HIGHER EDUCATION QUALITY AND CAPACITY

IMPROVEMENT PROJECT

AUDITED FINANCIAL STATEMENTS AND

INDEPENDENT AUDITORS’ REPORT

31 DECEMBER 2015

HIGHER EDUCATION QUALITY AND CAPACITY IMPROVEMENT PROJECT

Under the International Development Association (“IDA”) Credit Number 4796-KH and Grant Number H607-KH between the Royal Government of Cambodia and the IDA

PROJECT INFORMATION

PROJECT MANAGEMENT: H.E. Youk Ngoy - Project Director

IMPLEMENTING AGENCY: Ministry of Education, Youth and Sport

Department of Higher Education

PRINCIPAL BANKER: National Bank of Cambodia

AUDITORS: BDO (Cambodia) Limited

HIGHER EDUCATION QUALITY AND CAPACITY IMPROVEMENT PROJECT

Under the International Development Association (“IDA”) Credit Number 4796-KH and Grant Number H607-KH between the Royal Government of Cambodia and the IDA

CONTENTS / PAGE
PROJECT MANAGEMENT’S REPORT / 1
INDEPENDENT AUDITORS’ REPORT / 2 - 3
STATEMENT OF FINANCIAL POSITION / 4
STATEMENT OF SOURCES OF FUNDS AND EXPENDITURES / 5
STATEMENT OF DESIGNATED ACCOUNTS / 6 - 7
NOTES TO THE FINANCIAL STATEMENTS / 8 - 31

1

HIGHER EDUCATION QUALITY AND CAPACITY IMPROVEMENT PROJECT

Under the International Development Association (“IDA”) Credit Number 4796-KH and Grant Number H607-KH between the Royal Government of Cambodia and the IDA

PROJECT MANAGEMENT’S REPORT

The Project Management hereby submits the report together with the audited financial statements of Higher Education Quality and Capacity Improvement Project (“the Project”), which comprise statement of financial position as at 31 December 2015, statement of sources of funds and expenditures and statement of designated accounts for the financial year ended 31 December 2015.

Responsibility of the Project Management in respect of the financial statements

The Project Management is responsible to ascertain that the financial statements of the Project for the financial year ended 31 December 2015 are prepared, in all material respects, in accordance with the basis of preparation and accounting policies set out in Note 2 to the financial statements. In preparing these financial statements, the Project Management is required to select suitable accounting policies and then apply them consistently.

The Project Management is responsible for ensuring that proper accounting records are kept which enable the financial statements to be prepared in compliance with the basis of preparation and accounting policies set out in Note 2 to the financial statements and in accordance with the terms of the financing agreement for Credit Number 4796-KH and Grant Number H607-KH between the Royal Government of Cambodia and the International Development Association (“IDA”). The Project Management is also responsible for safeguarding the assets of the Project and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Project Management assumes the responsibility to provide, and has provided, the auditors with all accounting records, supporting and other documents, minutes, and any other pertinent information and explanations, either orally or in writing, necessary for the audit.

Statement by the Project Management

In the opinion of the Project Management, the financial statements set out on pages 4 to 31 are prepared, in all material respects, in accordance with the basis of preparation and accounting policies set out in Note 2 to the financial statements and the related financing agreement.

On behalf of the Project Management,

______

H.E. Youk Ngoy

Project Director

Secretary of State

Ministry of Education, Youth and Sport

Phnom Penh, Cambodia

Date:

3

INDEPENDENT AUDITORS’ REPORT TO THE PROJECT MANAGEMENT OF

HIGHER EDUCATION QUALITY AND CAPACITY IMPROVEMENT PROJECT

Report on the Financial Statements

We have audited the accompanying financial statements of the Higher Education Quality and Capacity Improvement Project (“the Project”), which comprise statement of financial position as at 31 December 2015, statement of sources of funds and expenditures and statement of designated accounts for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 4 to 31.

Project Management’s Responsibility for the Financial Statements

The Project Management is responsible for the preparation of the financial statements in accordance with the basis of preparation and accounting policies set out in Note 2 to the financial statements, and for such internal control as the Project Management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Project’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on effectiveness of the Project’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Project Management, as well as evaluating the overall presentation of the financial statements.

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

INDEPENDENT AUDITORS’ REPORT TO THE MANAGEMENT OF

HIGHER EDUCATION QUALITY AND CAPACITY IMPROVEMENT PROJECT (continued)

Report on the Financial Statements (continued)

Opinion

In our opinion, the financial statements of the Project for the financial year ended 31 December 2015 are prepared, in all material respects, in accordance with the basis of preparation and accounting policies set out in Note 2 to the financial statements.

