform

and EU compatible phytosanitary and food safety regulations and standards.

- A3 - Strengthening agriculture inspectorate capacity through the training of inspectors and the

upgrading of existing buildings and resources.

- A4 - Strengthening agriculture extension services through the development of pluralistic,

participatory market-driven, results-oriented entity-level extension programs, establishment of

extension departments for policy and budgetary control and contracting of existing agencies to

develop extension strategy and the management of extension delivery, and provision of

Incremental funding for local service providers.

1


1. Introduction (continued)

1.2 Components and activities of the Project

(B) Enhanced agriculture and rural development support programs

At present, most of the assistance concerns market support measures linked to specific agricultural

products, with milk and tobacco payments absorbing a large share of total subsidies. The impacts of

the agriculture support programs are undermined by weak systems for the targeting and administrating

of incentives and grants. This Component will provide assistance to address these constraints through

the following three sub-components:

- B1 - Strengthening rural development program planning and coordination, by supporting the

establishment of a rural development coordination unit within the sector for agriculture, food,

forestry and rural development under Ministry of Foreign Trade and Economic Relations

("MOFTER") for playing an effective role in liaising with the EU on agriculture and rural

development policies and programs in B&H and in decision-making coordination. Project inputs

will include payment system infrastructure including minor civil works, office and computing

systems, IT equipment and supporting software, secure communications systems, equipment,

furniture, vehicles, and staff capacity building.

- B2 - Strengthening the systems for providing rural development payments, building capacity for

managing, monitoring and administering rural development grants at Entity level, improving the

accessibility and transparency of granting processes, establishing harmonized and integrated

Entity farm and entitlement registries and rural development payment database. Strengthening

rural development program planning, coordination and monitoring within the Sector for agriculture

and rural development in MOFTER.

- B3 - Increasing investment grant fund for target objectives and areas by providing incremental

funds to be disbursed by Entity-level Ministries as grants for specific objectives, including

encouraging innovation, community/collective action and income diversification.

(C) Project coordination, administration and monitoring

Build capacity within the Ministry of agriculture, water management and forestry of FB&H under

MOFTER to coordinate, monitor and evaluate the Project, including the design and implementation of

a public communication program and the Ministry of Agriculture, Water Management and Forestry of

FB&H and the Ministry of Agriculture, forestry and water management of RS. It also aims to support

the establishment of the PIU within these Ministries. Project support includes: salaries and fees of PlU

staff and specialized expertise, office equipment, furniture, vehicle, fiduciary training, financial and

environmental audits, and incremental operational costs.

2



1.3 Financing of the Project

The Project is financed by:

a) IDA Credit No. 4325 BOS in the amount of XDR 13,800,000;b) Swedish Grant TF 090773 in the amount of SEK 41,160,000.

1.3.1 IDA Credit No. 4325 BOS

B&H is the borrower of the International Development Association (IDA) Credit No. 4325 BOS

amounting to the equivalent of XDR 13,800,000.

Under the terms of the subsidiary finance agreements between B&H, and FB&H and RS, funds of the

equivalent of XDR 7,151,000 have been lent to FB&H and funds of XDR 6,649,000 have been lent to

RS.

Categories of cost items to be financed out of the proceeds of the Credit, the allocation of the amounts

of the Credit to each category and the percentage of expenditure for cost items so to be financed in

each category are as follows:Amount of the % of expenditure to

Item Credit allocated be financed(in XDR)

(la) Goods, works, consultants' services andtraining under Part 1 of the Project 1,215,000 85%

(1 b) Goods, works, consultants' services andtraining under Part 1 of the Project 1,120,000 85%

(2a) Operating costs under Parts 1 A and 1 B of theProject in accordance with Section C.1 95,000 85% up to and

including June 30,2009; 0% thereafter

(2b) Operating costs under Parts 1A and 1 B of theProject in accordance with Section C.1 88,000 85% up to and


(3a) Operating costs under Part 1C of the Projectin accordance with Section C.2 50,000 85%

(3b) Operating costs under Part 1C of the Projectin accordance with Section C.2 46,000 85%

