Islamic Republic of Afghanistan Supreme Audit Office AUDIT REPORT FY 1397 (2018) Prjc ID Gran NubrPoetNm P122235 TF-0 12029 & H681 Irrigation Restoration and Development Project I.......... Deeme 201 4= 4 Islamic Republic of Afghanistan Supreme Audit Office Reference Number: .ate:.iJDate/ U Auditor General's Report To His Excellency, Minister of Finance, Government of Islamic Republic of Afghanistan Report on the Audit of the Financial Statements Opinion We have audited the accompanying Statements of Cash Receipts and Payments (the "Financial Statements") of Irrigation and Restoration Development Project (IRDP) bearing World Bank Project ID Number P122235 Financed under Grant Number H6810 & TF12029 (hereinafter referred to as "Project") for the financial year ended 30 Qaws 1397 (21 December 2018), which comprise the summary of significant accounting policies and other explanatory notes forming part of the financial statements. In our opinion, the accompanying financial statements present fairly, in all material respects, the cash receipts and payments of the Project for the financial year ended 30 Qaws 1397 (21 December 2018) in accordance with Cash Basis IPSAS (International Public Sector Accounting Standard) - "Financial Reporting under the Cash Basis of Accounting" and comply with the terms and conditions of Projects Grant/ or Financing Agreement. Basis for Opinion We conducted our audit in accordance with international Standards of Supreme Audit Institutions ("ISSAIs"). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are the Supreme Audit Institution (SAl) of Islamic Republic of Afghanistan and independently derive our lega mandate from the Supreme Audit Office Law and in accordance with the Code of Ethics implemented by the SAO based on the ISSAI 130- Code of Ethics together with the ethical requirements that are relevant to our audit of the financial statements in Afghanistan and applicable to SAO auditors including external experts for the audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics of SAO. Page 1 of 3 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Ministry of Finance for the Financial Statements The Ministry of Finance (the Ministry) is responsible for the preparation and fair presentation of the Project financial statements in accordance with International Public Sector Accounting Standards "Financial Reporting under the Cash Basis of Accounting" and for such internal control as Ministry determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error and selecting and applying appropriate accounting policies. The Ministry is also responsible for ensuring that activities and financial transactions and information reflected in the Financial Statements are in compliance with the Project's Grant/ or Financing Agreement. Those charged with governance of the Ministry are responsible for overseeing the Project's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAls will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISSAls, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * 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 the purpose of expressing an opinion on the effectiveness of the Project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transact io is ar events in a manner that achieves fair presentation. Page 2 of 3 * Evaluate the financial transactions and information reflected in the Financial Statements and whether they are in compliance with the terms and conditions of Project's Grant/ or Financing Agreements. We communicate with those charged with governance of the Ministry regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance of the Ministry with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Report on Other Requirements Management Letter highlighting the areas of improvement in financial management including the compliance with covenants ofthe Grant/ Financing Agreements and results of its operations for the financial year ended on 30 Qaws 1397 (21 December 2018) has been attached to this report. These observations and recommendation have been communicated to and discussed with Project management and intended to improve internal control and results in other operating efficiencies of the Project. Mob in mad Naien Haqmal Audito Supreme Audit Office Page 3 of 3 Islamie Republie of Afghanistan Irrigation Restoration and Development Project World Bank Reference: Project ID P122235; Grant ID H6810 & TF 12029 Financial Statements for the year ended 30th Qaws 1397 (21st December, 2018) Irrigation Restoration and Development Project World Bank Reference: Project ID P122235; Grant ID H6810 & TF 12029 STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) 1397 1396 Cumulative Receipts/ To Date Payments Payments Controlled by Third by entity Parties Total Total USD USD USD USD USD