PROJECT((STRENGTHENING EVIDENCE-BASED POLICYMAKING

FOR EDUCATION SECTOR PERFORMS IN THEREPUBLIC OF BELARUS>

Financial statementsfor the year ended 31 December 2015

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CONTENTS

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS 3

FINANCIAL STETEMENTS OF THE PROJECT "STRENGTHENING EVIDENCE-BASEDPOLICYMAKING FOR EDUCATION SECTOR REFORMS IN THE REPUBLIC OFBELARUS", FINANCED BY WORLD BANK GRANT #TF016518 5

STATEMENT OF PROJECT SOURCES AND USES OF FUNDS FOR THE YEAR ENDED 31 DECEMBER 20155

STATEMENT OF USES FUNDS BY PROJECT ACTIVITY FOR THE YEAR ENDED 31 DECEMBER 2015 7

DESIGNATED ACCOUNT STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2015 11

TRANSIT ACCOUNT STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2015 12

STATEMENT OF EXPENDITURE WITHDRAWAL SCHEDULE FOR THE YEAR ENDED 31 DECEMBER 201513

NOTES TO THE FINANCIAL STATEMENTS 14

2

KPMG, Limited liability company Telephone +375 17 372 72 5757 Dziar2ynskaha avenue Fax +375 17 372 72 58

premises 53, office 53-2 Internet www.kpmg.by

220089 Minsk Belarus

Independent Auditors' Report on Financial Statements

Mr. S.A. VazhnikDirectorNational Institute of Education16 Korolya St.Minsk, 220004, Republic of Belarus

Certificate of state registration is issued under ruling ofMinsk City Executive Committee on 24 July 2002Registration number NL190374888

Out ref.: 2204-03

We have audited the accompanying financial statements of the Project "StrengtheningEvidence-Based Policymaking for Education Sector Reforms in the Republic of Belarus"#TF016518 (hereinafter - Project) prepared by National Institute of Education, whichcomprise the statement of project sources and uses of funds, statement of uses of fundsby project activity, designated account statement, transit account statement, statement ofexpenditure withdrawal schedule for the year ended 31 December 2015, and notes to thefinancial statements. The financial statements have been prepared by management on thebasis of cash accounting and in accordance with the relevant guidelines of the World Bank

Management's Responsibility for the Financial Statements

The Management is responsible for the preparation of these financial statements on thebasis of cash accounting and in accordance with the relevant guidelines of the World Bank,as well as for such internal control as management determines necessary to enable thepreparation of these special purpose financial statements that are free from materialmisstatement, whether due to fraud or error.

Auditors'Responsibility

Our responsibility is to express an opinion on these financial statements based on ouraudit. We conducted our audit in accordance with International Standards on Auditing.Those standards require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether the financial statements are freefrom material misstatement.

KPMG, a Limited liability company and a member firm of Registered in Belarus 191434140the KPMG network of independent member firms Registered office: 57 Dziar2ynskaha avaffiliated with KPMG International Cooperative (uKPMG premises 53, office 53-2International., a Swiss entity, 220089 Minsk Belarus

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on our judgment,including the assessment of the risks of material misstatement of the financial statements,whether due to fraud or error. In making those risk assessments, we consider internalcontrol relevant to the entity's preparation of the financial statements in order to designaudit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity's internal control. An audit alsoincludes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluating theoverall presentation of the financial statements.

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

Opinion

In our opinion, the financial statements of the Project "Strengthening Evidence-BasedPolicymaking for Education Sector Reforms in the Republic of Belarus " #TF016518 for theyear ended 31 December 2015 are prepared, in all material respects, on the basis of cashaccounting and in accordance with the relevant guidelines of the World Bank.

Basis of Accounting

Without modifying our opinion, we draw attention to Notes to the financial statements,which describe the basis of accounting. The financial statements are prepared to assistNational Institute of Education to comply with the financial reporting provisions of theWorld Bank. As a result, the financial statements may not be suitable for another purpose.

Vasyl Pavien 4Deputy Audit" c 0,

22 April 2016A,

Minsk, Republic ofBela

LLC "KPMG"

Certificate of state registration is issued byMinsk Municipal Executive Committeeunder ruling of 10.02.2011, Registration number 191434140

KPMG, a Limited liability company and a memberfirm of Registered in Belarus 191434140the KPMG network of independent member firms Registered office: 57 Dziar2ynskaha avaffiliated with KPMG International Cooperative < KPMG premises 53, office 53-2International,), a Swiss entity. 220089 Minsk Belarus

FINANCIAL STETEMENTS OF THE PROJECT "STRENGTHENING EVIDENCE-BASED POLICYMAKING FOR EDUCATION SECTOR REFORMS IN THE REPUBLICOF BELARUS", FINANCED BY WORLD BANK GRANT #TF016518

Statement of Project Sources and Uses of Funds for the year ended 31 December 2015(in USD)

Actual PlannedFor the year Cumulative For the

ended 31 total amount wholeDecember 2015 project

periodOpening Cash BalanceProject Bank Account .