(4) Goods, works, consultants' services andtraining under Parts 2A(i), 2A(ii), 2A(iii)(a), (b)and 2B(i) of the Project 2,894,000 85%

(5) Operating costs under Parts 2A and 2B of theProject 547,000 85% up to and


3



1.3.1 IDA Credit No. 4325 BOS (continued)

Item Amount of the % of expenditure to

Credit allocated be financed

(in XDR)(6) Operating costs under Part 2C of the Project 210,000 85%(7) Consultants' services under Part 2 A(iii)(c) of

the Project 430,000 50%

(8) Rural development grants under Part 2B (ii) ofthe Project 1,710,000 100% of amounts

disbursed(9) Goods, works, consultants' services and

training under Parts 3A(i), 3A(ii), 3A(iii)(a), (b)and 3B(i) of the Project 2,542,000 85%

(10) Operating costs under Parts 3A and 3B of theProject 503.000 85% up to and


(11) Operating costs under Part 3C of the Project 210,000 85%

(12) Consultants' services under Part 3A(iii)(c) ofthe Project 430,000 50%

(13) Flood rehabilitation, works, goods andservices under Part 3B (ii) of the Project 1,710,000 100% of amounts

disbursed

Subtotal 13,800,000

4



1.3 Financing of the Project (continued)


By the Amendment to Financing agreement, dated June 17, 2010, percentage of expenditure to be

financed under categories 2a,2b, 5,7,10 and 12 is revised to read 85%.

By the Amendment to Financing agreement, dated October 13, 2011, Categories of cost items to be

financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each category

and the percentage of expenditure for cost items so to be financed in each category are as follows:

Amount of the % of expenditure toItem Credit allocated be financed

(in XDR)(la) Goods, works, consultants' services and

training under Part 1 of the Project inaccordance to Section C.1 (i) of Schedule 2 1,215,000 85%

(1b) Goods, works, consultants' services andtraining under Part 1 of the Project inaccordance with Section C.2 (i) of Schedule 2 1,120,000 85%

(2a) Operating costs under Parts 1A and 1 B of theProject in accordance with Section C.1(i) ofSchedule 2 95,000 85%

(2b) Operating costs under Parts 1 A and 1 B of theProject in accordance with Section C.2 (i) of 88,000 85%Schedule 2

(3a) Operating costs under Part 1 C of the Project inaccordance with Section C.1 (i) of Schedule 2 50,000 85%

(3b) Operating costs under Part 1 C of the Projectin accordance with Section C.2 (i) of Schedule2 46,000 85%

(4) Goods, works, consultants' services andtraining under Parts 2A(i), 2A(ii), 2A(iii)(a), (b)and 2B(i) of the Project 3,321,000 85%

(5) Operating costs under Parts 2A and 2B of theProject 160,000 85%

(6) Operating costs under Part 2C of the Project 400,000 85%(7) Consultants' services under Part 2 A(iii)(c) of

the Project 30,000 85%(8) Flood rehabilitation, works, goods and services

under Part 2B (ii) of the Project 1,880,000 100%(9) Goods, works, consultants' services and

training under Parts 3A(i), 3A(ii), 3A(iii)(a), (b)and 3B(i) of the Project 3,029,000 85%

(10) Operating costs under Parts 3A and 3B of theProject 240,000 85%

(11) Operating costs under Part 3C of the Project 180,000 85%

5





Amount of the % of expenditure to

Item Credit allocated be financed(in XDR)

(12) Consultants' services under Part 3A(iii)(c) of

the Project 46,000 85%

(13) Flood rehabilitation, works, goods and 100% of amountsservices under Part 3B (ii) of the Project 1,900,000 disbursed

Subtotal 13,800,000

IDA Credit No. 4325 BOS became effective on February 26, 2008. Planned closing date was August

31, 2012, but the Project was extended until June 30, 2013. Afterwards the project was additionally

extended until June 30, 2016.

1.3.2 Swedish Grant TF 090773

B&H is the recipient of trust fund made available by Swedish Government in the form of a grant (TF

090773) amounting to SEK (Swedish Krona) 41,160,000.

