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ARMENIAN SOCIAL INVESTMENT FUND

ARMENIAN SOCIAL INVESTMENT FUND III PROJECT

IDA Credit 4238-AM IDA Credit 4548-AM (Additional financing)

ffiRD Credit 7847-AM (Second additional financing) IDA Credit 5071-AM (Third additional financing)

SPECIAL PURPOSE FINANCIAL STATEMENTS

AND

INDEPENDENT AUDITOR'S REPORT

For the year ended 31 December 2013

YEREVAN May 2014

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CONTENT

Page

THE BOARD OF THE ASIF ....................................................................................................................... 3

INDEPENDENT AUDITOR'S REPORT : ....................... .. ................. ....................................................... 4

STATEMENT OF CASH RECEIPTS AND PAYMENTS ......................................................................... 6

STATEMENT OF USES OF FUNDS BY PROJECT ACTIVITY ............................................................. 7

SUMMARY OF SUMMARY REPORTS AND SOEs ........ ....................................................................... 8

STATEMENT OF DESIGNATED ACCOUNT .......................................................................................... 9

NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS ................................................... II

ANNEX I. RECONCILIATION BETWEEN THE AMOUNTS SUBMITTED BY THE PROJECT

AND DISBURSED BY THE WORLD BANK ......................................................................................... 24

lr111enian 'irJ< ra/ Jnve,·fmenl Fund Ill l'roie< 1

Proj,•cr Special l'urp01e Fimmcial Statement\' For !he year ~·nded 31 /)ecemher 20/J ]/.J.j

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THE BOARD OF THE ASIF

The Chairman Hovik Abrahamyan Prime Minister of the Republic of Armenia

Members

Armen Gevorgyan Deputy Prime minister of the Republic of Armenia, Minister of Territorial Administration

Gagik Khachatryan Minister of Finance of the Republic of Armenia

Narek Sargsyan Minister of Urban Development ofthe Republic of Armenia

Artem Asatryan Minister of Labor and Social Affairs ofthe Republic of Armenia

Armen Ashotyan Minister of Education and Science of the Republic of Armenia

Taron Margaryan Mayor of Yerevan

General Director of representation in Armenia of charitable Jirayr Markosyan organisation "Aznavour pour 1' Armenia"

Ara Vardanyan Executive Director of All-Armenian Fund

Levon Karaqashyan Representative of organization "Knights ofVardan"

Arpi Vardanyan Director of AGBU Armenia representation

Ashot Kirakosyan Executive director of Armenian Social Investment Fund

-lr1•teman Sch·ta/ lnves/melll Fund Ill f'roje,/ Pmjt't.'l Special !'urpo.1e Filial/cia/ Statements For !he Y<'ill" mdcui 3 I /)eccmber 20 I J .1/l..J

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"UOU-Ufif'.l}.f1S" Un}£!

"80S-AUDIT" LTD

INDEPENDENT AUDITOR'S REPORT N 32

On the special purpose financial statements of Armenian Social Investment Fund III Project for the year ended 31 December 2013

To the Management of the Armenian Social Investment Fund (the ASIF)

We have audited the accompanying special purpose financial statements of the Armenian Social Investment Fund III Project (the Project), the statement of cash receipts and payments, the statement of uses offunds by project activity, the summary of summary reports and SOEs, the statement of designated account for the year then ended 31 December 2013, and a summary of significant accounting-policies and other explanatory notes.

I -

Management's Responsibility for the Financial Statements

The ASIF management is responsible for the preparation and fair presentation of these special purpose financial statements in accordance with International Public Sector Accounting Standards (IPSAS): Financial Reporting Under the Cash Basis of Accounting, issued by the International Federation of Accountants (IF A C), and Financial Management Manual for World Bank Financed Investment Operations, and for such internal control as management determines is necessary to enable the preparation of special purpose financial statements that are free from material misstatements, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these special purpose financial statements based on our audit'. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the special purpose financial statements are free from material misstatement.

An audit involves performing procedures to obtain reasonable audit evidence about the amounts and disclosures in the special purpose financial statements. The procedures selected depend on the auditor's judgment ·including the assessment of the risk of material misstatement of the special purpose financial statements, whether due to fraud or error. In making those assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the special purpose financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the special purpose financial statements.

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=!=!; p. bfll..wO 0037, U.StJqflWOJwO 38/55; "'bn.' (+37410) 2011 51; :bwpu· (+37410) 20 11 50; www.sosaudit.am; tL-Ltmum· info@sosaudit.am

An Associate of the Crowe Horwath Business Alliance

38/55A.Tigranyan, 0037 Yerevan, RA; Tel.: (+37410) 20 11 51; Fax: (+37410) 20 11 50; www.sosaudit.am; E-mail: info@sosaudit.am

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"U OU -Ufii'-L1P.S" U till!

