Islamic Republic of Afghanistan Supreme Audit Office AUDIT REPORT FY 1397 (2018) P119047 H-732-AF, H-8930 Financial Sector Rapid Response & D-1400 Project Í1 Islamic Republic of Afghanistan Supreme Audit Office Reference Number: Date: \ 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 Financial Sector Rapid Response Project (FSRRP) bearing World Bank Project ID Number PI19047 financed under Grant Number H-732-AF, H-8930 & D-1400 (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 on 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 Project's Grant/ or Financing Agreement. Basis for Opinion We conducted our audit in accordance with International Standards of Supreme Audit Institutions ("ISSAls"). 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 (SAI) of Islamic Republic of Afghanistan and independently derive our legal 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Page 1 of 3 Responsibilities of Ministry of Finance for the Financial Statements The Ministry of Finance 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 projects 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 ISSAIs 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 transactions and events in a manner that achieves fair presentation. * Eva luate 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 signifi Ludit findings, including any significant deficiencies in internal control that we identify r{gw a udit. Page 2 of 3 tif 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 of the 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. Moh mmad Naie Haqmal Aud orGener Supre it Office V~ Page 3 of 3 Islamic Republic of Afghanistan Financial Sector Rapid Response Projeet World Bank Reference: Proj eet ID P1 19047; Grant ID H7320, H8930 & D1400 i ri Financial Statements for the year ended 30th Qaws 1397 (215t December, 2018) Financial Sector Rapid Response Project World Bank Reference: Project ID P119047; Grant ID H7320, H8930 & D1400 STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) 1397 1396 Cumulative To Date Receipts/ Receipts/ Payments Payments Controlled by Controlled by entity entity USD USO USD RECEIPTS Initial Advance - 2,800,000 Replenishment 7,086,671 - 17,813,080 TOTAL RECEIPTS 7,086,671 - 20,613,080 PAYMENTS Disbursement Category: Goods, Non-Consulting Servcies, Consultants' services, Incremental Operating Costs and Training (except APS) 5,804,039 1,138,263 18,737,782 Goods, Non-Consulting Servcies, Consultants' services, Incremental Operating Costs and Training (for APS) - . - Bank Charges 75 - 700 TOTAL PAYMENTS 5,804,114 1,138,263 18,738,482 Increase/(Decrease) in Cash & Cash Equivalents 1,282,557 (1,138,263) 1,874,598 Cash and Cash Equivalaents at the beginning of the year 592,041 1,730,304 Increase/(Decrease) in Cash & Cash Equivalents 1,282,557 (1,138,263 Cash and Cash Equivalents at the end of the year 1,874,598 592, The accompanying notes form an integral part of this financial statement. Zahid Hamdard Deputy Vinister for Finance Ministry of Rirntce, Islamic Republic of Afghanistan Dated: November 13, 2019 Financial Sector Rapid Response Project (World Bank Reference: Project ID P119047; Grant ID 117320, 118930 & D1400) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) 1) LEGAL STATUS AND ACTIVITY a) The Financial Sector Rapid Response Project was set up on August 27, 2011. The project's objective is to assist the Da Afghanistan Bank to develop actions plans for improved banking supervision and implement a modern national payment system for efficient and transparent payment transactions. b) The project was initially funded by a grant bearing reference number H7320 from International Development Association in the amount equivalent to Special Drawing Rights (SDR) 11,900,000. In June 2014, another grant bearing reference number H8930 was provided in the amount equivalent to Special Drawing Rights (SDR) 4,400,000 and another grant bearing reference number D1400 has been provided during the financial year 1396 in the amount equivalent to Special Drawing Rights (SDR) 14,400,000, although there were no disbursements from it during the reporting period, c) The project consists of the following parts: i) Audits of Commercial banks ii) Modernization of ANPS iii) Support to Afghanistan Institute of Bank and Finance iv) Technical Assistance, Training and Project Implementation d) The significant terms and conditions that determine or affect the availability of the funding assistance are primarily the presentation of the 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 acc areetilaui ments of the Development Grant Agreements signed between the Gove m t ppuii c of Afghanistan and the International Development Association fort . 2) SIGNIFICANT ACCOUNTING POLICIES tr a) Basis of Preparation The financial statements are prepared under the historical cost c ad in dr r with Cash Basis IPSAS - Financial Reporting under the Cash Ba 'ca % dd by International Federation of Accountants (IFAC). b) Reporting Entity These financial statements are for the Project referred to in para 1(a) which is funded by the grants as specified in para 1(b) and encompass the operations of the project to the extent funded by those grants. 