RECEIPTS Initial Advance - - 6,830,110 Replenishments 15,884,849 - 15,884,849 14,903.980 96,447,615 Direct Payment - 3.561,182 3,561,182 1,187,060 34,016,145 Taxes Collected but not transferred - - - 12,432 50,332 TOTAL RECEIPTS 15,884,849 3,561,182 19,446,031 16,103,472 137,344,202 PAYMENTS Disbursement Category: Goods, Works, Non-Consulting Services, Consultant's Services, Training, Resettlement Costs and Incremental Operating Costs 16,304,350 3,561,182 19,865,532 15,768,969 137,717,067 Bank Charges 75 - 75 225 2,925 TOTAL PAYMENTS 16,304,425 3,561,182 19,865,607 15,769,194 137,719,992 Excess of Receipts over Payments (419,576) - (419,576) 334,278 (375,791) Taminat (Net) 142,278 142,278 (294,437) 4.026,770 Increase/(Decrease) in Cash & Cash Equivalents (277,298)- (277,298) 39,841 3,650,979 Cash and Cash Equivalaents at the beginning of the year 3,928,277 3,928,277 3,888,436 Increase/(Decrease) in Cash and Cash Equivalents (277,298) - (277,298) 39,841 Cash and Cash Equivalents at the end year 3650,979 3,650,979 3,928,277 The accom nying noteyform an int ral art of this financial statement. Zahid H 4ard Deputy n ter for Finance Ministry frcsamjgRep6bWc of Afghanistan Date December 5, 2019 Irrigation Restoration and Development Project (World Bank Reference: Project ID P122235; Grant ID H6810 & TF 12029) SIGNIFICANT ACCOUNTING POLICIES & NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) 1) LEGAL STATUS AND ACTIVITY a) The Irrigation Restoration and Development Project was set up in May 2011 to increase agriculture productivity and production in the project areas. b) The project consists of the following parts: i) Rehabilitation of Irrigation Systems; ii) Small Dams Development iii) Establishment of Hydro-Meteorological Facilities and Services; iv) Project Management and Capacity Building c) The project was initially funded by a grant from the International Deveppment Association bearing reference number H6810 in the amount of SDR 61,700,000. Another grant bearing number'TF 12029 on the amount of USD 48,400,000 was made available from the Afghanistan Reconstruction Trust Fund in month of March 2012 which was enhanced to USD 118,400,000 through an amendment to the financing agreement executed in June 2016. d) The significant terms and conditions that determine or affect the availability of the funding assistance are primarily the presentation of eligible expenditures to donor within the period as per and in accordance with the financing agreement. e) These financial statements of the Project have been prepared in accordance with the requirement of the financing agreement signed between the government of the Islamic Republic of Afghanistan and the International Development Association in May 2011. 2) SIGNIFICANT ACCOUNTING POLICIES a) Basis of Preparation The financial statements are prepared under the historical cost convention and in accordance with Cash Basis IPSAS - Financial Reporting under the Cash Basis of Accounting issued by International Federation of Accountants (IFAC). a) Reporting Entity These financial statements are for the Project referred to in para 1(a) which is funded by the grant(s) as specified in para 1(c) and encompass the operations of the project to the extent funded by those grant(s). b) Receipts These represent grants and aid received and taxes collected but not transferred to the government's revenue account during the period during the period. c) Payments Payments made from Special Account are recognised in the financial statements based on the date the cheque is issued and direct payments by World Bank are recognised on the date on which the withdrawal application for the payment is submitted to the World Bank. However, cheques or withdrawal applications that were ultimately rejected by the bank or the World Bank are reversed in the reporting period. Irrigation Restoration and Development Project (World Bank Reference: Project ID P122235; Grant ID H6810 & TF 12029) 3) NOTES TO THE FINANCIAL STATEMENTS a) Initial Advance Initial advance represents the advance given by the World Bank into the designated account of the project. b) Reporting Currency The reporting currency is US Dollars. Since US Dollars is the principal disbursement currency of the donor, the financial statements are not prepared in the Afghani which is the currency of Afghanistan. c) Currency Translations Transactions in currencies other than the reporting currency are translated into US Dollar at the rate of exchange at which the transaction is actually executed. d) Payments made by third parties These represent payments directly made by the World Bank, on basis of requests submitted by the Ministry of Finance in form of a withdrawal application, towards settlement of the claims, liabilities and contractual obligations against contracts and agreements