Tel No 2212 6758/59/60/61 Fax: 22229666 e-mail: piukship@gmail.com GOVERNMENT OF KARNATAKA KARNATAKA STATE HIGHWAYS IMPROVEMENT PROJECT (Public Works, Ports & Inland Water Transport Department) No. PIU:KSHIP:ACTS:WB:AG:01:2017-18 O/o The Project Implementation Unit, Karnataka State Highways Improvement Project K R Circle, Bangalore - 560 001. Date: 15.06.2017 1-9 JUN ZOP, The Country Director, The World Bank, New Delhi Office, No.70, Lodi Estate, New Delhi - 110003. Dear Sir, Sub: Audit Report on the Annual Financial Statements of KSHIP-II Loan No. 8022-IN for the Financial Year 2016-17. Ref: Letter of the Deputy Accountant General No. Pr.AG (ERSA)/IAU- I/F/2017-18/16, dated 02.06.2017. With reference to the above, please find enclosed the Audit Report dated 2nd June 2017 along with the Audited Financial Statements of KSHIP-II pertaining to IBRD Loan No. 8022- IN for the Financial Year 2016-17 issued by the Principal Accountant General, Karnataka Bangalore. This is in accordance with Section II Part B4 of the Project Agreement dated 30th May 2011. Yours faithfully, Sd/- (Manivannan. P) Chief Project Officer, PIU, KSHIP, Bangalore. End: As above CC: To: 1) The Joint Secretary (MI), Department of Economic Affairs, Ministry of Finance, North Block, New Delhi - 110001. 2) Sri. Srikumar Tadimalla, Task Team Leader, The World Bank, The HT House Building, 18-20 Kasturba Gandhi Marg, New Delhi - 110001. 3) Sri. Anantha Krishna Karur, Financial Management Specialist, The World Bank, No.70, Lodi Estate, New Delhi - 110003. 4) Sri. S.G. Dastidar, Controller of Aid Accounts and Audit, B wing, 5th Floor, Janpath Bhavan, New Delhi. 5) The Additional Chief Secretary to Government, PWP & IWT Department, Vikasa Soudha, Bangalore - 560001. 6) The Secretary to Government (Fiscal Reforms), PMU, Finance Department, 4th Floor, M.S. Building, Bangalore - 560001. X nnan. P) Chief Project Officer, PIU, KSHIP, Y Bangalore. Indian Audit And Accounts Department Office of the Accountant General (E & RSA), Karnataka No. AG (ERSA)/IAU-I/F/2017-18/ MG Date :02.06.2017 To The Project Director. Project Implementation Unit, Karnataka State Highways Improvement Project (KSHIP), K.R. Circle. Bangalore - 560 001. Sir. Sub Report on the Project Financial Statement of Karnataka State Highways improvement Project - 11 (KSHIP- II) under IBRD Loan No. 8022-IN and ADB Loan No. 2705-IND for the period ending 2016-17. With reference to the subject above. I am to enclose the Report on the Project Financial Statement of the Karnataka State Highways Improvement Project - II (KSHIP - II) under IBRD Loan No. 8022-IN and ADB Loan No. 2705-IND for the period ending 2016-17. The receipt of the same may please be acknowledged. P -D Yours faithfully, CAO SPL. D.C Acutn~ea Deputy Accut eneral DS (F) SE-1 (Economic Sector - 1) SE-2 SE-3 EE to C-Block, "Audit Bhavan", Near Vidhana Soudha, Post Box No. 5398, Bengaluru - 560 001 Ph 080 22289101 Fax : 080 22253753 E-mail : agauKarnataka2@cag.gov.in website : http:Hlwww.agkar.cag.gov.in Indian Audit And Accounts Department Office of the Accountant General (E & RSA), W Karnataka REPORT OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA To The Project Director, Project Implementation Unit, Karnataka State Highways Improvement Project (KSHIP)-II, K.R. Circle, Bangalore-560001 REPORT ON THE PROJECT FINANACIAL STATEMENT We have audited the accompanying financial statements of Karnataka State Highways Improvement Project-Il World Bank Assisted Project Loan No-8022-IN including Highway Financing Modernization Component