Designated Account -Transit Account (Belarusianrubles in the USD equivalent .on the account in Belarusian rubles)

TOTAL _

Add:Sources of FundsGovernment Funds - -

World Bank Funds 125 956 125 956Direct payments 47300 47300Designated Account 78 656 78 656TOTAL 125 956 125 956

Less:Uses of Funds

Financed by World Bank 109712 109712 340 000Component 1: CapacityDevelopment for Evidence-basedPolicymaking in the GeneralSecondary Education Sector 29 000 29 000 36 000

Component 2: Introduction ofInternational Examples and BestPractices of Education FinancingReforms to Government Officials 55 760 55 760 135 300

Component 3: Strengthening ofQuality Assessment Practices inGeneral Secondary Education 3 908 3 908 80 800

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Component 4: ImplementationSupport and Audit 21 044 21 044 87 900

Financed by Government - --

TOTAL 109712 109712 340000

Closing Cash BalanceProject Bank Account - - -

Designated Account 13526 13 526 -Transit Account (Belarusianrubles in the USD equivalenton the account in Belarusian rubles) 2718 2718 -

TOTAL 16244 16244 -

Director of the National itute of Education Head of Accounting Department of theNational Institute of Education

Mr. Sergey A. Vazhnik / Ms. Elena V. Nikitsina

The notes on pages from 14 to 16 form an integral part of the financial statements.

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Statement of Uses Funds by Project Activity for the year ended 31 December 2015

(in USD)Project activities Total For the Amount Total

Amount reporting payable at the paymentper period reporting date still to be

procureme (goods/service madent plan s accepted but

not paid)/

1. Capacity Development forEvidence-based Policymaking inthe General Secondary EducationSector

Assessment of existing practices ofdata collection, analysis and use forpolicy-making in general secondaryeducation (local consultant) 5 000 3 000 2 000 2 000

Assessment of existing practices ofdata collection, analysis and use;improvement of the methods of datacollection for policy-making ingeneral secondary education inaccordance with best internationalpractices (international consultant) 26 000 26 000 -

Strengthening of information systemsfor data collection and disseminationon the general secondary educationsector (local consultant) 3000 - 3000

Purchase of licenses for softwareproducts for data collection andanalysis 1 500 - 1 500

Training and workshops withinComponent 1 500 - - 500

Total for Component 1 36 000 29 000 2 000 7 000

2. Introduction of InternationalExamples and Best Practices ofEducation Financing Reforms toGovernment Officials

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Acquaintance of representatives ofeducation system with thecorresponding examples of worldpractice on reforming of financialmanagement system of generalsecondary education 36000 - 36000

Exploration by key representatives ofeducation system of the Republic ofBelarus of experience of othercountries in the field of applicationof alternative funding mechanismsfor education 26000 24911 - 1 089

Exploration by Belarusian officialsof experience of the countries withconsiderable traditions of the fundingmechanism applicable in theconditions of the Republic of Belarus 7 000 9 118 - (2 118)

Capacity development of specialistsof Ministry of Education andsubordinated structures in the sphereof use of the specialized Englishlexicon on introduction of newfunding mechanisms of generalsecondary education 7500 - 7500

Capacity development of stateauthorities in the sphere ofapplication of alternative approachesto financing of general secondaryeducation in the Republic of Belaruson experimental grounds (local) 4500 - 4500

Capacity development of stateauthorities in the sphere ofapplication of alternative approachesto financing of general secondaryeducation in the Republic of Belaruson experimental grounds(international) 36500 15000 - 21 500

Purchase of computer hardware andsoftware for introduction of modernmeans of monitoring theeffectiveness of the use of funds on 10000 10000

the implementation of new

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approaches to funding institutions of

general secondary education

Training and workshops within

Component 2 7800 6731 (19)* 1 069

Total for Component 2 135 300 55 760 (19) 79 540

3. Strengthening of QualityAssessment Practices in GeneralSecondary Education

Acquaintance of representatives ofeducation system with the advancedpractice and relevant examples ofnational systems of an assessment ofeducational achievements of pupils atthe level of general secondaryeducation (international consultant) 30000 - 30000

Analysis of the existing system ofquality assessment in generalSecondary Education using SABERprogram "Systems Approach forBetter Education Results" (localconsultant) 7300 1 800 - 5500

Purchase of hardware and softwarefor technical support for theimplementation of PISA 4000 - 4000

Participation in the meeting of theGovernors of national projects onpreparation for carrying out PISA in2015 2500 2 108 - 392

