REPUBLIC OF TURKEY

PRIME MINISTRYUndersecretariat of Treasury

INDEPENDENT AUDITOR'S REPORT

On

HEALTH SYSTEM STRENGTHENING AND SUPPORT PROJECT

Implemented by

MINISTRY OF HEALTH

And

Financed Under

World Bank Loan No: 8531-TR

As of December 31, 2016 and for the year then ended

Report Number: 249/4-67/14-44/4

Prepared by

Abbas ORMEN Bilgehan GOKMEN Mustafa Emre BAYKALSenior Treasury Controller Treasury Controller Treasury Controller

June 23, 2017

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TABLE OF CONTENTS

1. EXECUTIVE SUMMARY

2. INDEPENDENT AUDITOR'S REPORT & FINANCIAL STATEMENTS OF THEPROJECT

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 Requests for Disbursement (SOE Statement)

2.5 Statement of Special Account

2.6 Notes to the Project Financial Statements

1. General Information On The Project

2. Basic Accounting Policies

3. World Bank Loan

4. Limited Use Of Funds And Other Assets

5. Cash Balance

6. Planned Expenditure

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REPUBLIC OF TURKEYPRIME MINISTRY

Undersecretariat of Treasury

EXECUTIVE SUMMARY

A. Project Summary

A Loan Agreement numbered 8531-TR was signed between Republic of Turkey(the Borrower) and International Bank for Reconstruction and Development onSeptember 30, 2015 in order to finance Health System Strengthening and SupportProject carried out by the Ministry of Health. A total of 120 Million Euro will be used inthe project and all of the mentioned amount will be financed from World Bank

resources. The closing date of the project is May 31, 2020.

The objectives of the Project are to improve primary and secondary prevention of

selected non-communicable diseases, increase the efficiency of public hospitalL management, and enhance the evidence-based policy-making capacity of the Ministry of

Health. The Project consists of the following parts:

1.Primary and Secondary Prevention

2. Increasing Efficiency of Public Hospital Management

3. Improving the Effectiveness of Overall Health Sector Administration

In the audit period (01/01/2016 - 31/12/2016), total disbursements madeunder the Project is EURO 7.606.881,48

B. Objectives of Audit

The objectives of our audit are;

a) To give an opinion on whether the financial statements, prepared as of

December 31, 2016 and for the year then ended, 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, as of December 31, 2016, whether the Ministry of Health has

complied, in all material respects, with the rules and procedures of the Loan Agreement

numbered 8531-TR,

f c) To examine whether adequate supporting documentation has been

maintained to support claims to the World Bank for reimbursements of expenditures

incurred with respect to SOEs and to evaluate eligibility of these expenditures for

financing under the World Bank Loan Agreement numbered 853 1-TR.

C. Scope of Audit

We have performed an audit of financial statements of the project as of December

31, 2016, and for the period then ended in accordance with the cash receipts and

disbursements basis of accounting. We have also performed a compliance audit on

whether the Project activities are in line with the Loan Agreement and related World

Bank Guidelines.

Our audit was conducted in accordance with the International Standards on

Auditing published by International Federation of Accountants and related World Bank

guidelines.

There was no limitation in our scope for the Project's audit.

D. Audit Results

For the financial statements of the project; our audit resulted with an unqualified

opinion.

In addition, as of December 31, 2016, and for the period then ended the Ministry

of Health has complied, in all material respects, with the rules and procedures of theLoan Agreement.

With respect to SOEs, adequate supporting documentation has been maintained

to support claims to the World Bank for reimbursements of expenditures incurred; and

these expenditures are eligible for financing under the World Bank Loan Agreement.

E. Management Recommendations

A management letter, dated June 23 2017, to the attention of the Ministry ofHealth was issued separately from this report. The objective of this Management Letter

is to enable the auditors to communicate appropriately to those charged withgovernance 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

recommendations are attached to the Letter.