being executed through Karnataka State Road Development Corporation Limited which comprises of the Statement of Sources and Applications of Funds and reconciliation of claims to Total Application of Funds for the year ended March 2017 . These statements are the responsibility of the Project's management. Our responsibility is to express an opinion on the accompanying financial statement based on our audit. We conducted our audit in accordance with the Auditing Standards promulgated by the Comptroller and Auditor General of India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audit examines, on a test basis, evidence supporting the amounts and disclosure in the financial statements. It also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements present fairly, in all material respects, the sources and application of funds of Karnataka State Highway Improvement Project-Il for the year ended 31 " March 2017 in accordance with Government of India accounting standards. In addition, in our opinion, (a) with respect to Financial Monitoring Reports adequate supporting documentation has been maintained to support claims to the World Bank for reimbursement of expenditures incurred, and (b) except for ineligible expenditure (nil) as detailed in the memo of disallowances appended to this audit report, expenditure is eligible for financing under the loan/credit agreement. During the course of audit, Statement of Expenditure/ Financial Monitoring Reports and the connected documents were examined and these can be relied upon to support reimbursement under the loan / Credit agreement as detailed below: C-Block, "Audit Bhavan", Near Vidhana Soudha, Post Box No. 5398, Bengaluru - 560 001 Ph : 080 22289101 Fax: 080 22253753 E-mail: agauKarnataka2@cag.gov.in website: http://www.agkar.cag.gov.in (RS. in million) SI Category Expenditure Eligible Less Expenditur Percentag Amount No Expenditure inadmissi e e of Reimbursable ble admissible Reimburs as per audit ement I Consultants Services, 367.783 280.032 - 280.032 80% 224.026 training, studies, incremental operating costs, under Part A.1, A.2, C and D of the project 2 Consultants Services, 39.734 25.493 - 25.493 80% 20.394 training, studies, incremental operating costs, under Part B.1, B.2 and B.3 of the project 3 Goods and Works under 2632.971 2361.239 - 2361.239 80% 1888.991 r part A.1, C and D of the project 4 Goods and Works under 1070.281 698.720 - 698.720 100% 698.720 part A.2 of the project 5 Goods and Works under 1330.580 383.560 - 383.560 100% 383.560 part B.2 of the project 6 Front End Fee 0 0 - 0 0 0 Total 5441.349 3749.044 - 3749.044 - 3215.691 This report is issued without prejudice to Comptroller & Auditor General's right to incorporate the audit observations in the report of C&AG of India for being laid before Parliament /State Legislature. Deputy AccountantGeneral (Economic Sector-I) O/o the Accountant General (ERSA) Karnataka, Bangalore MEMO OF DISALLOWANCES World Bank Assisted Project Loan No.8022-IN NIL Deputy Accountant7eneral Economic Sector-I Annexure 1 Karnataka State Highways Improvement Project - II World Bank Assisted Project - Loan No.8022 IN Statement of Sources & Application of Funds Report for the year ended 31" March 2017 (Rs. In Millions) Particulars Receipts/Expenditure Project to date For the year Sources of Funds Opening Bank Balance Government of Karnataka Funds 1948.463 9331.319 World Bank Funds: 0.000 0.000 PPIAF Grant 0.000 8.973 Loan Funds 3492.886 9267.575 Total Funds 5441.349 18607.867 Uses of Funds Road Improvement Works 3844.262 14542.925 Highwy Financing Modernization Component 1362.551 2155.632 Road Safety Component 107.997 229.117 Road Sector Policy & Institutional Development 72.598 196.270 Incremental Operating Costs 46.180 242.035 Advances 7.761 1202.845 Front End Fee 39.043 Total Expenditure 5441.349 18607.867 Closing Bank Balance - PRO,. eta (Finance)KSHP Project irector, Accountant General, KSHIP MBANGALORE m KSHIP Karnataka. Date :q0 2 A R 01. 