Technical assistance in thepreparation of the Republic ofBelarus to participation in theInternational student assessmentsystems (such as the Programme forInternational Student Assessment orthe Trends in InternationalMathematics and Science Study)(international consultant) 36000 - 36000

Training and workshops withinComponent 3 1 000 - 1000

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Total for Component 3 80 800 3 908 - 76 892

4. Implementation Support andAudit

Project Consultant,for ManagementFinancial Resources 14 000 4 270 518 9 730

Procurement Consultant of theProject Management Group 14000 2625 196 11 375

Audit of the project accounts 20000 - - 20000

Translator of the ProjectManagement Group 20950 3 357 - 17593

International facilitator 7 450 6 300 - 1 150

Publication of the materials 1 500 - - 1 500

Training for National Institute ofEducation staff in the World Bank'sprocurement and financialmanagement procedures 8 000 3 153 - 4 847

Adapting an existing accountingprogram for the project objectives 2 000 1 339 - 661

Total for Component 4 87 900 21 044 714 66 856

Total Project Expenditure 340 000 109 712 2 695 230 288

Director of the Natio ) Institute ofEducation Head of Accounting Department of theNational Institute of Education

Mr. Sergey A. Vazhnik Ms. Elena V. Nikitsina

* Amount payable at the reporting date (goods/services accepted but not paid) for the Trainingand workshops within Component 2 in the amount of USD -19 is overpayments for trainings andworkshops to be refunded in January 2016.

The notes on pages from 14 to 16 form an integral part of the financial statements.

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Designated Account Statement for the year ended 31 December 2015

(in USD)Bank where the special account was opened OJSC "Belinvestbank"

Currency USD

Account Number 3642951394038

Opening balance at the beginning of the period -

Add:

World Bank advances into the Designated account during theperiod 78 656

Less:

Amount of eligible expenditures paid during the present period 23 193

Amount of funds transferred to the transit account in BYR 41 937

Total withdrawals during the period 65 130

Calculated designated account closing balance 13 526

Designated account closing balance as at 31 December 2015 13526carried forward to next period - per bank statements

Director of the Nationsn tute of Eduction Head of Accounting Department of theNational Institute of Edsation

Mr. Sergey A. Vazhni i Ms. Elena V. Nikitsina

The notes on pages from 14 to 16 form an integral part of the financial statements.

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Transit Account Statement for the year ended 31 December 2015

(in USD)

Bank where the transit account was opened OJSC "Belinvestbank"BYR

CurrencyAccount Number 3642951394100

1. Opening balance at the beginning of the period -

Add:

2. Advance from designated account during the period 41 937

Less:

3. Amount of eligible expenditures paid during the present period 39 219

4. Calculated transit account closing balance 2718

5. Transit account closing balance as at 31 December 2015carried forward to next period - per bank statements 2 718

6. Difference between 4 and 5 (should be zero or explained) -

Director of the NatiA Institute of Educqtion Head of Accounting Department of theNational Institute of Education

Mr. Sergey A. Vazh i Ms. Elena V. Nikitsina

The notes on pages from 14 to 16 form an integral part of the financial statements.

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Statement of Expenditure Withdrawal Schedule for the year ended 31 December 2015

(in USD)Number Component 1: Component 2: Component 3: Component 4: Total

of Capacity Introduction of Strengthening Implementati SOEapplicati Development International of Quality on Support

on for for Evidence- Examples and Assessment and Audit

withdra based Best Practices of Practices inwal Policymaking Education General

in the General Financing Secondary

Secondary Reforms to EducationEducation Government

Sector Officials

2 - 23 172 - 2893 26065

4 - 6181 1800 - 7981

Total - 29 353 1 800 2 893 34 046

Transferred to the Designated Account:

(in USD)

Number Advance Category 1: Category 2: Category 3: Category 4: Total

of Goods Consultants' Training Otherapplicati services and (audit)

on for (including workshopswithdra travel and

wal per diem)

1 50000 - - 50000

2 - - 2591 26065 - 28656

Total 50 000 - 2 591 26 065 - 78 656

Director of the Nation4 tstitute pf Educatid' Head of Accounting Department of theNational Institute of Edu tion

Mr. Sergey A. Vazhnik Ms. Elena V. Nikitsina

The notes on pages from 14 to 16 form an integral part of the financial statements.

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Notes to the financial statements

For the year ended 31 December 2015(All amounts determined in USD if not otherwise stated)

Project Description

At the request of the Ministry of Education of the Republic of Belarus, the InternationalBank of Reconstruction and Development ("World Bank") has extended a grant under theInstitutional Development Fund (IDF) for the purpose of building government capacity foreducation sector reforms based on modern approaches to evidence-based policymaking,through improved data collection and analysis, financing and quality assessment. The totalgrant amount is USD 340 000.