for eligible expenditures of the project as per the financing agreement. These payments do not constitute cash receipts or payments by the entity and as such are disclosed in the "Payments by Third Party" column in the statement of Cash Receipts and Payments. e) Taminat The amount of Taminat reported in the Financial Statements represents net flow arising from deduction/repayment of security deposit (retention money) during the reporting period. f) Bank Charges The Ministry of Finance has negotiated with Da Afghanistan Bank that bank charges will not be charged on the transactions in the US Dollar Special bank account of the grant. Bank Charges may be levied by intermediary banks on deposits into the Special Account and balances returned to the World Bank. g) Comparison of Budget and Actual Amounts The Project, being the reporting entity for the purpose of these financial statements, in its capacity as such does not make its annual approved budget publicly available nor is its budget explicitly available publicly in the compiled approved budget in a manner purposeful to the context of these financial statements. Thus, the requirement of presenting a comparison of budget and actual amounts is not considered contextually applicable. h) Authorisation Date These Financial Statements are authorised by the Deputy Minister for Finance, Ministry of Finance or any official acting on his behalf who has been so authorised to act on the date endorsed on the Statement of Cash Receipts and Payments. i) Appendices The accompanying appendices provide additional information and analysis and form an integral part of these notes, except as indicated otherwise. j) Others These Financial Statements are originally prepared." n'tnghsh and then translated into Dari. In the event of any inconsistency between the English and Dr,versions, the English version shall be considered to be correct. Irrigation Restoration and Development Project World Bank Reference: Project ID P122235; Grant ID H6810 & TF 12029 APPENDIX Al SUMMARY OF WITHDRAWAL APPLICATIONS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Application Initial Description Number Advance Amount H6810: USD USD DA-A 72 2,884,849 12029: UN-A UN FAO ADVANCE 3 2,374,122 DA-1 58 8,000,000 DA-1 57 5,000,000 UN-A UN FAO ADVANCE 2 1,187,060 Irrigation Restoration and Development Project World Bank Reference: Project ID P122235; Grant ID H6810 & TF 12029 APPENDIX A2 US Dollar SPECIAL ACCOUNT SUMMARY FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Account No: Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD USD Alc 27457 Alc 27408 Opening Balance as per Bank Statement 3,563,798 364,479 Add: Replenishments from World Bank 13,000,000 2,884,849 Payments pertainig to this account made from 27457 - 5,291 Total Additions 13,000,000 2,890,140 Deduct: Payments for Project Expenditure 15,562,511 599,561 Payments pertainig to 27408 made from this account 5,291 - Incorrect debits by bank 2,975 - Bank Charges 50 25 Total Deductions 15,570,827 599,586 Closing Balance as per B.S 30 QAWS 1397 (21 DECEMBER 2018) 992,971 2,655,033 Irrigation Restoration and Development Project World Bank Reference: Project ID P122235; Grant ID H6810 & TF 12029 APPENDIX A3 US DOLLAR SPECIAL ACCOUNT RECONCILIATION FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Account No: 27417 Depository Bank: Da Afghanistan Bank (DAB) Address; Kabu USD Closing Balance as per bank statement - 30 QAWS 1397 (21 DECEMBER 2018) Nc 27457 992,971 Nc 27408 2,655,033 3,648,004 Add: Incorrect debits by Bank 2,975 Closing balance as per financial statements- 30 QAWS 1397 (21 DECEMBER 2018) 3,650,979 Irrigation Restoration and Development Project World Bank Reference: Project ID P122235; Grant ID H6810 & TF 12029 APPENDIX A4 COMPONENT-WISE DISBURSEMENTS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) (not an integral part of the Financial Statements) 1396 1397 Cumulative Project Component To Date USD USD USD Rehabilitation of Irrigation Systems 11,448,350 13,626,657 82,325,933 Small Dams Development - 3,130,617 Establishment of Hydro-Meteorological Facilities and Services 714,938 198,802 4,877,321 Project Management & Capacity Building 3,605,681 6,040,073 47,383,196 Bank Charges 225 75 2,925 TOTAL PAYMENTS 15,769,194 19,865,607 137,719,992 � � Q �ct�v с�, а гл °s � °° о' r- �о ёп � � � � с� � а� � ❑ � � � � F �� N т С3 tП U г3 Q к�� п f в а г� r� .� ��.� � �� � � а п�=-� ��-® � ��х� j � �� ��' � Q �.��, � � "' N ° �n "�' � с�с� �� � �N ��т�. �� ���fl �'г т� ц7 Ш ц�'] � � г .11! .fi1 С5У � � �[ � � г СЭ С1 ,� Ui N GЭ ❑ С] С] D L� О о д`" #i н (13 iГ] (П :f] GI} {f} +� w .у � � � fj � � � � � ��.. � fl9 Ш � �Тк � � � � 'гц °пs 1 +s�., °� о о w м rn r' ti гв т� и � � ц � � � r�aa #-ц�j � � ti�ю �� � г`�ат°��. 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