0w Senior Audit Officer 2 5 APR 2017' 7rUFhf!5R ChRit q Notes: Office of ti Accoutant General (E & RSA) 1. This Financial Statement is prepared on a cash basis of accounting as per provisions #I/JWukavn. W, 4V/Kamataka kru. Rules and codes applicable. 2. The Expenditure figures are based on monthly/quarterly abstract of Tally Software used for project accounts 3. The receipt of World Bank Loan Funds were accounted based on A CA release from Government of India. 4. Highway Financing Modernization Component expenditure Rs.1362.551 Million includes Rs. 750.00 Million (Cumulative advance Rs.790.00 Million) -released as advance to KRDCL for Resettlement & Rehabilitation and LandAcquisition activities. S. Names ofAccounting units whose financial statements are aggregated to prepare the consolidated accounts are: PIU-KSHIP, Bangalore and four Project Divisions namely Tumkur, Shimoga, Raichur and Annexure 2 Karnataka State Highways Improvement Project - II World Bank Assisted Project - Loan No.802 2 IN Reconciliation of Claims to Total Applications of Funds Report for the year ended 31 March 2017 Ami (Rs. Millios Schedules Previous Project to Current Year Yerdt Year date Bank Funds Claimed (A) IUFR-Application No.37 84.374 IUFR-Application No.38 698.695 IUFR-Application No.39 171.197 IUFR-Application NoAG 556.678 IUFR-Application NoAl 127.337 IUFR-Application No.42 485.678 IUFR-Application No.43 1091.735 Funds Claimed for the year Ref: Schedule 1 3215.694 Less: Claims of previous years IUFR 0.000 Funds claimed for the current year(A) 3215.694 Total Expenditure made (B) 5441.349 5166.237 18607.867 Expenditure as per books of account 5441.349 5166.237 18607.867 Less: Expenditure Not Claimable (C) Ref: Schedule 1 1692.305 Expenditure Not Claimed (D) 0 Claimable Expenditure (F) = (B)- (C)-(D) 3749.044 World Bank Share (E) 3215.694 Claims in excess of Expenditure (A-E) 0 0' ROJt De ry-Finance, 0 roject Director, KSIIP Accountant General, KSHIP O/ (Karnataka Date: ~Sen;of Audi tOffil-: 25 APR 2017'Office of the Accountant Ce'nUal :1 1) Total expenditure made during the year (B above) must be the same as the Total Expenditure shown on the Statement of Sources and Applications of Funds. 2) Total Expenditure made during the year (B above) included advances of Rs. 7761 Mi Ilion to Consultants and Contractors and advance of Rs. 750.00 Million to KRDCL for implementation of Resettlement and Rehabilitation and Land Acquisition activities. Karnataka State Highways Improvement Project - 11 World Bank Assisted Project - Loan No.8022 IN (Rs. In Millions) Disbursement Category and Expenditure for the year ended 31.03.2017 Disbursement Category Expenditure Eligible %claim Expenditure Amount Consultants' services, training, studies, Incremental Operating Costs.under Parts A.1, A.2, 367.783 280.032 80% 224.026 C, and D of the Project Consultants' services, training, studies, Incremental Operating Costs under Parts B.1, B.2 39.734 25.493 80% 20.394 and B.3 Goods and workA under Part A.1, C, and D of the Project 2632.971 2361.239 80% 1888.!94 Goods and Works under Part A.2 of the Project 1070.281 