Under the terms of the subsidiary finance agreements between B&H, and FB&H and RS, funds of SEK

20,580,000 have been lent to FB&H and funds of SEK 20,580,000 have been lent to RS.

Item Amount of the % of expenditureGrant allocated to be financed

(in SEK)

(1 a) Goods, consultants' services, training and technical

services under Part 1 of the Project 4,875,551 85%

(1 b) Goods, consultants' services, training and technical

services under Part 1 of the Project 5,073,616 85%

(2) Goods, consultants' services, training and technical

services under Part 2 of the Project, excluding rural

development grants 5,727,965 85%

(3) Goods, consultants' services, training and technical

services under Part 3 of the Project, excluding rural

development grants 5,529,900 85%

(5) Rural development grants under Part 3B of the Project 9,976,484 100%

(4) Rural development grants under Part 2B of the Project 9,976,484 100%

Subtotal 41,160,000

6




1.3.3 Swedish Grant TF 090773

By the Amendment to Financing agreement, dated October 13, 2011, Categories of cost items to be

financed out of the proceeds of the Grant, the allocation of the amounts of the Grant to each category

and the percentage of expenditure for cost items so to be financed in each category are as follows:

Item Amount of the % of expenditureGrant allocated to be financed

(in SEK)

(la) Goods, consultants' services, training and technicalservices under Part 1 of the Project 6,375,551 85%

(1 b) Goods, consultants' services, training and technicalservices under Part 1 of the Project 6,573,616 85%

(2) Goods, consultants' services, training and technicalservices under Part 2 of the Project, excluding floodrehabilitation activities under Part 2B of the Project 5,414,449 85%

(3) Goods, consultants' services, training and technicalservices under Part 3 of the Project, excluding floodrehabilitation activities under Part 3B of the Project 5,216,384 85%

(4) Goods, works, and services under Part 2B of theProject relating to flood rehabilitation activities 8,790,000 100%Goods, works, and services under Part 3B of the

(5) Project relating to flood rehabilitation activities 8,790,000 100%

Subtotal 41,160,000

Swedish Grant TF 090773 became effective on February 28, 2008. Planned closing date was August

31, 2012, but the Project was extended until June 30, 2013. Afterwards the project was additionally

extended until May 30, 2014.

7

Deloitte d.o.o.Zmaja od Bosne 12cDeloitte 71000 SarajevoBosnia and Herzegovina

Tel: +387 (0) 33 277 560Fax: +387 (0) 33 277 561www.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 consolidated project financial statements

We have audited the accompanying consolidated project financial statements of the Agriculture and

Rural Development Project (the "Project"), which comprise of Summary of sources and uses of funds,

Balance sheet, Designated accounts, local bank accounts and petty cash statements, Statements of

Credit and Grant withdrawals as of and for the year ended December 31, 2016 and a summary of

significant accounting policies and other explanatory notes for the year then ended, financed under

IDA Credit agreement No. 4325 BOS and Swedish Grant agreement TF 090773. 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 consolidated project financial statements

The State of Bosnia and Herzegovina, i.e. the management of the project implementation unit in the

Federation of Bosnia and Herzegovina and agricultural project coordination unit in Republika Srpska

(the "Management") is responsible for the preparation and fair presentation of these consolidated

project financial statements on the cash basis of accounting based 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 the

Management determines is necessary to enable the preparation of the consolidated 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 consolidated 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 consolidated 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 consolidated project financial statements. An audit also includes assessing of the

accounting principles used and significant estimates made by the 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 ("DTTL" or "Deloitte Global"), its network ofmember firms, and their related entities (collectively, the "Deloitte Network") DTTL and each of its member firms are legally separate and independent entitiesDTTL does not provide services to clients. Please see www.deloitte com/ba/about for a more detailed description of DTTL and its member firms

In Bosnia and Herzegovina, the services are provided by Deloitte Ltd and Deloitte Advisory Services Ltd (jointly referred to as "Deloitte Bosnia and Herzegovina")which are affiliates of Deloitte Central Europe Holdings Limited. Deloitte Bosnia and Herzegovina is one of the leading professional services organizations in thecountry providing services in audit, tax, consulting, financial advisory and legal services through over 45 national and specialized expatriate professionals