"SOS-AUDIT" LTD

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

Opinion ·

In our opinion,

1. the special purpose financial statements present fairly in all material respects cash receipts and payments, designated accountsmovements and its balances of the Project for the year ended 31 December 2013 in accordance with International Public Sector Accounting Standards (IPSAS): Financial Reporting Under the Cash Basis of Accounting, and Financial Management Manual for World Bank Financed Investment Operations;

2. funds have been used in all material respects in accordance with the conditions of the Credit Agreements IDA 4238-AM, 4548-AM (additional financing) and 5071-AM (third additional financing) between the Republic of Armenia and International Development Association, and IBRD 7847-AM (second additional financing) between the Republic of Armenia and International Bank of Reconstruction and Development, with due attention to economy and efficiency, and only for the purpose for which they were provided;

3. supporting documents, records and accounts have been maintained to support claims for reimbursement of expenditures incurred. The expenditures included in the withdrawal applications and reimbursed against are eligible for financing under the IDA Credit Agreement 5071-AM (third additional financing), and IBRD Credit Agreement 7847-AM (second additional financing).

Emphasis of matters

Without qualifying our opinion we draw your attention to Note 9 of these special purpose financial statements which disclosed that financing under IDA 4238-AM, IDA 4548-AM and IBRD 7847-AM Credit Agreements were completed as at reporting date.

SOS-Audit LLC 7 May 2014

Gnel Khachatryan, FCCA Auditor

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STATEMENT OF CASH RECEIPTS AND PAYMENTS Armenian Social Investment Fund Ill Project IDA Credits 4238-AM, 4548-AM (additional financing) and 5071-AM (third additional financing) IBRD Credit 7847-AM (second additional financing) For the year ended 31 December 2013 lnUSD

Actual Description Reporting vear Cumulative

~pening Cash Balance 1,307,104 -~ources of Funds

IDA 4238-AM - 24,711,159 IDA 4548-AM - additional financing - 7,988,525 lBRD 7847-AM- second additional financing - 7,000,000 IDA 5071-AM -third additional financing 5,056,585 7,172,088 RA Government (1,401) 6,230,802 . RA Government -additional financing (298) 1,335,722 RA Government - second additional financing - 1,378,821 RA Government - third additional financing 1,693,045 2,419,820 Community contribution 275,127 4,050,518 Sponsors 62,720 373,198 Reimbursement of PPF - 1,909,171

Total 7,085,778 64,569,824 Adjustments 39,153 (61,461) ' Uses of Funds I. Works 5.495,258 39,854,055 2. Goods 822,802 6,216,370 3. Consultants' services and training 253,734 3,151,045 4. Operating costs 633,015 4,575,864 5. Reimbursement of PPF - 1,628,213

~-....---:~

6. Works, Goods, Consultants' services and training -IB!3D~Zt\~~=;t,.-~ 75,350 7,913,440 7. Front-end fee //5.' ~;-. .. ~-!. <vu~i. x~ - 17,500

trotal 0~· '1-'-tl'"''" '' _,, .>o· _!/, .._'? ~ .... ~ .,.----.._., (~ c,.>.\.-\ 7,280,159 63,356,487

!closing Cash Balance k~k!"'.._._. /~ /"-,"" '(Y~':\.J,J5J,876 1,151,876 - . - ·- .... .-....... "' - - .. - ~ , "--" - .. - -

accompanymg notes form an integral part oft~e\~~~:r\i~;i;l-~u!);·-;~Ji\fl]i_;g~---c. ~'hi statemen)/ts~. ~ ~ ~ ... ~ ' \ ' :;· t'::::!: .\~,t_) ~ :-.!. .... -~<::}

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• \.\::J>./, 'lr, """'·· Ashot ~arakosyan , Q~:~;~~·· * <-''h~"{\t,._·· '? Levon ~u~yan. .

D1rector , ~ I~~ ~n!lllCial and Admomstratove D~rector l'roJ<< r ·'r•euall'ttrt•os\ I wu:t, _:,rf 'lmemc:llr' Jhr tht \.tart Jtd:: ,I 3 i I''\ ,•m.', , . .!fJi3

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Planned Reporting year Cumulative

6,730,923 41,089,720 589,077 5,982,645 730,500 3,627,811 718,500 4,661 ,349

- 1,628,213 - 7,838,090 - 17,500

8,769,000 64,845,328

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Variance Reporting year Cumulative

1,235,665 1,235,665 (233,725) (233,725) ;

476,766 476,766 85,485 85,485

- -(75,350) (75,350)

- -1,488,841 .. 1,488 841

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STATEMENT OF USES OF FUNDS BY PROJECT ACTIVITY

Armenian Social Investment Fund Ill Project IDA Credits 4238-AM, 4548-AM (additional financing), and 507 l-AM (third additional financing) IBRD Credit 7847-AM (second additional financing) For the year ended 31 December 2013 lnUSD

Project Activities

1. Community Investments

Works

School furniture

Support to MP/vehicles

CB&TA 2. Local level institutional strengthening, monitoring and evaluation

Training in management

3. Project Management

CB&TA toASIF

Special studies

GA&M

Front-end fee

Total Project Expenditures

Armenian Social!m·•·::/m,·J;/ Fu11d Ill Proje(:! /'roj,•cf SpN:ial Purpuse !- iJmf/c:ial Slalemert/s fhr !Itt.' )/tYJr endc.·J 3i I Jeo.:e111/Jt'r 2013