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!,NnoPoNnENT Aun.ToR,5 RoPoRT&{_F,NANC,AL STATEMENTs OF THE PROJECT

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REPUBLIC OF TURKEYPRIME MINISTRY

Underseeretariat of Treasury

INDEPENDENT AUDITOR'S REPORT

TO REPUBLIC OF TURKEY, MINISTRY OF HEALTHPROJECT MANAGEMENT AND SUPPORT UNIT

Opinion

We have audited the Statement of Sources and Uses of Funds, Statement ofCumulative Investments, Statement of Requests for Reimbursement (SOE Statement)

and Statement of Special Account of the Health System Strengthening and Support

Project as of December 31, 2016, and for the period then ended, and a summary of

significant accounting policies and other explanatory information. The financial

statements have been prepared by the Ministry of Health based on relevant provisions

of the Loan Agreement Numbered 8531-TR

In our opinion;

a) The accompanying Statement of Sources and Uses of Funds, Statement of

Cumulative Investments, Statement of Requests for Reimbursement (SOE Statement)

and Statement of Special Account present fairly, in all material respects, the financial

position and accounting policies of the Health System Strengthening and Support Project

as of December 31, 2016 and for the period then ended in accordance with the

provisions of the Loan Agreement Numbered 8531-TR

b) The Ministry of Health, as of December 31, 2016 has complied with, in all

material respects, the requirements of the Loan Agreement Numbered 8531-TR.

c) With respect to SOEs, adequate supporting documentation has been

maintained to support claims to the World Bank for reimbursement of expenditures

incurred, and these expenditures are eligible for financing under the Loan Agreement

Numbered 8531-TR.

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 Health 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.

Emphasis of Matter

Without modifying our opinion, we draw attention to the finding numbered 1which are attached to our Management Letter. The following point, which are expressedin detail in the finding numbered 1, must be given utmost consideration in the futureperiods of the project.

* A tender which could be conducted through National Competitive Biddingprocedure was conducted through Shopping procedure in three parts with a view toremoving the time and cost limitations in the World Bank Procurement Procedures.

In order to avoid recurrence of the abovementioned issue, the recommendationsattached to our Management Letter must be followed and necessary measures must betaken.

Basis of Accounting and Restriction on Distribution and Use

We draw attention to Note "2" to the financial statements, which describe thebasis of accounting.

The financial statements are prepared to assist the Ministry of Health to complywith the financial reporting provisions of the World Bank Loan Agreement Numbered8531-TR. As a result, the financial statements may not be suitable for another purpose.Our report is intended solely for the Ministry of Health, Undersecretariat of Treasury,and World Bank, and should not be distributed or used by other parties.

Responsibilities of Management and Those Charged with Governance forthe Financial Statements

The Ministry of Health is responsible for the preparation and fair presentation ofthese financial statements in accordance with Loan Agreement Numbered 8531-TR, andfor such internal control as management determines is necessary to enable thepreparation of financial statements that are free from material misstatement, whetherdue to fraud or error.

Those charged with governance are responsible for overseeing financialreporting process of the Ministry of Health.

Auditor's Responsibilities for the Audit of the Financial Statements

The objectives of our audit are to obtain reasonable assurance about whether thefinancial statements as a whole are free from material misstatement, whether due tofraud or error, and to issue an auditor's report that includes our opinion. Reasonableassurance is a high level of assurance, but is not a guarantee that an audit conducted inaccordance with ISAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individuallyor in the aggregate, they could reasonably be expected to influence the economicdecisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgmentand maintain professional skepticism throughout the planning and performance of theaudit. We also:

* Identify and assess the risks of material misstatement of the financialstatements, whether due to fraud or error, design and perform audit proceduresresponsive to those risks, and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error, as fraud may involvecollusion, forgery, intentional omissions, misrepresentations, or the override of internalcontrol.

* 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 thepurpose of expressing an opinion on the effectiveness of the entity's internal control.

* Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

* Evaluate the overall presentation, structure and content of the financialstatements, including the disclosures, and whether the financial statements representthe 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 auditfindings, including any significant deficiencies in internal control that we identify duringour audit.

We are also required to provide those charged with governance with a statement

that we have complied with relevant ethical requirements regarding independence, andto 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 SUCUActing Chairman ofBoard of Treasury Controllers

A ('ALlgKANVic hairman

(Audit Partner)

Abbas ORMEN Bilgehan GOKMEN Mustafa Emre BAYKALSenior Treasury Controller Treasury Controller Treasury Controller

Date : 23/06/2017Address: T.C. Ba§bakanlk Hazine Miiste§arhgi,Hazine Kontrolbrleri Kurulu Ba kanligi,06510 Ankara/TURKEY

MINISTRY OF HEALTHHEALTH SYSTEM STRENGTHENING AND SUPPORT PROJECT (8531-TR)

SOURCES AND APPLICATION OF THE FUNDS CHART3111212016 and for the period ending on this date (in Euro)