) 2017 Deloitte Bosnia and Herzegovina

Report on the consolidated project financial statements (continued)

Opinion

In our opinion, the accompanying consolidated project financial statements present fairly, in all material

aspects, the financial position of the Project as of December 31, 2016 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 Bahtanovip, director and licenced auditor lAdna Valjevac, licenced auditor

Sarajevo, Bosnia and Herzegovina

June 23, 2017

9

AGRICULTURE AND RURAL DEVELOPMENT PROJECTof the Ministry of Finance and Treasury of Bosnia and HerzegovinaConsolidated project financial statements for the year ended December 31, 2016(all amounts in EUR, unless otherwise stated)

3. Consolidated project financial statements for the year 2016

3.1 Summary of sources and uses of funds under the IDA Credit No. 4325 BOS, SwedishGrant TF 090773, Government contribution and Other income

Actual Cumulative Cumulative Cumulative CumulativeRef. 2016 2016 2015 budget variance

FINANCING

IDA Credit No. 4325 BOS 3.1.1 714,312 14,633,639 13,919,327 15,258,839 625,200

Swedish grant TF 090773 3.1.2 - 4,488,945 4,488,945 4,334,189 (154,756)

Government contribution 3.1.3 122,232 3,381,314 3,259,082 5,308,611 1,927,297

Other income 3.1.4 13,715 86,024 72,309 - (86,024)

TOTAL FINANCING 3.2 850,259 22,589,922 21,739,663 24,901,639 2,311,717

PROJECT EXPENDITURE

By CategoryGoods, works, consultants'services and training under Part 1of the Project 182,217 4,571,633 4,389,416 5,140,643 569,010Operating costs under Parts 1Aand 1 B of the Project 65,739 65,739 221,221 155,482Operating costs under Part 1C ofthe Project - 21,820 21,820 169,153 147,333Goods, works, consultants'services and training under Parts2A(i), 2A(ii), 2A(iii)(a), (b) and 2B(i)of the Project 577,451 5,663,368 5,085,917 5,091,501 (571,867)Goods, works, consultants'services, training and technicalservices under Parts 3A(i), 3A(ii),3A(iii)(a), (b) and 3B(i) of theProject 678,377 4,494,457 3,816,080 4,881,135 386,678Operating costs under Parts 2Aand 2B of the Project 5,725 108,241 102,516 211,957 103,716Operating costs under Part 2C ofthe Project 168,573 1,421,219 1,252,646 529,892 (891,327)Consultants' services under Part 2A(iii)(c) of the Project - - - 39,743 39,743

Operating costs under Parts 3Aand 3B of the Project 3,886 43,943 40,057 487,569 443,626

Operating costs under Part 3C ofthe Project 8,289 103,481 95,192 271,186 167,705

Consultants' services under Part3 A(iii)(c) of the Project - 50,377 50,377 792,789 742,412Flood rehabilitation, works, goodsand services under Part 2B (ii) ofthe Project 92,479 2,748,172 2,655,693 3,071,725 323,553Flood rehabilitation, works, goodsand services under Part 3B (ii) ofthe Project - 2,949,091 2,949,091 3,993,125 1,044.034

TOTAL EXPENDITURE 3.2 1,716,997 22,241,541 20,524,544 24,901,639 2,660,098

10


3. Consolidated project financial statements for the year 2016 (continued)

3.1 Summary of sources and uses of funds under the IDA Credit No. 4325 BOS, SwedishGrant TF 090773, Government contribution and Other income (continued)


PROJECT EXPENDITURE

By Component

Agriculture information system andinstitutional capacity building 815,569 9,032,781 8,217,212 14,446,317 5,413,536

Enhanced agriculture and ruraldevelopment incentive programs 714,533 11,103,061 10,388,528 9,390,873 (1,712,188)

Project coordination, administrationand monitoring 186,895 2,105,699 1,918,804 1,064,449 (1,041,250)