Actual

Reporting year Cumulative

6,617,418 57,916,450

5,563,901 48,197,356

805,152 6,454,560

- 156,175

248,365 3,108,359

- 171,902

- 171,902

662,741 5,250,635

5,370 61,872

- 199,627

657.371 4,989,136

- 17,500

7,280,159 63,356,487

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Planned

Reporting year Cumulative

7,875,388 59,174,420

6,730,923 49,364,378

589,077 6,238,485

- 156,175

555,388 3.415.382

150,000 321,902

150,000 321,902

743,612 5,331,506

- 56.502

- 199.627

743,612 5,075,377

- 17,500

8,769,000 64,845,328

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Variance

Reporting year Cumulative

1,257,970 1,257,970

1,167,022 1,167,022

(216,075) (216,075)

- -307,023 307,023

150,000 150,000

150,000 150,000

80,871 80,871

(5,370) (5,370)

- -86,241 86,241

- -1,488,841 " 1,488,841

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SUMMARY OF SUMMARY REPORTS AND SOEs

Armenian Social Investment Fund JJJ Project JBRD Credit 7847-AM (second additional financing) For the year ended 31 December 2013 lnUSD

E'9J_enditure category Application Works, Goods, Consulting services

number* and training 1

30 42,069.30 31 63,859.10

105,928.40

(*)For the period from 01.01.2013 to 28.02.2013

Armenian Social Investment fund Ill Project IDA Credit 50 71 -AM (third additional financing) For the year ended 31 December 2013 JnUSD

Expenditure category Application Works, Goods, Consulting Operating costs

number services and training 1

7 393,950.68 8 180,902.63 9 170,986.96 10 212,366.70 II 220,700.00 12 414,137.39 13 333,585.13 14 572,753.26 15 500,847.63

16 515,279.04 17 436,603.15 18 590,979.45

4,543,092.02

Armenian Sodal/m•es/menl Fund Ill f'rc.~jeCI Pmjecf Speciall'urpose Fimzncial Statement.\ fi;r th~;.· year ended 31 December 20 I J

2 41,980.33 23,062.63 23 ,344.52 24,752.61 21,581.12 23,430.68 33,132.48 24,001.59 24,665.22 25,795.12 25,581.17 22,165.98

313,493.45

Total

435,931.01 203,965.26 194,331.48 237,119.31 242,281.12 437,568.07 366,717.61 596,754.85 525,512.85 541,074.16 462,184.32 613,145.43

4,856,585.47

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STATEMENT OF DESIGNATED ACCOUNT

Armenian Socia/ Investment Fund Ill Project IDA Credits 4238-AM, 4548-AM (additional financing) and 5071-AM (third additional financing) IBRD Credit 7847-AM (second additional financing) For the year ended 31 December 2013 lnUSD

Designated Account

Currency

Account number

IDA Credit 4238-AM

USD

900000907031

IDA credit 4548-AM

USD

900000907056

IBRD Credit 7847-AM

USD

900000907072

Central Treasury

IDA Credit 5071-AM

USD

900000907015

Bank

Location Meliq Adamyan Street I, Yerevan, Republic of Armenia, 00 I 0

1. Opening balance as at 01.01.2013

2. Add: opening discrepancy*

3. IDA advance/replenishment

4. Less: Refund to IDA from DA

5. Amount advanced to DA

6. DA closing balance as at 31.12.2013

7. Add: Amount of eligible expenditures paid

8. Less: interest earned (if credited to DA)

9. Total advance accounted for

I 0. Discrepancy (5)-(9) *

IDA Credit

4238-AM

(8,735)

(8,735)

(8,735)

Ar11wnia.'1 SrJ< wllnwstmenl Fund IIi l'roje, 1

!'rr!ir.'c'f S(WC wll'uq•o.\·e Flml/lcial Stmemcll/<

J<•r rht· yc11r mded 3 I /)ecember 2(JJ 3

IDA Credit

4548-AM

(169)

(169)

(169)

IBRD Credit IDA credit 7847-AM 5071-AM Total

63,176 362,224 425,400

613 1,845 (6,446)

5,056,585 5,056,585

__ ___::6.:::.c3,'-'-7.:::.:89;_ __ ..::;5.!..:,4..::2.:::.:0,~65=-4.:_ 5,475,539

173,626 173,626

63,859 5,246,563 5,310,422

63,859 5,420,189 5,484,048

(70) 465 (8,509)

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STATEMENT OF DESIGNATED ACCOUNT (Continued)

* Discrepancy consists of as follows:

IDA Credit IDA credit

4238-AM 4548-AM (a) (a)

Opening discrepancy Balance at current account 963

Balance at cash desk Refund to IDA from current account (5,722)

FX revaluation gain/(loss) (3,976) (169)

Total opening discrepancy (8,735) ____j169)

Closing discrepancy Balance at current account Balance at cash desk Refund to IDA from current account (5,722)

Transfer to interest account (c) 963

FX revaluation gain/(loss) (3,976) (169)

Total closing discrepancy {8,735} {169}

IBRD C•·edit IDA credit

7847-AM 5071-AM (a) (b)

1,559

16

613 270

613 1,845

131

66

(70) 268

{70} 465

In USD

Total

2,522

16

(5,722)

(3,262}

(6,446}

131

66

(5,722)

963

{3,947}

{8,509)

(a) As at 31.12.2013 financing under IDA 4238-AM, IDA 4548-AM and IBRD 7847-AM credit agreement were completed (Note 9).

