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Ministry of Education and Higher Education, Republic ofLebanon - Second Education Development Project - EDP II -Loan# 7966

Report and financial informationfor the period from 1 January 2015 to 31 December 2015

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Ministry of Education and Higher Education, Republic of LebanonSecond Education Development Project - EDP II- Loan# 7966

Report and financial informationfor the period from 1 January 2015 to 31 December 2015

Page

Independent auditor's report 1-2

Statement of cash receipts and payments by category 3

Statement of cash payments classifying the uses of funds 4

Statement of movements in the Designated Account 5

Notes to the financial information 6-9

List of signed contracts Appendix A

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Independent auditor's reportto the Ministry of Education and Higher Education, Republic of Lebanon

Report on the financial information

We have audited the accompanying financial information of the Second EducationDevelopment Project (EDP II) ("the Project") which comprises: (i) Statement of cash receiptsand payments by category; (ii) Statement of cash payments classifying the uses of funds forthe period from I January 2015 to 31 December 2015; (iii) Statement of movements in theDesignated Account; and (iv) the notes to the financial information. The financialinformation has been prepared by the Education Sector Development Secretariat ("ESDS") inaccordance with the accounting policies described in note 2 of the financial information, asapproved by the World Bank, and as required by the terms of the Financial OperationalManual of Loan No. LE-7966, dated April 2012.

The ESDS's responsibility for the financial information

The ESDS is responsible for the preparation of this financial information in accordance withthe accounting policies described in note 2 to the financial information. This includesdetermining that the basis of accounting set out in note 2 is an acceptable basis for thepreparation of the statement in the circumstances, and for such internal control as the ESDSdetermines is necessary to enable the preparation of financial information that is free frommaterial misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on this financial information based on our audit.We conducted our audit in accordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance whether the financial information is free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial information. The procedures selected depend on the auditor'sjudgement, including the assessment of the risks of material misstatement of the financialinformation, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity's preparation of the financial information inorder to design audit procedures that are appropriate in the circumstances. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation ofthe financial information.

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

PricewaterhouseCoopers, Saba House Bldg., Block B/C, Said Freiha Str., Hazmieh, Lebanon, MoF # 95693P.O. Box 11-3155, Beirut, Lebanon, Telephone +961 (5) 428600, Facsimile +961 (5) 95 19 79 , ww.12vc.com/iQliiddle-ast

2

Independent auditor's report (continued)to the Ministry of Education and Higher Education, Republic of Lebanon

Opinion

In our opinion, the financial information for the Project for the period from I January 2015 to31 December 2015 presenting the sources and uses of funds, the expenditures by loancomponent and the movement in the Designated Account, is prepared, in all materialrespects, in accordance with the accounting policies described in note 2 to the financialinformation.

Basis of accounting and restriction on distribution and use

Without modifying our opinion, we draw attention to note 2 to the financial information,which describes the basis of accounting. The financial information is prepared to enable theESDS to meet its reporting obligations to the World Bank under the terms of the LoanAgreement No. LE-7966. As a result, the financial information may not be suitable foranother purpose. Our report is intended solely for the Ministry of Education and HigherEducation, Republic of Lebanon and the World Bank and should not be distributed to or usedby parties other than the Ministry of Education and Higher Education, Republic of Lebanonand the World Bank.

Beirut, Lebanon28 June 2016

7023

3Ministry of Education and Higher Education, Republic of LebanonSecond Education Development Project - EDP II - Loan# 7966

Statement of cash receipts and payments by categoryfor the period from 1 January 2015 to 31 December 2015

Note2015 2014

USS US$Sources of fundsIBRD loan funds 5 1,092,740 1,163,145IBRD loan direct payments 5 2,072,110 -

3,164,850 1,163,145

Uses of funds by project componentEarly childhood education 4 2,424,017 230,235Supporting improvements in qualityof education 581,232 -

Education sector policydevelopment and management 4 433,852 621,031

3,439,101 851,266

Incremental operating costsProject management and operating costs 24,555 21,672

3,463,656 872,938

(Deficit) surplus (298,806) 290,207

The notes on pages 6 to 9 are an integral part of this financial information.


Statement of cash payments classified by componentfor the period from 1 January 2015 to 31 December 2015

Note 2015 2014USS US$

Early childhood educationQuantity and quality of KG Schools 4 2,424,017 230,235

Supporting improvements in qualityof education

Educational leadership for school-baseddevelopment and improvement 5 581,232

Education sector policy developmentand management

Institutional capacity developmentand efficiency 6 124,479 118,072

Sector development management,monitoring and evaluation 6 309,373 502,959

433,852 621,031

Incremental operating costsProject management and operating costs 24,555 21,672

Total expenditures by loan componentand sub-components 3,463,656 872,938



Statement of movements in the Designated Accountfor the period from 1 January 2015 to 31 December 2015

2015 2014UsS US$

Designated Account balance atbeginning of period 413,957 123,750

Add:IBRD loan funds 1,092,740 1,163,145IBRD direct payments 2,072,110 -

3,164,850 1,163,145

Less:Uses of funds (3,463,656) (872,938)

Designated Account balanceat end of period 115,151 413,957



Notes to the financial informationfor the period from 1 January 2015 to 31 December 2015

1 Project background

The Lebanese Republic has obtained from the International Bank for Reconstruction andDevelopment "[BRD" of the World Bank a loan of US$ 40 million to finance theimplementation of the Second Education Development Project (EDP II).

