Neff/. - 7M7C 7 finistry ofFinnre Singh Durtcr, lcthmanduv Report on the Financial Slt en uts We have audited the accompanying Project Financial Statements including Statement of Designated Account and Statements of Expenditures (SOEs) of the " kabeli -A Hydroelectric Project " financed by Grant No. H900-NPJDA Credit No.5338 as at July 16, 2018 and for the year then ended and a summary of accounting policies and other explanatory notes, Management's Responsibility for Financial S tatements Management is responsible for the preparation and fair presentation of the Financial Statements in accordance with the Government of Nepal (GON) accounting policies and relevant practices. This responsibility includes: designing, implementing and maintaining internal control relevant to preparation and fair presentation of project financial statements that are free from material misstatement, whether due to fraud and error. Auditor's Responsibility Our responsibility is to express an opinion on these Project Financial Statements based on our audit. We conducted our audit in accordance with the INTOSAI (International Organization of Supreme Audit Institutions) Fundamental Auditing Principles. Those Principles require that we 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 the auditor's 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, the auditor considers internal control relevant to the entity's preparation and fair presentation 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 the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit eidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion Management letter high?ighting areas for improving financial managementis attached herewith In our opinion, the Project Financial Statements including Statement of Designated Account Reconciliation Statement, in all material respects, give a true and fair view of the financial position of the " kabeli -A Hydroelectric Project n" anced by Grant No. H900-NP,IDA Credit No.5338 as at July 16, 2018, and of the results of its operations and its cash flows for the year then ended in accordance with GON accounting policies. We also report that fund provided under IDA Grant No. 11900-NP has been utilized for intended purposes. In addition, with respect to SOEs, a) adequate supporting documentation has been maintained to suppot claims to donors for reimbursement of expenditures incurred; and b) expenditures re chgi le for financing under the above mentioned Grants. ame ya Kun r Deputy Auditor General Government of Nepal Office of the investmenl Board Kabeli-A Hydroelectric Project World Bank IDA Credit No.5338 NP/ Grant No.HI900-NP Audited Project Account (Financial Report) Period of FY 2017/18 (2074/75) Government of Nepal Office of the Investment Board Kabeli-A Hydroelectric Project Audited Project Account (Financial Report) Contents Notes to Project Financial Statement: Accounting Policy and Explanatory Notes Report 1 Sources and Uses of Funds Report 2 Designated Account Statement Report 3 Statement of Expenditure Note 1 GoN Fund and GoN Reimbursable Fund Note 2 Disbursement Report Statement of Expenditure (Disbursement) Government of Nepal Office of the Investment Board Kabeli-A Hydroelectric Project World Bank IDA Credit No.5338 NP/ Grant No.H900-NP Notes to Project Financial Statement: Accounting Poli vnd Explanatory Notes L.PotLBkgrund World Bank IDA approved $46 million grant assistance for the Project on April 19, 2014. The grant agreement was signed on July 31, 2014 and declared effective on July 31, 2014. The grant closing date has been set on December 30, 2019, The Project comprises of three components: (i) Kabeli-A Hydroelectric Project; (ii) MOE Component; and (iii) IBN Component. The Project will help the Government to promote economic and social development of Hydroelectric project of Nepal. Access to electricity, electricity supply and demand, strength of institution, financial performance of the power sector, lack of public and private investment Major Project outputs are: Hydroelectric development 2. Statement of Comliance Project Financial Statements have been prepared in accordance within the Government Auditing Standards Part 3, Audit Guideline - Project Financial Statements, issued by the office of the Auditor General, Nepal in October 2005. 3. Significant Accounting Policies: 3.1 Basic of Accounting The project has maintained accounts according to the Government of Nepal Accounting policies on a cash basis of accounting and double entry accounting systems. 4. Funds Flow mechanism After the annual budget is approved by the parliament, MOF issues authorization letter to the OPMCM and OPMCM will issue authorization letter to all the implementing agencies. Office of the Investment Board has opened a Special Account in USD for Human resource development, training and monitoring and evaluation component only. Direct payment procedure has been adopted for the payments to the consultants and for issuing of commitment letters for supply of goods. Based on the authorization letter and approved annual Program, all the lAs implement the project activities. District Treasury Comptroller Office releases the GON fund under single treasury account system. Office of the Investment Board works as a Project Management Unit of the Project. As authorized by Ministry of Finance, IBN/PMU complies the financial reports including SOEs and submits withdrawal applications to IDA for direct payment and replenishment. IBN/PMU also consolidates the project financial statements of all implementing agencies and submits audit report to World Bank of each FY. S. Advance Advances are treated as expenditure. 