(b) Financing under IDA 5071-AM credit agreement will be completed on 31 March 2015. (c) Current account balance in the amount of 963 USD that was generated from interest

accrued has been transferred from IDA 4238-AM into IDA 5071-AM interest account on 08.01.2013.

lmwman ~·rh ia/ flll'eSI!IIC:l/1 rzmd /J/ f'roi<'<i

f't o;u 1 .\/Ji'twl {'Ttr/ 10.\"<' Financiu/ .~/afemcnr< j(·,,. th<· year mded 31 necenzht'r 2013

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NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS

Armenian Social bTVestment Fund Ill Project IDA Credits 4238-AM and 4548-AM (additional financing) IBRD Credit 7847-A M (second additional financing) IDA Credit 5071-AM (third additional financing) For the year ended 31 December 2013

1. General information

1.1. The Projectjina11cing

According to the Agreement between the Republic of Armenia and the international Development Association (IDA) on l November 2006, IDA provided Credit 4238-AM in the amount of 16,900,000 SDR (Special Drawing Rights) to the Republic of Armenia. The credit was provided for implementation of Armenian Social Investment Fund III Project (hereinafter Project).

Additional financing agreement IDA Credit 4548-AM in the amount of 5,200,000 SDR was entered into between the Republic of Armenia and the international Development Association on 26 February 2009.

Second additional financing agreement, IBRD Credit 7847-AM, in the amount of 7,000,000 USD was entered into between the Republic of Armenia and the International Bank of Reconstruction and Development (IBRD) on 5 May 2010.

Third additional financing agreement IDA Credit 5071-AM in the amount of7,100,000 SDR was entered into between the Republic of Armenia and the International Development Association on 24 February 2012.

Closing date for the IDA Credit 4238-AM is set on 31 March 2012 Closing date for the IDA Credit 4548-AM is set on 30 June 2011. Closing date for the IBRD Credit 784 7 -AM is set on 31 October 2012. Closing date for the IDA Credit 5071-AM is set on 31 March 2015.

1.2. The Project's objective

The objective ofthe Project is to support the Recipient's policy to raise the living standards of the poor and vulnerable groups through: (a) improving the quality and access, and increasing the coverage of community infrastructure and services in poor communities, and for the most vulnerable groups in response to critical emerging needs; and (b) promoting complementary institutional capacity building at the community and municipal level so as to improve the quality and sustainability of service delivery and municipal investments, increase accountability, and enhance greater stakeholder empowerment at the local level.

The Project consists of the following components.

1. Community investments, 2. Local level institutional strengthening, monitoring and evaluation, 3. Project Management, Monitoring and Evaluation.

-lrmenian Social Jnve,ament Fund Ill Projeu Pmjt•,:r .\i1ecial l'ur[IO.H' Fimmcial Starement• / 01' tl~<· \t' cll' t' lldcd 31 f)ecc~ml>er }(J/3

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The Project is implemented by the Armenian Social Investment Fund, established by a Decree ofthe Government of the Republic of Armenia, the sole founder, as an autonomous non-profit agency.

1.3. Budget

As at 31 December 2013 updated budget of Project financing is 68,4 70,609 USD. Budget disclosure by expenditures category is presented in next page (in USD). For budget formation the following matters were taken into consideration:

(a) Credit IDA 4238-AM and IDA 4548-AM budgets in SDR were updated on 31 January 2011.

(b) Budget USD equivalents for Credits IDA 4238-AM, IDA 4548-AM and IDA 5071-AM, with underling currency of SDR, are calculated based on cumulative funds received in USD plus, if any, USD equivalent of undisbursed funds in SDR as at reporting date. There were no undisbursed funds under Credits IDA 4238-AM, IDA 4548-AM and IBRD 7847-AM as at 31 December 2013. SDRIUSD rate as at 31.12.2013 is set at 1.54000 (31.12.2012: 1.53692).

(c) Budget of financing from Sponsors and Communities are equal to the amounts received as at reporting date.

-lrmenianSocial/nve,,·rmenr Fund Ill f'roiecf Prof•'•'' Speciall'urpose Fimurcial Starenumts for th,• yeur ,•nded 31 December 2013 IF.N

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Initial Category/ Financing

SDR

Works 11,194,000

Goods 2,366,000

Consultant Services and training 1,386,000

Operating Costs 940,000 Refund of project Preparation Advance 1,014,000

Works, goods, consultant's services, including training for the project -Front-end fee -

Total Amount 16,900,000

Category/ Financing IDA 4238-AM

USD

Works 3,235,799

Goods 987,179

Consultant Services and training 578,205

Operating Costs 1,391,000 Refund of project Preparation Advance 480,000

Works, goods, consultant's services, including training for the project -Front-end fee -Total Amount 6,672,183