Actual Planned Deviation

Current Period Cumulative Carrent Period Cumulative Current Period Canaative

I- SOURCES OF THE FUNDSA-Government Funds 000 0,00 0,00 0,00 0,00 0,00B- Other Sources 0,00 000 0, 00 0,00C. World Bank Loan 6.212.745,80 E.212.745,EO 3964.000,00 3.964.000,00 425,25 425,25

1. Direct payments 424917111 4249171.112. Designated Account 3963574.75 3903574.75 3964000.00 395400000 425,25 42525

a) Advance 2 000.00000 2000000.00 2000000.00 2 000 0G0,00 0.00 000b) 1595319.40 1 595319.4D 95500h00 h5o5 5d.00 1060 16060c) Summary Statement Method 365255,35 366 255.35 360500,00 368.500,00 244,65 244,65

3-Other 0,00 0.00 0.00 0,00 0,00a) WE Adminotrative Commission 0,00 0,00 0,00 0,00 0.00

D- Reimbursement to the Designated Account 0,00 0,008212.745,86 8.212.745,86 3.964.000,00 3.964.000,00 425,25 425,25

L It. APPLICATION OF TH E FU NDSI. PRIMARY AND SECONDARY PREVENTION1.1 Increasiog Awareness and Behavior Change 599.535,60 59900560 600 165.00 6016560 37,53 37.53

1 Piloting Healt3y Living Centers 216.81,03 216 51.03 21696000 3 16 960,0 010.97 5 25?1 1.2 Public Outreach 15.617.,0 10617,00 200 050.00 200050,00 43.07 432 021.1 3SbstanceAbuse andAlcoholsmPrevention sd Treatmeot 183.006,67 103 56,67 16 125,00 10 125.00 1180,33 11033

1.2 E118cOe Screening Precedares 116.005,9 116.006.09 116030.00 116500,00 24.11 24,11

1..1 Diagnosis Centers Capacity Building 0.00 000 0.00 0.00 0.00 0,001.2.3 Nationai Cancer Registry Software 11065,80 116 005.69 116,030.00 116.030.0 24,11 24,11

1.2 3 Palliative Care Aci 0.00 0.00 0.00 0,00 0.00 0.00

I 3Streogthening Pftryeafl tht Care 7405077,01 249.t77,01 2409250,00 2409250.00 172,tO 172.19

1 3 Fmilly Phyoician TraIng Programs 245.077.81 2490177.0l 249 250.00 245.250,80 172.$0 172.19Worload Anaiysisand SanrdardiZed Work procedure 0o Family P0ysiciaos 0.,0 000 0,60 0.00 0,00 0,00

TOTAL COMPONENT 8 984. .4358 34.0 00,30 06.445,00 960.440,00 233,3 233,03II. INCREASING THE EFFICIENCY OF PUELIC HOSPITAL MANAGEMENT AND OPERATONS21 fcrm os loans Facility Saagem t Systems 320 002,47 30082.47 330.1 20,00 320.120,00 37,53 37,53

2 2 Arctectural aod Techsical Stnoards to. Heait1 6ai 0,00 0.00 0,00 060 0.00 000

2.3 Techoical Sapped to roue PPs 179.711,83 17071168 179010.00 116 000 9.17 24,11

TOTAL COMPONENT 11 499.794,30 499.794,30 490.930,00 495.930.00 135,70 135,70]LiIMPROVING THE EFFECTIVENESS OF OVERALL HEALTH SECTOR ADMINISTRATION3.1 Weit Fuoctiorno tHosi1h Manago1most System 932 613,07 932013.57 933 076.0 0339676,00 291.35 201.35

01.1 Narmoiation i inernatiso a standards 104.904,72 116 904.72 116 776.00 1 776.0,00 870,2 070.28

3 12 National 8-hoath staodards and legislation C,01,877,70 601.077,70 600300.10 t02,250.00 372.30 372,301 3 Computerized Decision Suppert System 0.00 0,00 0,00 0.00 0.00 0,00

3 S4MedicaT Practices Declsioh Sappd System 145 0.1 14.031.15 146950.00 14950,00 1109 119,1

3 2 Sharng Turkeys Enperoence 143.335,00 143 335,60 144 3%000 144 350,00 1014.45 1 014,453 3 1Sildsg copacity in ngealt Tcotogy Assessmont 79.776.03 79776.03 60300.00 20300,00 523,97 523.97

3 Spporing PrAaecly Manage aed SWotroi c Posnfog 4F98m 772P6h 4y6s772,i5 4667050.00 496700,00 277 35 277.35

TOTAL COMPONENT Ill 6.142.497,B8 5.142.497,80 6,145.675,00 6.145.675,00 2.107,12 2.107,12

Total Project Disbursement 7.806.001,40 7.606.881,40 7,611.060,00 7.611.050,00 2.476,66 2.470,65

