Public Disclosure Authorized REPUBLIC OF TURKEY PRIME MINISTRY Undersecretariat of Treasury MANAGEMENT LETTER Public Disclosure Authorized Public Disclosure Authorized On PUBLIC FINANCE MANAGEMENT REFORM IMPLEMENTATION SUPPORT PROJECT Implemented by MINISTRY OF FINANCE And Financed Under World Bank Grant Agreement numbered TF-19355 For the Period January 1, 2017 - March 31, 2018 Prepared by: Public Disclosure Authorized H. Aypen BILENLER Neslihan YIKILMAZ Senior Treasury Controller Senior Treasury Controller (igdem KAHVECi Treasury Controller June 14, 2018 Ref.: Report Dated June 14, 2018
TABLE OF CONTENTS 1. EXECUTIVE SUMMARY 2. INDEPENDENT AUDITOR'S REPORT & FINANCIAL STATEMENTS OF THE PROJECT 2.1. Independent Auditor's Report 2.2. Statement of Sources and Uses of Funds 2.3. Statement of Cumulative Investments 2.4. Statement of Special Account 2.5. Notes to The Project Financial Statements 1. Objectives and Nature of the Project 2. Main Accounting Policies 3. Limited Use of Funds and Other Assets 4. World Bank Grant 5. Cash Availability at March 31, 2018
EXECUTIVE SUMMARY
REPUBLIC OF TURKEY PRIME MINISTRY Undersecretariat of Treasury A. Project Summary EXECUTIVE SUMMARY The Republic of Turkey has provided a grant equivalent to USD 780.000 with the Grant Agreement signed with International Bank for Reconstruction and Development (IBRD) on November 26, 2015. This Project is implemented by Ministry of Finance (MoF). The overall objective of the Project is to enhance the transparency and accountability of Turkish public sector through the provision of support to its institutions in addressing implementation challenges of the public financial management reform. The project consists of 3 basic components; A. Development of a Program Classification and Program Structure B. Enhanced Implementation of Public Internal Financial Control Framework C. Enhancing the Accounting and Reporting System to Promote Accountability The total amount of the Project is 780.000 USD. Opening balance of TCMB special account, as of January 01, 2017 is 80.000 USD and closing balance, as of December 31, 2017 is 80.000 USD. In 2017, 264.834 USD was transferred to TCMB special account and the same amount was disbursed. Opening balance of TCMB special account, as of January 01, 2018 is 80.000 USD and closing balance, as of March 31, 2018 is 10.834 USD. This amount was refunded to World Bank on 28.03.2018. In 2018, 69.166 USD was disbursed. Also 395.914 USD was disbursed as direct payment and the total disbursement amount is 729.914 USD. This report is prepared for all components of the Project.
B. Objectives of Audit The objectives of our audit are; a) To give an opinion on whether the financial statements, present fairly, in all material respects, the financial position of the project in accordance with the cash receipts and disbursements basis of accounting, b) To determine, for the period 01.01.2017-31.03.2018, whether the Ministry of Finance has complied, in all material respects, with the rules and procedures of the Grant Agreement, C. Scope of Audit We have performed an audit of financial statements of the Public Finance Management Reform Implementation Support Project for the period 01.01.2017-31.03.2018 in accordance with the cash receipts and disbursements basis of accounting. We have also performed a compliance audit on whether project activities are in line with the Grant Agreement. Our audit was conducted in accordance with International Standards on Auditing published by International Federation of Accountants (IFAC) applicable to the audit of financial statements and compliance auditing. There was no limitation in our scope for the Project's audit D. Audit Results For the financial statements of project; our audit resulted with an unqualified opinion. In addition, for the period 01.01.2017-31.03.2018, Ministry of Finance has complied, in all material respects, with the rules and procedures of the Grant Agreement. E. Management Recommendations A management letter, dated June 14, 2018, to the attention of the Ministry of Finance was issued separately from this report. The objective of this Management Letter is to enable the auditors to communicate appropriately to those charged with governance and management deficiencies in internal control that the auditors have identified during the audit and that, in the auditors' professional judgment, are of sufficient importance to merit their respective attentions. For this purpose, our recommendation is attached to the Letter.