Armenian Soc:iallm·c·~fm<'ill hmd 11/l'row< 1

Pl'f?iecr Speci.lll'urp,J.\e Finanr:ial SI,I!c/11• •·I'

iiir tile vear ended J I [ lt't ember .:!0 13

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IDA4238-AM

Updated Initial Updated Initial (a)

USD USD

SDR equivalent SDR equivalent (b)

11,361,032 16,564,213 17,604,524 4,820,000

2,516,380 3,500,000 3,866,133 200,000

1,222,732 2,050,000 1,901,368 180,000

940,000 1,391,000 1,450,578 -859,856 1,500,000 1,288,959 -

- - - -- - - -

· 16,900,000 25,00S,2I3 26,III,562 5,200,000

Commu-RA Government cofinancin1 nity co-

IDA WRD IDA5071-financing

(c) 4548-AM 7847-AM AM

liSD USD USD USD

1,140,828 - 1,920,960 3,750,134

86 785 - 49,500 -78,107 - 221,540 -

- 440,000 708,000 -

- - - -

- 794,706 - 265,997

- - - -1,305,720_ - _1,234,7~ 2,900,000 -4,016,131

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IBRD IDA third additionai5071-AM IDA additional 4548-AM 7847-AM Sl!btotal

Updated IDA and

Initial Updated IBRD (a) Initial Initial Updated

USD USD USD SDR equivalent USD equivalent equivalent equivalent

(b) USD SDR

(b) USD

4;912,000 7,415,385 7,551,972 - 6,022,000 9,331,140 9,221,029 34,377,525

200,000 307 692 302,053 - 265,000 410,000 403,057 4,571,243

88,000 276,923 135,557 - 353,000 550,860 539,877 2,576,802

- - - 440,000 460,000 708,000 703,561 2,594,139

0 0 0 1,288,959 - - - -0 0 0 6,542,500

- - - 6,542,500

- - - 17,500 0 0 0 I7,5oo 1

5,200,000 8,000,000 7,989,582 7,000,000 7,100,000 11,000,000 10,867,523 si,968,668 1

Sponsors co-

financ:int:: (c)

Subtotal Total

USD USD USD

279,345 10,327,066 44,704,591

- 1,123,464 5,694,707

- 877,852 3,454,654

- 2,539,000 5,133,I39

- 480,000 1,768,959

93,856 1,154,559 7,697,059

- - I7,500 I

373,201 16,50 1,94J- 68,47Q,§02.J

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1.4. Financing percentage

Armenian Social Investment Fund III Project is financed from the following sources: International Development Association (IDA Credit 4238-AM), International Development Association (IDA Credit 4548-AM (additional financing)), International Bank of Reconstruction and Development (IBRD Credit 7847-AM, (second additional financing)), International Development Association (IDA Credit 5071-AM (third additional financing)), Government of the Republic of Armenia, Government of the Republic of Armenia (additional financing), Government of the Republic of Armenia (second additional financing), Government of the Republic of Armenia (third additional financing), Communities, Sponsors.

Credit financing rates for expenditure categories of the Project are as follows:

IDA Credit IDA Credit IBRD Credit 4238-AM 4548-AM 7847-AM

Works 78% 78% -Goods 78% 78% -Consultant Services and training 78% 78% -Operating Costs 50% - 50% Works, Goods, Consultants' services and training - - 85%

1.5. Project Implementati01r

IDA Credit 5071-AM

78% 78%

78% 50%

-

The Project is implemented by the Armenian Social Investment Fund (the ASIF). The ASIF has been established by a Decree N 162 dated 11.04.2000 of the Government of the Republic of Armenia, the sole founder, as an autonomous non-profit agency to assist in the rehabilitation of small-scale infrastructure through community initiated and demand-based activities. The Board, chaired by the Prime-Minister of the Republic of Armenia, is a supreme governing body of the AS IF.

The ASIF registered address is: 31 Ulnetsy Street, Yerevan, 0037, Republic of Armenia.

Armeniun So•ial lnvesunenl Fund Ill l'rojeCI Project Special Purpose fi'illwtcial Sraremenrs for rhe Y<'c1r t'nded 31 f)ecemht'r 2013 14,2-1

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2. Summary of significant accounting policies

2.1 Preparation and presentation of financial statements

The special purpose financial statements are prepared in accordance with the International Public Sector Accounting Standard (IPSAS): Financial Reporting Under the Cash Basis of Accounting, developed by the International Federation of Accountants (IF A C) and presented in accordance with Financial Management Manual for World Bank Financed Investment Operations: RM 3 -Financial Reporting and Auditing (March 201 0).

The special purpose project financial statements consist of:

Statement of cash receipts and payments, Statement of uses of funds by project activity, Summary of summary reports and SOEs, Statement of Designated account, Notes to the special purpose financial statements, including summary of significant accounting policies and other explanatory notes.

The principal accounting policies applied in the preparation ofthese special purpose financial statements are set out below. These policies have been consistently applied to all the periods presented.