TOTAL EXPENDITURE 3.2 1,716,997 22,241,541 20,524,544 24,901,639 2,660,098

11



3.1.1 Summary of sources and uses of funds under the IDA Credit agreement No. 4325 BOS


FINANCING

IDA Credit No. 4325 BOS 15,258,839

Initial deposit - 700,000 700,000

Direct payments 402,211 6,000,857 5,598,646

SoE replenishments 429,525 8,050,206 7,620,681

Refund to World Bank (117,424) (117,424) -

TOTAL FINANCING 3.1 714,312 14,633,639 13,919,327 15,258,839 625,200

PROJECT EXPENDITURE

By CategoryGoods, works, consultants' servicesand training under Part 1 of theProject 154,884 2,557,068 2,402,184 2,582,053 24,985Operating costs under Parts 1A and1 B of the Project - 55,879 55,879 202,353 146,474Operating costs under Part 1 C of theProject - 18,547 18,547 106,159 87,612Goods, works, consultants' servicesand training under Parts 2A(i), 2A(ii),2A(iii)(a), (b) and 2B(i) of the Project 407,092 4,142,064 3,734,972 3,739,836 (402,228)Goods, works, consultants'services and training under Parts3A(i), 3A(ii), 3A(iii)(a), (b) and 3B(i)of the Project 576,621 3,249,908 2,673,287 3,282,733 32,825

Operating costs under Parts 2A and2B of the Project 4,867 88,697 83,830 180,179 91,482

Operating costs under Part 2C of theProject - 658,847 658,847 450,447 (208,400)

Operating costs under Parts 3Aand 3B of the Project 3,303 37,352 34,049 195,078 157,726

Operating costs under Part 3C ofthe Project 7,045 87,956 80,911 260,104 172,148

Consultants' services under Part 2A(iii)(c) of the Project - - - 33,784 33,784

Consultants' services under Part3A(iii)(c) of the Project - 42,821 42,821 49,853 7,032

Flood rehabilitation, works, goodsand services under Part 2B (ii) of theProject 92,479 1,746,080 1,653,601 2,117,101 371,021

Flood rehabilitation, works, goodsand services under Part 3B (ii) of theProject - 1,948,420 1,948,420 2,059,159 110,739

TOTAL EXPENDITURE 3.2 1,246,291 14,633,639 13,387,348 15,258,839 625,200

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3.1.2 Summary of sources and uses of funds under the Swedish Grant agreement TF 090773


FINANCING

Swedish Grant TF 090773 4,334,189

Initial payment - 440,000 440,000

Direct payments - 1,337,830 1,337,830

SoE replenishments - 2,730,313 2,730,313

Return of unused funds - (19,198) (19,198)

TOTAL FINANCING 3.1 - 4,488,945 4,488,945 4,334,189 (154,756)

PROJECT EXPENDITURE

By Category

Goods, consultants' services,training and technicalservices under Part 1 of theProject - 1,327,983 1,327,983 1,362,906 34,923

Goods, consultants' services,training and technical servicesunder Part 2 of the Project,excluding flood rehabilitationactivities under Part 2B of theProject - 587,820 587,820 588,028 208

Goods, works, and servicesunder Part 2B of the Projectrelating to flood rehabilitationactivities - 1,002,092 1,002,092 954,624 (47,468)

Goods, consultants' services,training and technical servicesunder Part 3 of the Project,excluding flood rehabilitationactivities under Part 3B of theProject - 570,379 570,379 532,064 (38,315)

Goods, works, and servicesunder Part 3B of the Projectrelating to flood rehabilitationactivities - 1,000,671 1.000.671 896,567 (104.104)

TOTAL EXPENDITURE 3.2 - 4,488,945 4,488,945 4,334,189 (154,756)

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3.1.3 Summary of sources and uses of funds under Government contribution


FINANCINGGovernment contribution -FB&H - 879,261 879,261 1,273,447 394,186

Government contribution - RS 19,947 1,327,556 1,307,609 4,035,164 2,707,608

VAT returns - FB&H 102,285 1,174,497 1,079:212 - (1,174,497)

TOTAL FINANCING 3.1 122,232 3,381,314 3,259,082 5,308,611 1,927,297

PROJECT EXPENDITURE

By Category

Goods, works, consultants'services and training underPart 1 of the Project 27,333 686,582 659,249 1,195,684 509,102