INDEPENDENT AUDITOR'S REPORT & FINANCIAL STATEMENTS OF THE PROJECT
REPUBLIC OF TURKEY PRIME MINISTRY Undersecretariat of Treasury TO MINISTRY OF FINANCE ANKARA Opinion INDEPENDENT AUDITOR'S REPORT We have audited the Statement of Sources and Uses of Funds, Statement of Cumulative Investments, and Statement of Special Account of the Public Finance Management Reform Implementation Support Project for the period 01.01.2017-31.03.2018, and a summary of significant accounting policies and other explanatory information. The financial statements have been prepared by Ministry of Finance based on relevant provisions of the Grant Agreement Numbered TF-19355. In our opinion; a) The accompanying Statement of Sources and Uses of Funds, Statement of Cumulative Investments and Statement of Special Account present fairly, in all material respects, the financial position and accounting policies of the Public Finance Management Reform Implementation Support Project for the period 01.01.2017-31.03.2018 in accordance with the provisions of the Grant Agreement Numbered TF- 19355. b) Ministry of Finance, as of March 31, 2018 has complied with, in all material respects, the requirements of Grant Agreement Numbered TF-19355. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Financial Statements" section of this report We are independent of the Ministry of Finance within the meaning of ethical requirements and have fulfilled our other responsibilities under those ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Basis of Accounting and Restriction on Distribution and Use We draw attention to Note "2" to the financial statements, which describe the basis of accounting. The financial statements are prepared to assist the Ministry of Finance to comply with the financial reporting provisions of the IBRD Grant Agreement Numbered TF- 19355. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for the Ministry of Finance, Undersecretariat of Treasury, and IBRD, and should not be distributed or used by other parties. Responsibilities of Management and Those Charged with Governance for the Financial Statements Ministry of Finance is responsible for the preparation and fair presentation of these financial statements in accordance with Grant Agreement Numbered TF-19355, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Those charged with governance are responsible for overseeing financial reporting process of the Ministry of Finance. Auditor's Responsibilities for the Audit of the Financial Statements The objectives of our audit are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the planning and performance of the audit. We also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
* Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We are also required to provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Ahmet Umit SUCU Acting Chairman of Board of Treasury Controllers Akif Bilent BOYACIOOLU (Audit Partner) Vice-Chairman H. Ay en BILENLER Neslihan WHKILMAZ igdem KAHVECi Senior Treasury Controller Senior Treasury Controller Treasury Controller Date : June 14, 2018 Address: Republic of Turkey Prime Ministry Undersecretariat of Treasury, Board of Treasury Controllers Emek/Ankara, TURKEY
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[MINISTRY of FINANCE] [PUBLIC FINANCIAL MANAGEMENT IMPLEMENTATiON SUPPORT PROJECT (TF: 19355)] SPECIAL ACCOUNT STATEMENT ACCOUNT NO: 940701041 AT CENTRAL BANK For the year ended. December 31, 2017 (in US Dollars) Opening Balance 80.000,00 Reimbursements to SA 264.834,00 a) Advance 264.834.00 b) SOE Procedure 0 c) Summary Sheet 0 Refunds to SA 0,00 Available Funds 344.834,00 Payments Made for Expenditures 264.834,00 Service charges for the account 0 Total Project Investments 264.834,00 Closing Balance 80.000,00 _J E E
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[MINISTRY of FINANCE] [PUBLIC FINANCIAL MANAGEMENT IMPLEMENTATiON SUPPORT PROJECT (TF: 19355)] SPECIAL ACCOUNT STATEMENT ACCOUNT NO: 940701041 AT CENTRAL BANK For the quarter ended. March 31, 2018 (In US Dollars) Opening Balance 80.000,00 Reimbursements to SA 0 a) Advance 0 b) SOE Procedure 0 c) Summary Sheet 0 Refunds to SA 0,00 Available Funds 80.000,00 Payments Made for Expenditures 69.166,00 Service charges for the account 0,00 Total Project Investments 69.166,00 Closing Balance 10.834,00
REPUBLIC OF TURKEY MINISTRY OF FINANCE PUBLIC FINANCIAL REFORM IMPLEMENTATION SUPPORT PROJECT GRANT NO. 19355 NOTES TO THE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31,2018 I. OBJECTIVES AND NATURE OF THE PROJECT PFM Grant No. TF019355 Public Finance Management Reform Implementation Support Project under Multi-Donor Programmatic Trust Fund for Europe and Central Asia Public Finance Management (TF071577) was signed between Republic of Turkey and International Bank for Reconstruction and Development ("IBRD") on November 26, 2015. The objective of the grant is to enhance transparency and accountability in the Turkish public sector through the provision of support to its institutions in addressing implementation challenges of the public financial management reform. Project consists of three parts; Part A is related with development of a program classification and program structure. Part B is about enhanced implementation of Public Internal Financial Control Framework. Part C is for enhancing the accounting and reporting system to promote accountability. General Directorate of Budget and Fiscal Control was responsible for implementing part A and B of the projects and the General Directorate of Public Accounts was responsible for implementing C. Both General Directorates (Ministry of Finance) acted as the financial intermediary for providing funds to private sector enterprises (Consultants) under Part A, B and C. The IBRD agrees to make available to Republic of Turkey the OTF Grant in an amount US Dollars 780,000.00. The closing date was set as November 30, 2016. However, it was extended two times and final closing date was set as January 31, 2018. 2. ACCOUNTING POLICIES a) The Ministry uses the cash basis of accounting to account for project transactions. Under that basis, income is recognized when funds are received and expenses are recognized when payment is made. At March 31, 2018, there were no material transactions pending disbursement. b) The Ministry maintains a kind of subsidiary recording system for each project. When a subsidiary agreement is signed between the Ministry and a consultant, the Ministry opens and credits an account equal to the amount of the subsidiary agreement for consultant under the sub-account Public Finance
Reform Implementation Support Projects payments. After reasonable cost of consultancy services required for carrying out the sub-project are made, the said account is debited by the amount of expenditure. When total of the subsidiary agreement withdrawn from the Grant, the account opened for this consultant is closed with a zero balance. Payments are made directly to the consultants either from special account or from the World Bank. c) Transactions are recorded in foreign currency (USDs) by the Ministry. Statements of Sources and Uses of Funds and Cumulative Investments, have been prepared in USDs. 3. RESTRICTED USE OF FUNDS AND OTHER ASSETS In accordance with the grant agreement between the Turkish Government and IBRD, funds available in the Special Account were restricted to project purposes only. Project funds still unused at the end of the project have been refunded to the International Bank for Reconstruction and Development in accordance with the provisions of the corresponding financing agreement. 4. IBRD GRANT Because the agreement signed between IBRD and Republic of Turkey on November 20, 2015 was a grant agreement financed by Multilateral Fund, Republic of Turkey is not obligated to make any repayment under the grant agreement. 5. CASH AVAILABILITY AT MARCH 31,2018. There is no any cash account. -w 04