Basis of Accounting

Without modifying our opinion, we draw attention to Note 2 to the financial statements, which describes the basis of preparation and accounting policies adopted by the Project. The financial statements are prepared to assist the Project to meet its financial reporting requirements. As a result, the financial statements may not be suitable for another purpose.

Lim Seng Siew

Partner

BDO (Cambodia) Limited

Certified Public Accountants

Phnom Penh, Cambodia

Date:

5

HIGHER EDUCATION QUALITY AND CAPACITY IMPROVEMENT PROJECT

Under the International Development Association (“IDA”) Credit Number 4796-KH and Grant Number H607-KH between the Royal Government of Cambodia and the IDA

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2015

Year ended 31 Dec 2015 / Year ended 31 Dec 2014
IDA Grant / IDA Credit / IDA Grant / IDA Credit
Note / No.H607-KH / No.4796-KH / Total / No.H607-KH / No.4796-KH / Total
US$ / US$ / US$ / US$ / US$ / US$
ASSETS
Cash and bank balances / 3 / 713,685 / (111,970) / 601,715 / 869,694 / 1,062,376 / 1,932,070
Advances / 4 / - / 5,165 / 5,165 / - / - / -
TOTAL ASSETS / 713,685 / (106,805) / 606,880 / 869,694 / 1,062,376 / 1,932,070
fund balance / 713,685 / (106,805) / 606,880 / 869,694 / 1,062,376 / 1,932,070

The accompanying notes form an integral part of the financial statements.

5

HIGHER EDUCATION QUALITY AND CAPACITY IMPROVEMENT PROJECT

Under the International Development Association (“IDA”) Credit Number 4796-KH and Grant Number H607-KH between the Royal Government of Cambodia and the IDA

STATEMENT OF SOURCES OF FUNDS AND EXPENDITURES

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

Note / Year ended / Year ended / Cumulative to
31 Dec 2015 / 31 Dec 2014 / 31 Dec 2015
US$ / US$ / US$
SOURCES OF FUNDS
IDA - Grant / 5.1 / 1,790,486 / 4,726,690 / 11,808,132
IDA - Credit / 5.2 / 1,736,417 / 2,148,682 / 7,648,925
3,526,903 / 6,875,372 / 19,457,057
EXPENDITURES BY CATEGORIES
Goods and works, consultancy services,
trainings and workshops and
incremental operating costs / 8 / 2,905,598 / 1,635,726 / 7,625,323
Fellowships / 9 / 1,236,143 / 1,538,112 / 4,405,094
Scholarships / 10 / 560,570 / 914,366 / 3,713,551
Development and innovation grants / 11 / 149,782 / 1,135,561 / 2,975,802
Priority operating costs / 12 / - / - / 130,407
4,852,093 / 5,223,765 / 18,850,177
(Deficit)/Excess of sources of funds
over expenditures / (1,325,190) / 1,651,607 / 606,880
Fund balance at beginning of financial year / 1,932,070 / 280,463 / -
Fund balance at end of financial year / 606,880 / 1,932,070 / 606,880
EXPENDITURES BY COMPONENTS / 14
Strengthening the capacity
of the higher education system / 2,920,840 / 2,240,719 / 8,260,641
Provision of competitive development
and innovation grants / 366,736 / 1,260,744 / 3,581,374
Provision of scholarships to disadvantaged students / 605,042 / 931,774 / 4,028,761
Project management and monitoring
and evaluation / 959,475 / 790,528 / 2,979,401
4,852,093 / 5,223,765 / 18,850,177

The accompanying notes form an integral part of the financial statements.

7

HIGHER EDUCATION QUALITY AND CAPACITY IMPROVEMENT PROJECT

Under the International Development Association (“IDA”) Credit Number 4796-KH and Grant Number H607-KH between the Royal Government of Cambodia and the IDA

STATEMENT OF DESIGNATED ACCOUNTS - IDA - GRANT

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

Note / Year ended / Year ended / Cumulative to
31 Dec 2015 / 31 Dec 2014 / 31 Dec 2015
US$ / US$ / US$
SOURCES OF FUNDS
Unused funds from previous year / 869,694 / (268,957) / -
Funds received during the year / 5.1 / 1,790,486 / 4,726,690 / 11,808,132
2,660,180 / 4,457,733 / 11,808,132
EXPENDITURES BY CATEGORIES
Fellowships / 9 / 1,236,143 / 1,538,112 / 4,405,094
Scholarships / 10 / 560,570 / 914,366 / 3,713,551
Development and innovation grants / 11 / 149,782 / 1,135,561 / 2,975,802
1,946,495 / 3,588,039 / 11,094,447
Excess of sources of funds
over expenditures / 713,685 / 869,694 / 713,685
REPRESENTED BY:
Cash and bank balances / 3 / 713,685 / 869,694 / 713,685