Operating costs under Parts1A and 1B of the Project - 9,860 9,860 18,868 9,008

Operating costs under Part1C of the Project 3,273 3,273 62,994 59,721

Goods, works, consultants'services and training underParts 2A(i), 2A(ii), 2A(iii)(a),(b) and 2B(i) of the Project 170,359 933,484 763,125 763,637 (169,847)

Goods, works, consultants'services, training andtechnical services underParts 3A(i), 3A(ii), 3A(iii)(a),(b) and 3B(i) of the Project 101,756 674,170 572,414 1,066,338 392,168

Operating costs under Parts2A and 2B of the Project 858 19,544 18,686 31,778 12,234

Operating costs under Part2C of the Project 168,573 762,372 593,799 79,445 (682,927)

Operating costs under Parts3A and 3B of the Project 583 6,591 6,008 292,491 285,900

Operating costs under Part3C of the Project 1,244 15,525 14,281 11,082 (4,443)

Consultants' services underPart 2 A(iii)(c) of the Project - - - 5,959 5,959

Consultants' services underPart 3A(iii)(c) of the Project - 7,556 7,556 742,936 735,380

Flood rehabilitation, works,goods and services underPart 3B (ii) of the Project - - - 1,037,399 1,037,399

TOTAL EXPENDITURE 3.2 470,706 3,118,957 2,648,251 5,308,611 2,189,654

14



3.1.4 Summary of sources and uses of funds under Other income


FINANCING

Interest - IDA Credit(FB&H only) - 5 5 (5)

Interest - Swedish Grant - 1,555 1,555 - (1,555)

Interest - Government 10,781 54,588 43,807 - (54,588)

Insurance indemnity(FB&H only) - 3,318 3,318 - (3,318)

Tender documentation sold(FB&H only) 4,523 26,558 22,035 - (26,558)

Other income (fundstransferred by theGovernment by mistake)* (1.589) - - 1,589 - -

TOTAL FINANCING 3.1 13,715 86,024 72,309 - (86,024)

PROJECT EXPENDITUREBy Category

TOTAL EXPENDITURE 3.2 -

* During 2015, the Government of RS has made transfer of funds by mistake to the Governmentcontribution account in amount of BAM 1,589. The funds are transferred during 2016 on the correctbank account

15



3.2 Consolidated balance sheet as of December 31, 2016 showing accumulated funds of theproject and bank balances concerning World Bank funding

December 31, December 31,Ref. 2016 2015

ASSETS

Project expenditure under IDA Credit No. 4325 BOS 3.1.1 14,633,639 13,387,348

Project expenditure under Swedish Grant TF 090773 3.1.2 4,488,945 4,488,945

Project expenditure under Government contribution 3.1.3 3,118,957 2,648,251

22,241,541 20,524,544

Designated account - IDA Credit No. 4325 BOS - FB&H A.1 - 194,535

Local bank account - IDA Credit No. 4325 BOS - FB&H A.2 - 39

Designated account - IDA Credit No. 4325 BOS - RS A.3 - 328,982

Local bank account - Government contribution - FB&H A.4 3,836 247,163

Petty cash - Government contribution - FB&H A.5 - 314

Local bank account - Government contribution - RS A.6 344,545 444,086

Local bank account - Government contribution - RS A.7

348,381 1,215,119

Total assets 22,589,922 21,739,663

LIABILITIES

IDA Credit No.4325 BOS C.1 14,633,639 13,919,327

Swedish Grant TF 090773 C.2 4,488,945 4,488,945

Government contribution 3.1.3 3,381,314 3,259,082

Other income 3.1.4 86,024 72,309

Total liabilities 22,589,922 21,739,663

16


4. Notes to the consolidated 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 Board.

4.2 Accounting 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 IDA Credit / 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 Credit / Grant account of the World Bank.

Statement of Expenditure (SoE)

Statements of Expenditure are used to state the expenditure under IDA Credit / Swedish Grant during

a certain period. These statements are sent to the World Bank's disbursement department who

authorises the payment of the expenditure through the Designated accounts.