S2bttal 000 0,00 0,00 0,00 0,00 0,00

a)WB Administra dase Commission 0.00 0.00 0.00 0,00

0,00 0 00

2peoing Balance 0,00Closing Oalance 606.864,30

Z Ide. ENALPP eel Director

II.MRVN H FETIEESO VRL.ELT ETRAMNSRTO3.I elFntoigHat.aaeetSse 3 135 3 1.79396c 3 70 9.5213

MINISTRY OF HEALTHHEALTH SYSTEM STRENGTHENING AND SUPPORT PROJECT (8531 TR)

CUMULATIVE INVESTMENTS TABLE3111212016 and for the period ending on this date (in Euro)

1-INVESTMENTS Actual Planned Deviation

1RIMARY AND SECONDARY PREVENTION Current Period Cumulative Current Period Cumulative Current Period

Cumulative

1 1 Increasing Awareness and Behavior Change 599.505,68 599 505,568 600 165,00 600 165,00 37.53 37,53

1 1 1 Piloting Healthy Living Centers 216.801,03 216.881,03 216.990,00 216.990,00 10B,97 108.971 1 .2 Public Outreach 199 617.90 199.617,98 200 050,00 200 050,00 432,02 432,02

1.13 Substance Abuse and Alcoholism Prevenion, and Trealment 13 006,67 183006,67 183 125,00 183.125,00 118.33 118,33

1.2 Effective Screening Procedures 11600589 116 005.89 116 03000 116 030.00 24.11 24.11

1 2.1 Diagnosis Centers Capacity Building O,00 0.00 0.00 0 0,00 0 00

1 2 National Cancer Registry Software 116005,89 116 005.89 116 030,00 116 02000 24,11 24 11

1.2.3 Palliative Care Activies 0,00 0,00 0,00 0.00 0.00 0,00

13 Strengthening Primary Health Care 249077,81 249.077,81 249250,00 249 250,00 172,19 172.18

1.3 1 Family Physician Training Programs 249.077,81 249 077.81 249 250,00 249.250,00 172.19 172,19

1 12 Workload Analysis and Standardized Work Procedures for Family Phystians 0.00 0.00 0.00 0,00 0,00 0.00

TOTAL COMPONENT I 964589,38 964.589,38 965.445,00 965.445,00 233,83 233,83

It. INCREASING THE EFFICIENCY OF PUBLIC HOSPITAL MANAGEMENT AND OPERATIONS

2.1 Reform of the Health Facillty Management Systems 320.082,47 320 02,47 320 120,00 320 120.00 37.53 37.53

2.2 Architectural and Technical Slandards Ior Hnallh Facilifies 0,00 0.00 0.00 0,00 0.00 0.00

2.3 Technical Support to the PPP 179.711,83 179.711,83 179 810,00 179.840,00 98,17 98.17

TOTAL COMPONENT il 499.794,30 499.794,30 499.930,00 499.930,00 135,70 135,70

Ill. IMPROVING THE EFFECTIVENESS OF OVERALL HEALTH SECTOR ADMINISTRATION

3 1 Well Functioning Health Management System 932 613,57 932 613,57 933975,00 933 975,00 291 35 291,35

3 1 1 Harmonization with intemational standards 184 904,72 184 904.72 185775,00 18 775,00 070,28 870,28

3.1.2 National e-health standards and legislation 601.877,70 601.877,70 602.250,00 602 250,00 372,30 372,30

3.1.3Computerized Decisian Support System 0,00 0,00 0,00 000 0,00 0,00

3,1 4 Medical Practices Decision Support System 145.831,15 145.831,15 145950,00 145 950,00 116,85 11.85

3.2 Shaong Turkeys Experience 143 335,55 143.335,55 14435000 144.350,00 1014,45 101445

3 3 Building Capacity in Health Technology Assessment 79.776,03 79.776,03 8030.00 80300,00 523.97 523,97

3 4 Supporting Proecl Management and Stratgc Planning 4 986 772,65 4 985 772,65 4 91 030.00 4 987 L60,00 277.35 2/7 35

TOTAL COMPONENT ilt 5.142,497.80 0.142.497,85 6.145,675,00 6.145.676,00 2.107.12 2.107,12

Total Investmlent Cost 7.606.881,48 7,606.881,48 7,611,050,00 7.611.0$0,00 2.476,65 2.476,65