HIGHER EDUCATION QUALITY AND CAPACITY IMPROVEMENT PROJECT

Under the International Development Association (“IDA”) Credit Number 4796-KH and Grant Number H607-KH between the Royal Government of Cambodia and the IDA

STATEMENT OF DESIGNATED ACCOUNTS - IDA - CREDIT

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015

Note / Year ended / Year ended / Cumulative to
31 Dec 2015 / 31 Dec 2014 / 31 Dec 2015
US$ / US$ / US$
SOURCES OF FUNDS
Unused funds from previous year / 1,062,376 / 549,420 / -
Funds received during the year / 5.2 / 1,736,417 / 2,148,682 / 7,648,925
2,798,793 / 2,698,102 / 7,648,925
EXPENDITURES BY CATEGORIES
Goods and works, consultancy services, trainings and workshops and
incremental operating costs
8 / 2,905,598 / 1,635,726 / 7,625,323
Priority operating costs / 12 / - / - / 130,407
2,905,598 / 1,635,726 / 7,755,730
(Deficit)/Excess of fund over expenditures / (106,805) / 1,062,376 / (106,805)
REPRESENTED BY:
Cash and bank balances / 3 / (111,970) / 1,062,376 / (111,970)
Advances / 4 / 5,165 / - / 5,165
(106,805) / 1,062,376 / (106,805)

The accompanying notes form an integral part of the financial statements.

20

HIGHER EDUCATION QUALITY AND CAPACITY IMPROVEMENT PROJECT

Under the International Development Association (“IDA”) Credit Number 4796-KH and Grant Number H607-KH between the Royal Government of Cambodia and the IDA

NOTES TO THE FINANCIAL STATEMENTS

1. PROJECT INFORMATION

On 7 September 2010, the Kingdom of Cambodia represented by the Ministry of Economy and Finance (“MEF”) and the International Development Association (“IDA”) signed a Financing Agreement - Credit Number 4796-KH and Grant No. H607-KH - to finance the Higher Education Capacity and Improvement Project (“the Project”).

The Project became effective on 30 December 2010 and has a closing date of 30 September 2017, with total funding of Special Drawing Rights (“SDR”) 15,700,000 comprising:

·  Credit No. 4796-KH will finance SDR7,850,000

·  Grant No. H607-KH will fund SDR7,850,000

The service charge payable on the withdrawn credit balance will be 0.75% per annum.

The Credit funds will be repaid between 2021 and 2050, with two payments made each year, on 1 February to 1 August. The payment amounts will be as follows:

·  1 February 2021 to 1 August 2030 - 1% of principal for each payment

·  1 February 2031 to 1 August 2050 - 2% of principal for each payment

The objectives of the Project are:

·  To improve the quality of teaching, management and research in project-supported entities;

·  To pilot the targeting of disadvantaged students for enhanced retention.

The Project consists of the following components:

Component 1: Strengthening the Capacity of the Higher Education System

Supports the improvement of the overall development, management and governance of higher education sub-sector by:

·  Strengthening the institutional capacity of Ministry of Education, Youth and Sports (“MoEYS”) and elected Higher Education Institute (“HEI”);

·  Strengthening the Accreditation Committee of Cambodia’s institutional capacity and the HEI accreditation process; and

·  Enhancing the overall coordination of the higher education system through provision of trainings and workshops, fellowships, technical advisory services, small works to upgrade existing facilities and other material support.

HIGHER EDUCATION QUALITY AND CAPACITY IMPROVEMENT PROJECT

Under the International Development Association (“IDA”) Credit Number 4796-KH and Grant Number H607-KH between the Royal Government of Cambodia and the IDA

1.  PROJECT INFORMATION (continued)

Component 2: Provision of Competitive Development and Innovation Grants

Supports MoEYS in the provision of Sub-grants to private and public HEIs for:

·  Research proposals to improve the quality of teaching and learning in HEIs; and

·  Research proposals that deal with solutions to local development problems.

Component 3: Provision of Scholarships to Disadvantaged Students

Provides technical and advisory services and other material support to MoEYS to:

·  Develop and implement a Special Priority Scholarship Program, including tuition and stipends;

·  Develop and implement an awareness campaign on said scholarship program;