The objectives of the Project are to: (i) improve teaching quality and the learningenvironment in general education and in preschool in the Lebanese Republic; and(ii) increase governance and managerial capacity of the Ministry of Education and HigherEducation (MEHE) and schools.

The Education Sector Development Secretariat (ESDS) within the MEHE is responsible foroverall coordination and implementation of the EDP II.

2 Principal accounting policies and basis of preparation

The Education Sector Development Secretariat ("ESDS") prepares the financial informationof the Education Development Project II (EDP II) ("the Project").

The Project's governing documents provide certain guidelines for governing its financialactivities. To ensure observance of limitations and restrictions on the use of financialresources, the ESDS classifies the Project's uses of funds for accounting and reportingpurposes under the following components:

Component 1 - Early Childhood Education (US$ 15.7 nillion): The first componentsupports increasing the schools' readiness upon students' entry into primary education. Thisincludes increasing infrastructure capacity, enhancing learning resource materials, initiatinga program of professional development for preschool teachers, evaluating theimplementation of early childhood education programs, and assisting the Ministry ofEducation and Higher Education to measure the preschool learning environment andstudents' readiness for first grade.

Component 2 - Supporting Improvements in Quality of Education (US$ 7.6 million): Thesecond component enhances school-based development through improving the quality ofteaching and learning at the school level. It also enhances teacher professional developmentthrough establishing a national system of professional standards and other mechanismsincluding induction programs and trainings related to the teachers' professionaldevelopment.


2 Principal accounting policies and basis of preparation (continued)

Component 3 - Education sector policy development & management (US$ 16.7 million):The third component provides advisory services and technical assistance to the Ministry ofEducation and Higher Education to strengthen the education sector.

Incremental operating costs: consists of necessary incremental expenditures related to themanagement and implementation of the Project.

The Project's expenditures are reflected in the unaudited Interim Financial Reports (IFRs)presented to the World Bank office in Beirut on a quarterly basis.

For the period from I January 2015 to 31 December 2015, total cash receipts received fromthe World Bank amounted to US$ 1,092,740 (2014 - US$ 1,163,145); disbursements madeamounted to US$ 3,463,656 (2014 - US$ 872,938) and IBRD loan direct paymentsamounted to US$ 2,072,110 (2014 - nil).

The significant accounting policies adopted by the ESDS in the preparation of the financialinformation are as follows:

Basis of preparation

The financial information has been prepared in accordance with the cash receipts anddisbursements basis of accounting.

Sources of Funds

Funds received are recognised when cash is received.

Use of Funds

Uses of funds, expenses and other disbursements are recognised when cash is disbursed.Eligible expenditures under the Loan Agreement are used, accounted for and classified inaccordance with the conditions of the Loan Agreement and applicable laws and regulationsof the ESDS's financial activities.


3 Project expenditures by loan component

2015 2014US$ US$

Early childhood education (note 4) 2,424,017 230,235Supporting improvements in quality of

education (note 5) 581,232 -Education sector policy development

and management (note 6) 433,852 621,031Project management and operating costs 24,555 21,672

3,463,656 872,938

4 Early childhood education

Quantity and quality of KG SchoolsGoods 2,072,110 230,235Consultants' services 351,907 -

2,424,017 230,235

5 Supporting improvements in quality of education

2015 2014US US$

Supporting improvements in qualityof education

Consultants' services 581,232 -

6 Education sector policy development and management

2015 2014US$ US$

Institutional capacity developmentand efficiency

Goods 17,530 -Consultants' services 106,949 118,072

124,479 118,072

Sector development management,monitoring and evaluation

Consultants' services 289,700 407,976Training 19,060 58,918Goods 613 36,065

309,373 502,959

433,852 621,031


7 IBRD loan funds and direct payments received

The below table lists the IBRD loan funds received in the Designated Account for theperiod from I January 2015 to 31 December 2015:

USsReceipt dates4 April 2015 337,12521 August 2015 326,35926 October 2015 429,256

Total IBRD loan funds 1,092,740

The below table lists the IBRD direct payments made by the World Bank for the projectfrom I January 2015 to 31 December 2015:

USSReceipt dates6 March 2015 818,0025 May 2015 563,40530 June 2015 409,00030 July 2015 281,703

Total direct payments 2,072,110

8 Movement on the Designated Account

The table below shows the movement in the Designated Account for the period fromI January 2015 to 31 December 2015:

USSDebit Credit Balance

At 1 January 2015 413,95731 January 2015 802 - 413,15528 February 2015 250,280 - 162,87531 March 2015 77,089 - 85,78630 April 2015 26,922 337,125 395,98931 May 2015 31,211 - 364,77830 June 2015 191,137 - 173,64131 July 2015 31,294 - 142,34731 August 2015 2,929 326,359 465,77730 September 2015 395,032 - 70,74531 October 2015 30,751 429,256 469,25030 November 2015 119,353 - 349,89731 December 2015 234,746 - 115,151Designated Account at31 December 2015 1,391,546 1,092,740 115,151

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