THE PALESTINIAN MINISTRY OF FINANCE AND PLANNING

Gaza Sustainable Water Supply Program – TF017186

FUNDED BY THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND MANAGED BY THE PALESTINIAN WATER

AUTHORITY

PROJECT FINANCIAL STATEMENTS

FOR THE PERIOD FROM JANUARY 5, 2016 TO DECEMBER 31, 2016

TOGETHER WITH INDEPENDENT AUDITORS’ REPORT

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The accompanying notes form an integral part of these financial statements 4

The Palestinian Ministry of Finance and Planning

Gaza Sustainable Water Supply Program

Funded by the International Bank for Reconstruction and Development And Managed by the Palestinian Water Authority

Balance Sheet As at December 31, 2016

Note USD Assets Current Assets

Cash at bank 7 468,440 Total Current Assets 468,440 Total Assets 468,440

Liabilities and Fund Balance Fund Balance

Fund balance 7 468,440 Total Liabilities and Fund Balance 468,440

The accompanying notes form an integral part of these financial statements 5

The Palestinian Ministry of Finance and Planning

Gaza Sustainable Water Supply Program Funded by the International Bank for Reconstruction and Development

And Managed by the Palestinian Water Authority

Statement of Sources and Uses of Funds For the Period from January 5, 2016 to December 31, 2016

Note USD FUND BALANCE – BEGINNING OF PERIOD - SOURCES OF FUNDS

Advance Payment from World Bank 3 500,000 Replenishments received 3 697,744

Total Sources of Funds 1,197,744 USES OF FUNDS

Consultants' Services, including Audit 4 729,144 Bank charges 160

Total Uses of Funds 729,304 CHANGE IN FUND BALANCE 468,440 FUND BALANCE – END OF PERIOD 7 468,440

The accompanying notes form an integral part of these financial statements

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The Palestinian Ministry of Finance and Planning

Gaza Sustainable Water Supply Program Funded by the International Bank for Reconstruction and Development

And Managed by the Palestinian Water Authority

Designated Bank Account Statement

For the Period from January 5, 2016 to December 31, 2016

Account number 0458/2220997/001/3001/000

Depository bank Bank of Palestine

Address Ramallah

Related loan / credit TF017186

Currency U.S. Dollar (USD)

Note USD Balance, beginning of period -

Add:

Receipts during the period 3 1,197,744 1,197,744

Deduct: Payments for project expenditures from designated bank account 729,304

729,304 Balance, end of period 7 468,440

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The Palestinian Ministry of Finance and Planning Gaza Sustainable Water Supply Program

Funded by the International Bank for Reconstruction and Development And Managed by the Palestinian Water Authority

Notes to the Project Financial Statements For the Period from January 5, 2016 to December 31, 2016

(Currency: USD)

1. The Project and its Financing

The Palestinian Liberation Organization, for the benefit of the Palestinian Authority, and the International Bank for Reconstruction and Development (the World Bank), acting as an administrator of the partnership for infrastructure development in the West Bank and Gaza Multi-Donor Trust Fund, signed a grant agreement number TF017186 (the Agreement), dated October 12, 2015, whereby the World Bank made a grant, to the Palestinian Authority, in an amount equals to USD 2,500,000 to finance a project entitled " Gaza Sustainable Water Supply Program " (the Project), managed by the Palestinian Water Authority (PWA) in Gaza. The effectiveness date of the Agreement was January 5, 2016. The categories to be financed by the World Bank and the percentage of expenditure for items to be financed in each category are as follows:

Category

Allocated Amount (USD)

Percentage of Expenditure to be

Financed (inclusive of taxes)

(1) Goods, Non-consulting Services, Consultants' Services (include audits), and Training and Workshops

2,500,000 100%

2,500,000

The objective of the Project is to make available to the PWA studies and key initiatives needed to support the preparation of the Project. The Project consists of the following parts:

a) Preparation of feasibility and non-revenue water studies, engineering design, and preparation of tender documents for works contracts.

b) Preparation of the environmental and social impact assessment, household surveys and tariff study.

c) Support capacity building and Project management and coordination activities through carrying out study tours, stakeholder workshops and hiring of key Project staff.

The closing date of the Project is December 31, 2017.

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2. Summary of Significant Accounting Policies

The Project financial statements are prepared under the historical cost convention. Significant accounting policies follow: - Basis of accounting - The Project financial statements are prepared using the cash

basis of accounting, which is a comprehensive basis of accounting other than International Financial Reporting Standards (IFRSs). Sources of funds are recognized either when cash is received or when the direct payment is effected by the World Bank and uses of funds are recognized when cash payments are made or when expenditure are due for direct payment.

- Foreign currency - The Project’s basic functional currency is the United States Dollar (USD). Transactions that are expressed or denominated in other currencies were translated to USD using exchange rates in effect at the time of each transaction. Differences arising from the fluctuations in exchange rates were treated as exchange gains or losses in the Statement of Sources and Uses of Funds and Designated Bank Account Statement.

3. Sources of Funds

Sources of funds comprise:

Withdrawal Application (WA) # Date of fund

transfer Advance Category 1

Replenishment

Amount

Received Amount

2016 GSWSP - 1 June 14, 2016 500,000 - - 500,000

GSWSP - 2 August 23, 2016 - 206,854 206,854 206,854

GSWSP - 3 October 27, 2016 - 490,890 490,890 490,890

Amount received during the Audit Period

500,000 697,744 697,744 1,197,744

4. Consultants' Services, including Audit

This item comprises:

2016 Associated works to Gaza desalination plant – Design Stage 687,144 Legal advisory services 42,000

729,144

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5. SOE Procedures (Payments from Designated Bank Account)

SOE procedures represent amounts disbursed by PWA under the Project for the following disbursement categories: -

Withdrawal Application (WA) # Payment Method Category 1 Total 2016  

WA # GSWSP-2 Payment from designated bank account.

206,854 206,854

WA # GSWSP-3 Payment from designated bank account.

490,890 490,890

Amount recorded by PWA but not reported to the World Bank as of December 31, 2016 (Reported subsequently in WA # GSWSP-4)

Payment from designated bank account.

31,560 31,560

Total amount for the Audit Period 729,304 729,304

6. Reconciliations between World Bank Records (Client Connection) and PWA Records

December 31, 2016

Project accounts per the client connection Advance payment transferred to PWA 500,000 Category 1: Goods, Non-consulting Services, Consultants' Services

(include audits), and Training and Workshops 697,744 1,197,774

Project accounts per PWA records Category1: Goods, Non-consulting Services, Consultants' Services

(include audits), and Training and Workshops 729,304 Cash at Bank (note 7) 468,440

1,197,774 Difference -

7. Fund Balance - End of Period

The fund balance as at December 31, 2016 represents cash maintained in the USD designated bank account.