Za ide SENAL3Pr ject Direct r

I i

MINISTRY OF HEALTHHEALTH SYSTEM STRENGTHENING AND SUPPORT PROJECT (8531 TR)

STATEMENT OF WITHDRAWALS FOR DISBURSEMENT (SOE)3111212016 and for the period ending on this date

(in Euro)

1- Requests ReimbursedDisbursement Catego ies

1- Goods and 2- Consultants 3- Training 4 Ca5- Incremental Total Amount Date ofApplication Date Application Number Technical 2 n t and apitation Operating Total

Services Payments oti Paid PaymentServices Workshops Costs29.09.2016 1 11.985,83 181,62 12.167,45 12.167,45 11.10.201629.09.2016 2 66.124,65 261.425,17 1.419,93 328.969,75 328.969,75 12.10.201629.09.2016 3 87.271,91 129.535,18 825,18 217.632,27 217.632,27 12.10.201629.09,2016 4 6.861,06 110.427,22 158.648,20 3.479,92 279.416,40 279.416,40 12.10.201629.09.2016 5 149.490,35 0,00 168,93 149.659,28 149.659,28 12.10.201629.09.2016 6 0,00 160.156,13 10.615,20 264,41 171.035,74 171.035,74 12.10.201607.12.2016 8 169.118,83 39.929,51 261,83 209.310,17 209.310,17 12.12.201607.12.2016 9 155.030,33 46.474,90 25.623,11 227.128,34 227.128,34 12,12.2016

Subtotal 6.861,06 909.605,25 646.628,16 0,00 32.224,93 1.595.319,40 1.595.319,40

II- Requests Pending ReimbursementDisbursement Categories

1- Goods and 3- Training .. 5- Incremental2- Consultants' 4- Capitation Total Amount Date ofApplication Date Application Number Technical and Operating TotalSevies Services Wrsos Payments CssPald PaymentServices Workshops Costs

Subtotal 0,00 0,00 0,00 0,00 0,00 0,00

TOTAL AMOUNT REQUESTED 6.861,06 909.605,25 646.628,16 32.224,93 1.595.319,40 1.595.319,40

Za e ?ENALP'Pr t Director

MINISTRY OF HEALTHHEALTH SYSTEM STRENGTHENING AND SUPPORT PROJECT (8531 TR)

DESIGNATED ACCOUNT STATEMENTACCOUNT NO: 941632006

AT THE CENTRAL BANK OF TURKEY31/1212016 and for the period ending on this date

(in Euro)

Opening Balance 0,00

Reimbursements to DA 3.963.574,75a) Advance 2.000.000,00b) SOE Procedure 1.595.319,40c) Summary Sheet 368.255,35

Refunds to DA 0,00

Available Funds 3.963.574,75

Withdrawals Made for Expenditures 3.357.710,37

Service charges for the account paid to the Central Bank 0,00

Total Disbursements from DA 3.357.710,37

Closing Balance 605.864,38

Zahi e SENA PPro t t r

L i

REPUBLIC OF TURKEY MINISTRY OF HEALTHHEALTH SYSTEM STRENGTHENING AND SUPPORT PROJECT

(LOAN NO. 8531-TR)NOTES ON PROJECT FINANCIAL STATEMENTS

FOR THE YEAR ENDING ON 31.12.2016

1.GENERAL INFORMATION ON THE PROJECT

The loan agreement was signed between the Government of Turkish Republic andInternational Bank for Reconstruction and Development (WB) to provide financial support in theexecution of Health System Strengthening and Support Project (HSSSP) on 30/09/2015 andapproved by the resolution of the Council of Ministers no.2015/8168 and dated 12/10/2015 andcame into effect on the same day as the letter of World Bank dated 26/11/2015.

The Project consists of main components and sub-components. These components have beenprepared in line with the Strategic Goals set out in the Strategic Plan and the component activitiesare carried out together by different units of the Ministry of Health. Component 1 includes activitiesfor Primary and Secondary Prevention, Component 2 for Increasing the Efficiency of PublicHospital Management and Operations, and Component 3 for Improving the Effectiveness of OverallHealth Sector Administration. Table 1 below shows the Project Components and the funds allocatedto each component in accordance with the Loan Agreement. There are 10 implementing units(given below) for 3 main components and their subcomponents which will be executed by theMinistry of Health under the Project, and the Program Implementation Plan demonstrates whichunit is responsible for which component.

Component 1.