Currency conversions

The reporting currency is Euro (EUR). Sources and use of funds (payments to suppliers and

contractors) in currencies other than EUR have been converted to EUR 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 accounts

This is the total amount of the withdrawals from the Credit / Grant account for the Project. IDA Credit

account is in XDR. Swedish Grant account is in SEK.

Local bank accounts

This concerns bank accounts at local banks (other than Designated accounts) in local currency

translated at the exchange rate at the date of the balance sheet.

17

AGRICULTURE AND RURAL DEVELOPMENT PROJECTof the Ministry of Finance and Treasury of Bosnia and HerzegovinaConsolidated project financial statements for the year ended December 31, 2016(all amounts in EUR, unless othenwise stated)

4. Notes to the consolidated project financial statements (continued)

4.2 Accounting policies

Other income

Other income includes interest earned on cash funds at the bank accounts and income from tender

documentation sold.

Interest on Designated accounts

Interest earned on the Designated accounts belongs to the Borrower.

Interest on local bank accounts

Interest earned on the local bank accounts used for the payments from IDA Credit / Swedish Grantfunds belongs to the Borrower; interest earned on the local bank account used for the payments from

Government contribution is treated as additional source of financing of the Project.

18


APPENDIX A.1 DESIGNATED ACCOUNT STATEMENT - FB&H

Account owned by: Ministry of Finance and Treasury of Bosnia and Herzegovina

Account No.: 10000076000

Depository Bank: UniCredit Bank d.d.

Address: Kardinala Stepinca b.b., Mostar

Related Credit: IDA Credit No. 4325 BOS

Currency: EUR

Ref. EUR

Opening balance January 1, 2016 3.2 194,535

Add:World Bank replenishments B.1 182,849*

182,849

Deduct:

Payments to suppliers - Expenditure under IDA Credit 248,480

Refund to World Bank 117,424

Return-overpaid Government contribution 11.480

377,384

Ending balance December 31, 2016 3.2 -

* Difference of EUR 10, between the replenishments for 2016 as per Appendix B.2 and Appendix C.2 (in

amount of EUR 182,859) and replenishments for 2016 as per Appendix A 1 (in amount of EUR 182,849)

represents bank charges on disbursements received in 2016.

Bank account has been closed at December 19, 2016.

19


APPENDIX A.2 LOCAL BANK ACCOUNT STATEMENT - FB&H

Account owned by: Ministry of Agriculture, Water Management and Forestry of FB&H

Account No.: 338 690 223 9119597

Depository Bank; UniCredit Bank d.d.



Currency: BAM

Ref. BAM EUR

Opening balance January 1, 2016 3.2 77 39

Add:

Deduct:Payments to suppliers - Expenditure under IDA Credit 15 7

Return - overpaid Government contribution 62 32

77 39

Ending balance December 31, 2016 3.2 - -

Bank account has been closed at December 20, 2016.

20


APPENDIX A.3 DESIGNATED ACCOUNT STATEMENT - RS

Account owned by: Ministry of Finance and Treasury of Bosnia and Herzegovina

Account No.: 10000077000




Currency: EUR

Ref. EUR

Opening balance January 1, 2016 3.2 328,982

Add

World Bank replenishments C.1 246,666Tender documentation sold(considered as Government contribution) 250

246,916

DeductPayments to suppliers - Expenditure under IDA Credit 575,648

Payments to supliers-Expenditure under Government Contribution A.2 250

675,898

Ending balance December 31, 2016 3.2 -

21


APPENDIX A.4 LOCAL BANK ACCOUNT STAEMENT - FB&H

Account owned by: Ministry of Agriculture, Water Management and Forestry of FB&H

Account No.: 338 690 2265 057494



Related Credit: Government contribution

Currency: BAM

Ref. BAM EUR

Opening balance January 1, 2016 3.2 483,410 247,163

Add:

VAT returns 200,053 102,285

Tender documentation sold 8,846 4,523Return from designated IDA account and IDA local BAMaccount - overpaid Government contribution 22,516 11,512

Interest 3.1.4 - -52 26

231,467 118,346

Deduct:

Payments to suppliers - Expenditure under Government 702,873 359,372

Transfers to Petty cash - Government A.4 4,500 2,301

707,373 361,673

Ending balance December 31, 2016 3.2 7,504* 3,836*

* As of March 26, 2017 the amount of EUR 3,892 has been transffered to Government, and bank

account has been closed.