According to the Resolution of Council of Ministers of the Republic of Belarus dated July31, 2014 No 742 <<On approval of international technical assistance projects >> the project hasbeen entitled as an approved international technical assistance project and has beenregistered by the Ministry of Economy of the Republic of Belarus as of November 17, 2014,registration No. 2/14/00731.

In conformity with the Grant Agreement dated April 24, 2014 National Institute of Educationacts as a Project Implementing Agency.

The objective of the Project is to build government capacity for education sector reforms inthe Recipient's country based on modern approaches to evidence-based policymaking,through improved data collection and analysis, education financing and quality assessment.The Project consists of the following parts:

1. Component 1: Capacity Development for Evidence-based Policymaking in the GeneralSecondary Education Sector.

2. Component 2: Introduction of International Examples and Best Practices of EducationFinancing Reforms to Government Officials.

3. Component 3: Strengthening of Quality Assessment Practices in General SecondaryEducation.

4. Component 4: Grant Implementation Support and Audit.

The period of the Project implementation is 2014-2017.

Significant accounting policies.

Basis of accounting

Financial statements have been prepared on a cash basis of accounting. Accounting policieswere used consistently during the whole period of the Grant use. Accounting data ofNational Institute of Education form the basis for the financial statements preparation. Theproject transactions recorded separately from the funds received from other sources offinance of National Institute of Education.

Reporting period

This report covers the period ofuse of the Grant funds for the year ended 31 December 2015.

Financial statements currency

USD is the currency of the financial statements in accordance with the requirements of theWorld Bank. Payments made in Belarusian rubles are presented in the financial statementsin USD at the actual bank exchange rate at the date of foreign currency sale.

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Funds of the project financed by the World Bank

The World Bank provided the Project funds upon requests signed by the authorizedrepresentative of National Institute of Education. In the reporting period, financing providedby additions to the initial advance to the designated account of the project opened in OJSC<<Belinvestbank>>, as well as by direct payments.

Project accounts

Project accounts opened in OJSC <<Belinvestbank>>, which comply with the requirements ofthe World Bank.Designated account of the project X2 3642951394038 is opened in USD.Transit project account X2 3642951394100 is opened in BYR. This account is intended fordepositing the ruble equivalent of sold currency from the designated account for furtherpayments.

Withdrawal offunds

National Institute of Education submitted 6 withdrawal applications during 2015 as shownbelow:

Payment USDApplication Date of

numberType wihrwlCurrency Amount equivalentnumber withdrawal

1 DA-A 05.02.2015 USD 50000 500002 DA-A 01.06.2015 USD 28 656 28 656

Direct3 Payment 23.06.2015 USD 6300 63004 DA-A 04.12.2015 USD -

Direct5 Payment 28.12.2015 USD 15000 15000

Direct6 Payment 29.12.2015 USD 26 000 26 000

Total: 125 956

Financing received:

Direct payment 47 300Transferred to thedesignated account 78 656

Total: 125 956

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Determination of earnings and expenses

National Institute of Education keeps its records and prepares its financial statements on cashbasis accounting. Cash proceeds are recorded when obtained from the World Bank. Expensesare recorded at the date of withdrawal of funds from the project accounts. The followingtable shows the Categories of components to be funded under the Grant, Grant allocationsfor each Category and the percentage of costs of components, which will be financed in eachCategory:

Category Amount of the Grant Percentage of costs to befunds financed

(in USD)

(1)Goods 17000 100%

(2) Consultants' services 250 200 100%(including travel and perdiem)

(3) Training and 52 800 100%workshops

(4) Other (audit) 20 000 100%

TOTAL AMOUNT 340 000

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World Bank Audit Documentation Checklist

Name of Loan/Credit: World Bank

Loan/Credit # TF016518

Auditors' Report: 22 April 2016Check if Check ifIncluded N/A

I. Auditors' Report,(Opinion):

A. Applicable accounting standards noted XB.Applicable auditing standards noted X

C.Opinion rendered on all forms of withdrawals:

1. Statement of Expenditures for the year Xended 31 December 2015

2. Designated account X

D.All sources of financing for the project are noted X

II. Financial statements:A.Revenue Earning Entity (all items are to be filled-in):

1. Balance sheet X2. Cash Flow Statement X3. Income Statement X

B.Non-Revenue Earning Entity (all items are to befilled-in):

1. Balance sheet X2. Statement on use of funds by Project Xcomponents

C.If applicable (refer to Loan Agreement):1.Statement of Expenditure for the year Xended 31 December 20152.Statement on use of designated account X

III.Notes to the financial statements X

IV.Reconciliation between World Bank records andproject records

V.Management Letter X

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