2.2 Cash basis of accounting

The special purpose financial statements are prepared and presented using the cash basis of accounting. Cash basis means a basis of accounting under which transactions and other events are recognized only when cash or its equivalent is received or paid. Financial statements prepared under the cash basis provide information about the sources of cash raised during the period, the purpose for which cash was used and the cash balances at the reporting date.

2.3 Reporting currency

The Project financial statements are presented in United States Dollars (USD).

2.4 Foreign currency transactions

Foreign currency is a currency other than the reporting currency of the Project.

Project accounts are maintained in USD and Armenian Drams (AMD). Transactions in foreign currencies are translated to presentation currency at exchange rates at the dates of the transactions. Settlement rate of foreign currency over functional currency established by the Central Bank of the Republic of Arn1enia (the CBA) is taken as the exchange rate. Transactions denominated in AMD are translated into USD as follows:

Contributions of the Republic of Armenia expressed in AMD are presented in USD at the official exchange rate defined by the CBA at the date of transfer. Payments to contractors and suppliers expressed in AMD are presented in USD at the exchange rates defined by the CBA at the date of payment.

lrmenitln Social lnvesunent l'und Ill l'roj,•, 1

l'roj •. •cr Special l'urpo.,,: f<'il/(lll t:ial Sratemcnt' jiw the Y<'clr t'llded 31 l)ecemh,•r 20 I 3

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The exchange rate defined by the CBA as at 31 December 2012 is: USD I = 403.58 AMD. The exchange rate defined by the CBA as at 31 December 2013 is: USD I = 405.12 AMD.

2.5 Budgeting

Annual budgets for funding and expenditures are based on approved budget (as updated) of the project agreement (Note 1.3.). Expenditure budget is created based on actual accumulated expenditures for the last period plus the updated procurement plans for the period. Financing budget per fund source is created based on actual accumulated expenditures for the last period per funding source plus the share of funding for the coming period budgeted expenditures.

2.6 Taxes

All applicable taxes are paid in accordance with tax regulations ofthe Republic of Armenia.

Armeni<ln Social Jnvestmenl f'und Ill !'r()}<'t! Project Speciall'urpose Financial S1aremenr.1' .for the year ende,i 3 I {)ecemher 2013

l r. 3. STATEMENT OF FINANCIAL POSITION

31.12.2013 31.12.2012 Note USD USD

ASSETS

Cash and cash equivalents

l Cash 4 1,151,876 1,307,104

Cumulative Project Expenditures 6 63,356,487 56,076,328

TOTAL ASSETS 64,508,363 57,383,432

I FUNDS AND LIABILITIES

Funds 5

l IDA 4238-AM 26,111,563 26,111,563

IDA 4548-AM-additional financing 7,988,525 7,988,525

I IBRD 7847-AM -second additional financing 7,000,000 7,000,000

IDA 5071-AM-third additional financing 7,172,088 2,115,503

RA Government 6,548,417 6,549,818

L RA Government- additional financing 1,335,722 1,336,020

RA Government -second additional financing 1,378,821 1,378,821

RA Government -third additional financing 2,419,820 726,775

Community contribution 4,241,670 3,966,543

Sponsors 373,198 310,478

Total Funds 64,569,824 57,484,046

Adjustments 6 {61,461) {100,614}

TOTAL FUNDS AND LIABILITIES 64,508,363 57,383,432

4. Cash 31.12.2013 31.12.2012

Designated account, IBRD 7847-AM (USD) 63,176 Designated account, IDA 5071-AM (USD) 173,626 362,224 Community contribution account (AMD) 335,632 543,152 RA Government account (AMD) 602,408 335,393 Current account, IDA 4238-AM (AMD) 963 Current account, IDA 5071-AM (HSBC bank, AMD) 131 1,559 Interest account, IDA 5071-AM (ADB bank, AMD) 37,537 RA Government account (HSBC bank, AMD) 102 591

c Sponsors contribution account (AMD) 2,374 30

Cash on hand 66 16

1,151,876 1,307,104

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f'rojt'ct Special I'urpo.><' Filtallcial Srmemems jhr tht' yt'or ended 31 /)ecemher 2013 17-':'4

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5. Funds

Funding including PPF is as follows:

Cumulative as at 31.12.2013

Funding ASIF III

USD IDA 4238-AM 24,711,159 IDA 4548-AM- additional financing 7,988,525 lBRD 7847-AM- second additional financing 7,000,000 IDA 5071-AM- third additional financing 7,172,088 Government of RA 6,230,802 Government ofRA-additional financing 1,335,722 Government ofRA-second additional financing 1,378,821 Government ofRA- third additional financing 2,419,820

Community Contributions 4,050,518

Sj)onsors Contributions 373,198

Total Funds 62,660,653

Ar111eni.m Soda/ 1nvewnen/ Fund 111 !'r(Jj<'< 1

f'rojt'ct Speciall'urpose Fliwncial Swwment\ for th,• y,•ar t'nded 31 December 201 J