22


APPENDIX A.5 PETTY CASH STATEMENT - FB&H

Address: PlU. Sarajevo


Currency: BAM

Ref. BAM EUR

Opening balance January 1, 2016 3-2 614 314

Add:Transfers from Local bank account - Government A.3 4,500 2,301

4,500 2,301

Deduct:Payments to suppliers - Expenditure under Government 5,114 2,615

5,114 2,615

Ending balance December 31, 2016 3.2 - -

23


APPENDIX A.6 LOCAL BANK ACCOUNT STATEMENT - RS

Account owned by: Ministry of Agriculture, Forestry and Water Management of RS

Account No.: 5520300002265095

Depository Bank: Hypo Alpe-Adria-Bank a.d.

Address: Aleja svetog Save 13, Banja Luka


Currency: BAM

Ref. BAM EUR

Opening balance January 1, 2016 3.2 868,555 444,086

Add:Contribution from Government of RS 37,465 19,155

Interest 21,034 10,755

Tender documentation sold A.1 1,059 542

59,558 30,452

Deduct:

Payments to suppliers - Expenditure under Government 252,136 128,404

Return of funds to Government _ _ _ 3,108 1.589

254,244 129,993

Ending balance December 31, 2016 3.2 672,869 344,545

24


APPENDIX A.7 LOCAL BANK ACCOUNT STATEMENT - RS

Account owned by: Ministry of Agriculture, Forestry and Water Management of RS

Account No.: 194-106-49465111-65

Depository Bank: ProCredit Bank d-d-

Address: Emerika Bluma 8, Sarajevo


Currency: BAM

Ref. BAM EUR

Opening balance January 1, 2016 3.2 - -

Add:

Deduct:

Ending balance December 31, 2016 3,2 - -

Note: During 2015, the bank account related to Government contribution as part of SIDA Grant TF

90773, was closed since this part of project was finished and the remaining amount of funds were

returned to Ministry of Finance of Republika Srpska.

25

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APPENDIX C.1 Reconciliation between World Bank's disbursement statements in XDR

and IDA Credit account in EUR according to the consolidated balance

sheet as per December 31, 2016; SoE Withdrawal Schedule of IDA Credit

No. 4325 BOS

Changes in Exchange Changes in

IDA Credit rate used IDA Credit

(in XDR) (in EUR)

Original amount 13,800,000 15,258,839

Disbursed in previous years 12,054,356 13,919,327

FBIH-60 52,961 1.265138 67,003

FBIH-61 92,124 1.257609 115,856

FBIH-62 102,749 1.253929 128,840

FBIH-63 95,654 1.254344 119,983

RS-37 174,492 1.247392 217,660

RS-38 122,220 1.255016 153,388

RS-39 23,361 1.241642 29,006

Total withdrawal 663,561 831,736

Refund to World Bank (92,533) 1.268996 (117,424)

Total disbursed in 2016 571,028 714,312

Cumulative disbursements 12,625,384 14,633,639

Calculated undisbursed balanceas of December 31, 2016 1,174,616 625,200

Undisbursed balance as perWorld Bank Summary for December 2016 1,174,616 1.282010 1,505,870

Potential exchange rate gain 880,670

28


APPENDIX C.2 Reconciliation between World Bank's disbursement statements in SEK and

Swedish Grant account in EUR according to the consolidated balance

sheet as per December 31, 2016; SoE Withdrawal Schedule of Swedish

Grant TF 090773

Changes in Exchange Changes in

Swedish Grant rate used Swedish Grant(in SEK) (in EUR)

Original amount 41,160,000 4,334,189

Disbursed in previous years 40,780,816 4,488,945

Total disbursed in 2016

Cumulative disbursements 40,780,816 4,488,945

29

consolidated project financial statements...

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