Primary and Secondary Prevention 39.390.000

1.1. Increasing National Awareness 25.320.0001.2. Increasing effective cancer screening 3.760.000

1.3. Strengthening primary health care 10.310.000

Component 2.

Increasing the Efficiency of Public Hospital Management and Operations 41.650.000

2.1. Reforming the health facility management system 25.500.000

2.2. Introducing architectural and technical standards for health facilities 2.590.000

2.3. Strengthening health investments to be made through PPP 13.560.000

Component 3.38.960.000

Improving the Effectiveness of Overall Health Sector Administration

3.1. Health management system 27.264.000

3.2. Sharing Turkey's experience 2.846.000

3.3. Health technology assessment 3.516.000

3.4. Project Management 5.334.000

TOTAL PROJECT AMOUNT 120.000.000

Ministry of Health, Project Implementing and Expenditure Units:

1. General Directorate of Health Investments

2. General Directorate of Health Information Systems

3. General Directorate of Health Services

4. General Directorate of Health Research

5. General Directorate of Emergency Health Services

6. General Directorate of Foreign Affairs and European Union

7. Public Health Institution of Turkey

8. Public Hospitals Institution of Turkey

9. Project Management and Support Unit

10. General Directorate of Health Promotionp

Total project amount has been allocated to the Ministry of Health of Turkey as 120.000.000 Euros.The relevant unit which will execute the Project on behalf of the Ministry of Health is the ProjectManagement and Support Unit. And, under the Health System Strengthening and Support Project(HSSSP), the implementing units of the Ministry of Health (General Directorates, Departments, andDivisions) will be responsible for planning, budgeting and implementing their own activities andexpenditures. Therefore, the Project Implementing Units will continue to execute their payment andprocurement operations with their expenditure authorizations. Project Management Support Unit isresponsible for procurement and payment regarding the activities stipulated in the projects underSub-Component 3.4 "Project Management and Strategic Planning" under Component 3 of theProject titled "Improving the Effectiveness of Overall Health Sector Administration" as well ascoordinating planning of the Units/budget requests with Strategy Development Presidency,monitoring and providing any kind of technical support.

2. BASIC ACCOUNTING POLICIES

a. Transactions regarding the project are entered into accounts on a cash basis. According tothis basis, income occurs when the funds are received, and expense occurs when the fundsare paid.

b. Payments are made to the selling institutions through direct payments or through aDesignated Account.

c. Accounts are kept in the local currency of TL and the credit currency of EURO. Payments,which are made in currency other than the local currency or EURO, are exchanged intoEURO by using the exchange rate of the Republic of Turkey Central Bank on the date ofpayment and are passed into accounts.

d. Financial tables have been prepared with the aim of ensuring that the Ministry of Healthacts in accordance with the financial provisions of the Loan Agreement no. 853 1-TR.

3. WORLD BANK LOAN

The loan agreement was signed between the Government of Turkish Republic and InternationalBank for Reconstruction and Development (WB) to provide financial support in the execution ofHealth System Strengthening and Support Project (HSSSP) on 30/09/2015 and approved by theresolution of the Council of Ministers no.2015/8168 and dated 12/10/2015 and came into effect onthe same day as the letter of World Bank dated 26/11/2015.

4. LIMITED USE OF FUNDS AND OTHER ASSETS

In accordance with the loan agreement made between the Government and the World Bank, theutilization of the funds in the Designated Account is limited to the project aims. The project fundswhich are not used by the end of the project will be returned to the Undersecretariat of Treasury tobe distributed to those providing this fund in accordance with the provisions of the relevantfinancing agreement. Fixed assets procured by the project funds belong to the user institutions andtheir use is limited to project purposes until the completion of the project.

5. CASH BALANCE AS OF 31 DECEMBER 2016

The existing cash balance expressed in Euro on 31 December 2016 is as follows:

L Loan Funds Government Source TotalDESIGNATED ACCOUNT 605.864,38 C 605.864,38 C

6. PLANNED EXPENDITURES

Under the Health System Strengthening and Support Project (HSSSP), the budget allocated for theMinistry of Health was 112.676.000,00 TRY for the current period of 2016. The share of ProjectManagement Support Unit in the said budget was 5.300.000,00 TRY.The reason for the large budget allocation to the Project Management Support Unit was to providesupport to meeting the needs of the other user units.

The realized expenditures by the Ministry of Health amounted to 7.606.881,48 Euros, with theProject Management Support Unit having a share of 4.986.772,65 Euros in this realized amount.

Za de $E ALPP 'ecj ector