PPF for ASIFIII Total

USD USD 1,400,404 .126,111,563

- 7,988,525

- 7,000,000

- 7,172,088 317,615 6,548,417

- 1,335,722

- 1,378,821

- 2,419,820

191,152 4,241,670

- 373,198

1,909,171 64,569,824

Cumulative as at 31.12.2012 PPF for

ASIF III ASIF III Total USD USD USD

24,711,159 1,400,404 26,111,563

7,988,525 - 7,988,525

7,000,000 - 7,000,000

2,115,503 - 2,115,503 6,232,203 317,615 6,549,818

1,336,020 - 1,336,020

1,378,821 - 1,378,821

726,775 - 726,775

3,775,391 191,152 3,966,543 310,478 - 310,478

55,574,875 1,909,171 57,484,046

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S.l.Disbursement procedures

Financing, including PPF, from WB was provided through the following disbursement procedures:

Disbursement procedure

IDA Credit 4238-AM

Advances/ (advance repayments) -SOE procedure -Summary Sheet -

_Total -

Arm,:lliOil S<>c:iuiii/Vl'SIIJI('nt rund 11/l'rojen h·. :iect Sp .. :cial PwpMe Financial SWI<'II!ems !;Jr!ite yeur ended]! /)(~( ·etnber 2013

IDA Credit

4548-AM, additional financing

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For the year 2013 IBRD Credit IDA Credit

7847-AM, 5071-AM, 2ad 3rd

additional additional IDA Credit financin~ financin~ Total 4238-AM

(105,928) 200,000 94,072 -

58,063 1,820,010 -1,878,073 18,798,783

47,865 3,036,575 3,084,440 7,312,780

- J 5,056,585 5,056,585 26,111,563

/')24

~ ~ - rJ ~ ~

Cumulative as at 31.12.2013 IBRD Credit

IDA Credit 7847-AM, IDA Credit 4548-AM, 2ad 5071-AM, 3nl additional additional additional financin~ financin~ financin~ Total

(1,057) - 1,000,000 998,943

7,912,086 3,571,596 2,433,931 32,716,396

77,496 3,428,404 3,738,157 14,556,837

7,988,525 7,000,000 7,172,088 48,272,176

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6. Cumulative Project Expenditures

a) Project expenditures under the main categories of expenditures are presented at the Statement of cash receipts and payments. b) Project expenditures under the main project heading are presented at the Statement of uses of funds by project activity. c) Project expenditures summarized based on funding sources are as follows:

Year 2013

Category

IDA IDA 4238-AM 4548-AM

I. Works -2. Goods -3. Consultants'

services and training -4. Operating costs -6. Works, Goods, Consultants' services and training -IBRD 7847-AM -

Total -

A 1'1/ICI/iall Sociui 111~\'Siiih'/11 h!lld Ill l'rojeCI p,·,)jec:l Sp .. ·;,:ia/ PwiX•se Fincm<'ial .'i!meutems 1~·),. the year ended 3 i I )er.:·c·u;her 2013

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IBRD 7847-AM

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63,859

63,859

RA Govern- RA

ment Government IDA co fin a- additional

5071-AM ncing cofinancing

4,192,976 5,932 -

542,590 - -

194,624 1,150 -

316,373 - -

- - -

5,246,563 7,082 -

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RA Govern-

ment RA second Government

additional third cofinan- additional Community

cing co financing cofinancing

- 765,732 472,356

- 280,212 -

- 54,894 -

- 316,373 269

2,457 - 9,034

2,457 1,417,211 481,659

Sponsors cofinan-

cing

58,262

-

3,066

-

-

61,328

:---:1 ---

USD

Total

5,495,258

822,802

253,734

633,015

75,350

7,280,159 i

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Cumulative as at 31.12.2013

Category

IDA IDA 4238-AM 4548-AM

1. Works 18,525,112 7,551,158 2. Goods 3,949,245 302,053 3. Consultants' services and training 1,918,900 135,557 4. Operating costs 1,688,466 -6. Works, Goods,

Consultants' services and training -IBRD 7847-AM - -7. Front-end-fee - -Total 26,081,723 7,988,768

Armc'lliall Social litvestme/11 J·u11d 1//l'roF·u Pruject Special PttJJhl!ie l;irwncial S!atentems tiJr 1he year ended 31 Oe,YIIlber 21) 13

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RA IBRD IDA Government

7847-AM 5071-AM cofinancin~

- 5,636,081 3,379,563

- 581,440 1,113,823

- 385,662 569,466 439,999 394,814 1,519,505

6,542,501 - -17,500 - -

7,000,000 6,997,9~1__ _6,58~,357

r-'j -- _.... ~ -

USD RA

Govern-ment RA

RA second Government Govern men additional third Sponsors t additional co fin an- additional ·Community cofinan-cofinancin~ cin~ cofinancin~ cofmancin~ cin~ Total

1,208,670 - 1,025,060 3,457,159 266,303 41,049,106 85,194 - 291,170 - - 6,322,925

46,873 - 108,776 - 8,718 3,173,952 - 439,993 394,815 1,972 - 4,879,564

- 917,273 - 361,134 92,532 7,913,440

- - - - - 17,500

1,340,737 __L357 ,26§_ 1,819,821 3,820,265_ 367,553 63,356,487

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7. Adjustments USD

31.12.2013 31.12.2012 Currency revaluation gain/{loss) (101,493) (104,465)