698.720 100% 698.720 Goods and Works under Part B.2 of the Project 1330.580 383.560 100% 383.560 Front End Fee 0 0 0 Total 5441.349 3749.044 3215.694 Breakup for claim amount: Reimbursement claimed during 1638.281 the period (Ref. Schedule - 1) Pending claim amount as of 31.3.2017 (IUFR Application No.42 & 43) Total 3215.694 to Deputy Se ry-Finance, 0I. Project Director, KSHIP Accountant General, KSHIP Karnataka Date. 250APR201 NI, --rc.a"." ,&rPSP t Schedule - I Karnataka State Highways Improvement Project - II World Bank Assisted Project - Loan No. 8022 IN Details for Withdrawal Applications for the Year Ended 31-03-2017 (Rs. In Millions) SL. IUFR Period Expenditure Eligible Reimbur Reimburse Reimbursem Expenditure Remarks No Appl for the Period Expenditure sable ment Claim ent through Not No. " for the Period %age Amount ACA Release Claimable 2 3 4 5 6 7 8 9=(4-5) 10 135.377 105.467 80% 84.374 1) 37 01-04-2016 to 15-06-2016 67.835 0 100% 0 84,197 97.745 Total 203.212 105.467 84.374 502.086 424.842 80% 339,875 2) 38 16-06-2016to 3108-2016 496.660 358.820 100% 358.820 694.634 215.084 Total 998.746 783.662 698.69 272.621 213.997 80% 171.197 3) 39 01-09-2016 to 30-09-2016 2.304 0 10% 077.191.2 52.304 0 1.00% 0 170,928 110.928 Total 324.925 213.997 171.197 360.351 270.972 80% 216.778 4) 40 .01-10-2016 to 02-11-2016 391.158 339.900 100% 339.900 553.867 140.637 Total 751.509 610.872 556.678 161.015 159.171 80% 127.337 5) 41 03-11-2016 to 31-12-2016 437.798 0 100% 0 127.196 439,642 Total 598.813 159.171 127.337 OA (A) Expenditure Claimed & Received 2877.205 1873.169 1638.281 1630.822 1004.036 0 duringthe Year r 636.445 607.097 80% 485.678 6) 42 01-01-2017 to 28.02.2017 71.381 0 100% 0 0 100.729 Total 707.826 607.097 485.678 ..-- _Claim is in pipeline. Please 972.593 885.218 80% 708.175 refer foot note (2) 7) 43 01.03.2017 to 31.03.2017 883.725 383.560 100% 383,560 0 587.540 Total 1856.318 1268.778 1091.735 (B) Expenditure Claimed & yet to be 2564.144 1875.875 1577.413 0.000 688.269, received as on 31.03.2017 or Schedule - I Karnataka State Highways improvement Project - 11 World Bank Assisted Project - Loan No.8022 IN Detalls for Withdrawal Applications for the Year Ended 31-03-2017 (Rs. In Millions) SL. IUFR Period Expenditure Eligible Reimbur Reimburse Reimbursem Expenditure Remarks No Appl for the Period Expenditure sable ment Claim ent through Not No. for the Period %age Amount ACA Release Claimable 1 2 3 4 5 6 7 8 9-(4-5) 10 (A+B) Total 5441.349 3749.044 3215.694 1630.822 1692.305 453.936 435.110 80% 348.089 8) 34 01-01-2016 to04-03-2016 630.497 339.900 100% 339.900 687.621 309,423 Total 1084.433 775.010 687.989 157.637 133.250 80% 106.600 9) 35 05-03-2016 to 24-03-2016 711.817 629.882 100% 629.882 740.265 106.322 Total 869.454 763.132 736.482 399.852 288.481 80% 230.785 10) 36 25-03-2016 to 31-03-2016 378.908 203.940 100% 203.940 434.178 286.339 Total 778.760 492.421 434.725 Claims of previous year received 2732.647 2030.563 1859.196 1862.064 702.084 during the year Total Bank Funds Claimed during 8173.996 5779.607 5074.890 3492.886 2394.389 the Year Note: (1) Application No. 42 & 43 were in pipeline as of 31.03.2017. (2) In the IUFR 42 for the period 01.01.2017 to 28.02.2017 & IUFR 43 for the period 01.03.2017 to 31.03.2017, out of the eligible expenditure of Rs.1875.875 Million and Reimbursement claim amount of Rs. 1577.413 Million. The ineligible expenditure Is Rs.688.269 Million. D ance, Project irector, Accountant General, KSHIP KSHIP Karnataka DATE: Sno A t c ~. .t> -. or Audit Officetr W~ WCM