6. Foreign currency transaction A Special Account of US$ 400,000 is in Account Number: 1204660/001.005.840 at Nepal Rastra Bank, Banking Office, Thapathali, Kathmandu. Special account is replenished and liquidated as per Loan Disbursement Handbook 2015. The special account is opened for human resource development, hydroelectric development and other awareness component only. 7. Reporting currency The reporting currency is in Nepalese Rupees - NRs. (currency of Nepal). Financial statements for projects financed under external grants are separately reported showing currencies of financed in Note- 8. Intended puroose The Grant has been used exclusively for the intended purpose of the project. 9. Date of authorization: These financial statenents have been authorized for issue by the IBN/PMU on every fiscal year according to the date of mandatory. 10. Pro'ect cost of financing plant: (a) Kabeli-A hydroelectric project: USD 40 million (b) Ministry of Energy component: ISD 2 million (c) IBN component: USD 4 million The IBN component (US$ 4.0 million) will provide technical assitance and support to the IBN in improving its ability to carry out its responsibilities of facilitating the development of large hydropower projects across the country in line with applicable international performance, technical, environmental and social standards equivalent to relevant WBG's Safeguards Policies and Performance Standards. Specifically, the component will support IBN in (a) conducting additional due diligence to assess readiness of large hydropower projects (four projects, totaling 3050 MW) proposed by private investors, and thereafter, carry out negotiations with the private developers of these projects for signing PDAs; (b) supervising the construction of the above-mentioned projects to ensure compliance with the terms and conditions of the PDAs and sustainability of such projects; (c) building up its procurement, financial management, operating costs of the project implementation. This component will not provide any direct financing to construct any hydropower projects. Rather, the technical assistance provided to IN under this component will enhance its capacity to uphold international standards on technical, fiduciary, social and environmental management and also fund technical studies in line with relevant Bank policies and standards for the four hydropower projects currently in its pipeline. A. Project cost and financing category of IBN: a. Technical due diligence and PDA negotiations USD 1.3 million b. Supervision and project implementation cost USD 0.60 million c. Safeguards, procurement, financial, technical capacity building USD 1.3 million d. Incremental operating cost USD 0.80 million Total USD 4.0 million B. Progress report of financing Description Proposed Expenditure USD Technical due diligence and PDA USD 1.3 million 0 negotiations Supervision and project USD 0.60 million 0 implementation cost Safeguards, procurement, USD 1.3 million 9171.55 financial, technical capacity building Incremental operating cost USID 0.80 milion 1947,36 Total USD 4.0 million 11118.91 Ripud oJ Kc SunI POudel am Bhakta agle Account Officer Senior Divisional Engineer Joint Secretary Program Coordinator Program Director � jf � . . � � � г , �� � ;� � � N � ' . � �,г м �� щ � м .; � , - � �� � � � � ' ' � � � � �� i�, _ а� о� .� I'7 Э° � � "°'' �� ✓,Ir_,� / � r., �� sU р - � h � `'� - � к z7 -с� � - � � ..: � � _ �s '� а ¢ i ;� ` � � � . , '. � " � � У � . � i , � r1 . � .,� : т '` о • [ ,е,/у+ _ .h ; � � � � й°� �__ ' � 'т ✓ в � й = `� г � . ��:,у � i �� � � � � � � � � О � ' � ,� - ч. - - ryr � l о t7 � ._.. � � � i г ` s� � ° 1 - - � й 7 г ! � � �� � b � � _ ! iг M1 � �" 1 м � ��.. q � Е 1 � � � с С3 в. - � Г - 4 � , у � , � . 1t 4� sa � 1 �i а �.: � . 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D�' �� 4 - U 2 2 Z � � � � � � G �_ t д п ' I `t_ , �? rn Е. 3� _а т ( _ � �..� �� � � �г й о'� �� � � � п�= � � Е � - ��z� �, .. - � г � U� т rn I � �' � � I "i чa3 s� . - � fi �i ;r � � В � _ .. й �х cr .. г-- � i - . 4 ш .У �, - т :. �. . . . � �� � � � �, �` � � roй1 � � .� � �, ` - . д °л ; - " . ¢ �3 � .� а �и i � ` � 2� г g � ы =. г � � �, � � � � � � �' - � U � _1 4i 4 ' '� б1 С _ 4 U � � г 'ёи � _ � и ; 6 6 n �м - - 'а I р с� I[� . � 1 ч ач �� Я � � �.3 р� 1'�j� т� а � т - i:� г. i-� s:� v° с� [i � cr � �-1 � Government of Nepal Office of the Investment Board Kaeli-A Hydroelectric Project Audited Project Account (Financial Report) Report 2 Designated Account Statement i- scal Year: 2017/2018( 2074/2075) pe F C,,: 1 i - A/C No.: 12046601001.005.840 (KABELEI-A HYDROELECTRIC PROJECT) Amount in USID CI, --Jal veupto FY-201612017 Ourreflt --Is,,a' Year Cumulative to Date 1stTrimester 2ndTrimester Vd-millester Year to date 1. Opening Cash Balance in Designed Account - - 2. Add: FwdsRccpip from IDA[TF 400,000-00 4,00,000,A 400,000.00 3. Total Cash Balance (1+2) 400,000-00 400,00U0 400,000.00 4, Less: (a) Tranbf,--,r to GON Treasury from DAI Imprest Account - - - (b) Di rect Payment from DA/ I rn prest Accou n 1 11,118-91 11,118,91 11,118-91 5. Closing Designated Account Balance at the end of Reporling Peaod 1113 ' 388,881-09 398 88109 388,881,G9 A .... q e ..... ........... Ripudh Kc Sunil Poudel Uttam Bhakt gle Account fficer Senior Divisional Engineer J ecretaryyg 'a Program Coordinator "Program Director 1011 . .. ... .. . .. ... . .. . ... .. .. . .. . Maha Prasad Adhikari Sishir rm a r D h u n g . n a S I III R a aya Kunwar ............ -- - ........ 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