Exchange gains/(loss) (7,023) (7,035)

Interest accrued in bank accounts- payable to RA Government 47,498 11,330 Other pavables/(advances) (443) (444)

Total (61,461) (100,614)

8. Project budget management

Cumulative as at 31.12.2013 Budget Implementation

Uses of Funds USD USD 0/o

I. Works 39,854,055 44,704,591 89% 2. Goods 6,216,370 5,694,707 109%

3. Consultants' services and training 3,151,045 3,454,654 91% 4. Operating costs 4,575,864 5,133,139 89% 5. Refunding ofPPF 1,628,213 1,768,959 92%

6. Works, Goods, Consultants' services and training -IBRD 7847-AM 7,913,440 7,697,059 103% 7. Front-end fee 17,500 i 17,500 100%

Total 63,356,487 68,470,609 93%

9. Funds closing

9.1. IDA 4238-AM and IDA 4548-AM (additional financing),

The financing under the IDA 4238-AM (Closing date: 31.03.2012) and IDA 4548-AM (Closing date: 30.06.2011) credits were completed as at reporting date. Regarding to those credits:

• No financing received during the reporting year ending 31.12.2013; • No expenditures incurred during the year ended 31.12.2013; • No withdrawal applications were submitted during the year ended 31.12.2013; • There are no cash balances as at 31.12.20 13; • There are no receivable or payable amounts; • We are not aware about any pending or existing litigations.

9.2. ffiRD 7847-AM (second additional financing)

The expenditures Closing date is 31 October 2012 and Grace period for submitting withdrawal applications is 28 February 2013. As at date of signing these special purpose financial statements, regarding to IBRP Credit 7847-AM:

• No expenditures were incurred after 31 October 2012: o The payments made during the reporting year in the total amount of USD

75,350 related to the expenditures incurred before the Closing date;

Armenian Social Investment Fund Ill /'r(Jjec f Projecr Special l'urpose Finc111cial Staremenrs for the Y•'Gr ended 31 {)eceml::er 2013

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• No withdrawal applications were submitted after 28 February 20 13: • No cash balance existed at the Designated Account as at 28.02.2013 and after then; • There are no advances or payables outstanding as at reporting date; • We are not aware about any pending or existing litigations.

10. Events after the reporting date

10.1 Reimbursement of expenditures

The Project expenditures for the December 2013 registered at the application #20 of IDA 5071-AM in the total amount of USD 825.7.9.5.68 was submitted to WB on 22 January 2014 and documented on 23 January 2014.

11. Litigations

There are no pending litigations related to the Project as at reporting date and as at approval date of these special purpose financial statements.

·lrmenian S(}( tal inves1men1 Fund Ill Proie< I !'rojeer Special l'ur{lose Fim111cial ,'l'taremen/,1 for th,• yt'ar ended 3 I necem/:>,,r 20 I 3

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ANNEX 1. RECONCILIATION BETWEEN THE AMOUNTS SUBMITTED BY THE PROJECT AND DISBURSED BY THE WORLD BANK

Armenian Social Investment Fund /II Project IDA Credit 507 l-AM (third additional financing) For the year ended 3 I December 2013 In USD

Expenditure Category Advances (Recovery)

I. Works, Goods, Consulting services, including training

2. Operational costs

Total

Armenian Social Investment Fund /II Project

Appl. 19

7 8 9 10 11 12 13 14 IS 16 17 18

7 8 9 10 II 12 13 14 15 16 17 18

JBRD Credit 7847-AM (second additional financing) For the period 01.01.2013-28.02.2013 JnUSD

Expenditure Category Advances (recovery)

1. Works, Goods, Consulting services and training

-lrmenian So, iallnveSI!nelll Fund ill Proiec 1

Projea Specmll'urpo.l·c! Fi/1(11/cial Statements (or the .war e11ded 3 I December 20 I 3

Appl. 30 31

30 31

AS IF WB Difference 200,000.00 200,000.00 200,000.00 201!t_OOO.OO 393,950.68 393,950.68 -180,902.63 180,902.63 -170,986.96 170,986.96 -212,366.70 212,366.70 -220,700.00 220,700.00 -414,137.39 414,137.39 -333,585.13 333,585.13 -572,753.26 572,753.26 -500,847.63 500,847.63 -515,279.04 515,279.04 -436,603.15 436,603.15 -590,979.45 590,979.45 -

4 543,092.02 4~543,092.02 41,980.33 41,980.33 -23,062.63 23,062.63 -23,344.52 23,344.52 -24,752.61 24,752.61 -21,581.12 21,581.12 -23,430.68 23,430.68 -33,132.48 33,132.48 -24,001.59 24,001.59 -24,665.22 24,665.22 -25,795.12 25,795.12 -25,581.17 25,581.17 -22,165.98 22,165.98 -

313,493.45 313,493.45 5_,_056~85.47 5,056,585.4 7

AS IF WB Difference ( 42,069 .30) (63,859.10)

( 1 05,928.40) 42,069.30 42,069.30 -63,859.10 63,859.10 -

105,928.40 10~28.40 105 928.40 -