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, Financial Sector Rapid Response Project (World Bank Reference: Project ID P119047; Grant ID 117320, 118930 & D1400) cheques or withdrawal applications that were ultimately rejected by the bank or the World Bank are reversed in the reporting period. d) 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. e) 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. 3) NOTES TO ACCOUNTS a) Receipts These represent grants and aid received during the period. b) Initial Advance Initial advance represents the advance given by the World Bank into the designated bank account(s) of the project. c) 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. d) 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. e) Authorisation Date These Financial Statements are authorised by the Deputy Minister for Fi e r, & inance or any official acting on his behalf who has been so authorised to ac s-eadorsed the Statement of Cash Receipts and Payments. f) Appendices The accompanying appendices provide additional information rtr nalysis and form an int part of these notes, except as indicated otherwise, g) Others r These Financial Statements are originally prepared in English and th sa td mt y the event of any inconsistency between the English and Dari versions, the velsa hall be considered to be correct. Financial Sector Rapid Response Project World Bank Reference: Project ID P119047; Grant ID H7320, H8930 & D140( APPENDIX Ai SUMMARY OF WITHDRAWAL APPLICATIONS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Application Initial Description Number Advance Amount USD USD H8930: DA-B 8 1,048,712 H7320: DA-A 24 5,250,000 DA-A 22 787,959 Financial Sector Rapid Response Project World Bank Reference: Project ID P119047; Grant ID H7320, H8930 & D1400 APPENDIX A2 US Dollar SPECIAL ACCOUNT SUMMARY FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Account No: 27419 Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD Opening Balance as per Bank Statement 592,041 Add: Replenishment by World Bank 7,086,671 Total Additions 7,086,671 Deduct: Payments for Project Expenditure 5,804,039 Bank Charges 75 Total Deductions 5,804,114 Closing Balance as per B.S 30 QAWS 1397 (21 DECEMBER 2018) 1,874,598 Financial Sector Rapid Response Project World Bank Reference: Project ID P119047; Grant ID H7320, H8930 & D1400 APPENDIX A3 US DOLLAR SPECIAL ACCOUNT RECONCILIATION FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Account No: 27419 Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD Closing Balance as per bank statement - 30 QAWS 1397 (21 DECEMBER 2018) 1,874,598 Closing balance as per financial statements - 30 QAWS 1397 (21 DECEMBER 2018) 1,874,598 Financial Sector Rapid Response Project World Bank Reference: Project ID P119047; Grant ID H7320, H8930 & D1400 APPENDIX A4 COMPONENT-WISE DISBURSEMENTS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) (not an integral part of the Financial Statements) 1397 1396 Cumulative To Project Component Date USD USD USD Audits of Commercial banks 5,804,039 1,138,263 11,265,104 Modernization of ANPS - Support to Afghanistan Institute of Bank and Finance - 104,146 Technical Assistance, Training and Project Implementation - 7,368,532 Bank Charges 75 - 700 TOTAL PAYMENTS 5,804,114 1,138,263 18,738,482 nk' ~~ г , i � и, � о в�л о о а rn � v � � ra cv n ra ui so м � г4 �, � Ф N � (Я � � i�+ � � � � � V 4f] ® � � � S6 0. ~ � и � С fY � СУ �Э [] С1 С} °} � � а ® � � � � �' и � в о в о L °о � n° � °в °с � с7 � � свэ �' � � � о � �r v ё� � о Т г о � •Е � е� о с� г� ir [У L1 f] Ll . � С] С] С7 U7 гг1 сП и � Х Х ?{ � � � т c�i � � ё � с� s� м sд к�- rn � С] в и д' +х� аг �� � г� гл ш чэ гп о �� �у с .м ® � а� r+. � e�r м � °а й а� й й с�ч G�« � � � v г� .- гл �v ш � а � � � `= г�у N � с с � � ,� с"', � н к к 4� � ci ci �' qp т t в Ci ы�н И� �� М 6�Э N t�L3 •� �• � � 7т �� Сг � � � С> � �' [п сГ7 {,} [,) .... Еу Ш дS пi � '�+ � т "° о с в г� � с"�д е�. Е Е�•г� �+ h �� гл Sц 7 б3 г- r г3? t�F iV 0 6 = � � � � ��:я Р� � {D F� .н- ч- � � ��а' ® �I Ш т Т а r• 1-- т � � �•� 4 '''' � � � iY [У СУ ❑ С3 L] � � � м � � � д i� � СЭ ь� СЭ � � � га т � © С�? � �+ � R tП N {�j (4 iFJ�.г.�г{!! [`] � N t6 U � i� � г 4 ц С9 р Й �� м�� � _ � а� А ro � � � ¢ р 4 v � ~ '4i]. [2 С tiS � � � � fI � . � , 4$ �,'`� � '4Т Ш ` �N l С r] � � � Q � �� ~ F � � � D ЁЭ � С � w � � � ���•У7.' � . .4'Чг• � •4� � С71 Cfi � �1 �1 � _ Q� .вг � � •4, .,ь -а � гу 'С � Z� . ь 4. Т у � .с С ti1 tЭ l �., � � � � �Ь �' j С.• �9 _D" К�2 � � 45 � � F�Q � U�-. � ы ,� �s �v � Q � л :, � � � �, �, � � #- � � �✓ г'. ал дt � � � у � i о` �� ['� , п`�� � с •с � ш i.г у � Ф ��Г �� . 4 irы�` [i � � �р LП Lii �� цг' �- . �' р С С !11 S] � Q м.. • f4 {Sf V !7. г � Ш � п] �i0 С f � � а -а ,-�� � ` � ГМ �� � � � i!k ,� � С] О 4 [U � i r � гЛ г � � � L �. 4 � v� � � 7, 7, � � r - S� д U ( � � � � Q as ст � :� -cs -а � � - `� � � Е � 4 С�] � ` тэ с с af с °� с с ` г{ � � � � � .г13 N пд с С rt � � ;д ,� i3 =�2. т i�] � � Q v� и1 � t� � � G�i U? тз г� � U' � д tт �� и и �J � � � � � СЭ `� �'О � М 1 � �_ �� �р � D � О д ] р � q�j � � рпу � д3 � О 9 iT Q,1 Е с и га у и� °о �^ ��� гв 1 ° с� � _° � � и� а� � .� � д е с о ду � Q {) .� � � д Э � tis л� ës � � � о � � тЭ � ? � � � пs сл е с д е с пу ш пs га га � � с� � и � � у � `т �U ггs � � � о о Zj о гэ •� т � � � � т 4� Е С �� r�' а � г=т г� t� � � � � л, � ш F С} ¢ {L � � 5 = � с.� г•а 1 � С